Deadlock in Britain

The British elections settled no great national questions, and they left altogether untouched the larger issues of world politics. Neither party gave the British voter any guidance on how to create the flexible, prosperous, and expanding world economy on which the cold war against Russia must depend. Among the ablest spokesmen for post-war Britain, BARBARA WARD has been the foreign editor of the London Economist since 1940. She is also a governor of the Old Vic and the youngest governor of the BBC.

by BARBARA WARD

1

IT IS hardly necessary to repeat that the British elections of February this year produced a political deadlock. The votes given by the electors to the Tabor Party, on the one hand, and to their opponents, the Conservatives and the Liberals, on the other, were very nearly even, and in the House of Commons the Labor Government was left with a majority of six. There has, however, been less comment on the fact that this Parliamentary deadlock to some extent reflects a political and economic deadlock in the country at large. Both in domestic politics and in its foreign relations. Great Britain appears to have reached a point which it can neither maintain nor quit, and it is just possible that the voters, with a sort of sixth sense of political judgment, reproduced this situation in the electoral results.

For five years the British community has been living in a state of more or less controlled inflation. It has been brought about by the Governments attempt to do everything at once—create social services, subsidize food and housing, build up a free medical service, restore war damage, re-equip industry, rebuild schools, homes, and hospitals, and provide a defense budget as well. The outlay of the community has exceeded its resources. As a result, monetary demand has outstripped supply.

This process has been aggravated by the policies pursued in the countries which use sterling as their trading currency. The new Dominions, India and Pakistan, have used their newly found freedom to expand their purchases and their investments. Colonial development has been expanded on a greater scale than ever before. This inflation of demand within the sterling area has been made possible by very large releases of sterling to wartime creditors, such as India, Iraq, and Egypt, out of their accumulated war debt. In the last year alone probably about 500 million pounds (a sum equivalent to a quarter of all Britain’s exports) have been released in settlement of the outstanding sterling balances.

The results of this general economic policy have been satisfactory enough to the great mass of the people. It. is true that uncontrolled inflation has been held at bay by extremely high levels of taxation in Britain — the amount of the country’s wealth absorbed by the Government has reached the astonishing scale of 43 per cent of the national income. But this very heavy taxation does not fall on the majority of earners, and the compensating advantages are many. The first of them is, of course, full employment. The working population, disciplined by the mass unemployment of the thirties to consider security at work their highest aspiration, have had five years of uninterrupted employment, regular wages, and secure jobs near their own homes.

It would be a mistake to think that this security has been given only to the workers. For business firms as well, the five-year period has been one of great stability, of great prosperity, with prices enabling even the marginally efficient to make a profit and giving the efficient producer dividends which may range between 100 and 300 per cent. From the point of view of the community, the obverse of this bright penny of security and full employment has been high costs, brought about by the lack of any real incentive to reduce them — for why be more efficient if, in any case, every thing produced can be sold? It has also induced in the economy a dangerous degree of rigidity. There is little temptation to change methods or types of production, to go out for new markets, to attempt to adapt oneself to changes which may not after all occur. This, then, has been the position since the end of the war, and if all other things were equal, this type of semi-controlled inflation could probably continue indefinitely without either side of industry attempting to break away.

It is clear, however, that such a situation cannot continue. If the British Isles were a large, self-contained economy including within itself all the resources necessary for its economic life, it is just possible that conditions of semi-boom might be maintained indefinitely; but the country is, on the contrary, an intensely vulnerable part of the international trading community, and everything — from work to bread — depends upon Britain’s ability to trade, in the last five years, the British have enjoyed, together with every other European producer, all the advantages of the post-war sellers’ market. They have also received Marshall Aid to assist them with their dollar purchases, and Marshall Aid itsell was the sequel to the American loan to Britain, concluded at the end of the war. But these extraneous conditions are coming to an end more slowly perhaps than anyone expected, but surely. The buyers’ market is returning in the world, and although devaluation has positioned the crisis in Britain’s balance of payments, the facts of devaluation must impinge upon the internal structure of the economy.

