The Split Society-2

SUBLIMATION, FRUSTRATION AND. DISILLUSIONMENT

By NICHOLAS DAVENPORT

DURING the war years there was a sublima- tion of the social conflict. Every class put the safety of the nation above its own self- interest. But Labour did not transfer its aspirations to the national war drive until its leaders had joined the coalition government under Churchill. The trade unions were then prepared to pull together with the Government in the national struggle for survival. For the time being the workers had confidence in their parliamentary spokesmen—an event which had not been seen since 1918.

It was an accepted principle of the coalition that on the civil front the organisations of capital and labour shared the exercise of eco-' nomic power while at the Ministry of Labour ruled a great trade unionist, Ernest Bevin. The coalition worked so smoothly and efficiently that I began to be afraid that after the war these powerful organisations of capital and labour would carry their co-operation a step too far and found the managerial State in which the con- sumer would be unmercifully exploited. But the danger of the corporate State happily passed away when the Parliamentary Labour Party remained true to its first principles and refused to join the Churchill 'caretaker govern- ment' after the war.

The war stirred up the social conscience of the nation. Every Minister of State from Churchill downwards felt that the workers were entitled, when peace came, to full employment and social security. Corning not long after Dunkirk—while the Dunkirk spirit ruled—a suc- cession of White Papers poured out from the departments on such matters as improved national insurance, supplementary pensions, family allowances, education and health, free milk and subsidised meals at schools, in fact. the complete package of the modern Welfare State. The nation had decided once and for all to make an end of the hardships and cruelties of laissez-faire capitalism and so complete the work that Lloyd George had begun in the great Liberal administration before the First World War.

The height of this social idealism was ex- pressed in the famous White Paper of 1944 on employment policy (Cmd. 6527). This committed all post-war governments to the practice of the Keynesian theory of full employment which had been evolved during the great depression. It was the joint effort of the Treasury (John Anderson), the Ministry of Reconstruction (Wootton) and the Board of Trade (Dalton), who had all been instructed to study the problems of post-war reconstruction. The draughtsmen were the outside economists employed in the Treasury.

Dalton had been drafting a policy paper for the Labour national executive on 'Full Employ- ment and Financial Policy' in April, 1944, in which he had fought for iron and steel to be included in the list of industries which his party had determined to nationalise after the war. He was delighted that he was able to get this memor- andum out in print before the Treasury White Paper. His main objective was to solve the special problem of local unemployment by directing companies and industries to the so- Called `distressed areas.' Pure Keynesian eco- nomics this White Paper expounded. So it came about that the Conservative Party as well as Labour bound itself to a policy of full employ- ment and expansion. In other words, the Welfare State had become the joint property of the two great political parties in Great Britain.

The Keynesian theories were clearly expressed in the foreword to the White Paper which ran as follows:

The Government accept as one of their pri- mary aims and responsibilities the maintenance of a high and stable level of employment after the war. • . . A country will not suffer from mass unemployment so long as the total de- mand for its goods and services is maintained at a high level.

The White Paper laid down three general con- ditions for `a high and stable level of employ- ment':

(i) total expenditure on goods and services must be prevented from falling to a level where general unemployment appears;

(ii) the level of prices and wages must be . kept reasonably stable;

(iii) there must be sufficient mobility of workers between occupations and localities.

It insisted that the Government must be ready to check and reverse any decline in consumer spending which might follow on a temporary drop in private investment or exports. But the authors showed that they were well aware of the inflationary risk of this spending policy because in Clauses 49 and 50 they wrote:

If we are to operate with success a policy for maintaining a high and stable level of em- ployment it will be essential that employers and workers should exercise moderation in wages matters. . . . The principle of stability does mean that increases in the general- level of wage rates must be related to increased productivity due to increased efficiency and effort.

