The Ideas That Shaped Post-War Britain

William Collins

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A William Collins Original 1996

Copyright © David Marquand and Anthony Seldon 1996

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INTRODUCTION

Ideas and Policy

MORE YEARS have passed since 1945 than from the beginning of the century to that date. The major issues and questions in British history from 1900–45 are now fairly well established and there have been authoritative responses in many areas. In contrast, the historiography of the last fifty years is still in flux. A mass of scholarly literature has been written on particular policy areas, institutions and individuals. But the pattern and contours of post-war British history have been strangely hard to define. This is particularly true of the complex relationship between the world of ideas and the world of action. Some of the published literature refers in passing to the role of ideas, but for most authors it is very much a secondary concern.

Yet it is clear that the fifty years since the end of the Second World War have seen dramatic changes in the intellectual and cultural framework within which policy is made and implemented. The details of policy change, as well as the fluctuating fortunes of the political parties, reflect these broad changes in the subconscious of the nation and cannot be understood in isolation from them. The object of this book is to tease out the relationships between these dimensions of change. It explores the impact of transformations in the intellectual and cultural climate on the thinking and assumptions of policy makers, seeks to explain why ideas (such as privatisation or monetarism) which seemed beyond the pale in one period became the orthodoxy of another, and analyses the relationship between changing policy approaches and changes in the content of policy.

In doing so, The Ideas that Shaped Post-War Britain aspires to throw new light on the alleged shift from the collectivism of the post-war era to the individualism of the last decade and a half, and to place the Thatcher revolution and its aftermath, as well as the preceding thirty years, in a new and richer context.

Ideas, and the complex relationship between thought and action, provide the connecting theme of the book. However, our authors have approached the subject from very different angles. In the first chapter, David Marquand examines the rise and fall of Keynesian social democracy from the late 1940s until the mid-1970s, explores the New Right paradigm which dominated the following twenty years and speculates on the possible emergence of a third paradigm (which is itself the subject of the final chapter in the book). Marquand’s distinctive approach is to provide a subtler separation than that between individualism and collectivism, and to suggest that within each dominant phase were powerful cross-cutting political languages, at one time active and moralistic, at another passive and hedonistic.

Albert Hirschman, the seminal American political economist, next measures the British post-war experience against the propositions of two of his recent books, Shifting Involvements (1981) and The Rhetoric of Reaction (1992). Hirschman’s work is well known to social scientists in Britain, but historians have paid too little attention to it. His oeuvre provides the inspiration for several chapters that follow.

Chapters three and four provide the opportunity for two of our leading historians of economic thought to examine the impact of the ideas of Keynes, the single most powerful and influential thinker of the period, on post-war British history. Robert Skidelsky finds that Keynesian economics lost out in the 1970s to Friedmanism because the former failed to renew itself intellectually when it still held sway. A different perspective is provided by Peter Clarke in his chapter on the argument over macroeconomic policy in Britain since 1945. Robert Taylor in chapter five explores another aspect of economic policy in his story of the uneven abandonment of the voluntarist tradition in British industrial relations.

The book then moves on to consider social policy. Jose Harris, the biographer of William Beveridge, the other main influence on post-war British history, examines the theoretical underpinning of the British welfare state as it emerged in the 1940s. Chris Pierson brings the story up to the present day in his chapter on the post-war welfare state. Social policy, he finds, by the 1990s was profoundly different to how it was conceived by Beveridge fifty years before. Raymond Plant examines the social-democratic tradition in British politics, grounding his analysis in the work of C. A. R. Crosland, before moving on to consider the neo-liberal reaction to it.

The book broadens out beyond economic and social policy at this point. Geoff Mulgan considers in chapter nine British culture and its relation with society since 1945, while Jim Bulpitt explores the tortuous but central question of the motives for Britain’s changing stance on Europe in chapter ten. In chapter eleven, Anthony Seldon brings together the strands of the book in his analysis of the key turning points in post-war policy across a broad area, and weighs the relative influence of ideas, individuals, interests and circumstances in bringing about change. In the final chapter, Will Hutton explores some of the ideas behind ‘New Labour’. The book does not aim to be comprehensive. We are painfully aware that several key areas, such as environmentalism and feminism, have been neglected. The book is sponsored by the two organisations to which the editors belong, the Political Economy Research Centre and the Institute of Contemporary British History. The editors wish to thank colleagues at these bodies, especially Andrew Gamble and Sylvia McColm at the former, and Peter Catterall and Virginia Preston at the latter. They also wish to thank Annemarie Weitzel for her secretarial skills in bringing the book together, and Philip Gwyn Jones and Toby Mundy at HarperCollins for their enthusiasm and support.

