A Lesson From History


Pictured: Clement Attlee addressing the Big Meeting in 1936

In 2008, the world financial system failed, creating a crisis, economists tell us, far more dangerous than the crisis of 1929. Consequently, the economy of the advanced capitalist countries has entered the longest period of stagnation for a century and the Greek economy is teetering on the verge of bankruptcy, threatening to pull down the whole of the European economy with it. In this article, Dave Temple revisits the 1929 crisis and looks how the Labour Party then dealt with the question of austerity. (Published in the official Gala brochure, 2015)

At the time of the 1929 Gala, County Durham was in a state of deep depression. Employment in the mines had dropped from 172,329 to 128,901 in the space of eight years condemning over 40,000 miners to mass poverty and the slender relief of the dole. 

Despite this bleak situation, there was some hope of a change. Just two months earlier, the country had gone to the polls and while Labour had emerged with the largest number of seats, it remained 33 MPs short of an overall majority. However, when Labour leader Ramsay MacDonald, the newly elected member for the Durham constituency of Seaham, was summoned to Buckingham Palace, he accepted the King’s invitation and formed an administration, relying on the tacit support of the Liberals.  

Durham’s miners, optimistic he would honour his pledge and improve their wages and reduce their hours of work, were in for a nasty surprise. Just three months after the Gala, financial institutions in the United States crashed. Bankers and financiers, rather than face poverty, threw themselves from their office windows onto the pavements of Wall Street and it was not to be long before they dragged the world economy down in their wake. 

By the 1930 Gala, the full effects of the Wall Street crash had still not hit Britain. Despite the fears, the Gala that year was well attended. The bands played familiar optimistic tunes of the time – Amy Johnson, Happy Days are Here Again and Keep Your Sunny Side Up – but the ray of hope apparent at the previous Gala was melting away.   

1931 Gala 

By the following year’s Gala, storm clouds were well and truly gathering over Europe. When Independent Labour Party leader James Maxton rose to speak, he argued that the crisis was a vindication of the need to change the economic system root and branch. He said, 

Every man who is genuinely anxious for the welfare of the workers is impatiently waiting for a new social order where poverty, tyranny and degradation will be unknown. The earliest socialist thinkers in analysing the capitalist system of society at a time when it appeared to be an unchallengeable economic system pointed out, amidst years of mockery, that the system of running industrial life for the profit of a few would develop contradictions within itself and would collapse. 

Today we have the great outstanding contradiction that while there is the capacity in the country and throughout the world to turn out wealth at a greater rate than mankind has ever known, every great capitalist country is slowly but surely having its wheels of industry brought to a standstill. 

The great capitalist powers have just met to try and save one of their number from bankruptcy, not because of any special love that they have for that one country but because of their sure and certain knowledge that if that country’s economic system crashes, the others would topple over with it. 

The great powers Maxton was talking about were Britain, France and the USA which had met on July 20 just five days before the Gala and the country they were hoping to save from bankruptcy was Germany. 

After the Wall Street crash of 1929, the USA called in its European loans, creating a banking crisis that became contagious. In May 1931, the Austrian bank Credit Anstalt crashed, causing in turn the collapse of several German banks. On July 15, Germany froze its foreign assets, transferring the strain on to other financial centres, particularly London. 

At their meeting on July 20, the Great Powers could not agree on the vexed question of the burden of Germany’s war reparations. Britain and the USA were in favour of suspending payments in order to make Germany’s ability to repay a new loan more credible but France was obdurate in insisting that the payments should continue and, as a result, no loan was forthcoming. 

The epicentre of the crisis now moved to the Bank of England, which by August 1 had lost a quarter of its assets. It was now Britain that urgently required a loan. 

On July 28, three days after the 1931 Gala, Britain secured a £25m loan from Paris but this was just a stopgap – more was required to head off collapse.  

On July 31, the Government was informed that the projected budget Government’s spending which, the Americans insisted, had to have Parliament’s backing.  

