1. Democracies in Crisis Political responses to the Great Depression

2. The Department of Political Science Presents The Territory of Somewhat Requited Dreams: The Territory of Somewhat Requited Dreams: Creating an ethnically-sensitive state in Nunavut Dr. Annis May Timpson Director of Canadian Studies University of Edinburgh Science Building Lecture Theatre February 12, 2008 @ 7:30pm

3. The 1929 crash  October 1929: NY Stock market crashes  Immediate knock-on effects ‘Scramble for liquidity’ ‘Scramble for liquidity’ Bankruptcies, bank failures Bankruptcies, bank failures Creditanstalt (1931) > runs on other banks, firms, pressures on gov’ts dependent on creditCreditanstalt (1931) > runs on other banks, firms, pressures on gov’ts dependent on credit Rising unemployment Rising unemployment Falling demand reinforces downward spiral Falling demand reinforces downward spiral US responds by raising tariffs, calling loans US responds by raising tariffs, calling loans  Impact spreads rapidly to Europe: Germany’s ability to pay reparations depends on US loans…. Germany’s ability to pay reparations depends on US loans…. Contraction of world trade Contraction of world trade

4. Initial responses Some relief efforts (e.g. UK) but for the most part economic orthodoxy prevails  Governments use tariffs & quotas restrict imports, prevent outflow of gold  Try to balance budgets by raising taxes, reducing expenditures, cutting wages  Firms respond in same way  Net effect: pro-cyclical, reinforcing downward spiral > vicious circles

6. Britain  Minority Labour government tries to balance budget  Attempts to lower wages by 10% in 1931  Resistance forces Britain to abandon gold standard  Devaluation improves competitiveness, mildly counter- cyclical effects  National coalition (Liberals, Conservatives, Ramsey MacDonald without Labour) presides over depressed economy  Nevertheless Some nationalizations (e.g. London transport), rationalization of coal industry Some nationalizations (e.g. London transport), rationalization of coal industry Investment in housing (facilitated by cheap money Investment in housing (facilitated by cheap money Existing pensions & unemployment insurance systems overwhelmed by the magnitude of the problem Existing pensions & unemployment insurance systems overwhelmed by the magnitude of the problem

7. Germany:  Withdrawal of American loans results in precipitous decline in production & employment  Brüning government responds by increasing taxes to reduce deficits & balance budgets  Deflation & end of reparations fail to arrest downward spiral  Support for Communists & Nazis grows

8. France  Initially cushioned large # of small, self-financing firms large # of small, self-financing firms But decline in exports (because of gold standard) & fall in commodity prices ripples through economy But decline in exports (because of gold standard) & fall in commodity prices ripples through economy  Tardieu gov’t attempts to modernize & reflate economy but maintain gold standard Torpedoed by divisions within coalition: his own Radicals fail to support… Torpedoed by divisions within coalition: his own Radicals fail to support…  Conservative coalition assumes office  1932 election brings coalition of left to power Unable to act because of divisions between Socialists & Radicals Unable to act because of divisions between Socialists & Radicals  Increased polarization Workers radicalized – move left Workers radicalized – move left Peasantry moves to the right Peasantry moves to the right

9. The 3 rd Republic Party system PCF SFIO RADICALS independents far right __________________________________ Left Right

10. Toward the Popular Front  From 1932: left majority if Communists, Socialists & Radicals can cooperate  But Communists turned inward: Communists turned inward: BolshevizedBolshevized unwilling to cooperate with ‘socio-fascists’unwilling to cooperate with ‘socio-fascists’ Socialists distrust CommunistsSocialists distrust Communists Socialists and Radicals unable to sustain cooperation: Radicals unwilling to accept Socialist demands for reforms, 40 hour week,Socialists and Radicals unable to sustain cooperation: Radicals unwilling to accept Socialist demands for reforms, 40 hour week,

11. Changing domestic & international situation Domestic side  Growing unrest: increasing activities of far right, fascist groups – Action Francaise Action Francaise Faisceau Faisceau Jeunesse Patriotes Jeunesse Patriotes Croix-de-Feu… Croix-de-Feu…  Financial scandal results in “Stavisky” riots & resignation of Daladier government (1934)  Fears of fascist takeover (not necessarily well- founded)

