The Rise and Fall of England XV. C. Carson

1 Keith Hutchison, The Decline and Fall of British Capitalism (London: Jon athan Cape, 1951), p. 291.

1969 SOCIALISM IN POWER 301 The times were right, in the first place, because-the English people had become accustomed to collec tive efforts during the war. They were acclimated to vast undertak ings by government - to large scale evacuations, to massive mo bilizations of armed forces and their deployment around the world, to collective responses to air raids and the attendant black outs, to concentration on war pro duction, and so forth. One writer says, "All this produced a revolu tion in British economic life, until in the end direction and control turned Great Britain into a coun try more fully socialist than any thing achieved by the conscious planners of Soviet Russia."2 At any rate, they were psychological ly prepared for the continuation of such undertakings in peacetime. Moreover, during the war the government had either taken or promised measures moving in the direction of socialism. The most famous of the tacit promises was the one contained in the Beveridge Report, made public in 1942. It was comprehensive in what it called for: . . . It covered all the known causes of the "giant" Want, by pro viding for unemployment benefit, sickness benefit, disability benefit, 2 A. J. P. Taylor, English History: 1914-1945 (New York: Oxford Univer sity Press, 1965), p. 507.

workmen's compensation, old age, widows' and orphans' pensions and benefits, funeral grants, and mater nity benefits. In addition to these fi nancial provisions, the Report was also based on the assumption that a comprehensive health and rehabilita tion service was to be established, its full resources available to all.... 3 "Its popular appeal was immense, 250,000 copies of the full report and 350,000 of an official abridg ment being sold within a few months. . . ."4 The thrust toward socialism during the war was, to a considerable extent, bipartisan. The Beveridge Report was author ized by the government, which was predominantly Conservative. Moreover, Anthony Eden, speak ing for the Conservative Party, had this to say in the House of Commons, December 2, 1944: We have set our hands to a great social reform programme . . . and even though there be an interruption it is the intention of each one of us who are members of the Government to carry that programme through. I have no doubt that ... if a Labour Government were returned, that Government would put through what was outstanding in this programme.

And I can say, on behalf of the Prime Minister, that we, as members of the Conservative Party, would 3 Sidney Pollard, The Development of the British Economy: 1914-1950 (Lon don: Edward Arnold, 1962), pp. 348-49. 4 Ibid., p. 350.

302 THE FREEMAN May give them support in putting through that programme .... 5 Both maj or parties, then, had done their part to prepare the people for great changes after the war. The times were right, too, be cause the long-term trend toward greater and greater government intervention and control was well established. Since the early twen tieth century, the government had become more and more involved in the economy: by minimum wages, by the dole, by "in surance programs," by heavy tax ation, by monetary manipulation, by ownership of certain undertak ings, by control and regulation. The minds of the people were set toward intervention: by the ac tivities of the Fabians, by the Left Book Club, by the very popu lar Keynesian economics, and by the tendency of most of the liter ary cadre to write favorably toward it. Fe'w in positions of leadership or authority were ap parently able to think in other than socialistic terms. Conserva tives sometimes held back against more radical measures, but they were hardly. inclined to oppose the general trend.

One other condition made it relatively easy for the socialists at the end of the war: wartime controls were still in effect, and 5 Hutchison, Ope cit., p. 285. could be continued with less re sistance than if they were intro duced for the first time. On the other hand, whichever party came to power after the war could expect some rough going. This was especially true for the Labour Party, for socialists tend to take on responsibility for all economic effort, or at any rate to claim credit for any achievements. To take on the British economy or lack of one - at the end of the war was not an enviable task. There had been considerable phys ical da.mage in Great Britain dur ing the war. An estimated £ 1,500,000,000 damage had been done to factories, railways, and docks. Some 4,000,000 houses had been either destroyed or damaged. 6 Eighteen million tons of shipping were lost, and only two-thirds of this replaced in the course of the war. 7 According to one writer, "A large part of her industrial equip ment was desperately in need of replacement, for instead of spend ing, as she would normally have done over five years, £ 1,000,000, 000 to maintain and renew plants and factories in the civilian indus tries, she had spent this money on munitions of war."8 6 Fl'2.ncis Williams, Socialist Britain eNew York: Viking Press, 1949), p. 13.