Prices are beginning to rise. The pressure to increase wages will increase with them. It can only be a matter of time before a new spurt of inflation compels the Government to reconsider its economic policy. The need will be all the greater in that external aid from the United States is being steadily reduced all the time. No Government could in these circumstances continue with the present policy of both attempting to control inflation and yet indulging in inflationary expenditure. Some of the expenditures of the British community, even the desirable ones, would have to be cut. Yet the aims of this expenditure are so desirable that any Government would shrink from using the knife.

Nor is it simply a domestic problem. The need of the Colonies for development and of the new Dominions for economic assistance is so great that it is difficult to assess which course would have the more unfortunate consequence to continue the policy of large releases from the sterling balances, or to risk the political disturbances which might follow upon cutting them off.

A deadlock of such proportions might seem to provide sufficient worry for Britain’s hard-pressed statesmen. The British, unfortunately, face another only slightly less pressing, in the field of their foreign relations. The grim necessity of combating Communist expansion is very generally accepted. There is also general, though rather grudging, acceptance of the idea that the cold war can hardly be waged effectively unless closer forms of association between Western Europe, the British Commonwealth, and the United States are evolved.

With this general objective in mind, the British Government has in the last two years taken a number of steps which seem to advance in that direction. It has joined with its European neighbors in the Brussels Pact. It has participated in the Council of Europe. It has joined with Western Europe and the United States in setting up the North Atlantic Defense Council. It has set up a small committe for permanent discussion between Britain, Canada, and the United States in Washington. The difficulty lies in knowing what precisely this policy now entails. Is the logical consequence of joining the Council of Europe to move forward towards a Western European Customs Union? Should the “integration of a single Western European market “ take precedence over the vital necessity of maintaining full employment at home?

A similar uncertainty hangs over British relations with the Commonwealth, After the conference at Colombo, it was decided to set up a committee in Canberra to evolve a Commonwealth Economic Plan for Southeast Asia, but can such a plan be carried through without further adding to inflationary pressure in Britain? Above all, what is to be the pattern of future relations with the United States? What can closer economic relations mean with a giant economy whose productive and competitive power might swamp Britain completely if the barriers of protection and national sovereignty were in any way removed? Once again, it seems that British policy has reached a position of deadlock in which to advance further seems to jeopardize cherished and strongly guarded domestic achievements such as full employment, yet to stand still might mean the losing of the cold war.

2

THESE two great uncertainties provided the background to the general elections of February, and it is perhaps a measure of the bewilderment, and indeed paralysis, which has crept into official thinking on both scores that the issues were not even discussed in the electoral campaigns. Foreign policy played no part in the election at all. Europe was not mentioned. Future relations with the United States were not dismissed. At one point, Mr. Churchill’s appeal for an understanding with Russia on the question of the hydrogen bomb did raise a flicker of interest on the conduct of foreign affairs, but it died as quickly as it had been born. Equally, no party discussed how Britain could as a trading nation, vulnerable to all the movements of the world economy, maintain its standards and its work in the coming years.

In retrospect, it seems that the election was fought on one issue only — that of full employment — and on this the Conservatives were as dogmatic as the Labor Party itself. The Conservative Party program included every social benefit promised by Labor and even added one or two of its own.

The Labor Party in its turn based its campaign upon the claim that it had secured full employment for five years, and the strongest point in its attack upon the Conservatives was the comparison with the thirties, during which the number of unemployed rarely fell below two million. Specific policies for maintaining full employment in an unfavorable international environment were not mentioned. The financing of full employment was not discussed. The implications of foreign policy in relation to full employment did not reach a single speakers notes, and it may be that the simplicity of the issue, coupled with the unanimity of the two great parties upon it, really explains the division of the country into two almost equal parts.

