The Thirties: An Intimate History of Britain

As Thomas was speaking to the Commons, all sorts of other ambitious plans were being drafted. These included a £37.5-million, five-year road-building programme, improvements on the railways, £1 million for colonial development schemes which included building a bridge across the Zambezi — and plans to attract new industries to those areas of Britain where unemployment was highest. Thomas went to Canada for several weeks to try to stimulate the market for British coal and ships. His success was very limited. One of the three assistants who had been appointed to help him in his gargantuan task when they weren’t busy with their other responsibilities, Tom Johnston, Under-Secretary of State for Scotland (the other two were the wealthy and arrogant Sir Oswald Mosley, once a Conservative MP but now Labour’s Chancellor of the Duchy of Lancaster and fizzing with new schemes, and the veteran politician George Lansbury, whose espousal of ‘Poplarism’ — named after a rate strike in London’s deprived East End in 1921 — had made him a symbol of local defiance of central government in the interest of the poor and needy) pressed for the construction of a road round Loch Lomond (what he got was the reconstruction of the coach road from Aberfoyle to the Trossachs). Lansbury favoured a retirement pension for workers at sixty (‘Better pay the old to do nothing than the young,’ commented Thomas Jones), a colonising scheme in Western Australia and a land reclamation programme at home.

By November 1930 Thomas was able to report to Parliament that £24 million had already been spent on stimulating public works schemes. But for James Maxton, chairman of the Independent Labour Party (ILP), such initiatives were certainly ‘not socialism’, and he taunted Thomas with being ‘caught in a spider web of capitalism’, and prophetically warned that a choice would have to be made between the government and the unemployed — and he knew which side he would be on.

In October 1929 a heavyweight committee was appointed under the chairmanship of a barrister, Lord Macmillan, to examine the workings of the banking and financial systems and to make recommendations ‘calculated … to promote the development of commerce and the employment of labour’. Macmillan, who later confessed that he ‘never learned to move with any ease in the realm of finance’, was surrounded by some expert and authoritative minds. There were employers, including the President of the Federation of British Industries, a professor of banking from the London School of Economics, a director of the Bank of England, a merchant banker and a former Permanent Secretary to the Treasury, working alongside a former ‘Red Clydesider’, J.T. Walton Newbold, while the trade union slot was filled by Ernest Bevin of the Transport and General Workers’ Union. The economist John Maynard Keynes, whose hand had been behind the ‘remedy for unemployment’ set out in the Liberal election manifesto We Can Conquer Unemployment (distilled from the famous ‘Yellow Book’, Britain’s Industrial Future), was also invited to join.

The Committee, which was criticised in some quarters as being ‘packed in favour of finance’, took evidence throughout 1930 and into the following year. Keynes presented his — which was in effect a dry run for his two-volume work A Treatise on Money, published later in the year — ‘like a seminar’, seeking to educate the Committee on the fundamental distinction between saving and investment: the world’s wealth had not been accumulated by thrift, but rather by enterprise. Savings by themselves achieved nothing: they needed to be put to work. From this followed — though Keynes took several cliffhanging days to expound what followed: ‘You are a complete dramatist,’ Macmillan said admiringly — his ‘favourite remedy’: home investment by the government to ‘break the vicious circle’ of underinvestment and mop up unemployment by increasing domestic demand rather than relying on the vagaries of the export market. Along with this went the further rationalisation of industry, protection of the home market by tariff barriers (a new departure for Keynes), and bringing down interest rates — cheap money.

Reginald McKenna, who had been a respected Liberal Chancellor of the Exchequer during the First World War, and subsequently Chairman of the Midland Bank, agreed, and gave an easy-to-follow explanation of how this could work in practice: with more money in circulation more boots would be bought, more men would be taken on to make the boots, their wages would be spent on cotton goods, which would create employment in the cotton industry, and so it would go on. Ernest Bevin was equally enthusiastic, envisaging the prospect for coalminers, whose purchasing power was almost half what it should have been; if it was raised ‘it would lead to a greater demand for boots for children, and clothes and furniture and luxuries and things of that kind’.

