The Labour Party and the Planned Economy, 1931-1951 (Royal Historical Society Studies in History New Series)

ROYAL HISTORICAL SOCIETY STUDIES IN HISTORY New Series

THE LABOUR PARTY AND THE PLANNED ECONOMY, 1931–1951

Studies in History New Series Editorial Board Professor David Eastwood (Convenor) Professor Michael Braddick Dr Steven Gunn Dr Janet Hunter (Economic History Society) Professor Aled Jones (Literary Director) Professor Colin Jones Professor Mark Mazower Professor Miles Taylor Dr Simon Walker Professor Julian Hoppit (Honorary Treasurer) This series is supported by an annual subvention from the Economic History Society

THE LABOUR PARTY AND THE PLANNED ECONOMY 1931–1951

Richard Toye

THE ROYAL HISTORICAL SOCIETY THE BOYDELL PRESS

© Richard Toye 2003 All Rights Reserved. Except as permitted under current legislation no part of this work may be photocopied, stored in a retrieval system, published, performed in public, adapted, broadcast, transmitted, recorded or reproduced in any form or by any means, without the prior permission of the copyright owner First published 2003 A Royal Historical Society publication Published by The Boydell Press an imprint of Boydell & Brewer Ltd PO Box 9, Woodbridge, Suffolk IP12 3DF, UK and of Boydell & Brewer Inc. PO Box 41026, Rochester, NY 14604–4126, USA website: www.boydell.co.uk ISBN 0 86193 262 5 ISSN 0269–2244

A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Toye, Richard, 1973– The Labour Party and the planned economy, 1931–1951 / Richard Toye. p. cm. – (Royal Historical Society studies in history. New series, ISSN 0269–2244) “A Royal Historical Society publication.” Includes bibliographical references and index. ISBN 0–86193–262–5 (alk. paper) 1. Great Britain – Economic policy – 1918–1945. 2. Central planning – Great Britain – History. 3. Great Britain – Politics and government – 1910–1936. 4. Great Britain – Politics and government – 1936–1945. 5. Labour Party (Great Britain) I. Title. II. Series. HC256.3 .T65 2003 330.941’082 – dc21 2002153719

This book is printed on acid-free paper Printed in Great Britain by St Edmundsbury Press Ltd, Bury St Edmunds, Suffolk

Contents Page Acknowledgements ix Abbreviations xi Introduction 1 1 Planning: birth of an idea 9 2 Plan or perish: 1931 and its impact 34 3 Practical economics? 1932–1939 65 4 The economic consequences of the war 87 5 Shall the spell be broken? 114 6 Planning for reconstruction 139 7 International planning: external economic policy in the 1940s 156 8 Bricks without straw: unplanned socialism, 1945–1947 185 9 Planning, priorities and politics, 1947–1951 208 Conclusion 236 Bibliography 243 Index 259

TO JANET, JOHN, ELEANOR AND KRISTINE

‘What is national planning but an insistence that human beings shall make ethical choices on a national scale? Planning means that you ask yourself the question: which comes first? What is the most important? Every attempt to choose between all courses of conduct is a moral choice. Therefore those who say that we are materialists, that we have no sense of comprehensive design, are failing to fit what we are doing into our central purpose. The language of priorities is the religion of socialism’: Aneurin Bevan, Labour Party annual conference report, London 1949, 172

Publication of this volume was aided by a grant from the Scouloudi Foundation, in association with the Institute of Historical Research.

Acknowledgements Thanks are due, first, to Professor Peter Clarke, who supervised the PhD dissertation upon which this book is based. Not only did he provide me with invaluable help and guidance throughout my time in Cambridge, but he also allowed me access to the private papers of Sir Stafford Cripps, when they were under his custodianship. I am grateful, too, to the Cripps family, for their agreement to this arrangement. James N. Miller kindly provided me with copies of material from the Truman Library. Professor Martin Daunton, Dr Ross McKibbin, Professor Kenneth O. Morgan, Professor Sir Hans Singer, Dr Miles Taylor, Dr Keir Thorpe and Dr J. M. Winter have all read and commented upon parts of the present work. My parents, John and Janet Toye, have done likewise, thus going far beyond the ordinary calls of familial duty. I would also like to thank the editors of Twentieth Century British History, the Historical Journal and Contemporary British History, and a number of anonymous referees, for comments on three articles, parts of which have been incorporated in an amended form into chapters 4, 7 and 8. Such errors that remain, are, of course, entirely my own. Unpublished writings of John Maynard Keynes copyright the Provist and Scholars of King’s College, Cambridge, 2003. Richard Toye

ix

Abbreviations AER BLPES BSSLH C20BH CEPS CJE CSO EAC EcHR EHR EIU EJ EPB EWO FJ FQ FRUS FTC GATT HC Debs HJ HL Debs HPE HWJ ILO ILP IMF IO ITO JBS JCH LCC LPA LPACR LRC LSE MAP NEP NFRB NIB NJC OEEC

American Economic Review British Library of Political and Economic Science Bulletin of the Society for the Study of Labour History Twentieth Century British History Central Economic Planning Staff Cambridge Journal of Economics Central Statistical Office Economic Advisory Council Economic History Review English Historical Review Economic Information Unit Economic Journal Economic Planning Board essential work order Fabian Journal Fabian Quarterly Foreign Relations of the United States NEC policy committee finance and trade subcommittee General Agreement on Tariffs and Trade Parliamentary debates, 5th series, House of Commons Historical Journal Parliamentary debates, 5th series, House of Lords History of Political Economy History Workshop Journal International Labour Organisation Independent Labour Party International Monetary Fund International Organization International Trade Organisation Journal of British Studies Journal of Contemporary History London County Council Labour Party archive Labour Party annual conference report Labour Representation Committee London School of Economics Ministry of Aircraft Production New Economic Policy New Fabian Research Bureau National Investment Board National Joint Council Organisation for European Economic Cooperation xi

PEP PF PLP PP PQ SDF SSIP TUC WEC

Political and Economic Planning Public Finance Parliamentary Labour Party Past and Present Political Quarterly Social Democratic Federation Society for Socialist Inquiry and Propaganda Trades Union Congress War Emergency: Workers’ National Committee

Introduction

Introduction The British Labour Party ended the twentieth century as it began it, at its formation in 1900 – as a non-socialist party, albeit with many socialists among it numbers. Between 1918 and 1995, however, Labour was formally committed to the common ownership of the means of production. Yet whether, during this period, Labour was at any point a truly socialist party has been the subject of intense dispute and, indeed, remains a matter of current political significance. Within this debate, the record of Clement Attlee’s 1945–51 government – the Labour government which had, perhaps, the most to show for its time in office – has been crucial. Unsurprisingly, Tony Blair, the party leader responsible for finally jettisoning the common ownership commitment, has been keen to downplay the socialist aspect of the Attlee government’s ideology, whilst still taking pride in that government’s achievements. In a speech on the fiftieth anniversary of the 1945 general election he said: ‘It was a government that was willing to draw on the resources of the whole progressive tradition. The ideas of Keynes and Beveridge were the cornerstone of reform.’1 Blair’s remarks represented a subtle attempt to secure an ‘old Labour’ lineage for his political modernisation project, of which many party members were instinctively deeply suspicious. But to what degree was his assessment correct? To the extent that Labour in the Attlee years had drawn on the ideas of Beveridge and Keynes – and in the latter case, in particular, this was not a simple or straightforward process – it had done so in support of a project the traces of which Blair himself was now attempting to erase. That project was nothing less than the attempt to create a British socialist commonwealth. This book explores a key aspect of the effort to realise this ideal in the crucial area of economic policy; it examines the origins and fate of the Labour Party’s repeatedly expressed pledge to create a planned socialist economy in Great Britain. The fascination of this issue lies in the disparity between promise and performance. B. W. E. Alford, Rodney Lowe and Neil Rollings have noted, though Labour came to office in 1945 profoundly committed to economic planning, ‘ideology was not matched by a practical programme of action’.2 1

Tony Blair, New Britain: my vision of a young country, London 1996, 11. The following year Blair commented privately that, ‘It was such nonsense that Keynes and Bevan and Beveridge were all [sic] in different parties’: Paddy Ashdown, The Ashdown diaries, I: 1988–1997, London 2000, 456, entry for 5 Sept. 1996. 2 B. W. E. Alford, Rodney Lowe and Neil Rollings, Economic planning, 1943–1951: a guide to documents in the Public Record Office, London 1992, 9, 16.

1

THE LABOUR PARTY AND THE PLANNED ECONOMY

Given that the party had spent the fourteen years since the fall of the previous Labour government attempting to devise such a programme, this might be thought surprising. What makes it the more so is that, in other areas, Clement Attlee’s administration established an extremely good record of keeping its election promises. Accordingly, some historians have been driven almost to distraction by that government’s failure to plan, for example Peter Hennessy: ‘it was the great delight of Attlee and [Herbert] Morrison to make statements in parliament about the uniquely British way of democratic socialist economic planning that enabled us to organise ourselves efficiently without losing individual liberty . . . the fact that there was no real attempt to do it, even in the British circumstances, even within the British political and bureaucratic tradition, is still to me amazing’.3 One purpose of this investigation is to resolve, or at least diminish, such bafflement; to explain why, in Stephen Brooke’s words, socialist economic planning ‘became the unlikeliest casualty of the Attlee government’.4 In order to do this, it is necessary to understand why Labour had adopted the notion of the planned economy, and in what form. This in turn is only possible with reference to the experience and legacy of 1931. In August of that year, the party met with disaster. Ramsay MacDonald, its leader and first prime minister, abandoned it to form a National government, an act which he saw as necessary for the restoration of the country’s financial stability. In the general election that followed in October, MacDonald defeated his former party by a massive majority, reducing Labour to a mere fifty-two members of parliament (including a half-dozen ILP and other rebels). This went down in Labour mythology as the ‘great betrayal’, and was to sour politics for a generation. But, as Jennie Lee put it, writing from her perspective as a former ILP MP, ‘when three Labour leaders of such widely divergent temperaments as Ramsay MacDonald, [Philip] Snowden and [J. H.] Thomas decide to abandon the party they have belonged to all their lives, serious people are bound to ask not what was wrong with their morals but what was wrong with their political philosophy’.5 Thus, as Roger Eatwell and Anthony Wright have put it, the 1931 trauma triggered within the Labour movement’s ranks ‘a process of theoretical stock-taking and prescription among British socialists unparalleled in the history of the Labour Party and which claimed to be rooted in concrete political experience’6 – the experience, that is, of humiliation and defeat.

3

Peter Hennessy, ‘Never again’, in Brian Brivati and Harriet Jones (eds), What difference did the war make? Leicester, 1993, 3–14 at p. 8. 4 Stephen Brooke, ‘The Labour Party and the Second World War’, in Anthony Gorst, Lewis Johnman and W. Scott Lucas (eds), Contemporary British history, 1931–1961: politics and the limits of policy, London 1991, 1–16 at p. 13. 5 Jennie Lee, This great journey, New York 1942, 117. 6 Roger Eatwell and Anthony Wright, ‘Labour and the lessons of 1931’, History lxiii (1978), 38–53 at p. 40.

2

INTRODUCTION

A new conception? It was natural, therefore, that this process of stocktaking should have resulted in the party’s rejection of MacDonald’s philosophy of gradualism, just as MacDonald himself had rejected the party. This gradualism was not simply a policy of political caution, but an economic doctrine: it was believed that rentiers could be painlessly expropriated via taxation, an evolutionary transition to socialism taking place whilst capitalist economic efficiency continued undimmed.7 Labour’s pre-1931 view of socialism was thus intimately bound up with economic theory. (This was perhaps inevitable, given that the aim of socialism was to replace one economic system, capitalism, with a socially just alternative.) It followed that, in order to exorcise the ghosts of the MacDonaldite, gradualist past, Labour needed a new view of economics. Since 1918, socialism had been the party’s stated end; now, economic planning became the means. It was to remain central to the party’s ideology for the next two decades and beyond. The Labour planners, like most politicians, were often eager to claim that the policy positions they now held were those that they had always held. John Maynard Keynes, however, was close to the mark when in March 1932 he hailed state planning as ‘a new conception . . . something for which we had no accustomed English word even five years ago’.8 (F. A. Hayek, from a different perspective, later saw 1931 – when the National government adopted protection – as the moment when Britain launched itself on its ‘headlong plunge’ towards planning.)9 The novelty of the untested idea, moreover, perhaps contributed to the vague and inchoate nature of the policy, to which hostile contemporaries were keen to point. Part of this problem arose from the fact that the idea of planning was so popular that it came to mean many different things to many different people. Walter Elliot, a minister in Neville Chamberlain’s government, in 1940 satirised the prevalent attitude: ‘Anything which anyone objects to is not planning. What we like is planning. What we do not like is chaos.’10 Confusion was exacerbated by the fact that the new vogue was a cross-party phenomenon. Naturally, left-wing Conservatives and Liberals saw planning in a rather different light 7 8

See Robert Skidelsky, Interests and obsessions: selected essays, London 1993, 118. Indeed, as late as 1933, the Oxford English Dictionary did not recognise the existence of the word ‘planning’. John Maynard Keynes, The collected writings of John Maynard Keynes, London 1971–89, xxi. 84; J. Stevenson, ‘Planner’s moon? The Second World War and the planning movement’, in Harold L. Smith (ed.), War and social change: British society in the Second World War, Manchester 1986, 58–77 at p. 66. 9 Writing in 1943, F. A. Hayek noted that in the company of middle-class socialists ‘as long as ten or twelve years ago [i.e. in 1931–3] I first experienced in this country [Britain] the then still unusual sensation of being suddenly transported into what I had learnt to regard as a thoroughly “German” intellectual atmosphere’, i.e. one that favoured planning: The road to serfdom, London 1962, 9 n. 1, 34, 144 n. 1. 10 HC Debs, 359, 17 Apr. 1940, col. 1039.

3

THE LABOUR PARTY AND THE PLANNED ECONOMY

than socialists did, but were not necessarily given to greater precision in their use of language. This makes the untangling of the web of ideas a yet more complicated task.

The planned economy: a definition Clearly, the socialist planning ideas of the 1930s and 1940s cannot be examined purely on their own, frequently vague, terms. The challenge is to elicit sense, or at least consistency, from statements that were often, in technical economic terms, meaningless; whilst neither condemning, as such, the politician’s necessary resort to platitude and rhetoric, nor making the reverse mistake of intellectualising politics by assuming that the authors of populist clichés ‘must’ have known more economics than they were letting on. Furthermore, the sphere of ‘planning’ was generally taken to include planning for health, housing and social security, and town and country planning, as well as more formal economic questions. Thus, in the nature of things, any one study of planning is likely to concentrate on a small part of what contemporaries tended to see as a seamless political continuum. To what extent, then, is it possible for the historian to cut through both the mass of potentially salient material, and the intellectual muddles in which the historical actors were often caught up? Any solution will, of course, be partial. Nevertheless, it is possible, and necessary, to devise a loose definition of economic planning as a guide to investigation. Adrian Oldfield has postulated a distinction between those who wanted ‘planning’ as a means to tide the economy through immediate crises (that is, to return the existing system to the rails essentially unchanged) and those who wanted a plan as a substitute for capitalism. Harold Macmillan and Oswald Mosley fell into the former category, according to Oldfield, whilst the bulk of the Labour Party was in the latter.11 Further, one can distinguish between ‘planning’ and ‘interventionism’.12 On these terms, the mere decision of a government to intervene in a particular sphere of economic life does not amount to planning, unless that intervention is tied to others as part of a coherent scheme. This definition has the advantage of having been used by contemporaries: ‘It is . . . quite untrue’, wrote Evan Durbin in 1935, ‘that general planning will be no more than the sum of a large number of interferences with a private enterprise economy’.13 The distinction is important, for it might well be argued that, in spite of Labour’s aspirations in the 1930s, the

11

Adrian Oldfield, ‘The growth of the concept of economic planning in the doctrine of the Labour Party, 1914–1935’, unpubl. PhD diss. Sheffield 1973, p. i. 12 Alford, Lowe and Rollings, Economic planning, 3. 13 E. F. M. Durbin, Problems of economic planning: papers on planning and economics, London 1949, 42.

4

INTRODUCTION

Attlee government’s policy in the 1940s was merely interventionism under the barest veneer of planning.14 John Bennett has usefully summarised the key features of a centrally planned economy as follows: ‘In any period the planners construct a plan that will guide economic activity in the following period . . . They construct a plan using a welfare function, or some other clearly defined objective, that is proposed from outside the model, presumably by politicians.’15 Moreover, the state owns the means of production, thus giving the plan its ‘socialist’ character. The Labour would-be planners would certainly have recognised this model as their own. Therefore, in examining the Labour Party’s aim of creating a planned economy, the planning ideas of most pressing importance are likely to be those with the following characteristics: 1 a concern with fundamentally altering or replacing the existing economic system, i.e. ‘Planning which results in the general supersession of individual enterprise as the source of economic decisions’, in Durbin’s phrase16 2 that the intended replacement system would be based on the central direction of a very substantial portion of economic life, not merely on a series of ostensibly unrelated government interventions 3 that state ownership of the means of production is seen as an important tool in relation to such central economic direction.

The historiography of planning, and its implications In recent years, quite aside from the studies, too numerous to list here, that have touched on Labour’s planning policies in the course of more general accounts of the party’s development, there has also emerged a specialist planning literature. This ranges from Alan Budd’s wide-ranging popular account of the politics of economic planning, to Daniel Ritschel’s recent monograph on planning debates in the 1930s, and from Alec Cairncross’s biting chapter on ‘The planned economy’ under Attlee, to the measured and intensely detailed work of both Jim Tomlinson and Keir Thorpe on the same period; and this is merely to scratch the surface.17 Moreover, the publication, within 14

See Bernard Donoughue and G. W. Jones, Herbert Morrison: portrait of a politician, London 1973, 354. 15 John Bennett, The economic theory of central planning, Oxford 1989, 1. 16 E. F. M. Durbin, Problems of economic planning, 42. 17 Alan Budd, The politics of economic planning, Manchester 1978; Daniel Ritschel, The politics of planning: the debate on economic planning in Britain in the 1930s, Oxford 1997; Alec Cairncross, Years of recovery: British economic policy, 1945–51, London 1985, 299–332; Jim Tomlinson, Democratic socialism and economic policy: the Attlee years, 1945–51, Cambridge 1997; Keir M. Thorpe, ‘The missing pillar: economic planning and the machinery of government during the Labour administrations of 1945–51’, unpubl. PhD diss. London 1998.

5

THE LABOUR PARTY AND THE PLANNED ECONOMY

the last fifteen years, of diaries and memoirs of civil servants directly involved in the planning process between 1945 and 1951, is likely to stimulate yet further interest from historians;18 as is the availability of B. W. E. Alford, Rodney Lowe and Neil Rollings’s Economic planning 1943–1951: A guide to documents in the Public Record Office (1992), which runs to 1,172 pages. What is the significance of this growth industry? Martin Francis has pointed out that what the Attlee governments meant by ‘Socialism’ is ‘a question historians have been surprisingly reluctant to ask, let alone answer’.19 This has been changing in recent years, but, to a lesser extent, it has traditionally been true of studies of the 1931–45 period too; ideological socialism has generally been treated as at best incidental to the Labour Party’s true mission of political pragmatism. The essential point of difference has been whether or not this pragmatism was laudable.20 The current interest in planning may signal a move away from this trend. On the one hand, given the importance that contemporary socialists attached to it, understanding what Labour meant by ‘the planned economy’, is bound to bring insight into the nature of the party’s political mission. On the other, neither the drastic nature of the policy, nor the circumstances of the ultimate failure to enact it, can provide much comfort either to those who argue that Labour was never a party of genuinely socialist intention, or to those who wish to play up the modest, sober, competent progress supposedly achieved under Mr Attlee. Thus, if we want to explain the link between party ideology and practical policy, the progress of planning is an excellent place to start. It should be stressed, of course, that ideology is only one part of the picture. For example, Robert Millward has pointed out that the nationalisations of the 1940s, concentrated as they were in the transport and fuel industries, cannot be explained purely in terms of Labour’s commitment to public ownership: ‘Why . . . should the socialist vision be restricted to transport and

18 Susan Howson and D. E. Moggridge (eds), The collected papers of James Meade, IV: The Cabinet Office diary, 1944–46, London 1990; Alec Cairncross (ed.), The Robert Hall diaries, 1947–1953, London 1989; Edwin Plowden, An industrialist in the Treasury: the post-war years, London 1989. 19 Martin Francis, ‘Economics and ethics: the nature of Labour’s socialism, 1945–1951’, C20BH vi (1995) 220–43 at p. 220. See also Martin Francis, Ideas and policies under Labour 1945–1951: building a new Britain, Manchester 1997, 2–3. 20 Thus, Ben Pimlott argues, with approval, that ‘The Labour Party as a whole has always seen itself as a party of the present as much as of the future. . . . The Labour Party is, indeed, a reformist party, and it has been on its reformism, rather than its long-run socialist aspiration, that its appeal to the electors has been based.’ On the other hand Gregory Elliott argues, with severe disapproval that ‘Labour is not now – and has never been – a socialist party. . . . As its very name suggests, Labour was founded to advance the interests of the labouring class within capitalism, via reforms, not to create a qualitatively different form of society; to ameliorate, not abolish, capitalism.’ See Ben Pimlott, Labour and the left in the 1930s, Cambridge 1977, 194; Gregory Elliott, Labourism and the English genius: the strange death of Labour England, London 1993, p. xi.

6

INTRODUCTION

fuel?’21 Thus, as Millward has shown, it is also necessary to look at the specific features of the industries concerned (which in these cases had strong elements of natural monopoly and externalities) if we are to reach a full explanation. But this is not to say that ideology was unimportant, only that the study of economic ideas in the political arena must be related to the condition of particular industries, as well, of course, to wider economic trends. Indeed, the potential to enact particular political and economic proposals may depend in part on a national ‘climate of opinion’ influenced by such conditions and trends, a climate one party alone may have a limited ability to change. Equally, a new government, however much its ideas represent a break with the past, will inevitably be constrained, to some degree, by the actions of previous ones. As with the Attlee administration, moreover, governments may be faced with harsh external economic constraints not of their own making, and ideological adjustment to this may be long and fraught. Yet ideology does not merely reflect such broader forces; it also, to some extent, conditions them and their impact. Labour’s thinking on the planned economy thus provides a prism through which to view the changing nature of the state in twentieth-century Britain, and the way in which parties and politicians have reacted to and shaped its evolution.

21

Robert Millward, ‘The 1940s nationalizations in Britain: means to an end or the means of production?’, ECHR i (1997) 209–34 at p. 209.

7

Birth of an Idea

1

Planning: Birth of an Idea In the nineteenth century socialists wanted to abolish rule by private economic interest, but the idea of the planned economy to replace capitalism was born only in the twentieth. The birth of the concept of planning was thus a seminal event, both for economic theory and perhaps still more importantly for socialism. Attempts to devise and implement schemes for the central direction of nations’ economic lives in supersession of private enterprise marked a step away from mere utopianism; and, somewhat paradoxically, such planning was also a major departure from marxian anti-utopianism, which saw attempts to describe the future socialist order as futile, given that such an order was bound inevitably to evolve as a product of historical forces. The planned economy as a practical phenomenon found expression in Germany during World War I, an example followed consciously by the Russian Bolsheviks after 1917; British state intervention in the economy during war time had far less long-term impact on the theory and practice of socialism. This chapter cannot, of course, give a comprehensive description of all these complex practical and theoretical developments. Rather, its purpose is simply to explore their relative impact upon the British labour movement in the years before 1931, with a view to establishing that year as a turning point in Labour’s economic thought. Therefore, a consideration of the domestic and European intellectual traditions which in time contributed to the British ‘planning boom’ of the thirties will take place in parallel with a discussion of the relevant practical questions of Labour politics.

Does socialism imply planning? The late-Victorian British economy was characterised by low growth and productivity. Britain consistently ran an adverse balance of trade; however, a healthy balance of payments surplus was achieved through the provision of services (such as insurance and shipping) and through investment income derived from abroad.1 For the most part, then, this system seemed successful as a means of generating wealth; nevertheless, it still produced gross social inequalities. Accordingly, from the 1880s onwards, socialist societies and groups proliferated. These included the Fabian Society, the Social 1 Peter Mathias, The first industrial nation: an economic history of Britain, 1700–1914, 2nd edn, London 1983, 369–71, 282–9.

9

THE LABOUR PARTY AND THE PLANNED ECONOMY

Democratic Federation (SDF), William Morris’s Socialist League, and the Independent Labour Party (ILP). But did a belief in socialism necessarily imply a belief in some form of economic planning? Some writers have suggested that this was indeed the case. According to E. H. Carr, discussing the case of Russia, ‘the concept of planning . . . was inherent in any reaction from the laissez-faire economy of the nineteenth century’.2 For Adrian Oldfield, author of a PhD thesis on the origins of British socialist planning, the rejection of laissez faire does not itself imply planning; but ‘planning is implied in, or can be inferred from, the socialist aim of the public ownership and control of the means of production’.3 Thus, Carr and Oldfield seem to share the notion that planning, though unarticulated, was ‘inherent’ or ‘implied’ in earlier sets of ideas. There is a danger that such an argument will tend towards the logic of post hoc ergo propter hoc, and that an idea’s roots will be traced back to wherever one wishes to find them.4 Equally, when one idea clearly does imply another to the modern eye, the initial idea’s proponents often confound the historian by failing to make the ‘obvious’ link themselves. Such is frequently the case when looking at socialism and planning. This can be illustrated with specific reference to Carr’s contention that ‘The conception of a socialist planned economy . . . was deeply imbedded in Marxist thought’.5 Marx and planning The connection between Marx and planning might be thought clear. The Russian Bolsheviks claimed to be Marxists; they initiated the grandest experiment in economic planning the world has ever known; and they self-consciously attempted to do this in line with Marxist precepts (or at least sought to justify what they were doing in those terms). Yet not only, as Carr admits, had Marx and his successors done little to develop the conception of planning in detail6 but the idea of doing so was actually considered antithet2 3

E. H. Carr, The Russian revolution from Lenin to Stalin, 1917–1929, London 1979, 106. Adrian Oldfield, ‘The Labour Party and planning – 1934, or 1918?’ BSSLH xxv (autumn 1972), 41–55 at p. 47, and ‘Growth of the concept of economic planning’. See also Eric Hobsbawm, Age of extremes: the short twentieth century, 1914–1991, London 1994, 377: ‘planning is implicit in a socialized economy’. 4 For example, Ferdynand Zweig in 1942 put forward the notion that ‘the idea of planning . . . is nearly twenty-four centuries old, having been first formulated by Plato in his Republic’. More recently P. J. D. Wiles has argued that Gracchus Babeuf and his 1794 ‘conspiracy of the equals’ ‘possibly invented the command economy, and certainly were the first to work it out in detail’. Neither author, however, presents any evidence in support of such extravagant claims, which, perhaps, are simply an attempt to gain for planning an antiquated, and thus presumably respectable, intellectual lineage: Ferdynand Zweig, The planning of free societies, London 1942, 20; P. J. D. Wiles, Economic institutions compared, Oxford 1977, 215. 5 Carr, Russian revolution, 106. 6 Ibid.

10

BIRTH OF AN IDEA

ical to ‘scientific’ socialism. As F. A. Hayek, a vigorous opponent of planning, was keen to point out in 1935, Marx and the Marxians . . . proceeded, quite consistently, positively to discourage any inquiry into the actual organization and working of the socialist society of the future. If the change was to be brought about by the inexorable logic of history, if it was the inevitable result of evolution, there was little need for knowing in detail what exactly the new society would be like . . . Marx himself had only scorn and ridicule for any such attempt to deliberately construct a working plan of such an ‘utopia’.7

In fact, in the Communist manifesto (1848), Marx and Engels did advocate a programme of action which ‘in the most advanced countries’ they considered ‘pretty generally applicable’. This was made up of measures which in themselves appeared ‘economically insufficient and untenable’ but which would ‘necessitate further inroads upon the old social order, and are unavoidable as a means of revolutionizing the mode of production’.8 But these hardly amounted to an explanation of how a future communist society would work in economic terms. Indeed, the German revisionist socialist Eduard Bernstein even quoted Marx as saying ‘the man who draws up a programme for the future is a reactionary’.9 Of course, Bernstein was interpreting Marx for his own ends. But the essential point, in Hayek’s words, is that ‘Only occasionally, and then in a negative form, do we find in his works statements about what the new society would not be like.’10 Marx left behind an economic analysis of capitalism, not socialism. Nevertheless, there is a smattering of references in Marx and Engels, which Carr quotes, on the desirability of the regulation of national production ‘upon a common plan’ (Marx),11 and to ‘social regulation of production according to a definite plan’ (Engels).12 Equally, Marx, in Capital, spoke of a future time ‘when production is subjected to the genuine, prior control of

7

F. A. Hayek, ‘Nature and history of the problem’, in F. A. Hayek (ed.), Collectivist economic planning: critical studies on the possibilities of socialism, London 1935, 1–40 at p. 13. 8 Karl Marx and Friedrich Engels, Collected works, VI: Marx and Engels, 1845–48, London 1976, 504–5. These measures included abolition of property in land, a heavy progressive income tax, abolition of all right of inheritance, centralisation of credit in the hands of the state, state control of communication and transport, extension of factories and instruments of production owned by the state ‘and the improvement of the soil generally in accordance with a common plan’. Such a ‘common plan’ appears to indicate a uniform blueprint for agricultural improvement, not a plan of production. 9 Cited in E. H. Carr, The Bolshevik revolution, 1917–23, London 1950, 5. 10 Hayek, ‘Nature and history of the problem’, 13. 11 Karl Marx and Friedrich Engels, Collected works, XXII: Marx and Engels, 1870–71, London 1986, 335. 12 Idem, Collected works XXV: Friedrich Engels: anti-Dühring, dialectics of nature, London 1987, 267. Engels also refers (pp. 139, 331) to ‘a society organised for co-operative work on a planned basis’, and to ‘the conscious organisation of social production, in which production and distribution are carried on in a planned way’.

11

THE LABOUR PARTY AND THE PLANNED ECONOMY

society’.13 That these remarks are so few and so vague, however, simply underlines Hayek’s point. Furthermore, Carr’s own admission that Marx attempted no discussion of the conditions or the instruments of socialist production renders almost meaningless his subsequent conclusion that ‘Marx . . . left behind the conception of a socially planned economy’. Certainly, to a large degree ‘his economic analysis of the capitalist order was to provide by process of contradiction the basis of the techniques of socialist planning’ in the USSR.14 But this simply meant that the Bolsheviks later exploited Marx’s analysis of capitalism to derive a conception of planning; no such positive conception was present in the works of Marx himself. If, as is commonly assumed, Marx’s thought had no influence on the development of the British Labour movement, this last point would not be important. But in fact, although Marx’s influence was small, it existed nonetheless; as Frank Trentmann has noted, ‘the popular dismissal of Labour as ignorant of Marx has gone too far’.15 The Labour Representation Committee (LRC), the Labour Party’s forerunner organisation, rejected the doctrine of the ‘class war’ at its inaugural conference in February 1900. Yet in spite of this, Philip Snowden, who would become Labour’s original ‘iron chancellor’, could write, in the days before the great war, that ‘Marx’s doctrine of surplus value . . . is a concrete fact’.16 And Ramsay MacDonald, Labour’s future prime minister, could argue in 1921 that although the validity of Marx’s economic theories was ‘more than doubtful’, his work nonetheless ‘translated an economic criticism into a living movement’, and ‘he imparted to the working class movement a greatness and a majesty in the evolution of human society’.17 There may even have been an acceptance, to some degree, of Marx’s anti-utopianism. Fred Jowett, the ILP/Labour MP for Bradford West, wrote in 1907 that ‘The future must grow out of the present; it cannot be created to fit with a plan.’18 But if MacDonald and others emphasised Marx the man over and above the school of thought he founded, it was still the case that sub-Marxian rhetoric was used by minority left-wing groups within the Labour Party throughout the inter-war period, and sometimes crept into official pronouncements too. More significant than this, however, was the earlier, indirect impact of Marx’s thinking in the evolution of the economic theories of the Fabian Society, which was founded in 1884, the year after Marx’s death; for it was the Fabians who, at the close of the World War I, succeeded in placing their ideological imprint on Labour. 13 14 15

Karl Marx, Capital: a critique of political economy, iii, Harmondsworth 1981, 288–9. Carr, Bolshevik revolution, 6, 8–9. Frank Trentmann, ‘Wealth versus welfare: the British left between free trade and national political economy before the First World War’, Historical Research lxx (1997), 70–98 at p. 79. See also Francis, Ideas, 15. 16 Philip Snowden, Socialism and syndicalism, London 1912, 73. 17 J. Ramsay MacDonald, Socialism, critical and constructive, London 1929, 65, 67, 73. 18 Keith Laybourn, The evolution of British social policy and the welfare state, c. 1800–1993, Keele 1995, 163. I am grateful to Robert Benjamin for this reference.

12

BIRTH OF AN IDEA

The Fabians According to Hayek, ‘even outside the Marxian camp the common descent of all modern branches of socialism from some essentially historical or “institutional” view of economic phenomena had the effect of successfully smothering all attempts to study the problems any constructive socialist policy would have to solve’; only in response to outside criticism, well after the turn of the twentieth century, did socialists begin to wrestle with economic problems of planning.19 The Fabians were the leading British ‘institutional’ school of socialism. Were they, then, guilty of neglect, or even, as Hayek would have it, of wilful blindness? Elizabeth Durbin has written that Sidney and Beatrice Webb, the famous Fabian ‘firm’, were disdainful of abstract economics.20 This is unfair to Sidney, at least; in 1883 or 1884 he began to participate in discussions of Capital at the ‘economic tea parties’ of the Karl Marx Club (later the Hampstead Historic Society), apparently at the behest of George Bernard Shaw.21 (Shaw also persuaded Webb to join the infant Fabian Society in May 1885.)22 Up until 1886 Webb was thus involved in prolonged discussion of Marx, towards whom he ‘generally adopted a respectful attitude’, commending the force of his exposition of exploitation whilst denying the originality of his economic ideas. (Beatrice Potter, his future wife, was independently criticising Marx’s labour theory of value at this time.)23 The significance of his contribution was that, as fellow-discussant Graham Wallas put it, ‘under Webb’s leadership, we worked out the Jevonian anti-Marx value theory as the basis of our socialism, and that from our studies of the history of the socialist idea we became consciously “evolutionist” ’.24 Therefore, the Fabians not only used W. S. Jevons’s marginal utility concept to rebut Marx’s argument that the value of a good was determined solely by the amount of labour necessary to produce it, but, as the second part of Wallas’s remark indicates, also looked beyond the realm of pure economics in order to reach their evolutionary socialist conclusions. Indeed, as A. M. McBriar has shown, the Fabians did not swallow Jevonian economics whole, and other factors contributed to their rejection of Marx. By 1886, the Fabians had repudiated H. M. Hyndman’s revolutionary Social Democratic Federa-

19 20

Hayek, ‘Nature and history of the problem’, 14. Elizabeth Durbin, ‘Fabian socialism and economic science’, in Ben Pimlott (ed.), Fabian essays in socialist thought, London 1984, 39–53 at p. 39. 21 Royden J. Harrison, The life and times of Sidney and Beatrice Webb, 1858–1905: the formative years, London 2000, 28–9, 354 n. 74 22 Peter Clarke, Liberals and social democrats, Cambridge 1978, 30–2; Lisanne Radice, Beatrice and Sidney Webb: Fabian socialists, London 1984, 53–4, 56. 23 Harrison, Sidney and Beatrice Webb, 29–30, 137. 24 Wallas to E. R. Pease, 10 Jan. 1916, cited in Clarke, Liberals, 31.

13

THE LABOUR PARTY AND THE PLANNED ECONOMY

tion, ‘and Marx’s theories . . . had come to be connected in the public mind with the politics of the SDF’.25 The Fabian spurning of Marxist catastrophism was therefore bound up with distaste for the political methods it implied, as well as with doubts about its economic basis. As David Marquand has summarised, ‘It was because capitalism had solved the problem of production – because resources were plentiful even if maldistributed – that Marx’s prophecy of progressive proletarian impoverishment had been falsified, and the Marxist strategy of class war rendered unnecessary. And it was because revolutionary Marxism was wrong that gradualist democratic socialism was right.’26 Sidney Webb’s theory of rent implied that the capitalist class could be induced, via the dual pressures of higher taxation and higher wage costs, to surrender its assets to the community in instalments, leading to that class’s eventual elimination.27 Robert Skidelsky has argued that the political significance of this theory ‘was precisely to deny the theoretical necessity of exploitation under capitalism, and thus establish the possibility of an evolutionary and peaceful transition pari passu with continuing capitalist efficiency’.28 It would be wrong, of course, to claim that the theory of rent in itself was solely responsible for the adoption of an evolutionary approach to political change. To some extent the leading Fabians used and amended the theory in line with, or as a means of justifiying, their own differing political proclivities, and its significance for the overall Fabian vision has been challenged.29 Nevertheless, the evolutionary strategy did become Labour’s hallmark in the thirty years after the party’s formation (although there was also an influential anti-evolutionary tradition, of which William Morris and John Ruskin were the godfathers).30 The dominant view would be encapsulated in Sidney Webb’s remark to the 1923 party conference on ‘the inevitable gradualness of

25 26

A. M. McBriar, Fabian socialism and English politics, 1884–1918, Cambridge 1966, 30–5. David Marquand, The progressive dilemma: from Lloyd George to Kinnock, London 1991,

65. 27

For a summary and assessment of the theory see McBriar, Fabian socialism, 36–42. See also his An Edwardian mixed doubles: the Bosanquets versus the Webbs: a study in British social policy, 1890–1929, Oxford 1987, 21, and Skidelsky, Interests and obsessions, 118. 28 Skidelsky, Interests and obsessions, 118. 29 In the 1880s and 1890s, Shaw saw ‘permeation’ in terms of weaning the radicals away from the Liberal Party. Sidney Webb defined it in terms of giving expert advice to a political elite without any need for a new party: Mark Bevir, ‘Fabianism, permeation, and independent labour’, HJ xxxix (1996), 179–96, and ‘Fabianism and the theory of rent’, History of Political Thought x (1989), 313–27. 30 Nevertheless, the two schools of thought were not strictly compartmentalised in all respects. As José Harris has noted, writings by the Webbs on such themes as the ‘national minimum’, ‘national housekeeping’, and female citizenship, were deeply reminiscent of Ruskin’s thought: ‘Labour’s political and social thought’, in Duncan Tanner, Pat Thane and Nick Tiratsoo (eds), Labour’s first century, Cambridge 2000, 8–45 at pp. 12–13, and ‘Ruskin and social reform’, in Dinah Birch (ed.), Ruskin and the dawn of the modern, Oxford 1999, 7–33 at p. 28.

14

BIRTH OF AN IDEA

our scheme of change’.31 However, the emphasis on inexorability was as significant as the emphasis on incrementalism.32 In the shorter period, however, the Fabians ‘with considerable courage set out to reconstruct society, and . . . frankly confessed that we did not know how to go about it’, as Edward Pease, the group’s first general secretary, put it.33 It was during the 1880s that unemployment was recognised by politicians and administrators, for the first time for nearly fifty years, as a chronic social problem.34 The Fabians studied the issue, identifying an array of causes for joblessness, from indiscriminate almsgiving to the absence of labour mobility.35 It would be unfair, therefore, to criticise the Fabians, as Hayek did, for ‘smothering all attempts to study the problems any constructive socialist policy would have to solve’. But they, and the Webbs in particular (who met in 1890 and married two years later), concentrated on administrative rather than economic solutions. Arguably, therefore, they tended to overlook the most important category of problems. The Webbs set themselves the task of devising the set of institutions which would ensure social harmony in the new society. They defined the state as a ‘national association of consumers’ engaged in ‘housekeeping on a national scale’.36 They did, indeed, note that ‘Every kind of co-operation among men requires a coherent plan, which can be explained to the participants, and which will, in its working, so far conform to the nature of things as to be practicable.’37 And H. G. Wells, in The new Machiavelli, his 1911 satire on the Webbs, wrote that ‘Failure is not failure nor waste wasted if it sweeps away illusion and lights the road to a plan’.38 For the Webbs, however, such plans were not economic plans in the sense of the central co-ordination of all economic activity. Once the public service ideal had been substituted for the private profit motive, by virtue of the collective control and administration of the main instruments of wealth production, enlightened administration would, they believed, by itself render redundant the economic problems of capitalism.39 This was what Sidney Webb meant by ‘the substitution of 31 32 33 34

LPACR, London 1923, 178. Harris, ‘Labour’s political and social thought’, 11–12. Edward R. Pease, The history of the Fabian Society, London 1963, 40. José Harris, Unemployment and politics: a study in English social policy, 1886–1914, Oxford 1972, 7. 35 McBriar, Edwardian mixed doubles, 89–90. 36 J. M. Winter, ‘Webb, Beatrice and Sidney’, in John Eatwell, Murray Milgate and Peter Newman (eds), The new Palgrave: a dictionary of economics, iv, London 1987, 885–6. 37 Sidney and Beatrice Webb, ‘What is socialism? – III’, New Statesman, 26 Apr. 1913. 38 H. G. Wells, The new Machiavelli, Harmondsworth 1946, 38. 39 On the other hand, the 1909 minority report of the Royal Commission on the Poor Laws, which was written jointly by both the Webbs and signed by Beatrice, did propose the reduction of cyclical unemployment by ten-year programmes of public works designed to compensate for the impact of the trade cycle. The significance of this should not be overplayed, given that the majority report of the commission also agreed, albeit in less specific terms, that public authorities should stagger some of their work in order to increase it when

15

THE LABOUR PARTY AND THE PLANNED ECONOMY

consciously regulated co-ordination among the units of each [economic] organism for their intermittent competition’ – something that would emphatically not involve the running of all industries from a central office in London.40 Thus, with regard to the Hayek critique, it should be noted that the pre-war Fabian vision was not the wholly centralised bureaucracy of the Austrian’s nightmares. Although state takeover of capitalist monopolies was an important feature of Fabian thought, Pease pointed out in 1916 that, ‘What the Fabian Society did was to point out that Socialism did not necessarily mean the control of all industry by a centralised State.’41 Piecemeal municipalisation, not just large-scale nationalisation, would play a key role in bringing about the transition from capitalism. This was perhaps natural in view of the trend of expanding local government in this period; local authority spending rose rapidly from the 1880s to the point where, for the single year 1905, more than half of all public spending was undertaken by local authorities.42 Thus, the dirigisme popular with British socialists (and indeed with the Webbs themselves) in the 1930s was in important respects at odds with previous Fabian thinking.

Attitudes to competition and consumerism There would, however, be strong elements of continuity, particularly in terms of attitudes to the market. The pre-1931 Fabians deplored what they saw as the wasteful proliferation of retailers, wholesalers and middlemen under the capitalist system, attacked advertising as creating further waste by deceiving consumers, and believed that the sovereignty of the private consumer in a market economy was characterised by anarchic irresponsibility.43 Of course, many of these views were not unique to the Fabians. In the 1870s, the artist, critic and social reformer John Ruskin had opposed the ‘evil trade’ of advertising, even to the point of refusing to allow his own works to be advertised.44

unemployment was high. This should be borne in mind when considering José Harris’s fundamentally correct argument that, with their proposal, the Webbs ‘came closer than any other contemporary reformers to devising an “economic” remedy for unemployment’, but ‘were much more interested in creating an administrative science for the treatment of unemployed workmen analogous to the science of public health’: Unemployment and politics, 258–9, 6 n. 1. See also McBriar, Edwardian mixed doubles, 291–305. 40 Sidney Webb, The difficulties of individualism, London 1896, 5, cited in Noel Thompson, ‘Hobson and the Fabians: two roads to socialism in the 1920s’, HPE xxvi (1994), 203–20 at p. 206; Sidney Webb and Beatrice Webb, A constitution for the socialist commonwealth of Great Britain, London 1920, 179. 41 Pease, Fabian Society, 82. 42 John Stevenson, ‘From philanthropy to Fabianism’, in Pimlott, Fabian essays, 15–26. 43 Thompson, ‘Hobson and the Fabians’, 204–5. 44 Ruskin, in his emphasis on human fulfilment and the dignity of labour, also had a more

16

BIRTH OF AN IDEA

J. A. Hobson, a liberal socialist advocate of expansionary monetary policies whose views in important respects contrasted with those of the Fabian Society, shared with it the opinion that monopoly capitalism was absorbing small-scale enterprise. Much influenced in his overall outlook by Ruskin, he likewise believed that the rise of mass consumerism was creating a breeding ground for a ‘new bastard culture’ driven by selfish materialism, which would erode the moral cohesion of society.45 Socialists also noted that social deprivation led to despair and thence to self-destructive and anti-social behaviour; and they thus held capitalism responsible for a wide variety of ills. As Philip Snowden put it, ‘Competition is largely responsible for insanity, suicide, and drinking.’46 The belief that the market was socially destructive as well as economically inefficient persisted within the Labour Party during the 1931–51 period, and was a significant influence on the policies that it proposed in opposition and enacted in government. Just as market competition was perceived to be damaging to civilised community values, so socialism would restore them; one of its key purposes was ‘to make men and women better than they are’.47 The party’s planning policies, as they developed in these years, were not just about the achievement of economic efficiency but also about collective moral improvement. The success or failure of these policies in the end hinged on, and was indivisible from, the attempts of Labour in power to inspire individuals to work together for the common good.

The economic theory of the collectivist state Although the Fabians and other socialists might conceivably be held accountable for not developing more fully their own economic conception of the collectivist state, they did not plough on blindly with their own work in wilful ignorance of a body of generally well-known and understood planning theory. Three European economists, Friedrich von Wieser (1851–1926),

general influence on ILP founder members Keir Hardie, F. W. Jowett and Tom Mann, and on many of the first Labour MPs. See E. T. Cook and Alexander Wedderburn (eds), The works of John Ruskin, London 1903–12, xxvii. 352–5; Joan Abse, John Ruskin: the passionate moralist, London 1980, 238, 245; Lawrence Goldman, ‘Ruskin, Oxford and the British labour movement’, in Birch, Ruskin, 57–86. 45 Goldman, ‘Ruskin’, 57–86; Frank Trentmann, ‘Civil society, commerce, and the “citizen-consumer”: popular meanings of free trade in modern Britain’, in Frank Trentmann (ed.), Paradoxes of civil society: new perspectives on modern German and British history, Oxford 2000, 306–31 at p. 318; John Allett, New liberalism: the political economy of J. A. Hobson, Toronto 1981, 17–19; H. C. G. Matthew, ‘Hobson, Ruskin and Cobden’, in Michael Freeden (ed.), Reappraising J. A. Hobson: humanism and welfare, London 1990, 11–30. 46 Snowden, Socialism, 90. 47 This remark was made by Herbert Morrison in the aftermath of the 1951 general election. See Steven Fielding, ‘Labourism in the 1940s’, C20BH iii (1992), 138–53 at p. 138.

17

THE LABOUR PARTY AND THE PLANNED ECONOMY

Vilfredo Pareto (1848–1923) and Enrico Barone (1859–1924) did make important contributions in this arena from the 1880s to the 1900s. But the significance of these was long to remain obscure, and made little impact on other thinkers, socialist or otherwise, until the 1930s. Nonetheless, these three non-socialists between them ‘created what is to all intents and purposes the theory of the socialist economy’ and in the long run, according to Joseph Schumpeter, ‘rendered a service to socialist doctrine that socialists themselves had never been able to render’.48 As their work is generally agreed to represent the beginnings of modern planning theory, it is worthy of consideration here. Wieser is considered one of the founding trio (with Carl Menger and Eugen Böhm-Bawerk) of the Austrian School of economics in the last quarter of the nineteenth century.49 His Der Naturliche Werth (1889), translated into English as Natural value in 1893, used the assumption of a communist state as an expository device, thus demonstrating that such a state would necessarily give rise to the same value phenomena (for example, rent, wages, interest) which are observed in a competitive society.50 According to Schumpeter, this means that any attempt to develop a general logic of economic behaviour will automatically yield a theory of the socialist economy as a by-product, and ‘The first to realise this explicitly was von Wieser.’51 Pareto, who succeeded to Leon Walras’s chair of economics at Lausanne university in 1892, published the second volume of his Cours d’économie politique in 1897. Schumpeter has argued that this established Pareto’s claim more than any other individual to be the originator of the modern pure theory of the socialist economy.52 The Cours provided a mathematical criterion for the optimum allocation of resources within a society: it must be impossible by any reallocation of resources to enhance the welfare of one household without reducing that of another.53 Barone, who was acquainted with Pareto, clarified and built on this criterion in a 1908 article in which he posed the question, ‘How, in a collectivist regime, ought production to be directed?’54 In answer to this, he formulated the set of simultaneous equations he believed that the ministry of production (or the ‘central planning authority’, in later usage) would have to solve. He concluded that, in theory, resources could be allocated as rationally in a collectivist (or ‘planned’) economy as by a free market. He doubted, however, that such an approach 48 49

Joseph A. Schumpeter, History of economic analysis, London 1959, 986. E. Streissler, ‘Wieser, Friedrich Freiherr von’, in Eatwell, Milgate and Newman, New Palgrave, iv. 921–2. 50 See Hayek, ‘Nature and history of the problem’, 25. 51 Schumpeter, History, 987. 52 Ibid. 53 Abram Bergson, ‘Socialist economics’, in Howard S. Ellis and Bernard F. Haley (eds), A survey of contemporary economics, i, Homewood, Ill. 1957, 412–18. 54 The article is translated as ‘The ministry of production in the collectivist state’, in Hayek, Collectivist economic planning, 245–90.

18

BIRTH OF AN IDEA

would be practical, given the enormous number of equations it would be necessary to solve, ‘although it is not inconceivable that . . . such difficulty could be overcome’.55 This article, then, can be seen as the first rigorous formulation of what the planners in a socialist (or otherwise collective) economy would actually have to do. But until it was published in English in 1935, under Hayek’s editorship, it remained a mere curiosity. The significance of these three contributions, as seen later, was two-fold. First, it was possible to infer from the writings of Wieser and Pareto that the job of a planning authority is to carry out consciously the same calculations which take place implicitly in a completely free market. Second, Barone suggested a mechanism whereby this might be done. At an abstract level, planning could be proven to ‘work’, and this would shift future anti-planners onto the different ground of formulating practical objections. Most importantly for our argument here, however, these prototypical planning ideas were not, at the time of their inception, recruited into political debate. Socialists and anti-socialists ignored them alike. Only the extension of state economic control during World War I brought the theory of planning into increasing prominence. Most notably, in Germany war-time developments spawned the term ‘planned economy’ (Planwirtschaft), and in turn strongly influenced the Russian Bolsheviks. By contrast, the war did not produce in Britain any widespread use of the word ‘planning’ in an economic sense; such references to it as did occur in the war years and after were few and far between, and were usually ambiguous. However, the war did bring about a radical restructuring not only of the Labour Party’s organisation, but of its political thought. Labour’s adoption of socialism in 1918 did not in itself amount to the acceptance of planning; but, after 1931, the prominence of ‘clause 4’ in the party’s constitution had a major impact on the form taken by Labour’s planning ideology.

State control in Britain during World War I In the opening months of the Great War, the British government’s motto was ‘business as usual’, a phrase which was, in Peter Hennessy’s words, a verbal ruse, masking massive, confidence-restoring interventions in the insurance and financial markets.56 But in spite of such interventions, the idea that industry itself would have to be deliberately organised for war production ‘encountered subconscious resistance in a Government committed to the doctrines of free trade and individualism’, as war-time civil servant E. M. H. Lloyd put it in 1924. ‘It is not surprising that the necessity for State interven55 56

Ibid. 287. See also Bennett, The economic theory of central planning, 2. Peter Hennessy, Whitehall, London 1988, 60–1. See also David French, ‘The rise and fall of “business as usual” ’, in Kathleen Burk (ed.), War and the state: the transformation of British government, 1914–1919, London 1982, 19.

19

THE LABOUR PARTY AND THE PLANNED ECONOMY

tion was only gradually admitted by Ministers who had spent the greater part of their political careers in exploding the fallacies of Protectionism on the one hand and Socialism on the other.’57 The first significant extension of government intervention from the purely financial sphere to the direct control of production and distribution was triggered only by a first-rate crisis. This was the shell-shortage scandal of May 1915, which resulted not only in the establishment of a ministry of munitions, but also brought the Labour Party into government as part of the newly formed Asquith coalition: the party’s leader, Arthur Henderson, entered the cabinet. David Lloyd George, in charge of the new ministry, revolutionised production: as a consequence of his inventive methods, the normal laws of supply and demand were suspended. But no Labour thinker was later willing to admit that Lloyd George’s actions were any more than the improvisations of a brilliant but untrustworthy maverick. Moreover, his departures from laissez-faire as yet found no echo elsewhere in government. Only when Lloyd George replaced the ‘damp squib’ H. H. Asquith as prime minister in December 1916 did Britain undertake its war-time revolution.58 There was a new, small war cabinet of five, of which Henderson was a member. Under its direction, state control advanced rapidly; freed from Treasury constraints, the entire government machine appeared to contemporaries to have got out of hand.59 However, controls over manpower, finance, transport, production and consumption were rarely pushed to their logical limit even in the final months of the war, for each measure of state interference had to be preceded by some disaster or immediately impending danger. For example, by 1917, shortages and maldistribution in food supply, together with unwarranted price increases, were a potent cause of industrial unrest. A commission of enquiry led to the appointment of a food controller, and in July, the prices of wheat sugar and meat were fixed. But the food crisis grew, price control was extended and, after December 1917, rationing was generally adopted, but not on a uniform basis. Rationing of milk did not even begin until the winter of 1918–19. There was a similar story over shipping, where partial government control led to soaring prices and profits in the uncontrolled sector, thus forcing the state to extend its powers further.60 Moreover, 57 E. M. H. Lloyd, Experiments in state control at the War Office and the Ministry of Food, Oxford 1924, 22. Lloyd had been a civil servant both in the War Office and in the Ministry of Food during the war, responsible for devising schemes of requistioning, rationing and price control of food and raw materials. He worked alongside future Labour MP E. F. Wise, and in the 1920s came into contact with many leading figures in the ILP, especially H. N. Brailsford and Clifford Allen. For details of his career see Oldfield, ‘Economic planning’, 133–4. 58 A. J. P. Taylor, English history, 1914–1945, Oxford 1965, 109. 59 James E. Cronin, The politics of state expansion: war, state and society in twentieth-century Britain, London 1991, 71. 60 Sidney Pollard, The development of the British economy, 1914–1980, 3rd edn, London 1983, 22–4.

20

BIRTH OF AN IDEA

industries were dealt with separately, ad hoc, which of course had advantages, but hardly made for uniformity; thus, in E. M. H. Lloyd’s words, the development of control was ‘due almost entirely to the overwhelming force of circumstances and hardly at all to a deliberate policy of State intervention consciously thought out and consistently applied’.61 This was perhaps inevitable, given that the imposition of control, over labour as well as industry, was potentially politically explosive.62 Thus, in place of a coherent strategy rested an amalgam of piecemeal and cautious administrative expedients.63 This, at least, was the Labour view between the wars. This sense of disappointment on behalf of socialists was compounded in the immediate post-war period by the failure of reconstruction initiatives, and the winding up of many of the state’s new functions. The Ministry of Reconstruction itself, set up in 1917 (following the previous year’s appointment of an official reconstruction committee, on which Beatrice Webb served) was shut down in 1919. Other war-time ministries – munitions, shipping, and food – were wound up in 1921. The Ministry of Labour, established in 1916 as part of the price of the Labour Party’s support for the Lloyd George coalition, continued after the war, but never lived up to initial hopes that it would give workers a new voice in government. The ambitious post-war housing plans of coalition health minister Christopher Addison – a future Labour cabinet member – were in 1921 sacrificed in the interests of retrenchment.64 This rolling-back of the state’s frontiers coincided, first, with an inflationary boom, and then, from 1920, with high unemployment – the dominant theme of the inter-war years.

The Labour movement in war-time Before looking at how Labour reacted to the problems of those years, it is necessary to examine, together with the effect of war-time developments on the Labour Party’s economic policy, the impact of the war on the movement as a whole. The first fundamental question here has been enunciated by J. M. Winter: why in the latter years of the war did Labour’s leading figures, Ramsay MacDonald and, in particular, Henderson, seek out Sidney Webb’s advice and enable him ‘to formulate virtually every major aspect of Labour Party policy’, notably the programme and party constitution of 1918? As Winter argues, ‘The contrast with the cool, if not hostile, relationship between the Webbs and the leading figures of the pre-war Labour movement could not

61 62 63 64

Lloyd, Experiments, 268, 277, 260. Cronin, Politics of state expansion, 68–9. Duncan Tanner, Political change and the Labour Party, 1900–1918, Cambridge 1990, 353. Cronin, Politics of state expansion, 48, 67, 88–9; Henry Pelling, A history of British trade unionism, Harmondsworth 1963, 155.

21

THE LABOUR PARTY AND THE PLANNED ECONOMY

have been more striking.’65 The second question, of course, must be why Webb formulated policy as he did. Webb, who had first met Henderson at the ILP’s Easter 1914 ‘coming-of-age’ conference, was involved from the start in forming Labour’s response to war, and at a high level. He sat on the executive of the War Emergency: Workers’ National Committee (WEC), a widely representative body summoned into existence on 5 August 1914 when there was still thought to be a hope of peace. Henderson was chairman; the other committee members included such diverse persons as MacDonald, who resigned as party leader on 6 August in opposition to the war, and SDF founder H. M. Hyndman. The Labour Party was at this time in danger of splitting; the way to avoid this was for the factions to work together on concrete tasks. Thus, in order to avoid ructions, the WEC consciously kept its head down, concentrating on immediate social problems such as unemployment, prices and rising rents rather than on wider issues of reconstruction. This phase continued until early in 1916, when the committee asserted itself by calling for all Labour organisations to present a united front to the government on post-war problems. This provoked the jealousy of the Labour Party’s national executive (NEC), which acted to take discussion of such questions out of the WEC’s hands; significantly, Webb now shifted allegiance, accepting a place on the NEC’s new subcommittee on post-war problems.66 This was a strong stimulus to official Labour’s work on reconstruction issues, but it was not until Henderson’s visit to Russia in the summer of 1917, and his subsequent cabinet resignation in mid-August, that Webb’s diligent work began to bear substantial fruit.67 Furthermore, Henderson’s increasing scepticism about the prime minister’s ‘knock-out blow’ policy made possible a genuine rapprochement with the ILP minority who had opposed the war, in particular MacDonald and Snowden.68 His achievement now was to persuade the mutually antipathetic MacDonald 65

J. M. Winter, Socialism and the challenge of war: ideas and politics in Britain, 1912–1918, London 1974, 6–7. 66 Ibid. 216–17. 67 Henderson’s resignation from the government was a consequence of his new-found support for the proposed international socialist conference in Stockholm. He adopted this changed view after Lloyd George sent him as a British envoy to Petrograd. He explained his position to a dinner party that included the Webbs and their nephew, the as yet unpolitical Stafford Cripps, who recorded: ‘At dinner [Henderson] was very interesting over Russia holding that had we permitted the “Stockholm Conference” Kerensky would have been able to maintain his power and that the Russians would have continued fighting under him. His argument was that Russia was quite prepared to wait for a general peace as long as she thought an effort would be made to conclude peace as soon as it was possible, but when the Stockholm conference was forbidden she realised that militarism was still rampant in all countries and she has lost her patience’: Stafford Cripps diary, entry for 1 Feb. 1918, Cripps papers, Nuffield College, Oxford. This analysis far overrated the strength of Kerensky’s position. 68 See Francis Williams, Fifty years’ march: the rise of the Labour Party, London 1949, 275.

22

BIRTH OF AN IDEA

and Webb to work together with him on a statement of British war aims. Perhaps yet more importantly, Webb helped Henderson write a new constitution for the Labour Party; he also wrote a major policy statement to accompany it, Labour and the new social order. This document was in fact a compilation of resolutions from the 1917 annual party conference, policies which had in many cases themselves been worked out over a number of years.69 Certain elements on the economic side, however, were clearly attributable to the war. Before 1914, no socialist would have dreamed of suggesting that price control under capitalism was the way forward; indeed, Webb had argued in the first days of war that prices were irrelevant and wages were all.70 But the new programme demanded the retention of war controls over prices, profits and processes in capitalist industry, and a system of centralised purchase of foodstuffs and raw materials. Together with the ‘conscription of wealth’ proposals first developed by Webb and others on the WEC as a socialist quid pro quo for the introduction of compulsory military service, these ideas lost prominence in Labour’s inter-war programme, only to be resurrected shortly before, and during, World War II.71 By contrast, proposals to nationalise key industries, notably the mines and the railways (both of which had come under temporary state control during the war), and for the control of agricultural land, would prove durable throughout these years and beyond. A further demand was that, as in war time, supplies of scarce resources should be rationed to factories in accordance with national needs.72 This could perhaps be seen as a justification for arguing with Oldfield that both Labour and the new social order and the new constitution that went with it embodied, or rather anticipated, a concept of planning. Certainly, the word ‘plan’ itself was used. There was a call for ‘deliberately planned co-operation in production and distribution’; the party claimed to present ‘a deliberately 69

Henry Pelling and Alistair J. Reid, A short history of the Labour Party, Basingstoke 1996,

40. 70

‘High prices are not to be feared like unemployment’, he argued. ‘To a certain extent they might do good by teaching people to economise. They would mean the cutting down of wastefulness in food, and other things. . . . What is the use of having food cheap if the people have not the money to buy it?’: Daily News and Chronicle, 6 Aug. 1914, cited in Winter, Socialism, 192. 71 When Lloyd George’s post-war coalition started dismantling the apparatus of state intervention with all the eagerness with which it had been set up, Labour proposals to maintain existing controls quickly lost relevance. But although military service was abolished too, ‘conscription of wealth’ outlived it for a short time in the form of proposals for a capital levy to relieve the war debt. The policy became a central part of the 1922 general election campaign, but was subsequently discreetly buried by Snowden. See Labour Party, Labour and the new social order: a report on reconstruction, London 1918, 17; ‘Labour’s call to the people’ (1918), in F. W. S. Craig (ed.), British general election manifestos, 1900–1974, London 1975, 31–2; Labour Party, Labour and the war debt: a statement of policy for the redemption of the war debt, London 1922; Ben Pimlott, Hugh Dalton, London 1985, 143. 72 Labour Party, Labour and the new social order, 15.

23

THE LABOUR PARTY AND THE PLANNED ECONOMY

thought out, systematic and comprehensive plan for . . . immediate social rebuilding’, and called upon ‘the present government to formulate its plan, and to make in advance all arrangements necessary for coping with so unparalleled a dislocation’.73 It is at least worth asking, however, whether or not these were references to plans of action, in the common sense, rather than economic plans. And without dismissing the importance of this first use of planning vocabulary in an official party programme, it may be noted too that it was also the last such use for at least ten years.74 The nub of Oldfield’s argument, however, is his claim that ‘a concept of planning is immanent in any proposal of collective ownership and control of land and capital as a means of making more efficient use of these resources, and of distributing the wealth so produced more equitably’.75 Clause 4 of the party’s new constitution stated the socialist objective: To secure for the producers by hand or by brain the full fruits of their industry, and the most equitable distribution thereof that may be possible, upon the basis of the common ownership of the means of production and the best obtainable system of popular administration and control of each industry or service.76

Thus from Oldfield’s perspective, the Labour Party became a planning party in 1918, simply by virtue of adopting socialist collectivism. Socialism equalled planning, or rather necessitated it, and once a political party adopted socialism it could only be a matter of time before it realised this: ‘public ownership and control on a sufficiently large scale entail planning, of some sort’.77 Thus, Labour’s whole-hearted embrace of planning in the 1930s was merely the delayed consequence of the adoption of clause 4 at the end of World War I. If Oldfield’s analysis is right, what the authors of clause 4 really meant in writing it is almost irrelevant; for once they, and the party, were committed to the form of words, they were bound inexorably to their eventual fate as ideological planners. But common sense must reject such a deterministic view. Moreover, as Ross McKibbin has argued, clause 4 was in fact an ‘uncharacteristic adornment’ on the corpus of the 1918 constitution: ‘That constitution embodied not an ideology but a system by which power in the Labour Party was distributed.’78 That adornment, indeed, was vague, perhaps deliberately so, as Webb, who almost certainly wrote it, argued:

73 74 75 76

Ibid. 4, 5, 7. The ILP represents a separate case, which will be dealt with below. Oldfield, ‘Economic planning’, 107. Cited in Pelling and Reid, Short history, 39. The words ‘distribution and exchange’ were added only in 1929. 77 Oldfield, ‘The Labour Party and planning’, 41–55. 78 Ross McKibbin, The evolution of the Labour Party, 1910–1924, Oxford 1974, 91.

24

BIRTH OF AN IDEA

This declaration of the Labour Party leaves it open to choose from time to time whatever forms of common ownership, from co-operative store to the nationalised railway, and whatever forms of popular administration and control of industry, from national guilds to ministries of employment and municipal management [which] may in particular cases commend themselves.79

A centrally planned economy, therefore, would later prove quite consistent with the 1918 constitution and programme, but then so would the local co-op. Clause 4 only ‘anticipated’ later notions of central planning in the general sense that it allowed the Labour Party to try any economic measures it chose, provided they were consistent with the broadest principles of socialism. For, as has been seen, the Webbs were at this time themselves hostile to excessive dirigisme. In 1920 they wrote in their Constitution for the socialist commonwealth of Great Britain that ‘It need hardly be said that there is no suggestion of the centralisation of industrial administration . . . It would clearly be hopeless to attempt to conduct the administration of the coal mines, any more than that of the harbours and ports, from a London office.’80 To view Sidney Webb as the godfather of Labour’s planning policies would therefore be a mistake.

The impact of German war planning It was only the apparent success of the first Soviet five-year plan that popularised planning in Britain after 1931. The Bolsheviks themselves, however, were strongly influenced in their ideas by the German experience during the great war. The German war corporations of mixed state and private ownership, representing what Lenin called ‘war state monopoly capitalism’, appeared to Russian observers as a transformation of the bourgeois economy which might temporarily postpone its collapse but would ultimately render the economic transition to socialism all the easier.81 Similarly, Walter Rathenau of German General Electric (AEG) and Prussian engineer Wirchard von Moellendorf developed their experience of organising wartime production and raw material allocation into a concept of Planwirtschaft (‘planned economy’) to be preserved post-war; the early Russian planners drew upon this notion explicitly.82 The German war-time experience also had an impact in the immediate post-1918 years upon the pure economic theory of planning, although the debate generated was, for the time being at least, largely confined to 79

Sidney Webb, ‘New constitution of the Labour Party’, Observer, 21 Oct. 1917, cited in Winter, Socialism, 268. 80 Webb and Webb, Constitution, 179. 81 Charles S. Maier, ‘Between Taylorism and technocracy’, JCH v (1970), 27–61 at pp. 46, 50. See also Carr, Bolshevik revolution, 362–3. 82 Maier, ‘Between Taylorism and technocracy’, 45–51.

25

THE LABOUR PARTY AND THE PLANNED ECONOMY

Germany and Austria. With socialist parties in power in many central and eastern European states, the question of how to organise production on socialist lines was of obvious practical significance. Although the Planwirtschaft conception was in fact rejected by the German Social Democratic Party in cabinet in July 1919, this and like schemes for ‘socialisation’ became a vital topic of discussion amongst economists. The Viennese economist Otto Neurath, for example, developed an extreme, moneyless conception of the command economy.83 Such proposals provoked a seminal reaction from another Austrian, Ludwig von Mises, whose paper Economic calculation in the socialist commonwealth, published in April 1920, was a milestone in the debate. The problem it sought to address, that of value in a socialist economy, had first been raised by the Dutch economist N. G. Pierson as far back as 1902.84 But it was Mises who, according to his fellow conservative Hayek, obtained ‘The distinction of having first formulated the central problem of socialist economics in such a form as to make it impossible that it should ever again disappear from the discussion’.85 Mises’s argument was, E. Streissler points out, a development of Wieser’s statement that a socialist economy would need the same ‘measuring rod’ as a capitalist one: out of this came Mises’s idea that, lacking prices, a socialist society could not plan rationally.86 In fact, his argument was, in theoretical terms, flawed. He does not appear to have been aware of Barone’s proof, in principle, that rational economic calculations could be made in a collectivist state, however difficult this might be in practice. But nonetheless, future attempts to devise an economic theory of socialism would be bound to contend with the questions Mises had highlighted. Again, however, it was not until the article concerned was published in English in 1935 that it became influential in British circles.

Early Soviet planning and the British Labour movement Against the backdrop of Russian ‘war communism’, the economic chaos of which lasted from 1918 until the introduction of the new economic policy (NEP) in 1921, Mises’s fears could perhaps be seen to have some basis. In any event, the Soviets consciously followed the German example in these early post-revolutionary years, as they would again during the five-year plan. Accordingly, the USSR’s first limited attempts at concerted planning took

83

Gregory Grossman, ‘Command economy’, in Eatwell, Milgate and Newman (eds), The New Palgrave, i, 494–5. 84 Ludwig von Mises, ‘Economic calculation in the socialist commonwealth’, in Hayek, Collectivist economic planning, 87–130; N. G. Pierson, ‘The problem of value in the socialist community’, ibid. 41–85. 85 Hayek, ‘Nature and history of the problem’, 32. 86 Streissler, ‘Wieser’.

26

BIRTH OF AN IDEA

place during the war communism era. At the ninth party congress in March 1920, a resolution presented by Trotsky contained an anonymous amendment calling for ‘a single economic plan designed for the coming historical period’.87 A joint British Labour delegation, consisting of nine TUC and two ILP representatives, arrived in Russia on 10 May of the same year. During their visit, the plan was explained to them. The group concluded that ‘Great efforts have been made for the economic reconstruction of the country, which is a matter of life or death for Russia’, but also that, ‘These achievements of the Soviet Government . . . have been bought at a very heavy price’, that of bloodshed and repression.88 Overall, the report had a considerable influence upon the shaping of British–Soviet relations at a critical moment.89 But the delegates’ observations on the working of the economic plan itself do not appear to have attracted significant attention from their colleagues in the Labour movement. Other questions, indeed, were more urgent for the British visitors. In the closing months of the civil war, the whole question of the nature of the Bolshevik regime, in the absence of reliable news at home, was bound to take precedence over economic technicalities. The delegates’ report, indeed, strove to be fair-minded, although it was by no means uncritical, and ended with an appeal against intervention by foreign powers; its ambiguity was typical of the Labour movement’s uncertain attitude towards the USSR in the years of the regime’s infancy.90 At this stage, there was little chance of Russia becoming an ‘exemplar’ for British socialists, in economic matters or otherwise. Thus, when Leonid Krassin, a Bolshevik who was in Britain to conclude an Anglo-Soviet commercial treaty, gave an eloquent exposition of the new ideas to the Fabian summer school in September of the same year, the mood was one of polite but sceptical interest. As Krassin admitted, the plan required all authority to be centralised, and ‘obedience to this one supreme authority must be considered a religious duty’. Personal freedom, both in terms of production and consumption, had to be suspended until Russia’s enemy’s were conquered. Beatrice Webb wrote: ‘one is tempted to wonder 87 88 89

Cited in Carr, Bolshevik revolution, 370. Labour Party, British Labour delegation to Russia 1920: report, London, 1920, 3, 7 Stephen White, ‘British Labour in Soviet Russia, 1920’, EHR cix (1994), 621–40. Thanks to Julie Gottlieb for this reference. 90 Henderson’s opposition to Bolshevik extremism was kindled by his experiences in Petrograd during the summer of 1917; and MacDonald, party leader once more after 1922, was in full agreement. This was in contrast to figures such as George Lansbury, well-loved champion of the emotional left, who met Lenin in February 1920 and found him ‘the wisest and most simply single-minded man I have ever met’. The difficulty, however, was for the official leadership to defend in argument the methods of democratic socialism against Bolshevism whilst at the same time condemning the government policy of armed intervention against Soviet Russia. See George Lansbury, Looking backwards – and forwards, London 1935, 168.

27

THE LABOUR PARTY AND THE PLANNED ECONOMY

whether this creed does not consist almost entirely in an insistent demand for the subordination of each individual to the “working plan” of the scientifically trained mind of the expert; though, of course, the plan is assumed to be devised in the interests of the community as a whole’. She was, at this time, doubtful about this latter assumption.91 There were several further reasons why Labour did not embrace the concept of central planning warmly at this time. In the first place, in mid-1920 Britain had not yet moved from post-war boom to deep-seated slump. It would take ten and more confidence eroding years of depression, and the end of two Labour governments, before the party seriously called into question the gradualist scheme for building socialism on the foundations of an efficient capitalism. As Skidelsky has observed, the Fabian vision was based on the late-Victorian desire to moralise success, and it was not yet apparent that there was no more success left to moralise.92 There was thus no pressing need, for the time being, for Labour to seek a replacement for its as yet rather orthodox economic suppositions: in 1920 socialists had no reason to fear mass unemployment, and the Labour Party adopted a policy of deflation, which term its leaders were not afraid to use.93 In the second place, Soviet planning as yet had little to show for itself; its early manifestations did not represent the ‘command economy’ arrived at later.94 Russia was about to return, to a degree, to the market under NEP, a move widely seen as a reverse for socialism; and although the state commission for the electrification of Russia (Goelro) and the state planning commission (Gosplan) were founded in 1920 and 1921 respectively, it would be 1928 before the first five-year plan was launched. The plan of which the British delegates to Russia and the Fabians were told, then, was a prototype, and could not show the spectacular results produced in the Soviet Union by the beginning of the next decade. Planning was still but a curiosity, and the question of whether it might be applicable in Britain does not appear to have occurred.95

91

Margaret Cole (ed.), Beatrice Webb’s Diaries, 1912–1924, London 1952, 188–95, entry for 4 Sept. 1920. See also Barbara Drake, ‘The Webbs and Soviet communism’, in Margeret Cole (ed.), The Webbs and their work, London 1949, 221–32 at p. 223. 92 Skidelsky, Interests and obsessions, 119. 93 See Hugh Dalton, Call back yesterday: memoirs, 1887–1931, London 1953, 128. 94 Alec Nove, An economic history of the USSR, 1917–1991, 3rd edn, Harmondsworth 1992, 96. 95 The Russians remained ahead of the west in respect of some areas of economic thought for a long time. In particular, the Soviet planners of the 1920s became pioneers of thinking about economic development. As Alec Nove has argued, ‘Whatever weaknesses there may have been in their thinking and their practice, it must be emphasized that they could have learnt nothing useful from the West, which did not begin to discuss these issues until 1945, or even 1955’: ibid. 126–8.

28

BIRTH OF AN IDEA

The ILP and planning: a doubtful case The Labour Party achieved its electoral breakthrough in 1922, becoming, for the first time, the main opposition party. Labour proceeded throughout the twenties on a programme of improving social services funded through the increased taxation of the capitalist classes, who would thus be progressively but painlessly expropriated. This was underwritten by the famous financial orthodoxy of Philip Snowden, who became chancellor of the exchequer for the first time in the short-lived Labour government of 1924. Indeed, this orthodoxy – which historians have, nonetheless, perhaps tended to overemphasise96 – was a key to the party’s appeal. The commitment to free trade, in particular, was a crucial factor in attracting former Liberal voters. Oldfield contends, however, that in contrast with Snowden’s philosophy, the concept of planning was part of the staple of ILP literature throughout the decade.97 If this were true, it would suggest that prior to 1931 the Labour Party rejected planning, not by default – having merely failed to think of it – but consciously, actively throwing out the clear-cut planning proposals of an important affiliated organisation. Oldfield’s argument, however, does not rest on a particularly firm basis. Oldfield does succeed in identifying several references to ‘planning’ and to the need for ‘a common plan’ for industry, in certain ILP publications and in the writings of people associated with the party. These references, of course, are significant to the degree that they signalled a call for concerted action against the background of Britain’s economic drift; that they amounted to a concept of planning of the kind which became familiar in the thirties may nonetheless be doubted. For example, E. M. H. Lloyd, the former war-time civil servant who mixed in ILP circles, published a book Stabilisation in 1923 in which he argued that capitalism lacked ‘a central plan of adjusting production and consumption, even of the necessaries of life, in such a way as to promote the general well-being of the community’.98 His remedy, however, which was to stabilise raw material and labour costs indirectly via the central control of credit, lacked features in common with the Labour Party’s later ideas of physical planning. More compellingly, The socialist programme, published by the ILP in November 1923, did envisage a committee on production to allocate resources within industry, as part of a proposed ‘common plan with a definitely thought-out design’.99 (At the same time, it

96 As Philip Williamson has argued: National crisis and national government: British politics, the economy and empire, 1926–1932, Cambridge 1992, 40. 97 Oldfield, ‘The Labour Party and planning’, 47. Harris similarly contends that, within the Labour movement, ‘Serious thought about planning first emerged in the ILP’s “Living Wage” proposals of 1926’: ‘Labour’s political and social thought’, 23–4. 98 E. M. H. Lloyd, Stabilisation: an economic policy for producers and consumers, London 1923, 78 99 ILP, The socialist programme, cited in Oldfield, ‘Economic planning’, 167–8.

29

THE LABOUR PARTY AND THE PLANNED ECONOMY

too argued for the state regulation of credit.) One of the programme’s authors, ILP chairman Clifford Allen, had gone with the delegation to Russia in 1920, from where he may have imported the terminology of planning – although, generally, he had doubts about the centralism of the Soviet system.100 But this early example of planning thought was, in the sense that it was at least arguably a precursor of later developments, unique. And to say that in some ways it anticipated those developments is not to say it caused them. Furthermore, a crucial part of Oldfield’s argument is based on the 1926 ILP report The living wage. He claims that although this document’s ‘overt emphasis was on a living wage, the central argument was for the adoption of full-scale planning’.101 But in spite of the fact that the report did indeed call for ‘a policy of national planning and reorganisation’, such a contention is doubtful.102 Drawing on co-author J. A. Hobson’s theory of ‘underconsumption’ (that maldistribution of income led to over-saving and in turn to economic slump and unemployment), The living wage proposed the remedy suggested in its title; increased working-class incomes, together with credit expansion, would cure the depression in which Britain was now stuck. It was also proposed to establish a national industrial bank (or investment trust), to nationalise the Bank of England, and to nationalise industries that failed to raise wages; although nationalisation of industry was not, in itself, the highest priority.103 Bulk government purchase of raw materials was also advocated. But these proposals do not justify Oldfield’s claim that the demand for a living wage ‘thus led inexorably to the demand for a comprehensive system of planning’ unless ‘planning’ is simply taken to mean any kind of state economic intervention consequent on public ownership of industry.104 Moreover, the report’s fundamental conception, that improvements in working-class living standards could in themselves play a part in triggering the onset of socialism, was after 1931 comprehensively rejected by the mainstream of the Labour Party. Even had this not been the case, the continued opposition of trade union leaders, notably Ernest Bevin, to political intervention in the wages market would still have been a barrier to the acceptance of the ILP proposals. It is for this reason difficult to detect much continuity between The living wage and the socialist planning ideas of the thirties – even though, in political terms, it was anti-gradualist.105 Indeed, Noel Thompson has argued that the proposals manifested, by socialist standards, a compara100 101 102

Arthur Marwick, Clifford Allen: the open conspirator, Edinburgh 1964, 63. Oldfield, ‘Economic planning’, 185. H. N. Brailsford, John A. Hobson, A. Creech Jones and E. F. Wise, The living wage, London 1926, 19. 103 John Wheatley MP, arguing in favour of The living wage at the ILP summer school, said that the proposals would mean ‘the nationalisation of the products of industry, and this is more important immediately than the nationalisation of the means of industry’: New Leader, 6 Aug. 1926. 104 Oldfield, ‘Economic planning’, 188. 105 Allett, New liberalism, 43.

30

BIRTH OF AN IDEA

tively positive attitude to the role of the market, and that their subsequent rejection ‘effectively confirmed the hegemony of the Fabian alternative’.106 If Thompson is right – and it must also be borne in mind that the Fabian vision itself was soon to undergo important changes – this rejection of the continuity hypothesis would tend to be confirmed. The scattered references to planning in the ILP literature of the mid-twenties, then, had much the same status as those in Labour and the new social order in 1918. They were significant for the use of the word – which, significantly, was itself then appropriated by Oswald Mosley – but did not, in terms of substance, bear a very strong relationship to later developments. Indeed, by the late twenties, the ILP was of rapidly declining political relevance. After 1926 it swung radically to the left under the leadership of the passionately sincere rhetorician James Maxton, and wilted. Although 114 out of 150 Labour MPs in the 1924–9 parliament were ILP members, most supported MacDonald’s moderation against Maxton’s extremism.107 MacDonald himself was not particularly averse to the economics of The living wage, but he took offence at the implied criticism of his leadership, and dismissed the report as a collection of ‘flashy futilities’. The 1927 Labour Party conference accordingly referred it to a committee, which produced an adverse report that was overwhelmingly accepted by the following year’s conference.108 It should be stressed, however, that if there was little connection between the ILP’s economic ideas and the form of economic planning taken up by the Labour Party in and after 1931, this should not be taken as dismissal of their intellectual significance per se. Perhaps, as Thompson suggests, The living wage was simply ahead of its time. Nor is it even the case that these ideas, or indeed other socialist schemes such as the Webbs’ 1909 plan for contracyclical public works, could not, with the benefit of hindsight, be loosely described as types of ‘economic planning’. The argument advanced here is simply this: that there was no real continuity between the ‘planning’ ideas of the ILP and those later adopted by the Labour Party itself; and, of course, that the occasional references to ‘planning’ in ILP literature could by no means match the ubiquity of the term within the Labour Party (and elsewhere) in the 1930s. That ubiquity would be facilitated only by the combination of world slump, domestic political crisis, and the apparent dramatic success of the Soviet five-year plan.

106 107

Thompson, ‘Hobson and the Fabians’, 203. Andrew J. Williams, Labour and Russia: the attitude of the Labour Party to the USSR, 1924–34, Manchester 1989, 47. 108 See F. M. Leventhal, The last dissenter: H. N. Brailsford and his world, Oxford 1985, 191–4; David Marquand, Ramsay MacDonald, London 1977, 453–5; Robert Skidelsky, Politicians and the slump: the Labour government of 1929–31, London 1994, 50; LPACR 1927, London 1927, 216–20; Thompson, ‘Hobson and the Fabians’, 203.

31

THE LABOUR PARTY AND THE PLANNED ECONOMY

Labour and the nation, 1929–31 The Labour Party fought the general election of June 1929 on the basis of the programme Labour and the nation prepared the previous year. This programme has been criticised as vague, particularly by comparison with the Liberal manifesto We can conquer unemployment, which was endorsed by Keynes.109 Philip Williamson has challenged this view, arguing powerfully that Snowden, who favoured loan-based public works, was prepared to suspend some of the tenets of financial orthodoxy in the face of large-scale unemployment.110 But if there was some degree of commitment to a ‘positive’ employment policy of this kind, the caution of the party’s leaders tended to obscure it. As Hugh Dalton recalled, ‘Most of our elderly leaders weren’t against such a policy. But they missed most of the points and put it all so dully.’111 This caution, perceived as timidity by Dalton, may, in fact, have improved Labour’s electoral chances. It also diminished, of course, the likelihood that such a policy would be enacted once Labour was in office – not, of course, that enacting it would necessarily have solved Britain’s key economic problems, notably the loss of export markets.112 More significantly for the argument here, the programme was also devoid of even those slight references to planning found in Labour and the new social order – although the manifesto How to conquer unemployment, drafted by G. D. H. Cole, did contain passing references to the party’s ‘constructive plans’ and to the ‘scientific planning of production’.113 Equally, the start of the five-year plan in Russia does not appear to have provoked much interest in British socialist circles, no doubt in large part because it had yet to show results. Thus, when MacDonald took office for the second time, as in 1924 without a parliamentary majority, Labour was still committed to gradualist, evolutionary socialism. The belief that society embodied a pent-up accumulation of forces making for incremental change had been the running theme of MacDonald’s ideas since before World War I. As José Harris has noted, ‘This perspective was something quite different from pragmatism, and by no means confined to those temperamentally inclined to piece-meal change.’114 The degree to which it was shared is to some extent indicated by the Labour movement’s almost universally high expectations of the new government.115 That these were confounded can by no means be entirely blamed on the 109 Elizabeth Durbin, New Jerusalems: the Labour Party and the economics of democratic socialism, London 1985, 60–1. 110 Williamson, National crisis, 40. 111 Dalton, Call back yesterday, 183. 112 Jim Tomlinson, ‘Labour and the economy’, in Tanner, Thane and Tiratsoo, Labour’s first century, 46–79 at p. 54. 113 Ritschel, Politics of planning, 34. 114 Marquand, Ramsay MacDonald, 114; Harris, ‘Labour’s social and political thought’, 12. 115 Neil Riddell, Labour in crisis: the second Labour government, 1929–1931, Manchester 1999, 221.

