IF BRITAIN’s momentous 1964 general election was a clear victory for anyone, it was a victory for liberals. But the Liberal Party, although it won substantial popular support, was almost utterly defeated by the electoral system. The British system has no room for third parties. Nevertheless, the nine Liberal Party members were immediately put in a strong position in Parliament.

The closeness of the vote, the close approach of the two main-party platforms in the bid for middle-of-the-road votes, the size of the Liberal vote, the rejection of the Tory leadership, all these things underlined the new significance that the liberal attitude has for British politics now and in the immediate future.

This attitude has been defined by Professor Max Beloff of Oxford as “a concern for individuals that makes possible plans for social action that do not weaken the sense of personal initiative and personal responsibility to the point where the social order must be sustained by a degree of state control, wasteful in itself, and relying upon an unacceptable degree of coercion.”

It has also been remarked that Harold Wilson himself as a student at Oxford was a member of, and indeed an official of, the university Liberal Party, and not, as many people seem to have assumed, a left-wing socialist. Wilson’s basic liberalism made him feel especially close in political attitude to President Kennedy. And the whole liberal trend in the United Kingdom, particularly when it is considered alongside De Gaulle’s antiAmericanism, suggests that Great Britain is likely to move closer to the United States.

There is one other highly significant aspect of this strange election: politically the United Kingdom has become “two nations.” The north of England and Scotland went Labor in a landslide. The majorities were as great as, and in some cases greater than, the Labor majorities in the famous 1945 landslide, when after the war, and even with Churchill leading the Tories, the socialists swept into power.

The south of England, overcrowded already, nevertheless has a serious labor shortage. It enjoys a scale of prosperity that is as yet unknown north of the English Midlands. The north still has an unemployment problem, and the farther north one goes the larger and more intractable it seems.

The traditional Labor attitude thus still has very strong support in Britain. Prime Minister Wilson and Parliament have to adjust to it or meet a very strong left-wing reaction. The question, however, is how far Wilson can go in forcing through the more controversial of Labor’s proposals without losing his slender control of power.

Labor’s program

Labor’s plans originally included a new Ministry of Economic Planning, functioning through regional planning boards; nationalization of steel and of the water supply and of part of the roadtransport industry; and the purchase of new building land “for the nation” by a new Land Commission. In the area of defense, Labor is pledged to abandon Britain’s deterrent and to renegotiate with the United States the Nassau agreement, which gave Britain the prospect of Polaris submarines instead of Skybolt missiles.

In welfare, Labor has promised to raise all benefits and pensions and to link them in the future to average earnings. In taxation, Labor insists on introducing a full capital gains tax and is pledged to “change the tax system to encourage industries and firms to export more.” All parties favor a huge increase in educational facilities and in scientific development.

To pay for its expensive welfare, educational, and scientific programs, and to support nationalized industries that do not make profits, the Labor government must maintain a 4 percent, or perhaps 5 percent, rate of economic growth. Here it finds itself immediately in difficulties. It has first to restore the balance of payments.

The major problems that Great Britain has to face would test even a strongly entrenched government. They can be summarized as follows: relations with the United States, particularly with regard to the multilateral force; relations with Europe, particularly with regard to probable measures which will be taken within the Common Market to make a start on political union; relations with the Commonwealth, particularly with regard to Africa, especially Southern Rhodesia; economic growth, and the deficit in the balance of payments, which threatens to mortgage Britain’s entire gold and foreign currency reserves within eighteen months; inflation, welfare, and transportation. On so crowded an island, with an increasing population, a balance has to be struck between public transport and private transport which will halt the constant rise of transportation costs and release the brake upon national growth.

If it ever gets time, the new government will also have to consider trades union reform, House of Lords reform, and tax reform.

In the long run the most significant of these problems may well be relations with Europe and with the United States. Sir Alec DouglasHome during the election campaign made a particular point of claiming that because of Britain’s long-established independent deterrent, its Prime Minister sits “with the Chairman of the U.S.S.R. and the President of the United States” when the truly great issues are decided.

But with or without a deterrent those days may be gone. Certainly if it were ever to “join Europe,” Britain would have to renounce its claim to be Europe’s permanent representative at the summit. And the likelihood has to be faced that with or without Britain, Europe may take some steps at least toward political union, even if it has to allow De Gaulle to call the tune. The affairs of the Common Market, now that it is 60 percent of the way toward full trade freedom, have reached a point where the momentum must be maintained or the whole project will fall to the ground. And momentum can probably be maintained only by steps toward economic, monetary, and fiscal union, which are essentially political steps.

Britain will be forced to react to any measures of political union that are taken. It may also find that for ecomomic reasons it will have to come closer to the six countries of the European Economic Community, for it urgently requires that market for its exports if substantial growth is to be maintained. The European Free Trade Association, in which Great Britain’s exports have grown swiftly and steadily, may have to merge with or become the trade partner of the Common Market.

Growth versus balance

The most immediate problem facing the new government is that of economic growth itself. The last months of the Tory government, while they produced no crisis, made it clear to all that the secret of steady growth for Britain has yet to be discovered.

Reginald Maudling, the Tory Chancellor of the Exchequer, had been unusually successful in steering a course between overexpansion and stagnation. The 4 percent growth rate was achieved. On that score his critics were confounded. But once again when growth was achieved the balance of payments went awry. Imports grew. Exports failed to expand equally fast. Invisibles, while strong, failed to cover the gap.