7 David Thomson, England in the Twentieth Century (Baltimore: Penguin Books, 1965),p.202. 8 Williams, op. cit., p. 13.

1969 SOCIALISM IN POWER 303 foreign Trade Problems The most serious difficulty con fronting the British at the end of the war was in the realm of for eign trade. They had come to de pend on imports for much that they consumed. "Nearly three quarters of all the food she ate came from abroad, 55 per cent of her meat, 75 per cent of her wheat, 85 per cent of her butter, all of her tea, cocoa, and coffee, three quarters of her sugar. Every year more than 20,000,000 tons of im ported food had to be brought across the seas and unloaded at her docks."9 What made this situation press ing was that the British had long since ceased to balance these im ports with goods exported. The difference was increasingly made up in recent decades by income from foreign investments, services such as shipping and insurance, and payments in gold. At the end of the war, Britain was deeply in debt abroad, most of the gold sup ply depleted, much of foreign in vestments sold to defray the ex penses of the war. Moreover, Britain had for the two decades preceding the war been losing out to competitors in those things for export where she had traditionally dominated. (This situation was not simply a consequence of the war, however, or even particularly 9 Ibid., p. 11.

such a consequence. On the con trary, in the years between World War I and World War II, the gov ernment pursued policies which made it increasingly difficult for British industry to hold its own.) In addition, the British as vic tors in the war had heavy military obligations. They undertook to oc cupy a zone in dismembered Ger many. They had heavy commit ments in other parts of the world also, and were very soon confront ed with volatile situations in areas to which their hegemony had long extended. Even so, the leadership of the Labour Party plunged into sociali zation with a will, even with ap parent alacrity. For more than a decade they had been committed to such a course if and when they came to power. And there was no counterbalancing power now to hinder them in their surge. A working majority of the House of Commons was all they needed. The Conservative Party was supine.

The House of Lords was powerless to do more than delay or make helpful amendments. The mon archy was reduced to a symbolic role in affairs. Indeed, it was the King who announced to Parlia ment the course it was to pursue. He said, in part: "My Government will take up with energy the tasks of reconverting industry from the purposes of war to those of peace, 304 THE FREEMAN May of expanding our export trade and of securing by suitable control or by an extension of public owner ship that our industries and serv ices shall make their maxim urn contribution to the national well being."Io Such power as there was in the United Kingdom rested in the hands of a socialist ministry. There were three main facets to the domestic socialization program in England: (1) the completion of the welfare state, (2) the nation alization of certain key industries, and (3) control over those por tions of the economy which re mained technically in private hands.

Completion of the Welfare State The welfare aspect of socializa tion has probably received more attention generally than any other, though it is not clear that social ists would consider it most im portant. In any case, a full-fledged welfare state was established by several acts shortly after Labour came to power. Indeed, one act was passed in 1944 which should be mentioned. It was the Education Act. This act raised the school leaving age to fifteen, provided "free" secondary education for all children, and set up a system of separating at the age of eleven 10 Alfred F. Havighurst, Twentieth Century Britain (New York: Harper and Row, 1962, 2nd ed.), p. 369. those pupils to go to preparatory schools and those to attend termi nal schools. ll The two most dramatic welfarist acts, however, were passed in 1946 under the Labourites: National Insurance Act and National Health Service Act. The National Insur ance Act provided protection against various vicissitudes to that large portion of the public which had not been so protected as yet.

It covered "every person who on or after the appointed day, being over school-leaving age and under pensionable age, is in Great Brit ain and fulfills such conditions as may be prescribed as to residence in Great Britain. . . ."12 These would then be eligible for unem ployment benefits, sickness bene fits, maternity benefits, and so on and on. The expenses were to be defrayed by employer, employee, and taxpayer (government) "con tributions." The National Health Service Act was much more con troversial. Many physicians op posed it. Even so, it was passed, and eventually went into effect in 1948. The act provided for free medical and dental services for everyone, and for those who pro vided the services to be paid by the government. It was intended 11 See Stephen B. Baxter, ed., Basic Docu1rwnts of English History (Boston: Houghton Mifflin, 1968), p. 281-82. 12 Ibid., p. 288.

1969 SOCIALISM IN POWER 305 as a comprehensive plan for look ing after the health of those Iiving in England and Wales. Welfarist in nature also was the massive house building pro gram undertaken under Aneurin Bevan, Labourite Minister of Health. The program tended to ward nationalization of housing also, for it encouraged the build ing of rental housing and dis couraged building for private own ership. It "was decided that the maj or part of the permanent building programme should be carried out through the local au thorities, who would employ build ers under contract to build houses to rent and who would be given financial aid by the Government in order that ... the houses when constructed could be let on the basis of need at fairly low stand ard rents." To discourage private building, "builders were to be al lowed to build for sale or under contract to private purchasers only to a restricted degree and only after a license had been secured from the local authority."13 Nationalization of Industry Nationalization was undertaken with considerable vigor. The broad categories of industries national ized were banking, power and light, transport, and iron and steel.

