Читать книгу The Ideas That Shaped Post-War Britain - Anthony Seldon - Страница 13

Peter Clarke

UNTIL THE Second World War, no government professed to have a macroeconomic policy. The concept simply did not exist. To be sure, governments had long been held responsible, in a general way, for the health of the economy and it is obvious that ‘hard times’ hurt the party in power. This helped to bring the heavens down on the Conservative Government in the General Election of 1880, serving as the electoral meteorology behind the rain-dance performed with such ostentation by Gladstone in his Midlothian campaign. Conversely, an uncovenanted upturn in the export trade apparently vindicated the Free Trade case in the 1906 General Election and made Joseph Chamberlain’s prescient warnings about manufacturing decline look like empty scaremongering. The arguments over the Gold Standard in the 1920s were, to our eyes, unmistakably about macroeconomic issues; in this sense, the advocates of sound money, with their theory of a self-equilibrating system that was therefore ‘knave-proof’, were simply blinded by their own ideology to the actual consequences of what they were doing – Keynes’s point, of course, in his public criticism of the return to Gold in 1925. Indeed this controversial decision inaugurated, under the prompting of continuing unemployment, a continuing debate – concerned in many different ways with the economic role of the state – which was macroeconomic avant la lettre.1

It seems that we owe the actual term ‘macroeconomic’ to P. De Wolff, in an article published in 1941 in the Economic Journal (of which Keynes was still editor). De Wolff built upon an earlier differentiation between micro-dynamic and macro-dynamic analysis and, according to the New Palgrave, was ‘quite clear about the distinction between micro- and macroeconomics’, one being valid ‘for a single person or family’, the other ‘for a large group of persons or families’.² But while this is pointing in the right direction, it fails to capture the essential definition of macroeconomics as the study of the system as a whole, not simply of one sector, however great in magnitude, nor of any sub-set of economic agents, however numerous.

This distinction is in fact made much more clearly by Keynes himself, who inescapably bulks large in any discussion of macroeconomic policy. So far as I am aware, he never used the expression macroeconomics (or microeconomics) in any of his writings, though he must surely have become aware of its growing usage in the five years before his death. Look in the index of his collected writings and there is only a hop, skip and a jump from Macmillan Committee (‘see Finance and Industry’) to Magicians (‘Newton, the last of the’). Yet, like M. Jourdain, Keynes’s prose was unimpaired by his lack of the right word. Book Two of the General Theory, concerned with ‘Definitions and Ideas’, leads up to a clinching assertion, in its final sentence, of ‘the vital difference between the theory of the economic behaviour of the aggregate and the theory of the behaviour of the individual unit.’³

Indeed in the preface to the French edition, Keynes tried to pretend that this was why he had termed it ‘a general theory. I mean by this that I am chiefly concerned with the behaviour of the economic system as a whole – with aggregate incomes, aggregate profits, aggregate output, aggregate employment, aggregate investment, aggregate saving – rather than with the incomes, profits, output, employment, investment and saving of particular industries, firms or individuals.’⁴ It was this determination to seize on the aggregate dimension – not just as an analytical issue but also as a policy tool – which makes the early history of macroeconomic policy in Britain so largely synonymous with the history of Keynesianism.

Keynesian macroeconomic theory may have been devised at the bottom of a slump, but it was symmetrical in its policy implications, as its author explicitly affirmed. ‘The best we can hope to achieve is to use those kinds of investment which it is relatively easy to plan as a make-weight, bringing them in so as to preserve as much stability of aggregate investment as we can manage at the right and appropriate level,’ he wrote in 1937, at the peak of British economic recovery. ‘Just as it was advisable for the Government to incur debt during the slump,’ he argued, ‘so for the same reasons it is now advisable that they should incline to the opposite policy.’⁵ The irony in the administrative reception of Keynesianism is that it was ‘the opposite policy’ which prevailed during the 1940s. For it is now clear that the concepts of the General Theory were first operationalised within the administrative community in a way which spoke to the macroeconomic issue raised by the Second World War: how to control inflation.