The position of balance has to be restored fairly quickly. For although Britain has huge drawing rights against the International Monetary Fund and other sources of credit, the deficit, if it continued, could swallow the reserves that stand security for those borrowings within eighteen months. The new government will be loath to hike interest rates very high or to restrict credit, and therefore investment, very severely. That sort of remedy is considered out of date. The cure is as bad as the disease.

The government may well try unconventional methods instead. It can, for instance, adopt a two-tier system of interest rates, low for home investment, high for overseas deposits. It can subsidize exports indirectly, through a rebated turnover tax, as some European countries do.

It has already put a 15 percent tax on imports, and it can make the matter of financing imported stocks almost too expensive to contemplate.

Halting the rise in prices

But these are very short-term measures, and they are likely to be self-defeating. The shared experience of all Europe — shared through the Organization for Economic Cooperation and Development in Paris — shows that when it is rising prices that disturb the balance of payments, the only effective cure is to halt the rise in prices.

There has been some argument whether Britain’s export prices are in fact too high. It is claimed that Europe’s have been rising faster. And so they have in the past eighteen months. The Economic Commission for Europe, noting this, has predicted a faster growth this winter for British exports. Yet if one takes the figures for a five-year period, the outlook seems less optimistic. French export prices since 1958 (when the franc was devalued) have risen on average less than 5 percent. German prices have risen 8 percent. Italian prices have risen only 3 percent. But British export prices have risen 10 percent.

Before the election, the Board of Trade admitted: “There has been a pause in the growth of exports in recent months. In the last three months their volume was 4 per cent less than in the previous three.”

To halt the rise in prices must therefore become a prime aim of the new government. Ordinary humanity, as well as its own welfare promises, demands it. Britain’s welfare state has fallen behind in quality. Its retirement pensions, for instance, now are 15 percent below those of Holland and Germany. They buy so little that one in five of Britain’s 5,800,000 pensioners draws the supplementary National Assistance each week, a hated sign of poverty.

Getting people around

There is also a problem of equal urgency to which little attention has yet been given by overseas commentators, or even by British economists. That is the transportation problem. Town planners and Labor politicians tend to rely upon the argument that public transport must be expanded and that the costs must be borne by fresh taxes on private transport, and are willing to leave it at that. But it cannot be left at that.

Since 1953 about $15.5 billion has been raised in taxes on private transport. Only some $1.5 billion has been spent on new or improved roads. This alone makes congestion inevitable. But at the same time, with taxes and spending for roads entirely dissociated, the roads appear to their users to be “free.” Congestion becomes doubly inevitable.

Meanwhile, the railroads, already nationalized, have been losing money at the rate of more than $400 million a year. This loss is a brake on economic growth. It means that the railroads cannot pay their employees a decent wage. It means also continuous annual increases in fares and freights, makingprice inflation virtually inevitable.

The automobile industry is by now vital to Britain’s growth. This year its export performance and its productive performance have been relatively better than those of either Germany or France. What is required, therefore, is a balanced transportation system that is neither a brake upon growth nor a constant spur to the rise of prices.

Here, as elsewhere, what Britain most requires is a balance between community interests and individual liberty. This, as the British see it, is the very essence of the general task that the electors will demand of their new government. This is the significance of October, 1964.

The Tories take stock

For many of the younger Tories, the disappointment at defeat was lessened in a way by the fact of Wilson’s slim majority. Particularly if there is an economic crisis, this could mean a short life for the Labor government. And as these younger Tories see it, the party needs time to rethink its policies and to establish a new chain of command.

Douglas-Home almost brought off a miracle. He took over the Tory party at the nadir of its reputation, when a crushing defeat at the polls seemed almost inevitable. Yet he nearly won.

But Douglas-Home is the Establishment personified — the gifted amateur politician with little grasp of economic or social problems, a great landowner, an earl descended from the Duke of Marlborough and related to most of the other great political and financial dukes, earls, and viscounts of England.

Home undoubtedly will fight to retain the leadership of the Conservative Party. To him this is what the aristocracy is for; he believes that it is his duty to lead. But the rank and file of supporters are bound to turn to different, younger men with different backgrounds and ideas.

Maudling has very strong support. He is a rich man from a public school and Oxford background. But he is plain “Mister” and the same age as Wilson. Sir Edward Boyler, a third baronet, is another product of Eton and Oxford, and he is younger still — barely forty. Edward Heath, who unsuccessfully negotiated for Britain’s entry into the Common Market, is a solid middle-class professional politician. But he did not shine in the election and has virtually no public following.

Ian Macleod, however, could make a comeback. A young liberal Conservative who held cabinet rank, he resigned when Home was made Prime Minister. One dark horse is Enoch Powell, the “conscience of the party.” A stern, high-principled, thoughtful right-winger, Powell conceivably could benefit if there were opposition to the progressive liberalism of the other candidates for party leader.

Another liberal Tory, Aubrey Jones, once Minister of Fuel and Power, has written that the Tories lost the election because “they lost their hold on the middle class.” The Tory party has, he says, also lost touch with young scientists, professional men, and business executives. To win again, it must regain that touch.