Big Mac to go Ramsey MacDonald meets the press in 1931 THE CRISIS of the last few weeks has been full of eerie reminders of the crisis of August 1931.
Then, as now, the attempt to defend the value of the pound against a fixed exchange rate caused financial havoc.
Then as government financial crisis was met by savage attacks on the working class, including cutbacks in social security spending and unemployment pay, and attacks on public sector wages.
And then as now, working class response was hampered by the right wing leaders of the labour movement, although in 1931 they were the government rather than the opposition.
Minority
Ramsay MacDonald's government had been elected in 1929, although not with an overall majority. Labour had 287 seats, the Tories 269 and the Liberals 59.
MacDonald in his first Commons speech wondered aloud to the Tories and Liberals 'how far it possible, without in any way abandoning our party positions... to consider ourselves more as a Council of State and less as arrayed regiments facing each other in battle!
The cynical mental chuckles of the Tories and Liberals at this open profession of class collaborationist intent were almost audible.
The background to the 1931 crisis was of course the 1929 stock market crash and the ensuing world slump. When the Labour government came to power there were well over one million insured workers on the dole. The numbers rapidly increased.
Standard
Labour had pledged either 'work or maintenance' - either a job or unemployment benefit at a level to support a 'reasonable' standard ofliving.
In 1926 the TUC and Labour Party had jointly demanded 20 shillings a week. But when the Unemployment Insurance Bill was brought forward by Labour in November 1929, the dole was left at 17 shillings, plus two shillings for each child.
A small minority of the 110 Independent Labour Party MPs (about 20 of them, led by James Maxton) rebelled against the government. They were to be the core of the eventual split to form the ILP as a short-lived independentparty.
By December 1930 the official unemployment figure was 2.5 million; by July 1931 it was 2.8 million. Huge dole payments were putting pressure on the Treasury.
Drastic
Labour Chancellor Philip Snowden told the House in February 1931 that 'the nationposition is so grave that drâstic and disagreeable measures will have to be taken if Budget equilibrium is to be maintained and industrial progress made..!
Snowden promised 'temporary sacrifices' only, and those best able to bear them would have to make the largest sacrifices.
Parliament appointed the all-party May Committee charged with 'effecting all practical and legitimate reductions in national expenditure consistent with efficiency of services'.
Attacking
The May Committee, which had been proposed by the Liberals and only opposed by the ILP rebels, was in fact aimed simply at attacking working class benefits and wages. Snowden and MacDonald eagerly accepted the proposal.
At the end of July 1931 the May Committee reported. It proposed a 20 per cent cut in BRITAIN OFF GOLD ONE-DAY STOCK bill to Stor expon or But Banks to TATEMENT Carry on busines As Uanal HITUATION NO NEED unemployment benefit, steeply increased unemployment contributions and the introduction of the notorious Means Test.
In addition it proposed cuts in the pay of teachers, the police and armed forces, as well as huge cutbacks in public works expenditure. The proposals caused a political storm.
Crisis
When the May Report appeared, there was already a developing international financial crisis with a series of bank failures in Germany and eastern Europe. The report itself increased the panic, and a run on gold destabilised the pound sterling.
Depreciation of Britain's exchange reserves meant that the governm nt turned to foreign bankers t secure a major loan. But the hid of the US banking syndicate, JP Morgan, demanded major expenditure cutbacks before 'confidence' could be 'restored' and the loan granted.
On August 19 Ramsay MacMorgan's confidence by cuthalf a million (the proportions split on the issue, but made an arose as to whether the opposigovernment, c no less. This was too much for even the leadership of the MacDonald could only get the economic cuts package through parliament with the support of the Tories and Liberals. By constructing this alliance he effectively sank the Labour government.
Two days later he had handed his resignation to the King; on the same day after discussion with Stanley STANDARD-Official CLOSING FOR * ARMED MENACÉ TO EXCHANGES TAL DIALL Bate 6 Pat Raised do a Can i General HITLER'S LOVER Election Intrigue FOR ALARM "MacDonald's political coup made him the prisoner of the Tory party" Baldwin and the Liberals he was re-installed - as leader of the National Government. Only 13 Labour MPs supported the new government.
Gold Standard On 21 September the National took Britain off the Gold Standard, to avoid further drain on foreign currency reserves. In effect, the pound was left to float, rather than have a fixed parity with gold. But the cuts in government expenditure to finance defence of the Gold Standard had already been made.
MacDonald's political coup against the labour movement made him the prisoner of the Tory party. They demanded a general election.
Formally held between the 'National Government' and the Labour Opposition, it was in fact between the Tories and Labour. The Tories won 471 out of 615 seats, and government supporters had won 556 seats overall, including 13 'National Labour'.
Ramsay MacDonald was unceremoniously dumped, and Stanley Baldwin enthroned as the new prime minister of the 'National' (Tory) government.
By splitting the labour movement and subjecting it to the diktats of international capital MacDonald had delivered the working class its most decisive defeat since the General Strike.
This ensured that the dreadful 1930s would see the Tories permanently in power, until a new coalition was established during the war.
The ILP, convinced that Labour was finished as the party of the working class, disaffiliated from the party. delusion data period or defeat Carried away the could create the conditions for the building of an alternative mass party of the working class, within a couple of years the ILP had disappeared as a significant political force. No. 30 25 Oct, 1992
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