The Ideas That Shaped Post-War Britain. Anthony Seldon

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СКАЧАТЬ financial community. As a social philosophy, Keynesianism represented a delicate balance between capital and labour. Maintaining demand at a high level would give businessmen the confidence to invest, and guarantee labour against the heavy unemployment of the inter-war years. Moderate collectivism was traded off against greater collectivism. (A similar implicit social contract underpinned the welfare state: the wealthier classes would pay for most of it but would be entitled to its benefits.) The shift to a more collectivist politics in the 1960s and 1970s made Keynesianism increasingly controversial. It started to be associated with a growing share of national income spent by the state, growing public sector deficits, an increasing tax burden, and attempts to control supply through planning of production and incomes. Such policies, arguably, also made the market system work less well, thus creating reasons for ever more extensive interventions. At some point Keynesianism lost its political function of preserving freedom, and came to be widely seen as an agent of creeping socialism. It stopped being able to do political work.⁴⁰

      The relationship between these political/theoretical swings and changes in the structure of economies remains obscure. To what extent were the changes in cost structures which undermined the profitability of large sections of manufacturing industry in the early 1970s caused by excess demand? It is difficult to say. What is probable is that they precipitated the microelectronic revolution which brought to an end the ‘Fordist’ era of mass production and undermined the autonomy of national economic policy. These developments enormously strengthened the power of international capital. In the 1980s, governments lost their ability to ‘choose’ their national technologies and national rates of inflation, growth, employment, taxation. In short-run perspective, the shift to monetarism is best seen as the adaptation of theory and policy to the new facts. In the long run, these facts were, at least in part, brought about by the ideas and policies which dominated the Keynesian age.

      Thus it is much too simple to see the fall of Keynesianism simply as a triumph of a reactionary rhetoric. The rhetoric was the result of real failures in policy and ideas, and real changes in economic structures. If ‘new Keynesian’ ideas are to play a part in shaping the policies of the future they will do so in a very different world and intellectual climate from those which gave birth to the Keynesian revolution.

CHAPTER 4

      The Keynesian Consensus and its Enemies

      The Argument over Macroeconomic Policy in Britain since the Second World War.

       Peter Clarke

      UNTIL THE Second World War, no government professed to have a macroeconomic policy. The concept simply did not exist. To be sure, governments had long been held responsible, in a general way, for the health of the economy and it is obvious that ‘hard times’ hurt the party in power. This helped to bring the heavens down on the Conservative Government in the General Election of 1880, serving as the electoral meteorology behind the rain-dance performed with such ostentation by Gladstone in his Midlothian campaign. Conversely, an uncovenanted upturn in the export trade apparently vindicated the Free Trade case in the 1906 General Election and made Joseph Chamberlain’s prescient warnings about manufacturing decline look like empty scaremongering. The arguments over the Gold Standard in the 1920s were, to our eyes, unmistakably about macroeconomic issues; in this sense, the advocates of sound money, with their theory of a self-equilibrating system that was therefore ‘knave-proof’, were simply blinded by their own ideology to the actual consequences of what they were doing – Keynes’s point, of course, in his public criticism of the return to Gold in 1925. Indeed this controversial decision inaugurated, under the prompting of continuing unemployment, a continuing debate – concerned in many different ways with the economic role of the state – which was macroeconomic avant la lettre.1

      It seems that we owe the actual term ‘macroeconomic’ to P. De Wolff, in an article published in 1941 in the Economic Journal (of which Keynes was still editor). De Wolff built upon an earlier differentiation between micro-dynamic and macro-dynamic analysis and, according to the New Palgrave, was ‘quite clear about the distinction between micro- and macroeconomics’, one being valid ‘for a single person or family’, the other ‘for a large group of persons or families’.² But while this is pointing in the right direction, it fails to capture the essential definition of macroeconomics as the study of the system as a whole, not simply of one sector, however great in magnitude, nor of any sub-set of economic agents, however numerous.

      This distinction is in fact made much more clearly by Keynes himself, who inescapably bulks large in any discussion of macroeconomic policy. So far as I am aware, he never used the expression macroeconomics (or microeconomics) in any of his writings, though he must surely have become aware of its growing usage in the five years before his death. Look in the index of his collected writings and there is only a hop, skip and a jump from Macmillan Committee (‘see Finance and Industry’) to Magicians (‘Newton, the last of the’). Yet, like M. Jourdain, Keynes’s prose was unimpaired by his lack of the right word. Book Two of the General Theory, concerned with ‘Definitions and Ideas’, leads up to a clinching assertion, in its final sentence, of ‘the vital difference between the theory of the economic behaviour of the aggregate and the theory of the behaviour of the individual unit.’³

      Indeed in the preface to the French edition, Keynes tried to pretend that this was why he had termed it ‘a general theory. I mean by this that I am chiefly concerned with the behaviour of the economic system as a whole – with aggregate incomes, aggregate profits, aggregate output, aggregate employment, aggregate investment, aggregate saving – rather than with the incomes, profits, output, employment, investment and saving of particular industries, firms or individuals.’⁴ It was this determination to seize on the aggregate dimension – not just as an analytical issue but also as a policy tool – which makes the early history of macroeconomic policy in Britain so largely synonymous with the history of Keynesianism.

      Keynesian macroeconomic theory may have been devised at the bottom of a slump, but it was symmetrical in its policy implications, as its author explicitly affirmed. ‘The best we can hope to achieve is to use those kinds of investment which it is relatively easy to plan as a make-weight, bringing them in so as to preserve as much stability of aggregate investment as we can manage at the right and appropriate level,’ he wrote in 1937, at the peak of British economic recovery. ‘Just as it was advisable for the Government to incur debt during the slump,’ he argued, ‘so for the same reasons it is now advisable that they should incline to the opposite policy.’⁵ The irony in the administrative reception of Keynesianism is that it was ‘the opposite policy’ which prevailed during the 1940s. For it is now clear that the concepts of the General Theory were first operationalised within the administrative community in a way which spoke to the macroeconomic issue raised by the Second World War: how to control inflation.

      For present purposes, it is not the administrative but the ideological impact of Keynesianism which is the focus – by ideological, I mean the social or political purchase of Keynes’s ideas, or ideas attributed to him, in a particular historical argument. Since we are concerned with ‘actually existing Keynesianism’, it should come as no surprise to discover that ideological distortions of Keynes’s original intentions were a price that had to be paid for the influence of the doctrine.⁶ What I have to say here bears less upon the policy-making process, on which there is now a fine scholarly literature, than upon the justifying rhetoric in which the central ideas were couched.

      I shall take a number of representative texts in the political discussion of Keynesianism and macroeconomic policy over a period of forty years, and quote them, sometimes extensively, in order to capture and illustrate strategies of argument, rather than to assess their objective validity. It will become clear that this discourse cannot simply be characterised as a conflict between progressive and conservative positions. Indeed, if the rhetoric which helped justify the post-war consensus arguably held its own nemesis, through being pitched in an over-confident СКАЧАТЬ