THE NEW ORDEAL BY PLANNING

The Experience of the Forties and the Sixties

 By the same author

AN INDUSTRIAL SURVEY OF CUMBERLAND AND FURNESS

(with A. Winterbottom)
JUVENILE UNEMPLOYMENT (with A. Winterbottom)
WAGES AND LABOUR IN THE COTTON SPINNING INDUSTRY
(with E. M. Gray)
THE JUVENILE LABOUR MARKET (with Sylvia Jewkes)
THE SOURCES OF INVENTION
(with David Sawers and Richard Stillerman)
THE GENESIS OF THE BRITISH NATIONAL HEALTH SERVICE
(with Sylvia Jewkes)
VALUE FOR MONEY IN MEDICINE (with Sylvia Jewkes)
PUBLIC AND PRIVATE ENTERPRISE
THE NEW ORDEAL
BY PLANNING

THE EXPERIENCE OF THE FORTIES

A.ND THE SIXTIES

JOHN JEWKES
FBLLOVV OF MERTON COLLEGE
PROFESSOR OF ECONOMIC ORGANISATION, UNIVERSITY OF OXFORD

Palgrave Macmillan
19 68
 ISBN 978-1-349-81752-8 ISBN 978-1-349-81750-4 (eBook)
DOI 10.1007/978-1-349-81750-4

© John Jewkes 1968

Softcover reprint of the hardcover 1st edition 1968 978-0-333-03836-9

Introduction to Second Edition and Part One

Published by
MACMILLAN & CO LTD
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and also at Bombay Calcutta and Madras
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Library of Congress catalog card no. 68-11548

 CONTENTS
INTRODUCTION TO THE SECOND EDITION, page ix
INTRODUCTION TO THE FIRST EDITION, page xi

PART ONE
ORDEAL BY PLANNING IN THE SIXTIES
THE CONSERVATIVE PLAN, page 3
THE LABOUR PLAN, page 12
MUST CENTRAL ECONOMIC PLANNING INEVITABLY FAIL? page 14.
THE COSTS OF PLANNING, page 20
WHY DO CONSERVATIVES AND BUSINESS MEN
FAVOUR PLANNING? page 23
PLANNING AND THEORIES OF ECONOMIC GROWTH, page 30
THE FUTURE? page 35
CONCLUSIONS, page 39
POSTSCRIPT, page 42

PART TWO
ORDEAL BY PLANNING IN THE FORTIES
I. THE SPREAD OF THE FASHION, page 45
II. Is THE BUSINESS MAN OBSOLETE ? page 62
III. CONFUSION AMONG THE PLANNERS, page 80
IV. PLANNERS AS A SPECIES, page 97
V. PLANNING AS A SCIENTIFIC METHOD, page 121
VI. PLANNING AND PROSPERITY, page 142
VII. PLANNING ·AND ECONOMIC STABILITY, page 164
VIII. PLANNING AND FREEDOM, page 182
IX. THE MORAL SICKNESS OF A PLANNED SOCIETY, page 203
X. NATIONAL PLANNING AND THE WORLD ECONOMY, page 223
INDEX, page 237

V
Glendower: I can call spirits from the vasty deep.
Hotspur: Why, so can I; or so can any man;
But will they come when you do call for them?
Henry IV, Part I, Act III, Scene 1

Not merely because we are ignorant of the data required for the
solution, even of very simple problems in organic and social life,
are we called upon to acquiesce in an arrangement which, to be
sure, we have no power to disturb; nor yet because these data, did
we possess them, are too complex to be dealt with by any rational
calculus we possess or are ever likely to acquire; but because,
in addition to these difficuities, reasoning is a force most apt to
divide and disintegrate; and though division and disintegration
may often be the necessary preliminaries of social development,
still more necessary are the forces that bind and stiffen, without
which there could be no society to develop.
A. J. BALFOUR, The Foundations of Belief,
1895
I very rarely make statements about the future, as the Hon.
Gentleman, if he studies my past statements, will realise.
DOUGLAS JAY, House of Commons,
November 30, 1966
 INTRODUCTION TO THE SECOND EDITION
WITHIN less than one generation British Governments have twice
fallen victim to the hallucination that they possess the knowledge
and power positively to determine the rate of economic growth
through central economic planning, and twice, in the grip of these
ideas, they have embarked upon massive figuring and the prepara-
tion of elaborate economic blue-prints which have quickly led to
confusion and frustration. Twice is a lot. And since these Govern-
ment excursions into a world of unreality have not merely wasted
time and energy and fostered much double-talk in economics, but
have also led to breakdowns in the economy and made us poorer, it
ought to be possible to draw some moral from these two melancholy
episodes. That is the purpose of this volume.
The first of these periods of central economic planning covers
the years 1945-51 whilst the Labour Party was in power. I wrote
about those years in Ordeal by Planning, first published in 1948,
and I wish to add nothing to what I then said. This original essay is
reprinted, virtually unchanged, in later pages. I Despite its imper-
fections, it vividly recalls the controversies of that time and I have
nothing to retract from the doctrine I then enunciated - that when
Governments begin to claim that they know of short cuts to pros-
perity, economic trouble is in the offing. But the overriding reason
for reprinting what I said nearly twenty years ago is simply to draw
attention to the fact that there was an earlier period of centrai econ-
omic planning. One of the most surprising things about the second
period of planning after 1960 has been that practically no one has
referred to the earlier period; no one has sought to embody into the
policies of the present the lessons of the past. This is not good sense.
Any prologue to the original Ordeal by Planning need be only
short. By 1951, public interest in central economic planning had
I Chapters III and IV of the first edition, however, have been excluded from

the second edition because, whilst they deal with important topics, they now seem
to be less closely bound up with the main subject than they then were.
IX
x THE NEW ORDEAL BY PLANNING
evaporated. Noone cared to defend the absurdities which so recently
had been claimed as a higher form of economic wisdom. Certain
planning pundits, indeed, some of whom since 1960 have come back
to the stage in important roles, did not altogether lose heart. But
they devoted themselves to the proliferation of mechanical models
of economic development of doubtful value, or to the tendering of
advice to the poorer under-developed countries, and especiany
India, where their doctrines have done much harm. Despite this, it
was possible to hope that the rough lesson of experience had been
learnt: that however deep-seated and serious were the economic
problems of Britain (and no one could doubt their presence) the
publishing of central economic plans was as little likely to bring
about economic advance as the turning of the hands of a watch to
change the pace of the sun.
This is a convenient place, before embarking upon a study of the
period of planning after 1960, to make once again a point I stressed
in 1948. In examining British planning I have been compelled to
name and often to criticise the views of public men of high standing.
I would have been happy to have been able to avoid this, because I
am not concerned with personalities but with ideas. But the truth
is that no real analysis of planning can be made without scrutinising
carefully the ideas of those who were or are our economic rulers for
the time being. Any study of a market system and of its conse-
quences can be made impersonally, for then we are dealing with a
spontaneous organisation for which no one is directly and consciously
responsible. The market system can be defined; all those who study
it are studying the same thing although they may finally disagree
about its efficacy. But planning is not clearly defined; each planner
has his own interpretation of what it is and how it should be oper-
ated. Perhaps the only really satisfactory definition of planning is
that planning is what planners think and do. So there is no way of
ascertaining what kind of an economic world is being cooked up for
the rest of us except by a careful study of the utterances and actions
of those statesmen who have taken upon themselves the task of
consciously manipulating the economic system.
University of Oxford May I967
 INTRODUCTION TO THE FIRST EDITION

I HAVE written this book reluctantly. I know that it will

offend some of my friends and I fear it may hurt some of
those with whom I worked in friendly co-operation during
the war. But I had no option. For I believe that the recent
melancholy decline of Great Britain is largely of our own
making. The fall in our standard of living to a level which
excites the pity and evokes the charity of many other richer
countries, the progressive restrictions on individual liberties,
the ever-widening destruction of respect for law, the steady
sapping of our instinct for tolerance and compromise, the
sharpening of class distinctions, our growing incapacity to
playa rightful part in world affairs - these sad changes are
not due to something that happened in the remote past.
They are due to something which has happened in the past
two years; At the root of our troubles lies the fallacy that
the best way of ordering economic affairs is to place the
responsibility for all crucial decisions in the hands of the
State. It is a simple error, it is certainly an understandable
error. But it is one which, driven to its logical conclusion,
as it is now being driven by those who have been constitu-
tionally put into power, can bring upon us untold miseries
and humiliations of which the past two years have given us
a foretaste. Holding these views, and knowing that basically
the men and women of this country are of such a quality
that they merit, and can indeed in the right environment
command, a better fate than now seems to be in store for
them, it would have been disloyal of me not to attempt
to say my part.
There will be those who will dismiss this book as essen-
tially negative and destructive. And so it is, if clearing a
field of weeds before planting the new crop is negative and
xi
xii THE NEW ORDEAL BY PLANNING
destructive, or trying to stop a horse running wildly down a
crowded street is negative and destructive. I have devoted
myself to an attack on the latter-day planners because I am
convinced that, whatever may be the right ordering of
society, economic regimentation of the kind to which we
are now subject is the wrong answer to our problems and
is an arrangement which, so soon as it unfolds its inevit-
able consequences, will be repugnant to everyone of liberal
instincts. Unfortunately, by the time that the lesson is
learned the hard way from bitter, accumulated experience,
the right of choice may no longer be ours. For the trap is
slowly closing even in Great Britain. Economic confusion
is the breeding-ground of totalitarian ideas. Everyone re-
cognises that. Sir Stafford Cripps, in his moving speech to
the House of Commons on October 23, 1947, said:
Our struggle is to maintain the decent standards and the
freedom that our ever-expanding democratic experience has
taught us, in circumstances in which it is only too easy for more
violent and totalitarian methods to prevail.
The tragedy is that the planned economy is, in itself, one of the
main sources of the confusion which drives men into political
mania. So the first task, as it seems to me, is to do what one
can to bring about greater maturity in economic thinking so
that, without suffering all the pains that it is capable of
inflicting upon us, we may come to recognise the idea of a
centrally planned economy for what it really is - an attempt
to build another Tower of Babel. There is, indeed, urgent
need for all of us to concern ourselves with what should be
put in the place of the planned economy; we have taken
the basis of our liberal society far too much for granted
since the beginning of this century. But the first thing is to
prevent the imminent disintegration of what remains of our
liberal traditions.
I should have found no purpose in writing this book if
other earlier words, wiser and more scholarly than mine,
had been sufficiently pondered over. Everything that I
 INTRODUCTION TO THE FIRST EDITION xiii

have to say here, and indeed much more, is to be found in

Professor Hayek's masterly Road to Serfdom. Every planner,
who believes in reason as the guide in social organisation,
should read or re-read that book now and honestly ask
himself whether events are or are not following the course
against which Professor Hayek warned us three years ago.
But since the British are not. given to overmuch theorising
and since they find it odd that anyone should suggest that
their liberties could ever be filched away, a study of planning
in practice, such as I have tried to provide in these pages,
may help to rouse them to the mortal dangers which now
beset them.
I have relied largely upon British experience in the past
two years whilst trying to interpret those events against what
I saw of central planning in war-time. This means that I have
had to quote extensively from the words of present British
Ministers because they happen to be running, and trying to
expound to the public, the planned economy. I hope that
nothing I have said will be taken as personal criticism of
individuals - it certainly is not intended as such. I look upon
the present supreme human agents for planning in this
country as victims, in common with us all, of a system, all
innocently introduced, which threatens to become our
master - an evil genie released from a bottle. The contro-
versy over planning runs right across the divisions between
the ordinary political parties - there are certainly many
members of the British Conservative Party whose views on
this subject I find it difficult to distinguish from those of
members of the Socialist Party. But it happens to be the
socialists who are responsible for the current experiment
in economic regimentation. It is, therefore, only fair to
interpret what is occurring in terms of their ideas and their
policies.
One preliminary word concerning definition. I have
contrasted in these pages the centrally planned economy
with the free economy. The dividing line between the two
 xiv THE NEW ORDEAL BY PLANNING
can never be sharp. The free econorrw presupposes the
institution of private ownership in property (including pro-
perty in the means of production); the sovereignty of the
consumer; the freedom of contracts of service between
independent parties; freedom in the choice of occupation
(including the choice not to work at all) and free economic
intercourse between nations. These are ends in themselves ;
they are bound up with the rightful place of man in society.
The free economy also implies, not as an end but as the only
known means for maintaining economic freedoms, a free
price mechanism. But freedom in this sense does not mean
license. The free economy will vary from time to time and
from one set of circumstances to another.
The centrally planned economy implies the State deter-
mination of investment and its distribution, of occupation,
of consumer's choice. It involves progressively the destruc-
tion of private property and it leads to national self-sufficiency.
It, too, may be operated through a price mechanism, but one
which, as I have tried to show in the following pages, must
be directed towards the wrong ends. I am sure it will be said
that the British planned economy is not of this kind, that it
is a mixed economy gaining the advantages of all systems,
that there is no intention anywhere to deprive people of their
right of choice in occupation, consumption or production.
In brief, that I am arguing against something which does not
and, in Great Britain at least, never will exist.
It is true that every sensible economy is a 'mixed'
system. But everything turns on the mixture. The presence
in 1935 in Moscow of half a dozen decrepit droshky drivers,
working for private profit, did not disturb the general con-
clusion that there was a planned economy in Russia. There
is a watershed in these matters where, vague as the flows
may momentarily seem, the difference between east and
west, north and south, liberty and slavery is being irrevoc-
ably determined. I submit that there is no doubt in which
direction the current has started to flow for us. If we ask
 INTRODUCTION TO THE FIRST EDITION xv

about the Britain of the present day the following questions,

- are people entitled freely to choose and change their
occupation? are consumers free to distribute their incomes
between different goods in the proportions they would wish ?
are producers free to seek out and satisfy the freely expressed
preferences of consumers? are contracts of service a matter
for individuals? is the economy being allowed to knit
naturally with the world economy? - the answer in each
case is categorically no. There is a second test. Is the
present economic organisation one which is accepted by
anyone as a stable system which well serves our purpose, or
is it regarded by all as a kind of purgatory from which some
advocate escape in one direction and others urge escape in
the opposite? Surely it is accepted by all that we cannot
stay where we are, that either we go forward to more plan-
ning or we go back to the free price mechanism and all that
is bound up with it. It is precisely because I am convinced
that the choice has to be made, once and for all, in the
immediate future that I have written this book.
Univers£ty of Manchester November I947
 PART ONE
ORDEAL BY PLANNING IN THE SIXTIES
 PART ONE

ORDEAL BY PLANNING IN THE SIXTIES

The Conservative Plan

The second period of planning, beginning under a Conservative
Government in 1961, has run its course through two Labour
Governments to the present day. It is possible to trace with some
accuracy the resurgence of central economic planning and indicate
at least its proximate causes. The ball seems to have been set rolling
by the Federation of British Industries itself.! At the end of 1960,
the Federation held its annual meeting at Brighton, the central topic
of discussion being 'The Next Five Years'. The conference
accepted the report of one of its study groups which claimed that
there was
room for a more conscious attempt to assess plans and demands in par-
ticular industries for five or even ten years ahead.

This is not the first time that business men, through their
organisations, have supported measures destructive of the working of
free markets and private enterprise and therefore of their own
special rOle in society. It is only fair to report that at a similar con-
ference, held five years later at Eastbourne, with the logical conse-
quences before them of their own earlier recommendations, the
Federation sought to retrace at least some of their steps. For now
disenchantment was in the air.

The use of statistical projections in the form of models of possible

future growth may have value for certain purposes: but harm can be done if
over-optimistic projections are regarded as a basis for expanded Govern-
ment expenditure, or as a basis for wage claims within an Incomes Policy
before the precedent conditions are assured. 2

I The story is told in detail in S. Brittan, The Treasury Under the Tories

I95I-64, pp. 216 et seq. Penguin A72Z.

• The Times, January 23, 1965.
3
4 THE NEW ORDEAL BY PLANNING
After 1961 the Conservative Government allowed itself to be
stampeded along the new course. There were many reasons for this.
Economic growth admittedly was slower in Britain than in some
other countries and therefore, it was argued in despair, 'something
must be done'. There was a flabby surrender to the idea that
, stop-go' ·was not merely disagreeable but also avoidable, and that
a National Plan would smooth out the fluctuations and relieve busi-
ness men of uncertainties. It was thought, but without foundation,
that the growing mass of economic information and the increased
knowledge of economic processes becoming available would make
planning both simpler and more successful. Many British econo-
mists openly favoured increased State intervention. As they saw
it, their function as independent critical observers of the economic
system was giving way to that of technologists equipped, and only
too willing, to assist governments to replace the price mechanism
by the conscious control of the economy. Few protests were heard
at this important departure in Government policy. 1
Perhaps the most important influence of the time was the favour-
able impression created, particularly upon the minds of some Con-
servative leaders, by what was regarded as the striking success of
French economic planning after 1958. The failures of planning in
other countries, such as Russia and India; the outstanding success
of some economies which had not engaged in planning, such as those
of the United States, Germany, Japan and Canada; the fundamental
differences between the British and French economic systems: these
equally relevant pieces of evidence were set on one side. Across the
Channel the land seemed bright.
It is, therefore, worth while diverging for a moment to ask why
the British, who are not overly disposed to flatter the French by imi-
tation, thought it wise to do so on this occasion. After 1950 France
I On May 12, 1962, The Economist exulted in a leading article: " Loud cheers

for NED I It launched itself down the slipway this week in precisely the form
which The Economist has long advocated - but which we had frankly not expected
to see achieved ... the first Shone Report is not to be officially called a five-year
plan and 4 % per annum is not even being specifically called a target rate of
growth. . .. But, of course, unless older-style influences somehow launch a
counter-attack, the five-year plan and a target rate of growth are what they are
hearteningly likely to become."
 ORDEAL BY PLANNING IN THE SIXTIES 5
had had a series of Four-Year Plans, the third of them covering the
years 1958-61. Economic growth had been satisfactory, higher
than that in the United Kingdom, but had been associated through-
out with inflation and financial crises. Inflation had been especially
severe in 1957 and had led to emergency measures including a fur-
ther devaluation of the franc. I Whatever the French plans were
doing, they were not enabling France to avoid the extremes of finan-
cial instability. In September 1958 the Government set up a com-
mittee, under the chairmanship of M. Rueff, to submit proposals for
dealing with the financial crisis. Its Report, largely the work of
M. Rueff himself, was published in December 1958 and its recom-
mendations were adopted almost wholly by the Government.
Most of the measures proposed were directly antipathetic to the out-
look and concepts of central economic planning. M. Rueff is a
liberal economist who has always argued in favour of the virtues of
free market forces. The purpose of his Report was to restore sol-
vency in the French finances and, inflation once cured, to allow com-
petitive prices and free markets to be widely relied upon. z These
measures, to my mind, did more to strengthen the French economy
in the post-war era than anything for which the planners can take
credit.
Whether the difference between the rate of economic growth in
France and that in the United Kingdom up to 1961 can be attributed
to the presence in France and the absence in Britain of an economic
plan is the kind of question which, in the nature of things, cannot
be answered yes or no. But at least one highly informed observer
has doubted it.3
The prestige of the French plan in the minds of the British may
have grown because it possessed in exceptional degree the charac-
teristic closely associated with such planning in the Western world;
no one knew exactly what it was or did and, in consequence, people
who may have had little or nothing in common, save a vague
I V. Lutz, ' The French Miracle' in Economic Miracles, 1958. I have made
much use in the following paragraphs of this valuable essay.
Z For English readers the most convenient reference to this Report is to be
found in the appendix of Jacques Rueff, The Age of Inflation, J964.
3 V. Lutz, op. cit., pp. 151-2.
6 THE NEW ORDEAL BY PLANNING
distaste for free markets, could all claim to be planning, since each
could interpret the meaning and purpose of the plan in his own way.
What, indeed, was the essence of the French plan? Many
looked upon it as a document, with attendant statistics as a peri-
pheral ornament, which would foster a ' spirit' in the whole nation.
General de Gaulle himself had called upon his countrymen to re-
gard the achievement of its aims as an " ardent obligation" and to
make the plan " la grande affaire de La France". The powers of
the plan' as a myth' were much stressed. I M. Masse, the Head
of the Commissariat au Plan, reported in 1959 that "happily, the
spirit of the Plan is spreading". It was declared that the plan" is
above all a state of mind" and that" the value of the Plan as a sym-
bol is very great and its approval by Parliament, for example, should
be an event surrounded by a certain ceremony and solemnity". 2
Did the plan have teeth and, if so, how and when were they to be
used to bite people? Those who feared that the plan might be
coercive could be reassured by the information that the planning
was ' soft " ' indicative', ' fixing the climate of expectations', ' not
imperative'. M. Masse has said that
There are powerful psychological factors which ensure that the Plan
having once been drawn up, it, as it were, carries itself out. The agree-
ment achieved whilst the Plan was being drawn up tends spontaneously
to extend itself when it comes to implementing the Plan. 3

Conversely, to those who imagined that, because of this voluntary

element in the plan, few people might take any notice of it, it could
be made plain that though the plan was ' indicative', it was ' not
merely so '; that the Government could use its powers of taxation
and of granting credits and subsidies in order to implement the
plan; that the Government itself controlled a large part of national
investment and that these public sectors could influence other sec-
tors 'upstream'. The iron hand was to be found in the velvet
glove.
I v. Lutz, op. cit., p. 162.
2 J. and A. N. Hackett, Economic Planning in France, 1963, p. 7 and p. 299.
3 These and subsequent quotations from M. Masse are taken from his com-
ments in Economic Planning in France. P.E.P., 1961.
 ORDEAL BY PLANNING IN THE SIXTIES 7
Firms are unlikely to disregard the advice of the Planning Authorities
unless they believe that they will not need the State's financial backing
during the period of the Plan. I

M. Masse put it in this way:

In supervising the execution of the Plan, it is the function of the
Commissaire General to exercise both great understanding and great firm-
ness.
For every fear there seemed to be an effective anodyne. Any-
one inclined to belittle the plan as 'mere forecasting' could be
informed that, on the contrary, it was planning' in the real sense'.
Anyone who suspected that heavy-handed Government direction
might enfeeble private enterprise could be disarmed by a descrip-
tion of the long and stimulating 'dialogues' which went on
between business men, officials and trade unionists. (One French
business man declared that "the drawing up of the Plan is for
the industrialist like going to see the psychiatrist".) The sceptic
who protested that there was really nothing new in this planning
technique could be challenged with the statement that it was in fact
revolutionary. The cautious observer who thought that planning
was new and untried could be confronted with the statement that in
fact planning was a very, very old thing. Thus M. Masse:
The tool for these forecasts and programmes is Franc;ois Quesnay's
Economic Table. This was described by Mirabeau as "the great dis-
covery which glorifies our century and will yield posterity its fruits".
Posterity has been waiting for a long time.
Upon the uninitiated or naive, who might ask why, if satisfactory
economic models could be constructed, the details of the French
plans so often went widely astray,2 patience could be urged.
M. Masse explained that the techniques were not yet perfect:
We have been reluctant to formulate the complete models underlying
our plans. There were three reasons for this hesitation. First the basic
information is defective. Second there is a great contrast between the
elaborate and accurate algebra of the programming methods and the
[ Economic Planning in France, p. 228. P.E.P., 1961.
2 For the inaccuracies in French planning see C. Pratten, ' The Best Laid
Plans ... " Lloyds Bank Review, July 1964.
8 THE NEW ORDEAL BY PLANNING
blurred picture of what remains uncertain .... And third output has to
be valued; but the current level of prices will often reflect a merely tem-
porary excess demand or supply.

Both those who feared that planning would leave too little room and
those who thought it would provide too much room for competition
could accept the blurred middle of the road suggested by M.
Masse:
I certainly admit the stimulant merit of competition; but one must
also recognise that beyond a point it results in wastage, especially when
costly investment is involved.
It is not the purpose here to study in detail the labyrinthine
apologia for French planning that has been developed, but merely to
point out that it has been presented with great literary dash and an
almost mesmerising display of elusive economic concepts. Perhaps
the British disciples took their French masters more seriously than
the masters took themselves.
The volte-face of the British Conservatives may at first have been
hesitant but it finally became fairly complete. In late 1961 the
Government set up a National Economic Development Council
which, having accepted a ' 4 per cent growth objective', published
on February 18, 1962 a National Plan under the disarming title of
Growth of the United Kingdom Economy to I966 - over one year
after the beginning of the period 1961-66 it was supposed to cover.
Despite some prevarication about the status and meaning of this
document, the second period of planning had, in fact, been ushered
in. From now on the plan was to take a clearly defined form: one
figure for the percentage rate of national economic growth with
figures consequentially 'implied' for the major sections of the
economy - imports, exports, investment, labour and so on - and,
in varying detail, for individual industries and services. I
There can be no doubt that the Government of the day regarded
these new moves as important departures in policies and methods.
The choice of the figure 4 for the annual percentage increase in
I From now on this Conservative plan will be referred to as National Plan I, the

plan of the Labour Government which was to follow as National Plan II.
 ORDEAL BY PLANNING IN THE SIXTIES 9
national product was, in some ways, surprising. It represented a
rate of growth half as fast again as that which had occurred in the
United Kingdom in the fifties, and twice as fast as the average for
the first half of this century. The injection of some new impulse,
powerful enough to modify long-established trends, was clearly
being presupposed. And the only conceivable new factor in the
situation was the inauguration of the plan itself. As the Director-
General ofN.E.D.C. put it:
This emphasis on growth - which involves basing economic policy
on the dynamic concept of change - represents a major revolution in
attitudes. It is a departure from the static approach represented by either
the simple Micawber-type preoccupation with securing a satisfactory
cash balance of income and expenditure or the more sophisticated
Keynesian concern with the national balance of income and expenditure.
In contrast, the dynamic approach to economic issues looks to the future
objectives of the economy, and the rates of growth needed to attain them. I
Did planning up to September 1964, when the Conservatives
went out of office, do more good than harm? Table I shows the
critical figures as given in the plan and the actual achievements of
the economy. Two simple conclusions seem indisputable.
(I) The F.B.1. in its agitation in 1960 and the Government in setting
up N.E.D.C. in 1961 were crying' wolf' when it was very far
from the door. The previous three years had shown relatively
high and stable expansion of product and investment.
(2) From the promulgation of National Plan I big economic oscilla-
tions occurred. The national product first fell far below and
then exceeded 4 per cent. Extraordinary changes in the scale
of investment occurred. As in France, the plan clearly did not
bring about economic and financial stability.
I Financial Times Annual Review, July 6, 1964.
 TABLE I
United Kingdom
Plans and Performance I9S8-70

Percentage increase over previous year

National Product" Investmentb Exports C Imports C Eamings d

Year Plan Plan Plan Plan Plan Plan Plan Plan Plan Plan
Actual 1963 1965 Actual 1963 1965 Actual 1963 1965 Actual 1963 1965 Actual 1963" 1965f
1958-1) +2'0 , , , , ' , , , +4'2 , , , , + 7'0 , , , , ' , , ,
+ 7'5 +5'5
1951)--60 +4'4 ' , , , + 9'9 ' , , , +5'2 , , , , +12'8 , , , , +6'0 , , , ,
1960-1 +3'7 ' , , , + 9'5 ' , , , +2,6 , , , , - 2'2 , , , , +5'7 ' ,
1961- 2 +0'8 +4'0 , , - 0,6 , , , , +2'3 +5'0 , , + 3'4 +4'0 , , +3'1 +3-3! ' ,
1962-3 +4'0 +4'0 , , + 1'7 ' , +3'9 +5'0 , , + 3'9 +4'0 , , +5'2 +3-3! ' ,
1963-4 +5,8 +4'0 +16'9 ' , +2,8 +5'0 , , +II'2 +4'0 , , +8'5 +3-3!
1964-5 +2'6 +4'0 + 3'5 } <3:3'8 +5'5 +5'4 +5'0 +5'6 + 0,8 +4'0 +4'0 +8'7 +3-3! +3-3!
1965-6 +1,6 +4'0 + 0,6 +5'5 +3'4 +5'0 +5'6 + 2'5 +4'0 +4'0 +7'5 +3-3! +3-3!
1966--'] , , , , , , +5'5 +6'7 g , , +5'6 + 7'2 g , , +4'0 +2'3 ' , +3-3!
1967-8 , , , , , , +5'5 ' , , , +5'6 , , +4'0 , , , , +3-3!
1968-1)- , , , , , , +5'5 ' , , , +5'6
.'
, , , , +4'0 , , , , +3-3!
1969--']0 , , }+ , , ., +5'5 ' , , , +5'6 , , , , +4'0 , , , , +3-3!
--- - - ------- --- '--- - - ---- - ---- -

" Gross Domestic Product at factor cost: constant prices,

b Gross Fixed Capital formation at home: constant prices,
C Volume,

d Average weekly earnings of manual workers,

The Plan contains no figure for earnings but Budget Statement, April 1964, indicates that" acceptance of the 4 % target involves
acceptance of the 3-3i % figure for incomes generally".
f National Plan, I96S, p, 66,
g First half of year,
 ORDEAL BY PLANNING IN THE SIXTIES II

Can it be assumed, therefore, that the plan had no influence at all

on the course of affairs and is not worth discussing? There are
grounds for believing that the plan did positive harm and that actions
were taken in 1964 which are now recognised as having been mistakes
and which might not have been taken if no plan had been in
existence.
The economic events of the hectic last six months of 1964 were
complicated by political factors and by the General Election, so that
the list of ' might have beens ' is endless. But the figures as they
are now available to us surely have a story to tell. It will be seen
from Table I that in 1964 the increase achieved in the national pro-
duct was much higher than that planned, in investment was almost
three times as high, in imports nearly three times as high and in
exports only half as high. The records make it clear that the Chan-
cellor of the Exchequer, Mr. Maudling, correctly sensed the charac-
ter of the economic dangers of the time. But he could not be cer-
tain of what was actually happening. Critical and reliable figures
were not then available (and will never, in the nature of things, be
available) at the speed which is relevant to action. Amidst the in-
evitable uncertainties, what help was being given to him by the plan
and the planners? In March 1964, N.E.D.C. had published The
Growth of the Economy in which it looked at the original plan in the
light of the most recent movements and declared that these were
unlikely to put the current account into substantial deficit in 1964.
At various times in the year, Mr. Maudling had been reassured by
the planners that a 4 per cent growth rate could just be achieved,
i.e. if the plan was correct, there was no serious danger of the over-
heating of the economy. And it certainly did not contribute to
wisdom when Mr. Callaghan, in the House of Commons on July 20,
1964, said:
I want to make it clear that on this side of the House we recognise
that our programmes cannot be achieved until we are maintaining a
growth rate of 5 per cent or 6 per cent. The 4 per cent has already been
fully committed by the Government. We shall have to strive to move:
to a higher rate of expansion in order to fulfil these programmes.
In the light of after-knowledge, it seems difficult to escape the
12 THE NEW ORDEAL BY PLANNING
conclusion that the very presence of the plan in those disturbed days
had the effect of darkening counsel and unduly delaying remedial
measures.

