Economic Lessons of the 1930s

315 Pages·1963·19.791 MB·English

by  H. W. Arndt

THE ECONOMIC LESSONS
OF T H E NINETEEN-THIRTIES
The Royal Institute of International Affairs is an unofficial and
non-political body, founded in 1920 to encourage and facilitate the
scientific study of international affairs.
The Institute, as such, is precluded by its Royal Charter from
expressing any opinion on any aspect of international affairs. Any
opinions expressed in this book are, therefore, purely individual.
THE
ECONOMIC LESSONS
OF THE
NINETEEN-THIRTIES
A Report Drafted by
H. W.ARNDT
First published by
FRANK CASS AND COMPANY LIMITED
This edition published 2013 by Routledge
711 Third Avenue, New York, NY 10017
2 Park Square, Milton Park, Abingdon, Oxon 0X14 4RN
Routledge is an imprint of the Taylor & Francis Group, an informa business
First issued under the auspices of the
Royal Institute of International Affairs
This reprint has been authorized by the Oxford University Press
First edition 1944
Second impression 1963
Third impression 1972
ISBN 0 7146 1204 9
FOREWORD TO FIRST EDITION
I
n undertaking a series of studies on post-war economic
problems, the Economic Group of the Chatham House
Reconstruction Committee decided to prepare a Report on
the economic lessons of the nineteen-thirties. The drafting of this
report was confided to their Research Assistant, Mr. H. W.
Arndt. In his task Mr. Arndt was assisted by discussion with the
members of the Group to whom the various chapters were sub
mitted. The subject is obviously controversial, and though there
was a large measure of agreement in regard to all the chapters
except the last, the Group decided not to attempt an agreed text,
but to publish the document, together with such dissenting notes
as were submitted by some of those consulted. Mr. Arndt
assumes responsibility for the text of the report itself.
ASTOR
Chairman of the Council
Chatham House,
St. James's Square,
London, S.W.i
8 December 1943
5
CONTENTS
FOREWORD by Viscount Astor P*g*5
I. THE NINETEEN-TWENTIES 9
I. THE WORLD ECONOMIC SITUATION IN THE NINETEEN-
TWENTIES 9
II. THE UNITED STATES
III. GREAT BRITAIN *9
IV. FRANCE 23
V. GERMANY 25
VI. THE WORLD DEPRESSION 31
2. THE UNITED STATES: INTERNAL POLICY 34
I. THE NEW DEAL 34
II. BANKING REFORM 36
III. THE DEVALUATION OF THE DOLLAR 37
IV. CHEAP MONEY POLICY 40
V. THE N.R.A. 42
VI. THE A.A.A. 46
VII. GOVERNMENT LENDING AND SPENDING 50
VIII. THE AMERICAN RECOVERY I933~7 60
IX. THE 1937 SLUMP 68
THE UNITED STATES: FOREIGN ECONOMIC
3-
POLICY 71
I. THE BACKGROUND 71
II. THE DEVALUATION OF THE DOLLAR 73
III. THE CORDELL HULL TRADE PROGRAMME 77
IV. RECIPROCAL TRADE AGREEMENTS 81
V. RESULTS OF TRADE AGREEMENTS 83
VI. CONCLUSIONS 89
4- GREAT BRITAIN 94
I. INTRODUCTION 94
II. THE ABANDONMENT OF THE GOLD STANDARD 96
III. PROTECTION AND IMPERIAL PREFERENCE 102
IV. THE BAN ON FOREIGN LENDING no
V. EXPORT POLICY i n
VI. DEBT COLLECTION 116
VII. THE TREND TOWARDS BILATERALISM AND TRADE
CONTROL 117
VIII. INTERNAL RECOVERY POLICY 121
IX. THE BRITISH RECOVERY 126
6
CONTENTS
FRANCE page 135
S-
I. THE VICIOUS CIRCLE OF DEFLATION 135
II. THE BLUM EXPERIMENT 141
6. GERMANY: INTERNAL POLICY 15*
I. THE GERMAN RECOVERY
II. THE CONTROLLED ECONOMY
III. NAZI FINANCE 165
IV. THE RESULTS OF NAZI ECONOMIC POLICY 169
V. THE SIGNIFICANCE OF REARMAMENT I73
7- GERMANY: FOREIGN ECONOMIC POLICY I76
I. THE OBJECTIVES 176
II. EXCHANGE CONTROL 180
III. THE CLEARING SYSTEM 186
IV. NAZI FOREIGN TRADE POLICY I90
V. THE RESULTS 197
8. NOTE ON SWEDISH RECOVERY POLICY 207
9- INTERNATIONAL ACTION IN THE ECONOMIC
FIELD 221
I. INTRODUCTION 221
II. THE TRANSITION FROM WAR TO PEACE, I919-24 222
III. PROSPERITY, 1925-9 227
IV. DEPRESSION, I93O-3 234
V. DISINTEGRATION, I933-9 242
10. THE LESSONS 25O
I. INTERNAL ECONOMIC PROBLEMS 250
I. THE SCOURGE OF UNEMPLOYMENT 25O
2. SPECIAL UNEMPLOYMENT 252
3. GENERAL UNEMPLOYMENT * TRADE CYCLE CONTROL 253
4. EFFICIENCY OF INDUSTRY 264
II. INTERNATIONAL ECONOMIC PROBLEMS 270
I. INTERNATIONAL TRADE 270
2. INTERNATIONAL MIGRATION AND INVESTMENT 278
3. THE INTERNATIONAL MONETARY SYSTEM 283
4. SOME ECONOMIC AND POLITICAL IMPLICATIONS 295
APPENDIX. Dissenting note by Sir Andrew McFadyean 303
INDEX 309
7
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Chapter One
THE NINETEEN-TWENTIES
I. THE WORLD ECONOMIC SITUATION IN THE NINETEEN-TWENTIES
T
HE great depression ended a period of short but rapid
and in many respects unexampled economic progress.
By 1925 most of the immediate problems of post-war
reconstruction appeared to be solved. Most of the advanced
industrial countries had recovered from a brief but severe post
war slump. The political problems which had prevented eco
nomic progress during the first five years after the war seemed
settled. The frontiers of the European countries seemed at last
stabilized; the reparation problem, which had been the immediate
cause of the Ruhr invasion and monetary chaos in Germany, was
temporarily solved by the Dawes Plan. By 1925 order had been
restored in the internal monetary systems of most countries, and,
with the exception of France, all the major countries of the world
had returned to the gold standard, which seemed to have resumed
its function as the automatic mechanism for the adjustment of
the international economic system. Between 1925 and 1929
world production of primary products rose by 11 per cent,
industrial production by something between 23 per cent and
27 per cent, and the quantum of world trade rose by about
20 per cent.1 At the same time, there was considerable progress
during the decade in industrial productivity, national incomes,
and standards of living, though the rate of progress varied greatly
in different countries.
However, the equilibrium of the world economic situation
throughout the first post-war decade was unstable. While the
immediate causes of the depression must be sought primarily in
the internal economic development of the countries concerned—
and especially in the internal development of the U.S.A., from
where the crisis and depression spread throughout the world—
the fact that the depression did spread to every country, its
severity, and the obstacles to recovery during the nineteen-
thirties are largely accounted for by three outstanding factors in
the economic conditions of the world during the post-war decade
which were all to some extent but different aspects of the same
problem.
The world war had meant a violent breach in the continuity of
1 League of Nations, Revietv of World Production 1925-31 (Geneva, 193a),
P- 9-
A*