But when the ill-prepared and irritable Montagu Norman appeared before the Committee, he rejected Keynes’ view that the financial system was ‘jammed’ and the key to unlock it was obsolete: in Norman’s view it was industry that was jammed, and since he saw the Bank of England’s relation to the nation as similar to that of a high street bank’s to its customers — that is, to ensure that they did not live beyond their means — industry needed rationalisation, not credit, to meet its difficulties. He accepted, however, that rationalisation was hardly a short-term fix, and agreed that unemployment would be ‘apt to increase’ (the word ‘temporarily’ was added in the final report to sweeten the pill). In essence the Bank’s view — more ably put by others subsequently — rejected the notion that the return to the Gold Standard in 1925, much to the disquiet of Keynes, and indeed McKenna, had resulted in inflated interest rates, or that there were any other monetary shortcomings. The basic problem was that British industry was uncompetitive, and until its house was put in order (largely by wage cuts, ‘encouraging’ labour mobility by cutting unemployment pay, reducing taxes on profits and — of course — rationalisation) any other remedies would be merely palliative.

By December, after less than six months in office, the verdict of Hugh Dalton, then Under-Secretary at the Foreign Office (‘The under secretaries are all aristocrats,’ Beatrice Webb had sniffed when the government was formed: Dalton’s father had been Canon of St George’s Chapel, Windsor, and an intimate friend of George V), was that ‘the Labour Government as a whole has been pretty disappointing with bright patches. Thomas and Maggie Bondfield [Margaret Bondfield, Minister of Labour] are two of the most obvious failures. Few have anything good to say about either of them. MacDonald has been messing about again with the idea of the Economic General Staff, and having economists to lunch. But nothing concrete comes of it.’ Thomas Jones was not much more optimistic: ‘Labour is worried by the growing figures of unemployment. JHT [Jimmy Thomas] for some weeks now seemed to lose his nerve entirely. All criticism from all sides, which used to be spread over several Departments, is concentrated on him. There have been various devices for saving his face, the latest is a luncheon party which I have got to give for the PM.’

This was one of several such soundings-out about setting up ‘a new machine which Ramsay could hail as his own creation’. The ‘upshot of all this cogitation’ was the appointment in January 1930, when employment had risen to just under 1.5 million, of an Economic Advisory Council (EAC) which would be ‘the eyes and ears of [the Prime Minister] on economic questions’. MacDonald hoped it would be more than a talking shop: ‘If it meets on a Monday, it must be ready for action to be taken on a Tuesday,’ he insisted. The Council included bankers, industrialists, two scientists, the socialist intellectuals G.D.H. Cole and R.H. Tawney — and J.M. Keynes, plus Ernest Bevin and Walter Citrine as trade union voices.

There was considerable overlap between the personnel and the remits of the Macmillan Committee and the EAC, and since it had no executive authority and a rather vague brief, Citrine was concerned that EAC was likely to become a dumping ground for ‘all the odds and ends that government likes to turn over to us’. Its secretary, the Cambridge economist Hubert Henderson, editor of the Nation until it merged with the New Statesman in 1930, was equally underwhelmed, since according to one of his colleagues, ‘He hated woolly thinking and theorising … and scorned Labour’s economic theories.’ In the event it proved impossible to get a consensus between the businessmen and the economists about the central issue of how to deal with unemployment, and Keynes persuaded MacDonald to set up a smaller group comprising solely economists, with him in the chair as an experiment to test ‘the hypothesis, that [economics] can be treated like any other science, and ask for qualified scientists in the subject to have their say’.

By the summer of 1930 the original EAC was meeting less and less, and Bevin and Citrine had become disillusioned. The breakaway group of economists was equally fissiparous, and it proved wearisome to draft a report that was satisfactory to all — when it was published in October, Professor Lionel Robbins from the London School of Economics disassociated himself from the majority view entirely, and wrote a passionate defence of free trade. Nevertheless, no matter how ineffective the EAC was perceived to be, it was the first time a British Prime Minister had received consistent economic advice independent of the Treasury. Moreover, it was a sobering educative experience for those who sat on it, particularly Bevin and Citrine, who saw at first hand just how complex the problems were, and how irretrievably economic and political considerations were enmeshed.

