The grand illusion
Peter Jenkins
The Delusion of Incomes Policy Samuel Brittan and Peter Lilley (Temple Smith 23.00)
Pay is back in the news. Mr Enoch Powell, no doubt, soon will be telling us once more that incomes policy is a 'nonsense' and comparing it with the idea of making a rope out of sand or draining the ocean with a tea-spoon. Messrs. Brittan and Lilley are of the same opinion and, although they rehearse the market economist's critique of incomes policy in this polemical essay at proper length and with many useful insights, they nevertheless play the Powellite trick of stretching other people's logic to absurdity.
A supplementary technique, which they use in full measure, is to scorn other people's innovative boldnesses as utopian silliness, while treating more respectfully daft schemes which happen to be congenial to themselves. Thus the notion of national job evaluation is dismissed by them as a nonsense, no less than the mediaeval notion of a 'just price,' but crazy ideas—such as Professor Milton Friedman's for a monetary authority independent of the government— are solemnly presented for our serious consideration.
Another means by which they enable nonsense to mock good sense is by posing abstract models against what the former TUC General Secretary, Mr George Woodcock, used to call the 'shoddy, shabby
compromises' of the real world. The reader will have had a great deal of market economics served up to him in all its elegant simplicity before he reaches page 213 and discovers that the market is no more than 'a theoretical construction developed by economists to help them to understand the real world.' That real world is, of course, an imperfect market ; but the world is more than a market and is imperfect in many other ways; a wages policy is but another model for exposing its imperfections—for example the imperfection of collective bargaining institutions—in the hope of amending social behaviour and achieving beneficial change.
Unfortunately the theoretical disciplines of market economics appear to have failed in this case to assist the authors in an understanding of the real world. They imagine themselves to be attacking a powerful and fashionable consensus gripped by the 'delusion' of incomes policy; more likely, they are having a little academic argument with the Treasury, where the model of incomes policy holds out against the onslaughts of monetarist dogma of the kind which has inspired this tetchy and donnish book. The arguments for and against an incomes policy are well known by now and are well enough set out here—although, of course, a polemic does not aim to be fair. Proponents of incomes policy (of which I am one) will not bother attempting to deny the vast array of practical difficultieS which, as Brittan and Lilley point out, encumber our path. Nor will they trouble to enter counter-claims for great past successes. Whetherbr not a regulated labour market is desirable as a replacement for social democracy's missing link, or undesirable as the thin end of an authoritarian wedge, is a nice philosophic point but in the 'real world'—to which Brittan and Lilley aspire —no practical claim is made for it beyond that of somewhat moderating the practice of what is known as 'free collective bargaining.' That, in the real world, is the 'market' and there is no point in discussing textbook 'alternatives' which are not alternatives at all, in that they have no relevance to the outer world of trade unionism and anger.
What is disturbing about this book—and disturbing about the purveyors of monetarist nostrums in general—is the profoundly unpolitical, or a-political, intelligence behind them. Mr Brittan I know to be a most kindly man, and can only assume that the brilliance of his theoretical constructions leaves him innocently, indeed blissfully, unaware of the kind of politics which by implication he has increasingly espoused. What, for example, does this passage mean ? 'Union pressures can be kept at bay by paying out more shrinking pounds for a limited time, during which the problem appears to be one of inflation. But once union leaders pierce through the money illusion and start to make their demands in terms which allow for changes in the purchasing power of money, inflation becomes useless as a way of coping.' Now, what does this say ? Does it say that collective bargaining could be employed in the service of revolutionary syndicalism? In theory that could be so. Is it intended to suggest that governments ought to he moving into confrontation with trade unions over the share of real resources now, before it is too late? And if the real conflict is about real and not money shares of wealth, what means do they propose 'the haves should employ against 'the have-not's'? And what role do troops play in this kind of market economics?
Of course the authors are not intending to argue for the restoration of a market economy behind a ring of bayonets, anY more than it is their wish to double the unemployment rate and restore the lash of poverty. What they fail to see, and this is their central failure, is that their monetarist means of teaching lessons are essays in pure authority, whereas the hope contained in incomes policy lies in establishing new bases for economic government by consent. This question—one of the most fundamental of our times—is begged throughout their book. Like most monetarists they are victims of the fallacy that government is autonomous or that, if not, there is at least an appeal to some higher authority—the IMF or the Hidden Hand, gold or God. The only way in which the unions can have a continuing impact on the inflation rate is through government reaction to the on" employment, actual or threatened, brought about by their behaviour.' So what? How is society more easily to be governed with the aid of this pedantic point about causality ? What are they saying? That government should visit upon the citizenrY the consequences of collective bargaining and upon all trade unionists the sins of s° trade unionists ? If so, how would that help? The success of a mixed economy depeI1ds,. upon the acceptance of a great measure ot inequality in the hope of material improvement; growth is essential for moderating the thrust of egalitarianism and for oiling the frictions of social change. Whether or not incomes policy enables a better Per; formance in these matters, it has evolveo over the last decade as one helpful device for underpinning the system by broadening the basis of consent. That is why incomes policy is always attacked from the Left as well as from the ideological Right where, Mr Brittan now stands. The'delust°?,1 which he and Mr Lilley seek to dig'. consists at worse in the fond hope that collective self-determination is not quite yaelt dosetacrse and the democratic spirit not
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