When Clement Attlee led the British Labour Party into the 1945 general election against Winston Churchill and the Conservatives, the controver-sial Harold Laski was serving as the Party’s chairman. Laski was a politi-cal scientist at the London School of Economics – his office close to F. A.
Hayek’s – and a leading socialist intellectual. When a series of newspaper stories reported Laski’s seemingly favorable statements about the Soviet economic system and Stalin’s government, Attlee was not pleased. After winning the election by a wide margin, Prime Minister Atlee informed reporters that he, not Professor Laski, would be in charge of policy making.1 The New York Times duly ran a story with the droll headline: “Britain Not Run by Intellectuals.”
Professor Laski, after the election was over, sued the popular British news-paper The Daily Express, charging that its stories had libelously accused him of advocating violent revolution. During the trial Laski had to spend several hours in the witness box interpreting his own speeches and academic prose as the newspaper’s barrister confronted him with statement after statement that did, on its face, seem to favor such a revolution. Instructed by the judge that they could interpret Laski’s words according to their ordinary mean-ings, the jury found that Professor Laski had not in fact been libeled.2
THE gENERAL ELECTIoN oF 1945
The Labour Party’s election manifesto of 1945, “Let Us Face the Future,”
declared the Party’s intention to bring about “the establishment of the
1 Attlee rebuked Laski in private by sending him the message that “a period of silence on your part would be welcome.”
2 Daniel Johnson, “Minds Both Absent and Present,” New York Sun (16 May 2006), available online at http://www.nysun.com/arts/minds-both-absent-and-present/32793/.
Socialist Commonwealth of great Britain,” a government that would “plan from the ground up” with “a firm constructive hand on our whole productive machinery.” Under Labour’s rule a “National Investment Board would deter-mine social priorities” for “planned investment in essential industries and on houses, schools, hospitals and civic centres.”3 These were not entirely new promises. Labour had endorsed some kind of “national planning” at least as far back as its 1934 manifesto. It had been committed to “common owner-ship of the means of production” since 1918.4 In its 1945 election campaign, the Party invoked the victorious results of wartime planning. As Labour pol-itician Tony Benn (Member of Parliament 1950–2001) later summarized the case: “There was a belief that if we can plan for war we can plan for peace.”5
Benn explained why Clement Atlee, the Labour Party’s candidate for Prime Minister, rejected a free market economy:
Attlee . . . saw the terrible poverty, and he said, “If you look around the world, what are the problems? They’re all caused by the private ownership of the means of production, distribution, and exchange.” And in the manifesto of 1945, he said the prewar slumps were not acts of god; they were the result of too much power in the hands of too few people, who behaved like a state within a state, and we have to take our future into our own hands.6
Longtime socialist Labour MP (1945–79) Barbara Castle, whose autho-rized biography was entitled Red Queen, similarly blamed the market economy’s lack of central planning for the boom and bust of the great Depression:
[P]eople were brought up sharply against the fact that a free-for-all market economy is exactly what it says. It doesn’t know or care what the next fellow is doing. They’re all rampaging along and suddenly the whole thing comes unstuck because there’s no central planning, no brain at work behind it. . . . Then, with lots of people doing that without ever looking over their shoul-ders [to] see how they were affecting anybody else, it couldn’t work, and it didn’t work, and it just came to a standstill.7
3 “Let Us Face the Future: A Declaration of Labour Policy for the Consideration of the Nation”
(London: 1945), available online at http://www.fordham.edu/halsall/mod/1945labour- letsusface.html.
4 Richard Toye, The Labour Party and the Planned Economy 1931–1951 (Woodbridge, UK:
Boydell Press for the Royal Historical Society, 2003), pp. 1, 70.
5 ollie Stone-Lee, “The Wartime Battle for Welfare?” BBC News Web site (25 July 2005), available online at http://news.bbc.co.uk/2/hi/uk_news/politics/4713041.stm.
6 Commanding Heights interview with Tony Benn (17 october 2000). Available online at http://www.pbs.org/wgbh/commandingheights/shared/minitext/int_tonybenn.html.
7 Commanding Heights interview with Barbara Castle (16 october 2000), available online at http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/int_barbara-castle.html.
LABoUR IN PoWER
With Labour’s landslide victory in the 1945 general election, in Castle’s words, “What we set out to do was to ensure that this system of fair shares and the planning and controls continued after the war, and when we won, that’s what we did.” She was right about the “fair shares” (government ration-ing) and controls. Prices controls and rationing of consumer goods contin-ued for years after the war. Clothing and furniture were rationed until 1948 and 1949. The last of food rationing was not eliminated until 1954. Coal rationing remained until 1958. In addition to viewing price controls and rationing as fair, Labourites saw them as a way of suppressing inflation. In a report prepared for the wartime government, which sought suggestions for postwar policies, A. C. Pigou blamed the prompt elimination of price controls after the First World War for postwar price inflation and a boom-bust-stagnation cycle.8
The Attlee government also continued wartime foreign exchange con-trols, restricting the exchange of British pounds for U.S. dollars. The fixed dollar value of the pound was too high to meet all demands to swap pounds for dollars without exhausting the government’s dollar reserves. Exchange controls effectively restricted exports of financial capital and imports of goods and services. Most imported goods were also restricted by quotas.
