by Tony Judt
The UK’s endemic balance of payments crisis was in large measure a result of the debts racked up to pay for the six-year war against Germany and Japan, to which should be added the enormous costs of supporting an effective post-war defense establishment (8.2 percent of the national income in 1955, against a German outlay of less than half that figure). The pound—still a major unit of international transactions in the 1950s—was overvalued, which made it hard for Britain to sell enough abroad to compensate for sterling’s chronic deficit against the dollar. An island country, utterly dependent on imports of food and vital raw materials, Britain had historically compensated for this structural vulnerability by its privileged access to protected markets in the Empire and Commonwealth.
But this dependence on far-flung markets and resources, an advantage in the initial post-war years as the rest of Europe struggled to recover, became a serious liability once Europe—and especially the EEC zone—took off. The British could not compete with the US, and later Germany, in any unprotected overseas market, while British exports to Europe itself lagged ever further behind those of other European producers. British manufactured exports represented 25 percent by value of the world’s total in 1950; twenty years later they constituted just 10.8 percent. The British had lost their share of the world market, and their traditional suppliers—in Australia, New Zealand, Canada and the African colonies—were now turning to other markets as well.
In some measure the relative economic decline of Britain was thus inevitable. But Britain’s own contribution should not be underestimated. Even before World War Two, Britain’s manufacturing industry had gained a well-deserved reputation for inefficiency, for coasting on past success. It was not that the British were overpriced. Quite the contrary. As Maynard Keynes pointed out in a sardonic commentary on Britain’s post-war economic prospects: ‘The hourly wage in this country is (broadly) 2/- per hour; in the US it is 5/- per hour . . . Even the celebrated inefficiency of British manufacturers can scarcely (one hopes) be capable of offsetting over wide ranges of industry the whole of this initial cost-difference in their favour, though admittedly they have managed it in some important cases . . . The available statistics suggest that, provided we have never made the product before, we have the whole world licked on cost’.137
One problem was the workforce. Britain’s factories were staffed by men (and some women) who were traditionally organized into—literally—hundreds of long-established craft unions: British Leyland’s car factories in 1968 counted 246 different trade unions with whom management had separately to negotiate every detail of work rates and wages. This was an era of full employment. Indeed, the maintenance of full employment was the cardinal social objective of every British government in these years. The determination to avoid a return to the horrors of the thirties, when men and machines decayed in idleness, thus trumped any consideration of growth, productivity or efficiency. Trade unions—and especially their local representatives, the factory shop stewards—were more powerful than ever before or since. Strikes—a symptom of labour militancy and incompetent management alike—were endemic to post-war British industrial life.
Even if Britain’s trade union leadership had followed the German example and offered amicable shop-floor relations and wage restraint in return for investment, security and growth, it is unlikely that most of their employers would have taken the bait. Back in the 1930s the future Labour Prime Minister Clement Attlee had accurately identified the British economic malaise as a problem of underinvestment, lack of innovation, labour immobility and managerial mediocrity. But, once in office, there seemed little that he or his successors could do to stop the rot. Whereas German industry inherited all the advantages of the changes wrought by Nazism and war, Britain’s old-established, uncompetitive industries inherited stagnation and a deep fear of change.
Textiles, mines, shipbuilding, steel and light engineering plants would all need restructuring and retooling in the post-war decades; but just as they chose to accommodate trade unions rather than attack inefficient labour practices, so British factory managers preferred to operate in a cycle of under-investment, limited research and development, low wages and a shrinking pool of clients, rather than risk a fresh start with new products in new markets. The solution was not obvious. Keynes, once again: ‘If by some sad geographical slip the American Air Force (it is too late now to hope for much from the enemy) were to destroy every factory on the North East coast and in Lancashire (at an hour when the Directors were sitting there and no-one else) we should have nothing to fear. How else are we to regain the exuberant inexperience which is necessary, it seems, for success, I cannot surmise.’
In France, a similar heritage of managerial incompetence and inertia was overcomeby public investment and aggressive indicative planning. British governments, however, confined themselves to collective bargaining, demand management and exhortation. For a state that had nationalized such sweeping tracts of the economy after 1945, and that was by 1970 responsible for spending 47 percent of the country’s GNP, this caution seems a curious paradox. But the British state, although it owned or operated most of the transport, medical, educational and communications sectors, never boasted any overall national strategic ambition; and the economy was for practical purposes left to its own devices. It fell to a later generation of free-market reformers—and a radically state-averse Conservative prime minister—to apply the full force of central government to the problem of Britain’s economic stagnation. But by then some of the strictures levelled at Britain’s mal-adapted ‘old’ economy were being levelled, for different reasons, at the faltering German economy too.
XI
The Social Democratic Moment
‘The important thing for Government is not to do things which
individuals are doing already, and to do them a little better or a little
worse; but to do those things which at present are not done at all’.
John Maynard Keynes (1926)
‘The challenge is not going to come from the U.S, . . . from Western
Germany or from France; the challenge is going to come from those
nations who, however wrong they may be—and I think they are wrong in
many fundamental respects—nevertheless are at long last being able to
reap the material fruits of economic planning and of public ownership’.
Aneurin Bevan (1959)
‘Our nation stands for democracy and proper drains’.
John Betjeman
‘I want to throw open the windows of the Church so that we can see out
and the people can see in’.
Pope John XXIII
‘Photography is truth. The cinema is truth twenty-four times per second’.
Jean-Luc Godard
The 1960s saw the apogee of the European state. The relation of the citizen to the state in Western Europe in the course of the previous century had been a shifting compromise between military needs and political claims: the modern rights of newly enfranchised citizens offset by older obligations to defend the realm. But since 1945 that relationship had come increasingly to be characterised by a dense tissue of social benefits and economic strategies in which it was the state that served its subjects, rather than the other way around.
In later years the all-encompassing ambitions of the Western European welfare states would lose some of their appeal—not least because they could no longer fulfill their promise: unemployment, inflation, ageing populations and economic slowdown placed insuperable constraints upon the efforts of states to deliver their half of the bargain. Transformations in international capital markets and modern electronic communications hamstrung governments’ capacity to plan and enforce domestic economic policy. And, most important of all, the very legitimacy of the interventionist state itself was undermined: at home by the rigidities and inefficiencies of public-sector agencies and producers, abroad by the incontrovertible evidence of chronic economic dysfunction and political repression i
n the Socialist states of the Soviet bloc.
But all of this lay in the future. In the peak years of the modern European welfare state, when the administrative apparatus still exercised broad-ranging authority and its credibility remained unassailed, a remarkable consensus was achieved. The state, it was widely believed, would always do a better job than the unrestricted market: not just in dispensing justice and securing the realm, or distributing goods and services, but in designing and applying strategies for social cohesion, moral sustenance and cultural vitality. The notion that such matters might better be left to enlightened self-interest and the workings of a free market in commodities and ideas was regarded in mainstream European political and academic circles as a quaint relic of pre-Keynesian times: at best a failure to learn the lessons of the Depression, at worst an invitation to conflict and a veiled appeal to the basest human instincts.
The state, then, was a good thing; and there was a lot of it. Between 1950 and 1973, government spending rose from 27.6 percent to 38.8 percent of the gross domestic product in France, from 30.4 percent to 42 percent in West Germany, from 34.2 percent to 41.5 percent in the UK and from 26.8 percent to 45.5 percent in the Netherlands—at a time when that domestic product was itself growing faster than ever before or since. The overwhelming bulk of the increase in spending went on insurance, pensions, health, education and housing. In Scandinavia the share of national income devoted to social security alone rose 250 percent in Denmark and Sweden between 1950 and 1973. In Norway it tripled. Only in Switzerland was the share of post-war GNP spent by the state kept comparatively low (it did not reach 30 percent until 1980), but even there it stood in dramatic contrast to the 1938 figure of just 6.8 percent.
The success story of post-war European capitalism was everywhere accompanied by an enhanced role for the public sector. But the nature of state engagement varied considerably. In most of continental Europe the state eschewed direct ownership of industry (though not of public transport or communications), preferring to exercise indirect control; often through notionally autonomous agencies, of which Italy’s tentacular IRI was the biggest and best known (see Chapter 8).
Conglomerates such as IRI serviced not just their employees and consumers, but also a variety of political parties, trade unions, social service agencies and even churches whose patronage they dispensed and whose influence they enhanced. Italy’s Christian Democrat Party ‘colonised’ at every level from village to national capital a protean range of public services and state-controlled or state-subsidized products: transport, electronic media, banks, energy, engineering and chemical industries, the building trades, food production. The primary beneficiaries, after the Party itself, were the millions of children and grandchildren of landless peasants who found secure employment in the bureaucracies that resulted. The Italian National Institute for War Orphans employed 12 people for every 70 orphans and spent 80 percent of its annual budgetary allocation on salaries and administration.
In a similar way, control of public-sector companies in Belgium allowed the national government in Brussels to buffer local resentments and bribe contending regional and linguistic interests with services, jobs and costly infrastructure investment. In France the post-war nationalizations established long-lasting networks of influence and patronage. Electricité de France (EDF) was the country’s primary energy provider. But it was also one of the country’s largest employers. By an agreement dating from the initial post-war legislation, one percent of EDF’s French turnover was handed annually to a social fund managed by the then-dominant trade union movement, the Confédération Générale du Travail (CGT). The vacation and other benefits paid from this fund (not to mention the employment opportunities for its staff) represented for decades to come a lucrative and politically significant lever of patronage for the CGT’s own patron, the French Communist Party.
The state thus lubricated the wheels of commerce, politics and society in numerous ways. And it was responsible, directly or indirectly, for the employment and remuneration of millions of men and women who thus had a vested interest in it, whether as professionals or bureaucrats. Graduates from Britain’s leading universities, like their contemporaries in French grandes écoles, typically sought employment not in private-sector professions, much less industry and commerce, but in education, medicine, the social services, public law, state monopolies or government service. By the end of the 1970s, 60 percent of all university graduates in Belgium took up employment in the public services or publicly subsidized social sector. The European state had forged a unique market for the goods and services it could provide. It formed a virtuous circle of employment and influence that attracted near-universal appreciation.
