Chapter II. The Post War Settlement: 1945-1951.
Labour in Power
Power and Responsibility
Economic Difficulties and Trade Union Discipline
The Changing Social Scene
The Trend Towards Equality
The Social Structure
Britain and the World.
Labour in Power.
Power and responsibility.
With hindsight, explaining the Labour victory in 1945 is easy. At the time, however, commentators and even secret services all anticipated a return of Conservatives to power. The international standing of Churchill was undisputed, and few victorious governments lose elections. His main contender, Clement Attlee, who had become the Labour leader in the 1930’s, after Mac Donald’s defection, did not have much of an aura, and was underestimated by his opponents ( one of Churchill’s favourite quips was: “Mr Attlee is a modest man. Indeed he has much to be modest about”). However, the modest Mr Attlee proved in tune with voters.
The commitment of Labour to the implementation of the Beveridge report was a serious asset. Besides, the memory of 1918 loomed large in popular consciousness. At the end of the First World War, hopes had run very high, the government had pledged itself to “reconstruct” (sic) the country on the basis of entirely new principles, and the Prime Minister, Lloyd George, had promised to build “homes fit for heroes” . Voters had supported the war time leaders at the following elections, and promises had been quickly forgotten. Only a few thousands of houses were built, and a long decade of poverty, rising unemployment and crisis followed. Barely twenty five years separated the two wars, and voters decided not to act in the way they had in 1918.
The country as a whole had moved to the left: the stigma of being working class had somewhat disappeared, as the war had been largely won by ordinary people doing their duty. Besides, the war was highly political, being waged not just against “Germany and Italy”, but also against ideological systems, namely nazism and fascism. It had been felt necessary to educate the British population, and in particular the Armed Forces, and explain the principles of political democracy – which came to include a social side. Equality was very much in the Zeitgeist (= spirit of the time). This was also true of France, where the governments originating from the Resistance implemented the most far reaching democratic reforms of the XXth century. A special institution had been created in the Armed forces, called the Army Bureau of Current Affairs, which organized lectures, discussion groups, and published pamphlets. The goal was to drill into the military the principles of democracy. This practice is unusual in the UK, where the army remains usually neutral and has absolutely no tradition of involvement in politics, contrary to French “césarisme”. The only exception took place in Ireland in I914, when the army refused home rule for Ireland.
The ABCA was staffed by intellectuals, many of them left wing. Writers and playwrights were mobilized by the BBC, and contributed to the development of a critical, democratic mass culture. (George Orwell was one of them) . Publishing was also undergoing a revolution. Cheap books became available to all, such as the “Penguin specials”, the ancestors of paperback books.
Apart from those cultural factors, the political ones also played a part. The Conservatives were not identified with Churchill, but with the pre war leadership which had been responsible for the disastrous policy of appeasement. Churchill himself was a respected figure from a military and geo political point of view, but his social policy was considered as not bold enough for the time. Besides, he made a number of aggressive remarks about the Labour Party, comparing it to the Gestapo, which did not cut much ice and were judged unfair.
On July 5th 1945, voters gave an absolute majority of seats to the Labour party, for the first time in history. Labour polled, in the whole of the country, 47.8% of the popular vote, and the Conservatives 39.8 % . The first past the post system, (“scrutin uninominal à un tour”) which turns relative majorities in the country into absolute ones in Parliament, provided the Labour Party with 393 MP’s, against 213 for the Conservatives, … and 12 for the Liberals, whose combined vote represented 9 % of the electorate. The British system can be criticized, but one should bear in mind its legitimacy, stability, and ability to provide overall majorities for governments as well as opportunities for political change (“l’alternance”). This stands in stark contrast with the constitutional arrangements prevailing elsewhere in Europe, and the series of crises Britain’s neighbours have undergone.
A government, and a Cabinet were formed, and included the two components of the labour leadership, Trade Union leaders and socialist intellectuals. 6 members of the Cabinet were trade unionists, including :
Ernest Bevin, at the Foreign Office. Since he was a fierce anticommunist, this meant British foreign policy would not be significantly different from Churchill’s.
Aneurin Bevan, in charge of health and social affairs. He was a Welsh miner, and, as such, very left wing. This represented a serious commitment to the setting up of the Welfare State.
Helen Wilkinson, in charge of education. She had become prominent during the marches against unemployment in the 1930’s, and was also identified with the left.
Among the intellectuals, the Chancellor of the Exchequer, Stafford Cripps, was one of the country’s top lawyers (a “King’s Council”). He had a very upper class background, and was known as a man of principles and a rather austere character, as a Christian-socialist.
