Why Did Britain Avoid Revolution During the 1930's Great Depression?

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The Wall Street Crash in America in 1929 had a great impact on Europe in the subsequent years. It left countries with stockpiles of unsold goods along with the production of goods being greatly reduced resulting in unemployment soaring to extremely high levels and also leading to many national financial crises. Britain and Germany were two of the key European economies which both had extremely high levels of unemployment. In the British case the high levels of unemployment were mainly due to intensely severe deflation which was induced by the authorities. They wanted to depress prices and rise the value of the pound to what it was compared to the dollar before the war. The authorities wanted Britain to yet again be the centre of the world financial market but it cost Britain highly in lost output and employment. At the start of the century the government was committed to balancing the budget by a rule based system while the monetary policy was ruled independently by the Bank of England. They were more committed to a fixed rate of exchange in which the sterling pound was able to be fully converted into gold. After the First World War there was an attempt to try to return to this form of economy but it failed leaving Britain’s economy exposed to huge levels of deflation with no effective plan to counteract in place. This led to the suspension of the gold standard along with capital controls and a policy of permanently low domestic interest rates being introduced. In 1929 a new government came into power, although they were not expected to come to an agreement to make cuts to the dole system they did stick strictly to the ‘orthodox treasury view’ in its fiscal and monetary policies. This was all done for a good reason as the labour government were worried that an inflationary policy would reduce the real wage of labour. The unemployed population may have been able
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