The Labour Plan

The Conservatives went out of office as a result of the General
Election in October 1964 and with them went their plan. In the
course of the election campaign, the Labour Party had attacked
National Plan I and had promised to do better themselves by pro-
ducing a ' coherent, long-term plan'. It is odd that the Labour
Party should have taken this line because, in effect, Labour planning
and Conservative planning amounted to much the same thing and
although, with the new Government, administrative machinery was
to be shuffled about a little, the planning was to be carried out by
much the same group of permanent and part-time officials. In both
forms of planning an overall rate of increase in national production
was laid down; this rate was associated with rates of increase in the
critical economic aggregates. It is true that efforts were made to
distinguish between the two types of planning, particularly by the
Conservatives. Mr. Heath declared that
Their planners would increase centralised control over industry at
exactly the moment when more adaptability and flexibility were re-
quired. I
and Mr. Hogg that
It is not planning to which we are opposed, but socialist planning. 2
But all this was little more than shadow-boxing. In fact, Conserva-
tive leaders were complaining that the opposing Party was purloining
their ideas, both in objective and methods. And on November 3,
1965, at the end of a major debate on the Labour Government's
National Plan, the House of Commons accepted without division
the resolution:
That this House welcomes the National Plan.
When it was finally published, National Plan II revealed some
I The Times, September 14, 1964. 2 The Times, September 17. 1966.
 ORDEAL BY PLANNING IN THE SIXTIES 13
secondary differences from the earlier Conservative document.
The claims made for it were, if anything, more grandiose:
The publication by the Government of a plan covering all aspects of
the country's economic development for the next five years is a major
advance in economic policy-making in the United Kingdom. 1
And Mr. George Brown, on November 3, invited the House of
Commons to welcome the plan " as a reasonable basis for claiming
that at last Britain is on her way ".
Again, the new National Plan did not lay down annual rates of
increase of national product. It simply prescribed an overall in-
crease of 25 per cent in the six years 1964 to 1970. This, of course~
meant that the success or failure of the plan could not in any case be
determined until the end of the period. When, as in this case,
emphasis was put on the need for recurrent adjustments of the plan
in the light of events it meant that, technically, the plan could never
be adjudged correct or incorrect - it had a built-in alibi.
A third difference was that the Labour National Plan was a
much more elaborate document than its predecessor. The Con-
servative Plan had run only to 149 pages, it embodied a detailed
analysis of only 17 industry groups; the Labour Plan ran to 483
pa~es and analysed virtually the whole of the economy.
How far was National Plan II a success? The first point
to notice, and it is an important one because of the stress that
is always laid upon the need for flexibility and up-to-dateness in a
plan, was that the Labour National Plan took a great deal of time to
prepare and operated effectively for a much shorter period. The
chronology is as follows. The Labour Party came into power in
October 1964. In early December it was reported that a study had
begun of a new plan. The first idea was that an outline plan would
be issued in the spring of 1965 with a full plan to follow in the
summer. By March 1965 it had become clear that the publication
of an outline plan had been dropped. In April 1965 Mr. Brown
announced that
This information [for the planning process] simply does not exist at
the moment.
I The National Plan (Cmnd. 2764), p. iii.
14 THE NEW ORDEAL BY PLANNING
And he spoke of his enquiry as "the most difficult enquiry ever
undertaken". In May 1965 it seems to have been decided that the
Government's questionnaire to industrf should remain secret, al-
though indeed this document had been widely circulated in indus-
trial and commercial circles and printed in full or in condensed form
in private publications. Meanwhile the plan was being discussed
privately by N.E.D.C., section by section. In Maya' stock-
taking' of the National Plan was held at Chequers. In August the
N.E.D.C. approved the National Plan. On September 12, 1965,
Mr. Callaghan announced the imminent appearance of the plan:
We can say to the people of this country: ' here is a vision for the
future'. This will be a solid, well-constructed plan which will show
Britain the way ahead.
The plan was published on September 16, 1965. It had, there-
fore, taken a full year to prepare and publish. In March 1966 there
was another General Election and the Labour Party was again re-
turned to power. From this time onwards the Government was
struggling with increasing economic problems and progressive
balance-of-payments difficulties and was taking emergency meas-
ures to correct the conditions. On July 27, 1966, Mr. Brown sadly
announced that the National Plan must, in effect, be set on one side
whilst declaring that " it does not destroy the idea of the plan".
He confessed that
The rate of growth we intended to get, and were set to get, and on the
basis of which we predicted all other things for 1970, is no longer avail-
able.
And no new plan has, as yet, been published. So that between
September 1964 and September 1967, Plan II was operative for
ten months and in the greater part of that time all the important
economic measures of the Government had little or no connection
with the plan.
Must Central Economic Planning Inevitably Fail?
By any test, central planning between 1963 and 1967 was a
failure. But might it have succeeded if it had been handled more
skilfully? With the added experience, might another effort, more
 ORDEAL BY PLANNING IN THE SIXTIES IS
intelligently operated, lead to success? The Labour Party clearly
believe that the basic idea is sound and they are not to be deterred
by past misfortunes. Even some Conservative leaders are of -the
same mind. Mr. lain Macleod and Sir Edward Boyle have rejected
the view that

the cure for bad planning of this type is not better planning but no plan-
ning'!

Yet there are some strong a priori reasons for supposing that
failure will always be the fate of the kind of central planning that has
been going on in Britain in recent years.
First, it has no theoretical foundation; intellectually it is a vacuum.
The supporting literature is a hotch-potch of undefined terms,
dubious parallels, mutually incompatible explanations and prescrip-
tions which have no content for action. Is a National Plan a
prediction or an aspiration? Is it permissive or is it imperative ?
Does it matter if it goes wrong? Are all parts of it of equal im-
portance? Each one of these questions has been fervently answered
both yes and no. One or two illustrations must suffice.
Some consider that the figures in the plan should be correct.
For if they are to be regarded as guiding lines, what is to happen if
they point the wrong way? But others think there is value in
deliberately setting down the wrong figures, in putting the targets
• on the high side', for in that case there will be a hidden stimulant
in the plan. Some think that it does not greatly matter whether the
figures are wrong or right. If they are right, well and good. If
they are wrong, then good may be plucked from it, because the study
of past mistakes will make future mistakes less likely.2 Some feel
that the chief value of the plan is to layout, in broad quantitative
terms, the general shape of the economy over a longish period.
This clearly has been in the minds of many business men 3 and was
in the mind of Mr. George Brown when he deplored the practice of
breaking down into annual increments his figure of .. 25 per cent

I House of Commons, November 3, 1965, cols. 1069 and II4-6.

• J. Jewkes, Public and Private Enterprise, 1965, p. 63.

3 See below, pp; 27 et seq.
 THE NEW ORDEAL BY PLANNING
increase by 1970". Others think that the overall figures are much
less important and that the value of the plan lies in the fitting to-
gether of the different parts of the economic system. I Some think
that the Government should tell the business men what the plan is
and others that it should be the task of the business men to tell the
Government. There is one recorded case where it was proposed
that the right method would be to split the difference. 2 Some think
of the plan as a document designed to create a sense of security in the
minds of business men. But others look upon the plan as merely
the jumping-off point for studies and campaigns for probing and
testing and ' the removing of obstacles', all with the purpose of
keeping the business man endlessly on tenterhooks.
It is difficult to believe that anything but chaos can emerge from
this kind of chaos.
Secondly, plans of this type are unscientific because the method
employed in preparing them involves reasoning in a circle. The proce-
dure adopted is for the Government to make ' assumptions' as to
the rate of increase of national product, investment, exports, output
per head and so on, and then to ask individual business men, in the
light of these national assumptions, what their own plans would be.
Now if an army is told that it must march at four miles an hour and
is then asked how many paces a minute must be taken on that
assumption, it is not surprising if the discovery is finally made that
the army will march at four miles an hour. So with the plan. Once
the mould had been determined within which the answers of indivi-
dual businesses had to be provided, the aggregate of the answers
could be expected broadly to fill the mould. But that, of course,
does nothing to validate the original assumptions. 3
If by any chance the circular reasoning of the Government does
I See below, pp. 24 et seq.

• Mrs. Shirley Williams, now Minister of State for Education and Science, in
the House of Commons on November 3, 1965, said: " I would be surprised if the
Rt. Hon. Gentleman is still so primitive in his economic thinking that he believes
with Adam Smith that the summation of a set of individual targets amounts to
what the nation requires. Surely the true solution is to find the middle path
between the willingness of firms to meet the national targets and the requirements
of the nation if the National Plan is to be achieved."
3 J. Brunner, The National Plan, 1965; , Spartacus'. Growth Through Competi-
tion. 1966; A. Day, The Observer, September 19. 1965.
 ORDEAL BY PLANNING IN THE SIXTIES 17
not bring it back to the point from which it started, then it may be
forced to engage in extraordinary manoeuvrings in its efforts to
make sense of the procedure it is following. An interesting, and
extremely important, case of this is found in National Plan II.
When this plan was debated in the House of Commons on
November 3, 1965, Mr. George Brown pointed out that its prepara-
tion had revealed that there was " a shortage of 400,000 workers".
If the plan had been a scientific document, the correct deduction
presumably would have been that the overall target assumed of a
25 per cent increase up to 1970 was too high and, therefore, should
be reduced. But this Mr. Brown was not prepared to accept. He
argued that this ' gap , of 400,000 could be met in the following
ways:
(I) 200,000 can be found by the use of the effective regional policies ...
the bringing into work of people now being wasted in hitherto neglect-
ed regions. [At this time the total unemployment in Britain was about
310,000 persons and the number unemployed in regions where the
unemployment rate was more than It per cent was 193,000.]
(z) That would then leave us with a deficit of zoo,ooo but it is not an
intelligent conclusion that therefore we must have zoo,ooo more
workers. That would assume that there was nothing to be found by
way of increased productivity per worker currently employed ... it
must be clear that there is much to be gained from greater produc-
tivity ....
But, in fact, the questionnaire upon which the plan was based had
specifically instructed business men that
in reaching their estimates of requirements of man-power and investment
to meet the planned level of output in 1970, industries will have taken into
account the need to use man-power and other resources in the most econo-
mical way and to eliminate any out-of-date customs and practices
which stand in the way of doing this.
So, presumably, business men had already taken into account all
the improvements in productivity they thought possible. Mr.
Brown, in challenging the information they had given to him, must
have assumed either that business men had deliberately set out to
deceive him or that they did not know their own business. If the
former were true, what was the point of sending out the question-
naire at all? If the latter, on the basis of what information did
B
18 THE NEW ORDEAL BY PLANNING
Mr. Brown claim that he was better informed than the business
community? If he was better informed, he must have been so be-
fore the questionnaire was sent out and the plan was drawn up.
The third reason why planning is hardly likely to make us richer is
that the plan is really not an economic document at all. It is funda-
mentally a political document decked out with some primitive
technocratic derivatives. All important Western economies are still
in large measure market economies. They are systems where the
readjustments in consumers' demand, methods of production, rates
and directions of innovation are at once the outcome of and the re-
flection of changes in prices and costs. A National Plan consisting
of figures of physical quantities of things to be produced or con-
sumed has virtually no meaning unless it is known what is being
assumed about relative prices and costs. But little or nothing is
said about prices in the British National Plans. I
If a National Plan must conform to the push and pull of political
necessities then, in a democratic society, its economic virtues will be
slight. For example, governments will be tempted to pitch the
figure for the rate of growth on the high side, partly for its supposed
stimulant effect, partly because one government will be loath to fix
a lower figure than its predecessor since this might suggest that
it is ' giving' less to the people. Or again, under these conditions,
governments will tend to emphasise the 'flexibility' of the plan
because this renders respectable continuous changes in the plan to
keep it abreast of reality -like knocking over the chess men before
an inevitable defeat - and partly because this will create an im-
pression of scientific and experimental open-mindedness on the
part of government. But there must come a point at which, with
increasing flexibility, all shape is· lost.
Fourthly, whilst there is no way of proving that the accurate pre-
diction of the economic future is impossible, yet the evidence points so
directly to that conclusion that it appears nothing less than wilful pur-
blindness to deny it. Economic forecasts, of course, are not always
wrong. And governments can, if they are prepared to ignore econo-
I In submitting information for National Plan II firms were asked to assume

constant prices until 1970 I

 ORDEAL BY PLANNING IN THE SIXTIES 19
mic costs, make particular things happen as they have been planned.
If a government, for instance, controls investment in the generation
of electricity and also, through building licences, controls all other
building, it need cause no surprise if the plan for building
generating stations is achieved 100 per cent. But the long history
of economic prediction is mainly one of almost risible mistakes,
many of which have done harm.! The British National Plans
have not had any close link with reality, either in their overall
or more detailed figures, and with regard to some items, such as the
supply of gas, it has almost seemed as if the planners were the only
people who were not aware of what was going on. It is often
claimed for French planning that forecasts of the overall average in-
crease in national product have been roughly correct; but in the
case of large industries the achieved and planned increases have di-
verged widely - in the Third Plan actual increases ranged from
10 per cent to 236 per cent of those planned. 2 Given the multipli-
city of changes always going on, such errors seem inevitable. For
example, in the United States in the two periods 1948-53 and 1960-
65 the national product was growing at about the same rate of 5 per
cent. But in each of these periods the annual growth rate of output
for 381 individual products revealed a spread from more than plus
25 per cent to more than minus 15 per cent. Moreover many pro-
ducts with the higher rates in the first period showed lower rates in
the second, and vice versa. 3 How could anyone have begun to pre-
dict changes of this kind ?
It is chimerical to believe that things will become easier in the
future because the' whims' of the consumer will be less disturbing,
or because sooner or later it will be possible to collect sufficient
statistics at sufficient speed to enable the future to be forecast with
confidence. Mr. Brown, in his Preface to the National Plan in 1965,
declared that

To make the Plan work requires above all an acceptance of change.

[ J. Jewkes, Public and Private Enterprise, 1965, pp. 18-23.

2 C. Pratten, ' The Best Laid Plans ... " Lloyds Bank Review, July 1964.
3 U.S. Survey of Current Business, November 1966.
20 THE NEW ORDEAL BY PLANNING
But to accept change on a scale inseparable from our type of econo-
my is precisely what renders the plan unworkable.

The Costs of Planning

Planning is not simply an agreeable pastime which, whilst doing
no positive good, can be held to do no real harm. A price has to be
paid for it in various ways.
There is first the time and energy used up. All accounts of how a
plan is prepared stress the masses of information collected; the pro-
longed discussions at many levels; the passing backwards and for-
wards of revisions of the plan; the drafting and redrafting that goes
on to discover forms of words to reconcile differences of judgment.
Even the most fervent and indefatigable may, at times, cry for an end
to this, as when Mr. George Brown himself, in 1965, wrote an
article under the title: 'When The Talking Has To Stop'. I When
the plan is in crisis or breaks down, then even further emphasis is
sometimes put on the need for the' dialogues'. Thus Mr. George
Brown, in announcing in the House of Commons on July 27, 1966,
the breakdown of the National Plan, commented:
I must sit down again with my advisers, with industry ... and with
the t~ade unions, and have a new look at the rate at which we now think
we can go ... the check list of action, of things to be done by industry,
management, the unions and the Government become more important
than ever....
Second, if the main guiding lines of the plan prove incorrect, and
the plan is taken notice of, distortions will be brought about in the
economy. Suppose that, in the absence of a plan, the economy
would of itself move forward at an annual rate of 3 per cent. If the
plan lays down a 2 per cent rate, then the danger is that the 3 per
cent will not in fact be achieved; it only needs one important sec-
tion of the economy, or one important industry, to take cognisance
of the plan and gear itself to a 2 per cent rate of growth to hold back
the economy as a whole. If the plan prescribes a 3 per cent rate of
growth then it will be prescribing what. would happen in any case.
If, and this seems to be the most likely case, the plan prescribes
I British Industry, October 1965.
 ORDEAL BY PLANNING IN THE SIXTIES 21

a higher, say a 5 per cent rate of increase, then adverse consequences

are likely to follow. The exaggeration of the probable future
magnitude of the national product will render it likely that the claims
of certain groups in the community will be met which, otherwise,
might have been resisted. These groups, therefore, will absorb a
larger proportion of the national product than had been intended un-
less their claims are first accepted and then are surreptitiously ex-
punged by inflation. These groups, indeed, certainly stand to gain
in the short period through the circulation of National Plans setting
unattainable targets.
Thus, whatever the cautionary statements that may have origi-
nally surrounded the issue of a National Plan, claims for wage and
salary increases will naturally be made upon the basis of it. As Mr.
Maudling in his Budget Statement on April 14,1964, said:

As I said last year, acceptance of the 4- per cent target involves accept-
ance of the 3-31 per cent figure for incomes generally.
The dilemma here is that whilst the 4 per cent target may not be
achieved, not less than the 3-3t per cent increase in incomes will
almost certainly be demanded. If the Government, as a precau-
tionary measure, stresses the chance that the 4 per cent growth rate
may not be achieved, this will be looked upon as evidence that the
Government itself has only limited confidence in its plan - a
confession likely to destroy the prestige of the plan.
Another form of expenditure where consequential claims on the
national income are likely to be met before the guesses about the
future size of that income can be tested by time, is public expendi-
ture, and particularly expenditure on welfare services. There is
not, perhaps there never can be, any simple rule for determining
what part of the national income should be spent in this way. In
many countries, including Britain, the accepted rough working rule
has been that public expenditure can with safety rise at about the
same rate as the national product. But in Britain this link seems
now to have been snapped and the National Plan appears to have
been a contributory cause of this. The sequence of events has been
as follows. In the House of Commons on December 7, 1964,
 THE NEW ORDEAL BY PLANNING
Mr. Callaghan, as Labour Chancellor of the Exchequer, said:
The great distress to me ... is to find that we have got a growth rate
of 2 per cent and programmes to which we are committed based on a
growth rate of 4 per cent. This presents the whole House with a very real
problem which we shall have to face before very long ....
His distress was short-lived. In National Plan II, and in sub-
sequent statements, the Labour Government indicated its intention
to increase public expenditure by 41 per cent per annum up to 1970
although the national product was planned to increase by something
less than 4 per cent. Mr. Callaghan said in the House of Commons
on January 31,1967:
There was a deliberate choice made by the country, and the party
opposite when it was in power, towards the end of its life, that there
should be a shift from an improvement in the private standard of life of
the individual to an improvement in the collective standards, as expressed
in housing, hospitals and many other ways.
Since 1964 public expenditure has continued to rise more
rapidly than the national product. For 1967, Government expendi-
ture was expected to increase by 5'3 per cent; national product by
0'3 per cent.! Indeed these movements have led Mr. Callaghan to
raise once again the distress signals. In March 1967 he was report-
ed as saying he
would be very concerned if the present rate of increase in public expendi-
ture was to continue every year much beyond 1967-68. Too high a rate
of public spending in the following year could set off inflationary pres-
sures brought about by Government action.:t
Planning weakens competition. Planners are, by tradition, if not
actively hostile to competition, lukewarm towards it and disposed
to stress its limitations. 3 They conceive of planning as a substitute,
I London and Cambridge Economic Bulletin, March 1967.

• The Times, March 6, 1967.

3 Thus Mr. H. F. R. Catherwood, Director-General of the National Economic
Development Council, in The Christian in Industrial Society, 1964, p. 35. "There
seems, therefore, to be an area, too large to be comfortable, in which the market
economy does not automatically look after the public interest. Large capital
expenditure schemes of competing companies in the same industry tend to hold
back and go forward together to protect each company's market share, whereas
 ORDEAL BY PLANNING IN THE SIXTIES 23
in whole or in part, for free markets. They recognise that free
markets, because of the uncertainties they engender, render plan-
ning more difficult and frustrating. They know that the competi-
tive spirit within industry is inimical to the joint discussions and
collective action between business men called for under planning.
Competition means that each firm must be prepared to back its own
view of future possibilities, to take the risks of making mistakes, to
be sanguine about the chances of outstripping its competitors.
How can this happen if, under planning, the firms in an industry are
being encouraged to think of policies in common, especially of in-
vestment policies, and are expected to follow guiding lines laid down
from above about the chances of expansion? Can firms be expected
to go to the trouble and expense of collecting information relating
to the chances and risks of the future, includmg the chances of put-
ting their competitors out of business, if they are expected to share
this information with other business men? In so far as 'business
men are encouraged to co-operate in the numerous ways implied
by the ' dialogues', they are being encouraged not to compete. It
is significant that the extension of planning leads business men to
point to the inconsistencies between what the Government is now
expecting them to do and the curbs imposed upon them by anti-
monopoly legislation, and to urge the relaxation of this legislation. I

Why do Conservatives and Business Men Favour Planning?

In the light of the unhappy experiences with planning in Britain
in the last twenty years, why should it still be defended with such
conviction in some quarters? It is understandable that those who
feel that the free market as an institution is overrated, and who take
the public interest would seem to demand that they be coordinated and phased to
avoid swings between too little capacity and too much. It must also be admitted
that, in the market economy, competition does not have the quick and beneficial
effects which economic theory would lead us to expect. Efficient companies do
not reduce their prices and put the inefficient companies' into liquidation. Move-
ment of capital, labour and competition [sic] from inefficient to efficient is sluggish
at best."
I In January 1967 the N.E.D.C. endorsed unanimously a report of its full-

time officials which said that the Restrictive Trade Practices Act was frustrating
the work which the little Neddies wanted to undertake. Daily Telegraph,
January 5, 1967.
24 THE NEW ORDEAL BY PLANNING
it for granted that collectivist principles must in the long run pre-
vail, will look upon the errors and misfortunes of the past as merely
the teething troubles in the engineering of a better world and will
persist in their efforts to create it.
The real enigma is why some business men, whose practical
everyday experience might be expected to render them highly sus-
picious of doctrines of this type, and non-socialist politicians who
claim great virtues, both economic and social, for private enterprise,
have espoused the National Plans of recent years. What specific
advantages do they see in them ?
Among Conservative politicians Sir Edward Boyle stands out for
the careful studies he has made of the principles of planning and for
his systematic exposition of what he cbnsiders its merits. 1 No one
would want to challenge his purpose:
It seems to me clearly right, and in full accordance with our Conserva-
tive Party philosophy, that the Government should deliberately make
it their business to encourage faster growth.
But how is this to be done? Sir Edward makes very damaging,
and perfectly fair, comments on the Labour Government's National
Plan II. But he seems reluctant to draw the conclusion that
what is a sign of weakness in Socialist policy cannot be proof
of strength in Conservative. He minimises the value of the overall
targets of the Labour National Plan (although the earlier Conserva-
tive plan contained just such targets):
It seems to me that the main value of indicative planning lies not so
much in overall targets of this kind - especially when these are clearly
political decisions rather than responsible economic forecasts - as in
more limited exercises.
He seems to feel that the great benefits of planning lie in the power
of the Government to preven.t a lack of balance between one indus-
try and another, so that the expansion of the one will not be held
up by the failure of the other to grow at the right rate. He is more
I His views have been set out in full in Conservatives and Economic Planning,

Conservative Political Centre, 1966, and in his speech in the debate on this subject
in the House of Commons on November 3, 1965. All my quotations are taken
from these two sources.
 ORDEAL BY PLANNING IN THE SIXTIES 2S
concerned with the interstitial adjustments within the economy than
with the major long-distance targets.
But is this not the kind of Government intervention which is
most likely to do harm? In any highly developed industrial econo-
my every hour, at millions of points, the integration and balancing
of supply and demand is being brought about by the operation of
prices and the market. In the totality of its detail this system of
mutual adjustments cannot possibly be comprehended by anyone
human mind or anyone group. This Sir Edward would doubtless
accept. But, he asks, are there not major sections of the economic
system where dislocation is possible and where a deft and timely
intervention by Government will keep things straight? He men-
tions a specific case:
Take a topical example - chemicals. The output of chemicals is
dependent on the level of investment in the chemical industry, which is
itself bound up with the capacity of the chemical engineering industry.
If, as at present, plant makers cannot meet the investment orders of the
chemical industry, the result is £30 millions worth of chemical imports
for which we ought to have capacity in this country.

It is worth while examining this example in some detail. It is one

which has been hawked about everywhere as if it provided indisput-
able proof of the weaknesses in ordinary market operations which
can be avoided by the intervention of the planners. Yet, in fact,
the case proves just the opposite: it reveals how shortsighted and
precipitate interference by public bodies can block the spontaneous
adjustments of the market and magnify economic dislocations. The
1965 National Plan, in speaking of the chemical industry, said:
A massive programme of investment will be required to expand and
modernise capacity, as well as a continuing high rate of expenditure on
research. The industry foresees a need for annual investment outlays to
increase from £155 millions in 1963 and £190 millions in 1964 to an
average of £280 millions during 1965-69 and £300 millions by 1970. The
individual companies' firm investment plans for the period up to the end
of 1967 are well in accord with this programme, though their execution
is being delayed by shortages of capacity in the chemical plant industry;

I The National Plan, p. 145.

