The Ideas That Shaped Post-War Britain

wholly inconceivable that the politician of the future, inspired by these economists, should persuade the trade unions voluntarily to disband, and the people to accept a permanent reduction of the social services with the enthusiasm that greeted the sharp deflationary budget of 1931. It is not impossible that the British working class could be persuaded, by the compelling force of ideas, to abandon with cheerful courage the social hopes that they have entertained for generations; and thus to acquiesce in a mournful return to a world that they had left behind them for ever. It is not impossible to conceive this; but such a change is, surely, in the highest degree improbable. Social systems have rarely developed backwards.19

The counter-arguments which gave the New Right its victory in the struggle for intellectual and moral leadership in the late 1970s and early 1980s must be seen against this background. Their most striking feature is that they were not new at all: they consisted of more or less ingenious re-statements of very old arguments, which the rising liberal collectivists of the late nineteenth and early twentieth centuries thought they had refuted. Inequality, said the New Right, is desirable; social justice is a chimera. So are the positive freedoms embodied in social-citizenship rights and the notion of a public domain, separate from the market domain. So far from erecting boundaries between the market and other domains, market relations should be given as free a rein as possible. The invisible hand of free competition does produce opulence, state intervention in the market-place does misallocate resources and the principles that govern the finances of a private household do apply to the public finances. From this, it followed that Keynesian pump priming was inherently inflationary and state planning, even of the modest kind attempted by the governments of the 1960s and 1970s, inherently wasteful. The role of the state was to enforce contracts, to supply sound money and to ensure that market forces were not distorted. To attempt more than this was to embark on a slippery slope to inflationary crisis and collectivist oppression.

To be sure, that was only the beginning of the story. If the New Right had confined itself to a re-statement of nineteenth-century economics, no one would have listened. The originality and power of its critique of the Keynesian social-democratic system came from its politics, not from its economics. Above all, they came from its answer to the Keynesian social-democratic argument from market failure. The New Right did not, on the whole, deny that markets can fail. But it added that market failure was balanced – and more – by government failure. It followed that attempts to correct market failure through government action did more harm than good.

One reason, derived from the pessimistic Austrian anti-rationalism of Hayek, was epistemological.20 No government or planning board, the argument ran, not even one equipped with the most sophisticated technology, can know enough to second-guess the ‘spontaneous order’ of the market-place. If it tries, it will fail; if it tries to compensate for its failure with further interventions (as it is inherently likely to do), it will make matters even worse. That leads on to the second reason, derived from the public-choice theorists of the so-called Virginia School. Excessive government intervention, according to this argument, is not the product of intellectual hubris alone. It springs from the inescapable pressures of party competition in conditions of mass democracy, and from the equally inescapable pressures of bureaucratic empire-building in the conditions created by an extended modern state. Behind all this lies the simple, not to say simplistic, premise that political processes can be reduced to economic ones: voters are like shoppers without a personal budget constraint; politicians seeking votes are like salesmen competing for custom; bureaucrats strive to maximise their bureaux as entrepreneurs strive to maximise their profits. On that key assumption rest the conclusions that politicians will always promise more than they can perform, voters will always vote for exaggerated promises, officials will ceaselessly seek to extend the scope of their activities and the extended democratic state is therefore, of necessity, a prey to self-stultifying overload.21

Yet even these arguments were not as new as they were sometimes thought to be. They were the latest manifestations of a long line of speculation and rhetoric, going back to the earliest apologists of the capitalist market economy and of the unconditional rights of private property.22 The notion that markets are, in some mysterious sense, more ‘spontaneous’ than governments goes back to Adam Smith’s famous claim that a propensity to ‘truck, barter and exchange’ is fundamental to human nature. The proposition that deliberate government planning cannot out-perform market spontaneity goes back to his doctrine of the invisible hand, and perhaps even to Mandeville’s Fable of the Bees, with its sardonic claim that ‘private vices’ unintentionally produce ‘publick benefits’. The claim that democratic party competition is bound to engender inflationary overload is a modern version of the fears that disturbed the sleep of a long line of nineteenth-century economic liberals, alarmed by the thought that a democratic suffrage would endanger the market order. On a deeper level, the assumptions behind it can be traced back to the rhetoric of the eighteenth-century Court whigs who dismissed the ideal of civic activism on the grounds that, as J. G. A. Pocock puts it, men were ‘interested beings’, to be policed ‘by a strong central executive’.23

