The Ideas That Shaped Post-War Britain. Anthony Seldon

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СКАЧАТЬ it may be argued that the long upswing of the 1950s and 1960s and the slowdown which followed were not policy-induced at all, but were different phases of the ‘Kondratieff cycle’ first observed in the nineteenth century. Keynesianism was unjustly credited with the upswing and unjustly blamed for the downswing. Economists and politicians fiddled away: Rome prospered or burnt despite their best efforts.

      Every historian knows that ideas, policies, and events form complex explanatory wholes. It would be naive to look for a single explanation for the demise of Keynesianism. The historical record may throw some light on the relationships between the explanatory variables and the extent to which one or other dominated at any single time.

      III

      The most basic, but also least tractable, question is: to what extent was the ‘golden age’ of the 1950s and 1960s the fruit of recognisably ‘Keynesian’ ideas and policies? Angus Maddison can do no better than to say that it ‘was due in considerable measure to enlightened policy, but it was helped by temporarily favourable opportunities for fast growth and modest inflation’.¹⁸ The field of enquiry can be narrowed by concentrating on the British experience, leaving aside for the moment the question of international factors.

      Keynesianism was a collection of ideas, policies, and institutions designed to maintain full employment. In Britain, the Employment White Paper of 1944 committed governments to a ‘high and stable level of employment’. (Similarly, the 1946 Employment Act in the USA pledged the Federal government to use all its ‘plans, functions, and resources’ to maintain ‘maximum employment, production, and purchasing power’.) Full employment became a goal, says Herbert Stein, because it had become a fact in the war.¹⁹ I doubt if this is true: there was full employment in the First World War too, but no full employment goal after it. The goal was not the product of full employment, or even the wishes of the electorate, but of governments’ belief that they knew how to get full employment and how to maintain it. This was the result of the Keynesian revolution.

      This is not to deny the importance of political factors. The Keynesian policy of full employment was adopted by the two leading capitalist victors, the United States and Britain, in order to put capitalism in a stronger position to withstand revolutionary assaults, both domestic and international. In Britain, the full employment commitment was part of an implicit social contract by which the state undertook to compensate the civilian population for its wartime sacrifices. Keynesianism was also a way of being left-wing without being socialist, and of purging Conservatism from its association with inter-war unemployment. It ‘became the flag around which everyone could rally’.²⁰ It relegated disputes between planners and anti-planners, businessmen and socialists to the background. In liberated Europe, Keynesianism was seen as a way of re-legitimating the state.²¹ Keynesianism, together with the associated commitment to welfare and a mixed economy of public and private sectors, became the basis of a new ‘consensus’. So the important political function of Keynesian ideas must not be neglected. The question is whether these ideas had much effect on economic performance.

      After the war, Britain’s Labour government initially favoured planning sectors of supply (through a licensing or rationing system) to planning components of demand. Supply-side planning more obviously pointed to public ownership. Socialists like Dalton (Britain’s first post-war Chancellor), Durbin and Gaitskell were hostile to Keynes’s social values. ‘Durbin recognised that Keynesian policies alone would lead to a continuation of the system of private enterprise …’²² However, there was some scope for reconciliation. On the one hand, demand management could be made the instrument of redistributive goals which socialists favoured, while reducing the need for extensive nationalisation. On the other side, the socialised public utilities offered increased scope for controlling aggregate investment. On this basis, a deal could be struck. Powerful anti-planning arguments were provided by the economists Denis Robertson and, intermittently, Hubert Henderson, who both spoke for Keynes’s values, if not his theory, as did Hayek in his influential book, The Road to Serfdom.

      However, the crucial factor facilitating acceptance of Keynesianism was the need to contain inflationary pressures. Here was a paradox. The Keynesian commitment of the mid-1940s was directed to saving the world from another slump. Keynesian policy was actually adopted to control the postwar boom. The technique adopted was fiscal Keynesianism. Not only had it proved itself in the war, but the Treasury wanted to keep interest rates low to borrow more cheaply. The situation called for budget surpluses, not deficits. Thus Keynesian calculation emerged as an instrument of financial orthodoxy.

      This is the plausible story told by Jim Tomlinson. As he tells it, the budget of November 1947 marked a shift within the government from the use of controls to fiscal policy and Harold Wilson began his ‘bonfire of controls’ in 1948. A full employment target of 3 per cent was officially announced in 1951, mainly, it seems, to encourage the United States and other countries to follow suit so as to ensure a high demand for British exports. On the other hand, a basic problem had already emerged with using the public sector as an instrument of short-term demand management, because of its disruptive effect on public sector investment programmes. This pointed to reinserting monetary policy into the armoury of instruments available to balance the economy. ‘The kind of macroeconomic management that began to emerge in the late 1940s, and was to dominate the 1950s and 1960s, owed little to the devices suggested in 1944. It focused on budgetary and, to a lesser extent, monetary policy, within an overall framework of buoyant private expenditure and budget surpluses.’²³

      However, this cannot be quite right. Although British budgets were always in surplus ‘above the line’ from 1947 onwards, loan-financed capital spending by public authorities was much greater than it had been before the war. There was a positive borrowing requirement (budget deficit) right through the Keynesian age (except for the years 1969–70) which tended to expand with time.²⁴ It is at least arguable that the net impact of fiscal policy during the ‘golden age’ was somewhat inflationary. However, the more substantial charge is not that public spending policies produced inflationary pressures in the golden age, but that Keynesian policy-makers, over-anxious about the dangers of depression, took the build-up of these pressures too lightly.

      The Conservatives, who held power from 1951 to 1964, had their own political agenda, notably cutting taxes. This meant making more use of monetary policy as an instrument of short-term demand management. More importantly, demand-management under the Conservatives was directed towards maintaining the sterling-dollar exchange rate at $2.80 at all costs, and ensuring the re-election of Conservative governments. Both aims made their policies seem perverse from a ‘Keynesian’ perspective, without however threatening the maintenance of full employment. From the mid-1950s onwards, maintaining the value (and it was thought the world position) of sterling in face of low productivity growth and wage inflation required subjecting the British economy to frequent ‘stops’ in order to protect the balance of payments from the tendency to import too much at full employment. The Conservative penchant for depressing and stimulating the economy at the ‘wrong’ times led to them being credited with inventing the ‘political business cycle’. ‘Stop-Go’ or ‘fine-tuning’ the economy may be seen as a specific British contribution to Keynesianism arising from the economic characteristics of a declining economy, the tightness of the political battle between Conservative and Labour, and the ability of the British Prime Minister to fix, within broad limits, the date of the next general election.

      Although ‘stop-go’ policies were attacked for destabilising the economy, they did not destabilise it by much, and unemployment never exceeded 3 per cent over the whole Conservative period. This employment record was not the result of national full employment policy but of a global private investment boom which swept up the ‘free world’ in a cumulative wave of prosperity. In other words, those historians are right who claim that the ‘golden age’ was the product of world conditions, from which most national economies benefited, irrespective of whether their governments were imbued with СКАЧАТЬ