British Economic Policy since the War, by Andrew Shonfield

[p018] Capitalist N E P? British Economic Policy since the War, by Andrew Shonfield (Penguin Books, 3s. 6d.) Confronted in the post-war years with full employment and ‘excess’ demand, the reflex of economic theory and policy in Britain, deeply influenced by Keynesianism, was to accept the necessity for holding investment in check. The recurrent pressures, expressed in balance of payments and inflationary crises, were met with deliberate cutbacks in capital outlays by both Labour and Conservative governments. Consequently. the level of investment, though sufficiently maintained to underpin a steady expansion, compared unfavourably with that attained in other countries. Since a high level of investment is a condition for rising production, productivity and incomes. Britain has been at a disadvantage. According to Shonfield the responsibility for this lies with the policy-makers who refused to recognize that Britain could no longer play the role in world politics which her wealth and power had at one time permitted. Economic growth was sacrificed to traditional and prestige objectives involving heavy arms expenditure, the maintenance of overseas bases, renewed export of capital and measures to hold together the Sterling Area and enable the. pound to retain its place in international trade. Shonfield is a prolific writer who, as a financial journalist. was in close touch with many of the developments which he describes. This can be judged from the pungent sayings attributed to businessmen, bankers, politicians, officials and chance acquaintances on his overseas journeyings. In fact, a good deal of light is cast upon the mentality of these people; in its way, unconsciously, this book is an indictment of British capitalism and the people who run it. There is, too, a tang of the real world (or rather that part of it represented by the City and Whitehall) so often missing in the austere academic treatise. Shonfield knows that something must be done, and that urgently, so he puts forward his New Economic Policy as a way of prosperity—or is it survival?—for British capitalism. The new way consists of stripping down of overseas com- mitments, a major reduction in defence spending and the encouragement of capital accumulation by incentives, cajoling, exhortation—as well as controls to check the anti-patriotic pro- clivities of the businessmen, whom he knows too well to trust to go it alone. One revealing remark made to him when he objected that a line of policy being put forward would infringe exchange restrictions was: “Nobody but small fry takes any notice of exchange controls now’. There are a number of major weaknesses in Shonfield’s approach. In the. first place his theoretical groundwork is over-simplified. Obsessed by the investment idea, he leaves out more than half the story. Under capitalism a high level of investment requires favourable conditions—namely, where the means of production are themselves being built up, new investment opportunities being opened out and markets ex- panding. Its continuance is threatened by the very forces which it calls into existence. Means of production have, eventually, to issue into an increased flow of goods; investment opportunities shrink as accumulation proceeds: rising costs eat into profits; markets cease to expand fast enough to enable the fruits of rising investment to be realized. Technological change, increasing the ratio of capital to labour, likewise tends to restrict demand in relation to capacity. The failure of the different branches of the economy ta march in step, arising from the anarchy of the market, can itself impede the expan- sion or even bring it to an end. Autumn Books The bourgeois advocates of more and more investment have caught on to the fact that investment is the dynamic element in the system. But, by reason of its instability, it is also the source of shocks. Periods of high investment are followed by slump, stagnation, even decline, and subject the whole social order to severe strains. In recent years, of course, world capitalism has been expansive, primarily because it has received shots in the arm from various sources. As the World Economic Survey put it in mid-1957: “To date one expansionary force has been replaced by another, and defici- encies in one sector have been compensated by buoyancies in another. The same document also pointed out the necessity for ‘investment or other elements of effective demand’ to be ‘continually increased to match the growth in capacity’ if excess capacity and unemployment were to be avoided. The turn from expansion to recession in the capitalist economies indicates the fallacy of the high investment utopia which has found favour with intelligent defenders of capitalism like Shonfield. On the other hand, much in his analysis and policy sug- gestions deserves attention. He rightly criticizes the disproportionate amount of Britain's resources which has gone into armaments in accordance with a policy which ‘is in the long run suicidal for Britain’. However, both in this case, and in that of overseas investment, he too readily assumes that everything else would remain the same wefe cuts to be made. A major political reorientation would be called for. In any event armaments were not purely negative: they were a vital component of the upsurge and are free from the disabilities under which productive investment suffers. Even from the standpoint of British capitalism, Shonfield is one-sided. Capitalists seem to have done pretty well for them- selves: they ought to be thankful anyway to have survived the world depression and the Second World War at all. And it must be said that if British capitalists had been able to get rid of the dead wood of obsolete equipment oy destruction or in reparations, and had been presented with a floating labour reserve several millions strong, then they could have shown a rate of growth comparable with that of Western Germany. Conversely. with recession on the way. British capitalism may be in a better position to weather the storm than other countries simply because its own investment boom was not carried to such heights. The carrying out of Shonfield’s programme, as a whole, would require an impossible change of heart in one, or both, major parties and involve a revolution by consent in the strongholds of the system. He says he wants a New Economic Policy: indeed he invokes the Russian example. It is worth recalling, therefore, that Lenin understood NEP as a trans- _itional stage leading on to the development of the material bases for socialist construction and that it had been preceded by ihe transfer of power. Shonfield is unable to understand either planning (which he identifies with Stalinist tyranny and Whitehall red tape) or socialism (which he assumes checks economic growth). His NEP is intended as an alternative; it is a salvage operation for British capitalism. What is needed is an NEP. consciously transitional in character, for the rapid expansion of Britain’s industrial base with the support and participation of the working class on the road to socialism. Such a policy could not tolerate the holding back of the people’s consumption in order that the capitalist would ‘come out at the end with his capital wealth considerably increased’— which Shonfield admits would result from his measures, In-. deed it would compromise the taking over of his wealth. The regeneration of British economy can only take place on the basis of social ownership. — FRANK GREEN 79

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