A policy that was consistently followed by the Stanley Baldwin government (and later followed by the Ramsay McDonald government) was that of deflation. The basic thrust for this policy is achieving a stable economy, but it proved very harmful for the unemployed as it made it difficult for them to avail benefits. The provisions under National Insurance Act of 1920 were also unfavourable to the unemployed. War veterans, many of whom had only partially contributed to the unemployment insurance fund, nevertheless made claims on it upon returning to Britain. This meant that the fund ran into debt very quickly. It was for the government to intervene through underwriting the debt and offering the ‘dole’. By the time the Great Depression hit the United States, the size of the ‘dole’ had become a sizable burden on the exchequer. Growing ever concerned with the unbalanced budget situation by the early 1930s the Conservative government was determined to reduce “the cost of unemployment benefit and to provide only for the ‘genuine’ unemployed.” (Laybourn, 1990, p.19) Although this helped balance the budget, the condition of the unemployed grew ever precarious, so much so that official unemployment numbers touched 1.5 million in January 1930 and 2.75 million by June 1931. (Laybourn, 1990, p.19)
In an interesting juxtaposition, just as interwar years were one of unemployment and poverty, it also witnessed a craze for consumerism. In retrospect, historians note how the interwar years set the foundation for the consumer society that would take shape later in the century. Research conducted in recent years throw light on how such a phenomenon could hold up in the face of economic depression. The explanation is that, “in terms of lost output and unemployment, it was never as deep as it was in America and Germany.” (Hill & Lubin, 1934, p. 36) Britain was also fortunate in that it witnessed phases of growth between 1919-20, late 1920s, and between 1933 and ‘37. Even when economic conditions were at their worst, a majority of the workforce was still in employment. For this workforce savings was not a high priority. They instead put the last penny of their incomes back into the economy thereby offering a constant stimulus. Also helping consumerism was the fact that
“the major fall in prices in both the agricultural and manufacturing sectors across the world made this a difficult period for producers in general, but a good one for consumers. Even in the worst slump years prices fell faster than wages, making for an improvement in the real value of most people’s salaries.” (Pugh, 2008)
It was the crucial factor of rise in value of real incomes that supported and encouraged consumption. The result was a general rise in consumption of necessities such as food and housing; as well as expenditure on leisure and entertainment. But the consumption boom was not orchestrated by policy makers – it was the natural consequence of favourable economic factors. One area where the National Government did make a contribution was in increasing milk production in the 1930s. By the 1930s milk consumption had increased by 55% compared to pre-war levels. In 1922, the Ministry of Health made “pasteurization compulsory for commercial milk production as a means of checking the spread of tuberculosis, and from 1933 onwards the Milk Marketing Board was able to offer consumers reliable quality and stable prices.” (Pugh, 2008) This stabilization of prices somewhat alleviated the sting of unemployment that had gripped Britain in the early 1930s. The government can take credit in this regard. The National government can also take some credit for facilitating a minor housing boom during the interwar period. For example,