ABSTRACT
Many government officials, industrialists and economists between the wars saw a distinct connection between the crisis of unemployment and the prevailing level of wages. There were differing interpretations, however, as to the precise nature of this alleged association and of its consequences for public policy. Classical orthodoxy in other words maintained that the existence of unemployment beyond the frictional level was due primarily to real wages being too high in relation to marginal productivity. It was natural that the marked degree of money wage stability after 1923 should have occasioned alarm within government and industry given the pressures of high unemployment and weak international competitiveness. There was a strong temptation nevertheless for businessmen and politicians, concerned about rising labour costs and mounting unemployment at home and declining international competitiveness abroad, to see in an enforced reduction of real wages a direct and effective remedy for Britain’s economic ills.