Thus the Labour Party as well as the Con- servative was committed after the war not only to the attempt to iron out cyclical depressions in the Keynesian style by stepping up public expenditure in periods of sub-normal trade but to what is now known as a 'wages policy'—the restriction of the rate of wage advances to the rate of increase in national productivity. And the Labour Ministers showed no hesitation at all in agreeing. It was significant that the only opposition to the White Paper came from Aneurin Bevan. He saw that Keynesian theories could save capitalism from collapse and he just did not want to save or even reform the capitalist system. He wanted a socialist Britain after the war. He described the pledge 'to sustain a high and stable level of employment' as a hare-faced attempt to side-step nationalisation and social- ism. 'These White Papers,' he said, 'are the blueprints of the coalition programme at the next general election. White Paper carrots! The donkey should watch out!'" He had the insight to see that the Labour Party might be trapped into anti-socialist attitudes. Bevin saw the White Paper differently. He welcomed it as the accept- ance by all parties of the expansionist policy which he and Keynes had tried to urge on the Government in the 1930s. Dalton saw it as a * From Aneurin Bevan, by Michael Foot. Later on Bevan agreed with a wages policy and said so in his book In Place of Fear.

wonderful opportunity to help the `distressed areas.' He represented one in Parliament.

Before the war-time coalition broke up Dalton managed by superhuman efforts—threatening at one time to resign if Churchill did not agree— to get the principles of the White Paper trans- lated into action in his Distribution of Industry Bill. This empowered the Board of Trade to build factories and houses in 'development' areas, to acquire and prepare land for that purpose, to help local companies to raise new capital for factory building or extension and finally to make loans to non-profit-making trading estates. A vital clause was inserted to require industrialists to notify the Board of Trade of their intention to build factories. This enabled a Labour Government later on to direct industry into the areas of high unemployment. It was a remarkable feat on Dalton's part to get the Royal Assent to this Act on June 15, 1945, the day when Parliament was to be dis- solved. This was his greatest hour—his greatest contribution to the economic well-being of the nation.

Socialism, 1945 must first explain how the Labour Party came to fight and win the 1945 election on a full-blooded socialist programme. As everyone knows, Labour has never been a revolutionary party. It was formed in 1900 out of the union of various labour and socialist societies for the express purpose of sending representatives to Westminster—not as a Trojan horse for the overthrow of that citadel of democracy but as a practical means of getting legislation passed to improve the pay and working conditions of the working class. That is why the great Liberal administration of 1906 won the enthusiastic support of the Labour movement for its radical programme of social reform. The Insurance Act of 1912 could be said to have laid the founda- tions of the modern Welfare State. Thanks to Labour support and the demagogic drive of Lloyd George the quick tempo of social change was sustained right up to 1914—and indeed until immediately after the war—in spite of the intense opposition of the Conservative forces entrenched in the House of Lords. But when the war ended there came social upheaval and discontent.

By this time the Labour movement had acquired a socialist ferment. The triple alliance which had been formed of miners, railwaymen and dockers in 1914, the shop stewards' move- ment, the Clyde Workers Committee, all were tending towards direct industrial action. The Russian revolution of 1917 created immense excitement and there was even a mass meeting in Leeds to discuss the formation of workers' and soldiers' councils. In this electrifying atmo- sphere the Labour Party acquired a new and socialistic constitution.t It was adopted at the conference in 1918 with the following national objectives:

t Under this constitution there had to be an execu- tive committee of twenty-three members, of which thirteen represented the trade unions and five the local Labour Parties. Four places were reserved for women. Thus, the trade union forces were given a perpetual majority of votes.

1. To organise and maintain in Parliament and in the country a Political Labour Party.

2. To co-operate with the General Council of the Trades Union Congress, or other kindred organisations, in joint political or other action in harmony with the Party Constitution and Standing Orders.

3. To give effect as far as may be practicable to the principles from time to time approved by the Party Conference.

4. To secure for the workers by hand or by brain the full fruits of their industry and the most suitable distribution thereof that may be possible upon the basis of the common owner- ship of the means. of production (distribution and exchange), and the ,best obtainable system of popular administration and control of each industry or service. [At the 1929 annual con- ference of the Labour Party this clause was amended to read 'the common ownership of the means of production distribution and ex- change.'] 5. Generally to promote the political, social and economic emancipation of the people and more particularly of those who depend directly upon their own exertions by hand or by brain for the means of life.

The party statement issued later under the title Labour and the New Social Order advocated the nationalisation of the land (by degrees), the railways, coal, electricity, gas, industrial life insurance, ,canals, harbours, docks and steam- ship lines and the entire manufacture and distri- bution of alcoholic drinks.

There was apparently no dispute between right and left over the Marxist-looking Clause 4. I am indebted, to Mrs. Cole for correcting the wrong idea I once held that the left pressed this clause on the right. In a letter to the Spectator of February 22, 1963, she made it clear that it was the other way about: 'If any- thing, Henderson was le plus royaliste. Beatrice Webb's diary of September, 1919, records him as demanding that Webb should produce a scheme for universal socialisation of industry, asking why miners and railwaymen should be specially privileged. The Webbs begged him not to be in such a hurry.' The dispute between right and left, as Mrs. Cole went on to explain (letter of March 8), was not about socialisation, on which they were all agreed, but 'on the method of attaining a socialist society.' Direct action,' she said, 'in so far as its advocates did not join the Communist Party, declined when the slump came and died with the general strike.'

This was fortunate for the Labour Party, Which could then develop free from any taint of Communism. It rejected every application of the new Communist Party for affiliation; it passed a resolution in 1925 making Communists ineligible for membership in the Labour Party and its associated bodies. But reliance on par- liamentary gradualism had its opponents in the party and so a party split developed between left and right.

Later in the 1930s the intellectuals on the left, Tawney, Cole and' Laski, shocked by the MacDonaldite desertion, impressed their image on Labour's new policy and before the Second World War ended they had the party re- committed to a fully socialistic programme. This was popularly expressed in the 1945 election pamphlet Let Us Face the Future, which was intended to show how a first instalment of Clause 4 could be carried out. Some of the in- tellectual left doubted the practicability of parliamentary gradualism and held the idea that Clause 4 could never be implemented without a revolution. Laski in particular was driven by this logic into expressing such extreme revo- lutionary sentiments that he was singled out for attack in the press—subsequently he brought a libel action which he lost—but the majority held firm to their parliamentary gradualism. So the first phase in the 'socialisation of all the means of production, distribution, and exchange' was confined to the nationalisation of coal, gas, electricity, railways, road transport, civil avia- tion, cables and wireless, iron and steel and the Bank of England.

In Let Us Face the Future there was a hint of more to come. The Labour Party, it said, 'is a socialist party and proud of it. Its ultimate purpose at home is the establishment of the socialist commonwealth of Great Britain. But socialism cannot come •overnight as the product of a weekend revolution. There are basic in- dustries ripe and over-ripe for public owner- ship. , . . There are big industries not yet ripe. . . . Labour believes in land nationalisa- tion and will work towards it.' But these brave words were quickly forgotten. I remember saying in a speech to the New York State Cham- ber of Commerce in April, 1947, that with the iron and steel Bill 'Socialism in Britain had shot its bolt.' American bankers at that time were convinced that Britain was turning Com- munist: they could hardly believe their ears when they heard this prophecy. But it was true. The old capitalist system was changed into a mixed economy of public and private sectors (with the public responsible for about 30 per cent of the national product) but private enterprise remained the real driving force in the economy.

The sad truth is that the great socialistic fandango of -1945 ended in anti-climax. By 1951 nothing that could be recognised as social- ism was establiuhed except the national health service and the new towns. Aneurin Bevan apart, a tired lot of right-wing Ministers, ex- hausted by their war-time offices, tried ineffect- ively to implement a radical programme of social change which had not been carefully thought out and prepared beforehand—and they made a hash of it. By 1947—that annus horrendus—they had lost their drive. They left unchanged the social status of the workers. Society was just as class-ridden as before. The rich had become richer, the privileged no less powerful. The commanding heights of the economy were still in the hands of the vested interests in the City. Nothing in fact was done to lay the foundations of a planned; egalitarian socialist State. Instead of closing the division in their ranks the leaders left a deep party split (Aneurin Bevan, Harold Wilson and John Freeman resigning from the Government) and by failing to win over the trade unions to their wage restraint policy—because they tackled dividend limitation too late—they allowed the working class once again to feel disillusioned and alienated from society as a whole. It was a sad sequel to the overwhelming popular vote of 1945. When Hartley Shawcross made his famous victory cry: 'We are the masters now !' he implied that the submerged working mass need no longer look upon the ruling clique as 'them' but 'us.' We were now, he imagined, all one society. Alas, his colleagues in 1951 left it as split as it was before.