Symbolical measures were taken immediately, so as provide a link with the movement’s history. The Trade Disputes Act, which had been voted by the Conservative Parliament in 1927, on the aftermath of the crushing defeat of the 1926 General Strike, and which purported to make strikes more difficult and deprive public employees of the right to join the Trade Unions Congress, was repealed.
Economic Difficulties and Trade Union Discipline.
The country had won the war, but was ruined. Britain asked for Lend Lease to be maintained, but this was refused by the USA, which did not feel inclined to help a left wing government, and found a good opportunity to bring a former rival to heel. Britain had no choice. Keynes was sent to the US to negotiate, but the terms were harsh. Britain had to integrate the Bretton Woods system. This was an international agreement ensuring the convertibility of all the currencies of the member countries with each other, and in particular with the US $, whose value was, in theory, guaranteed in gold ( 32 $ for an ounce of gold). Britain abandoned the Imperial Preference system, agreed to consider the British £ as an ordinary currency, and obtained a fresh loan from the US government. Restoring Britain’s balance of payments was therefore a chief priority, at a time when, understandably after 5 years of war, most people looked forward to a life of consumption and greater comfort . What is remarkable is that not only was this contradiction solved, but the government also managed to implement extremely far reaching reforms, in spite of its financial difficulties. Austerity was not used as an excuse to postpone reforms.
Income tax was increased, and became the main channel for raising funds. Britain , in this respect, became part of the group of Northern countries, also including Scandinavia, which favour direct taxation over indirect taxation. This is much more redistributive and egalitarian than the alternative, giving priority to indirect taxation, since income tax alone is progressive. Prices were kept under government control , and rationing was maintained until 1952, i.e. much later than in France. Life in post war Britain remained fairly drab for a number of years. The government launched a drive for exports, encouraging industrial mergers, and giving large firms priority. “Big” was then “beautiful”. Consumption came last. This policy was a great success, and, by 1950, Britain had recovered.
The Trade Unions agreed to support the government, their government, and recommended wage restraint to their members in 1947. Wage increases would not be demanded. This was welcomed by Attlee, who advocated a freeze in prices, profits and wages: this was a far cry from market principles. Traditionally, British Unions support free collective bargaining, and dislike wage freezes, which, contrary to France, are not part of local traditions. They are not accustomed to State intervention in industrial relations, and certainly do not welcome it.
This could not last for a very long time. By I950, the wage freeze had become untenable. The economy had recovered, prices increased, and the government was criticized by the left for its costly involvement in the Korean war, a very controversial policy indeed. Pressure was exerted in the Trade Union movement itself, by a significant section which included the communists but went far beyond them, so as to reject wage restraint. By 1951, wage restraint had ended and more bitterness had returned in industrial relations.
The Trade Unions had become a formidable force, with 9.5 million members. The scene was set for the considerable wage increases and improvements in living standards of the 1950’s, within the fordist framework. Fordism, the invention of the American car manufacturer Henry Ford in the I920’s, consisted in adding a new element, high wages, to the process pioneered before the First World War by Taylor, called the “scientific organization of labour”. For Taylor, it was possible to make productivity gains by observing the way workers performed their tasks. Human intervention was then reduced to very simple gestures, which could be made by unqualified workers. Complex human tasks were broken up into simple ones, as Charlie Chaplin described in Modern Times. Conversely, machines were more and more sophisticated, and costly. Twenty years later, Ford had realized that it was also necessary to keep workers happy, and enable them to purchase the products they manufactured. This was done by increasing wages. Thus, productivity gains benefited both employers and employees, as well as the State which enjoyed higher income tax returns as well as higher proceeds from indirect tax. The system relied on the fact productivity was constantly rising, which enabled permanent increases in wages, as well as in government expenditure. By the late 1940’s, the combination of productivity gains, a shortage of labour, and strong trade union organization led to considerable rises in wages, and living standards.
By and large, the virtuous circle of Fordism, reinforced by the conceptions of Keynes in economic theory, ensured prosperity for the developed world until the 1970’s, when productivity stopped increasing. The dynamics of growth were then broken.
The aim of nationalizations was an improvement in the efficiency of the sectors involved, NOT the introduction of socialism in British industry, that of industrial democracy, or the need to deprive rich families who had collaborated with Nazism from their economic influence (as was the case with Renault in France). It was a fairly rational affair from an economic point of view. Britain was not heading towards a Soviet-type command economy, and the Labour government never imagined it could use the nationalised sector to exert more influence over the economy as a whole. The notion of “industrial policy”, which is commonplace in France, or Japan, was alien to British culture. “Plan”, in English, is a four letter word.