The government directly allocated such materials as steel and timber. Its allocations favored nationalized industries, export industries, and the con-struction of public housing. Controls on steel lasted until 1950, and then were briefly reinstated in 1952–3.9
Castle’s statement about the continuation of planning was something of an exaggeration. A centralized effort to direct the allocation of resources, in peace as in the war, never really materialized.10 Some Labourites tried. An organized group of economists within the Attlee government half-seriously called themselves “gosplanners” after the Soviet central planning bureau, though their favored version of planning was less comprehensive than the Soviet version. Their influence was eclipsed by a rival group they called the
8 Pigou’s study, completed in 1942, was later published as A. C. Pigou, Aspects of British Economic History, 1918–1925 (London: Macmillan, 1947).
9 Martin Chick, Industrial Policy in Britain 1945–1951: Economic Planning, Nationalisation and the Labour Governnments (Cambridge: Cambridge University Press, 1998), pp. 2–3.
10 on British wartime and postwar industrial policies and their administration, see David Edgerton, Warfare State: Britain, 1920–1970 (Cambridge: Cambridge University Press, 2006), ch. 2.
“Thermostatters,” led by economist James Meade, who favored Keynesian aggregate demand management without detailed industrial planning.
Meade called his own faction “Liberal-Socialists.”11
In 1947 the Attlee government did create an Economic Planning Board, a Central Economic Planning Staff (CEPS) headed by a Chief Planner, and an Investment Programmes Committee (IPC). But the Board was merely an advisory “talking shop.” The CEPS and IPS focused on the government budget and state-owned enterprises.12 Their activity did not usher in “the general supercession of individual enterprise as the source of economic decisions,” the declared goal of the Labour Party’s chief theoretician of plan-ning, economist Evan Durbin.13
According to Stephen Brooke, comprehensive economic planning was blocked in part by trade union leaders, a powerful element of the Labour Party, who would not accept a “planned wage policy” for directing the allo-cation of manpower. Meanwhile Evan Durbin rejected nonwage (compul-sory) allocation of labor.14 Here Durbin lived up to the promise he had made in his critique of Hayek’s Road to Serfdom (see Chapter 6), that planning would not lead to restrictions on worker and consumer choice. If Hayek’s book had had some small part in electing Labour (through the blowback against Churchill’s clumsy use of its argument in an election speech), per-haps the book or Hayek personally had some small part, by exercising a classical-liberal influence on his LSE colleague Durbin, in restraining Labour’s planning efforts once in power.
Labour’s nationalization program did give the UK government a large measure of control over the commanding heights. Under Attlee, Parliament nationalized iron and steel companies, inland transportation companies (railroads, aviation, trucking, canals), fuel and power companies (coal, gas, electricity), and the telecommunications firm Cable and Wireless.
(Telephone services had already been nationalized under the post office earlier in the century.) It nationalized hospitals and most of other med-ical care by creating the National Health Service. It did not nationalize land, despite the election manifesto’s declaration that “Labour believes in land nationalisation and will work towards it,” but did introduce a “Town
11 Toye, The Labour Party, pp. 187–9. Meade received the Nobel Prize in economics in 1977 for his work in international trade theory.
12 Ibid., p. 16.
13 Quoted by Toye, Labour Party, p. 5.
14 Stephen Brooke, “Problems of ‘Socialist Planning’: Evan Durbin and the Labour government of 1945,” Historical Journal 34 (September 1991), pp. 687–702.
and Country Planning” system.15 It nationalized the Bank of England, which had already long been under government control despite nominal private ownership, but did not nationalize the commercial banks. It did not nationalize sugar refining, thanks to the Tate & Lyle firm’s popular adver-tising campaign featuring the cartoon mascot Mr. Cube (Figure 7.1), who vigorously crossed out the “S” to prevent “Tate” becoming “State.”16
The nationalized industries, following the models of the British Broadcasting Corporation (established 1927) and London Transport, became state-owned corporations run by government-appointed boards.
Together they employed about 20 percent of British workers.17
THE FABIAN SoCIALIST RooTS oF LABoUR PoLICy
Labour’s postwar program of nationalization was the fruit of many decades of intellectual activism by the Fabian Society, a democratic socialist
15 See Michael Tichelar, “The Labour Party, Agricultural Policy and the Retreat from Rural Land Nationalisation during the Second World War,” Agricultural History Review 51 (2003), pp. 209–25.
