ABSTRACT
This chapter explores what was the nature of Britain's response to the world depression in relation to how it saw its place in the world economy. It also examines British economic policy at both the international and domestic level in a little more detail. Economic turmoil stimulated political turmoil and the fact of a Labour government in power served only to increase the sense of instability in the minds of international bankers and financiers. The monetarist approach to British economic performance in the 1930s has attracted considerable support as part of an upsurge in the popularity of market, or new classical, economics following the demise of Keynesian economics in the stagflation of the early 1970s. The USA, by contrast, was generating large and increasing surpluses on its trading accounts, because of the heavy world demand for its goods combined with its own near self-sufficiency.
