by Peter Watson
Schumpeter’s main thesis was that the capitalist system is essentially static: for employers and employees as well as for customers, the system settles down with no profit in it, and there is no wealth for investment. Workers receive just enough for their labour, based on the cost of producing and selling goods. Profit, by implication, can only come from innovation, which for a limited time cuts the cost of production (until competitors catch up) and allows a surplus to be used for further investment. Two things followed from this. First, capitalists themselves are not the motivating force of capitalism, but instead entrepreneurs who invent new techniques or machinery by means of which goods are produced more cheaply. Schumpeter did not think that entrepreneurship could be taught, or inherited; it was, he believed, an essentially ‘bourgeois’ activity. What he meant by this was that, in any urban environment, people would have ideas for innovation, but who had those ideas, when and where they had them, and what they did with them was unpredictable. Bourgeois people acted not out of any theory or philosophy but for pragmatic self-interest. This flatly contradicted Marx’s analysis. The second element of Schumpeter’s outlook was that profit, as generated by entrepreneurs, was temporary.8 Whatever innovation was introduced would be followed up by others in that sector of industry or commerce, and a new stability would eventually be achieved. This meant that for Schumpeter capitalism was inevitably characterised by cycles of boom and stagnation.9 As a result, his view of the 1930s was diametrically opposite to Keynes’s. Schumpeter thought that the depression was to an extent inevitable, a cold, realistic douche. By wartime he had developed doubts that capitalism could survive. He thought that, as a basically bourgeois activity, it would lead to increasing bureaucratisation, a world for ‘men in lounge suits’ rather than buccaneers. In other words, it contained the seeds of its own ultimate failure; it was an economic success but not a sociological success.10 Moreover, in embodying a competitive world, capitalism bred in people an almost endemic critical approach that in the end would be turned on itself. At the same time (1942), he thought socialism could work, though for him socialism was a benign, bureaucratic, planned economy rather than full-blooded Marxism or Stalinism.11
If Mannheim took planning for granted in the postwar world, and if Schumpeter was lukewarm about it, the third Austro-Hungarian, Friedrich von Hayek, was downright hostile. Born in 1899, Hayek came from a family of scientists, distantly related to the Wittgensteins. He took two doctorates at the University of Vienna, becoming professor of economics at the LSE in 1931, and acquired British citizenship in 1938. He too loathed Stalinism and fascism equally, but he was much less convinced than the others that the same centralising and totalitarian tendencies that existed in Russia and Germany couldn’t extend eventually to Britain and even America. In The Road to Serfdom (1944), also published by George Routledge, he set out his opposition to planning and linked freedom firmly to the market, which, he thought, helped produce a ‘spontaneous social order.’ He was critical of Mannheim, regarded Keynesian economics as ‘an experiment’ that, in 1944, had yet to be proved, and reminded his readers that democracy was not an end in itself but ‘essentially a means, a utilitarian device for safeguarding internal peace and individual freedom.’12 He acknowledged that the market was less than perfect, that one shouldn’t make a fetish of it, but again reminded his readers that the rule of law had grown up at the same time as the market, and in part as a response to its shortcomings: the two were intertwined achievements of the Enlightenment.13 His reply to Mannheim’s point about the importance of having greater sociological knowledge was that markets are ‘blind,’ producing effects that no one can predict, and that that is part of their point, part of their contribution to freedom, the ‘invisible hand’ as it has been called. For him, therefore, planning was not only wrong in principle but impractical. Von Hayek then went on to produce three reasons why, under planning, ‘the worst get on top.’ The first was that the more highly educated people are always those who can see through arguments and don’t join the group or agree to any hierarchy of values. Second, the centraliser finds it easier to appeal to the gullible and docile; and third, it is always easier for a group of people to agree on a negative program – on the hatred of foreigners or a different class, say – than on a positive one. He attacked historians like E. H. Carr who aimed to present history as a science (as indeed did Marx), with a certain inevitability about it, and he attacked science itself, in the person of C. H. Waddington, author of The Scientific Attitude, which had predicted that the scientific approach would soon be applied to politics.14 For Hayek, science in that sense was a form of planning. Among the weaknesses of capitalism, he conceded that the tendency to monopoly needed to be watched, and guarded against, but he saw a greater practical threat from the monopolies of the labour unions under socialism.
As the war was ending, a fourth Austro-Hungarian released The Open Society and Its Enemies.15 This was Karl Popper. Popper’s career had an unusual trajectory. Born in Vienna in 1902, he did not enjoy good health as a young man, and in 1917 a lengthy illness kept him away from school. He flirted with socialism, but Freud and Adler were deeper influences, and he attended Einstein’s lectures in Vienna. He completed his Ph.D. in philosophy in 1928, then worked as a social worker with children abandoned after World War I, and as a teacher. He came into contact with the Vienna Circle, especially Herbert Feigl and Rudolf Carnap, and was encouraged to write. His first books, The Two Fundamental Problems of the Theory of Knowledge and Logik der Forschung (The Logic of Scientific Discovery), attracted enough attention for him to be invited to Britain in the mid-1930s for two long lecture tours. By then the mass emigration of Jewish intellectuals had begun, and when, in 1936, Moritz Schlick was assassinated by a Nazi student, Popper, who had Jewish blood, accepted an invitation to teach at the University of Canterbury in New Zealand. He arrived there in 1937 and spent most of World War II in the calm and relative isolation of his new home. It was in the Southern Hemisphere that he produced his next two books, The Poverty of Historicism and The Open Society and Its Enemies, many of the arguments of the former title being included in The Open Society.16 Popper shared many of the views of his fellow Viennese exile Friedrich von Hayek, but he did not confine himself to economics, ranging far more widely.