32

BIRTH OF AN IDEA

government’s ideological deficiencies; yet the more that the initial hopes were frustrated, the more likely it was that new thinking would be stimulated in response. The government’s record has been hotly debated. Although Neil Riddell’s recent monograph, Labour in crisis, has attempted to move the focus of study beyond the events surrounding the administration’s collapse, these are still bound to loom large, as the book’s title suggests. So why did the government fail so dismally? Skidelsky’s 1967 assessment, Politicians and the slump, took MacDonald and Snowden to task for their economic orthodoxy, and for their failure to adopt the supposedly proto-Keynesian solutions proffered by maverick Labour MP Oswald Mosley. Ultimately, in Skidelsky’s view, Labour ‘was not fit for the kind of power it was called upon to exercise’.116 Riddell has implicitly endorsed this, arguing that, important external factors notwithstanding, ‘the administration’s failure was due in large measure to the shortcomings of the party’s structure, its policies, its strategy and its ideology’.117 McKibbin, by contrast, has doubted Skidelsky’s belief that the Labour government wilfully ignored credible alternatives that were likely, if implemented, to cure economic depression.118 Certainly, it was MacDonald’s bad luck to come to power just before a catastrophic world slump, an event which not merely emphasised the government’s apparent impotence in the face of unemployment, but contributed in large part to the financial problems which finally triggered its downfall. What is beyond doubt is that the Labour Party’s experience of failure in these years, and the crushing electoral defeat it suffered as a consequence of that failure, were of crucial importance in defining its attitudes to state and economy over the next two decades. The crisis that exploded in August 1931 was the trigger for a major rethink within the Labour Party, not only of policy detail but of the overall political and economic philosophy of socialism. It was this crisis, in combination with the attractions of the Soviet example, that projected economic planning to the top of the British socialist agenda. This was a turning-point not only for Labour’s economic thinking but for the party more generally – and, arguably, for the intellectual atmosphere of the country as a whole. The process by which this radical change was brought about will be examined in the next chapter.

116 117 118

Skidelsky, Politicians and the slump, p. xii. Riddell, Labour in crisis, 229. Ross McKibbin, ‘The economic policy of the second Labour government, 1929–1931’, PP xlviii (1975), 95–123.

33

1931 and its Impact

2

Plan or Perish: 1931 and its Impact In February 1931, Lloyd George wrote to the Labour cabinet minister George Lansbury that he was ‘genuinely perplexed and disappointed by the stickiness of some of your colleagues. They are always finding reasons for not doing things. They are too easily scared by obstacles and interests.’ He also prophesied that unless ministers showed, like Lansbury, some faith and courage, ‘your party and ours will be landed in an overwhelming catastrophe’.1 It was this ‘stickiness’ of MacDonald, Snowden and others that, from 1930 onwards, brought forth increasingly vocal calls for planning as an antidote to complacency and economic stagnation; these came most notably from the talented, flawed Sir Oswald Mosley and his fellow Labour MP John Strachey. Outside the party, the creation of the organisation Political and Economic Planning (PEP), which self-consciously sought to appeal to enlightened Conservatives as well as to moderate socialists and Liberals on a non-laissez-faire basis, signalled the emergence of the ‘middle opinion’ which Arthur Marwick has identified.2 In the period before the government’s fall, however, unease about the status quo could not contend with the Labour Party’s still-strong loyalty to MacDonald. Making little impact, Mosley and Strachey parted from Labour, ultimately in opposite political directions. Equally, the official movement was suspicious of non-party initiatives such as PEP, and was to remain so throughout the decade; Labour’s planning ideology after 1931 developed distinct from ‘middle opinion’, and frequently disdained it. Given the seismic changes that the crisis brought about in British politics, it is hardly surprising that historians have paid it such extensive attention.3 Nor is it surprising that they have differed over its ideological implications for Labour: did the party successfully replace the gradualist fallacy with ‘practical socialism’, or did it muddle on with a still unrealistic socialist vision, failing to adopt appropriate solutions for the economic malaise of the 1930s?4 The

1

Lloyd George to George Lansbury 16 Feb. 1931, Lansbury papers, BLPES, vol. 10. This letter was in response to Lansbury’s private appeal to Lloyd George to join the Labour Party – which of course was declined: Colin Cross (ed.), Life with Lloyd George: the diary of A. J. Sylvester, 1931–45, London 1975, 24. 2 See Arthur Marwick, ‘Middle opinion in the thirties: planning, progress and political “agreement” ’, EHR lxxix (1964), 285–98. 3 For a brief review of the literature see Riddell, Labour in crisis, 4–5. 4 For examples of the former view see Elizabeth Durbin, New Jerusalems, 70; Pimlott, Hugh Dalton, 212–13; Pimlott, Labour and the left, 37. For differing examples of the latter view see

34

1931 AND ITS IMPACT

purpose of this chapter is to cast new light on these questions, through an examination of the process by which planning, which initially represented a challenge to the party leadership, emerged, in the immediate aftermath of MacDonald’s desertion, as Labour’s key official slogan. Existing accounts fail to show explicitly how this came about.5 They also tend to underplay the influence of the Soviet example on Labour’s economic policy at this time; this is generally seen as a factor merely reinforcing, rather than actually helping to stimulate, the party’s adoption of planning.6 It will be argued here that, partly in response to growing Labour interest in the five-year plan in the first part of 1931, the party’s economic policies did undergo a major change in that year, in substance as well as rhetoric. Yet it will also be argued that, in those areas where there was continuity (such as the ongoing commitment to the balanced budget), this too served an important political purpose. It is thus important not to assume that if the party’s purging of its ideological past was in some ways incomplete, this necessarily represented failure on Labour’s behalf.

Mosley and Strachey Oswald Mosley, more than any other individual, was responsible for bringing the term ‘planning’ to prominence in British public life. First a Conservative MP, then an independent, he had won a by-election for Labour at Smethwick in 1926. The previous year he had published a pamphlet, Revolution by reason (expounded upon by Strachey in a book of the same name) in which he explicitly called for ‘socialist planning’, borrowing the term from the ILP.7 But the proposals it contained for curing unemployment by expanding working-class purchasing power were not themselves meant as a means of supplanting the capitalist system. Rather, it was intended first to restore ‘normal’ conditions, and only then to begin the transition to socialism; planning was conceived as an unusual, and temporary, remedy for an abnormal situation.8

Skidelsky, Interests and obsessions, 107–35, and Alan Booth, ‘How long are light years in British politics? The Labour Party’s economic ideas in the 1930s’, C20BH vii (1996), 1–27. 5 Ritschel, The politics of planning, 97–8; Elizabeth Durbin, New Jerusalems, 70, 116–20. 6 An exception is Pimlott’s biography of Dalton, which demonstrates convincingly that Dalton’s visit to the USSR in 1932 ‘fundamentally altered his attitudes to domestic policy’; and that this had a knock-on effect on the Labour Party itself. Yet, as will be seen, important shifts in Labour attitudes had already occurred by the time that Dalton made his visit: Hugh Dalton, 208–12. 7 Ritschel, The politics of planning, 60. 8 Mosley did, nevertheless, argue at the 1926 ILP summer school ‘against introducing Socialism piecemeal, because it would be impossible with the present Parliamentary machine to deliver the goods in a reasonable space of time’. But he did not use the term ‘planning’ in this context: New Leader, 6 Aug. 1926.

35

THE LABOUR PARTY AND THE PLANNED ECONOMY

When Labour took office in 1929, however, Mosley was presented with the practical task of trying to do something about the dole queues. In his role of chancellor of the Duchy of Lancaster, Mosley, together with Lansbury and Thomas Johnston, had the job of advising lord privy seal J. H. Thomas on the question of unemployment, for which MacDonald had given the latter overall responsibility. It was uphill work. Not only was Thomas incompetent, but, as Skidelsky has written, Mosley also ‘found that the main lines of policy had been formulated without his [i.e. Mosley’s] assistance and that the policy itself was directly contrary to his own views’.9 By December 1929 Mosley had begun drafting a long memorandum expressing his opinions, to be presented to the prime minister and the cabinet. It called not only for an expanded programme of public works, but for administrative reorganisation, and for a long-term programme of economic reconstruction, including greater reliance on the home market and more state involvement in the financing and rationalisation of industry.10 Again, although heavily interventionist – and to some extent ambiguous about the precise role of the state – these proposals were certainly not a call for a centrally planned economy in the sense that Labour would later develop it. Although ‘long-term planning’ was briefly mentioned as a function of a new, powerful prime minister’s department (and although in July 1930 he called for a ‘systematic planning organisation’ to readjust industries to the home market) Mosley for the time being remained averse to the notion of running industry ‘from Whitehall’.11 With his memorandum rejected by the cabinet in May 1930, Mosley resigned his post, and at a subsequent meeting of MPs had his motion of censure on the government defeated by 210 to twenty-nine. Though his real instinct was for a form of economic imperialism, his next proposals were influenced – via his associates – by the example of the Soviet five-year plan. This has tended to be overlooked, given the extent to which existing accounts of Mosley’s thinking concentrate on the degree to which he was swayed by the work of Keynes. (Daniel Ritschel has correctly concluded that Mosley’s concept of planning was ‘far removed from either the letter or the spirit of Keynesian economics’.)12 Yet although indirect, this influence was highly significant, if not for Mosley’s own longer-term development, then as a precursor of the impact that Russian planning would soon have in wider Labour circles. In September 1930, John Strachey visited Russia in the company of Aneurin Bevan, a young left-wing MP who had recently joined the Mosley caucus, and G. R. Strauss MP.13 Strachey had been to the Soviet Union 9 10 11 12

Skidelsky, Politicians and the slump, 168. See ibid. 171–82. Ritschel, The politics of planning, 65. Ibid. 64. For alternative views see Robert Skidelsky, Oswald Mosley, London 1975, 129–46, and Riddell, Labour in crisis, 150–7. 13 Mosley’s wife, Lady Cynthia, who was also a Labour MP, visited Russia at the same time

36

1931 AND ITS IMPACT

before, in 1928, and had found its atmosphere ‘astonishing and stimulating’, and his enthusiasm was now reinforced.14 Although not entirely uncritical of what he saw of the five-year plan, upon his return he claimed in a pamphlet, co-authored with Bevan and Strauss, that ‘in spite of all the difficulties and drawbacks, the actual achievements of the Soviet Goverment . . . are so far-reaching and so valuable to the Russian people that their disappearance is inconceivable’.15 He believed, moreover, that the Soviet experience was relevant for Britain.16 Strachey seems to have done the lion’s share, if not all, of the writing of the pamphlet in question.17 However, Bevan’s personal views matched the published account almost to the letter. He told the South Wales Echo upon his return: There are food queues in Russia . . . and the people obviously undergo a certain amount of privation, but it is all done voluntarily in order to help build up the country’s heavy industries, and the people have great faith in the coming prosperity, which they believe will reward their sacrifices in five years from now.18

He thus believed that the Russians were opting to go without jam today in order to have more jam tomorrow. This was the context for a remark he later recalled making: that ‘whereas in Britain we were slaves to the past, in Russia they were slaves to the future’.19 But back in the House of Commons, Strachey was faced with the difficult job of squaring planning with Mosley’s schemes of imperialism and economic ‘insulation’. ‘We do not believe that we can get through the present crisis without national planning’, he argued, ‘ . . . and we do not believe that we can have national planning unless we have control of our own imports’ – even though this apparently conflicted with Labour’s internationalist principles.20 (As will be seen in chapter 7, such tensions would be a continuing and important factor in the party’s development for a long time to come.) However, Mosley was shortly to drop the imperialist aspect of his protectionism, his

but independently. However, she does not appear to have taken particular note of developments in the country’s economy; and she was not, at any rate, a major influence on her husband’s views: Nicholas Mosley, Rules of the game/Beyond the pale: memoirs of Sir Oswald Mosley and family, London 1998, 154–66; Julie V. Gottlieb, Feminine fascism: women in Britain’s fascist movement, 1923–1945, London 2000, 185–90. 14 Michael Newman, John Strachey, Manchester 1989, 32–3. 15 Aneurin Bevan, E. J. Strachey and George Strauss, What we saw in Russia, London 1931, 28. 16 Hugh Thomas, John Strachey, London 1973, 88. 17 Ibid. 89. 18 This evidence contradicts John Campbell’s claim that ‘Strachey . . . was more impressed than Bevan by what they saw’: South Wales Echo and Evening Express, 29 Sept. 1930; John Campbell, Nye Bevan and the mirage of British socialism, London 1987, 41. 19 Aneurin Bevan, In place of fear, London 1952, 41. 20 HC Debs, 244, 29 Oct. 1930, cols 169–74; Newman, John Strachey, 88.

37

THE LABOUR PARTY AND THE PLANNED ECONOMY

ideas being pushed to the left as the price of his acquiring a definite following in the Labour Party.21 The result of this attempt to gain a power-base was the ‘Mosley manifesto’, published in December 1930, and signed by seventeen MPs. It proposed a small, powerful cabinet of five, a short-term policy of loan-financed public works, and a national plan based on the development of the home market, coupled with an import control board and a tariff-granting commodity board.22 Furthermore, an exposition of Mosley’s new policy by Strachey, Bevan, W. J. Brown MP, and Allan Young called for a national economic planning organisation. This would formulate the national plan, to be executed by a national investment board, which would control and coordinate state investment, and set on foot new capital projects.23 It seems likely, therefore, that Mosley’s move (or, in Ritschel’s view, return) to a fully fledged concept of centralised planning was to an important degree influenced by Bevan and Strachey’s Russian experience.24 Indeed, Fenner Brockway of the ILP believed that Mosley was calling for ‘a British equivalent of the Russian “Gosplan” ’.25 Nevertheless, a keynote of the programme was that planning, rationalisation and re-organisation should take place behind protectionist barriers.26 In the light of the strong protectionist element, therefore, it would be wrong to claim much continuity, either with previous ILP ideas, or with Labour’s subsequent planning ideas – even though a national investment board would form part of Labour’s platform in the general elections of 1931, 1935 and 1945. The true significance of the Mosley group’s proposals, then, was twofold. First, Labour politicians were looking to the Soviet Union for economic inspiration – although, as later, there was no wholesale imitation in terms of policy. Second, the proposals articulated a demand for decisive action in the face of a worsening crisis. A similar concern for action had, of course, led to the ILP’s occasional use of planning vocabulary in the twenties (which Mosley had imitated for his own purposes). Now the economic situation was yet more serious. However, the Mosley manifesto proved ‘a forty-eight hour wonder’.27 As Beatrice Webb noted, ‘its argument in favour of a general plan, and there is much reason for it, is well done. But its proposals are as grandiose as they are vague . . . it falls 21 22 23

Skidelsky, Oswald Mosley, 237. Ibid. 237–9. Aneurin Bevan, W. J. Brown, John Strachey and Allan Young, A national policy, an account of the emergency programme advanced by Sir Oswald Mosley, London 1931, esp. pp. 22, 40–1. 24 Ritschel, The politics of planning, 66. 25 Brockway argued that the specific proposals in the manifesto would have been acceptable to the ILP, but that Mosley’s scheme, taken as a whole, was ‘anti-Socialist in objective because designed to stabilise Capitalism’: ibid. 72. 26 See Noel Thompson, John Strachey: an intellectual biography, Basingstoke 1993, 61. 27 Ben Pimlott (ed.), The political diary of Hugh Dalton, 1918–40, 1945–60, London 1986, 134, entry for 7 Dec. 1930.

38

1931 AND ITS IMPACT

dead in the no-man’s land between those who wish to keep and those who wish to change the existing order.’28 Defeated in the Parliamentary Labour Party (PLP) and the NEC, Mosley, his wife, Strachey and two others left to form the short-lived New Party. Strachey subsequently became a communist, before eventually reverting to the Labour Party, and Mosley, famously, went on to found the British Union of Fascists.

The Weekend Review’s ‘National Plan’ Mosley and Strachey were not unique in calling for national planning, however. Having resigned en masse in 1930 in protest at their proprietor’s conversion to empire free trade, the former editorial team of the Saturday Review quickly brought out their own weekly, The Weekend Review, and set themselves the task of exposing the ‘out-of-date, ineffectual’ way the country was run. As one contributor, Max Nicholson, recalled, ‘A number of young and frustrated Members of Parliament responded that such carefree sniping was not good enough: the journal should define positively what it stood for.’29 In response, the Review’s editor Gerald Barry charged Nicholson with drawing up a national plan, in consultation with experts, to be published as a supplement to the paper. The result was made public on 14 February 1931 under the title ‘A national plan for Great Britain’. The document, 20,000 words long aimed to show ‘that a great part of the present troubles of this country and the world are due to the failure to develop erratic and conflicting traditional policies into a Plan. . . . The basic object is replacement of the present chaotic economic and social order by a national planned economy.’ Aiming at cross-party appeal, the plan contained a large number of proposals, ranging from an overhaul of the machinery of government and the conversion of the post office and the Ministry of Works into autonomous public utilities, to the creation of a green belt for London and the reconstruction of the south bank of the Thames. Moreover, the conception of a ‘national planned economy’ included the restriction and in some cases the elimination of competition, whilst ‘the larger maladjustments in the economic field would be corrected by agreement between each of the industries thus organised and the National Planning Commission, subject to Government ratification’. This planning commission would be required to produce ‘a master plan’ prescribing the contribution to be made by each industry over a period of years, but would have the power to make and enforce a plan for a particular industry only where that industry

28 Norman and Jeanne MacKenzie (eds), The diary of Beatrice Webb, IV: 1924–1943: the wheel of life, London 1985, 240, entry for 1 Mar. 1931. 29 John Pinder (ed.), Fifty years of political and economic planning: looking forward 1931–1981, London 1981, 6.

39

THE LABOUR PARTY AND THE PLANNED ECONOMY

failed to do so itself – compulsion would be used only as a last resort.30 Thus, although the Review had supported Mosley during the summer and autumn of 1930, his new-found economic centralism was now rejected.31 But although Mosley’s ideas were finding little favour in Labour circles, the Review’s alternative vision of a planning structure which devolved responsibility onto private industry itself was not welcomed in socialist quarters. Harold Laski of the London School of Economics (LSE), who was the British left’s pre-eminent political theorist, and who would draw up Labour’s election manifesto later in the year, agreed in general terms that a plan was necessary; socialism, however, would provide the answer.32 The Labour weekly The Clarion was more scathing: ‘Everybody has a Plan . . . now, these plan-makers argue, is the time to put England on its feet by a bit of honest undergraduate work.’ In fact, the paper argued, What has broken down is not so much the Parliamentary machine as the capitalist machine, and it is not the least ironical chapter of recent history that Labour should be blamed for the failure of its opponent . . . Mr Barry’s Plan strains after the impossible; it attempts to discover some way out of this country’s present economic position by compromise, by adopting the present social structure without disturbing its roots. The solution does not lie there. A national plan is needed, but it must be conceived not in the spirit of compromise but of reconstruction.33

Such criticism did not deter the plan-makers, however; the publication of the Weekend Review supplement led directly to the formation of the group Political and Economic Planning (PEP), which held its inaugural meeting that June. What the Weekend Review/PEP initiative demonstrates, along with Mosley’s activities (which to some extent were its stimulus), is that planning was ‘in the air’ in the 1930–1 period. Furthermore, the idea was being pursued with some diligence in more than one arena. The vital question is: how did the call for planning, conceived at first in antithesis to the official policy of Labour’s leaders, and so reluctantly conceded by Laski and the Clarion, come to form in the course of 1931 a central plank of Labour policy and the key demand of the party’s election manifesto in October? This can only be answered with reference to changing attitudes to the Soviet five-year plan, and the activities of the newly formed New Fabian Research Bureau (NFRB).

30 31 32 33

The Weekend Review, 14 Feb. 1931. Ritschel, The politics of planning, 81. The Weekend Review, 14 Feb. 1931. The Clarion, Mar. 1931.

40

1931 AND ITS IMPACT

The five-year plan: attitudes in 1931 The first half of 1931 saw the publication of a spate of books and pamphlets on Russia, including Bevan, Strachey and Strauss’s What we saw in Russia. This profusion of printed matter was matched by a perceptible warming towards the five-year plan on behalf of key Labour thinkers. This is a point that has not generally been commented upon,34 yet which must play an important part in explaining how planning retained its popularity in socialist circles, even after Mosley’s disloyal departure risked discrediting the idea. For example, whereas Sidney Webb had declared not long after the October revolution that ‘Bolshevism must fail economically’ and thought that ‘Lenin can know nothing of economics’, now Beatrice apparently believed the reverse.35 She wrote in her diary on 25 March: the Russian experiment is so fascinating – they are daring to test their assumptions by observation and experiment – their very ruthlessness may spell failure. – But the endurance and subserviency of the Russian people may enable them to pull through, in which case we may be able to follow their lead without the suffering and oppression the Russian people have had to endure. At present it looks as if Soviet Russia might turn out to be an economic success and a moral failure.36

The Webbs had met the Soviet ambassador, Grigory Sokolnikov, several times since February 1930. He had interested Beatrice in the five-year plan, to which she repeatedly referred in her diary, although, as in the above quotation, she clearly retained strong doubts at this time. What was now new was her explicit statement that Britain might be able to follow the Russian lead. The Oxford don and former guild socialist G. D. H. Cole was also notable among those who suspected that planning Russian-style could yet prove a practical model for a British socialist system. This had not hardened into a conviction. Cole wrote in February: ‘The outcome of that experiment [the five-year plan] is still uncertain, for the Russians are attempting a tremendously difficult thing . . . Now, if the Russians succeed, or even half succeed, in pulling off their Five Year Plan . . . [as] a means to the thorough development of their national resources for the benefit of their whole people, so clearly can we.’37 In March, the month after he wrote this, Cole formed the New Fabian Research Bureau, out of frustration with both the Labour

34

Neither Williamson nor Ritschel, for example, make much mention of the Soviet Union in their respective accounts of Labour’s thinking on planning; and neither makes a significant attempt to trace the influence of the five-year plan on the party prior to the Labour government’s collapse in 1931: Williamson, National crisis and national government, 462, 467–8, 478; Ritschel, The politics of planning, 102. 35 R. H. Bruce Lockhart, Retreat from glory, London 1934, 22. 36 Beatrice Webb diary, entry for 25 Mar. 1931, Passfield papers, BLPES. 37 The Clarion, Feb. 1931.

41

THE LABOUR PARTY AND THE PLANNED ECONOMY

government and the old Fabian Society. A suspicious MacDonald in due course gave the NFRB his reluctant blessing.38 Clement Attlee was chairman of the executive committee. By May, Cole had drawn up a plan of research for the group. One of the key questions that he asked in this was ‘How far is State Economic Planning desirable (e.g. the Five Years’ Plan in USSR)?’. He followed this with a range of subsidiary questions, including: ‘How far is such planning possible except in relation to publicly-owned enterprises? Should there be a National Economic Council entrusted with the work of planning?’39 The same month, one of the NFRB’s first conferences was addressed, with Attlee presiding, by a Soviet official on the subject of the five-year plan. The atmosphere was one of polite but quizzical interest. Kingsley Martin, the recently appointed editor of the New Statesman, ‘questioned [the] accuracy of statistics supplied by local people responsible for the success of the plan’. He received the reassuring reply that the Russians ‘were anxious for real success not propaganda’.40 At the end of May, an NFRB subcommittee was formed to consider the problems of economic planning and capital supply; it was convened under Colin Clark, a professional economist who had served on the Economic Advisory Council (EAC) formed by MacDonald to advise the government. The committee’s remit was to study the machinery of economic planning, not economic policy, which was delegated to another group under Evan Durbin (a young LSE economist who would play an important role in Labour policy discussions in the coming years). Moreover, the NFRB made no dramatic strides in its first months.41 But planning was now receiving some consideration within an as yet uninfluential, but still ‘respectable’ Labour Party group. Furthermore, by September, Clark would be in a position to contribute his views on planning to party policy discussions at the highest level. Meanwhile, the concept of planning was becoming much more prominent in the ILP’s discussions than it had been in the 1920s. In May, H. N. Brailsford perceptively pointed out in the New Leader that although ‘Russia has made the world familiar with the idea of national planning’, and although there was much to learn from the five-year plan, ‘Russia’s problem is not the same as ours’. This was because ‘She is a backward country bent on telescoping the normal development of fifty years into five. But her problem is almost entirely one of production. Ours is mainly, but not solely, one of consumption.’42 Hence, when the ILP unveiled its own ‘Five Year Plan’ in August, ‘This, not surprisingly, turned out to be a restatement of the old 38

Neil Riddell, ‘ “The age of Cole”? G.D.H. Cole and the British labour movement, 1929–1933’, HJ xxxviii (1995), 933–57 at p. 948. 39 NFRB, ‘Memorandum of a plan of research into economic policy’, May 1931, Fabian Society papers, BLPES, J10/1; Elizabeth Durbin, New Jerusalems, 118. 40 Easton Lodge conference 9 May 1931, Fabian Society papers J2/3. 41 Elizabeth Durbin, New Jerusalems, 79–80, 118–20. 42 New Leader, 22 May 1931.

42

1931 AND ITS IMPACT

programme in the new language of planning’ (Ritschel).43 Although there was mutual recognition of the value of the slogan, therefore, the ILP and the NFRB were on differing intellectual trajectories; and it was the NFRB approach that would influence the Labour Party. As the summer progressed, increased public discussion of the Soviet economy further stimulated Labour’s embryonic interest in planning. In June 1931, the Russians launched a new propaganda drive designed to acquaint westerners with Soviet scientific and industrial progress.44 At the end of that month, Winston Churchill criticised the five-year plan in the House of Commons, implying that it was being undertaken for the purposes of war preparation.45 This prompted a stout response from Martin in the New Statesman, in the course of which he argued that the plan ‘is already transforming Russia with immense rapidity from a poor, undeveloped country into a potentially wealthy industrial one’.46 In July, George Bernard Shaw made a highly publicised visit to the USSR.47 He followed this up in August by giving an address to the ILP summer school in which, provoking laughter, he declared that the socialism that had established itself in Russia was Fabian socialism. Furthermore, ‘we want a Five Year Plan here, very badly’.48 Given Shaw’s obvious eccentricity, it is doubtful that this speech, in itself, was greatly influential. But some reactions to it were indicative of the fault-lines in the Labour Party. On 16 August, mere days before the government split, Philip and Ethel Snowden, ‘full of GBS’s speech’, dined with Sidney and Beatrice Webb. Each cabinet minister allied himself with his wife in the dispute that followed: ‘It was a wickedly mischievous speech,’ Philip muttered, whereupon they [the Snowdens] and we had a hot dispute over Sovietism, they denouncing it as a cruel slave state and we upholding it as a benificent experiment in organizing production and consumption for the common good. It was significant of our completely different outlook on life.49

Such differences were, indeed, significant, but this should not be exaggerated. By this point, the commitment to planning, even in those circles where the idea was raising strong interest, was still fairly tentative. As Beatrice Webb noted, Shaw’s support for Italian fascism in the 1920s made it difficult to take 43 44

Ibid. 14 Aug. 1931; Ritschel, The politics of planning, 98. Gary Werskey, The visible college: a collective biography of British scientists and socialists of the 1930s, London 1988, 139. 45 HC Debs, 254, 29 June 1931, cols 960–1. For other hostile reactions to the five-year plan (including from Stanley Baldwin) from February 1931 onwards see W. P. Coates and Zelda K. Coates, A history of Anglo-Soviet relations, London 1944, 382–4. 46 New Statesman and Nation, 4 July 1931. 47 See Michael Holroyd, Bernard Shaw, III: 1918–1950: the lure of fantasy, London 1991, 221–55. 48 New Leader, 7 Aug. 1931. 49 MacKenzie and MacKenzie, Beatrice Webb diary, iv. 250, entry for 18 Aug. 1931.

43

THE LABOUR PARTY AND THE PLANNED ECONOMY

his enthusiasm for Russia completely seriously.50 The Webbs themselves were not fully converted to the Soviet system until their own visit to the USSR the following year. Cole’s NFRB had initiated discussions of planning, but, at the very least, the idea had not yet received a fully detailed exposition. Furthermore, as Snowden’s vehement reaction showed, there was not much chance of the new concept being welcomed by Labour’s leaders. Nor was there much chance of it being imposed on them from below. There was mounting disillusion with the government not only amongst intellectuals, but also within the PLP, the local Labour parties, and the unions; yet inertia and bitterness, rather than open revolt, were the general consequence.51 Nevertheless, the Soviet system was now being recognised in some Labour quarters as a possible future model for British socialism; and the deluge that overcame Labour between August and October 1931 provided the stimulus for a wider acceptance within the party of the idea of the planned economy.

The 1931 crisis The Labour government fell on 24 August 1931, to be replaced by an ad hoc National government from which the bulk of the Labour Party was excluded, although MacDonald remained prime minister. The occasion for this drama was provided by the summer’s financial crisis. There is no need to rehearse its causes here, save to say that the government was still committed to the twin pillars of orthodoxy, the gold standard and the ideal of the balanced budget; and the difficulties this caused were compounded by the delay and equivocation of ministers. Moreover, having accepted precepts that were economically conservative, the cabinet as a whole lacked the stomach to follow them through. Although there was no fundamental disagreement on the need for economies to restore financial confidence, the minority refused to accept the 10 per cent cut in the rate of unemployment benefit upon which the ‘hawks’, led by MacDonald and Snowden, were insisting. On the evening of 23 August the cabinet agreed that with nine ministers out of twenty dissenting on the issue it had no alternative but to resign. The next morning, to collective shock, it transpired that MacDonald had handed in the Labour cabinet’s commission only to accept a new one, at the invitation of George V, in collaboration with Conservatives and Liberals. A handful of Labour colleagues, including Snowden and Thomas, joined with him. Labour had been torn apart by the classic dilemma of Labour governments: the problem of whether, and to what degree, domestic reform programmes can, or should, be maintained when their existence is undermining international confidence in the British economy. As will be seen in chapter 7, the Attlee government

50 51

Ibid. 248, entry for 28 July 1931. Riddell, Labour in crisis, 87–90, 124–5, 168–9, 223–4.

44

1931 AND ITS IMPACT

faced this difficulty throughout its life; but would weather the resultant crises with far more success than MacDonald did. This was in part because the 1931 crisis itself made a massive impact on Labour. Herbert Morrison, one of the ministers who lost office, later wrote that ‘The spiritual and psychological effects upon the Labour movement of what became known as “the Great Betrayal” were, I am inclined to think, as serious as the thing in itself and its immediate electoral consequences. It left in the Party a spirit of distrust of the idea of leadership, a determination that for the time being there should be no more great men’.52 In due course, this had the positive result – except, of course, from the point of view of Morrison himself – of facilitating the low-key but successful leadership of Attlee. There was clearly no risk that this notoriously quiet, elusive and impenetrable individual would fall prey to the blandishments of the aristocracy, as MacDonald was believed to have done; and, over a long period, he gained tremendous respect, both inside and outside the party. This would become a crucial asset for Labour during the testing times of 1945–51. In the shorter term, the ‘spiritual and psychological effects’ of the crisis manifested themselves in two ways. First, although Henderson, Labour’s new leader, was initially willing to accept MacDonald back into the Labour fold, the prime minister was expelled from the party, and then vilified in an increasingly personal fashion.53 Second, the political philosophy associated with the ‘traitor’ had to be rejected, even – perhaps especially – by those who had been close to him or who had benefited from his patronage. As Sir Stafford Cripps, whom MacDonald had brought into the government as solicitor-general in 1930, was to tell October’s party conference, ‘the one thing that is not inevitable now is gradualness’.54 This meant, of course, that an alternative was needed; as Hugh Dalton, fresh from his Foreign Office post, put it, it was necessary ‘to hammer out a firm, detailed policy of Socialist reconstruction in industry and finance’.55 And it was planning that proved to be the policy, or the slogan, of the hour.

52 Herbert Morrison, Herbert Morrison: an autobiography, London 1960, 131–2. In some quarters, an obsession with 1931 continued considerably longer. During the 1976 IMF crisis, Tony Benn, the secretary of state for energy, whose father had been a cabinet minister in 1931, came to believe that history was repeating itself. To drive the point home, he arranged for the 1931 cabinet minutes to be reproduced in Tribune: Tony Benn, Against the tide: diaries 1973–76, London 1989, 649–50, 657, entries for 18, 25 Nov. 1976. 53 MacDonald was expelled on 28 September, but the attacks on him did not in fact reach their full intensity until after the following month’s general election. See, in particular, Sidney Webb, ‘What happened in 1931: a record’, PQ iii (1932), 1–17, and Isaac Kramnick and Barry Sheerman, Harold Laski: a life on the left, London 1993, 298. 54 LPACR 1931, 205. 55 Dalton, Call back yesterday, 279.

45

THE LABOUR PARTY AND THE PLANNED ECONOMY

Policy-making, September 1931 Labour, in opposition, quickly found itself in an invidious situation. The ex-ministers who now led the party were ‘tarred with the brush of acquiescence’ in unemployment cuts.56 Under pressure from the TUC general council they acceded on 27 August to a manifesto which repudiated all economies, but then proceeded to ignore it.57 Subsequent disclosures in the Commons about their part in the cabinet discussions of August added to Labour discomfort. Yet belief in the possibility of a Labour victory at a general election, especially if the election were delayed, was widespread. In this atmosphere, William Graham, the former president of the Board of Trade, set up a committee to deal with financial problems: ‘We propose to thrash out a constructive alternative for the immediate situation . . . When Parliament meets we must make full use of our opportunites in Opposition to build up a constructive Socialist case.’58 Planning was moving rapidly up the policy agenda. On 10 September at the TUC congress, the general council put forward a motion on ‘Planned Economic Development’, welcoming ‘the present tendency towards a planned and regulated economy in our national life’: ‘Congress expresses the view that only by a comprehensive planning of our economic development and regulated trading relations can the needs of the present day be met.’ The motion was proposed by Arthur Pugh, general secretary of the steelworkers’ union, who argued the need for ‘a practical policy in relation to the national economic life’.59 It was seconded, in much more striking terms, by Ernest Bevin, the now increasingly influential leader of the transport workers’ union. Bevin had become chairman of the Society for Socialist Inquiry and Propaganda (SSIP), which like the NFRB was a Cole-sponsored think-tank, upon its formation in June 1931. He had thus read memoranda by Cole and Clark on economic planning.60 He now told the congress of the need to develop ‘an economic policy based on planning’: cutting right across [the] world economy to-day is the new development in Russia. Russia has introduced, whatever may be said about it, a new motive for industry – a motive which is not profit. That new economy involves planning, and the attack on Russian planning does not arise because of the way Russian 56 57

Stafford Cripps to Lord Parmoor, 30 Aug. 1931, Cripps papers. NEC minutes (joint meeting of the NEC, PLP executive and the TUC general council), 27 Aug. 1931, LPA, National Museum of Labour History, Manchester; LPACR 1931, 5–6; Andrew Thorpe, The British general election of 1931, Oxford 1991, 134. 58 William Graham to Cripps, 2 Sept. 1931, Cripps papers, reproduced in Eric Estorick, Stafford Cripps: a biography, London 1949, 93. 59 TUC report, London 1931, 406. 60 Alan Bullock, The life and times of Ernest Bevin, I: Trade union leader, 1881–1940, London 1960, 501.

46

1931 AND ITS IMPACT

labour might be treated; it arises because it is planning against the old world economy of scramble and individualism and profit.

Nevertheless, he believed that the study of economic planning would be ‘a long and arduous task’, and that planning would be harder in an ‘old’ country like Britain than a ‘new’ one like Russia. But ‘There is an economic cry going on for an entirely new world order.’ To meet this cry, the TUC should undertake a programme of study and recommendation. The resolution was opposed by representatives of the locomotive engineers and firemen, the general and municipal workers, and the miners federation – on the grounds that it was in fact concerned with making the capitalist system work, not because the speakers themselves doubted the merits of socialist planning. It was nonetheless carried by 2,866,000 to 749,000.61 The TUC’s economic committee followed the resolution up over the course of the following year.62 The ‘advent of the Russian exemplar’ had altered the policy-making climate.63 Moreover, the Labour Party’s new finance and trade policy committee, chaired by Graham, dealt with the planning issue throughout September 1931. Its deliberations can be traced in detail, using records from the Stafford Cripps papers. Those present at its meetings varied, but included Christopher Addison, Alfred Barnes, A. V. Alexander, Sydney Arnold, Attlee, Cripps, Dalton, Arthur Greenwood, Mary Agnes Hamilton, Tom Johnston, H. B. Lees-Smith, F. W. Pethick-Lawrence, and E. F. Wise.64 Colin Clark acted as assistant secretary. On 9 September five subcommittees were appointed, to deal with (1) emergency powers, (2) reparations and interallied debts, (3) trade policy and tariffs, (4) banking, currency and foreign exchange, and (5) industrial planning and reorganisation.65 Dalton reported early on that in spite of efforts to tap city personnel for information, the committee was not functioning particularly well; Wise went ‘on and on . . . never surrendering any point, however small’.66 The work had to be done in a hurry; policy was needed ready for the party conference. Moreover, much of the group’s deliberations were devoted to whether, and if so how, Britain should depart from the gold standard. These efforts were rendered redundant on 20–21 September, when the National government took the by-now inevitable step itself. The committee, nevertheless, had a threefold significance. It was the embryo of the formal policy-making structure that would be more firmly established in the post-1931 years; it brought future leaders Attlee, Cripps and Dalton into new influence, and at a seminal moment; and it produced the first, detailed discussions of economic planning 61 62 63 64 65 66

TUC report 1931, 408–26. See also Trevor Evans, Bevin, London 1946, 152. TUC report 1932, London 1932, 201–5. Beatrice Webb diary, entry for 23 Sept. 1931, Passfield papers. In addition to the minutes in the Cripps papers see Williamson, National crisis, 384–5. NEC finance and trade policy committee minutes, 9 Sept. 1931, Cripps papers. Dalton diary, entry for 7 Sept. 1931, Dalton papers, BLPES, I/14a; Thorpe, The British general election of 1931, 145.

47

THE LABOUR PARTY AND THE PLANNED ECONOMY

within the highest councils of the Labour Party, in a form clearly consistent with future developments. As Philip Williamson has noted, the committee’s work ‘represented a major break with previous party policy . . . the main shift was towards ideas of physical state control’.67 In the course of the committee’s discussions, the vocabulary of planning was used widely. For example, the trade policy subcommittee called for ‘the deliberate organisation and development, on a definite plan, of those forms of industrial activity which are likely to produce the highest standard of life for the people of this country’. Capitalism was breaking down, and Britain’s industries needed to be brought under public ownership ‘and be developed on an orderly plan . . . in the national interest’.68 Moreover, Attlee, Barnes and Hamilton, who comprised the industrial planning and reorganisation subcommittee, wrote a joint memorandum which argued: ‘As in finance so in economics, what is required is definite and conscious national direction: [a] national plan of orderly regulation . . . general rationalisation is not enough.’ They called for the distribution of industry to be correlated with town and country planning, and for the distribution and sale of products as well as production itself to be organised by the government.69 Was this mere sloganising, or did any of those involved in the September deliberations have a clear concept of how their proposed directed economy would work? It was easy, after all, for socialists to declare that ‘Socialism is an ordered plan for social well-being . . . Capitalism is an accident’, without necessarily having much idea of how the ‘ordered plan’ was going to operate.70 Indeed, over the next two decades, the would-be planners were repeatedly accused of ‘express[ing] their hopes for the future in ornate imagery’ whilst remaining impenetrably vague about how these hopes were to be accomplished.71 However, substance as well as verbiage came out of the policy group’s 1931 deliberations. First, it is clear that all concerned now accepted a rapid and far-reaching takeover of economic functions by the state as the necessary alternative to the gradualist policy of simply increasing taxation in order to extend social services to the poor. Second, the specific proposals put forward to this end were increasingly detailed, an important change from what R. H. Tawney called the ‘radiant ambiguity’ of the MacDonald era.72 Moreover, whereas the MPs concerned nonetheless still tended to waffle (Attlee et al. calling for a ‘balanced national economy’ in

67 68

Williamson, National crisis, 385. Subcommittee on trade policy, memorandum, 21 Sept. 1931, Cripps papers. The members of the committee were Addison, Alexander, Arnold, Attlee, Lees-Smith, Johnston and Wise. 69 C. R. Attlee, A. Barnes and Mary Hamilton, ‘Draft report on industrial organisation’, subcommittee on industrial planning and organisation, Sept. 1931, Cripps papers. 70 The words are those of J. R. Clynes: LPACR 1931, 177. 71 John Jewkes, Ordeal by planning, London 1948, 104. 72 R. H. Tawney, The attack and other papers, London 1953, 60.

48

1931 AND ITS IMPACT

which ‘flexibility and stability’ were both ‘vital elements’),73 Clark, the professional economist, succeeded in describing his view of a planned economy with rather more clarity. Declaring that ‘The essential new constructive idea which Socialism has to offer . . . is the idea of the central planning of the Nation’s economic life’, he defined what he saw as the tasks of planning: The ministers, the central planning staff, and the departments concerned would be charged firstly with the duty of so controlling currency and investment so as [sic] to keep the general level of prices stable, and to plan for increases of wages as efficiency increased and as the private profit-maker could be dispensed with . . . Secondly a full and detailed economic plan must be prepared covering all the industries of this country, whether under public control or not. Such planning should cover the quantity of production, prices, capital requirements and similar matters.74

This apparent attempt to distinguish between macroeconomic and microeconomic spheres was also an early example, and a clear one, of Labour’s already extant, though unacknowledged, planning dilemma. On the one hand, ‘planning’ was used simply to mean the regulation of currency, prices, investment, etc., via fairly conventional – if more boldly applied – methods of economic management, to be used during the transition to socialism.75 On the other, the ultimate ‘economic plan’ was apparently intended to involve the systematic central control of almost all aspects of virtually all production. These aspects of policy were perhaps not irreconcilable, but the connection between them was never fully described; and in the early thirties, the Labour politicians most influential in the economic sphere seem instead to have vacillated between the two.76 Party conference, general election It is notable, furthermore, that although in the autumn of 1931 the members of the finance and trade policy committee talked in private about planning, the resolutions they prepared for the party conference did not articulate the idea clearly. Rather, the resolutions strongly reflected the recently published conclusions of the Macmillan committee, the official enquiry into the relationship of finance to industry set up by the Labour government. Thus the party now expressed ‘the conviction that the aim of monetary policy should 73

Attlee, Barnes and Hamilton, ‘Draft report on industrial organisation’, Sept. 1931, Cripps papers. 74 Colin Clark, ‘Industrial reconstruction’, n.d., Sept. 1931, Cripps papers. 75 This is not to say that support for conventional tools (e.g. the use of tax policy) necessarily implied orthodoxy of the Philip Snowden/‘Treasury view’ variety. 76 See Donald Winch, Economics and policy: a historical study, London 1969, 345.

49

THE LABOUR PARTY AND THE PLANNED ECONOMY

be to stabilise wholesale prices at a reasonable level’; it also called for an international conference with the object of arriving at a concerted monetary policy. Tariffs were attacked.77 These ideas, in and of themselves, were not wildly controversial, or even at dramatic odds with previous party policy. Moreover, even the somewhat more striking notion of a national investment board with (undefined) statutory powers – a key part of Labour’s planning proposals in subsequent years – had started life as a policy adopted by the Liberal Party at the behest of Keynes in the late twenties, and had also been taken up by Mosley.78 These particular policies, therefore, did not fall far outside the mainstream of British economic debate. Again, however, such relative conservatism sat alongside a much more dramatic interpretation of recent events. In the light of the crisis, even a supposed ‘moderate’ like Dalton could write that capitalism was ‘swiftly approaching a complete breakdown’.79 Thus the party conference willingly endorsed the idea that ‘Socialism provides the real solution to the evils resulting from unregulated competition on the one hand and the domination of vested interests on the other’, and pressed ‘for the extension of publicly-owned industries and services conducted solely in the interests of the people’.80 This standard socialist rhetoric was complemented, moreover, by a widely (but not uniformly) held belief in the ‘bankers’ ramp’, the theory that the Labour government had been driven from office by the dictates of finance capital. As a consequence the party now committed itself to bringing the banking and credit system of the country under public ownership and control, as an antidote both to the deflationary policy promoted by the privately-owned Bank of England and to future capitalist ‘plots’. MacDonald having called a general election for 27 October, Labour’s manifesto, drafted by Harold Laski, repeated the conference resolutions, but these were embellished with more strident and catastrophist language. Laski was no economist, but he latched onto the value of planning as slogan: The Capitalist system has broken down even in those countries where its authority was thought to be most secure . . . [The National government] now seeks from the electorate a mandate for the impossible task of rebuilding Capitalism . . . [The Labour Party] works for the substitution of co-ordinated

77

LPACR 1931, 188, 195. The economist J. R. Bellerby, in response to a paper by Hugh Dalton, had warned against seeking to remedy Britain’s problems by altering the world; but Labour now none the less confirmed its tendency to seek international solutions to domestic difficulties: Finance and trade policy subcommittee, ‘Notes on the memorandum of the subcommittee on international policy’, 30 Sept. 1931, Cripps papers. See also Skidelsky, Interests and obsessions, 121. 78 Keynes, Collected writings, xxi. 590–2. 79 Hugh Dalton, ‘Draft report to the main committee’, NEC subcommittee on international policy, Sept. 1931, Cripps papers. 80 LPACR 1931, 321.

50

1931 AND ITS IMPACT

planning for the anarchy of individualistic enterprise. Labour insists that we must plan our civilisation or perish.81

In the event, it was the Labour Party that came close to perishing. The electoral campaign was almost, but perhaps not quite, unprecedentedly ugly.82 The party’s strength in the Commons was slashed from 265 to fifty-two, including six unendorsed Labour and ILP candidates. Of those who had served as ministers in the Labour government only three retained their seats: Lansbury, Attlee and Cripps. Lansbury became chairman of the PLP by default, Attlee became his deputy.

After the deluge: policy-making One impact of the crisis was to confirm Labour in some aspects of its past ideology, even whilst the emotional swing against ‘gradualism’ continued. Because Labour had been painted by its opponents as the party of financial irresponsibility, its new leaders were keen to demonstrate their rectitude through the advocacy of budgetary orthodoxy. They were, moreover, nervous of possible laxity amongst their followers on this score. As former minister H. B. Lees-Smith warned privately, two years after the Labour government’s collapse, ‘It is dangerous to suggest to our people that they need not balance the budget’.83 For if Labour appeared weak on this issue, then it would not be possible to criticise the National government when it violated its own orthodox canons. And such criticism formed a vital part of Labour’s strategy. The party constantly recruited arguments about 1931 into debates about economic policy throughout the remainder of the decade, demonstrating an almost obsessive desire for self-vindication. Indeed, given that the government claimed the re-establishment of sound finance as its raison d’être, to challenge it on this score called the government’s very legitimacy into question. As Sydney Silverman MP argued in 1939, when the National government’s massive borrowings for defence were contrasted with the relatively ‘paltry’ debts run up by Labour, the political controversy that had projected that government into power could easily be seen as ‘dishonest and fraudulent’ in nature.84 Therefore, although historians have sometimes been tempted to view Labour’s insistence on balancing the budget as a sign of reprehensible conservatism, there were very sound political reasons for it – even if the party’s constant harping on the theme of 1931 was liable to evoke memories in the voters which might better have been left dormant. Equally, of course, the enthusiasm for planning had solid political motiva81 82 83 84

Craig, Manifestos, 68–9. See NEC minutes, 10 Nov. 1931, ‘Report on the general election’, LPA. H. B. Lees-Smith to James Meade, 25 Oct. 1933, Meade papers, BLPES, 2/7. HC Debs, 346, 25 Apr. 1939, cols 1040–1.

51

THE LABOUR PARTY AND THE PLANNED ECONOMY

tion, even if the policy itself was vague. Colin Clark observed in January 1932, ‘the most recent universal remedy is apparently contained in the word “Plan” ’; indeed, at a time of rapidly mounting unemployment, this word was an excellent stick with which to beat the National government.85 Nevertheless, in the aftermath of the general election, changes in Labour policy were conditioned not merely by this desire for political revenge, nor simply by evolving intellectual reactions to the slump, but also by changes in the movement’s institutional dynamics which resulted from the defeat. The diminutive PLP was condemned to a role in essence ‘futile and unreal’,86 so power shifted towards the NEC and, some historians have argued, most strikingly towards the trade unions. The unions’ increased participation in the party’s counsels was enacted through the National Joint Council (NJC) (renamed the National Council of Labour in 1934). This previously moribund body was revived at the end of 1931, ostensibly to improve co-ordination between the three bodies it represented, the NEC, the PLP and the TUC general council. That the TUC had seven representatives, whereas the other bodies had only three each, meant that the movement’s industrial wing could always out-vote the political wing. Henry Pelling, claiming for the unions an unrivalled capacity to use the NJC to dominate the movement through control of policy, has thus dubbed Labour in the thirties ‘The General Council’s Party’.87 Pelling’s analysis, if correct, would suggest a clear direction for party policy. TUC general secretary Walter Citrine, for example, believed that the Labour Party ‘was created by the Trade Union Movement to do those things in Parliament which the Trade Union Movement found ineffectively performed by the two-Party system’.88 Such reformism was bound to conflict with the belief, now widespread in the party, that the transfer of economic power to public hands should take precedence over sectional claims and ‘the mere alleviation of distress’.89 But, in spite of Alastair Reid’s claim that ‘the unions were able to push overall policy in a more pragmatic direction’, it is by no means clear that the TUC succeeded wholly or immediately in quelling the radical aspirations of the movement’s political wing.90 As Richard Shackleton has argued, between 1932 and 1934 ‘the unions were themselves too divided on basic issues and too stunned by the impact of the pit of the depression on their membership, funds and morale to exert a consistent lead-

85 86 87 88

Eatwell and Wright, ‘Labour and the lessons of 1931’, 48. Dean E. McHenry, The Labour Party in transition, 1931–1938, London 1938, 171. Pelling and Reid, Short history, 65–79. Minutes of a joint meeting of the TUC general council and the NEC, in NEC minutes, 10 Nov. 1931, LPA. 89 Tawney, The attack, 65. 90 Alastair J. Reid, ‘Labour and the trade unions’, in Tanner, Thane and Tiratsoo, Labour’s first century, 221–47 at p. 229.

52

1931 AND ITS IMPACT

ership in political affairs’.91 Therefore, although the potential for union domination now existed by virtue of the party’s reformed institutional structure, it would be mistaken to talk of a TUC takeover of Labour, or of policy ‘dictation’. The policy re-appraisals of the thirties were controlled, and largely initiated, by the NEC, with comparatively little union interference. (Of course, as a general principle, the NEC still had to take union sensibilities into account when formulating policy.) The body with most influence over party policy, therefore, was the NEC’s policy committee. This was a restructured version of that which had drafted the resolutions for the 1931 conference. It was chaired by Hugh Dalton, working closely with Herbert Morrison, another man whose star was rising even though he was out of parliament; Dalton also chaired the new body’s finance and trade subcommittee (FTC). As Dalton’s biographer, Ben Pimlott, has put it, ‘Other leaders ran noisy campaigns, captured the headlines and gained the adoration of the constituencies. But the Labour Party that entered the 1940 Coalition and formed a majority Government five years later had an unmistakably Daltonian stamp.’92 By contrast, it was Morrison who, through his skilful management of the party machine, would come to deserve a great deal of credit for the organisational side of the 1945 victory. Of the outside bodies that sought to make a contribution to the FTC’s deliberations on economic policy, the NFRB was temporarily eclipsed, owing to Dalton and Morrison’s misgivings about Cole’s reliability.93 Immediately in 1932, therefore, the newly formed XYZ Club proved to be the party’s most influential unofficial think-tank. This was a group of city experts, including Vaughan Berry of the Union Discount Company, Francis Williams of the Daily Herald, and Nicholas Davenport, the financial columnist of the New Statesman.94 It first met on 8 January 1932 in a city restaurant, its aim being to provide Labour leaders with advice on administrative and financial problems.95 As a result, Labour’s economic policy quickly became more detailed; 91

Richard Shackleton, ‘Trade unions and the slump’, in Ben Pimlott and Chris Cook (eds), Trade unions in British politics, London 1982, 120–48 at p. 127. 92 Pimlott, Hugh Dalton, 212. 93 Elizabeth Durbin, New Jerusalems, 81. 94 Dalton acted as the group’s main liaison within the Labour Party, but Cripps also played a part in overcoming internal opposition (from H. Scott Lindsay, secretary to the PLP) to taking outside advice. Although Cripps had little patience for committee work, he might thus have been prepared to play a greater part in official policy-making in the thirties, had it not been for the sudden death of William Graham in January 1932. Graham had encouraged Cripps’s participation during the previous autumn’s deliberations, and the men remained in touch until Graham succumbed to pneumonia. None the less, according to Davenport, admittedly an unreliable witness, Cripps did become involved in XYZ’s discussions; the journalist claimed that out of Attlee, Dalton, Morrison and Cripps, only the last was not ‘sublimely ignorant of the City and suspicious of its institutions’: Cripps to Graham, 31 Dec. 1931, and Cripps to Lansbury, 31 Dec. 1931, Cripps papers; Nicholas Davenport, Memoirs of a city radical, London 1974, 76, and The split society, London 1964, 47. 95 Douglas Jay, Change and fortune: a political record, London 1980, 60.

53

THE LABOUR PARTY AND THE PLANNED ECONOMY

this trend was first manifested in the NEC’s 1932 policy report Currency, banking and finance, which was prepared with XYZ assistance. It laid out a scheme to nationalise the Bank of England, and developed the proposal for a national investment board. (The board would have powers, largely negative, to prevent ‘waste and misdirection in the use of long-term capital’.) The report also argued for a managed currency and a stable price level, and for undefined emergency powers to prevent a financial panic.

Currency, banking and finance The report was symbolic of the ‘managerial’ strand of Labour’s developing post-crisis philosophy. Clark had previously identified the first task of planning as controlling currency and investment so as to keep prices stable; the NEC’s initial priority was now identical. It concluded: To establish control over this department of our economic life will not, by itself, bring about Socialism, nor raise the workers’ standard of life to a proper level. But such control is the necessary foundation of Socialist reconstruction, and without such control the achievement of the Labour Party’s aims will be impossible.96

This belief rested on two bases. The ‘banker’s ramp’ theory contributed to the idea that public control of the financial system was essential ‘to prevent Socialist policy from being defeated either by active opposition or by private financial interests’ – and the increasingly vocal left of the party was happy to share in the implication that capitalist financiers had been to blame for the Labour government’s collapse. Equally, and more positively, the control of finance could cure the slump and make possible a policy of ‘planned National Development’.97 Monetary factors thus played a very important part in Labour’s analysis of the slump.98 As developed in subsequent years, the argument ran that, while the power to control finance remained in private hands, there could be no guarantee that savings would be fully employed in investment: under capitalism investment was forthcoming only in response to private profit, not social need. The resulting dislocations between planned savings and actual investment led inevitably to the alternation of boom and slump, ‘the normal and inevitable history of capitalist finance’ according to Labour’s official line

96 97 98

Labour Party, Currency, banking and finance, London 1932, 4. Ibid. 3. As Hugh Dalton put it in 1935, ‘the economic disasters of the post-war years are mainly due to financial causes and financial mismanagement. There has been no failure in productivity. . . . But there has been gross failure in the financing of production, exchange and distribution’: Practical socialism for Britain, London 1935, 182.

54

1931 AND ITS IMPACT

in 1933.99 This argument owed much to Keynes’s Treatise on money (1930).100 Its implication, from the socialist point of view, was that the common ownership of the means of production, distribution and exchange would eliminate the disequilibrium that the false expectations inherent in the private sector’s pursuit of the profit motive caused in the system. Through the exercise of monetary policy, planned savings could be made to equal actual investment at the full employment level of output. (In practice this argument was generally reduced to a cruder level: the phrase ‘equality of savings and investment’ became a mantra.)101 Also, any extra investment could be channelled into ‘socially useful’ projects. The slump could be cured. Full socialist reconstruction – including the redistribution of wealth – could then begin, facilitated by the sound financial management that was its prerequisite. By what means, though, would the ‘planned’ investment be directed? Currency, banking and finance reflected the XYZ group’s view that the National Investment Board should be a licensing agency for capital issues, with a remit to collate all proposed investment projects, public and private, and draw up a scheme of national investment for consideration by the government. Clark and other Labour economists were more ambitious, however, wanting the board to have powers to raise capital by issuing government-guaranteed bonds, making or guaranteeing loans to approved private and public projects. Debate rumbled on amongst the party’s advisers throughout the 1930s, with victory for the more ambitious vision coming during the war.102 These disagreements as to the NIB’s functions, however, may have contributed to the Attlee government’s failure to enact the policy. Disagreements notwithstanding, the proposals in Currency, banking and finance, which won the guarded public approval of Keynes, represented a fairly detailed blueprint of how a Labour government might first grasp and then refine control of the nation’s financial machinery.103 Planned socialist reconstruction would follow on easily; further obstacles were not expected. This made Davenport of the XYZ Club uneasy. ‘I always got the feeling that these Labour leaders did not really care what happened to private enterprise in the private sector,’ he recalled. ‘The Marxists, of course, wanted to kill it while the Fabians, I felt, were not sufficiently interested in keeping it alive and kicking.’104 Such lack of enthusiasm was, perhaps, hardly surprising given that the private enterprise system appeared, if not actually to be breaking down, then

99 100 101

Labour Party, Socialism and the condition of the people, London 1933, 10. Skidelsky, Interests and obsessions, 125. See Christopher Mayhew, ‘Memorandum on the official and unofficial material dealing with the Labour Party’s financial policy’, n.d. 1938 or 1939, Fabian Society papers J26/7. 102 Susan Howson, British monetary policy 1945–51, Oxford 1993, 69–70. 103 New Statesman and Nation, 17, 24 Sept. 1932, reproduced in Keynes, Collected writings, xxi. 128–37. 104 Davenport, Memoirs, 79.

55

THE LABOUR PARTY AND THE PLANNED ECONOMY

certainly to be failing a great mass of the British people. Although, during the 1930s, the country’s economy grew relatively rapidly, and there was a reasonable improvement in productivity, the fruits were unevenly distributed.105 Unemployment peaked at an estimated 3,750,000 in September 1932, with the worst impact falling on the staple export trades such as coal and cotton.106 These industries in turn were located in Labour’s electoral heartlands (or what was left of them), and MPs, activists and trades unionists were well-placed to appreciate the social devastation wrought by their decline; it justified the slogan ‘poverty in the midst of plenty’. It was natural to seek out alternative economic models in response.

The NFRB visit to Russia Amongst those seeking out alternatives, there was a conflict between the moderate, technocratic approach inspired by the city radicals and a much more sweeping conception of planning. This latter approach corresponded with Clark’s proposed second task of planning: the preparation of a full and detailed economic plan covering the quantity of production, prices and capital requirements in all industries. The growing interest in the Russian experiment reinforced such a view of planning within the Labour Party, and in progressive circles generally. Fabians who visited the USSR in the summer and autumn of 1931, such as C. M. Lloyd, S. K. Ratcliffe and Somerville Hastings were favourably impressed.107 The following year, this trickle of visitors turned into a flood. ‘The entire British intelligentsia has been to Russia this summer,’ observed Kingsley Martin late in 1932. ‘Most of it has asked me to print its articles.’108 Reasonably-priced package holidays provided by Intourist, the Soviet tourist agency,109 and advertised in the Labour press, also brought the experience within reach of ordinary party members. Partly in consequence, the USSR was now used in many quarters of the Labour movement as an example of an alternative to unfettered capitalism. For, as Bevin said, no country outside Russia seemed to have a policy of any kind, and 105 Neil K. Buxton, ‘Introduction’, in Neil K. Buxton and Derek H. Aldcroft (eds), British industry between the wars: instability and industrial development, 1919–1939, London 1979, 9–23 at pp. 13–14. 106 Sidney Pollard, The development of the British economy, 1914–1980, 3rd edn, London 1983, 155. 107 Beatrice Webb diary, entry for 13 Oct. 1931, Passfield papers; Thomas Jones, A diary with letters, 1931–1950, London 1954, 21–2. 108 David Low and Kingsley Martin, Low’s Russian sketchbook, London 1932, 9. 109 Intourist began operations in 1929, and was from the outset very concerned with raising hard currency. Before that, in the 1920s, many tourists went through VOKS, the All-Union Society for Cultural Ties Abroad, which developed very strained relations with Intourist during the first five-year plan – in which era the number of foreign visitors increased substantially. I am grateful to Michael David-Fox and Nick Baron for this information.

56

1931 AND ITS IMPACT

Britain was in a mess because it had no policy.110 And, as Stephen Kotkin has argued, just as Soviet images of a miraculous future based on industrialism borrowed freely from an international vocabulary, so the message of the five-year plan resonated back around the world.111 Discussions in preparation for an NFRB investigative trip to Russia had begun, tentatively, by December 1931, and arrangements were fairly well advanced by the following February. At different times during these months, Beatrice Webb noted that Cole and Dalton discussed Russia eagerly, whereas Morrison was, by comparison, unsympathetic.112 Attlee also took a positive interest in Soviet economics.113 The NFRB trip took place in July and August 1932. It strongly reinforced Labour’s interest in Soviet planning, which, as has been seen, had been developing for nearly two years. Led by Margaret Cole, the group included, amongst others, Dalton, F. W. Pethick-Lawrence (the former financial secretary to the Treasury), Dick Mitchison (a future Labour MP) and Redvers Opie, a Russian-speaking Oxford economist. For Dalton, one of the most dramatic moments of the trip was his arrival at Magnitogorsk, or Magnetic Mountain City, the giant steel town that had been raised from the nearly barren Urals steppe within the space of three years; it was Stalin’s showcase, demonstrating the supposed economic triumph of socialism over capitalism. Arriving there in July, Dalton recorded: As seen from the railway station Magnitogorsk is like a great war-time Railhead or . . . an American mushroom town – except that there are no real estate offices, or capitalist advertisements. Instead only an occasional red streamer with some notice or exhortation. Wooden shacks, storehouses and station buildings and great dumps of crates, sacks, machines, nails, timber, etc . . . The blast furnaces and tall industrial chimneys of Magnitogorsk stand up some while before you reach it. They are belching smoke. The thing is working, it is not a fantasy, nor a propagandist tale.114

What Dalton and the other visitors were witnessing was a form of economic organisation characterised (in Kotkin’s words) by ‘hyper-centralization, extreme rigidity, and colossal waste and inefficiency, but also by the knowing 110 111 112

Cited in Williams, Labour and Russia, 155. See also Bullock, Ernest Bevin, i. 508. Stephen Kotkin, Magnetic mountain: Stalinism as a civilization, Berkeley, CA 1995, 32. Beatrice Webb diary, entries for 10 Dec. 1931, 17, 27 Jan. 1932 and 22 Feb.1932, Passfield papers. 113 Williamson, National crisis, 462 n. 33. 114 Dalton USSR diary, entry for 19 July 1932, Dalton papers I/53. This enthusiasm was in contrast to Dalton’s amused scepticism in 1930 when Colonel W. B. J. Mitford, honorary attaché to the British embassy in Moscow, told him about life in Russia: ‘[Mitford] is informed of the Five Year Plan. The Russians will certainly make good. The stunt about religious persecution is all moonshine. The priests whom he sees all look fat. . . . There are no brothels, nor venereal disease – fucking not being morally prohibited and marriage easily contracted and dissolved – and illiteracy is being rapidly wiped out. . . . Mitford ought to run about the West End talking this stuff. It’s grand!’: Pimlott, Dalton political diary, 99, entry for 20 Mar. 1930.

57

THE LABOUR PARTY AND THE PLANNED ECONOMY

violation or circumvention of rules and procedures in the interest of “getting the job done” ’.115 Dalton was certainly aware of the inefficiency in the system, suffering himself from the Russians’ lack of punctuality. But he was sufficiently impressed by the energy shown by the Soviet planners not to carp too much about the haphazard means of its application, which he did not blame on the industrial high command. Rather, he thought it the fault of the ‘messy, muddly little people’ underneath, who were always ‘late and vague and garrulous’.116 The resort to a ‘national character’ explanation for the faults and failures of Soviet planning was widespread in British socialist circles. Barbara Wootton, a Labour economist who travelled to Russia, independently of the NFRB, in the same year, wrote that it was necessary to remember that the great experiment was being carried out not by westerners, but by ‘Russians, Georgians, Tadzhiks and Uzbeks – by people who have provided Dostoievsky and Chekov with their characters . . . How different might the result have been had the job been undertaken, not by Russians, but by orderly, accurate Germans!’117 The Webbs, who had been converted to the Soviet system after travelling to the USSR (in May 1932), expressed similar sentiments. Beatrice explained: ‘the plan is superior to the execution; the theory to the practice’. The raw material out of which the new social system was being wrought was ‘very raw indeed, excessively diversified and, for the most part, of low grade intellect and character’.118 Manifest deficiencies notwithstanding, therefore, the impression created by the five-year plan encouraged what George Orwell sneeringly called the ‘Socialism-progress-machinery-Russia-tractor-hygiene-machinery-progress’ mentality.119 Throughout the 1930s there was continued belief in the success of the Soviet economic project, in spite of growing disquiet about Stalin’s political system. Cole was still waxing lyrical about the five-year plans in 1937, the year of the great purge.120 Evan Durbin, at around the same time, was by contrast far more critical. He believed ‘the ruthless destruction of the peasantry’ in Russia to have been ‘a great crime’.121 Nonetheless, planning was a superior system: a backward country had cured unemployment, built capital very fast and maintained its foreign credit. The Bolsheviks stood condemned on ethical grounds because they were dictators. But ‘They have made the Planned Economy work surprisingly well.’122 This was the general belief amongst British socialists. Indeed, it is easy to see why, with unemploy-

115 116 117 118 119 120 121 122

Kotkin, Magnetic mountain, 41–2. Dalton USSR diary, entry for 22 July 1932, Dalton papers I/53. Barbara Wootton, Plan or no plan, London 1934, 164. New Clarion, 8 Oct. 1932. George Orwell, The road to Wigan pier, London 1937, 240. Tribune, 7 May 1937. E. F. M. Durbin, ‘Summary lecture on Russia’, n.d., Durbin papers, BLPES, 1/6. Idem, ‘Assessment and lessons’, 1937, ibid.

58

1931 AND ITS IMPACT

ment creating misery in Britain, the Soviet model had its attractions. For, as Dalton put it, ‘In the Soviet Union . . . at least they are trying to plan . . . at least they are trying, and not impotently giving up the ghost’.123 It was not true, then, that the NFRB visitors of 1932 had no reservations about what they saw. Rather, they recognised many problems, but minimised their significance. Dalton and his colleagues were of course aware that there was no political freedom in Russia, but ‘perhaps, some of us thought, we had overvalued this in the West, relatively to other freedoms’.124 He also confided to his diary ‘The British Socialist’s mixed feelings and conflicting impressions’ not to mention his dislike of ‘this ugly, lumpy, slow-moving people’, the Russians themselves: ‘Sometimes I was exalted. “You must restrain your enthusiasm,” said one of my companions. At other times I shared the view that this was a lousy civilisation.’125 When the visit was written up as Twelve studies in Soviet Russia (1933) both Dalton and his colleagues tended to suppress the negative aspects of their feelings. Nevertheless, Andrew J. Williams argues that, since only two of the NFRB authors (D. N. Pritt and H. L. Beales) were completely unambiguous in their praise for what they saw in Russia, the temptation to read a massive commitment to the Soviet system into their accounts must be resisted.126 But Raymond Postgate, who contributed an essay on the Soviet media, himself broadcast from Russia in terms which stopped just short of being sycophantic.127 Naomi Mitchison, who later recalled that she had been ‘in two minds’ about the Communist Party itself, nonetheless commended the five-year plan very strongly in the New Clarion in 1933.128 Pethick-Lawrence, too, ‘formed a very high opinion of the way in which planning was being carried out’.129 Margaret Cole, the book’s editor, later accepted that the visitors had minimised what they did not want to see. Clearly somewhat embarrassed about her own past enthusiasm – ‘One has come home’, she had written to her husband from Russia – Cole recalled in 1961 ‘the unique and compelling force of the Soviet appeal in the dark years of the depression’.130

123 124 125

New Clarion, 12 Nov. 1932. Hugh Dalton, The fateful years: memoirs, 1931–1945, London 1957, 28. ‘The British socialist’s mixed feelings and conflicting impressions’, notes attached to Dalton’s USSR diary, Dalton papers I/54. 126 Williams, Labour and Russia, 177. 127 John Postgate and Mary Postgate, A stomach for dissent: the life of Raymond Postgate, 1896–1971, Keele 1994, 173–4. 128 Naomi Mitchison, You may well ask: a memoir, 1920–1940, London 1979, 191; New Clarion, 21 Jan. 1933. 129 F. W. Pethick-Lawrence, Fate has been kind, London 1943, 177. 130 Margaret Cole’s undated letters to G. D. H. Cole, July–Aug. 1932, Margaret Cole papers, Nuffield College, Oxford, B1/14/3; Betty D. Vernon, Margaret Cole, 1893–1980, London 1986, 84–7; Margaret Cole, The story of Fabian socialism, London 1961, 227–9. For further evidence of the group’s views see Graeme Haldane’s diary of the trip, and especially the entry for 15 July 1932, Haldane papers, Churchill College, Cambridge, 3/1.

59

THE LABOUR PARTY AND THE PLANNED ECONOMY

Williams is clearly right to point up the ambivalence that most of the writers felt, but he underrates the strength of their pro-Soviet feeling. In Dalton’s case, at least, the desire to play down the negative side of what he had seen arose largely because he was so impressed with the Russians’ claim to have eradicated unemployment: ‘Here there was no “industrial depression”, no inescapable “trade cycle”, no limp surrender to the law of supply and demand’, he recalled in his memoirs.131 Though in some respects disappointed, and certainly not converted to communism, he thus concluded upon his return from Russia: ‘It may be held that, even with a measure of social control far less extensive than that which prevails today in the Soviet Union, the adoption of the principle of economic planning can lead to large and beneficial results’.132 It is not therefore true, as Harris appears to imply, that interest in Soviet-style planning was restricted solely to Labour’s left-wing.133 Convinced that he had seen socialist planning in action, Dalton’s experiences had a major impact upon Labour’s electoral programme. (Morrison too, in at least a partial reversal of his prior attitude, was ‘greatly impressed’ when he visited Russia the following year.)134 As Pimlott puts it, ‘the notion that planning should involve the physical control of resources by a central instrument of government became one of Dalton’s strongest themes in the years that followed’.135 He seems to have had a somewhat naive view of how easy it would be to implement this policy: The Soviet economy is essentially simple. . . . It is decided what shall be done, and, if not physically impossible, it is done. Investment, for example, is decided on and then takes place, not induced by devious devices (bank rate, open market policy, etc.) . . . [The] Inducement mechanisms of capitalism [are] unnecessary.136

This disdain for ‘devious devices’ (he specifically included those advocated by Keynes and by A. C. Pigou) may partially validate Nicholas Davenport’s view that Dalton could not ‘absorb the details of a complicated money system, which was alien to his way of life’.137 This depiction exaggerates the 131 132

Dalton, The fateful years, 28. Idem, ‘A general view of the Soviet economy’, in Margaret Cole (ed.), Twelve studies in Soviet Russia, London 1933, 15–34 at p. 16. Pethick-Lawrence’s views were similar: ‘I had no wish to see Russian institutions transplanted bodily to my own country. . . . But I saw much to admire during my visit, and I recognized that there was an immense amount that we could learn from it to our own advantage’: Fate has been kind, 177–8. 133 Harris, ‘Labour’s political and social thought’, 24. 134 Herbert Morrison, ‘Preface’, in W. P. Coates and Zelda K. Coates, The second five-year plan of development of the USSR, London 1934, p. v. See also Daily Herald, 25 Sept. 1933. 135 Pimlott, Hugh Dalton, 213. 136 ‘Economic categories and conceptions’, notes attached to Dalton’s USSR diary, Dalton papers I/54. 137 Davenport, Memoirs, 72.

60

1931 AND ITS IMPACT

ignorance of Dalton, whose Principles of public finance (1922) ran to several editions, but clearly there was a significant divide between the command economy that impressed him and the far subtler ‘inducement mechanisms’ that were the stuff of conventional economics. Yet conversely, Currency, banking and finance, written before the trip to Russia, appeared to endorse such mechanisms. Indeed, the non-socialist Davenport apparently contributed to it and, in due course, it was accepted by the party’s autumn conference. Amended under left-wing pressure from the newly-formed Socialist League to include the nationalisation of the joint stock banks, the waters were muddied further.

The Socialist League The Socialist League was formed at the Labour Party’s 1932 conference in Leicester, when the minority of the ILP, which had rejected the majority’s decision to disaffiliate from Labour, joined together with the SSIP. The League’s leading lights included Cole, Cripps (who took over the chairmanship when E. F. Wise died in 1933) and William Mellor. Acting as a pressure-group for left-wing policies, the League quickly adopted the tactics of confrontation with the party leadership. It did not succeed in gaining mass support from within Labour’s ranks, and acted as an irritant to officialdom until forcibly disbanded in 1937. Within days of its formation, however, it scored its biggest success, inflicting high-profile defeats upon the leadership at Leicester. The joint stock banks resolution was the most important of these.138 It appears that, in the immediate wake of the 1931 crisis, the party leadership had been temporarily converted to the idea of nationalising the banks. ‘You can talk about socialising your railways and other things’, Bevin had told the Scarborough conference, ‘socialise credit and the rest is comparatively easy’.139 A year later, both Bevin and the NEC had changed their minds, doubtful of both the economic and the electoral merits of the proposal. Wise, who now put forward the bank nationalisation amendment, subsequently wrote that the 1929–31 government ‘was crippled from the beginning by finance and was finally killed by the financiers’. A new Labour government could thus expect a new financial crisis to be orchestrated against it. Moreover, ownership of the banks would help implement a ‘national plan for economic development’ by directing credit towards nationalised industries, the 138 Pimlott, Labour and the left, 42–56. See also James Jupp, The radical left in Britain, 1931–1941, London 1983, 42–3. 139 LPACR 1931, 192. See also Pethick-Lawrence’s comments, ibid. 189, and Ernest Bevin and G. D. H. Cole, The crisis: what it is, how it arose, what to do, London 1931, 38–9. This latter pamphlet was drafted by Cole but reflected Bevin’s views too: Bullock, Ernest Bevin, i. 502.

61

THE LABOUR PARTY AND THE PLANNED ECONOMY

ultimate aim being to end poverty.140 Cripps told the conference: ‘it will be impossible for a Socialist Party to carry through Socialism as long as the Joint Stock Banks remain under private control’.141 The delegates were in the mood for a dramatic, anti-gradualist gesture, and accepted the amendment by 2,241,000 votes to 984,000. In economic terms, the arguments that the Socialist League and its allies put forward were not very convincing. The implication was that, had the banks pursued a more liberal policy, they could have safely extended credit, so making it possible for manufacturers to increase employment. But there seems no reason to doubt the view put forward by the TUC general council to the Macmillan committee: ‘There does not appear to be any actual evidence that the banks have, within their accepted sphere, pursued a policy less liberal than was possible to them’, i.e. within the constraints placed upon them by the Bank of England in order to maintain the gold standard.142 Perhaps sensing they were on weak ground, those who argued for nationalisation explicitly sought to avoid considering its economic merit. Attlee and Cripps, writing in the wake of the Leicester decision, saw the matter as a symbol, ‘the acid test upon which to decide between gradualism and socialism’. The difference . . . between those who believe in immediate nationalisation and those who do not is not really on the technical and economic issue. It is much more upon the general issue of whether it is possible to persuade capitalism to hand over control to socialism by gradual and restrained measures. We are convinced that to take such a course is to court disaster.143

This was the emotional spirit in which the Leicester decision was taken. Not only did the Socialist League’s victory encourage the group’s extremism, it also further confused Labour’s economic policy, by committing the NEC to a measure in which it did not believe. The anomaly would persist for five years. By October 1932, then, the Labour Party’s economic policy had undergone a profound change of direction. Discontent with MacDonald’s government had led to calls for ‘national planning’ from 1930 onwards. Mosley to some extent owed this vocabulary, if not the substance of his ideas, to the ILP; and, under the influence of Strachey and Bevan’s Russian experience, bent his thinking further in the direction of state control of industry. Although this was not enough to win him significant Labour support, the Soviet example did evince increasing interest in planning within the party after he had left. It certainly played a key role in Cole’s initiation of the NFRB’s planning discussions, which in turn seem to have influenced Bevin. As long as the ancien régime

140 141 142 143

E. F. Wise, Control of finance and the financiers, London 1934, 1–3. LPACR 1932, London 1932, 192. TUC report 1931, 276. C. R. Attlee and Stafford Cripps, ‘The joint stock banks’, Jan. 1933, Dalton papers 2/1.

62

1931 AND ITS IMPACT

remained in charge, however, the demand for planning had no practical impact on party policy. But when the National government was formed, Labour needed a new policy urgently; and what better policy could there be than ‘planning’, an idea first mooted out of frustration with MacDonaldite gradualism? Bevin argued powerfully for the new concept at the TUC congress; and the hastily convened finance and trade policy committee provided the means to introduce the notion explicitly into the Labour Party’s own deliberations. Colin Clark played a key role in these latter discussions; Laski made the idea resonate with the slogan ‘plan or perish’. This was a turning point in Labour’s official thinking. Williams has written that, ‘in the early days after October 1931 planning was used as a rallying cry, not a policy. No policy existed.’144 There is much truth in this. However, even at this early stage, one vital characteristic stood out – the division of planning into a) financial measures, and b) the detailed control of industry. Financial measures at first received priority. This was partly because of Labour’s concern to forestall a future crisis by taking control of Britain’s financial apparatus. Also, financial questions were the chief concern of the city experts of XYZ, not all of whom were avowed socialists. But belief in the potential of the physical control of production was further boosted by the NFRB’s visit to Russia in the summer of 1932. Dalton, newly influential as chairman of the NEC policy committee, was deeply impressed by what he saw. This was a strong influence on party policy as it developed in 1933 and 1934. These two aspects of Labour’s planning policy were intended to be complementary; but in fact, the super-centralism that Dalton seemed to favour risked contradicting the spirit of the low-key proposals in Currency, banking and finance. To some extent, also, the understandable desire to make a break with the past conflicted with the equally understandable wish to confound the party’s critics by sticking to financially ‘responsible’ orthodox policies. The situation was further complicated when the Socialist League wrong-footed the NEC by appealing to the emotions of the delegates at Leicester; economic policy was being made on considerations that were not economic, but symbolic. Nevertheless, these unclear elements in Labour’s programme notwithstanding, there were broad areas of agreement within the party about what planning meant. The vast majority of socialists now assumed that the nationalisation of industry and investment were the prerequisites of planning. Models of nationalisation, which industries were to be included, and timing, would all, as the decade went on, remain matters of extensive, sometimes violent, argument – as would the issue of workers’ control. Yet the basic project was agreed: not only was nationalisation the means to enact Labour’s egalitarian ideals, but the supposed administrative efficiency of socialism 144

Williams, Labour and Russia, 207.

63

THE LABOUR PARTY AND THE PLANNED ECONOMY

would eliminate the ills that capitalism caused, unemployment chief among them. Moreover, during the MacDonald era, nationalisation and the redistribution of wealth had not been linked intrinsically to one another: the latter had not depended on the former, but on improved social services funded from taxation and on increased wages gained through industrial action. After 1931, by contrast, redistribution and nationalisation became part of the same engine; it was argued that only the public ownership, direction and control of industry could bring about equality. In this way, the gradualism of the MacDonald years was rejected as an economic fallacy as well as a political one. Planning, then, conceived as an antidote to the slump, was also an antidote to Labour’s uncomfortable past – and an ideological weapon in the broader political battles of the 1930s.

64

Practical Economics? 1932–1939

3

Practical Economics? 1932–1939 By the close of 1932, the idea of the planned economy to replace capitalism was firmly established as the defining principle of the Labour Party’s socialist policy. As a consequence of the events of 1931, and bolstered by the seeming success of the Soviet model, planning was, within the Labour movement, the almost universally accepted antidote to both the incrementalism of the MacDonald years and ‘the cult of impotence’ supposedly preached by the National government in the face of the slump.1 Moreover, as the decade drew on, the case for planning was strengthened by developments abroad. Labour politicians argued, as the threat of war burgeoned, that because of the class interests which the Conservative party represented, the government which it dominated was congenitally incapable of (a) pursuing a ‘constructive’ foreign policy based on collective security via the League of Nations, and (b) organising finance and production in the developing ‘near-war’ economy in an equitable and efficient fashion. Labour aspirations towards a socialist foreign policy based on international co-operation thus went hand in hand with calls for a domestic economy planned on socialist lines. Moreover, the party’s internal divisions notwithstanding, there was significant agreement between Labour’s left and right wings on what ‘minimum steps’ were necessary for socialism. Samuel Beer has described this phenomenon as ‘pluralism within consensus’.2 Nevertheless, the immense energy that went into discussions of socialist planning bore remarkably diverse fruit. Justifications for planning ranged from a simple faith in human will-power as the motive force of a more efficient economic system, to the more minimalist claim that, whatever the economic advantages of the free market, only planning could guarantee social equality. The proposed machinery of planning, too, was controversial, as were questions of consumer sovereignty, and of controlled prices versus ‘market socialism’. As war drew closer, planning grew in relevance as a solution to the country’s economic problems and, indeed, was as popular as ever; but by 1939 these difficult issues were still not adequately resolved, although certainly not for want of trying. The decade did, however, see significant developments in the economic theory of planning. Hayek’s Collectivist economic planning was a landmark, not 1

Hugh Dalton, memorandum for policy subcommittee on finance and trade, 1933, Dalton papers 2/1. 2 Samuel H. Beer, Modern British politics: a study of parties and pressure groups, London 1965, 163.

65

THE LABOUR PARTY AND THE PLANNED ECONOMY

only for the slowly burgeoning anti-planning movement but also for the planners, as it drew important socialist responses, notably from Evan Durbin and from Oskar Lange. Of course, Labour’s views on the planned economy did not develop merely at this abstract level. The ‘capitalist planning’ measures taken by the National government, and the challenge posed by ‘middle opinion’ groups such as PEP and The Next Five Years, helped Labour define its own planning policies in a distinct fashion. Policy was also conditioned by yet broader considerations – not all of them strictly economic. For example, Labour’s views on unbalanced budgets in the 1930s cannot be properly understood without reference to the political legacy of the 1931 crisis, and to the defence finance schemes put forward by the National government in the latter part of the decade. These in turn must be viewed in relation to the distrust and contempt felt by Labour for a ‘capitalist’ administration that, having allegedly come to power on the basis of fraudulent claims, was now supposedly pursuing its class interests by truckling to dictators. This is the context in which to view the opposing claims that historians have made about the party’s economic programme. Elizabeth Durbin has argued that ‘By the outbreak of war the Labour Party had travelled light-years in the depth and sophistication of its knowledge of British financial institutions and economic policy options since the dark days of 1931’.3 Alan Booth has responded that, on the contrary, Labour’s policy-makers were ‘naive’ and ‘adept at coining slogans that were devoid of meaning’, and that their ideas on economic planning were ‘half-baked’ and irrelevant to the real problems of the British economy.4 This chapter, however, will examine the political function of the idea of planning alongside this question of the economic ‘sophistication’ of the party’s programme; for it should not be assumed that political and economic sophistication were necessarily synonymous.

The political context In the aftermath of the 1931 crisis, mainstream thinkers within the Labour movement quickly renounced the heat-of-the-moment contention that capitalism was in the process of breaking down. A New Leader spot poll of Labour intellectuals in March 1932 showed only Stafford Cripps believing a crash was imminent.5 Ernest Bevin’s view was perhaps more typical: ‘The statement that Capitalism was doomed to collapse was misleading . . . Trade Union people . . . saw Capitalism adjusting itself more rapidly than many people imagine. We were in a state of turmoil and doubt’.6 Labour thinkers, therefore, developed objections to capitalism (and hence justifications for plan3 4 5 6

Elizabeth Durbin, New Jerusalems, 261. Booth, ‘Light years’, 22, 26. New Leader, 18 Mar. 1932; Williams, Labour and Russia, 208. SSIP Bulletin, June 1932, Fabian Society papers J6/2.

66

PRACTICAL ECONOMICS? 1932–1939

ning) on non-catastrophist grounds. Broadly, these objections fell into two categories. First was the economic idea that capitalism, if not doomed, was nonetheless inefficient. Second was the claim that even if capitalism could be made economically efficient it would still be socially unjust. As the dole queues lengthened in the early thirties, capitalism stood, in Labour’s view, increasingly condemned for its failure to prevent ‘poverty in the midst of plenty’. The government’s apparent willingness to tolerate the situation helped fuel the party’s ‘fierce political hatred’ of the National government.7 This bitterness was also accentuated by resentment over the events of 1931, and, as the decade went on, by perceived foreign policy ‘betrayals’; government–opposition relations were unusually poor, being mired in mutual contempt. There were, nonetheless, some lights on the horizon. The Labour Party nationally began to experience a recovery of sorts as early as 1932. Although trade union affiliated membership slumped, individual membership grew, the party gaining 100,000 new members in a year.8 Despite ongoing financial difficulties, the party experienced local and by-election success in the early thirties, the most notable triumph being the capture of the London County Council (LCC) in 1934. This revival, however, was achieved in spite of Labour’s rather public internal divisions. Within a few months of its formation at the emotive 1932 party conference, the Socialist League began to develop into ‘a sort of Jesuit Order within the Labour Church’, in Mervyn Jones’s phrase.9 Cripps and his colleagues within the League used the language of class war and inevitable crisis. This was, perhaps, an understandable reaction to the era of slump and appeasement. Nonetheless, this led them into a series of embarrassing gaffes, appearing to indicate, for example, that they would be prepared to see a Labour government prolong its term of office beyond five years without an election.10 The League continued to cause trouble until it was forcibly disbanded in 1937; and it was a further two years before Cripps himself was expelled from the party, having committed further misdemeanours. The left was by turns opposed and tactically appeased, and the official policy-making process was conditioned by this ongoing struggle. In 1933, for example, Dalton brought forward to conference a detailed scheme for the nationalisation of the joint stock banks, in order to comply with the left-wing resolution passed the previous year over the NEC’s objections. This was welcomed by leftwingers, although Dalton had deliberately omitted to say when in the life of a future Labour government the banks would be taken under control.11 7 8

Dalton, The fateful years, 22. Jack Reynolds and Keith Laybourn, Labour heartland: a history of the Labour Party in West Yorkshire during the inter-war years, 1918–1939, Bradford 1987, 110. 9 Mervyn Jones, Michael Foot, London 1994, 28. 10 Stafford Cripps, ‘Can socialism come by constitutional methods?’, in Christopher Addison and others, Problems of a socialist government, London 1933, 35–66 at p. 39. 11 Dalton, The fateful years, 46.

67

THE LABOUR PARTY AND THE PLANNED ECONOMY

Arguably, manoeuvres like this simply created confusion in the mind of the electorate as to where the party really stood. It should be noted, however, that the Socialist League conflicted with the official party line mainly over questions of political tactics rather than over substantive economic issues. As was noted in chapter 2, even the nationalisation of the joint stock banks, a key point of difference, was seen on the left primarily in symbolic rather than economic terms. Certainly there was no disagreement on the fundamental principle that capitalism should be replaced by a planned socialist economy, on the basis of the public ownership of industry. There was a fair measure of agreement on the measures that would go along with this: the socialisation of finance and the creation of a national investment board featured as much in the programmes of the League as in the NEC’s own statements.12 Of course, Cripps and his colleagues were willing to push such proposals much further than were the more moderate party leadership, who were frequently accused of reformism and reaction.13 But everyone in the Labour Party was now a would-be planner – even if the meaning of ‘planning’ often remained unclear. However, if the shared use of rhetoric was to some to degree matched by agreement in terms of substance, this is not to say that there was unanimity. The TUC’s economic committee (on which Dalton and Morrison both sat) concluded in 1932 ‘that the comprehensive planning of our economic life, in the Socialist direction, and the development of international co-operation, offer the only hope of economic recovery . . . without them, the collapse of the industrial system but of civilisation itself is a very real possibility’. Yet in spite of Bevin’s earlier argument that the international labour movement should investigate Russia’s ‘superhuman effort to rebuild a state on socialistic lines’ to see if it was a success, the committee emphasised ‘we do not advocate that the Russian or any other model should be followed by this country’. Nor, indeed, by planning ‘do we mean a detailed supervision and regimentation all through the economic system’, but rather ‘the intelligent organisation of production, distribution and finance’.14 Dalton himself, however, was at this time by no means afraid to cite the Soviet example, claiming ‘if the Russians can do it . . . how much more effectively could we in England do it!’ (He subsequently wrote in slightly more circumspect terms.)15 The Socialist League, meanwhile, called for ‘a Five-Year Plan of Socialisation’, albeit without explicitly invoking the Russian model.16 Labour’s policy-makers,

12

Of course, the question of the joint-stock banks was controversial, but it was not a simple left/right issue. The otherwise moderate Hugh Gaitskell and Evan Durbin of the NFRB supported bank nationalisation until 1935: E. F. M. Durbin, Problems of economic planning, 35; Elizabeth Durbin, New Jerusalems, 164. 13 Ritschel, The politics of planning, 136–8. 14 TUC report 1932, 205, 203; Bullock, Ernest Bevin, i. 508. 15 Pimlott, Hugh Dalton, 211. See also Dalton, Practical socialism, 114–15, 250. 16 Socialist League, Forward to socialism, London 1934, 8.

68

PRACTICAL ECONOMICS? 1932–1939

therefore, had to reconcile as best they could trade union caution – and their own doubts about the Soviet political system – with socialist enthusiasm. In these circumstances, ambiguity in the party’s economic programmes could help mask divisions, and was thus in some ways a source of political strength.

Labour’s policy statements, 1933–7 Four policy reports dealing with various aspects of planning were presented by the NEC to the 1932 party conference.17 But the first attempt at a single, comprehensive statement encompassing all aspects of policy was Socialism and the condition of the people, presented to the 1933 conference at Hastings. It restated the conviction that: Chaos and disorganisation must be replaced by ordered planning. The only basis on which ordered planning of industry and trade can be carried out is that of public ownership and control. Neither competition nor private monopoly has proved able to rescue the nation from its plight. The one sane alternative which is left is Socialisation.18

What followed reflected the commonly stated belief that the problem of production had been solved, and it was simply necessary to find a way to distribute the ‘plenty’ that the capitalist system was holding back from the less fortunate: ‘there has been in recent years a phenomenal increase in productive capacity . . . once this power is released, it should be utilised for the benefit of the whole people’.19 Planned reorganisation, ‘whether under public ownership or in industries remaining in private hands, pending nationalisation’, would achieve this in six ways: by the introduction of efficient methods of production; by the organised purchase of raw materials; by the establishment of effective selling agencies; by ‘the elimination of all unnecessary charges’; by guaranteeing reasonable conditions for the producers; and by ensuring reasonable prices for consumers.20 The socialisation of key industries and services would allow the adoption of planned devel17 The report Currency, banking and finance was examined in chapter 2. The national planning of transport (London 1932) called for the nationalisation ‘of all forms of transport which it is administratively practicable to take over forthwith’ under a national transport board (p. 3). The reorganisation of the electricity supply industry (London 1932) proposed the industry be fully nationalised, again under a board appointed by the appropriate minister (p. 3). The land and the national planning of agriculture (London 1932) proposed the national ownership of agricultural land to be administered by a national agricultural commission. There would also be national commodity boards with full power for purchasing or otherwise regulating imports; this would be coupled ‘with adequate control over prices in the interests of the consumer’ (p. 3). 18 Labour Party, Socialism and the condition of the people, 5. 19 Ibid. 6. 20 Ibid. 7.

69

THE LABOUR PARTY AND THE PLANNED ECONOMY

opment separately in each, but these separate plans would need to be co-ordinated with one another: this would be one of the main duties of the newly socialised financial institutions (particularly the National Investment Board), which would also be charged with making ‘investment equal to savings’.21 And ultimately, ‘The objective of the Government would be to eliminate all private enterprise as quickly and completely as possible, so that the benefits [of planning] would accrue to all workers by hand and brain’.22 The following year’s policy report For socialism and peace was perhaps the boldest programme Labour had ever produced. It was adopted at the 1934 Southport conference and formed the basis upon which the party fought the 1935 election. It reiterated the advantages to be gained from a planned economy put forward in Socialism and the condition of the people, and set forth a long list of industries to be nationalised: transport, water, coal, electricity, gas, agriculture, iron and steel, shipping, shipbuilding, engineering, textiles, chemicals and insurance, as well, of course, as banking and credit.23 The document also refined previous proposals in detailing the responsibilities of the national investment board: it would license new capital issues, it would prepare annual estimates of the national income, and would co-ordinate all schemes of capital expenditure by all public bodies including government departments, local authorities and nationalised industries.24 Furthermore, For socialism and peace made explicit the connection between Labour’s domestic economic policy and its entire world view. Just as the detested foreign policy of the ‘capitalist’ National government was judged indivisible from the failures of the private enterprise system at home, so, conversely, was it believed that socialist planning would help prevent war: Planning and control in international life both postulate and follow from national planning and socialised control of our national life. A foreign policy directed to establishing a Co-operative World Commonwealth is the inevitable corollary to a home policy which actively works for the establishment of the Socialist State. . . . The Labour Party therefore seeks for power to plan a new society to replace the old, not only on a national but on a world scale.25

There was an ironical aspect to these sentiments, given that for a party which rested its principles so firmly on the internationalist ideal Labour was in some ways insular, even xenophobic – although this tendency should not be overemphasised.26 (There was also a tension between the party’s national and 21 22 23 24 25 26

Ibid. 18–19, 10. Ibid. 19. Labour Party, For socialism and peace, London 1934, 12. Ibid. 14. Ibid. 7. William Gillies, secretary of the party’s international department, was reputed not merely to distrust foreigners but to dislike them; Dalton’s views on the ‘ugly, lumpy’

70

PRACTICAL ECONOMICS? 1932–1939

international economic aspirations, a point which will be explored in chapter 7.) Nevertheless, these remarks, together with the specific policy proposals being put forward, would seem to indicate a commitment to an extremely bold socialist project. Yet many historians have sought to downplay the extent to which Labour was at this time a thorough-going socialist party. In some cases, this has taken the form of the claim that Labour was really committed to the market, albeit in modified form. Oldfield, for example, has concluded that the conception of planning embodied in For socialism and peace ‘is one in which the institutions of the planned economy . . . provide a corrective rather than an alternative to the market’.27 It is doubtful that the report’s authors would have seen it that way, given that they wrote: There is no half-way house between a society based on private ownership as a means of production, with the profit of the few as the measure of success, and a society where public ownership of those means enables the resources of the nation to be deliberately planned for attaining the maximum of general well-being.28

It must therefore be concluded that in the early thirties, Labour was committed to the abolition of ‘a capitalist society in decay at its very foundations’ and its replacement by a planned socialist system in which the market would play little if any role.29 This formal commitment, admittedly, sat rather uncomfortably with the reformist disposition of many – although not all – trade unionists. The unions, indeed, had ignored George Lansbury’s doubts and intervened to ensure that For socialism and peace included practical measures to improve social services and reduce unemployment as well as those of rapid socialist transition.30 But nevertheless, the official line, to which all the party’s prominent politicians subscribed with apparent sincerity, was one of fervent radicalism. As Herbert Morrison argued with approval in the wake of the Southport conference, ‘it will increasingly be the case at

Russians, ‘descendants of the stupidest of the Aryans’, were hardly enlightened; whilst Lansbury argued for the role of ‘the white races’ in upholding civilisation. Labour’s insularity was also reinforced by the fact that its political preconceptions were deeply wedded to British national culture. Nevertheless, Stefan Berger has argued convincingly that Labour was not as divorced from mainstream western European social democracy as has often been assumed. See Williams, Labour and Russia, 153; Dalton, ‘The British Socialist’s mixed feelings and conflicting impressions’, Dalton papers I/54; undated news report of a speech by Lansbury at Bristol in 1932, Lansbury papers, vol. 10; Egon Wertheimer, Portrait of the Labour Party, London 1929, 91–2; Stefan Berger, ‘Labour in comparative perspective’, in Tanner, Thane and Tiratsoo, Labour’s first century, 309–40. 27 Oldfield, ‘The Labour Party and planning’, 45. 28 Labour Party, For socialism and peace, 6. 29 Ibid. 30 Shackleton, ‘Trade unions and the slump’, 136.

71

THE LABOUR PARTY AND THE PLANNED ECONOMY

future British elections for the issue frankly to be Socialism versus Capitalism’.31 Morrison’s aspiration was not in fact fulfilled at the general election of the following year. Arguments about domestic policy were overshadowed by the Abyssinian crisis (which had already led to the pacifist Lansbury being driven from the Labour leadership and replaced by Attlee). The result of the election was a disappointment, with Labour winning only 154 seats (although the party gained more votes than ever before). The National government’s subsequent failure to fulfil its foreign policy promises further heightened Labour’s bitterness. The party seemed as far from power as ever; whereas the 1931 defeat could, with varying degrees of plausibility, be explained away, the 1935 result seemed likely to confirm Labour as a permanent opposition. As G. D. H. Cole put it, ‘A new “minority” Labour Government, even if anyone wanted it, seems nearly as improbable as a Labour Government with a clear majority behind it’. Cole concluded that this was because floating voters were scared of Labour, mistrusting its competence and suspecting its confiscatory designs upon the ‘small man’: ‘the refusal to delimit the party’s objectives in plain terms has made it possible for the Tories to quote against Labour isolated passages from the writings of unofficial Socialists (such as myself), as if they were official Labour Party pronouncements’.32 The party did indeed now set out to delimit more clearly what a Labour government would actually do in its first term of office. The result, entitled Labour’s immediate programme, was published in March 1937. Basing the document on a memorandum provided by Evan Durbin, Dalton’s aim, as the main author, was to ‘arouse interest, to maintain self-confidence, and to blanket and discredit the disloyalists’.33 The nine-page long programme was notable as much for what it omitted as for what it included. The joint stock banks were not to be nationalised during Labour’s first term; the commitment to nationalise the land was scaled down; and the only industries specifically singled out for public ownership were transport, coal and power, and armaments manufacture. Accordingly, Ritschel has argued that the document ‘formally signalled the end of the party’s post-1931 radicalism’.34 However, the change represented by the Immediate programme was largely presentational. As Stephen Brooke has pointed out, although the radical mood had now ebbed somewhat, it would be misleading to treat the new document as anything more than a streamlining of the basic programme born of that mood.35 Labour remained formally committed to all the measures in For socialism and peace. Moreover, as Attlee himself made clear in a book 31 32 33 34 35

New Statesman and Nation, 15 Dec. 1934. Ibid. 23 Nov. 1935. Dalton, The fateful years, 124–5; Elizabeth Durbin, New Jerusalems, 246. Ritschel, The politics of planning, 317. Stephen Brooke, Labour’s war: the Labour Party during the Second World War, Oxford 1992, 30–1.

72

PRACTICAL ECONOMICS? 1932–1939

published in the same year, the ultimate goal of establishing a socialist commonwealth had not been abandoned. Socialism, in his words, remained ‘the key which will unlock the treasure house of a better world’. Class distinctions would be abolished. And, he wrote, in order to attract voters ‘It is not the preaching of a feeble kind of Liberalism that is required, but a frank statement of the full Socialist faith in terms which will be understood’.36 Of course, it is possible to suggest that this was mere rhetoric, designed to disguise the watering down of the socialist objective. But it is clear that, if the scope of the proposed nationalisation programme had narrowed, the intellectual justification for it had not. Competition was still regarded as wasteful and inherently chaotic; planned co-operation was still the remedy for ‘poverty on the midst of plenty’. Labour was now being more realistic about what it could achieve in the life-time of one parliament; its fundamental outlook had not changed.

Labour and ‘capitalist planning’ That outlook, of course, reflected a broader movement in Britain in favour of economic planning that was not restricted merely to socialists. As Evan Durbin wrote in 1935, ‘in this country planning has become one of the many subjects that scarcely enters into party controversy’.37 PEP and The Next Five Years group (established in 1934) expounded their own versions of nonsocialist planning,38 and the National government was taking an increasingly interventionist role in the economy. In 1936, G. D. H. Cole drew up a non-exhaustive list of ‘functions now exercised by government within the field that can be broadly described as potential economic planning’. The list ran to twenty-one items, including the management of the exchange equalisation fund, the cartelisation of sections of the agricultural industry, and subsidies to shipping.39 Business, too, was often far from averse to schemes limiting competition, a trend which had been central to the rationalisation philosophy of the 1920s.40 This general movement towards control, regulation and cartelisation led free-marketeers like Hayek to despair: ‘We are certainly as far from capitalism in its pure form as we are from any system of central planning. The world of to-day is just interventionist chaos.’41 In the eyes of Labour thinkers, this absence of perfect competition of

36 37 38

C. R. Attlee, The Labour Party in perspective, London 1937, 137, 281, 145, 279. E. F. M. Durbin, Problems of economic planning, 41. See Next Five Years Group, The next five years: an essay in political agreement, London 1935. 39 G. D. H. Cole, ‘Preliminary draft report of subcommittee on the machinery of planning’, Fabian Society papers J25/4. 40 Ritschel, The politics of planning, 34–5. 41 Hayek, ‘Nature and history of the problem’, 23–4.

73

THE LABOUR PARTY AND THE PLANNED ECONOMY

which Hayek complained actually strengthened the argument for planned socialism. Free enterprise, as opposed to private enterprise, wrote Dalton, ‘belonged to a short and peculiar phase in our history, which has already passed away. Freedom to compete implied also freedom not to compete, but to combine. Private monopoly, in all its variations of degree and form . . . is both the child and the destroyer of freedom.’42 (This, of course, was a longstanding Fabian theme.) Schemes to limit competition under capitalism were thus viewed with distrust. Private planning, based on private monopoly, would lead to output being limited in order to raise prices, causing unemployment. In other words, if planning was not directed towards the social goal of equality, Labour thinkers saw it as invidious for, under capitalism, planning was bound to promote the sectional interests of the producer at the expense of the consumer.43 The term Cripps used to describe such schemes was ‘economic fascism’, a view also echoed by Attlee.44 And as Ritschel has shown, in his impressive study of the 1930s planning debate, ‘not only did socialists instinctively reject the suggestion that the non-socialist planners’ ideas had anything to do with their own, but the non-socialist planners themselves repeatedly and loudly proclaimed their attachment to “capitalist” planning and the rejection of any association of their stance with the “fallacies” of socialism’.45 Moreover, Labour’s deep scepticism both of private, corporatist planning and of state interventions in the economy that fell short of co-ordinated socialist planning, also coloured the party’s view of Roosevelt’s New Deal. Although Roosevelt’s energy, optimism and willingness to flout convention were admired, the validity of the whole project was felt to be questionable.46 This was true particularly on the left. As Cripps told Attlee and Lansbury after meeting the president in the mid-thirties, ‘My whole impression was of an honest, anxious man faced by an impossible task – humanizing capital and making it work’.47 The trade unions, gradualist by their very nature, were more enthusiastic, however. At the 1933 Congress, TUC general secretary Walter Citrine moved a resolution on economic policy criticising the National government and praising Roosevelt, which was accepted unanimously.48 But, paradoxically, union leaders continued to exercise their block votes at Labour Party conferences in favour of resolutions which declared

42 43 44 45

Dalton, Practical socialism, 245. See G. D. H. Cole, Practical economics, London 1937, 245. Ritschel, The politics of planning, 203; New Clarion, 9 Dec. 1933. Daniel Ritschel, ‘The non-socialist movement for a planned economy in Britain in the 1930s’, unpubl. DPhil. diss. Oxford 1987, p. vi. 46 See, for example, Dalton, ‘Memorandum for policy subcommittee on finance and trade’, 1933, Dalton papers 2/1. 47 Estorick, Stafford Cripps, 138. 48 TUC report 1933, London 1933, 261–70. See also Ritschel, The politics of planning, 134–6.

74

PRACTICAL ECONOMICS? 1932–1939

that recovery within capitalism was impossible.49 This mild ideological schizophrenia helped ensure that the party remained committed throughout the thirties to the proposition that only the public ownership and control of the means of production could bring about genuine planning and hence economic revival.

The expansionist case This overriding belief that state ownership was the key to prosperity meant that policies designed to increase employment in other ways never achieved much prominence in the party programme. In particular, Labour had a luke-warm relationship with Keynes and his ideas. Keynes himself despised the Labour Party’s class basis and the supposed intellectual inferiority of its leaders; equally, trade unionists were deeply suspicious of an academic with no experience of working-class life, and many socialists opposed Keynes’s aim of restoring the vitality of capitalism. Nevertheless, there was a marked degree of interest in expansionary policies within the NFRB. These were controversial within the group, Evan Durbin at one point contending that socialists should not concern themselves with the short period at all.50 This was very much a minority view, however. By the early thirties, Durbin’s fellow economists in the NFRB, including Colin Clark, Roy Harrod, Richard Kahn and James Meade, were in agreement about expansion through cheap money and public works. By the end of 1933, Durbin too was convinced of the virtue of expansion during a depression, although concerned about its inflationary potential.51 Elizabeth Durbin has argued that under the influence of these young protégés, Dalton began to press for more expansionary policies, although not to much avail: in her words, ‘others were obviously working to remove any explicit references to expansionary policies’ from party statements.52 Ritschel has also accepted this view; but Booth has rightly suggested that Dalton himself formed a major barrier to the acceptance of Keynesian analysis.53 It is not absolutely clear who these other opponents might have been, and Dalton himself made no reference to such opposition in his diaries or memoirs. Although he attacked the ‘Treasury view’, and was impressed by Keynes’s The means to prosperity – to which reference was made in the 1933 Labour Party programme – Dalton continued to vacillate, in Donald Winch’s words, ‘between a fairly orthodox monetary view of the trade cycle, and faith 49 50

Shackleton, ‘Trade unions and the slump’, 135–6. E. F. M. Durbin, ‘Memorandum on future conclusions’, n.d., Meade papers 2/3. Elizabeth Durbin dates this document as being from the spring of 1932: New Jerusalems, 139. 51 ‘Conference on some aspects of socialist planning, 4–5 Nov. 1933’, Fabian Society papers J14/2; Elizabeth Durbin, New Jerusalems, 138–44. 52 Ibid. 219. 53 Ritschel, The politics of planning, 317; Booth, ‘Light years’, 18.

75

THE LABOUR PARTY AND THE PLANNED ECONOMY

in the ultimate powers of central planning’.54 As Dalton wrote in 1934, he believed that, although those who preached expansionism had a good case, ‘freedom from recurrent booms and slumps can be found only in a Planned Economy’.55 This view predominated within the Labour Party because expansionary steps to restore prosperity were seen as but the first part of the socialist equation. Although such steps might bring about full employment, they could not, in themselves, bring about a qualitatively different form of society. Only the socialisation of industry could facilitate the planned redistribution of incomes upon which the goal of equality depended. As Durbin put it: We have failed to maintain prosperity for reasons of monetary policy alone . . . But it is also evident that a complete control over the monetary elements in economic life does not give the power over economic development which it is anticipated the Government of a fully Socialist community will possess. Even more serious, is the obvious fact that the “Planning” of the monetary system with a view to curing unemployment will do nothing to destroy the system of economic inequality which it is the main objective of Socialist policy to change . . . Equality can only be secured within a Planned Economy.56

Therefore, in spite of the growing enthusiasm of many of Labour’s young economists – symbolised by the publication of Douglas Jay’s book The socialist case in 1937 – Elizabeth Durbin’s contention that ‘By the late 1930s most democratic socialists in Britain had recognised the importance of the 54 Elizabeth Durbin, New Jerusalems, 219; Labour Party, Socialism and the condition of the people, 19; Winch, Economics and policy, 345. 55 Hugh Dalton (ed.), Unbalanced budgets: a study of the financial crisis in fifteen nations, London 1934, 458. It should be emphasised, however, that the Labour Party did favour an extensive programme of public works financed in the first instance by loans. It was expected, however, that these would be repaid largely through the surpluses that the newly nationalised industries were expected to generate (although the budgetary benefits of the multiplier effect were also acknowledged). Labour’s expansionary programme therefore depended for finance on the nationalisations that Keynes for one thought irrelevant to recovery. As the New Statesman put it in 1933, ‘the contention is not that any reflationist experiment is bound to fail, but that it can succeed in the long run only by passing beyond Capitalism. . . . Socialists who want a “Rooseveltish” policy in this country want it not because they think Rooseveltism as such can succeed in restoring stable prosperity, but because a “reflated” Capitalism seems to them to afford a better basis for the building of a Socialist system’. Labour Party, Socialism and the condition of the people, 19–20; Dalton, Practical socialism, 255–66; New Statesman and Nation, 30 Sept. 1933. 56 Of course, what socialists meant by ‘equality’ differed. Greater equality of economic outcome, equality of opportunity and more qualitative ideas of ‘fellowship’ were emphasised to varying degrees by different people. In the 1930s, however, as Nicholas Ellison has emphasised, the dominant ‘technocratic’ vision, of which Durbin was an exponent, saw a planned economy based on public ownership as the means necessary to achieve a classless society: Nicholas Ellison, Egalitarian thought and Labour politics: retreating visions, London 1994, pp. ix–x, 4–16; E. F. M. Durbin ‘Memorandum on the principles of socialist planning’, Jan. 1934, Fabian Society papers J25/3.

76

PRACTICAL ECONOMICS? 1932–1939

Keynesian message for socialism’ may be doubted.57 (Jay at this time doubted the merits of full-scale planning, although, as will be seen in chapter 5, his views later changed.)58 For the Labour mainstream, central planning based on nationalisation remained the cornerstone of economic thinking at the close of the decade. Somewhat paradoxically, this was matched by a continuing commitment to one of the key tenets of financial orthodoxy – the balanced budget. This commitment was intrinsically connected both to the legacy of 1931, and to the party’s doubts about the defence policies of the National government. A common Labour charge against that government was that it was reaching balanced budgets on paper only by resort to financial jiggery-pokery – an accusation aimed at showing that it had come to power on the basis of fraudulent claims to financial probity. And for electoral purposes, the slightest hint that Labour might run a budget deficit was anathema after the accusations levelled at the party in 1931. At a general election strategy meeting in October 1935, the possibility was canvassed that the National government might seek to raise a defence loan – a suggestion that soon proved prescient. Bevin thought such a loan ‘the most dangerous thing that might go before the country’. He may have been talking at least partly in economic terms, for Dalton concurred on the following grounds: In 1931 we were attacked because we could not balance the budget by taxation. We should reverse that and turn it against the Government. Whatever is required should be met by the taxation of those able to pay. . . . We stand for an honestly balanced budget. A defence loan would be a great financial ramp.59

Thus, during the Commons debates on defence finance from 1937 onwards, when the British economy was beginning to revive, the government’s borrowing of large sums of money to pay for rearmament was attacked, both as the expensive consequence of a failed foreign policy, and as bad finance in 57

Elizabeth Durbin, ‘Fabian socialism and economic science’, 44. If ‘most democratic socialists’ is taken to include the bulk of Labour Party members, then it is doubtful that even the basics of economics were properly understood. In the early thirties, PPE graduate Barbara Betts (later Barbara Castle) explained to her local party the need for more capital to be invested in British industry: ‘Wasn’t capital the engine of that hated capitalist system which had brought the country to its knees?, one truculent member demanded. . . . Not necessarily, I replied. . . . Some of the more militant among them remained unconvinced, suspecting that Oxford had corrupted me.’ And at a more exalted level, George Orwell, democratic socialist par excellence, in all his writings mentioned Keynes by name but once: to record the fact that he, Orwell, had not read Keynes’s The economic consequences of the peace. See Barbara Castle, Fighting all the way, London 1993, 60; Sonia Orwell and Ian Angus (eds), The collected essays, journalism and letters of George Orwell, IV: In front of your nose, London 1968, 471. 58 Douglas Jay, ‘Plans and priorities’, in Jay and others, The road to recovery: Fabian Society lectures given in the autumn of 1947, London 1948, 9–26 at pp. 9–10. 59 ‘Notes on a joint meeting held in grand committee room, Westminster Hall, on 22 Oct. 1935’, Citrine papers, BLPES, I/I.

77

THE LABOUR PARTY AND THE PLANNED ECONOMY

its own right. There was, as time went on, an increased willingness to grant, hypothetically, that it might be correct in times of more acute slump to unbalance the budget in order to stimulate the economy. However, given that the borrowing that the government proposed would take place at the peak of the trade cycle when, outside unemployment blackspots, shortages of materials and skilled labour were already starting to appear, it was argued that such borrowing could create inflation without curing unemployment.60 (Attacking rearmament borrowing on this technical basis conveniently left open the question of whether or not the expenditure itself was moral – a question which, within the party, was highly controversial.) The corollary of this analysis, which developed further as war became closer, was that extensive physical economic planning was the only way to resolve the impasse.61 The socialist response to the Hayek critique Therefore, neither ‘capitalist planning’ schemes which limited competition, nor expansionary policies on their own, were seen as genuine potential solutions to unemployment. Of course, scepticism about these techniques was not confined to the left. Hayek and his followers, from a very different perspective, were concerned that such forms of intervention would seriously prejudice the efficiency of the market. His attacks on planning were therefore not aimed only at the ideas of socialists: he held all forms of planning, including the Keynesian ‘middle way’, in equal contempt. But many of his criticisms were clearly also relevant to the Labour Party’s notions of how a planned economy would work, and so are worthy of consideration here, not least because they led some Labour thinkers to redefine their own planning ideas. Hayek first developed his critique in his inaugural lecture at the LSE in 1933, and in greater depth in the edited volume Collectivist economic planning in 1935. One important charge against the planners was that they laboured under the erroneous impression that, since all social phenomena were the product of human actions, society could be altered for the better purely by force of will.62 Hayek furthermore contended that such attempts to deliberately overcome the spontaneous forces that were the mainspring of the free 60

F. W. Pethick-Lawrence argued in 1937 that ‘There is almost unanimous economic opinion . . . that it may be wise, whether it be in accordance with orthodox traditions or not, in a slump to borrow money and pump new purchasing power into the community, enabling it to keep itself afloat’. However, ‘it is thoroughly bad to unbalance the Budget at a period when boom is shortly coming, because that accentuates the boom and accentuates the slump that is to follow’. Such a course, taken at this point, would be ‘most dangerous’, and the government’s proposed defence loan would be ‘rank inflation’: HC Debs, 320, 17 Feb. 1937, cols 1226–8. 61 See Richard Toye, ‘The Labour Party and the economics of rearmament, 1935–1939’, C20BH, xii (2001), 303–26. 62 F. A. Hayek, ‘The trend of economic thinking’, Economica xiii (1933), 121–37.

78

PRACTICAL ECONOMICS? 1932–1939

market would inevitably result in economic chaos. This argument spurred socialist economists on to develop and refine ‘market’ and ‘iterative’ models of the planned economy which would meet these objections. As Hayek was obliged to acknowledge, there had, in recent years, been increasing discussions of the economic problems of planning amongst socialists at a sophisticated level. F. M. Taylor and W. Crosby Roper (both in America), and H. D. Dickinson (in Britain) had proposed solutions.63 But Hayek argued that these did not progress far beyond Barone’s system, and would require the solution of an enormous number of simultaneous equations: ‘It is only necessary to attempt to visualise what the application of this method would imply in practice in order to rule it out as humanly impracticable and impossible’.64 Evan Durbin, Hayek’s LSE colleague, conceded this;65 He further acknowledged that earlier critics of socialism ‘were pointing to a real gap in the armour . . . a blindness in the mind of Planners’. But he resented the attitude of Hayek, Mises, Lionel Robbins, and the other anti-planners. There had been two courses open to them, he claimed: (a) to say we accept the superior distributive ideals of justice and equality – but there is this difficulty in your practical proposals – ‘let us come in and help’ – in which case their contribution would have been wholly welcome. (b) but instead they said . . . you are very stupid people – and don’t know economics – and we can tell you it can’t be done – and you will get into a hopeless muddle.

In which case, Durbin concluded, should the anti-planners be proved wrong, ‘their de haut en bas attitude . . . will fall on their own heads’.66 He and others continued trying to refute the anti-planners. Durbin himself sought to demonstrate the theoretical possibility of a rational pricing system in a planned economy, suggesting a quasi-market solution to the problem of economic calculus therein.67 The Polish economist Oskar Lange built on F. M. Taylor’s work to develop an iterative model whereby, as under capitalism, a method of trial and error would be used to determine prices.68 Abba Lerner (a protege of Robbins and later of Keynes) followed H. D. Dickinson in developing the argument that, in a socialist economy, price should be made

63

F. M. Taylor, ‘The guidance of production in a socialist state’, AER xix (1929), 1–8; W. Crosby Roper, The problem of pricing in a socialist state, Cambridge, MA 1931; H. D. Dickinson, ‘The economic basis of socialism’, PQ i (1930), 561–72, and ‘Price formation in a socialist community’, EJ xliii (1933), 237–50. 64 F. A. Hayek, ‘The present state of the debate’, in Hayek, Collectivist economic planning, 201–43 at p. 208. 65 E. F. M. Durbin, Problems of economic planning, 140. 66 Idem, ‘Economic planning – the next stage of the debate’ (lecture notes), n.d. 1935 or after, Durbin papers 1/8. 67 Idem, Problems of economic planning, 140–55. 68 Oskar Lange, ‘On the economic theory of socialism’, in Benjamin E. Lippincott (ed.), On the economic theory of socialism, London 1964, 57–143.

79

THE LABOUR PARTY AND THE PLANNED ECONOMY

equal to marginal cost, a proposition that gained some support within the Labour Party.69 Booth has described these efforts to develop pricing strategies for a wholly socialised economy as an ‘abstruse and esoteric exercise’, irrelevant to the actual problems confronting Labour and Britain at the time.70 Yet, given that it was Labour’s professed long-term aim to create such an economy, some effort on these lines was surely essential, and represented a bold intellectual response to the challenge put by Hayek. Nevertheless, the important theoretical developments that resulted were not reflected in Labour’s official programme. Durbin, Jay and Hugh Gaitskell, the main proponents within the party of ‘market’ solutions, depended for their influence on Dalton. He, however, opposed this ‘Unplanned Socialism’, which he found ‘of theoretical interest only, combining public ownership of the means of production with free movement of all prices’.71 But although Labour’s policy documents therefore implied that prices and wages should be regulated, it was not made clear exactly how this would be achieved.72

Price-fixing and consumer sovereignty This was in spite of the fact that many Labour thinkers, quite apart from the three mentioned above, were aware of the importance of the price question. Barbara Wootton, for example, having witnessed the Russian planned economy at work, was aware of the system’s lack of meaningful prices. In a passage which Hayek could have applauded, she wrote: it becomes quite impossible to get a true objective measure of all the costs of production where saving and investment are performed by collective units. There can, therefore, be no absolutely reliable index which will infallibly reveal to a planning authority the point at which additional output from any industry is no longer so urgently needed as to justify the cost entailed in pro-

69 A. P. Lerner, ‘Statics and dynamics in socialist economics’, EJ xlvii (1937), 253–70. For in-depth discussion of these various proposed solutions see Elizabeth Durbin, New Jerusalems, 169–71, 236–9. 70 Booth, ‘Light years’, 11. 71 Dalton, Practical socialism, 247n. Attlee appears to have been similarly unenthusiastic about ‘unplanned socialism’, in that he was opposed to G. D. H. Cole’s belief, stated in 1937 in a draft pamphlet, that ‘the prices of goods and services should correspond as near as possible to the real cost of producing them’. Attlee protested that ‘This statement belongs to the era of free competition. If I am to organise the Fuel industry, I must in my view base it upon adequate wages for the miners not upon the wages which competition in the world market will enable the industry to pay. Unless planning is based upon giving to all enough purchasing power to make them effective consumers at least of necessaries, it it will break down’: Attlee to John Parker, 2 Aug. 1937, G. D. H. Cole papers, Nuffield College, Oxford, D1/1/56/5. 72 Labour Party, For socialism and peace, 13.

80

PRACTICAL ECONOMICS? 1932–1939

ducing that output. It follows that there must be a certain element of arbitrariness in the decisions of the planners.

But she did not regard this as a crippling disadvantage; rather, it would mean that the planners could not evade responsibility for their decisions, as they would ‘not be able to abdicate in favour of an automatic register’, the price mechanism.73 The question, however, was deeply controversial. Elizabeth Durbin has written that, in the pro- and anti-planning debate of the 1930s, ‘the free choice which the pricing system enables consumers to express was considered the economic complement to political freedom by both sides’ with the noted exception of Marxists such as Maurice Dobb. Moreover, ‘for democratic socialists, this freedom was the chief distinguishing political characteristic of their economic system in contrast to the dictatorial methods of a system of planning by controls’.74 But this was certainly not true of all democratic socialists. Labour Party policy-makers were deeply divided on the closely related issues of pricing and consumer sovereignty, as an NFRB discussion on socialist planning in November 1933 demonstrated. Dalton opened the discussion on price-fixing machinery, saying he did not think that Parliament should have a direct say in setting prices. But The matter could not be left to industries to fight amongst themselves (laissez faire socialism). Central planning was essential. . . . He himself favoured the creation of an economic committee of the Cabinet to be responsible for price-fixing. This committee would have its own secretariat which would be supra departmental . . . [with] overriding powers over industry. He supported planning as against consumers’ preference. It was pedantic to think consumers’ preference important so long as there was great poverty. A dictatorship of consumption was desirable. . . . There would be less dislocation on the producers’ side if the caprice of consumers’ expenditure were controlled.75

This reflected the traditional Fabian view of the market as an unsatisfactory allocative device which, if left unfettered, would lead to a socially suboptimal distribution of resources.76 Evan Durbin, however, strongly disagreed with Dalton’s view, suggesting that the Fabian perspective on the market had not gained a completely hegemonic status within the Labour Party. As he put it slightly later, ‘A high standard of living requires the careful adjustment of production to the needs and tastes of the public, and no index of employment or physical output will measure the extent to which the production of different 73 74 75

Wootton, Plan or no plan, 324. Elizabeth Durbin, New Jerusalems, 240–1. Ritschel mistakenly attributes the second part of this quotation to Herbert Morrison: ‘Conference on some aspects of socialist planning, 4–5 Nov. 1933’, Fabian Society papers J14/2; Ritschel, The politics of planning, 114–15. 76 See Thompson, ‘Hobson and the Fabians’.

81

THE LABOUR PARTY AND THE PLANNED ECONOMY

industries is adjusted to public taste’.77 He was also, of course, to become a pioneer of the laissez-faire or ‘market’ socialism of which Dalton disapproved. He now restricted himself, however, to the observation that poor people had strong consumer preferences; subsequent discussion led to no firm conclusions: Cole considered that consumers’ preference would be of greater importance in an equalitarian society. . . . Mrs. [Margaret] Cole urged the necessity of ministerial responsibility for the policy followed in price-fixing. [Roy] Harrod thought that a system of costing should take caprice into account. A new economists’ system of costing should be drawn up which would take account of marginal costs. [Colin] Clark pointed out that costs were considerably raised through manufacturers’ lack of standardisation.78

Thus, although most of those present seemed to favour some sort of price-fixing, no clear consensus emerged on the basis on which this was to be done, whether as a means of satisfying consumer demands or of establishing a ‘dictatorship of consumption’. A further conference in 1935 showed little progress on these questions. Hugh Gaitskell suggested that rigid price fixing might lead to wastage of resources and that price variations should be used to encourage consumption. His conclusion that price-fixing was unnecessary came under heavy attack, rationing being raised as a possible way of distributing basic commodities. Cole, summing up, said he did not follow the profit and loss criterion for pricing and production of ‘essential’ goods, and if production of these fell short they should be rationed; but equally, rationing was undesirable.79 Again, the NFRB’s members had failed to reach much agreement even on generalities. Discussions between a group of economists and politicians during 1934–5 made a little more progress, agreeing that prices should be based on cost and that ‘the principle of controlling production by margin of price over cost was not unacceptable’. But tellingly, ‘The problem of how this could be done was not discussed’.80 Machinery of planning Equally, the machinery of planning was not described in much depth in Labour’s policy documents. This was perhaps scarcely surprising, given the absence of agreement about what that machinery would be for. The problem was exacerbated by some thinkers’ naive views of the planning process. 77

E. F. M. Durbin, ‘Memorandum on the principles of socialist planning’, Jan. 1934, Fabian Society papers J25/3. 78 ‘Conference on some aspects of socialist planning, 4–5 Nov. 1933’, ibid. J14/2. 79 ‘Report of weekend conference on socialist planning held at Tunbridge Wells on 29–30 June 1935’, ibid. J15/3. 80 ‘Labour Party policy’, 25 Feb. 1935, ibid. J19/2.

82

PRACTICAL ECONOMICS? 1932–1939

Wootton, for example, envisaged the planners performing a kind of ready-reckoning. They might say: ‘The production of potatoes makes men healthy, wealthy and wise, and we think, after considering the alternative possible occupations for the people of, say, Sussex, that it would be well to make Sussex much more of a potato-growing county than it is to-day.’81 This appeared to imply direction of labour, to which the unions would have been understandably hostile. Moreover, Wootton’s unsophisticated approach to resource allocation, which was admitted to be arbitrary, was not really compatible with the divination of complex mechanisms for ensuring consumer satisfaction. Such questions were dealt with in detail by others, however. But although everyone within the Labour Party agreed about the need for some kind of supreme economic authority, that authority’s composition and its relationship with the other parts of the planning machinery were harder issues to reach consensus upon. A wide range of different proposals were therefore discussed at various times. Morrison wanted a central authority, growing out of the Board of Trade, to be in charge of all socialised industries and services under a single minister. He doubtless saw himself in that role. Dalton, by contrast, wanted an economic committee of the cabinet to be responsible for planning. He also rejected Durbin’s proposal that economic experts should be given parity with politicians on any planning authority, seeing this as inadmissable on constitutional grounds.82 Cripps in turn favoured a scheme in which the House of Commons would spend the greater part of each parliamentary session discussing a single planning and finance bill.83 An NFRB subcommittee set to work on the machinery of planning in 1936: ‘there appeared to be almost as many different preferences as there were members’, wrote Cole.84 Three main alternatives emerged: respectively that planning should be under the Treasury, the Board of Trade or directly under the prime minister.85 This last was Cole’s own preferred choice; he recommended in 1938 that there should be a department of economic planning directly under the authority of the premier. He also proposed a number of planning commissions to co-ordinate different groups of nationalised industries.86 Neither Attlee nor Morrison could agree to Cole’s ideas, however, and the Labour Party was left without a policy.87

81 82

Wootton, Plan or no plan, 324. ‘Conference on some aspects of socialist planning, 4–5 Nov. 1933’, Fabian Society papers J14/2; Herbert Morrison, Socialisation and transport, London 1933, 280–97; Dalton, Practical socialism, 313; Dalton to Meade, 9 Oct. 1933, Meade papers 2/7. 83 New Statesman and Nation, 3 Feb. 1934. 84 G. D. H. Cole, The machinery of socialist planning, London 1938, 66. 85 Idem, ‘Preliminary draft report of subcommittee on the machinery of planning’, 11 Aug. 1936, Fabian Society papers J25/4. 86 Idem, The machinery of socialist planning, 43–9. 87 Elizabeth Durbin, New Jerusalems, 260–1.

83

THE LABOUR PARTY AND THE PLANNED ECONOMY

The economics of near-war But if these important problems were not resolved, the approach of World War II undoubtedly strengthened the case for physical planning of the kind for which Labour had been arguing since 1931. In the 1936–9 period, discussion within XYZ (Labour’s unofficial group of financial experts) focused on ‘the technique of running an all-out controlled war economy’.88 Party politicians and thinkers, moreover, argued that the developing international crisis justified existing Labour objectives of a planned economy and increased social welfare provision. For example, in October 1938 Pethick-Lawrence, now one of the party’s key economic spokesmen, gave a talk entitled ‘Can we afford it?’ to the Edinburgh city business club. He argued for ‘intelligent economic planning’, in order to prevent the rearmament process depressing working-class living standards: ‘the decisive factor is not finance but economics . . . Can our economy be made to produce what we require?’ Answering in the affirmative, he concluded that the choice between ‘guns or butter’ was a false dichotomy. Social services, and with them working-class purchasing power, should be maintained and extended, in order that the nation’s productive resources should be fully employed.89 The need to prepare for the contingency of war thus created an immediate practical justification for Labour’s ideas. Dalton outlined the party’s view of planning, in relation to rearmament, during the course of the Commons debate on the budget in May 1939. ‘We are living at present in a prolonged and sinister twilight between peace and war’, he said; yet the National government had failed to solve the problem of how to organise a ‘near-war economy’. The requisite national plan should provide five things. First, ‘the necessaries of life for all our people and full provision for their effective defence both against bombs and against poverty’. Second, ‘that there should be no cake for anyone until all have bread and the nation has a sufficiency of arms’. Third, ‘an opportunity for every willing worker’. Fourth, ‘social justice in the carrying of great burdens’. Fifth, ‘a deliberate and efficient scheme to mobilise men, money and materials for the common good and for the security of all’.90 By thus linking social justice, full employment and sound defence, Dalton built up a powerful indictment against a government which, in Labour eyes, had failed in its duties on all of these points. It was, moreover, an analysis that the catastrophe of 1940 would in due course appear to vindicate – bringing Labour significant political rewards. This, then, is how the party’s planning ideas should be viewed – not merely as a technocratic response to a set of perceived economic problems, but also as a key component of a more

88 89

Jay, Change and fortune, 60–1. ‘Can we afford it?’, speech given by F. W. Pethick-Lawrence to the Edinburgh city business club, 18 Oct. 1938, Fabian Society papers J36/3. 90 HC Debs, 346, 1 May 1939, col. 1517.

84

PRACTICAL ECONOMICS? 1932–1939

sweeping political philosophy that could, at its best, encompass the claims of efficiency, equity and patriotic endeavour. The idea of planning thus helped link together the party’s manifold criticisms of its opponents; political crises abroad, as well as the economic one at home, could be explained as the product of the unplanned capitalist system. But the potential power of the policy as a political weapon was not, as has been seen, matched by precision in terms of practical proposals. Given the absence of an agreed policy on questions of pricing, planning machinery or consumer sovereignty, one of the anti-planners’ most important criticisms must, in the case of the Labour Party, be upheld: although socialists were all but unanimous on the need to replace capitalism with a planned economy, they had, by the end of the thirties, failed to agree in detail what the planned alternative would consist of. Equally, Booth’s argument against Elizabeth Durbin must in important respects be found vindicated – even if his vitriolic denunciation of the ‘clueless’ Labour planners at times seems excessive. It seems undeniable that the party’s planning policies had little to offer by way of solution to important contemporary problems such as, for example, the state of the cotton industry (which was a victim of the depression, but highly atomistic and thus difficult to nationalise). Moreover, as will be seen in subsequent chapters, the deliberations of the 1930s would leave Labour in important respects unprepared for the challenges it would face in government after 1945.91 Yet there is also another dimension, which allows us to look on things in a more positive light. For, as Booth appears to acknowledge, it would be unreasonable to expect the published programme of any political party to prove theoretically consistent in economic terms.92 Manifestos exist, after all, for the purposes of propaganda, not intellectual enlightenment. Indeed, high levels of technical economic knowledge do not necessarily bring politicians success in argument. For example, Pethick-Lawrence’s familiarity with financial issues was substantial, perhaps too much so for parliamentary purposes; as he later recalled, Neville Chamberlain could often outwit him in debate by ‘feigning ignorance so as to trap me into making impromptu explanations, which he knew would be too technical for the House of Commons to understand’.93 Thus Labour’s programmes did not need to be wholly consistent, coherent, intellectually brilliant or even fully relevant to the economic needs of the country for the party to fulfil in an effective way one of its key functions as an opposition – drawing attention to shortcomings in the government’s policies and methods. The planned economy, moreover, was not just an economic doctrine, but held a political function for Labour – just as it had when initially adopted in 1931. The rhetoric of planning was that of bold, definite action, of seeking to 91 92 93

Booth, ‘Light years’. Ibid. 10. Pethick-Lawrence, Fate has been kind, 190.

85

THE LABOUR PARTY AND THE PLANNED ECONOMY

make an impact upon events. These characteristics, were, of course, those that had been so conspicuously lacking during the fated second Labour government; the party thus chose to define its identity in such a way as to recover its sense of purpose. As the world’s economic crisis persisted and its political crisis deepened, Labour’s willingness to take bold action could also be contrasted effectively with the National government’s apparent inability to deal with either. ‘Planning or drifting, looking ahead or living from hand to mouth, are two different styles of conduct’, observed Dalton in 1935.94 Labour’s advocacy of the former – naive and inconsistent as it doubtless often was – showed no sign, before World War II, of winning the country. Nevertheless, the approaching world conflict gave Labour an unprecedented chance to promote its ideas of economic planning – ideas which, when war came, were of increased and compelling relevance.

94

Dalton, Practical socialism, 243.

86

Economic Consequences of the War

4

The Economic Consequences of the War The outbreak of war in September 1939 created mixed feelings of moral relief and terrified apprehension. An end had come at last to the National government’s policy of appeasing Germany, so recently hugely popular with the public, but now widely seen as a miserable sequence of betrayals. But the horrors of the great war seemed, if anything, likely to be exceeded, given the ‘progress’ of military technology. Stanley Baldwin’s famous phrase, ‘the bomber will always get through’, continued to resonate. A typical view from within the Labour Party was recorded by Barbara Betts (later Castle) in her memoirs: ‘We were immensely relieved that our timorous government had at last been forced to stand up to Hitler, and we prepared to play our part in the anti-fascist war. But I was under no illusions about what war would mean, and I dreaded it.’1 Yet the phoney war that followed was eerily uneventful, creating an unease that was reflected in the political peculiarity of the period. Labour remained outside the government, believing, as Dalton argued, that in entering an administration headed by Neville Chamberlain and John Simon, the party would not only be uninfluential from within, but would lose its power to influence from without.2 The spirit of national unity had not yet taken over. Although the Labour movement was fully pledged to the war effort, and in spite of the electoral truce, relations between the unions and the government were still mired in mutual suspicion. The spirit of party warfare continued in parliament although the practice of it ceased at the ballot box. Moreover, this period afforded more open and more substantial public debate about how the war-time planned economy should be financed and run than was possible later in the war, when vocal criticism of the war effort became the preserve of a dissident minority. In particular, debate raged over Keynes’s proposals for compulsory saving or ‘deferred pay’ as a method of war finance. This scheme has generally been seen in theoretical terms both as an important step in the development of national-income accounting in Britain, and as an application of the principles of the General theory, albeit adapted in order to deal with excessive, as opposed to deficient, demand.3 But the plan had a political as well as a theoretical impact, an impact this chaper sets out 1 2 3

Castle, Fighting all the way, 88. Pimlott, Dalton political diary, 297, entry for 6 Sept. 1939. Roy Harrod, The life of John Maynard Keynes, London 1951, 490–1; Peter Clarke, Hope and glory: Britain 1900–1990, London 1996, 210; Winch, Economics and policy, 261.

87

THE LABOUR PARTY AND THE PLANNED ECONOMY

to explore. The controversy that Keynes’s ideas generated forced Labour thinkers to define more clearly their philosophy of war-time planning. Furthermore, the practical outcome of the debate helped set the parameters within which a Labour government – or any other – would have to function upon the outbreak of peace. Thus the arguments which helped determine the shape of the British war economy in 1939–40 also shaped the Labour economic inheritance of 1945.

Peace aims No sooner had war broken out than socialists started thinking about the peace to come. There was a belief that the promise of a better post-war world would aid morale, and also a determination that the disappointments of the post-1918 period should be avoided. As Attlee put it in November 1939, ‘People want to know for what kind of country they are fighting’, adding on a personal note, ‘many of us remember the hopes that we entertained at the end of the last war and what happened after the peace’.4 On the left, Nye Bevan went further, believing the war to herald a social revolution: it would be a war for socialism, or socialism realised through war, with fascism abroad and Toryism at home as the two enemies to be fought as part of the same process.5 In Harold Laski’s view, equally, Labour should only support Chamberlain in so far as it was his purpose to defeat Hitler; it should at the same time seek to expose his weakness and achieve a victory for socialism as well as for the nation.6 Labour’s established leaders were more circumspect than Bevan and Laski. But so long as Chamberlain, with his ill-disguised contempt for the Labour Party, remained at the head of the government, the truce between the parties remained merely electoral, not political; and it was an armed and uneasy one, the tension exacerbated by the determination of many socialists to wring concessions from the government in time of war that would have been impossible in time of peace. This latter hope, ‘that we may yet use this war to lay the foundations of a juster and more generous life’, to use Laski’s phrase, rested on two premises.7 The first was the observation that as labour became a scarce resource the trade unions could hold out for better wages, conditions and social services than they might hope to achieve during peace-time. Equally, such improvements might in the longer term be extracted as the political price of Labour Party participation in a coalition. Secondly, there was the belief that only socialist methods of organisation could bring about

4 5 6 7

HC Debs, 353, 16 Nov. 1939, col. 877. Campbell, Nye Bevan, 91–2. Kingsley Martin, Harold Laski, 1893–1950: a biographical memoir, London 1953, 124–5. Kramnick and Sheerman, Harold Laski, 416.

88

ECONOMIC CONSEQUENCES OF THE WAR

victory. ‘The fact is’, Attlee told the Commons in November, ‘if you want to win this war you will have to have a great deal of practical Socialism.’8

Shouting aloud for planning ‘Practical socialism’, for immediate war purposes, was thought to comprise in part the national ownership, or at least control, of the railways and mines. There was also another urgent question: as the future Treasury civil servant, R. W. B. ‘Otto’ Clarke, wrote just before war broke out, ‘the present position shouts aloud for planning, and the Left has always been the advocate of planning. The time is ripe to demand more of it, and to demand it loudly.’9 As was seen in the previous chapter, this was exactly what Labour had been doing in the months prior to the war, to convincing effect. It may have been in reaction to this, and in particular to the widespread call for an ‘economic general staff’, that Chamberlain decided in June 1939 to ask Josiah Stamp to undertake a survey of the government’s financial and economic war plans, an appointment made public after the outbreak of war.10 The Stamp survey was an embryonic version of the economic section of the cabinet secretariat, which later played a substantial role in the development of post-war planning policies. But at the time it was felt in Labour circles to be an inadequate response to the emergency of war: Stamp’s work was only part-time, and he retained his directorship of the LMS railway. Opposition MPs thus had much fun at his expense when their trains were delayed, and Stamp was later attacked brutally by the authors of the seminal polemic Guilty men.11 The attacks on Stamp personally were unfair – he approached his task with dedication and efficiency. Much more reasonable was the criticism that the survey was useful in itself but was no substitute for an effective minister responsible for economic planning.12 In February 1940, calling for such a minister of war economy, to be supplied with an expert staff, Herbert Morrison declared himself ‘sickened and disgusted’ with the government’s excessive invocation of the word ‘co-ordination’ as a remedy for all administrative ills: ‘Co-ordination has its uses, but it is no substitute for government, for decision, drive or direction.’13 Earlier, he had argued that the government was congenitally lacking in such qualities because of the business and profit-oriented outlook of its members: 8 9 10

HC Debs, 355, 28 Nov. 1939, cols 22–3. R. W. B. Clarke, ‘The economics of near-war’, FQ xxii (summer 1939), 4–12. Alan Booth, ‘Economic advice at the centre of British government, 1939–1941’, HJ xxix (1986), 655–75 at p. 657. 11 ‘Cato’ [Michael Foot, Frank Owen and Peter Howard], Guilty men, London 1940, 99–101. 12 Alec Cairncross and Nita Watts, The economic section, 1939–1961: a study in economic advising, London 1989, 11–12. 13 HC Debs, 356, 1 Feb. 1940, col. 1321.

89

THE LABOUR PARTY AND THE PLANNED ECONOMY

‘The Conservative party cannot eliminate [the profit-maker] and so make more simple the economic problems of war.’14 This argument (which perhaps implied that ministers’ failures were in part a product of their class origins) was commonplace.15 Moreover, if it were the profit-making urge and bigbusiness pressure that were to blame for the lethargy of the war effort, then Chamberlain and Simon could be presented not merely as bumbling individuals but as hard-nosed representatives of a discredited financial orthodoxy. Later, the catastrophes of 1940 could be seen as the culminating indictment of a failed economic system.

Controlling interests In the meantime, Labour critics of the government did not restrict themselves to general criticisms, but also made more constructive calls for greater control over the economy. In particular A. V. Alexander, the head of the co-operative movement, was vociferous in calling for widespread food rationing, later declaring himself vindicated when vital supplies were cut off by the German advance.16 Furthermore, food was not the only sphere in which the (slow and partial) progress made by the government was along the lines of demands made by socialists. For example, as Brooke has pointed out, Labour had long called for comprehensive controls over foreign exchange.17 Upon the outbreak of war the Treasury immediately took such powers, although this was out of the practical necessity to conserve dollars in the absence of American aid, rather than as the result of opposition pressure. Measures to restrain prices and profits were, by contrast, a more clear-cut case of the government trying to appease the Labour movement, both politically and industrially. The scope and limitations of such efforts were exemplified by an episode which took place in the autumn of 1939. Gwilym Lloyd George, a junior minister at the Board of Trade, approached Stafford Cripps for help in drafting anti-profiteering legislation.18 Cripps had recently been expelled from the Labour Party, but the initiative demonstrated that some members of the government, at least, wanted to benefit from the advice of socialists. As drafted by Cripps, and accepted by the government, what became the Price of Goods Act sought not to tackle profits directly, but to restrain them through the control of prices. Defects in the legislation meant that the act was diffi-

14 15 16

HC Debs, 355, 6 Dec. 1939, col. 751. See, in particular, Campbell, Nye Bevan, 95, and ‘Cato’, Guilty men, 113. A. V. Alexander, memo to Attlee, 28 May 1940, Alexander papers, Churchill College, Cambridge, 5/4/15. 17 Brooke, Labour’s war, 236. 18 Cripps diary, entry for 26 Sept. 1939, Cripps papers.

90

ECONOMIC CONSEQUENCES OF THE WAR

cult to enforce at the manufacturing stage;19 what alarmed Cripps, however, was that Oliver Stanley, president of the Board of Trade, refused to appoint him chairman of the new central price regulation committee. ‘He said he wanted me –’ Cripps noted in his diary, ‘– was sure I would make a good job of it etc. etc! But the Trading interests has [sic] said they would not have me, so someone else had to be appointed!’20 This apparent example of poachers enjoying the right to veto the appointment of gamekeepers was the kind of thing that was calculated to make socialists suspicious: controls were not being imposed and administered in the interests of workers, it seemed, but in the interests of capitalists. As Margaret Cole put it, one of the real dangers of government control was a bureaucracy which is in fact insufficiently bureaucratic, which is merely big business under another name, and which directs in accordance with the interests of big business while giving either none or only nominal say to the interests of the workers either as labour power or as consumers and citizens.

Already, she concluded in the autumn of 1939, there were signs that such a state of affairs was becoming manifest.21

The Keynes plan During this early stage of the war, then, Labour thinkers were often fearful that apparently well-intentioned schemes to promote the national effort would be manipulated by employers, with the connivance of the government, to anti-social ends. It was within the context of such fears, together with more general doubts about the government’s willingness and ability to plan the war economy with adequate vigour, that the Labour movement confronted the war finance plans of John Maynard Keynes. His proposals for compulsory saving or ‘deferred pay’, developed between October 1939 and February 1940, generated major public controversy; and Keynes realised from the first that Labour’s attitude to his scheme for preventing a vicious spiral of rising prices was vital to the plan’s success. As he wrote shortly after his initial proposals were published, ‘The adoption of my plan would require the approval of the Labour Party. But they will never be asked to approve inflation. It will just happen.’22 Keynes’s attempts to solicit support from the Labour movement for his scheme are of great interest, as his attempts to accommodate Labour opinion were a key factor in shaping the final outcome of his thought, the minor economic classic How to pay for the war.23 Keynes injected 19 20 21 22 23

W. K. Hancock and M. M. Gowing, British war economy, London 1975, 158. Cripps diary, entry for 18 Oct. 1939, Cripps papers. Margaret Cole, ‘The progress of government control’, FQ xxiii (autumn 1939), 4–20. Keynes, Collected writings, xxii. 77. For a discussion of the historiography of this episode see Richard Toye, ‘Keynes, the

91

THE LABOUR PARTY AND THE PLANNED ECONOMY

further social radicalism into his plan in order to make it more attractive to Labour; Labour neither reciprocated the spirit of his concessions, nor accepted the consumer-choice philosophy upon which the plan’s main principle was based. The relationship between Keynes and the Labour movement had not ceased to be one of ambivalence, although the thirties had seen a very gradual thawing of relations. Still prevented from joining the Labour Party by what he saw as, on the one hand, the timidity of its leaders, and, on the other, the extremism of their followers, in the general election of 1935 he nonetheless supported Labour.24 He wrote privately in 1936 that there is ‘little divergence between the political implications of my ideas and the policy of the Labour Party . . . I should officially join that party if it did not seem to be divided between enthusiasts who turn against a thing if there seems a chance that it could possibly happen, and leaders so conservative that there is more hope from Mr Baldwin.’25 In 1937 he made a donation of £100 towards the party’s fighting fund for the LCC elections.26 But he alternated his sympathy for the party with contempt. The Labour Party, for its part, was divided in its attitude to Keynes. This had been vividly demonstrated prior to the war when, in April 1939, he argued in print that ‘the problem of abnormal unemployment will cease to exist during the financial year 1939–40’, as a consequence of the government’s increased borrowing for defence, and that it was possible to achieve this without inflation, even if this would be complicated by the incipient shortage of skilled labour.27 Some Labour figures reacted with hostility. Richard Stokes MP referred to Keynes as ‘one of our leading mumbo-jumbo economists’, and mocked ‘his discovery that as a result of this expenditure unemployment will come down, and that this is going to be dreadful because there will only be 750,000 [unemployed] people left on whom we can draw, and most of them probably will be unskilled’.28 G. R. Sandison, prospective parliamentary candidate for Southend-on-Sea, described Keynes as ‘the bogey boy of capitalist economists’ who, he said, ‘argued that the present

Labour movement and How to pay for the war’, C20BH x (1999), 255–81 at pp. 256–7. Since that article was published, Robert Skidelsky has completed John Maynard Keynes, III: Fighting for Britain, 1937–1946, London 2000. The relevant sections are at pp. 52–72, 87–90. 24 Robert Skidelsky, John Maynard Keynes II: The economist as saviour, 1920–1937, London 1992, 438, 536. 25 Keynes to A. L. Rowse, 12 May 1936, cited in Richard Ollard, A man of contradictions: a life of A. L. Rowse, Harmondsworth 2000, 96–7. 26 Herbert Morrison to Keynes, 2 Mar. 1937, Keynes papers, King’s College, Cambridge, L37/5. This was odd, given that the previous year Beatrice Webb had recorded that Keynes had ‘an unmitigated contempt for the official Labour Party (especially Morrison)’: MacKenzie and MacKenzie, Beatrice Webb diary, iv. 371, entry for 19 June 1936. 27 Keynes, Collected writings, xxi. 509–18. 28 HC Debs, 346, 26 Apr. 1939, col. 1257.

92

ECONOMIC CONSEQUENCES OF THE WAR

rearmament programme of the Government will abolish unemployment altogether, and that therefore we did not need to do anything about it’.29 Other Labour spokesmen, however, attempted to use Keynes’s arguments to justify socialist policies and to attack the government. H. B. Lees-Smith claimed that Keynes’s ‘modern scientific argument’ was a vindication of traditional socialist underconsumptionism.30 George Ridley MP argued that if Keynes was correct, and government borrowing could indeed eradicate unemployment, ‘how much bigger is the crime of the Government in refusing to engage in a public works policy over the last seven or eight years’.31 Tom Johnston MP made a similar point, arguing that ‘what is important is that one of our greatest living economists has arrived at the conclusion that we can, when we desire to do so, reduce our unemployment figures by a million’.32 Some socialists, then, were in certain contexts prepared to enlist Keynes’s opinions in support of their own; but this did not necessarily make them into Keynesians.33 The views of F. W. Pethick-Lawrence, with whom Keynes personally was on good terms, illustrate the difference. He told the Commons: ‘Mr Keynes argued that, so long as unemployment remains, there cannot very well be inflation . . . I want to suggest that that does not necessarily follow in this case’. Although there was much in Keynes’s articles with which he agreed, he said, he did not believe that increased demand in itself could overcome the bottlenecks in the economy. ‘Unemployment will not disappear merely as a result of throwing money about. It will never disappear unless the Government use this money with planning in order to bring the whole available manpower of the country into operation.’34 In other words, the kind of physical planning that Labour favoured was in important respects very different from Keynes’s conceptions of economic management. The controversy over How to pay for the war would give further illustration of this continuing disparity. Nevertheless, the war brought a radical alteration in Keynes’s own attitude to the Labour movement. In the General theory he had reached the famous conclusion that ‘it is ideas, not vested interests, which are dangerous for good

29 30 31 32 33

LPACR 1939, 268. HC Debs, 346, 26 Apr. 1939, col. 1267. Ibid. 1 May 1939, col. 1562. Forward, 22 Apr. 1939. For example, in a book published in March 1940 Dalton wrote ‘I share with Mr. Keynes “the profound conviction that the Economic Problem, as one may call it in short, the problem of want and poverty and the economic struggle between the classes and the nations, is nothing but a frightful muddle, a transitory and unnecessary muddle” ’. But, as will be seen, he did not support Keynes’s specific policy proposals at this time. (The quotation was from Keynes’s Essays in persuasion [1931]. In the original, ‘unnecessary’ was in italics.) See Hugh Dalton, Hitler’s war: before and after, Harmondsworth 1940, 181; Keynes, Collected writings, ix, p. xviii. 34 HC Debs, 346, 26 Apr. 1939, col. 1182.

93

THE LABOUR PARTY AND THE PLANNED ECONOMY

and evil’; but in 1939–40, as a vigorous advocate of his own war-finance plan, he was newly prepared to court the ‘vested interests’ in the Labour Party and the unions, and was prepared to alter his ideas substantially if so doing would secure their acceptance.35

The Times articles Keynes first turned his mind to the twin problems of war-finance and inflation in October 1939, when he gave a lecture on the subject to the Marshall Society in Cambridge.36 His strategy for securing his proposals’ acceptance was not to appeal to public opinion directly, but to persuade representative political leaders of their virtue.37 He thus sent a long memorandum encapsulating the ideas in his lecture to a number of eminent persons including the chancellor, John Simon, and Attlee. As published in The Times on 14 and 15 November, under the title ‘Paying for the war’, Keynes’s ideas focused on the need to restrain working-class consumption during war time in order to avoid inflation: Nothing is more certain than that the wages bill of this country will increase. . . . Thus the working classes will have a substantially larger money income than before, but they must not, at the best, consume any more than they did. For the wise and just solution of this problem the leaders of the working class must be taken into earnest and sincere consultation.

Yet Keynes dismissed both rationing and anti-profiteering measures, the policies preferred by the Labour movement, as ‘pseudo-remedies’. The former, against a backdrop of a general increase in purchasing power, would simply divert demand from the rationed to the unrationed article, and ignored differing consumer preferences; the latter ‘exalts into undue prominence the least significant cause of rising prices’. He therefore turned to what he saw as the three genuine ways of restoring equilibrium between supply and demand. The first was inflation. To some extent this was both inevitable and desirable, but to rely on it alone would be to invite a ‘vicious spiral’ of prices and wages. The second remedy was taxation. Yet, not only was it impossible to finance the war entirely out of current taxation without borrowing, ‘But to help solve our present problem it must involve taxation of the working classes’, as it was they who did three-fifths of the nation’s consuming, and it was their incomes which were expected to rise. Thus, ‘The price remedy and the taxation remedy are alike in depriving the working class of any benefit from their increased earnings. Yet a large portion of the earnings now in question represents increased effort on their part.’ But if it were physically impossible for the 35 36 37

Keynes, Collected writings, vii. 384. D. E. Moggridge, Maynard Keynes: an economist’s biography, London 1992, 629. See Keynes to J. L. Garvin, 13 Mar. 1940, Keynes papers HP/4/90–1.

94

ECONOMIC CONSEQUENCES OF THE WAR

community at war to reward this increased effort by immediate consumption – and if immediate consumption might in fact have to be reduced – there was no reason why it should not be rewarded by a claim on future resources. This ‘deferred payment’ was Keynes’s third, and preferred, remedy. The detail of his plan was that a percentage of all incomes in excess of a stipulated minimum income would be paid over to the government, partly as compulsory savings and partly as direct taxes, on a steeply graduated scale. At some date after the war, the sums thus credited would be unblocked and made freely available to the holder, probably by a series of instalments, thus helping the country through the anticipated post-war slump. ‘All methods of war finance are open to objections’, Keynes wrote pointedly. ‘But this new one offers some positive advantages which will not go unnoticed, I hope, by the leaders of the Labour Party.’38 But once he had made his plan public, Keynes was quickly ‘overwhelmed with a volume of criticism and comment’,39 much of it from Labour circles.

Labour reacts From the outset, Keynes had attached much importance to the acquiescence of the Labour movement in his scheme. In sending Attlee his original memorandum, he had written: ‘the way in which [the plan] strikes the Labour leaders is obviously vital . . . for my part, I believe that it presents the only way of handling the financial end of the war in a way that is at the same time just and advantageous to the working-class’. He also offered to hold up publication in The Times, in the hope, as he told Harold Laski, that he might be able to adapt the proposal to the feelings of the Labour leaders.40 Attlee who, Keynes believed, had not fully understood the plan, replied that ‘To take my own case . . . Your scheme would impose upon me an amount of compulsory saving which would be crushing.’41 (‘No comment whatever on the relation of my scheme to the working class’, Keynes noted drily.)42 Keynes wrote a long letter back, answering questions of detail raised by Attlee, and adding: The question is, do you prefer to be mulcted in the alternative ways? [i.e. taxation or inflation]. . . . Now it is not the slightest good your saying that you

38

Keynes, Collected writings, xxii. 41–51. As published, the Times articles omitted the suggestion in the original memorandum that the purchasing power of the proposed compulsory savings should be guaranteed. This was at the suggestion of Henry Clay of the Bank of England, on the grounds that it would distract discussion from the main plan. 39 The Times, 22 Feb. 1940. 40 Keynes to C. R. Attlee, 24 Oct. 1939, Keynes papers HP/2/2; Keynes to H. J. Laski, 11 Dec. 1939, ibid. HP/2/22–24. 41 Attlee to Keynes, 30 Oct. 1939, ibid. HP/2/3. 42 Keynes to Laski, 11 Dec. 1939, ibid. HP/2/22–24.

95

THE LABOUR PARTY AND THE PLANNED ECONOMY

cannot afford any of them. You have got to suffer the reduction one way or another. The question is which way you prefer.43

The response to this was typically Attlee-esque and curt: ‘I was not, of course[,] dealing with the general issues raised by your proposal, but only trying to elucidate its exact basis.’44 Keynes nonetheless waited another fortnight before he went ahead and published in The Times. Thus, when Harold Laski accused him of approaching the Labour leadership in a way calculated to cause them offence, he was able to defend himself fully; Laski was forced to admit that he had ‘a good alibi’.45 By contrast, one prominent Labour leader appears to have behaved very badly in the affair. On 17 November, two days after Keynes’s second article appeared, an article was published in the Daily Express under the byline of Arthur Greenwood, the Labour Party’s deputy leader. The Express, under Lord Beaverbrook’s proprietorship, was at this time running a violent laissez-faire campaign against rationing and all forms of central control. The article in question was called ‘Good enough for Hitler’s workers – but not good enough for ours, Mr Keynes . . .’: ‘If Mr Keynes’s plan is adopted its principles will be established – and the temptation to raid the pockets of the poor will be far too alluring to be resisted’, it read. ‘. . . This proposal goes beyond anything we have tolerated in this country since democracy was established here.’46 It is hardly surprising that Keynes had ‘seldom suffered a greater disappointment’ than when reading this.47 But Greenwood’s real offence was not in the views expressed, or even the manner of their expression, but in the fact that they were apparently not his views at all. As Kingsley Martin reported to Keynes, once the latter had written to Greenwood correcting misapprehensions contained in the Express article and offering to meet: I have now heard the interesting story of your correspondence with Greenwood. . . . The Express article was written for him; he had no idea what it was all about. . . . He went into the Herald office in some perplexity about your letter, not knowing what to answer because he had not even read your articles.48

This story lacks corroboration; but, if true, it would certainly explain why Keynes’s letter to Greenwood received no direct reply. And, if true, the scandal was compounded by the fact that Greenwood would have received a substantial fee for the article he had not written. ‘You accused me of lack of

43 44 45

Keynes to Attlee, 31 Oct. 1939, ibid. HP/2/4–7. Attlee to Keynes, 2 Nov. 1939, ibid. HP/2/8. Laski to Keynes, 5 Dec. 1939; Keynes to Laski, 11 Dec. 1939; Laski to Keynes, 12 Dec. 1939, ibid. HP/2/21–5. 46 Daily Express, 17 Nov. 1939. 47 Keynes to Arthur Greenwood, 19 Nov. 1939, Keynes papers HP/2/10–11. 48 Kingsley Martin to Keynes, 19 Dec. 1939, ibid. HP/2/28.

96

ECONOMIC CONSEQUENCES OF THE WAR

tact in approaching the Labour leaders’, Keynes retorted to Laski. ‘It appears that Beaverbrook understands the right technique better than I do.’49 The response of other Labour leaders was also disappointing to Keynes. Pethick-Lawrence wrote a long article attacking the notion of compulsory saving, which appeared in the socialist weekly Forward on 25 November. He agreed with Keynes that the war necessitated much abstinence from non-essential expenditure, but ‘at present there are a million-and-a-half people unemployed, and it is unsound economy to forego expenditure, with the result that more people are thrown out of work until the tide of war expenditure has risen and is ready to absorb them’. Moreover, the enormous variation in individual circumstances meant that voluntary rather than compulsory saving was desirable, if the latter could possibly be avoided: this trust in good sense and patriotism was ‘in accordance with the genius of our people’, upon whom it was unnecessary to impose ‘a rigid scale of forced loans’. And finally, ‘statesmen and economists cannot expect the workers to make new and unprecedented sacrifices until they are prepared to impose a special tax on capital wealth’.50 He also sent these views to Keynes direct, after receiving an initial letter from the economist advocating his scheme and conveying disappointment at Greenwood’s article.51 In peacetime Keynes would have naturally concurred with PethickLawrence’s sentiment that it was wrong to try to deflate the economy in conditions short of full employment. But the situation had now altered fundamentally. Keynes had, in a third Times article responding to his critics (published on 28 November), pointed out that large-scale unemployment, combined with heavy government expenditure, was a situation that could not long persist.52 This he also pointed out to Pethick-Lawrence directly in the first part of December. Moreover, he insisted that his plan was flexible, and asked for input from Labour: ‘I wish you and your colleagues would prepare your own plan, absorbing so much of mine as you find serviceable’.53 He had some grounds for optimism on this score, in that Pethick-Lawrence was trying to arrange for him to meet the Labour Party front bench early in the New Year.54 But, more ominously, Ernest Bevin now seemed to set his face against the scheme. As the leader of Britain’s largest union, Bevin was both highly influential within the Labour movement and an industrial force in his own right. His attitude to the Keynes plan was thus of vital importance. He did not yet condemn it explicitly; but by the turn of the year his likely opposition could

49 50 51

Keynes to Laski, 29 Dec.1939, ibid. HP/2/26. Forward, 25 Nov. 1939. Keynes to Pethick-Lawrence, 19 Nov. 1939, Pethick-Lawrence papers, Trinity College, Cambridge, P-L2/216; Pethick-Lawrence to Keynes, 22 Nov. 1939, ibid. P-L2/250. 52 Keynes, Collected writings, xxii. 75. 53 Keynes to Pethick-Lawrence, 11 Dec. 1939, Pethick-Lawrence papers P-L2/217. 54 Pethick-Lawrence to Keynes, 8 Dec. 1939, ibid. P-L2/251.

97

THE LABOUR PARTY AND THE PLANNED ECONOMY

perhaps have been surmised. The root of the difficulty was that he was determined to resist all reductions in working-class living standards, and if possible to fight for improvements. On 29 December he wrote (in a letter subsequently seen by Keynes, who thought it ‘Almost the worst thing I have read since the beginning of the war’): My time has been taken up in trying to get wages commensurate with the cost of living. I am determined to try to keep them up to a proper level. The powers that be have won in the first round but that is only a temporary victory for them. As our people sicken of this business they will revolt against the depression of their standards.55

When Chamberlain, in his Mansion House speech of 9 January 1940, argued that it would be a mistake to tie wages to the cost of living,56 Bevin reacted angrily. ‘The policy of the Government as I see it’, he told the Daily Herald, ‘is to talk about sacrifices by people who had nothing to sacrifice when the war started’. Of those wage-earners to whom Mr Chamberlain talks of sacrifice, 90 per cent. were on wage standards that left no margin. To reduce their purchasing power . . . only reduces the efficiency standard of the people, and such a policy can only result, if this war lasts a long time, in outbreaks of labour troubles of a serious character.57

This was fighting talk, perhaps motivated by the desire to outflank potential militant opposition to the TUC leadership;58 but Keynes believed that Bevin’s ‘bark is often worse than his bite, and I should not yet despair of getting him round to some sort of rational scheme’.59 Yet Bevin chose, for the time being, to remain aloof from direct discussion of Keynes’s proposals. And although his scheme was attacked by many on the left, Keynes was not entirely without allies within the Labour movement. One of these was Laski, stalwart of the left on the party’s executive, who himself admitted he was no 55

Ernest Bevin to B. S. Rowntree, 29 Dec. 1939 (copy), and Keynes to Lord Stamp, 12 Jan. 1940, Keynes papers HP/2/37–8. 56 The Times, 10 Jan. 1940. 57 Daily Herald, 10 Jan. 1940. 58 See, for example, TUC general secretary Walter Citrine’s remarks to the chancellor of the exchequer the previous week: ‘the Chancellor clearly urged that increases of wages should not be in the same proportion as increases in the cost of living. In Sir Walter’s view . . . workers would repudiate leaders who asked them to do this. Moreover, the trade unions had at all times to counter definite opposition designed to discredit the existing trade union leadership in the eyes of the trade union members . . . and nothing should now be done to afford opportunities for subversive opposition to that constitutional leadership’: Minutes of the national joint advisory council to the Ministry of Labour, 3 Jan. 1940, TUC archive, modern records centre, University of Warwick, MSS 292/108.2/1. Bevin may well have been thinking along the same lines. 59 Keynes to Stamp, 12 Jan. 1940, Keynes papers HP/2/38.

98

ECONOMIC CONSEQUENCES OF THE WAR

economist but admired the Times articles for their persuasive effect.60 Once Keynes had related to him the story of his travails with Attlee and Greenwood, Laski withdrew the charge that he had been tactless in approach, and undertook to stimulate discussion of the plan within the NEC.61 Another sympathiser was G. D. H. Cole. On 6 January 1940, an (unsigned) article by him in the New Statesman commended the scheme, albeit because his preferred alternative, ‘a Socialist system of production and distribution’ was excluded by the political situation at the time.62 But neither of these men was in the first rank of influence. Cole told Keynes at the end of January that he had not been consulted on the issue either by the TUC or the Labour Party: ‘Possibly I am too much in disgrace to be consulted, on account of my Popular Front activities.’63 Thus lacking powerful advocates in the Labour movement, it was logical for Keynes himself to seek to meet groups within it face to face.

Keynes meets the Labour front bench By the end of November 1939 Keynes was receiving suggestions that he should reprint his Times articles and his forthcoming Economic Journal article as a single pamphlet, but thought that such a publication would be ‘rather a mess’.64 Determining to rework the material into a more coherent whole, which might be published after Christmas, his changes were not, however, to be merely stylistic. This would be his chance to remould his proposals into a form more acceptable to the Labour movement. Having made the cosmetic (if psychologically significant) change in title from ‘compulsory saving’ to ‘deferred pay’ in early December, three of his four substantive alterations to the scheme were in place by 22 January, perhaps earlier.65 ‘For my own part’, he wrote, ‘I cannot but believe that the revised version ought to be outrageously attractive to the Labour Party.’66 On 24 January he met the Labour Party front bench in the morning and a committee of the TUC general council in the afternoon. Keynes’s new scheme, which he now presented, attempted to meet previous criticism in several ways. To begin with, there was no longer any hint that working-class consumption would be reduced; the aim was now merely to hold it level. Moreover, according to his biographer, Harrod, Keynes now ‘fell in love with his own scheme as a method of social reform’.67 His plan, he told Josiah 60 61 62

Richard Kahn to Keynes, 30 Nov. 1939, ibid. HP/2/20. Laski to Keynes, 12 Dec. 1939, ibid. HP/2/25. New Statesman and Nation, 6 Jan. 1940; G. D. H. Cole to Keynes, 9 Jan. 1940, Keynes papers HP/3/89. 63 Cole to Keynes, 30 Jan. 1940, ibid. HP/3/93. 64 Keynes to Geoffrey Dawson, n.d. (subsequent to 20 Nov. 1939), ibid. HP/6/37–8. 65 Keynes, Collected writings, xxii. 84, 91–6. 66 Keynes to John Parker, 18 Jan. 1940, Keynes papers HP/2/79. 67 Harrod, John Maynard Keynes, 492.

99

THE LABOUR PARTY AND THE PLANNED ECONOMY

Stamp, was ‘now not merely a piece of technique, but aims . . . for a bigger move towards equality than any we have made for a long time’.68 Accordingly, he proposed a system of family allowances of five shillings per child under fifteen; thus a married man with two young children would actually have more left in cash for all rates of earnings up to nearly 75 shillings, and would accumulate substantial deferred pay too. In all, the scheme would provide the working classes with better security against misfortunes, and with increased wealth, ‘for a right to deferred consumption is precisely what wealth is’.69 Moreover, he now suggested that accumulated credits could be repaid – the security of the savings being a perennial Labour concern – via a post-war capital levy. This idea came directly from Hayek, who had raised it in the Spectator in November,70 but Keynes had good reason to think it would find Labour approval. A capital levy had been official party policy in the immediately post-1918 years, although it was later discarded by Labour’s then leaders, partly because of altered economic circumstances, and partly because it was seen as an electoral liability.71 But in April 1939 the young Labour economists Douglas Jay, Hugh Gaitskell and Evan Durbin suggested the party call for ‘conscription of wealth’; if the government accepted this proposal, Labour should accept the principle of military conscription in return. This plan for a special defence levy was supported by Attlee and Dalton, but rejected by the Parliamentary Labour Party, which still opposed the call-up and hence the proposed quid pro quo.72 Nevertheless, the idea of an emergency tax on wealth was quickly resurrected. After the outbreak of war, most Labour thinkers who did not favour compulsory saving advanced a year-on-year capital tax as an alternative. Keynes was certain this would ‘not do what we want, which is a reduction of current consumption rather than a transfer of capital assets to the Treasury’;73 but a post-war levy was a different question. The other new touch was that deferred pay would now be handed over by employers to trade union friendly societies, and administered by them, which would help alleviate the oft-expressed fear that the state, or employers, would refuse to hand the workers’ savings back to them after the war was over.74 The only record of what happened when this scheme was presented to the Labour front bench is Keynes’s own. He told Harold Laski the meeting was ‘satisfactorily non-committal on the whole, but it could scarcely be regarded as a serious discussion of the business’:

68 69 70 71 72 73 74

Keynes to Lord Stamp, 29 Jan. 1940, Keynes papers HP/2/39–41. Keynes, Collected writings, xxii. 94–6. Spectator, 24 Nov. 1939. M. Gottlieb, ‘The capital levy after World War I’, PF ii (1952), 356–84. Jay, Change and fortune, 78–9. Keynes, Collected writings, xxii. 96. Ibid.

100

ECONOMIC CONSEQUENCES OF THE WAR

Of those there Attlee and Lees-Smith ran away after about quarter of an hour, saying nothing, but I thought Attlee was obviously extremely hostile. Dalton stayed on, friendly and non-committal, saying at the end that he had been against the plan, but was now at least to some extent shaken and prepared to consider it. [John] Wilmot [MP], whom I did not know before, was clearly an enthusiatic supporter and said that he was 100 per cent converted. Most of the actual discussion was between myself and Pethick-Lawrence, who was, as usual, candid and delightful, but seemed to want a terrible lot of breaking in if he was to contemplate a new idea. He vehemently advocated voluntary saving on general principles of extreme laissez-faire . . . I assaulted him vigorously and, though perhaps I flatter myself, I really think he was at the end just beginning to see the point. But I rather felt . . . that I was up against such a terrific degree of nineteenth century laissez-faire, that the discussion was more of historical than current interest.75

Unfortunately, owing to the lack of evidence from other sources, it is impossible to judge how fair this assessment was.

Keynes meets the TUC Keynes’s meeting with the TUC later that day was, from his point of view, rather more satisfactory. This was in spite of the fact that TUC general secretary Walter Citrine was absent in Finland, and that Bevin, as Keynes believed, had ‘carefully arranged not to be on the Committee’ in question.76 (That committee – although believing that ‘The economic considerations from which the plan arises are hardly disputable’ – had already cast doubt on the practicability of Keynes’s scheme. Its preferred remedies were rationing and price control, and it had received endorsement for these views from Dalton and Pethick-Lawrence.)77 Keynes now began by explaining his new proposals to the gathering. Not only did he have to think about the technical problem of how to finance the war without inflation, but ‘He felt that there was here an opportunity for getting a big constructive working class policy . . . The time of war might be just the moment for getting some things they could not easily get in time of peace.’78 He then went on to outline, at somewhat

75 76 77

Ibid. xxii. 97–8. Keynes to Stamp, 29 Jan. 1940, Keynes papers HP/2/39–41. ‘Wages, prices and standards of living during the war’: memorandum issued to the TUC general council 20 Dec. 1939 and minutes of the national joint advisory council to the Ministry of Labour (general council side) 16 Jan. 1940, TUC archive MSS 292/108.2/1; ‘Second memorandum on wages, prices and standards of living during the war’, 16 Jan. 1940, Keynes papers HP/2/49–55. 78 ‘Report of meeting of the trade union side of the national advisory council to the ministry of labour with Mr. J. M. Keynes, on 24 Jan., 1940, at 3 p.m.’ (cited hereinafter as ‘Keynes–TUC meeting’), Citrine papers 5/19, 2.

101

THE LABOUR PARTY AND THE PLANNED ECONOMY

greater length, the written scheme he had circulated to the committee. At two significant points, however, he diverged from it. At the point where Keynes was elucidating his capital levy idea, an unidentified person interjected ‘capital tax’: ‘Mr Keynes said that he, personally, very much agreed on that.’ He continued: they had talked after the last war of a capital levy in the form of instalments, and that would create the machinery for a capital tax. A capital tax should be part of their fiscal machinery . . . If, of course, it was paid by instalments they could ultimately have its place taken by a permanent capital tax.79

This was, to say the least, a radical suggestion, which duly took its place in How to pay for the war. The General theory had famously advocated ‘the euthanasia of the rentier’; its author now advanced a practical proposal for achieving that end. Keynes was thus both genuinely passionate for social reform and willing, for tactical reasons, to emphasise the ‘socialist’ aspect of his thought in order to accommodate Labour and trade union opinion. The second divergence was on the question of rationing, something he had not put on paper ‘because it was of necessity controversial, and not of the essence of the scheme’: There was a good case for sugar and butter rationing but when they got to general rationing its result would be to destroy consumer’s [sic] choice. It had been said you had either to tighten up the pocket or the pantry. . . . He was all for the pocket and not the pantry. . . . Once they had constricted the pocket they were coming on to the moment when they could have a Government scheme.

Keynes said such a scheme should consist of a narrow list including necessities made into a Ministry of Labour cost of living index. The authorities should then undertake to do their utmost (probably via food subsidies) to prevent the prices on that list from rising, ‘something which he thought would only be operative if the list was small’.80 This would shortly after harden into his final acceptance of the ‘iron ration’ proposal put forward by Sir Arthur Salter, R. H. Brand and J. R. and Ursula Hicks; he eventually chose to favour this course even though, as he had previously admitted, ‘As an old Treasury man I am scared of it’ on grounds of expense.81 After Keynes had finished his presentation, the trade unionists asked him many small questions of detail. At one point, in response to the suggestion that the scheme helped families at the expense of single men, he quipped that he ‘thought it was the policy of the trade unions never to admit that a man

79 80 81

Ibid. 9–10. Ibid. 10–11. Keynes to R. H. Brand, 5 Jan. 1940, Keynes papers HP/3/123.

102

ECONOMIC CONSEQUENCES OF THE WAR

had less than three children!’82 He also went on to say he felt that the unions had been perfectly right in saying that it was not their position to put forward a scheme, but that the chancellor of the exchequer should do so. But when he reflected on the present chancellor it became clear that the initiative would have to come from elsewhere: he ‘had to confess he was pinning more hope on them [the TUC] than on the Chancellor’.83 Keynes later told Laski that whilst the trade unionists ‘were extraordinarily careful to commit themselves to nothing, I felt the atmosphere most friendly, and above all serious and intelligent’.84 Of those present, those most apparently enthusiastic for the scheme were George Hicks, the leader of the builders’ union and a Labour MP, and John Marchbank, general secretary of the national union of railwaymen. There were sceptical views expressed too. G. W. Thomson of the association of engineering and shipbuilding draughtsmen suggested that the value of the deferred pay was likely to be eradicated by future inflation, and when Keynes responded that their value would be written up accordingly, argued ‘it was impossible to conceive any Government doing this’.85 Returning to the theme a little later, Keynes admitted ‘He thought they would find it extraordinarily difficult to get an assurance’ from the Treasury on these lines.86 In a lengthy summing up, George Woodcock, the secretary of the TUC’s research and economic department, said that the problem as a whole, from the unions’ point of view, was not an entirely economic question: ‘They might accept completely all the economic points, but it did not necessarily solve their problems.’87 In other words, there were issues of political palatability at stake as well as the mere technical question of restraining inflation – precisely the issues that Keynes had sought to address when including in his proposals social reform ‘sweeteners’ like family allowances, which were independent of his technique for paying for the war. Woodcock further believed that the ‘moral influence’ of the trade union movement in persuading people to save voluntarily should not be underestimated, but also wondered whether Keynes’s scheme should not be made more stringent.88 The distinguished visitor was much impressed.89 82 83 84 85 86 87 88 89

‘Keynes–TUC meeting’, 17. Ibid. 18. Keynes, Collected writings, xxii. 98. ‘Keynes–TUC meeting’, 20–1. Ibid. 23. Ibid. 25. Ibid. 25–6. Keynes, Collected writings, xxii. 98. Woodcock, a future secretary-general of the TUC was, for his part, dazzled by Keynes, whom he ‘revered’. Later in life he told the journalist John Cole ‘a good story about Keynes’s wife, Lydia Lopokova, the ballerina. Woodcock was so fascinated by Keynes’s thinking that he could scarcely tear himself away from a lunch at the great economist’s home. Eventually Lopokova deposited the star-struck young union man on her Bloomsbury doorstep – with skills, he skittishly assumed, that she had developed under Diaghilev’: John Cole, As it seemed to me: political memoirs, London 1995, 20.

103

THE LABOUR PARTY AND THE PLANNED ECONOMY

Finally, Keynes offered to hold up publication until the general council had considered the matter; if they were prepared to adopt his ideas, he would abandon the field, handing over to them the results of his thinking ‘rather than butt in on his own . . . He had no pride in authorship.’90 Although the TUC ‘deeply appreciated the extreme generosity of your offer’ they nonetheless refused it;91 that it was made at all was yet another indication of Keynes’s willingness at this time not only to be flexible in his ideas, but to do everything he could in order to see them accepted by the Labour movement. His campaign now continued accordingly.

Keynes meets the Fabian Society By the time that Keynes addressed a packed meeting of the Fabian Society at London’s Royal Hotel at lunchtime on 21 February, his new booklet was ready, and proof copies were being received by those he sought to convert.92 He had by now settled on the title How to pay for the war: a radical plan for the chancellor of the exchequer. His substantive proposals were thus in their final form, the ‘iron ration’ idea now being definitely included. He told the Fabians: I am a highly teachable person. I learn from criticism and before now have laid myself open to the reproof that my second thoughts are often better than my first thoughts – which is an indication, some people think, of a dangerous instability of character . . . Well it has happened again. I have played a low trick on my critics. I have improved my plan and have thus slipt [sic] out of their net.93

Having summarised the changes to the scheme, he went on to claim that ‘this is the right socialist solution’. It was ‘a planned social scheme, aimed at increasing equality and snatching new social advantages out of the exigencies of war’. He concluded, moreover, that his plan allowed liberty and the right to personal choice to be made harmonious with the welfare of the community as a whole: ‘It is for the state to say how much a man may spend out of his earnings. It is for him to say how he will spend it.’94 This, perhaps, was the crux of the difference between Keynes’s philosophy and that of many of those within the Labour movement who opposed him. For, even amongst those allegedly still attached, like Pethick-Lawrence, to nineteenth-century ideas of laissez-faire, there were few Labour champions of 90 91 92

‘Keynes–TUC meeting’, 28. George Woodcock to Keynes, 30 Jan. 1940, Keynes papers HP/2/76–7. The Times, 22 Feb. 1940; Margaret Cole, The story of Fabian socialism, 264; William Piercy to H. V. Berry, 22 Feb. 1940, Piercy papers, BLPES, 5/72. 93 Notes for a speech to the Fabian Society, 21 Feb. 1940, Keynes papers HP/2/88–99. 94 Ibid.

104

ECONOMIC CONSEQUENCES OF THE WAR

the right to consumer choice. The ‘pseudo-remedy’ of widespread rationing was supported by most socialists as representing ‘fair shares’ or ‘equality of sacrifice’, particularly in time of war. Keynes’s strictures against the shortages this would produce underestimated not only the British genius for queueing, but also the extent to which Labour had a genuine preference for direct physical controls as opposed to more subtle methods of macroeconomic management. Yet in spite of this underlying philosophical difference, the Fabian lunch was a success, Keynes having ‘a pretty strong impression that at least a majority were persuaded’ and the word in Labour circles being positive.95 And on 27 February the book itself was published.

A radical plan Upon its launch, Keynes continued his vigorous propaganda campaign. Happily for him, How to pay for the war was greeted with near unanimous acclaim by economists of all shades, including Dennis Robertson, Hayek and Lionel Robbins. Unsurprisingly, however, the reaction within the Labour movement was more mixed. The New Statesman called on Labour to endorse Keynes’s scheme, which was also welcomed by G. D. H. Cole in Tribune, H. N. Brailsford in Reynolds News and Richard Crossman in Left News.96 Barbara Wootton reviewed the book favourably in the Political Quarterly.97 In TUC circles Keynes now counted amongst his supporters not only George Hicks and Jim Griffiths (an MP and a former miners’ union leader) but Citrine. Keynes also seems to have won over public opinion. A survey by Mass Observation indicated that ordinary workers, although suspicious of the intentions of the state, preferred compulsory saving to higher taxes or prices.98 Ominously for Keynes, however, ‘Bevin is unapproachable, not only by myself but by everyone’, and would not, in fact, break his silence until the end of March.99 The general council itself did not at this stage discuss deferred pay further, and did not even succeed in agreeing a statement supporting a drive for voluntary savings until the end of April, once it had received governmental assurance that new money lent to the nation up to £375 would be ignored for the purposes of the means test.100 On the positive side, the Ministry of Labour believed that, even though the TUC leaders could not imperil their own authority by admitting openly there should be no

95 96

Keynes, Collected writings, xxii. 103; Piercy to Berry, 22 Feb. 1940, Piercy papers 5/72. New Statesman, 2 Mar. 1940; Tribune, 29 Mar. 1940; Reynolds News, 10 Mar. 1940, Left News, Apr. 1940. 97 Barbara Wootton, ‘Who shall pay for the war?’, PQ xi (1940), 143–54. 98 R. C. Whiting, ‘The boundaries of taxation’, in S. J. D. Green and R. C. Whiting (eds), The boundaries of the state in modern Britain, Cambridge 1996, 146–69 at pp. 159–60. 99 Keynes, Collected writings, xxii. 101. 100 TUC general council minutes, 24 Apr. 1940, TUC archive.

105

THE LABOUR PARTY AND THE PLANNED ECONOMY

increases, Keynes’s proposals had encouraged voluntary wage restraint by the unions.101 Yet conversely, one inland revenue official had previously reported to the chancellor ‘that two of the most influential of the Trade Union leaders have said that deductions from wages in pursuance of the plan would inevitably be followed by claims for equivalent and compensating increases in wages’.102 There were further ‘dark questionings’ by the Labour front bench.103 Pethick-Lawrence was still havering – he eventually came out against the plan, as did Dalton – and A.V. Alexander was openly opposed.104 These Labour doubts were based in part on a continuing failure to see that economic conditions had changed since the slump. On the day after How to pay for the war was published, Lord Snell, the party’s leader in the House of Lords, refused to countenance any restriction in working-class consumption whilst unemployment remained.105 As Keynes argued on the same day, to assume that this state of affairs would continue was to accept that the war effort was to fall far short of what it might be.106 But Snell was merely echoing Aneurin Bevan, who earlier in February had challenged economists: ‘You can start your lectures when we have first maximised production in Great Britain’, i.e. at the full employment level. There were still over a million unemployed; this was felt on the Labour side to be a symptom of the government’s half-hearted and lackadaisical conduct of the war effort, which was still lacking in planning and central direction. Meanwhile, restraints on luxury consumption were thought to be insufficient. Such consumption should be reduced as a token of good faith: if, after this, it still proved necessary to reduce the standard of living of the workers, the question could be looked at again.107 There were also vestiges in Labour circles of the trade unions’ traditional opposition to family allowances, on the grounds that employers would use them as an excuse to depress wages,108 but this had not been raised at Keynes’s meeting with the TUC, and the allowances were at any rate not essential to his scheme. The ‘iron ration’, too, aroused some limited controversy. As Bevan had put it, ‘The proposition that steel workers, miners and engineers 101 Interdepartmental committee on economic policy (40) 9th meeting, 17 Apr. 1940, cited in Hancock and Gowing, British war economy, 165. 102 In a minute of 16 Mar. 1940, cited in R. S. Sayers, Financial policy, 1939–45, London 1956, 34n. 103 Keynes, Collected writings, xxii. 103. 104 Stephen King-Hall to Keynes, 18 Mar. 1940, Keynes papers HP/4/28; King-Hall to Keynes, n.d., March 1940, ibid. HP/4/24; HC Debs, 360, 24 Apr. 1940, col. 231; Reynolds News, 14 Apr. 1940. 105 HL Debs, cxv, 28 Feb. 1940, col. 654. 106 Notes for a talk by Keynes at the House of Commons, 28 Feb. 1940, Keynes papers HP/3/176–87. 107 HC Debs, 357, 8 Feb. 1940, cols 518–26. 108 See, for example, the remarks made by Charles Dukes (general secretary of the National Union of General and Municipal Workers) in Feb. 1940, cited in Labour research department, The Keynes plan – its dangers to the workers, London 1940, 7.

106

ECONOMIC CONSEQUENCES OF THE WAR

shall subsist upon this restricted margin of commodities, surrounded by the spectacle of war profiteers being able to buy goods at highly inflated prices, but still able to buy them, will never be accepted by the organised industrialists of this country’, i.e. the unions.109 This view was not universal, however. Keynes also had to spend much energy reiterating his belief that deferred pay should not be taken into consideration under the means test. Yet more substantial criticisms were also raised. Perhaps the most convincing of these was political, not economic. Ellen Wilkinson MP argued that ‘the Keynes Plan was a perfectly sound proposal if considered in vacuo, but that, in practice, it was impossible to consider it except in relation to the social and industrial circumstances in which . . . it would be carried into effect’. These circumstances consisted of the perceived class antagonism of the Chamberlain government, and the habit of capitalist governments in war time of making, in exchange for sacrifices, promises to the workers which were subsequently broken. All Keynes’s safeguards depended ‘on the promise of a distinguished professor of economics – but not of the government who would have to implement them’.110 Keynes conceded, ‘I would have no objection at all to your saying that, whilst you would not accept my safeguards from Mr Chamberlain, you would accept them from a Government in which you had more confidence’.111 Wilkinson had originally attacked the plan without, apparently, having read it; most of her criticisms were ill-conceived, and Keynes managed to half-convert her. This was a potentially important coup, as she had by then been co-opted onto the NEC committee dealing with the scheme.112 Another important issue was raised by a member of the secretarial staff of the national union of railwaymen, who wrote to Keynes in a private capacity noting that most trade union criticism of the plan was directed at the issue of the security of the savings.113 Keynes admitted that this objection, also raised by Wilkinson amongst others, was difficult to meet, ‘chiefly for the reason that there is so little that is definite behind it’. But the savings would be simply another part of the national debt: ‘There has never been a case of repudiation in this country, and I should have thought that political reasons alone would have made the position of deferred pay quite safe.’114 There was, of course, a subsidiary point: assuming that the government did repay its 109 110 111 112

HC Debs, 357, 8 Feb. 1940, col. 522. Ellen Wilkinson to Keynes, 13 Mar. 1940, Keynes papers HP/4/124–6. Keynes to Wilkinson, 14 Mar. 1940, ibid. HP/4/127–8. She told Keynes at the beginning of April that ‘I have been living “Keynes” for the last month. I am on the Committee of the Labour Party dealing with it and I am continually at discussions in the House about the plan . . . when I am with people who are objecting to the Keynes Plan I find myself hotly arguing in its favour and it is only when I am with people who want to put it into practice at once, tomorrow morning, that I see all the difficulties’: Wilkinson to Keynes, 10 Apr. 1940, ibid. HP/4/129; NEC minutes, 20 Mar. 1940, LPA. 113 A. E. Ward to Keynes, 8 Mar. 1940, Keynes papers HP/4/131–5. 114 Keynes to Ward, 9 Mar. 1940, ibid. HP/4/136–7.

107

THE LABOUR PARTY AND THE PLANNED ECONOMY

debts, when would this happen, and after how much inflation? In this respect the critics were ultimately shown to have had a degree of foresight: when a limited version of Keynes’s scheme was in time put into place, the resultant ‘post-war credits’ depreciated heavily before they were eventually (and tardily) repaid. The delay, in particular, was a powerful source of post-war grievance amongst workers.115 By contrast, when Ernest Bevin finally showed his hand, his criticisms of How to pay for the war did not demonstrate any great acumen on his part. But the power of ideas is partly a function of the power of the person who has them, and after he declared his opposition to the plan it was unlikely that the rest of the TUC would overrule him. Speaking in Cornwall on 28 March he said that there was ‘grave danger’ in the scheme, or any other like it, ‘which might jerk the country out of its organised industrial life’. ‘We have the proof that all our finely balanced negotiating machinery is standing the test of wartime conditions’, he claimed. ‘Then we get professors without experience of the reactions likely to be produced by their advice, seeking to promote fancy schemes . . . Their schemes are likely to jolt the industrial machine, endanger production, and result in serious disturbances and strikes at a critical moment’.116 Bevin did not, in fact, manage to articulate precisely what his objection to compulsory saving was, save for a general distaste for compulsion itself; but his not-so-subtle threat to cause trouble were the scheme implemented would surely have put the government off adopting the plan, even had it been minded to in the first place.

The Labour Party decides Meanwhile, the Labour Party NEC was determining its official position. This was a convoluted and time-consuming process. In January, the press, publicity and campaign subcommittee, on which Laski served, had recommended a meeting with Keynes; this proposal was then shelved by the policy committee, which nonetheless agreed to meet specially to discuss the proposals. This meeting eventually took place on 4 April, reached no conclusion, and then reconvened on 11 April.117 Those present included Dalton, Attlee, Jay, Pethick-Lawrence, Wilkinson and Greenwood. The committee considered a document initialled by its secretary, G. Grant McKenzie, which analysed the Keynes scheme in detail. (However, McKenzie was certainly no economist, so it is possible that the drafting had been done by an assistant.) The plan was objected to first on grounds of administrative complexity; moreover, in order to enable deductions to be calculated ‘it would require 115 116 117

Whiting, ‘The boundaries of taxation’, 160. Daily Herald, 29 Mar. 1940. NEC press, publicity and campaign subcommittee minutes, 16 Jan. 1940, LPA; NEC policy committee minutes, 8 Feb., 14 Mar., 4 and 11 Apr. 1940, LPA.

108

ECONOMIC CONSEQUENCES OF THE WAR

employers to be informed of the whole personal income and circumstances of all their employees’, which ‘would create grave objection and difficulty’. (This was in the days before PAYE.) It was acknowledged that Keynes had modified his scheme in response to criticism, but it was argued that his modifications left untouched both the problem of evasion by the rich, and the diversity of individual capacity to save.118 Furthermore, ‘the adoption of the scheme would inevitably destroy the bulk of individual voluntary saving’; the likely net yield of genuine saving generated was thus estimated to be only £140 million, much lower than Keynes’s aim of £550 million. Assuming this lower estimate ‘proved even approximately correct, the scheme would fail of its purpose, and would not in any way justify the upset it would cause’, this being presumably a reference to Bevin’s veiled threat of industrial action.119 What, then, were the suggested alternatives? Unsurprisingly, the document focused on increased taxation of middle and higher incomes and war profits, as well as on rationing and the regulation of prices, and on a better organised scheme of voluntary saving: ‘If, after these methods have been thoroughly tried, prices are not under control and inflation threatens, only then will it be necessary to consider whether compulsion is necessary and practicable.’120 There was, however, no mention of an annual capital tax during war time. This was surprising, in that such a tax was an important feature of the official policy pamphlet written by Douglas Jay, and of unofficial socialist thought too.121 (However, as Brooke points out, this idea did not command unanimous support even in socialist spheres, Barbara Wootton in particular opposing it on grounds of administrative complexity.)122 At any rate, the committee subjected the document only to slight amendment before approving it. It was not, however, to be published, thus leaving a very slight opening for a future reversal in policy; but, to all intents and purposes, Keynes’s attempt to make his plan ‘outrageously attractive to the Labour Party’ had now failed.

118 NEC policy committee minutes, 11 Apr. 1940, LPA. Keynes had in fact discussed the possibility of evasion with J. R. Hicks and others, but only in private, and not with any members of the committee. He had told Hicks on March 13: ‘I do not deny that there may be some leakage . . . But that, I feel, is an inevitable consequence of almost any kind of drastic remedy’: Collected writings, xxii. 110. 119 NEC policy committee minutes, 11 Apr. 1940, LPA. 120 Ibid. 121 Douglas Jay, Paying for the war, London 1940. The most important unofficial Labour statement on war finance was E. F. M. Durbin’s How to pay for the war: an essay on the financing of war (London 1939), written before Keynes published his Times articles, containing an appendix by Hugh Gaitskell proposing a capital tax (pp. 109–13). 122 Brooke, Labour’s war, 245; Wootton, ‘Who shall pay for the war?’.

109

THE LABOUR PARTY AND THE PLANNED ECONOMY

‘Good economics’ versus ‘good politics’ This was not yet the end of the story, for the system of deferred pay was eventually incorporated, as ‘post-war credits’, into the budget of April 1941, albeit on a rather limited scale. Yet this came about only after Keynes himself had been inducted into the Treasury in the summer of 1940. This, in turn, was only made possible by the political changes of May, themselves brought about by the much larger circumstance of the military disaster in Norway. But as of the beginning of that month, Keynes was as far from achieving his objective as ever. This was in large part because the Labour leaders, whose support he coveted, remained immovable; although he found many sympathisers he failed to influence official policy. His friendly reception from the TUC did not lead to any public pronouncement in his favour: the unions subsequently came out against compulsory saving on the ground that, even though it might be immediately economically necessary, it was likely to have undesirable (and unnamed) long-run political and economic consequences.123 Nor did Keynes’s attempts to court the Labour Party front bench prevent the official (though private) rejection of his plan by the NEC. This body did not, in fact, burn its boats entirely on the issue, but by the beginning of May Keynes’s continued lack of success brought a change in tactics. As he told Clement Davies, a Liberal MP, ‘there is a good deal to be said for concentrating on the inadequacy of the spending programme rather than on the inadequacy of the fiscal programme. If we can get what is wanted done in the former respect, the inadequacy of the latter should be shown up.’124 This was, of course, an implicit admission that he had thus far failed to demonstrate the inadequacy of the fiscal programme either to the government or to the opposition. So why was it that Keynes, in spite of all his concessions, had failed to get his plan adopted by the Labour movement? He himself speculated that his ‘incorrigible’ Labour opponents were simply weak-minded: ‘I suppose the trouble is that they have entirely lost any possibility of concentration, and there is nothing on earth they are prepared really to give their mind to.’125 Yet even were one to accept this damning verdict in its entirety, it would still be only a partial explanation. It is possible to wonder further if Keynes’s charm offensive, for all its sweet reasonableness, came a little late for the Labour front bench. As recently as January 1939, he had publicly described the official leadership as behaving like ‘sectaries of an outworn creed mumbling moss-grown demi-semi-Fabian Marxism’.126 It is not inconceivable that they might have taken offence. But again, this cannot be the whole answer. It is thus necessary to turn again to the pronounced ideological differences between Keynes and the Labour movement. These, of course, cannot serve as 123 124 125 126

TUC report 1941, 185. D. E. Moggridge, Keynes, Basingstoke 1993, 131; Keynes, Collected writings, xxii. 143. Keynes to King-Hall, 12 Mar. 1940, Keynes papers HP/4/25. Keynes, Collected writings, xxi. 495.

110

ECONOMIC CONSEQUENCES OF THE WAR

an entire explanation; both Laski and Bevan, for example, shared a similar Marxian outlook, but the former approved Keynes’s plan whereas the latter did not. But the attitude to the scheme held by Attlee, Bevin and others does suggest a wide disparity between the Labour leadership’s economic viewpoint and that of Keynes. On this evidence it is necessary once more to challenge Elizabeth Durbin’s conclusion that by 1939 the majority within the Labour Party understood the importance of the Keynesian message for socialism.127 The fact that, on occasion, Keynes himself barely received courtesy from Labour leaders is suggestive; but more significant was the general socialist preference for specific controls on consumption as opposed to the more general demand management represented by compulsory saving. Even Jay, perhaps the most consciously ‘Keynesian’ of Labour economists, proved unable to accept Keynesian precepts when these were aimed at reducing demand rather than expanding it. Moreover, the Keynes scheme’s supporters within the Labour movement hankered after physical control as well – for Richard Crossman compulsory saving was ‘not a substitute for a Labour plan of war-economy’, but one feature of a plan which should feature price-fixing, rationing, and unified control of food production ‘if possible on the basis of the nationalization of the land’.128 It must not be forgotten, moreover, that Labour’s leaders always had their eyes on what was politically popular – even if, as in this instance, they did not necessarily read public opinion correctly. ‘I don’t know if it is good economics’, remarked Emanuel Shinwell MP of the April 1939 ‘conscription of wealth’ proposal, ‘but it certainly sounds good politics to me’.129 Similarly, and without suggesting that all those concerned were as shamelessly cynical as Shinwell, one must suppose that Keynes’s ideas were ultimately judged not to be ‘good politics’. At a rather more noble level, it is also possible to appreciate Labour leaders’ genuine concern for the condition of the workers at a time when wages were already falling behind prices, and when large-scale unemployment still remained: compulsory saving could easily be seen as yet one more sacrifice at a difficult time. Furthermore, Keynes believed that a long war was necessary, and that within a reasonably short time it would involve total economic mobilisation. In this last conjecture he may have been too optimistic; many Labour figures were less certain. As Bevan told the Commons at the end of April (before the details and repercussions of the Norwegian disaster were known), ‘Mr Keynes himself pointed out that the necessity for his plan does not arise until the nation’s resources are fully employed. So long as we have 1,000,000 men and 2,000,000 women who might be employed in an extremity, it does not seem to me that this House is called upon to consider the details of Mr Keynes’s plan.’130 Thus as long as the 127 128 129 130

Elizabeth Durbin, ‘Fabian socialism and economic thought’, 44. Left News, Apr. 1940. Jay, Change and fortune, 79. HC Debs, 360, 25 Apr. 1940, col. 461.

111

THE LABOUR PARTY AND THE PLANNED ECONOMY

war appeared to be ‘phoney’, and the economic effort involved half-hearted, it seemed to some Labour thinkers correspondingly less necessary to worry about how to pay for it, especially if the answer involved the painful restraint of working-class consumption. Perhaps there was an element of practical wisdom in these doubts – Skidelsky suggests that premature adoption of the Keynes plan might well have made government policy too deflationary in the first period of the war – but they were not matched by even a conditional welcome of the scheme’s principle.131 Together, these various reasons do much to explain why, by April 1940, Keynes had failed to win the Labour movement’s acceptance of his plan. Moreover, whilst Chamberlain and Simon, seen by the Labour movement as antagonistic to the working class, remained in their respective positions, it was impossible for Keynes to succeed. Even had their government sponsored his plan, Labour would have rejected it; a fact which in turn prevented the government adopting it in the first place. But Churchill’s accession to power changed the situation. In the spring of 1941, Kingsley Wood’s budget, which included a version of Keynes’s scheme, was warmly welcomed by all the main political parties, including Labour, although the TUC remained opposed to compulsory saving. Why this change of heart? To begin with, it was clearly now easier for the Labour movement to accept assurances about the security of deferred pay from a government in which, with Attlee, Greenwood and Bevin in prominent positions, it was generously represented. Second, as the economy became more fully mobilised, the rapid reduction of unemployment rendered progressively redundant the argument that action against inflation was as yet unnecessary. Furthermore, the Treasury scheme, as put into effect, was on a notably small scale, yielding only £125 million a year: ‘It was thus more of an experiment than the centrepiece of war finance’, in Donald Moggridge’s words.132 The corollary of this, of course, was that the scheme was merely the junior partner to large-scale rationing and profits-limitation exercises – war finance methods that the Labour movement very much approved. The concession of principle involved, if any, was therefore slight. In 1948, in an anti-planning polemic, John Jewkes observed that, when the Labour government came into power at the end of the war, it found itself in possession of a complete set of detailed economic controls imposed for war-time purposes. ‘This was, indeed, a gift from the gods’, he wrote. ‘The doctrinaire belief in the planned economy made the Government reluctant to remove these controls however unsuitable they might be for peace-time purposes.’133 Yet, throughout the war, and particularly in its early stages, socialists were keen to emphasise the dangers of bureacratic control in the 131 132 133

Skidelsky, Keynes, iii. 87. Moggridge, Maynard Keynes, 647. John Jewkes, Ordeal by planning, 77.

112

ECONOMIC CONSEQUENCES OF THE WAR

form that it had been introduced. It was control of business, by business, for business, a bastard form of self-government of industry.134 However, as will be seen in the next chapter, there were also early and widespread calls for the retention of the new controls post-war; the proviso, of course, was always that such controls should be ‘socialist’ in character. Moreover, in rejecting Keynes’s compulsory saving scheme, the Labour movement put an obstacle in the way of the development of an alternative model of war economy which did not involve a large number of physical controls. The detailed controls and their associated problems, inherited by Labour in 1945, then, were not merely ‘a gift from the gods’. They were in part the result of choices made by the movement’s leaders in 1939–40. This is not to say that in helping frustrate the adoption of Keynes’s scheme Labour had interrupted a panacea. Concerns about the value of the savings when eventually repaid proved to be well-founded. There are also many reasons for supposing that the attempt to restrict consumption in war time purely by the pocket rather than the pantry would prove unfeasible in practice.135 Moreover, the control schemes introduced by Chamberlain and Simon faced Churchill’s incoming government with something of a fait accompli – the pressing task in the summer of 1940 was to extend and make effective existing arrangements, not to embark on radical new departures in war finance. G. C. Peden is indeed right to say that historians should not call upon Keynes as a deus ex machina providing an easy solution to every complex dilemma.136 Neither, however, should they rush to the opposite conclusion that nothing he said was worth listening to at all. For it seems plausible to suggest that, had Labour taken up the Keynes plan with enthusiasm, it could have been put into practice on a substantially wider scale, and perhaps earlier too. This in turn might have diminished, if by no means eliminated, the problems of control and de-control that the Labour government faced in the post-war period (although it might also have increased post-war grievances over delays in repayment of the savings). More immediately, however, Labour’s entry into Churchill’s coalition in May 1940 faced the party with an unprecedented opportunity to participate in the development of Britain’s planned war economy; the experiences thus gained taught lessons and threw up questions that the party’s policy-makers and thinkers were eager to assimilate and explore.

134 See Margaret Cole, ‘The progress of government control’; Ernest Davies, ‘Private enterprise and state control’, FQ xxvii (autumn 1940), 10–20; John Parker, ‘After a year of coalition’, FQ xxx (summer 1941), 5–9. 135 See W. B. Reddaway, ‘Rationing’, in D. N. Chester (ed.), Lessons of the British war economy, Cambridge 1951, 182–99 at p. 182. 136 G. C. Peden, ‘Keynes, the economics of rearmament and appeasement’, in Wolfgang J. Mommsen and Lothar Kettenacker (eds), The fascist challenge and the policy of appeasement, London 1983, 142–56 at p. 154.

113

Shall the Spell be Broken?

5

Shall the Spell be Broken? Labour’s entry into Winston Churchill’s coalition government in May 1940 not only facilitated a crucial strengthening of the war effort, but played a key part in transforming the party’s own future political fortunes. Since September 1939 the party had been in an uncomfortable position. Prior to the onset of military disaster, Chamberlain remained as personally popular as ever, whereas there were doubts about Attlee’s leadership even from within the Parliamentary Labour Party. Moreover, direct attacks on the government could lead to charges of disloyalty in war time; yet equally, ‘patriotic’ measures such as the electoral truce led to accusations of pusillanimity from constituency activists.1 By joining the government at a moment of incipient national catastrophe, however, Labour not only gained directly from its association with Churchill but, at the same time, all its previous criticisms of the terminally discredited Chamberlain now appeared vindicated. The party also threw off, virtually at a stroke, the charges of narrow sectionalism that had dogged it since 1931, and recaptured its status as a genuinely national party. As Steven Fielding has noted, ‘despite their best efforts the Conservatives could not overcome the fact that it was they rather than Labour who had come to be identified as the defenders of a sectional interest by 1945’.2 All this would in due course bring great electoral rewards for Labour; but in the early summer of 1940 considerations of such advantage were forgotten. With the fall of France imminent, all minds focused on Britain’s own fight for survival. Labour politicians and trade unionists were thus able sacrifice the short-term pursuit of vested interests in order to work shoulder to shoulder with Tories and Liberals for the defeat of Hitler.3 To describe this temporarily woven spell as representing a political or economic consensus is perhaps an exaggeration; major differences between the parties persisted, and often caused bitter conflicts within the coalition. But the arrangement could certainly be called an expedient, and largely workable, compromise which, moreover, had a dramatic impact on Labour’s post-war ideology. For it was believed that the war-time laying aside of class differences in pursuit of a

1

Kevin Jefferys, The Churchill coalition and wartime politics, 1940–1945, Manchester 1987,

17. 2

Steven Fielding, ‘The Second World War and popular radicalism: the significance of the “movement away from party” ’, History lxxx (1995), 38–58 at p. 57. 3 See Brooke, Labour’s war, 270–5.

114

SHALL THE SPELL BE BROKEN?

common effort – and, indeed, the willingness of the population as a whole to respond to incentives other than money when the cause was just – showed that, with sufficient determination and self-sacrifice, socialism could be built in the post-war world.4 Indeed, the fate of the Attlee government’s policy of ‘democratic planning’ would hinge on whether or not this altruistic spirit could be harnessed in peace-time. In the shorter term, there was a widespread replacement, within the Labour movement, of the rhetoric of class antagonism with the rhetoric of community. The anti-planners compromised too; they felt able to put aside laissez-faire for the duration of the war. Lionel Robbins, explaining later why he and other anti-planning economists were willing, as newly recruited civil servants, to support and participate in the development of the war-time planned economy, wrote: ‘In a liberal society at peace, the operative principle of economic society is the satisfaction of consumers and investors . . . the objectives are heterogeneous and are incapable of being assimilated to any common denominator which is more precise than this general formula.’ Yet, Robbins continued, total war changed all this, the objective of victory becoming paramount: ‘the dominant feature of the situation is a stupendous simplification of the criteria of requirements: the minimum provision of personal consumption necessary to maintain health and morale; everything else for the service of victory’. Therefore, ‘in conditions of total war a degree of collectivist control which would be highly inappropriate for a would-be liberal community at peace, is a logical necessity’.5 This ‘victory principle’ was the common thread which enabled conservative and socialist economists to work together at the heart of Churchill’s government on the administration of war-time planning. Labour’s participation in that government influenced the party’s own planning policies via two processes. First, Labour ministers and Laboursympathising temporary civil servants were in a good position simply to observe the workings of the war-time planned economy, and to derive lessons which might in turn be reflected in the party’s official policy statements. Second, they were involved both individually and collectively (with non-Labour colleagues) in immediate practical decisions which determined the nature of the economy that would be extant at the end of the war. These processes helped determine, on the one hand, the party’s programme, and on the other, the planning machinery with which the Labour government would be equipped after 1945. Clearly, there were also other factors at work. Labour ministers were by no means the only people within the party who wrote policy documents; equally, although nominally accepting collective responsibility for all government decisions, they were sometimes opposed to them. 4

Fielding, ‘Labourism in the 1940s’, 141; Steven Fielding, Peter Thompson and Nick Tiratsoo, England arise! The Labour Party and popular politics in 1940s Britain, Manchester 1995, 79–82. 5 Lionel Robbins, Autobiography of an economist, London 1971, 176–7.

115

THE LABOUR PARTY AND THE PLANNED ECONOMY

Moreover, the status of Labour war-time ‘temporaries’ like Douglas Jay, Hugh Gaitskell, Evan Durbin and Harold Wilson, whose loyalties between Whitehall and Transport House must sometimes have been tested, was if anything more ambiguous. Bearing such grey areas in mind, then, this chapter aims to answer the questions: (a) what was the practical impact of the Labour Party on the coalition’s planning policies, and with what consequences for the future? and (b) what was the theoretical impact of the war experience on Labour’s official and unofficial thought about the nature of the planned economy?

Buried Treasury When the coalition took office, the political atmosphere was definitely hostile to the Treasury, particularly in Labour circles.6 Not only was Horace Wilson, who had been appointed permanent secretary in 1939, deeply associated with the policy of appeasement, but there was also a continuing resentment over the inter-war slump and the events of 1931, for which the ‘Treasury mind’ was thought to bear much responsibility. The Treasury’s role was downgraded; the chancellor of the exchequer was excluded from the war cabinet between May and October 1940, and again between February 1942 and September 1943. Moreover, there was a new cabinet committee structure which put an end to the Treasury dominance of economic policy. Attlee chaired the home policy and food policy committees, and Greenwood chaired the economic policy committee and the production council. The lord president’s committee was to concert these bodies’ work. When Greenwood proved ineffectual, his committees were taken away from him, the first being abolished and the second replaced by the production executive under Bevin. The lord president’s committee (with the newly formed economic section of the cabinet secretariat acting as its expert staff) now grew in power so that by the end of 1941 it was, in Churchill’s words, ‘almost a parallel cabinet concerned with home affairs’.7 Not only did this arrangement satisfy – partially – Labour calls for a non-departmental minister of economic co-ordination but, in war-time, the Treasury’s decline was a natural state of affairs. As James Meade, the then director-designate of the economic section, wrote in 1944, ‘In war-time the 6 7

D. N. Chester, ‘The central machinery for economic policy’, in his, Lessons, 5–33 at p. 6. Ibid. 6–9. This was under Sir John Anderson, who replaced Neville Chamberlain as lord president in October 1940. When Attlee in turn became lord president in September 1943, after Anderson became chancellor on the death of Kingsley Wood, the committee declined in importance. As Dalton put it in January 1944, ‘The Lord President’s Committee is rapidly losing business to [Lord] Woolton’s Reconstruction Committee, and is becoming a place where odds and ends are discussed in an atmosphere of jovial irresponsibility!’: Ben Pimlott (ed.), The Second World War diary of Hugh Dalton, 1940–45, London 1986, 698, entry for 14 Jan. 1944.

116

SHALL THE SPELL BE BROKEN?

Treasury has in many ways played second fiddle, the fundamental economic instruments being the direct “real” controls (consumer rationing, labour controls, raw material controls, etc.); and the Treasury has tagged along behind trying to mop up the purchasing power made redundant by the “real” controls’. Meade predicted that in the post-war period these controls would recede into the background and thus ‘The Treasury, willy-nilly, will become the central economic Dept.’.8 Yet other Labour thinkers were eager to prevent this happening, believing that a newly powerful Treasury might cause serious problems when the war was over. In 1943 Evan Durbin told Dalton ‘that none of the Treasury officials knew any economics and this might have disastrous consequences. They only knew about a few strictly limited topics – Public Finance in the narrower sense, Foreign Exchange and the technique of Public Borrowing. If left to themselves, half a dozen high officials at the Treasury would land us with two million unemployed at the end of the war.’9 Moreover, Labour’s continuing preference for physical controls meant that most Labour thinkers did not see the Treasury resurgence predicted by Meade as either desirable or inevitable. Controls represented the fulfilment of human needs, full employment, ‘order’; Treasury supremacy meant giving in to the dictates of finance, a return to the dole queues, ‘chaos’. The party’s official line in 1944 was that ‘Finance must be the servant, and the intelligent servant, of the community; not their stupid master’.10 Thus, as Bevin had argued the previous year, the distribution of physical resources should take on a new priority: ‘We must make our statistical forecasts in the form of the right use of manpower and not only of money.’11 (This demand that the claims of finance should be diminished was made, it should be noted, by a man who himself confidently expected to become chancellor of the exchequer were Labour elected.) These were the reasons why between 1945 and 1947 economic responsibilities would continue to be divided between the Treasury and the lord president’s committee: in these years Morrison as lord president would be ‘economic overlord’ with overall responsibility for planning. This was an example of a successful war time planning system being continued into peace-time and failing; ultimately the Treasury regained its old supremacy under the authority of Stafford Cripps. In this and other ways, it was temptingly easy for Labour thinkers to assume that the planned war economy represented a foundation upon which a future socialist planned economy could be built, without thinking too hard about whether or not the model was appropriate.

8 9 10 11

Howson and Moggridge, Meade papers, iv. 2, entry for 5 Nov. 1944. Pimlott, Dalton war diary, 626, entry for 24 Aug. 1943. Labour Party, Full employment and financial policy, London 1944, 3. Alan Bullock, The life and times of Ernest Bevin, II: Minister of labour, 1940–45, London 1967, 283.

117

THE LABOUR PARTY AND THE PLANNED ECONOMY

The importance of being Ernest The Treasury and the lord president’s committee, however, were not the only sources of war-time economic decisions. From the point of view of the war effort, the Ministry of Labour and National Service, under Bevin, was also vital. In accepting the job of minister, Bevin emphasised to Churchill that ‘I feel it is imperative that [the ministry’s] position and place should be strengthened in order to deal with the problem of labour organization and supply, and the Ministry must therefore be in a position to make its contribution to the actual organization of production so as to secure the right utilization of labour, and not merely to be regarded as an institution to supply the personnel’.12 The difficult task of securing ‘right utilization’ was complicated on the one hand by the need to avoid measures of compulsion wherever possible (in order to avoid antagonising the unions), and on the other by the need to be seen to be taking firm action (in order to mollify left-wing and other critics of the war effort). Bevin’s inexperience of parliament, furthermore, sometimes made it hard for him to get his case across in his early months as a minister. Nevertheless, two important planning instruments developed under his remit: the essential work order (EWO) and ‘manpower budgeting’. Both would have a continuing role after 1945. The first of these instruments was developed in the context of continuing criticisms that the war effort was being conducted insufficiently vigorously. The peculiar circumstances of coalition meant that outspoken attacks on the government in parliament remained the preserve of an isolated few, in particular Shinwell and Bevan, as well as a few disaffected Conservatives. But this criticism was vociferous. Bevin was accused of having no plan for the distribution of labour. Tories felt that his policy of ‘voluntaryism’ was being exploited by the unions, whereas Labour critics felt that management and employers were to blame for failings in production. Finally, in January 1941, Bevin was persuaded to make more use of his powers. The manpower requirements committee, chaired by Sir William Beveridge (who was assisted by the ‘very clever . . . chubby and chirpy’ Harold Wilson),13 reported that the labour crisis was likely to become acute in the course of that year. One of the committee’s recommendations was that the minister of labour should have the power to schedule any factory or undertaking as engaged on ‘national work’. No one employed on such work could leave or be dismissed without the minister’s consent. This became, with Bevin’s and the war cabinet’s approval, the essential work order. The quid pro quo for compulsion was that an undertaking could only be registered under the order if the minister was satisfied that terms and conditions of employment, welfare arrangements and

12

Ernest Bevin to Winston Churchill, 13 May 1940, Churchill papers, Churchill College, Cambridge, CHAR 20/11/59–60. 13 Jay, Change and fortune, 86.

118

SHALL THE SPELL BE BROKEN?

training facilities were satisfactory.14 By thus subjecting both workers and management to some form of compulsion, Bevin had the essentials of a defence against critics on both sides of the house. But in fact, his performances in the Commons continued to be unconvincing, and the EWO met criticism from both sides of industry. He was unable to allay an incipient new wave of class feeling, employers and workers blaming each other for shortcomings in the war effort.15 The spell of national unity was in danger of breaking. Bevin’s problems were therefore by no means at an end. The weekly meetings of the Parliamentary Labour Party, previously largely concerned with dull business, after a year of coalition had become a forum for quizzing Labour ministers and expressing discontent.16 In December 1941, after a further crisis over manpower shortages, ‘secret excursions and alarums within the Labour Party’ gave rise to a serious backbench revolt.17 The forty rebels believed that Bevin’s proposed extension of national service should be matched by ‘public ownership and control of all industries vital to our war effort’.18 In the face of such criticism, which at times seemed to threaten to break the coalition, it was essential for Bevin to reassure his supporters, his opponents, and particularly the unions that his new powers were only temporary. This he continued to do: ‘compulsory direction of labour would have to go’ when the war was over.19 In this, which accorded with his original policy of voluntaryism, he was entirely sincere; indeed, practical experience seemed to dictate that the manipulation of pay differentials, rather than direction, was the quickest way of moving people from one industry to another.20 He and his colleagues in the post-war Labour government, moreover, continued at first to believe that in peace-time it would be possible ‘to carry through a planned economy without compulsion of labour’ (Cripps’s words).21 Nevertheless, in September 1947 the EWO was reinstated, temporarily as it turned out, a move which some conservative critics saw as the thin end of the wedge of denial of freedom of occupation.22 But ultimately, the post-war government did not wish to resort to compulsion, preferring to rely on persuasion, propaganda and public goodwill to help achieve the ends it sought; this, indeed, was the essence of its

14 15 16 17

Bullock, Ernest Bevin, ii. 36–49. Ibid. 50, 57; Jefferys, The Churchill coalition, 74. Parker, ‘After a year of coalition’, 5–6. Kevin Jefferys (ed.), Labour and the wartime coalition: from the diary of James Chuter Ede, 1941–1945, London 1987, 26, entry for 3 Dec. 1941. 18 Ibid. 19 Joint meeting of the TUC general council, NEC, and administrative committee of the PLP, 9 May 1945, LPA. 20 Jay, Change and fortune, 89. 21 Stafford Cripps, speech, Feb. 1946, cited in Jewkes, Ordeal by planning, 200. 22 Ibid. 200–2.

119

THE LABOUR PARTY AND THE PLANNED ECONOMY

vision of socialism, which was based on the sincere hope that educated citizens would respond freely to meet national imperatives. Manpower budgeting, another development arising from Beveridge’s manpower requirements committee report, thus had a greater long-term significance than the EWO. The committee’s survey of manpower requirements was the first attempt to make a serious estimate of how many people the war effort required, and in which occupations. As such it formed the foundation of future war-time planning; by the autumn of 1942, the regular manpower surveys had become the key to the economy. Bevin’s department provided the necessary figures; the lord president recommended to the cabinet how labour should be allocated; and other resources were distributed in accordance with the programmes set.23 This was not merely an administrative expedient; it chimed in with the Labour preference that real resources, rather than financial ones, should take priority in a future peace-time planned economy. As Bevin told the voters in 1945, under a Labour government ‘instead of the human element having to fit in with the finance side, the Finance Budget will have to be cast to cover the human requirement’.24 This was reflected in reliance on manpower budgeting in the early economic surveys, which were produced annually after 1945. These surveys were the chief instrument of Labour’s immediate post-war planning policies; and, as Alec Cairncross has noted, many of the early economic decisions of the Attlee years were couched in terms of manpower.25 Planning and the unions Yet not only did Bevin play a role in the development of planning devices that would be used by the post-war Labour government; it was also his job to tackle the vexed issue of union rights in war time. This was a political mine23 Bullock, Ernest Bevin ii. 35, 213. However, as Alec Cairncross wisely cautions, ‘when it is said that resources were allocated through manpower planning this is not entirely accurate . . . what was really being decided was the size of, say, the aircraft programme, not how many men should be herded into aircraft manufacture. Manpower “planning”, in other words, rested on the power of government to influence final demand (as, for example, the demand for aircraft), and hence the demand for labour, with only limited pressure on labour to comply’: Years of recovery, 311–12. 24 Transcript of broadcast by Bevin, 23 June 1945, Bevin papers, Churchill College, Cambridge, 2/14. Bevin thus expected the reforms he had initiated to last beyond the war period. Asked in 1943 how long he expected to be minister of labour, he said Gladstone’s methods had dominated Treasury thought and practice for forty years, ‘so that Gladstone was, in spirit, Chancellor for a long time. He, Bevin, believed some of his achievements would affect the Ministry of Labour for a long time too. In particular he thought his idea of an annual “human budget” would live and be to the nation’s great advantage’: Marguerite Dupree (ed.), Lancashire and Whitehall: The diary of Sir Raymond Streat II: 1939–57, Manchester 1987, 239, entry for 4–6 Jan. 1943. 25 Cairncross, Years of recovery, 385.

120

SHALL THE SPELL BE BROKEN?

field in its own right, and it also touched upon the key question of liberty in a planned economy. Some socialists, notably Evan Durbin, had long recognised that free collective bargaining conflicted with the state’s ability to plan; meaningful planning would depend on the ability to control all aspects of production, including the price of labour.26 Naturally, in peace-time, any such sentiments were anathema to the unions, and found no expression in the Labour Party’s programmes. Under the war-time spell of national unity, however, the TUC was induced to surrender many of the cherished rights of organised labour, on the condition that these would be restored when hostilities were over. Specifically, as well as accepting the ‘dilution’ of skilled labour, the unions agreed in 1940 to compulsory, binding arbitration in cases where regular negotiation failed. This in effect made strikes illegal. By 1942, moreover, Bevin was convinced that union leaders would be willing to accept a continuation of this system once the war was over: ‘I regard this as vital. I would not ask them to commit themselves for longer than 6 years.’27 At first there was opposition to this, Walter Citrine arguing in November 1943 that ‘The people must be educated up to their own responsibility under free arbitration’.28 Nonetheless, Bevin’s hope was eventually fulfilled. Order 1305, which made resort to the national arbitration tribunal compulsory, was to remain in force until 1951; for after the USA cut off lend-lease aid after VJ day, the general council was persuaded to agree to the order’s continuation. This was not an entirely selfless act; the arbitration tribunal was useful to the unions because it generally led to a pay increase, however small.29 Nor did the order in fact put an end to all industrial strife.30 However, important elements in the TUC leadership increasingly accepted that the advent of a new economic system would bring organised labour new responsibilities. In January 1944, Citrine, qualifying his earlier opposition, had argued: he was not in favour of compulsory arbitration, but the Trade Union Movement would be in a difficult position if it insisted on a system of price control and at the same time asserted its right to refuse to submit to arbitration of any kind. It was clear that in order to have full employment a price must be paid and someone would have to sacrifice something.31

Nevertheless, at the war’s close, the unions remained strongly committed to the principle of free collective bargaining. Moreover, as Bevin said, even

26 27

See E. F. M. Durbin, Problems of economic planning, 57. Ernest Bevin, ‘Note from the minister to the secretary: post war policy on the industrial side’, 3 Oct. 1942, Bevin papers 2/3. 28 This remark was made during a TUC meeting with Beveridge, which took place in the course of the latter’s enquiry into full employment: ‘Meeting with members of the economic committee of the trades union congress’, 10 Nov. 1943, Beveridge papers IXa/15 (item 174). 29 Pelling, British trade unionism, 224, 245. 30 Fielding, Thompson and Tiratsoo, England arise!, 31. 31 TUC general council minutes, 26 Jan. 1944.

121

THE LABOUR PARTY AND THE PLANNED ECONOMY

order 1305 was in practice ‘virtually a collective agreement, given the clothing of law’.32 Nor did arbitration give the government a general ability to regulate wages. Thus, even at the war-time peak of restrictions on union rights, the state had no statutory powers which would enable it to determine wages rationally in accordance with an economic plan. It was reasonable to hope that, with the good-will of the unions, certain extant powers could be retained after the war; it was too much to expect they could be extended. This fact necessarily put limits on the scope of any plan that a post-war government might seek to implement; indeed, in the case of a Labour government, which was likely to share many of the unions’ cherished beliefs, many of these limits were likely to be self-imposed.

Cripps and controls This problem of planning without resort to compulsion would be a key dilemma for the Attlee government. The way in which it was dealt with owed much to the war-time experience of another important figure. This was Stafford Cripps, whose experience as minister of aircraft production in 1942–5 had a vital impact on his vision of economic planning. This in turn was of crucial importance when he served successively at the Board of Trade, as minister of economic affairs, and finally as chancellor, in the years 1945–50. Cripps had been expelled from the Labour Party 1939 Blackpool conference for his continued advocacy of a popular front, in defiance of the NEC. Appointed by Churchill’s government as ambassador to the Soviet Union, upon his return early in 1942 he received enormous public credit for his association with the fearless Russian ally; but his potential as a serious rival to the prime minister in a year of military disasters slowly ebbed away once he was appointed to the war cabinet. After the victory at El Alamein in the autumn, Churchill was able to demote him. But, at the Ministry of Aircraft Production (MAP), where he remained for the rest of the war, the technical task that he faced suited him much better than his previous attempts to turn himself into a political colossus. Initially, his officials complained of ‘his mechanistic outlook on planning – “there’s no limit in theory, is there,” he asked, “to central planning?” ’ Although he was at first tempted to involve himself in every detail of the running of the department, his civil servants took it upon themselves to educate him in ‘the function of management, the part played by judgement in planning’.33 His role as minister, as they saw it, was to approve broad strategic decisions, act as a spokesman to the public, and secure the co-operation of the

32 33

Pelling, British trade unionism, 216. Alec Cairncross diary, 10 Dec. 1942, copy in Cripps papers.

122

SHALL THE SPELL BE BROKEN?

workforce and management in the thousands of firms with which the ministry had to deal.34 He fulfilled these tasks successfully, making an exhausting round of morale-boosting visits to factories, Lady Cripps in tow. Moreover, his enthusiasm for the system of joint production committees of workers and management formed a crucial part of the social and economic vision he took back with him to the Labour Party when he rejoined in 1945.35 This experiment in industrial democracy contributed to his belief in a form of democratic planning which depended for its success on the voluntary working-together of all classes. (This was in line with the longstanding Labour view that a new social spirit would be necessary under socialism, given that material incentives would be greatly reduced.)36 This philosophy of class co-operation in turn relied on the social and moral spirit prevalent during the war being continued into time of peace. Relapse from the idealism of common effort would lead to a renewal of the struggle for narrow sectional advantage. The spell would be broken.37 Thus, the complexities of the task he faced led him to develop a planning ideology far removed from the class struggle policies he had advocated in his Socialist League days. He nonetheless continued to emphasise that ‘We must not be deluded by the professions of those who have much to lose by way of possessions or privilege’. Apparent agreement in the hour of peril did not necessarily imply that the same agreement would continue when the peril had passed. Still, ‘The time to get agreement on post-war plans is during the war when the atmosphere of co-operation is still strong’.38 Cripps, therefore, was in the process of becoming a consensus politician. This did not mean that he was afraid of public ownership – within weeks of taking up his post at MAP he had summarily taken over Short Brothers because its management was failing – but by the end of the war his belief in wholesale nationalisation had diminished. Private enterprise had shown its willingness and ability to follow state instructions: ‘Oh no, my dear Richard’, Cripps told Sir Richard Acland, ‘we have learned in the war that we CAN control industry’.39 Yet he did not underestimate the difficulties involved. As he told the 1945 Labour Party conference:

34 Idem, ‘How British aircraft production was planned in the Second World War’, C20BH ii (1991), 344–59. 35 Simon Burgess, Stafford Cripps: a political life, London 1999, 186. 36 See, for example, E. F. M. Durbin, ‘Memorandum on the principles of socialist planning’, Jan. 1934, Fabian Society papers J25/3; G. D. H. Cole, The intelligent man’s guide through world chaos, London 1932, 587; Attlee, The Labour Party in perspective, 149. 37 See Stafford Cripps, Shall the spell be broken? Rectorial address to the University of Aberdeen delivered on 6 February 1943, copy in Cripps papers. 38 Ibid. 4–6. 39 Acland diary, entry for 12 Oct. 1944, cited in Paul Addison, The road to 1945: British politics and the Second World War, 2nd edn, London 1994, 262.

123

THE LABOUR PARTY AND THE PLANNED ECONOMY

Those of us who have been concerned with the planning of war industries . . . realise that when we come to the far broader national plan that will be required, with its different degrees of nationalisation and control in different industries, we shall be faced with a very difficult technical task, a task made the more difficult because no due preparations have been made for its accomplishment. We must not lead the people to believe that this is some easy Utopia into which we are inviting them to step.40

It would be wrong to claim that Cripps’s ideas were always lucid. Still, of Labour’s post-war ‘big five’, his view of planning was the most articulate and distinctive, and owed much to his war-time experience. But it is difficult to avoid the conclusion that this growing preference for ‘different degrees of nationalisation and control’ was in many ways made easier by his independence from the Labour Party for most of the war period. His views were certainly out of kilter with Labour’s left; Bevan, who had gradually taken on Cripps’s former role of enfant terrible, believed that ‘In peace-time, economic planning by means of state control of private enterprise is a delusion’.41 But Cripps, in his years outside the Labour Party, was still thought of as a left-wing hero and as the champion of Russia. By the time he rejoined, he had in many respects transformed himself from a firebrand to a latter-day gradualist – a fact that suspicious party colleagues were powerless to alter.42 Russia revisited Thus, just as Bevin’s key decisions created a practical legacy for the Attlee government, Cripps’s intellectual evolution would also in due course have powerful results. The extension of war-time controls over finance, labour and industry also did much to influence the Labour Party’s ideology of planning in the shorter run. At a simple level, the fact that the planned war economy operated successfully was seen as a vindication of planning, and socialism, in general.43 Indeed, the war even drew Douglas Jay, who in the 1930s had believed that ‘It would be possible to have a great deal of socialism, and not much planning’, much more firmly into the planners’ fold.44 In a lecture 40 41 42 43

LPACR 1945, London 1945, 95. Tribune, 29 Dec. 1944. Burgess, Stafford Cripps, 195. See, for example, the presidential address given by Dame Anne Loughlin (of the national union of tailors and garment workers) to the 1943 trades union congress: TUC report 1943, London 1943, 10. 44 Jay, ‘Plans and priorities’, 9–10. The alteration in his views can be seen in the important changes of emphasis that he made in the second (1947) edition of his book The socialist case, first published ten years earlier. The new version omitted paragraphs which had made important concessions to the point of view of Hayek and Mises. The first edition said that ‘To abandon the price system entirely . . . would certainly produce a worse misdirection of resources than to obey it entirely’. It was therefore right to preserve that system ‘and to

124

SHALL THE SPELL BE BROKEN?

given in November 1947 he explained his change of heart, attributing it to the British experience since 1940. Before the war, he recalled, ‘I doubted the sheer practical ability of central authorities to control big sections of the nation’s economic life. . . . I believe the last seven years have proved that . . . that job can be done after all.’45 Furthermore, just as the success of the British war-time model reinforced planning sentiment, so there came, in due course, a renewed belief in the efficacy of Russian planning. Paradoxically, this was true even though faith in its actual method – the arbitrary budget of production – had all but dissolved as a model for the British economy (as will be seen below). For if the show trials and then the Nazi–Soviet pact had undermined faith in Stalin’s regime in the immediate pre-war years, the USSR’s entry into the war in June 1941 led to redoubled enthusiasm for all things Russian. This surge of emotion spread beyond the left.46 It was not, of course universal on the left; Evan Durbin and the young Tony Crosland were notable sceptics as, much more famously, was George Orwell.47 But the myth was powerful and sustaining.48 The following remark made by G. D. H. Cole in 1942 was typical, in that it linked praise of the bravery of Russia to an implicit call for a new social spirit at home in Britain: A planned economy, planned for social well-being, can evidently make an appeal to all those who work in it which a capitalist society is unable to make . . . . It is as much beyond doubt that the citizens of the Soviet Union have worked better for the knowledge that the instruments of production and the goods made with them are their own, as that the Russian armies have fought

modify it bit by bit in all those ways in which modification is indisputably justifiable’. The second edition, by contrast, said that ‘Only when purely personal preferences between inessentials are involved should we be content with the haphazard price scramble . . . over a wide field far better results – not merely for production but for general consumption – can be achieved by . . . planning than by laissez-faire’: The socialist case, 297–303; 2nd edn, 242–5. For a fuller consideration of Jay’s change in attitude see Richard Toye, ‘ “The gentleman in Whitehall” reconsidered: The evolution of Douglas Jay’s views on planning and consumer choice, 1937–1947’, Labour History Review lxvii (2002), 187–204. 45 Jay, ‘Plans and priorities’, 9–10. 46 See, for example, the remark of Captain R. A. Pilkington, the Conservative MP for Widnes, that ‘Russia’s resistance had shown her to possess a way of life that must play a big part in the post-war settlement’: Jefferys, Labour and the wartime coalition, 22, entry for 12 Nov. 1941. 47 ‘Durbin thinks that our post-war troubles will be with the Russians’, Dalton recorded. ‘They will want, soon if not at once, to expand, like every other Great and Growing Power. And then they will begin to threaten our interests. He doubts whether talking to them will be any easier than talking to other lunatics, such as Hitler (I think, and tell him, that this all seems to me too gloomy)’: Pimlott, Dalton war diary, 626, entry for 24 Aug. 1943. For Crosland’s views see Kevin Jefferys, Anthony Crosland, London 1999, 15. 48 See Adam Piette, Imagination at war: British fiction and poetry, 1939–1945, London 1995, 145–8.

125

THE LABOUR PARTY AND THE PLANNED ECONOMY

infinitely better in this war than in the last because on this occasion they have felt themselves to be defending their very own country.49

In turn such feelings strengthened demands for a planned economy, for it was believed, as Dalton told the 1945 party conference, that the Russians had ‘made the best job of central economic planning in a great community that has ever been made’.50 In 1946, Douglas Jay used the Soviet example by way of specific refutation of Hayek’s pre-war anti-planning critique: ‘After the experience of 1941–5, it is less easy to argue that Russian economic life is not “rationally” or “successfully” organized!’51 The overall impact of Russian war successes during this period was to heighten the prestige of planning in general but not, however, to influence the putative British model in any particular direction. Thus Attlee could declare, also in 1946, that ‘in matters of economic planning we agree with Soviet Russia’, even while his government pursued policies which had very little in common with Soviet planning at all.52 Thus, during war time, there was a strong tendency to articulate a fairly low-key vision of planning, even, sometimes, whilst Soviet methods were simultaneously held up for approval. In 1942 the TUC’s economic committee agreed ‘that it was necessary to regard “planning” as a function to be exercised continuously and not as a matter of merely producing, in advance of their application, one or a number of specific plans’.53 Tawney, in 1944, talked of planning as being simply ‘the transference of responsibility for the higher ranges of economic strategy from profit-making entrepreneurs to a national authority’.54 James Meade – who did not approve of Russian methods – was becoming increasingly convinced of the need for plans to be flexible and he expounded on the possibility of a ‘middle way’ between complete socialist planning and liberal laissez-faire.55 Dalton too emphasised flexibility but, ironically, took the Soviet Union as his model: ‘you can’t just “make a long-term plan” and then sit back and let the plan take charge, but . . . as the Russians have shown us, there must be constant re-adjustment of the plan in the light of ever changing conditions’.56 The arbitrary nature of detailed production budgets was thus increasingly recognised. Greater, if rarely wholehearted, emphasis was now placed on the importance of some form of consumer sovereignty. Furthermore, there was also a growing belief in a mixed economy, which would contain a substantial 49 50 51

G. D. H. Cole, Great Britain in the post-war world, London 1942, 118–19. LPACR 1945, 103. Jay, The socialist case, 2nd edn, 244. Although this revised edition was published in 1947, it had been completed by November of the previous year. 52 HC Debs, 430, 18 Nov. 1946, col. 580. 53 TUC economic committee minutes 14 Jan. 1942, TUC archive, MSS 292 560.1/3. 54 Tawney, The attack, 95. 55 Howson and Moggridge, Meade papers, iv. 75, 79, entries for 6, 13 May 1945. 56 Pimlott, Dalton war diary, 830, entry for 14 Feb. 1945.

126

SHALL THE SPELL BE BROKEN?

measure of private enterprise, at least in the medium term. The moderate, almost minimalist, conceptions of planning which now prevailed among Labour thinkers therefore represented a departure from the harshly dirigiste ideas of the thirties. (On the other hand, the war convinced some thinkers, like Jay, of the need for a more dirigiste approach, although only, perhaps, to the point where he converged with what was now a more moderate mainstream.)57 But was there now also greater moderation in the crucial sphere of public ownership?

Nationalisation versus controls Brooke has claimed that the war weakened the case within the Labour Party for unlimited nationalisation as the basis of a socialist economy. As he puts it: ‘The war demonstrated that efficiency could be achieved by means which fell short of outright ownership. The road to the “Socialist Commonwealth” became paved not with nationalized industries, but with manpower budgets, building licences, and physical controls’.58 By contrast, Ian Taylor claims that Labour failed to develop detailed proposals for industrial control, and that the party’s nationalisation policies hardly changed.59 Both are powerful arguments but they can, to an extent, be reconciled. Brooke is correct to claim that war-time developments undermined the theoretical justification for socialisation; but Taylor is also right in that this process in practice had little impact on Labour’s official programme. Moreover, there was also a countervailing tendency whereby the perceived growth of monopoly during the war made nationalisation of the industry appear all the more imperative. Nor was this strengthened demand for public ownership solely confined to the Labour left, as Brooke’s narrative would appear to suggest. In fact, the commitment to nationalisation received important boosts from both Bevin and Dalton, neither of them notorious as extremists. Therefore, the left-wing backlash which in 1944 saw the NEC defeated on nationalisation policy at the party conference was for the most part an over-reaction: there was at this time no real threat that the party leadership would abandon its commitment to large-scale public ownership. Nevertheless, there is compelling evidence to support Brooke’s thesis, not all of which he himself cites. For example, in March 1945 G. Grant McKenzie (of the party’s research department) wrote that ‘it is no earthly good talking about the nationalisation of production, distribution and exchange – it does not mean a damned thing anyway, and the electorate knows it’. In the pre-war era this would have been tantamount to heresy, and 57 58 59

Jay, ‘Plans and priorities’, 9–26. Brooke, Labour’s war, 231, 239. Ian Taylor, ‘Labour and the impact of war 1939–45’, in Nick Tiratsoo (ed.), The Attlee years, London 1991, 7–28 at pp. 23–4.

127

THE LABOUR PARTY AND THE PLANNED ECONOMY

even for the closing stages of the war was exceptionally blunt. Nevertheless, even McKenzie favoured nationalisation of key industries; his other ideas included strict regulation of trusts and cartels, control of capital issues and control of location of industry ‘much beyond present proposals’.60 Equally, an earlier policy document on the steel industry, which Brooke does quote, goes a long way to support his (i.e. Brooke’s) argument. Prepared by the party’s social and economic reconstruction subcommittee, it read: We have always believed that a socialised [steel] industry was the object to be obtained, but from what we have seen of the operation of the Iron and Steel Control . . . we are doubtful if any form of organisation, even including nationalisation, could have rendered as efficient a service in the war time emergency as has been rendered by the iron and steel industry in its present form of organisation.61

Yet not everyone was so sanguine. ‘The [steel] industry emerged from the last war (apparently) over-equipped, unbalanced and badly organised’, Attlee was told by William Piercy, one of his advisers, in 1944: ‘It ran into economic blizzards and met them badly. Is it certain that there will be no repetition?’62 Concerns were heightened when the Iron and Steel Federation (the organisation of the industry’s employers) produced its own plan for the future of the industry. The employers in effect wanted cartelised international trade together with a great deal of protection; there were also, as Meade put it, ‘horrifying suggestions for completing [a] system of monopolistic organisation and price control at home’.63 Such indications that the employers intended to return to pre-war restrictive practices widely perceived as anti-social were bound to strengthen the case for public ownership of steel.64 This, indeed, was a clear example of war-time developments provoking concerns about the growth of capitalist self-government of industry under the guise of government control. War-time schemes of industrial concentration were thought to increase the tendency towards private monopoly.65 Moreover, suspicions 60

G. Grant McKenzie, ‘Labour and the general election’, 27 Mar. 1945, sent to Bevin on 9 Apr. 1945, Bevin papers 2/14. 61 Social and economic reconstruction subcommittee, ‘Steel control’, RDR 111, July 1942, LPA; Brooke, Labour’s war, 241. 62 Piercy to Attlee , ‘The iron and steel industry’, 30 June 1944, Piercy papers 8/31. 63 Howson and Moggridge, Meade papers, iv. 32, entry for 20 Jan. 1945. 64 Durbin, however, told Attlee that the report ‘makes it plain as a pikestaff that the only alternative to a continuation of the present Control is an immediate reversion, after the war, to a strong and determined [private] monopoly in this vital industry’, not mentioning the possibility of nationalisation. But it is possible that he was assuming a Conservative victory at a post-war election: the Tories would obviously not have nationalised the industry, but they might conceivably have continued the control, at least for a transitional period: Durbin to Attlee, ‘Report by the Iron and Steel Federation on post-war reconstruction’, 18 Oct. 1944, Piercy papers 8/31. 65 See Thomas Balogh, ‘Industrial conscription and democracy’, FQ xxix (spring 1941), 4–14.

128

SHALL THE SPELL BE BROKEN?

about the true nature of government intervention were provoked by the fact that those who operated particular controls were often businessmen who had worked in the same branch of trade before the war.66 John Parker thus wrote in 1941 that ‘wherever wartime needs have made radical reorganisation of a particular trade necessary [the Labour Party] should be advocating full national ownership accompanied by drastic reorganisation’.67 Such beliefs also had repercussions for policy for the post-war era; public ownership continued as a central plank of policy. The fact that controls, short of nationalisation, had frequently worked well in war time was often ultimately ignored. Most notably, this was true in the case of the steel industry. Dalton, who took care in cabinet committees to emphasise the iron and steel control’s success, was in fact the person who in 1945 took the greatest initiative to ensure that nationalisation of the industry was included in Labour’s manifesto.68 As he recounted it in his autobiography, on April 11th we had a row. Morrison proposed, supported by Greenwood, to back down on iron and steel, and leave it out of the Policy Declaration. He had been lunching, he said, with some friends of ours in the City, who had told him that it was too ambitious to talk of any Public Board ‘owning’ this complicated and troublesome industry. I strongly resisted this and won. I said that, if iron and steel was dropped, I should refuse to speak in support of the Policy Declaration at Conference, and then Morrison and Greenwood could explain to the delegates why this item, which had been enthusiastically adopted by Conference only last December, had now vanished.69

The argument about the future of the industry, of course, persisted throughout the lifetime of the Labour government. That ultimately it was resolved in favour of nationalisation cannot disguise the fact that there were serious divisions over the desirable extent of public ownership. Yet this was not a simple left–right divide: Dalton later found support for his position from Bevan and, he claimed, Bevin.70 Moreover, it seems likely that Morrison’s position in 1945 was dictated as much by political caution as by technical considerations. Circulating an early draft of the policy declaration, from which public 66

For example, ‘Who knows exactly where the Iron and Steel Federation ends and the Steel Control begins; and who can say, in the case of petroleum products, or aluminium, or other non-ferrous metals, what are the real relations between the big firms and the controls which are largely officered by “dollar a year men” expecting to return to their old employment?’: G. D. H. Cole, ‘From war to peace in industry’, PQ xvi (1945), 205–13 at p. 208. 67 Parker, ‘After a year of coalition’. 68 Pimlott, Dalton war diary, 794, entry for 9 Oct. 1944. 69 Dalton, The fateful years, 432–3. 70 In 1952 Dalton told Francis Williams that ‘In 1945–51 [Bevin] and I . . . both wanted to nationalize Iron and Steel. The idea that Nye made the running on this inside the Cabinet is nonsense’. But in fact, during crucial cabinet discussions in 1947 Bevan made his views explicit, whilst Bevin was far more cautious and equivocal: Dalton to Williams, 4 Nov. 1952, Francis Williams papers, Churchill College, Cambridge, 8/5; Kenneth O. Morgan, Labour in power, 1945–51, Oxford 1984, 116–17.

129

THE LABOUR PARTY AND THE PLANNED ECONOMY

ownership of steel was omitted, he had urged upon his colleagues ‘the undesirability of over-loading a ship which has to survive the storms of electoral controversy and be readily understood by the many millions of our countrymen and women less accustomed to political and economic technicalities than we are’.71 In this vital instance, therefore, the example set by war-time control of the industry in question, does not appear to have been the defining factor in determining Labour’s policy for that industry in the post-war era. Rather, political considerations were at the forefront of a discussion which ultimately hinged both on the likely future attitude of the steel employers and on the virtues or otherwise of adopting electorally sensitive policies in order to stay in line with conference decisions. Brooke is nevertheless correct to argue that controls short of public ownership became a much more significant feature of Labour’s thought as a result of the war. Yet the interest in controls was not wholly new; as Brooke indeed acknowledges, many government controls in fact bore ‘striking similarity’ to socialist proposals of the 1930s.72 Equally, Dalton’s remarks about a ‘dictatorship of consumption’ clearly envisaged physical controls. Furthermore, the eagerness and speed with which, after the outbreak of war, Labour politicians called for controls, and subsequent to their implementation called for them to be retained post-war, suggests that the preference for controls was not induced entirely by the experience of seeing them work in practice. More strikingly, as early as 1931 Colin Clark had gone so far as to reject ‘the outworn Nationalising ideas’, and to claim that by comprehensive control of investment the government could control industry indirectly: ‘Private enterprise, left in nominal command, would find . . . that the State could influence policy, and this influence finally meant control over conditions, profits, prices, and the amount produced’, an idea which admittedly did not gain much purchase at the time.73 Yet the following year, the TUC had acknowledged that there were some industries not immediately ripe for socialisation, but which required some measure of public regulation.74 These arguments should not be pressed too far. Public control of private industry was not a very popular pre-war theme. Where discussed at all, it tended to be thought of as a step towards complete nationalisation, not as a long-term alternative to it. Brooke is therefore right that the most distinctive contribution the war made to Labour’s economic thinking was the large-scale development of the belief that significant parts of industry could be regulated by the state even whilst remaining in private hands. As John Brown of the iron and steel union put it in April 1944, ‘Ownership was not nearly so 71

Herbert Morrison, ‘First draft declaration of policy for the 1945 annual conference: memorandum by the chairman’, RDR 282, 20 Feb. 1945, LPA. 72 Brooke, Labour’s war, 246. 73 SSIP, ‘Report on delegate conferences on the crisis’, 1931, Fabian Society papers J2/3. See also Colin Clark, National planning, London 1931, 4. 74 TUC report 1932, 207.

130

SHALL THE SPELL BE BROKEN?

important as control and the Movement should proceed to get the largest possible measure of control in industry’.75 Therefore public ownership became, in Brooke’s words, ‘simply one of several forms of public control . . . the highest form of physical planning, not an end in itself’.76 However, this did not mean much in practice; as Taylor points out, there was little discussion of how control of private industry might operate.77 As Citrine stated in a discussion on post-war reconstruction in May 1944, ‘there were some industries that were not ripe for nationalisation and consequently the TUC and the Labour Party had not considered those industries’.78 Thus, Labour’s commitment to planning remained much better articulated for the infrastructure industries with long-standing problems of natural monopoly – for which public ownership was an obvious remedy – than for the manufacturing sector, populated as it was both by oligopolistic industries such as steel and by highly atomistic industries like cotton.79 Moreover, as will be seen in the next section, attempts to develop policies for the public control of industry short of ownership could run into political difficulty within the Labour Party, even when sponsored from on high.

Half-way house When, in 1942, Attlee was made deputy prime minister, he had appointed Evan Durbin and William Piercy to assist him. In November 1944 they supplied him with a memorandum called ‘The immediate future of financial and industrial planning’. Noting that the relative technical and economic inefficiency of a number of basic British industries threatened the country’s future prosperity, they argued that ‘there would be very wide public support for a determined attempt to modernize the equipment and practice of some of the most important of these industries’. But time was pressing: the reorganisation of any major industry would take two to four years, and by that time the post-war export boom would be over, and industrial efficiency and competitiveness would count for a great deal. At the same time, the coalition was 75 76 77 78

TUC general council minutes, 5 Apr. 1944, TUC archive. Brooke, Labour’s war, 242–4. Taylor, ‘Labour and the impact of war’, 23. Subsequently, however, the TUC’s Interim report on post-war reconstruction did suggest a system of industrial boards to help plan private industry in order to secure maximum effciency. In some ways similar to the system of public boards proposed slightly later by Durbin and Piercy, these would be composed of representatives of workers and employers. They ‘would be recognised as the bodies responsible for the internal regulation of the industry and as the appropriate channel for interpreting the industry’s requirements to the Government and applying the Government’s requirements to the industry’. But this was laid down as a broad general principle: the cases of particular industries were not considered: TUC general council minutes, 5 Apr. 1944; TUC report 1944, London 1944, 405–8. 79 Millward, ‘The 1940s nationalizations in Britain’, 225–6.

131

THE LABOUR PARTY AND THE PLANNED ECONOMY

likely to stay in office ‘for the better part of another year’. It was therefore vital to find workable compromise proposals that could be accepted by the government as a whole, so that these critical twelve months should not be lost. Accordingly, Durbin and Piercy recommended that industrial boards, with directors appointed by the government, should be set up in a limited number of industries (coal, cotton, and iron and steel in the first instance). These boards would have a range of powers. They could call for information on technical and financial matters. They could provide cheap finance for approved schemes of re-equipment. They could acquire, upon payment of reasonable compensation, ‘any firm that could be, but was not being, run efficiently’. Finally, the boards could be given powers to run pilot enterprises of their own, and to finance the building up of buffer stocks of commodities essential for the industries in question. To fund the scheme, a new financial corporation would be set up, with the duty of finding the money for reequipment required by the industrial boards at low rates of interest, and by the use of various forms of government guarantees. It was acknowledged that The nomination of Directors or Boards possessing these powers is, of course, a compromise policy. None of the industries would be socialised or owned by the State. Private enterprise and management would remain the normal method of administration. Nevertheless, such a ‘half-way house’ would possess a great number of advantages. Industries so organised could be more easily nationalised when a Labour Government is formed – and in the meantime the deadlock in the present Government might be broken, and the vital task of re-equipment begun. That is in the interest of the whole nation.80

Attlee was likely to welcome the proposals. Unlike left-wingers such as Laski, he believed that ‘while we have an all-Party Government, planning for the interim period must be based on compromise’.81 He also believed that such compromise was feasible; he had previously told Churchill that he himself had detected ‘a remarkable consensus of opinion on many points between people of different economic and social backgrounds’.82 Hoping to exploit this climate, he passed Durbin and Piercy’s paper on to Bevin, suggesting that it should be discussed by the chief Labour ministers at the same time as a paper on industrial policy which Morrison wanted to submit to the war cabinet. In response, Bevin sent Attlee a long letter which rejected the proposals; he also dismissed Morrison’s paper (which had called for ‘a great national plan of capital re-equipment and technical reorganization’).83 His first objec80

E. F. M. Durbin and William Piercy to Attlee, ‘The immediate future of financial and industrial planning’, 10 Nov. 1944, Bevin papers II 4/12. 81 Attlee to J. S. Middleton, 1 May 1944, in NEC minutes, LPA. 82 Attlee to Churchill, n.d., 1942–3, Attlee papers, Churchill College, Cambridge, 2/2. 83 Donoughue and Jones, Herbert Morrison, 330; Bullock, Ernest Bevin, ii. 337.

132

SHALL THE SPELL BE BROKEN?

tion was that to put the two papers to the cabinet when an election was pending could be no more than a gesture: ‘If, as a matter of tactics it is desired to put forward these views in order to have them aired in a debate of the type we usually have in the Cabinet on these matters, with the ultimate view of showing what disagreement there is, I can understand that move, but I do not recommend it’. Secondly, he felt that accepting the various proposals would involve going back on decisions already taken by the cabinet, notably on the cotton industry; it would put Labour ministers in an awkward position if they appeared to do this. Moreover, if we attempt to set up the forms of organisation suggested [in the Durbin–Piercy paper] . . . are we not thereby prejudicing the whole socialisation of industry? I myself am being forced to the conclusion that a country run by a series of London Transport Boards would be almost intolerable.

This was a dig at Morrison who, during the second Labour government, had pioneered the concept of the public corporation in his London passenger transport bill. Bevin opined: Boards like these would be unrepresentative, unresponsive and unlikely to pay much attention to the public interest. In my view the only real way to bring these big basic industries to serve the public is not to apologise for the State but to come right out for State Ownership, but this is not the time and this is not the Cabinet to take that course. . . . to attempt to do anything in this Cabinet and to enter into further compromises pending an election will, it seems to me, be a serious handicap to our people in putting their point of view when the time comes.84

Nothing more came of the proposals; at a meeting to discuss them, Attlee said little, and Morrison was also discouraged by Bevin and Dalton from putting his own paper forward.85 Durbin and Piercy’s ideas went no further, despite being sponsored in the first instance by the leader of the Labour Party. Clearly, the issues of political tactics raised by Bevin were significant for this outcome. But ultimately Bevin, at this time far better respected in the Labour movement than Attlee, was able to crush plans that departed from Labour’s orthodoxy of nationalisation – even when those plans were partly intended to ease the transition to public ownership in the longer run. Unlike Cripps, whose temporary state of independence had given him the scope to mature politically, Attlee had his forays into new ideological territory circumscribed by party sensitivities.

84

Bevin to Attlee, 22 Nov. 1944, Bevin papers II 4/12. See also Bullock, Ernest Bevin, ii. 337–9. 85 Pimlott, Dalton war diary, 809, entry for 22 Nov. 1944; Donoughue and Jones, Herbert Morrison, 330.