It is true that the vote shows some structural differences. Industrial workers in the bigger towns tended to vote Labor; men and women living on the land tended to vote Conservative. So too did those living in the dormitory communities round London. But undoubtedly a large number of workingmen and trade-unionists voted for the Conservatives, and a large cross section of the middle class did not swerve from their allegiance to Labor. The reason for the appearance of this equal division may therefore be that with both parties committed to the welfare state and full employment in domestic politics, and in the foreign field to opposition to Russia in the cold war, neither side was decisive enough or different enough to secure the advantage.

Probably under one condition only could this even division have been avoided at the last election. The Labor Party might have gone to the country saying: “We have worked for five years and introduced a number of changes. If you return us, we pledge ourselves not to make new experiments but to consolidate the progress that has been made. We will not nationalize new industries. We will try to secure the efficient functioning of those nationalized already.” With such a program, they might have secured sufficient marginal seats to give them a working majority. Instead, they loaded their program with fresh projects for nationalization, such as that of sugar and cement, which everyone recognized as senseless, and undoubtedly they lost a proportion of votes on this issue. That they were conscious of this danger themselves is proved by their complete silence on the issue of nalionalization during the electoral campaign.

Equally, the Conservatives might have won a working majority if they had not been still burdened with the weight of their past. The massive unemployment of the thirties still colors men’s minds and prevents complete confidence in the Conservative pledge that full employment is now their aim. The difference can perhaps be summed up by saying that the people who feared Labor because of its future were balanced by those who feared Conservatism because of its past, and thus neither side could secure a clear lead.

The outcome of the election gives very little guide to the future. True, if no external event were, to break in upon the deadlock of British politics, the present indecisive result might be maintained for sometime. The fact is, however, that circumstances will change and that the deadlock will be broken one way or the other. But the situation that would then arise cannot be deduced from the results of the last election. The first reason has already been explained. If is quite simply that in the electoral campaign neither side discussed how it would maintain full employment and the welfare state if economic conditions were to become extremely unfavorable. But this is only a superficial reason. It reflects the deeper fact that neither party really knows.

The Conservative conversion to the ideal of full employment is doubtless sincere, but there is no theorist of free-enterprise economics, nor any practitioner of free-enterprise politics, who really knows how the fluctuations connected with the trade cycle can be ironed out, or how a trading community can, when times are hard, sell to markets that are closing or buy when its own reserves of foreign currency are running out. The problem in Britain is particularly acute since no amount of internal financing to counter the beginnings of a depression would ensure essential supplies of raw materials which can be obtained only by purchases overseas.

But Labor has no policy either. For fifty years, Socialist thinking has tended to assume that if the “means of production, distribution, and exchange” were transferred to public ownership, the problems of the trade cycle would vanish. The early Fabians never talked about planning, and as the Labor Party grew to maturity, the general assumption prevailed that the trade cycle was simply a piece of capitalist wickedness. These last five years have shown that nationalization is very largely irrelevant to the problem of full employment, and that the techniques that have to be learned lie rather in the field of finance and foreign trade. But in these fields, it is difficult to give a dogmatic answer. There are theorists in the Labor Party-including indeed one or two Cabinet Ministers — who believe that full employment can be maintained as economic circumstances worsen by imposing more controls, by extending still further bilateralism in foreign trade and encouraging more and more bulk purchase and barter. Yet, for a trading nation such as Britain, these methods might undermine its intensely lucrative position as banker and agent for a vast trading area, and their outcome, far from leading to full employment, might impoverish the nation still further.

Nor is it simply in the domestic field that this confusion of thought reigns. Although the Conservatives may appear more favorable to the idea of closer association with Western Europe, their published papers and speeches give no more evidence than do those of the Labor Party that they have any idea of what new types of economic and political coéperation such an effort at democratic union would entail. There are old tried methods which date from more liberal periods — customs unions, currency unions — and there are, on the other hand, the more doubtful expedients which date from the troubled years between the wars—international cartels, for instance. But the types of association possible in an epoch in which governments have taken so great a responsibility for economic policy, and in which the demand for social security and full employment has become so much more insistent, are not known in Britain. Transport House, the Foreign Office, the Federation of British Industries, the Athenaeum — the learned societies — are equally in the dark. It is possible that rather more people are groping about and feeling for the door in one or other of these institutions, but it is certain that no one yet has found the way out.