The immediate spur to The Open Society was the news of the Anschluss, the annexation of Austria by Germany in 1938. The longer-term inspiration arose from the ‘pleasant sensation’ Popper felt on arriving for the first time in England, ‘a country with old liberal traditions,’ as compared with a country threatened with National Socialism, which for him was much more like the original closed society, the primitive tribe or feudal arrangement, where power and ideas are concentrated in the hands and minds of a few, or even one, the king or leader: ‘It was as if the windows had been suddenly opened.’ Popper, like the logical positivists of the Vienna Circle, was profoundly affected by the scientific method, which he extended to politics. For him, there were two important ramifications. One was that political solutions were like scientific ones – they ‘can never be more than provisional and are always open to improvement.’ This is what he meant by the poverty of historicism, the search for deep lessons from a study of history, which would provide the ‘iron laws’ by which society should be governed.17 Popper thought there was no such thing as history, only historical interpretation. Second, he thought that the social sciences, if they were to be useful, ‘must be capable of making prophecies.’ But if that were the case, again historicism would work, and human agency, or responsibility, would be reduced and perhaps eliminated. This, he thought, was nonsense. He ruled out the very possibility that there could be ‘theoretical history’ as there was theoretical physics.18
This led Popper to the most famous passage in his book, the attack on Plato, Hegel, and Marx. (The book was originally going to be called False Prophets: Plato, Hegel, Marx.) Popper thought that Plato might well have been the greatest philosopher who ever lived but that he was a reactionar
y, who put the interests of the state above everything, including the interpretation of justice. For example, according to Plato, the guardians of the state, who are supposed to be philosophers, are allowed the right to lie and cheat, ‘to deceive enemies or fellow-citizens in the interests of the state.19 Popper was attacked for his dismissal of Plato, but he clearly saw him as an opportunist and as the precursor of Hegel, whose dogmatic dialectical arguments had led, he felt, to an identification of the good with what prevails, and the conclusion that ‘might is right.’20 Popper thought that this was simply a mischaracterisation of dialectic. In reality, he said, it was merely a version of trial and error, as in the scientific method, and Hegel’s idea that thesis generates antithesis was wrong – romantic but wrong: thesis, he said, generates modifications as much as it generates the opposite to itself. By the same token, Marx was a false prophet because he insisted on holistic change in society, which Popper thought had to be wrong simply because it was unscientific – it couldn’t be tested. He himself preferred piecemeal change, so that each new element introduced could be tested to see whether it was an improvement on the earlier arrangement.21 Popper was not against the aims of Marxism, pointing out, for example, that much of the program outlined in the Communist Manifesto had actually been achieved by Western societies. But that was his point: this had been achieved piecemeal, without violence.22
Popper shared with Hayek a belief that the state should be kept to a minimum, its basic raison d’être being to ensure justice, that the strong did not bully the weak. He disagreed with Mannheim, believing that planning would lead to more closure in society, simply because planning involved a historicist approach, a holistic approach, a Utopian approach, all of which went against the scientific method of trial and error.23 This led Popper to consider democracy as the only viable possibility because it was the only form of government that embodied the scientific, trial-and-error method and allowed society to modify its politics in the light of experience, and to change government without bloodshed.24 Like Hayek’s writings, Popper’s ideas may not seem so original today, for the very reason that we take them so much for granted. But at the time, with totalitarianism in full flood, with the stock market crash and the depression still fresh in the mind, with World War I not so far in the past as it is now, many people took the view that history did have a hidden structure (Popper specifically attacks Oswald Spengler’s Decline of the West thesis as ‘pointless’), that it had a cyclical nature, particularly in the economic sphere, that there was something inevitable about either communism or fascism. Popper believed that ideas matter in human life, in society, that they can have power in changing the world, that political philosophy needs to take account of these new ideas to continually reinvent society.
The coincidence of these four books by Austro-Hungarian emigrés was remarkable but, on reflection, perhaps not so surprising. There was a war on, a war being fought for ideas and ideals as much as for territory. These emigrés had each seen totalitarianism and dictatorship at close hand and realised that even when the war with Germany and Japan ended, the conflict with Stalinism would continue.
When he completed Christianity and the Social Order in 1941, William Temple was archbishop of York.25 By the time the book appeared, in early 1942, published as a Penguin Special, Temple was archbishop of Canterbury and head of the Church of England. Leaders of the church do not often publish tracts of a social scientific, still less a political, nature, and the book’s high-profile author helped ensure its success: it was reprinted twice in 1942 and soon sold well over 150,000 copies. Temple’s book perfectly illustrates one aspect of the intellectual climate in the war years.
