The Rise and Fall of England: 15. Socialism in Power
MAY 01, 1969 by CLARENCE B. CARSON
Dr. Carson, Professor of History at Grove City College, Pennsylvania, will be remembered for his earlier FREEMAN series, The Fateful Turn, The American Tradition, and The Flight from Reality.
In July of 1945 an election was held throughout the United Kingdom. The war was over in Europe, but fighting still continued in the Pacific. Despite the fact that a National Government, headed by the Conservative, Winston Churchill, had been successful in prosecuting the war, the decision was made to have a partisan election. To the consternation of almost everyone, the Labour Party won overwhelmingly, returning 393 members to the House of Commons to 189 for the Conservatives and 58 for all other parties. For the first time in history the Labour Party came to power with a clear-cut majority. Twice before, the party had formed ministries, but each time they had ruled with Liberal support. This time they had as clear a mandate to govern according to their ideas as they were likely to get. Socialism had come to power. In its election manifesto for 1945, the Labour Party proclaimed that it was "a socialist party and proud of it."¹
In several respects, the times had been propitious for the socialists to make their move. Clement Attlee, the Labour Party leader, must have realized this, for he had pressed for an early dissolution of the government and a new election.
The times were right, in the first place, because the English people had become accustomed to collective efforts during the war. They were acclimated to vast undertakings by government — to large-scale evacuations, to massive mobilizations of armed forces and their deployment around the world, to collective responses to air raids and the attendant blackouts, to concentration on war production, and so forth. One writer says, "All this produced a revolution in British economic life, until in the end direction and control turned Great Britain into a country more fully socialist than anything achieved by the conscious planners of Soviet Russia."2 At any rate, they were psychologically 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 providing for unemployment benefit, sickness benefit, disability benefit, workmen’s compensation, old age, widows’ and orphans’ pensions and benefits, funeral grants, and maternity benefits. In addition to these financial provisions, the Report was also based on the assumption that a comprehensive health and rehabilitation 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 abridgment being sold within a few months…."4 The thrust toward socialism during the war was, to a considerable extent, bipartisan. The Beveridge Report was authorized by the government, which was predominantly Conservative. Moreover, Anthony Eden, speaking 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 give them support in putting through that programme….5
Both major parties, then, had done their part to prepare the people for great changes after the war.
The times were right, too, because the long-term trend toward greater and greater government intervention and control was well established. Since the early twentieth century, the government had become more and more involved in the economy: by minimum wages, by the dole, by "insurance programs," by heavy taxation, by monetary manipulation, by ownership of certain undertakings, by control and regulation. The minds of the people were set toward intervention: by the activities of the Fabians, by the Left Book Club, by the very popular Keynesian economics, and by the tendency of most of the literary cadre to write favorably toward it. Few in positions of leadership or authority were apparently able to think in other than socialistic terms. Conservatives 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 could be continued with less resistance than if they were introduced 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 physical damage in Great Britain during 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 equipment was desperately in need of replacement, for instead of spending, as she would normally have done over five years, £ 1,000,000, 000 to maintain and renew plants and factories in the civilian industries, she had spent this money on munitions of war."8
Foreign Trade Problems
The most serious difficulty confronting the British at the end of the war was in the realm of foreign trade. They had come to depend 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 imported food had to be brought across the seas and unloaded at her docks."9
What made this situation pressing was that the British had long since ceased to balance these imports 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 supply depleted, much of foreign investments sold to defray the expenses 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 such a consequence. On the contrary, in the years between World War I and World War II, the government pursued policies which made it increasingly difficult for British industry to hold its own.) In addition, the British as victors in the war had heavy military obligations. They undertook to occupy a zone in dismembered Germany. They had heavy commitments in other parts of the world also, and were very soon confronted with volatile situations in areas to which their hegemony had long extended.
Even so, the leadership of the Labour Party plunged into socialization with a will, even with apparent 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 monarchy was reduced to a symbolic role in affairs. Indeed, it was the King who announced to Parliament 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, of expanding our export trade and of securing by suitable control or by an extension of public ownership that our industries and services shall make their maximum contribution to the national well."¹º Such power as there was be 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 nationalization of certain key industries, and (3) control over those portions of the economy which remained technically in private hands.
Completion of the Welfare State
The welfare aspect of socialization has probably received more attention generally than any other, though it is not clear that socialists would consider it most important. 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 those pupils to go to preparatory schools and those to attend terminal schools.11
The two most dramatic welfarist acts, however, were passed in 1946 under the Labourites: National Insurance Act and National Health Service Act. The National Insurance 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 Britain and fulfills such conditions as may be prescribed as to residence in Great Britain…."¹² These would then be eligible for unemployment benefits, sickness benefits, maternity benefits, and so on and on. The expenses were to be defrayed by employer, employee, and taxpayer (government) "contributions." The National Health Service Act was much more controversial. Many physicians opposed 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 provided the services to be paid by the government. It was intended as a comprehensive plan for looking after the health of those living in England and Wales.