133

THE LABOUR PARTY AND THE PLANNED ECONOMY

Re-planning Ellen’s hat These sensitivities were particularly acute, of course, on the left of the party, where the argument about planning, ownership and controls was seen simply. At the 1942 party conference, Jean Mann, a future MP, put it in particularly vivid terms: ‘Personally, I’d like to re-plan Ellen [Wilkinson]’s hat, but as Ellen owns it and I don’t, there’s not much chance of my doing so.’86 In other words, planning of industry was impossible without state ownership. It was at the 1944 conference, however, that the arguments were most fully rehearsed. The occasion for this was a debate on an NEC resolution on economic controls, public ownership and full employment. The resolution read, in part: The Conference reaffirms its conviction that Full Employment and a high standard of living . . . can only be secured within a planned economy, through the maintenance and adaptation of appropriate economic controls after the war, and above all by the transfer to the State of the power to direct the policy of our main industries, services and financial institutions.87

But the resolution made no explicit mention of public ownership, raising doubts in the minds of leftwingers about whether the party leaders had the political will to radically reconstruct the national economy.88 Accordingly, the Reading Labour Party put down a motion calling for public ownership of the land, large-scale building, heavy industry and all forms of banking, transport, fuel and power. Suitably composited with other similar resolutions, it was moved by Ian Mikardo, Reading’s future MP. Mikardo declared that the rank and file would be ‘appalled and disappointed’ by the ‘un-socialist character’ of the NEC’s motion. Ignoring the arguments put forward from the platform by Emanuel Shinwell and Philip Noel-Baker, the conference overwhelmingly supported Mikardo’s line: the Reading resolution was passed on a show of hands.89 Hennessy has argued that, by painting nationalisation boldly into the post-war picture, this conference decision ‘changed the face of Britain’s political economy’.90 This claim is out of all proportion to the facts. Clearly, the fact that the executive chose not to mention public ownership expressly in this one motion is of some significance. Yet Shinwell, proposing the NEC’s resolution, went out of his way to stress that ‘The Socialist policy of the Labour Party remains unchanged . . . We stand, as always, for . . . collective organisation and ownership of indispensable national industries and services.’91 Noel-Baker, winding the debate up, said that ‘of course, we are in 86 87 88 89 90 91

Cited in Tribune, 29 May 1942. LPACR 1944, 161. Ian Mikardo, Back-bencher, London 1988, 74. LPACR 1944, 163–8. Peter Hennessy, Never again: Britain, 1945–51, London 1992, 80. LPACR 1944, 161.

134

SHALL THE SPELL BE BROKEN?

general agreement with [the Reading resolution]’ but argued that in certain particulars it conflicted with earlier conference decisions.92 Of course, these arguments may have been disingenuous; the delegates obviously felt so. But it was perfectly true, as the executive pointed out, that in other war-time policy statements state ownership was given its customary high priority. For example, the document Full employment and financial policy, passed at the very same conference, directly equated socialism with public ownership, and argued: ‘Every extension of socialism makes it easier to plan employment as a whole.’93 It is possible, then, to doubt both the extent to which Mikardo’s criticisms were justified, and the degree, if any, to which the party leadership was really backing down on public ownership at this time. Furthermore, as has already been seen, Bevin at this time wanted ‘to come right out for State Ownership’; he had the power to prevent anything he perceived as weakening this line. Moreover, Dalton had recently drafted a short-term programme for the party which called for the nationalisation of coal, gas, electricity, iron and steel, and transport.94 Attlee, in spite of his brief flirtation with the ideas of Durbin and Piercy, which were at any rate intended to make the transition to public ownership easier, subsequently remained a firm advocate of nationalisation. In retirement he justified the policy to Francis Williams: ‘Fundamental nationalisation had got to go ahead because it fell in with the planning, the essential planning of the country.’95 Morrison was the only real waverer. He told Mikardo after the crucial debate: ‘You realise, don’t you, that you’ve lost us the general election’.96 This remark showed again, however, that Morrison’s doubts about public ownership were more the product of his innate political caution than of any deeply thought-out economic reasoning; and the draft electoral programme he shortly afterward submitted to the policy committee nevertheless called for the nationalisation of electricity, gas, coal, water and inland transport, baulking only at iron and steel.97 Far from altering the face of Britain’s political economy, then, the immediate repercussions of the 1944 debate were limited. Certainly, the conference decision strengthened Dalton’s hand when arguing with Morrison for the inclusion of iron and steel in the list of industries to be taken under public ownership. But with this exception, the list of industries to be nationalised in the 1945 manifesto was practically identical to that in the Immediate programme of 1937. This strong element of continuity undermines Hennessy’s

92 93 94 95

Ibid. 167. Labour Party, Full employment and financial policy, 8. ‘A short-term programme’, RDR 271, Sept. 1944, LPA; Brooke, Labour’s war, 263. Francis Williams, A prime minister remembers: the war and post-war memoirs of Rt. Hon Earl Attlee, London 1961, 88. 96 Mikardo, Back-bencher, 77. 97 ‘First draft declaration of policy for the 1945 annual conference’, Feb. 1945, RDR 282, LPA.

135

THE LABOUR PARTY AND THE PLANNED ECONOMY

view that the 1944 decision represented a radical departure in British politics. Brooke may nonetheless be correct to argue that differences of opinion over public ownership had by this time opened a gulf within the party.98 It might, however, be more accurate to say that although these differences threatened serious conflict in the future, the consequences for the immediate post-1945 period were negligible. There appears to have been basic accord on a limited programme of nationalisation – the question of iron and steel being the exception – of the kind that could be implemented within a single parliament. The real question was what a socialist government, having completed such a programme, should do next. To the extent that the war period saw divergence within the Labour Party on public ownership issues, then, the consequences were not fully played out until after Attlee had completed his first term as prime minister. In spite of the importance of these questions for the future, therefore, in 1945 the nationalisation of a significant part of industry was still seen throughout the Labour Party as the fundamental building block of a socialist planned economy.

Freedom under planning In the final years of the war, the party’s thinkers were not only interested in questions such as nationalisation versus controls as methods of planning. They were also seeking an intellectual resolution to the broader dilemma with which Bevin and Cripps had, in their different ways, been wrestling with for some time: was planning itself compatible with individual freedom? This question was posed most famously, of course, by Hayek. In The road to serfdom (1944) he argued that political and personal freedom was contingent on freedom in economic affairs; there was no third course between an economic system based on free enterprise, and totalitarianism and, therefore, attempts by the state to plan economic life would inexorably lead to the destruction of liberty. Naturally, socialist politicians and intellectuals – as well as some Conservatives – dissented. Dalton later dismissed Hayek’s meisterwerk as ‘a “silly-clever” book which . . . was said to have impressed Queen Mary’.99 Attlee, in reply to Churchill’s 1945 election broadcast – in which the prime minister clumsily recycled the argument of The road to serfdom into the claim that a Labour government would have to fall back on ‘some form of Gestapo’100 – also referred dismissively to the ‘Austrian Professor Friedrich August von Hayek’. Attlee, at least, had in all probability read the book, but there is perhaps an element of truth in Richard Cockett’s charge that he was ‘subtly stressing Hayek’s foreign origins to persuade his listeners that Hayek 98 99 100

Brooke, Labour’s war, 266. Hugh Dalton, High tide and after: memoirs, 1945–1960, London 1962, 102. Ina Zweiniger-Bargielowska, Austerity in Britain: rationing, controls and consumption, 1939–1955, Oxford 2000, 211–13.

136

SHALL THE SPELL BE BROKEN?

was nothing more than a mad foreign professor who did not understand the English way of doing things’.101 Attlee, of course, was speaking under enormous provocation, albeit from Churchill rather than directly from Hayek. There was, however, ample discussion at a more considered level.102 R. H. Tawney claimed, shortly after the book was published, that Hayek had used a narrow and pessimistic conception of planning as his starting point. Given Hayek’s assumptions, then, ‘it is not surprising that a totalitarian monster should emerge as his conclusion, for the author has been at pains to include totalitarianism among his premises’.103 This was a convincing argument. Durbin made a similar point, and also argued that Hayek’s suggested comparisons with Nazi Germany ignored the strength of the British parliamentary tradition.104 For Barbara Wootton, freedom under planning was possible, but would depend on the spread of a social spirit of ‘democratic competence and courage’, which in turn could only be guaranteed by planned social equality. ‘The problem . . . thus resolves itself in the end into a circle that can either be vicious or virtuous’, she wrote: ‘it is the citizens of a wisely planned society who are least likely to fall victim to the dangers of planning; and vice versa.’105 Labour thinkers, moreover, had considered the question of freedom under socialism long before The road to serfdom was published. Philip Snowden, for example, had addressed the issue as early as 1903;106 and Laski had criticised Shaw’s Intelligent woman’s guide to socialism (1928) as insufficiently concerned with individual freedom.107 Indeed, many of the ideas Hayek’s own book contained had themselves been in circulation for some time.108 But his contribution did lead Labour’s intellectuals to delineate more precisely the distinction between the totalitarian planning that they too abhorred, and their own democratic conception. It was Durbin who was most articulate on this point. He was able to point to his own earlier work, and show that he himself had never favoured the definition of planning that Hayek used as his starting point. He too believed, like Hayek, that a plan based on the imposition of a complete budget of production for every commodity, without reference to consumer choice, ‘could only be fettered upon us by dictatorship and

101 Richard Cockett, Thinking the unthinkable: think-tanks and the economic counter-revolution, 1931–1983, London 1994, 92, 94–5. 102 José Harris is wrong to assert that the book ‘met with conspicuously little response’ from planners: ‘Political thought and the state’, in Green and Whiting, The boundaries of the state, 15–28 at p. 23. 103 Tawney, The attack, 94–5. 104 E. F. M. Durbin, Problems of economic planning, 91–106. 105 Barbara Wootton, Freedom under planning, London 1945, 156–7. 106 Snowden argued that collective action could guarantee working-class families sufficient income to take advantage of their individual rights: Laybourn, British social policy, 164. This argument, and variants upon it, were commonplace in the inter-war and war years too. See, for example, Labour Party, The old world and the new society, London 1942, 13. 107 Holroyd, Bernard Shaw, iii. 131. 108 Cockett, Thinking the unthinkable, 79.

137

THE LABOUR PARTY AND THE PLANNED ECONOMY

terror’. But, he continued, ‘Professor Hayek should know that, rightly or wrongly, this is not what most of us now mean by “economic planning”. We use that term to indicate a principle of administration and not an inflexible budget of production.’ There would be no comprehensive plan, then, but merely a change in the direction of economic responsiblity: ‘Instead of looking towards small and unrepresentative minorities of shareholders, the persons or [public] Corporations directing production would look upwards, or towards a Central Economic Authority, for guidance on the larger questions of output, prices and investment.’ It would, moreover, be possible to construct statistical budgets, which would not be sacrosanct or inviolable, which together would give a picture of the productive activity of the country as a whole.109 Yet although the party’s intellectuals were eager to engage with the book and refute it, Attlee and Dalton clearly did not take The road to serfdom very seriously. Nonetheless, they, and other Labour leaders, now took greater care to couch their planning rhetoric in consensual, democratic terms; it was important to them to prove Hayek and his followers wrong.110 This would be particularly so in the dark days of 1947, when some of his predictions for a short while appeared to be coming true. This enhanced commitment to democratic planning had the potential to exacerbate the practical difficulties of the transition from war to peace. These were likely be manifold, for the extant system of controls would not necessarily be wholly appropriate, or in some cases sufficiently extensive, for peacetime planning purposes. As shortages diminished, rationing would become progressively redundant. The limited controls over wage rises were in themselves not enough to implement a planned earnings structure. And the limited controls that there were over the free movement of labour were to be abolished, albeit, as it turned out, only for the time being. The Labour Party’s ability to build a planned economy once it entered government would therefore be heavily circumscribed, given that such forms of compulsion would be denied it. The alternative to coercion – which Labour at any rate abhorred – was to hope that the war-time spirit of social cohesion could be mobilised again during the peace, that individuals could thus be persuaded to act voluntarily in the best interests of the collective, and that, by identifying the well-being of the workers with that of the nation, the spell could be maintained.

109 110

E. F. M. Durbin, Problems of economic planning, 95–8. Francis, Ideas, 42.

138

Planning for Reconstruction

6

Planning for Reconstruction At the end of September 1939, the young James Callaghan, at that time the assistant secretary of the Inland Revenue staff federation, wrote that ‘Socialists must be ready to take advantage of the war and the immediate post-war situation’.1 A few days later, he jotted down his own personal aspirations, calling for colonial freedom, an end to the system of imperial preference, and for fundamental social and economic change at home: ‘Britain to cease enduring two millions unemployed; the Bank of England to be controlled and a National Investment Bank to be established; coal-mining, cotton, woollen and agriculture industries to be planned in the national interest.’2 Whether or not Callaghan was typical of the forthcoming 1945 generation of Labour candidates, he did at least hold views which were a fairly close approximation of the party’s pre-war programme; and, significantly, he saw reconstruction, at both domestic and international levels, as a vital topic even at this early stage of the conflict. Indeed, as was seen in chapter 4, talk of ‘peace aims’ was endemic throughout the Labour Party from the first days. Kevin Jefferys has written that, in terms of discussion of reconstruction, the war fell into two phases. In the first, he argues, the coalition directed its energies almost exclusively to matters of military strategy and production; once the military situation had improved there was ‘an active phase of reconstruction’, with the government under increasing pressure to outline its reform plans.3 What may have been true of the government as a whole, however, was not true of the Labour Party. Within days of taking up his post as minister of labour, Ernest Bevin was being criticised, presumably by Tories, ‘for being a little too much interested in the world after the war is won’.4 Reconstructing Britain as a ‘planned economic democracy’ was a key Labour theme even in the years before victory was assured. After the military tide finally turned, it was, inevitably, a theme that became ever stronger. It is possible to make a tentative division of war-time socialist thought about economic planning into two categories. The first kind was examined in the previous chapter – that directly contributing to, and affected by, the development of the planned war economy itself. The second, which this

1

Callaghan diary, entry for 26 Sept. 1939, cited in Kenneth O. Morgan, Callaghan: a life, Oxford 1997, 36. 2 Morgan, Callaghan, 36–7; James Callaghan, Time and chance, London 1987, 52. 3 Jefferys, The Churchill coalition, 112–13. 4 Jones, A diary with letters, 467.

139

THE LABOUR PARTY AND THE PLANNED ECONOMY

chapter will examine, was the more self-conscious consideration of reconstruction issues – the deliberate attempt to plan for the post-war era, when it was hoped that Labour would be in power. Such thinking covered an enormous area (and included some issues, such as town and country planning and the physical reconstruction of bombed areas, which are beyond the scope of this book). There were questions not only of manpower and the location of industry, but of international reconstruction (which will be examined in the next chapter). And there was planning for social security, which was seen as the corollary of full employment – which itself, in turn, was the chief raison d’être of the reconstructed, planned economic system it was hoped the post-war period would bring. Moreover, the Labour Party concentrated not only on drawing up its own post-war plans in detail, but also in squeezing as many policy concessions on the domestic front as possible out of the Conservative-dominated coalition.5

The old world and the new society Attlee and his colleagues, in spite of left-wing criticisms that they were not making suffcient gains for socialism to justify their presence in the government, pushed reconstruction priorities to the best of their abilities, emphasising to Conservative colleagues the need for early decisions in order to provide for the immediate post-war period.6 And Attlee, for one, believed that it was Churchill and his closest advisers, not businessmen nor even the Conservative party as a whole, who formed the stumbling block to progress on such matters.7 But the fact that the energies of Labour ministers were thus so often bound up with the government’s reconstruction programmes, makes the study of the party’s own policies more taxing. It is sometimes difficult to know how much weight to attach, in terms of party ideology, to any particular declaration or initiative. It was sometimes hard to get more than a ‘scratch’ attendance for internal party meetings, with the result that responsibility for the drafting of policy fell into the hands of unrepresentative individuals such as Laski. This, as Dalton complained, could have potentially ‘vexatious’ political results.8 Dalton himself, of course, was hardly above hijacking the policy-making process for his own ends. He had the habit of using special knowledge he had gleaned as a minister to write a policy document, which he

5

The classic study of these themes, emphasising the degree of political consensus amongst the main parties, is Paul Addison’s The road to 1945. Powerful challenges to Addison’s analysis are offered in Jefferys, The Churchill coalition and in Brooke, Labour’s war. 6 Addison, The road to 1945, 233–4; Kenneth Harris, Attlee, 2nd edn, London 1995, 225–7. 7 See Attlee to Churchill, 19 Jan. 1945, Attlee papers (Churchill College) 2/2. 8 Dalton to John Wilmot, 4 Apr. 1941, and Dalton to Attlee, 4 Apr. 1941, Dalton papers II B (7/10).

140

PLANNING FOR RECONSTRUCTION

would get published in the Labour Party’s name. ‘Then he would point to this official Party declaration and claim, in the inner counsels of the Government, to be responding to a united Labour demand’, Pimlott has noted.9 If such ploys were successful, he could also, of course, point to the implementation of yet another ‘Labour demand’ as a refutation of the left-wing claim that the party was achieving nothing, and should leave the coalition. But were policies devised in this way Labour policies, government policies, or simply Hugh Dalton policies? Difficulties of attribution therefore apply with regard to the Labour’s major war-time reconstruction initiatives, with which Dalton and other ministers were at varying levels involved. The first of these was the creation of the party’s central committee on problems of post-war reconstruction, which met for the first time in July 1941. The birth of the central committee was largely the result of pressure from Morrison, who wanted the party to examine post-war economic and financial problems systematically.10 Yet, as Brooke has noted, the committee was also a way of keeping two troublemakers, Shinwell and Laski, as busy as possible: Shinwell became the body’s chairman, and Laski its secretary.11 How seriously should its deliberations be taken, then, and how representative were its conclusions? It produced a major report, The old world and the new society, which was written by Laski and presented to the party conference in 1942; but this was not the detailed blueprint that Morrison might have liked, being principally rhetorical in character. Dalton thought it ‘much too long . . . written in Laski English and very remote and unprofitable’.12 Yet, in spite of such reservations, it was adopted as official party policy. Moreover, as Brooke argues, the report’s language was reminiscent of Attlee’s statements of 1939–40, and, one might add, of pre-war party declarations too.13 ‘We have learnt in the war that the anarchy of private competition must give way to ordered planning under national control’, it read. ‘That lesson is not less applicable to peace.’14 The sentiments expressed in the conference resolution that accompanied the report were equally familiar.15 Thus although there was an eagerness within the party to address post-war problems, by the end of 1942 there had been no great departures in policy. The first reconstruction initiative with great political repercussions would in fact come not from the Labour Party but from Whitehall – in the form of the Beveridge report.

9 10

Pimlott, Hugh Dalton, 366. Morrison to James Middleton, 21 Apr. 1941; Middleton to Morrison, 22 Apr. 1941; Morrison to Middleton, 26 Apr. 1941, in NEC minutes, LPA. 11 Brooke, Labour’s war, 105. 12 Pimlott, Dalton war diary, 359, entry for 4 Feb. 1942. 13 Brooke, Labour’s war, 108. 14 Labour Party, The old world and the new society, 13. 15 LPACR 1942, London 1942, 110.

141

THE LABOUR PARTY AND THE PLANNED ECONOMY

Beveridge Labour did nonetheless play a part in the birth of the Beveridge plan. In January 1941, Arthur Greenwood’s responsibilities for economic co-ordination were removed; he was put in charge of reconstruction instead. This appointment undoubtedly reflected the low priority that Churchill gave to post-war issues. Greenwood set about his new job, moreover, in timid fashion. He claimed to the TUC that he himself had opposed the creation of a full-blooded ministry of reconstruction: ‘he considered his functions to be mainly those of encouraging existing departments to get on with the job, and to help them to do so’.16 He thus made very little impact before his ignominious sacking from the war cabinet in February 1942; his one signal achievement was to appoint Sir William Beveridge, at Bevin’s suggestion, to head an enquiry into social insurance and allied services, as Greenwood put it, ‘with a view to producing a plan to guarantee freedom from poverty’.17 The Beveridge report was published as a government white paper to great public acclaim on December 1, 1942. Labour heartily supported the principle of ‘cradle to grave’ social security which the report espoused; but, at the same time, the party’s leaders were faced with something of a political headache. When the Commons debated the issue, all but two Labour backbenchers defied the party leadership and voted against the government, which had hedged its response to Beveridge. The future of the coalition seemed threatened. Yet ultimately, although Labour politicians took this issue of social reconstruction very much to heart, it was by no means the be-all and end-all of their world-vision. Indeed, to a certain extent, they sought to play it down. As Morrison said publicly, a few weeks after the Beveridge report was published: what is a social security scheme after all? . . . At best, it is nothing more than ambulance and salvage work: rescuing and patching up our social casualties. . . . These things must be done; but. . . . In our true policy for the future, social security can play but a part, and, if we succeed, it will and should be an ever-lessening part.18

Therefore, although the welfare state is often seen as the crowning achievement of the post-war reconstruction era, it was certainly not, in itself, the highest socialist priority in the years immediately preceeding. Indeed, G. D. H. Cole warned that social security had a bad as well as a good side: ‘It is not a sign of health in the community when its young men and women

16 17

TUC economic committee minutes, 14 May 1941, TUC archive MSS 292 560.1/3. Addison, The road to 1945, 169; Central committee on reconstruction minutes, 21 Apr. 1942, LPA. 18 Herbert Morrison, Prospects and policies: five speeches on post-war subjects, Cambridge 1943, 6.

142

PLANNING FOR RECONSTRUCTION

prefer security to adventure.’19 In the 1945 party manifesto, only a single paragraph was devoted to social insurance; sections on full employment and on industry took a much higher billing. For, as Cole had put it three years earlier, adequate minimum social security was ‘an impracticable plan on any basis other than that of a planned economy working under conditions of “full employment”. We shall not be rich enough after the war to provide these benefits on a tolerable scale unless we make full use of all our productive capacity.’20 Beveridge himself, of course, would have agreed with the proposition that his plan was incompatible with high levels of unemployment. But many Labour thinkers went rather further than this. In their eyes, social security schemes depended upon the creation of a planned economy, which in due course would itself render such schemes more or less redundant. As Attlee put it, ‘Socialism does not admit an alternative, Social Security to us can only mean Socialism’.21

The thick end of the wedge? But once again, serious war-time discussion of full employment began in Whitehall, not Transport House (although the Labour Party eventually stole a march on the mandarins, producing its report on the question first). The economic section, during 1941, did a considerable amount of work on post-war problems.22 Most notably, James Meade produced a memorandum in February on ‘The prevention of general unemployment’.23 (Meade was of course a Labour supporter, but saw himself as a ‘Lib/Lab’, and not as a ‘real’ socialist.)24 This document, slightly amended, was widely circulated outside the section, and in November was submitted to the new inter-departmental committee on post-war internal economic problems. The document focused mainly on contra-cyclical demand management, although it also recommended the government should take action to improve the mobility of labour, and should make arrangements ‘for the localisation of new industrial enterprises as near as possible to the sources of unemployed labour’.25 Evan Durbin, commenting on Meade’s original paper, generally welcomed it, but said that the proposal to stimulate consumption in times of depression via direct money allowances by the state to consumers might render other suggested measures redundant. ‘The final object of all the proposed action is

19 20 21 22 23

G. D. H. Cole, Great Britain in the post-war world, 140. Ibid. Harris, Attlee, 220. Cairncross and Watts, The economic section, 70. PRO, T230/13 EC(S)(41)22, reproduced in Susan Howson (ed.), The collected papers of James Meade, I: Employment and inflation, London 1988, 171–83. 24 Elizabeth Durbin, New Jerusalems, 197. 25 Howson, Meade papers, i. 171–83.

143

THE LABOUR PARTY AND THE PLANNED ECONOMY

to influence the total money income and expenditure of the community . . .’ he wrote. ‘But surely if it is possible to change the money incomes of consumers directly the tremendous apparatus of a “programme of public works” becomes an unnecessary and elaborate piece of ritual?’ This might also have been taken as undermining the traditional view that socialist planning should comprise of a large number of co-ordinated microeconomic interventions. For, as Durbin himself put it, if it was possible to prevent unemployment simply by altering demand, ‘why do anything else?’26 Such logic was not taken to its conclusion, however, either in the economic section – Meade retained his public works idea – or in the Labour Party. Although socialists increasingly favoured large-scale demand management they also remained wedded to physical controls as a tool to be used in the reconstruction period and beyond; full employment by itself was not thought to be a sufficient remedy for economic inequality, nor, it was believed, would demand management provide a remedy for frictional and structural unemployment. If, as Brooke suggests, the Labour leadership began to move in a revisionist direction during the war years, it was to a strictly limited degree.27 The economic section’s views on employment, as represented by Meade’s memorandum, received a boost when the Beveridge report was published; for Beveridge’s social insurance plan depended on the avoidance of mass unemployment, and the government, having accepted the plan in principle, had to find ways to achieve this. Keynes had earlier predicted that the Treasury’s opposition to full employment planning would prove futile, because when post-war plans came under the political spotlight the Labour members of the government would undoubtedly press for an expansionist policy.28 Morrison and Dalton did indeed express general support for the economic section’s approach in committee when the time came, in mid–1943; their disagreement with Kingsley Wood, the chancellor, led to the creation of a steering committee of officials which would produce a new report on employment policy. This report in turn led to the decision to publish a white paper on the subject; the pressure to produce it was exacerbated by the government’s desire to publish before Beveridge presented the results of his own independent inquiry.29 The white paper on Employment policy, when it came out in May 1944, contained the famous commitment that ‘The Government accept as one of their prime aims and responsiblities the maintenance of a high and stable level of employment after the war’.30

26

‘The prevention of general unemployment: note by Mr. Durbin’, 27 Mar. 1941, PRO, T230/13 EC(S)(41)24. 27 Brooke, Labour’s war, 263. 28 Keynes to Hubert Henderson 8, 15 Apr. 1942, Henderson papers, cited in Rory MacLeod, ‘The promise of full employment’, in Smith, War and social change, 78–100 at p. 82. 29 Cairncross and Watts, The economic section, 81–6. 30 Cmd. 6527, Employment policy, May 1944.

144

PLANNING FOR RECONSTRUCTION

This, of course, was a compromise; but some Labour thinkers were optimistic. Durbin wrote to Attlee in October 1943, once the cabinet had agreed to act, that The acceptance of the principle that all preparations are to be made, whether controversial or not, to maintain full employment after the war will carry us pretty far – a little farther, I think, than the Prime Minister realises. If we are to have a flexible investment programme and complete control over the sources of consumers’ income the Government will find itself committed to pretty extensive activity in the economic field. This is obviously a pretty thick end of the wedge of ‘economic planning’.31

But, as left-wing critics of the white paper were keen to point out, the final form of words chosen, ‘a high and stable level of employment’, was not the same as ‘full employment’. Aneurin Bevan, ridiculing the government’s approach as ‘Jobs For Some’, went on to argue that its proposals were ‘released to the public for reasons of public psychology, rather than as a sober and thoughtful job of social planning’; in other words, the white paper was merely a propaganda ploy, designed to fool the troops into believing that the government was serious about reconstruction, the better to bolster their morale on the eve of the battle of Normandy.32 This excessively conspiratorial view did at least have the merit of showing that the public commitment to the political objective of low unemployment would not necessarily result in the adoption of the economic policies necessary to achieve it, in the way that Durbin had seemed to imply. This might be because, as Bevan suggested, that that promise was made cynically or, more plausibly, because there might be practical obstacles which the political will of the government could not by itself overcome. One such potential obstacle was the stated attitude of the unions: the TUC could not at any stage commit itself in advance to approve or to acquiesce in the methods to be adopted to reach full employment simply because those methods can be shown to be well fitted and even necessary to the achievement of that objective. . . . the TUC would have at all times to consider whether on balance it was better that the objective should be modified rather than that methods incompatible with the rights of workpeople and the objects of Trade Unionism should be used to achieve it.33

Rory MacLeod has thus written that ‘The TUC was not prepared to abandon its sectional interest if measures to secure full employment were thought to be

31

E. F. M. Durbin to Attlee, ‘Cabinet conclusion on reconstruction plans WM (43) 144th’, 27 Oct. 1943, Piercy papers 8/4. 32 Celticus [Aneurin Bevan], Why not trust the Tories?, London 1944, 48–9. See also Brooke, Labour’s war, 262. 33 TUC report 1944, 419.

145

THE LABOUR PARTY AND THE PLANNED ECONOMY

contrary to the interests of the unions’.34 This is correct, so far as it goes. Such an attitude, however, was surely simple prudence which, combined with the scepticism of the left, contributed to the lukewarm, and in some cases downright hostile, reaction to the white paper within the Labour movement. Moreover, in anticipation of the government’s proposals, the Labour Party itself had already produced its own contribution to the employment debate. This was the document Full employment and financial policy, which was published in April 1944.

Full employment and financial policy What were its origins? In January 1943, Morrison’s response to the original Beveridge report had led Dalton to engage him in a signficant discussion of employment and social policy. This took place when, shortly after joining the war cabinet, Morrison put in a paper rejecting the Treasury’s conclusion that such a comprehensive social security scheme was unaffordable.35 Dalton wrote to him in agreement: ‘My own view is that something very much like the Beveridge Plan both can and should be adopted. . . . Simple people will refuse to believe it can’t be done, and they will be quite right, since, as you cogently point out, we only can’t do this particular job, on the assumption that we can’t make any decent show in post-war reconstruction.’ He then went on to outline in depth his views on how the scheme could be afforded. First, he argued that military expenditure could be kept down by forcing the former enemy nations, after they had been defeated, to contribute to the cost of peacekeeping in Europe and elsewhere. Second, ‘We shall have to do some more thinking about the post-war national debt . . . we have learned that the Treasury can, if it chooses, insist on cheap money and make the banks and other financial interests toe the line.’36 A policy of cheap money (referring at this time to low nominal interest rates) had been pursued in Britain since 1932, in the belief that this would help stimulate capital investment. It had the support of Keynes and of Treasury officials; the Treasury’s 1945 national debt enquiry reported to the chancellor in May of that year that the policy should be continued.37 The policy was also supported by Labour; from the socialist point of view it had not only the egalitarian attraction of reducing the income of rentiers, but also held out the possibility of reducing the cost of servicing the national debt. In the future, as chancellor, Dalton would make a bold, but ultimately doomed attempt, with his ‘cheaper money’ strategy, to drive interest rates down even 34 35

MacLeod, ‘The promise of full employment’, 93. PRO, CAB 76/13 PR(43)2, 20 Jan. 1943, cited in Donoghue and Jones, Herbert Morrison, 314–15. 36 Dalton to Morrison, 24 Jan. 1943, Dalton papers 8/1. 37 Howson, British monetary policy, 5, 18, 46–52.

146

PLANNING FOR RECONSTRUCTION

further. He now also told Morrison that ‘The case for a bold once-for-all surgical operation by way of a Capital Levy’, to accompany a post-war cheap money policy, ‘will be very strong’. He continued: On the other hand, the case for an annual sinking fund of £100 million or any lesser amount, will be very weak; it will make an utterly insignificant impact on the principal of the debt and, the rate of interest being so much lower, will have only a neglible impact on the annual interest charge. Moreover there is much evidence, e.g. in the successful handling of the Swedish Budget, in favour of the view, long favoured by some economists, that we should deliberately unbalance the Budget, in order to secure full employment, when the first symptoms of ‘trade depression’ show themselves. This does not, of course mean that we should always have budget deficits. We should, on this theory, have surpluses when trade is better than average. But it does mean that we should not tie ourselves to a sinking fund of any particular size.

This would mean more money available to pay for social security schemes. As to full employment, ‘we must do our utmost to make it, and to get below and keep below Beveridge’s 1,500,000’. (Beveridge’s social insurance scheme required that unemployment should not rise above 8.5 per cent of the insured population.) And further: We must have (a) employment plans for particular industries, (b) a comprehensive employment plan for industry as a whole, and (c) a financial, in the sense of a monetary plan to enable (a) and (b) to work. The financial plan is required to underpin the employment plan which, otherwise, will collapse if there is deflation, or blow up if there is serious inflation.38

These were rather vague stipulations. They indicated, however, that Dalton saw cheap money, budget deficits and the like, as an essential complement of physical planning, not as an alternative means to the same egalitarian end. At any rate, Morrison wrote back in broad agreement with Dalton’s arguments. He did cast doubt on the capital levy proposal: ‘Would any Levy that we impose achieve more savings than would be balanced by the loss of taxable revenue?’ (Research carried out by James Meade for the Treasury in 1945 confirmed that the yield would be very low.) Crucially, though, Morrison told Dalton that ‘I quite agree with you that we should very much keep in mind the technique of unbalanced budgets’.39 The two men who would be the chief economic ministers in the 1945–7 period, then, were by now explicitly agreed about the merits of a contracyclical budgetary policy to prevent unemployment. This represented a major departure from the thirties, when unbalanced budgets had been anathema to Dalton and other official

38 39

Dalton to Morrison, 24 Jan. 1943, Dalton papers 8/1. Morrison to Dalton, 29 Jan. 1943, ibid.; Howson, British monetary policy, 52–3. For post-war debates on the capital levy see Francis, Ideas, 189–92.

147

THE LABOUR PARTY AND THE PLANNED ECONOMY

spokesmen. Yet, ironically, it was not a tool that the Attlee government would ever be called upon to use. Moreover, at around this time Labour thinkers were taking an increased interest in national income accounting. In Whitehall, James Meade and Richard Stone (a young Cambridge economics graduate) had in 1940–1 produced the first official estimates of the UK national income.40 This work continued; it was necessary not least in order to provide a statistical basis for the planning of aggregate demand in view of the commitment in the employment white paper.41 Socialists had long been interested in analysis of the national income, not so much as a potential planning tool, but rather because the statistics could be used to make a point about the unequal way in which that income was distributed. But, as the official work progressed, leading Labour figures became more and more interested in the practical applications. The argument was cast in the familiar terms, whereby real resources were to be given priority over financial ones. Morrison argued in 1942: ‘We shall, in fact, have to estimate the size, not merely as we do now, of the State budget, but of the national income as a whole, and relate it to the demands we want to make upon it.’42 Or, as Durbin put it the previous year, ‘The Budget must be treated as an instrument for determining the total money income of the community as well as a means of financing the expenditure of the Government.’43 Once the NEC had agreed, then, in January 1944, that Dalton should draft a statement on full employment to be presented to the annual conference, there was a fairly broad consensus about what it should contain.44 ‘We all know what we want to say . . . ’, he wrote, ‘the trick is to say it well.’ This proved somewhat difficult; abandoning a ‘frightful’ draft by Jay and Gaitskell, Dalton asked Durbin to try his hand. This was more successful, but Dalton wrote most of Full employment and financial policy himself.45 To his delight it was in print before both the government’s white paper and Beveridge’s Full employment in a free society.46 In 1942, Morrison had claimed that he himself could ‘see no sharp distinction in nature between the economic problems of war and the problems of the strenuous, difficult peace that lies before us’.47 By contrast, Full employment and financial policy argued that ‘the principles which have served us well in war . . . must, of course, be applied differently in peace time’. Nevertheless, the document’s main reconstruction emphasis was on continuity of war 40 41 42 43

Moggridge, Maynard Keynes, 645; Howson, Meade papers i. 2. Cairncross and Watts, The economic section, 87. Morrison, Prospects and policies, 11. ‘The prevention of general unemployment: note by Mr. Durbin’, 27 Mar. 1941, PRO, T230/13 EC(S)(41)24. 44 Dalton, The fateful years, 421. 45 Pimlott, Dalton war diary, 718, 723, entries for 4–5, 18–19 Mar. 1944. 46 Dalton, The fateful years, 423. 47 Morrison, Prospects and policies, 9.

148

PLANNING FOR RECONSTRUCTION

arrangements rather than on change. As in war, economic possiblities should be limited not by finance, but only by the physical possibilities of production. It would be possible to ‘double or treble’ the standard of living. In order to achieve this, the principal war-time financial controls should be retained ‘until more permanent and satisfactory arrangements can be made’. Subjection of the Bank of England to the Treasury should continue; controls on capital issues and over the export of capital should continue; and, in extension of the war-time system of Treasury deposit receipts, ‘Loans, compulsory if necessary, from the Joint Stock Banks will help the Chancellor to find the purchasing power required for full employment without imposing crippling charges on his budget’.48 In these ways, Dalton’s eagerness ‘to be most conservative as regards financial institutions, and to hold fast to what we have won’ committed the Labour Party to post-war arrangements based on the model of the planned war economy, and thus to some extent inhibited policy innovation.49 Nevertheless, the argument that ‘We need not aim at balancing the Budget year by year’ was, as a public statement, novel.50 Indeed, Susan Howson has written that the document represented ‘the formal acceptance by the Labour Party of Keynesian ideas’.51 Dalton himself wrote that the document was ‘largely Keynesian’, albeit with ‘some socialist additions’ in the form of continued emphasis on physical controls.52 But, as Alan Booth has pointed out, his description cannot be taken at face value, given that later, as chancellor, he blocked the deployment of Keynesian techniques in the making of domestic budgetary policy.53 Moreover, in view of the continuing debate about the meaning of ‘Keynesianism’, it might be safest to say that it marked the adoption of policies which Labour took to be Keynesian; or even that it was an important step on the road towards ‘actually existing’ Keynesianism within the party.54 At any rate, although expressed more boldly, the practical proposals contained in Full employment and financial policy were not radically different from the recommendations of the government’s white paper. To this extent, then, Labour’s official proposals reflected a more consensus-based approach to the employment planning aspect of recon-

48 49 50 51

Labour Party, Full employment and financial policy, 2–3. Dalton diary vol. 27, entry for 20 Dec. 1942, cited in Howson, British monetary policy, 78. Labour Party, Full employment and financial policy, 4. Howson, British monetary policy, 93. See also Susan Howson, ‘ “Socialist” monetary policy: monetary thought in the Labour Party in the 1940s’, HPE xx (1988), 543–64. 52 Dalton, The fateful years, 422. See also Pimlott, Hugh Dalton, 396. 53 Booth, ‘Light years’, 19. 54 See Scott Newton, ‘The Keynesian revolution debate’, in Gorst, Johnman and Lucas, Contemporary British history, 75–9. For further consideration of the historiographical debate see Alan Booth, ‘New revisionists and the Keynesian era in British economic policy’, ECHR liv (2001), 346–66.

149

THE LABOUR PARTY AND THE PLANNED ECONOMY

struction – although not, as Brooke has pointed out, at the expense of continued faith in physical controls.55

Regional planning A vital aspect of this consensus approach, such as it was, related to proposals for the planned location of industry. This had long been a Labour concern. As early as 1930 Attlee was expressing concern about the uncontrolled industrial growth of London at the expense of other areas; he proposed a minister of industry, with the power to direct the location of new works.56 And, as the depressed regions continued to suffer from the slump, Labour MPs naturally clamoured for remedial government action: where practical, they argued, industry should be directed into areas of high unemployment. Naturally enough, these ideas were linked to Labour’s proposals for overall economic planning; the question of the location of industry could hardly be divorced from overall plans for national development, as John Parker pointed out.57 Nevertheless, as Peter Scott has argued of Labour’s post-war regional policies, the main emphasis was undoubtedly on maximising employment rather than economic efficiency – although, of course, the two were felt to be largely synonymous.58 Booth has claimed that Labour’s regional plans were born, late, out of political embarrassment.59 Be that as it may, by the outbreak of war the party’s principles on the matter were clear. In 1936, the economist Hubert Henderson argued that one of the central problems of the British economy was ‘the difficulty of absorbing an unemployed coal-miner of fifty in the Rhondda Valley, or a female cotton operative living as a married woman in Blackburn, in the manufacture of motor-cars or wireless sets’.60 The Labour Party solution to such dilemmas was to take the work to the workers.61 Furthermore, even before 1939, there were elements of cross-party agreement on regional policy. The National government acknowledged a degree of responsibility for solving the problem of the distressed areas, passing the Special Areas Act in 1934, and a subsequent amendment act in 1937; but the commissioners appointed to help revive trade in the designated regions had little power or money. In 1937, the government appointed a royal commis55 56 57

Brooke, ‘The Labour Party and the Second World War’, 9–10. Harris, Attlee, 578, 580–1. ‘Suggested terms of reference for committee on territorial planning’, 7 Feb. 1934, Fabian Society papers J27/1. 58 Peter Scott, ‘British regional policy, 1945–51: a lost opportunity’, C20BH viii (1997), 358–82. 59 Booth, ‘Light years’, 20–1. 60 Henry Clay (ed.), The inter-war years and other papers: a selection from the writings of Hubert Douglas Henderson, Oxford 1955, 164. 61 See Labour Party, Labour and the distressed areas; a programme of immediate action, London 1937. See also Dalton, The fateful years, 434.

150

PLANNING FOR RECONSTRUCTION

sion under Sir Montague Barlow to study the distribution of the industrial population; this was partly for fear of the consequences of strategic bombing, given the concentration of the population in the south east.62 The Barlow report, when it came out in January 1940, recommended the creation of a central authority with responsibility for determining land use throughout the country. The report made little impact at the time, but Dalton later drew upon it when writing the coalition’s policy on the location of industry.63 But if the main planks of Labour’s policy were in place already, the war certainly strengthened the party’s commitment to control over the location of industry (and perhaps made such a policy more palatable to Conservatives too). In the midst of the manpower difficulties of 1941, Jim Griffiths MP said: ‘we are paying the price for our failure to control the distribution of factories in this country. We have allowed industry to be concentrated in certain areas and now we are looking for ways of dispersal.’64 Various steps were taken to achieve such dispersal. The Ministry of Production in time established an industrial location planning room, which at the close of the war was transferred to the Board of Trade in order to help facilitate peace-time planning.65 There were also important developments with reconstruction implications elsewhere in government. Jay joined the Ministry of Supply in December 1940; he later attributed much of the ministry’s success in securing sufficient manpower in 1941–2 to the ‘candid acceptance . . . that labour was a mainly geographical resource and could not be rapidly moved about the country like a machine tool or a ton of steel’. This ‘implied that the more capacity we developed in areas where workers already lived, the faster would output expand’. In 1943, Dalton pressed Jay to become his personal assistant at the Board of Trade and special adviser on post-war industrial reconstruction. Jay accepted because ‘I was increasingly anxious to use all that I had learned about the location of labour and the mobility of industry during the war in the service of a new full-employment policy which would prevent the curse of the depressed areas arising after the war’.66 By the time Jay arrived at the Board of Trade, Dalton had already established support from other Labour ministers, notably Bevin, for his ideas on location planning.67 The next task was to get a commitment to what was now tactfully called the ‘steering’ of industry written in to the employment white paper. After ‘a long tussle’ over the draft of the relevant chapter, Dalton got what he wanted: ‘It will be an object of Government policy to secure a balanced industrial development in areas which have in the past been unduly

62 Addison, The road to 1945, 42–3. For the TUC’s evidence to the Barlow commission see the TUC report 1939, London 1939, 249. 63 Pimlott, Hugh Dalton, 401. 64 HC Debs, 368, 21 Jan. 1941, col. 144. 65 HC Debs, 404, 21 Mar. 1945, col. 850. 66 Jay, Change and fortune, 88, 108. 67 Pimlott, Hugh Dalton, 401.

151

THE LABOUR PARTY AND THE PLANNED ECONOMY

dependent on industries specifically vulnerable to unemployment.’68 After further struggles, and a resignation threat from Dalton, the distribution of industry bill, which would put this commitment into practice, was introduced into parliament in the spring of 1945. The bill gave the Board of Trade powers to acquire land, to build factories, and to make loans and grants to companies, in specified development areas. Industrialists were also required to notify the Board of their intentions to build new factories. The bill finally passed into law under Churchill’s caretaker government, after the coalition had dissolved; in this sense it was perhaps a reconstruction measure truly based upon consensus, a ‘socialist’ idea enacted by an overwhelmingly Conservative administration, which no longer even had the need to appease Labour colleagues. It was not universally popular, however. Some Tories, unsurprisingly, attacked it as bureaucracy, socialism and hampering, centralised control carried to the last limit. But rather more tellingly, W. J. Brown, who had been one of the authors of the Mosley manifesto and was now an independent MP, suggested that the bill was not connected to an overall economic strategy: ‘ “There ain’t no plan!” . . . there is no Government plan for industry as a whole, nor for any one industry in Britain.’69 The Economist, too, suggested that the bill was still a long way from ‘regulating the nation-wide distribution of industry’.70 Indeed, during the first few months of the policy’s operation, few new projects were in fact diverted to the development areas.71 That the bill did not give the state substantive planning powers was partly due to political circumstance; Dalton got everything he could from his coalition colleagues, and only after a fight. But equally, his chief concern in this instance was to prevent the return of large-scale unemployment in the distressed areas; he does not seem to have designed his legislation with a view to developing it into machinery for overall industrial co-ordination should Labour succeed at the polls. The distribution of industry bill was therefore in some ways typical of the pattern of events after 1945; ministers would talk in grand terms about constructing a planned economy and then settle for measures which, if perhaps desirable in themselves, represented nonetheless a much smaller-scale form of intervention than the original rhetoric implied. This trend was to some extent presaged in the party’s manifesto Let us face the future, which talked boldly about creating a planned economy but equally contained few measures which seemed likely to achieve such an end.

68 69 70 71

Dalton, The fateful years, 441; Cmd 6527. HC Debs, 404, 21 Mar. 1945, col. 878. The Economist, 3 Mar. 1945, cited in Jefferys, The Churchill coalition, 118–19. ‘The distribution of industry policy’, 24 Oct. 1945, PRO, T230/18 EC(S)(45)35.

152

PLANNING FOR RECONSTRUCTION

‘Labour’s five-year plan’ Hubert Henderson noted in 1947 ‘the psychological fact that by the end of the war, belief in the value of economic planning had taken root . . . this belief was accompanied by an optimistic assumption that the technique of planning was comparatively easy’.72 These beliefs and assumptions were not of course shared by all thinkers – Henderson himself was a sceptic – but it nonetheless seems fair to speculate that in 1945 the prestige of ‘planning’ reached an all-time high. (It is telling, for example, that Churchill chose to offer the British people a ‘four-year plan’, even whilst borrowing crudely from Hayek’s ideas for his notorious ‘Gestapo’ election broadcast.) The extent to which the electorate positively shared the enthusiasm of politicians and intellectuals is, of course, difficult to establish. The majority of voters in 1945 appear to have approved of Labour’s nationalisation policies, albeit in a passive way, possibly because they were persuaded that these were the necessary corollary of the party’s popular plans for social security and a national health service.73 ‘Planning’ then, in its loosest sense, was probably a vote-winner but, understandably, people focused on the ends of the policy rather than the means. One Labour activist, Jim Mortimer, recalled that even voters loyal to Churchill wanted a very ambitious housing programme, full employment, social security and continued co-operation with America and the USSR. ‘So’, he reasoned, ‘the mood, even among those who voted Conservative, was sympathetic to a planned economy.’74 Such sympathy, if it existed, was obviously vague, however, and this was surely true for many non-Conservatives as well. Within the Labour Party itself, of course, enthusiasm for a planned economy was high, perhaps more so even than in the thirties. Planning was popular, as Henderson pointed out, partly because quantitative planning had worked in war time, and it was tempting to think that the same techniques could be used to increase prosperity in peace time. But also, the idea of physical planning had become indissolubly wedded to the evident problem of physical reconstruction of bombed towns and cities. One of the most pressing problems of the post-war world would clearly be that of getting enough demobilised men into the building industry; it was hard to deny that some form of manpower planning would be necessary in order to achieve this. And as Attlee had pointed out to Churchill earlier in the war, this question was linked to other forms of reconstruction planning at regional, national and international levels:

72 73

Clay, The inter-war years, 330. Steven Fielding, ‘What did “the people” want? The meaning of the 1945 general election’, HJ xxxv (1992), 623–39 at p. 634. 74 Daniel Weinbren, Generating socialism: recollections of life in the Labour Party, Stroud 1997, 193–4.

153

THE LABOUR PARTY AND THE PLANNED ECONOMY

When you speak of men returning to their jobs as one of the first essentials at the end of the war I agree, but without planning there won’t be the jobs. For instance there will be an urgent need for housing. . . . There is an equal need for working out where the houses are to be built and this in turn largely depends upon the future of industry. This again is largely dependent upon our export trade and the agreements which we may make with the Dominions and the USA and other states.75

This holistic analysis, whereby planning had to be carried out at all levels in order for planning at any one level to work, was one of the guiding principles of the party’s 1945 manifesto, which declared ‘Labour will plan from the ground up’.76 This manifesto was mainly written by Michael Young, the newly recruited head of the party’s research department, who had formerly been director of PEP. Upon his appointment he found himself, to his surprise, in charge of propaganda as well as research. He recalled in 1996 that ‘If the Labour Party [had] had a decent organisation, I would never have found myself writing the manifesto’. He also remembered that ‘Herbert Morrison, Patrick Gordon Walker and Ellen Wilkinson all supplied some paragraphs but it did not hang together too well, and the task of giving the document some cohesion fell to me’.77 Much of the language that he chose would have been familiar in Labour circles, from both pre-war and war-time days. ‘The Labour Party stands for order as against the chaos which would follow the end of all public control’, it read. ‘We stand for order, for positive constructive progress as against the chaos of economic do-as-they-please anarchy.’ Moreover, ‘drastic policies of replanning’ were promised, as well as ‘planned investment in essential industries and on houses, schools, hospitals and civic centres’. A national investment board would be created to ‘determine social priorities and promote better timing in private investment’. There were also the familiar policies of nationalisation, control over the location of industry, and price control.78 Herbert Morrison told the party conference, ‘this document Let Us Face the Future may be described as Labour’s Five Year Plan’.79 That Morrison should so describe it is suggestive on two counts. On the one hand, when discussing the reconstruction of Britain, he was not afraid to refer to the Soviet example. On the other, Let us face the future had in practice about as much connection to a Russian plan as Churchill’s four-year plan had to Goering’s. There was no commitment to establish any form of supreme economic authority. Substantial ‘constructive enterprise and private endeavour’ would co-exist with publicly-owned industries. For obvious 75 76 77

Attlee to Churchill, n.d. 1942–3, Attlee papers (Churchill College) 2/2. Craig, Manifestos, 123–31. Michael Young, ‘1945’, in Giles Radice (ed.), What needs to change: new visions for Britain, London 1996, 249–56 at pp. 249–50. 78 Craig, Manifestos, 123–31. 79 LPACR 1945, 89.

154

PLANNING FOR RECONSTRUCTION

reasons, controls over labour were not envisaged. And perhaps the strongest planning commitment, the national investment board, was abandoned by Labour in power. Clearly, the proposed nationalisation of industry was potentially an important step on the road to planning; Jean Mann’s maxim about ‘re-planning Ellen’s hat’ had a measure of truth in it, after all. Equally, the many war-time controls which were to be retained might perhaps have found a role in a genuinely planned system; indeed, physical controls would remain central to Labour’s vision throughout the lifetime of its 1945–51 administrations. Yet, all in all, the grand promises to plan in reality masked a rather more modest programme of state intervention than the manifesto’s words seemed to suggest. Thus, when Labour swept to power in July 1945, at a time when pro-planning sentiment was at its highest, there were already hints that socialist planning would become, in Stephen Brooke’s words, ‘the unlikeliest casualty of the Attlee government’.80 This is not to suggest, however, that that government’s achievements were negligible. The years 1945–51 saw a major increase in the role of the state in terms of nationalisation and improved social services, as well attempts to ‘take on the city’ by driving down interest rates, and to achieve social justice and economic efficiency via the tax system. None of this suggests that Attlee and his colleagues were mere milk-and-water socialists who backed down at the first sign of a challenge. The failure to create a planned economy in the sense that had been envisaged before 1945, then, has to be explained not only by examining Labour’s planning ideology in its own terms, but also by relating it to the manifold practical problems and perplexities that faced the party when it came into office. The most immediate of these related to the country’s external economic position: on 21 August 1945, less than a month after Labour’s election victory, and a week after the end of the war with Japan, the USA terminated lend-lease aid. Britain was thus threatened with financial disaster, having liquidated its reserves and restricted its exports in the pursuit of victory. The next chapter will examine the way in which the Labour government reacted to the dilemmas created by this situation, the impact this had on its domestic planning policies, and the way in which these were linked to the party’s long-established vision of ‘international planning’.

80

Brooke, ‘The Labour Party and the Second World War’, 13.

155

International Planning

7

International Planning: External Economic Policy in the 1940s In December 1945 the new Labour government accepted an American loan on terms which one cabinet minister, Emanuel Shinwell, declared would make socialist planning in Britain impossible, a view some historians have endorsed.1 According to this theory, Labour’s manifest failure to construct a planned economy after the war was a consequence of accepting the commitments to international economic liberalisation which the Americans demanded as the conditions of the much-needed loan. By this argument, making these commitments (which included membership of the newly formed International Monetary Fund (IMF) and World Bank, early sterling convertibility and participation in an international system of multilateral freer trade) out of short-term expediency, Labour scuppered its own domestic economic aspirations almost before it had a chance to enact them. Proponents of this logic argue that the construction of a socialist economy in Britain was dependent on the ability to plan foreign trade via bilateral deals and rigorous exchange control, a privilege which was now foregone. However, the claim that in 1945 the lamb of planning was, at the behest of the Americans, sacrificed on the altar of international economic liberalisation, is seriously flawed; and it can be refuted by putting the acceptance of the loan conditions within the context of Labour’s broader aspirations towards ‘international planning’. In 1945, Labour was caught between its desire to make world planning a reality, and the consequences of the compromises such planning turned out to involve. Booth, with the loan decision in mind, has spoken of a Labour ‘volte-face on foreign economic policy’ in the 1940s: ‘Despite the rhetoric of the 1930s on the death of free trade, Dalton, Gaitskell and others easily fell in behind the Atlanticist approach to the liberalization of postwar trade and payments’.2 But this is inaccurate. Rather, Labour’s behaviour in office was driven by a paradox long implicit in its ideology. The party’s aspiration towards international forms of planning – which suggested some surrender of national sovereignty – was clearly at odds with its desire to extend state 1

See Teddy Brett, Steve Gilliatt and Andrew Pople, ‘Planned trade, Labour Party policy and US intervention’, HWJ xiii (spring 1982), 130–42. 2 Booth, ‘Light years’, 24. See also Alan Booth, British economic policy, 1931–49: was there a Keynesian revolution?, London 1989, 135–7.

156

INTERNATIONAL PLANNING

control over Britain’s own national economy. The story of Labour’s post-war external economic policy is that of the attempt to resolve these contradictory objectives. Fundamental as this paradox was, however, Labour’s behaviour in government cannot be explained purely in terms of ideology. The party’s attitudes were to a great extent conditioned by, and had implications for, Britain’s precarious economic circumstances, in the war years and after. Moreover, not only did Labour ministers play an important part during the war in determining Britain’s attitude to the proposed new world arrangements; but, in power in their own right after the war, the question of international economic co-operation presented them with profound practical dilemmas. These dilemmas principally revolved around proposals for economic liberalisation, a term which encompassed several issues: greater freedom of payments through multilateral settlements; the elimination of discrimination in foreign trade; tariff reductions; and reductions in non-tariff barriers (for example, quantitative import restrictions). The purpose of this chapter, then, is twofold. First, to present Labour’s post-war approach to these questions, with particular reference to the US loan, in the light of the party’s prior attitudes. Second, to lay to rest the idea that the Attlee government’s failure to build a planned economy at home was the consequence of a surrender to Atlanticist economic objectives in the international field.

Labour and ‘international planning’ before 1939 Prior to World War I Labour had strongly opposed Joseph Chamberlain’s campaign for tariff reform, but, as Frank Trentmann has argued convincingly, its views were not simply an extension of the Liberal party’s free trade case. Campaigners like Philip Snowden rejected liberal trade theory, based on the paradigm of comparative advantage and the international division of labour; but equally, they retained a belief that trade promoted international understanding by breaking down the walls of insular prejudice and chauvinism associated with Chamberlain’s protectionist imperialism. Trentmann has identified this as a ‘socialist–radical dualism’; and such a divided approach to questions of international economic policy persisted long after Snowden himself had left the Labour Party.3 Trentmann has also shown that in the post-World War I years, free trade was gradually losing its social and cultural support within the country as a whole, with the final blow being dealt in 1931 when the National government adopted protection. Within the Labour movement, this loss of support was reflected in increased support for trade regulation during the 1920s, and in the Labour Party’s own programmes in the 1930s.4 It was felt that econ3 4

Trentmann, ‘Wealth versus welfare’, 70. Idem, ‘Civil society, commerce, and the “citizen-consumer” ’, 320–1.

157

THE LABOUR PARTY AND THE PLANNED ECONOMY

omic restructuring at home was not enough; there should also be some form of world economic co-operation. As was seen in chapter 3, the 1934 policy document For socialism and peace argued that, ‘Planning and control in international life both postulate and follow from national planning and socialised control of our national life’. This ‘inevitable corollary’ had foreign policy implications in terms of support for collective security in the form of the League of Nations, which in turn arose from beliefs about the reasons for international conflict: ‘the chaotic conditions arising out of unbridled competition give rise to social injustice that imperils peace, and the scramble for markets and fields for investment which are a direct cause of war’. Therefore, just as in home policy the Labour Party would insist upon decisive control over the whole economic life of the country, so in international policy it would press for international planning in economic and financial questions. . . . It would attack the disastrous economic nationalism of the present age by working for an all-round lowering of tariffs, and their substitution by a system of planned international exchange.5

These twin objectives, whilst ostensibly aimed at the same thing – the achievement of order in economic life – were in fact in opposition to one another. It is contradictory to seek to strengthen control of all aspects of one’s own national economy whilst at the same time working to abolish economic nationalism in the world at large. This ‘planning paradox’, though largely unrecognised, remained an important feature of Labour’s thought in years to come. But what of Labour’s more detailed policies? In 1935 Dalton argued for the reduction or abolition of extant import duties, although, ‘in taking such action, we should seek reciprocity’. Multilateral agreements to achieve this would be worthwhile, but it was unlikely they would be forthcoming. Therefore Britain should seek bilateral or perhaps group agreements. And, like Attlee, Dalton favoured import and export boards.6 But although the party was determined to establish import and export boards, and in spite of the frequent sideswipes made against ‘economic nationalism’, Labour’s approach to international trade was far from resolved.7 The National government’s adoption of tariffs and the extension of the system of imperial preference meant that an incoming Labour administration would be presented with a protectionist fait accompli. As John Parker noted at a Fabian conference in 1936, ‘the Party was increasingly being driven to recognise the fact of economic nationalism and that certain benefits had accrued from our protective system’. But on the other hand, he went on to argue, the co-operative movement – a major retail interest and a constituent part of the Labour movement 5 Labour Party, For socialism and peace, 8–9, 11. See also C. R. Attlee, The will and the way to socialism, London 1935, 94. 6 Dalton, Practical socialism, 299–308; Attlee, The will and the way, 233–6. 7 See Elizabeth Durbin, New Jerusalems, 251–6.

158

INTERNATIONAL PLANNING

– was in favour of unilateral free trade and continued to put up strong opposition to the regulation of trade by import boards or similar bodies. (Trentmann has, however, pointed out that the co-operative movement itself was in fact divided on the issue.) Yet equally, Parker noted, some trade unions were strong supporters of protection.8 These differing sectional interests aside, there was also disagreement amongst the party’s intellectuals. Almost everyone could agree with Dalton that ‘Free Trade, in the old sense, is a denial of planning; tariffs, in the old sense, are a caricature of planning’.9 But what was the alternative solution? Parker himself argued that by means of trade agreements a Labour government should try to build up a low tariff group; Gaitskell responded that ‘the idea of a low tariff group was nonsense if your internal policy demanded, or if you already had, import boards. You must in that case have a policy of trade agreements.’10 Therefore, by 1939, the party was committed to a third course between free trade and protection, but with no clear and detailed official proposals which could resolve the intellectual and practical dilemmas this involved (and which, given the ‘planning paradox’, were perhaps in any case insuperable). In the monetary sphere, the aim of stabilising exchange rates remained simply an aspiration. It was therefore by no means obvious how planned international co-operation was to be achieved.

Early war-time discussions There was, however, a shared Labour rhetoric on the benefits of international economic action, upon which the coming of war brought a renewed emphasis. International planning was seen not merely as the logical extension of socialist planning at home, but as a means of eliminating the rivalries between capitalist nations which, it was believed, had destroyed peace in the first place. In 1939 Attlee condemned ‘the cult of economic self-sufficiency’ and called for ‘Bold economic planning on a world scale’ to meet the post-war situation.11 However, in 1940, Aneurin Bevan, a firm advocate of world planning, did nonetheless hint that such lofty aspirations might be accompanied by pitfalls: ‘it will not be possible for Britain to frame intelligent proposals for other countries unless she is prepared to so adjust her own industries that they can be fitted into the international pattern’.12 Socialists did not dwell on such potential problems, although, from the

8

‘Report of conference on international commercial policy, 24–25 Oct. 1936’, Fabian Society papers J15/10; Trentmann, ‘Civil society’, 321. 9 Dalton, Practical socialism, 304–5. 10 ‘Report of conference on international commercial policy, 24–25 Oct. 1936’, Fabian Society papers J15/10. 11 C. R. Attlee and others, Labour’s aims in war and peace, London 1940, 108. 12 Tribune, 11 Oct. 1940.

159

THE LABOUR PARTY AND THE PLANNED ECONOMY

very beginning of the war, they discussed international (as well as domestic) post-war reconstruction extensively. For example, in June 1941 Arthur Greenwood was pressing for Anglo-American discussions on post-war policy.13 Nevertheless, Labour’s internal considerations of such issues remained unsystematic until July of that year, when the party’s central committee on problems of post-war reconstruction met for the first time. This committee divided its work between ‘internal’ policy and ‘international trade’, suggesting that similar importance was attributed to both areas.14 Naturally, consideration of the latter sphere deserved to be influenced by ongoing world events; and indeed, two Anglo-US agreements were soon signed with major repercussions for Labour’s international economic policy. On 14 August 1941, the British and American governments issued the Atlantic charter, a communiqué of aims in which the two countries stated their ‘desire to bring about the fullest collaboration between all nations in the economic field with the object of assuring, for all, improved labour standards, economic development and social security’.15 And on 23 February 1942, Britain committed herself to article VII of the mutual aid agreement, whereby as ‘consideration’ for American lend-lease aid, she agreed ‘to the elimination of all forms of discriminatory treatment in international commerce, and the reduction of tariffs and other trade barriers’.16 In the short term, the Atlantic charter further stimulated Labour’s own exploration of international reconstruction issues; and in the long term, article VII would create problems and embarrassments for Churchill’s coalition government, and, after 1945, for Attlee’s Labour government too. This danger was not recognised at the time, however, as relief at the prospect of immediate US aid erased possible concerns about the longer-run consequences of its acceptance. Yet amongst socialists there was, nevertheless, increasing recognition of the difficulties involved in international cooperation. The international relationships subcommittee of Labour’s central committee on reconstruction, discussing the objective, contained in the Atlantic charter, ‘to free all the men in all the lands from fear and want’, acknowledged this would not be easy. ‘Constructive economic international planning can only succeed if peace is assured’, the committee argued, ‘. . . political stability is the foundation of economic prosperity.’ However, the political difficulties were minimised and the economic ones emphasised. The experience of the League of Nations had taught lessons about how (or indeed how not) to achieve political stability, ‘But with regard to international economic problems, we stand now almost where we stood with regard to political 13

L. S. Pressnell, External economic policy since the war, I: The post-war financial settlement, London 1986, 33. 14 Brooke, Labour’s war, 105. 15 The Labour Party was sufficiently enamoured of the Atlantic charter to reproduce its text in full in the 1942 policy document The old world and the new society (p. 30). 16 Cited in Moggridge, Maynard Keynes, 668.

160

INTERNATIONAL PLANNING

problems in 1919 . . . we are still largely in the dark about the technical difficulties to be overcome’.17 In an accompanying note, Dalton sketched out some ‘rather random thoughts’ of his own. He noted that the Soviet Union had not, in pre-war days, had a significant impact on the rest of the world’s economy. ‘If, however, Russia chooses to expand her foreign trade [post-war] there will be certain advantages’, he argued. ‘Some international trade at least will be planned from the start and this will be useful in countering capitalistic instabilities . . . Nevertheless, since there is so much in doubt about Russia’s future economic policy, the first aim must be to secure Anglo-American co-operation.’ Such co-operation should aim at creating a common monetary and investment policy, in order to secure and maintain full employment of resources; if possible, Russia should be involved too. This policy, he claimed, if successful, would make the problems of international trade much easier to handle; but this would still be a knotty problem: Clearly the days of individualist Free Trade are past; so, for that matter, are the days of individualist protection. It is certain that, in some degree, trade between countries will be regulated by Agreements between Governments. . . . The easiest type of Agreement to negotiate is obviously a simple bilateral Agreement. . . . But bilateral agreements are certainly less conducive to International Economic well-being than multilateral agreements in which a number of countries are involved, and no attempt is made to equalise the balance of trade between any two countries alone.

Therefore, only through multilateral agreements ‘is it conceivable that the most sensible forms of International Economic specialisation be adopted’. As in the thirties, Dalton recognised that such agreements were difficult to negotiate. But this did not quell his aspirations: ‘the ultimate goal must, I think, be a kind of supreme International Economic Planning Body, which would attempt to co-ordinate the various Agreements between Governments and producers, and would all the time be suggesting ways of improving agreements so as to secure a more sensible distribution of resources’.18 These views were in line with those Dalton had previously held (although he was now somewhat more convinced of the practicalities of multilateralism). At the same time, it is clear that he was indeed moving towards a more Atlanticist approach. This was not a question of reneging on previous principles. Rather, his emphasis on Anglo-American co-operation was clearly based on a realpolitik assessment of the likely relative post-war economic power of Britain’s main allies; Britain’s dependence, for the rest of the war, on American aid would only make the point more clearly. It is not 17

International relationships subcommittee, ‘Note and preliminary questions on post-war international economic policy’, RDR 4, Oct. 1941, LPA. 18 Hugh Dalton, ‘Notes on international economic policy in the post-war world’, RDR 4, Oct. 1941, LPA.

161

THE LABOUR PARTY AND THE PLANNED ECONOMY

clear exactly how drastic the powers of Dalton’s proposed international planning organisation were to be. But other Labour thinkers, particularly on the left, had far-reaching ambitions in this sphere. The Hungarian-born economist Thomas Balogh, later a friend and adviser to Harold Wilson, wrote that ‘The production of the main foodstuffs and raw materials must be planned internationally’.19 And in 1942, another internal party memorandum argued, in another apparent example of the ‘planning paradox’, that The state must nationally maintain and extend its war-time powers of determining what is to be produced and at what price it is to be distributed; internationally it must yield some of its attributes of economic sovereignty to an international authority which must have the power to plan and control production and distribution.20

This emphasis on the physical control of production and consumption by a body with supra-national powers was far removed from the American free-enterprise viewpoint – and yet, as the logic of Dalton’s argument suggested, American collaboration was a prerequisite to the success of any international scheme. In due course, the processes of Anglo-American negotiation opened a division between the advocates of compromise in order to gain agreement, and the die-hard socialist planners. For the time being, however, a level of apparent consensus persisted. Labour’s reaction to the respective international post-war finance plans of Keynes and Harry Dexter White gave strong evidence of this.

The Keynes and White plans Keynes had first proposed an international currency union in September 1941, but, before finally emerging as the government white paper Proposals for an international clearing union in April 1943, his plan went through many drafts.21 The plan’s purpose was to create balance of payments equilibrium between all nations, without poorer countries having to undertake internal deflationary policies in order to achieve this. Adopted by the Treasury as the basis for its proposals for post-war monetary arrangements, the plan would eventually be offered to the Americans as the ‘consideration’ to which they were entitled under article VII.22 As the scheme went through successive versions, the major input from the Labour side of the coalition came from Bevin, who would prove to be persistently sceptical of the merits of the 19

Thomas Balogh, ‘A statement on international economic reconstruction’, RDR 6, Oct. 1941, LPA. 20 International relationships subcommittee (economic section), ‘A long-term international economic policy’, RDR 121, Aug. 1942, LPA. 21 Cmd. 6437, Proposals for an international clearing union, Apr. 1943. 22 Moggridge, Maynard Keynes, 676.

162

INTERNATIONAL PLANNING

various proposals for international monetary co-operation. When Keynes’s ideas were put before the war cabinet’s reconstruction problems committee on 31 March 1942, Bevin made up his mind that they ‘really took us back to the automatic gold standard with just a little more rope before the poor unfortunate debtor was hanged’.23 Keynes met Bevin to discuss his objections, and reported to colleagues: He is afraid that the new scheme, though giving a certain amount of leeway, might result in the last resort, in a return to the evils of the old automatic gold standard, and he remembers that that, in the last analysis, was what drove him, against his natural inclinations, to fight the General Strike. I told him that I thought few or no responsible persons contemplated the use of the old weapons, deflation enforced by dear money, resulting in unemployment, as a means of restoring international equilibrium, and that, if the new scheme was to break down, this would not be the remedy which anyone would seek to adopt. He replied that, if this was made perfectly clear, he would feel very much happier about it all.24

Accordingly, it was made clear that the measures which a country might be asked to undertake if it had a substantial debit balance ‘do not include a deflationary policy, enforced by dear money and similar measures, having the effect of causing unemployment’.25 The Keynes plan, after yet further revisions, was finally published a year later, on 7 April 1943. On the same day the official American proposals were also published, which had been prepared by Harry Dexter White, an assistant secretary of the US Treasury. The White plan proposed the creation of two separate institutions: a stabilisation fund and a bank for reconstruction and development. The fund, on which discussion for the time being focused, would have resources of $5 billion, which would be subscribed by member countries in gold, local currency and securities in accordance with quotas determined by a complex formula. These resources would be available to countries in temporary balance of payments difficulties; in return, the rights of member nations to maintain exchange controls and to vary exchange rates would be limited. Moreover, domestic policy would be subject to fund supervision (based on a 4/5ths majority decision).26 On a visit to Britain in 1935, White had met both Dalton and the then Labour Party leader George Lansbury (and had also met Keynes for the first time). The two men had told him then that Labour was against a return to the gold standard.27 Eight years later, socialists and others feared that the White plan amounted to exactly this. Pethick-Lawrence, who was now an 23 24 25 26 27

Ibid. 678; Bevin to Anthony Eden, 24 Apr. 1942, Bevin papers 3/2. Keynes, Collected writings, xxv. 142. Ibid. 143. Ibid; Moggridge, Maynard Keynes, 685–7. David Rees, Harry Dexter White: a study in paradox, London 1974, 59–60.

163

THE LABOUR PARTY AND THE PLANNED ECONOMY

important Labour spokesman outside the government, told the Commons that ‘the American plan proposes in fact a full return to the gold standard . . . I certainly could never support such proposals.’28 These fears – which Keynes had initially partly shared – were misleading.29 As Keynes put it later: I have never heard [White] express the opinion . . . that exchange rates should be fixed, subject to the rarest and most difficult exceptions, just as they once used to be, in terms of gold. The chief matter at issue has been a quite different one, namely whether countries should surrender to an international body the right to decide whether the circumstances are such as to justify a change, or whether they should retain at least some measure of discretion in their own hands.30

Under the scheme, as eventually enacted, only the dollar was pegged to gold, and other currencies were in turn pegged to the dollar, subject to adjustment in specified circumstances, the intention being to avoid the anarchy of competitive devaluation. But at the point when the plan was published, concerns about excessive exchange-rate rigidity, and the possibility that debtor nations might be compelled to take deflationary measures if they wished to devalue, were immediately linked to the psychologically significant fact that the White plan involved a gold subscription: it became difficult for some politicians, Conservative as well as Labour, to rid themselves subsequently of the idea that the plan involved a ‘return to gold’. Thus, although Labour politicians and thinkers did not give the Keynes plan unqualified acceptance, they unanimously praised it at the expense of the White plan.31 (There was also perhaps an element of patriotic support for the home-grown initiative.) An internal party memorandum noted the contrasts between the schemes. The Keynes plan was based on trade levels and there was no preponderant power of veto, whereas in White’s scheme gold played an important part, and the USA, given the size of its proposed national quota, ‘is given in effect a veto, i.e. no 4/5ths majority decision can be taken without it’. The British plan placed responsibility for adjustment on creditors as well as debtors; the American plan placed it only on debtors. The British plan allowed currency blocs, and, unlike its counterpart, aimed specifically at reducing tariffs. Moreover, ‘Although the Keynes Scheme is not related to any post war trade plan, it makes it quite clear the dependence of 28 29 30 31

HC Debs, 389, 12 May 1943, col. 666. Moggridge, Maynard Keynes, 687. Keynes, Collected writings, xxvi. 34. See Tribune, 9, 16 Apr. 1943; New Statesman and Nation, 10 Apr. 1943; Thomas Balogh, ‘The currency plans and international economic relations’, PQ lxi (1943), 343–56; Dalton to Pethick-Lawrence, 7 May 1943, Pethick-Lawrence papers; G. D. H. Cole, Money: its present and future, London 1944, 249–63; E. F. M. Durbin to Attlee, ‘Keynes and Morgenthau plans’, 10 May 1943, Piercy papers 8/9. Durbin clearly attributed the inspiration for the US plan to Henry Morgenthau, the US treasury secretary, rather than to White, his subordinate.

164

INTERNATIONAL PLANNING

the scheme on world collaboration in trade’; whereas, the ‘main fault’ of the White plan ‘appears to be that, whilst no evidence appears of a clear understanding on the part of the USA that their Tariff policy must go, they expect everyone to return to the gold standard, i.e. the stage is set for a repetition of the errors of the past’.32 The commercial union The charge that the US plan took no account of trade policy was perhaps, like the ‘gold standard’ one, unfair.33 However, no American proposals on this subject were yet forthcoming. An important British initiative on this, though, was already in the pipeline; it was written by James Meade, of the economic section of the cabinet secretariat. Meade had long taken an interest in international economic co-operation, and in July 1942 proposed an international commercial union in order to complement Keynes’s clearing union scheme. Meade argued that Britain, whose trade in the past had been largely of a multilateral character, would benefit from a general reduction of barriers and restrictions in international markets, and from the removal of those discriminations and rigidly bilateral bargains that removed the opportunities for multilateral trading. Multilateralism and the removal of trade restrictions ‘do not, however, imply laissez-faire, and are in no way incompatible with a system of state trading’. (Tomlinson has noted that Meade’s views were ‘replete with ideological tension about how far the international economy could be “planned” ’.) Membership of the proposed union would bring the obligation not to extend preferences or other price advantages to any other member country without extending it to all countries. Discrimination of any kind would be allowed against nations which had not joined the union, and were not therefore themselves pledged not to discriminate in turn. Also, ‘discrimination of a defined and moderate degree in favour of a recognised political or geographical grouping of states’ would be permitted, which ‘would thus permit the continuation of a moderate degree of Imperial Preference’.34 Having completed his paper, Meade sought help from Gaitskell, his pre-war Fabian colleague. Gaitskell was now personal assistant to Dalton, who had recently been appointed president of the Board of Trade. Gaitskell redrafted the commercial union proposal and passed it on to his boss. Dalton noted: ‘This is a good paper. I agree generally with the policy proposed, though many points of detail are of first class importance – and first class 32

Post-war finance subcommittee, ‘Some contrasts in the “Keynes” and “White” schemes’, RDR 211, May 1943, LPA. 33 See Rees, Harry Dexter White, 139. 34 Susan Howson (ed.), The collected papers of James Meade, III: International economics, London 1988, 27–35; Tomlinson, Democratic socialism, 24.

165

THE LABOUR PARTY AND THE PLANNED ECONOMY

controversial value’.35 Clearly, Meade’s ideas appealed to him as representing a ‘middle way’ between pure free trade and the excesses of protectionism and bilateralism; his pre-war views had not changed, but he now had a practical scheme to put forward which embodied them. At his instigation, an interdepartmental committee was established to examine the questions at hand. The committee’s report, which favoured multilateral negotiation of a multilateral trading convention, proved controversial.36 Accordingly, in consultation with Attlee, Dalton prepared a memorandum which was put to the war cabinet in April 1943, summarising three policy options. ‘View A’ argued that a general clearance of trade barriers was particularly in Britain’s interest, and could best be secured by a multilateral commercial convention of the kind suggested by Meade. ‘View B’ similarly favoured multilateralism, but argued that Britain should not bind itself to limitations on quantitative import restrictions which might be essential to maintain its balance of payments, or, in the immediate future, give an international body the right to pass judgement on its commercial policy. According to ‘view C’, import restrictions, the balance of payments question aside, were a sound and permanent instrument of national planning.37 The Labour ministers at this time favoured view A; but their own government’s actions after the war would be far more in line with view B, with actual progress towards multilateral trade being made slowly and with reluctance. In the meantime, however, Attlee and Dalton were in the multilateralist vanguard. They were however, unable to prevent the cabinet’s discussion of views A, B and C (on 8 April) descending into mild chaos. Churchill gave a rambling monologue – either because he did not understand the issues at hand or, as Thomas Johnston, the Labour secretary of state for Scotland, suggested, out of cunning, hoping to mislead and entrap the opponents of view A. At one point, after a discussion on buffer stocks had been proceeding for some minutes, the prime minister said, ‘I thought you said Butter Scotch . . . I am getting very hard of hearing.’ Neverthless, the meeting in the end determined to accept an amended version of view A. A cabinet committee was established (on which Dalton was to sit) to produce a solution in line with this. Dalton noted that ‘All this looks like a remarkable success’. But the policy would subsequently become mired in ministerial controversy – which in time, it seems, served to weaken the Labour ministers’ commitment to multilateral trade.38

35 James Meade and Hugh Gaitskell, ‘Post-war commercial policy: a proposal for an international commercial union’, 24 Aug. 1942, Dalton papers II(B)7/4; Pimlott, Hugh Dalton, 399–400. See also Howson, British monetary policy, 80–1. 36 Pressnell, External economic policy, 101–6. 37 PRO, CAB 66/35 WP(43)136, 5 Apr. 1943. 38 Pimlott, Dalton war diary, 577–9, entry for 8 Apr. 1943; PRO, CAB 65/34 WM50(43), 8 Apr. 1943.

166

INTERNATIONAL PLANNING

The Law mission and after Both Attlee and Cripps (who at this time, of course, was still in exile from the Labour Party) had been insistent that the countries of the empire should be consulted before an approach was made to the United States; and when the cabinet committee reported back, on 22 April, this was agreed.39 By the end of July, the cabinet was ready to open discussions with the United States on all subjects covered by article VII, including commercial policy, in order arrive at an agenda for further talks.40 There were further cabinet discussions about the line the delegation to the US would take. Bevin and Dalton argued that the proposed stabilisation fund should not buy or sell gold or currencies. Dalton said ‘he hoped our representatives would do their best to ensure that the scheme was based on gold to the minimum possible extent’41 – although he privately recorded that he thought the rate of exchange more important than either the amount of gold to be subscribed, or the currencies in which the fund could deal.42 According to Leo Amery, the Conservative secretary of state for India, moreover, ‘Bevin . . . voiced a very sensible fear lest any fixed Exchange should interfere with social policy. He added that it would not do to have 19th century America preventing the 20th century in this country. On this I sent him a little note of congratulation.’43 The Labour ministers found general support for their views although, despite reservations, it was decided that Britain would if necessary agree to a 12 1/2 per cent gold subscription in order to reach accord with the United States. Attlee had been told by William Piercy that ‘the general line of making every possible concession to the Americans, both in substance and in form, is wise’.44 The cabinet clearly felt similarly, as further significant efforts to meet US opinion were also made. These included the acceptance both of a smaller fund than had originally been envisaged in the clearing union proposals (with the American commitment limited to $2.3 billion), and of the idea that voting arrangements should bear some relation to national quotas.45 The British delegates, with the Foreign Office minister Richard Law at their head, were instructed accordingly. These developments led, in some Labour quarters, to profound optimism. Evan Durbin told Attlee: ‘I am enormously impressed by the really remarkable success in the field of International Economic Co-operation. I had always assumed that this would be one of our most obstinate problems but we seem

39 40 41 42 43

PRO, CAB 65/34 WM(43)58, 22 Apr. 1943. PRO, CAB 65/35 M(43)106, 27 July 1943. PRO, CAB 65/35 WM121(43), 2 Sept. 1943. Pimlott, Dalton war diary, 629, entry for 1 Sept. 1943. John Barnes and David Nicholson (eds), The empire at bay: the Leo Amery diaries, 1929–1945, London 1988, 937, entry for 2 Sept. 1943. 44 Piercy to Attlee, ‘Monetary clearing union’, 1 Sept. 1943, Piercy papers 8/9. 45 Moggridge, Maynard Keynes, 723.

167

THE LABOUR PARTY AND THE PLANNED ECONOMY

to be moving faster here than anywhere else . . . I do not suggest that all is well – there is still a lively and, in my view, dangerous distrust of the United States over these matters – but, taking the subject as a whole, the record is startlingly encouraging.’46 The progress of the Law mission to some extent bore this buoyant view out. On commercial policy, the British proposals provided the framework for discussion, and were used as the basis of the unpublished joint Anglo-American report of the discussions – although it appeared that the USA would only reduce her own tariffs substantially in exchange for the virtual abolition of imperial and other preferences.47 Progress was also made on the stabilisation fund, the British accepting that it would take the form proposed in the White plan (notably, it was felt within the UK delegation that Attlee and Dalton would support this, but that Bevin would not.)48 However, by way of concession to the British, greater exchange elasticity was ensured, and the right of withdrawal from the fund was recognised. Further outstanding differences were resolved over the coming months.49 But despite the progress of the experts towards agreement, Law’s favourable report on the negotiations led to disagreement amongst ministers. This document, which L. S. Pressnell has dubbed the Washington principles, was circulated to the cabinet on 17 December.50 Amongst Conservatives, devotees of imperial preference like Leo Amery naturally opposed its drift, and Lord Beaverbrook in particular argued that the monetary proposals meant a return to the gold standard. But some of the strongest backing for the results of the Anglo-American discussions came from Labour ministers. In the first of two cabinets on the issue in February, Attlee recorded his support for Law’s views, before having to leave the meeting early. Dalton ‘thought the proposals would help clear the road for our exports in the transitional period, and regarded them as representing the most hopeful line of progress. He was prepared to support them on the currency side, since he regarded them as the opposite of any reversion to the gold standard.’ Herbert Morrison expressed his general agreement with the Washington principles: ‘On sentimental grounds we should all of us favour Empire Trade. But this country could not live solely on it, nor could the Dominions live on trade merely with the United Kingdom and the other Dominions.’ Bevin, always difficult on the gold standard point, had, according to Dalton, ‘been warned that if he makes a row today he will be isolated along with Beaverbrook and the Bank of 46 47 48

E. F. M. Durbin to Attlee, ‘Review of “reconstruction” ’, 21 Oct. 1943, Piercy papers 8/9. Pressnell, External economic policy, 118–19, 129. Susan Howson and D. E. Moggridge (eds), The wartime diaries of Lionel Robbins and James Meade, 1943–45, Basingstoke 1990, 124, entry for 2 Oct. 1943. 49 Harrod, John Maynard Keynes, 570; Richard N. Gardner, Sterling–dollar diplomacy in current perspective: the origins and prospects of our international economic order, New York 1980, 111–21; Moggridge, Maynard Keynes, 725–8; Pressnell, External economic policy, 116–26. 50 PRO, CAB 66/44 WP(43)559 (revise), 17 Dec. 1943; Pressnell, External economic policy, 125.

168

INTERNATIONAL PLANNING

England. . . . This warning has had its effect.’ He thus did not venture a firm opinion, although he did suggest that it might be possible to impose import restrictions against members of the fund who did not enforce the minimum working conditions laid down by the International Labour Organisation (ILO). Churchill summed up the discussion in favour of ‘proceeding with a policy generally on the lines discussed at Washington’. A committee on external economic policy was set up, to determine the line to be taken by officials in discussions with the dominions and India, on which Dalton amongst others was to sit.51 The committee, in spite of Beaverbrook’s ‘great skill in obstruction’, produced a favourable majority report.52 This was presented to the cabinet on 23 February. Attlee, Dalton and Morrison again supported the Washington principles, Attlee arguing, ‘it would be impossible to maintain the sterling area in the form in which it had existed before the war . . . to ignore the attitude of the US in this matter, would lead to disaster’.53 But, as Dalton recorded, the proceedings turned into something of a nightmare: ‘Clearly many ministers, including the PM, have not even read our short report . . . the Beaver begins to shout headlines, “It is a gold fund” . . . “We are giving up our economic empire” . . . The whole thing develops into the worst pandemonium I have ever seen in Cabinet. Towards the end, four or five ministers are often shouting at once.’54 The meeting ended inconclusively. At a further cabinet on 14 April it was agreed, under US pressure, that an Anglo-American joint statement on the principles of an international monetary fund should be issued at an early date; but this was subject to the proviso that ‘while His Majesty’s Government regarded the scheme as a valuable contribution to our objectives in the field of international trade, His Majesty’s Government were in no way committed to it’. (Bevin, for one, ‘still had an uneasy fear that in some way the scheme would anchor us to gold’.)55 The publication on 22 April 1944 of the Anglo-American Joint statement by experts on the establishment of an international monetary fund nonetheless contributed to the rapid progress on the monetary side which culminated in the successful conclusion of the Bretton Woods conference in July.56 The commercial plan was not to be published, however. Dalton argued that the time was not yet ripe: the scheme was not in such an advanced state 51

PRO, CAB 65/41 WM(44)18 (and confidential annex in CAB 65/45), 11 Feb. 1944; Pimlott, Dalton war diary, 704–6, entry for 11 Feb. 1944. 52 Pimlott, Dalton war diary, 706–8, entry for 14–17 Feb. 1944. 53 PRO, CAB 65/41 WM(44)24 (and confidential annex in CAB 65/45), 23 Feb. 1944. 54 Pimlott, Dalton war diary, 710–12, entry for 23 Feb. 1944. 55 PRO, CAB 65/42 WM(44)49 (and confidential annex in CAB 65/46), 14 Apr. 1944. Some socialists, however, were now reassured on the ‘gold standard’ point, even if they were not wildly enthusiastic about the plan as a whole. See, for example, G. D. H. Cole, Money, 6, 318–21. 56 Cmd. 6519, Joint statement by experts on the establishment of an international monetary fund, April 1944.