If Dalton thought that the Cabinet was ‘full of overworked men growing, older, more tired and more timid with each passing week’, the dashing Chancellor of the Duchy of Lancaster was seething with energy and radical solutions. After several frustrating months working with Jimmy Thomas, who was not only ‘growing old and tired’, but also more lachrymose, and was inclined to drink too much, Sir Oswald Mosley produced what he declared was ‘a coherent and comprehensive conception of national policy’, which he sent to Ramsay MacDonald on 23 January 1930. The ‘Mosley Memorandum’ asserted that the government needed to take charge of the economy, with a new department set up under the direct control of the Prime Minister to ‘mobilise national resources on a larger scale than has yet been contemplated’. Britain’s long-term economic problems would be met by systematic planning to create new industries and revitalise existing ones, while the immediate problem of unemployment would be solved by an ambitious three-year £200-million programme of public works which would cut through all the red tape involved in local authority schemes, and make roadbuilding a national responsibility. In addition, the school leaving age should be raised and retirement pensions paid earlier — shrinking the workforce from both ends. It amounted to a ‘British equivalent of the Russian “Gosplan”’, thought Fenner Brockway. It didn’t really, though it was in favour of pretty heavy — if somewhat ambiguous — state intervention. But for Beatrice Webb its proposals were ‘as grandiose as they are vague’.

Nevertheless, the Cabinet debated Mosley’s package at length over the next few months. Snowden was obdurate: investment capital was limited, and if it was spent on ambitious public works schemes it would not be available to make Britain’s export industries competitive. A loan such as Mosley proposed would push up interest rates and destroy overseas confidence. MacDonald was ambivalent: he was depressed by Snowden’s ‘hard dogmatism expressed in words & tones as hard as his ideas’, yet was unconvinced that massive public spending was the answer. By February 1930 the government had already sanctioned £37 million worth of road improvement programmes but only £27 million worth of schemes had been put in hand, and only 1,620 men had been given jobs.

Mosley was coldly furious. Sneering that a Napoleon could spend £200 million in three years if he wanted to, he quoted Keynes against the Treasury orthodoxy, and resigned on 20 May 1930. His resignation speech to the House on 29 May, during the debate on a Conservative vote of censure on the government’s unemployment policy, was a powerful indictment: present government policies were providing jobs for only 80,000 people a year, at a time when unemployment was over 1.75 million and still rising. It was a brilliant performance, and the sharp-tongued diarist and tireless social reformer Beatrice Webb, who recognised that Mosley possessed both ‘a young man’s zeal’ and the ability to ‘use other men’s brains’, wondered, ‘Has MacDonald found his superseder in O.M.?’ MacDonald turned in a lamentable performance, seeming completely out of his depth in answering his critics.

The government survived nevertheless, and MacDonald reshuffled. Thomas was shoved off to the Dominions Office (though he was later allowed to retain responsibility for rationalisation), MacDonald put himself at the head of a panel of Ministers set up to develop the government’s unemployment policies; that barely noticed rising star Major Clement Attlee, who considered that Mosley ‘always speak[s] to us as if he were feudal landlord abusing tenants who are in arrears with their rent’, replaced him at the Duchy of Lancaster.

Mosley, showing his arrogance and fatal lack of political judgement, founded his New Party in February 1931, since in his view the ‘old men’ in the ‘old parties’ had signally failed to deal with the problems of the postwar world, and thus a new party must be formed ‘not to introduce Utopia but to prevent collapse’. His would be a party of neither right nor left, composed of young men with an agenda of parliamentary reform and economic planning, which sought to ‘apply scientific method to public affairs to determine precisely what things must be done’, untrammelled by party loyalty or political dogma, ready to take ideas from ‘anyone so long as they are realist — be they Gladstone, Marx or Joseph Chamberlain’. Its role would be somewhere between a parliamentary ‘ginger group’, an intellectual think tank and a ‘new movement’ designed to ‘sweep away the mockery and pretence of the old game of party politics’. Nevertheless the party formed to save Britain in its hour of crisis attracted only three Labour MPs, one of whom, John Strachey (a former member of the ILP and future Communist supporter who had resigned with Mosley when his memorandum was rejected — he had been Mosley’s best man when he married the daughter of Lord Curzon) soon left. The New Party, which appeared to have ‘no vision beyond the immediate emergency’, largely disintegrated after failing to win any seats in the 1931 election. In October 1932 Mosley, who felt that the Italian dictator Benito Mussolini had the vision and drive the British government lacked, founded the British Union of Fascists.