26 THE NEW ORDEAL BY PLANNING
It was, doubtless, this alarmist report which led to the setting up
by the National Economic Development Office of a group to study
this subject - The Process Plant Working Party. It reported in
January 1967.1 The Report makes it quite clear that the chemical
plant industry was, in fact, extremely successful in raising its output
between 1958 and 1966 and that the forecast demand for such plant
has declined sharply for the years 1967 and 1968. So that whilst the
process plant makers were being accused of ' failing the nation ' and
were being encouraged to increase their own capacity, they were
anxiously trying to fill their emptying future order books.
This same Report reveals the weaknesses often inseparable from
attempts to predict and control demand and supply through official
bodies. Vague and grandiose prospects are held out for increasing
exports:
The export potential must be measured in hundreds of millions, not
the present assumption of £30 millions. The operative word is ' poten-
tial '.2
Autarchic attitudes are taken up towards imports:
Imports of plant are substantial. They are assumed to be of the order
of £70 millions per annum and a substantial part of this should be made
in the United Kingdom. 3

It is particularly bewildering to find planning being defended on

the score that governments will foresee and avoid internal disturb-
ances of balance, because the records suggest that governments
have frequently, either by over- or under-investment, plunged into
errors on a scale and over a period unmatched by anything in market
economies. We may choose to ignore what has happened in this
connection in Russia and India; we may have forgotten what hap-
pened with the British ground-nuts scheme. But we can hardly
conceal from ourselves very recent cases where governments,
wrongly foreseeing an economic breakdown, have engaged them-
selves in 'co-ordinated and coherent forecasting' and thereby
I Future Demand For Process Plant, Process Plant Working Party, January
1967. National Economic Development Office.
2 Ibid., p. 8. 3 Ibid., p. 8.
 ORDEAL BY PLANNING IN THE SIXTIES 27
generated a wave of economic fluctuations. One illustration of this,
of which something will be said below, is that of electricity supply.
An even more vivid illustration is that of the supply of bricks since
1964. In that year a shortage of bricks, which the industry proper-
ly interpreted as a transient trouble, led the Government to press
brick-makers to increase their capacity as a matter of urgency.
This, combined with the Government's declared aim of building
500,000 houses a year, a target which was never nearly achieved,
produced a crisis of over-capacity. The actual consumption of
bricks was lower in 1965 and 1966 than in 1964. The stocks of
building bricks had by April 1966 risen to about three times the
normal and were still abnormally high in March 1967, even
though about 100 brick-works had been closed down during the
previous eighteen months. In February 1967 the plight of the
brick-makers was such that pleas were being made for Government
intervention to rationalise the industry by raising a levy from
which compensation could be paid to firms prepared to close down
plant. The Government was being called upon to act as the saviour
of the economic system it had disrupted.
Indeed, it can be urged as a general proposition that the kind of
planning for' balance' which Sir Edward Boyle recommends is the
kind likely to produce breakdown. In any complicated industrial
system operating under private enterprise shortages are always
round the corner; this is just another way of saying that economical
operation calls for the maintenance of the minimum stocks consist-
ent with smooth running. It is part of the normal risk-taking of
private firms to decide when shortages threaten to be serious
enough to call for the creation of additional capacity. For them,
avoiding over-capacity is just as important as suffering from
under-capacity. But, in the case of politicians, under-capacity
is what they will most fear. A political reputation can more
easily be lost by the failure to deal with a shortage than by precipi-
tate action which leads to over-capacity and waste.
Why do many business men support the idea of central economic
planning? As opposed to Sir Edward Boyle, they seem to believe
that it is the major targets of the National Plan that are important
28 THE NEW ORDEAL BY PLANNING
and not the consequential balancing of the parts. They know that
even with their constant attention, long experience and intimate
knowledge, planning in their own limited organisations is subject to
endless shocks and surprises. They know that a National Plan is
infinitely wider and more complex and that it is conceived and
elaborated by officials who have only limited knowledge of the past
and only the vaguest indications of coming events. If I judge them
aright, business men defend planning because they think that the
promulgation of a figure for long-period national economic expan-
sion will reduce the uncertainties involved in their own private
planning.
I think that they are, thereby, setting a trap for themselves.
This is clearly illustrated by the case of electricity supply, one
of great importance to the economy, where the motives and ideas
of the parties happen to have been documented in some detai1. 1
An authority controlling the supply of electricity must make its
plans for a number of years ahead. These plans depend critically
upon a judgment of the future demand for electricity, and this in
turn depends upon probable general economic expansion. The
question at issue is whether the fixing by a government of some
figure, 3 or 4 or 5 per cent annual rate of expansion, will be more
likely to be correct than if the figure is thought of by some smaller
but more interested body. In a paper delivered before the World
Power Conference in October 1966, the Chairman of the Electricity
Council, who has great knowledge of the intrinsic difficulties of
planning, nevertheless concluded that

Indicative planning ... is useful and will, I believe, make for better
and more consistent economic decisions by both Governments and in-
dustry.

How, in the light Of the extraordinary vicissitudes of the fuel and

power industries in the past five years, did he reach that conclusion ?
He recognised that, although up to 1962 the industry had to make

I See especially Professor Sir Ronald Edwards' Economic Planning and Elec-
tricity Forecasting, 1966, and Electricity Supply I96S-66, The Electricity Council.
 ORDEAL BY PLANNING IN THE SIXTIES 29
its own estimates of national economic growth, it had done pretty
well in that respect:

Estimates of aggregate economic behaviour have not been a serious

weakness in the forecasting exercise.

He explained that the expansion of the electricity supply industry

had been firmly geared to the National Plans of a 4 per cent annual
rate of growth under the Conservatives and a 25 per cent rate of
growth in six years under the Labour Government plan. But, as
we now know, these guesses have proved to be very wide of the
mark. If the figure in the National Plan was accepted as the basis
for the planning of electricity supply, and acted upon, it can
hardly be denied that the National Plan was the origin of grave
errors in the planning of the Electricity Council. And this
contrasts with the earlier comparative success of the electricity
authorities in guessing at future broad economic aggregates.
The same document draws back the veil which so often cloaks
the mysteries of the ' dialogue'. Sir Edward explains:

Each of the industries - coal, electricity, gas and oil- is therefore

competing for the favour of the customer and at the same time putting in
long-term forecasts of the share of the business that it expects (or hopes)
to get. The aggregate of these forecasts for 1970 is more than the Minister
of Power believes plausible. Happily the final difference has been re-
duced to 4 per cent (i.e. well within the error attached to all these fore-
casts) and it has been decided not to press the industries to an adjustment
downwards to close this gap.

This is revealing. It is frequently claimed that Government can

play its most useful rOle in taking an ' overall ' view of demand and
supply. But in this case the Government was prepared to accept
a threat of surplus capacity, which is precisely the threat considered
serious under private enterprise.
It is much to be feared, in consequence, that the general
planning of the British fuel and power industries is becoming a
confusing and wasteful hotch-potch. The muddle fundamentally
can be traced back to the exaggerated hopes of general economic
30 THE NEW ORDEAL BY PLANNING
expansion raised by National Plans I and II. But other specific
decisions and influences have added to the difficulties: the inflated
ideas, under successive governments, of the economic benefits
of atomic energy in the generation of electricity; the pressure of
Government Planning Authorities upon the electricity industry to
increase its capacity; the lack of perception of the potentialities of
the natural gas supplies in the North Sea; the reluctance to use
market forces and the price mechanism to determine the distribu-
tion of the new natural gas supplies. l The net cost to the commu-
nity cannot be measured precisely. But it can be indicated broadly:
too much capital has been sunk too quickly into the supply of elec-
tricity, too little too slowly into that of gas. Up to 1962, invest-
ment in electricity supply had been about one-third of that in manu-
facturing industry as a whole. In the years 1963-65 it jumped to
nearly 50 per cent. In 1967 it threatens to be even higher. In
1967 investment in gas supply may well be seven times greater than
that envisaged in National Plan I and twice that envisaged in
National Plan II.
The details are shown in Table II. It ought to be sufficient to
undermine the confidence of all save the most staunchly doctrinaire
planners.

Planning and Theories of Economic Growth

Errors persist longest where answers are volunteered before the
relevant questions have been properly enunciated" Are there theo-
retical reasons for supposing that the preparation and publication
of such documents as National Plan I and National Plan II will in-
crease the rate of economic growth? So far as I am aware, that
question has never been squarely faced or answered. But, after
1960, planning enjoyed a new lease of life and still retains some of
its prestige, because it was assumed that this question had been
asked and answered positively. How was this self-deception born ?
In recent years the interest of economists and the attention of
politicians and the public have been drawn towards the underlying
causes of economic growth. In any country which has a strong
I G. Polanyi, What Price North Sea Gas?, 1967.
 TABLE
II
Electricity and Gas, United Kingdom
Planned and Actual Fixed Investment, I96I-70
(I) (2) (3) (4) (5) (6) (7) (8)
Gas £m. Electricity £m.
Expectations Expectations
Pre-Plan 1963 Plan 1963 Plan 1965 Actual Pre-Plan 1963 Plan 1963 Plan 1965 Actual

1961 46 46 .. 42 36 3 36 3 .. 36 4
1962 59 59 .. 57 4 13 4 13 .. 412
1963 66 67 .. 82 50 4 5 16 .. 5 10
1964 44 49 89 87 560 601 610 60 7
1965 39 43 III 103 5 64 650 715 654
1966 34 37 142 186 574 690 740 718
1967 .. ·. 155 280& .. ·. 740 670&
1968 .. ·. 140 ·. .. ·. 690 ..
1969 .. ·. 143 ·. .. .. 680 ..
1970 .. .. 149 ·. .. ·. 740 ..
Sources: Cols. (I), (2), (5), (6): Growth of the United Kingdom Economy to 1966, pp. 79-84.
Cols. (3), (7): The National Plan, 1965, p. 57.
Cols. (4), (8): National Income and Expenditure Tables.
Cols. (I), (2), (5), (6) at 1961 prices.
Cols. (3), (7) at 1964 prices.
Cols. (4), (8) actual prices.
& Estimated.
32 THE NEW ORDEAL BY PLANNING
central Government and a people who feel that their standard of
living or the rate in its improvement are intolerably low, it is under-
standable that the economic experts should be encouraged to seek
for the determinants of the wealth of a nation and that the Govern-
ment should be expected to put any new knowledge to good use.
If it were known precisely what measures would speed up economic
expansion it would be foolish not to take advantage of them, not
to plan their introduction. To avoid semantic confusion here, this
search for the secrets of economic growth will be described as
, growthmanship '.
If carried out in a scientific fashion, growthmanship is an in-
tellectually respectable occupation. But, as with all scientific tasks,
the certainty of success should not be assumed, much less should
the success be anticipated. Unfortunately, not a few economists
have shaken off such self-denying ordinances and, for one reason or
another, have been ready to make exaggerated claims for economic
science and thus, as allies or dupes of politicians looking for short
cuts to prosperity, have turned growthmanship into something little
short of an intellectual racket.
This is a harsh, but I believe not an unfair comment and - al-
though it is not the purpose here to analyse at length all that is in-
volved in the vast recent literature on the causes of economic
growth - it calls for some defence.
Any general theory of economic growth which is to have prac-
tical value would have to satisfy certain conditions:

(I) The theory would identify the variables and the relationships
associated with economic growth.
(2) These variables and relationships would be susceptible to
measurement so that results of action designed to change them
could be observed.
(3) Reliable administrative methods would have to be available for
manipulating the variables.
(4) The administrative methods would not be destructive of other
important values in society to a degree which would offset the
benefits of economic growth.
 ORDEAL BY PLANNING IN THE SIXTIES 33
At the moment we are at the very beginning of understanding on
all these matters. There is no current theory of economic growth
which finds general acceptance or which would even approximately
match up with the many elusive factors clearly related to economic
expansion. Indeed, Kuznets, one of the most profound students of
this subject, has declared that no ' significant theoretical work' on
the theory of economic growth broadly defined has been done in the
hundred years since the mid-nineteenth century, except for attempts
to revise Marxist theory. 1 He goes on to indicate that economic
growth has been a function of broad social arrangements which, so
far as we know at the moment, cannot be manipulated quickly ex-
cept by the use of force by the State:
The transformation of an undeveloped into a developed country is not
merely the mechanical addition of a stock of physical capital; it is a
thorough-going revolution in the patterns of life and a cardinal change in
the relative power and position of various groups of the population. 2

The failure to recognise the rudimentary state of knowledge

about growth has meant that some very bad advice has been ten-
dered to governments by economists. The first false start was to
assume that the critical factor in growth was investment, but
it is a doubtful doctrine and far from an adequate theory for policy pur-
poses. If you make higher investment your watchword - even higher
, productive investment', whatever that is - you may do little to accele-
rate growth and may even slow it down; and if you want higher invest-
ment, planning is not necessarily the best way of getting it.3

Similarly, unwarranted claims have been made as to the direct

connection between economic growth and expenditure on general
education, scientific research or health services. 4
Noone would wish to discourage the study of economic growth;
scientists must follow the paths to which they are drawn by their

[ S. Kuznets, 'Economic Growth and Structure', Selected Essays, 1965,

PP·4-5·
2 S. Kuznets, op. cit., p. 30.
3 A. K. Cairncross, The Short Term and the Long in Economic Planning, p. 5.
4 J. Jewkes, Public and Private Enterprise, 1965, pp. 37-52.
34 THE NEW ORDEAL BY PLANNING
CUriosity. It should, however, be conducted far from the corridors
of power and out of the immediate reach of politicians itching to
snatch the credit for the efforts and results of other men's work.
And the study of the causes of growth should certainly not begin
with the presumption that they will necessarily be found in ever
more extensive Government intervention.
No science can survive unless those who practise it develop an
instinct for choosing the more promising leads towards greater
understanding, and for sensing the occasions when they are con-
fronted with the insoluble and the impossible. This applies to
economists as to other scientists. Yet there is a danger that econo-
mics, to its own discrediting, will be directed towards the dis-
covery of pots of gold at the end of rainbows. One glaring example
of this is the implication in much planning that economists can or
will be able to predict the economic future. Perhaps no economist
really believes this but some have been slow to disclaim such super-
natural powers. There are, however, more subtle ways in which
it may be hinted that every economic problem has its solution.
Thus the fact that Britain appears to be lagging behind other
countries in economic growth has produced a flood of possible
explanations. It does not follow, however, that once the causes
of this disparity are fully understood they are therefore automatic-
ally susceptible to remedy. The studies may merely reveal the
inescapable facts of life. For example, it has been suggested that
because Britain, as contrasted with other countries, became in-
dustrialised much earlier, has been drawing labour into industry
from agriculture for a longer period and, therefore, now has a small
proportion of its working population in agriculture, the future rate
of industrial growth in Britain will be restricted by , a shortage of
labour'. This explanation is very convincing.. It does not follow
that, by some economic legerdemain, the Government can enable
the nation to avoid these consequences. There are occasions when
it is necessary to recognise that the cake once eaten cannot be eaten

I Mr. Enoch Powell was one of the first to stress this point, in his Economic
Miracles, 1964, p. xv.
 ORDEAL BY PLANNING IN THE SIXTIES 35
again, and that efforts to kick against this simple logic may do much
more harm than good. 1

The Future?
Anyone who witnessed the passing away after 1950 of the first
wave of British planning must have been surprised at its return after
1960. The vital question is whether history will now repeat itself
and whether the second planning era will come to an end in much
the same abrupt fashion. It is by no means certain that history will
repeat itself.
It is true that on the present occasion a number of critics, some
of whom have been referred to in the preceding pages, have spoken
out strongly, although sometimes at the risk of being thought of as
engaged in mildly treasonable activities. 2 They have more recently
been joined by some other writers, who had been drawn towards
planning and had, in a number of cases, joined the Government
service presumably to play their part in creating the new economic
order but had apparently, in the process, found that the real econo-
mic world was more complex than they had imagined. Some of
them, indeed, have explained in detail the grounds for their change
of mind.3 Important organs of opinion also seem to be changing
1 In this connection it seems to me that some recent writings by Professor
N. Kaldor (Causes of the Slow Rate of Economic Growth of the United Kingdom,
1966) and Professor E. A. G. Robinson (Economic Planning in the United King-
dom, 1966) are suspect. Both these writers favour more' micro-economic' plan-
ning, especially for the purpose of redistributing labour between manufactur-
ing and other activities. The grounds upon which they claim that this will
increase the rate of British economic growth are highly disputable. Unfortunately
the Government, by introducing the Selective Employment Tax, now has a simple
administrative device by which endless experiments can be made upon the body
economic. The Selective Employment Tax has already brought about adverse
and (at least to the Government) unsuspected consequences. The danger here,
as in medicine and other branches of knowledge, is that, just because techniques
have been improved, it will be assumed that we have advanced our knowledge of
how, or whether, they can be employed to good effect.
2 John Brunner, The National Plan; 'Spartacus', Growth Through Competition;

D. S. Lees, Uses and Abuses of National Planning, 1966. Professor T. Wilson has
made valuable contributions to the discussion by pointing out that the relations be-
tween instability and growth are by no means so simple as many have supposed.
, Instability and the Rate of Growth " Lloyds Bank Review, July 1966.
3 Thus S. Brittan in The Treasury Under the Tories I95I-64, p. 242, said in
August 1964: "This insistence on a 4 per cent growth target, obscure and
 THE NEW ORDEAL BY PLANNING
their ground. There is something almost bizarre in finding The
Times, which had earlier solidly supported the idea of planning,
speaking of" the' confidence trick' theory on which the N.E.D.C.
study and the National Plan were based". I
On the other hand, what may be described as the Planning Es-
tablishment is now a more formidable vested interest than formerly.
One important Government department is now devoted mainly to
the task of planning. At least some support for it is found in both
the main political parties. Labour politicians have certainly not
yet abandoned their dogmas. Mr. Stewart, in the House of
Commons on November 10, 1966, said:

That does not mean that the concept of planning is invalidated; in-.
deed it is more than ever necessary . ... [my italics]
Mr. Callaghan, in the House on December 1,1966, said:
The National Plan must playa central part if people are to have con-
fidence in the future ... the present Plan is being revised. That does not
mean that it is being abandoned .... It is more than ever necessary [my
italics] that we should push ahead with the programme of action con-
tained in the Plan ....

statistical though it may seem, was Mr. Selwyn Lloyd's own greatest personal
achievement as Chancellor, and right up to the time of going to press is N.E.D.C.'s
own greatest success as well . . . it was concerned with real wealth and living
standards rather than paper symbols." But, as we now know, the symbols were
paper after all. By January 1967, in Inquest on Planning in Britain, Mr. Brittan
had concluded that, " Because of the wishful thinking of politicians and much
public opinion, the planning movement turned out not only materially but also
intellectually, harmful." (p. 22) and" The best friendly advice one can give is to
call a temporary moratorium on all official model-building except for the minimal
purposes of planning Government expenditure." (p. 54.)
P. D. Henderson, who edited Economic Growth in BrItain, in his own Chapter 7
of that book gave six principal reasons for believing that planning could contribute
to raising the growth rate. "Our conclusion therefore is that economic planning
in Britain has a potentially valuable role as part of a general set of policies to
increase the rate of growth." (p. 230.) This was written before the end of 1964.
But Mr. Henderson also produced a general introduction to the book, written
much later, and in that he is much more cautious: " Despite all that has been
done, however, our understanding of the nature and causes of economic growth
remains very limited." (p. 15) and" There is not a great deal that Governments
can do to bring about any rapid or significant increase in the future rate of growth."
(p. 16.)
I The Times, April 6, 1967.
 ORDEAL BY PLANNING IN THE SIXTIES 37
And Lord Shackleton, speaking for the Government in the House of
Lords on February 1,1967, declared:
The Government have not abandoned planning and we believe that
it would be disastrous if we were to do so [my italics]. . .. The Department
of Economic Affairs and other Departments are now working to establish
a framework of assumptions about the development of the economy over
the next few years ....
In the communique issued after the visit of Mr. Kosygin to Britain
in February 1967 there was even a suggestion that British and Rus-
sian plans might usefully be linked together:
It was agreed that ... it was desirable to develop longer-term
arrangements, related to the forward planning of their respective econo-
mies, to enable on both sides the development of productive capacity for
expanding trade in both directions.
Such statements may well be a smoke-screen behind which
the politicians are preparing a strategic retreat, for it is not easy
for them openly to confess to final failure. If this be the case,
it can be expected that the content of National Planning will
be watered down progressively. The plan might be kept in cold
storage until the economy, by other methods, is once again restored
to health; so that when the balance-of-payments problems were
solved and production was rising steadily, the plan could be
brushed down and reintroduced in such fair economic weather that
there was no danger of its going wrong. In the meantime its pre-
cision could be reduced and its meaning thereby rendered more
elusive.
This, indeed, appeared to be happening in the early part of 1967.
In February the N.E.D.C. was urging that
There must be no repeat of the Plan's fundamental error - setting
up a 25 per cent growth target and moulding the rest of the Plan to it .... '
Increased flexibility, it was being suggested, might be gained by
having a whole lot of different targets. In March 2 the N.E.D.C.
was said to be favouring the idea of a National Plan' without a
target '. The logical end of this kind of reasoning is, of course, a
I The Times, February 14, 1967.
• The Times, March 2, 1967.
 THE NEW ORDEAL BY PLANNING
National Plan without a plan. In these circumstances it is there-
fore, not surprising that one of the topics suggested for the Prime
Minister's Second Productivity Conference, held in June 1967,
was a discussion of the aims and methods of planning and that,
as the N.E.D.C. saw it,
The first task is to plan how to set about planning.
It might, indeed, be a happy outcome if the planning movement
were to strangle itself finally by contortions of this kind. But we
cannot wholly rule out a drive in the other direction: that of trying
to make the plan work by producing another major National Plan
and buttressing this "macro-economic control by micro-economic
controls over the distribution of investment, incomes and prices,
and the movements of labour.
There would, of course, be strong resistance to a dictated plan
because it would only be practicable if it went along with direction
of labour and the control of emigration. Yet the Government now
has a sufficiently wide and tight grip on the economic system to en-
able it to impose a plan should its mind run in that direction. The
combination of powers now in the hands of the Government is in-
deed formid~ble. The proportion of national investment in the
public sector has risen from 40 per cent in 1960 to 47 per cent in
1966, and to an estimated 49 per cent in the first half of 1967 and
52 per cent in the second half of that year. Nearly everyone favours
the idea that the Government, whatever other planning it should or
should not do, should plan its own expenditure. When public
investment has reached these proportions, the planning of it will
progressively influence and' even dominate private investment.
Where a government operates a widely extended range of bureau-
cratic controls over the economic system, a myriad ways will be open
to it by which private firms who do not ' play the game' can be
brought to heel by the fear that discriminatory action, always diffi-
cult to prove but none the less potent, might be taken against them.
The bureaucratic network in .Britain is now extremely wide: it
comprises the control of foreign exchange, of international invest-
ment, of regional development, of building, of prices and incomes.
 ORDEAL BY PLANNING IN THE SIXTIES 39
Of course, a forced plan would be likely to smother enterprise
and inhibit growth. Yet it is worth remembering that at least
one-half, perhaps nearer two-thirds, of the world's population
endures under governments which, in pursuit of mistaken ideas
about their powers to enrich the people, steadily impoverish them.

Conclusions
I have tried in these pages to establish that the economic strength
of Britain has been frittered away and its future endangered by
erroneous, if seductive, ideas about what makes for the wealth of a
nation. I know that in restricting myself to a criticism of National
Planning, I shall be accused of being , merely negative'. I admit
the charge if it means that, in my opinion, governments have but
limited powers to do economic good but virtually unlimited powers
to do harm; that the continuing danger must, therefore, be that they
will try to do too much and that planning is a blatant example
of it.
Indeed, it is a pity that the National Economic Development
Council itself has not been more' negative' in outlook. When the
Council was first set up, one of the tasks remitted to it was that of
identifying and suggesting ways of removing obstacles to economic
growth. This responsibility always seems to have taken a very bad
second place to that of the more spectacular task of constructing a
National Plan. On a priori grounds, it would seem easier and more
fruitful to release to the full the potential economic energies of the
people by sweeping away existing impediments than by searching
vaguely for new sources of energy and novel routes to efficiency.
If the National Economic Development Council had pursued more
vigorously this promising line, it might earlier have made the dis-
covery (towards which, indeed, it now appears to be groping) that
one of the real obstacles to British economic growth since 1960
is to be found in the National Plans. Such a discovery would have
been a positive contribution to prosperity.
Admittedly, if National Plans I and II had never been heard of,
the economic performance of Britain would probably have been
considered unsatisfactory in the year 1967. I have not concerned
40 THE NEW ORDEAL BY PLANNING
myself here with what might be done in a wider sense by govern-
ments to remedy a condition which the British themselves regard
with baffled indignation and which most other Western countries,
I think, sincerely regret. It may very well be that there is nothing
that a British Government can do about this state of affairs. If the
people maintain their present attitudes towards work, leisure and
incentives, and if they persist with the doctrine that the attainment
of equality is the primary aim of society, then it would not be sur-
prising if Britain remained low, and even fell further, in the interna-
tionalleague.
If the British people willinglyand deliberately opted for an in-
digent rather than an affluent society, no one would have the right
to interfere or complain. I do not myself believe that they have
resigned themselves to such vows of poverty. If not, the only line
of escape from the present douleurs is through the fuller release of the
economic energies of the community. How is this to be brought
about? Broad changes of social attitudes are among the most mys-
terious of occurrences and little seems to be known about the causes.
I doubt whether the direct actions of governments can do much to
influence these changes. But there are measures, of omission and
commission, through which British Governments might make some
positive contribution towards restoring our standing in the world.
I have expatiated on these in another place, I and I content myself
here with a mere list of them.
First, the Government must change its priorities and concen-
trate its energies and abilities upon the primary but neglected
duties of providing for national defence, curbing internal violence
and maintaining the value of the currency. These age-old tasks
must take precedence because Britain has now drifted into a state
in which national defence is given low priority, internal violence
is on the increase and the erosion of the value of money has long
continued. Unless governments can master these elementary
duties, they are not likely to command the respect and confidence
necessary for the fulfilment of wider responsibilities. There are
'"J. Jewkes, Public and Private Enterprise, 1965, and A British Economic
Miracle, speech to the Conservative Political Centre, Oxford Summer School,
196 5.
 ORDEAL BY PLANNING IN THE SIXTIES 41
other, newer functions, which governments should perform. To
employ the Budget annually to maintain a high, but not inflationary,
stable level of employment; to create the. conditions favourable to
higher mobility of labour; to maintain competition by anti-monopoly
legislation and administration; to supply more promptly more of
the economic information needed if individual firms are to be able
to plan their own activities; to devote at least as much energy to
the study of how economic problems might be overcome through
the refinement and development of market processes as is now
devoted to that of organising Government powers as a cure-all
for every trouble.
These would be necessary acts of commission. But a stronger
flow of individual economic effort might follow if governments were
to refrain from doing certain things. They should resist the tempta-
tion to make long-period promises of national affluence. They
should not assume that for every social ill there is a speedy and
effective specific lying to hand. Having done their best to frame
policies likely to foster incentive, they should take the results as they
come. They should abandon the myth that economic advisers
with expensive computers have magical powers of making political
promises come true. This is especially bad for economists, who
may come to believe that they really possess such powers and feel
obliged to recommend intricate and untried routes to prosperity and
to regard as beneath their notice less spectacular incentives - such
as high and highly differentiated earnings for skill and effort; profit-
making for those who successfully take risks; the wider ownership
of private property and the greatest possible freedom for the con-
sumer to spend his earnings as he wishes - all of which the common
man knows about and responds to. If governments wish to help
the poor and needy in the matter of health services, housing, food
and education, they should help the poor and needy and refrain from
distributing public money indiscriminately to rich and poor alike in
the name of the Welfare State. They should recognise that they
now dispose of such a high proportion of national investment that
any further increase will carry with it a countervailing loss in the
progressive enfeeblement of the system of private enterprise.
42 THE NEW ORDEAL BY PLANNING
If recent Governments had paid more attention to such matters,
instead of searching for gimmicks and confidence tricks as easy
ways to fortune, we would all undoubtedly have benefited.