Frustration and Disillusionment, 1945-51 I can well understand the state of disillusion- ment which befell the working class after a Labour Government had been in pflice for nearly six years. I was feeling pretty disillusioned myself. This was due to my personal disenchant-

ment over Hugh Dalton, whose accession to power at the Treasury had filled me originally with such high hopes. In the 1930s Vaughan Berry,* a bill broker employed by the Union Discount Company, and I had formed a dining club among our City friends—it was called XYZ—for the

express purpose of inviting the Labour leaders to dinner in order to educate them about the facts of life in the City. We found them ill- informed and suspicious of the City institutions. The Stock Exchange, the hub of the capital mar- ket, which is a vital part of the mechanism of the capitalist system and the most efficiently and democratically managed institution in the City, they regarded as a sort of casino. They did not even know the difference between stock jobbers and stockbrokers. We zealously invited real-life City people to meet them, people who were staunch Conservatives but not unsympathetic to change. We wrote papers and produced statistics. Berry composed a first rough draft for national- ising the Bank of England. I was the specialist on the capital market, having lectured on this subject to the Liberal summer schools when I was working with Keynes and Henderson. Being strongly in favour of a planned economy, I advo- cated the setting-up of a National Investment Board—as in the old Liberal plan—and was in- trigued to find that Dalton lifted my paper and put it almost bodily into a Labour Party policy memorandum which was published in 1934. This broadsheet proposed a National Investment Board `to mobilise our financial resources and guide them into the right channels' (my words) and 'advise the Government on a financial plan for the full employment of our people' (his words). In the pamphlet Let Us Face the Future the Labour Party stressed the importance of `planned investment' and promised that 'a National Investment Board will determine social priorities and promote better financing in private investment.'

To my chagrin Dalton dropped the National Investment Board as soon as he arrived at the Treasury. He had been staying with me in the country for the weekend before, discussing some ideas 1 had put forward, and when I motored him to Great George Street on the Monday morning he had said with a wave of assurance as be over- slammed the door : `I have got your XYZ papers in my bag and I am going to put them on my desk, press the button for my new slaves and ask them why we should not put them into practice.' I found that the slaves became his masters. The Treasury hierarchs had always been opposed to any outside planning organisation which would detract from their paramoupt control of the economy. I imagine that Bridges, the then per- manent Secretary, who had his finger in every pie, persuaded Dalton that a National Investment Board was unnecessary. Were not five big indus- tries, the main spenders on capital account, to be nationalised? Would this not give the Govern- ment a firm enough control of investment? The Treasury already had a 'planning branch' (it was merely a co-ordinating committee at bureaucrat level) and would not another Board duplicate the planning machinery already at the Chancellor's disposal? Whatever the arguments were which Bridges used, Dalton ratted on the National In- • vestment Board and thereby abandoned the principles of a planned economy. This convinced me that the decision which Attlee made over lunch-time on July 27, 1945, to reverse the offices

* Now Sir Vaughan Berry. which he had offered Dalton and Bevin in the morning had been a horrible mistake.

To placate the planning enthusiasts of his party who had been looking forward to and counting on the promised National Investment Board, and were as upset as I was by its non- appearance, Dalton set up a consultative National Investment Council in 1946 on which he invited me to serve. It was a waste of time. The Council was denied by the Treasury all power, all infor- mation, all staff and all dignity. We used to meet in the Chancellor's room for tea and a pleasant chat. Bridges and his bureaucrats used to sit be- hind the Chancellor in rows, their poker faces alert to see that we did not propose anything revo- lutionary that might upset the Treasury establish- ment. The thing was a farce and everyone knew it. No planning of the national investment was ever discussed. Members were invited to give their opinion about any subject that entered their heads—provided it was not about planning in- vestment. We Were asked our views, for example, about convertibility. I had written to The Times at the beginning of the convertibility crisis of 1947 urging the immediate suspension of gold shipments. Dalton thundered at me disapprov- ingly: `I see some of you have been writing to the press'—as if it was any good writing to a staff-less, powerless, make-believe National In- vestment Council. As soon as Cripps became Chancellor the Council was abolished. Previously Cripps has been appointed Economics Minister to the dismay of Bridges, but with his translation to No. 11 Downing Street economic as well as financial power became centred once again in the Treasury. Thereafter Bridges slept peacefully at nights, confident that the idea of a planned economy directed by independent experts sitting on a National Investment Board outside and above the Treasury had been killed for his time of office. Indeed, it had. The Treasury firmly re- tained sole control of the economy thereafter and to this we must attribute the succession of post- war financial and economic crises.