The model which was used was that of the “corporation”, such as the BBC or London Transport, which were created or nationalized in the 1930’s. The new public firms would belong to the State, but would be managed in the same way private ones were. Neither their employees nor government would have a say in the firm’s policy.
The Bank of England was nationalized in 1946, but was the only financial establishment undergoing this process. In France, on the contrary, most banks were nationalized. The bulk of nationalizations in the UK concerned utilities. Banking remained the preserve of the British upper classes.
In January 1947, coal mining was nationalized. The industry had a long history of industrial strife, but also of under-investment on the part of its owners. During the Second World War, as well as during the first one, mines had been overexploited, machinery had not been replaced, coal had been dug out where it was easier to find, and less profitable seams had been discarded. Large scale, long term investment was necessary, and the country needed a secure supply of cheap coal, which only the State could provide. Coal mining was nationalized in order to supply British industry with a secure and efficient source of energy.
The same type of arguments held true for railways, canals and road haulage (1947), electricity (1948), gas (1949). None of those nationalizations were controversial. The ease with which those sectors were nationalized also explains the rather painless process of privatisation, in the 1980’s, under Margaret Thatcher. When government and a section of the public were convinced that private ownership would improve efficiency, the change in status was practically unopposed. The last of the nationalizations, in 1951, that of iron and steel, was much more controversial. It was resisted by Conservatives as well as by owners, who bought advertising space in newspapers to attack the government. The government went ahead, but Conservatives denationalised in 1952, Labour renationalised in 1967, and Thatcher eventually denationalised again in 1983.
The Labour Party was committed to implementing the Beveridge report, and did so. In 1946 and 1948, two Acts were passed, the National Insurance Act and the National Assistance Act, offering “from cradle to the grave” coverage to the whole population, according to the universalist principle, and irrespective of people’s former contribution. Employees and employers, the self employed, the poor were all covered. This was much simpler than the French approach, which, according to Bismarckian principles, pigeon holed people according to their occupation into different “régimes” and “caisses”. France had to wait until 1988 to invent the RMI, and 1999 for the Couverture Médicale Universelle, intended for the officially poor.
Contributions were paid by employees and employers and topped up by the State. In practice, Labour went further than Beveridge, who wanted his scheme to be purely financed by Social Security contributions. Labour also resorted to taxation. This made the British system more redistributive than planned, and certainly more egalitarian than the French one, since tax was highly progressive.
The risks covered included: health, disability, accidents at work, pensions, child benefit, unemployment.
The Poor Laws, which stigmatised the poor, and dated back to 1834, were repealed.
In 1947, the National Health Service Act was passed, establishing what became a model for the rest of the world until the 1970’s. It offered free medical care for all. Only a modest prescription charge was added after a few years, the equivalent of the Ticket modérateur in France. Patients were (and still are) charged a fixed amount for each visit to the doctor, and for each item on the prescription list. This was controversial, since the prescription charge was introduced to reduce costs, at a time the government had embarked on the Korean war. The budget of the NHS was voted every year, and could not be exceeded. There is no such thing as a “déficit de la Sécurité Sociale” in the UK, but, after the 1970’s, health care was in practice under funded and rationed, which explains the decline of the NHS.
Hospitals were all nationalized, and local authorities remained in charge of “community care”, an important notion without an equivalent in France, including nurses, infant welfare, care for the elderly, and any treatment that could be administered outside a hospital.
The government wanted doctors (called ”GP’s” – for “general practitioner”) to become paid employees, but they fiercely resisted this, and preferred the old “liberal” system – which France has kept to this day. A compromise was struck, and GP’s were paid both a wage, like any public employee, and a fee according to the number of patients they saw.
A Housing Act also made provision for Council Housing: the local authorities would have responsibility for finding accommodation at a moderate cost (equivalent of HLM). The debate centred on the contradiction between cost and quality. Should cheap, poor quality houses be built, in which case the costs would be low, and vast numbers could be made available very quickly, or should council houses be of good quality, in which case few would be built, and the shortage would not come to an end ? The second option was chosen and, what with the baby boom, the return of soldiers, and general aspirations to a quiet life in a new home, and the destructions resulting from the war, demand far exceeded supply. This was reversed by the Conservatives, when they came back to power in the 1950’s, who built large and cheap tower blocks in suburban Britain.