Postscript, September I967

In the past five months the Government has given no clear
indication if and when it will publish a new National Plan although
it clearly intends to intervene more extensively in the structural
changes and the operation of industry, through numerous Govern-
ment agencies and by varying methods. Any new National Plan
could, therefore, be bolstered up by more administrative devices
but, of course, the need to integrate the activities of these various
agencies with each other and with the Plan would itself produce
fresh complications. In the interim, the Government claims to be
basing its major actions on the assumption of a 3 per cent annual
growth rate, although nothing like this rate is as yet being achieved.
The dislocations induced by National Plan II continue to pro-
duce their effects. In particular, the over-investment in electricity
supply, combined with Government insistence upon a fixed rate
of return on capital, has rendered inescapable a drastic increase
in electricity prices and thus undermined anti-inflation policy.
But perhaps the most disquieting sign of the times is the recent
revival of certain ancient and elementary errors about economic
organisation. In its barest form, the case against central economic
planning is this. First, that planning which is feasible for a lesser
organisation, such as a firm, may be wholly impracticable for a
greater, such as a national economic system. Second, that central
economic planning is monolithic and thereby creates the danger of
vast errors unlikely where planning is carried out by numerous
independent bodies operating within a price system. But J. K.
Galbraith in his New Industrial State (1967) flatly challenges these
propositions and he is followed by M. Shanks! and A. Shonfield. 2
If such views prevail it will mean that the experiences of the forties
and sixties have gone for nothing.
I "Why, then, if corporate planning is good, should national planning ..•

be bad?" The Times, September 9, 1967.

2 "If presight has any value at all, a planned system . . . will suffer fewer

bottlenecks . . . the capital/output ratio will be more favourable". Modern

Capitalism, 1965, p. 226.
 PART TWO

ORDEAL BY PLANNING IN THE FORTIES

THE greatest tyranny has the smallest beginnings. From pre-
cedents overlooked, from remonstrances despised, from griev-
ances treated with ridicule, from powerless men oppressed
with impunity, and overbearing men tolerated with com-
placence, springs the tyrannical usage which generations of
wise and good men may hereafter perceive and lament and
resist in vain. At present, common minds no more see a
crushing tyranny in a trivial unfairness or a ludicrous indignity,
than the eye uninformed by reason can discern the oak in the
acorn, or the utter desolation of winter in the first autumnal
fall. Hence the necessity of denouncing with unwearied and
even troublesome perseverance a single act of oppression.
Let it alone and it stands on record. The country has allowed
it and when it is at last provoked to a late indignation it finds
itself gagged with the record of its own ill compulsion.
The Times, August II, 1846
 CHAPTER I

THE SPREAD OF THE FASHION

The people never give up their liberties but under some
delusion.-EDMuND BURKE.

I
FASHIONS in economic thinking are notoriously infectious
and fickle. They run through communities with the speed
of forest fires, often dying down as quickly as they arise.
Since the end of the first World Wax there has been a long
string of these crazes of which little now remains except
derelict societies and neglected literature. It is difficult to
recall now the vehemence of the propaganda in favour of
rationalisation, technocracy or guild socialism, or the en-
thusiasm with which bands of zealots have found the real
secrets of economic and social progress, now in the United
States, now in Russia, in Sweden or in Switzerland. Even
the obsession in Great Britain in 1946 for indiscriminate
industrial re-equipment and vast capital investment has been
almost forgotten.
These fashions perhaps do little harm: their excesses
finally evoke the appropriate resistances. Where, as so
frequently happens, they centre on the part which the State
should play in society they help to sharpen our social
wits and thus contribute to a contemporary solution of the
finest problem of all legislation - ' how to determine what
the State ought to take upon itself to direct by public wisdom
and what it ought to leave with as little interference as
possible to individual exertion '.
The current mania for comprehensive economic planning
by the State may well appear, half a century hence, as just
another of the red herrings which fate throws across the
4S
46 THE NEW ORDEAL BY PLANNING

forward march of free peoples. But looking at it close up,

as we must now do, it presents some more than ordinarily
disturbing features which ought to put democracies on their
guard and rouse them to ask whether they are not confronted
with ideas fundamentally incompatible with their cherished
ways of living.
Central economic planning has gained such a firm grip
that it is often forgotten how new an idea it is. The patient
reader will find no reference to it in the works of Marx or of
the Fabians. The histories of British socialism up to the
end of the first World War make no reference to it. Indeed
the conception of an economic system operated by the
State as a manager might operate one factory runs directly
counter to many interpretations of socialism.
It seems to have originated, as many evil ideas origin-
ated, in Germany in the war of 1914-18 when it was con-
ceived of as a technique for war administration. It was
seized upon between the wars by German intellectuals who
saw in it an endlessly fascinating set of problems in complex
administration and an irresistible opportunity of breaking
individuals to the purpose of the State. It came to real life
when Lenin, finding himself with power over a demoralised
economy, cast round for some way of diverting the thoughts
of his subjects from their present tribulations to the hopes
of a terrestrial paradise. He found no help in the existing
literature. He said :
We knew when we took power into our hands that there were
no ready forms of concrete reorganisation of the capitalist system
into a socialist one .... I do not know of any socialist who has dealt
with these problems.!
He invented a new will-o' -the-wisp, an apparently simple and
practical idea which swiftly swept through the existing intel-
lectual vacuum. In 1920 he wrote thus to Krzhizhanovsky:
Couldn't you produce a plan (not a technical but a political
scheme) which would be understood by the proletariat? For
I Quoted from Carr, SOfJiet Impact on the Western World, p. 23.
 THE SPREAD OF THE FASHION 47
instance, in 10 years (or 5 ?) we shall build 20 (or 30 or 50?)
power stations covering the country with a network of such
stations, each with a. radius of operation of say 400 versts (or 200
if we are unable to achieve more) . . . . We need such a plan
at once to give the masses a shining unimpeded prospect to work
for: and in 10 (or 20 ?) years we shall electrify Russia, the whole
of it, both industrial and agricultural. We shall work up to God
knows how many kilowatts or units of horse-power. I
This was the embryo of the idea, with its already well-
established characteristics of political cynicism, slap-dash
economics and obsessions with the spectacular, which has
grown up so quickly and threatens to cause so much trouble
in the world.
Young as it is, the idea has already travelled far and
wide. In Russia the very knowledge of what constitutes a
free economy has been stamped out completely. In many
of the countries of Europe the State has taken over the
industrial equipment in whole or in part. In democratic
countries the bait is being gobbled without too much thought
for the hook that may lie in it. The rulers in Great Britain
claim to have a centrally planned economy, to be carrying
out a social and economic revolution. Even in the United
States many of the young intellectuals are beginning to
yearn after the benefits of ' social engineering' in a fashion
which suggests that they, too, will soon be calling for a regi-
mented society.
It is not only the speed and fury of this movement in
democratic countries which is alarming. It is also the
incipient evidence of totalitarian fervour for doing good to
other people at whatever the cost to them. The prophets of
the new age are beginning to reveal a testy intolerance to all
who stand in their way.
The critics of planning are in these days regarded almost
as engines of evil. Their motives are impugned, their feel-
ing for humanity doubted. This restive impatience in the
face of criticism is destructive of the tolerance upon which
I Quoted from Webb, SO'IJiet Communism: A New Civilisation? p. 615.
48 THE NEW ORDEAL BY PLANNING
democratic communities are founded. It should increase
the sense of ultimate danger and lead the socially wary to
prod carefully for the traps before they go forward into the
promised land.
It is also disturbing that, in their controversy, the
planners and anti-planners dispute over one point but are
really concerned about something else much more vital.
They dispute as to whether an economic system run by the
State would make us richer or poorer than one operated in
a free society, where each man can choose his occupation and
use his capital as he wishes. But the disputants have at the
back of their minds a deeper question: what kind of society
will go along with the planned economy? We have it on the
authority of one of the most acute social observers I that
a society may be fully and truly socialist and yet be led by an
absolute ruler or be organised in the most democratic of all
possible ways; it may be aristocratic or proletarian; it may be
a theocracy and hierarchic or atheist or indifferent as to religion ;
it may be much more strictly disciplined than men are in a modem
army or completely lacking in discipline; energetic or slack; . . .
warlike and nationalist or peaceful and internationalist; egali-
tarian or the opposite; it may have the ethics of lords or the
ethics of slaves. . . .
If this is true it is clearly important to know which of these
states of society is the more likely to arise in a planned
economy. For whatever may be said about a free economy,
experience shows that it is not consistent with dictatorship,
slavery or other forms of extreme tyranny.
The struggle between central planners and their oppo-
nents goes on, therefore, in terms of economics. But the
stakes are moral and spiritual. If the issue were merely that
of a little more or a little less wealth 'the fight would be of
no moment. In fact the prizes are the ultimate prizes:
room for the mind freely to follow its own courses; room
for society to enrich itself by the encouragement of diversity
and the tolerance of eccentricity; room for the growth of
I Schumpeter, Capitalism, Socialism and DemoCTacy, p. 170.
 THE SPREAD OF THE FASHION 49

dignity in human relations. Everything, indeed, that is

bound up with the uniqueness of personality and with the
Christian ethic.
It is, at first sight, strange that the new ideas regarding
economic organisation should have gained so wide and ready
an acceptance. Experience might have been expected to
restrain the movement. The only centrally planned eco-
nomies we have so far known, .those of Russia, Germany
and Italy, have been born into, or have finally produced
societies in which terror, sadistic cruelty and constant inse-
curity have been the lot of all save the privileged few. In
each the arts sickened, science withered, charity declined.
Each found it necessary to cut itself off from all ordinary inter-
course with the outside world, to restrict the movement of its
people across the frontiers, to misrepresent abroad what was
happening at home and to misrepresent at home what was
happening abroad. Each has been the source of a feeling
of world insecurity and of the possibility of war. It is often
held that such associations are not inevitable, that there can
be ' good' planning as well as ' bad' planning. But to the
objective mind there should be food for thought and grounds
for caution in the undisputed fact that, so far as experience
goes, the depths of human wretchedness and a centrally
planned economy have invariably gone together.
It is clear that there are powerful impulses making for
this new tide in economic ideas. Some of them are un-
doubtedly old evils in somewhat new forms. Among the
leaders of this new movement would undoubtedly be found
a high proportion of morbid types. Men who itch after
power to control their fellows. Men of little understanding
and less restraint who would smash the existing economic
institutions out of pure ignorance of their functions. Ego-
maniacs who can conceive of no standard of values but their
own and strive, with Jesuitical fervour, to save the world
despite itself. But the activities of all such cannot wholly
explain the rapid growth of the popularity of planning.
c
50 THE NEW ORDEAL BY PLANNING
Among the converts are many men of good will. Their
conversion can only be understood on the assumption that
they are following social aims for the attainment of which
central economic planning is regarded as essential.
I suggest that there are at least six highly commendable
human aspirations lying behind this movement.
There. is, first, the desire to avoid in the future the mass
unemployment which occurred between the wars in every
system of free enterprise. 1 An economy which leaves a
significant part of its producing power unutilised does not
make sense. Up to now, free economies have suffered from
the serious defect of running at something less than full
steam. Not unnaturally the ordinary man contrasts this with
the full employment in Russia and in Germany between the
wars and with the shortage of labour in all countries during
the war and deduces that State planning has made the dif-
ference. If the State could only grip economic activities
tightly enough, surely, he concludes, the waste of idleness
and the dislocating effects of industrial fluctuations could be
prevented.
Second, there is the growing feeling that men must be
masters of their economic destiny.z The search for ways of
controlling human environment is, indeed, one of the under-
lying causes of all progress. In all politically mature countries
the individual has created devices to safeguard himself
against the arbitrary acts of other individuals or groups. But
the worker or the employer may still find his livelihood
destroyed overnight by some unpredictable and apparently
I Mr. Morrison, House of Commons, July 8, 1947, " The test of a modem
economic policy is whether or not it keeps the economy running somewhere near
full capacity".
2 Mr. Morrison, Economic Planning (1946), p. 14: "In a few years' time
people looking back will be amazed to see . . . how little was understood of the
part which planning could play in freeing employers and workers and farmers
from the horrors of uncontrolled and unforeseen fluctuations".
Sir Oliver Franks, Central Planning and Control in War and Peace, p. 37 :
"The GovemInent must so present its policy and programmes that they
are accepted as the right answer in the circumstances for a nation that will be
master of its fate".
 THE SPREAD OF THE FASHION 51
uncontrollable jerk of the economic machine. These bolts
from the blue are not merely painful, they are humiliating.
They outrage the sense of order and appear to leave men at
the mercy of chance. And the State seems to be the most
convenient agent for creating security and certainty.
Third, planning is associated with the extension of the
scientific method. The great achievements of the natural
sciences in the last thirty years have stirred the popular
imagination. Through some unfortunate twist in the inter-
pretation of the scientific method it has come to be assumed
that the economic system cannot be scientific unless every-
thing which happens in it is under the direct and conscious
control of some individual. If a Government official decides
what amounts of a commodity shall be produced, where they
shall be produced, how they shall be distributed, that con-
stitutes 'scientific' planning. The human mind has been
brought to bear in a systematic fashion upon a specific pro-
blem, collective behaviour is controlled by a single master
plan from above. But if production and distribution is
allowed to take place through the operation of an impersonal
price system, that is to say, through the free co-operation
of independent individuals - even though much the same
results are achieved - then there is not the same feeling of
achievement. This is much as if the force of gravity were
to fall into popular disrepute, because it was not the outcome
of the conscious activity of a human mind, and industrial
processes were consciously planned to the neglect of, or in
defiance of, this force.
Fourth, the State is being called into economic affairs
because it is believed that increase in wealth can thereby
be speeded up, or even that it will be possible to get some-
thing for nothing. To the social scientist an economic
system which can double real income per head every thirty
or forty years, with an occasional bonus added when some
especially fruitful technical improvement comes along,
would appear to be justifying itself. But to the individual
S2 THE NEW ORDEAL BY PLANNING
who is looking for an immediate increase of one-third in his
own income (and most of us are in that position) the matter
appears quite different. Broad economic progress of the
kind which free economies have achieved in the past is
largely irrelevant to his own immediate problems. The State
is expected to resolve this difficulty, partly by redistributing
wealth to the advantage of the under-privileged, partly by
creating a more efficient economic society which will turn a
2 per cent annual increase in income per head into something
much larger.
Fifth, there is a widespread insistence upon economic
security. It is, indeed, paradoxical that in this century when
life is held cheaper than during most other periods of history ;
when within twenty-five years the people of the world could
twice be brought to slaughter each other in unparalleled
numbers; when peace-time machines (particularly in trans-
port) which maim and kill increasingly are accepted with-
out demur, other forms of courage should seem to be
dying out and there should be this firmly held attitude that,
whatever the cost in terms of individual liberty, economic
risks must be reduced. And since a system of free enterprise
inevitably creates discontinuities and personal hardships,
partly as a result of its rapid absorption of the fruits of tech-
nical progress, partly as a consequence of its tendency to
move forward in jerks and starts, those seeking a quick
solution for these evils not unnaturally turn to the State as
a possible stabilising agency.
Finally, there is a growing economic humanitarianism
which renders intolerable the inequalities of wealth associated
in the past with a system of free enterprise. Absolute
economic equality, if that were possible, would probably be
obnoxious to the sense of justice, for it is widely recognised
that people work with varying intensities and that greater
natural aptitudes should bring some differential award. But
the striking disparities between the richest one-tenth and the
poorest one-tenth of the citizens in many countries in the
 THE SPREAD OF THE FASHION S3
past fifty years is something which the twentieth century
cannot stomach. Here again the deduction is drawn that
only the direct control of the economic system by the State
can bring improvements.
It is the purpose of this book to show that these legiti-
mate aspirations ~ to make a steady, continuous and full
use of the community's powers of production, to dominate
one's economic environment, to operate economic institutions
scientifically, to provide all with higher material comforts,
to avoid economic fluctuations disturbing to the individual,
to mitigate the grosser forms of inequality - are completely
and finally frustrated by central State planning. For central
planning ultimately turns every individual into a cipher and
every economic decision into blind fumbling, destroys the
incentives through which economic progress arises, renders
the economic system as unstable as the whims of the few
who ultimately control it and creates a system of wire-
pulling and privileges in which economic justice ceases to
have any meaning.
There can be nothing but bitterness and ruin waiting for
those who create, or suffer to be created, a centrally controlled
economy. It is not a system which can be coolly experi-
mented with and then dropped, if it fails, with no greater
loss than a return to the status quo. There is no easy way
back. For the more threatened it is by failure, the more
savage will be the efforts to make it succeed at any cost. The
more apparent becomes the insolubility of the intellectual
problems it involves, the crazier and more irresponsible will
become the efforts to solve them. Nor is it true, as some of
the less confident planners are inclined to argue, that at the
worst the planned system amounts simply to bartering some
part of our liberty for increased wealth or increased security.
There is no choice open to us between slavery with plenty
and freedom with poverty. For the consumer is just as
certain a victim of the planned economy as is the free man.
54 THE NEW ORDEAL BY PLANNING

II
If all this is true, how does it come about that so many
intelligent, sincere and well-meaning people have been
brought to accept, for the attainment of their aims, methods
which are worse than useless for the purpose? How have
they been fooled or been brought to fool themselves? One
might probe endlessly into those dark and deep recesses
of the mind wherein myths and confusions, and apparently
economic myths more than others, grow in such profusion.
But some of the more important sources of the confusions
of our times are easily to be recognised.
The most important is the habit of the planner of com-
paring his ideals - his blue-prints, the products of his
drawing-board - with the actual working, with all its de-
fects, of the system he wants to get rid of. He is nearly
always anxious in these days to keep out of court the evidence
of what has actually happened in Russia. That is 'bad'
planning as contrasted with the ' good' planning which he
is anxious to introduce. But he insists upon dragging into
court the actual experience of the free economy in the past
fifty years. Suggestions that some of the admitted weak-
nesses of a free economy are susceptible to simple and
effective remedies are rejected as wishful thinking. All
kinds of improbable changes in human nature are assumed
in portraying what will happen in a planned economy I but
none of them are permitted for the purpose of foretelling
the future of a free economy. The unresolved, or unresolv-
able, snags in a planned system are evaded by assuming that
people will be ' sensible and play the game'. But no one
I Thus Schumpeter, Capitalism, Socialism and Democracy, p. 21 I : "The
socialist order presumably will command that moral allegiance which lS in-
creasingly refused to capitalism. This, it need hardly be emphasised, will give
the workman a healthier attitude towards his duties than he possibly can have
under a system he has come to disapprove." If, as is not at all unlikely, many
people look forward to a socialist State because it will mean that they will have
to work less hard, it seems unreasonable to assume that, once the socialist State
is established, they will be prepared to work harder than ever.
 THE SPREAD OF THE FASHION 55
can be assumed to be sensible or reasonable or fair-minded
in the free economy.
The great attraction, for the naive or the unscrupulous,
of building up human societies on the drawing-board is that
the incentives to effort cannot be depicted and, therefore,
can be ignored. There is no room in the organisation chart
of the U.S.S.R. for the secret police. The clean, simple
lines of responsibility leave no room for sketching in the
motor which is to do the driving. Blue-prints omit black
markets. The social engineer can always assume that he
can bend, twist and plane his human material against the
grain without resistance and fractures.
This unscrupulous dodging about between dual stan-
dards confuses judgment. There is point in comparing the
Russia we know with the Great Britain or the United States
we know. There may be point in contrasting a socialist blue-
print with what could be made of a reformed free economy.
But to make the comparison on different levels of objectivity
really begs the question.
A second source of confusion is the failure to recognise
that differences of degree can ultimately become differences
in kind. It is precisely at this point that those who are most
strongly convinced of the potential evils of growing State
control find it most difficult to hold their position in dis-
cussion of detail. For there comes a point at which to argue
each case on its merits really amounts to not arguing the case
at all. If, for example, the State proposes to nationalise some
relatively unimportant industry, the pros and cons of that
particular case may be equally balanced. It may seem
highly unrealistic, in the particular context, to raise major
issues regarding liberty and the general efficiency of the
economic system. And yet a multiplication of such cases
may alter for the worse the whole character of the economic
and social system. This difficulty, of course, confronts ail
democratic communities in dealing with totalitarian ideas
and tactics. At what point, it has to be asked, should we dig
56 THE NEW ORDEAL BY PLANNING
In our heels and declare that further infiltration, however
minor, will be resisted? It is this dilemma which creates
the class of appeasers. For the habits of compromise, of
empiricism, of tolerance and of open-mindedness which
alone make a free society possible are just the habits which
render the democrat an almost sitting target for his totali-
tarian opponent. The planner prefers to have each case
discussed on its merits, i.e. to have it discussed without re-
lation to its wider implications. It should be the tactics of
his opponent to discuss each case within a wider framework
of principle. But he can only do this at the risk of being
described as doctrinaire and unrealistic. In political affairs,
the appeasers of the period between the two great wars now
suffer the contempt they merit. But in economics the
appeasers still hold the field as the men of balanced and
judicial mind responsive to the changing needs of the time. 1
Yet no democratic community can exist save where its
members understand the difference between having their
hair cut short and having their scalps taken clean off, and
recognise in the former the ever-growing dangers of the latter.
An extremely important case where differences of degree
may ultimately become differences in kind lies in the field of
administration. Everyone knows that it is possible to plan,
with purpose and success, a small organisation, such as a
reasonably sized business or local authority. If planning is
desirable on this scale why not extend its scope and plan the
working of a whole country, or indeed, as many would suggest,
the whole world? The simple answer is that this is adminis-
tratively impossible, that what can be done on a small scale
cannot always be done on a large. But in social and economic
I Thus The Times leader of September 25, 1946: " In the General Election
last year . . . the centre of gravity was set markedly nearer to a planned
economy and further from laissez-fllire. But, while the right degree of this
adjustment is and will be a matter of strong domestic contention, there was
no break in the continuous evolution of an approach to social and economic
tasks which has led thp. people and successive Governments of this country
to seek, step by step and stage by stage, that habitable half-way house for which
a large part of the world is now seeking."
 THE SPREAD OF THE FASHION 57
affairs it is an answer which rarely appears conclusive. It
is thoroughly grasped in other branches of thought. We
can never have a wasp as large as a tiger, since the mechanisms
used in integrating the functions of the wasp do not stretch
to that size. We can never have an elephant fifty times as
large as the present size: its legs could not carry the weight
or, if they were made strong enough to carry the weight, they
would be so thick that the animal would not be able to move
at all. But most people assume that you can increase an
administrative organisation indefinitely in size and that it
will continue to do its job with just the same success and
speed as before. In fact, the crowding together of vital
decisions at the top would mean that the organisation ulti-
mately would cease to do anything at all.
This is so critical a point that it is worth asking why
the right answer is reached in one set of instances and the
wrong answer in others. It may, in part, be due to the
rudimentary state of the science and art of administration ;
there we are still in the stone age. It may, in part, be due
to woolly thinking regarding the advantages of decentral-
isation. It is often argued that all these problems of adminis-
tration, even in a complete centrally planned economy, can
be solved by 'decentralisation' . And, of course, within
limits, decentralisation does help. What is overlooked is
that decentralisation creates administrative problems of its
own: how to co-ordinate the decentralised units. That can
only be carried on successfully within narrow limits. To go
back to an illustration given above, we may reach the point
at which the job to be carried out really requires an elephant
fifty times bigger and stronger than the present type. We
know such an elephant does not and cannot exist. We may
argue that the right solution is decentralisation - fifty
elephants of the present size instead of one fifty times larger.
But we do not, thereby, dodge the problem. For the qu~stion
now is: can we get fifty elephants to work together with the
sensitivity and the automatic adjustment provided by the
S8 THE NEW ORDEAL BY PLANNING
instinctive reactions between the brain and muscles of one
elephant? Here there clearly is a limit. The failure to attribute
to administrative limitations the crucial role they should
play in social and economic organisation is mainly due to the
fact that in administrative problems there can never be the
precise and final answer which can be given in scientific
problems. Men differ in their powers of administration.
Some cannot control successfully a toffee shop. Some can
control an organisation with (say) 20,000 workers. So it is
assumed that because there is no definite limit to the growth
of a successful administrative unit there is no limit at all.
This is just as wrong, and just as dangerous, as if we were
to argue that, since some men are five feet high and others
six feet high, there is no reason why we should not have men
fifty feet high and proceed to design all our machinery so
that it could only be operated by such giants.
Planning, again, commends itself to many because it is
felt that ' this is the way things are going', that it is a part
of the' wave of the future', that it is foolish to press against
the rising irresistible tide of affairs. This attitude of resig-
nation, paradoxically enough, runs right across the view,
already examined, that planning will put us in a position to
become masters of our own economic destiny. It is also
highly unscientific because it assumes that when any social
force has gained momentum it must inevitably continue
until it dominates the whole of human activity.!
Finally, in the period following a victorious war the
conditions are ripe for the growth of the planned economy.
The people have been subject for a number of years to per-
sonal regimentation. The fact that the war has been won
surrounds the economic organisation which contributed
to success with an often quite unmerited prestige; 2 the
I G. K. Chesterton long ago saw through this fallacy when he twitted the

experts who" when they see a pig in a litter larger than the other pigs, know
that by an unalterable law of the Inscrutable it will some day be larger than an
elephant" .
2 Thus Sir Stafford Cripps never wearies of describing the success of
planning during the war in the Ministry of Aircraft Production.
 THE SPREAD OF THE FASHION S9
failures, weaknesses, wastes and losses are forgotten, the
achievements unduly magnified by time. I The shortages
and poverty which follow war create a real need for some
extraordinary controls. If planning brought us victory
through its powers to produce agents of destruction, how
much more potent it might be if employed in peace-time
constructive purposes.

III
The case for planning, however, could hardly have made
the progress it has made were it not for the current mis-
representations and pure ignorance regarding the nature of
the economic system: ignorance of the working of the price
system, of the part played by risk-taking and speculation in
economic progress, of the need for freedom for those minds
which must do the path-breaking for society, of the enormous
economic progress made by free societies in the last half-
century and of their power to defend themselves, in the last
extremity, against the armed force of totalitarian States.
The wildest ideas are abroad - that big organi~ations and
institutions are inevitably more efficient than small; that
the State (i.e. Ministers and Civil Servants) can draw on a
fund of wisdom and judgment that is not available to other
men; that the techniques of production nowadays are so
spectacularly different from those of thirty or forty years
ago that little that we have learnt from the past is relevant
to present-day conditions; that the competition between
business men is inherently immoral; that business men no
longer compete but fleece the community by creating mono-
polies; that profit-making is evil; that business is now
controlled by an administrative class not directly concerned
with profit - making; that competition creates enormous
waste by driving thousands of firms into bankruptcy; that
competition no longer works in eliminating surplus capacity;
I See E. Devons, • Economic Planning in War and Peace 'J The Manchester

School, January 1948.

60 THE NEW ORDEAL BY PLANNING
that monopoly brings into existence huge corporations too
large for efficiency; that monopoly will usually mean that
the output of a firm will be smaller than it would be under
competition; that the free economy stifles inventions; that
the free economy creates widespread technological unem-
ployment - an endless list of assumptions many of which
are mutually contradictory and most of which are without
foundation in fact. When there is added to all this the
savage misrepresentation that has surrounded the subject of
planning in the past twenty years, the causes of confusion
are only too obvious. In such confusion any and every view,
however bizarre or improbable, will get a hearing and the
chance that truth will prevail is remote.
The obstacles encountered in establishing economic facts
and in creating an understanding of economic cause and
effect may well lead to a cynical, if not completely fatalistic,
attitude. Is there some queer defect in the human mind,
some universal black insanity which will inevitably lead us
to destroy those very social and moral values which we most
cherish? Is it the calamity of modern life that we cannot
learn, or learn early enough, all the things which we must
know for our survival ?
It seems to me far too early to fall prisoner to such
pessimistic moods. Economic rationality has, in some recent
cases, suddenly shot above the apparently barren ground in
a most unexpected fashion. Who would have believed ten
years ago that countries could wage major wars, as Great
Britain and the United States have done, without falling into
inflation? Who could have forecast the growing knowledge
in labour circles of the relation between price and wage
movements, which led to the far-seeing and courageous
restraint during the war by British trade unionists on the
subject of wage policy? Who would have anticipated in
1925 that, within twenty years, the Keynesian economic
doctrines offering us a route towards the maintenance of full
employment within a free society would have been so gener-
 THE SPREAD OF THE FASHION 61
ally accepted? It may be that the realm of popular under-
standing will widen even more quickly in the future. In the
past planned economies have operated under a veil of secrecy.
Now, however, we have in Great Britain an experiment in
central economic planning carried on in the open, subject
to public discussion and scrutiny by Parliament. The lessons
to be drawn from that experiment, if they can be drawn
coolly and without bias, may well change the whole course
of economic thinking in the world. For even those who
regret that such an experiment had to be carried out merely
to reveal what they regard as the inherent defects and dangers
in . a planned economy, may console themselves with the
thought that, if such an experiment was inescapable, much
better it should be carried out in Great Britain, with its
instinct for justice, fair play and free speech, and its strong
social cohesion, rather than in some other community where
the lines of social cleavage were more marked and the tradi-
tional impediments to the practices of human slavery less in
evidence.
 CHAPTER II

IS THE BUSINESS MAN OBSOLETE?

THOSE who are opposed to the conception of a centrally
planned State economy will not be able to make much head-
way with their case unless they can dispose of the argument
that there is really no alternative to a planned system. It is
declared with increasing frequency that the business man,
the important initiating agent in the free economy, is destined
to lose his functions, his powers and even his interest in
performing the services which, in the past, have justified his
existence. If it is true that private individuals can no longer
be found to undertake the functions of investment, of risk-
taking, of management and of innovation, then either the
community must resign itself to a return to the simplicity
and poverty of peasant farming or the State must take over
the responsibilities of the entrepreneurs.
From Marx onwards, the business man has often been
counted out prematurely by his detractors. Much of this
theorising has failed to stand the test of time. There are,
however, some modern theories as to the inevitability of the
decay of the entrepreneur which have greater internal con-
sistency and which command more general support. The
most devastating attack has been made in Professor Schum:..
peter's remarkable book Capitalism, Socialism and Democracy.
If Professor Schumpeter is right, then those who resist the
growing tide of economic regimentation are wasting their time.
He argues that the business man, and the economic and
social system which grew around him, are inevitably doomed,
not because they have failed in any special way to deliver the
goods but for four other reasons:
(a) Capitalistic enterprise has shown such great achievement
6z
 IS THE BUSINESS MAN OBSOLETE? 63
in making economic progress automatic that there IS
nothing left for it to do. It has destroyed its own
function. It has performed once and for all a service
which need not be repeated.
(b) The business man has failed to create defences against
political attack on the free economy. On the one hand,
he has inevitably destroyed the feudal and aristocratic
elements in society which might have provided a guardian
for him; on the other, he has brought into existence and
failed to control a group of intellectuals who, by their
very nature, will turn to destroy him.
(c) The business man has really lost interest in behaving as
a business man. His incentives have gone or are going.
He no longer reveals the instinct of self-preservation.
(d) The system of capitalistic economy has created an almost
universal hostility to its own social order. This hostility
may be largely irrational but it persists because the case
for the free economy is complex, is based upon long-
range considerations and is essentially lacking in an
appeal to the emotions.

Has the Free Economy served its Purpose?

The first and third of these reasons are by far the most
important. For whilst the other two are reasons why the
business man may disappear (irrespective of whether this
will be a good or a bad thing), reasons one and three, if they
can be substantiated, are reasons why he should go. No one
wishes to retain for the sake of old times social and economic
instruments which have become blunt.
The first reason boils down to this: the fundamental
task of the business man is that of forcing innovations into
the system, of breaking down resistance to change. But, by
now, we have all " become accustomed to economic change
- best instanced by an incessant stream of new consumers'
and producers' goods. . . . The resistance which comes
from interests threatened by an innovation in the pro-
64 THE NEW ORDEAL BY PLANNING
ductive process is not likely to die out so long as the capital-
istic order persists. . . . But every other kind of resistance
- in particular, to a new kind of thing because it is new-
has vanished already. Thus economic progress tends to be-
come de-personalised and automised. . . . Innovation itself
is being reduced to routine." Bureaux, committees and teams
of technicians can now take the place of the personality, the
driving force, the will of the individual business man.
This argument implies that once the customer has
become accustomed to a steady stream of new things he will
accept this state of affairs as a matter of course and that the
consumers' expectation that the stream will flow on end-
lessly constitutes, in itself, one of the motors of economic
progress. I do not believe this to be the case. Consumers
have short memories. Provided the change is not too rapid,
the standard of living can be reduced almost without the
consumer noticing it. No clearer illustration of that could
be found than the experience of British people who travel
now, after years of austere living, to the United States or
Sweden. Their clearest impression is that of suddenly re-
membering the consumer joys of the past. The ~onsumer up
to now has not been an initiator in the system, he is much
more of an arbitrator and arbitration is bound up with a
certain conservatism and passivity. In any case there are
wide ranges of consumers' demand where the producer
has never yet succeeded, even under the most favourable
conditions, in breaking down the instinctive resistance to
change. Perhaps the most interesting is that of housing in
many countries ~here the consumer stubbornly clings to
ways of living which are sadly archaic.
N either does it seem to be true that "technological
progress is increasingly becoming the business of teams of
trained specialists who turn out what is required and make
it work in predictable ways". Surely the words 'what is
required' robs this sentence of the meaning which Schum-
peter intended it to have? The application to commercial
 IS THE BUSINESS MAN OBSOLETE? 6s
purposes of the progress of pure science is essentially a
process of risk-taking and guessing. The early exploitation
of the' deep' freezing of foods - which promises to revolu-
tionise domestic economy - could certainly not be regarded
as automatic. It was due to a commercial plunge by one
firm in 1929. The development of the jet engine in Great
Britain was the outcome of the confidence of a financial
company at a time when the official attitude to the idea was
wholly tepid. And there are many cases at the moment-
such as television, the pressurisation of high-altitude air-
craft, the use of welding in shipbuilding - where it is far
from being a simple matter of telling the technicians what to
do and then waiting for the inevitable solution. All such
decisions call for acts of faith amidst a tangle of conflicting
considerations of commercial production and technological
possibilities. Left to themselves, and having no particular
reasons for taking risks, teams of technicians will almost
invariably bog themselves down without direction or purpose.
The record of State aeronautical-research organisations in
Great Britain is one very good illustration of this point.
They have produced virtually nothing; almost all technical
development in war-time came from the private firms;
Government technical experts frowned on nearly every one
of the crucial new devices for improving aeronautical per-
formance until the persistence of the entrepreneur settled the
dispute beyond a doubt. The history of the appalling delays in
British tank development, even during the war, is another excel-
lent illustration of what a technical bureaucracy is capable.
Take away the motive force of innovation - the business man
- and the cautious and conservative habits of the consumer
and technician would roll back over us with deadening effect.
Indeed one can go much further than this and argue
that the development of the entrepreneur's function in mer-
chanting and production is still only at a very primitive stage
and has still wide fields to conquer.
As standards of living improve, the consumer tends to
66 THE NEW ORDEAL BY PLANNING
become more discriminating and the task of suiting him
more delicate and more risky. There is a stage in the growth
of consumer taste and discretion when it is sufficient for the
entrepreneur simply to offer something new. The first
white men on the American continent could dispose of beads,
wire, brightly coloured cloth; anything that had not been
seen before. But, at a later stage of consumer sophistication,
novelty of itself ceases to have any attraction since new
things have become unexciting in themselves. The con-
sumer reaches further back to a more rational examination
of the attraction of the new. Fresh fields for entrepreneurial
activity are, thereby, opened up. In the past the entre-
preneur has been able to carry out his functions with an
absence of real finesse and has relied upon two crudities, both
of which must progressively fail to satisfy: large-scale
advertising and mass production. The latter gives the
consumer the second-best - an article which satisfies nobody
because it is made for the average man who does not exist.
It will become increasingly unpopular as communities grow
richer and less immature. The former seeks to deaden the
growth of discrimination and can hardly fail to produce a
final revolt, all the more decisive because it is likely to swing
to the other extreme where people begin to believe nothing
they read and fall back on their own tastes and inclinations
in the exercise of their consumer judgments.
On the supply side, the role of the entrepreneur in giving
direction to technological progress must also become more
complex and difficult. For the more numerous the strands of
scientific knowledge, the greater the number of combinations
of such strands available for technological application, the
more arduous the choice among the various possibilities for
successful commercial application. It is true that the actual
technical work is increasingly performed by salaried teams;
it is equally true that what technical work should be done is
increasingly a function of risk-taking and of market intuition
- i.e. a function of the entrepreneur. Even under mass
 IS THE BUSINESS MAN OBSOLETE? 67
production the crucial question has to be answered: which
thing shall be mass-produced? In more discriminating
production this question crops up more frequently and is
more difficult to answer. Compare, for example, the position
of an entrepreneur in 1900 wondering whether he should
make bicycles with that of an entrepreneur in 1946 con-
sidering whether he should make television sets. The
second question opens up a vast range of technical, commercial
and production issues almost wholly lacking in the former.
It is, of course, true that some industries may have
periods of quietude in which the role of the entrepreneur
becomes of less significance. But these periods may be
limited. Thus the textile industries, after a comparatively
long breathing-space, now seem to be set on quite revolu-
tionary changes as the result of recent developments in
artificial fibres and in methods of arranging these fibres to
form fabrics. And the tinplate industry, after a long period
of relatively simple methods of production, has suddenly shot
forward with the invention of the continuous hot-strip system.
In this connection Professor Schumpeter's military
analogy is very revealing. He argues that, until recently,
" the technique of warfare and the structure of armies being
what they were, the individual decision and driving power
of the leading man . . . were essential elements in the
strategical and tactical situations. . . . This is no longer so.
Rationalised and specialised office-work will eventually blot
out personality, the calculable result, 'the vision'." Can
there ever have been a more compendious misunderstanding
of the vital role played by personality and morale in the last
war? For the battle units were admittedly larger than
heretofore, the processes more mechanised. But, time and
again, one man made an enormous difference to the outcome
of the struggle because he was able to drive his personality
through the administrative machine to get at the vital thing
which decided battles - the morale of the fighting individual.
In fact, the larger the units engaged the more precious were
68 THE NEW ORDEAL BY PLANNING
these qualities of leadership and of intuition. Can there be
any doubt that the turning-point in the last war was the
personal clash of wits between Montgomery and Rommel,
or the defence of Stalingrad, which had as little to do with
office-work as did the result of the battle of Trafalgar?
This conclusion regarding the continuing rale of the
entrepreneur would be more easily accepted were it not for
the perversity of many writers in refusing to examine what
is really happening to the structure of industry. If the
entrepreneurial rale is becoming more difficult, more com-
plex, more important, that would inevitably exercise a re-
straining influence on the size of the business unit: the
limit to administrative skill would be reached fairly early.
But Professor Schumpeter, although he has some qualifica-
tions to make, finally concludes that " the perfectly bureau-
cratised giant industrial unit not only ousts the small or
medium-sized firms and expropriates its owners but in the
end it also ousts the entrepreneur". It will be shown in the
next chapter that this picture of the whole industry
dominated by a few giant concerns is misleading. It was
not true in the past. There is no reason to believe that
it will occur in the future. In some industries, of course,
the giant concern has advantages over the relatively small
firm. In many other industries the opposite is true. A
healthy and progressive free economic system will always
be creating a place for the small firm. New industries are
always springing up in which the small man gets his chance.
Increased discrimination by the consumer is constantly
creating needs which can, in fact, only be met· by relatively
small and flexible firms. If the State carries out its legitimate
function of controlling monopoly, and the size of an in-
dustrial concern is strictly linked to its efficiency, the scope
for the small firm will become even wider.
But, leaving on one side the statistics regarding the size
of firms, is there any evidence that the work of the business
man is becoming more automatic, more routine? On the
 IS THE BUSINESS MAN OBSOLETE? 69
contrary, is it not the case that the head of every large concern
in these days groans under the difficulties of exercising his
will powerfully enough to keep his administration going;
that every large business seeks methods of decentralisation
in order to stop the rot of routine and the slowing down of
progress; that the heads of the largest concerns are the most
sceptical of the advantages of great size? If the Schumpeter
diagnosis were correct the business man would be showing
the clearest indications of obsolescence in the United States,
where innovations in consumer goods are most rapid and
organised technical research most advanced. But it is
precisely in the United States that his functions are most
vigorously pursued and developed.
The entrepreneur may be doomed, but, if so, it is not
because his activities have become superfluous In a pro-
gressive economy. 1
The Political Defencelessness of the Business Man
There is, second, the argument that the business man
has failed to qualify as a political animal; that right to the
end of the period of vital and intact capitalism he left the
governing, particularly in England, to the aristocratic element
which his rational system was bound to destroy. Apparently
the bourgeois is incapable of ruling. "There is no trace of
any mystic glamour about him which is what counts in the
ruling of men. . . . A genius in the business office may be,
and often is, utterly unable outside of it to say boo to a goose,
both in the drawing-room and on the ·platform. Without
protection the bourgeoisie is politically helpless and unable
not only to lead its nation but even to take care of its own
particular class interest, which amounts to saying that it
needs a master."
I It seems difficult to square Schumpeter's conception of automatic pro-
gress through the activities of consumers and teams of technologists with hi'
statement elsewhere (journal of Political Economy, June 1946, p. 270) that
" the principles of individual initiative and self-reliance are the principles of
a very limited class. They mean nothing to the mass of the people who - no
matter for what reason - are not up to the standard they imply."
70 THE NEW ORDEAL BY PLANNING
On a priori grounds, it would seem surprising that such
a sweeping generalisation could be made in this way about
any large class. For governments have in the past been
drawn from any and every class of society. And within a
class as large as (say) the British bourgeoisie there must have
been found many different types, aptitudes and gifts which
might have been expected, even by the laws of chance, to
produce some men equipped for political leadership. Schum-
peter does not specify why the successful management of a
business under competitive conditions is such a very different
task from running a party, or a government or a cabinet. He
admits that the bourgeois class have often been successful in
city management but he dismisses this as irrelevant - " city
management was akin to business management". This still
leaves the question why business management is so distinct
from political management. He further admits the appear-
ance of the great merchant republics and the ~uccessful
bourgeois governments of the Low Countries but he says
" the merchant republics failed in the great game of inter-
national politics ". It would, indeed, be interesting to know
why the game of international politics is so different from
the game of business. On the surface they might seem to
have much in common. And, of course, he. has to admit
the presence of a continuing bourgeois government in the
United States.
Let us take the special case of England - on which
Professor Schumpeter leans very heavily for his theory. How
far is it true that the bourgeois element found itself incapable
of ruling " right to the end of the period of intact and vital
capitalism ".
Between 1900 and 1940 there were long periods of pre-
dominantly conservative Parliaments in which 'hard-faced
business men ' were perhaps only too numerous.
Mr. Thomas I has made an analysis of the' interests' of
the members of the House for each of the Parliaments
1 The House of Commons, I83Z-I90I.
 IS THE BUSINESS MAN OBSOLETE? 71

between 1868 and 1900. This shows that business interests

were extremely powerful between these two dates.
PERCENTAGE DISTRIBUTION OF INTERESTS I IN PARLIAMENT
1868- 1 900
,
1868 1880 1886 18 95 1900
Landowners, Army and
Navy. . 43"2 33"9 24"5 22"0 22"6
Business Interests 42"9 49"3 52"0 52"2 52"2
Lawyers 8"0 9"0 10"9 11"7 10"4
Men of Letters and Aca-
demic 3"1 4"1 5"3 6"1 5"6
Others 2"8 3"7 7"3 8"0 9"2
Total 100 100 100 100 100
-----.----

It has to be recognised, on the other hand, that many of

these business men were probably concerned more with
finance than with manufacturing proper, that the business
men who have gone to Parliament have probably not found
their way into the Cabinets with the frequency appropriate
to their numbers and that the business men in Parliament
have probably not been the best business men (the best
preferring to stick to their own jobs). But when every
allowance is made for these points Schumpeter's picture is
overdrawn.
Whilst, according to Schumpeter, the business man has
been kicking from under himself the prop of the aristocratic
and feudal element in society, he has been further embar-
rassed by an intellectual class which has devoted its powers
of exposition, and apparently its malice, to the destructive
criticism of the bourgeois society. Schumpeter's analysis
of the intellectuals is, indeed, one of the most penetrating
parts of his book. He defines this group as that which wields
the power of the spoken and written word, which has no
I In compiling the table attention was paid not to the number of members

returned but to the number of ' interests' which those members possessed"
Therefore, when a landowner who was also a director of a railway company
was returned to the House, it was made to count as the election of two interests
to Parliament"
72 THE NEW ORDEAL BY PLANNING
direct experience of a responsibility for practical affairs,
which " cannot help nibbling because it lives on criticism that
stings", criticism that passes from persons to institutions.
This group of intellectuals is brought into existence by the
rationalism and freedom of a bourgeois society; its weapons
are sharpened by the growth of education, by printing, by
the popular press, by the radio. The role of the intellectual
groups "consists primarily in stimulating, energising, verbal-
ising and organising and only secondarily in adding to the
general hostile atmosphere which surrounds the capitalist
engine ".
This is a damaging attack upon the scribblers of the Left.
No one can doubt that it faithfully portrays the character and
functions of the group which in Great Britain, before the war,
came to be known as the 'Bloomsbury set' or the group
which in Germany did much to open wide the gates of
totalitarianism. It is, indeed, depressing that since the
beginning of the century those who have been best equipped
in knowledge and powers of exposition should, by their
extraordinary lack of wisdom and their malicious desire to
upset, have acted as a continually destabilising social influ-
ence. But it is seriously to be questioned whether their
power is as great as Schumpeter would have us believe.
This iconoclastic group is, at least in Great Britain, only
a section of those who possess the power of expression or the
leisure for speculation. There are others who think differ-
ently. The Leftist intellectuals do not always have it their
own way. Among the British scientists, recently, the attempt
on the part of a few to propagate the principle of 'pure
scientific research with a social purpose' (i.e. the Moscow
line) produced a quite violent reaction among other members
of the profession. It is extremely doubtful whether the
social scientists of Great Britain do take up the attitude to a
free economy ~hich Schumpeter seems to take for granted.
In Great Britain in the last thirty or forty years the intellec-
tual power of the community has been predominantly liberal.
 IS THE BUSINESS MAN OBSOLETE? 73

The social defence of a society against the stridency of

the intellectuals of the Left lies, of course, in those deeper
intuitions of the community which are broadly described
as common sense. N ow the intellectuals by their own
activities create popular distrust. They quarrel among them-
selves with the same lack of restraint as they quarrel outside.
They set up as experts in fields where they do not even
possess knowledge (as the scientists who overnight become
experts in the social sciences). They have a high mental
volatility and a low intellectual flash-point, so that they
change their minds with great frequency (particularly where
they keep an eye on the line of the Party). They are comic-
ally lacking in a sense of humour.1 They find it difficult
to conceal their ambitions as administrators. The general
suspicions which are bred by their somewhat adolescent
strutting bring discredit on ' experts' as a group.z

The Loss of Incentives

Thirdly, Schumpeter alleges that the business man finds
his own incentives weakening. The controllers of large
businesses more and more become executives with the
psychology of the paid employee as distinct from the owner-
employers of yesterday. Business no longer revolves around
a family - with its sense of continuity, its desire for accumu-
lation, its attachment to property.
It is, however, much to be doubted whether these changes
do weaken incentives to the degree suggested. The point
has already been made that those who insist upon regarding
I Thus the solemnity of the vVebbs' Decay of Capitalist Civilisation, p. 31 :
" It is not too much to say that, in the Britain or the United States of today,
the very existence, in any neighbourhood, of a non-producing rich family,
even if it is what it calls well conducted, is by its evil example a blight on the
whole district, lowering the standards, corrupting the morality and to that
extent counteracting the work alike of the churches and the schools".
2 Incidentally, if Schumpeter is correct, the Leftist intellectuals are strangely
indifferent to the fate of their own intellectual progeny. Thus he states that,
in the socialist State, " intellectuals as a group will no longer be hostile and
those individuals who are will be restrained by a society that once more believes
in its own standards. Such a society will in particular be firm in its guidance
of the young."
74 THE NEW ORDEAL BY PLANNING
the industrial system as consisting of a few large, bureau-
cratically controlled firms are, in fact, discussing a system
which does not exist. It is a serious over-simplification to
suppose that property accumulation is the only, or indeed the
major, driving force behind the entrepreneur. There is a
mixture of motives at play: the desire to exercise ·power, the
desire for independence, the scientific interest in making an
organisation work, the thrill of risk-taking, the loyalty to a
group which has grown up under one's hands. In an in-
dustrial system which is devoting itself to meeting the needs
of the consumer and evolving the type of industrial structure
called for, it is difficult to imagine most of these motives
becoming weaker of themselves. The destruction of the
close relation between family and business may well encour-
age, rather than discourage, business incentive. For in the
past the family business, with its nepotism, has often con-
stituted one of the principal obstacles to the poor and ambi-
tious young apprentice and has bred among those privileged
by birth an enfeebling sense of security which has weakened
progress. 1 It is important for economic progress that men
should recognise the urgency of their task and be disinclined
either to leave their most baffling problems to be solved, or
the fruits of their labour to be too fully enjoyed, by their
descendants, attitudes highly typical of the socialist adminis-
trator.
The Unexplained and the Irrational Elements
There remain only those elements in the opposition to
the free economy which are generally admitted to be irrational
or purely emotional. It is true that the case for the free
economy is complex, that it involves wide and long-range
considerations. As has already been pointed out, it is
I Dare I quote, on this subject, the Webbs' Decay of Capitalist Civilisation,

p. 122: "Sons reared in luxurious homes, and .•. not picked out for their
profit-making ability, succeeded to their father's businesses, which gradually
ceased to be marked by those qualities of initiative, discovery and enterprise
which had served as a justification for the dictatorship of the capitalist" ?
 IS THE BUSINESS MAN OBSOLETE? 7S
possible for the public to grasp sound economic ideas and to
act wisely in the light of them. Why should they be con-
sidered at the end of their capacity for learning? It is true
" that no one can become emotional about capitalism" whilst
they obviously can get emotional about socialism. But this
may well be the result of the meretricious attraction of what
is new. It will be interesting to see what light the experience
of Great Britain during the next few years will throw upon
this point. There remains what Schumpeter describes as
the " almost universal hostility to capitalism " which means
that capitalism " stands its trial before judges who have the
sentence of death in their pocket". No one can doubt the
presence of this combination of crusading and hysteria. 1
And because it is so completely irrational it is most difficult
to deal with and, in the last analysis, most dangerous to any
rational organisation of society.

The Nature of the Beast through Socialist Eyes

Schumpeter's analysis is so powerful and informed that
it largely supersedes much that has.been written on the same
subject by socialists. The contrast between his apt technique
and that of the Webbs 2 or of Professor Laski,3 to take two
outstanding socialists, is very striking. But it is worth while
making a short comparison of the two groups if only to
indicate how hazardous is much of the broad sociological
theorising 1 egarding the functions of classes.
These three writers reach the same conclusion which may
be summarised by a quotation from the Webbs. "Our
present capitalist civilisation . . . is dissolving before our
eyes not only in that septic dissolution . . . brought upon
I The latest converts to the idea of planning reveal the greatest irritability

when confronted by the traditional liberal economic doctrines. Presumably

they are anxious to make up for lost time. When, for example, a group of the
British Working Party on the Cotton Industry put forward a sober case for free
enterprise in that industry the Manchester Guardian described this case as
" petulant". And The Spectator described it as " sentimental search for some
Victorian elysium ".
a The Decay of Capitalist Civilisation (1923).
3 Liberty in the Modern State (1937).
76 THE NEW ORDEAL BY PLANNING
us by war . . . but in that slower changing of the epochs
which war may hasten."
But beyond that the careful reader will begin to rub his
eyes. For it immediately becomes clear that there are at
least two kinds of business man. Professor Schumpeter's
business man is down and out:
Entrepreneurs cease to stand by their guns . . . . They talk
and plead . . . snatch at every chance of compromise . . . are
ever ready to give in . . . never put up a fight under the flag of
their own ideals . . . the bourgeois order no longer makes sense
to the bourgeoisie itself. . . . When all is said and done, it does
not really care.
The Webb business man is a much fiercer animal:
The energetic spirits [of capitalism] have for the most part
vulgar ambitions, vulgar capacities and vulgar tastes in excite-
ment. They are competitive rather than cooperative: they like
success, which means money-making and the personal power and
prestige that money-making leads to, and the gambling element
in big business flavours it attractively for them.
Professor Laski's business man is a veritable bulldog:
The great army of owners . . . believe they will win; and
they prefer conflict to the alternative of abdication . . . . Would
it not be rather surprising that its members should refuse to
abdicate when they believe they have the prospect of victory ?
No such class in the past, at least, has voluntarily parted with
the right to dominate the state power. We need not be moved
by the argument that there is no evidence of a will to fight. . . .
For the Schumpeter business man the lure of consumers'
property is evaporating:
The amenities of the bourgeois home are becoming less obvious
than are its burdens . . . . The average family of bourgeois
standing tends to reduce the difficulties of running the big house
and the big country place by substituting for it small and mech-
anised establishments plus a maximum of outside service and
outside life.
The Webb business man moves in quite a different way:
The [captain of industry] will return after his day's work to
his well-appointed home - the appointment of which probably
 IS THE BUSINESS MAN OBSOLETE? 77
consists essentially in avoiding all labour-saving appliances and
making necessary a whole group of domestic servants - to eat
an unwholesome dinner on which ten times as much labour has
been expended as on the meat by which his labourers maintain
their health, and to encourage his wife to crowd his house with
indiscriminate articles of furniture and ornamentation which
have no merit beyond the amount of labour that has been wasted
on them. In good times, he will respond to every caprice of his
wife and children, " Get it, it only costs money".
The Schumpeter type " drifts into an anti-saving frame of
mind". The Webb type is " dominated by the desire for
amassing more wealth, without any very nice discrimination
between the different forms of production". For Schum-
peter the tragedy of the bourgeois is that he destroys the
feudal and aristocratic classes. For the Webbs the calamity
is that "the specially active men arising in the old families
nowadays vie with the crowd of the newly enriched in the
making of profit by the organisation and administration of
the instruments of production ".
To Schumpeter the bourgeoisie is politically helpless, is
incapable of ruling, requires a master. To the Webbs " this
far-reaching coercive guidance of national and local govern-
ment by the property owners and profit-makers, large and
small, [is responsible for] the sudden and rapid decay of the
confidence of the wage-earning class in these institutions".
To Schumpeter the intellectuals are the inevitable foe of
the bourgeois. To the Webbs
the lawyers, the engineers, the architects, the men of financial
and administrative ability, the civil servants, the authors and
journalists, the teachers . . . the whole class of managers, the
inventors, even the artists and the men of science . . . are almost
inevitably retained, consciously or unconsciously, in the main-
tenance of the existing social order, in which the private owner-
ship of the instruments of production is the corner stone.
Laski describes the bourgeoisie as
a class which dominates the courts, the civil service, and the
defence forces of the modern state. Overwhelmingly, also, it
controls all the techniques for influencing opinion.
78 THE NEW ORDEAL BY PLANNING
To sum up: the business class in Schumpeter's view is
fated to die out because it lacks certain qualities and attitudes.
In the view of the Webbs and of Laski, the business class is
doomed because it possesses those same qualities and takes
up those same attitudes.