This does not prove that the arguments concerned are false, of course: old arguments may well be better than new ones. But it does raise an obvious question. Why should a set of arguments, which had seemed intellectually discredited and politically irrelevant for the first three decades after the Second World War, suddenly experience a miraculous rebirth in the fourth and fifth? Granted that the history of social thought provides plenty of examples of recycled ideas masquerading as new ones, what was it about these particular theories that made it possible to recycle them to such effect?

For many New Right sympathisers, the answer lies in a kind of inverted historicism, as deterministic as the historicism of the Keynesian social democrats and their precursors in the first part of the century. The inexorable tides of economic and social change which the Keynesian social democrats once rode, the argument runs, have changed direction. They are still there, and they are still inexorable; but they no longer run from the small to the big, from the disorganised to the organised, or from the individual to the collective. Now they run in the opposite direction. Like a de-coagulant dissolving a blood clot, the micro-electronic revolution has dissolved the great power blocks that impeded the free flow of market forces. Large organisations have broken up and social classes have merged. As a result, the state has been disempowered. For in the fluid, dynamic, rapidly-changing economy created by modern technology, the techniques of Keynesian social-democratic regulation have no purchase. Planning, corporatism, even demand management have become unnecessary, and in any case impossible. As David Howell put it during the high noon of the New Right,

The unplanners have defeated the planners completely. There has to be less government because more government is becoming unnecessary and unworkable. The corporatists, who rested their thinking on big unionism, big government, big finance and big industry, are seeing their edifice collapse not because they have lost some temporary political power struggle (or because some other clique has won it) but because this degree of centralism has simply become outdated. The computer and micro-electronic communications disperse power and knowledge, and therefore traditional political formations, just as they disperse and alter industrial and commercial activity. So a new business landscape has emerged, and therefore a new political landscape as well.24

Unfortunately, there are at least two weaknesses in this answer. In the first place, its claims are too universal. The information revolution and its accompanying economic fluidity have affected the entire globe. The moral and intellectual victory of the British New Right was peculiar to Britain, or at most to the English-speaking world. If the demise of Keynesian social democracy and the rise of the New Right were the products of some inexorable technological imperative, continental Europe and Japan would have seen something similar. But although the forms of economic regulation and the rhetoric of political and intellectual leaders have changed in both, neither has experienced anything remotely comparable to the New Right ascendancy in Britain. Technological imperatives that manage to produce Margaret Thatcher in Britain, but François Mitterrand in France and Helmut Kohl in Germany, cannot be as imperious as all that.

Much the same applies to the suggestion that inexorable tides of change have disempowered the state. No one can dispute that the British state is less effective, less respected and, in important ways, less powerful today than it was in 1945. This is scarcely surprising. In 1945, it had just emerged triumphant from the most terrible test in its entire history. It had nowhere to go but down. The same is true, in varying degrees, of the other victor states of the Second World War. The Soviet Union has disappeared altogether, while the United States has suffered a decline almost as marked as that of the British state. But it is not true of the defeated states of the Second World War or, for that matter, of the other major states of western Europe. As Alan Milward has argued, the post-war history of western Europe is a history of the revival and reconstruction of the nation-state, not of its decline.25 The German, French, Spanish and even Italian states are, by any reasonable definition, more powerful, more efficacious and more respected in the 1990s than they were in the 1940s. Indeed, most modern states have far more power over their citizens than Napoleon, Louis XIV or, for that matter, Bismarck or Nicholas II could have dreamed of. Of course, there is much that they cannot do. In capitalist market economies, they cannot force up the long-term rate of growth by expanding demand, successfully defy the world’s currency markets or make much difference to pre-tax income differentials. But they never could.