For present purposes, it is not the administrative but the ideological impact of Keynesianism which is the focus – by ideological, I mean the social or political purchase of Keynes’s ideas, or ideas attributed to him, in a particular historical argument. Since we are concerned with ‘actually existing Keynesianism’, it should come as no surprise to discover that ideological distortions of Keynes’s original intentions were a price that had to be paid for the influence of the doctrine.⁶ What I have to say here bears less upon the policy-making process, on which there is now a fine scholarly literature, than upon the justifying rhetoric in which the central ideas were couched.

I shall take a number of representative texts in the political discussion of Keynesianism and macroeconomic policy over a period of forty years, and quote them, sometimes extensively, in order to capture and illustrate strategies of argument, rather than to assess their objective validity. It will become clear that this discourse cannot simply be characterised as a conflict between progressive and conservative positions. Indeed, if the rhetoric which helped justify the post-war consensus arguably held its own nemesis, through being pitched in an over-confident and triumphalist register, such characteristics were often echoed, or even amplified, in the anti-Keynesian rhetoric which ultimately displaced it. Progressive illusions, imputing boundless competence to projects for reform, may have a timeless element, as may a conservative wisdom, tempering enthusiasm with wholesome pragmatism. The story of the rise and fall of Keynesianism in post-war Britain however, hardly suggests that one side had a monopoly on illusions and the other on wisdom.

The ideological impact of Keynesianism makes a more straightforward, less ironical story than that of its administrative reception. The enemy here was clearly unemployment rather than inflation. It was unemployment, rhetorically termed ‘Idleness’, which had a star billing in the Beveridge Report as one of ‘five giants on the road of reconstruction’, along with ‘Want, Disease, Ignorance and Squalor’.⁷ Beveridge reached for no elevated soubriquet to characterise inflation, which retained its lower-case pygmy status throughout his Report. Conversely, ‘Want’ could not be slain without first dealing with ‘Idleness’. Progressive reforms marched together in a happy example of mutual support – what Hirschman identifies as ‘synergy’.⁸ Beveridge needed to banish mass unemployment in order to make his grand vision of social insurance viable. Hence the third assumption of the Beveridge Plan, that full employment would be maintained. True, the actuarial premise here was for an overall level of unemployment up to 8.5 per cent, which was soon to seem an unacceptably high, rather than a desirably low figure. What was required, the Report explained, was ‘not the abolition of all unemployment, but the abolition of mass unemployment and of unemployment prolonged year after year for the same individual.’⁹

Beveridge adduced five reasons for this contention. One was that cash payments, while suitable for tiding workers over, would, in the longer term, have a demoralising effect. Another was that it became impossible to test unemployment by an offer of work if there were no work to offer. The availability of work, moreover, actively drew in people who would otherwise lapse into debility. These three reasons were concerned with the working of a social insurance scheme, showing its administrative inter-dependence with a buoyant labour market. ‘Fourth, and most important,’ Beveridge continued, ‘income security which is all that can be given by social insurance is so inadequate a provision for human happiness that to put it forward by itself as a sole or principal measure of reconstruction hardly seems worth doing.’ Participation in productive employment, he suggested, was a great end in itself; the ethic of work thus provided a higher symbiosis between reforms which tackled the linked evils of unemployment and poverty. Finally, Beveridge pointed to the heavy cost of his Plan, warning that ‘if to the necessary cost waste is added, it may become insupportable.’ For unemployment simultaneously increased claims while depleting available resources¹⁰

Beveridge himself soon became converted to the practicability of reducing unemployment below 3 per cent. It was this more ambitious target which defined ‘full employment’ in the debates of 1944, as against ‘the maintenance of a high and stable level of employment after the war’ which was what the Coalition Government’s White Paper more prudently promised.¹¹ Either way, it was unemployment which was at the centre of the arguments.