What then is left of the arguments that the free economy,

and with it the business man, have reached the end of their
days? A mass of sociological forecasting that has already
in part proved unsound; a conflict between the experts as
to the character of the capitalist system and the frailties of
the business man; unanimity on final conclusions based on
mutually exclusive trains of reasoning. But the fact that it
has been thought fit to make a diagnosis in this way leads to
three reflections. The first is that it is probably quite un-
sound to talk of business men as a class as if they were cast in
a mould like Prussian officers. The motives which lead men
to engage in business as entrepreneurs are so complex that
it would be surprising if, in any significant way, they con-
stituted a class. Among the business men of the last fifty
years - provided we are prepared to judge them in the round,
and not merely by the few spectacular cases - will be found
scholars and buccaneers, the impetuous and the calculating,
the avaricious and the generous, the scientists and the
empiricists, the law-breaking and the law-abiding, the
publicists and the retiring, the politically minded and those
without political interest, in just about the proportions in
which they are found in the community as a whole.
The second is that the business man would be unwise to
ignore the criticisms which are now falling upon him thick
and fast. There are reasons, much simpler than those of the
socialist intellectuals, to explain the frequent silences of the
business man in the face of attacks. He is busy. His job
ought not to leave much time over for other activities. He
must, on many occasions, find the critics so patently ill-
 IS THE BUSINESS MAN OBSOLETE? 79
informed that it hardly seems worth while to engage in
elementary education. So that when the young men with
the Marxian dialectic, the mystifying talk of imperfect
competition and social costs, and the terrible facility with
figures and charts, reach conclusions which he knows to be
absurd, he probably keeps quiet. But he does so at the peril
of his own existence and that of the free economy. For the
cult of planning has now gone so far that it certainly cannot be
checked unless business men as a group take thought as to
why the type of economic system which finds room for them
has positive advantages over a centrally planned economy,
understand thoroughly the nature of the free economy, and
take time and trouble to rebut misrepresentations of it.
The third is that the business man should recognise that
he is now very carefully watched and that he is not likely to
be able to engage in practices which are inconsistent with his
own rationale. He cannot, for instance, pass off monopoly
practices as part of a free economy. He cannot blindly resist
all forms of State intervention. He should be prepared to
take the initiative and put his own house in order before
someone else burns it down out of a mistaken belief that· it is
derelict.
 CHAPTER III

CONFUSION AMONG THE PLANNERS

I N an economy where the functions of the State are limited,
economic relations are impersonal and individual decisions
are made by reference to a framework of prices. A mechanism
of this kind cannot be substantially influenced by anyone
individual. Its study is in the nature of a science. In a
community subject to an ' overall economic plan' economic
analysis is more diffuse and less scientific. An overall plan
implies that, in the last resort, one man, or a few, make the
decisions for the many. The personal opinions, idiosyn-
crasies or even prejudices of the Supreme Planners may
then become of great importance in determining the form
and purpose of the economic system. There may be many
different suggested plans since planners tend to be strongly
individualistic. 1 The varying conceptions of the overall
plan may thus lead, particularly in the early stages of its
development, to significant conflicts of ideas.
Confusion is the more likely in the embryonic planned
economy since the normal procedure is for the planners first
to seize power and only later to consider what should be
done with that power. 2 The upshot is that, so long as freedom
I Planners often complain that their opponents are discussing not their

kind of planning but somebody else's. Mr. Durbin, in the Economic journal,
December 1945, takes Professor Hayek to task because the Professor bases his
understanding of economic planning only upon modern references to students
of government and sociology, and such socialist economists as Marx, Engels,
Shaw and the Webbs, and ignores the writings of" those of us who are now both
practi.sing economists and also socialists ".
2 In the House of Commons on August 8, 1947, Mr. Morrison, in intro-
ducing the Supplies and Services (Transitional Powers) Bill, which gave the
State vast powers oyer persons and property, said: " We have no preconceived
notions as to precisely how we propose to utilise [the Bill]. What we need
is the power to utilise it."
80
 CONFUSION AMONG THE PLANNERS 81

of speech remains, there will be a babel of voices each seeking

to provide the authoritative answer to the crucial question:
What is Planning ?

I
Experience in Great Britain between 1945 and 1947 is
extremely illuminating on this point. There seems little
doubt that the members of the British Government believed
that they had created, or were in the process of creating, a
centrally planned economy. They frequently spoke of the
social and economic revolution through which we were
passing. They contrasted the British type of economy with
that found in the United States. Mr. Attlee put this point
beyond doubt by his declaration that" in matters of economic
planning we agree with Soviet Russia ".1 But there were
many conflicting strands of thought to be found among the
British S~preme Planners and, indeed, some Ministers
seemed to subscribe to a whole range of mutually exclusive
ideas. The classification which follows cannot, therefore,
be watertight. Indeed, the vocabulary of planning has now
become so opulent and varied as almost to defy the efforts
of the cataloguer.

Planning with a Purpose

Perhaps the most important question to ask about an
overall plan is this: does it express a purpose, something
which the planners intend to make happen? Or is it some-
thing far less substantial than that, an estimate of what might
happen, a prayer for what ought to happen? The funda-
mental difference between these two approaches has been
well put by Monsieur Stalin: 2
Admittedly they [i.e. under the capitalistic system] too have
something akin to plans. But these plans are prognosis, guess
plans which bind nobody, and on the basis of which it is impos-
I House of Commons, November 18, 1946.

• Quoted from Baykov, Soviet Economic System, p. 424.

D
82 THE NEW ORDEAL BY PLANNING
sible to direct a country's economy. Things are different with
us. Our plans are not prognosis, guess plans, but instructions
which are compulsory for all managements and which determine
the future course of the economic development of our entire
country:. You see that this implies a difference of principle.
There were first, then, the British planners with a pur-
pose. They believed, with Monsieur Stalin, that men are
masters of their economic environment, that they can lay
down in advance what should happen and then proceed to
make it happen. Sir Stafford Cripps is perhaps the leading
figure in this group. He has said,! " I was delighted with
the general measure of agreement that we should plan, and
having a plan that we should try to carry out the plan". He
is anxious to follow the Russian model and get the kind of
results achieved in Russia. He employed the 'must'
technique for the first time when, in September 1947, he
fixed export targets for the different industries, without
prior consultation with those industries, at the same time
indicating that "where particular firms or whole industries
find themselves unable to sell abroad their export quota . . .
labour will have to be withdrawn from that particular form
of production ".
The significant point about planning with a purpose is
that, once the plan has been set, then the Supreme Planners
tend to fall into the frame of mind in which they are prepared
to make any , sacrifice', or more exactly force any , sacrifice'
on others, in order to achieve the plan. So that a plan laid
out for promoting the interests of the consumers often leads
to the deliberate and implacable sacrifice of those .interests.
This could only be regarded as logical if the attainment of
the plan, independently of the economic consequences of
fulfilling the plan, were regarded as an end in itself. Broadly
speaking, any plan which calls for 'sacrifices' should be
subject to suspicion since the purpose of a plan (except
perhaps in the case of war or threatened war) should be to
1 House of Commons, February 28, 1946.
 CONFUSION AMONG THE PLANNERS 83
lessen sacrifices and not increase them. A pertinent illustra-
tion is provided by the campaign to raise British exports to
75 per cent over pre-war levels. That figure saw the light of
day as a rough estimate of the export target to be reached if
Great Britain were to enjoy the pre-war standard of living.
But in the minds of the planners with a purpose it rapidly
became a target to be reached for its own sake even if, in order
to attain it, the standard of living had to be cut down below
the level it might have reached with a lower level of exports.
A close analogy would be that of a relieving force which sets
out to bring food supplies to a besieged and starving garrison.
The relieving force meets unexpected difficulties and is
compelled to consume both its own food and that intended
for the garrison. But with blind courage the relieving force
presses forward and gloriously reaches its objective, but only,
of course, to add to the sufferings of the garrison by increasing
the number of people to be maintained on the garrison's
depleted resources.

Free Planning
Sharply contrasted with the planners with a purpose are
the free planners. This name is most suitable for the group
partly because they appear to contemplate the possibility
that the plan may leave room for some private enterprise,
partly because they emphasise the need for planning for
, freedom " and, most important, because they envisage a
procedure by which the plan will emerge, as the feeling of the
meeting emerges at a Quakers' conference, out of widespread
discussion of the plan at every level in the community.
Every fact must be assembled, every interest consulted and
the resultant plan thoroughly explained to the public. Mr.
Morrison has most clearly defined this attitude:
The idea of planning is by now over and above party politics.
There is only one basis on which planning can succeed in a demo-
cratic society and that is the conscious understanding by each
84 THE NEW ORDEAL BY PLANNING
section of its place in the community as a whole and the deliberate
acceptance of the resulting obligations and loyalties. I
In another place he has explained: 2

As we believe in a free society we must have the courage of

our convictions and trust the people to achieve more by under-
standing and backing an agreed plan than other nations might
achieve by carrying out under orders a plan dictated to them by
their rulers.
This type of planning, however, has some serious defects.
It is not possible to collect all the facts, particularly those
relating to future events. And what is to happen if the
people do not agree, or agree so slowly that by the time
agreement is reached another plan is called for? Moreover
other Supreme Planners do not acccept this conception.
Thus Mr. Dalton in the House of Commons on June 30,
1947, said:
In a democracy such as ours in which differences of opinion
are widely held and freely expressed there is no one economic
policy which would unite the country.

Flexible Planning
The third group of flexible planners also have ideas
which run counter to those of the ' must' planners. They
attach great importance to keeping the plan so flexible and
altering it so swiftly that reality wIll never falsify the plan.
Thus Mr. Dalton has said: 3
These plans must not be mere essays. They must be con-
sistent with practical possibilities. They must not be too rigid
or hidebound. They must be capable of continuous adjustment
in the light of changing conditions. We shall never be able to
sit back as some planners imagine and close our eyes and let the
plan take charge, like one of the automatic pil9ts in an aeroplane.
Eternal vigilance is the price of successful planning.
I June 10, 1947.
2 Economic Planning, p. 9.
3 House of Commons, February 5, 1946.
 CONFUSION AMONG THE PLANNERS 85
Mr. Morrison, speaking on September 6, 1947, under the
pressure of the balance of payments crisis, subscribed to the
same idea.
We have had to modify our plans quickly. . . . The course
of international politics, and economics, and even of Nature itself,
has been far more unfavourable to us than could reasonably have
been expected. . . . Earlier this summer the Government an-
nounced that it was working on a Four Year Plan. That plan
is being modified to cut out the frills and concentrate on essentials.
When it has been completed it will be announced. But it is
unreasonable to ask the Government in a flash to produce a master
plan to solve all the difficulties of a disorganised, uncertain world.
This type of planner may easily become a menace to
logical thought because, if he is successful in changing his
plans sufficiently quickly to fit the facts, then he comes to
believe that he is controlling the economic system when he
is really controlling only the statistics in his own plan. This
wastes effort just as it would be wasted by a man who took
great pains to keep his watch scrupulously correct so that the
movements of the sun should not be held up.

Planning through Dislocation

There is, fourthly, a group of thinkers who would appear
to push opportunism to the point at which they deny the
very purpose of the overall plan. Whatever disagreement
there may be on other points, most people would consider it
axiomatic that an overall plan should strive so to distribute
national resources that the efforts of the different co-ordinated
pieces of the system would fit snugly together. The different
flows of raw materials, labour and capacity should be ad-
justed so that the predetermined flow of consumer goods
should issue without stoppages or wastage at any point. But
some planners seem positively to welcome the waste of
'. bottlenecks' (i.e. of shortages of supply of one thing in
relation to others) and indeed to consider that the plan makes
this inevitable. Thus Mr. Morrison addressing the Labour
Party Regional Council at Leeds on November 30, 1946,
86 THE NEW ORDEAL BY PLANNING
speaking of the many bottlenecks in the economic system,
said:
It is not at all my view that this array of bottlenecks is a cause
for gloom or discouragement. On the contrary, the fact that we
see so many bottlenecks is evidence that we are expanding our
economy. Let us be realistic and recognise these bottlenecks not
as reasons for alarm and ine.rtia but as challenges to our resource
and initiative . . . . In a full employment world where the bad
old practice of wasting plant and labour and materials is frowned
upon, we must expect that the higher level of demand and the
fuller use of resources will constantly thrust this bottleneck
problem upon us.
Planning on the bottlenecks was a method which was
widely used in the urgency of war. But it confronts its
operator with many problems of practice and logic. If, as
is indicated above, the "bottleneck problem" is simply the
problem of having to waste one lot of resources because they
have not been properly matched in the plan with other sets of
resources, then it would seem that there is little to choose
between the bad old world and Mr. Morrison's brave new
world.
This point can perhaps be made clearer by taking a
parallel case in an ordinary business. If a business man
planned his production, acquired his labour, machines and
raw materials and then discovered that, unfortunately, he
could not operate because he had forgotten to acquire a
supply of lubricating oil, we should naturally consider this as
a breakdown of his planning. Any attempt at robust bluster-
ing on his part that " this kind of thing is inevitable" would
properly be looked upon as pure make-believe. But when
national overall planners make such mistakes we are expected
to welcome the dislocation as evidence of the expansionist
tempo.
There is a second point in Mr. Morrison's statement
which seems to defy the principles of elementary economic
logic. A" bottleneck " is the item which ultimately is holding
up everything else. That is to say, there cannot be several
 CONFUSION AMONG THE PLANNERS 87
bottlenecks simultaneously because th~re cannot be several
items all in shortest supply at the same time. A man who is
mixing mortar cannot be shortest of cement and sand at the
same time. When Mr. Morrison speaks of simultaneous
bottlenecks in man-power of all kinds, raw materials, coal,
electricity and gas, he can only mean either one of two things.
Either that the plan has been drawn up in defiance of the facts
upon which the plan should have been based, that the plan is
far too large to be carried out. Or that whilst there is an
adequate supply in total of (say) raw materials they have been
distributed to the wrong points, i.e. that the distribution side
of the plan has broken down. In neither case does there
appear to be cause for self-congratulation.
Even, however, if the principle of the uniqueness of the
bottleneck is accepted, difficulties arise in identifying the
bottleneck. For when one bottleneck is cured (or opened,
broken, released or whatever is the appropriate term) then
another is automatically created. Much time is wasted in
chasing the bottleneck. Thus, June 18, 1947, Mr. Morrison
had said:
The shortage of steel had been threatening to replace the
shortage of coal as " the most vexatious and crippling bottleneck ".
To which The Times was forced to reply a few days later:
Though it was recently stated by the Government that steel
had replaced coal as the firs~ limiting factor, the shortage of steel
is itself largely due to insufficient supplies of coal, and freedom
of coal supplies to the steel industry will quickly restore coal to
its baleful pedestal.
It Wa$ perhaps this kind of fundamental difficulty which
led Mr. Morrison at one stage to put up on the pedestal an
entirely novel first limiting factor.
What is Britain's greatest shortage now? Is it dollars, is it
coal, is it man-power, is it food? It is none of these things. It
is Time. Time is running against us faster even than the drain
of dollars. I
I August 23. 1947.
88 THE NEW ORDEAL BY PLANNING

Guess Planning
The fifth group of planners, to employ Monsieur Stalin's
phrase, are the guess planners. 1 They recognise that events
will be determined by forces at least partly outside their
control. They are interested in what is likely to happen in
the future but they recognise the fallibility of economic fore-
casting. Mr. Attleehimself seems to fall into this group.
He has said, 2 " Although we may have to plan without having
all the data, it is better than having no plan at all. We must
make some kind of economic forecast." So long as the
guess planners do nothing which binds anyone, their activities
are of no great significance. But the state of being a guess
planner seems to be a highly transitional one. For if their
prognosis is a gloomy one the guess planners are easily led
on to try to avoid by positive action what they believe, rightly
or wrongly, they see in the future. If their prognosis is
favourable they will be tempted to try to bring about the
desirable conditions much earlier than they could normally
be expected. Indeed it seems to be a general working rule
among many planners: "find out what is going to happen
and then make it happen more quickly". In both cases
guess planning is transmuted into planning with a purpose.
There are many other forms of planning 3 but sufficient has
perhaps been said to indicate the discordant character of the
discussions during the early stages of the planned economy.
I Some authorities prefer to describe this as 'wish' planning or even

, dream' planning. Actually the most striking cases of wishful thinking are
found not in Great Britain but in other countries. Thus in the French
, Monnet ' Plan enormous increases in productivity per head were wished into
the plan. The Czechoslovakian Plan was based upon the unlikely assumption
that very large foreign loans would be available. An interesting case of ' wish'
planning in Great Britain was revealed when Sir Stafford Cripps announced
on January 13, 1947, that the allocations of coal to industries would be roughly
halved but that this would not necessarily reduce the amount of coal which
would actually be received since the old allocations had been on an 'un-
realistic' basis. Another case was when Sir Stafford announced in September
1947 that the steel control must be modified because there had been a serious
, inflation ' of steel allocations.
• House of Commons, February 26, 1946.
3 ' Variety Among the Planners " The Manchester School, January 1947.
 CONFUSION AMONG THE PLANNERS 89

II
Another bone of contention among the planners is the
form that the plan should take. Most planners think of it as
a very large document (similar to the fat volumes embodying
the various five-year plans of the Soviet Union) which would
lay down in detail the output of each commodity and would
prescribe the allocations of raw materials, capacity and labour
for each specific final commodity. This would go- along with
a group of physical controls exercised by the State which
would steer resources into the correct channels. That is to
say, there should be a plan continuously controlled in detail.
Sir Stafford Cripps appears to hold this view. I
Our objective is to carry through a planned economy without
compulsion of labour. The general idea is that we should use a
number of controls in order to guide production into the necessary
channels, according to the plan we have formulated. The prin-
cipal controls will be financial, including price control and taxa-
tion, materials control, building control, machinery and exports
control.
Sir Stafford, however, subsequently changed his ground some-
what, perhaps because of a growing realisation of the adminis-
trative impossibility of co-ordinating a mass of physical
controls. On November 21, 1946, he said in the House of
Commons:
. . . A great many controls have been removed. . . . This
process is continually going on and will continue until we have
been able to get rid of a great many in the future.
He placed increasing emphasis on the planning of the distribu-
tion of man-power as the fundamental instrument of planning.
The planning of the choice of products . . . carries with it
the planning of the distribution of man-power.
If the central plan is to be based on a detailed man-power
budget without labour compulsion, difficulties immediately
arise. Is the plan to be based on the labour allocations which
I House of Commons, February 28, 1946.
90 THE NEW ORDEAL BY PLANNING
the Supreme Planners regard as ideal? Or is it to be based
on labour allocations which are regarded as practicable in
view of the' stickiness' of the labour supply. If the former,
then the plan becomes a pious aspiration; if the latter, then
an estimate has to be made of the probable effect of Govern-
ment propaganda. For example, if the Minister of Supply
believes that another 20,000 foundry workers are vitally
necessary, and he starts a drive to get these workers (without
using the incentive of ' inducement-wages '), will the plan
assume that he will or he will not get these workers for the
foundries? How are such estimates to be made ?
The chief drawback of planning through the distribution
of labour is that, whatever the original intentions of the
planners, compulsion of labour soon becomes inevitable.
For how, otherwise, can labour be got into the appropriate
jobs? Thus Sir Stafford Cripps said in the House of Com-
mons on February 28, 1946:
No country in the world, so far as I know, has yet succeeded
in carrying through a planned economy without compulsion of
labour. Our objective is to carry through a planned economy
without compulsion of labour.
Yet, eighteen months later, direction of labour was intro-
duced in Great Britain. I
Unfortunately just at the time when Great Britain was
embarking upon an overall plan under the guidance of a
group of thinkers who favoured a plan and the instrument
of physical labour controls for carrying it through, another
group, the real intellectuals of the planning movement, were
cutting the ground from under the feet of the first by attacking
the idea of a Plan, sometimes on the grounds that it will not
work, sometimes because they fear the destruction of demo-
cratic liberties in the process. Mr. Durbin, for example, has
stated quite specifically :
Planning does not in the least imply the existence of a Plan -
I See pp. 191 et seq.
 CONFUSION AMONG THE PLANNERS 91

in the sense of an arbitrary industrial budget which lays down in

advance the volume of output for different industries. I
Other thinkers in this group such as Mr. Lerner 2 have
swung even further from the old line and would seek to com-
bine the benefits of the capitalist economy and the collectivist
economy in a sort of ' mixed' economy. But they all con-
template a system in which the State would make a few major
economic decisions and, thenceforward, the distribution of
production factors would be carried out by a socialist' pricing
system '.
Theoretically, many of the logical and administrative
problems bound up with central planning can be avoided by
the use of a price system operating within a framework of
major economic decisions by the Supreme Planners. Pro-
gressively intricate discussions on this subject are now going
on among the economic experts. 3 It is not to be assumed
that they have yet reached agreement or that their findings
prescribe practical measures for the running of a controlled
economy. In particular, they appear to ignore, in their
theoretical working models, most formidable problems
associated with incentive. But they are all agreed, as far as
I can understand them, on two points: first, that the price
mechanism must be allowed to operate sufficiently extensively
to leave to the individual a great mass of detailed decisions
which the old-fashioned planners now in charge in Great
Britain would leave to the State; second, that the consumer
must be free to distribute his income as he wishes and that
the productive system must be free, within the framework of
the major economic decisions, to adjust itself to the con-
sumers' wishes. Whether the ingenuity of the academics
will ever produce a scheme of thought which will provide a
solid basis for practical policy only time can decide. We
1 Economic Journal, December 1945.
2 Economics of Control, p. 1.
3 See Lerner, Economics of Control; Meade, Economic Journal, April 1945 ;
Wilson, Economic Journal, December 1945; Fleming, The Manchester School,
September 1946.
92 THE NEW ORDEAL BY PLANNING
certainly need not hasten to implement their findings until
these have reached a more advanced stage of precision and
are more widely accepted.
Even if they ever do reach final agreement, their ideas
will be obstructed, first, by the inherent attraction of planning
through the physical controls mentioned above, and second,
by an almost pathological dread among many of the older
type of planners of the working of the free price system. I This
in itself is causing a great deal of confusion. The two main
functions of price movements are to bring about necessary
changes in supply and to distribute goods among potential
consumers. But Mr. Strachey, the Minister of Food, for
example, seemed to reject both these functions. On August
19, 1946, speaking of the Wheat Agreement with Canada, he
is reported as having said :
He had been criticised on the ground that in two or three
years the price of wheat might have dropped. Even if there was
a great slump in wheat prices again, he said, quite frankly, that
they could buy from the Canadian farmers too cheaply. If they
got their wheat from them at the price of sawdust, the Canadian
farmers were ruined, which was not a very nice or fraternal or
good thing.
(Incidentally it may be noted that the Ministry of Food fixed
prices for Danish agricultural produce at a level which, the
Danes allege, involved losses for the Danish farmers.) Mr.
Strachey further rejected the price mechanism as a device
for rationing (without coupons, queues or black markets) the
available goods between consumers. In the House of
Commons on July 18, 1946, he described a rise in the price
of bread as the traditional method of rationing such a com-
modity. He indignantly rejected the idea that the Govern-
I The head-on conflict of principle is perhaps seen most clearly in the

application of the marginal principle. Thus the modern planners insist upon
the importance of the rule that marginal cost should equal price, which, in cases
of increasing returns, would imply that a concern as a whole would run at a
loss. But the old-fashioned planners who were responsible for the Bill to
nationalise the British transport industry will have none of this. They assert
(Clause 3) that the enterprise must cover its total costs.
 CONFUSION AMONG THE PLANNERS 93
ment would resort to it. He is reported on October 27, 1946,
referring to the varying consumption of meat, eggs, butter
and milk by rich and poor people before the war, as saying:
that was rationing all right for the poor family. It was the most
vicious, pernicious, vilely unfair kind of rationing that you can
imagine - rationing in which the rich got three times ~s much
as the poor. That is the kind of rationing to which we will never
go back.
Now, unless Mr. Strachey had in mind a policy of completely
equal distribution of income (which it is difficult to imagine
is the case in view of Government policy regarding the
salaries of Ministers, M.P.s, officials of Public Boards, etc.),
this must mean that he regarded ' rationing by income' as
inconsistent with his conception of a planned economy. If
this is really correct, those who are working on the possibility
of a ' socialist price system ' are wasting their time.

III
These fundamental confusions naturally led in Great
Britain after the war to anxiety, impatience and criticism
among the planners themselves and tended to undermine
public confidence. For in a society where some freedom of
speech, thought and action still remains it is impossible for
the community to be mobilised behind the plan unless a
satisfying answer can be given to the crucial question: What
is Planning? The growing disillusionment passed through
three stages.
First, the more robust believers in planning began to
criticise the existing form of planning and to call for the
introduction of their own particular ideas of planning. There
was a cry that the planning should be ' positive' instead of
negative, ' real ' instead of unreal, ' good ' instead of bad.
What the nation urgently needs, and would respond to, is
some real economic planning, some purposive direction of its
affairs instead of the present hortatory, sloganised drifting. 1
I Economist, August 30, 1947.
94 THE NEW ORDEAL BY PLANNING
A new start was widely called for. But there was no agree-
ment from which point the new start should be made. As a
consequence of the failure of the Government to produce an
overall plan which satisfied all planners, a large crop of plan-
ning schemes poured into the centre from the periphery.
The sectional planners were anxious to put purpose into the
overall plan. From their knowledge of their immediate
economic environment they saw clearly that, as far as their
own sections was concerned, the overall plan was defective.
They concluded that the first step required was for the
Central Government to put their section right and they could
not understand why this should not be proceeded with forth-
with. What they did not see was that their sectional plans
might well conflict with other sectional plans or with the
necessary character of the co-ordinating agency at the centre.
On the other hand the central co-ordinating agency was not
in a position to chop the sectional plans about in order to
make them fit together, partly because it did not know enough
to do so, partly because the number of possible permutations
and combinations of sectional schemes was infinitely large.
So whilst those at the centre pleaded patience, those outside
cried forward. All this added to the original confusion.
The cleavage of purpose revealed itself even in Govern-
ment documents. In the Economic Survey for ;C947 the
conflicting views emerge sharply. In Section I it is said :
A democratic Government must conduct its economic plan-
ning in a manner which preserves the maximum possible freedom
of choice to the individual citizen. . . . During the war, the
Government could direct labour and was the direct purchaser of
a large part of the nation's production. The Government's
influence in peace-time must be exercised by other less drastic
measures . . . . "The task of directing by democratic methods an
economic system as large and complex as ours is far beyond the
power of any Governmental machine working by itself, however
efficient it may be.
The remainder of the Survey is a description of the existing
controls and proposed plans which involved the State in
 CONFUSION AMONG THE PLANNERS 9S

tasks which earlier had been declared administratively

impossible.
Those things which are fundamental to our national life must
come first. . . . Planning the allocation of resources between the
varioUs national requirements is at present a task of deciding
which out of a number of claimants must go short. . . . It is
precisely the same problem, only on a national scale, as the house-
wife has to solve every week.
As the year 1947 went on the Government imposed more and
more controls, culminating finally in the control of labour.
The clamour in Great Britain for the real overall plan
could not, however, be stilled. Each new plan was clearly
obsolete, overrun by the speed of events as soon as pub-
lished. There was a widespread demand for C the real facts
of the situation' (although they were obvious) and for an
even more supreme planning organisation, such as an inner
Cabinet to devote itself wholly to planning. The Supreme
Phmners sought to recreate confidence by various stalling
devices such as-
(a) declaring that a plan cannot be properly formed until
much more information has been collected. Thus Sir
Stafford Cripps : 1 cc It is no good doing any more today
because no plan can be any more than an approximation.
The statistics do not exist yet " ;
(b) complaining that there is cc a shortage of administrative
talent" ;
(c) complaining that some members of the community are
trying to obstruct the plan;
(d) asserting, as did Mr. Morrison,2 that it is cc unreasonable
to ask the Government to produce in a flash a master
plan to solve all the difficulties of a disorganised, un-
certain world ".
At this second stage, the Government was able to quieten some
of the criticism and create the impression of real action
I House of Commons, February 28, 1946.
Z September 6, 1947.
96 THE NEW ORDEAL BY PLANNING
simply by taking on more powers for the State, imposing
more controls and enlarging the planning bureaucracy. In
the late summer of 1947 the Government established new
forms of regimentation for labour and for industry. In July
1947 a new Economic Planning Board was set up to advise the
country on the best use of the country's economic resources.
In September 1947 Sir Stafford Cripps was appointed to take
charge of the whole of the economic affairs of Great Britain.
The paradoxical position was, therefore, reached in which
liberally-minded citizens were urging on the Government to
a swifter creation of a totalitarian regime.
The third stage, and the one which at present (September
1947) is not yet fully worked out, was the tug-of-war between
the alleged advantages of the overall plan and the claim of
the individual to elementary liberties. Freedom of choice of
occupation has gone but freedom of speech still remains.
And yet freedom of speech is highly injurious to central
planning. It makes for confusion and destroys the homo-
geneity of communal purpose and the blind faith in the
omnipotence and omniscience of the Supreme Planners so
necessary for the success of the plan. The attack on personal
liberty as antagonistic to the plan will, in the early stages,
probably take the form of exhortations to the people to keep
steady, not to bother too much about what is said in the
newspapers, on the radio or by rival political factions, to
trust their leaders, and so on.
After two years of so-called planning in Great Britain the
fundamental obstacle still remained that no one could answer
the question: What is Planning? Experience suggested
that planning was bound up with extreme confusion regarding
the aims and methods of the economic system and that it
meant personal restrictions on the individual both as consumer
and producer. Beyond that all was darkness.
 CHAPTER IV

PLANNERS AS A SPECIES
So soon as they are called upon to put their ideas into practice
the overall planners break up into numerous factions so that
no one conception of planning will enjoy a fair trial until one
group has seized power and firmly suppressed all rival views.
But up to that point the planners jointly subscribe to many
economic articles of faith which constitute the breeding-
ground for some of the major economic fallacies of our times.