That leads on to the second weakness inherent in the New-Right world view. It purports to explain the second phase in the post-war struggle for hegemony, but it ignores the third. If it were true, there would be no cracks in the New Right’s ascendancy, and no intimations of a new policy paradigm or a new ideological divide. The 1990s would be a continuation of the 1980s; the social and economic imperatives that gave the New Right hegemony in the 1970s could be relied upon to perpetuate its position into the next millennium. But, as we have seen, there are striking differences between the ideological climate of the late 1990s and that of ten years ago; that is, between Act Two of the drama and Act Three. And the transition from Act Two to Act Three is as important to the play as that from Act One to Act Two.

The key to these transitions, I shall argue, lies in a dimension which the political language of the last one hundred years does not capture. Since the late nineteenth century, it has been customary to distinguish between ‘individualism’ and ‘collectivism’ and to think in terms of transitions from one to the other. The Victorian jurist, A. V. Dicey, famously thought that the age in which he lived was dominated by a swing to collectivism, and away from the individualism of the early part of the century. More recently, W. H. Greenleaf has found the key to the British political tradition in a continuing dialectic between ‘collectivism’ and what he calls ‘libertarianism’ – essentially another word for individualism. More recently still, Robert Skidelsky has written the history of the twentieth century as a history of the rise and fall of collectivism on the one hand, and of the fall and rise of individualism on the other. Albert Hirschman’s now-classic suggestion that ‘involvement’ swings back and forth from the public to the private sphere belongs to the same genre.26

However, despite its distinguished lineage, the distinction between individualism and collectivism is too crude to catch the full meaning of the story I have been discussing. Individualism, but for what kind of individuals? Collectivism, but for which collective goals? The abstinent, energetic, self-improving, God-fearing puritans whom Max Weber pictured as the ancestors of modern capitalism were individualists. So were (and are) the rationally-calculating utility-maximisers of Jeremy Bentham, of neo-classical economics and of the public-choice theorists of the Virginia School. But the moral and emotional meanings of these two kinds of individualism are far apart: so far, in fact, that it hinders understanding to use the same term for both. The same is true of ‘collectivism’. Joseph Stalin and R. H. Tawney both held ‘collectivist’ values, but their conceptions of the purposes and modalities of collective action were diametrically opposed.

Plainly, no simple classification can do justice to all these nuances. Yet this does not mean that there is nothing more to be said. Cutting across the familiar distinction between collectivism and individualism is a more subtle distinction between two conceptions of the Self, of the good life and of human possibilities and purposes. On one side of the divide are those who see the Self as a static bundle of preferences, and the good life as one in which individuals pursue their own preferences without interference from others. On the other are those for whom the Self is a growing and developing moral entity, and the good life one in which individuals learn to adopt higher preferences in place of lower ones. On one side of the divide, stress is laid on satisfaction; on the other, on effort, engagement and activity. The first group is uneasy with the suggestion that some satisfactions may be morally superior to others. The second believes that it is better to be Socrates unsatisfied than a pig satisfied.

It is not easy to find labels for these two conceptions. They might be termed ‘hedonist’ and ‘moralist’, or perhaps ‘passive’ and ‘active’. This yields a fourfold classification, in place of the simple dichotomy of individualism and collectivism. Individualism can be passive and hedonist, or active and moralist. So can collectivism. Individual liberty can be valued, in other words, because it allows individuals to satisfy freely-chosen desires, to live as they please so long as they do not prevent others from doing the same. Or it can be valued because it enables them to lead purposeful, self-reliant and strenuous lives, because it encourages them to take responsibility for their actions and, in doing so, to develop their moral potential to the full. By the same token, collective action and collective provision may be seen as instruments for maximising morally-neutral satisfaction, or as the underpinnings of personal and cultural growth, of engagement in the common life of the society and so of self-development and self-fulfilment. Anthony Crosland’s collectivism was essentially passive-hedonistic. So was Nigel Lawson’s individualism. Gladstone’s individualism was moralist-activist, as was R. H. Tawney’s collectivism.

