(The GREAT DEPRESSION to 1935 – continued)
In 1931 in Sweden, wages had been falling and unemployment had been rising. Communist agitation had also been rising, and that year labor unrest and the use of strikebreakers resulted in bloodshed. Sweden's moderately conservative government was pursuing a policy of maintaining the nation's money supply. Industrial production was down that year no more than 10 percent from its peak in 1929, and its unemployment rose no higher than 12 percent. The economic downturn, however, resulted in a loss of power for the incumbent conservatives. In September 1932, Social Democrats were elected to power.
With winter, the economic crisis deepened, including a rise in unemployment. The Social Democrats entered an alliance with Sweden's Farmer's Party. Then Sweden's economy hit bottom – a few months later than the mid-1932 bottoming of the US economy.
But Sweden would recover faster. A reduction in taxes gave the average wage earner more money to spend, and a raised minimum wage increased the ability of low-income people to spend money. The government increased investments in public works. Federal money was pumped into unemployment insurance, medical care and old age pensions. The government willingly created a deficit, believing that it was emergency spending that would be paid back after the recovery. And with recovery being rapid and revenues increasing as a result of the rising economy, revenues increased and the deficit was quickly overcome.
Government participation in the economic life of Sweden had increased. The government supported farm prices and protective tariffs for farm products, and giving aid to the unemployed in farming areas helped to slow migration from the countryside into the cities. The Social Democrats gave labor the right to strike, but Sweden had a board that settled worker-management grievances, a board in which labor and management had confidence, and peace between labor and management benefited the economy.
Sweden's industrialists were disgruntled over higher taxes on their personal incomes, but they did not feel threatened to the extent that they withdrew from participating in the economy or the recovery. Manufacturing was to remain over 90 percent in the hands of capitalists, and business profits were left untaxed in order to stimulate rapid reinvestment. By 1936, industrial production in Sweden was 50 percent above what it had been in 1929 and unemployment had returned to 5 percent.
The depression reached France later than it did some other nations, France remaining prosperous through 1931. Then, in 1932 the economy was hurt by a drop in tourists, a fall in exports of perfumes, wine, food and other items, and there was the decline in prices for what exports it could sell abroad. In 1932 unemployment was at 15 percent and industrial production off 25 percent from its 1929 level. note29
A new French government was elected in 1932, led by André Tardieu, whose campaign issue was the threat of Communism. His government was a coalition of conservatives and rightists defending against demands from the left for spending on the unemployed and other benefits for the poor. Tardieu's government was determined to maintain low taxation, a balanced budget and no inflation. It sought economic recovery in the expansion of France's trade with its colonies and in public belt-tightening – austerity. France refused to join Britain, the US and Germany in going off of the gold standard. This kept its currency overvalued, hurting French exports. Some people in France expected that their currency would eventually be devalued, and they hurt France's economy by converting their money and sending it abroad.
France's economy joined other economies in hitting bottom in the latter half of 1932. And, following this, France's economy remained stagnant. In 1935 unemployment and industrial production were still at 1932 levels. note30
Meanwhile, defending its conservative economic policies, the government appealed to patriotism. Class warfare promoted by Marxists, it warned, was a crime against the country, and it announced that socialism brings misery, anarchy and ruin.
Mussolini's highly praised corporate-fascist economy suffered like other economies during the Great Depression. Mussolini was erratic in making policy, his twists and turns the result of an unwillingness to surround himself with sound-thinking, independent-minded advisors. The public saw Mussolini's contradictory moves as genius, while the economy did benefit from government involvement in industry, cooperative industrialists, a docile labor force, and increased welfare benefits. Italy's economy emerged from its economic slump in 1934, but Italy's share in world manufacturing was down then to around 2.8 percent – the lowest of Europe's big players in international affairs. note31
The Depression brought only a minor decline in Great Britain's economy. Its economy had been stagnant in 1929. The Labour Party had been running the government with the arrival of the world economic depression, and some people in Britain put blame on Labour Party politicians for their economy's poor performance. Their vote helped to send more Conservatives to parliament, and a new government of national unity was formed – a coalition of Labour and Conservatives. The socialist Ramsey MacDonald remained Prime Minister, and the conservative Stanley Baldwin became the dominant figure in the cabinet, dominating also MacDonald.
Like France, Great Britain was suffering from an overvalued currency. Gold was a commodity. Its price was responding to market demand, and the price was rising, which pushed the British pound to a level that the new British government considered too high – an overvalued pound making the price of its exports higher and therefore diminishing foreign trade. Great Britain shocked the world by going off the gold standard and switching to a managed currency. Britain was able to devalue its currency, and it lowered lending rates, which dropped to two percent, helping to simulate building and ease depression.
Great Britain also attempted to insulate itself from the rest of Europe and the US by drawing on its economic ties with its empire and the commonwealth. Needing to import two-thirds of its food, Britain went to extraordinary lengths to maintain sales of its exports. It moved to keep the costs of manufacturing low, including keeping wages down. This meant austerity for the public. And in trying to keep inflation down, Britain tried to keep spending down, which meant little or no public works projects and little of the deficit spending that was tried in Sweden. But Britain did maintain its unemployment insurance, Labour resisting pressure from conservatives for cuts in unemployment benefits. The overall result kept Britain's economy from falling as far as had the US and German economies. Britain's economy joined others in hitting bottom in 1932, and its recovery was slower than Sweden's. In 1935, Britain's industrial output returned to its 1929 level, and its unemployment returned to 10 percent – twice as high as Sweden's. note32
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