The White Paper began by clearly identifying mass unemployment as a macroeconomic problem, for which the Government now accepted responsibility. True, many caveats followed. Nigel Lawson, as Chancellor of the Exchequer more than forty years on, mischievously strung some of them together in an address to economists. Not only (so he found in paragraph 56) would it be ‘a disaster if the intention of the Government to maintain total expenditure were interpreted as exonerating the citizen from the duty of fending for himself’, but he was able to seize upon the remarkable comment in paragraph 74 that: ‘None of the main proposals contained in this Paper involves deliberate planning for a deficit in the National Budget in years of sub-normal trade activity.’¹² The provenance of the document is thus evident, as a compromise achieved through committee work. Hence paragraph 66 upholds the ‘notion of pressing forward quickly with public expenditure when incomes were falling and the outlook was dark’ despite the ‘strong resistance from persons who are accustomed, with good reason, to conduct their private affairs according to the very opposite principle’.¹³ Yet this counter-cyclical fiscal doctrine is promptly undercut by the wholly inconsistent paragraph 74, in which Lawson took comfort.

The fact is that everything else in the White Paper is by way of qualification to its central claim. Lawson knew this perfectly well in 1987, just as Keynes did in 1944, when he wrote that it was ‘the general line and purpose of policy’ that mattered at this stage. ‘The object of the White Paper,’ he affirmed, ‘is to choose the pattern of our future policy.’¹⁴ This it did, most prominently in the foreword: ‘A country will not suffer from mass unemployment so long as the total demand for its goods and services is maintained at a high level.’¹⁵ That this claim was founded on a Keynesian multiplier analysis was later made explicit.¹⁶

The policy to be followed included not only strictly Keynesian measures for the counter-cyclical regulation of public investment, but also parallel measures, chiefly due to Meade, for controlling swings in consumption expenditure by varying the rates of social insurance contributions. ‘The ideal to be aimed at is some corrective influence which would come into play automatically – on the analogy of a thermostatic control – in accordance with rules determined in advance and well understood by the public.’¹⁷ The analogy chosen here may seem banal and commonplace to us but must have inspired mixed feelings in the chilly British homes of an era of open fires and fuel rationing.

The general tone of the White Paper, however, is authentically that of the 1940s and did not, despite claims by some subsequent historians, hold out easy promises of a ‘New Jerusalem’:

It cannot be expected that the public, after years of wartime restrictions, will find these proposals altogether palatable; and the Government have no intention of maintaining wartime restrictions for restriction’s sake. But they are resolved that, so long as supplies are abnormally short, the most urgent needs shall be met first. Without some of the existing controls this could not be achieved; prices would rise and the limited supplies would go, not to those whose need was greatest, but to those able to pay the highest price. The Government are confident that the public will continue to give, for as long as is necessary, the same wholehearted support to the policy of ‘fair shares’ that it has given in war-time.¹⁸

This kind of language made an obvious appeal to the political left. This was congruent with the way that the case for macroeconomic regulation of the economy was commonly meshed into a debate about planning, the buzz-word of the 1940s. It was under this guise that Keynesianism was assimilated to conventional arguments for socialism. When John Parker was commissioned by Penguin to put the Labour case in a book published in 1947, he struck this chord in the chapter called ‘A Planned Economy’:

At the back of the minds of all those who have been through the two wars is the fear of a fresh slump and of widespread unemployment. The effect of Lord Keynes’ teaching and of wartime experience has been the creation of a very widespread belief in Britain that unemployment can be practically prevented by the full development of a planned economy. Booms and slumps, it is hoped, can be ironed out if a deliberate attempt is made to do so.¹⁹

The fact is that planning had become an essentially contested term, a Humpty-Dumpty word which was invested with glosses appropriate to the arguments in which it was currently imbricated. ‘Am I a planner?’ asked James Meade in 1948:

If a planner necessarily believes in a quantitative programme of output, employment and sales for particular industries, occupations and markets and the exercise of such direct controls by the State as are necessary to carry this out, I am certainly no planner. If an anti-planner necessarily denies that the State should so influence the workings of the price mechanism that certain major objectives of full employment, stability, equity, freedom and the like are achieved, then I am a planner.²⁰