The Craving for a New World

Most planners suffer from a turbulent craving for a new
order of things. A pathological dread of becoming old-
fashioned leads them to press for Utopias at almost any cost.
They express their hopes for the future in ornate imagery,
such as 'the wave of the future', the 'shape of things to
come', 'social engineering'. The psychological causes of
this exaggerated restlessness cannot be examined here. At
the one extreme it may amount simply to a desire to be
ostentatiously different. At the other, it may arise from
infantile anxieties to escape from the implications of human
mortality.
Whatever its cause, this impatience with the facts of life
leads to much economic irresponsibility. It is, for instance,
very surprising how many, otherwise rational, people will
seriously argue in favour of central economic planning because
, something will always beat nothing' or 'the clock cannot
be put back', as if it were never good to leave things alone and
as if change were always preferable to rest. The disposition
to ignore the continuity of human societies, the feeling that
at any time the slate can be wiped clean and the writing
97
 THE NEW ORDEAL BY PLANNING
started again, is bound to create a care-free indifference to
the risks of change.
The itch for novelty goes far to explain two very common
attitudes taken up by the economic planner. First, he is
much more concerned with the distant future than with the
present, and is prepared to make immediate sacrifices, and
force these sacrifices on others, for some hypothetical gain in
the future. The planned economy always promises 'jam
tomorrow ',I always calls for immediate sacrifices by the
consumer, always occupies itself with capital investment on a
large scale whatever the present poverty of the consumer.
Second, the planner is prepared to go ahead with his schemes
even if it means leaving all the difficult and unanswered
questions to a wiser future, as if time itself could heal the
wounds of ignorance. Much of the legislation framed by the
present British Government for the purpose of carrying out
socialisation has left all the really difficult questions to be
solved, if soluble they are, to somebody else and to a later
time. 2 The consequence is that those who embark upon
socialist policies find unsuspected difficulties often when it
is too late to draw back. Thus the Parliamentary Secretary
to the Minister of Fuel and Power, as late as the Third
Reading of the debate on the Coal N ationalisation Bill, said :
It is not for me to say, at this stage, although we might have
a very interesting discussion on the matter on some future occa-
sion, the precise criteria which should be applied to measure
efficiency but it is a subject which would repay thought and some
of us are thinking about it.
The Minister of Fuel and Power, November 22, 1945, said:
We are about to take over the mining industry. It is not so
easy as it looks. I have been talking about nationalisation for 40
I Mr. Dalton, of ' song in my heart' fame, in speaking on the Town and

Country Planning Bill, a measure singularly well deRigned to damp down enter-
prise and change, said, quoting H. G. Wells, " , For a moment I caught a vision
of the coming City of mankind, more wonderful than all my dreams, full of life,
full of youth, full of the spirit of creation.' That is the spirit of the Bill."
Z This is particularly true of the National Health Scheme and of the scheme
for nationalising Transport.
 PLANNERS AS A SPECIES 99
years but the implications of the transfer of property have never
occurred to me.
And it is only too obvious that the British Labour Govern-
ment in 1946 embarked upon a policy for destroying the free
economy without having any clear idea of how, in the absence
of a price system, labour could be properly distributed.

The Over-simplification of the Economic Problem

Most planners, until they really have to operate their
plan, have a remarkably over-simplified conception of the task
which lies before them. They believe, for instance, that the
world is, or could easily be made, very rich; that there is some
little trick of technique or of administration which will
suddenly unloose an unlimited flood of wealth. Just round
the corner lies the end of the economic quest. Hence the
popularity of such terms as 'the problem of production is
solved' or ' poverty in the midst of plenty'. It is easy to
understand the exasperation, of those who hold such views, at
any delay in establishing the Utopia. I
The facts are quite otherwise. The world, judged even
by the standards of living which have been attained in a few
places such as the United States or Great Britain, is deplor-
ably poor. Pre-war international comparisons of income
per head, 2 however rough they may be, reveal an enormous
range of incomes per head between the different countries.
Three-fifths of the world's income before the war was found
in the United States, Great Britain, Germany, France and
the U.S.S.R. which account for only one-quarter of the
world's population. Perhaps three-quarters of the population
of the world had an average pre-war jncome per head lower
even than that in Great Britain. Improvement can be, and
I Aldous Huxley, Science, Liberty and Peace, p. 27, has pointed out that

" faith in the bigger lind better future is one of the most potent enemies to
present liberty; for rulers feel themselve-s justified in imposing the most
monstrous tyrannies on their subjects for the sake of the wholly imaginary
fruits which these tyrannies are expected to bear some time in the distant
future ".
Z Colin Clark, The Conditions of Economic Progress.
100 THE NEW ORDEAL BY PLANNING
has been made steadily, but it will always be relatively slow.
No one denies that, in the past, the free economy, under
appropriate conditions, has proved the most powerful instru-
ment for increasing national income. Yet, even in their best
periods, the United States and Great Britain have not been
able to increase real income per head by more than about
2 per cent per annum. The economic problem of the world
is poverty. There are no spectacular cures for it. Nothing
but frustration can come from the view that the vast world
economic engine can suddenly be made to run twice as fast as
before.
Spectacular results are always expected from the instal-
lation of new capital equipment. No one would wish to
minimise the importance of new technical and mechanical
ideas in improving the standard of living, in reducing human
drudgery and in thus enhancing human dignity. It can be
confidently expected that, as science and technology develop,
economic progress will become more rapid. But the planner
sees this process in the wrong light. He is over-much con-
cerned with dramatic developments - such as electrification I
and wholesale schemes for rationalisation. Yet by far the
most important progress comes from the million and one
tiny improvements in transport, distribution and production
which arise from the patient watchfulness of those on the
spot who have a direct economic interest in improvement and
economy of efi"ort.2
The exaggeration of the benefits to be derived from
mechanisation is due also to the failure to recognise that
machines do not grow on trees, they have to be made with
labour; that heavy capital investment means that consumers
must make immediate sacrifices and that the economies to be
, There is a fascinating, and I believe largely unexplored, relation between
economic revolution and electricity. At the centre of nearly every overall plan
is to be found a vast scheme of electrification, although the use of coal for the
making of electricity is a relatively inefficient method of consuming this
mineral.
2 See Jerome"Mecharlisation of Industry; and Terborgh, The Bogey of Eco-
nomic Maturity.
 PLANNERS AS A SPECIES 101

derived from bigger units in industry are limited.

The average planner finds it hard to grasp the almost
stupefying variety of the products of the economic system.
One coal-field may produce three or four thousand different
kinds of coal suitable for different purposes. There are
several thousand kinds of sewing thread, hundreds of different
kinds .of textile products each produced to meet a special
need. I Despite all this he still instinctively thinks of the
economic system in terms of a few homogeneous 'basic'
products. He looks upon the economic system as a group of
industries each of which can be identified, separated and
handled independently, instead of as an intertwined mass of
economic activities linked together inextricably by technical,
production and commercial relations. He regards an industry
as something essentially homogeneous. 'This industry is
efficient, that industry is inefficient.' The truth is, of course,
that an industry consists normally of a number of firms of
very widely-varying efficiency, size and function. He picks
out some industries as 'basic', although in a highly wide-
spread industrial system practically all industries are essential
for efficient operation. His obsession with the spectacular
leads him to regard as 'basic' such industries as coal, iron
and steel, chemicals and transport, but when shortage of
production in some other industry threatens to hold up the
system, then this industry automatically jumps into the list
of ' basic' industries. In the first two years of planning in
Great Britain practically every industry at one time or another,
with the exception of distribution, betting pools and amuse-

I No one should presume to discuss economic organisation who has not

taken the trouble to examine at least one industry in all its detail. No publica-
tion gives a more vivid conception of the complexity of industry than Mr.
Hubba11's paper, The Cotton Trades War Time Commodity Supplies, read
before the Manchester Statistical Society, December II, 1946. He shows
that hundreds of different minor products are used by the cotton industry
and describes how shortages of such apparently remote materials as sodium
and potassium bichromates, castor, linseed and other oils, farina, sago flour,
glucose, antimony lactate, spermaceti wax and formaldehyde each threatened
to hold up production at different times.
102 THE NEW ORDEAL BY PLANNING

ments, was officially described as a ' basic', 'vital', , essential'

or ' foundation ' industry. The process, therefore, of chasing
the shortages boils down to one of chasing the elusive basic
industries. The failure to understand. the integration of all
industrial activity leads to the erroneous belief that the eco-
nomy can be planned in successive stages, that one bit can
be put right whilst the rest is temporarily ignored. This, of
course, explains why the planner's work never seems to be
complete. He is always creating problems for himself. 1
The ·planner usually has a strong predilection for tidiness
in the economic system. Loose ends and lack of uniformity
exasperate him and account often for his objection to a free
economy with its innumerable rivulets of enterprise taking
unexpected courses, its constant urge to expand and diversify,
and its endless multiplicity of activities, quite ungraspable in
their entirety by one mind. z
Of course, once the planner gets the opportunity to put
his scheme into action he quickly discovers his mistakes.
He then begins to realise the difficulties of increasing wealth
and to understand the extraordinary complexity of the system
he is trying to handle. So that until he gets into power the
planner complains that labour is sweated and the consumer

I Thus Sir Stafford Cripps, House of Commons, August 7, 1947: "In order
to get this increased production we must carry out our planning in an orderly
way. We must secure raw materials and sources of power first of all for pro-
ducing things like coal, steel, transport, agricultural production and those
primary things that are the basis of our industrial life . • . and then tum to
the semi-manufactured goods of importance and finally to the completely
manufactured goods."
~ The neurotic anxiety for tidiness is perhaps best exemplified in the policy
of the British Government· regarding the distribution of services such as
electricity and gas. A map showing Great Britain divided up into 14 areas for
the control of the distribution of electricity looks much tidier than one divided
in 450 areas. Within the larger areas uniform prices can be established even
though costs in different parts of the area are very different.
Another interesting case was provided in the Statement on the Economic
Considerations affecting relations between Employers and W OTkers issued by
the British Government in January 1947. This was a most gloomy review in
which it was admitted that" the position of Great Britain is extremely serious",
that "there was a serious maldistribution of labour". Yet the Statement
spoke approvingly of "the orderliness within our industrial system . . .
throughout . . . the transition from war to peace".
 PLANNERS AS A SPECIES 103

under-supplied; after he gets into power he engages in

constant exhortation for harder work and calls for an almost
oriental patience from the impoverished consumer. I Un-
fortunately, owing to the exclusive nature of planning, only
the very few in each generation can learn from experience in
this way and those few will find it politically impossible,
having once set out on their path, to retrace their steps in the
light of their experience.

Consumption as a Crime
The failure to grasp the essential complexity of an
advanced economic system derives from the lack of under-
standing of the purpose of economic activity. Scientists tell
us that every ear of wheat in a field is different, ideally calling
for different methods of cultivation and harvesting. Much
more so is every consumer unique. The only rational purpose
of an economic society is to strive to satisfy each peculiar
bundle of tastes. The planner naturally finds his task easier
if the consumer can be standardised, -that is to say, deprived
of those characteristics which make of him a consumer.
The consequence is that the planner reveals a certain
impatience at the very existence of the consumer. He
persuades himself, against all reliable physiological and
psychological evidence, that equal shares are ' fair' shares. 2
He denies the 'sovereignty of the consumer'; 3 he em-
phasises the losses which are suffered from ' excessive • variety
in consumers' demand; he is instinctively attracted towards
the standardisation of products; he approves of the creation
I It is, indeed, possible to identify the moment when, in the course of
British planning, the crucisl, age-long fact of scarcity was first recognised by
the planners. In the Economic Suroey lOT I947 is found this statement: .. The
central fact of 1947 is that we have not enough resources to do all that we want
to do. We have barely enough to do all that we must do...• To get all that we
want, production would have to be increased by at least 2S per cent."
2 Dr. Widdowson, in his study of children's diets, has shown that equal
rations for children in one age-group are grossly inequitable since individual
requirements vary enormously.
3 See Hobson, Conlelsions 01 an Economic Heretic; and Dobb, Political
Economy and Capitalinn.
104 THE NEW ORDEAL BY PLANNING
of ' utility' models; he looks upon ' design' in industry as
something which can best be imposed from above; 1 he
advocates the ' pooling' of products; he argues in favour of
permanent rationing; he believes that if any scheme is in the
interests of a group of producers it must be in the interests of
the community as a whole.2-
Such measures as these are sometimes advocated on the
grounds that one group of consumers is taking unfair ad-
vantage of another group and that it must be the function
of the State to redress the injustice. But there is evidence to
suggest that the objection is really to the interests of the
consumers as a whole. It was the planners who first raised
the cry that consumers were getting their goods at too low a
price. 3 The growing practice of determining how well fed
is the consumer by measuring his ' calorie intake' is another
indication that the consumer is increasingly looked upon as a
part of the system of production into which must be shovelled
a minimum quantity of fuel without too nice a regard for his
own tastes or his own satisfactions. Consumer goods as a
whole come to have two functions only: to keep the human
machine efficient and to provide incentive to work. It is,
therefore, not difficult to see why the planner is inclined to
regard the consumer as a great inconvenience to his plans, and
to look upon his interests as secondary. The ostensible
reasons for keeping consumption screwed down have already
been referred to: that we must s~crifice now for the sake of
future gains, that we must work for our children and our
I Thus the Parliamentary Secretary to the Board of Trade boasted that
the Design Panel for Utility Furniture included representatives of furniture
manufacturers, designers, distributors and the furniture trade unions, and .. a
housewife is also included ". One housewife.
2 Before the war, under the Milk Marketing Board, large milk distributors
wer~ allowed a rebate on surplus milk which had to be manufactured. Small
distributors could not get this rebate. The latter laid a complaint with the
Committee of Investigation, who found that the action of the Board was justified
as it was in the interests of milk producers and milk manufacturers as a whole
.. and might therefore be said to be in the public interest".
3 Mr. Strachey, House of Commons, February 6, 1947: .. Before the war
. . • wheat was imported into this country at 49 cents a bushel. What was the
effect? . . . We imported two million unemployed along with them."
 PLANNERS AS A SPECIES lOS

children's children, that consumptioI}. must temporarily give

way to the need for capital equipment. 1 But at the back of
all this is a confusion between the means and the ends of the
economic system.

The Fear of the Price System

Something has already been said of the morbid fears in
the minds of many planners about the free operation of the
price system. 2 In some cases this is due to ignorance of
the function of prices in bringing about the production of the
required goods and in distributing goods among consumers.
In others, the price mechanism is objected to by socialists
because it represents the traditional method of rationing
in a free economy and must, therefore, be suspect. Some-
times the objection is really to inequality in the distribution
of wealth or income. 3 Sometimes it is against the diversity
and complexity of prices: many planners are strongly in
favour of an extensive 'postalisation' of prices by which,
irrespective of the cost of providing goods and services, all
consumers should be charged the same price or even no price
at all for gas, electricity, coal, transport, etc. 4 Sometimes it
arises from the failure to recognise that a price is a measure of
the satisfaction which a consumer derives from the goods or
services he is buying. The planner cannot be brought to
recognise, for example, that if a small shop charges more than
I It is perhaps superfluous to refer to any specific statement on this point.
But Sir Hartley Shawcross deserves mention. Speaking on September 28,
1946, he said, .. While the Government held out no easy promises, if we tackled
the problems we had to face in the spirit of a free, energetic democracy, we
could achieve a golden aKe of freedom, happiness and prosperity".
2 Mr. Bevin has said (July 26, 1947), .. We cannot go back to the
Cobdenite economy". Mr. A. J. P. Taylor, The Lirtener, March 20, 1947,
" This was the great revolutionary discovery of the nineteeth century: that
there were so-called natural economic laws; everything, even human beings,
had to be subordinated to the 'price mechanism', that terrible Moloch to
.which old-fashioned economists still bow down ".
3 Attempts to distort the price system in order to soak the rich often pro-
duce just the opposite result. Thus the policy of ' bringing electricity to the
countryside' by charging low prices there, may well mean that a slum dweller
has to contribute to the cost of providing electricity for a country mansion .
.. See Barbara Wootton, Freedom under Planning, p. SI.
106 THE NEW ORDEAL BY PLANNING
a large for the same commodity that is not necessarily a proof
that the former is less efficient than the latter but may be due
to the fact that the consumer is prepared to pay the higher
price for the greater convenience of the shop 'round the
corner '.
In the last analysis, the planner's attitude towards the
price mechanism may arise out of a feeling that such a
mechanism deprives him of some part of the gratification of
exercising control. To control an economic system through
the so-called 'physical controls' - raw materials, labour,
factory space, etc. - gives a direct and immediate sense of
the use of power. There would be, indeed, something of an
anti-climax to more than fifty years' struggle for socialism
in Great Britain if, at this very last stage, the fruits of victory
should be snatched away by employing for control the very
price mechanism which, in one form or another, has been
one of the major objects of attack in socialist propaganda.
The same distrust is naturally felt for all those processes
and agencies by which prices perform their functions. Most
planners are obsessed with the need for price stability. A
price is essentially an indicator, by reference to which pro-
ducers and consumers regulate their action. A price which
cannot move cannot perform that function any more than a
thermometer which cannot move can help us to decide when
to put more coal on the furnace. It is true that there are
substantial advantage$ in stability of a general price level,
though there are times when an upward or downward
movement is desirable. But the stability of general prices is
impossible if specific prices cannot change in order to bring
about readjustments within the economic system. Unfor-
tunately the suspicion of price changes is addressed, by many
planners, to specific prices. They feel, when such changes
take place, that something is going on for which they are not
responsible, that the economic system is playing queer tricks
with them. The result is that the extraordinary measures are
sanctioned to keep specific prices unchanged by the use, of
 PLANNERS AS A SPECIES 10']

subsidies and other methods. The rate of interest, the price

of capital, is specially suspect because of its close association
in the public mind with the capitalist system, and normally
efforts will be made first, to reduce it, and second, to keep it
low. The consequence is that that particular price ceases to
exercise its function in distributing capital to the different
possible uses and in striking a balance between consumption
and investment. Attempts will also nearly always be made to
keep down that group of prices which enter into the cost-of-
living index number by subsidising the commodities entering
into the index and by preventing officially the upward move-
ment of the cost of living, even though this may result in other
prices rising abnormally.
British economic policy in 1946 and 1947 provides highly
relevant illustrations of the serious consequences which may
follow from planning which is operated in defiance of the
price mechanism. Thus the fuel crisis which struck so serious
a blow at British industry in early 1947 was made the worse
because the consumption of electricity and gas was positively
encouraged by the prices charged. In his 1946 Budget Mr.
Dalton had withdrawn the purchase tax on electric fires, thus
reducing their price; the prices charged for gas and electricity
had been kept abnormally low because they entered into the
cost-of-living index number and the special pre-war tariffs
which had been designed to encourage the consumption of
electricity were still in operation.
More dangerous still is the belief that the price system
is useless in abnormal times, that it is a fair-weather device.
The truth is that the price mechanism is most valuable when
serious readjustments are called for (the Russians recognised
this when they established their New Economic Policy). The
British planners have not been nearly so realistic. Thus Mr.
Morrison, in the middle of 1947 when the British economy
was rapidly approaching paralysis, said:
Any person or group who asks for more in the post-war circum-
stances of Great Britain is, in fact, asking for more government.
108 THE NEW ORDEAL BY PLANNING
The classical conditions in which more could be got by the free
play of the market have ceased to operate for us for the time being.
More converts are brought to the planning fold through
ignorance of the price system than through any other
cause. For those who cannot, or will not, acquaint themselves
with the principles of this system have no clue through which
to reach an understanding of the intricate organisation operat-
ing around them. Tortured and bemused by the fear of the
unknown, they finally come to believe that everything in the
free economy is subject to 'the blind ravages of chance' ;
that what is produced, what work each man pursues, what
price is fixed for commodities are isolated ad hoc decisions.
Into this intellectual vacuum the idea of a planned economy
rushes with all the force of a gospel of salvation.
The price system in a free economy is not without its
defects. Prices can be manipulated. They fail on occasions
to bring about necessary readjustments quickly enough.
Inequality in the distribution of income may rob them of
much of their social purpose. In some cases they fail to
evoke services which the community urgently needs. There
is no more need to conceal these defects than there would be
to deny that a steam engine or an electricity generating station
was not 100 per cent efficient. But no one has yet devised a
better system for co-ordinating the work of very large groups
of people, for shifting the emphasis of production as con-
sumers' demands change, for enabling the consumer to
distribute his income in the most convenient way between
different products, or enabling the worker to choose his
occupation freely, having regard to his relative assessment of
work and leisure and his personal inclination towards one
type of work or another.
Such a price system is of a remarkable ingenuity and
simplicity. It is based upon the market and upon the firm.
In the market the consumers, by their process of choosing,
are engaged in a perpetual plebiscite as to the goods they
want. The results of that constant and detailed voting are
 PLANNERS AS A SPECIES 109

passed back to the firm, which must, in the light of its costs,
decide what adjustments it should make to cater for the
revised needs of the consumer. This is an old story, told
in innumerable volumes. But the tragedy is that the vast
majority of those who, in the name of planning, are now
seeking to upset the economic systems of the world have
never heard of it.
In a free economy prices must be linked to costs, indeed
costs are but one special group of prices. The distrust of
the price system is often attributable to an anxiety lest the
control of costs over economic activity should prevent the
community from following policies which it considers right.
Now it has long been recognised that there are certain social
costs, as distinct from private costs, which are not measured
by the free economy and which therefore may well lead an
individual, seeking his own interests, to pursue a given
course to a point which is potently anti-social. If I reduce
my factory costs by using a type of fuel which creates more
smoke and incurs others in losses through having to wash
their curtains more frequently, or through the general de-
struction of the amenities of the neighbourhood, then the
price system is producing the wrong answers. The opponents
of the price system have seized upon these defects and have
sought to magnify them, although such social costs are small
in relation to the total and can, in fact, be allowed for in a
rough-and-ready way by State intervention within a free
economy. Exceptions there must be: but unless the vast
mass of economic decisions are made by reference to cost, and
those methods for producing a given result chosen which
yield the lowest cost, complete chaos will be the result. Yet
this overriding criterion is increasingly being set on one side
by those who make a nebulous appeal to 'the national interest' . I
I Thus Sir George Schuster, The Observer, December 8, 1946, speaking
of the future of the cotton industry and re-equipment policy, points out that, in
all the circumstances, " it may well be doubtful for an individual firm whether
it will pay to put in new machinery ". He concludes that" if we could double
the volume of production, even with a slightly higher cost of manufacture (my
italics), it would be to the national interest to do so ".
110 THE NEW ORDEAL BY PLANNING