David Marquand and Anthony Seldon, October 1996

CHAPTER 1

Moralists and Hedonists1

David Marquand

[T]he ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back … [S]oon or late, it is ideas, not vested interests, which are dangerous for good or evil.

J. M. Keynes.2

[T]he supremacy of a social group manifests itself in two ways, as ‘domination’ and as ‘intellectual and moral leadership’ … A social group can, and indeed must, already exercise ‘leadership’ before winning governmental power.

Antonio Gramsci.3

KEYNES’S heroic intellectualism dazzles more than it persuades. The notion that ideas rule the world, or shape societies, implies a platonic philosopher king, legislating for society from the outside. No such creature appears in this book. It is based on the assumption that, if thought influences action, action also influences thought. Madmen in authority may distil the frenzy of academic scribblers, but academic scribblers respond to the pressures of the society around them, and their scribbles resonate only when they speak to social forces. If practical men are apt to be enslaved by defunct economists, living economists inhabit a world managed by practical men. As Gramsci knew, intellectual leadership precedes domination, but as he also knew, successful intellectual leaders tailor their appeals to inherited traditions. Belief and behaviour, ideas and policies, visions of the future and legacies of the past, form a seamless web; attempts to unpick it, to give primacy to thought over action, or to action over thought, confuse more than they illuminate.

This web provides the subject matter of the chapters that follow. In different ways, they all explore different facets of the complex and fluctuating relationship between thought and action in post-war Britain. The remaining chapters examine particular aspects of that relationship. In this chapter, I try to pull some of the threads together. I trace the rise and fall of two clusters of ideas and assumptions, through which two sets of claimants for power have sought Gramsci’s ‘intellectual and moral leadership’, and I speculate about the possible emergence of a third cluster, as yet only half-formed. I begin by describing the varied fates of these clusters and discussing the ideas they contained. I then offer an interpretation of the courses they have followed.

It is a story that falls into three broad phases. From the late 1940s to the mid-1970s, governments of right and left alike adhered to a form of liberal collectivism, sometimes known as ‘Keynesian social democracy’.4 As that formulation implies, liberal collectivism or Keynesian social democracy was not the preserve of any single political party. Nor was it the product of any single ideological tendency. Its intellectual ancestry was too rich and diverse to fit the pigeon-holes of left and right; and it owed more to the crises, contingencies and compromises of the early post-war period than to the doctrines championed by either major party at the beginning of the period. The Attlee Government, under which its essentials were embodied in legislation and (much more importantly) in administrative practice, set out in 1945 with quite different intentions. So did the Conservative opposition under Churchill. Yet by the early 1950s at the latest, it had become the lodestar of the two front benches in the House of Commons, of the Whitehall mandarinate, of the leaders of organised capital and organised labour and of the academic and journalistic apologists and interpreters of this nexus of interests. Dissenters – Aneurin Bevan and his followers in the Labour Party; Peter Thorneycroft, Enoch Powell and Nigel Birch in the Conservative Party – were either marginalised or obliged to recant.

For Labour, the Keynesian social-democratic moment came gradually. In the two years from 1947 to 1949, ministers slowly abandoned their original vision of a socially-controlled economy – in which resources would be allocated by political decisions rather than market-place haggling – in favour of a mixed economy centred upon Keynesian demand management. The fact that the retreat from social control was headed by Sir Stafford Cripps, the arch-visionary of 1945, only made it all the more poignant. The equivalent Conservative moment was more compressed. It came in 1952, when the Cabinet rejected the Treasury’s so-called ‘Robot’ plan for a floating pound, sterling convertibility and a return to market disciplines, on the grounds that it would lead to higher unemployment and, as Lord Cherwell argued, ‘put the Conservative Party out for a generation. Even a Government with a large majority could not survive such a sudden, complete reversal of policy’.5 Thereafter, on both sides of the party divide, the heirs of the practical men whom Keynes had teased took it for granted that they could exercise power only within Keynesian social-democratic parameters, and lead successfully only by showing that they were better Keynesian social democrats than their rivals.

