Mr. Chakrabortty\’s history

The most famous episode of austerity was during the interwar years, as Germany, Britain, France and Japan all fought to stay on the Gold Standard even amid the Great Depression. The deflationary impact of keeping their currencies pegged to gold, along with the austerity policies they followed to do so, was disastrous.

In Britain, unemployment jumped from 10.4% in 1929 to 22.1% by early 1932, even while government debt surged.

Yes, so what did we do next? We came off the gold standard, devalued the curency, cut government spending and the economy came back. We were back to 1929 by 1934 in fact.

What have we done this time? Devalued the currency and ……..well, you see? The very example Chakrabortty is using shows that they are at least attempting to follow the policies that really did work last time around.

7 thoughts on “Mr. Chakrabortty\’s history”

  1. From memory, the reason that ‘going back to the gold standard’ became problematic was because it was done assuming the price of gold in Sterling at the old pre WW1 price. This was unrealistic as Sterling had been inflated to pay for WW1. Had Churchill(?) gone back to the gold standard at the 1929 price it would have worked. Mind you Churchill also wanted to introduce LVT in the 1911(?) People’s Budget, so he was not all bad…

  2. Lola,

    Britain returned to the gold standard in 1925 following several years of internal devaluation (“austerity”) in order to return sterling to its pre-WW1 price. The UK had its depression in the 1920s, not the 1930s, and actually weathered the 1930s pretty well compared to other major economies, not least because we didn’t have so far to fall. We did’t have the pre-1929 credit boom that the US had, for one thing. But coming off the gold standard earlier than others undoubtedly helped.

  3. Ah, but the bit we’re NOT doing this time is cutting government spending.

    So that’s why it’s not working I guess.

  4. @lola
    The Labour Government actually intro’d LVT in the Finance Act of 1931 ( The official text is on the Labour Land Campaign’s website under Land Value Tax:Papers,last of list) .But they went into coalition with Tories and Liberals and these” partners” abolished it.But land was very cheap due to agricultural depression (and probably because of the fear of LVT ) and there was a massive building boom, of all those pre-war semis round London and other cities: between 1933-1939 three million homes were built!There is evidence that” the Bank of England enlarged the cash base of the banks by buying or converting gilts” (sounds like QE).
    Then there were the Ottawa Accords which set up a kind of Commonwealth Common Market based on Imperial Preference .This worked well enough for the Americans to come gunning for it as the price of entering the War; in the event Hitler declared war on them.Brigadier Enoch Powell declared the US to be our real enemy and carried on saying so to the end of his days.
    BTW the People’s Budget was 1909.

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