16 on the Mr. Cube campaign see H. H. Wilson, “Techniques of Pressure – Anti-Nationalization Propaganda in Britain,” Public Opinion Quarterly 15 (Summer 1951), pp.
225–42.
17 yergin and Stanislaw, Commanding Heights, p. 26.
Figure 7.1. Mr. Cube opposes the Nationalization of Sugar Refiners Tate and Lyle.
Source: Cole (1932), p. 237.
movement long led by Sidney Webb, Beatrice Webb, and george Bernard Shaw.18 In Labour’s 1945 election victory, over two hundred members of the Fabian Society were elected to Parliament. The label Fabian, mean-ing incremental rather than revolutionary, came from Quintus Fabius Maximus, the Roman general whose strategy was to weaken Hannibal’s invading Carthaginian army by gradual attrition rather than to engage in any end-all battle. The society, explained g. D. H. Cole, one of its lead-ers from the 1930s to the 1950s, took an “evolutionary and gradualist”
approach to economic policy reform, “expecting socialism to come as the sequel to the full realization of universal suffrage and representative government.”19
The Fabian Society was founded in 1883, splintering off from a utopian socialist group to focus on one-step-at-a-time policy reform, developing and publicizing appealing socialist proposals. george Bernard Shaw and Sidney Webb joined the following year, and the two became its intellectual leaders. The book Fabian Essays in Socialism (1889) by Shaw, Webb, and others, made the society’s first big splash. A third leader arrived in the per-son of Beatrice Webb, née Potter, who joined in 1891 and became Sidney’s wife the following year. From the 1880s to the 1930s the society turned out more than two hundred “Fabian Tracts” expounding for a popular audience the various shortcomings of capitalism and the various advantages of social-ist policies. Some representative titles: An Eight Hours Bill (No. 9, 1890), Practicable Land Nationalisation (No. 12, 1891), Socialism: True and False (No. 51, 1894), The Case for State Pensions in Old Age (No. 73, 1899), Houses for the People (No. 76, 1899), State Purchase of Railways (No. 150, 1910), A National Medical Service (No. 160, 1911). The society today describes itself as “the UK’s premier left of centre think tank” and is officially affiliated with the Labour Party.
SIDNEy AND BEATRICE WEBB
Sidney James Webb (1859–1947) married Martha Beatrice Potter (1858–
1943) – not to be confused with Beatrix Potter (1866–1943), author of The Tale of Peter Rabbit and other children’s stories – in 1892. They had no children. Together the Webbs founded the London School of Economics and Political Science in 1895, the LSE for short, using some £20,000 bequeathed to the Fabian Society. Both were active in the Fabian Society
18 Ibid., p. 23.
19 g. D. H. Cole, “Fabianism,” in Edwin R. A. Seligman, ed., Encyclopedia of the Social Sciences (London: Macmillan, 1932), pp. 46–9. Available online at http://web.archive.org/
web/20080119011941/http://www.wcml.org.uk/group/fabianism.htm.
and in Labour Party politics. In 1913 they started a weekly magazine, New Statesman. They coauthored many books during their half-century together, including History of Trade Unionism (1894); Industrial Democracy (1897); English Local Government (9 volumes, 1906–29); English Poor-Law Policy (1910); The Cooperative Movement (1914); A Constitution for the Socialist Commonwealth of Great Britain (1920); The Decay of Capitalist Civilization (1923); Methods of Social Study (1932); Soviet Communism: A New Civilization? (1935); and The Truth about Soviet Russia (1942).20
Sidney helped to found the Labour Party in 1900. He served as a Party executive 1915–25, as a Labour Member of Parliament 1922–9, and in the Labour government 1929–31. He cowrote the Party constitution that was adopted in 1918.21 Clause IV of the constitution, endorsing “the common ownership of the means of production and the best obtainable system of popular administration and control of each industry or service,” remained a part of the Labour Party constitution until it was finally struck out and replaced under Tony Blair’s leadership in 1995. The first part of the clause committed the Party to socialism. The second part left the institutional type of socialism open. The range of possibilities ran from municipal coops to nationalized industries. National central planning on the Soviet model was not yet part of Labour socialism in 1918. It would be incorporated in the early 1930s.22
The Party’s 1918 election manifesto, Labour and the New Social Order, was also largely drafted by Sidney Webb. Thus the historian Richard Toye observes that “it was the Fabians who, at the close of World War I, suc-ceeding in placing their ideological imprint on Labour.”23 The manifesto offered a detailed program of reform in four parts. (1) government was to guarantee a minimum personal income, characterized as “the securing to every member of the community, in good times and bad alike (and not only to the strong and able, the well-born or the fortunate), of all the req-uisites of healthy life and worthy citizenship.” It was to ensure a maximum (48 hour) work week, commit to “deliberately and systematically prevent-ing the occurrence of unemployment” through public works projects, and provide unemployment insurance. (2) The manifesto called for “a genu-inely scientific reorganization of the nation’s industry, no longer deflected
20 For a joint biography of their early careers see Royden Harrison, The Life and Times of Sidney and Beatrice Webb, 1858–1905 (London: Macmillan, 2000).