The Town and Country Planning Act was also passed, and new towns were started, based on the imaginative designs of modern architects … this has remained controversial to this day. The slum clearance programme, on the other hand, did away with “squalor” and the remaining areas of dereliction in British cities.
The changing social scene.
The trend towards equality.
In the political field, Britain eventually adopted the democratic principle: “one person one vote”. (Women had obtained the right to vote in two stages, 1918 and 1928). Dual voting, i.e. the ability of some people to vote – legally - twice, disappeared for good, and the universities of Oxford and Cambridge lost their special seats in the Commons. More significantly, the powers of the House of Lords were reduced, and its right to veto legislation was limited.
The combination of full employment, health insurance, education and a redistributive tax policy made society more equal. Income tax became very progressive indeed. Over £ 10 000 a year, income tax amounted to 64%. Inheritance tax was also very high and progressive. From £ 100 000 to £150 000, tax represented 50% and, for fortunes over £ 1 000 000, tax amounted to 80%.
Tax dodging became gradually essential to the preservation or accumulation of wealth. Tax havens, such as the Channel islands, the Isle of man, the Caïman Islands, became attractive throughout the second half of the XXth century, and, as an alternative to very high wages, companies started offering their executives advantages in kind, and more or less legal perks: by 1990, 50% of all new cars registered in the UK are supposed to be company cars.
As the wages of the whole population gradually increased, the Labour Party established its reputation as the party of taxation, which was a terribly damaging liability, since even fairly modest wages were heavily taxed (by the 1970’s, 25% of a modest wage was clawed back by the taxman). Only Tony Blair was able to change this, and put forward policies that did not require tax increases, and met the goals of the labour party at the same time.
B. Changes in the social structure.
The Establishment protected its power and identity through its culture, as well as economic power. The power elite was able to reproduce itself through the Public Schools and “Oxbridge” (= Oxford + Cambridge). Gradually, a managerial elite of competent administrators appeared on the scene. Some of these people were the product of the meritocratic educational system. This was resented by both the old elites, who saw themselves as the legitimate owners of the country, and the working class, which was deprived of its most gifted and ambitious elements , but remained culturally and symbolically dominated, even though its living standards had improved. Among intellectuals, this nurtured a resentment against mass culture, which was seen as vulgar and materialistic, and americanized. A vast amount of nostalgic literature was produced, lamenting the demise of Old England and the victory of “materialism”.
The working class’s income only started rising significantly in the 1950’s. Until then, a large majority of incomes remained very modest. Holidays became gradually common practice (two weeks per year). The changes were therefore visible from the mid 1950’s onwards, but not before then.
After the war, there was a rather conservative reaction. A lot of the battles seemed to have been won: welfare, economic opportunities, political rights. After so many years of hardship, the return to family life was welcomed by many. On the other had, the areas of the economy which were expanding employed a lot of women: clerical, administrative jobs, business. The improving living standards gave women a lot of power as consumers, and decision makers as purchasers, since the growth of the domestic appliances market was staggering in the 1950’s. However, this was not reflected in women’s position as wage earners, since the system remained centred on the traditional family. The campaign for equal pay had an effect in the public sector (teachers, nurses) but not elsewhere.
III Britain and the world.
a. Cold war, European reconstruction and the drive towards unity.
Britain took an active part in the reconstruction of Europe, was an early recipient of Marshall aid, from 1947. It was even used by the US as its bridge head for the distribution of Marshall aid to the rest of Europe, thus reinforcing Britain’s influence.
The key element in post war international policy is the rapid deterioration of the relationships between East and West, and the beginning of the cold war. At an early stage, Britain supported the creation of the North Atlantic Treaty Organization (NATO), in April 1949. The British and American occupation zones in Germany were merged, and the presence of the US navy in the Mediterranean was welcomed. After the general elections of 1950, won again by Labour, but with a smaller majority, the cold war intensified. A real war broke out in Korea. Western troops, under the command of the US general Mac Arthur, included a British contingent. This become very controversial. Mac Arthur, a hero of the Second World War, came to be distrusted by the US government, and by public opinion, when it appeared he had very personal ideas about the war, and recommended the use of atomic weapons against China. The involvement of Britain was criticized on several grounds: the cost of the war was considerable, Britain ran the risk of being dragged into a war it was not really concerned about, and the reintroduction of military service was very unpopular. The US leadership was also resented by the left. Left wing ministers, including Aneurin Bevan, resigned for government, supported by backbenchers.