The first nationalization was au13 Williams, Ope cit., p. 127. thorized by the Bank of England Act passed in 1946; the last major one was authorized by the Iron and Steel Act of 1949. A fairly typical nationalization measure was the Coal Industry Nationali zation Act passed in 1946 to go into effect January 1, 1947. "The act provided for a National Coal Board appointed by the minister of fuel and power and consisting of nine representatives of various functions within the industry (such as finance, technology, labor, marketing), who were to operate all coal mines subject to the gen eral supervision of the ministry. The public corporation replaced more than eight hundred private companies, which surrendered their assets for a compensation. •••"14 T4e way had been prepared for further consolidation and even tual nationalization of most of these industries by the carteliza tion that had taken place in the 1930's by government sponsorship.

It was not simply a matter of chance that these particular in dustries were selected for nation alization. Socialists may not know how to plan an economy to achieve their ends. The record would indi cate that they do not. And British socialists had, in effect, organized irresponsibility on a large scale in these industries, for they had placed them under the control of 14 Havighurst, Ope cit., p. 370.

306 THE FREEMAN May boards whose members had much authority but few responsibilities - responsibilities to stockholders, responsibilities to operate efficient ly, even responsibilities to Parlia ment. Even so, British socialists demonstrated that they knew where the main arteries of a mod ern economy are. They meant to bring these directly into the hands of government agencies, and did. Before spelling out the import of nationalization and indicating the extent of much more extensive controls, it will be helpful to re view briefly the vision which the socialists had in mind. One of the men who participated in the early stages of this broad effort de scribed it as a test and an experi ment. He said, in part: ... Here at last a practical test of two vast and so far unproven as sumptions is taking place. The first is that a planned socialist system is economically more efficient than a priva te-en terprise capitalist system; the second is that within democratic socialist planning the individual can be given broader social justice, great er security, and more complete free dom than under capitalism.l 5 To make this test, planning has to reach through to every ligament of an economy. The above writer's description suggests the extent of such planning: 15 Williams, op. cit., p. 5.

The central planning organization, for example, is required to estimate the total number of men and women available for employment, the amount of essential raw materials such as coal, steel, and timber likely to be available from all sources, the total national production of goods possible in the current situation, and how this productive effort should be divided between home consumption, exports, and capital investment. Having made this analysis, the Planning Board assesses industrial priorities in the light of it; decides what proportion of the total working population is needed for national se curity in the defence services, what proportion in· the public and admin istrative services, how many in trade, industry and agriculture in order to reach the production targets set, and what general division of manpower there ought to be between export and home production, and be tween the productive and distribu tive trades. A similar assessment of the correct distribution of basic raw materials between various types of users is also required ... .16 In short, the determination of what was to be done in the eco nomic realm was to be_taken out of the market and made by gov ernment officials. To accomplish this - if it could be done - it would be necessary to have full control of key industries. The key industries of a modern economy 16 Ibid., pp. 87-88.

1969 SOCIALISM IN POWER 307 are, undoubtedly, banking, power and light, transport, and iron and steel. No modern enterprise can operate effectively without the use of one or more, and usually all, of these goods and services. Power is essential; capital is required (not necessarily borrowed money, but money, and central monetary au thorities can either maintain the money supply or destroy it); transport must be had; and equip ment and housing made in some part of iron and steel are practical necessities. The government which, in effect, possesses these essential goods and services can dictate to virtually all other undertakings. Other Controls and Regulations Of course, British socialists did not content themselves with .na tionalization. Additionally, a vast network of controls, subsidies, pri orities, prescriptions, proscrip tions, and regulations were extend ed over the remainder of industry and agriculture. .It will have to suffice here to call attention to some of these.

One of the most dramatic ex amples of compulsion can be ex amined in the regulation of the location of industry. The compul sion was provided for by a Dis tribution of Industry Act, the Town and Country Planning Act, and procedures adopted by the Board of Trade. The main impetus was to have new industries located in areas where labor was most abundantly available -.,.. to move factories to the workers. The Dis tribution of Industry Act aided by making loans, by giving finan cial assistance to companies that would open factories in desired areas, and by the use of tax mon ies to build factories for lease. This, in itself, was largely an ef fort by the government to influ ence the location of industry. But stronger weapons were at hand. In order to build a new factory, it was necessary to get a ·license from the Board of Trade. The Board of Trade could, in effect, veto a plan to build a factory any where. This was bolstered by the powers exercised under the Town and Country Planning Act: not only were new towns planned but also building activity was direct ed.17 Economic activity of every sort was minutely regulated. Wanted "production was encouraged; lux ury production was limited. Li censes were required to export raw materials and any manufac tured articles ... needed· at home.

