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Cold War Britain / United KIngdom post-War erconomic failure
Cold War Britain: Post-War Economic Failure
Figure 1.--Here we see J.T. Fitzgerald and his family, living in a Battersea school refugee shelter. The press caption read, "London Is Grim: Britisg Face a Hard Winter: Peacetime Londontoday is grimmer thn the London during the last German Blitz od V-1 and V-2 bombs, according to Acme Staff Photographer Bert Brandt, who is making a round ??????? on assignment. The threat ofsudden death is gone. But in its place there is less food, less pleasure, less energy. With new austerity food cuts, this winter will probably be the hardest England has ever known, and yet Londoners retain their wartime courage and their traditional England-will-muddle through philosophy. These Acme photos show typical Londoners and typical London scenes." And about the family here, the caption read, "J.T. Fitzgerld, his wife and their children mke their home in a curtailed area in a Battersea school which is still a rest center two years after the war. This family and three others share one classroom in the school, with only curtain separating them."The photograph was dated September 10, 1947.
Churchill's electoral defeat after VE Day meant that Britain's initial Cold war policy would be led by the Labour Party--a Socialist party. Britain's role in the Cold War was limitd by the huge World War II expenditures essentially bankrupting the country. America spent even more, but the vigouros free market economy after the War generated the wealth and economic growth to quickly pay off the war debts. Prime-Minister Atlee with a huge Labour majority in Parliament had the ability to do what they had dreamed about for years -- fundamentally resjape the fabric of British society. They introduced a vast array of Socialist policies designed to make Britain a more fair society, but in fact impeded economic growth and expansion. Granted, the new Labour Government faced enormous problems. Hugh Dalton, Chancellor of the Exchequer, faced the same urgent problems that
Britian had to comfront after World War I. Fully half of Britain's economy had been mobilized for war. Britain mobilized soldiers and civilians for war. The primary focus of indstry was on the air war and fleets of Lancaster bombers to carry the war to the Reich. In addition produced vast quantities of other arms, bombs, and munitions. Dalton had to craft a peacetime budget and at the same time minimize inflation. The Labour Party's emphasis was not on building a dynamic private sector economy as in America, but social reform. Much as President Obama decided as president to focus on health care reform rather than creating jobs. Labour launched into social reform like the National Health Serviceas the first step in creating a welfare state. Labour's economic policy was centered on nationalisation of industry. The Labour dominated Parliament nationalized Britain's railways and heavy industries.
State planners took over the management of the economy. Taxes were substantially increased to pay for the new welfare system. Britain not only did not grow at the sme rate as America, but it even lagged behind the defeated Axis countries. Britain had the strongest economy in Europe before the war and highest wages. Soon after the War, Britain's economy and wages began to fall behind its continental partners. These countries would also build welfare states, but generally after their conomies revived and not before. Nor was the massive nationalizationof heavy industry on the continent. The weak economy significantly limited Britain's role in the Cold War.
A major event after VE Day was the British General Election (July 5). There was no requirement that Britain hold an election after VE Day. This was a decision that Prime-minister Churchill made. He thought after 10 years, the time for an election had come. After all, the fight agajnst the Axis had been to preserve democracy. His advisers argued against it. They understood that the British people were in a mood for change. They advised Churchill to hold off from an immediate general elction so that the Government would have time to implement moderate conservative reforms. Churchill was intent, however, on an elction to show that the defeat of the Axis was a triumph for democracy. We suspect that dispite the assessment of advisers, he expected that his war time popularity would ensure a Conservtive Party victory. The result was not released for several weeks because of postponed voting in some constituencies and the delays on counting overseas ballots, especially the servicemen overseas (July 26). Britain because of the World War II emergency had gone over 10 years without a General Election. It was the first General Election to be held since 1935. The major parties (Conservatives, Labour, and Liberal) agreed to a coaltion government. Elections were suspended during the War and a National (unity) Government was formed by the major parties. The results shocked many. Prime-minister Churchill was enormously popular as a war leader. But the British people wanted change--meaning a peace benefit. British workers were convinced that socialism offered a more prosperous future than capitalism. They voted for Labour which promised fundamental social reforms. Labour was a socialist party. "Socialist and proud of it," was a Party slogan. They ran on a platform of significantly changing the British capitalist economy. Labour depicted capitalim as evil and convinced much of the British public who wanted change after a decade of austerity. It was a shatering electoral victory. Labour won nearly twice as many seats (393) as the Conservatives (197). Churchill used the term National Government, but he ran essentially with the support of the Conservatives. The Labour MPs selected their leader Clement Attlee as the new prime-minister. Churchill ran a poor campaign. He charged that Atlee would require a Gestapo-esque body to implement his program. Labour Party pledges included full employment, free universal health care, and a cradle-to-grave welfare state. This was basically a massive resistribution of income. The idea that a healthy capitalist economy was needed to pay for the cost of the new welfare system simply did not occur to men like Atlee who were intent on remaking British society. Labour's campaign slogan was 'Let us face the future.' This meant transforming Britain from a capitalist to a socialist state. A Labour tract read, ".It is intolerable that in the second half of the twentieth century the power to decide whether men and women have work or be unemployed and whether our children will have decent prospects or flounder in a dead-end, should rest with these small groups of monopolists. All the talk about the utilisation of science and about planning is meaningless unless the big concentrations of industry and financial power become the property of the people." Labour's plans included nationlizung major industries (mining, fuel and power, transport, and iron and steel). Labour also ntionalized the Bank of England. Except for the Soviet Union, whose economic failures, were not yet known, there had been no socialist contries. And the promoses of Labour (socialist) politicns were very aluring. King George offered Churchill the Order of the Garter, a dejected Churchill commented, "Why should I accept from my sovereign the Order of the Garter when his subjects have just given me the Order of the Boot?"