There was another XYZ matter on which Dalton failed to live up to his promises and left many others besides Berry and myself sadly dis- illusioned. This was over the nationalisation of the Bank of England. We had found Labour poli- ticians before 1945 constantly talking of how they would seize `the commanding heights of the economy.' This was a Leninist phrase and sounded well when suitably intoned on political platforms before an audience of comrades. We had tried to explain to them that 'the command- ing heights of the economy' were all to be found within the square mile of the City clustered round and about the Bank of England. We fondly imagined that when they had got control of the Bank they would appoint a technocrat Governor outside politics who was experienced in the mone- tary management of a mixed economy, that they would restrict the Court of the Bank to technical experts and that they would remove the part-time banker or merchant directors who, later on, were to give their amateur selves away at the Bank Rate Tribunal. We also expected that they would take power for the Bank to issue and enforce clear directives to the directors of other banks, perhaps requiring government representation on the boards of the banks so 'directed.' This was our conception of the practical way in which the money system of the country could be brought under proper public control.

The mistake we made was to suppose that we were dealing with men who knew what they were up against and were anxious to take over the seats of financial power. It became clear that they

were either unwilling to make a radical change or were ignorant of the way in which it could be effected. Obviously a true radical like Aneurin Bevan would have turned the old establishment out and put his own men in. This might have had bizarre results, but what Dalton did was really laughable. First, he asked the existing Governor of the Bank, Lord Catto of Morgan Grenfell, to stay on because he was such a nice friendly chap who had risen up from the ranks. Then he re- duced the Court from twenty-four to sixteen and took power to appoint only four of them each year. (He retained the prominent directors who had been associated with the worst disasters

of Montagu Norman.) Later, when Dalton had gone, Cripps gave up trying to appoint four Labour supporters each year and accepted as a matter of course the nominations put up to him by the Governor. They were mainly old Etonians.

And the Governor he chose, Cobbold, was the protdgd of Montagu Norman who had given Dalton hopelessly wrong advice over converti-, bility.

I believe that Dalton was blinded partly by ignorance of the way in which the City Estab- lishment worked, partly by conceit over his suc- cess in the nationalisation debate, partly by hatred of the left-wing intellectuals like Laski. In his autobiography he wrote : `Once in some Left Book Club circles I had listened to the tedious theory that the capitalists would resist, if neces- sary by force, a socialist government which would try to nationalise the Bank of England or any- thing else. Impatiently I had replied : Make me Chancellor of the Exchequer'and give me a good Labour majority in Parliament and I will under- take the nationalisation of the Bank of England over a dinner party. And now no dinner party had been necessary : only tea for two.' Of course Lord Catto would not resist, or any of his capitalist friends, because they know that Dalton intended no revolution in the City, planned no real change in the management of the Bank and had no real wish to upset the financial Establishment or un- dermine the subtle power it exercised through its interlocking bank directorships. It would have been very different if a real revolution had been intended. So Dalton had not made a fool of Laski : he had made a fool of himself. And to many of his left-wing supporters he had betrayed the socialist revolution.

The Act of Nationalisation of the Bank of England was the first of the great measures of socialism intended to implement Clause 4 and the worst drafted. Dalton called it a 'streamlined socialist statute' but it was streamlined with ambiguities. As a result the Governor and his new Court regarded themselves as an autonomous public board, managing their own affairs inde- pendently of Parliament and Treasury. Under the Act no directions could ever be given to the joint stock banks except on the Governor's initiative (which was not envisaged). Even if they were given, no sanctions were attached to them, • so that they could be safely ignored. In fact, no directions have been given to this day, because, as Cobbold explained at the Radcliffe inquiry, no one has been able legally to define a bank.t The Radcliffe Committee was later to report that the Bank had laid 'mistaken stress' upon those provisions of the Act which concerned 'the affairs of the Bank.' The Bank witnesses had told them that in the Governor's opinion 'the affairs t Writing in the Fabian Journal in 1958 Dalton still imagined that the power to issue directives to the banks existed! No directions will ever need to be issued, he said, for it is only necessary to hint at the power. Could he have understood the Act?