After intense negotiations within the Labour Cabinet, it finally agreed to a £30m cut in the pay of public servants and a 10 per cent cut in unemployment benefit. At a cabinet meeting held on August 23 1931 they voted 11 to nine in favour of these draconian cuts.  

However, the nine who voted against were senior members of the cabinet, men with the authority of Arthur Henderson who argued that, rather than carry out the dictates of the bankers, Labour should resign as a united party and hand over responsibility to the Tories and Liberals.  

These men commanded wide support within a party whose rank and file were steadfastly against austerity making the outcome inevitable and the second minority Labour Government resigned. 

The Great Betrayal 

Behind the backs of his colleagues, however, MacDonald had been asked by the King to form a National Government and remain Prime Minister – which he did – but was joined in this venture by only three of his Cabinet colleagues: Snowden, Sankey and the notorious and heartily despised railwaymen’s leader, James Thomas. Only 12 Labour backbenchers followed MacDonald and supported the National Government and all were expelled from the Labour Party within weeks. 

The National Government then set about the task of balancing the budget. A 10 per cent reduction in unemployment benefit was accompanied by a soon to be hated method of enforcement called the Means Test. This involved a kind of social police force that would enter the homes of the unemployed and calculate the household’s assets down to the last pincushion. These assets would then have to be sold before benefit could be claimed. If a son or a daughter was working and living in the same house as their unemployed parents, their income would be taken into account against any claim made. 

The reductions in the pay of government employees did not go down well with teachers or the police and was even more resented in the army and navy. 

On the evening of September 12 1931, Royal Navy ratings at Invergordon in Scotland mutinied, sending a huge shock wave through the establishment that further undermined confidence in the British economy among the financiers. 

In October 1931, MacDonald called a General Election that resulted in a landslide victory for the National Government whose candidates won 556 seats and 70% of the popular vote. MacDonald retained his Seaham seat and the Labour Party lost two million votes nationally and was reduced to 52 MPs, little more than its pre-First World War total. 

As the economy crumpled, hundreds of thousands were thrown out of work and it was the coalfields that suffered the most. In south west Durham, more than 50% of the insured population lost their jobs and, in some pit villages, only the schoolteacher and the Methodist minister were left in employment.

1932 Gala 

When the miners and their families marched into Durham in July 1932, there were 70,000 miners unemployed in the county and many thousands more on short time but this human catastrophe was not enough to dampen spirits. The estimated attendance at the Gala was a staggering 200,000. 

The reporter from the Advertiser tells us: ‘All cares and worries were thrown to the wind for this one day.’ 

However, there was no disguising the loathing Durham miners felt for MacDonald. All images of MacDonald were obliterated from any banner that had hitherto carried his portrait. Some lodges painted over his portrait with the image of a different leader, others displayed just a blank space while, on one, a white sheet had been neatly sewn to obliterate his image.  

From that day on, MacDonald’s name was synonymous with betrayal. Speaking at the Gala, a young Jennie Lee, Labour MP for North Lanarkshire, thought it was not just the betrayal of leaders but the fact that the Labour Party had not broken from the ‘pre-war radical ideas of building up social services and leaving the structure of capitalism unchanged.’ She continued,  

It is a pleasant thing, especially when you are looking for votes, to say, ‘Don’t be afraid, we are not going to change very much’. I believe that from now onwards to speak like that to the working people of this country is a dishonest thing. 

I believe that our job is to make it as clear as we can that there is going to be no improvement of social conditions for workers until the workers themselves have power and control in this country. 

George Lansbury, now the leader of the Labour Party, received a rousing reception, explaining that all the economic problems stemmed from the capitalist system and this had to be changed. 

The full effects of the economic collapse were most acutely felt in Germany. 

Faced with the strongest working class and organised labour and trade union movement in Europe, Germany’s most powerful capitalists threw their weight heavily behind Hitler’s National Socialist Party in the hope that its racist propaganda – in particular its insistence that the economic crisis was the fault of a Jewish world conspiracy – would divert the working class from the real cause of the system’s problems. 