Domestic consumption was regu lated by rationing, subsidies and price controls .... New industrial enterprises seeking capital had to be approved by a government com mittee .... " There was much more, 17 Ibid., pp. 93-94.

308 THE FREEMAN May of course: "paper control was di rected by the manager of a large paper manufacturing concern; matches were controlled by an of ficial of the largest manufactur er.... " Moreover, "Treasury bud gets were drafted with a view to controlling investment .... For foreign travel, limitations, changed from time to time, were placed on the amount of cash which could be taken from the United King dom."IS The bureaucrats made ubiquitous attempts to control ev erything. As for agriculture, it was de cided not to nationalize the land but to re'gulate and control activ ity in this area. The Ministry of Food was authorized to buy agri cultural produce and became, in effect, the sole market in which farmers were to sell. As the only buyer and seller, it proceeded to set prices to the farmers, on the one hand, and to the consumers, on the other. In general, the Min istry paid high prices for products wanted and sold them at a loss, the aim being not profit but to en courage the kind of production and consumption wanted. Agricul ture was controlled "by a range of other measures, such as the giving of acreage grants for particular crops, financial aid for improve ments, loans to agricultural work ers to become farmers on their 18 Havighurst, op. cit., p. 384.

own account, and the establishing of pools of labour and machinery upon which individual farmers can call during sowing and harve,sting seasons. There is also power to give directions to farmers to plough up land and grow particu lar crops."19 Finally, a large portion of the income of Englishmen was "na tionalized" by way of taxation. Taxes were excruciatingly high under the Labour government. An economic historian indicates that the government took 37.7 per cent of the value of the gross national product from the people in 1946. 20 The income tax was confiscatory. "Here is a story which shows it: a big American business which had decided to pay the head of its Eng lish subsidiary a salary of 20,000 dollars (£ 5,000) was informed that, owing to the Income Tax, the recipient would in fact touch half only. Not to be put off, the Ameri can business asked how much it would need to pay its servant to ensure him £ 5,000 net. The an swer came back - £ 50,000, the figure which will, after taxation, leave £ 5,093 lOs. O· d."21 Dependent and Stifled Two things should be immedi ately apparent. The first is that socialism had made the English 19 Williams, op. cit., p. 98.

20 Pollard, op. cit., p. 366.

1969 SOCIALISM IN POWER 309 people dependent upon govern ment. They were made dependent for food, for markets, for educa tion, for health services, for li censes, for loans, for subsidies, for jobs (it became necessary to belong to a labor union to work in unionized employments), for ma ternity benefits, for funeral sub sidies, for unemployment benefits, for disability payments, for build ing permits, for the amount that could be taken abroad, for priori ties for buying, for authorizations to sell, for houses in which to live (in the case of numerous renters), for broadcasting facilities, and so on. Such dependence has not cus tomarily been known as freedom; the generic term for it is bondage. Secondly, British economic ac tivity was strait-jacketed by gov ernment ownership, control, and regulation. Such overall bureau cratic direction greatly reduced the number of minds to cope with economic tasks and the number of ways that may be used to deal with them. When enterprise is free, when men receive the re wards of their labor, every man may use his initiative, ingenuity, 21 Bertrand de J ouvenel, Problems of Socialist England, J. F. Huntington, trans. (London: Batchworth Press, 1949) , p. 206.

and energy to grapple with the economic problem of scarcity. But under state dictation men are not permitted to exert their energies as they see best. If they perform at all, they are to perform as they are directed, with whatever will they can muster for the effort. Un der socialism, the English people were told what to produce, where to produce it, where to sell it, where they could buy, and when if at all to undertake it. Bureaucrats were free to plan; the people were free to obey. The economic situation of Eng land was precarious enough in 1945, as has been pointed out. The English people had a big job ahead of them to recover from the ef fects of the war and to regain their position in the world. It was task enough to challenge the initi ative, ingenuity, and energy of the whole people. Unfortunately, they decided to strait-jacket a large por tion of the population and to de pend upon bureaucrats. It was as if a drowning man should encum ber himself with balls and chains fastened to one arm and both legs, leaving himself only one arm with which to swim. In such circum stances, England's fall was precip itate. ~ The next article of this series will describe "The Fall of England."