Economic Situation
Britain's role in the Cold War was limitd by the huge World War II expenditures essentially bankrupting the country. The Labour Goverment elected (1945) blamed the econmic stagnation after the War on the huge war debt and damage. In fact many counties had far more war damage and adverse fisal situation, but experienced economic miracles after the War. Britain on the other hand declined in relation to most of Western Europe. And unlike these countries was forced to continue war time rationing into the 1950s. Queen Elizabeth even had to rely on donations for her wedding dress.
American Situation
America spent even more than Britain on the War, expebditures that began before America entered the War. And considerable expenditures went to keeping Britain and the Soviets as well as other countries in the War through Lend Lease. The United States to fight the Depression and much more so the War contracted a massive debt -- the largest debt contracted by any country in all of history. It amounted to 110 percent of GDP. But the vigouros American free market economy and sound Government policies after the War generated the wealth and economic growth to quickly pay down the war debts. The American national debt is now approaching these levels, primarily the result of welfare entitlement spending.
American Aid
he United States terminted Lend-Lease and Jaopan foimally surrendered (September 1945). Lend Lease fron the United States, however, would contunue until the vJapanese surrender (Seprewmber 1945). New loans from the United States and Canada were essential to keep living conditions tolerable.
Demobilization
The new Labour Government faced enormous problems. Hugh Dalton, Chancellor of the Exchequer, faced the same urgent problems that
Britian had to comfront after World War I. Fully half of Britain's economy had been mobilized for war. Britain mobilized soldiers and civilians for war. The primary focus of indstry was on the air war and fleets of Lancaster bombers to carry the war to the Reich. In addition produced vast quantities of other arms, bombs, and munitions. Dalton had to craft a peacetime budget and at the same time minimize inflation.
Nationalization
It did no gone down well whem Churchill suggested thatbit would take a Gestapo like police force to force nationalization of privatre propert on Britain. But that was not what the British punliv vored for in 1945, they voted a more fair society and increased opportunity and security. That was, however, what may of the new Labour MPs taking their seats in Westminster were internt on a vast nationalization of British industry. The Labiur MO's sanf 'The Red Flah' upon tking their seats. And a series of nationalizations, but they were mostly in the transport and utilities followsed which was not uncommon in Europe even before the War. Cold was nationalized, but was a moiribund industry. The biug steep was steel. Parliament took the plunge, but delayed the plunge and did not go further. Why was this? They had the votes to go go far further--but they didn't. The breaks were put in by a basic division in the Labour Party--the parlimentary party and the trade unions. The parlinentary party wanted to go furher. The rrade uniins which the MPs need to win elections did not. Why was that, after all socialism means taking over the means of production. The problem for Labout was the parrlimentary party wanted to control the nationalized industry and not turn over control to the unions. The trade unions as they were not to be given control, were not about to gve up the hard-won right of collective bargaining. Atlee understanding this basic split did not push beyond steel in the first round og natuinbalixing as it would hgave split thev Party. And because serious economiuc problems occurred did not initiaiate a secind round of nationalizations.
