The fact is that everything else in the White Paper is by way of qualification to its central claim. Lawson knew this perfectly well in 1987, just as Keynes did in 1944, when he wrote that it was ‘the general line and purpose of policy’ that mattered at this stage. ‘The object of the White Paper,’ he affirmed, ‘is to choose the pattern of our future policy.’14 This it did, most prominently in the foreword: ‘A country will not suffer from mass unemployment so long as the total demand for its goods and services is maintained at a high level.’15 That this claim was founded on a Keynesian multiplier analysis was later made explicit.16
The policy to be followed included not only strictly Keynesian measures for the counter-cyclical regulation of public investment, but also parallel measures, chiefly due to Meade, for controlling swings in consumption expenditure by varying the rates of social insurance contributions. ‘The ideal to be aimed at is some corrective influence which would come into play automatically – on the analogy of a thermostatic control – in accordance with rules determined in advance and well understood by the public.’17 The analogy chosen here may seem banal and commonplace to us but must have inspired mixed feelings in the chilly British homes of an era of open fires and fuel rationing.
The general tone of the White Paper, however, is authentically that of the 1940s and did not, despite claims by some subsequent historians, hold out easy promises of a ‘New Jerusalem’:
It cannot be expected that the public, after years of wartime restrictions, will find these proposals altogether palatable; and the Government have no intention of maintaining wartime restrictions for restriction’s sake. But they are resolved that, so long as supplies are abnormally short, the most urgent needs shall be met first. Without some of the existing controls this could not be achieved; prices would rise and the limited supplies would go, not to those whose need was greatest, but to those able to pay the highest price. The Government are confident that the public will continue to give, for as long as is necessary, the same wholehearted support to the policy of ‘fair shares’ that it has given in war-time.18
This kind of language made an obvious appeal to the political left. This was congruent with the way that the case for macroeconomic regulation of the economy was commonly meshed into a debate about planning, the buzz-word of the 1940s. It was under this guise that Keynesianism was assimilated to conventional arguments for socialism. When John Parker was commissioned by Penguin to put the Labour case in a book published in 1947, he struck this chord in the chapter called ‘A Planned Economy’:
At the back of the minds of all those who have been through the two wars is the fear of a fresh slump and of widespread unemployment. The effect of Lord Keynes’ teaching and of wartime experience has been the creation of a very widespread belief in Britain that unemployment can be practically prevented by the full development of a planned economy. Booms and slumps, it is hoped, can be ironed out if a deliberate attempt is made to do so.19
The fact is that planning had become an essentially contested term, a Humpty-Dumpty word which was invested with glosses appropriate to the arguments in which it was currently imbricated. ‘Am I a planner?’ asked James Meade in 1948:
If a planner necessarily believes in a quantitative programme of output, employment and sales for particular industries, occupations and markets and the exercise of such direct controls by the State as are necessary to carry this out, I am certainly no planner. If an anti-planner necessarily denies that the State should so influence the workings of the price mechanism that certain major objectives of full employment, stability, equity, freedom and the like are achieved, then I am a planner.20
This was consistent with Meade’s advocacy since 1945, as head of the economic section, of the combined use of both planning and the price mechanism: a distinction between liberal (macroeconomic) and socialist (microeconomic) planning with which Sir Alec Cairncross has made us familiar.21
One obvious feature of the claims for post-war macroeconomic management is the claim to novelty. This even bursts through the staid prose of the White Paper: ‘The Government are prepared to accept in future the responsibility for taking action at the earliest possible stage to arrest a threatened slump. This involves a new approach and a new responsibility for the State.’22 Here was an explicit contrast with the old belief that trade depression automatically brought its own corrective. ‘In these matters,’ it was proclaimed, ‘we shall be pioneers.’23
The peroration to the White Paper sets its economic aspirations within a political framework: ‘The Government believe that, once the war has been won, we can make a fresh approach, with better chances of success than ever before, to the task of maintaining a high and stable level of employment without sacrificing the essential liberties of a free society.’24 So far, so uplifting. The implicit objection here, of course, was that mounted in its classic form by F. A. Hayek’s Road to Serfdom. As Hirschman has shown, Hayek’s critique of the welfare state can be seen as an example of the argument that such a proposal, far from achieving the best, would actually jeopardize the good.25 As such it is essentially political, asserting the incompatibility of regulation with liberty. The sort of planning associated with full-employment policies was equally his target: indeed more so, since he seized on the essentially macroeconomic nature of the project to bring out its danger.
Many separate plans do not make a planned whole – in fact, as the planners ought to be the first to admit – they may be worse than no plan. But the democratic legislature will long hesitate to relinquish the decisions on really vital issues, and so long as it does so it makes it impossible for anyone else to provide the comprehensive plan. Yet agreement that planning is necessary, together with the inability of democratic assemblies to produce a plan, will evoke stronger and stronger demands that the government or some single individual should be given powers to act on their own responsibility. The belief is becoming more and more widespread that, if things are to get done, the responsible authorities must be freed from the fetters of democratic procedure.26
This gave the special reason – though of course there were many others – ‘why “liberal socialism” as most people in the Western world imagine it is purely theoretical, while the practice of socialism is everywhere totalitarian’.27 The support of the Labour Party for planning was not wholly surprising, but Hayek hinted at the futility as well as the jeopardy which lay in train: ‘It is one of the saddest spectacles of our time to see a great democratic movement support a policy which must lead to the destruction of democracy and which meanwhile can benefit only a minority of the masses who support it.’28 Such arguments entered into post-war Conservative propaganda, albeit often in a watered-down form.29
If Hayek’s political argument against Keynesianism was much the same as his argument against the welfare state, and was unsurprisingly directed against broadly the same opponents, it should likewise be unsurprising that this famous economist also mounted a specifically economic argument. In its weak form this rested on the futility of trying to buck the market; in its strong form, which should not be overlooked, it pointed to perverse effects. Hayek contested Keynes head-on, asserting a dichotomous view of the available economic strategies:
Both competition and central direction become poor and inefficient tools if they are incomplete; they are alternative principles used to solve the same problem, and a mixture of the two means that neither will really work and that the result will be worse than if either system had been consistently relied upon.30
Keynes took issue with this view, in the course of an otherwise highly emollient private response to Hayek: