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Characterized by mass unemployment, protectionism, diverse exchange rate regimes, the disintegration of the world trade, and poor long-term growth prospects, the interwar period was, by any standards, a remarkable one. This textbook provides a survey of the key macroeconomic questions that arose from the experience of the British economy from 1919 to 1939. A comparative approach is adopted throughout, placing the UK experience in the context of the world economy. The book continually applies economic theory to historical examples.
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The twenty-year period between the two World Wars was, by any standard, a remarkable one. Characterised by mass unemployment, protectionism, diverse exchange rate regimes, the disintegration of world trade, poor growth prospects and high business cycle volatility, the interwar period has proved to be of enduring interest to economists and policy-makers alike. This textbook provides a survey of the key macroeconomics questions that arise from the experience of the British economy from 1919 to 1939: Why was unemployment so high and persistent in the interwar years when compared with the low unemployment rates of the pre-1913 era? Did the choice of making a fast transition to the pre-1913 gold parity constrain the economy to a low growth equilibrium? Why were interwar business cycles so volatile when compared to the pre-1913 era? Did tariffs stimulate economic recovery in the 1930s? Throughout the book a comparative approach is adopted, placing the UK experience in the broader context of the world economy. For example, the fast transition in the UK to the pre-1913 gold parity is contrasted with the experiences of the countries that allowed their currencies to depreciate. The effects of devaluation in the UK in the 1930s are also contrasted with those of the gold bloc economies. The book is aimed primarily at students of economics studying economic history. A major feature of the book is the application of economic theory to concrete historical examples providing students with a valuable device to evaluate the relevance of competing theoretical frameworks. THEMES IN MACROECONOMIC HISTORY THE UK ECONOMY, 1919-1939 THEMES IN MACROECONOMIC HISTORY THE UK ECONOMY, 1919-1939 Solomos Solomou Faculty of Economics, Cambridge CAMBRIDGE UNIVERSITY PRESS Published by the Press Syndicate of the University of Cambridge The Pitt Building, Trumpington Street, Cambridge CB2 1RP 40 West 20th Street, New York, NY 10011-4211, USA 10 Stamford Road, Oakleigh, Melbourne 3166, Australia © Cambridge University Press 1996 First published 1996 A catalogue record for this book is available from the British Library Library of Congress cataloguing in publication data Solomou, Solomos. Themes in macroeconomic history: the UK economy, 1919-1939 Solomos Solomou. p. cm. Includes bibliographical references. ISBN 0 521 43033 X (he). - ISBN 0 521 43621 4 (pbk.) 1. Great Britain - Economic conditions - 1918-1945. 2. Great Britain - Economic policy - 1918-1945. I. Title. HC256.3.S56 1996 330.941083 - dc20 95-35069 CIP ISBN 0 521 43033 X hardback ISBN 0 521 43621 4 paperback Transferred to digital printing 2003 VN To Alexi and Chloe CONTENTS Acknowledgements Note on the text page x xi 1 Epochs in economic history, 1919-39 1 2 The exchange rate regime and UK economic performance during the 1920s 24 3 Unemployment, 1919-38 53 4 85 Economic fluctuations, 1919-38 5 Exchange rate regimes and economic recovery in the 1930s 112 6 Protection and economic revival in the 1930s 132 7 Policy lessons of the interwar period 159 Glossary Bibliography Index of names Index of subjects 166 179 191 193<