Tariffying! British history lessens...
What could possibly go wrong?
Longtime readers will be well aware that while we agree with Mark Twain that history doesn’t repeat itself but it often ‘rhymes’ and that we increasingly see Herbert Hoover as the best historic precedent of Donald J Trump (we’d love to hear from any readers who can come up with good rhymes for either Hoover or Trump than the ones we’ve entertained ourselves with).
But it’s not only in America that we see historic assonance (emphasis NOT on ‘onance’) or parallels.
Herbert Hoover was inaugurated as POTUS on 4th March 1929. Just over 3 months later, James Ramsey MacDonald was sworn in for his second term as Prime Minister of the UK. In 1892 MacDonald had, along with Arthur Henderson and Keir Hardie founded the Labour Party as a radical political force representing the working class. Currently Labour Party leader, Keir Starmer, is reportedly named after Keir Hardie but many may see more parallels with MacDonald.
Having abandoned his earlier socialist principles, Macdonald had come to be seen as a centrist moderniser, promoting globalism (or internationalism as it was then known) and forging electoral pacts with the Liberals. Specifically he came to oppose radicalism and militancy, and promoted himself as a “determined enemy of Communism” but a strong supporter of Zionism, as a solution to the ‘Palestine problem’.
He was also an advocate of constructing a tunnel under the Channel to connect the UK and France. Although he was the first Labour Prime Minister, his policies promoted widespread distrust and unease, among the broader Labour Party members and the workers’ movements and unions, to the extent that in the 1929 election MacDonald had to move from his long held previously safe Welsh constituency of Aberavon, to the bullet-proof seat of Seaham Harbour to avoid the potential loss of his parliamentary seat. Oswald Mosley, who was later to found the British Union of Fascists formed part of MacDonald’s second government.
When the Great Depression took root, MacDonald’s cabinet refused to engage in deficit spending despite the urgings of Mosley, former Liberal leader Lloyd George and foremost economist of the era, JM Keynes. By the end of the following year, MacDonald’s response to unemployment doubling to over two and a half million was to pursue what today would be described as austerity policies, especially in the forms of benefits cuts.
In the crises that followed, MacDonald was expelled from the Labour Party and instead lead a predominantly Conservative ‘National Government’ which engaged in the Beggar Thy Neighbour tariff policies of the 1930s, during which time it became apparent that the economic primacy of the British Empire had been clearly surpassed by American global dominance and that the economic downturn was of such severity that it would take many years and a global conflict before there would be any meaningful recovery, in any of the developed economies.
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About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.
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