Welfarist in nature also was the massive house building program undertaken under Aneurin Bevan, Labourite Minister of Health. The program tended toward nationalization of housing also, for it encouraged the building of rental housing and discouraged building for private ownership. It "was decided that the major part of the permanent building programme should be carried out through the local authorities, who would employ builders 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 standard rents." To discourage private building, "builders were to be allowed 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 nationalized were banking, power and light, transport, and iron and steel. The first nationalization was authorized 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 Nationalization 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 general supervision of the ministry. The public corporation replaced more than eight hundred private companies, which surrendered their assets for a compensation…."14 The way had been prepared for further consolidation and eventual nationalization of most of these industries by the cartelization that had taken place in the 1930′s by government sponsorship. It was not simply a matter of chance that these particular industries were selected for nationalization. Socialists may not know how to plan an economy to achieve their ends. The record would indicate 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 boards whose members had much authority but few responsibilities — responsibilities to stockholders, responsibilities to operate efficiently, even responsibilities to Parliament. Even so, British socialists demonstrated that they knew where the main arteries of a modern 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 review briefly the vision which the socialists had in mind. One of the men who participated in the early stages of this broad effort described it as a test and an experiment. He said, in part:
Here at last a practical test of two vast and so far unproven assumptions is taking place. The first is that a planned socialist system is economically more efficient than a private-enterprise capitalist system; the second is that within democratic socialist planning the individual can be given broader social justice, greater security, and more complete freedom than under capitalism.15
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:
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 security in the defence services, what proportion in the public and administrative 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 between the productive and distributive 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 economic realm was to be taken out of the market and made by government 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 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 authorities can either maintain the money supply or destroy it); transport must be had; and equipment 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 nationalization. Additionally, a vast network of controls, subsidies, priorities, prescriptions, proscriptions, and regulations were extended 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 examples of compulsion can be examined in the regulation of the location of industry. The compulsion was provided for by a Distribution 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 Distribution of Industry Act aided by making loans, by giving financial assistance to companies that would open factories in desired areas, and by the use of tax monies to build factories for lease. This, in itself, was largely an effort by the government to influence 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 anywhere. 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 directed.17
Economic activity of every sort was minutely regulated. Wanted "production was encouraged; luxury production was limited. Licenses were required to export raw materials and any manufactured articles… needed at home. Domestic consumption was regulated by rationing, subsidies and price controls…. New industrial enterprises seeking capital had to be approved by a government committee…." There was much more, of course: "paper control was directed by the manager of a large paper manufacturing concern; matches were controlled by an official of the largest manufacturer…." Moreover, "Treasury budgets 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 Kingdom."¹8 The bureaucrats made ubiquitous attempts to control everything.
As for agriculture, it was decided not to nationalize the land but to regulate and control activity in this area. The Ministry of Food was authorized to buy agricultural 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 Ministry paid high prices for products wanted and sold them at a loss, the aim being not profit but to encourage the kind of production and consumption wanted. Agriculture was controlled "by a range of other measures, such as the giving of acreage grants for particular crops, financial aid for improvements, loans to agricultural workers to become farmers on their own account, and the establishing of pools of labour and machinery upon which individual farmers can call during sowing and harvesting seasons. There is also power to give directions to farmers to plough up land and grow particular crops."19
Finally, a large portion of the income of Englishmen was "nationalized" 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 English 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 American business asked how much it would need to pay its servant to ensure him £5,000 net. The answer came back — £50,000, the figure which will, after taxation, leave £5,093 10s. 0 d."²¹
Dependent and Stifled
Two things should be immediately apparent. The first is that socialism had made the English people dependent upon government. They were made dependent for food, for markets, for education, for health services, for licenses, for loans, for subsidies, for jobs (it became necessary to belong to a labor union to work in unionized employments), for maternity benefits, for funeral subsidies, for unemployment benefits, for disability payments, for building permits, for the amount that could be taken abroad, for priorities 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 customarily been known as freedom; the generic term for it is bondage.
Secondly, British economic activity was strait-jacketed by government ownership, control, and regulation. Such overall bureaucratic 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 rewards of their labor, every man may use his initiative, ingenuity, 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. Under 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 England was precarious enough in 1945, as has been pointed out. The English people had a big job ahead of them to recover from the effects of the war and to regain their position in the world. It was task enough to challenge the initiative, ingenuity, and energy of the whole people. Unfortunately, they decided to strait-jacket a large portion of the population and to depend upon bureaucrats. It was as if a drowning man should encumber himself with balls and chains fastened to one arm and both legs, leaving himself only one arm with which to swim. In such circumstances, England’s fall was precipitate.
The next article of this series will describe "The Fall of England."
¹ Keith Hutchison, The Decline and Fall of British Capitalism (London: Jonathan Cape, 1951), p. 291.
2 A. J. P. Taylor, English History: 1914-1945 (New York: Oxford University Press, 1965), p. 507.
3 Sidney Pollard, The Development of the British Economy: 1914-1950 (London: Edward Arnold, 1962), pp. 348-49.
4 Ibid., p. 350.
5 Hutchison, op. cit., p. 285.
6 Francis Williams, Socialist Britain (New 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.
9 p. 11.
10 Alfred F. Havighurst, Twentieth-Century Britain (New York: Harper and Row, 1962, 2nd ed.), p. 369.
11 See Stephen B. Baxter, ed., Basic Documents of English History (Boston: Houghton Mifflin, 1968), p. 281-82.
12 p. 288.
13 Williams, op. cit., p. 127.
14 Havighurst, op. cit., p. 370.
15 Williams, op. cit., p. 5.
16 Ibid., pp. 87-88.
¹7 Ibid., pp. 93-94.
¹8 Havighurst, op. cit., p. 384.
19 Williams, op. cit., p. 98. 20 Pollard, op. cit., p. 366.
2¹ Bertrand de Jouvenel, Problems of Socialist England, J. F. Huntington, trans. (London: Batchworth Press, 1949), p.206.