21 g. D. H. Cole, A History of the Labour Party from 1914 (London: Routledge, 1948), p. 44.
22 Ibid., pp. 54, 56; Toye, Labour Party, pp. 25, 28, 70–1.
23 Ibid., p. 12. on the Fabian Society’s earlier impact see A. M. McBriar, Fabian Socialism and English Politics, 1884–1918 (Cambridge: Cambridge University Press, 1966).
by individual profiteering, on the basis of the Common ownership of the means of Production.” Common ownership was to begin with “the imme-diate Nationalisation of Railways, Mines, and the production of Electrical Power” and extend to “Canals . . . along with Harbours and Roads and the Posts and Telegraphs – not to say also the great lines of steamers,” and still further to “the Common ownership of the nation’s land, to be applied as suitable opportunities occur.” And in general: “other main industries, espe-cially those now becoming monopolised, should be nationalised as oppor-tunity offers.” Nationalized industries were to be run with the “participation of the organised workers in the management of both central and local.” (3) The income tax was to fall more heavily on incomes above the minimum standard. This was to be supplemented by “an appropriate direct Taxation of Land Values,” namely taxation on “the rental value of the lands superior to the margin of cultivation.” “Death Duties” were to be “regraduated, much more strictly collected, and greatly increased.” (4) The state was to expropri-ate “surplus wealth.”24
The Labour manifesto, Stanley Shapiro notes, was read and hailed by
“virtually all the organs of progressive thought” in the United States, led by The New Republic which “devoted a whole edition to Labour and the New Social Order and published the text as a special supplement.” American labor union periodicals joined in the praise.25 Norman Angell, a Labourite author, pitched the manifesto to the American audience in his book The British Revolution and the American Democracy: An Interpretation of British Labour Programmes (1919).
In addition to his books with Beatrice, and his coauthorship of Fabian Essays in Socialism (1889), Sidney wrote Facts for Socialists (1887), Problems of Modern Industry (1898), and Restoration of Trade Union Conditions (1917). He supported himself as an author and journalist, with help from Beatrice’s inheritance, until he took a chair as professor of public adminis-tration at the LSE, which he held from 1912 to 1927.
Beatrice Webb as sole author wrote The Co-operative Movement in Great Britain (1891), Wages of Men and Women: Should They Be Equal? (1919), and two memoirs: My Apprenticeship (1926) and Our Partnership (1948).
She was a member of the Royal Commission on the Poor Law (1905–9), in
24 All quotes from “Labour and the New Social order,” reprinted as Appendix I in Norman Angell, The British Revolution and the American Democracy: An Interpretation of British Labour Programmes (New york: B. W. Huebsch, 1919), pp. 297–324.
25 Stanley Shapiro, “The Passage of Power: Labor and the New Social order,” Proceedings of the American Philosophical Society 120 (29 December 1976), p. 470.
which capacity she and Sidney coauthored a Minority Report calling for a greater government role in poor relief.
Critics have pointed to the Webbs’ apparently naive “romance” with Russian communism, often quoting Beatrice’s statement that they had
“fallen in love with the Soviet Union.”26 The couple visited the Soviet Union in 1932. After returning home they wrote a book on what they had been shown and told, published in 1935. In a scathingly critical account of the western “Sovietophiles” of the 1930s, the historian Robert Conquest writes:
Most notorious, of course, were the deans of Western social science, Sidney and Beatrice Webb, who went to Russia, saw the system, and produced what purported to be a learned tome on the subject – Soviet Communism: A New Civilisation? – which in its second edition, at the height of the terror, dropped the question mark.
Their massive exercise in drivel was largely based on believing Soviet official documents. They were, in effect, taken in above all by Potemkin paperwork – of elections, trade unions, cooperatives, statistics, all the documents of the phantom USSR.27
The “terror” to which Conquest refers was Soviet ruler Josef Stalin’s pro-gram of show trials, executions, deportations to Siberian gulags, and poli-cy-made famines.28 The Webbs overlooked all that. They praised the Soviet Union’s health and educational systems, and its equality for women. They predicted that its “social and economic system of planned production for community consumption” would spread across the globe. They continued
The “terror” to which Conquest refers was Soviet ruler Josef Stalin’s pro-gram of show trials, executions, deportations to Siberian gulags, and poli-cy-made famines.28 The Webbs overlooked all that. They praised the Soviet Union’s health and educational systems, and its equality for women. They predicted that its “social and economic system of planned production for community consumption” would spread across the globe. They continued