Political Commentary
The heart of the matter
Patrick Cosgrave
I have often argued that the doctrine of monetarism — which gives control of the growth of the money supply as one of the most important means of restraining inflation and managing the economy successfully — is less a matter of political philosophy than of plain common sense, for a government, like an individual, cannot forever spend beyond its means without reaching ruin. Thus, if a strict control is exercised over the money supply — if a government spends not much more than it raises through taxation or borrows in reasonable amounts, at reasonable interest, and with a reasonable prospect of repayment — we may have to do without many of the things we have become accustomed to government providing for us; but we will enjoy a stable economic life and; if our economy functions well, a goodly measure of prosperity and social welfare in addition. There is, of course, a rub here: a government can balance its budget through heavy taxation; but if it taxes too heavily it will prevent industry from generating the wealth which will enable it to make provision for welfare. And in the present state of affairs money supply must be controlled, not only to reduce inflation, but to make reductions of taxation possible as well. For, as Sir Keith Joseph said at Edinburgh last January, "There is no substitute for restoring profitability; no substitute whatever."
Though there are few socialists who would accept it, the simple arithmetic of our national situation is contained in that paragraph, and beside it all the chatter about incomes policies, greater opportunities within the EEC, and public subvention of industry, is irrelevant.
There are, however, other dimensions to the debate, and some of them are contained in three recent and important publications. Two of these are, broadly, monetarist and Tory, and the third is socialist. The Tory documents obviously have their origins in the sterling work done by the Institute of Economic Affairs over the years, and clearly also draw for inspiration on the speeches of Mr Enoch Powell. The socialist likewise goes back a long way — I am reminded of Richard Crossman's attack on the inadequacies of the Attlee Welfare State — but its essential inspiration is. the failure of the first two Wilson governments and the re-thinking done after 1970.
All three documents reach beyond mere debate about economic management and sketch, however lightly, the sort of society their authors would like to see: it may be said that Strategy for Socialism does so much less fully than the others do but, in stating unequivocally the major socialist objective, to which all other objectives must yield, it is invaluable. Here are three key quotations:
In the UK over the past few years more and more economic decisions have been taken outside the market. The result has been intense pressure group activity in the political arena, the growth of direct action by employees, and greater social unrest generally as even the meekest and most law-abiding citizens have come to realise that economic rewards are increasingly disbursed through the political system and according to criteria which attach greater importance to the strength of a man's voice than to his ability and contribution. The more governments have intervened to remove economic decisions out of the market and into the political arena, the more they have set group against group, class against class, and sectional interests against the public interest. The politicisation of so wide an area of the country's economic activities has set up strains which are threatening its social cohesion. In short, what the country is now confronted with is not a crisis of the market economy but a crisis of government interference with the market economy. (My italics) — Why Britain Needs a Social Market Economy, Centre for Policy Studies, 25p.
Thirty years after the war, it is clear that the hopes for a planned welfare state have been severely compromised. One reason lies in the nature of planning within a capitalist system. Where planning attempts only to alleviate poverty, distress and squalor, it will perpetuate the capitalist mechanisms which continually throw up social injustice, rather than transcend them. In particular, if planning is not socialist planning, aiming to transform the dominance of capitalist production and capitalist motivation, it will maintain the kinds of class structure and economic inequalities which are essential as incentives to the maintenance of a capitalist system. Such incentives give rise to a dichotomy between economic progress and social progress because the government lacks the means to intervene in such a way as to transform the process of growth and distribution in a capitalist society. This was the fate of the 1964-70 Labour government . . . It failed to grasp that social redistribution depended on socialist transformation, and therefore was forced to cut back on the very social expenditure which was supposed to alleviate injustice and inequality. — Stuart Holland, The Socialist Challenge, Spokesman Books, 95p.
We are now more socialist in many ways than any of the other developed countries outside the Communist bloc ... And what is the result? Compare our position today with that of our neighbours in north-west Europe — Germany, Sweden, H011and, France. They are no more talented than we are. Yet, compared with them, we have the longest working hours, the lowest pay and the lowest production per head. We have the highest taxes and the lowest investment. We have the least prosperity, the most poor and the lowest pensions. We have the largest nationalised sector and the worst labour troubles. Our education, our social services, our health services — our cultivated barbarisms — all give cause for concern. We find it more difficult than our neighbours to give the right treatment to the disabled and good rewards to such groups as teachers and nurses. — Sir Keith Joseph, Upminster, June 1974, reprinted in Reversing the trend, Barry Rose (Publishers) Ltd, E1.00.
And Sir Keith added, at Edinburgh in January 1975, "If we pillory the lender, denigrate the saver and penalise the investor — treating his income as unearned — we shall not have capital investment, and industry and workers alike will suffer."
Now, few objective readers would deny that the Centre's pamphlet, and Sir Keith's speeches, are more readily supported by our recent experience than is Dr Holland's argument. Indeed, Dr Holland, who is a long-time and influential adviser to Labour governments and ministers, implicity accepts that, on the surface at least, this is so, when he refers to the experience of the 1964-70 government. What he insists, of course, is that this government failed because it did not see clearly enough proper socialist objectives, nor use properly socialist methods to reach them. What he absolutely refuses to accept, of course, is that the increasingly centralised and bureaucratic structure of politics and economics in our country — which is a manifestation of socialism if not dramatic then at least creeping — has seriously damaged the country. Rather, he insists that more of the same is needed to get us out of our difficulties. Sir Keith, who confesses himself troubled by the tendency to state socialism of the last Conservative government, does see that the centralising solution has failed. In commenting on Mr Benn's industrial proposals at Upminster he asked, "How could it come about that the suggestions could even be made by a Minister of the Crown after a generation's experience of state ownership of a fifth of the economy?"
I am not, just now, concerned to dispute the two analyses in detail, but to spend a moment on the broad strategic direction of both. It is clear from Dr Holland's whole pamphlet, and especially from the paragraph from which I quoted, that, to the Socialist mind, all purposes must be subjugated to the purpose of the achievement of equality. Neither individual freedom, nor prosperity, are major goods in themselves: he is above all concerned with egalitarianism; and that, he believes, can be achieved only by massive, thorough and radical state intervention. So be it: but it is the increasing thoroughness of state intervention that has produced the quarrelsome, bickering, unjust, illogical state so effectively described in the quotation above from the Centre for Policy Studies pamphlet. The more a still-free (in terms of its possessing a free press, and free and elected parliamentary institutions) society strives to legislate for essentially unobtainable objectives like equality the greater will be the number, the clamour and the disorder of pressure groups and — such has been the experience of states who have gone much further down the road than ourselves in this respect — it is eventually necessary for the state to suppress their dissent arbitrarily. As Sir Keith says in his preface to the Centre's pamphlet, "a command economy means a command society."
It is the nearness of this resolution of our affairs that makes the statement of the Tory alternative essential; and it is a pity, and perhaps a tragedy, that so many Tories, sooner than embrace that alternative, seek rather to make their peace, on impossible terms, with those who, through their denial of economic freedom and the social market seek to destroy both freedom and individuality. Toryism is not, as the Centre for Policy Studies says, "an egalitarian creed, for it recognises the fundamental Conflict betNeen equality and personal liberty." And, "Capitalism is the elemental component of a free society. These are truths, and they are brilliant truths, and they need to be hammered home if our free country is to survive. Yet, within the Conservative Party few indeed have the courage or faith to proclaim them. If they fail among men we will end with a society, not bankrupt merely, but totalitarian.
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