This was consistent with Meade’s advocacy since 1945, as head of the economic section, of the combined use of both planning and the price mechanism: a distinction between liberal (macroeconomic) and socialist (microeconomic) planning with which Sir Alec Cairncross has made us familiar.²¹

One obvious feature of the claims for post-war macroeconomic management is the claim to novelty. This even bursts through the staid prose of the White Paper: ‘The Government are prepared to accept in future the responsibility for taking action at the earliest possible stage to arrest a threatened slump. This involves a new approach and a new responsibility for the State.’²² Here was an explicit contrast with the old belief that trade depression automatically brought its own corrective. ‘In these matters,’ it was proclaimed, ‘we shall be pioneers.’²³

The peroration to the White Paper sets its economic aspirations within a political framework: ‘The Government believe that, once the war has been won, we can make a fresh approach, with better chances of success than ever before, to the task of maintaining a high and stable level of employment without sacrificing the essential liberties of a free society.’²⁴ So far, so uplifting. The implicit objection here, of course, was that mounted in its classic form by F. A. Hayek’s Road to Serfdom. As Hirschman has shown, Hayek’s critique of the welfare state can be seen as an example of the argument that such a proposal, far from achieving the best, would actually jeopardize the good.²⁵ As such it is essentially political, asserting the incompatibility of regulation with liberty. The sort of planning associated with full-employment policies was equally his target: indeed more so, since he seized on the essentially macroeconomic nature of the project to bring out its danger.

Many separate plans do not make a planned whole – in fact, as the planners ought to be the first to admit – they may be worse than no plan. But the democratic legislature will long hesitate to relinquish the decisions on really vital issues, and so long as it does so it makes it impossible for anyone else to provide the comprehensive plan. Yet agreement that planning is necessary, together with the inability of democratic assemblies to produce a plan, will evoke stronger and stronger demands that the government or some single individual should be given powers to act on their own responsibility. The belief is becoming more and more widespread that, if things are to get done, the responsible authorities must be freed from the fetters of democratic procedure.²⁶

This gave the special reason – though of course there were many others – ‘why “liberal socialism” as most people in the Western world imagine it is purely theoretical, while the practice of socialism is everywhere totalitarian’.²⁷ The support of the Labour Party for planning was not wholly surprising, but Hayek hinted at the futility as well as the jeopardy which lay in train: ‘It is one of the saddest spectacles of our time to see a great democratic movement support a policy which must lead to the destruction of democracy and which meanwhile can benefit only a minority of the masses who support it.’²⁸ Such arguments entered into post-war Conservative propaganda, albeit often in a watered-down form.²⁹

If Hayek’s political argument against Keynesianism was much the same as his argument against the welfare state, and was unsurprisingly directed against broadly the same opponents, it should likewise be unsurprising that this famous economist also mounted a specifically economic argument. In its weak form this rested on the futility of trying to buck the market; in its strong form, which should not be overlooked, it pointed to perverse effects. Hayek contested Keynes head-on, asserting a dichotomous view of the available economic strategies:

Both competition and central direction become poor and inefficient tools if they are incomplete; they are alternative principles used to solve the same problem, and a mixture of the two means that neither will really work and that the result will be worse than if either system had been consistently relied upon.³⁰

Keynes took issue with this view, in the course of an otherwise highly emollient private response to Hayek: ‘I should say that what we want is not no planning, or even less planning, indeed I should say that we almost certainly want more.’³¹ He remained wholly unmoved by Hayek’s fundamental economic contention that this sort of planning was dysfunctional, whereas for Hayek a nightmare scenario was already foretold: ‘if we are determined not to allow unemployment at any price, and are not willing to use coercion, we shall be driven to all sorts of desperate expedients, none of which can bring any lasting relief and all of which will seriously interfere with the most productive use of our resources.’ The prospect was of ‘an inflationary expansion on such a scale that the disturbances, hardships, and injustices caused would be much greater than those to be cured’.³²