Adolf Hitler had risen from obscurity in the early 1920s and steadily bludgeoned his way to power, employing the combined tactics of the ballot box, street violence and assassination. On January 30 1933, he was appointed Chancellor of Germany although he had never, up to that point, attained more than 37 per cent of the popular vote.  

The powerful German Communist Party and Social Democratic Party, even after Hitler became Chancellor and had the full power of the state behind his Nazi Party, polled over 12 million votes in the last free elections held in Germany on March 5 1933. 

1934 Gala 

At the 1934 Gala, Ellen Wilkinson, who had lost her parliamentary seat in Middleborough in the 1931 election, had Germany very much on her mind. She said,  

The labour and trades union movement, had lessons to learn from what is taking place in central Europe: Two years ago the socialist movement in Germany was thought to be absolutely invincible. Today that great movement is smashed... 

...If we are not to see our movement smashed and the leaders placed in concentration camps, the workers must be prepared to take power. There is great hope in the situation. Everything we have preached since the days of Keir Hardie is coming to fulfilment. 

It is now our task as a working-class movement to take over and run the show for the benefit of the community. Unless the working class is thinking in terms of power it will have to think in terms of defeat. Fascism is capitalism’s last big trick... I want you to think in terms of power and if you get that mentally you will get power. If however you think only in terms of defeat, of keeping quiet to retain what you have got, then you will get no more than did the democrats in Germany. 

After 1931, the Labour Party slowly started to regain the confidence of the people and regained 19 seats in a series of by-elections. In 1935, Lansbury retired as leader of the Labour Party, handing over to Clement Attlee who led Labour into the General Election of that year in which the Labour Party won 154 seats – an increase of 100. Manny Shinwell, winning by a margin of 21,000 votes, ousted MacDonald from his Seaham seat. However, the National Government was still firmly in control with 431 seats.  

Attlee’s first speech at the Durham Miners’ Gala was made in 1936 in which he made clear the difference between the austere policies of the National Government and that of the Labour Party: 

 The lesson to us is that we must seek power and that when we get power we must deal with the immediate issues that face us. We must end the capitalist system. 

In the latter half of the decade, preparations for war with Germany began to breathe life into Durham’s mines and the shipyards of the Tyne, Wear and Tees.  

The crash of 1929 was finally resolved in the death of over 60 million people and the total destruction of vast swathes of industry throughout Europe and Asia. Over three times as many people were killed as had perished in WW1 – the war to end all wars.  

The returning troops and a population now having suffered the hardships of three decades of wars and depressions were determined that things had to be changed and, in 1945, elected the Labour Party with a unprecedented majority of 173 over the Tories and Liberals. ‘No Return To The ‘30s’ became a watchword for the next fifty years. 

It is generally accepted that the reason for this victory was down to the Labour’s manifesto that promised radical change: nationalisation of major industries, nationalisation of the Bank of England, the establishment of a welfare state with a comprehensive National Health Service free at the point of use, a huge council housing building programme and a reform of the education system in favour of the hitherto disadvantaged.  Labour created a settlement that was largely left untouched until Thatcher. 

This year’s Gala takes place the day before the 70th anniversary of that famous victory of July 12 1945. Perhaps we should pause a moment and reflect on the lessons of that day and the preceding decade and ask those aspiring to the leadership of the Labour Party:  

  • Was the Labour Party right in 1931 to refuse to implement an austerity programme, which made working people pay for the crisis?  
  • Would there have ever been a great victory in 1945 if they had joined MacDonald in 1931? 
  • Did those speakers at the pre-war Galas get it right in identifying the capitalist system as the source of the crisis and is the solution, as Clem Attlee said at the 1936, to ‘end the capitalist system’?  
  • Or was James Ramsay MacDonald, who the Durham miners painted out of their banners, right after all?