of the Bank' were 'the fixing of Bank rate, the management of the money market and the man- agement of the issue department's portfolio.' The Radcliffe Committee did not agree. They rejected the view expressed by more than one official wit- ness that the public interest required that the central, bank should be assured complete political independence. I well remember Macmillan say- ing when he was Chancellor of the Exchequer in 1956—in an interview he gave to Robert Boothby and myself—that the Bank of England had become far more independent since it had been nationalised. Nobody, he said, could now sack the Governor or his officials, being civil ser- vants, and the Governor was no longer amenable to political influence. In the old days, he added, you could always influence Montagu Norman if you got him to dine alone and locked the doors.

My own disenchantment over Dalton is not to be compared with the disillusionment which the working class must have felt over nationalisation after six years of Labour Party rule. They had been told to expect the beginning of the socialist millennium but nationalisation turned out to be a very different affair from the socialism which they had expected. It appeared to them merely an alternative system of management. Public ownership was, so to speak, downgraded from socialism to managerialism and the only differ- ence between the old managers and the new was that the old were top-hatted capitalists and the new bowler-hatted bureaucrats. What is more, the attitude of the new bureaucrats to the workers was no more humanly sympathetic and understanding than that of the old proprietors. The Acts of nationalisation made no change whatsoever in the social status of the workers, for they continued to be treated as 'inferior class' citizens liable to be dismissed on a week's notice regardless of their years of service. Nothing came of the old Labour boast that 'it stands for demo- cracy in industry and for the rights of the workers, both in i the public and private sectors, to full consultation on all the vital decisions of man- agement, especially those affecting conditions of work.' The new managers of the public boards were not disposed to have any nonsense of shop- floor democracy. To knock this into the workers' heads the Government invariably chose a retired army general to fill the chairman's seat. When the miners in South Wales had General Sir Reade Godwin-Austin foisted on their south-western division they called the NCB the 'New Capitalist Bloody Board.'

Herbert Morrison had rightly insisted that the public boards should be composed of men technically qualified and competent to do the job, as the London Transport Board had been. But there his imagination stopped. The son of a policeman of working-class origin, he had been running the London County Council and had little understanding of the aspirations of the industrial worker. He had made good himself and as far as he was concerned there was not much room at the top for the rank and file. He did not appreciate that industrial workers wanted to be treated like human beings with natural ambitions, to be given a contract of service like salaried employees, to be guaran- teed compensation if jobs became redundant through no fault of their own, to be provided in that event with training for another job and to be assured that the more ambitious among them could be sent to college to be trained for more highly skilled work and perhaps for managerial work.

Morrison is not alone to be blamed. He and all his colleagues lacked the imagination to see what the industrial hour required in terms of human understanding. Obviously the Labour nationalisation programme should have provided for an industrial charter for the workers. The failure to do'so was another step in the estrange- ment of the working class.

The next shock, making disillusionment even more painful, was the realisation that under the so-called 'socialisation' programme the rich were becoming richer far more quickly than the poor were becoming less poor. There was a technical reason for this unexpected bloomer which could have been explained to the workers at the very beginning. When industries are nationalised and not confiscated the owners rightly receive fair compensation in the form of government bonds and as these bonds can be cashed on the excel- lent capital market which the City provides they are given a liquidity which they never previously enjoyed. The result, of course, was that they were able to turn a lot of unsaleable coal shares, railway stock and local gas shares into cash for reinvestment in far more profitable industries. I can give the figure of the monetary boost which the former proprietors received. At the various issue prices of the stocks it came to nearly £3,000 million. When realised and re- invested in the right 'growth' industries, provided the individual companies were wisely chosen, this huge sum could easily have been doubled in ten years. Capital in liquid form has always been far more valuable to the moneyed class than income.