Building the Welfare State
Prime-Minister Atlee with a huge Labour majority in Parliament had the ability to do what they had dreamed about for years -- fundamentally resjape the fabric of British society. They introduced a vast array of Socialist policies designed to make Britain a more fair society, but in fact impeded economic growth and expansion. The Labour Party's emphasis was not on building a dynamic private sector economy as in America, but social reform and nationalization. Much as President Obama decided as president to focus on health care reform rather than creating jobs. Labour launched into social reform like the National Health Service as the first step in creating a welfare state. Labour's economic policy was centered on nationalisation of industry. One historian reports that there was a strong Labour Party consensus both in the national executive committee and at party conferences that stressed both moral and material improvement. The Prime-Minister envisioned rebuilding British society as what he described as an 'ethical commonwealth'. A primary tool to achieve this was, based on Marxist doctrine--public ownership and goivernment controls aimed a eliminating extremes of wealth and poverty. Profiitability was not a a Labour concern, ignoring the fact that that profuitability determined no only jobs and wages, but also taxes paid to support the welfare system. Not one in Labour from the Prime-Minister Atlee on down thought that state manbagement would affect efficient operations and the generation of revenue. Labour Party leaders assumed that there was a detailed plans for nationalisation that the Party had been advoicating for decades. There was no such plan. Labour Leaders were anxious to capitalize oin the momntum of their stunning victory. They did noit want to pause and take monts to develop a detailed plans. So the Prime-Minister decided to pursure an ad hioc natiuonilization program. It began with the Bank of England followed by civil aviation, coal, and cables and wireless. Next came railways, canals, road haulage and trucking, electricity, and gas. Finally came the iron and steel industry. Thiss was a special case because it was a manufacturing industry. Altogether Labour nationlized about one fifth of the British economy. Labour dropped its plans to nationalise farm land, but it is incredible after the horror of Stalin's collectivization program and the drop in production that there was support within the Party for collectivezed agriculture. The Attlee Government then more carefully developed and proceeded to implemented a 'cradle to grave' welfare state. The program was coceptualized by Liberal economist William Beveridge. The heart of the program was the establishment the National Health Service under health minister Aneurin Bevan (1948). Most Labour Party members at the time and to this day believe it was the Party's greatest achievement. [Labour Party] Taxes were substantially increased to pay for the new welfare system. State planners took over the management of the economy. The result was something that Labour leaders in their wildest imaginations never even imagined. Britain not only did not grow at the same rate as America, but it even lagged behind the defeated Axis countries. Britain had been been the most orosperious nation in Europe before the War. Britain not only fell fell behind France and Germany, but even Italy.
The major powers of Europe used their considerable scientific expertise to develop new weapons systems. The Nobel prize awards are a good rought indicator of each nations scientifific capability. Germany was the leading country, but outdisranced bt the Americans and British, not counting the French. The German secret technology gets the most attention in Workld War II histories because it had the most obvious (jet aircraft and missles), even though they had little impact on the War. It was the Allied secret weapons (radar, cavity magnetron, proximity fuse, and atomic bombs) that had the greatest impact on the War. These were all projects coceived by the British, but improved by Amnerican scientists and brought to frition by Americ's far greater industrial capacity. Preime-Minister Churchill ordered that British secret technology be turned over to the United Stares even before America entered the War. This meant that after the War, both America and Britain had access to the extrodinary Allied scientific developments in addition to the technology of a defeated NAZI Germany. After the War, almost all of this technology was available to industry. And whole new industries developed from the technology, including, computers, jet engines, microwave ovens, and much more. But most of the commercial development came from American companies, not British companies. This was in part because of the greater enrepenurial American spirit. Another factir, however, was that the focus of the Labour Party was on creating the welfare state and preserving jobs in existing industry, nor in providing the resources for creating new industries
Britain had the strongest economy in Europe before the war and highest wages. Propaganda suggested that the NAZI Germnanyh had the strongest economy, but this was not the case. Hitler had actually bankrupted the country, but this was being hudden from the financioal community. Soon after the War, Britain's economy and wages began to fall behind its continental partners with booming economies. These countries were also building welfare states, but generally after their economies revived and not before. Nor was the massive nationalization of heavy industry on the continent. And even more imprtantly, the Government did not demonize privare companies, but wirked with them to promote econoimic growth. As a result the major European countries (France, Germany, and Italy) experienced econmomic miralcles, As did the Benalux countries. And Japan also increased an economic miralcle. Britain did not. The economy did not fail, it just did not grow like Ametica and the continental countries. And this was affected by kliving standards.
Cold War Role
The weak economy significantly limited Britain's role in the Cold War.
Sources
Francis, Martin. (1995).
Labour Party. "Proud of the NHS at 60" (April 14, 2010).
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