From this perspective, the ebbs and flows in the struggle for moral and intellectual hegemony in post-war Britain acquire a much more complex significance. A stylised account of them might run like this. Instead of three Acts, the drama now contains five. In Act One, lasting from the mid-1940s to the mid-1950s, the post-war generation of Keynesian social democrats exercised moral and intellectual leadership. Their collectivism was active and moralistic. For them, rights went hand-in-hand with duties, security with activity. A just society would be a moral society – not only because its resources would be distributed fairly, but because its members would be free to lead active and fulfilling lives. Collective action and resource redistribution would rescue their beneficiaries from dependence, indignity and passivity. It would also enable them – perhaps even oblige them – to repay society for the help it had given them. An enlarged public domain held no terrors: the public domain was a place of engagement, governed by an ethic of service and commitment. Beveridge was the emblematic figure and, as Jose Harris shows in her chapter in this book, Beveridge’s vision of social citizenship was quintessentially activist, drawing on a notion of civic virtue that went back to classical Greece. Social citizenship was a status, but a status that had to be earned. Its entitlements were not charitable doles granted to passive dependants, who had done nothing to help themselves. Benefits were paid out because contributions had been paid in; and Beveridge devised his system in this way because, in his own words, ‘Management of one’s income is an essential element of a citizen’s freedom’.27 And active citizenship was a means as well as an end. Social security had to be ‘won by a democracy; it cannot be forced on a democracy or given to a democracy’.28 The same values ran through the participatory productivism of the wartime shop stewards’ movement, and inspired Stafford Cripps’s conception of democratic planning as a system of moral suasion, in which ‘the Government, both sides of industry and the people’ worked together to achieve a common end.29 They also underpinned Attlee’s robust defence of peacetime conscription as a legitimate quid pro quo for the welfare state.30

Eventually, however, Act One gave way to Act Two. Gradually in the 1950s, and with gathering speed in the 1960s, Keynesian social democrats abandoned the austere moral activism of Attlee, Beveridge and Cripps. Keynes himself had never really shared it; though he killed himself overworking for his country, his moral vision was always suffused with the hedonistic relativism he had absorbed in the Cambridge and Bloomsbury of his youth. Later Keynesian economists saw themselves as technicians rather than moralists, or even citizens. In their eyes, their professional task was to understand the working of the economic system and to advise policy makers how to translate their preferences into action. As private individuals they might or might not make moral judgements of their own, but the realm of moral judgement and the realm of economic science were to be kept rigidly apart. What was true of post-Keynesian economic collectivism was also true, albeit for different reasons, of post-Beveridgean welfare collectivism. The notions that rights should be balanced by duties, that activity was better than dependence and the point of collective provision was to foster self-reliance and civic activism came to be seen as patronising, or elitist, or (horror of horrors) ‘judgemental’. Meanwhile, the service ethic of the professional mandarinate – the twentieth-century equivalent of the ‘clerisy’ of the nineteenth century and, as such, the chief guardians of the moral-activist tradition – came to be seen as camouflage for illegitimate privilege.31 On a deeper level, as Geoff Mulgan’s chapter suggests, the moral and cultural presuppositions of that ethic were undermined by a loss of confidence on the part of the mandarinate itself, exacerbated by an insistent demotic relativism on the part of its critics. Among left-of-centre Keynesian social democrats, equality came to be seen as a good in itself, irrespective of the uses to which the fruits of egalitarian policies were put. Among their right-of-centre counterparts, a technocratic managerialism, in which the good life was equated with rising living standards and political leadership with the promotion of economic growth, increasingly prevailed.32

If the mentality of the first group was epitomised in Hugh Gaitskell’s ‘socialism is about equality’, that of the second was summed up in Harold Macmillan’s 1957 boast that the British people had ‘never had it so good’. If the emblematic Keynesian social democrat of the 1940s was William Beveridge, that of the 1960s and 1970s was Anthony Crosland, with his ringing plea for an ethic of private pleasure in place of the Fabian ethic of public duty:

We need not only higher exports and old age pensions, but more open-air cafes, brighter and gayer streets at night, later closing-hours for public houses, more local repertory theatres, better and more hospitable hoteliers and restaurateurs, brighter and cleaner eating-houses, more riverside cafes, more pleasure gardens on the Battersea model, more murals and pictures in public places, better designs for furniture and pottery and women’s clothes, statues in the centre of new housing estates, better-designed street lamps and telephone kiosks, and so on ad infinitum …

… To-day we are all incipient bureaucrats and practical administrators. We have all, so to speak, been trained at the L.S.E., are familiar with Blue Books and White Papers, and know our way around Whitehall … Now the time has come for a reaction: for a greater emphasis on private life, on freedom and dissent, on culture, beauty, leisure, and even frivolity. Total abstinence and a good filing system are not now the right sign-posts to the socialist Utopia: or, at least, if they are, some of us will fall by the wayside.33

Alas for riverside cafes. As Raymond Plant suggests in a later chapter, hedonistic collectivism contains a built-in flaw. By definition, the redistribution it demands makes some people better off and others worse off. Also by definition, it can offer no convincing moral argument for doing so. If rights are not balanced by duties, why should the rich make sacrifices for the poor? If collective provision is not a means to moral improvement, why should those who do not need it pay taxes to pay for it? If the public domain is not a place of engagement, governed by a service ethic, what is to prevent it from becoming a battleground for predatory vested interests? Hedonistic collectivists could not answer these questions. By the mid-1970s, Act Two was ending. It was clear that there was a moral and rhetorical vacuum at the heart of the Keynesian social-democratic system. The beginning of Act Three saw the New Right rushing in to fill it.

For the New Right attack on the Keynesian social-democratic system was moral as well as economic and political: in the last analysis, moral rather than economic or political. Market forces were better than state intervention, not just because they were more efficient, but because the market-place was quintessentially the realm of freedom, and because only free people can be moral agents. Thrift, enterprise and self-reliance were, of course, the building blocks of a prosperous economy. But that was not the chief reason for valuing them. They were also the stigmata of the ‘vigorous virtues’ – of virtues whose possessors were, above all, ‘upright, self-sufficient, energetic, adventurous, independent-minded, loyal to friends and robust against enemies’.34 The ‘dependency culture’ allegedly created by the hedonistic collectivists of the Crosland generation was condemned, not just because it ate into the public purse, but because it turned those it entrapped into ‘moral cripples’.35 ‘Victorian values’ were extolled, not just because they had prevailed in the days of Britain’s glory, but because they were morally right. Collective action and collective provision were not only sources of inflationary overload. They were sources of moral escapism, encouraging those who took part in them to shelter from the consequences of their own actions, and so engendering a corrosive culture of guilt.36

But Act Three did not – could not – last. The moralistic individualism of the late 1970s and early 1980s turned out to be as fragile as the hedonistic collectivism which had preceded it. Moralistic individualists sought to resurrect the moral economy of the nineteenth century by returning to its political economy. They saw that the ‘vigorous virtues’ had flourished in a market economy, and they assumed that the way to reinstate them was to give freer reign to market forces. They forgot that the ‘vigorous virtues’ of nineteenth-century Britain had been nurtured by, and embodied in, a much older network of institutions and practices, whose origins lay far back in the pre-market past. The market economy of the nineteenth-century lived off a stock of moral capital, accumulated over long generations to which the norms of the marketplace were at best alien and at worst anathema. Its apologists did not fully recognise the significance of this moral legacy. It was part of the air they breathed, and they simply took it for granted. Matters are quite different today. Today, as Mrs Thatcher and Hayek both half-recognised, a moral order capable of sustaining the vigorous virtues can no longer be taken for granted; it has to be created. But market forces cannot create it. The market is inherently amoral, antinomian, subversive of all values except the values of free exchange. In the market-place, the customer is king; and customers sooner or later get what they are prepared to pay for, irrespective of its moral quality. The New Right’s moral vision was, in short, at odds with its economic vision. Act Three came to an end in the mid-1980s, with the victory of the latter over the former.