The Keynesian social-democratic phase terminated amid the confusion and crises of the 1970s. In classic Gramscian fashion, it ended in the realm of ideas well before corresponding changes took place in the realm of governmental power. By the middle of the decade, at the latest, the authoritarian individualists of the New Right, with their emphasis on market freedom, social and monetary discipline and a tightly concentrated state, were making the ideological running. Keynesian social democrats still controlled the commanding heights of Whitehall, but the intellectual system on which they based their claim to power was patently crumbling. In a profound sense, they no longer knew what to do. Ministers waited in vain for coherent official advice; officials waited in vain for firm ministerial decisions.6 It was as though a sleek ocean liner had suddenly become a rudderless raft. The New Right offered an alternative craft, and for the best part of twenty years this was the only vessel following a confident course. To be sure, New Right politicians never won a majority of the popular vote. They did not need to. With dazzling political skill, they constructed a new social coalition, distributed in such a way as to procure them decisive parliamentary majorities in spite of their comparatively low levels of popular support. More important still, the New Right paradigm shaped the political agenda and controlled the intellectual weather.

How far it still does is a moot question. Little remains of the confident and decisive Conservative regime of the 1980s. Since Britain’s forced departure from the European Exchange Rate Mechanism, the Major Government has been as rudderless as were the Wilson and Callaghan Governments of the 1970s. By the early months of 1996, the Conservative Party was riven by internal disputes as savage as those which tore the Labour Party apart in the early 1980s, and most observers took it for granted that a Labour Government was only a matter of time. But this does not necessarily betoken the end of the New Right paradigm, any more than the sad diminuendo of the second Attlee Government between February 1950 and October 1951 betokened the end of its Keynesian social-democratic predecessor. New Right ideology and Conservative statecraft have been symbiotically connected for nearly two decades, but they are not the same thing, and the disarray of the latter proves nothing about the former. On the structure of the British state and its place in an increasingly proto-federal European Union, Tony Blair’s ‘New Labour’ Party offers a decisive break, not just with Conservative policy, but with the governing assumptions of New Right politics. Yet on the only slightly less crucial issue of taxation and public expenditure it whistles an essentially New Right tune. It seems to be groping for a vision of the political economy as distinct from authoritarian individualism as authoritarian individualism was from Keynesian social democracy. It would be rash to assume that it will find what it is groping for.

Yet intimations of a possible new intellectual and policy paradigm are not difficult to detect – on the political right as well as on the left. The fall of communism has taken the zest out of the old battles of state against market, and socialism against capitalism. The simplistic universalities of the Cold War no longer resonate; the focus now is on complexity and difference. Persistent divergencies in the fortunes of market economies have focused attention on the varieties of capitalism, and on their moral and cultural dimensions.7 Endemic unemployment in Europe, the rise of the working poor in the United States, the transformation of labour markets everywhere and the associated threat of fragmentation and anomie have fostered a new concern with the dangers of social exclusion and the a priori necessity for social cohesion.8 Classic themes from the eighteenth and nineteenth centuries – the role of trust in a market economy; the prerequisites of civil society; the meaning of citizenship; the relationship between duties and rights; the need for and scope of a public domain; the threats to and demands of community – have been rediscovered.9 On the right there is talk of a new ‘civic conservatism’; on the left, of a ‘stakeholder economy’.10 The differences between them are real and important, but they spring from a shared experience and a common fear. As John Gray, one of the most passionate and original exponents of the new mood, puts it in an anguished pamphlet,

Communities are scattered to the winds by the gale of creative destruction. Endless ‘downsizing’ and ‘flattening’ of enterprises fosters ubiquitous insecurity and makes loyalty to the company a cruel joke. The celebration of consumer choice, as the only undisputed value in market societies, devalues commitment and stability in personal relationships and encourages the view of marriage and the family as vehicles of self-realisation. The dynamism of market processes dissolves social hierarchies and overturns established expectations. Status is ephemeral, trust frail and contract sovereign. The dissolution of communities promoted by market-driven labour mobility weakens, where it does not entirely destroy, the informal social monitoring of behaviour which is the most effective preventive measure against crime.11

These intimations are still tentative and inchoate (not to say confused). Only time will tell if they can provide the basis for the kind of intellectual and moral leadership I have been discussing. Through the fog, however, it is possible to discern the outlines of a third phase and a new political divide. This new divide cuts across the divides of the last fifty or even one hundred years, and the political vocabulary of the twentieth century does not capture it. On one side are those, of left and right alike, who believe that institutions are the guarantors of freedom, and collectivities the schools of individuality. On the other are those, also of left and right, who see institutional pressures as harbingers of tyranny, and who put their faith in the spontaneous mutual adjustment of unconstrained individuals. As Robert Skidelsky has suggested, it may perhaps be a divide between political and economic liberals, or on a deeper level between pessimists and optimists.12 Be that as it may, it is clear that, just as the final act of a play can give unforeseen meaning to the earlier acts, the tentative emergence of this new divide puts those that have preceded it in a new and unexpected light.