What is plainly disclosed, of course, as these spiralling counter-effects progressively cancel the early gains, is an economic situation worse than the problems which these naive expedients were designed to remedy in the first place:

There will always be a possible maximum of employment in the short run which can be achieved by giving all people employment where they happen to be and which can be achieved by monetary expansion. But not only can this maximum be maintained solely by progressive inflationary expansion and with the effect of holding up those redistributions of labour between industries made necessary by the changed circumstances, and which so long as workmen are free to choose their jobs will always come about only with some delays and thereby cause some unemployment: to aim always at the maximum of employment achievable by monetary means is a policy which is certain in the end to defeat its own purpose. It tends to lower the productivity of labour and thereby constantly increases the proportion of the working population which can be kept employed at present wages only by artificial means.³³

Here is a different case from the political argument with which the polemical author of The Road to Serfdom is generally identified: a case, however, which is easily assimilated with the rest of the oeuvre of the great apostle of economic liberalism. Hayek’s distinctive doctrinaire approach has often been contrasted with the abhorrence of rationalism which is to be found in writers like Oakeshott. Yet there is another face to Hayek’s argument which is far more conservative than liberal in its justification of ‘men’s submission to the impersonal forces of the market’ – the more so when this was justified by an appeal to such forces as superstition. Such a commendation of conservative instincts appealed to a deeper rationale than vulgar rationalism. ‘It may indeed be the case that infinitely more intelligence on the part of everybody would be needed than anybody now possesses, if we were even merely to maintain our present complex civilisation without anybody having to do things of which he does not comprehend the necessity’, Hayek enjoined. ‘The refusal to yield to forces which we neither understand nor can recognise as the conscious decisions of an intelligent being is the product of an incomplete and therefore erroneous rationalism.’³⁴

It was Keynes, not Hayek, who captured the ear of the opinion-forming elite in post-war Britain. In particular, the canonical status of the General Theory was now assured, as much by vague invocation as by specific citation. The White Paper went as far as was decent in making this plain:

the Government recognise that they are entering a field where theory can be applied to practical issues with confidence and certainty only as experience accumulates and experiment extends over untried ground. Not long ago, the ideas embodied in the present proposals were unfamiliar to the general public and the subject of controversy among economists. To-day, the conception of an expansionist economy and the broad principles governing its growth are widely accepted by men of affairs as well as by technical experts in all the great industrial countries.³⁵

In the two post-war books commissioned by Penguin from Labour and Conservative spokesmen, giving their cases access to a mass paperback market, there are differences of emphaisis, as one would expect. Thus Quintin Hogg’s account is imbued with caution:

Unemployment can temporarily be mitigated, and perhaps eliminated in a country, notwithstanding its international character, by government action which artificially increases demand in any way. This, however, means to some extent adopting a closed economy which, internationally speaking, is anti-social, and may involve the assumption of dictatorial powers. Moreover, unless the demand is carefully selected this palliative cannot last long. It cannot in any event last indefinitely unless ultimately world conditions improve.³⁶

Conversely, in John Parker’s account there was a residual flavour of socialist scepticism about relying on market mechanisms – ‘since it must be remembered that in one sense labour is always being “directed” by the demands of consumers’ – to achieve what Cripps was now terming ‘democratic’ planning, as distinct from the ‘totalitarian’ kind.³⁷

Yet Hogg’s and Parker’s accounts of the 1930s are on broadly similar lines. A wrong-headed approach, it was held, had been adopted in meeting the 1931 crisis; but this could be extenuated and excused in the absence of a fully articulated Keynesian agenda. According to Quintin Hogg, it was not really a partisan matter – ‘The Labour Government are not to be blamed for not following this course’ – and instead he cited the Keynesian claim, ‘with which I, as a Conservative, agree, that given low rates of interest, high wages, and adequate social security (for this is what redistribution means) this terrible scourge can again be relegated to the category of minor nuisances and we shall be free to face the real problem of civilisation – the lifting of humanity out of the primeval slime’.³⁸