‘Parliament itself is too big, too clumsy and too inexpert a body even to begin to tackle the complex problems of a modern community,’ John Strachey and C.E.M. Joad (a maverick philosopher, writer and self-styled polygamist who became a household name in the 1940s as a member of the BBC’s ‘Brains Trust’) had written in an article on parliamentary reform for the journal Political Quarterly in 1931. And in the crisis years of the early 1930s setting up committees to root around trying to find ways out of the blizzard was not indeed the prerogative of Parliament alone. As a young economist, Colin Clark, was to observe, ‘The most recent universal remedy is apparently contained in the word “Plan”.’

‘Everyone has a Plan,’ complained the Labour weekly the Clarion, though it considered most to be little more than ‘undergraduate work’, seeking compromises rather than the root-and-branch reconstruction of capitalism it deemed necessary, for which the Soviet Five Year Plan was something of a model. Indeed, there was soon an organisation the rationale of which was planning. On 14 February 1931 a 20,000-word ‘National Plan for Great Britain’ was published as a supplement to the Week-End Review, a magazine started by Gerald Barry and the editorial team who had all resigned from the Saturday Review when Beaverbrook converted to his policy of Empire preference. This plan was much needed because, in the view of Barry and its author, Max Nicholson, the country was in the hands of ‘elderly men with elderly ideas’, working with a ‘Heath Robinson contrivance composed of the clutter of past generations and tied together with rotten bits of string’. The ‘drift’ and ‘stagnation’ must stop, since ‘a great part of the present troubles of this country and the world are due to the failure to adapt erratic and conflicting national policies into a Plan’. The result was wide-ranging and prescient calls for an overhaul of the machinery of government, turning the Post Office and the Ministry of Works into autonomous public utilities — indeed, a measure of devolution from Whitehall and Westminster to industry the creation of a Bureau of Statistics to inform planners, designating national parks, trying to attract tourists, throwing a green belt around London and redeveloping the South Bank of the Thames. And that June, intending to lobby to turn vision into policy, the Political and Economic Planning (PEP) group held its inaugural meeting, and started to issue regular reports and circulate digests of these reports as ‘broadsheets’ entitled — what else — Planning. With a growing number of research groups — fifteen within a year — beavering away on various topics such as town and country planning, fuel policy, housing, the press, consumer protection and government spin, PEP saw its role as being ‘the ginger group of gradualness’, in the words of Israel Sieff, vice-chairman of Marks & Spencer, who took over as chairman in December 1932, aiming to influence opinion-formers of any political hue in ‘a crusade for continuous change’.

Unemployment hit the trade union movement hard, with falling numbers of members and a greater proportion of the wages of those in work going to support their unemployed brothers and sisters. However, until 1931 the movement had few alternatives to propose, and generally felt that the Labour government was doing its best — certainly no other party would do better — and that in general economic decisions were beyond its remit. But Keynes’ attack on the Gold Standard, and the suspicion that Treasury economic orthodoxy was likely to result in a call for wage cuts, led Bevin and Citrine to decide that it was important that the TUC General Council should formulate its position. An Economic Committee was set up, and Bevin and Citrine drew on their experience on government-sponsored committees to call for the nationalisation of the Bank of England (still a private corporation independent of the government, despite its responsibility for the nation’s monetary policy), iron and steel, leaving the Gold Standard and increasing government spending to increase purchasing power — very much what Keynes was also saying. If the TUC as a body was slower to develop an alternative economic strategy than its more unorthodox leaders — though by 1932 the Economic Committee had become its most influential policy body, particularly on the public control of industry and trade — defensive in the face of the growing possibility of wage cuts and calling for ‘as full a development as possible of the economic relations between the constituent parts of the British Commonwealth’, the government was equally unresponsive to trade union pressure.