169

THE LABOUR PARTY AND THE PLANNED ECONOMY

of preparation as the monetary one, further consultation with the dominions was desirable, and, furthermore, the Americans were not pressing for publication.57 This was plausible reasoning, although Amery suggested that in fact Dalton ‘was frightened by the course of the discussion’, and was perhaps influenced to a degree by the arguments of the critics.58 (Indeed, a few days later he remarked in the Commons that ‘Imperial Preference has been of quite definite value both to us and the Dominions’.)59 At any rate, progress on commercial policy was stymied, with Anglo-US talks not resuming until November 1944.

Official Labour policy, 1944 In parallel with developments in Whitehall, Dalton was also making the Labour Party’s own official policy on future international arrangements. The vehicle for this was the April 1944 document Full employment and financial policy (see chapter 6). For the section on ‘International arrangements’ Dalton made use of paragraphs drafted by Durbin.60 These presented schemes of international co-operation as the complement of demand management and economic planning at home: ‘we feel sure that we can and should enter into an agreement with the Dominions, the United States, Russia and other Governments, to control and raise the purchasing power of the world, to keep it constantly at a level that will give full employment everywhere, and to guarantee the stability of the principal rates of exchange without any fear that it will limit our freedom to maintain full employment at home’. Moreover, Dalton and Durbin’s faith in a liberal commercial policy was expressed again. The document argued for ‘the progressive and mutual reduction in tariffs and other impediments, such as import quotas’. Nevertheless, the limits to this commitment were clear: This emphatically does not mean that there should be any return to laissez-faire or ‘free trade’ in the capitalist sense. Socialists believe in the planning of imports and exports and the present apparatus of control – foreign exchange control, import programmes, allocation of scarce materials for the export trade – should remain in existence. War time arrangements for bulk purchase, through State agencies, of food-stuffs and raw materials, should continue. State trading, as the war has proved, brings great benefits to the peoples. We must not let this Socialist advance be halted or turned back.61

57

PRO, CAB 65/42 WM(44)49 (and confidential annex in CAB 65/46), 14 Apr. 1944; Pimlott, Dalton war diary, 735–6, entry for 14 Apr. 1944. 58 Barnes and Nicholson, Amery diaries, 978, entry for 14 Apr. 1944. 59 HC Debs, 399, 20 Apr. 1944, col. 481. 60 Howson, British monetary policy, 82–3, 91. 61 Labour Party, Full employment and financial policy, 6–7.

170

INTERNATIONAL PLANNING

But was this really in the spirit of article VII? Certainly, the Washington principles accepted ‘that conditions created by the war will tend to result in State trading on a more extensive scale than theretofore’, and that therefore ‘methods and arrangements between private-enterprise countries and State-trading countries . . . [should] be such as to take account of this situation in order that the interests of both may be harmonised’.62 Yet it would surely be difficult – although perhaps not impossible – to achieve this in a way that guaranteed non-discrimination. Thus, given that Labour’s state-trading ideas were the corollary of its desire to create a planned economy at home, it is clear that the party’s commitment to commercial liberalisation abroad would complicate the realisation of its domestic aspirations.63 For, as ‘Otto’ Clarke, a Treasury civil servant, would note two years later, when faced with trying to put such a policy into practice, to attempt to combine a liberal international economic policy with an internal economy based on planning meant venturing into a ‘theological maze’.64 The Commons debate Those who saw themselves as the guardians of socialist theology were, indeed, eager to denounce the proposed new international arrangements, which Dalton supported, as incompatible with the main tenets of their beliefs. Thomas Balogh was the intellectual chief of this group; he argued for a financial plan that would ‘permit single countries to maintain full employment irrespective of the consequences of this policy on the balance of their international payments’, and, seeing that the monetary plan did not provide for this, he and his followers sought a bloc of planned economies which would pursue bilateral agreements with one another.65 During the Commons debate in May 1944 on the Anglo-American joint statement, Emanuel Shinwell, at this time a maverick backbencher, followed these arguments closely. He claimed that trade expansion and full employment depended on planning – and having a plan meant ‘that this country . . . should be able at any time, irrespective of any international consideration, financial or otherwise, to enter into reciprocal agreements with any country’. The Labour Party ‘believe in planned trade, orderly trade, bulk purchase’ but ‘If you accept the principle of non-discrimination in relation to international exchange, it is 62 63

PRO, CAB 66/44 WP(43)559 (revise), 17 Dec. 1943. Attlee, Cripps and Bevin all had some appreciation of this, but were reassured by Law that the proposals that his mission had negotiated would not compromise Britain’s ability to undertake state trading. See Cripps to Richard Law, 30 Dec. 1943; Law to Cripps, 7 Jan. 1944; Law to Attlee, 7 Jan. 1944, PRO, CAB 127/91. 64 R. W. B. Clarke diary, entry for 6 Mar. 1946, Clarke papers, Churchill College, Cambridge, 25. 65 Thomas Balogh, Economics of full employment (1944), 159, cited in Gardner, Sterling– dollar diplomacy, 122.

171

THE LABOUR PARTY AND THE PLANNED ECONOMY

bound to affect the position when you come to make reciprocal trading agreements which are, essentially and fundamentally, based on discrimination’.66 Was this argument, which was later central to Shinwell’s opposition to the US loan, correct? John Anderson, the chancellor, claimed that ‘there is nothing in the [monetary] plan which will prevent us from entering into reciprocal trade agreements with other countries or groups of countries’; 67 Keynes pointed out too that ‘the monetary proposals . . . involve no commitments about commercial arrangements’.68 But, as Richard Gardner has written, ‘Where, in all this discussion, was the recognition of Britain’s solemn obligations under Article Seven?’69 The answer, it seems, is that owing to ‘the tergiversations of the Cabinet’ on commercial policy, both Keynes and the chancellor had to keep their own counsel on this point. But surely, as Keynes argued privately, even if commercial bilateralism and monetary multilateralism could be reconciled in a technical sense, as he himself believed, that did not mean that the adoption of the former by Britain would ‘not cause trouble and misunderstanding with the Americans’. Indeed, ‘I am sure it will’.70 For, as Durbin and Piercy advised Attlee, this would amount to ‘declaring a trade war on the United States’.71 This was a consideration that Shinwell did not address directly – but his subsequent stance on the post-war loan suggests that he was prepared to see Britain pay an extremely painful price if so doing was necessary in order to resist the Atlanticist economic agenda. The other contributions to the Commons debate gave Keynes little more comfort than Shinwell’s did.72 The bilateralist argument gained support even from the Tory benches, notably in the arguments of Bob Boothby; and the ‘gold standard’ criticism was also in evidence. On the Labour side, the left-winger G. R. Strauss warned that in its present form the monetary fund would be ‘disastrous to world trade, to the prosperity of this country and to [the] Anglo-American relationship. It is highly desirable that we should have the utmost co-operation in economic affairs with the United States. It is quite a different thing to bind ourselves to the United States with chains that are likely to become burdensome and possibly intolerable.’73 Therefore, apart from the speech of the chancellor himself, almost the only crumb of comfort that Keynes could extract from the debate was Pethick-Lawrence’s contribution, upon which he sent the old veteran a note of congratulation.74 But 66 67 68 69 70 71

HC Debs, 399, 10 May 1944, col. 1981. Ibid. col. 2045. Keynes, Collected writings, xxvi. 8. Gardner, Sterling–dollar diplomacy, 128. Keynes, Collected writings, xxvi. 26. ‘The international monetary fund – future criticisms’, n.d. 1944, (attached to Piercy and E. F. M. Durbin to Attlee, ‘Bretton Woods conference’, 25 Jan. 1945), Piercy papers 8/9. 72 Keynes, Collected writings, xxvi. 3. 73 HC Debs, 399, 10 May 1944, col. 2008. 74 Keynes, Collected writings, xxvi. 3–4.

172

INTERNATIONAL PLANNING

Pethick-Lawrence’s endorsement of the scheme was hardly a model of enthusiasm. Declaring that the greatest risk in non-co-operation would be a return to bilateral trade, which he opposed, he argued: there are grave risks in any scheme, and there are certain grave risks unresolved in the present scheme . . . [the chancellor] should prosecute his enquiries and should make it quite clear that it would be disastrous if we got tied up to gold; [and] that it would be disastrous if a board of management, either incompetent or unwise or one-sided, were to rule this Fund.75

The Commons passed the motion at hand, which merely supported further international consultation on the scheme, without enthusiasm. Keynes predicted: ‘The thing will grind along. We shall produce a further version and when at a later date the House is eventually faced with the alternative of turning their back on this sort of thing and begin to appreciate what that means, I have not the slightest doubt that they will change their minds.’76 As a prediction of the Labour government’s final attitude in 1945, this proved extremely prescient.

The aftermath of Bretton Woods The successful conclusion of the Bretton Woods conference, at which the forty-four nations represented agreed on the creation of an international monetary fund and an international bank, clearly provided a huge fillip for the cause of international co-operation; it was, as Attlee noted, ‘a striking success which owed much to Keynes’.77 But the agreement was subject to ratification by the individual countries. Much delay was occasioned in Britain by internal Treasury controversy over the precise nature of the convertibility obligations which had been agreed at Bretton Woods. On the Labour side, Bevin, in cabinet, continued to express scepticism about the entire scheme, thus earning himself more congratulations from Amery.78 The cabinet as a whole was sufficiently nervous of a negative reaction to the agreement that it allowed no further parliamentary debate. Commercial policy, too, made slow progress. This was largely because of long-drawn-out attempts to accommodate the views of the Ministry of Agriculture; but equally, there is no evidence of the Labour ministers, who perhaps were sensitive to party opinion, pursuing the multilateralist case with their previous vigour. By September, Dalton himself seemed unsure whether or not bulk purchase could be reconciled with the commitment to non-discrimination; and 75 76 77 78

HC Debs, 399, 10 May 1944, cols 2029–34. Keynes, Collected writings, xxvi. 4. Attlee to Tom Attlee, 15 Aug. 1944, Attlee papers, Bodleian Library, Oxford. PRO, CAB 65/51 WM(45) 9 (confidential annex), 21 Jan. 1945; Bullock, Ernest Bevin, ii. 350–1.

173

THE LABOUR PARTY AND THE PLANNED ECONOMY

Thomas Johnston argued for (discriminatory) quantitative import restrictions. Moreover, pressures from within Congress now led to a partial American retreat from multilateralism. At Anglo-American talks in the winter of 1944–5, US officials produced a draft charter for an international trade organisation (ITO); but under it, Britain would be expected to cut tariffs and preferences and abandon import controls, against ‘a mere halving’ of American tariffs.79 Nevertheless, there were some Labour devotees of the proposed international settlement. But as two of them, William Piercy and Evan Durbin, told Attlee in January 1945, the controversy over this subject is being conducted in a very curious fashion. The proposal to set up an International Monetary Fund is being attacked by the odd Parliamentary combination of Shinwell and Boothby, inspired by a number of Hungarian refugee economists (particularly Balogh), and supported by the extreme individualists among the financial journalists! Nevertheless, this paradoxical hotch-potch is exercising a considerable influence on Parliamentary opinion, particularly in the Labour Party, because of our deep and reasonable fear of ‘returning to the Gold Standard’.

They also suggested that Attlee send a refutation of such criticisms to Bevin ‘who is, as you know, greatly influenced by this line of thought’.80 The chancellor in the same month launched an ‘educational campaign’, meeting both Pethick-Lawrence and a (separate) group of Labour MPs to explain the proposals.81 But, at a time of renewed pressure from the Americans for resumption of discussion on article VII, the general mood within the party remained one of scepticism.82 Bevin, who, confidently but wrongly, expected to be chancellor in a future Labour government, was still not convinced of the merits of Bretton Woods. He told the Commons in June 1945 after the break up of the coalition, ‘I will join with anyone in finding a rational basis for an international price level, properly organised, provided it does not reflect itself in depressing the standard of life on the home market. As yet, neither the Chancellor nor Lord Keynes has ever been able to persuade me that there are sufficient safeguards in the Bretton Woods proposals to achieve that object.’83 But the new Labour government, which took office in July, by the end of the year ratified Bretton Woods. As Keynes had predicted, the 79 80

Pressnell, External economic policy, 194, 197, 201. Durbin also commented in March 1945 that he thought Labour’s ‘research and thinking had been weakest on the international economic side’ and ‘admitted that the proposal for state purchases of imports had not been thought through’: Piercy and E. F. M. Durbin to Attlee, ‘Bretton Woods conference’, 25 Jan. 1945, Piercy papers 8/9; FRUS 1945 vi, Washington, DC 1969, 39–40. 81 Keynes, Collected writings, xxvi. 187. 82 Churchill to Attlee, John Anderson and ‘others concerned’, 11 Feb. 1945, Churchill papers CHAR 20/223, fo. 22. 83 HC Debs, 411, 4 June 1945, col. 582.

174

INTERNATIONAL PLANNING

majority of sceptics, Bevin included, acquiesced when faced with the alternative – trying to survive the post-war transition without United States aid.

The US loan Dalton later recalled that, during the last months of 1945, as negotiations for American financial help proceeded, ‘we retreated, slowly and with a bad grace and with increasing irritation, from a free gift to an interest-free loan, and from this again to a loan bearing interest; from a larger to a smaller total of aid; and from the prospect of loose strings, some of which would be only general declarations of intention, to the most unwilling acceptance of strings so tight that they might strangle our trade and indeed, our whole economic life’.84 Almost the only bargaining counter that Britain had in her transactions with the USA was the threat that, if no loan was forthcoming, she would not ratify Bretton Woods; and if Britain did not do so by 31 December 1945, the fund and the bank would not be able to begin operations.85 But the USA in turn was able to exploit Britain’s predicament to tie her to further multilateral objectives. On commercial policy, these were broadly statements of intent: the Anglo-American financial agreement, finally signed on 6 December, asserted that one of the purposes of the loan was ‘to assist the Government of the United Kingdom to assume the obligations of mutilateral trade’, and parliament was in due course asked to welcome the initiative of the US government in putting forward the ITO proposals.86 But also, amongst the specific provisions, Britain would by 31 December 1946 have to ensure that her use of quantitative trade controls did not discriminate against the United States. And, on the monetary side, sterling would have to be made generally convertible for current transactions within one year after the effective date of the agreement (i.e. by 15 July 1947, as it turned out).87 The Labour cabinet, and parliament, accepted these obligations; but can it be argued that, by so doing, they easily fell in behind the Atlanticist approach to trade and payments? Booth has argued that this is the case. He claims that the acceptance of the loan, compounded by Bevin’s 1947 decision to press for the maximum possible amount of Marshall aid for Britain, helped reconcile Labour opinion to the Atlanticist economic agenda. However, he also argues that the ‘Atlanticist base . . . shaped Labour’s foreign economic policy, but it did so because the majority of ministers could find no real alternative’. This seems to contradict his own later claim that they were easily converted to the 84 85 86

Dalton, High tide and after, 74–5. See Gardner, Sterling–dollar diplomacy, 224. Cmd. 6708, Financial agreement between the governments of the United States and the United Kingdom, Dec. 1945; HC Debs, 417, 12 Dec. 1945, col. 422. 87 Cmd. 6708. See also Gardner, Sterling–dollar diplomacy, 213–21.

175

THE LABOUR PARTY AND THE PLANNED ECONOMY

American viewpoint. For, as Booth himself notes, ‘the Cabinet was extremely unenthusiastic’ about the terms of the US loan.88 This was certainly true in the case of Dalton, who, in the final analysis, was driven by political considerations to accept it complete with strings. The alternative, as he saw it, was ‘Less food . . . [and] practically no smokes, since eighty per cent of our tobacco cost dollars . . . leading towards sure defeat at the next election’.89 Dalton had the conviction, verging on desperation, that American help was essential at almost any cost. The prime minister shared this opinion. ‘We had to have the loan,’ Attlee told Kenneth Harris in retirement. ‘We knew how much we risked when we accepted convertibility, but Keynes urged us to take the risk – you see, he believed profoundly in Free Trade.’90 The implication of this, perhaps, was that Attlee shared no such belief, but he had a reputation for deferring to the experts in such matters, and in this case did so.91 Bevin, by contrast, has been described by Alan Booth as ‘the likeliest supporter of Anglo-American economic co-operation’ in 1945.92 Given Bevin’s prior attitude to Bretton Woods, it may be seen that this is almost the opposite of the truth. Indeed, Booth himself acknowledges that the foreign secretary could find little fervour for the loan. As Douglas Jay, Attlee’s new economic assistant, later recalled: Bevin, like many of us, started the negotiation with a strong distaste for accepting any help from the Americans or any conditions imposed by them. He used to march down the corridor to the Cabinet Room at No. 10 each evening remarking loudly with a broad grin: “Any danger of a settlement tonight?” But the stark realities of the situation steadily impinged on his mind, and in the end the very fact that he had started from this viewpoint gave him greater conviction and authority in his defence of the inevitable loan.93

In the Commons he completely reversed his position on Bretton Woods, declaring himself satisfied that under the rules which had been laid down, the problems of the gold standard years need never recur: ‘I feel that this is not the gold standard.’94 Thus, if anyone now performed a volte-face on external economic policy, it was Bevin. His about-turn meant the end of heavy-weight Labour opposition to the new international settlement, but left-wing critics remained vocal. Shinwell, now minister of fuel and power, told the cabinet that the loan was ‘incompat-

88 89 90 91

Booth, British economic policy, 136. Dalton, High tide and after, 85. Harris, Attlee, 275. For Attlee’s reputation see Howson and Moggridge, Wartime diaries of Robbins and Meade, 124, entry for 2 Oct. 1943. 92 Booth, British economic policy, 136. 93 Jay, Change and fortune, 137. 94 HC Debs, 417, 13 Dec. 1945, col. 733.

176

INTERNATIONAL PLANNING

ible with the successful operation of a planned economy in this country’; Aneurin Bevan, minister of health, supported him.95 In the Commons, Jennie Lee, Bevan’s wife, described the Anglo-American financial agreement as ‘a niggardly, barbaric and antediluvian settlement’.96 Labour backbencher Richard Stokes said that the Americans were ‘extremely ignorant’, and did ‘not understand the international trade problem’.97 Amazingly, Morrison, the lord president, had previously told a meeting of the Parliamentary Labour Party of the government’s decision that ‘should any member who held strong views on this matter find it necessary to vote against the Government’s proposals . . . disciplinary action would be inapplicable on this occasion’.98 The rationale for this, presumably, was the same as that given by the chancellor to James Callaghan when the latter expressed his doubts about the loan settlement: ‘Hugh Dalton gave one of his portentous winks. He did not mind, he said, if some of us voted against the loan and the Agreement. It would show the Americans that the Labour Government was not a pushover, and had its own domestic problems.’99 In the end, the measure was passed by 347 to 100, with most Tories abstaining and only twenty-three Labour MPs (including Callaghan) voting against. Kenneth Harris has written: ‘For better or worse [Britain] had tied her economic future to that of the Americans.’100

Developments after 1945 Although Harris’s statement contains an obvious measure of truth, Britain was not, as a result, corralled into unqualified acceptance of the American agenda on trade and payments. But in 1945 and after, the Attlee government was nevertheless faced with a dilemma. Francis Williams, the prime minister’s former public relations adviser, in 1948 characterised this as ‘the dilemma of the dual necessity – the need to plan an economy which will fit into a world pattern if that should still be possible but which will be capable of surviving if no such pattern is restored’.101 This was a version of the ‘planning paradox’, sharpened by circumstances. For Britain could only ensure her economic survival by using American dollar aid to ease her dire foreign exchange problem; but such aid would only be forthcoming on the basis of promises to fit in with the Atlanticist ‘world pattern’. Yet such promises, if enacted, could only weaken the country’s foreign exchange position once more.

95 96 97 98 99 100 101

PRO, CAB 128/4 CM(45)57 (confidential annex), 29 Nov. 1945. HC Debs, 417, 13 Dec. 1945, col. 669. Ibid. col. 709. Meeting of the parliamentary Labour Party, 12 Dec. 1945, LPA. Callaghan, Time and chance, 73–4. Harris, Attlee, 275. Francis Williams, The triple challenge: the future of socialist Britain, London 1948, 170.

177

THE LABOUR PARTY AND THE PLANNED ECONOMY

There was, therefore, a strong temptation to the British to make commitments, in particular to the extension of multilateral trade, in line with the aspirations that several Labour ministers had voiced during the war years. Yet equally there was every incentive to avoid putting such commitments into practice in the short term. The behaviour this situation encouraged led to the American accusation that the Labour government was not serious about liberalisation, both in this form and in general.102 The accusation was not necessarily fair. But the fact that it was made tends to suggest that there was no warm embrace of the Atlanticist position by Labour in the late 1940s; rather, the party’s actions in government were a product of tensions between competing practical and ideological objectives. In attempting to ensure her own economic survival, while keeping the path of future international co-operation open, Britain, in Williams’s words, had ‘to ride two horses at the same time’.103 There were, of course, strong US pressures to adopt the Atlanticist view more wholeheartedly. These, especially over the question of international payments, posed a potential danger to Labour’s domestic programme. Dalton feared that to ask for sterling convertibility to be delayed would be to invite American attempts to force Britain to abandon policies of nationalisation and improved social services.104 But although sticking to the commitment to make the pound freely convertible led directly to the crisis of July and August 1947, the paradoxical consequence of that episode, once convertibility had been suspended again, was that the aim of sterling convertibility was put to one side for the indefinite future – and meanwhile Labour stuck to its socialism at home. At the same time, Britain received official US sanction, for the time being, to discriminate against American goods in favour of non-dollar suppliers.105 The episode highlights the difficulties Labour faced in fulfilling its international and domestic promises at once; but the end result was no simple caving in to the American view. Equally, Roy Harrod, Keynes’s biographer, noting the government’s preoccupations with domestic matters, recalled in 1959 that ‘distinguished American officials’ had told him that ‘once the war was over, the British . . . seemed to show little interest in the development of the [Anglo-American] war-time planning or in the international institutions that had been set up’.106 To the extent that this was true, it was in part because those institutions showed no

102 The US magazine Time, however, did concede that Cripps believed in multilateralism and freer world trade, but that he had been forced to sacrifice principles for expediency (10 Nov. 1947). 103 Williams, The triple challenge, 170. 104 Dalton, High tide and after, 255. 105 Gardner, Sterling–dollar diplomacy, 336. 106 Roy Harrod, The prof: a personal memoir of Lord Cherwell, London 1959, 249.

178

INTERNATIONAL PLANNING

signs of living up to the high hopes that Keynes, and indeed Labour thinkers like Durbin and Piercy, had had for them.107 But at the same time, the once-held fear of Bevin and others, that the creation of the IMF and the World Bank meant a return to the gold standard, and the subjection of domestic policies to outside interference, was never fulfilled; in 1949 Britain was able to enact a substantial devaluation of sterling, with no threat of direct outside intervention to enforce deflationary policies. Nor, in fact, had Labour’s interest in international economic co-operation evaporated. Eager to avoid the errors of the inter-war years, in 1950 Cripps and Gaitskell warmly supported a United Nations scheme for the co-ordination of national full employment policies.108 But this type of ‘fairly extreme Keynesian solution’ was not the kind of international co-operation the Americans had in mind.109 Moreover, although Labour did not construct a planned economy at home, this was not the result of the commitments over trade and payments on which the US loan was conditional. Rather, Labour lacked the political will and the economic apparatus to enact its (extremely vague) conception of socialist planning (see chapters 8 and 9). Indeed, ironically enough, given Shinwell’s criticism of the loan agreement, the only attempt at long-range economic forecasting that the Attlee government made was undertaken partly in order to please the Americans. This, The long-term programme of the United Kingdom, was presented in 1948 as part of Britain’s bid to secure Marshall aid; thus, the need to win over US opinion did have some impact on the presentation of Labour’s policies, and this in turn had significant, if unintended, consequences for the government’s planning strategy. (This question will be examined in chapter 9.) But in spite of the warm feelings towards America generated by Marshall aid, there was no revolution in Labour’s economic thought. This was especially true on commercial policy, where the Americans continued to press for further multilateralism, but were for the most part frustrated. As Tomlinson has argued, Britain responded to US pressures on the basis of an overriding commitment to the Atlantic alliance, but never gave

107 108

See Booth, British economic policy, 151. Gaitskell noted that ‘there was now a general consensus of opinion among economists as to the causes of unemployment and its appropriate remedies. Much of the credit for that was due to a great Englishman who had also been a great internationalist – the late Lord Keynes’: United Nations economic and social council official records eleventh session, 390th meeting, 17 July 1950, 113–18. For Cripps’s views see Nicholas Kaldor to Sidney Dell, 24 Jan. 1950, Kaldor papers, King’s College, Cambridge, NK/3/30/55/30–1. See also Stephen Blank, ‘Britain: the politics of foreign economic policy, the domestic economy, and the problem of pluralistic stagnation’, International Organization xxxi (1977), 673–721 at p. 679; Anthony P. Thirlwall, Nicholas Kaldor, Brighton 1987, 108–9; Philip M. Williams (ed.), The diary of Hugh Gaitskell, 1945–1956, London 1983, 193–4, entry for 11 Aug. 1950. 109 Charles P. Kindleberger, ‘Economists in international organizations’, IO ix (1955), 338–52. See also Dell to Kaldor 21 Jan. 1950, Kaldor papers NK/3/30/55/32–3.

179

THE LABOUR PARTY AND THE PLANNED ECONOMY

more than was deemed politically inescapable to maintain that alliance.110 That is to say, the government continued to ride two horses at once. This was in part the consequence of a continuing dichotomy in Labour thought. Dalton and Attlee’s wartime support for commercial multilateralism had been conditional on its being made compatible with continued state trading. This attitude was sustained after 1945 by Stafford Cripps, who had taken Dalton’s old posting as president of the Board of Trade. Early in 1946, ‘Otto’ Clarke noted that ‘Cripps (main advocate of the ITO policy) has now come out for bulk purchase of cotton – which is quite illogical’.111 Whether so or not, it was in line with Cripps’s commitment to ‘planned multilateralism’, and was consistent with the policy that Dalton had bequeathed from wartime days.112 Cripps’s ‘two cardinal principles’ were that Britain should retain her freedom to engage in bulk purchase and to plan imports – even though he wanted the international trading system opened up.113 The situation was further complicated by Britain’s weakening external position, and the pressures and uncertainties of international trade diplomacy. In January 1947, the cabinet agreed to the establishment of a group of outside economists, which would study the alternative policies which might be adopted in the event of a complete or partial breakdown of plans for an ITO.114 This was to be kept top secret. As John Henry Woods, permanent secretary to the Board of Trade, told the economists concerned, ‘it would be acutely embarrassing if it got out . . . that we were doing anything which could be regarded as hedging on ITO’.115 This, however, was increasingly 110 111 112 113

Tomlinson, Democratic socialism, 35. Clarke diary, entry for 6 Mar. 1946, Clarke papers 25. Joseph D. Coppock oral history transcript, Truman Library, Independence, MO, 61–2. These remarks caused controversy in Congress: New York Times, 25 March 1947; United States Senate, committee on finance: hearings on ITO: (80)S821-0-A, 25 Mar. 1947, 192. 114 Cripps to Attlee, 8 Mar. 1947, Robinson papers, Churchill College, Cambridge, ADDNL 7 ii). 115 The members of the group, which met from March to October, were Richard Kahn, Austin Robinson, D. H. Robertson, H. J. Habbakuk and Donald MacDougall. The group was not successful in arriving at a satisfactory alternatve to the ITO. Robinson wrote, ‘I want to put on paper my reasons for feeling very considerable doubts about the efficiency of any of the devices that we have so far considered. . . . I am convinced that, if the ITO is a failure, the most important forms of adjustment to that fact are likely to be adjustments of the whole internal structure of our economy. While efforts to achieve some smaller measure of expansion of exports by international agreements or by bargaining devices may conceivably enable us to import £1400 millions, I cannot believe that they will relieve us of the necessity to take very drastic internal measures of readjustment.’ Nor did the group have much of an impact on policy. Kahn complained: ‘Personally I feel that I have been wasting my time over the summer . . . the reason why we were appointed to do a job that Civil Servants could do far better was that the Civil Servants concerned were so busy, and it seems to me a pity that we could not have been warned that they would remain so busy as not to have time to look at our products’. In fact, these products were read, but were written in an ‘obscure and involved style . . . too abstract for the ordinary civil servant’. The negligible practical results of the

180

INTERNATIONAL PLANNING

what the government was doing. Cripps’s opening contribution to the Geneva trade conference in April called for ‘a world policy of trade expansion to be based upon an extensive international division of labour’; but Wilson warned the same conference in August that in the coming months and years, Britain would have to use methods which ‘may appear to be opposed to the principles and methods of the draft [ITO] charter’.116 Of course, the convertibility crisis had intervened between the two men’s speeches, weakening the country’s external position radically, and with it the prospects of rapid progress towards multilateralism.117 Thus, as chancellor after 1947, Cripps resisted moves towards non-discrimination firmly, even whilst espousing it as an ideal to be pursued in the longer run. There is no reason to think that his pronouncements that non-discriminatory multilateral trade would be beneficial for Britain – when eventually put into practice at a much later point – were made cynically.118 But his approach risked coming across as hypocrisy, a case of ‘Give me chastity, oh Lord, but not yet’. This, of course, infuriated the Americans, who became convinced that ‘the present Government of the UK, while giving lip service to the principles of mutilateral trade, really believes that Britain can never face free competition and must seek sheltered markets through preferential arrangements, discriminatory bilateral contracts, and barter deals. For that reason it has never wanted . . . the ITO to be set up.’119 In fact, owing to congressional opposition, the ITO was abandoned by the US government itself in December 1950 (the preliminary General Agreement on Tariffs and Trade (GATT), signed in Geneva in 1947, survived). But exercise may also have been a consequence of Cripps’s alleged tendency not to monitor the implementation of his stated policies. See John Henry Woods to Robinson, 11 Mar. 1947, Robinson papers ADDNL 7 ii); E. A. G. Robinson, ‘The nature and dimensions of our economic problem’, n.d., 1947 Kahn papers, King’s College, Cambridge, RFK/7/2/419–24; Kahn to H. J. B. Lintott, 20 Oct. 1947 ibid. RFK/7/2/64–5; H. J. B. Lintott, ‘OTI’, 11 Oct. 1947, PRO, BT 11/3544; Sidney Dell to Jonathan Rosenhead, 10 Oct. 1983, Sidney Dell papers, Bodleian Library, Oxford, MSS.Eng.c.5860, fos 422–4. 116 Speech by Stafford Cripps on 11 Apr. 1947, Robinson papers 6/6/3; speech by Wilson at the second session of the preparatory committee of the UN conference on trade and employment, 6th meeting, 23 Aug. 1947, GATT archive, World Trade Organization, Geneva. See also Documents on Canadian external relations, XIV: 1948, Ottawa 1994, 904. 117 As Harold Wilson commented in November 1947, ‘The multilateral, all-convertible trading world envisaged in 1945 crashed in the summer’: ‘Paying our way abroad’, in Jay and others, The road to recovery, 89–98 at p. 97. 118 Tomlinson, Democratic socialism, 35. See also Dupree, Streat diary, ii. 316, entry for 8 Jan. 1946. 119 FRUS 1948, i, Washington, DC 1976, 878. Not all Americans, however, took such a negative view of the British negotiating attitude on external economic questions. W. Averell Harriman, US representative in Europe under the economic cooperation act of 1948, who negotiated the establishment of the European payments union, recalled ‘One thing about Cripps was that after he made an agreement he always did a little better than he said he would. It was very tough to get him to agree to something, but after he came to an agreement he was very cooperative’: oral history transcript, Truman Library, 9–10.

181

THE LABOUR PARTY AND THE PLANNED ECONOMY

it is certainly true that Britain had serious doubts about signing up to the ITO. This is not to say, however, that the American criticism was entirely fair; for these doubts were partly, and increasingly, a consequence of the USA’s reluctance to match British concessions by substantially lowering her own tariffs. Given this reluctance, Labour ministers, in the tough economic conditions that they faced, were more than willing to depart from multilateral trade policies. This was because the adoption of multilateral trade would weaken Britain’s ability to control its foreign exchange position, thus leading towards devaluation. And, although senior Labour politicians had argued during war time that under the new international system there should be the right to substantial devaluation, they did not want to exercise that right, not least because this would unfairly diminish the value of the huge sterling balances accumulated during the war by countries such as India. This in turn might trigger demands for immediate repayment. Thus Dalton remarked during the 1949 sterling crisis, shortly before the government was forced to bow to the devaluation that was in fact inevitable, that in the absence of ‘big’ financial assistance from the US, ‘we must fight our way through without [the Americans] . . . making bilateral deals with whoever we can’.120 Such considerations help explain why, by 1950, over half of all British imports were still subject to government control. Nevertheless, this figure had been over 95 per cent at the end of the war; so there had also been significant liberalisation in this area. The progress towards the 1950 level was in large part attributable to the previous year’s agreement between the Organisation for European Economic Cooperation (OEEC) countries to work to cut away quota restrictions between them – which agreement was itself the result of a British initiative.121 This was consistent with the line laid out in Full employment and financial policy in 1944. It was also consistent with the ‘dual necessity’ outlined by Williams – for it was an attempt to build up closely integrated trade with a small group of non-dollar nations as a basis for limited prosperity in case the hoped-for ‘world pattern’ did not emerge. In other words, this form of liberalisation developed as an alternative to Atlanticism: Cripps and Wilson hoped that a general relaxation of import controls in western Europe would help divert US pressure for new European payments arrangements which would involve a loss of dollars.122 Moreover, as will be seen in chapter 9, many Labour ministers were concerned, even on this basis, to see that liberalisation did not go too far. In January 1950, Gaitskell, Shinwell’s replacement as minister of fuel and power, won support from Dalton, Bevan, Strachey and Wilson, as well as some agreement from Cripps, when he argued that ‘Exchange control and import controls will be necessary, 120 121 122

Cited in Brett, Gilliatt and Pople, ‘Planned trade’, 138. J. C. R. Dow, The management of the British economy, 1945–60, Cambridge 1964, 154, 50. Burgess, Stafford Cripps, 273. For a convincing exposition of the issues at stake see C. C. S. Newton, ‘The sterling crisis of 1947 and the British response to the Marshall plan’, ECHR xxxvii (1984), 391–408.

182

INTERNATIONAL PLANNING

permanently, as vital instruments of policy’.123 Cripps’s public announcement to this effect led the US National Association of Manufacturers to call on the Truman administration abandon the (now virtually defunct) draft ITO charter in protest.124 It is therefore clear that Labour had not straightforwardly fallen in with the Atlanticist view as interpreted by the Americans. Dalton and others did not perform a volte-face in the 1940s; rather, they achieved consistency in ambiguity. High enthusiasm for monetary and commercial multilateralism (the latter of which was for a time Dalton’s pet project) in 1943–4 was matched by simultaneous advocacy of exchange controls, import controls and state trading. The acceptance of the Atlanticist provisions of Bretton Woods in 1945 was twinned with the pursuit of a domestic programme of dedicated socialist intent. And subsequently, the credibility of the continued, and undoubtedly genuine, Labour aspiration to international economic cooperation, was called into question, in US eyes at least, by the party’s dogged defence of Britain’s discriminatory privileges. Bevin, in some ways, was an exception from this general rule of ambiguity, in that he went from downright opposition to Bretton Woods, to expedient support of the loan and its conditions, to early and outright enthusiasm for most aspects of the Atlantic alliance. Yet even he continued to voice ‘carpet-slipper’ thoughts on international economic questions – suggesting, for example, that America should open Fort Knox and distribute its ‘useless’ gold to the world – in a way guaranteed to infuriate US opinion.125 Labour policy, therefore, retained vital contradictions. The example of ‘international planning’ may thus be taken as evidence in favour of the argument made by Booth that, in spite of the alleged sophistication of Labour’s post-1931 programme, such preparation proved of dubious value once the party was actually in government after 1945.126 During the war, international economic issues had been discussed within the party to an unprecedented degree; Labour ministers had been privy to cabinet discussions on these questions, and had had increased access to expert advice. Yet by the time that Labour took power, the party’s desire for international economic co-operation was still in conflict with key aspects of its wider socialist aspiration: the ‘planning paradox’ had not been resolved. As Attlee himself put it in November 1946: ‘In certain specific points of world economic planning, we find the 123 Neil Rollings, ‘ “The Reichstag method of governing”? The Attlee governments and permanent economic controls’, in Helen Mercer, Neil Rollings and Jim Tomlinson (eds), Labour governments and private industry: The experience of 1945–1951, Edinburgh 1992, 15–36; Philip M. Williams, Hugh Gaitskell: a political biography, London 1979, 218–25. In line with this view, Gaitskell later in the year extracted important concessions from the Americans over the form of the new European payments union: Scott Kelly, ‘Ministers matter: Gaitskell and Butler at odds over convertibility, 1950–52’, CBH xiv (2000), 27–53. 124 Thomas W. Zeiler, Free trade free world: the advent of GATT, Chapel Hill, NC 1999, 151. 125 Williams, The triple challenge, 170. 126 Booth, ‘Light years’.

183

THE LABOUR PARTY AND THE PLANNED ECONOMY

United States in agreement with us, but, generally speaking, they hold a capitalist philosophy which we do not accept.’127 For this reason alone, the post-war Labour government’s full acceptance of the Atlanticist international economic agenda was never likely. Therefore, if there was no general capitulation to Atlanticist economic objectives, British socialist planning cannot have been the victim of such a surrender. Yet, as will be seen in the next chapter, the Labour government was nonetheless dilatory in its attempts to build a planned economy at home. For this it could not blame the Americans. Rather, after 1945, in spite of all the party’s previous discussions of planning, the weaknesses of its preparations would become clear.

127

HC Debs, 430, 18 Nov. 1946, col. 580.

184

Unplanned Socialism, 1945–1947

8

Bricks Without Straw: Unplanned Socialism, 1945–1947 During the Attlee government’s first eighteen months in office, before the 1947 fuel crisis appeared to make a mockery of its claims of foresight and efficiency, the word ‘planning’ was still a great political trump card for Labour. On the one hand, economic circumstances were such that the need for a fair measure of government involvement in resource allocation during the transition from war to peace was pretty much undeniable. On the other, the Conservative opposition was conveniently split between those who favoured pure free enterprise and put all government failures down to planning, and the ‘me too-ers’ who argued that all the government’s problems were due to the fact that it was not planning sufficiently vigorously. The Labour Party had, it might have seemed, an historic opportunity to divide and plan. But, even as the government made dramatic progress on other fronts in this early period, it did not do so in the sphere of planning. Even contemporaries, in their most optimistic recollections, were subsequently hesitant to claim that ‘serious’ economic planning took place before 1947.1 This was not the perception at the time, however. Paradoxically, ministers failed to plan at least in part because they assumed that planning was already taking place. The government’s boldness in other spheres, such as nationalisation and social policy, together with the continuance of controls and the persistence of full employment, helped convince them that somehow it must be. Yet in practice their own ‘nebulous but exalted’ ideas of planning could not be enacted whilst, on the one hand, arguments between their advisers about the nature of planning continued, and, on the other, the ministers themselves did not get to grip with those disputes and act decisively to resolve them.2 This chapter will explore these difficulties, with reference to Labour’s initial period of ‘unplanned socialism’ – the government’s first two years in which, despite various tentative initiatives and much talk of planning, the planned economy did not come into being. This requires a slight diversion from strict party political concerns: given that Labour ministers were now in office in their own right, it is necessary, in order to understand their actions,

1

Herbert Morrison, Government and parliament: a survey from the inside, London 1954, 299; Hugh Gaitskell, ‘Labour and economic planning’, FJ (Nov. 1954), 4–11; E. A. G. Robinson, Economic planning in the UK: some lessons, Cambridge 1967, 3. 2 Cairncross, Years of recovery, 303.

185

THE LABOUR PARTY AND THE PLANNED ECONOMY

to study not only their own views, but also those of the civil servants who advised them. For, although they fell outside the realm of the party activity which is the direct concern of this book, disputes between officials can be used as a means of illuminating the different views of planning held by Morrison, Dalton and Cripps respectively. These differences, and their consequences, in turn had a profound influence on the development of planning thought throughout the party as a whole during the remainder of the Attlee years. First, then, this chapter will describe the structure and origins of such planning machinery as the government did set up in 1945. Second, in view of the increased importance of official advice at a time when ministers were failing to give a constructive lead, the divisions between civil servants on planning will be examined (and Tomlinson’s argument that there were no such divisions will be challenged). The diary of ‘Otto’ Clarke, previously underexploited in spite of Peter Hennessy’s recognition of its importance, provides new evidence on this point.3 Third, the impact of that official advice on the views of the chief economic ministers will be looked at, in the context of those ministers’ already differing skills, perspectives and obsessions.

Machinery of planning Clearly, a planned economy needs a central mechanism for reaching economic decisions, and then acting upon them. The form that such machinery would take had never been properly resolved by Labour thinkers in the years before 1945; and this lack of a clear blueprint showed when the party came into office. Disputes between ministers soon erupted. On 2 August 1945, Cripps, the president of the Board of Trade, told Attlee that ‘Herbert [Morrison] has written to me objecting to my overseeing the central economic and statistical staff, which was, as you will remember a condition of my taking this job’.4 In spite of this apparent previous commitment by the prime minister, the matter was resolved in Morrison’s favour on 20 August; the economic section would remain attached to the Cabinet Office.5 There was perhaps some virtue in the section keeping its independence in this way. But from the point of view of enacting Labour’s programme, it might have been better if Cripps had won; he had ambitious plans for ‘a large expert central staff comprising statisticians, economists and so forth’, in line with prior socialist calls for ‘an economic general staff’, and for which the economic section and the central statistical office (CSO) could have formed a base.6

3 4 5 6

Hennessy, Never again, 212–13, and ‘Never again’, 9. Cripps to Attlee, 2 Aug. 1945, copy in Cripps papers. Cairncross, Years of recovery, 318–19. Edward Bridges to Meade, 22 Aug. 1945, PRO, T230/18 EC(S)(45)27.

186

UNPLANNED SOCIALISM, 1945–1947

(Morrison thought the idea of such a staff to be ‘a mistaken conception’.)7 However, perhaps as a sop to Cripps, a ministerial committee on economic planning was formed, comprising Cripps, Morrison, Dalton and George Isaacs (the ineffectual minister of labour). Under this was an official steering committee on economic development, composed principally of the permanent secretaries of the four departments represented on the ministerial committee, which was charged with the preparation of an economic plan.8 But the ministerial committee only met eight times between January 1946, when it was formally named and constituted, and January 1947, when Morrison fell ill. By contrast, the official committee was much more active. In this situation official advice became of paramount significance, as did differences between officials, especially with regard to the finer points of economic policy. For example, early in 1946 ‘Otto’ Clarke, recently appointed as an assistant secretary at the Treasury, noted in his diary a hiatus over whether or not bulk purchase of cotton should be continued: ‘This is the height of rule by officials . . . Here we are at the nub of Socialism . . . It really makes a difference in a fundamental sense, unlike nationalization of the Bank [of England] or transport. But ministers have no policy and ask officials to produce one for them.’9 Given this heightened influence of civil servants over such vital planning matters, it is necessary not only to examine its ministers’ own ideological preconceptions, but also the views of those who were advising them.

Gosplanners versus thermostatters In February 1946 Clarke noted a division within Whitehall between those he labelled ‘thermostatters’ and ‘gosplanners’. ‘The conflict is beneath the surface at present . . . But it will develop strongly, and there will be two camps. Unfortunately, it seems unlikely that the conflict will go to Ministers. The danger is that Ministers will think we are planning when we are not.’10 Clarke identified himself as a gosplanner, a reference to the Soviet planning agency. The label ‘thermostatter’ was a reference to James Meade’s proposal, developed during the war, to control overall demand in ‘thermostatic’ fashion by adjusting national insurance contributions automatically, according to the rate of unemployment. Meade himself had similarly spoken in August 1945 of a struggle between ‘Gosplanites’ and ‘Liberal-Socialists’.11 Tomlinson, however, has argued explicitly that, in spite of Meade’s testimony, ‘there was no serious advocacy of Gosplan-style planning from ministers or economists 7 8 9 10 11

HC Debs, 419, 28 Feb. 1946, col. 2211. Cairncross, Years of recovery, 319. Clarke diary, entry for 3 Jan. 1946, Clarke papers 25. Ibid. entry for 5 Feb. 1946. Howson and Moggridge, Meade papers, iv. 118, entry for 26 Aug. 1945.

187

THE LABOUR PARTY AND THE PLANNED ECONOMY

in his period as head of the Economic Section’ (which ended in April 1947).12 Tomlinson is certainly right that Meade exaggerated; there was, contrary to Meade’s belief, no one of influence who was consistently of the opinion that the government should lay down in advance exactly how many shirts, boots and shoes should be produced over the next five years.13 Yet the existence of strong differences over planning amongst civil servants cannot be doubted; the real issue to be resolved is the nature of those differences, and their consequences. The opinions of Meade himself must form the starting point for understanding these conflicts. This is in spite of the fact that his leadership of the economic section cannot be counted a success. Tomlinson has overrated his influence; as Thomas Wilson, a member of the section in early post-war days, has noted, although Meade was academically distinguished, ‘effectiveness in shaping policy is another matter’.14 An academic purist, he was more interested in seeing that ministers were given the right technical advice than in making sure they accepted it or indeed understood it. Nevertheless, his views have generally been seen as a paradigm for a Keynesian-style view of planning, with the government largely restricting its interventions to the global (macroeconomic) sphere, an approach labelled by its opponents as ‘thermostattery’ or ‘globaloney’.15 How, then, did the thermostatters envisage planning taking place? In September 1945, at the behest of Morrison, Meade outlined his views in a memorandum entitled ‘Economic planning’. In his opinion, ‘the first and foremost purpose’ of planning was ‘to consider not so much the position of particular industries or regions but rather the overall position of the economy as a whole. Difficulties associated with particular industries or particular regions will be immeasurably easier to manage if the overall balance between supply and demand is maintained.’ In order to achieve this, it would be necessary to prepare an economic survey which would compare the total economic resources likely to be available with the claims likely to be made on them on the basis of current programmes and policies. On the basis of the probable inflationary or deflationary ‘gap’ thus uncovered, an overall economic plan could be devised to indicate the alternate ways in which the gap could be closed. In all, the idea was to plan in terms of broad categories of demand upon the nation’s resources, whilst eschewing ‘a rigid detailed plan for each

12 13 14

Tomlinson, Democratic socialism, 140. Howson and Moggridge, Meade papers, iv. 202, entry for 27 Jan. 1946. Anthony Seldon and Jim Tomlinson, ‘The influence of ideas on post-war economic policy in Britain (2): Anthony Seldon interviews Jim Tomlinson’, CBH x (1996) 191–212 at pp. 200, 207; Thomas Wilson, ‘James Meade and the role of economic advisers’, CBH xi (1997), 143–4 at p. 143. 15 Clarke diary, entries for 1 Feb. 1946, 20 Apr. 1947, Clarke papers 25.

188

UNPLANNED SOCIALISM, 1945–1947

particular line of production’, thus reconciling planning with consumer and producer freedom.16 To the advocates of more drastic kinds of planning, this seemed terribly wet, practically an admission of the superiority of the free market. But against them, and against those who, like Tomlinson, see him as ‘more Keynesian than Keynes’, it might be pointed out that Meade was not in fact interested only in macroeconomic questions, nor did he speak purely in terms of financial as opposed to real resources.17 Thus, within the broad global picture, ‘it will be possible to consider the probable balance between the supply and demand for resources in particular industries . . . [and] to take into account the effect of different policies upon particular sections of the economic system’. Moreover, ‘a survey of future national income and expenditure can, of course, only be built upon an examination of the underlying real resources’ – the most important of which, in his eyes, was manpower.18 In January 1946 he argued that the inflationary gap could be bridged in the current year by restricting individual investment through physical controls.19 Nevertheless, that his main emphasis lay on ‘sensible global planning’, as opposed to ‘senseless quantitative planning of output and employment in every single line’, is not open to doubt.20 The question remains, however, whether or not such quantitative planning had any supporters, as Meade believed it did.

‘Long and persistent battles’ On 30 July 1945, Hugh Dalton hosted a dinner for new Labour MPs, at which each guest was invited to speak for a few minutes. Christopher Mayhew, one of those present, argued ‘that the Government should announce a production plan for the major industries covering the next three or four years, e.g. that in agriculture the number of beasts should be so much; the output of wheat should be so much, etc’.21 However, ‘no one seemed to agree’.22 Hugh Gaitskell pointed out that such a production plan would imply control of labour, which Bevin had announced was to be dropped.23 When Mayhew subsequently pressed his views upon Morrison, he got nowhere; and, despite Meade’s subsequent fears about Cripps’s dirigiste aspirations, Tomlinson is correct in arguing that there is little evidence of opinions such as Mayhew’s

16 17 18 19 20 21 22 23

Howson, Meade papers, i. 265–74. Seldon and Tomlinson, ‘The influence of ideas’, 200. Howson, Meade papers, i. 266–7. PRO, CAB 134/503 MEP(46)1st, 21 Jan. 1946. Howson and Moggridge, Meade papers, iv. 122, entry for 1 Sept. 1945. Williams, Gaitskell diary, 11, entry for 30 July 1945. Christopher Mayhew, Time to explain, London 1987, 86. Williams, Gaitskell diary, 12, entry for 30 July 1945.

189

THE LABOUR PARTY AND THE PLANNED ECONOMY

amongst those who really counted in policy-making.24 But Clarke identified himself and his supporters as gosplanners; so if he was not arguing for a detailed budget of production, what did he mean by the term, and how did he try to get it implemented? Clarke himself was a force to be reckoned with. A brilliant chess player and the inventor of the Financial News (later Financial Times) index, he was ‘ruthless in the demolition of soft advice, soft decisions, soft colleagues and soft ministers’, striking terror into his civil service subordinates.25 He was left-wing, almost eccentrically so; J. P. W. ‘Bill’ Mallalieu, the Labour MP, recalled him joining the national union of journalists at the News before the war, ‘glinting at his colleagues through thick spectacles and muttering: “The striking workman is always right!” ’26 Meade described him as ‘a man who temperamentally revolts against an idealist solution or a solution based on general principle. . . . But he is a very nice man to argue with.’27 But what of his views on planning? The term gosplanner, as he used it, seems to have had little to do with the conscious emulation of the Soviet system. He recorded Austin Robinson, the economic adviser to the Board of Trade, whom he also included in the gosplanning camp, as saying that ‘he doubted very much whether the Russians plan at all in our sense of the word’, given the differences between the backward Soviet economy and the much more sophisticated British one.28 Rather, the term, which Meade used disparagingly, seems to have been self-applied by Clarke perhaps half-ironically, to denote those who were not content with planning purely in a macroeconomic sense. Thus the aspirations of the gosplanners were less dramatic than the nickname seemed to suggest. But this does not mean that their differences with the thermostatters were insignificant. Naturally, it is important to avoid taking the testimony either of Meade or Clarke too much at face value. This is especially true of the latter, who had a self-dramatising streak, and who may have exaggerated the ‘warring camps’ aspect of things. In particular, he may have labelled as gosplanners people who, although they broadly shared his views, would not have thought of themselves in that way. Still, the two men’s accounts tie up in many ways; it is thus clear that, by February 1946, serious tension was emerging. In the first instance, this surrounded the attempt to revise and update the Economic 24

Christopher Mayhew to Morrison, 13 Oct. 1945, PRO, CAB 124/890; Howson and Moggridge, Meade papers, iv. 202, entry for 27 Jan. 1946; Tomlinson, Democratic socialism, 162. 25 Donald Macintyre, Mandelson and the making of New Labour, London 2000, 86. 26 J. P. W. Mallalieu, On Larkhill, London 1983, 180. 27 Howson and Moggridge, Meade papers, iv. 153, entry for 22 Oct. 1945. 28 Clarke diary, entry for 14 Feb. 1946, Clarke papers 25. Robinson had himself travelled to the USSR, and put down his impressions in a letter to Keynes: ‘I had an idealised picture of a perfect system of town and country planning. That may exist . . . but it seems to me to work with many of the familiar imperfections of Whitehall.’ Yet also ‘Russia is going to be very rich – make no mistake’: Robinson to Keynes, 22 July 1945, Keynes papers L/45/24–31.

190

UNPLANNED SOCIALISM, 1945–1947

survey for 1946, which had recently been presented to ministers. As Meade recounted it, ‘The real trouble has been caused by the little group of Cambridge economists in the Board of Trade (E. A. G. Robinson, R. F. Kahn and W. B. Reddaway)’. This group objected to the disparity between demand and available supply being presented in terms of a purely notional ‘inflationary gap’: they argued ‘that for 1946 one should now try to do, not a forecast of departmental requirements and a comparison of this with available supplies, but rather an actual forecast of what is likely to happen in the absence of any further ministerial decisions about how the gap between requirements and availabilities should be closed’. They also claimed ‘that the greatest priority should now be given to doing a Survey for 1950 rather than revised Surveys for 1946 and 1947’. At the meeting in question, Meade noted, ‘We were . . . treated to a disgraceful and clearly prepared filibuster by the three Board of Trade economists’. Although Meade did not mention it, Clarke also lent his support to the Board of Trade view, but the economic section view finally prevailed nonetheless.29 Clarke therefore grumbled that there was a ‘Great unwillingness to accept the view that for the short-term we need a forecast, which will throw up what will actually happen unless the Government intervenes further. . . . The trouble is that none of the Economic Section people are planners . . . [They have] A touching faith in the free market.’30 Thus, what appear to the modern eye to be relatively minor disputes about the precise form of the economic survey, were in fact predicated, in Clarke’s mind at least, on major differences of economic philosophy. A few days later in February, he recorded in his diary a yet more precise description of his differences with the thermostatters. The stimulus for this was a meeting which Meade believed was simply ‘to report on the problems which would be involved in doing a survey for 1950’.31 Clarke, however, believed the purpose of the meeting was to prepare the plan for 1950. . . . This is really rather crucial – the first session of Gosplan, but only about four would-be Gosplanners. There is a fundamental struggle here between the official (Meade) policy of thermostatic control and the Gosplanners[’] policy of fixing target sizes for industries. The Thermostatters are interested in the 1950 plan only for the purpose of determining whether there will or will not be an inflationary or deflationary gap in 1950 – i.e. will the Government have to prime the pump or draw the water out. If there were no gap at all, they would sit back and say ‘All’s well for 1950’. The Gosplanners, however (myself, Robinson, R. F. Kahn are the main starters) argue that the size of the gap is relatively unimportant, unless it is appreciably larger than the error in the figures.32

29 30 31 32

Howson and Moggridge, Meade papers, iv. 210–11, 211n, entry for 10 Feb. 1946. Clarke diary, entry for 1 Feb. 1946, Clarke papers 25. Howson and Moggridge, Meade papers, iv. 210, entry for 10 Feb. 1946. Clarke diary, entry for 5 Feb. 1946, Clarke papers 25.

191

THE LABOUR PARTY AND THE PLANNED ECONOMY

Clarke was in fact being slightly unfair to Meade here, who believed that a secondary purpose of a survey for 1950 ‘would be to see what is likely to be the fortunes of particular industries etc. in order to base decisions which may be required now for such industries on better information’; however, he argued that ‘The tenuous and insubstantial nature of all these calculations relating to particular industries is obvious’, and it seems clear he felt that such calculations should not be given too great a priority or prominence.33 Clarke continued: What is important is the distribution of resources in 1950. Do we want the balance of payments on a high-import-high-export basis or on a low-importlow-export basis? Do we balance the resources budget with high-investment saving or low-investment saving? What will be the size of the chief industries? Should we not fix some of the latter now? There is a great conflict between those who want to forecast 1950 – obviously a hopeless thing to do – and the people who think the job is to fix targets for 1950 now, which are related to the free course of economic forces, but which, by being fixed now, help to mould the course of economic forces . . . at bottom it is a conflict between the people who believe that laisser faire gives the best distribution of resources and those who believe that planning gives the desired distribution of resources.34

It cannot be doubted, on the basis of this evidence, that there was a genuine dispute within Whitehall over the nature of planning, leading, as Robinson subsequently attested, to ‘long and persistent battles’ between the factions.35 Doubtless, personal passions helped magnify the conflict out of proportion to the real differences between the parties: Meade was not an advocate of laissez-faire in the Hayek mould any more than Clarke resembled a real Soviet planner. But conflict on important issues existed nonetheless. The gosplanners were not content to seek merely to reach a balance between global supply and demand, which they perceived to be the thermostatters’ agenda. Rather, they believed that, as Clarke put it, ‘the purpose of overall planning is to ensure a global consistency of Government programmes and policies, and to do that one has to relate it very closely indeed to the individual programmes, recognising a wide range of error in all these global statistics and not attempting to allocate too precisely’.36 They strove after what Austin Robinson approvingly called ‘The statistics of Utopia’, an outline of desirable economic objectives to be reached four or five years down the line. It was desirable ‘Both to see Utopia and to see the more hum drum road that we are likely in fact to travel’.37 The gosplanners thus wanted to plan over a

33 34 35 36

Howson and Moggridge, Meade papers, iv. 211, 213, entry for 10 Feb. 1946. Clarke diary, entry for 5 Feb. 1946, Clarke papers 25. Robinson to Hugh Weeks, 23 June 1947, PRO, T229/44. R. W. B. Clarke, Anglo-American collaboration in war and peace, 1942–1949, Oxford 1982,

77. 37

E. A. G. Robinson, ‘Economic planning’, 13 Nov. 1945, Robinson papers 5/2.

192

UNPLANNED SOCIALISM, 1945–1947

long time-frame, they wanted to set targets, and they wanted to do so in terms of real resources, particularly manpower, at least while shortages persisted. The next question is to address how many gosplanners there were. Clarke was, of course, significant in his own right. In the year after Keynes’s death in April 1946 he began to develop ‘a fantastic authority in the Treasury’, noting rather self-servingly that he was now ‘the only person capable of original thought and with a round view, so I get terrific reclame’.38 In due course, moreover, as will be seen below, he took over the authorship of the 1947 economic survey in controversial circumstances, and rewrote it according to his own predelictions. With the seeming exception of Morrison’s adviser Max Nicholson (see below), Clarke’s main support does, however, seem to have been restricted to the Board of Trade economists referred to above, Robinson, Reddaway and Kahn.39 Morrison But where did ministers stand in relation to the divide between the gosplanners and the thermostatters? This is a difficult question to determine, for, as Clarke correctly predicted, the issue would never be put before ministers for collective decision. One might speculate that this was because the thermostatters, for the meantime holding sway at the official level, feared that if the issue were politicised they would be defeated; as Robinson drily noted in November 1945, ‘I do not feel certain that planning in this more limited sense is what Ministers have in mind’.40 Clarke, no doubt taking a similar view, clearly hoped that the question would go to the politicians. His

38 39

Clarke diary, entry for 20 Apr. 1947, Clarke papers 25. Of the three, the views of Robinson are the best documented. It must also be said that they tended towards the ambiguous. Thus, although he saw the economic section’s work, as exemplified in the 1946 economic survey ‘as having not the remotest connexion with constructive planning’, he saw planning’s function as being ‘to perfect rather than to oppose the operations of an ideally functioning market economic system’. Thus, Thorpe has argued that Robinson’s major point of difference with Meade was his belief that planning had to look three years ahead or more, not merely a year. And Tomlinson has correctly argued that Robinson ‘was not a Gosplanner’ in the Soviet sense, but this is really to miss the point, for in Clarke’s sense it seems he was one. In November 1945 he wrote: ‘Do we, or do we not want to . . . write down, irrespective of administrative difficulties, certain objectives which we think we ought to be able to reach in 4 or 5 years’ time, and then think whether or not administrative means can be worked out for reaching these projects. . . . I believe there would be some advantage in attempting to do this’. Therefore, although he was much less scathing than Clarke about Meade’s general approach, it seems that both men were right to include him in the gosplanning camp: PRO, T230/20 EC(S)(46)9; Keir M. Thorpe, ‘ “Statistical floodlighting”? The unpublished economic surveys 1946–47’, CBH xi (1997), 86–111 at p. 92; Tomlinson, Democratic socialism, 139; Robinson, ‘Economic planning’, 13 Nov. 1945, Robinson papers 5/2. 40 Robinson, ibid.

193

THE LABOUR PARTY AND THE PLANNED ECONOMY

diary does not make it clear why he and his supporters were unable to bring this about; but their lack of direct access to Morrison, the responsible minister, may have been a key factor. Yet the politicians must have had some awareness of the debate; whether or not they saw its significance is another matter. One may be certain that Morrison, for one, did not. As the government’s ‘economic overlord’, he was the minister best placed to resolve the dispute, but it is generally agreed that he was wanting in economic understanding, and probably incapable of comprehending the long briefs the economic section sent him.41 Although he displayed occasional acumen, the best example of this – his common-sense rejection of marginal cost pricing in the nationalised industries – in fact served to alienate him from its advocates in the section still further.42 Moreover, he did not share its view that planning should be conducted in terms of demand management.43 Clarke later recalled that Morrison tended to think rather narrowly in terms of nationalisation, and not in terms of economic planning at all (although, in fairness, he did emphasise the need for ‘a planned economic programme’).44 His adviser, Max Nicholson, who had ‘rashly’ agreed to serve in response to Morrison’s ‘pressing invitation’, had a preference for planning in terms of real resources, and for setting detailed production targets, and may thus be argued to have fallen into the gosplanning camp.45 But although Morrison was supposedly in thrall to Nicholson, Morrison’s own contributions to the planning debate were largely restricted to banalities.46 Planning, he opined in 1946, ‘though big and complicated, is not much more than applied Commonsense’.47 In January 1947 he did press Dalton to prepare a forward plan of capital expenditure; but he was politely rebuffed, and took the matter no further (see below).48 The

41 Donoghue and Jones, Herbert Morrison, 354; Alec Cairncross (ed.), The Robert Hall diaries, 1947–1953, London 1989, 8, entry for 30 Sept. 1947. See also E. A. G. Robinson, ‘The economic problems of the transition from war to peace: 1945–49’, CJE x (1986), 165–85 at p. 181. 42 According to Thomas Wilson, ‘Morrison . . . saw at once that historic overheads should not be embodied in the prices charged but was highly sceptical about deliberately running the increasing returns industries at a loss. For how could one tell whether the loss was the consequence of the marginal rule or of managerial inefficiency?’: ‘James Meade and the role of economic advisers’, 144. For the views of Labour economists on this question during the 1930s see chapter 3 above. 43 Plowden, Industrialist, 18. 44 Clarke, Anglo-American collaboration, 79; Herbert Morrison, ‘The Labour Party and the next ten years’, in Herbert Morrison and others, Forward from victory! Labour’s plan, London 1946, 20–1. 45 Max Nicholson, The system: the misgovernment of modern Britain, London 1967, p. ix; Max Nicholson to Morrison, 2 Dec. 1947, Robinson papers 6/2/2. 46 Pimlott, Dalton political diary, 413, entry for mid-Sept. 1947. 47 Herbert Morrison, The peaceful revolution, London 1949, 21. 48 Morrison to Dalton, 1 Jan. 1947, and Dalton to Morrison, 17 Jan. 1947, PRO, CAB 124/898.

194

UNPLANNED SOCIALISM, 1945–1947

planning controversy in due course worked itself out without any decisive intervention from the lord president himself.

Dalton A far more complex case was that of the chancellor. Dalton’s pedigree as a politician long-interested in planning was, of course, exceptional. Nevertheless, most writers seem certain that during his time at the Treasury his interest had waned almost to the point where he was obstructive of planning initiatives: ‘He was no planner’, Kenneth O. Morgan claims, a view which Clarke’s recollections tend to support.49 Dalton’s abandonment of the long-standing Labour proposal for a national investment board with executive powers, and the creation instead of a national investment council which was merely advisory, could be taken as evidence of this.50 However, Tomlinson has shown convincingly that the reason for the demise of the NIB concept was not only the chancellor’s desire to avoid executive functions with regard to the control of investment being taken out of the immediate hands of the government, but also his conviction that financial controls over borrowing by industry should be kept separate from other, physical controls on investment.51 This in turn related to what is generally taken to be the classic example of Dalton’s recidivism: his wish to keep the publication of the economic surveys separate from the budget. This, on the face of it, looks like an old-fashioned case of Treasury jealousy; Dalton, it could be argued, had no intention of letting Morrison in on his budget secrets. Certainly, as Alford, Lowe and Rollings point out, ‘the lack of firm co-ordination . . . was a critical weakness in any attempt at planning’.52 However, it seems plausible to suggest, not that the chancellor was simply taking ‘the departmental view’, but rather that he was in fact adhering strictly to his party’s own ideology. The urge to keep finance and economics strictly compartmentalised – to make finance ‘the intelligent servant’ not ‘the stupid master’ of the economy – was deeply felt in all socialist quarters. ‘It would not be right to put the Ch[ancellor of the] Exch[equer] in charge of all economic affairs’, argued Attlee in September 1947, shortly before he was forced to do exactly that.53 Similarly, Dalton’s insistence on keeping finance and planning apart, although quite impractical, had a certain logic to it. As Meade recorded in June 1946, after a meeting of the ministerial committee on economic planning,

49 50 51 52 53

Morgan, Labour in power, 341; Clarke, Anglo-American collaboration, 79. See, for example, Davenport, The split society, 48–9. Tomlinson, Democratic socialism, 155–63. Alford, Lowe and Rollings, Economic planning, 14. Attlee to Morrison, 15 Sept. 1947, copy in Cripps papers.

195

THE LABOUR PARTY AND THE PLANNED ECONOMY

the Chancellor of the Exchequer argued that he was in favour of the [economic] Survey for the calendar year being published and debated in, say November of the previous year. He was clearly thinking very much in terms of a division between himself and the Lord President, he having his publicity in April on Central Government finance and the Lord President having his innings on the Economic Plan in November. To one who like myself believes that the main instrument in a Liberal-Socialist state for carrying out any plan must be fiscal policy, and who therefore believes that budgetary policy and the economic plan must be as closely linked as possible, this was terrifying.54

By August, however, Meade had been forced into a volte-face; he agreed that the economic survey should be published on a calendar year basis. This, he wrote, would ‘permit publication in February, which would . . . in fact have the effect in the end of forcing the hands of the Chancellor of the Exchequer to use his Budget in April to implement the published Plan’.55 As he had noted the previous month, ‘It would only be necessary for him to fail to do so on one occasion, and the outcry would be such as to ensure the connection in the future’.56 This, surely, was what Labour thinkers had always meant when they argued that finance should be subordinate to the demands of economic planning. It seems reasonable to assume, then, not that Dalton had simply abandoned his long-standing commitment to planning, but that rather he was trying to implement his admittedly rather perverse view of it. As he argued when rejecting Morrison’s idea of a forward plan for capital expenditure, ‘we must know what the distribution of our physical resources is to be, before we can match our financial policy to it’.57 He may even have felt that, by restricting his own interests as chancellor quite narrowly to the fiscal sphere, he was doing Morrison, the planning minister, a favour by leaving him a free hand. It does not seem right, therefore, to suggest that Dalton, however counterproductive his interventions, had thrown planning overboard. Indeed, he expressed frequently his eagerness to plan. In a Fabian lecture in the autumn of 1945 he insisted that ‘Socialist planning is a practical proposition, beneficial to the community’. (He also argued that ‘National planning of private enterprise is not impossible, but it is much more difficult than national planning of the public sector’.)58 In January 1947, he argued to Attlee the need for ‘a detailed National Plan’.59 After his April budget he seemed to agree with Cripps’s remark that ‘Unless we can get our planning done right, we shall be sunk’.60 And in October, he welcomed the first report of the newly formed 54 55 56 57

Howson and Moggridge, Meade papers, iv. 283, entry for 30 June 1946. Ibid. 309, entry for 15 Aug. 1946. Ibid. 299, entry for 27 July 1946. PRO, CAB 124/898, Dalton to Morrison 17 Jan. 1947. See also Tomlinson, Democratic socialism, 155, 163. 58 Hugh Dalton, ‘Our financial plan’, in Morrison and others, Forward from victory!, 47. 59 Dalton to Attlee, ‘Note on a difference of opinion’, 20 Jan. 1947, copy in Cripps papers. 60 Dalton, High tide and after, 237.

196

UNPLANNED SOCIALISM, 1945–1947

investment programmes committee of officials as ‘a real start to central planning’.61 But was he a gosplanner or a thermostatter? He did implement one of Meade’s ‘thermostatic’ ideas, on the differential taxation of company profits. In papers put to the budget committee in December 1946, Meade argued that the rate of tax should be varied according to the broader economic context, the lower rate applying to undistributed profits in time of inflation, and to distributed profits in deflationary periods. This was put into practice in 1947, with a lower rate on undistributed profits than on distributed ones. But, as Richard Whiting has argued, the government’s real motivation in this was not the potential for thermostatic control of the economy, but a political instinct against the distribution of profits as dividends and in favour of them being ploughed back into the enterprise. So Dalton’s agreement with Meade in this instance in terms of immediate practicalities was not really based on a shared economic analysis, and would probably not have been sustained in the case of a slump, as in that case Meade would have wanted to reverse the differential in favour of distributed profits.62 More generally, indeed, it is clear that Meade was not getting through to Dalton, whose chancellorship has not been noted for its Keynesianism. Equally, Clarke felt that he himself was ‘Assisted by [the] political feeling of Dalton’, although whether this referred to planning or other matters is unclear.63 But the overall impression gained is that, although Dalton wanted the government to plan, his views were too inchoate for it to be possible to make a precise judgement on which camp he belonged to, or, indeed, for his ideas to have had much constructive impact at the time.

Cripps Cripps’s position, by contrast, was a great deal less ambiguous, although a certain amount of reading between the lines is still necessary. Clarke later recalled him as being ‘the only Cabinet Minister in the 1945 Labour Government who thought in terms of economic planning’. This suggests that, at the time, the two men’s views were to some degree in accordance, even though Clarke, with the benefit of hindsight, later cast doubt on the feasibility of Cripps’s ‘democratic planning’ policy.64 In August 1945 Edward Bridges reported that ‘the President of the Board of Trade holds that the present situation calls for the working out of a national plan, in the sense that it is necessary to decide how much of our resources should be devoted to consumption 61 62

Cairncross, Years of recovery, 452. Richard Whiting, ‘Taxation policy’, in Mercer, Rollings and Tomlinson, Labour governments and private industry, 117–34 at p. 123. See also Francis, Ideas, 174–8. 63 Clarke diary, entry for 20 Apr. 1947, Clarke papers 25. 64 Clarke, Anglo-American collaboration, 79.

197

THE LABOUR PARTY AND THE PLANNED ECONOMY

goods, the export trade, capital goods, and so forth and to the more important classes of goods falling under each of these heads’.65 This, of course, was not a particularly precise stipulation, in that it said nothing about how such decisions were to be enforced, nor about the level of detail involved in such planning. But Meade, stimulated partly by Cripps’s bid to take over the economic section and the CSO, feared that ‘he thinks . . . in terms of planning the real resources of the community in the sense of deciding how many pairs of boots, how many shirts, how many bicycles, etc., etc. shall be produced’.66 He could have found confirmation for this in a speech made by Cripps prior to the election: ‘planned production . . . requires not only that the quantity to be manufactured should be laid down and arranged for but also that the price at which the article is to be sold should also be arranged in advance’.67 Tomlinson, however, has dismissed Meade’s view of the minister as inaccurate; he argues that historians should instead focus on Cripps’s ideas of promoting industrial efficiency via the mobilisation of consent in industry.68 Certainly, these were vital issues (which will be explored in the next chapter). But it would be wrong to suggest that Cripps took no interest in the planning agenda that was being hotly debated amongst the civil servants. Admittedly, such aspirations as Cripps may have entertained to plan the price and production of every last bicycle did not, it appears, last long. After all, having failed to secure his own ‘economic general staff’, and in the face of Morrison’s lack of interest in such questions, there was not much he could do about them anyway. He does, however, seem to have emerged as a gosplanner, not in the Soviet sense, but in Clarke’s sense of the word, in the areas that were his responsibility. Thus, in October 1945, he argued that the export trade should be planned: targets for each individual market might not be practical, but investment, labour supply and production programmes could be planned to fit output to the export targets needed to achieve a balance of payments.69 In January 1946, he ‘talked a lot about the need for an Economic Plan and emphasised that the [economic] Survey [for 1946] was not a Plan’. Meade’s consequent worry that Cripps, ‘no doubt primed by Austin Robinson’, wanted a plan in the sense of a detailed budget of production, was by this time, as Tomlinson has argued, probably exaggerated.70 Rather, it seems that he was lending his support to the gosplanners amongst his officials, as against the more moderate thermostatic views of the economic section. Clarke would owe his brief moment of victory at the time of the 1947 survey largely to the fact that Cripps had taken over Morrison’s responsibilities during the latter’s 65 66 67

Edward Bridges to Meade, 22 Aug. 1945, PRO, T230/18 EC(S)(45)27. Howson and Moggridge, Meade papers, iv. 115, entry for 26 Aug. 1945. Cripps, speech on ‘Post war problems for industry’, given at the Oxford University socialist club, 9 Mar. 1945, Cripps papers. See also Burgess, Stafford Cripps, 196–7. 68 Tomlinson, Democratic socialism, 139. 69 PRO, CAB 71/27 LP(I)(45)4, 24 Oct. 1945. 70 Howson and Moggridge, Meade papers, iv. 202, entry for 27 Jan. 1946.

198

UNPLANNED SOCIALISM, 1945–1947

illness. Nevertheless, Cripps’s views embodied a huge contradiction. While he wanted a vigorous form of planning, he would not will the means to implement it. He had long emphasised that ‘The problem was to combine the planning of industry with the liberty of the individual’.71 As he put it in November 1946, it would not be possible to carry out any comprehensive plan completely ‘without compulsions of the most extreme kind, compulsions which democracy rightly refuses to accept. That is why democratic planning is so very much more difficult than totalitarian planning’.72 The spiritual solution to this difficulty was the moral mobilisation of the nation, the wartime ‘spell’ being maintained and enhanced. The practical answer, however, remained obscure.

Rhetoric and reality What of the non-economic ministers’ opinions? Inevitably, their views are difficult to quantify; their calls for ‘definite’ planning were usually incredibly vague, or even at odds with their own behaviour. Attlee’s averrance in November 1946 that his administration agreed with Russia on matters of economic planning was perhaps typical, in the sense that it sounded bold but had little connection with what the government was actually doing; the economic section had advised the cabinet in September that it was not really possible to derive lessons from the Soviet economy, which was so radically different from the British one.73 Equally, although Bevin brought Clarke hope by calling for ‘a target for each works to inspire the men’, he did little to help planning along in practice.74 Although foreign secretary, he sought to retain control over manpower planning, using his position as chairman of the manpower committee in order to throw his weight around. This of course made Morrison’s job all the more difficult, not least because the two men loathed each other.75 Nevertheless, the continued importance that was attached to such planning, however poorly it was put into effect, was not merely a reflection of ministers’ continued preference for planning in terms of physical rather than financial resources. As Austin Robinson recalled in 1986, manpower was still the shortest resource: in the critical period of transition it thus made sense to try to plan in terms of it, and in terms of other real resources that were in short supply.76 In this sense, Labour’s ideology, with its perennial fondness for controls, was in tune with the needs of the moment. 71 72 73 74 75

‘Meeting of “the group”, no. 3’, 12 Oct. 1939, Cripps papers. HC Debs, 430, 21 Nov. 1946, col. 1086. HC Debs, 18 Nov. 1946, col. 580; PRO, CAB 129/13 CP(46)355, 24 Sept. 1946. Clarke diary, entry for 7 Mar. 1946, Clarke papers 25. Wilson, ‘James Meade and the role of economic advisers’, 144. See also Williams, A prime minister remembers, 125–7. 76 Robinson, ‘Economic problems of the transition’.

199

THE LABOUR PARTY AND THE PLANNED ECONOMY

The pity was that it was applied, in these crucial two years, in a haphazard, hand-to-mouth fashion, in the absence of a grander strategic vision. In their reminiscences, even the leading Labour ministers did not make great claims for their first fumbling attempts to plan. In Morrison’s recollection, ‘what happened was that the ad hoc use of economic and financial controls came first, together with a limited amount of economic planning’.77 It would be possible, given the eventual descent into crisis, to put this a good deal more brutally: the government failed to plan even in the simplest, short-term sense, even when the evidence of danger was staring it in the face. It might also be possible, however, to view the period in a more kindly light, even given the evident shortcomings in the planning process, if the arguments of Thorpe are correct. He claims that ‘Meade was able to establish his “Liberal-Socialist’ attitude of relying on financial tools firmly enough at the time of the first two Economic Surveys’ – i.e. the one for 1946, and the revised 1946–7 version – ‘that the more detailed quantitative approach was soon eclipsed as a method of planning’.78 Were this true, it could perhaps be argued that the years 1945–7 laid the groundwork for the government’s later ‘Keynesian revolution’, by securing support for its precepts at the official level – even while, in the shorter term, ministers were unable to escape from their self-imposed policy of drift. However, it seems that Thorpe is wrong about the extent of the thermostatters’ success. On the one hand, as he himself admits, the economic surveys which embodied their recommendations were increasingly sidelined. The manpower figures in the first post-war survey did spur ministers to a faster reduction in the armed forces, although this was the sole if notable achievement of what was supposed to represent an overall economic plan. But the second survey, owing to the hesitancy of officials, ‘was filed away and not properly presented to ministers’, although it identified the incipient coal shortage.79 On the other hand, when the economic section came to devise its next survey, the overall approach of the thermostatters became increasingly discredited (perhaps rather unfairly) as crisis loomed. Clarke noted in April 1947 that Towards the end of the year [1946], ominous creakings began to take place in our economy. The Economic Section drew up its so-called economic survey for 1947, on the customary globaloney basis. It soon appeared, however, that this was not worth the paper it was written on. The particular crises – coal, steel etc – did not emerge at all from the survey . . . the real limitations on the economy were coal and raw materials, and not man-power. This was all concealed in the global figures of national income and expenditure. The result was a revolt of the Steering Committee against this global planning.80 77 78 79 80

Morrison, Government and parliament, 299. Thorpe, ‘ “Statistical floodlighting”?’, 102. Ibid. 106. Clarke diary, entry for 20 Apr. 1947, Clarke papers 25.

200

UNPLANNED SOCIALISM, 1945–1947

Bernard Gilbert of the Treasury similarly wrote that ‘global planning is under a cloud at the moment’.81 The steering committee, ‘After considerable cogitation . . . put in a concrete report to Ministers, which probably demanded the wrong things, but at any rate demanded something tough’.82 The proposals in the steering committee’s report were for the postponement of the raising of the school leaving age, conscription of women for industry, cuts in the housing programme, and for a reduction in the size of the armed forces.83 This plan was designed to close the projected manpower ‘gap’ – i.e. the discrepancy between requirements and available labour, which, if not resolved, would make it impossible to complete some government programmes. The ministerial committee on economic planning (Dalton, Morrison, Cripps and Isaacs) broadly accepted the recommendations, the intention being that these would be put before the public in the form of a white paper.84 However, when the issue went to cabinet on 16 January 1947 progress was negligible. Morrison had just gone into hospital suffering from coronary thrombosis, which as Dalton later noted, ‘was very unfortunate and weakened our debating strength’. Bevin, another posible source of support, was also absent sick. Cripps, presenting the report, did his best; but Dalton recollected in his memoirs that the cabinet (which met twice that day) was ‘very bad and rowdy . . . a substantial group ganged up against Cripps and myself in opposition to all our proposals’. And he recorded in his diary ministers’ ‘easy-going, muddle-headed irresponsibility . . . the PM says that the gap is only two and a half per cent of the total labour force and should easily be able to be removed by ‘greater productivity’. As Dalton later pointed out to him, it was by no means clear that the scope for such increases in productivity existed.85 Yet the proposals were rejected, as was Dalton’s suggested compromise on the size of the armed forces at another meeting the next day. The chancellor protested that ‘the result could only be that the national economy would be seriously dislocated and we might well find ourselves in an extremely critical situation in the next year or two’.86 This, to say the least, proved an understatement. Meanwhile, Clarke recorded, ‘there was complete uncertainty whether or not a coal crisis existed’, in spite of the repeated warnings made, with the support of others, by Douglas Jay.87 The rejection of the committee’s report made Dalton very angry. This was 81

PRO, T171 390, cited in Andrew Chester, ‘Planning, the Labour governments and British economic policy’, unpubl. PhD diss. Bristol 1983, 161. 82 Clarke diary, entry for 20 Apr. 1947, Clarke papers 25. 83 PRO, CAB 129/16 CP(47)20, 7 Jan. 1947. 84 PRO, CAB 129/16 CP(47)25, 10 Jan. 1947. 85 Dalton, High tide and after, 193–4. 86 PRO, CAB 128/9 CM(47)7, 16 Jan. 1947; CM(47)8, 16 Jan. 1947; CM(47)9, 17 Jan. 1947. 87 Clarke diary, entry for 20 Apr. 1947, Clarke papers 25; Jay, Change and fortune, 143–52; Burgess, Stafford Cripps, 223–6.

201

THE LABOUR PARTY AND THE PLANNED ECONOMY

the first sign of the divide opening up between him and Attlee that would culminate in his resignation as chancellor in November, albeit as the result of an accidental leak rather than on any explicit policy difference. He now sent the prime minister a ‘Note on a difference of opinion’, laying out his grievances. He and the other members of the committee, he wrote, ‘have quite failed, both in writing and orally, to make our colleagues aware of the realities which we must face’. And he continued: I consider that this whole report has been treated by the Cabinet with much less attention than, having regard both to the standing of its authors, Ministerial and official, and the importance of the subject, we were entitled to expect. Much of the report was brushed aside last week in an atmosphere of emotional impatience and intellectual levity. No one welcomed, even ‘in principle’, this first attempt to make a detailed National Plan.88

Fascinatingly, Dalton did not include this last sentence in the version of the memorandum he published in his autobiography, not even using his customary suspension marks to indicate that something had been excised.89 Was this mere accident, or could he not bring himself to admit the extent to which the 1945 government had failed to implement one of its chief aims? Whatever the truth about these later actions, Dalton’s protest may have jolted Attlee to some degree; two days after it was sent, the cabinet took the decision to publish a white paper, as the steering committee had originally recommended, apparently at the prime minister’s instigation.90 The trouble was that, as Cripps had previously pointed out, ‘The Government would be exposed to serious criticism if they presented a white paper which discloses the seriousness of the economic position without proposing remedies sufficient to remedy the situation’.91 The cabinet had, of course, already rejected the remedies in front of it. Clarke characterised the way things stood thus: ‘the decision had been taken and announced to publish the “Economic Plan”. Nobody had the foggiest idea how to do it.’92 With Morrison absent, and Meade suffering from the stomach ulcers that would shortly force his resignation, the white paper was prepared within the Treasury, albeit with Cripps as the responsible minister. Max Nicholson later developed a conspiracy theory by which Cripps and Bridges plotted to strip Morrison of his economic responsibilities as soon as the latter went into hospital.93 It seems unlikely, however, that there was any deliberate coup. Rather, the whole affair seems to have developed semi-accidentally. As Clarke recorded:

88 89 90 91 92 93

Dalton to Attlee, ‘Note on a difference of opinion’, 20 Jan. 1947, copy in Cripps papers. Dalton, High tide and after, 195. PRO, CAB 128/9 CM(47)11, 22 Jan. 1947. PRO, CAB 128/9 CM(47)9, 17 Jan. 1947. Clarke diary, entry for 20 Apr. 1947, Clarke papers 25. ‘Interview with Max Nicholson’, 11 Oct. 1968, Morrison papers, BLPES.