3

IT WOULD be misleading to suggest that these doubts and dilemmas are confined to the British people. The two great unanswered problems which are holding the British community in a species of paralysis appear in more or less the same form throughout the free world. As the post-war boom passes and the pressure to buy goods at any cost slackens, the problem of maintaining a prosperous and stable economy begins to impinge upon every democratic government. Nor in the twelve months that have seen the discovery that Russia has the atomic bomb, the collapse of China, and the recrudescence of violent Communist sabotage in France can any free society ignore the threat of the cold war.

Indeed, the two problems are very closely linked together. Marx’s economics may have been nonsense and his faith in the beneficence of proletarian dictatorship absurd, but his prophecies of instability and recurrent crisis in capitalist society and his belief that at regular intervals more wealth would be produced than the system could distribute have become the stock in trade of Communism’s attack upon the free world. Every broadcast from Moscow, every speech, every slogan, every peace campaign, concentrates upon the instability of economic life in the democracies and prophesies that the West cannot escape the unemployment, the destruction of stocks in order to maintain prices, the coexistence of hunger and “surplus” food, which, the Communists cry, are inevitable consequences of a false economy.

In 1950, it would take a bold man to say that the Western world has a clear strategy for countering this, the most pervasive and disruptive aspect of the cold war. The tremendous initiative which the Western powers secured through the launching of the Marshall Plan has slackened. Its immediate target — the restoration of European production — has been achieved; but the wider problem — the creation of a flexible, prosperous, and expanding world economy — demands policies and techniques of which the democracies are yet unaware.

Meanwhile, even the signs of momentum within each national economy are slackening. Considerable unemployment has appeared in various parts of Western Europe; in America, the economy is maintaining itself rather than expanding, and surplus stocks of food have begun to accumulate. Paradoxically, it is in Britain and the sterling area, where supplies are inadequate, that a policy of expanding monetary demand is being pursued, while in the dollar area, where surpluses are growing, the tendency is for demand — both domestic and external — to fall.

If the economics of the free world are faltering and uncertain, political action offers no compensation. Britain’s hesitations to undertake full European policy are matched by Germany’s doubts whether it can really survive without Eastern Europe, or by France’s fear to commit, itself to fullblooded opposition to a Russia that may yet invade the West. And although Americans may well be startled by these hesitations, it seems nevertheless likely that American policy has not yet fully determined whether the British Commonwealth is a valued partner or a dangerous legacy of past imperialism, or whether the sterling area is one of the preconditions of international commerce or a dangerous rival to dollar trade. The doubts and hesitations which inhibit Britain’s foreign policies are as strong —if less explicit — among its neighbors.

The Western world has as yet made no final commitment to form a lasting union. On the contrary, each nation feels itself to have reached the limit of concession compatible with still drawing back. Such a position is the essence of deadlock. No progress can be made for fear of conceding too much; no retreat is possible for fear of losing what has already been gained.

It is not likely that this “dead point ” in the politics of the Western world — of which the British elections are only a particular example—can last for long. Communism is too explosive a force to permit permanent deadlock, and at some not very distant moment the Western nations will be compelled to decide whether to retake the initiative and win the cold war or accept a slow decline into Communist domination. There is no doubt —from the evidence of elections which eliminated Communist representation and wiped out even the fellow travelers— that the British people would rally wholeheartedly to the former course. But it is also possible that the nature of their economic and political deadlock may prevent them from giving a lead to the West. It is on the other side of the Atlantic that the resources, the prosperity, and the freedom of action for such an initiative lie today.