Wilson’s instinctive sympathy for the principles of planning was important for the future. The fundamental dilemma and divide of the 1950s, as the economic writer Sir Andrew Schonfield put it towards the end of that decade, was: ‘What did Labour propose to do when the shortages were over?’ This question hovered over the Labour Party, not just in the 1950s, but in the 1960s and 1970s as well. Different answers to it – to plan or not to plan, and varying interpretations of what ‘socialist’ planning might entail – continued to divide Labour opinion for the next forty years. After Labour left office in 1951, the distinction between a belief in the centrality of state planning as the essence of socialism, and a belief in the key importance of the international market mechanism, helped to split the Labour Left from Labour’s ‘revisionist’ Right.
From the start, Wilson kept a foot in both camps. He did not take the uncompromising position of Aneurin Bevan, that the ideal continued to be close control by the Government over the whole range of goods produced by industry.87 Nor did he share the ruthlessly liberalizing views of the ardent Keynesians. His own answer to the question of what kind of policy Labour should pursue, now that the emergency had ended, was given in a long memorandum, ‘The State and Private Industry’, which he wrote primarily as a party document and presented to a meeting of senior ministers in May 1950, after the general election and several months after the Government had been forced to devalue sterling. This offered a middle route – between the old Left, which advocated a simple extension of public ownership, and the emerging new Right, led by Gaitskell and Jay, which saw a more limited role for the state.
‘The State and Private Industry’ is a formidably clear, intelligent and carefully written paper. It shows how firm Wilson’s grasp of economic policy issues had become after two and a half years as President of the Board of Trade, and how misleading by this stage was the impression he sometimes gave of quickness without depth. The memorandum took a short-term and long-term view, with proposals both for immediate implementation, and for inclusion in the next Election Programme, or even in the one after that: it looked ahead over ten years at least. It was based on Wilson’s own conviction that in the problem of the relation between Government and private industry, ‘we have what is almost a vacuum in Socialist thought.’88 It sought to analyse the difficulties of managing a mixed economy, and to outline future ways of doing so. Much of it was devoted to a detailed critique of existing or recently abolished controls, and their inappropriateness. The remainder concentrated on new controls that needed to be put in their place.
‘It will be noticed that the memorandum shows a certain aggressiveness,’ wrote Wilson in a covering note.89 It did. It argued that in relation to socialist planning, offence was the best form of defence: that it was desirable ‘to turn the attack we are now getting on our nationalized industries back to appropriate sections of private industry’. Although he advocated some extension of nationalization – in particular, to parts of the chemical industry – he was more concerned with the firms that would not be nationalized, and the controls that should be used as an alternative. The private sector still represented by far the greater part of the economy; yet, he argued, ‘very little fundamental thinking has been done on the ways in which the Government can influence its actions.’ He maintained that there existed ‘a duty on private industry, no less than on socialized industries, to conform to the national interest’, but that the existing structure of private firms meant that ‘patriotism and exhortation’ alone were insufficient to ensure that the national interest was served.90
The danger of a new trade depression was one that particularly concerned him. ‘I am personally greatly apprehensive about our dependence on the decisions of private industry, over which we have no control’, he wrote, ‘for the maintenance of full employment.’ He said little about financial instruments, but stressed (to the annoyance of keen Keynesians) ‘the danger of an undue reliance on finance’.91 Disagreeing with the proposal, put forward in the left-wing manifesto Keeping Left, for powerful Development Councils for each industry, he advocated, instead, the placing of government directors on the boards of the largest 2–9,000 companies. He proposed that wartime powers to take over the management and ownership of inefficient firms should be reinforced.92 He emphasized that basic controls such as those on the location of industry, foreign exchange, import licensing and capital issues ‘are essential to our success, but manifestly not enough’, and he argued that an ‘essential instrument’ in government-industry relations would be price control on a permanent basis, ‘over the widest possible field of necessary goods’.93
Wilson sent a copy of this bold paper to the Prime Minister who reacted with an enthusiasm which was the more remarkable because enthusiasm was not, for him, a common emotion, ‘It raises important issues both for the Party and the Government,’ Attlee replied, ‘In the nature of things, the men of my generation will before long be passing out, and the responsibility will be passing to the younger generation.’ The Prime Minister proposed a series of meetings, including one involving senior, and another junior ministers; it should also be discussed, he suggested, at a forthcoming weekend conference, after which ‘we can consider how the subject should be handled by a Cabinet Committee.’ Wilson could not have hoped for better.
Attlee had in mind to restrict the ‘senior’ discussion to himself, the Lord President (Morrison) and the Chancellor, but at Wilson’s suggestion agreed to include other Cabinet ministers with an economic brief and – though not in the Cabinet – Hugh Gaitskell.94 The two meetings were held in the afternoon and evening of 17 May. At the meeting of the ‘senior’ group, ministers rejected the proposal for government directors, and expressed concern at the electoral impact of the whole document. At the subsequent ‘junior’ meeting, which Gaitskell also attended, scepticism was expressed by Douglas Jay, who complained that the document ‘made little reference to what would be achieved by persuasion as opposed to control’. Gaitskell felt that the memorandum tended to exaggerate the danger of an early depression, declared that he did not believe in controls on the private sector for the sake of control, and – summing up what was later to become the established Gaitskellite position – indicated that in general, ‘his view was that we should get rid of monopoly practices and let competition work.’95
There were further discussions of the paper at a weekend meeting of ministers, and with a group of MPs at a Fabian weekend conference at Oxford.96 After reading the memorandum in June, G. D. H. Cole wrote to Wilson that he found himself ‘on the whole in pretty close agreement with your approach’, and supported the government directors’ idea, with his own modifications.97 Defending a version of the paper before Fabians in July, Wilson made much of the ‘government directors’ proposal, while admitting that his Cabinet colleagues had rejected it. Two and half thousand firms would be officially designated under his scheme, encompassing half of national production, in order to provide ‘strategic control’. He pointed to the limitations of what he called the ‘half-Keynesian approach’ – that is, a reliance on monetary instruments – and insisted that government directors on the two and a half thousand boards would ‘prevent panic reaction to a slump. They will have a steadying influence.’98
The paper was never adopted, nor was it even made public. However, its carefully formed proposals, many of which found their way into party policy statements, retained a philosophical importance. Not only did they set the mould of Wilson’s own future approach, they played an implicit part in Labour’s internal debate in the 1950s, giving early substance to