Doctrinal differences over the ostensible goals of the state might noisily oppose Left and Right, Christian Democrats and Communists, Socialists and Conservatives, but almost everyone had something to gain from the opportunities the state afforded them for income and influence. Faith in the state—as planner, coordinator, facilitator, arbiter, provider, caretaker and guardian—was widespread and crossed almost all political divides.138 The welfare state was avowedly social, but it was far from socialist. In that sense welfare capitalism, as it unfolded in Western Europe, was truly post-ideological.
Nevertheless, within the general post-war European consensus there was a distinctive vision, that of the Social Democrats. Social Democracy had always been a hybrid; indeed, this was just what was held against it by enemies to the Right and Left alike. A practice in lifelong search of its theory, Social Democracy was the outcome of an insight vouchsafed to a generation of European socialists early in the twentieth century: that radical social revolution in the heartlands of modern Europe—as prophesied and planned by the socialist visionaries of the nineteenth century—lay in the past, not the future. As a solution to the injustice and inefficiency of industrial capitalism, the nineteenth-century paradigm of violent urban upheaval was not only undesirable and unlikely to meet its goals; it was also redundant. Genuine improvements in the condition of all classes could be obtained in incremental and peaceful ways.
It did not follow from this that the fundamental nineteenth-century socialist tenets were discarded. The overwhelming majority of mid-twentieth-century European Social Democrats, even if they kept their distance from Marx and his avowed heirs, maintained as an article of faith that capitalism was inherently dysfunctional and that socialism was both morally and economically superior. Where they differed from Communists was in their unwillingness to commit to the inevitability of capitalism’s imminent demise or to the wisdom of hastening that demise by their own political actions. Their task, as they had come to understand it in the course of decades of Depression, division and dictatorship, was to use the resources of the state to eliminate the social pathologies attendant on capitalist forms of production and the unrestricted workings of a market economy: to build not economic utopias but good societies.
The politics of social democracy were not always seductive to impatient young people, as later events were to show. But they were intuitively appealing to men and women who had lived through the terrible decades since 1914, and in certain parts of Western Europe social democracy by the mid-Sixties was no longer so much a politics as a way of life. Nowhere was this more evident than in Scandinavia. Between 1945 and 1964 the Danish Social Democratic Party’s share of the vote in national elections rose from 33 percent to 42 percent; in the same years the Norwegian Labour Party won between 43 and 48 percent; as for the Swedish Social Democrats, their share of the post-war vote never fell below 45 percent. In the elections of 1968 it even exceeded 50 percent.
What was remarkable about these voting figures was not the numbers themselves—the Austrian Socialist Party did almost as well on occasion and in the British general elections of 1951 Clement Attlee’s Labour Party had won 48.8 percent of the vote (though the Conservatives, with a smaller overall vote, got more parliamentary seats). It was their consistency. Year in, year out, Scandinavian Social Dem
ocratic parties secured over two-fifths of their countries’ votes, and the result was decades of unbroken control of government, occasionally at the head of a coalition of small and compliant junior partners but usually alone. Between 1945 and 1968, eight out of ten Danish governments were led by Social Democrats; in the same years there were five Norwegian governments, three of them Social Democratic, and four Swedish governments, all Social Democratic. There was consistency in personnel, too: Norway’s Einar Gerhardsen led two Social Democratic governments for a total of fourteen years; in Sweden, Tage Erlander ruled both his party and his country for twenty-three years, from 1946-1969.139
Scandinavian societies inherited certain advantages. Small and socially homogenous, with no overseas colonies or imperial ambitions, they had been constitutional states for many years. The Danish constitution of 1849 had introduced limited parliamentary government but extensive press and religious freedom. The Swedish (and at the time Norwegian) constitution of 1809 established modern political institutions, including proportional representation and the exemplary system of the ombudsman—the latter adopted throughout Scandinavia in later years—and provided the stable framework within which the party political system could develop. It would remain in force until 1975.
But Scandinavia was historically poor—a region of forests, farms, fisheries and a handful of primary industries, most of them in Sweden. Labour relations in Sweden and Norway especially were chronically troubled by conflict—the strike rate in both countries was among the highest in the world during the first decades of the twentieth century. During the Depression of the 1930s unemployment in the region was chronic. In 1932-33 one third of the Swedish labour force was out of work; in Norway and Denmark 40 percent of the adult workforce had no jobs—figures comparable to the worst years of joblessness in Britain, Weimar Germany or the industrial states of the US. In Sweden the crisis led to violent confrontations, notably at Ådalen in 1931 where a strike at a paper-mill was suppressed by the army (memorably recalled by Swedish director Bo Widerberg in a 1969 film, Ådalen 31).