Writing in the New Fabian Essays, five years later, John Strachey appealed to the post-war experience of both Britain and the USA to show how a democratic government could raise the standard of life – provided it had not only the will but also the expertise. ‘The government of the left when installed must know how to give effect to the push of the democratic forces,’ he wrote, mindful of the historical contrast with Leon Blum in France and Ramsay MacDonald in Britain. ‘The techniques for making an economic system work at full power – granted one has the will to do so – were in fact only worked out in the nineteen-thirties. The elucidations of the late Lord Keynes have in this respect played a genuine historical role.’³⁹

What were these much-lauded techniques? Keynes himself had a long-standing record of wishing to regulate investment so as to make full use of resources, and in the General Theory he accordingly suggested ‘a somewhat comprehensive socialisation of investment’. The post-war nationalisation measures in Britain, however, hardly fulfilled his criteria of controlling the overall volume of investment, whether public or private – ‘it is not the ownership of the instruments of production which it is important for the State to assume’.⁴⁰ Nonetheless, Labour appealed to a synergy between its nationalisation programme and a full-employment policy, under the elastic rubric of planning. They had seen the future – and it worked. Thus, looking back on the record of the Attlee Government in 1952, Austen Albu could claim that, insofar as the rationale for the nationalisation programme had lain here, it had achieved its objective: ‘The dominating motive in 1945 of planning for full employment has been satisfied with only one-fifth of industry nationalised, and there is a growing view that, in so far as internal conditions are concerned, this can be continued.’⁴¹

In regulating the level of effective demand Keynes’s instincts were always to concentrate on investment. Practically all that the General Theory said about consumption was: ‘The State will have to exercise a guiding influence on the propensity to consume partly through its scheme of taxation, partly by fixing the rate of interest, and partly, perhaps, in other ways.’⁴² Under the Labour Government, there was a commitment to macroeconomic management of the level of demand through fiscal policy, supplemented by the use of direct controls to keep inflationary pressure in check. This is how Sir Stafford Cripps explained the matter in his Budget speech of 1950: ‘Excessive demand produces inflation and inadequate demand results in deflation. The fiscal policy of the Government is the most important single instrument for maintaining that balance.’⁴³

By contrast, the use of monetary policy as an economic regulator smacked of the bad old deflationary days of the Gold Standard, and was abjured by Labour. In taking this line Dalton could initially claim both theoretical and practical endorsement from Keynes. Keynes repeatedly stressed the desirability of bringing down the rate to a low and stable level (in this sense ‘fixing’ the rate). Keynes’s often-quoted notion of bringing about ‘the euthanasia of the rentier’⁴⁴ made a natural appeal to Labour supporters, not least Dalton himself. But although the Bank of England’s discount rate remained fixed at the level of only 2 per cent until the Labour Government lost office at the end of 1951, it is now clear that Gaitskell as Chancellor was ready in principle to use monetary policy in support of budgetary policy – a case which his revisionist supporter Crosland was to elaborate in The Future of Socialism (1956).⁴⁵

It was in the New Fabian Essays (1952) that Crosland broached his fairly complacent assessment of the post-capitalist nature of contemporary Britain:

The trend of employment is towards a high level, and a recurrence of chronic mass unemployment is most unlikely. The Keynesian techniques are now well understood, and there is no reason to fear a repetition of the New Deal experience of a government with the will to spend its way out of a recession, but frustrated in doing so by faulty knowledge. The political pressure for full employment is stronger than ever before; the experience of the inter-war years bit so deeply into the political psychology of the nation that full employment, if threatened, would always constitute the dominant issue at any election, and no right-wing party could now survive a year in office if it permitted the figures of unemployment which were previously quite normal.⁴⁶

