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The politics of manpower

In 1919, Britain reduced the working hours in major industries to a 48-hour week for industrial workers. Historians have debated whether this move depressed labour productivity and contributed to the slump. Scott and Spadavecchia argue that productivity was in some ways enhanced, especially through higher hourly productivity, and that Britain did not suffer in its exports because most other nations also reduced working hours. Looking at coal, cotton, and iron and steel, they find that Britain did not suffer any significant relative productivity loss in these industries.[169] By 1924 workers had regained their productive output of 1913, this while working greatly reduced hours compared to the pre-war years.[170] By 1938 British industrial productivity had increased by 75% compared to pre-1914 levels, even after the setbacks of reduced working hours and the effects of the Great Depression were taken into account.[170]

Monetary policy of postwar governments also contributed to high unemployment. By April 1925, years of stringent deflationary policies by the British Exchequer had accomplished the intended goal of returning the Pound Sterling to its’ pre-war exchange rate of $4.86. This high exchange rate made for cheap consumer prices and a high real wage for UK workers. However, interest rates were also high as a result, making the cost of doing business all the more expensive, while high labor costs were inevitably offset by employers with layoffs and reduced hiring.[171]

By 1921, more than 3 million Britons were unemployed as a result of the postwar economic downturn. While the economy was recovering by 1922-3, the UK found itself struggling again by 1926, the general strike of that year doing it no favours. Growth for the remainder of the decade became erratic, with brief periods of stagnation constantly interrupting growth. Industrial relations briefly improved, but then came the Wall Street stock market crash in October 1929, which sparked the worldwide Great Depression (See the Great Depression in the United Kingdom).[172] Unemployment had stood at less than 1.8 million at the end of 1930, but by the end of 1931 it had risen sharply to more than 2.6 million.[173]By January 1933, more than 3 million Britons were unemployed, accounting for more than 20% of the workforce – with unemployment topping 50% in some parts of the country, particularly in South Wales and the north-east of England. The rest of the 1930s saw a moderate economic recovery stimulated by private housing. The rate of unemployment fell to 10% in 1938 – half of the level five years previously.[