By August 1930 Bevin was in despair. He considered the situation so serious ‘that it warrants a state of emergency. The best brains in the country should be mobilised for the purpose of really tackling the problem instead of “footling about” in the manner we are at the moment.’ In early 1931 he joined with some of these ‘best brains’ as Chairman of the Society for Socialist Inquiry and Propaganda (SSIP — usually referred to as ‘zip’), with the former Fabian G.D.H. Cole as Vice Chairman, one of two bodies set up in an attempt to ‘ginger up’ thinking and activity in the Labour Party and provide it with the nuts and bolts of socialist policy, as Cole was convinced that the government was mired in a ‘stagnant swamp’ and unable to act.

The other body, the New Fabian Research Bureau (NFRB) (since, according to Cole’s wife Margaret, the old one was becoming ‘moribund’), was tasked with considering all areas of long-term socialist policy, while the SSIP’s role was to diffuse its findings and stimulate discussion in the wider labour movement. G.D.H. Cole’s intention was to ‘rally the young men, among whom there is some excellent stuff’, and indeed both were organisations of all the talents (and not all young or male). Apart from the Coles, participants included Stafford Cripps, a lawyer of great intellectual repute — and earning power — who was wished on a Bristol constituency as its MP in January 1931; George Lansbury; Ellen Wilkinson, the MP for Jarrow; Clement Attlee, who fourteen years later would be Prime Minister in the Labour government that would implement much of what these bodies advocated; the erratically brilliant Harold Laski; the economist Evan Durbin; another economist, the apprentice politician Hugh Gaitskell (‘the cleverest and most self-contained of the young men Dalton advanced’); Arthur Pugh, General Secretary of the Iron and Steel Trades Association (who, together with Bevin, represented over half a million workers); and Leonard Woolf, husband of Virginia, who organised the international section.

Never intended as ‘parties within a party’ (as the ILP was charged with being), these two bodies were rather a collection of ‘loyal grousers’, several of whom would metamorphose into ‘patriotic gadflies’ during the Second World War. They were astonishingly industrious, arranging meetings, discussions and ‘kite-flying’ (today’s ‘out of the box’ or ‘blue skies’ thinking) sessions, educational meetings for students and trade unionists, and summer schools, in addition to producing a large number of influential books, booklets, pamphlets and memoranda, full of sound analysis and helpful advice. But for some time the government was politely but firmly dismissive of their efforts, and their penetration of the Labour machine proved to be almost as gradual as any old Fabian might have anticipated.

Hugh Dalton, appalled at how woefully ignorant he felt the Labour Party was about the workings of high finance, set out to meet ‘as many City blokes as possible’ in an attempt to fill in the blanks. One of these was Nicholas Davenport, who had worked with Keynes in the City and wrote the City column in the New Statesman under the byline ‘Toreador’. Although ‘all the claptrap of Clause 4 socialism’ was not for him, Davenport considered himself to be a radical, and he was certainly an iconoclast when it came to the workings — or failures to work — of the City. He would look back on the 1930s as a time when ‘the City’s Establishment was … in effect an old boys’ racket … It was a sort of Mafia in reverse — a gang based on honest dealing instead of blackmail, on good “hard” money (lots of it) instead of easy loot and on simplicity instead of cunning. The only rules were playing safe, resisting change, opposing new ideas, upholding the Establishment and being willing to dress up and go on pompous dinner parade in the City halls … the millions spent each year on guzzling [at these] junketings would amaze the underprivileged and enrage the poor.’

Davenport was alarmed that ‘Because the Labour Party was so ignorant of the workings of the financial system … it was bound to cause havoc if it tried to put it all under government control.’ He discussed this possibility ‘many times over coffee in City dives’ with Vaughan Berry, a City broker who was ‘an ardent undercover Labour member’, and the two decided to form ‘a private dining club where City men could meet the Labour leaders and instruct them in the mysteries of City finance so that they would not make a hash of it when they came into power’. Dalton was encouraging, and Davenport recruited a number of financial journalists, a banker, a stockbroker, an accountant, a statistician, the director of a gold bullion house, and later two economic policy perennials, Evan Durbin and Hugh Gaitskell, plus Douglas Jay, who would be an influential — and profoundly anti-European — advisor to Attlee’s post-war Labour government, but was then a staff writer on the Economist.