Such confidence – hubris is another word – had not grown overnight. At the end of the war there had been a general expectation that the post-1945 experience would parallel that of post-1918: a couple of years inflationary boom, with a slump around the corner. This fear was implicit in the 1944 White Paper. It was a prospect which, as John Parker reported, ‘most British socialists believe to be inevitable, although they are not agreed on the date when the slump is likely to arrive, nor what course it is likely to follow.’⁴⁷ True, Dalton’s Budget speech in April 1947 said that inflation rather than deflation was now the immediate danger. Yet Meade, writing in 1948, when inflation was already at the front of his own mind, prefaced his arguments with the comment: ‘We are all agreed that measures must be taken to stimulate total monetary demand and to prevent it from falling below the level necessary to sustain a high output and high employment when the time next comes – as sooner or later it assuredly will come – when a deficient total demand threatens to engulf us in a major depression.’⁴⁸

It was only from 1951 that a wholly different assumption about the nature of the economic problem supplied a new context for all these arguments. This occurred initially in the context of a rearmament programme which injected a huge boost of demand into the economy; as a proportion of GNP, defence spending rose by 3.5 per cent in three years while the budget surplus was cut by nearly 5 per cent between 1951–4.⁴⁹ Little wonder that economists – a fortiori the Keynesian revisionists represented in New Fabian Essays – stopped worrying about a slump. Even so, Strachey still qualified his judgement that, in most major respects, ‘our economy is exhibiting behaviour quite different from that which it exhibited during the whole of the inter-war period’ with the proviso that ‘it may be argued that it is as yet too early to claim that we have succeeded in eliminating trade depressions’.⁵⁰ But although it may have been judged premature to dismiss any possibility of a slump, fear of a slump had nonetheless disappeared because the weapons now existed to fight it – even if there should prove to be insufficient cleverness in anticipating and obviating it. The old-fashioned capitalist misery had been abolished, perhaps capitalism too. ‘It is now quite clear that capitalism has not the strength to resist the process of metamorphosis into a qualitatively different kind of society’ was how Crosland put it, and a further conclusion naturally followed: ‘Such an economy is far more likely to give rise to chronic inflation than chronic deflation.’⁵¹

Out of the frying pan into the fire? Not a bit of it! Strachey peremptorily refused to admit that ‘the unmistakable fact that a full employment economy generates powerful inflationary forces is a fatal defect: it is a bias in the new system which must be identified and vigorously counteracted. But granted that it is done, there is nothing fatal about it.’⁵² If the great locomotive of economic expansion had exceeded expectations about the horsepower it was capable of sustaining, this was simply a condition to which its suitably skilled driver would have to adapt: ‘The habitual posture of the Chancellor of the Exchequer in a full employment economy will be that of a man pulling and hauling with might and main at the brake levers of the economy. It will not be a very popular or comfortable posture. But what of it? It is his job!’⁵³

The steam-Keynesianism of the Labour revisionists was superseded by a fittingly privatised image from the impresario of Conservative Keynesianism in the 1950s, Harold Macmillan: ‘The real truth is that both a brake and an accelerator are essential for a motor car; their use is a matter of judgement but their purpose must remain essentially the same – to go forward safely; or, in economic terms, expansion in a balanced economy.’⁵⁴ The main difference in demand management under the Conservatives was the reinforcement of fiscal fine tuning with a monetary policy that now used interest-rate changes to the same ends. Here was the optimistic vision of progress in controlling and regulating the macroeconomic forces which could maintain full employment while keeping inflation in check. Stop-go, of course, was one name for this kind of economic policy; and ‘Butskellism’ for the political consensus which underpinned it. Samuel Brittan offered this summary in 1964:

It was an interesting mixture of planning and freedom, based on the economic teachings of Lord Keynes. Planning during this period was concerned with one global total – the amount the nation was spending on goods and services – the ‘level of demand’ in economists’ language. If production sagged, or unemployment looked like creeping up, extra purchasing power was pumped into the system through the Budget, the banks, or the hire-purchase houses. If employment was a bit too full or the pound came under strain, demand was withdrawn through these same channels.⁵⁵