While the rich were quickly inflating their wealth it began to dawn on the working class that the Labour Government was determined to re- strain the rise in their wages and to add to the in- direct taxation they bore. There was an element of tragedy in this story, for not only had Labour agreed for the best 'of reasons to a wages policy -in the coalition White Paper of 1944, but it could not possibly have avoided wage restraint in 1945-51 when the war had left an appalling shortage of goods. A wage-cost inflation then would not only have made the welfare legislation difficult but it would have made our recovery as a viable economy impossible. In the White Paper of January, 1947, written under Dalton's authority as Chancellor, it was stated that the total amount of incomes after tax in 1946 was well over £7,000 million while the value of goods and service available was only about £6,000 mil- lion. In February, 1948, another White Paper on Personal Incomes, Costs and Prices was issued on the authority of Cripps, who had become Chancellor in the previous October after Dalton's budget indiscretion (a trivial lapse due to nervous and mental exhaustion). This White Paper categorically stated :

It is essential that there should be no further general increase in the level of personal incomes without at least a' corresponding increase in the volume of production. . . . If general increases in profits, salaries or wages take place without more goods being made available no one can obtain any real benefit except the black market operator.

This was the strongest incomes warning so far issued by the Treasury and it could only have come from a Chancellor with the moral stature of Stafford Cripps. But the Labour Party's conference which followed in May, 1948, failed to give him any firm support. This was not surprising, seeing that in real terms wage rates in 1948 were not higher but lower than in 1947. At the next conference in June, 1949, Cripps had to reply to a trade union attack that the wage restraint policy had reacted 'un- fairly against the workers and has had little or no effect on the control of profits.' In an almost

religious fervour Cripps replied : 'It is not more money which we want, it is more goods; we want our money to be worth more in purchasing power and not less. Our party has always insisted . . . upon the supremacy of moral values.'

But Cripps could not impart his moral fervour into the hearts of his trade union colleagues. Wage costs in money terms went on rising and our competitive position abroad became so weakened and our deficit on the balance of pay- ments so threatening that in September, 1949, the £ had to be drastically devalued—from $4.03 to $2.80. There is no doubt that a 304 per cent devaluation was excessive but nerves at the Treasury were frayed. His Treasury colleagues, I understand, had advised a rate of between $3.00 and $3.10, but Cripps, who had resisted devalua- tion to the last, went the whole hog and overdid it.

In his Budget speech of April, 1950, Cripps had to admit the breakdown of wage restraint. 'It was not possible,' he said, 'to continue in- definitely the rigidity of the policy in regard to personal incomes which was .initiated immedi- ately after the devaluation of sterling.' There- after the trade unions paid little attention to the policy of restraint and passed a resolution against the maintenance of it at their Brighton conference in September, 1950. If Cripps had looked less like a vegetarian saint and more like a frustrated bon viveur they might have accepted austerity from him as a necessary forerunner of an affluent society to come—in which case we could have had a more sensible and better timed devaluation—but the trouble was that he offered no promise of growth, no prospect of expansion, in fact, no economic policy at all. All he seemed to offer was austerity for austerity's sake.

All that Cripps had done was to bottle up the wages steam in the industrial boilerhouse. And he had bottled it up for the time quite effectively. The following indices show that the rise in weekly wage rates from 1946 to 1951 was hardly more than was required to offset the rise in retail prices : Index : Average 1955=;100.

Weekly Wage Rates Retail Prices

Real Weekly Wage Rates

1946 63.6 67.3 94.5 1947 66.4 67.7 98.1 1948 69.9 72.1 96.9

1949

• 71.7 74.2 96.6 1950 73.1 76.5 95.6 1951 79.3 83.5 95.0 (Source: Ministry of Labour statistics; National Institute Economic Review No. 16) In this period the index of average weekly earnings rose from 57.3 to 75.0 and in real terms from 84.6 to 89.8. In other words, under six years of socialism the workers had to work a great deal of overtime to improve their stan- dard of living by a tiny 1 per cent a year.

Gaitskell, having had to spatchcock a rearma- ment programme into an over-extended economy, perforce carried on the Crippsian policy of restraint and the Labour Government's final collapse came with a bitter and squalid con- troversy between Gaitskell as Chancellor and Bevan as rebel over the charges in the national health service proposed for false teeth and spec- tacles. By this time the rank and file of the trade unions could see little difference between a Labour Government in power and a Conserva- tive or between Labour leaders and the old ruling clique.

(To be continued)

(8) Nicholas Davenport 1963