MACDONALD AND SNOWDEN - NO HALF MEASURE = NO MEASURES AT ALL
Traditionally of course Britain had been the pioneer and champion of international free trade and the gold standard. But Britain had betrayed its calling when it went off the gold standard in 1931. This was no small event. The American economic historian James Ashley Morrison calls it 'one of the greatest policy innovations in the history of the global economy.' (1) Given that the gold standard had been suspended during the war and had only been restored in 1925 that may look like an exaggeration but the fact that it could be said is of itself significant. It was certainly felt to be radical at the time. It was in order to avoid having to do it that Ramsay MacDonald and his chancellor Philip Snowden wrecked the Labour government and their own reputations in the historiography of the British Labour movement, entering into coalition with the Tories and the more fiscally conservative liberals in order to 'save the pound' by slashing government spending, in particular unemployment benefit.
(1) James Ashley Morrison: 'Shocking intellectual austerity: the role of ideas in the demise of the gold standard in Britain', International Organization, Vol 70, No 1 (Winter 2016), p.203. American in origin and formation, Morrison is now Assistant Professor in the Department of International Relations at the London School of Economics and Political Science.
It is absurd to accuse them of simple class betrayal. Robert Skidelsky argues that it was in fact their socialism that left them, as they imagined, with very little choice. He explains their dilemma in terms that still have a certain resonance for Socialist and Marxist politics today. Socialism and capitalism were incompatible. So if Socialism was impossible, the logic of capitalism, understood - as Marx understood it - in terms of the rigorous, supposedly scientifically established classical Ricardian economic theory, had to prevail. At the Labour Party Conference of 1930 in Llandudno, just a year before Snowden introduced what Morrison (p. 191) calls 'the most austere budget in British history' (Morrison has no fear of hyperbole): 'MacDonald provided his audience with an excuse that was sure to appeal to them.' (2)
'"So, my friends, we are not on trial; it is the system under which we live. It has broken down, not only in this little island; it has broken down in Europe, in Asia, in America; it has broken down everywhere as it was bound to break down."
'Thus the tables were neatly turned: it was the breakdown of capitalism, not the failure of the Government, that was responsible for the suffering and distress; and if the Government seemed impotent, was this not because it had no mandate for the only cure - socialism? Of course, the other Parties had their solutions - public works, protection - but these were no substitute for socialism and no Labour Government could be expected to subscribe to them:
'"And I appeal to you, my friends, today, with all that is going on outside - I appeal to you to go back on to your socialist faith. Do not mix that up with pettifogging patching - either of a Poor Law kind or of Relief Work kind."
(2) Robert Skidelsky: Politicians and the slump - the Labour Government of 1929-1931', Penguin Books, 1970 (first published in 1967), pp.270-1.
MacDonald's speech was greeted with 'thunderous applause'. Skidelsky continues:
'Throughout, MacDonald referred to public works as ‘relief works’ - to differentiate them from socialism, which was permanent reconstruction. If confusion lay at the heart of this analysis, it was the confusion of democratic socialism itself - the confusion that allowed a socialist party to take part in the ordinary political process, and yet sought to absolve it from responsibility for framing radical policies to meet concrete problems.'
Protection was the 'pettifogging patching' recommended by a wing of the Conservative Party (and in the event implemented by the National Government under MacDonald as titular Prime Minister); 'public works' was the policy associated with the Liberals, elaborated on their behalf by J.M.Keynes and his then colleague, Hubert Henderson, in their pamphlet (May 1929) Can Lloyd George do it? Keynes had been one of the few economists who opposed the return to the gold standard in 1925, but he didn't object to the gold standard in principle. It was the timing and the rate at which it was set that he criticised.