The main part of the book was rather general. Temple took some time justifying the church’s right to ‘interfere’ (his word) in social questions that inevitably had political consequences, and there was an historical chapter where he described the church’s earlier interventions, and in which he revealed himself as extremely knowledgeable about economics, providing an original and entertaining interpretation of what the biblical authorities had to say on that score.26 He tried to sketch out some ‘Christian Social Principles,’ discussing such matters as fellowship in the workplace, God’s purpose, and the nature of freedom. But it was really the appendix to Temple’s book that comprised its main attraction. Temple thought it wrong for the Established Church to put out an ‘official’ view on what ought to be done once the war was over, and so in the body of the book he kept his remarks very broad. In the appendix, on the other hand, he set out his own very specific agenda.
To begin with, he agreed with Mannheim over planning. Right at the beginning of the appendix, Temple writes, ‘No one doubts that in the postwar world our economic life must be “planned” in a way and to an extent that Mr Gladstone (for example) would have regarded, and condemned, as socialistic.’27 Temple had concluded the main part of his book by outlining six fundamental principles on the basis of which a Christian society should be governed; he now set about describing how they could be brought about. His first principle was that everyone should be housed with decency, and for this he wanted a Regional Commissioner of Housing with power to say whether land should be used for that purpose.28 Draconian powers were to be given to these commissioners, who were to prevent speculation in land. The second principle was that every child should have the opportunity of education to the years of maturity, and for this Temple wanted the school-leaving age to be raised from fourteen to eighteen. The third principle concerned an adequate income for everyone, and here he advocated straight Keynesianism, with a certain number of public works being maintained, ‘from which private enterprise should be excluded,’ and which could be expanded or contracted according to need. Fourth, all citizens should have a say in the conduct of the business or industry where they worked; Temple advocated a return to the mediaeval guilds with workers, management, and capital represented on the boards of all major undertakings. Fifth, all citizens needed adequate leisure to enjoy family life and give them dignity; Temple therefore recommended a five-day week with ‘staggered’ time off to help enterprises cope; he also proposed holidays with pay.29 Last, he advocated freedom of worship, of speech, and of assembly.
This last provision was by far the most unexceptional. As for the others, Temple was anxious to make it plain that he was not anti-business and went out of his way to say that ‘profit’ was not a dirty word. He also underlined his awareness that planning could lead to a loss of freedom, but he thought that certain freedoms were hardly worth having. For example, he quoted figures which showed that ‘three-quarters of the businesses which are started go into liquidation within three years. Frankly, it would seem to be a gain all round that there should be less inducement to start these precarious businesses, of which the extinction must cause inconvenience and may cause real distress.’ He thought that a percentage of profits should be used for a ‘wage-equalisation fund,’ and he looked forward to a time whereby the capital accumulated by one generation was made to ‘wither’ away over the next two or three generations by death duties. For Temple, money was ‘primarily an intermediary.’ The prime necessities of life, he said, were air, sunshine, land, and water.30 No one claimed to own the first two, and he made it plain that in his view the same principle should apply to the others.
The huge sales of Temple’s book reflected the wide interest in planning and social justice that lay behind the more immediate contingencies of war. The scars of the stock market crash, the depression, and the events of the 1930s ran deep. How deep may be judged from the fact that although ‘planning’ was anathema in some quarters, for others it wasn’t strong enough. Many people in Britain and America, for example, had a sneaking respect for the way Hitler had helped eliminate unemployment. After the experience of depression, the lack of a job seemed for some more important than political freedom, and so totalitarian planning – or central direction – was perhaps a risk worth taking. This attitude, as was mentioned earlier, also transferred to Stal
in’s ‘planning,’ which, because Russia just then was an ally, never received in wartime the critical scrutiny it deserved. It was against this intellectual background that there appeared a document that had a greater impact in Britain than any other in the twentieth century.
Late on the evening of 30 November 1942 queues began to form outside the London headquarters of His Majesty’s Stationery Office in Holborn, Kingsway. This was, to say the least, an unusual occurrence. Government publications are rarely best-sellers. But, when HMSO opened the following morning, its offices were besieged. Sixty thousand copies of the report being released that day were sold out straight away, at 2 shillings (24 old pence, now 10 pence) a time, four times the cost of a Penguin paperback, and by the end of the year sales reached 100,000. Nor could it be said that the report was Christmas-present material – its title was positively off-putting: Social Insurance and Allied Services. And yet, in one form or another, this report eventually sold 600,000 copies, making it the best-selling government report until Lord Denning’s inquiry into the Profumo sex and spying scandal twenty years later.31 Why all the fuss? Social Insurance and Allied Services became better known as the Beveridge Report, and it created the modern welfare state in Britain, stimulating a whole climate of opinion in the postwar world. The frenzy that attended its publication was as important an indicator of a shift in public sensibility as was the report itself.