The “special relationship” with the US was not really balanced, and was much more important for the UK than for the US. This appeared clearly on the nuclear issue. British scientists had made a significant contribution to the Manhattan project during the Second World War, the scientific research programme which had enabled the US to manufacture the first nuclear bombs, used against Japan. However, when, after the war, Britain asked the US for assistance in manufacturing its own bomb, this was refused. The UK had to start and finance its own nuclear programme, which enabled it to produce its own bomb in 1952. Until 1960, when France tested its first, rather small, atom bomb in Algeria, Britain remained the only nuclear power in Europe.
Attempts at improving European unity, and the drive towards European integration were resisted from the start. Britain saw itself as a global player, not a regional one. Churchill, still in the opposition , made several speeches encouraging continental Europeans to unite, but adding “we are with them, we are not of them”.
When the first political forum created by European countries , the Council of Europe, was created, Britain joined, but distrusted it. Bevin, the Minister for foreign affairs , said jokingly “ I don’t like it. When you open that Pandora’s box, you will find it full of Trojan horses”. British pressure ensured the Council was totally deprived of power. It remained to this day a talking shop, making nice recommendations but without any kind of influence other than symbolical. The Council met for the first time in August 1949.
The second attempt at creating a supranational European institution succeeded, but it did not include Britain. The European Coal and Steel Community (CECA in French) pooled French and German coal and steel industries. The twin goals were the rationalizing of production, and the control of the German steel industry, without which launching a war was at the time thought to be impossible. It succeeded on both accounts, enabling the considerable increase of production in the 1950’s, and its orderly contraction from the 1980’s. British production, by 1950, was the equivalent of the combined French and German ones. Britain had just nationalized coal, was about to nationalize steel, and did not feel inclined to accept foreign control. It kept aloof from the process.
Relationships with the South.
Every one in government agreed that Britain would have to leave. The magnitude of the problems met in India made the pursuit of British rule impossible. The administrative apparatus had collapsed, and the riots between Hindus and Muslims were so widespread that the situation really was out of control. Britain was suspected by Hindus of supporting Muslims, with some justification. The pledge taken by Britain in 1935, to offer India “self government” at some indefinite point in the future, would have to be made good.
The rational defence of British interests implied an orderly decolonisation, so as to maintain good relationships with an independent India, and keep it within the British political and cultural sphere of influence, the “Commonwealth”.
Lord Mountbatten, a hero of the Second World War, sped up the process. Two states were created, one for Hindus, India, and one for Muslims, Pakistan, which at the time included what is now Bangladesh, which seceded from Pakistan in 1970. Populations were exchanged, at great human cost (10 million people moved). The number killed in riots was about 200 000 in Punjab alone. However, this was considered as a successful case of decolonisation, since all out war was avoided.
The case of Palestine was rather more difficult. Britain had been granted the mandate over Palestine, until then part of the Turkish Empire, after the First World War. A British minister, Lord Balfour, had promised Jews, in 1917 to help them create a “national home” in Palestine. Under the British mandate, throughout the I920s and 1930’s, Jewish immigration to Palestine increased . Relationships between Palestinians, Jews , and the British authorities deteriorated. Britain find it hard to placate both the Zionist organizations, and the local Palestinians and their Arab supporters in the area. In the framework of decolonisation, nurturing good relationships with oil-rich Arab regimes was essential. After the war, the conflict of interest between Jews and Palestinians led to increased violence. Ships full of Jewish refugees from Europe were not allowed to land, Zionist terrorist organizations waged war against Britain: the Headquarters of the British forces in Jerusalem, the King David Hotel, was blown up .
The US included a powerful Zionist lobby and American protestants had always identified with the People of Israel described in the Bible. Support for Israel was great. Together with the USSR, they reached an agreement on the subject, and excluded Britain from the negotiations . A State of Israel would be created in Palestine. Britain, who felt snubbed, refused to implement the partition of Palestine, and left the country on May 15th 1948. On the same day, the neighbouring Arab countries invaded the territory, and tried to prevent Jews from creating their own state. The Arab armies were commanded by a British officer, known as Glubb Pasha. The war lasted until April 1949, when Jews managed to establish control over a section of Palestine. Britain was left out, but never had very good relations with Israel.
The post war governments were among the most busy in history. A new society came into being, a new social model, which flourished in the I950’s and I960’s and collapsed during the crisis of the 1970’s. This model was sustained by economic growth, and provided for social mobility, and a degree of redistribution. The Labour governments had their own ideology, although some ministers would probably have refused the word, but this more obvious in domestic issues than in international ones, where British national interest prevailed.