12. International  Growing fear of Nazism – espec. among Communists  Alliance between France & USSR from 1935 Maintaining it contingent on keeping right from coming to power Maintaining it contingent on keeping right from coming to power  Growing sense that a popular front & common program needed

13. The Popular Front (1936-1938)  Coalition between Socialists & Radicals under Leon Blum -- Communist support but stay out of government  Committed to progressive policies  Implementing them another matter: Unions stage wave of strikes, factory occupations Unions stage wave of strikes, factory occupations Matignon Accords (1936): Matignon Accords (1936): employers concede wage increases, 40 hour work weekemployers concede wage increases, 40 hour work week Unions recognized as collective bargaining agentsUnions recognized as collective bargaining agents Problem: investors move money outside the country Problem: investors move money outside the country increased uncertainty about profits,increased uncertainty about profits, maintenance of gold standard maintenance of gold standard Problems containing right, support, containing left (Spanish civil war) or maintaining coalition Problems containing right, support, containing left (Spanish civil war) or maintaining coalition

14. Demise of the popular front  Blum in office until 1937 Under constant pressure from not only from bourgeoisie but also Communists, others favouring: Under constant pressure from not only from bourgeoisie but also Communists, others favouring: Intervention in Spanish Civil War (1936-39Intervention in Spanish Civil War (1936-39 Further concessions to workersFurther concessions to workers  Popular Front governments in power through 1938 broaden ownership of Bank of France broaden ownership of Bank of France Devalue (leaving the gold standard) Devalue (leaving the gold standard) Nationalize munitions industry Nationalize munitions industry Fix price of wheat Fix price of wheat Raise school leaving age from 8 to 14 Raise school leaving age from 8 to 14 Begin rearming Begin rearming  By 1938 Popular Front dissipates, coalition shift to the right, workers gains rolled back > strikes & unrest

15. Sweden: public works & counter- cyclical management  Background 19 th century = fortified poorhouse 19 th century = fortified poorhouse Early adoption of universal suffrage & proportional representation Early adoption of universal suffrage & proportional representation Four party system: Four party system: Social Democrats, Agrarians, Liberals, Conservatives __________________________________________  Through1920s, no clear majority  From 1933: Social Democrats gain strength Social Democrats gain strength Form SD gov’t with Agrarian support Form SD gov’t with Agrarian support Begin long period of SD rule Begin long period of SD rule In power for all but 6 years through 1990sIn power for all but 6 years through 1990s

16. Policies  Deficit financing  Immediate spending on public works, housing, creating work In effect counter-cyclical management or Keynsianism -- foundation of post World War II welfare states In effect counter-cyclical management or Keynsianism -- foundation of post World War II welfare states  1938: Saltjöbaden Accords – agreement between trade unions (LO) & employers federation: Employers recognize unions, agree to bargain centrally them Employers recognize unions, agree to bargain centrally them Unions recognize right of owners to manage firms as they see fit, make profits Unions recognize right of owners to manage firms as they see fit, make profits  Lay foundations for well-developed welfare state, with workers earning high incomes & owners of capital high profits – what elsewhere would be called the postwar settlement

17. Why Sweden?  Unified labour movement – not split on religious or ideological lines two legs: two legs: Social DemocratSocial Democrat LO (trade union federation)LO (trade union federation)  Pragmatic – not hemmed in by Marxist theory  Sufficient support to set terms of a bargain which capital can accept (vs. Matignon accords)

18. Why not elsewhere?  Two reasons: Limits of dominant ideas, especially classical economics Limits of dominant ideas, especially classical economics  Those who do want to experiment lack the power to do so: Social Democrats in the Netherlands Social Democrats in the Netherlands French Socialists French Socialists Mavericks in established parties Mavericks in established parties  Osvald Moseley in UK – leaves Labour to establish British Fascist Party

19. Ironically  Keynes’ ideas – foundation of post-world War II economic management – are around  Keynes publishes General Theory of Employment, Interest & Money in 1935  Not only Swedes, but two other countries adopt similar policies: United States under Franklin Roosevelt United States under Franklin Roosevelt Nazi Germany, as a result of military spending, public works projects Nazi Germany, as a result of military spending, public works projects