So far, perhaps, so obvious. The final chapter of this story may be unfamiliar, but the first two are well-known. The inner meaning, however, is not obvious at all. Three sets of arguments underpinned post-war Keynesian social democracy, each with a long pedigree. The first was economic. As Keynes put it in his famous essay, ‘The End of Laissez-Faire’,

The world is not so governed from above that private and social interests always coincide. It is not so managed here below that in practice they coincide. It is not a correct deduction from the Principles of Economics that enlightened self-interest always operates in the public interest. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear-sighted than when they act separately.13

In short, markets fail. Their failures are systemic, not accidental. They fail because market actors cannot know enough to maximise their interests in the way that market economics postulates. They fail because they cannot, by themselves, ensure that social costs are borne by those who incur them. And, as Adam Smith knew, they fail because they cannot secure the production of public goods. Because they fail, they have to be both regulated and supplemented; and it is the state that has to regulate and supplement them. The Keynesian social-democratic paradigm left plenty of room for debate about the extent and form of state intervention, but on two points all Keynesian social democrats were agreed. They were for extensive state intervention in the market, and against state suppression of the market. In James Meade’s language, they were ‘Liberal Socialists’;14 in Andrew Shonfield’s, they wanted a ‘mixed economy’, in which ‘supplies of goods and services are largely determined by market processes’, but in which the state and its agencies ‘have a large capacity for economic intervention’.15

The second set of arguments was moral and political. To make a reality of civil and political rights, Keynesian social democrats insisted, social rights had to be guaranteed as well; indeed, social rights were the emblems of social progress. In his seminal 1949 essay, ‘Citizenship and Social Class’, T. H. Marshall offered a classic summary of the argument.16 Citizenship, said Marshall, had three dimensions – civil, political and social. Over the preceding three centuries, the struggle for citizenship rights had shifted from the first to the second, and then from the second to the third. Civil citizenship, manifested in equal civil rights, had been established in the eighteenth century, or at any rate in the 150 years between the Glorious Revolution and the first Reform Act. Political citizenship – equality of political rights – was largely the work of the nineteenth century. In the twentieth century, the focus had shifted to social citizenship – the struggle for equal social rights. The post-war welfare state had now enshrined the principle of equal social rights in legislation.

The implications went wider than appears at first sight. The essence of citizenship lies in its autonomy: the fact that citizenship rights are held independently of market power or social status. If the domain of citizenship expands, the domain of the market-place contracts. In celebrating the extension of citizenship, Marshall was also celebrating the growth of the public domain at the expense of the market domain. In writing the history of the preceding 250 years as a history of growing citizenship, he was saying that successive aspects of social life had been ring-fenced from the operations of the market-place. In presenting that process as evidence of social progress, he was also saying that it had been right to ring-fence them: if the democratic promise of equal citizenship were to be honoured, the market domain should not be allowed to invade other domains.

Buttressing the arguments from market failure and democratic principle was an argument from historical necessity. As Albert Hirschman has suggested, one of the stock themes of ‘progressive’ rhetoric is an appeal to irrevocable laws of motion, carrying society, willy-nilly, in the desired direction.17 In the eighteenth and nineteenth centuries, the founding fathers of market economics had employed that trope to devastating effect. The invisible hand of free competition, and the accompanying switch from status to contract, produced opulence; opulence produced civility; with civility came felicity; with both came progress. Not the least of the achievements of the intellectual progenitors of Keynesian social democracy – and not the least of the reasons why Keynesian social-democratic governments exercised leadership as well as power – is that they turned this historiography on its head. The irrevocable laws of motion, as depicted by them, pointed in very nearly the opposite direction – from the disorganised to the organised, from the dispersed to the concentrated, from the individual to the collective. The visible hand of oligopoly had gradually, but inexorably, replaced the invisible hand of free competition. Big firms, big unions and big government were the inescapable hallmarks of the modern age. So the maverick Conservative Harold Macmillan saw existing forms of economic organisation as ‘a temporary phase in the onward march of developing social history’,18 which would, sooner or later, terminate in a planned economy. And so the Labour economist, Evan Durbin, dismissed the ‘liberal’ economics of Mises, Hayek and Robbins with a kind of mocking determinism. It was not, he wrote,