202

UNPLANNED SOCIALISM, 1945–1947

I turned in a piece on the balance of payments. Dennis Proctor [also of the Treasury] at the crucial moment went down with appendicitis. It so came to pass that I was gradually called in to write [the white paper]. The Economic Section [was] completely under a cloud. So I went ahead and wrote it very much on the lines I wanted, and in popular style. It was bricks without straw, for there was no known plan and no known means of implementing a plan even if there had been a plan. The result was a rather peculiar document.

He went on to write that, with Morrison away ill, Ministers have virtually abdicated. The Chancellor was not trying. Mr Shinwell was in a state of hopeless fog. The PM pottering away. Not an ounce of will to govern or ability to control the situation . . . . Not a single one of them with the shadowiest concept of what was meant by planning . . . the chosen leadership of the workers was sitting there, not only baffled by the problems but apparently disinterested [sic], not seeming to appreciate that there was a crisis at all.94

Then, in the middle of the drafting process, the fuel crisis finally broke. On 7 February, the previously blithe Shinwell asked permission from the cabinet for electricity to be cut off from industry in large parts of the country and from all domestic consumers for five hours a day, which came as ‘a complete thunderclap’, in Dalton’s words.95 The changed circumstances, of course, threatened to make the white paper irrelevant, and it had to be revised again. After going through nine drafts in total, it was finally presented to the Commons, although Clarke believed that only Cripps, Dalton and Strachey had really read it beforehand.96 ‘A rather peculiar document’ The Economic survey for 1947, as the white paper was known, was indeed, as Clarke remarked, an odd document. Dalton noted that it was ‘well written and will, I hope, do more good in stirring people up than harm in depressing them. But it is a valid criticism that there is jolly little policy in it.’97 The survey had a foreword by the prime minister and a long first section comprising of a discourse on economic planning in a democratic society. Clarke later recalled that Cripps wrote this personally.98 Certainly, the survey was in accordance with Cripps’s previously expressed, rather contradictory, views. Again, the distinction was made between democratic and totalitarian forms of planning: ‘A democratic Government must . . . conduct its economic 94 95 96 97 98

Clarke diary, entry for 20 Apr. 1947, Clarke papers 25. Dalton, High tide and after, 203–4. Clarke diary, entry for 20 Apr. 1947, Clarke papers 25. Dalton diary, entry for 24 Feb. 1947, Dalton papers I/35. Clarke, Anglo-American collaboration, 78–9.

203

THE LABOUR PARTY AND THE PLANNED ECONOMY

planning in a manner which preserves the maximum possible freedom of choice to the individual citizen.’99 Such words would have found favour from James Meade. But it is unclear how such freedom of choice was to operate for, as Cairncross has pointed out in his devastating analysis of the survey, it made no mention whatsoever of the role of the price mechanism in planning.100 Presumably, like Clarke, Cripps felt that references to market forces were the thin end of the laissez-faire wedge. Similarly odd was the idea of planning as a guide to citizens in their economic roles as producers and consumers: ‘it is only by the combined effort of the whole people that the nation can move towards its objective of carrying out first things first, and so make the best use of its economic resources’.101 In Cairncross’s words, ‘The success of economic planning, like any other policy, may depend on favourable reactions from the general public; but it can hardly depend on freely adopted changes of conduct traceable exclusively to an intellectual grasp of the plan’s objectives.’102 (Such a grasp was at any rate unlikely to be forthcoming, given that the document was couched in language incomprehensible to many ordinary people.)103 Cripps, it seems, felt otherwise. This strong emphasis on attaining not only the consent of the population for the planning process, but its active participation, was matched by clear support for the gosplanners’ ideas. Six basic industries and services were identified, for each of which it was claimed ‘a long term plan is being developed’. These were coal, power, steel, agriculture, transport and building. (In the survey proper, output targets were given for coal, electric power, building and ship-building.) This stress on the development of individual industries was matched at a macro level by economic budgets for manpower and national income and expenditure. The survey, however, contained no financial estimate of the latter: ‘the argument was conducted entirely in manpower terms’ (Cairncross).104 The inclusion of output targets in the Economic survey for 1947 was a very bold move, as it meant giving considerable hostages to fortune. Together with the emphasis on manpower, these targets meant that the gosplanners had 99 100 101 102 103

Cmd. 7046, Economic survey for 1947, Feb. 1947. Cairncross, Years of recovery, 308. Cmd. 7046. Cairncross, Years of recovery, 309. The public opinion research group Mass Observation carried out a spot survey of citizens, asking them to interpret the ‘popular’ version of the economic survey, which differed from the white paper only in having a coloured cover and several statistical diagrams to support the text. Misunderstandings were legion. Sentences such as ‘The gap between resources and requirements will in the end be closed by some of the requirements being left unsupplied’ caused many people to boggle. Mass Observation concluded: ‘The White Paper as at present written is – on our analysis – incapable of directly influencing most of the population to any significant degree. This majority includes millions of sensible and intelligent citizens in responsible production jobs’: ‘The language of leadership’, 20 Mar. 1947, Mass Observation archive, University of Sussex, 2462. 104 Cmd. 7046; Cairncross, Years of recovery, 305, 323.

204

UNPLANNED SOCIALISM, 1945–1947

secured their chief objectives, at least in so far as this one survey went. It was, however, something of a pyrrhic victory. The authorship of the white paper had fallen to Clarke only by accident; responsibility for the surveys would shortly revert to the economic section, under Robert Hall, its thermostatically-minded, newly appointed head. Moreover, Clarke was all too aware of the inadequacies of what he had, in very short order, produced. His comment ‘bricks without straw’ was apposite. Not only did the survey rest on a weak statistical foundation, a problem exacerbated by the uncertainties thrown up by the fuel crisis, but, for a first published attempt at a national plan, the whole question of implemenation was left unresolved; or rather, it rested on Cripps’s confused notion of ‘democratic planning’.105 Nevertheless, the atmosphere of crisis in which the survey was produced did help stimulate institutional changes which promised to be of lasting significance for Labour’s planning policies. On 10 March, during the debate on the economic survey, Cripps announced these changes to the House of Commons. A chief planning officer would be appointed, with his own central economic planning staff (CEPS) in the Cabinet Office. Under his direction, there would also be departmental planning officers with their own staffs in the main economic departments (this proposal never in fact came to pass). An economic planning board (EPB) would be created too, for purposes of consulation, on which both sides of industry would be represented, as well as the planning staff.106 Where did these ideas come from? Morrison later recalled that ‘Before I was a victim of thrombosis’ – i.e. in mid-January, before the fuel crisis broke – ‘the Prime Minister, Sir Stafford and I decided that it was necessary to appoint a Chief Economic Planning Officer in the Lord President’s Office’.107 Morrison’s memory may have played him false, or he may have been exaggerating his own role, as the first concrete proposals in this direction in fact seem to have been made by an official, Bridges, in a memorandum of 7 March.108 These, including the planning board idea, also inspired by Bridges, were agreed upon at a ministerial meeting on the same day.109 Nevertheless, neither the publication of the economic survey, nor these alterations in the planning machinery, arrested the sense that the government was drifting. Owing to illness, Sir Edwin Plowden was unable to take up his appointment as chief planner until May; the EPB was not appointed until July.110 Morrison, after his return to work in late April, had perhaps even less 105 The NEC hoped that Labour Party members would take the lead in stimulating the battle for production in their workplaces: ‘The Labour Party and the Production white paper’, Feb. 1947, in NEC minutes, LPA. 106 HC Debs, 434, 10 Mar. 1947, cols 69–71. 107 Morrison, Government and parliament, 299. 108 Edward Bridges, ‘Proposals for strengthening the staff for economic planning’, 7 Mar. 1947, PRO, PREM 8/646. 109 PRO, CAB 130/17 GEN 169/2nd, 7 Mar. 1947. 110 Plowden, Industrialist, 8, 11.

205

THE LABOUR PARTY AND THE PLANNED ECONOMY

grasp of his economic brief than before: ‘Herbert just can’t do it’, Dalton told Attlee in September, a view shared by other ministers including, perhaps unsurprisingly, Bevin.111 During the summer, the government’s credibility had been further called into question by the convertibility crisis; left-wing backbenchers were becoming worried by ‘the lack of boldness and urgency in the Government’s economic planning’.112 By the autumn Plowden too was ‘frustrated and upset’ and threatening to resign.113 Progress, therefore, had to wait upon the political changes of the autumn. Planning, by the end of Labour’s first two years in office, had made little headway. Various explanations have been advanced for this. As Thorpe sensibly points out, the government was throughout its life plagued by a succession of crises and shortages that made the planners’ tasks more difficult, if more necessary.114 Nevertheless, after the American loan became all but a certainty once negotiations were completed at the end of 1945, the government was faced with no immediate crisis until February 1947; and, of course, thoughtful planning might have averted that crisis. Nor was it the case, as shown in chapter 7, that the government’s commitments to the Bretton Woods organisations and to trade liberalisation served to frustrate the creation of a planned economy in Britain. Therefore, although both ‘events’ and external political pressures undoubtedly placed important constraints upon the government’s freedom of action, the explanation must be sought in part elsewhere: in Labour’s own conception of planning. What were the flaws in that conception? At the time, left-wing MPs believed they knew the answer. As Ian Mikardo recollected in his autobiography, we felt that the impetus towards maintaining a planned economy was blunted by the tendency of Ministers to run away from any serious confrontation with vested interests. We applauded their pushing ahead with the agreed programme of nationalising the basic industries and services, but we could see that the public corporations they were setting up were not the instruments of socialist planning that had been promised, since they had much the same structure, objectives, operational methods and men at the top as the companies they were replacing.115

There was a measure of truth in this, in that the nationalised industries clearly never lived up to the planning role that Labour’s philosophy had traditionally assigned them. Equally, Cripps’s notions of democratic planning were 111 112

Williams, A prime minister remembers, 222–3. Mikardo, Back-bencher, 94. See also Mikardo, Foot, Castle and others to Attlee, 23 July 1947, Attlee papers (Bodleian), 57. 113 Plowden, Industrialist, 18. 114 Thorpe, ‘ “Statistical floodlighting”?’, 107. 115 Mikardo, Back-bencher, 94.

206

UNPLANNED SOCIALISM, 1945–1947

predicated on the government’s need to win the consent of industry and the unions alike. This placed an obvious limit on ‘serious confrontation with vested interests’ (although naturally Mikardo was referring solely to business interests). This consensualism, of course, was the direct descendant of Labour’s war-time emphasis on mutual self-sacrifice in the interests of the nation; it was no accident that ministers repeatedly invoked the Dunkirk spirit in the ‘battle for production’. At the same time, it was, to say the least, an inexact instrument of economic planning. The finger, then, must again be pointed at the nebulous, vague quality of the government’s planning ideas. Plowden in his memoirs described the government’s policy of democratic planning as ‘a mixture of physical controls, nationalisation and exhortation, laced with a dash of Keynesianism and a liberal dose of wishful thinking’.116 In this, of course, one witnesses the irritation of the technocratic official at having to contend with the rhetorical excesses that are a necessary element of any party’s political programme. But all the same, it is difficult to argue that Plowden’s possibly jaundiced view is fundamentally incorrect. Ministers, simply, had very confused notions of planning. In the 1945–7 period this was exacerbated by divisions amongst officials – the gosplanners versus thermostatters debate. Contrary to Tomlinson’s argument, this was a live, ongoing dispute. Inevitably, it added to the ructions which the politicians’ differing approaches to planning were already bound to cause, given the way in which economic responsibility was divided. This was in contrast to the situation during Cripps’s chancellorship and after, when Robert Hall and Plowden worked smoothly together. Co-operation between officials, of course, could not work miracles by itself. As Hall noted in 1950, ‘It gets more and more of a bitter joke, that Ministers should believe so strongly in planning and be so anxious to do nothing about it’.117 None the less, in the autumn of 1947, simmering discontent would give way to a realignment of ministers’ responsibilities. This brought in turn a major alteration in the way the government conducted economic planning; and a belated victory for the thermostatters over the gosplanners.

116 117

Plowden, Industrialist, 4. Cairncross, Robert Hall diaries, 105, entry for 15 Feb. 1950.

207

Planning, Priorities and Politics, 1947–1951

9

Planning, Priorities and Politics, 1947–1951 ‘What is national planning but an insistence that human beings shall make ethical choices on a national scale?’ asked Aneurin Bevan at the 1949 Labour Party conference. He continued: ‘Planning means that you ask yourself the question: which comes first? What is the most important? . . . The language of priorities is the religion of Socialism.’1 This was a subtle, oblique and persuasive defence of the government’s programme of cuts in investment and social services, of which Bevan’s own housing programme had been a notable victim. Chiefly associated not with Bevan, but with the famously ascetic figure of Cripps, this policy was accompanied by a marked change in Labour’s rhetoric about the planned economy. Once, to use Attlee’s pre-war phrase, planning had been seen as the key to the treasure house of a better world. Now, in the aftermath of the annus horrendus of 1947, it was a means of imposing hard economic choices in the interests of national survival. Labour’s ‘plan for plenty’ had been supplanted by the necessary expedient of austerity.2 Of course, this change was a reaction (perhaps somewhat belated) to the extreme economic situation in which Britain found herself. The problems the nation now faced were of an entirely different order from those of the 1930s, which Labour’s policy of planning had originally been designed to rectify. Accordingly, the measures which the government took – and which it nonetheless presented as consistent with Labour’s previous ideas – were in important respects different from the planning solutions that Labour had proposed since 1931. These changes form the theme of this chapter, which examines both their causes, and their consequences throughout the remaining life of the government. It does this not only with reference to the actions of ministers, but also against the back-drop of the party tensions that were once more surging into life. It is argued that the growing party discontent throughout 1947 with Attlee’s leadership in general and with the government’s planning policies in particular were an important cause of the government reorganisations that ultimately brought Cripps to the Treasury. It is also argued that the legacy of his chancellorship, and that of his successor, Gaitskell, led eventually to a fragmentation of the party’s views on questions of economic planning. 1 2

LPACR 1949, London 1949, 172. Michael Young’s book Labour’s plan for plenty (London 1947) was published, ironically enough, in February 1947, the month of the fuel crisis.

208

PLANNING, PRIORITIES AND POLITICS, 1947–1951

The party resurgent In the period between the 1945 election and the fuel crisis, the Attlee government had faced little serious criticism from within its own party on economic questions. Dalton’s ‘socialist gusto’ in ‘taking on the City and the Stock Exchange’ with his cheap money policy seemed to the Labour backbenchers ‘like a miracle’, according to Barbara Castle.3 Ordinary party members were, it seems, satisfied too, for the leadership’s line faced no serious challenge at conference. No doubt the party’s contentment was confirmed by the government’s regular assurances that an economic plan was in preparation. Moreover, this quiescent attitude on behalf of the rank and file allowed planning issues to be debated between officials and decided by ministers with little reference to broader party concerns. This changed during 1947. Motivated in part by worries about ‘the lack of boldness and urgency in the Government’s economic planning’, as Ian Mikardo put it, and partly by broader concerns about the failure of Attlee’s leadership, the party began to assert itself once more as a force to be reckoned with.4 The first serious signs of disaffection with the government’s handling of the economy emerged, naturally enough, in the wake of the fuel crisis. Hilary Marquand, the paymaster general, upon whom some of Morrison’s economic responsibilities devolved during the latter’s illness, met members of the trade and industry and finance groups of the PLP. Unsurprisingly, ‘There was criticism of lack of co-ordination among Ministries and of apparent lack of ability in our planning organisation to see ahead. We appeared to “panic from decision to decision” and to be taken unawares by crisis.’ Nor had the recently published economic survey done much to convince MPs of the virtues of the government’s strategy: ‘Some members thought the Survey’s budget for capital equipment was too low, others that, in view of the urgent need for exports and distribution of consumer goods as incentives, it was too high.’ That such criticism thus appeared to cancel itself out was perhaps not much consolation. The one ray of hope, as far as Marquand was concerned, was that ‘One or two members appreciate that detailed planning of the size and output of every firm is impossible’ – although, by implication, the rest did not.5 This discontent found a more openly ideological expression in the activities of the Keep Left group of MPs, which included in its membership not only Richard Crossman, Ian Mikardo, Barbara Castle and Michael Foot, but also future rightwinger Woodrow Wyatt. According to Castle, Crossman ‘and a few left-wing cronies’ had been holding private discussions on Labour policy for some time, assisted by, amongst others, the economists Thomas Balogh 3 4 5

Castle, Fighting all the way, 152–3. Mikardo, Back-bencher, 94. Hilary Marquand, ‘Questions raised by members of the trade and industry and finance groups of the parliamentary Labour Party at meetings with the paymaster general’, n.d. 1947, PRO, T229/11.

209

THE LABOUR PARTY AND THE PLANNED ECONOMY

and G. D. N. Worswick. By Easter 1947, stimulated by an earlier attack by Crossman on Bevin’s foreign policy, the group had ‘decided to turn [its] dilettante discussions into something more structured’. The resulting pamphlet, produced in a ‘Gotterdammerung atmosphere’, was not, however, restricted to foreign affairs.6 Although careful to praise the government’s achievements, Keep left argued, prophetically, that the American loan was running out, and also that the existing planning mechanism was inadequate. The government was told to ‘Turn the central planning authority into a full-scale Ministry of Economic Affairs, with a high-level Minister who is free from other duties’. The pamphlet also argued that the raw materials controls should be tightened ‘in favour of essential industries’, that ‘inessential’ trades should be cut, and that industrial democracy should be strengthened by making joint production committees compulsory. Moreover, luxury imports should be cut, and the armed forces reduced in size more rapidly – as Dalton had been arguing in cabinet.7 Morgan has played down the group’s importance, rightly pointing out that no outright parliamentary revolt resulted from the pamphlet’s publication.8 Nevertheless, it does not seem unreasonable to suppose that Attlee’s appointment in September of Cripps as minister of economic affairs may have owed something to its ideas, as Mikardo was subsequently quick to claim.9 (Cripps himself had links with the group through the medium of tea parties held by his wife.)10 Moreover, towards the end of July, the group followed up its pamphlet with a letter sent directly to Attlee. This called for ‘a general statement of the government’s plan for meeting the economic crisis’, in the form of an unofficial king’s speech. This would ‘dispel the notion . . . that we are drifting towards a sharp crisis when the dollars run out and that the Government has no settled plan to meet it’; cuts in imports and foreign commitments were again the suggested remedy. The letter argued, furthermore, that ‘Workers will be more ready to accept infringements of rights, which were necessary in a laissez-faire society, if they see that other sections of the community are called upon in the same summons to make real sacrifices’. Part of the answer, then, to be twinned with sacrifices from the rich, was the ‘negative direction of labour’, whereby workers would be forbidden to enter certain industries, rather than forbidden to leave their existing one.11 The policy the government eventually chose in September was the restoration of the war-time control of engagement order, which included limited powers of positive direction; but it seems plausible to suggest that this pressure from

6 7 8 9 10 11

Castle, Fighting all the way, 157–8, 160. Richard Crossman, Michael Foot, Ian Mikardo and others, Keep left, London 1947, 45–6. Morgan, Labour in power, 62. Tribune, 10 Oct. 1947. Burgess, Stafford Cripps, 234. Mikardo, Foot, Castle and others to Attlee, 23 July 1947, Attlee papers (Bodleian) 57.

210

PLANNING, PRIORITIES AND POLITICS, 1947–1951

within the PLP may have played some part in stimulating the cabinet’s action. In the meantime, however, the backbench clamour for decisive economic action continued. At a meeting of the PLP, A. J. Champion MP argued that it was not enough to wait on the recently announced Marshall plan: ‘we ought at once to smash into the luxury imports’, and ‘There should be drastic reductions in overseas commitments’. He thought ‘there should be a policy for dealing with profits . . . and he pressed for a coherent plan which would involve not less but more socialism’.12 There was also, amongst MPs, a more generalised unhappiness with Attlee’s ‘indifference’ in the face of the country’s problems; George Brown and Patrick Gordon Walker, the PPSs to Dalton and Morrison respectively, had in July ‘set out to organize a revolt by collecting signatures in the tea room’ of the Commons, an ingenious but unsuccessful expedient.13 Then came Dalton and Cripps’s abortive attempt to replace Attlee with Bevin as prime minister. Cripps shared the view that ‘There was no leadership, no grip, no decision’, but was particularly worried about the government’s planning arrangements. He told Dalton: ‘Morrison . . . was quite out of his depth, and didn’t understand what planning meant, nor how it should be handled’. He wanted Bevin to be not only prime minister, but, in effect, minister of production; Cripps would be his chief of staff, as lord president.14 The plot, of course, was stymied by Bevin’s famous refusal to displace the ‘little chap’.15 But furthermore, when Cripps saw the prime minister on 9 September in order to deliver his ultimatum, the latter, in Pimlott’s words, ‘coolly bought him off’, offering him responsibility for economic planning as minister for economic affairs.16 The prime minister must have been aware, however, that in creating the new post, he was not only neutralising a rival, but also conceding a key left-wing demand. Mikardo made capital of this in an article in Tribune in October, arguing that the appointment had been foreshadowed by the arguments in the Keep left pamphlet. The government’s previous ‘uncompromising attitude’ had been ‘totally reversed by the Prime Minister’s discovery that he needs at his side a high-level Minister, free from departmental duties, to assume control of the nation’s economic affairs’. National morale had been given ‘a tremendous fillip’ by Cripps’s appointment, the ‘stimulating effects’ of whom Mikardo praised. Nevertheless, Mikardo was not completely swept away on the wave of expectations the appointment generated.17 But Attlee, for the time being at least, had largely pacified the Labour critics of his planning policies, both

12 13

Carol Johnson to Morrison, 1 Aug. 1947, ibid. 59/1. George Brown, In my way: the political memoirs of Lord George-Brown, Harmondsworth 1972, 44–5; Pimlott, Hugh Dalton, 506. 14 Dalton, High tide and after, 240–1. 15 Pimlott, Hugh Dalton, 507. 16 Idem, Dalton political diary, 412. 17 Tribune, 10 Oct. 1947.

211

THE LABOUR PARTY AND THE PLANNED ECONOMY

within and without the government. This does not of course mean that the Keep Left group were directly responsible for Cripps’s appointment, as Mikardo was perhaps trying to imply; the need to react to the practical implications of the summer’s convertibility crisis, which had drained Britain of dollars, was obviously a much more important factor. But the episode does demonstrate Attlee’s astuteness, when all around were losing their heads and blaming him, at providing a solution that could hold the party (and also the country) together. Ironically, the new arrangements that he had brought into being were to last a mere six weeks. In November, Dalton’s resignation over a budget leak led to Cripps becoming chancellor; he took his planning responsibilities with him, putting paid to the idea of an autonomous planning minister (although lip service was still paid to the notion that he was separately minister of economic affairs). But his double elevation coincided with, and was partly responsible for, the new-found dominance of ‘the language of priorities’ in the government’s planning rhetoric. As Cripps repeatedly emphasised, the nation’s priorities were, first, exports, second, capital investment, and last, the needs, comforts and amenities of the family.18 Moreover, the government’s language now focused increasingly not only on the need for collective self-denial – by restraining consumption in the interests of national recovery – but on the role of the individual worker in stimulating production. Accordingly, Cripps’s philosophy of ‘democratic planning’ reached its apogee, and it became increasingly clear that Labour’s pre-1945 concept of a planned economy which would fully replace market mechanisms was dead. The dual strategy of austerity and exhortation remained. Cripps, of course, did not invent this policy, although he appeared to personify it. In fact, in advance of his appointment as planning minister, measures to reduce the government’s dollar expenditure had been initiated, in the face of the convertibility crisis. Moreover, a review of investment programmes had been undertaken. As Jay put it, ‘It has been obvious for a long time that, in total, we have started too much and finished too little. The reason for this is that nobody has the courage to say “No” to individual projects; and the plain remedy is sternly to postpone the start of new work over a large field for some time.’19 When the newly-formed investment programmes committee reported in October 1947, Dalton, at this point still chancellor, had welcomed the proposed cuts in industrial investment and house-building starts as ‘a real start to central planning’.20 Cripps, in remarkably similar terms, noted that the report was a ‘Very good paper, in form and substance. This is a real start in central planning! . . . The first real achievement of prac18 19

Plowden, Industrialist, 36. Note by Douglas Jay on the investment programmes committee report, 14 Oct. 1947, PRO, T229/66. 20 ‘1947 investment programmes committee: white paper on investment programme 1948’, ibid.

212

PLANNING, PRIORITIES AND POLITICS, 1947–1951

tical economic planning.’21 Dalton, at this time, was under too much pressure to have time for reflection, and Cripps was not the man to admit that his career had been built on anything save complete consistency of purpose, but either might have noted the irony of their fate. In pre-war days, Labour thinkers had seen central planning as a means to abolish unemployment, and to distribute more equally the fruits of the resultant cornucopia. Now, owing to radically changed conditions, the ‘first real achievement of practical economic planning’ was an (entirely necessary) cut in investment and the scaling-down of a key social service programme.

The framework of planning Cripps’s accession as planning minister also brought about another dramatic shift: for the first time a Labour minister was prepared to speak positively about market mechanisms, albeit conditionally and in private. (Positive references to competition soon began to creep into internal Labour Party documents too.)22 In a memorandum on ‘The framework of economic planning’ written shortly before he became chancellor, Cripps argued: The aim of economic planning is to ensure that available resources are fully employed in the best possible way to provide the consumer both with the goods and services he purchases directly himself and with essential social services which he enjoys as a member of the community. . . . To give the consumer goods he does not want at the expense of things he would like to have represents in ordinary circumstances a failure in planning.

Moreover, ‘In a free society, planning should seek the satisfaction of consumers’ wants with the most economical use of our resources. In normal times production should be fitted to the pattern of market demand.’23 This opinion had much in common with Austin Robinson’s philosophy of planning, and may well have been directly influenced by it. (Robinson was now a member of the CEPS.)24 It marked a development in Cripps’s thought about ‘democratic planning’ in that the general right to determine one’s own pattern of 21

PRO, PREM 8 491, cited in Chester, ‘Planning, the Labour governments and British economic policy’, 221. 22 For example, a May 1948 research department report on the motor industry commented that ‘Competition is the lifeblood of the industry. It can be stimulated only under private ownership. . . . It is very doubtful whether it [i.e. the industry] could have given as good an account of itself if it had been under public ownership’: Sue Bowden, ‘The motor vehicle industry’, in Robert Millward and John Singleton (eds), The political economy of nationalisation in Britain, 1920–1950, Cambridge 1995, 88–115 at p. 100. 23 Stafford Cripps, ‘The framework of economic planning’, 11 Nov. 1947, PRO, CAB 134/635 PC(47)11. 24 Plowden, a vital influence on Cripps, was another who ‘heartily agreed’ with Robinson’s views on this point: Industrialist, 46.

213

THE LABOUR PARTY AND THE PLANNED ECONOMY

consumption was now acknowledged, as well as the freedom to choose one’s own job. The ‘dictatorship of consumption’ that Dalton had advocated in 1933 had no part to play. This departure might have shocked the members of the Keep Left group as well, quite possibly, as a significant number of other Labour MPs, had they known of it. Cripps, however, added a major qualification to his views, for these were not normal times; and the ‘language of priorities’ again came into play. ‘It may . . . be necessary in order to secure supplies of vital necessities to restrict for the time being the consumption of less essentials. . . . Planning attempts to secure that first claims are met at the least cost in other desirable but less essential claims . . . in the next four years . . . it will be impossible to give complete freedom to the consumer.’ The implication of this was that as shortages decreased over the coming period, it would be possible to substantially abolish controls over consumption. (The 1948 ‘bonfire of controls’ would be a symbolic instalment of this process.) This raised the question of which controls, if any, were to be permanent – that is, what the role of planning would be after the reconstruction period. What clues did Cripps offer? There were some traces of his previous support for the gosplanners: ‘It is not sufficient for realistic planning to determine that certain levels of output, etc. are desirable. It is essential to be able to influence those levels by direct and/or indirect means. Otherwise planning is reduced to mere guess work or wishful thinking.’ He summarised these means as: (a) Planning of imports, in which a high degree of control of purchase is possible. This, together with the establishment of export targets, whose complete achievement is influenced by many factors outside our direct control, seeks to ensure an external balance of payments. (b) Planning of investment, in which a large part of investment can be influenced directly and the remainder only indirectly. This seeks to ensure a proper provision or economic advance which is consistent with demands on man-power and materials for essential consumption. (c) Planning of consumption, which outside the field of rationing depends on fiscal measures to ensure that the total level of expendable incomes is consistent with the level of goods and services to be bought.25

Alford, Lowe and Rollings have argued that, in following this reasoning, Cripps was taking a ‘strong’ line, making ‘no bones about the fact that what was needed was direct planning and not indicative planning’.26 However, the limits to planning which he stressed were almost as striking as the positive measures he put forward. He argued that ‘The high degree of dependence of the United Kingdom on foreign trade . . . makes hard and fast long-term 25

Cripps, ‘The framework of economic planning’, 11 Nov. 1947, PRO, CAB 134/635 PC(47)11. 26 Alford, Lowe and Rollings, Guide, 10.

214

PLANNING, PRIORITIES AND POLITICS, 1947–1951

planning impracticable’. Furthermore, although he supported the setting of general production targets for the basic industries, he claimed that ‘It is quite impossible and far from desirable over the whole field of industry to set production targets for every final product. The demands of the public . . . must be the ultimate guide in detail’.27 Moreover, his emphasis on the planning of global consumption showed that he had to some extent assimilated the thermostatters’ key idea – which would shortly form the basis of what was perhaps the central achievement of his time at 11 Downing Street. But it was not immediately apparent what route his chancellorship would take.

Gosplanners versus thermostatters revisited The conflict between gosplanners and thermostatters had not yet died away. Nor, it must be said, did official disputes about planning retain their former practical significance. This was partly because Cripps himself was a strong minister; moreover, he got on well with Hall and Plowden who, in turn, were united in their diminuendo approach to planning. Nevertheless, there were still subcurrents of conflict at the official level. Robinson, who had left the Board of Trade for academia in July 1946, had been persuaded to return and join the CEPS upon its establishment in June 1947; he brought with him three Cambridge economists, Robin Marris, Kenneth Berrill and Patricia Brown. Robinson’s own role in pushing forward a gosplanning agenda was mainly limited to work on a four-year economic survey (see below). However, Marris and Berrill were simultaneously pushing gosplanning ideas of their own – and coming into conflict with the economic section. After Clarke’s brief triumph in the aftermath of the fuel crisis, gosplanning conceptions had rapidly lost ground in official circles, as the difficulties of implementing them became clear. Progress reports on the targets set in the 1947 survey were abandoned that October as an ‘unreal’ exercise.28 Even Clarke himself appeared in time to abandon his original attitude, declaring in February 1948 that to set targets risked giving hostages to fortune.29 But Marris and Berrill, with some support from Robinson, seemed determined to pick up where Clarke had left off, at least in terms of their ability to dramatise disputes. As they put it in June 1948, ‘Fundamentally the difference between the Economic Section and ourselves is that, as an act of faith, we believe in planning and they do not’.30 They themselves wanted more detailed, longer-term plans than the economic section was prepared to countenance; Marris, who later 27

Cripps, ‘The framework of economic planning’, 11 Nov. 1947, PRO, CAB 134/635 PC(47)11. 28 Chester, ‘Planning, the Labour governments and British economic policy’, 228. 29 Thorpe, ‘The missing pillar’, 180. 30 R. L. Marris and K. E. Berrill, ‘Presentation of the long-term survey. Our differences with the economic section’, 15 June 1948, PRO, T229/166.

215

THE LABOUR PARTY AND THE PLANNED ECONOMY

explicitly identified himself as a gosplanner, complained in a 1954 Fabian pamphlet about the ‘absolute rule in Whitehall that thought about the future is of minor importance compared with action about the present’.31 By contrast, David Bensusan Butt, a prominent member of the section, dismissed the ‘sham precision’ of such ‘rigid and irreversible plans’ as mere ‘numerology’.32 But in spite of the harsh words exchanged, Thorpe is probably right to see the remaining gosplanners as an uninfluential ginger group, who had little chance against the more powerful figures of Hall, Plowden and Butt. As he argues, the debate had petered out by the end of 1949, by which point Robinson and Berrill had left the CEPS, and Marris was about to be transferred.33 Nevertheless, in the meantime, the gosplanning ideas that had triumphed during 1947 continued to have some influence on ministers – although it is unlikely that Marris and Berrill’s activities were the cause of this. Rather, Cripps continued to promote aspects of the gosplanners’ agenda as part of a dual strategy. This strategy encompassed not only the Keynesian demand management for which his time at the Treasury has become famous, but also detailed targets for industry in the fashion of the 1947 survey. Before considering how this dual strategy played itself out in and after the crucial year of 1948, however, it is worth putting Cripps’s personal planning ideas within the perspective of the broader assumptions of his party.

The ‘iron quadrilateral’ Jim Tomlinson has identified four of Labour’s assumptions in particular as providing ‘a very constraining framework within which the more pragmatic level of economic policy operated’. This framework he has labelled the ‘iron quadrilateral’. Its component parts were (a) commitment to maintaining parliamentary sovereignty, (b) Labour’s philosophy of ‘consensual tripartism’, (c) the Morrisonian model of nationalisation, and (d) commitment to free collective bargaining. All these, Tomlinson argues, were political obstacles in the path of economic reform.34 What was their impact on Cripps’s strategy, and to what extent did they circumscribe his room for manoeuvre? On the first point, Cripps perhaps had good reason to be sensitive. In the early thirties, in his Socialist League days, he had seriously embarrassed his party by appearing to suggest that a Labour government might be prepared to prolong the life of parliament for a further term without an election. 31

Thorpe, ‘The missing pillar’, 72; Robin Marris, The machinery of economic policy, London 1954, 11. 32 D. Butt, ‘Numerology’, 14 June 1948, PRO, T230/28. 33 Thorpe, ‘The missing pillar’, 71–8. 34 Jim Tomlinson, ‘The iron quadrilateral: political obstacles to economic reform under the Attlee government’, JBS xxxiv (1995), 90–111 at pp. 111, 91.

216

PLANNING, PRIORITIES AND POLITICS, 1947–1951

Certainly, when making economic policy after 1945, he and his colleagues were careful not to infringe parliament’s prerogatives, by ensuring that planning took place within the existing governmental structure. For example, the CEPS had no executive functions, but could only ‘advise and coordinate’.35 Whether planning agencies with more widespread powers located outside the normal administrative machinery would have proved more effective, as Tomlinson believes, must remain a matter of speculation. However, Cripps’s zeal for the doctrine of parliamentary sovereignty did have important consequences for his tripartite approach to planning. To this tripartism he was strongly committed. As Tomlinson notes, the Economic survey for 1947 had emphasised that ‘Under democracy, the execution of the economic plan must be much more a matter for co-operation between the Government, industry and the people, than of rigid application by the State of controls and compulsions’.36 In Cripps’s view, joint bodies would help facilitate such co-operation. Remarks he made early on in his time at the Board of Trade, advocating what came to be known as ‘working parties’, illustrated his thinking: There were several industries which, though they were not to be nationalised, were in need of positive action either to remedy conditions or to make them fully efficient. The idea was to set up a tripartite commission, one-third owners, one-third workpeople, one-third government, to decide what should be done. . . . But it would not have ‘powers’. All ‘powers’ must be vested in the Board of Trade. The Labour government were against so-called ‘selfgovernment’ for industry – that would only lead to a corporative state.37

Thus parliamentary sovereignty could only be maintained if the working parties did not have executive powers. This limitation applied similarly to the ‘peak’ tripartite bodies, including, notably, the economic planning board. Deprived of the means to enforce their wills directly, such bodies could serve as channels of information between government, industry and organised labour, but could do little to make planning more effective. Early in the planning board’s life, Cripps was forced to apologise for the fact that it had not been consulted about policy decisions made as a consequence of the convertibility crisis.38 In 1948, the cabinet rejected the board’s recommendation that the coal production target should be raised above 211 million tons.39 Both of these incidents showed that the board, supposedly integral to the government’s planning machine, was in fact merely tangential to the policy-making process. Tripartism, therefore, did not provide Cripps with a useful planning tool. 35 36 37 38 39

Plowden, Industrialist, 9. Cmd. 7046. Dupree, Streat diary, ii. 279, entry for 3 Sept. 1945. PRO, T229/34 EPB(47)9th, 16 Oct. 1947. PRO, CAB 128/12 CM(48)16th, 23 Feb. 1948.

217

THE LABOUR PARTY AND THE PLANNED ECONOMY

Equally, Tomlinson has argued, commitment to the public corporation model of nationalisation made the government’s capacity to direct the activities of the publicly owned industries ‘unsure and ambiguous’.40 Peter Hennessy’s words of warning should, however, be taken into account: ‘it would be as misleading for historians to succumb to the convenient shorthand of the “Morrisonian model” as for them to treat the activities of nationalised industries as in any way comparable to each other in size, scope or purpose’. As he points out, Morrison in fact enacted nationalisations in many different forms.41 Nevertheless, the gist of Tomlinson’s point must be accepted; for these different models did have a common basis, in that they were in general created with the aim of ensuring that the ‘experts’ in charge of industry were not subject to excessive ministerial interference. This autonomy, once granted, was jealously guarded, which brought about conflicts between the government and the boards of the industries on the key issue of investment priorities. (For example, the National Coal Board resisted government plans for increased investment in coke ovens, which it feared would not prove remunerative.) As Tomlinson points out, ‘Given that investment by the [nationalised] industries amounted to around one half of all domestic investment at this time, this issue was central to the government’s ability to plan the national economy’.42 Thus, Cripps’s ability to plan even that part of investment over which he had anticipated having direct control was severely circumscribed. Was Labour’s commitment to free collective bargaining the final barrier to his planning the economy successfully? Clearly, an unplanned wage sector did place a major obstacle in the path of the government’s attempts to secure the distribution of labour it desired. Cripps himself had opposed the reimposition of the control of engagement order, and continued afterward to stress that it ‘represented . . . the maximum approximation to [labour] direction which it was practical to adopt’.43 Yet the cabinet would not accept the obvious alternative to labour direction – an enforced differential wage structure in order to attract workers to the undermanned industries. Labour’s ability to create such a wage policy, thus allowing the government to plan the economy without resort to compulsion, was seen by a number of the party’s intellectuals, including Evan Durbin, as the key test of its democratic socialism.44 In July 1947, however, the cabinet rejected Shinwell’s arguments for a central advisory wage body; and in November, Cripps’s own argument that the government must ‘accept the implications for wages of adopting a policy of economic planning’ was stymied by the obduracy of George Isaacs, the 40 41 42 43 44

Tomlinson, ‘The iron quadrilateral’, 105. Hennessy, Never again, 200–1. Tomlinson, ‘The iron quadrilateral’, 108. PRO, CAB 128/9 CM(47)75th, 9 Sept. 1947; CAB 134/640 PC(49) 2nd, 26 Jan. 1949. Stephen Brooke, ‘Problems of “socialist planning”: Evan Durbin and the Labour government of 1945’, HJ xxxiv (1991), 687–702.

218

PLANNING, PRIORITIES AND POLITICS, 1947–1951

minister of labour.45 The idea of a central body was revived under Gaitskell’s chancellorship, was again opposed by Isaacs, before becoming terminally bogged down in negotiations with unions and within the Labour Party.46 Brooke, following Samuel Beer, has argued that this governmental failure to enact ‘wage planning’ was a consequence of the intransigence of the unions, which made ‘Socialist planning . . . untenable in practical terms’.47 Tomlinson points out that in fact many ministers, like Isaacs, themselves shared the unions’ suppositions about the inviolability of free collective bargaining – which wage planning would inevitably cut across.48 Keir Thorpe is surely right to steer a middle course: ‘Isaacs was able to use the ingrained assumptions of most of his colleagues to oppose inititiatives which ran counter to the TUC’s line’.49 One consequence of this was that the government, and Cripps in particular, increasingly adopted an overall disinflationary wage policy, rather than a differential one. Another result was that, as Cripps observed in 1949, ‘It was necessary to rely largely on persuasion and propaganda for securing the economic distribution of labour’.50 The ‘language of priorities’, then, became more and more the language of exhortation.

Propaganda Thus, as William Crofts has argued, ‘the Attlee government’s need for propaganda arose from this fundamental dilemma: how to resolve the conflict between centralized planning and “the utmost freedom of the individual” ’.51 Yet, if propaganda was the means to square the planning circle, the government’s grip of its key tool was weak. As ‘Mike’ Williams-Thompson, chief information officer to the Ministry of Supply from 1946 to 1949, wrote in a memoir published in June 1951: ‘Cabinet Ministers of the socialist Government in this country just don’t know how to “use” the Press, or their own Public Relations services’. He recalled that, in his experience, ‘they just let things happen and then blamed the press for “misinterpreting” their actions. And yet no Government needed real Public Relations more than the Socialist Government.’52 The government’s public relations strategy had been a matter of concern

45 46 47 48 49 50 51

PRO, CAB 128/10 CM(47)62nd, 17 July, 1947; CM(47)87th, 13 Nov. 1947. Thorpe, ‘The missing pillar’, 106. Brooke, ‘Problems of “socialist planning” ’, 700; Beer, Modern British politics, 209–10. Tomlinson, ‘The iron quadrilateral’, 103. Thorpe, ‘The missing pillar’, 119. PRO, CAB 134/640 PC(49)2nd, 26 Jan. 1949. William Crofts, Coercion or persuasion? Propaganda in Britain after 1945, London 1989, p. xi. 52 Richard Williams-Thompson, Was I really necessary?, London 1951, 1.

219

THE LABOUR PARTY AND THE PLANNED ECONOMY

to Labour MPs in the aftermath of the fuel crisis.53 The Keep Left group argued: ‘Don’t imagine you tell all the people when you issue a White Paper or answer a question in Parliament. Don’t be afraid of Party controversy. This is a Socialist revolution, not a National Savings Week.’54 The supposition that a socialist revolution would be more popular with the British people than a savings week was improbable. But the remark did hit on something. The government’s campaigns, which were aimed not only at persuading people into the undermanned industries, but also at improving the efficiency of existing workforces, lacked clarity, inspiration and human interest. Moreover, the faith of Cripps, Morrison and Attlee in the power of information proved unjustified, as the campaigns were frequently misunderstood by the public. To give but one example, a piece of publicity headlined ‘MORE AND MORE PRODUCTION’ was generally misinterpreted as being a demand for longer working hours, rather than for the increased productivity that the accompanying text expounded upon.55 Williams-Thompson highlighted the government’s approach to productivity in particular as ‘extremely gauche and clumsy’.56 Of course, neither the government’s heavy reliance on propaganda, nor its difficulties in getting its message across, were new developments after 1947. (Nor was lack of clarity in official information a new phenomenon under Labour.)57 Tomlinson is probably right, however, to suggest that the lectures on planning given by Sir Oliver Franks in February and March of that year were a key influence on Cripps.58 Franks, at this time the provost of The Queen’s College, Oxford, argued that, in order to make British planning a genuinely inclusive national enterprise, the country had to be brought up-to-date in its economic attitudes through educative campaigns.59 Cripps’s subsequent career was almost the embodiment of this principle. This was in marked contrast to his prior opposition to the publication of the economic survey for 1946: ‘to publish the Survey itself would set a precedent for publication in later years which might embarrass the Government, e.g. when the Survey warned private capitalists that a slump was to be expected’.60 This tension between providing the public with information and the accompanying risks of embarrassment continued to inform the government’s actions even after Cripps’s conversion to the educative route. As will be seen, the awareness that the government could be humiliated if its public economic predictions were falsified played an important part in the progressive emascu53 54 55 56 57

See Marquand ,‘Questions raised’, n.d. 1947, PRO, T229\11. Crossman, Foot, Mikardo and others, Keep left, 45. Crofts, Coercion or persuasion?, 69, 66. Williams-Thompson, Was I really necessary?, 98. Mass Observation, ‘The language of leadership’, 20 Mar. 1947, Mass Observation archive 2462. 58 Tomlinson, Democratic socialism, 140. 59 Oliver Franks, Central planning and control in war and peace, London 1947, 37, 50. 60 PRO, CAB 134/503 MEP(46)1st, 21 Jan. 1946.

220

PLANNING, PRIORITIES AND POLITICS, 1947–1951

lation of the economic surveys after 1948; these, as time went on, were stripped of targets and became merely reviews of the previous year.61 Nevertheless, the government’s efforts did mark an important departure in public policy. Its economic information unit (EIU), founded under Morrison in June 1947 and transferred to Cripps in September, helped deluge the British people with statistics.62 In spite of the propagandist gloss that was put upon these facts and figures, this was an unprecedented exercise in open economic government – even if the intended message did not always get across. Moreover, in the vital case of wage restraint, the message was received, understood and acted upon. Following the February 1948 publication of the white paper, Statement on personal incomes, costs, and prices, the number of respondents to the government’s social survey citing wages, prices, and the cost of living as urgent national problems more than doubled.63 This popular awareness must have helped the TUC sustain the wage freeze to which it agreed between 1948 and 1950, a policy which was, as Plowden pointed out in his memoirs, in many ways contrary to the movement’s raison d’être.64 Brooke has described the white paper as walking ‘a fine line between the disinflationary and socialist schools of thought’, given that it did make a nod towards the encouragement of higher wage levels in undermanned industries in which productivity had increased.65 It was, however, greeted by left-wing Labour MPs as an ‘ominous’ sign that Cripps was moving towards a deflationary policy.66 They were, to an extent, right, although ‘disinflationary’ would probably have been more accurate (Cripps himself was always concerned that his own fiscal stance might be excessively deflationary).67 For, as has been seen, although he spoke the language of priorities, Cripps in several key respects lacked the power to implement the government’s own priorities at a microeconomic level. The clear alternative was the macroeconomic restraint of global demand.

61 62

Thorpe, ‘The missing pillar’, 224, 138. However, S. C. Leslie, the EIU’s head and a friend of Morrison’s, was apparently loathed in Whitehall. Williams-Thompson recalled, with no doubt a fair measure of hyperbole, that ‘There are certain Civil Servants who even now cannot hear his name mentioned without almost having a fit. Whenever I had a project to get through which seemed likely to be opposed in the Ministry [of Supply], I always said “and of course in fairness I must mention Leslie is against it”. It was then passed unanimously’: Was I really necessary?, 193. 63 Cmd. 7321, Statement on personal incomes, costs and prices, Feb. 1948; Crofts, Coercion or persuasion?, 64. 64 Plowden, Industrialist, 38. 65 Brooke, ‘Problems of “Socialist planning” ’, 699. 66 Castle, Fighting all the way, 160. 67 Plowden, Industrialist, 78.

221

THE LABOUR PARTY AND THE PLANNED ECONOMY

The decisions of 1948 This was reflected in Cripps’s strategic thinking during the spring of 1948, when, in Plowden’s words, the ‘Crippsian Age’ began in earnest.68 The need for prudence, as a later chancellor would have put it, was also clearly linked with the need to impress the US administration with the government’s economic responsibility – for this was the the year in which Marshall aid was to be allocated. As Eric Roll, who joined the CEPS at around this time, has recalled, ‘the prospect of substantial dollar aid was the major factor determining outlook and policy’.69 A change in propaganda tactics resulted; the Economic survey for 1948 was not aimed merely at a domestic audience but, as Cripps put it, at readers ‘on both sides of the Atlantic’.70 Therefore, as Thorpe has argued, the compilers of the survey ‘aimed to portray the economy in a fashion that elicited as much aid as possible’.71 This involved a balancing act. As Edward Bridges put it, ‘The published document must not be drafted in such a way as to suggest that we were counting on Marshall Aid in any specified quantity, but, on the other hand, we should have to show quite clearly that we badly needed it’.72 Moreover, the timing of the survey was affected by the need to please the Americans; this in turn had significant repercussions for the future of British planning policy. As was seen in chapter 7, it was certainly not the case that the government abandoned planning in response to US pressure. But the demands of policy presentation in fact had unintended consequences for future policy substance. The vital issue was Cripps’s desire to break from past practice by integrating the economic survey with the budget. At the beginning of January 1948, he made some additions in his own hand to a draft document for the cabinet outlining the contents of the 1948 survey, which had been prepared for him by officials. These included his view that the survey should be published towards the end of February, and a debate on it postponed to coincide with that on the budget. Moreover, In future, the ‘Planning Year’ should be the same as the ‘financial year’ i.e. end on March 31st. This will enable the financial and economic policies to cover the same period, and will make it possible to publish the Survey before the period to which it relates.73

68 69 70

Ibid. 35–6. Eric Roll, Crowded hours: an autobiography, London 1985, 56. ‘Economic survey for 1948: memorandum by the chancellor of the exchequer’, 19 Feb. 1948, PRO, CAB 129/24. 71 Thorpe, ‘The missing pillar’, 179. 72 ‘Economic survey for 1948’, n.d., Robinson papers 6/2/2. 73 ‘Draft paper by chancellor of the exchequer: the economic survey for 1948’, 1 Jan. 1948, T229/46. Cripps’s comments were added on 2 Jan. 1948.

222

PLANNING, PRIORITIES AND POLITICS, 1947–1951

Here, then, is clear evidence of Cripps’s initial wish to achieve a closer relation between planning and budgetary policy than the government ever actually attained. However, he quickly changed his mind, and the question of American aid was the key to this. When the cabinet’s economic policy committee met to discuss the forthcoming survey, he announced that he no longer wished to press the suggestion that the document should be related to the financial year: “The fiscal year in the United States was related to the calendar year and, for the period of Marshall Aid at any rate, it would clearly be most inconvenient that our Economic Surveys should be related to our financial year.’74 Whether this point had been drawn to his notice by other ministers or by officials, or whether he had thought of it himself, is not clear.75 But for historians like Thorpe, who seek an explanation for Labour’s failure to integrate planning more consciously into the budget, the answer is here.76 Moreover, the realistic prospect that the government would create a planned economy which resembled that of the party’s pre-1945 vision, already growing faint, was now killed off; the pressing need to secure Marshall aid was the reason for its death. It was, one might say, a question of priorities. If the chancellor had stuck with his original proposal, 1948 might have gone down in history as the year of the first British planning budget (as Cripps himself believed it would).77 In fact, it was a watershed for other reasons. Although Dalton had pursued large budgetary surpluses, Cripps now used this policy more consciously and explicitly as a means to supplement savings. Thus, Austin Robinson recalled in the sixties, ‘it was Stafford Cripps in 1948 who first carried into peacetime budgeting the concepts which Keynes had developed for war finance’.78 (Cripps, of course, had himself been in exile from the Labour Party when it opposed these concepts in 1939–40; interestingly, his performance at the Board of Trade had been privately praised by Keynes shortly before the latter’s death.)79 His officials bore much of the responsibility for this; given the chancellor’s chronic fear of deflation, 74 75

PRO, CAB 134/216 EPC(48)2nd, 9 Jan. 1948. If civil servants were responsible, this could be taken as evidence in support of Andrew Chester’s argument that ‘being fundamentally opposed to the idea of economic planning, officials like [Sir Norman] Brook [the cabinet secretary] were not averse to using the economic dominance of the United States . . . as a lever against the policies that ministers were trying to follow’: Chester, ‘Planning, the Labour governments and British economic policy’, 259. 76 Thorpe, ‘The missing pillar’, 102–3. 77 Burgess, Stafford Cripps, 259. 78 Robinson, Economic planning in the UK, 21–2. 79 On Keynes’s final visit to America, Lord Halifax, the British ambassador, recorded the economist’s comments: ‘He is not too gloomy about things in England; he says that Stafford Cripps is really doing a good bit of work at the Board of Trade and that exports are moving better then he, Keynes, had dared to hope. He thinks, too, that he has succeeded in educating Hugh Dalton into some understanding of the essentials of the financial position and generally thinks we shall get through’: Halifax diary, entry for 5 Mar. 1946, Halifax papers, Borthwick Institute of Historical Research, York, A7.8.18.

223

THE LABOUR PARTY AND THE PLANNED ECONOMY

‘his advisers had to fight hard to keep [him] on the Keynesian straight and narrow’ (Booth). As a result of their efforts, Keynesian arithmetic was at the heart of both the budget and the economic survey.80 Robert Hall later attributed Cripps’s success in promoting the policy to his experience as a barrister; he believed that the chancellor could make more of his subordinates’ arguments than they could themselves. Hall thus gave the paradoxical explanation: ‘He did not really understand the basis of economic planning as we developed it under his regime, but he was entirely responsible for its development’.81 By ‘economic planning’, of course, Hall meant ‘demand management’. But if the 1948 budget represented at least a significant instalment of the Keynesian revolution, what were its consequences for planning policy, and for the Labour Party? Historians have tended to see the move towards demand management as an emasculation of Labour’s socialism (although Martin Francis has recently issued a welcome corrective to this view).82 Beer, though he does admit some continued role for physical controls, argues: By the last years of the Attlee Government a quite definite ‘choice’ had been made. . . . From physical planning [the government] turned to economic management. This approach to planning is quite compatible with private ownership, competition and profit-seeking. . . . From the viewpoint of economic planning, in consequence, it makes public ownership superfluous and the whole Socialist conception of the co-operative economy sustained by the public service motive irrelevant.83

Brooke echoes this argument, adding that, as a consequence of this decision, ‘Mr Butskell approached on the horizon bringing with him a crisis of identity for the Labour Party’.84 Clearly, there is a measure of truth in these analyses. As was seen earlier, Cripps, for one, was increasingly willing to recognise the legitimacy of individual free economic choice; he sought the co-operation of private industry, albeit in a fashion which many industrialists felt to be hectoring. Moreover, unable and unwilling in differing degrees to enforce its microeconomic priorities directly, the government’s resort to indirect global methods was a logical if perhaps somewhat unintended result of this impasse; no conscious decision appears to have been made. But the politicians concerned remained unaware that their position had altered, for they did not recognise the antithesis between demand management and physical planning. To the modern eye, the 1948 budget marks the death, if not the burial, of Labour’s original planning project. In the minds of Cripps and Gaitskell, serious economic planning had just begun. 80 81 82 83 84

Booth, British economic policy, 167. Cairncross, Robert Hall diaries, 222, entry for 29 Apr. 1952. Francis, Ideas, 36–49. Beer, Modern British politics, 199–200. Brooke, ‘Problems of “socialist planning” ’, 701.

224

PLANNING, PRIORITIES AND POLITICS, 1947–1951

Moving the goalposts Naturally, this belief owed something to politicians’ notorious capacity for deception, not least of themselves, and also of their limited opportunities, when in office, for reflection. As Gaitskell put it in 1957, ‘professional politicians, when they have been in the job for any length of time, are not well fitted for really deep thinking, partly because they have no time for it and partly because the very practice of their art involves them in continual simplification’.85 Moreover, in the words of Robert Blake, ‘much of the art of politics lies in concealing behind a facade of rigid adherence to immutable principle those deviations or reversals which events and responsibility so often force upon governments’.86 Cripps was a magnificent exponent of this art, and thus managed to present the shift to economic management as part of seamless continuum comprising an uninterrupted commitment to planning. He was helped in this by the fact that Labour thinkers did not, for the most part, recognise any black-and-white divide between Keynesianism and other, more dirigiste, forms of planning; rather, they enlisted Keynes’s ideas in support of such planning. As John Parker put it in 1947, ‘The effect of Lord Keynes’s teaching and of wartime experience has been the creation of a very widespread belief in Britain that unemployment can be practically prevented by the full development of a planned economy’.87 Of course, the kind of planned economy based on nationalisation that Parker had in mind would have been anathema to Keynes. Similarly, Jay, whose landmark, Keynesiantinged book The socialist case had recently been published in a new edition, in 1947 declared his faith in ‘the sheer practical ability of central authorities to control big sections of the nation’s economic life. I believe the last seven years . . . have shown the remarkable power of large-scale organisation at its best.’88 Keynes himself, of course, had always been willing to label his own ideas as planning if he thought it would get them accepted, a factor which helped blur what with hindsight appears to be the clear conceptual distinction that Beer identifies.89 Moreover, the decision to debate the economic survey at the same time as the budget was maintained, even though the idea of bringing the ‘planning year’ into line with the financial year was abandoned. This allowed Cripps to claim, with a degree of plausibility, that closer integration between economic and financial questions was indeed being achieved; the budget, he told the Commons, was now ‘complementary to, and, indeed, in some sense a part of the National Economic Plan’.90 Two years later, in his 1950 budget speech, he 85 86 87 88 89 90

Hugh Gaitskell, The challenge of coexistence, London 1957, 7. Robert Blake, Disraeli, London 1966, 764. John Parker, Labour marches on, Harmondsworth 1947, 55. Jay, ‘Plans and priorities’, 10. Chester, ‘Planning, the Labour governments and British economic policy’, 7. HC Debs, 449, 6 Apr. 1948, col. 37.

225

THE LABOUR PARTY AND THE PLANNED ECONOMY

not only denied that planning had been abandoned, but also, virtually in the same breath, argued that the budget itself was now ‘the most powerful instrument for influencing economic policy which is available to the government’.91 Cairncross has argued that Cripps thus ‘pronounced a requiem on economic planning as he had once conceived it’.92 This holds a strong measure of truth, but must be qualified with reference to his continued advocacy of permanent physical controls and his continued commitment to industrial modernisation (see below). Moreover, even as the chancellor was laying his old conceptions to rest, he was still intent on retaining the old label of planning for his new ideas. This, perhaps, helped quell his colleagues’ doubts about his strategy. Apparently, these doubts were shared even at the highest level. In the run-up to the 1950 budget, Christopher Addison, the lord privy seal, had criticised the ‘speculative’ policy of running a large surplus. In his opinion, if the money was not needed for public expenditure, there was no point in collecting it – the idea that this might be necessary to prevent inflation had apparently passed him by.93 Attlee, writing to Cripps, appeared to give some credence to Addison’s view – and suggested that ‘a good many of our colleagues’ shared the latter’s doubts.94 Cripps, therefore, with the strong support of Hall and Plowden, laid out the purpose of his policy in plain terms: ‘It is not going too far to say that the first duty of a Government which believes in planning is to keep away from inflation and from deflation. But we should never be able to do this without making use of the Budget as an instrument of control’.95 His view, of course, prevailed. The fact that, initially, it had not been understood, even by other members of the government, no doubt then helped stimulate him to lay out its philosophical basis to a wider public in his budget speech. Moreover, Cripps’s rearticulation of planning as a primarily macroeconomic activity was what enabled Gaitskell (in 1954) to praise his achievements and argue that ‘in three or four years [after 1947] central planning came to be accepted, and was carried out’.96 During Labour’s first two years in office, the government’s planning achievements had not matched up to its rhetoric; Cripps took on a new course, and adapted the previous rhetoric to suit his needs, whilst quietly disclaiming the more radical implications of the party’s prior aspirations.

91 92 93 94 95 96

HC Debs, 474, 18 Apr. 1950, col. 39. Cairncross, Years of recovery, 332. Addison, notes for Cripps, 10 Mar. 1950, PRO, T171/400. Attlee to Cripps, 11 Mar. 1950, ibid. ‘Budget policy: note by the chancellor of the exchequer’, 15 Mar. 1950, PRO, CP(50)35. Gaitskell, ‘Labour and economic planning’.

226

PLANNING, PRIORITIES AND POLITICS, 1947–1951

The abandonment of targets and of long-term planning There is no clearer example of this progressive abandonment of earlier aims than the fate of the economic targets set by the government. Targets for particular industries, of course, had been central to the ‘gosplanning’ ideas that the Economic survey for 1947 had encapsulated. And in September of the same year, shortly after his appointment as minister of economic affairs had been decided, Cripps declared in a public speech that the government’s policy was to give producers ‘an actual task to be performed which must be reached, and for which all the necessary materials, labour, etc. must be provided’.97 But, as has been seen, most of the key officials by this time doubted that targeting was worthwhile. In January 1948, however, there was still general agreement among ministers that ‘the practice of setting production targets, both for industries and for particular firms, might be with advantage extended’, although a note of caution was added in the case of coal. There was pressure from the economic planning board to increase this target above 211 million tons, but ‘There were obvious advantages in restricting a published target, which would be quoted for the purpose of pressing us to increase our exports of coal, to a figure we were fairly certain of achieving. And, even for domestic purposes, the publication of an “incentive” target was open to serious objections.’98 In the event, the Economic survey for 1948 included targets for coal, iron and steel, textile exports, agriculture, mining machinery and shipbuilding. Targets were also set for reducing the number of railway wagons and the amount of electricity generating plant under repair.99 Yet, as Cripps himself admitted, the government’s determination not to violate its own democratic precepts meant that it could not take the measures necessary to guarantee the execution of its own plans.100 Moreover, the economic predictions on which the targets were based lacked the statistical backing needed to make them meaningful. (‘Statistical weakness’ was the one criticism of the Labour government’s planning machine that Gaitskell would later allow himself to make.)101 Partly as a consequence of this, the government’s predictions were progressively falsified; as Cripps acknowledged in January 1949, ‘the cuts in the Investment Programme had failed in their purpose of freeing labour for more productive occupation, and in particular for the under-manned industries’. Speaking with reference to the draft economic survey for 1949, he added: ‘Experience had shown that there were serious objections to setting man-power targets. In particular, they were inconsistent with the special emphasis now being laid on the importance of increased productivity. One of the essential aspects of productivity was the 97 98 99 100 101

Daily Herald, 13 Sept. 1947. PRO, CAB 134/216 EPC(48) 2nd, 9 Jan. 1948. Economic survey for 1948, Mar. 1948, Cmd. 7344. HC Debs, 449, 6 Apr. 1948, col. 38. Gaitskell, ‘Labour and economic planning’.

227

THE LABOUR PARTY AND THE PLANNED ECONOMY

economical use of available man-power; and industries should not be encouraged to attach excessive importance to securing their full labour requirements’. However, ‘it would still be necessary to set certain production targets, and it would therefore be essential to give some indication in the Survey of what the Government regarded as a desirable distribution of man-power in 1949’.102 Therefore, the published survey for 1949 included not only export targets, but a target for production in the textile industry. But targets for coal and power were kept out, replaced by mere ‘forecasts’.103 In the case of coal, Gaitskell, as minister of fuel and power, preferred to face criticism in the early months of 1949 for excluding a target, than meet gibes nearer to a general election that such a target had not been fulfilled.104 In subsequent years, the instinct for ‘playing safe’ became yet stronger. In Thorpe’s words, ‘the bonfire of controls was now followed by a holocaust of targets’.105 Consequently, although the surveys had never in fact been an effective planning tool, even the idea that they might be was now abandoned. As Cripps put it to the cabinet’s production committee in January 1950, their ‘main purpose . . . was not to serve as a basis for planning’. They were merely ‘a convenient occasion for reviewing past progress and for laying down the broad objectives of economic policy’, their object being, it would seem, to provide an educational tour d’horizon for workers and voters.106 Moreover, if detailed targets for a single year ahead were now unwelcome to ministers, it is no surprise that thoughts of longer- term planning also now receded from ministers’ minds. The government did, in fact, undertake one major exercise on these lines in 1948 – a bowdlerised version of which was submitted to the OEEC in the autumn under the title The long-term programme of the United Kingdom, as part of Britain’s bid to get Marshall aid. The need to secure aid was not in fact the original stimulus for the work. Rather, Robinson recalled, the survey (which covered the years 1948–52) was in the first instance ‘produced as an outcome of the convertibility crisis, to provide a longer-term strategic plan for our recovery’.107 But, for practical purposes, the production of the Long-term programme served no real function other than to secure American goodwill. Its forecasts for the development of the UK economy were in fact broadly accurate, yet its effects on actual policy were virtually nil.108 For although Cripps was credited by Robinson with encouraging the long-term work, this work was not sustained once the immediate exigencies of the convertibility crisis and the Marshall aid bid were past.

102 103 104 105 106 107 108

PRO, CAB 134/640 PC(49) 2nd, 26 Jan. 1949. Economic survey for 1949, Mar. 1949, Cmd. 7647. Thorpe, ‘The missing pillar’, 208. Ibid. 204. PRO, CAB 134/644 PC(50) 3rd, 23 Jan. 1950. Robinson, ‘The economic problems of the transition’. Joan Mitchell, Groundwork to economic planning, London 1966, 116.

228

PLANNING, PRIORITIES AND POLITICS, 1947–1951

Indeed, new pressure on sterling in 1949 threatened to make even short-term planning impossible. As Cripps told the production committee in July, shortly before leaving for a rest cure in Switzerland, the government’s attempts to plan investment ‘had . . . been further complicated by the steady deterioration in our dollar balance of payments . . . Even for 1950 it was difficult to settle a programme with any degree of certainty’.109 Long-term planning thus fell victim both to events directly, and also to ministers’ tendency to concentrate their energies on immediate priorities. The fate of the pound was, of course, the most important of these, both economically and psychologically. In Cripps’s absence, the crucial decision to devalue was taken by a triumvirate of more junior ministers, Jay, Wilson and Gaitskell. Wilson travelled to Zurich to present the reluctant chancellor with the fait accompli. Cripps, if his position was not directly threatened, was clearly no longer indispensable, and his authority was inevitably undermined. This in turn had consequences for the residual aspects of the government’s planning policy.

Development councils and permanent controls If the economic surveys were stripped more and more of whatever practical meaning they might have had, and if long-term planning no longer found champions, it was not the case that, as a consequence, macroeconomic management was the government’s only economic policy tool. As Francis has argued, ‘Although Labour continued to take up and utilise some Keynesian ideas . . . the Attlee government never simply abandoned physical planning in favour of planning exclusively through fiscal measures’.110 So the planning that ministers still claimed was taking place was not merely dressed up Keynesianism. This may be seen with reference to the party’s ongoing commitment to tripartism in the form of the ill-fated development councils, and to permanent physical controls. Tomlinson has described the development councils as ‘probably Labour’s most distinctive policy instrument for industry’.111 The industrial organisation and development act (1947) which created them – or rather, which permitted their creation – was initiated by Cripps whilst still at the Board of Trade. The councils were to be industry-wide ‘supervisory’ bodies, on which workers and employers would be equally represented. Cripps saw them ‘as an essential and vital factor in our economic planning and the only satisfactory way in which, in a mixed economy, we can successfully combine private enterprise and state planning’.112 They were to be financed by a levy on firms, 109 110 111

PRO, CAB 134/640 PC (49) 17th, 11 July 1949. Francis, Ideas, 40. Jim Tomlinson, ‘Productivity policy’, in Mercer, Rollings and Tomlinson, Labour governments and private industry, 37–54 at p. 39. 112 Stafford Cripps, speech at High Wycombe, 18 Jan. 1950, Cripps papers.

229

THE LABOUR PARTY AND THE PLANNED ECONOMY

and were intended to help private industries increase the efficiency of production and distribution, as well as to facilitate liaison with governement; there were to be no compulsory powers over prices, nor were wages and conditions to come under the councils’ remit.113 However, the president of the Federation of British Industry described them as ‘backdoor nationalisation’ and ‘the new despotism’.114 But such opposition merely stiffened Cripps’s determination to proceed with his vision of industrial modernisation. In the run-up to the general election of 1950 he said: Immediately we are returned to power we must set to work in real earnest to strengthen that [industrial organisation and development] Act and to bring a large number of Development Councils into effective operation over-riding any political opposition that may be encountered. We have wasted valuable years trying to get agreement and we must not waste any more time.115

In fact, Labour’s slim overall majority in the election meant that he was denied the opportunity to strengthen the legislation. Even had he got his way, it seems unlikely that the councils would have had a transforming effect on the success of planning at the industry level any more than the economic planning board did at a national level. But, in view of the emphasis that Cripps put upon them, it seems difficult to argue that macroeconomic management was now his sole concern, as the arguments of Beer and Brooke might seem to imply. Tomlinson’s emphasis on Cripps’s modernisation ideas seems here very much to the point. And it must be emphasised again that, in pressing this agenda, Cripps had not abandoned his continued rhetorical commitment to the planned economy any more than he had been fully swept away on the Keynesian tide. Indeed, further examination of the pre-election speech just mentioned shows that he still advocated permanent microeconomic controls as a means of securing the Labour Party’s economic, social and political priorities (as did his colleagues). He argued that ‘positive physical controls are an essential part of succesful economic planning, if that planning is to result in fair shares and in the interests of the nation being given precedence over that of individuals’. Many controls, he pointed out, had been abolished and others might prove unneccessary in the future; but new ones might be needed in response to new economic situations.116 It must, however, be recognised that, in publicly adopting this position, he appears to have been responding to implicit criticism from within the government of his own increasing preference for indirect methods of control. Crucially, the person who expressed this 113 Marguerite Dupree, ‘The cotton industry: a middle way between nationalisation and self-government?’, in Mercer, Rollings and Tomlinson, Labour governments and private industry, 137–61 at p. 137. 114 Tomlinson, ‘Productivity policy’, ibid. 48. 115 Cripps, speech at High Wycombe, 18 Jan. 1950, Cripps papers. 116 Ibid.

230

PLANNING, PRIORITIES AND POLITICS, 1947–1951

was Gaitskell, in alliance with Jay. The former, who was shortly to move from his fuel and power role to become minister of state for economic affairs, had gained an ascendancy in economic policy-making owing to his firmness over devaluation the previous year. Cripps’s illness made this new dominance possible and, of course, paved the way for Gaitskell’s eventual succession to the chancellorship in October. The oblique attack that was launched against the philosophy of the incumbent, then, had ramifications with a potentially wide-ranging impact on the political scene. The challenge came in response to a report of the official programmes committee that was presented to the cabinet’s economic policy committee by Cripps in December 1949. The paragraph of the report to which Gaitskell objected argued that ‘It should be recognised that in the management of our general balance of payments indirect measures of control must play an increasing part, primarily by anti-inflationary internal policies and a strict external financial policy’.117 This was a close summation of the main thrust of Cripps’s well-established macroeconomic strategy. But perhaps it was the explicit way the argument was now stated which led Gaitskell to conclude that this policy ‘was not really compatible with the fundamental principles upon which the Government’s economic policy has hitherto been based’. Accordingly, with Jay’s help, he drafted a memorandum on ‘Economic planning and liberalisation’ which he presented to the economic policy committee in January. Gaitskell argued that ‘The use by the Government of direct controls . . . has been the distinguishing feature of British socialist planning’. Any attempt to abandon this policy, and to guide the economy solely ‘by indirect monetary means’ would lead either to inflation and a balance of payments crisis, or deflation and unemployment. He admitted that in fact there was little danger of the Labour government abolishing controls ‘consciously and positively’ but there was, however, ‘a real risk that we shall be drawn more and more in this direction almost unconsciously, because of objections to and criticisms of specific controls’. He concluded, therefore, that the government should be ‘exceedingly careful before demolishing any more important physical controls lest we be driven, as a result, to rely exclusively on monetary and budgetary policy’.118 Gaitskell found warm support from the committee for his ideas. Dalton (who had returned to the cabinet in 1948) thought the memorandum ‘first class’. He recorded the impact of the committee’s views: ‘Cripps says, with a wan smile, that he supposes this is a vote of no confidence in the Chancellor. Of course we all deny this. It is meant, we say, for guidance to official advisers, who keep on giving advice which runs contrary to H. M. Government’s view

117 PRO, CAB 134/223 EPC(49)157, 7 Dec. 1949; CAB 134/220 EPC(49) 51st, 14 Dec. 1949. 118 PRO, CAB 134/225 EPC(50)9, 7 Jan. 1950.

231

THE LABOUR PARTY AND THE PLANNED ECONOMY

of things.’119 But Cripps had associated himself directly with that advice, even though he was increasingly suspicious of the people giving it to him.120 Now he backtracked. According to the minutes of the meeting, he ‘agreed that one had to be on one’s guard against those who thought in terms of a free rather than a planned economy’. He was, he said, in general agreement with the lines of policy that Gaitskell set out.121 Indeed, the very day before the meeting he had delivered the speech mentioned above, which contained a close approximation of Gaitskell’s argument in favour of controls. This suggests either that the chancellor had been genuinely convinced by the memorandum, or that, as his demeanour in committee might seem to suggest, he was attempting to ward off a perceived threat to his own position. Either way, Gaitskell’s influence was confirmed – and in the aftermath of the election, so was the policy of direct controls which he advocated.

Loss of momentum This proved to be the case even as the Labour Party’s faith in wholesale nationalisation was weakening; public ownership of basic industries had previously, of course, been closely integrated with arguments for planning. Naturally enough, Labour politicians still defended the policy publicly as ‘absolutely essential for a successfully planned economy’, in Cripps’s words.122 But the divide between the Morrisonian ‘consolidators’ and the advocates of socialist advance led by Bevan was now opening up (although, after much agonising the decision to proceed with iron and steel nationalisation had finally been agreed in December 1949).123 Thus, for example, the NEC committee responsible for producing the new party programme, Labour believes in Britain, was told by an unidentified member that ‘the spiritual results of nationalisation are not as good as we hoped’; yet, another member wanted less stress placed on the encouragement of private enterprise.124 There was disagreement as to the very purposes of nationalisation.125 This was reflected in the ‘rag-bag’ list of industries that the 1950 manifesto proposed to nationalise.126 Along with water, a fairly easily justifiable candidate for nationalisation, cement, meat wholesaling and sugar were to come under public ownership (industrial assurance was also to be ‘mutualised’). 119 120

Pimlott, Dalton political diary, 465, entry for 24 Jan. 1950. Cairncross, Hall diaries, 63–4, entry for 8 July 1949; Francis Williams, Nothing so strange: an autobiography, London 1970, 280. 121 PRO, CAB 134/224 EPC(50) 5th, 19 Jan. 1950. 122 Cripps, speech at High Wycombe, 18 Jan. 1950, Cripps papers. 123 Morgan, Labour in power, 399–400. 124 NEC policy and publicity committee, 17 Jan. 1949, LPA. 125 Francis, Ideas, 65–93. 126 The phrase was G. D. H. Cole’s: ‘Buscot Park conference on problems ahead 15–17 July 1949’, Aug. 1949, G. D. H. Cole papers D1/16/2.

232

PLANNING, PRIORITIES AND POLITICS, 1947–1951

After the election, Crossman, putting his own left-wing credentials into question, argued that these promises ‘looked very silly’ during the campaign, and were ‘Frankly . . . irrelevant’. Owing to the government’s reduced majority the necessary bills could not be enacted, which was ‘very lucky’.127 Crossman, of course, was not very influential in his own right; but his arguments were supported by Morrison, who arranged for the memorandum in which they were made to be circulated to the NEC in April. Analysing the election results himself the previous month, Morrison had pressed on with his consolidation agenda: ‘it was more important to pay attention to making effective existing socialisations rather than to proceed with a further nationalisation programme’. Yet crucially, he believed that Labour’s arguments for economic planning and the exercise of economic controls ‘were effective and successful . . . I regard this aspect of our policy as a winner of importance’.128 (Attlee, whose election broadcast had contrasted Labour’s ‘ordered planning’ with Tory ‘incompetence’ presumably shared this view.)129 He therefore supported for party and electoral reasons the policy that Gaitskell had advocated for economic reasons; the confluence of opinion now found its result in the economic powers bill that the government now began to prepare. Both Morrison and Wilson, during 1949, had committed the government publicly to retention of permanent economic controls. But the 1945 Supplies and Services (Transitional Powers) Act was due to expire in 1950; what would replace it? In March of that year Morrison won the cabinet’s agreement for the drafting of a bill or bills to take permanent powers of economic control and price regulation.130 In May, the proposals were given a more openly political twist. At a conference held at Beatrice Webb House in Dorking, the NEC and the cabinet met with TUC and co-operative movement representatives to discuss future policy. Cripps emphasised that ‘full employment, the main essential of policy, is in danger all the time unless the Government maintains planning and control’. He, Bevan and Wilson all emphasised the necessity, and difficulty, of planning private enterprise.131 It was also concluded, on the basis of remarks made by Michael Foot and Hugh Dalton, that:

127 Richard Crossman, ‘Memorandum on problems facing the party’, 26 Apr. 1950, in NEC minutes, LPA. 128 Herbert Morrison, ‘The recent general election and the next’, 22 Mar. 1950, attached to campaign subcommittee minutes, 20 Mar. 1950, LPA. 129 H. G. Nicholas, The British general election of 1950, London 1951, 141. 130 Rollings, ‘Permanent economic controls’, 21–3. 131 Cripps said ‘We are going to spend the rest of our lives in a mixed economy. . . . Manufacturers who won’t conform to national policy must be controlled so that at least they won’t sabotage the national effort, and so that they will, if possible, be of assistance. . . . [We] Must now devise some means to bring some measure of planning to private enterprise.’ Bevan said that ‘In the Government we all know how difficult it is to plan the private sector at all . . . it is a matter of seducing, wooing and bullying’: file on Dorking conference, Labour Party general secretaries’ papers, National Museum of Labour History, Manchester, GS/DORK/47, pp. xxi, xiv, xxvi.

233

THE LABOUR PARTY AND THE PLANNED ECONOMY

We should clearly explain the planning instruments which we feel are necessary and challenge the Tories to indicate which they would abandon. The Supplies and Services Act is an important measure of economic control. It might perhaps be possible to link it, in the public mind, with full employment, i.e. by embodying the provisions of the Supplies and Services Act in a ‘Full Employment Maintenance Act.132

In fact, the title chosen was the ‘economic planning and full employment bill’, which then became simply the ‘full employment bill’, at Gaitskell’s insistence.133 As chancellor, he argued in November that ‘People will support controls if they recognise that they can prevent unpleasant things happening, but I doubt if the term economic planning is understood – or if it is, whether it is a popular concept’.134 This cast doubt on Morrison’s view of Labour’s planning policies as a ‘winner of importance’. Nor was the new emphasis on controls unanimously popular amongst the party’s up-and-coming intellectuals.135 It did, however, offer an agenda around which politicians as diverse as Morrison, Gaitskell, Cripps and Bevan could coalesce; agreement on the need for legislation for permanent controls was widespread.136 Potentially, this meant that divisions over nationalisation, and over the government’s economic direction in general, would be rendered less damaging by creating a new focus for legislative activity. But circumstances were to intervene; and the full employment bill was dropped in February 1951, the government choosing to rely for the time being on the existing emergency powers, renewed on an annual basis. As Neil Rollings has shown, the main cause of this was difficulties created by the Korean war. Powers additional to those included in the full employ-

132 ‘Summary of discussions at the conference held at Beatrice Webb House, 19–21 May 1950’, June 1950, attached to NEC policy and publicity committee minutes, 19 June 1950, LPA; file on Dorking conference, Labour Party general secretaries’ papers, GS/DORK/47, pp. ix, xxxviii. See also Morgan, Labour in power, 413–15. 133 Rollings, ‘Permanent economic controls’, 24. 134 PRO, CAB 130/65 GEN 343/2 9, Nov. 1950. 135 At a Fabian conference in the spring, Tony Crosland had argued that ‘the emphasis now laid on “controls” as against ownership was bad. It had tended to associate Socialism in people’s minds with bureaucracy, with centralisation and with increased state-power’. Crossman too warned against ‘clinging to emergency powers and mistaking them for socialism’ – although in the memorandum of his views that was circulated to the NEC a few weeks later, his position appears to have changed almost diametrically: ‘Fabian society conference at University College, Oxford, 31 Mar.–2 Apr. 1950’, G. D. H. Cole papers D1/20/12; Crossman, ‘Memorandum on problems facing the party’, 26 Apr. 1950, in NEC minutes, LPA. 136 Although Barbara Ayrton Gould, a member of the NEC, said at the Dorking conference that ‘She had noticed that those Members of Parliament who had spoken in favour of planning and nationalisation came from safe constituencies. They had all tended to ignore the fact that the people we had to win over were those to whom it was difficult to explain the purposes of planning and nationalisation’: file on Dorking conference, Labour Party general secretaries’ papers, GS/DORK/47, p. xxxii.

234

PLANNING, PRIORITIES AND POLITICS, 1947–1951

ment bill were now required for defence and rearmament purposes; to introduce further, permanent, powers on top of these emergency provisions would have muddied an already confused legislative situation further, and baffled the general public. So the full employment bill was set to one side. In Rollings’s words, ‘This did not mean that the idea of permanent economic controls had been finally dropped by Labour, merely that it had had to be put on the back-burner’.137 One consequence of this, however, was that Gaitskell’s chancellorship has gone down in mythology as the high-water mark for Keynesianism – with he himself cast as the latter half of Mr Butskell – although in fact his Keynesianism was complemented by a strong faith in physical controls which, moreover, he retained throughout the rest of the decade.138 Furthermore, the Korean war itself, which caused the bill to be dropped, also had another, far more devastating result for the government and for the Labour Party. This was the conflict between Gaitskell and Bevan over the costs and consequences of rearmament, which resulted in the latter’s resignation over the issue of NHS prescription charges. Equally, the economic burden of rearmament contributed to the government’s unpopularity in the country. The way was thus paved for both Labour’s election defeat the same October, and for the Bevanite feuds of the fifties. In this vital instance, the difficulties involved in making ‘ethical choices on a national scale’ had laid the party low.

137 138

Rollings, ‘Permanent economic controls’, 25–6. See Brian Brivati, Hugh Gaitskell, London 1997, 292.

235

Conclusion

Conclusion When the Labour Party left office in 1951, it was still committed to economic planning, and indeed claimed to have undertaken such planning when in government. Nevertheless, the party’s thought about the nature and scope of the planned economy was radically different from the planning policies and programmes which had been consequent upon its far heavier defeat twenty years earlier. The virtues of nationalisation as a planning tool were in doubt; the notion of consumer sovereignty was no longer a complete anathema; the need for a constructive policy for private industry was increasingly recognised; and global demand management via the budget was seen more and more as the key to planning, albeit augmented on a permanent basis by physical controls. There had been a clear departure from the grand aspirations of the past. Labour’s commitment to the planned economy had reached a crescendo in the aftermath of 1931. This died away to diminuendo in the Cripps and Gaitskell eras. And however noisy the drums surrounding later developments, like the Wilson government’s national plan of 1965, the main theme of the thirties – comprehensive planning based on wholesale nationalisation and extensive physical controls – would in future be reduced to the merest echo. The leaders of the Attlee generation had themselves prepared the party, both directly and indirectly, for this apparent reversal. In the immediate aftermath of Labour’s smashing defeat at MacDonald’s hands, Attlee, Cripps, Dalton, Morrison and even Bevin, had made pronouncements of a very radical socialist nature. By the later 1940s most of these men, with the possible exception of Dalton, whom gravitas always eluded, had made the transition to political respectability. And their views changed in parallel to their demeanour. From the wholeheartedly planned economy initially envisaged, at the point when ‘gradualism’ was the dirtiest of dirty words, they moved towards a final acceptance of a planning machine that had no executive power, and which has been compared with a mere ‘think-tank’.1 They had moved from comprehensive planning to a moderate form of interventionism, or ‘purposive improvisation’ as Douglas Jay put it.2 This was partly because, as examined in chapter 9, there were many direct obstacles to the creation of a planned economy in Britain. Equally, these institutional barriers were complemented and reinforced by the clear inhibi-

1

Jacques Leruez, Economic planning and politics in Britain, London 1975, 49. See also Hennessy, ‘Never again’, 7. 2 Jay, ‘Plans and priorities’, 18.

236

CONCLUSION

tions to comprehensive planning inherent in the ideology and structure of the Labour movement itself. Perhaps most crucially, a party created, funded, and in part responsible to the trade unions would always be limited in how far it could go in the direction of compulsion of labour. In such circumstances, it would be necessary to fall back, to a great degree, on the power of persuasion – a tool of doubtful and perhaps progressively diminishing value. Nevertheless, the faith that, with the right help and guidance from a benificent government, an active citizenry would undertake the necessary economic tasks without the need for state compulsion was a defining element of Labour’s world-view. Indeed, only a Labour government could have achieved the acquiescence of the unions in the 1948 wage-freeze; so idealism could indeed have practical results. This was possible largely because of the immense moral authority gained by the party’s leaders – in particular, Attlee and Cripps. Their genuine passion for creating a fairer society, together with their obvious incorruptibility, to some extent enabled them to transcend the tensions inherent in their economic ideas. Unfortunately for them, however, their political opponents were good at suggesting that ‘austerity’ – from which higher income groups naturally suffered disproportionately – was an unnecessary and vindictive policy rather than a national imperative. The Conservatives skilfully exploited rationing, controls and the ‘plight of the middle-classes’ as political issues. In 1951, Labour increased its share of the vote by one per cent over 1945, and, piling up the votes in its heartlands, in fact got more aggregate support than the Tories; but the defection of the middle-class vote in key constituencies, together with the peculiarities of the electoral system, the redistribution of seats, and the collapse of the Liberals, brought defeat.3 Key voters were thus driven towards the Conservatives in spite of the fact that Labour’s radicalism had dimmed, as the down-grading of its planning ambitions demonstrated. But can the fate of Labour’s planning experiment be used to derive wider-reaching lessons on the nature of the party’s political mission? It could be argued, for example, that although a temporary radicalism was induced by the shock of 1931, Labour, when in power once more, merely reverted to type, as an incrementalist party uninterested in any fundamental alteration to the status quo. This could be taken to explain its failure to create a ‘genuine’ socialist planned economy. Conversely, from the opposite perspective, one might argue that Labour’s leaders had simply matured as statesmen, having become, through the experience of office in war time, more keenly aware of the art of the possible. They did not build a planned economy because pragmatism prevailed – for all the right reasons. Yet, although both theses have a degree of merit, neither suffices fully. For Attlee and Cripps were not, in intent, mere reformists. Under their leadership, Labour undertook many

3

Ina Zweiniger-Bargielowska, ‘Rationing, austerity and the Conservative Party recovery after 1945’, HJ xxxvii (1994), 173–97. See also her Austerity in Britain, 214–34.

237

THE LABOUR PARTY AND THE PLANNED ECONOMY

radical measures. Moreover, it did so with the explicit aim of achieving a socialist commonwealth in Great Britain.4 And although the radicalism was often tempered by the caution that was the common characteristic of the party’s ‘big five’, it must not be assumed that, simply because that end was ultimately not achieved, the original aspiration was never genuine. In other words, it is possible to want to plan, and fail. Indeed, there is ample evidence that, at the point when Labour fell from power, the party still believed strongly in the idea of the planned economy. This belief was to a large degree tied up with the defence of the Attlee government’s record. For, although historians are today unanimous that that government did not itself build such an economy, contemporary Labour politicians would not have shared such a verdict. This was true even on the left, from which direction scepticism might have been expected. The authors of Keeping left (1950) sought to demonstrate that Britain’s economic recovery ‘had been made possible by socialist planning’ – which surely implied they believed that such planning had taken place.5 Crossman, writing shortly before the 1951 election, argued that the planned economy and the centralisation of power were no longer socialist objectives – because they were already being achieved. The Attlee government’s failure, in his view, was to leave the planning machinery in the hands of an unreformed civil service.6 Gaitskell, an individual of rather greater political consequence, wrote three years after the government’s fall of the ‘considerable achievements of economic planning’ which it had brought about.7 Morrison’s own book, Government and parliament (1954), pointed to a similar conclusion, and also to the author’s own continued belief in planning.8 Of course, as potential contenders for the party leadership, the latter two men had good reasons for defending the policy with which they were both identified; but there is no good reason for doubting their sincerity in doing so. The question must be, therefore, not whether, by 1951, Labour thinkers and politicians still believed in planning, but what kind of planning it was in which they believed. In 1935, Evan Durbin had distinguished between (a) Planning, meaning simply the intervention of the Government in a particular industry at a time when the greater part of the economy still remains in private hands, and (b) Planning which results in the general supersession of individual enterprise as the source of economic decisions.9 4 5

Craig, Manifestos, 127. Acland, Bruce and others, Keeping left, cited in Jonathan Schneer, Labour’s conscience: the Labour left, 1945–51, London 1988, 100. 6 Richard Crossman, ‘Towards a philosophy of socialism’, in Richard Crossman (ed.), New Fabian essays, London 1952, 27–8. 7 Gaitskell, ‘Labour and economic planning’. 8 Morrison, Government and parliament, 286–310. 9 E. F. M. Durbin, Problems of economic planning, 42.

238

CONCLUSION

In the 1930s, the Labour Party, collectively, aspired to solution (b). However, the Attlee government’s final legacy of a mixed economy plus demand management plus physical controls, which Gaitskell and Morrison defended, was much closer to solution (a). So the leadership group had largely abandoned Labour’s pre-1945 conception of the planned economy; but leftists like Bevan, Castle and Mikardo continued to think in terms of a predominantly socialised economy to replace capitalism on a comprehensive basis. In the early 1950s, therefore, there was increasing fragmentation in Labour’s economic thought – and, partly as a consequence, in its internal politics too. In this, as has often been observed, Labour was the victim of its own post-war success. Let us face the future had been based, in Morrison’s words, on ‘forty years of thought and propaganda’.10 The rapid achievement of its main objectives left the party in a quandary as to its future – should it proceed left or right? It must, of course, be admitted that the sum of the 1945 manifesto’s parts had not, once enacted, added up to the whole planned society that had been envisaged. Still, it was Labour’s collective belief in that planned society, however ill-defined, that helped put Labour in the position of power from which its very many real achievements flowed. In 1945–51, Britain did not plan in the fashion that had been envisaged by Labour thinkers during the depression of the 1930s and through the emergency of the war. But neither, during the years of post-war crisis, did she perish – a fact that remains to the enduring credit of the Attlee government and the Labour Party. It would be wrong, then, to play down the significance of Labour’s desire to create a socialist planned economy simply because the notion did not come to fruition. As Aneurin Bevan wrote after the end of the Labour government: ‘The influence of ideas on social events is profound, and is no less so because things turn out differently from what we expect.’11 This is because, perhaps, the ideas that politicians present as abstract truths are, of course, a product of circumstance, conflict and compromise. The Labour Party, in and after 1931, adopted the idea of the planned economy as a means of rejecting the gradualist identity it had previously held under MacDonald. Holding firm to the idea throughout the 1930s not only allowed Labour to distance itself from the MacDonald era, but was also a natural reaction to continued slump conditions. In other words, the ideology of planning served, to a great degree, as a ‘functional myth’ – a source of political confidence, identity and inspiration. But if adherence to ‘planning’ in this way created an affirmative and potentially powerful political weapon for Labour, this was not without its cost. For a political idea may well gain its power to inspire at the expense of clarity. In other words, in order for the arguments for planning to be of value to the party in electoral terms, it was by no means necessary for them to be intellectually watertight; as the Hayek critique showed, they were far from 10 11

LPACR 1949, 153. Cited in Barbara Castle, ‘A passionate defiance’, in Geoffrey Goodman (ed.), The state of the nation: the political legacy of Aneurin Bevan, London 1997, 36–67 at p. 65.

239

THE LABOUR PARTY AND THE PLANNED ECONOMY

that. War-time experience, however, appeared, at a superficial level, to vindicate the proponents of planning. If some doubts were thrown up about the merits of nationalisation, and if Keynesian ideas (or ideas that were taken to be Keynesian) made some further progress within the party, the idea of the wholesale planned economy, based on nationalisation and physical controls, was still alive and well in 1945. Throughout, Labour’s programme was subject, not purely to economic theory, but to the need to please party members, and to the attempt to win votes. If Attlee’s government was afterwards left to try to apply a set of ideas that were often nebulous and even self-contradictory, and if this provoked trouble, this was hardly surprising. For that government’s failure to create a planned economy was not simply a question of a disparity between promise and performance, of fickle politicians going back on their word. Rather, the inchoate nature of the promise, and the reasons for which it was made, in fact inhibited its subsequent enaction. All this points to an important lesson about the way that economic ideas are adapted to an explicitly political context. It is tempting for the historian to imagine that such ideas are subject to an objective test: if a politician espouses notions that fail the basic test of economic literacy, or are otherwise obviously inconsistent, those ideas may, on a prima facie basis, be found wanting, and the politician may, by extension, be condemned. But this is too simple. In Joan Robinson’s words, ‘there is no such thing as a “purely economic” problem that can be settled by purely economic logic; political interests and political prejudice are involved in every discussion of actual questions’.12 Moreover, even if there were such a thing as a value-free test, it would be wrong to assume that a politician who failed it was necessarily technically incompetent. For example, Lionel Robbins believed that Dalton in fact had rather a brilliant economic mind, but that, in spite of his skill, he was disingenuous when discussing economic issues in public.13 Indeed, politicians are almost bound, when seeking to popularise economic ideas, to render them crude, whether consciously or otherwise, and to adapt or even misuse them for their own political advantage. In turn, this is almost bound to have consequences when the time comes, in office, to apply those ideas in practice. Ultimately, if it comes to a choice, successful politicians will frequently, to use Emanuel Shinwell’s phrase, prefer ‘good politics’ to ‘good economics’ – and Attlee and his colleagues were no exceptions. This is, however, a dispiriting light in which to view an administration often looked upon as one of the greatest of the century. Some effort, therefore, must be made to redress the balance. For in fact, the Labour government’s failure to undertake more comprehensive planning did not prevent it from notching up significant economic achievements (not to mention its record in other spheres, such as the welfare state and decolonisation). As

12 13

Joan Robinson, Collected economic papers, v, Oxford 1979, 2. Robbins, Autobiography, 76–7.

240

CONCLUSION

Cairncross has pointed out, few governments have held back consumption more assiduously, in order to promote exports and investment: ‘They were successful in achieving a fast growth in exports, eliminating in turn the external deficit and then the dollar deficit and sustaining a high level of industrial investment in spite of the virtual cessation of personal savings’. Additionally, inflation was kept low, even while full employment was maintained.14 It is by no means wrong to dub the 1945–51 period ‘the years of recovery’. But could more planning, or better planning, have made that recovery stronger, and achieved growth rates equivalent to those of other European countries? Clearly, better planning early on might well have avoided the fuel crisis, and have reduced the external and dollar deficits more rapidly. It is far from obvious, however, that planning was the best solution, under the cirumstances, for anything other than these essentially short-term, transitional problems. Take, for example, cotton: the government was desperate to persuade workers to return to this industry in order to provide urgently needed goods for export, and its failure to do this was, of course a serious problem. Yet, had its planning proved effective in this area, the result would have been to expand artificially a dying industry which could only prove competitive whilst world conditions remained temporarily abnormal. In other words, had the government planned more comprehensively, it is possible that its interventions, in the long term, would have proved misdirected. In view of its obsession with maintaining the health of the ‘basic’ industries, at the expense of more plausible candidates for long-term growth, this seems all too possible. One would certainly have to be very cautious, then, about attributing Britain’s comparative economic decline since 1945 to a lack of planning in the immediate post-war years. In a purely negative sense, then, Labour’s failure to plan meant that it avoided some possible adverse side-effects of planning. There was, however, a wider sense in which the Labour Party, in the years after 1931, very emphatically got things right. The crisis of that year demonstrated, above all else, that budgetary orthodoxy, twinned with a commitment to maintain the exchange rate, could not, by itself, restore competitiveness, maintain employment, or otherwise bring good economic health to the nation. The machinery of economic management was desperately in need of modernisation. Labour’s conception of a socialist planned economy to replace capitalism was thus an overblown response to a genuine problem. Moreover, after the false starts of the 1945–7 period, the party scaled down its ambitions, and, with the help of some far-sighted civil servants, got to grips with the difficulty. The (admittedly partial) integration of finance and economics in the 1948 budget helped set a pattern of economic management for the next thirty years. Thus, it is true that, in one light, the history of 14

Cairncross, Years of recovery, 500.

241

THE LABOUR PARTY AND THE PLANNED ECONOMY

Labour’s attempts to plan the economy appears, as Peter Hennessy has put it, ‘painful and almost absurd’.15 However, in another light, it can be seen as a victory for Labour’s best qualities of pragmatism and flexibility, over the rhetorical excesses that can bewitch even the best-meaning politicians. Of course, this process generated some disappointments, and these would bedevil the party for a generation and beyond; but nonetheless, it was, perhaps, a triumph of hard governmental experience over the inflated hopes of opposition.

15

Hennessy, ‘Never again’, 8.

242

Bibliography Unpublished primary sources Cambridge, Churchill College A. V. Alexander papers Clement Attlee papers Ernest Bevin papers Winston Churchill papers R. W. B. Clarke papers Patrick Gordon Walker papers T. G. N. Haldane papers E. A. G. Robinson papers Francis Williams papers

Cambridge, King’s College Richard Kahn papers Nicholas Kaldor papers John Maynard Keynes papers Cambridge, Trinity College F. W. Pethick-Lawrence papers Coventry, Warwick University, Modern Records Centre Trades Union Congress archive Falmer, Brighton, Sussex University Mass Observation archive Geneva, World Trade Organization GATT archive London, British Library of Political and Economic Science (BLPES) William Beveridge papers Walter Citrine papers Hugh Dalton papers Evan Durbin papers Fabian Society papers George Lansbury papers James Meade papers Herbert Morrison papers 243

THE LABOUR PARTY AND THE PLANNED ECONOMY

Passfield papers William Piercy papers

London, Public Record Office (PRO), Kew Board of Trade commercial department (BT 11) Cabinet committees Cabinet conclusions Cabinet papers Central economic planning staff (T229) Economic section of the cabinet secretariat (T230) Prime minister’s papers (PREM 8) Stafford Cripps papers (CAB 127) Treasury papers (T171) Manchester, National Museum of Labour History Labour Party archive (LPA) Labour Party secretary-generals’ papers Oxford, Bodleian Library Clement Attlee papers Stafford Cripps papers Sidney Dell papers Oxford, Nuffield College G. D. H. Cole papers Margaret Cole papers York, Borthwick Institute of Historical Research Lord Halifax papers Oral history sources Independence, Missouri, Harry S. Truman Library Joseph D. Coppock interview transcript, 1974 W. Averell Harriman interview transcript, 1971

Published primary sources Official documents and publications British government white papers Cmd. 6437, Proposals for an international clearing union, Apr. 1943 Cmd. 6519, Joint statement by experts on the establishment of an international monetary fund, Apr. 1944 244

BIBLIOGRAPHY

Cmd. 6527, Employment policy, May 1944 Cmd. 6708, Financial agreement between the governments of the United States and the United Kingdom, Dec. 1945 Cmd. 7046, Economic survey for 1947, Feb. 1947 Cmd. 7321, Statement on personal incomes, costs and prices, Feb. 1948 Cmd. 7344, Economic survey for 1948, Mar. 1948 Cmd. 7647, Economic survey for 1949, Mar. 1949

Other Documents on Canadian external relations, XIV: 1948, Ottawa 1994 Foreign relations of the United States, 1945/vi, Washington, DC 1969; 1948/i, Washington, DC 1976 Labour Party annual conference reports (LPACR), London 1923–51 Parliamentary debates (Hansard), fifth series, London 1931–51 Reports of the Trades Union Congress, London 1931–51 United States Senate, committee on finance: hearings on international trade: (80)S821–0–A, Washington, DC 1947 United Nations economic and social council official records, eleventh session, New York 1950 Newspapers and periodicals Clarion/New Clarion Daily Express Daily Herald Fabian Journal Fabian News Fabian Quarterly Forward Left News New Leader New Statesman/New Statesman and Nation New York Times Reynolds News South Wales Echo and Evening Express Spectator Time The Times Tribune Weekend Review Contemporary books and articles Ashdown, Paddy, The Ashdown Diaries, I: 1988–1997, London 2000 Attlee, C. R., The will and the way to socialism, London 1935 ——— The Labour Party in perspective, London 1937 ——— and others, Labour’s aims in war and peace, London 1940 245

THE LABOUR PARTY AND THE PLANNED ECONOMY

Balogh, Thomas, ‘Industrial conscription and democracy’, Fabian Quarterly xxix (spring 1941), 4–14 ——— The currency plans and international economic relations’, Political Quarterly lxi (1943), 343–56 Barnes, John, and David Nicholson (eds), The empire at bay: the Leo Amery diaries, 1929–1945, London 1988 Benn, Tony, Against the tide: diaries, 1973–76, London 1989 Bevan, Aneurin, In place of fear, London 1952 ——— W. J. Brown, John Strachey and Allan Young, A national policy: an account of the emergency programme advanced by Sir Oswald Mosley, London 1931 ——— E. J. Strachey and George Strauss, What we saw in Russia, London 1931 Bevin, Ernest and G. D. H. Cole, The crisis: what it is, how it arose, what to do, London 1931 Blair, Tony, New Britain: my vision of a young country, London 1996 Blank, Stephen, ‘Britain: the politics of foreign economic policy, the domestic economy, and the problem of pluralistic stagnation’, International Organization xxxi (1977), 673–721 Brailsford, H. N., John A. Hobson, A. Creech Jones and E. F. Wise, The living wage, London 1926 Brown, George, In my way: the political memoirs of Lord George-Brown, Harmondsworth 1972 Cairncross, Alec (ed.), The Robert Hall diaries, 1947–1953, London 1989 Callaghan, James, Time and chance, London 1987 Castle, Barbara, Fighting all the way, London 1993 ‘Cato’, Guilty men, London 1940 ‘Celticus’ [Aneurin Bevan], Why not trust the tories’, London 1944 Clark, Colin, National planning, London 1931 Clarke, R. W. B., ‘The economics of near-war’, Fabian Quarterly xxii (summer 1939), 4–12 ——— Anglo-American collaboration in war and peace, 1942–1949, Oxford 1982 Clay, Henry (ed.), The inter-war years and other papers: a selection from the writings of Hubert Douglas Henderson, Oxford 1955 Coates, W. P. and Zelda K. Coates, The second five-year plan of development of the USSR, London 1934 ——— A history of Anglo-Soviet relations, London 1944 Cole, G. D. H., The intelligent man’s guide through world chaos, London 1932 ——— Practical economics, London 1937 ——— The machinery of socialist planning, London 1938 ——— Great Britain in the post-war world, London 1942 ——— Money: its present and future, London 1944 ——— ‘From war to peace in industry’, Political Quarterly xvi (1945), 205–13 Cole, John, As it seemed to me: political memoirs, London 1995 Cole, Margaret, ‘The progress of government control’, Fabian Quarterly xxiii (autumn 1939), 4–20 246

BIBLIOGRAPHY

——— The story of Fabian socialism, London 1961 ——— (ed.), Twelve studies in Soviet Russia, London 1933 ——— (ed.), Beatrice Webb’s diaries, 1912–1924, London 1952 Craig, F. W. S. (ed.), British general election manifestos, 1900–1974, London 1975 Cripps, Stafford, ‘Can socialism come by constitutional methods?’, in Christopher Addison and others, Problems of a socialist government, London 1933, 35–66 Cross, Colin (ed.), Life with Lloyd George: the diary of A. J. Sylvester, 1931–45, London 1975 Crossman, Richard (ed.), New Fabian essays, London 1952 ——— Michael Foot, Ian Mikardo and others, Keep left, London 1947 Dalton, Hugh, Practical socialism for Britain, London 1935 ——— Hitler’s war: before and after, Harmondsworth 1940 ——— Call back yesterday: memoirs, 1887–1931, London 1953 ——— The fateful years: memoirs, 1931–1945, London 1957 ——— High tide and after: memoirs, 1945–1960, London 1962 ——— (ed.), Unbalanced budgets: a study of the financial crisis in fifteen nations, London 1934 Davenport, Nicholas, The split society, London 1964 ——— Memoirs of a city radical, London 1974 Davies, Ernest, ‘Private enterprise and state control’, Fabian Quarterly xxvii (autumn 1940), 10–20 Dickinson, H. D., ‘The economic basis of socialism’, Political Quarterly i (1930), 561–72 ——— ‘Price formation in a socialist community’, Economic Journal xliii (1933), 237–250 Dupree, Marguerite (ed.), Lancashire and Whitehall: the diary of Sir Raymond Streat, II: 1939–57, Manchester 1987 Durbin, E. F. M., How to pay for the war: an essay on the financing of war, London 1939 ——— Problems of economic planning: papers on planning and economics, London 1949 Franks, Oliver, Central planning and control in war and peace, London 1947 Gaitskell, Hugh, ‘Labour and economic planning’, Fabian Journal (Nov. 1954), 4–11 ———The challenge of coexistence, London 1957 Gilbert, Martin (ed.), The Churchill war papers, I: At the Admiralty, September 1939–May 1940, London 1993 Hayek, F. A., ‘The trend of economic thinking’, Economica xiii (1933), 121–37 ——— The road to serfdom, London 1962 ——— (ed.), Collectivist economic planning: critical studies on the possibilities of socialism, London 1935 Howson, Susan (ed.), The collected papers of James Meade, I: Employment and inflation, London 1988

247

THE LABOUR PARTY AND THE PLANNED ECONOMY

——— (ed.), The collected papers of James Meade, III: International economics, London 1988 ——— and D. E. Moggridge (eds), The collected papers of James Meade, IV: The Cabinet Office diary, 1944–46, London 1990 ——— and D. E. Moggridge (eds), The wartime diaries of Lionel Robbins and James Meade, 1943–45, Basingstoke 1990 Jay, Douglas, The socialist case, London 1937 ——— Paying for the war, London 1940 ——— The socialist case, 2nd edn, London 1947 ——— Change and fortune: a political record, London 1980 ——— and others, The road to recovery: Fabian Society lectures given in the autumn of 1947, London 1948 Jefferys, Kevin (ed.), Labour and the wartime coalition: from the diary of James Chuter Ede, 1941–1945, London 1987 Jewkes, John, Ordeal by planning, London 1948 Jones, Thomas, A diary with letters, 1931–1950, London 1954 Keynes, John Maynard, The collected writings of John Maynard Keynes, London 1971–89 Labour Party, Labour and the new social order: a report on reconstruction, London 1918 ——— British Labour delegation to Russia 1920: report, London 1920 ——— Labour and the war debt: a statement of policy for the redemption of the war debt by a levy on accumulated wealth, London 1922 ——— Currency, banking and finance, London 1932 ——— The land and the national planning of agriculture, London 1932 ——— The national planning of transport, London 1932 ——— The reorganisation of the electricity supply industry, London 1932 ——— Socialism and the condition of the people, London 1933 ——— For socialism and peace, London 1934 ——— Labour and the distressed areas: a programme of immediate action, London 1937 ——— Labour’s immediate programme, London 1937 ——— The old world and the new society, London 1942 ——— Full employment and financial policy, London 1944 Labour research department, The Keynes plan – its dangers to the workers, London 1940 Lansbury, George, Looking backwards – and forwards, London 1935 Lee, Jennie, This great journey, New York 1942 Lerner, A. P., ‘Statics and dynamics in socialist economics’, Economic Journal xlxii (1937), 253–70 Lloyd, E. M. H., Stabilisation: an economic policy for producers and consumers, London 1923 ——— Experiments in state control at the War Office and the Ministry of Food, Oxford 1924 Lockhart, R. H. Bruce, Retreat from glory, London 1934 248

BIBLIOGRAPHY

Low, David and Kingsley Martin, Low’s Russian sketchbook, London 1932 MacDonald, Ramsay, Socialism, critical and constructive, London 1929 McHenry, Dean, The Labour Party in transition, 1931–1938, London 1938 MacKenzie, Norman and Jeanne MacKenzie (eds), The diary of Beatrice Webb, IV, 1924–1943: the wheel of life, London 1985 Mallalieu, J. P. W., On Larkhill, London 1983 Marris, Robin, The machinery of economic policy, London 1954 Marx, Karl, Capital: a critique of political economy, iii, Harmondsworth 1981 ——— and Friedrich Engels, Collected works, VI: Marx and Engels: 1845–48, London 1976 ——— Collected works, XXII: Marx and Engels: 1870–71, London 1986 ——— Collected works, XXV: Friedrich Engels: anti-Dühring, dialectics of nature, London 1987 Mayhew, Christopher, Time to explain, London 1987 Mikardo, Ian, Back-bencher, London 1988 Mises, Ludwig von, ‘Economic calculation in the socialist commonwealth’, in Hayek, Collectivist economic planning, 87–130 Mitchison, Naomi, You may well ask: a memoir, 1920–1940, London 1979 Morrison, Herbert, Socialisation and transport, London 1933 ——— Prospects and policies: five speeches on post-war subjects, Cambridge 1943 ——— ‘The Labour Party and the next ten years’, in Morrison and others, Forward from victory!, 20–1 ——— The peaceful revolution, London 1949 ——— Government and parliament: a survey from the inside, London 1954 ——— Herbert Morrison: an autobiography, London 1960 ——— and others, Forward from victory! Labour’s plan, London 1946 Next Five Years Group, The next five years: an essay in political agreement, London 1935 Nicholson, Max, The system: the misgovernment of modern Britain, London 1967 Orwell, George, The road to Wigan pier, London 1937 Orwell, Sonia and Ian Angus (eds), The collected essays, journalism and letters of George Orwell, IV: In front of your nose, London 1968 Parker, John, ‘After a year of coalition’, Fabian Quarterly xxx (summer 1941), 5–9 ——— Labour marches on, Harmondsworth 1947 Pease, Edward R., The history of the Fabian Society, London 1963 Pethick-Lawrence, F. W., Fate has been kind, London 1943 Pierson, N. G., ‘The problem of value in the socialist community’, in Hayek, Collectivist economic planning, 41–85 Pimlott, Ben (ed.), The political diary of Hugh Dalton, 1918–40, 1945–60, London 1986 ——— (ed.), The Second World War diary of Hugh Dalton, 1940–45, London 1986 Plowden, Edwin, An industrialist in the Treasury: the post-war years, London 1989 Robbins, Lionel, The great depression, London 1934 ——— Autobiography of an economist, London 1971 Robinson, E. A. G., Economic planning in the UK: some lessons, Cambridge 1967 249

THE LABOUR PARTY AND THE PLANNED ECONOMY

——— ‘The economic problems of the transition from war to peace: 1945–49’, Cambridge Journal of Economics x (1986), 165–85 Roll, Eric, Crowded hours: an autobiography, London 1985 Roper, W. Crosby, The problem of pricing in a socialist state, Cambridge, MA 1931 Snowden, Philip, Socialism and syndicalism, London 1912 Socialist League, Forward to socialism, London 1934 Strachey, John, The coming struggle for power, London 1934 Tawney, R. H., The attack and other papers, London 1953 Taylor, F. M., ‘The guidance of production in a socialist state’, American Economic Review xix (1929), 1–8 Webb, Sidney, ‘What happened in 1931: a record’, Political Quarterly iii (1932), 1–17 ——— and Beatrice Webb, A constitution for the socialist commonwealth of Great Britain, London 1920 Wells, H. G., The new Machiavelli, Harmondsworth 1946 Wertheimer, Egon, Portrait of the Labour Party, London 1929 Williams, Francis, The triple challenge: the future of socialist Britain, London 1948 ——— Fifty years’ march: the rise of the Labour Party, London 1949 ——— A prime minister remembers: the war and post-war memoirs of Rt Hon. Earl Attlee, London 1961 ——— Nothing so strange: an autobiography, London 1970 Williams, Philip M. (ed.), The diary of Hugh Gaitskell, 1945–1956, London 1983 Williams-Thompson, Richard, Was I really necessary’, London 1951 Wilson, Harold ‘Paying our way abroad’, in Jay and others, The road to recovery, 89–98 Wise, E. F., Control of finance and the financiers, London 1934 Wootton, Barbara, Plan or no plan, London 1934 ——— ‘Who shall pay for the war?’, Political Quarterly xi (1940), 143–54 ——— Freedom under planning, London 1945 Young, Michael, Labour’s plan for plenty, London 1947 Zweig, Ferdynand, The planning of free societies, London 1942

Secondary sources Abse, Joan, John Ruskin: the passionate moralist, London 1980 Addison, Paul, The road to 1945: British politics and the Second World War, 2nd edn, London 1994 Alford, B. W. E., Rodney Lowe and Neil Rollings (eds), Economic planning 1943–1951: a guide to documents in the Public Record Office, London 1992 Allett, John, New liberalism: the political economy of J. A. Hobson, Toronto 1981 Bennett, John, The economic theory of central planning, Oxford 1989 Beer, Samuel H., Modern British politics: a study of parties and pressure groups, London 1965

250

BIBLIOGRAPHY

Berger, Stefan, ‘Labour in comparative perspective’, in Tanner, Thane and Tiratsoo, Labour’s first century, 309–40 Bergson, Abram, ‘Socialist economics’, in Howard S. Ellis and Bernard F. Haley (eds), A survey of contemporary economics, i, Homewood, Ill. 1957, 412–18 Bevir, Mark, ‘Fabianism and the theory of rent’, History of Political Thought x (1989), 313–27 ——— ‘Fabianism, permeation, and independent labour’, Historical Journal xxxix (1996), 179–96 Birch, Dinah (ed.), Ruskin and the dawn of the modern, Oxford 1999 Blake, Robert, Disraeli, London 1966 Booth, Alan, ‘Economic advice at the centre of British government, 1939–1941’, Historical Journal xxix (1986), 655–75 ——— British economic policy, 1931–49: was there a Keynesian revolution’, London 1989 ——— ‘How long are light years in British politics? The Labour Party’s economic ideas in the 1930s’, Twentieth Century British History vii (1996), 1–27 ——— ‘New revisionists and the Keynesian era in British economic policy’, Economic History Review liv (2001), 346–66 Bowden, Sue, ‘The motor vehicle industry’, in Robert Millward and John Singleton (eds), The political economy of nationalisation in Britain 1920–1950, Cambridge 1995, 88–115 Brett, Teddy, Steve Gilliatt and Andrew Pople, ‘Planned trade, Labour Party policy and US intervention: the successes and failures of post-war reconstruction’, History Workshop Journal xiii (spring 1982), 130–42 Brivati, Brian, Hugh Gaitskell, London 1997 Brooke, Stephen, ‘Problems of “socialist planning”: Evan Durbin and the Labour government of 1945’, Historical Journal xxxiv (1991), 687–702 ——— Labour’s war: the Labour Party during the Second World War, Oxford 1992 Budd, Alan, The politics of economic planning, Manchester 1978 Bullock, Alan, The life and times of Ernest Bevin, I: Trade union leader, 1881–1940, London 1960 ——— The life and times of Ernest Bevin, II: Minister of labour, 1940–1945, London 1967 Burgess, Simon, Stafford Cripps: a political life, London 1999 Buxton, Neil K. and Derek H. Aldcroft (eds), British industry between the wars: instability and industrial development, 1919–1939, London 1979 Cairncross, Alec, Years of recovery: British economic policy, 1945–51, London 1985 ——— ‘How British aircraft production was planned in the Second World War’, Twentieth Century British History ii (1991), 344–59 ——— and Nita Watts, The economic section, 1939–1961: a study in economic advising, London 1989 Campbell, John, Nye Bevan and the mirage of British socialism, London 1987 Carr, E. H., The Bolshevik revolution, 1917–1923, London 1950 ——— The Russian revolution from Lenin to Stalin, 1917–1929, London 1979

251

THE LABOUR PARTY AND THE PLANNED ECONOMY

Castle, Barbara ‘A passionate defiance’, in Geoffrey Goodman (ed.), The state of the nation: the political legacy of Aneurin Bevan, London 1997, 36–67 Chester, D. N. (ed.), Lessons of the British war economy, Cambridge 1951 Clarke, Peter, Liberals and social democrats, Cambridge 1978 ——— Hope and glory: Britain, 1900–1990, London 1996 Cockett, Richard, Thinking the unthinkable: think-tanks and the economic counter-revolution, 1931–1983, London 1994 Cook, E. T. and Alexander Wedderburn (eds), The works of John Ruskin, London 1903–12 Crofts, William, Coercion or persuasion? Propaganda in Britain after 1945, London 1989 Cronin, James E., The politics of state expansion: war, state and society in twentiethcentury Britain, London 1991 Donoughue, Bernard and G. W. Jones, Herbert Morrison: portrait of a politician, London 1973 Dow, J. C. R., The management of the British economy, 1945–60, Cambridge 1964 Drake, Barbara ‘The Webbs and Soviet communism’, in Margeret Cole (ed.), The Webbs and their work, London 1949, 221–32 Dupree, Marguerite, ‘The cotton industry: a middle way between nationalisation and self-government?’, in Mercer, Rollings and Tomlinson, Labour governments and private industry, 137–61 Durbin, Elizabeth, ‘Fabian socialism and economic science’, in Pimlott, Fabian essays, 39–53 ——— New Jerusalems: the Labour Party and the economics of democratic socialism, London 1985 Eatwell, John, Murray Milgate and Peter Newman (eds), The new Palgrave: a dictionary of economics, London 1987 Eatwell, Roger and Anthony Wright, ‘Labour and the lessons of 1931’, History lxiii (1978), 38–53 Elliott, Gregory, Labourism and the English genius: the strange death of Labour England’, London 1993 Ellison, Nicholas, Egalitarian thought and Labour politics: retreating visions, London 1994 Estorick, Eric, Stafford Cripps: a biography, London, 1949 Evans, Trevor, Bevin, London 1946 Fielding, Steven, ‘Labourism in the 1940s’, Twentieth Century British History iii (1992), 138–53 ——— ‘What did “the people” want? The meaning of the 1945 general election’, Historical Journal xxxv (1992), 623–39 ——— ‘The Second World War and popular radicalism: the significance of the “movement away from party” ’, History lxxx (1995), 38–58 ——— Peter Thompson and Nick Tiratsoo, England arise! The Labour Party and popular politics in 1940s Britain, Manchester 1995 Francis, Martin, ‘Economics and ethics: the nature of Labour’s socialism, 1945–1951’, Twentieth Century British History vi (1995), 220–43 252

BIBLIOGRAPHY

——— Ideas and policies under Labour, 1945–1951: building a new Britain, Manchester 1997 French, David ‘The rise and fall of “business as usual” ’, in Kathleen Burk (ed.), War and the state: the transformation of British government, 1914–1919, London 1982, 7–31 Gardner, R. N., Sterling–dollar diplomacy in current perspective: the origins and prospects of our international order, New York 1980 Goldman, Lawrence, ‘Ruskin, Oxford and the British labour movement’, in Birch, Ruskin, 57–86 Gorst, Anthony, Lewis Johnman and W. Scott Lucas (eds), Contemporary British history, 1931–1961: politics and the limits of policy, London 1991 Gottlieb, Julie V., Feminine fascism: women in Britain’s fascist movement, 1923–1945, London 2000 Gottlieb, M., ‘The capital levy after World War I’, Public Finance ii (1952), 356–84 Green, S. J. D. and R. C. Whiting (eds), The boundaries of the state in modern Britain, Cambridge 1996 Grossman, Gregory, ‘Command economy’, in Eatwell, Milgate and Newman, The new Palgrave, i. 494–5 Hancock, W. K. and M. M. Gowing, British war economy, London 1975 Harris, José, Unemployment and politics: a study in English social policy, 1886–1914, Oxford 1972 ——— ‘Political thought and the state’, in Green and Whiting, The boundaries of the state, 15–28 ——— ‘Ruskin and social reform’, in Birch, Ruskin, 7–33 ——— ‘Labour’s political and social thought’, in Tanner, Thane and Tiratsoo, Labour’s first century, 8–45 Harris, Kenneth, Attlee, 2nd edn, London 1995 Harrison, Royden J., The life and times of Sidney and Beatrice Webb, 1858–1905: the formative years, London 2000 Harrod, Roy, The life of John Maynard Keynes, London 1951 ——— The prof: a personal memoir of Lord Cherwell, London 1959 Hennessy, Peter, Whitehall, London 1988 ——— Never again: Britain 1945–51, London 1992 ——— ‘Never again’, in Brian Brivati and Harriet Jones (eds), What difference did the war make’, London 1993, 3–14 Hobsbawm, Eric, Age of extremes: the short twentieth century, 1914–1991, London 1994 Holroyd, Michael, Bernard Shaw, III: 1918–1950: the lure of fantasy, London 1991 Howson, Susan, ‘ “Socialist” monetary policy: monetary thought in the Labour Party in the 1940s’, History of Political Economy xx (1988), 543–64 ——— British monetary policy, 1945–51, Oxford 1993 Jefferys, Kevin, The Churchill coalition and wartime politics, 1940–1945, Manchester 1991 ——— Anthony Crosland, London 1999 253

THE LABOUR PARTY AND THE PLANNED ECONOMY

Jones, Mervyn, Michael Foot, London 1994 Jupp, James, The radical left in Britain, 1931–1941, London 1983 Kelly, Scott, ‘Ministers matter: Gaitskell and Butler at odds over convertibility, 1950–52’, Contemporary British History xiv (winter 2000), 27–53 Kindleberger, Charles P., ‘Economists in international organizations’, International Organization ix (1955), 338–52 Kotkin, Stephen, Magnetic mountain: Stalinism as a civilization, Berkeley, CA 1995 Kramnick, Isaac and Barry Sheerman, Harold Laski: a life on the left, London 1993 Lange, Oskar, ‘On the economic theory of socialism’, in Benjamin E. Lippincott (ed.), On the economic theory of socialism, London 1964, 57–143 Laybourn, Keith, The evolution of British social policy and the welfare state c. 1800–1993, Keele 1995 Leruez, Jacques, Economic planning and politics in Britain, London 1975 Leventhal, F. M., The last dissenter: H. N. Brailsford and his world, Oxford 1985 McBriar, A.M., Fabian socialism and English politics, 1884–1918, Cambridge 1966 ——— An Edwardian mixed doubles: the Bosanquets versus the Webbs: a study in British social policy, 1890–1929, Oxford 1987 Macintyre, Donald, Mandelson and the making of New Labour, London 2000 Mackay, Donald I., David J. C. Forsyth and David M. Kelly, ‘The discussion of public works programmes, 1917–1935: some remarks on the labour movement’s contribution’, International Review of Social History xi (1966), 8–17 McKibbin, Ross, The evolution of the Labour Party, 1910–1924, Oxford 1974 ——— ‘The economic policy of the second Labour government 1929–1931’, Past and Present xlviii (1975), 95–123 MacLeod, Rory, ‘The promise of full employment’, in Smith, War and social change, 78–100 Maier, Charles S., ‘Between Taylorism and technocracy: European ideologies and the vision of industrial productivity in the 1920s’, Journal of Contemporary History v (1970), 27–61 Marquand, David, Ramsay MacDonald, London 1977 ——— The progressive dilemma: from Lloyd George to Kinnock, London 1991 Martin, Kingsley, Harold Laski, 1893–1950: a biographical memoir, London 1953 Marwick, Arthur, Clifford Allen: the open conspirator, Edinburgh 1964 ——— ‘Middle opinion in the thirties: planning, progress and political “agreement” ’, English Historical Review lxxix (1964), 285–98 Mathias, Peter, The first industrial nation: an economic history of Britain, 1700–1914, 2nd edn, London 1983 Matthew, H. C. G., ‘Hobson, Ruskin and Cobden’, in Michael Freeden (ed.), Reappraising J. A. Hobson: humanism and welfare, London 1990, 11–30 Mercer, Helen, Neil Rollings and Jim Tomlinson (eds), Labour governments and private industry: the experience of 1945–1951, Edinburgh 1992 Millward, Robert, ‘The 1940s nationalizations in Britain: means to an end or the means of production?’, Economic History Review l (1997), 209–34 Mitchell, Joan, Groundwork to economic planning, London 1966 Moggridge, D. E., Maynard Keynes: an economist’s biography, London 1992 254

BIBLIOGRAPHY

——— Keynes, Basingstoke 1993 Morgan, Kenneth O., Labour in power, 1945–51, Oxford 1984 ——— Callaghan: a life, Oxford 1997 Mosley, Nicholas, Rules of the game/Beyond the pale: memoirs of Sir Oswald Mosley and family, London 1998 Newman, Michael, John Strachey, Manchester, 1989 Newton, C. C. S., ‘The sterling crisis of 1947 and the British response to the Marshall plan’, Economic History Review xxxvii (1984), 391–408 ———, ‘The Keynesian revolution debate’, in Gorst, Johnman and Lucas, Contemporary British history, 75–9 Nicholas, H. G., The British general election of 1950, London 1951 Nove, Alec, An economic history of the USSR, 1917–1991, 3rd edn, Harmondsworth 1992 Oldfield, Adrian, ‘The Labour Party and planning – 1934, or 1918?’, Bulletin of the Society for the Study of Labour History xxv (1972), 41–55 Ollard, Richard, A man of contradictions: a life of A. L. Rowse, Harmondsworth 2000 Peden, G. C., ‘Keynes, the economics of rearmament and appeasement’, in Wolfgang J. Mommsen and Lothar Kettenacker (eds), The fascist challenge and the policy of appeasement, London 1983, 142–56 Pelling, Henry, A history of British trade unionism, Harmondsworth 1963 ——— and Alistair J. Reid, A short history of the Labour Party, Basingstoke 1996 Piette, Adam, Imagination at war: British fiction and poetry, 1939–1945, London 1995 Pimlott, Ben , Labour and the left in the 1930s, Cambridge 1977 ——— Hugh Dalton, London 1985 ——— (ed.), Fabian essays in socialist thought, London 1984 Pinder, John (ed.), Fifty years of political and economic planning: looking forward, 1931–1981, London 1981 Pollard, Sidney, ‘Trade union reactions to the economic crisis’, Journal of Contemporary History iv (1969), 101–15 ——— The development of the British economy, 1914–1980, 3rd edn, London 1983 Postgate, John and Mary Postgate, A stomach for dissent: the life of Raymond Postgate, 1896–1971, Keele 1994 Pressnell, L. S., External economic policy since the war, I: The post-war financial settlement, London 1986 Radice, Lisanne, Beatrice and Sidney Webb: Fabian socialists, London 1984 Reddaway, W. B., ‘Rationing’, in Chester, Lessons of the British war economy, 182–99 Rees, David, Harry Dexter White: a study in paradox, London 1974 Reid, Alastair J., ‘Labour and the trade unions’, in Tanner, Thane and Tiratsoo, Labour’s first century, 221–47 Reynolds, Jack and Keith Laybourn, Labour heartland: a history of the Labour Party in West Yorkshire during the inter-war years, 1918–1939, Bradford 1987

255

THE LABOUR PARTY AND THE PLANNED ECONOMY

Riddell, Neil, ‘ “The age of Cole?” G. D. H. Cole and the British labour movement, 1929–1933’, Historical Journal xxxviii (1995), 933–57 ——— Labour in crisis: the second Labour government, 1929–1931, Manchester 1999 Ritschel, Daniel, The politics of planning: the debate on economic planning in Britain in the 1930s, Oxford 1997 Robinson, Joan, Collected economic papers, v, Oxford 1979 Rollings, Neil, ‘ “The Reichstag method of governing?” The Attlee governments and permanent economic controls’, in Mercer, Rollings and Tomlinson, Labour governments and private industry, 15–36 Sayers, R. S., Financial policy, 1939–45, London 1956 Schneer, Jonathan, Labour’s conscience: the Labour left, 1945–51, London 1988 Schumpeter, Joseph, History of economic analysis, London 1959 Scott, Peter, ‘British regional policy 1945–51: a lost opportunity’, Twentieth Century British History viii (1997), 358–82 Seldon, Anthony and Jim Tomlinson, ‘The influence of ideas on post-war economic policy in Britain (2): Anthony Seldon interviews Jim Tomlinson’, Contemporary British History x (1996), 191–212 Shackleton, Richard, ‘Trade unions and the slump’, in Ben Pimlott and Chris Cook (eds), Trade unions in British politics, London 1982, 120–48 Skidelsky, Robert, Oswald Mosley, London 1975 ——— John Maynard Keynes, II: The economist as saviour, 1920–1937, London 1992 ——— Interests and obsessions: selected essays, London 1993 ——— Politicians and the slump: the Labour government of 1929–1931, London 1994 ——— John Maynard Keynes, III: Fighting for Britain, 1937–1946, London 2000 Smith, Harold L., War and social change: British society in the Second World War, Manchester 1986 Stevenson, John, ‘From philanthropy to Fabianism’, in Pimlott, Fabian essays, 15–26 ——— ‘Planner’s moon? The Second World War and the planning movement’, in Smith, War and social change‘, 58–77 Streissler, E., ‘Wieser, Friedrich Freiherr von’, in Eatwell, Milgate and Newman, The new Palgrave, iv. 921–2 Tanner, Duncan, Political change and the Labour Party, 1900–1918, Cambridge 1990 ——— Pat Thane and Nick Tiratsoo (eds), Labour’s first century, Cambridge 2000 Taylor, A. J. P., English history, 1914–1945, Oxford 1965 Taylor, Ian, ‘Labour and the impact of war 1939–45’, in Nick Tiratsoo (ed.), The Attlee years, London 1991, 7–28 Thirlwall, Anthony P., Nicholas Kaldor, Brighton 1987 Thomas, Hugh, John Strachey, London 1973 Thompson, Noel, John Strachey: an intellectual biography, Basingstoke 1993 256

BIBLIOGRAPHY

——— ‘Hobson and the Fabians: two roads to socialism in the 1920s’, History of Political Economy xxvi (1994), 203–20 Thorpe, Andrew, The British general election of 1931, Oxford 1991 Thorpe, Keir M., ‘ “Statistical floodlighting?”: the unpublished economic surveys, 1946–47’, Contemporary British History xi (1997), 86–111 Tomlinson, Jim, ‘Productivity policy’, in Mercer, Rollings and Tomlinson, Labour governments and private industry, 37–54 ——— ‘The iron quadrilateral: political obstacles to economic reform under the Attlee government’, Journal of British Studies xxxiv (1995), 90–111 ——— Democratic socialism and economic policy: the Attlee years, 1945–51, Cambridge 1997 ——— ‘Labour and the economy’, in Tanner, Thane and Tiratsoo, Labour’s first century, 46–79 Toye, Richard, ‘Keynes, the labour movement and How to pay for the war’, Twentieth Century British History x (1999), 255–81 ——— ‘The Labour Party’s external economic policy in the 1940s’, Historical Journal lxiii (2000), 189–215 ——— ‘Gosplanners versus thermostatters: Whitehall planning debates and their political consequences, 1945–49’, Contemporary British History xiv (winter 2000), 81–106 ——— ‘ “The gentleman in Whitehall” reconsidered: the evolution of Douglas Jay’s views on planning and consumer choice, 1937–1947’, Labour History Review lxvii (2002), 187–204 ——— ‘The Labour Party and the economics of rearmament, 1935–1939’, Twentieth Century British History, xii (2001), 303–26 Trentmann, Frank, ‘Wealth versus welfare: the British left between free trade and national political economy before the First World War’, Historical Research lxx (1997), 70–98 ——— ‘Civil society, commerce and the “citizen-consumer”: popular meanings of free trade in modern Britain’, in Frank Trentmann (ed.), Paradoxes of civil society: new perspectives on modern German and British history, Oxford 2000, 306–31 Vernon, Betty D., Margaret Cole, 1893–1980, London 1986 Weinbren, Daniel, Generating socialism: recollections of life in the Labour Party, Stroud 1997 Werskey, Gary, The visible college: a collective biography of British scientists and socialists of the 1930s, London 1988 White, Stephen, ‘British Labour in Soviet Russia, 1920’, English Historical Review cix (1994), 621–40 Whiting, R. C., ‘The boundaries of taxation’, in Green and Whiting, The boundaries of the state, 146–69 Wiles, P. J. D, Economic institutions compared, Oxford 1977 Williams, Andrew J., Labour and Russia: the attitude of the Labour Party to the USSR, 1924–34, Manchester 1989 Williams, Philip M., Hugh Gaitskell: a political biography, London 1979 257

THE LABOUR PARTY AND THE PLANNED ECONOMY

Williamson, Philip, National crisis and national government: British politics, the economy and empire, 1926–1932, Cambridge 1992 Wilson, Thomas, ‘James Meade and the role of economic advisers’, Contemporary British History xi (summer 1997), 143–4 Winch, Donald, Economics and policy: a historical study, London 1969 Winter, J. M., Socialism and the challenge of war: ideas and politics in Britain, 1912–1918, London 1974 ——— ‘Webb, Beatrice and Sidney’, in Eatwell, Milgate and Newman, The new Palgrave iv. 885–6 Young, Michael ‘1945’, in Giles Radice (ed.), What needs to change: new visions for Britain, London 1996, 249–56 Zeiler, Thomas W., Free trade free world: the advent of GATT, Chapel Hill, NC 1999 Zweiniger-Bargielowska, Ina, ‘Rationing, austerity and the Conservative Party recovery after 1945’, Historical Journal xxxvii (1994), 173–97 ——— Austerity in Britain: rationing, controls and consumption, 1939–1955, Oxford 2000

Unpublished theses Chester, Andrew, ‘Planning, the Labour governments and British economic policy, 1943–51’, PhD diss. Bristol 1983 Oldfield, Adrian, ‘The growth of the concept of economic planning in the doctrine of the Labour Party, 1914–1935’, PhD diss. Sheffield 1973 Ritschel, Daniel, ‘The non-socialist movement for a planned economy in Britain in the 1930s’, DPhil. diss. Oxford 1987 Thorpe, Keir M., ‘The missing pillar: economic planning and the machinery of government during the Labour administrations of 1945–51’, PhD diss. London 1998 Toye, Richard, ‘The Labour Party, 1931–1935: the meaning of defeat’, MPhil. diss. Birmingham 1997

258

Index Abyssinian crisis, 72 Acland, Richard, 123 Addison, Christopher, 21, 47, 48 n.68 Addison, Paul, 140 n.5 Advertising, 16 Agriculture, 69 n.17, 70, 73, 139, 204, 227 Alexander, A. V., 47, 48 n.68, 90, 106 Alford, B. W. E., 1, 6, 195, 214 All-union society for cultural ties abroad (VOKS), see under USSR Allen, Clifford, 20 n.57, 30 Amery, Leo, 167, 168, 169, 173 Anderson, John, 116 n.7, 172, 174 Anti-profiteering legislation, 94; see also price of goods act Armaments industry, 72 Arnold, Sydney, 47, 48 n.68 Article VII, see mutual aid agreement article VII Asquith, H. H., 20 Association of Engineering and Shipbuilding Draughtsmen, 103 Atlantic charter, 160 Atlanticist approach to trade and payments, 156–7, 161, 172, 175, 177–8, 182–4 Attlee, Clement, 1, 2, 6, 7, 47–8 & n.68, 53 n.94, 72–3, 74, 80 n.71, 83, 88–9, 100, 112, 114, 116 & n.7, 128 n. 64, 135, 136–7, 140, 141, 143, 150, 153–4, 155, 186, 195, 196, 201–3, 206, 208, 210, 212, 220, 226, 236–7, 240; chairs NFRB executive committee, 42; leadership style of, 45; becomes Labour deputy leader, 51; attitude to USSR, 57, 199; becomes party leader, 72; and Keynes, 94, 95–6, 99, 101, 108, 111; becomes deputy prime minister, 131; and Durbin-Piercy scheme, 131–3; becomes prime minister, 155; and external economic policy, 158, 159, 166–9, 171 n.63, 173, 174, 176, 180, 183–4; 1947 plot against, 211; 1950 election broadcast of, 233 Ayrton Gould, Barbara, 234 n.136 Balanced budgets, see budgetary policy

Baldwin, Stanley, 43 n.45, 87 Balogh, Thomas, 162, 171, 174, 209 Bank of England, 54, 62, 139, 149, 168–9, 187 Bankers’ ramp theory, 54, 61–2 Banking and credit, 70; see also Bank of England and joint stock banks Barlow report, 151 Barlow, Montague, 150–1 Barnes, Alfred, 47–8 Barone, Enrico, 18–19, 26, 79 Barry, Gerald, 39–40 Beales, H. L., 59 Beaverbrook, Lord, 96–7, 168–9 Beer, Samuel, 65, 219, 224–5, 230 Bellerby, J. R., 50 n.77 Benn, Tony, 45 n.52 Bennett, John, 5 Berger, Stefan, 70 n.26 Bernstein, Eduard, 11 Berrill, Kenneth, 215–16 Berry, Vaughan, 53 Betts, Barbara, see Castle, Barbara Bevan, Aneurin, 1 n.1, 36–8, 41, 62, 88, 106–7, 111, 118, 124, 129 & n.70, 145, 159, 177, 182, 232, 234, 239; and ‘language of priorities’, 208; at Dorking conference, 233 & n.131; conflict with Gaitskell, 235 Beveridge report, 141–2, 144, 146–7 Beveridge, William, 1, 128 n.28, 142–3, 144; Full employment in a free society, 148; and manpower requirements committee, 118, 120; see also Beveridge report Bevin, Ernest, 30, 46, 61 & n.139, 66, 68, 98 n.58, 112, 116, 117, 127, 129 & n.70, 135, 136, 139, 142, 151, 189, 201, 206, 236; attitude to planning, 46–7, 56–7, 62–3, 199; and economics of rearmament 77; and Keynes, 97–8, 101, 105, 108, 111; as minister of labour, 118–22, 124; and Durbin-Piercy scheme, 132–3; and external economic policy, 162–3, 167–9, 171 n.63, 173, 174–7, 179, 183; refuses to displace Attlee, 211

259

THE LABOUR PARTY AND THE PLANNED ECONOMY

Bilateralism, 156, 158, 161, 165–6, 171–3, 182 Blair, Tony, 1 Blake, Robert, 225 Board of trade, 83, 151–2 Böhm-Bawerk, Eugen, 18 Bolsheviks, 9, 10, 12, 19, 25, 58; see also USSR Bonfire of controls, 214, 228 Booth, Alan, 66, 75, 80, 85, 149, 150, 156, 175–6, 183, 224 Boothby, Robert, 172, 174 Brailsford, H. N., 20 n.57, 42, 105 Bretton Woods agreement, 173–6, 183 Bretton Woods conference, 169, 173 Bretton Woods organisations, see international monetary fund and international bank for reconstruction and development Bridges, Edward, 197, 202, 205, 222 Brockway, Fenner, 38 Brook, Norman, 223 n.75 Brooke, Stephen, 2, 72, 90, 109, 127–8, 130–1, 141, 144, 150, 155, 219, 221, 224, 230 Brown, George, 211 Brown, John, 130–1 Brown, Patricia, 215 Brown, W. J., 38, 152 Budd, Alan, 5 Budgetary policy, 51, 66, 77–8 & n.60, 147–9, 241; see also Keynesianism Building industry, 153, 204 Bulk purchase, see state trading Butskellism, 224, 235 Butt, David Bensusan, 216 Cabinet committees economic policy committee, 116, 223, 231; food policy committee, 116; home policy committee, 116; lord president’s committee, 116 n.7, 117; manpower committee, 199; ministerial committee on economic planning, 187, 195–6, 201–2 Cairncross, Alec, 5, 120 n.23, 204, 226, 241 Callaghan, James, 139, 177 Campbell, John, 37 n.18 Capital levy, 23 n.71, 100, 102, 109 & n.121, 147 Capitalist planning, 66, 73–5 Carr, E. H., 10–12 Castle, Barbara, 77 n.57, 87, 209, 239

‘Cato’, Guilty men, 89 Cement industry, 232 Central economic planning staff (CEPS), 205, 213, 215–16, 217, 222 Central price regulation committee, 91 Central statistical office, 186, 198 Chamberlain, Joseph, 157 Chamberlain, Neville, 85, 87, 88, 89, 90, 98, 107, 112–13, 114, 116 n.6 Champion, A. J., 211 Cheap money policy, 146–7, 155, 209 Chemical industry, 70 Chester, Andrew, 223 n.75 Churchill, Winston, 43, 112–13, 114, 116, 118, 136–7, 140, 142, 145, 153, 166, 169; coalition government, 114–16, 131–3, 140–1, 152; and ‘four-year plan’, 153, 154 Citrine, Walter, 52, 74, 98 n.58, 101, 105, 121, 131 Clarion/New Clarion, 40, 59 Clark, Colin, 42, 46, 49, 52, 54–5, 56, 63, 75, 82, 130 Clarke, R. W. B. (‘Otto’), 89, 171, 186–7, 190–5, 197–205, 215 Clause IV, 19, 24–5, 127–8 Clay, Henry, 95 n.38 Clearing union plan, see under Keynes, John Maynard Clynes, J. R., 48 n.70 Coal industry, 56, 70, 72, 132, 135, 139, 204, 217–18, 227–8 Cockett, Richard, 136 Cole, G. D. H., 41, 46, 53, 57, 58, 61 & n.139, 62, 73, 80 n.71, 82, 83, 125–6, 142–3; on prospects of a Labour government, 72; and Keynes, 99 Cole, Margaret, 57, 59, 82, 91 Commercial union plan, see under Meade, James Compulsory arbitration, see Order 1305 Compulsory saving, see under Keynes, John Maynard Congress, see under USA Conscription of wealth, 23, 100, 111 Consensus politics, 140 n.5 Conservative Party, 65, 114, 140, 185, 237 Consumer sovereignty and consumerism, socialist attitudes towards, 16–17, 81–2, 85, 92, 104–5, 124 n.44, 126, 213–14, 236; see also market socialism Control of engagement order, 210–11, 218 Covertibility, see sterling, convertibility of Controls, 112–13, 117, 127, 130, 138, 144,

260

INDEX

150, 153, 189, 195, 207, 224, 229–32, 234–5 & n.135, 236, 240; on labour, 83, 117, 119, 138, 155, 189, 210, 237; on raw materials, 117; see also essential work order and control of engagement order Cooperative movement, 25, 90, 158–9 Cotton industry, 56, 85, 131, 132, 139, 180, 187, 241; see also textile industry Cripps, Isobel, 123 Cripps, Stafford, 22 n.67, 45, 47, 51, 53 n.94, 66, 74, 83, 117, 119, 136, 212–13, 234, 236–7; and Socialist League, 61–2, 67–8; meets Roosevelt, 74; and price of goods act, 90–1; as minister of aircraft production, 122–4, 133; and external economic policy, 167, 171 n.63, 178 n.103, 179, 180–3 & n.116, 181 n.120; as president of the Board of Trade, 186–7, 189, 196, 197–9, 201–7, 217, 223 n.79; as minister of economic affairs, 211–12, 213–15; as chancellor, 208, 212, 215–35, 236; plots against Attlee, 211; and ‘democratic planning’, 197, 199, 203–7, 212, 213–14, 217; and ‘iron quadrilateral’, 216–19; 1948 budget, 223–4; 1950 budget, 225–6; and industrial modernisation, 226, 229–30; at Dorking conference, 233 & n.131 Crofts, William, 219 Crosland, Tony, 125, 234 n.135 Crossman, Richard, 105, 111, 209–10, 233, 238, 234 n.135

replaced by Cripps, 212; supports Gaitskell’s ideas, 231–2; at Dorking conference, 233 Davenport, Nicholas, 53 & n.94, 55, 60–1 Davies, Clement, 110 Deferred pay, see Keynes, John Maynard, compulsory saving plan of Demand management, see Keynesianism Democratic planning, see under Cripps, Stafford Devaluation of sterling, see under sterling, devaluation of Development councils, 229–30 Dickinson, H. D., 79 Differential taxation of profits, see under taxation Distribution of industry bill, 152; see also location of industry, control of Dobb, Maurice, 81 Dorking conference, 233–4 & n.131 & n.136 Dukes, Charles, 106 n.108 Durbin, Elizabeth, 13, 66, 75–7, 81, 85 Durbin, Evan, 4, 5, 58, 66, 68 n.12, 72, 73, 76 n.55, 83, 100, 109 n.121, 116, 117, 125 & n.47, 128 n.64, 143–5, 148, 238; and Keynesianism, 75–6; responds to Hayek, 79–80, 137–8; and consumer sovereignty, 81–2; and compulsion of labour, 218; and wage planning, 121, 218; and external economic policy, 164 n.31, 167–8, 170, 172, 174 & n.80, 179; see also Durbin-Piercy scheme Durbin-Piercy scheme, 131–3, 135

Daily Express, 96 Daily Herald, 53, 96 Dalton, Hugh, 32, 35 n.6, 45, 47, 53 & n.94, 54 n.98, 67–8, 72, 74, 83, 87, 100, 116 n.7, 117, 127, 129 & n.70, 130, 133, 135, 136, 141, 144, 148–9, 212–13, 214, 236, 240; attitude to USSR, 57–61, 63, 70 n.26, 125 n.47, 126; Principles of public finance, 61; and Keynes, 75–6 & n.55, 93 n.33, 101, 106, 108; attacks ‘unplanned socialism’, 80, 81; tactics in coalition government, 140–1, 151–2; and location of industry, 151–2; and external economic policy, 156, 158, 159, 161–2, 163, 165–70, 171, 173, 175, 176–7, 180, 182–3; as chancellor, 186–7, 189, 195–7, 201–3, 206, 209–10, 223; plots against Attlee, 211;

Eatwell, Roger, 2 Economic advisory council, 42 Economic general staff, 89, 186–7, 198 Economic information unit, 221 Economic planning board, 205, 217, 227 Economic policy committee, see under cabinet committees Economic section, 116, 143–4, 186, 188, 191, 194, 199, 200, 203, 215 Economic surveys, 188–9, 195–6, 220–23, 229 1946, 190–1, 198, 200, 220 1946–7, 200 1947, 193, 200, 203–5, 209, 215, 217, 227 1948, 221, 222, 227 1949, 227–8 Economist, 152 Electoral truce, 87

261

THE LABOUR PARTY AND THE PLANNED ECONOMY

Electricity industry, 69 n.17, 70, 135, 204, 227 Elliot, Walter, 3 Elliott, Gregory, 6 n.20 Ellison, Nicholas, 76 n.55 Employment policy (white paper), 144–5, 151–2 Engels, Friedrich, 11 Engineering industry, 70 Equality, Labour views on, 76 n.55 Essential work order, 118–20 European payments union, 181 n.120, 183 n.124 Exchange controls, 90, 170, 182–3 Exchange equalisation account, 73 Export boards, 158 Expansionary policies, see Keynesianism Fabian society, 9, 12, 13–16, 104–5; see also New Fabian Research Bureau Fielding, Steven, 114 Food policy committee, see under cabinet committees Foot, Michael, 209, 233; see also ‘Cato’, Guilty men Foreign policy, connection with economic policy, 65, 70, 77, 158 Forward, 97 Francis, Martin, 6, 224, 228 Franks, Oliver, 220 Free collective bargaining, 216, 218–19; see also order 1305 Fuel crisis, 1947, 185, 200, 201, 203, 206, 220 Full employment, 134, 140, 143–5, 151, 171, 185, 233, 234–5, 241 Full employment bill, 234–5 Gaitskell, Hugh, 68 n.12, 80, 82, 100, 109 n.121, 116, 148, 189, 224–6, 227, 233, 238–9; and external economic policy, 156, 159, 165, 179 & n.109, 182–3; as minister of fuel and power, 228, 182–3, 229, 231–2; as chancellor, 208, 219, 234–5, 236; challenges Cripps, 231–2; and full employment bill, 234; conflict with Bevan, 235 Gardner, Richard, 172 Gas industry, 70, 135 General Agreement on Tariffs and Trade (GATT), 181 General elections 1929, 32 1931, 38, 77

1935, 38, 71–2, 77 1945, 38, 155 1950, 230, 232–3, 237 1951, 235 George V, 44 German planning, influence of, 19, 25–6 Gilbert, Bernard, 201 Gillies, William, 70 n.26 Goelro, 28 Gold standard, 47, 62, 163–5, 168–9 & n.55, 172, 174, 179 Gordon Walker, Patrick, 154, 211 Gosplan, 28, 38, 187 Gosplanners v. thermostatters debate, 187–93, 204, 207, 214, 215–16, 227 Graham, William, 46, 53 n.94 Greenwood, Arthur, 47, 96–7, 99, 108, 112, 116, 129, 142, 160 Griffiths, Jim, 105, 151 Habbakuk, H. J., 180 n.116 Haldane, Graeme, 59 n.130 Halifax, Lord, 223 n.79 Hall, Robert, 205, 207, 215–16, 224, 226 Hamilton, Mary Agnes, 47–8 Hampstead Historic Society, see Karl Marx Club Hardie, Keir, 16 n.44 Harriman, W. Averell, 181 n.120 Harris, José, 14 n.30, 15 n.39, 32, 60 Harris, Kenneth, 176–7 Harrod, Roy, 75, 82, 99, 178 Hastings, Somerville, 56 Hayek, F. A. von, 3, 11, 13, 15, 19, 26, 73–4, 78–80, 100, 105, 124 n.44, 126, 153, 239; Collectivist economic planning, 65–6, 78; Road to serfdom, 136–8 Henderson, Arthur, 20, 21–2 & n.67, 27 n.90, 45 Henderson, Hubert, 150, 153 Hennessy, Peter, 2, 19, 134, 186, 218, 242 Hicks, George, 103, 105 Hicks, J. R., 102, 109 n.118 Hicks, Ursula, 102 Hobson, J. A., 17, 30 Home policy committee, see under cabinet committees Howson, Susan, 149 Hyndman, H. M., 13, 22 Imperial preference, 139, 158, 165, 168, 170 Import boards, 158–9

262

INDEX

Import controls, 37, 38, 157, 166, 170, 174–5, 182–3, 214 Independent Labour Party, 2, 10, 20 n.57, 22, 35, 61, 62; planning ideas of, 29–31, 42–3; Living wage, 30–1; Socialist programme, 29–30 Industrial boards, see Durbin-Piercy scheme Industrial organisation and development act, 229–30 Insurance industry, 70, 232 International bank for reconstruction and development (IBRD), 156–9, 175, 179, 206; see also White plan International Labour Organisation (ILO), 169 International monetary fund (IMF), 156, 174, 175, 179, 206; Anglo-American Joint statement on, 169, 171–3; see also White plan International planning, 70–1, 153–4, 155, 156–7, 183–4 International stabilisation fund, see White plan International trade organisation (ITO), 174–5, 180–3 & n.116 Intourist, 56 & n.109 Investment programmes committee, 196–7, 212 Iron and steel control, 128 & n.64 Iron and Steel Federation, 128 & n.64 Iron and steel industry, 70, 128–31 & n.64, n.66 & n.70, 132, 135, 136, 204, 227, 232 ‘Iron quadrilateral’, see under Tomlinson, Jim Iron ration proposal, 102, 104, 106–7 Isaacs, George, 187, 218–19 Jay, Douglas, 76–7, 80, 100, 108–9, 111, 116, 124–5, 126, 127, 148, 151, 201, 212, 225, 229, 231, 236; Socialist Case, 76, 124 n.44, 126 n.51, 225 Jefferys, Kevin, 139 Jevons, W. S., 13 Jewkes, John, 112 Johnston, Thomas, 36, 47, 48 n.68, 166, 174 Joint production committees, 123 Joint stock banks, 61–2, 67–8 & n.12, 72, 149 Jones, Mervyn, 67 Jowett, Fred, 12, 16 n.44

Kahn, Richard, 75, 180 n.116, 191, 193 Karl Marx Club, 13 Keep Left group, 209–12, 214, 220 Keeping left, 238 Kerensky, Alexander, 22 n.67 Keynes, John Maynard, 1, 3, 32, 36, 50, 55, 75, 87, 144, 146, 163–4, 172–4, 176, 179, 190 n.28, 225; Treatise on money, 55; Means to Prosperity, 75; Economic Consequences of the Peace, 77 n.57; General theory, 87, 93–4, 102; Essays in persuasion, 93 n.33; compulsory saving plan, 91–113, 223; How to pay for the war, 91, 93, 102, 104, 105–8; relations with Labour party, 92–4, 110–11; and capital levy, 100; and family allowances, 100; meets Labour front bench, 99–101; meets TUC, 101–4; meets Fabian Society, 104–5; clearing union plan, 162–5, 167, 223 & n.79; death, 193 Keynesianism, 75–8, 93, 149, 179, 188–9, 197, 200, 207, 216, 223–5, 229–30, 235, 236, 240 Korean War, 234–5 Kotkin, Stephen, 57 Krassin, Leonid, 27 Labour controls, see under controls Labour party, central committee on problems of post-war reconstruction, 141, 160–1; conference, 1931, 61, 69; conference, 1939, 122; conference, 1942, 134, 141; conference, 1944, 127, 129, 134–6; conference, 1945, 123–4, 126, 129; front bench meeting with Keynes, 99–101; international department, 70 n.26; national executive committee, 22, 39, 52–3, 61–3, 107, 108, 110, 127, 134–5, 148, 233; finance and trade committee, 47–9, 53; policy committee, 53, 108–9, 232; press, publicity and campaign committee, 108; Currency, banking and finance, 54–5, 61, 63, 69 n.17; For socialism and peace, 70–1, 72, 158; Full employment and financial policy, 135, 146–50, 170, 182; How to conquer unemployment, 32; Labour and the nation, 32; Labour and the new social order, 23–4, 31, 32; Labour believes in Britain, 232; Labour’s immediate programme, 72, 135; Land and the national planning of agriculture, 69 n.17;

263

THE LABOUR PARTY AND THE PLANNED ECONOMY

Let us face the future, 135, 143, 152–5, 239; Socialism and the Condition of the People, 69–70, 75; National planning of transport, 69 n.17; Reorganisation of the electricity supply industry, 69 n.17 Labour party, Parliamentary, 39, 52, 100, 114, 119, 209–11 Labour representation committee, 12 Labour theory of value, 12, 13 Lange, Oskar, 66, 79 Lansbury, George, 27 n.90, 34 & n.1, 36, 51, 70 n.26, 71, 74, 163; resigns, 72 Laski, Harold, 40, 50–1, 63, 88, 132, 137, 140, 141; and Keynes, 95–6, 98–100, 103, 111 Law mission, 167–9 Law, Richard, 167–8, 171 League of Nations, 65, 158, 160 Lee, Jennie, 2, 177 Lees-Smith, H. B., 47, 48 n.68, 51, 93, 101 Left news, 105 Lend-lease, 121, 155, 160 see also mutual aid agreement, article VII Lenin, V. I., 25, 27 n.90 Lerner, Abba, 79–80 Leslie, S. C., 221 n.62 Liberal party, 14 n.29, 32, 157 Lindsay, H. Scott, 53 n.94 Lloyd George, David, 20, 22 n.67, 23 n.71, 34 & n.1 Lloyd George, Gwilym, 90 Lloyd, C. M., 56 Lloyd, E. M. H., 19–20 & n.57, 21, 29 Location of industry, control of, 128, 140, 143, 150–2, 153–4 London county council, 67, 92 London passenger transport bill, 133 Long-term planning, 179, 192–3, 215–16, 228–9 Long-term programme of the United Kingdom, 179, 228 Lopokova, Lydia, 103 n.89 Lord president’s committee, see under cabinet committees Loughlin, Anne, 124 n.43 Lowe, Rodney, 1, 6, 195, 214 MacDonald, Ramsay, 2, 3, 12, 21–2, 27 n.90, 31, 33, 34, 36, 42, 50, 62, 64, 65, 236, 239; and 1931 crisis, 44–5 MacLeod, Rory, 145–6 Macmillan committee, 49, 62 Macmillan, Harold, 4 Magnitogorsk, 57

Mallalieu, J. P. W. (‘Bill’), 190 Mann, Jean, 134, 155 Mann, Tom, 16 n.44 Manpower budgeting, 117, 118, 120 & n.24, 127, 199, 201, 204, 227–8 Manpower committee, see under cabinet committees Manpower requirements committee, 118, 120 Marchbank, John, 103 Marginal cost pricing, 79–80, 82, 194 & n.42 Marginal utility, 13 Market, socialist attitudes towards the, see consumer sovereignty and consumerism and market socialism Market socialism, 79, 82 Marquand, David, 14 Marquand, Hilary, 209 Marris, Robin, 215–16 Marshall aid, 175, 179, 211, 222–3, 228 Martin, Kingsley, 42, 43, 56, 96 Marwick, Arthur, 34 Marx, Karl, 10–12, 13 Communist manifesto, 11 Capital, 11 Marxism, 10–12, 13, 14 Mass Observation, 105, 204 n.103 Maxton, James, 31 Mayhew, Christopher, 189–90 McBriar, A. M., 13 MacDougall, Donald, 180 n.116 McKenzie, G. Grant, 108, 127–8 McKibbin, Ross, 24–33 Meade, James, 75, 116–17, 126, 128, 143–4, 147, 148; commercial union plan, 165–6; as head of the economic section, 187–93, 195–7, 200, 202, 204 Mellor, William, 61 Menger, Carl, 18 Mikardo, Ian, 134–5, 206–7, 209, 211–12, 239 Millward, Robert, 6–7 Ministerial committee on economic planning, see under cabinet committees Ministry of agriculture, 173 Ministry of aircraft production, 122–4 Ministry of food, 21 Ministry of labour, 21, 102, 105–6; see also Bevin, Ernest, as minister of labour Ministry of munitions, 20, 21 Ministry of production, 151 Ministry of supply, 151, 219 Ministry of reconstruction, 21, 142

264

INDEX

Ministry of shipping, 21 Mises, Ludvig von, 26, 79, 124 n.44 Mitchison, G. R. (‘Dick’), 57 Mitchison, Naomi, 59 Mitford, W. B. J., 57 n.114 Moellendorf, Wirchard von, 25 Moggridge, Donald, 112 Morgan, Kenneth O., 195 Morgenthau, Henry, 164 n.31 Morris, William, 10, 14 Morrison, Herbert, 2, 45, 53, 68, 71–2, 81 n.75, 83, 89–90, 92 n.26, 129–30, 132–3, 135, 142, 154, 236, 238–9; attitude to USSR, 57, 60, 154 and full employment, 144, 146–8; and external economic policy, 168–9, 177; as lord president, 186–7, 188, 189, 193–5 & n.42, 196, 198, 200, 201–2, 205–6, 209, 211, 220, 221, 235; and ‘consolidation’, 232–3; Government and parliament, 238; see also nationalisation, Morrisonian model of Mortimer, Jim, 153 Mosley, Cynthia, 36 n.13 Mosley, Oswald, 4, 31, 34, 35–9, 40, 41, 50, 62; Revolution by reason, 35; Mosley manifesto, 38–9 Motor industry, 213 n.22 Multilateralism, 156–7, 158, 160, 165–6, 172, 173–5, 178 & n.103, 179–82 Municipalisation, 16 Mutual aid agreement, article VII, 160, 162, 167, 171–2, 174 National arbitration tribunal, 121 National association of manufacturers (US), 183 National council of labour, 52 National debt enquiry, 146 National government, 77, 84, 86, 87 National health service, 153, 235 National income analysis, 148, 189, 204 National investment board, 38, 50, 54–5, 70, 139, 154, 195 National joint council, see national council of labour National Union of Railwaymen, 103, 107 Nationalisation, 16, 23, 30, 63–4, 69–70, 72–3, 76 n.55, 123, 127–36, 153, 154, 155, 178, 185, 207, 224–5, 236, 240; debates over, 1949–50, 232–4 & n.136; Morrisonian model of, 133, 216, 218 National executive committee, see under Labour party

Neurath, Otto, 26 New Deal, 74, 76 n.55 New Fabian Research Bureau (NFRB), 40, 41–2, 44, 46, 53, 75, 81–2; visit to USSR, 56–61, 63 New Clarion, see Clarion New Leader, 42, 66 New Statesman, 42, 43, 53, 76 n.55, 105 Next Five Years Group, 66, 73 Nicholson, Max, 39, 193–4, 202 Noel-Baker, Philip, 134–5 Non-discrimination, 157, 160, 165, 171, 173, 175, 178, 181 Official steering committee on economic development, see steering committee on economic development Oldfield, Adrian, 4, 10, 23–4, 29–30, 71 Opie, Redvers, 57 Order 1305, 121–2 Organisation for European economic cooperation (OEEC), 182, 228 Orwell, George, 58, 77 n.57, 125 Oxford English Dictionary, 3 n.8 Pareto, Vilfredo, 18–19 Parker, John, 129, 150, 158–9, 225 Parliamentary Labour party, see under Labour party Peace aims, 139 Pease, Edward, 15, 16 Peden, G. C., 113 Pelling, Henry, 52 Pethick-Lawrence, F. W., 47, 57, 60 n.132, 78 n.60, 84, 85, 93, 97, 101, 106, 108; and external economic policy, 163–4, 172–3, 174 Physical planning, see controls Piercy, William, 128, 167, 172, 174, 179; see also Durbin-Piercy scheme Pierson, N. G., 26 Pigou, A. C., 60 Pilkington, R. A., 125 n.46 Pimlott, Ben, 6 n.20, 35 n.6, 53, 60, 211 Planned economy, definition of, 4–5 Planning, machinery of, 82–3, 85, 186–7, 205 Planning theory, origins of, 17–19 Planwirtschaft, see German planning Plowden, Edwin, 205–7, 215–16, 221–2, 226 Political and Economic Planning (PEP), 34, 40, 66, 73 Political Quarterly, 105

265

THE LABOUR PARTY AND THE PLANNED ECONOMY

Postgate, Raymond, 59 Post-war credits, 108, 110, 113 Potter, Beatrice, see Webb, Beatrice Pressnell, L. S., 168 Price control, 20, 23, 69 & n.17, 82, 90, 109, 111, 154 Price mechanism, 80–1, 85, 204 Price of goods act, 90–1 Pritt, D. N., 59 Proctor, Dennis, 203 Production council, 116 Production executive, 116 Propaganda, 219–21 Protectionism, 37, 157, 159; see also tariffs Public corporation, see nationalisation, Morrisonian model of Public ownership, see nationalisation Public works, 15 n.39, 32, 36, 38, 76 n.55, 144 Pugh, Arthur, 46 Quantitative import restrictions, see import controls Ratcliffe, S. K., 56 Railways, 89; see also transport industry Rathenau, Walter, 25 Rationing, 20, 82, 94, 96, 102, 105, 109, 111, 117, 138, 214, 237 Raw material controls, see under controls Rearmament, 77–8 & n.60, 84 Reddaway, W. B., 191, 193 Reid, Alastair, 52 Reynolds News, 105 Riddell, Neil, 33 Ridley, George, 93 Ritschel, Daniel, 5, 38, 41, 43, 72, 74, 75, 81 n.75 Robbins, Lionel, 79, 105, 115, 240 Robertson, Dennis, 105, 180 n.116 Robinson, Austin, 180 n.116, 190–3 & n.28 & n.39, 198, 199, 213, 215–16, 223, 228 Robinson, Joan, 240 Roll, Eric, 222 Rollings, Neil, 1, 6, 195, 214, 234–5 Roosevelt, Franklin D., 74 Rooseveltism, see New Deal Roper, W. Crosby, 79 Royal commission on the poor laws (1909), 15 n.39 Ruskin, John, 14 & n.30, 16 & n.44, 15 n.39 Russia, 22 & n.67, see also USSR

Salter, Arthur, 102 Sandison, G. R., 92–3 Schumpeter, Joseph, 18 Scott, Peter, 150 Shackleton, Richard, 52–3 Shaw, George Bernard, 13, 14 n.29, 43–4, 137 Shell-shortage crisis, 1915, 20 Shinwell, Emanuel, 111, 118, 134, 141, 156, 171–2, 174, 177, 182, 203, 218, 240 Shipbuilding industry, 70, 227 Shipping industry, 70, 73 Short Brothers, 123 Silverman, Sydney, 51 Simon, John, 87, 90, 94, 103, 112–13 Skidelsky, Robert, 14, 28, 33, 36, 91 n.23, 112 Snell, Lord, 106 Snowden, Ethel, 43 Snowden, Philip, 2, 12, 17, 22, 23 n.71, 29, 32, 33, 34, 43, 44, 49 n.75, 137 & n.106 Social Democratic Federation, 9, 13–14 Social security, 140, 142–3, 147, 153; see also Beveridge plan Socialisation, see nationalisation Socialist League (1880s), 10 Socialist League (1930s), 61–3, 67–8, 123, 216 Society for Socialist Inquiry and Propaganda (SSIP), 46, 61 Sokolnikov, Grigory, 41 Special areas acts, 150 Spectator, 100 Stamp survey, 89 Stamp, Josiah, 89, 99–100 Stanley, Oliver, 91 State trading, 69, 165, 170–1 & n.63, 173, 174 n.80, 180, 183 Statement on personal incomes, costs, and prices (white paper), 221 Steel industry see iron and steel industry Steering committee on economic development, 187, 200–2 Sterling convertibility, 156, 175, 178, 181, 206, 212 devaluation of, 179, 182, 229 Stokes, Richard, 92, 177 Stone, Richard, 148 Strachey, John, 34, 35–9, 41, 62, 182, 203 Strauss, G. R., 36, 41, 172

266

INDEX

Streissler, E., 26 Supplies and services (transitional powers) act, 1945, 233–4 Sugar industry, 232 Sweden, budgetary policy of, 147 Targets for industry, 191–3, 199, 204–5, 215, 217, 221, 227–8 Tariffs, 157, 158, 160, 165, 168, 174, 182 Tawney, R. H., 48, 126, 137 Taxation, 94–5, 109, 155; differential taxation of profits, 197 Taylor, F. M., 79 Taylor, Ian, 127, 131 Textile industry, 70, 227–8; see also cotton industry Thermostatters, see gosplanners v. thermostatters debate Thomas, J. H., 2, 36, 44 Thompson, Noel, 30–1 Thomson, G. W., 103 Thorpe, Keir M., 5, 200, 206, 219, 222–3, 228 Time magazine, 178 n.103 Times, 94–5, 97 Tomlinson, Jim, 5, 165, 179–80, 187–9, 193 n.39, 195, 198, 207, 220, 229; ‘iron quadrilateral’ concept, 216–19 Town and country planning, 4, 140 Transport industry, 69 n.17, 70, 71, 135, 187, 204 Treasury (UK), 83, 102–3, 110, 112, 116–17, 144, 146, 149, 162, 173, 195, 202 Treasury (US), 163 Trentmann, Frank, 12, 157 Tribune, 105, 211 Tripartism, 216–17, 229 Trotsky, Leon, 27 TUC, 105–6, 110, 112, 121, 130–1, 142, 219, 221, 233; congress, 1931, 46–7, 63; congress, 1933, 74; economic committee, 47, 68, 126; general council, 46, 52, 62, 99, 121; Interim report on post-war reconstruction, 131 n.78; and full employment, 145–6 Unbalanced budgets, see budgetary policy Underconsumptionism, 30, 93 Unemployment, 15, 21, 56, 97, 139, 225 United Nations, full employment scheme, 179 USA, 153, 154, 155, 160, 172, 183–4, 223; loan to Britain 1945, 156–7, 172,

175–7, 179, 183, 206, 210; Congress, 174, 180, 181; trade and payments negotiations with Britain, 167–70, 174, 181 USSR, 12, 35 n.6, 38, 62, 68–9, 122, 124, 153, 154, 190 & n.28, 199; labour delegation to, 1920, 27, 30; All-union society for cultural ties abroad (VOKS), 56 n.109; early attempts at planning, 26–8; thinking on economic development, 28 n.95; five-year plan, 25, 28, 31, 32, 35, 36–7, 40, 41–4, 46–7, 57–9 & n.114, 68; NFRB visit to, 56–61, 63; successes in WWII, 125–6 & n.46; trade policy of, 161, 170 Victorian economy, 9 VOKS, see under USSR Voluntaryism, 118 Wage planning, 138, 218–19 Wallas, Graham, 13 Walras, Leon, 18 War emergency: workers’ national committee (WEC), 22–3 Washington principles, 168–9, 171 Water industry, 70, 135, 232 Webb, Beatrice, 13–16, 25, 38–9, 57, 92 n.26; attitude to USSR, 27–8, 41, 43–4, 58 Webb, Sidney, 14–15, 25, 41, 43–4, 58 Weekend Review, ‘national plan’ of, 39–40 Wells, H. G., 15 Wheatley, John, 30 n.103 White plan, 162–5, 167–8 White, Harry Dexter, 162–4 & n.31; see also White plan Whiting, Richard, 197 Wieser, Friedrich von, 17–19, 26 Wiles, P. J. D., 10 n.4 Wilkinson, Ellen, 107 & n.112, 108, 134, 154 Williams, Andrew J., 59, 63 Williams, Francis, 53, 129 n.70, 135, 177–8, 182 Williamson, Philip, 29 n.96, 32, 41 n.34, 48 Williams-Thompson, Richard (‘Mike’), 219–20 Wilmot, John, 101 Wilson, Harold, 116, 118, 162, 181, 182, 229, 233 Wilson, Horace, 116 Wilson, Thomas, 188, 194

267

THE LABOUR PARTY AND THE PLANNED ECONOMY

Winch, Donald, 75 Winter, J. M., 21 Wise, E. F., 20 n.57, 47, 48 n.68, 61 Wood, Kingsley, 112, 116 n.7, 144 Woodcock, George, 103 & n.89 Woods, John Henry, 180 Woolton, Lord, 116 n.7 Wootton, Barbara, 58, 80, 81–2, 109, 137 World Bank, see international bank for reconstruction and development

Worswick, G. D. N., 210 Wright, Anthony, 2 Wyatt, Woodrow, 209 XYZ Club, 53–4 & n.94, 55, 63, 84 Young, Allan, 38, 208 n.2 Young, Michael, 154 Zweig, Ferdynand, 10 n.4

268