Contempt for the Distributor

In a free economy the rapid equating of supply and
demand through price changes goes on largely through the
instrument of the merchant and the distributor. It is not,
therefore, surprising to find that the merchant and distributor
are regarded by most planners as impediments to the creation
of wealth.
Nothing is more dangerous to economic progress in the
long run than the view that a nation only grows richer by
increasing the proportion of its population engaged in manu-
facturing industries, or that only those who are actually
engaged in manufacture are contributing to the wealth of the
community. Such a view cannot stand the test of facts.
Even in the most highly industrialised countries only a
minority of the workers are to be found in the so-called
productive occupations. In the United States about 30 per
cent of the occupied population is found in manufacturing
industry, mining and building. The corresponding figure
for Great Britain is 44 per cent. In both these countries,
which represent instances of industrialisation carried prac-
tically to its limit, the larger part of the national income is
derived, not from production in the narrow sense, but from
other forms of economic activity.
Moreover, in nearly every advanced industrial country
the proportion of the population which finds a livelihood in
manufacture is falling. It has been falling in the United
States for at least the last twenty years and in Great Britain
for a much longer period. The outstanding feature of all
rich economic communities is the very high proportion of
workers who are to be found in the 'service' occupations,
i.e. in distribution, commerce, finance, transport and the
other services. Both in Great Britain and the United States
about one-half of the people at work are engaged in these
service trades.
There are very good reasons for believing that this close
 PLANNERS AS A SPECIES III

relation between the importance of the service trades and

high standards of living is largely cause and effect, and that
growing wealth is inseparably bound up with the extension
of the services.
It is not difficult to understand why this should be so.
Among the devices which men have conceived to increase
wealth and to reduce the amount of work needed to reach a
given end, the method of specialisation stands out as proba.bly
the most fruitful of all. Specialisation takes very many forms
and runs through the whole of our economic life. Workers,
by specialising, increase their skill and speed, and enormously
extend production. Businesses, by specialising, increase their
efficiency and reduce the complexity of their administration.
Different parts of a country can with advantage specialise
upon types of production which best suit the natural con-
ditions and the type and quality of the existing labour force.
And the history between the wars constitutes an irrefutable
proof that unless the nations of the world are prepared to
specialise in those forms of production in which they have
the greatest economic advantage, then the world economy
disintegrates in a futile begga.r-my-neighbour struggle.
Without this specialisation in all' its forms, the standard
of living throughout the world would be considerably lower
than it is today. If, on the other hand, it can be extended and
developed, the prospect of a world set free from poverty is
clearly within sight.
Specialisation, however, is only one side of the shield.
It would be meaningless unless, at the same time, there were
forces operating to integrate the separate parts and bind
them up into a co-ordinated system. Specialisation and
integration go together. Now the integrating forces in a
specialised economy are just these services of distribution,
commerce, finance and transport. It is through such services
that the demands of the consumer are collected and passed
back to the producer in order to avoid the waste of manu-
facturing what the consumer does not want; that, before
lIZ THE NEW ORDEAL BY PLANNING
production can begin at all, raw materials in the right quan-
tities and the right qualities are steered into the right channels;
that stocks can be accumulated at strategic points to dampen
the effects of oscillations in the demands of the consumer and
thus to keep production running smoothly; that risks can be
taken in opening up new markets and placing improved goods
before the consumer; that the multitudinous financial
transactions involved in trading can be carried out expedi-
tiously by experts; that finally the finished products can be
put into the hands of the consumer where and when he wants
them.
The need for the parallel maintenance of those integrating
and specialised elements in an efficient economy can be
simply illustrated. Very large iron and steel plants have
great technical advantages over small plants. This means
that relatively few plants will normally be required in any
country. But if the iron and steel plants are few and widely
spaced it follows that the iron and steel industry must call
increasingly upon transport and distribution services, since
the wide spacing of the iron and steel industry means that
raw materials - particularly coal and iron ore - must now
be carried greater distances before they are turned into
finished products. In this case, therefore, the gains of modern
techniques and high outputs per head in the giant plants are
dependent upon simultaneous increase in the activities of the
services catering for the iron and steel industry.
Integration and specialisation go together. It is not an
accident that those countries in the world, above all the
United States, which have made the greatest use of the
principle of specialisation to enhance output per worker and
to raise the standard of living, have been compelled to
employ an increasing part of their population in the service
trades. We do not try to produce a faster and more efficient
aeroplane simply by putting more powerful engines into it.
We must, if catastrophe is to be avoided, at the same time
render the system of controls stronger and more sensitive,
 PLANNERS AS A SPECIES 113

the supplementary aids to the pilot more adequate, the auto-

matic stabilising devices more plentiful. We should not
expect to be able to enjoy the advantages of a more powerful
economic machine without a similar expansion of the guid-
ing, controlling and ancillary economic functions which the
services provide.
These are economic truisms supported by both past
experience and logical analysis, which would not merit
repetition were it not for the frequency with which, in these
days, they are ignored or even disputed. There is, indeed,
one extreme school which appears to argue that the services
are largely unnecessary, that they are parasitic in ~he body
economic, and that by a ruthless removal of them the wealth
of a nation would be increased. There is one very simple
answer to the exponents of this type of millennium. It is to
invite them to try to lead their lives without using the services
which they regard as wasteful, to seek out a farmer to buy
wheat each time they want to eat, to make their own arrange-
ment for the milling of the wheat and for the baking of the
flour, and so on through the whole range of the articles they
normally buy at retail; to arrange for the transport of these
goods and their storage, to accumulate throughout the year
stocks of goods which they will need in specially large amounts
at certain periods, to search out a designer or inventor each
time they have a new want for which their existing goods
and equipment are not well suited.
Sometimes the argument is less extreme. I t is admitted
that the services are necessary but it is claimed that they are
too extensive and, therefore, too costly.
Assertions of that kind are tantamount to a declaration
that producers do not know their jobs and consumers do not
know what is good for them. For no one compels a producer
to use the services of a merchant in the buying of his raw
materials. Broadly speaking, merchants have no monopoly
powers (in fact, it is sometimes urged that they compete too
much). Any producer at any time is free to carry out his
II
114 THE NEW ORDEAL BY PLANNING
own distribution services. If he chooses not to do so, unless
he is being charged with inefficiency, it must be assumed that
he finds it more economical to allow an outside agency to
carry out these services for him. Similarly with the final
consumer, if he feels that he disposes of his income best by
purchasing a loaf which is conveniently delivered to him,
who has the right to say that he would really prefer to have
two loaves which he must collect himself from the shop ?
Those, in fact, who claim that our services are too extensive
must take upon themselves the onus of laying down the
principles by which they determine what constitutes 'too
extensive' and of explaining upon what grounds they have
attained to the higher knowledge which enables them to
judge more exactly of the best methods of production within
business and the best methods of disposing of an individual
income than can the individuals directly concerned.
The countries with a high proportion of their workers
in the processes of distribution and transport are, without
dispute, the richest countries of the world. But the planners
cannot rid themselves of the feeling that such workers are
essentially unproductive (it is indeed precisely in these
essentially integrating services that the planned economies
have broken down most seriously). Thus Sir Stafford Cripps
has said:
Before the war we had been using a too large proportion of
our labour in distribution and we must not allow that state of
affairs to arise again. We must see to it that, beyond the reason-
able minimum required for distribution, the best of our energy
goes into production. 1
Pre-war we had nearly three million people in distribution
producing nothing. 2
[Workers in distribution before the war] probably earned not
far short of £500 millions per annum in wages and salaries, all
of which had to be paid for by the consumer as an addition to
the cost of production. 3
I October 19, 1945. 2 February 2, 1946.
3 February 12, 1946.
 PLANNERS AS A SPECIES lIS
Mr. Belcher has said:
We do not desire to encourage a return to the over-plus of
labour in the distributive industry. 1
These illogical views of • productive' and • unproductive'
labour are so deeply implanted that they persist in the face
of all evidence to the contrary. Thus in 1946, when Sir
Stafford Cripps was making the statements quoted above,
Great Britain was desperately short of labour largely because
of the withdrawal of married women from industry. This
withdrawal, in tum, was partly due to the shortage of workers
in distribution which made the task of running a home quite
incompatible with outside work. And whilst distributive
workers were being classed as unproductive the Government
was attempting to justify the retention of 2,000,000 workers
in National and Local Government. z
Obscurity of Language
A remarkable consequence of the growth of planning ideas
is the extensive use of vague and obscure terms which can
mean very different things to different people. This helps
to create a spurious sense of solidarity between different
planners. For so long as they can conveniently ignore the
different meanings they attach to the same word, conflict
can be reduced to a minimum. On occasions these nebulous
terms are deliberately adopted in order to mislead: more
frequently they are the result of muddled thinking or are
merely a substitute for thought itself.
Perhaps the most reprehensible tactics are those employed
in the use of the term • democratic society'. It is argued
that a system of free enterprise cannot give us a democratic
society and that only in a planned economy such as Russia
does this condition exist. 3 Thus, by a violent inversion of
I House of Commons, July 8, 1947.
2 It is also highly paradoxical that although the planners normally regard
distributors as parasitic many of the plannc:rs'· schemes increase distributors'
margins. Thus before the war the setting up of the Milk Marketing Board tended
to increase distributors' margins (R. Cohen, Economic Journal, March 1939).
3 See Laski, Manchester Guardian, April 27, 1946.
II6 THE NEW ORDEAL BY PLANNING
meaning, a State which keeps millions of workers in slave
camps, which ruthlessly transports large parts of its working
population from one part of the country to another, which
makes the holding of a ration card conditional upon the per-
formance of prescribed work, has created economic demo-
cracy. In the existing free economies, such as the United
States, in which workers are free to leave their jobs, to
move from one part of the country to another, to organise
themselves for their own defence, to strike, to set up their
own co-operative system of distribution or of factory pro-
duction, to enforce in the courts their contracts with em-
ployers, it is alleged economic democracy does not exist.
It is also a common habit to insist that economic problems
shall always be considered in terms of the 'broad interests
of the community as a whole' or of 'the general national
interest '. Now it is true that there are some decisions I
which can only be made on public grounds and there the
community must determine in a rough-and-ready fashion what
constitutes the general interest. The decision as to how far
it would be justifiable to throw additional costs for smokeless
fuel upon the householder in order to have cleaner cities
would be one such case. These decisions are extremely
difficult to make, there is no systematic or scientific way of
reaching them. The public hullabaloo which precedes the
location of a large electricity generating plant or a new town
is adequate evidence that in all such matters we necessarily
grope among the intangibles .
.Yet the planners would invoke this test of 'national
interest' over the whole economic field, although in the vast
range of economic decisions there are no criteria to decide
what is the national interest. z It is the outstanding merit of
the free economy that such decisions are left to be made in
I See Chapter VIII, p. 188.
2 Most planners would learn much, not least in clarity of exposition, from
a careful reading of Adam Smith. On this particular point he said (Book IV,
chap. 2): "I have never known much good done by those who affected to
trade for the public good. It is an affectation, indeed, not very common among
merchants."
 PLANNERS AS A SPECIES 117

terms of individual interests, which can be measured, operat-

ing within a general framework through which individual and
social interest will largely coincide.
This casual use of the 'national interest' argument
carries in its train many social dangers. First, it is a highly
convenient device for justifying dictatorial action: so long
as no one knows what the national interest is, an ingenious
planner can make a good case for practically anything,
however hard the policy may appear to bear on special groups
in the community. Second, it means that many of our
economic decisions must be made in the absence of concrete
and objective criteria. Third, it leaves us open to the
policies of cranks of every sort who will justify their case ' in
the national interest '.
At bottom, of course, the attitude of mind which leads to
the frequent use of this term is totalitarian. It is based upon
the assumption that there is a communal interest which is
above and independent of the interests of the individuals
which constitute the community. Indeed there are recorded
cases where a policy is advocated as in the national interest
although it is admitted that that policy will run counter to the
interests of every individual in the community.
The glossary of these misty planning terms is indeed a
long one. At the head of the list stand ' co-ordination ' and
, integration', 1 used mainly by those who have a vague sense
that this or that service should be made more efficient but
are not quite sure how. 'Stability' and ' orderly progress'
are others in high repute. Recently the word ' balance' has
become extremely popular in discussions of social organisa-
tion. Thus we speak of a balanced distribution of industry,
a healthy and well-balanced agriculture, a balanced popula-
tion, a balanced community, and in each case the word carries
a different meaning. At the moment in Great Britain,
I Mr. Barnes, the Minister of Transport, in introducing the Transport

Bill in the House on December 16, 1946, said, " I expect that for processes of
integration and co-ordination, country bus services will be more synchronised
with railway services than they have been in the past ".
lIS THE NEW ORDEAL BY PLANNING
, balanced industry' seems to mean an arrangement by which
each region has a wide range of industries, i.e. that all regions
should ideally produce different goods in the same propor-
tions. Balanced agriculture, however, does not mean that
each farm should produce the same crops but just the opposite,
i.e. that farmers should specialise in those crops in which they
have the greatest comparative advantage so that the industry
can be ' healthy' without having too large subsidies paid to
it. A balanced community is one in which all social classes
are proportionately represented. I A balanced population is
one which is reproducing itself. A balanced region for the
distribution of electricity is one in which one lot of consumers
live in a populous area, where costs will be low, and.another
lot in a sparsely populated area where costs of distribution
will be high. In fact the only thing common to all these
different uses of the word is that they all involve the calling-
in of the State to carry through, by ill-defined methods,
obscurely conceived policies.
There is a wide range of terms employed by planners, or
business men seeking to justify activities inconsistent with a
free economy, all of which are really synonyms for ,the exer-
cise of monopoly control: 'orderly marketing', 'concerted
programmes', 'price management' (instead of the more
brutal' price control '), , putting the house in order', ' cutting
out the dead wood ' and so on.
The ultimate effect of this use of slipshod language is to
dilute, where it does not positively poison, the meaning of
words to the point at which discussion could just as usefully
be carried on in pure gibberish. Endless examples could be
provided. The following may serve to illustrate the degree to
which meaning can be bleached from words by a lavish
employment of the planners' jargon.
(I) Before the war the British Government had conferred
upon the iron and steel industry a large measure of
I Final Report of New Towns Committee (Cmd. 6876).
 PLANNERS AS A SPECIES 119

monopoly power. The interests of the consumer were

supposed to be safeguarded by the Import Duties Ad-
visory Committee. That Committee on page 47 of its
, Report on the Present Position and Future Development
of the Iron and Steel Industry' defined what it regarded
as a proper price policy as follows:
A sound and reasonable price policy, aiming at the
maintenance on as stable a basis as possible of prices in
times of good trade as low as consistent with the provision
of adequate reserves for depreciation and obsolescence and
a reasonable margin of reward to the efficient producer,
and as high as consistent with an economic level of output
in times of bad trade when demand is attenuated, whilst
avoiding unfair discrimination, is then desirable in the
interest both of the industry itself and the national eco-
nomy of which it is so essential a part.
What is the meaning of sound, reasonable, stable, adequate,
efficient, attenuated, unfair and national economy ?
(2) The State-appointed British Transport Advisory Council
in its ' Report on Services and Rates' gave the following
definition of ' co-ordination ' :
The Council considers that . . . coordination may be
regarded as a state in which the various forms of transport,
irrespective of ownership, can, under equitable conditions,
function efficiently not only within their several spheres but
also as a part of a comprehensive whole under a system,
either imposed or reached by mutual agreement, condi-
tioned by public interest.
What is the meaning of equitable, efficiently, compre-
hensive whole, public interest?
(3) The Cotton Working Party, set up by the British Govern-
ment in 1946, thought it worth while to define the
objectives of the cotton industry in these terms:
The Cotton industry must be operated in the natio~al
interest and play its proper part in the national economy ....
Unless all those working in the separate units are prepared,
when necessary, to take into account the interests not only
of the industry as a whole but also the broad interests of
120 THE NEW ORDEAL BY PLANNING
the nation, unless there is readiness both to agree and
implement common policies when necessary for furthering
such interests . . . there is little chance of a satisfactory
outcome from any proposals.
What is the meaning of national interest, proper part in
national economy, when necessary, the broad interests of
the nation?
(4) In the declaration of Labour Party policy in the I945
election the following statement appeared :
Each industry must have applied to it the test of national
service. If it serves the nation, well and good; if it is
inefficient and falls down on its job, the nation must see
that things are put right.
How does one determine whether an industry is serving
the nation? What is the test of national service? How
can a nation see that an industry is put right?
In all these cases, of course, the authors vaguely state problems
but use such language as to create the impression that they
are answering them.
 CHAPTER V

PLANNING AS A SCIENTIFIC METHOD

Only an organising genius could produce a shortage of coal
and fish in Great Britain.-MR. ANEURIN BEVAN, Labour
Party Conference, 1945.

I
THE comparative novelty of the idea of a centrally planned
economy goes far to explain the paradox that whilst British
socialists have been busy now for half a century in framing the
socialist commonwealth and whilst many millions of social-
ists are now clamouring for its establishment, those who
constitute the intellectual spearhead of the movement are
still disputing among themselves and with their opponents
whether planning will really work and, if so, how it can
best be made to work.
In the days of the Webbs, socialist intellectuals concerned
themselves largely with what may be described as adminis-
trative geometry. They sought to layout, with hierarchical
precision, committees, councils, boards and tribunals, so that
the whole effect appeared tidy in an organisation diagram.
They sketched the ideal areas of operation of public services
so that everything would look neat and regular on a map.
Interest in this branch of socialism among the intellectuals
seems now largely to have evaporated. Instead they concern
themselves with the most fearsome algebra and calculus in the
hope that, through the higher mathematics, they may find
ways of introducing the price system into a socialist economy
and of bringing back competition as a benevolent game into
the economic mechanism.
The clash between those who believe that a plan must
consist of a quantitative determination by the State of pro-
121
122 THE NEW ORDEAL BY PLANNING
duction and consumption and those who would employ a
socialist price system has already been mentioned. But even
in this second group there are fundamental differences of
opinion as to the purposes for which the price system should
be employed. If there is to be a socialist price system, some
believe that it should be designed and operated to bring about
the conditions which would emerge in a theoretical system of
fr~e competition; others argue in favour of the economic
advantages of a substantial measure of monopoly. Many
would advocate the general application of a rule whereby
price would equal marginal cost; other writers have shown
that, in practice, this might seriously undermine managerial
efficiency. Is the consumer in a planned economy to be
regarded as sovereign in the sense that he is likely to know
what he wants and what is best for him, or are there cases
where the State can act more wisely and with greater know-
ledge? By what devices will the State measure the • social'
costs which it is often alleged the individual ignores? Are
there objective grounds for declaring that equality in the
distribution of wealth is likely to maximise the welfare of the
community, or must we move on such matters by instinct
or intuition? In general, how are incentives to be main-
tained in a planned economy and, in particular, how is a high
rate of taxation to be made consistent with maximum effort
and production? 1
All these speculations, which must be fascinating to the
intellectual but depressingly abstract to the ordinary run of
socialist who is anxious to get on with the planning, go to the
very heart of the questions as to whether, in a planned
economy, the planners will know what to do and whether, if
they do agree what should be done, they will be able to do it.
I There is now a vast literature on this subject. For those who wish to
pursue it reference may perhaps be made to the following: Lerner, Economics
of Control, chap. 3 ; Schumpeter, Capitalism, Socialism and Democracy, chap. 8 ;
Meade, 'Mr. Lerner on " The Economics of Control" " Economic Journal,
April 1945; Wilson,' Price and Outlay Policy of State Enterprise', Economic
Journal, December 1945; A. M. Henderson, • The Pricing of Public Utility
Undertakings', The Manchester Sclwol, September 1947.
 PLANNING AS A SCIENTIFIC METHOD 123

The present-day controversies, however, prompt three re-

flections. First, it may be that the unsettled abstract problems
will finally prove to be capable of resolution: on the other
hand they may prove to be insoluble, either because of the
logical difficulties, or because they call for the measurement of
things which cannot, in the nature of things, be measured.
It would be time enough to think about centrally planned
economies if and when we knew which of these possibilities
proved to be true.
Second, if these theoretical problems still remain un-
solved, and if they are so fundamental as to justify the
attention they are receiving, it may be asked what kind of a
muddle we would have got into if we had socialised our
economy when the great creators of socialist doctrine first
advanced it. Nothing is clearer than that, if we had followed
the Webbs' advice when it was first given, we should have
embarked upon socialism at a time when, according to later
discoveries, we did not even know what the more difficult
problems of a planned economy would be. And if, as must
now be admitted, our escape from the clumsy and unscientific
manipulations of the early-day socialists was providential, is
there not double reason to continue to exercise caution now
whilst the latter-day socialists dispute among themselves ?
Third, those who are uninitiated into the mysteries of the
more abstract economic analysis must not allow themselves
to be so overwhelmed by the brilliance of these discussions as
to assume that a planned economy is more scientific, and
therefore preferable, to a free economy. For the most part
these discussions are not devoted to the relative merits of the
two systems. They are mainly concerned with the best way
of running a planned economy if so~ebody else has already
decided that there should be a planned economy. In other
words (if the argument of this book is correct), of how one
may make the best of a bad job.
124 THE NEW ORDEAL BY PLANNING

II
Theoretically a price system could operate within a
socialised state in such a way as to guide a given volume of
production into those channels which best satisfy the con-
sumer and to enable the consumer to distribute his income,
among the goods produced, in such a way as to give him the
greatest possible satisfaction. To take a simple illustration,
suppose the community consists of one factory responsible for
all production. Suppose that every producer is paid the same
wage so that the total weekly wage bill is [,1000. Suppose
that the management fix such prices for the goods made each
week that the total value of the goods is [,1000. Then each
week the workers draw their wages ([,1000), buy the goods
made (for [,1000) and the [,1000 pass back to the management
and are ready to pay the next week's wages. The only
possible snag is that some 0'£ the goods produced would not
be sold because, at the price fixed, the workers did not want
them. There is an easy way out of this. The price of the
unwanted goods would be reduced and the price of the other
goods increased - still keeping the total value of the output
of the factory at [,1000. Each separate commodity would be
produced up to the point at which the money received for it
in the shops was equal to what had to be paid in wages for its
production (we are assuming everybody is paid the same
wage). So the output of the commodities which were not
wanted in the quantities originally produced would fall.
Similarly the output of other goods would rise. Finally, a
balancing point would be reached at which the goods pro-
duced each week at the prices fixed would all be bought each
week. The only rules which would have to be observed
would be, first, that total wages must equal the total value of
sales, and second, that the wages paid in making each separate
product should equal the money obtained by selling that
product. When that position was reached no consumer
would have any further interest in switching his income from
 PLANNING AS A SCIENTIFIC METHOD us
one commodity to another, the managers of the factory would
have no further interest in changing the proportions in which
the different commodities were produced.
Theoretically that argument is perfect. But the assump-
tions underlying it are often overlooked and the deductions
drawn from it are often fallacious. The important assump-
tions are these :
(a) The system described above provides no method of
determining objectively what part of the production
should go to consumer goods and what part should go to
making new equipment: that is to say, what part of their
total income the workers must save. It is, in fact, gener-
ally agreed that the volume of savings in a planned
economy must be an arbitrary political decision. I The
right of the individual to spread his spending between the
present and the future must be taken from him.
(b) Although the system will result in the correct distribution
of output among the various types 0': goods being pro-
duced, there seems to be no mechanism by which con-
sumers can exercise a demand for a new product which is
not now being produced. Whether new products were
introduced would depend, presumably, upon the initiative
of the managers. It seems inevitable under such circum-
stances that economic progress, as represented by increas-
ing variety of choice, would be endangered.
(c) The system would operate within a framework of major
economic decisions taken prior to the working of the
system. Thus a decision might be taken to pay all
workers equally. In that case compulsion would have to
be resorted to in order to get the right number of people
I Thus Schumpeter, Capitalism, Socialism and Democracy, p. 180, "The

vote on the investment item - at least on its amount - would involve a real
decision and stand on a par with the vote on army estimates and so on "; and
Lerner, Economics of Control, p. 262, " The decision of how much investment
there should be is a political decision and cannot be otherwise. There is no
certain way, in a collectivist economy, of permitting the consumers to make
this decision via the price mechanism."
126 THE NEW ORDEAL BY PLANNING
in the right jobs. Alternatively, differential wages might
be paid to bring about the required distribution of labour.

III
But it is the deductions drawn from the discovery that a
price system can operate in a socialist State which are most
open to criticism. Whilst many socialists squirm at the
unpleasant thought that modern planning theory involves the
use of a pricing mechanism so similar to that employed in a
free economy I many are now disposed to welcome the dis-
covery as long-awaited proof that a planned economy will
, work '. On that point two comments are relevant.
Every economic system may be said to 'work " at least
until the last consumer drops dead from starvation. What
one wants to know is whether the economy works well.
The presence or absence of a price system is not proof of
anything. For the price system, in itself, is a neutral though
powerful weapon. A knife may be used for social purposes,
like peeling potatoes, or anti-social purposes, like cutting other
people's throats. So, too, the value of a price system for the
purpose of increasing economic welfare lies in the environ-
ment in which it is allowed to operate. If it is allowed freely
to direct producers to the goods most needed and consumers
to the goods which provide the greatest satisfaction, for the
minimum of effort, it is doing its job properly. But, of
course, a price system can be manipulated for bringing about
the most evil ends: for the destruction of a social group, for
the starvation of a whole community, for the gratification of
the sadistic influences of one man. Or it may, through sheer
ignorance, be so mishandled as to produce spectacular and un-
necessary shortages of goods - as the price-control system in
Great Britain and the United States did after the war.l
The vital questions are, therefore: Will those who wield
I Noone should neglect to read the full story of how inept and timid price
control of agricultural products in the United States in 1945 brought privation to
millions of people all over the world. It will be found in Fortune for May 1946.
 PLANNING AS A SCIENTIFIC METHOD 127
supreme power in a planned economy be inclined to favour
the use of a price system and, if they do so, will they allow it
to operate with sufficient freedom, or can they be expected to
manipulate it in order to control the lives of others and to
withhold essential economic freedoms? I submit that it is
reasonable to expect the worst.

Every Economic Decision is potentially a Political Decision

There is, in the first place, the almost instinctive opposition
of many planners to the price mechanism itself. The type of
mind which is drawn towards central planning seems to be
strongly attracted to quantitative, physical controls: they are
simpler to understand, and convey to those who operate them
a more immediate sense of the use of power over others.
Even in time of war, when central planning had a purpose and
was universally accepted as necessary, this reluctance to use
the price mechanism to bring about the required results was
much in evidence.
Assuming that these inhibitions could be removed, there
still remains the major point that in a planned economy, how-
ever operated, no economic decision, however trivial and
however intimately and peculiarly bound up with the circum-
stances of the individual consumer, will be safe from the
possibility of interference from above.
It is, indeed, comically naive to imagine that the political
leaders in a planned economy will quietly allow a group of
economic and statistical experts to operate, without question,
an economic system according to the latest theoretical ideas
as to how best goods can be produced and distributed in order
to maximise total satisfaction. For the politicians can, will
and must interfere in such a way as to make hay-wire of the
scientifically devised plan. This issue cropped up in Great
Britain when the Labour Government was pressed to estab-
lish a central Economic General Staff for the purpose o~
carrying out the planning. Mr. Morrison gave the inevitable
answer in the House of Commons on February 28, 1946 :
128 THE NEW ORDEAL BY PLANNING
Sometimes it is said - I think wrongly - that we need an
economic general staff in the sense of a central body of economists
and experts who would make the whole plan, get it approved,
carry it through, administer it and execute it separat~ly from the
economic Departments of State. I think this is a mistaken con-
ception. Such an organisation would become almost as big as the
Government itself. The Departments of State which contribute
to our economic affairs are very considerable in number. They
spread over nearly the whole field of Government. It would not
work, and there would be friction all round. . . . The problem
is . . . to build up from the economic Departments of State,
together with the common service sections of the Central Govern-
ment, an efficient economic machine on the official level. . . .
There are ministerial committees above, which of course deter-
mine issues of policy, to which the reports of the economic
planners go, which determine what shall be done about the reports,
which give instructions to the officers on the official level as to
what they are to inquire into and what reports they are to
produce . . . .
This puts the experts into their place with a vengeance.
But it is important to recognise the true features of the
alternative system of building up a plan as Mr. Morrison has
outlined it.
A politician in power must be confident of his power to
'know what the people want'. 1 Everything conspires to
create that confidence. He has the backing of at least a
majority of the electorate. He regularly addresses large
meetings of those who share his political views and can be
expected to give him the popular applause which would
strengthen the will of the most modest. His self-justification
lies in this belief that he has a second sight in assessing public
needs and demands. He probably recognises that in straight
administration he is inferior to his civil servants. He may
well accept his purely intellectual and academic inferiority to
the numerous experts who are only too glad to advise him on
any subject. Unless, therefore, he holds on grimly to the
I Mr. Bevin has put this point most clearly. Discussing in October 1947
the various cuts which were to be imposed upon the consumer, he said, "We
are acting very much like a reasonable father and mother would act in manag-
ing a home".
 PLANNING AS A SCIENTIFIC METHOD 129

conviction that he is abnormally sensitive to the impulses,

wishes and needs of the public, he would find no reason for
being where he is.
In a free economy the opportunities of the ruling politician
to interfere with the intimate economic life of the people is
limited. By accepting the free economy he deprives himself,
by a self-denying ordinance, of the power of intervention.
But in a planned economy he is positively invited to fiddle
about with such things. As a member of the Government
he is personally responsible for every item in the national
economic plan. Any other rule would mean that a body of
expert economic planners, with no political responsibilities,
were in fact placed outside his control and outside the control
of the people. He may any day be attacked because there are
not enough bicycles, or ice-cream, or because the bread is too
brown or too white, or the equipment of industry is too new
or too old. He cannot ignore the detail because it is the
detail which might most easily catch him out. 1 He may
naturally be disposed to play the politically attractive role of
Father Christmas. 2
Now a plan, by definition, is a highly integrated scheme
in which every part of the programme is linked with every
other part. The only way to criticise a plan rationally is,
therefore, to criticise the whole of it - to argue that A should
be altered and that, in consequence, B, C, D, E, F, etc. should
be modified accordingly. But the statesman will never be in a
position to do this. His time, knowledge and interests are
limited. The scheme will be too vast in any case for him to
I Sir Stafford Cripps announced in the House of Commons on June 26,
19....7, that his Department was receiving letters from the public at a rate of
1,225,000 a month.
• Thus Mr. Dalton, speaking at a Union Society debate at Cambridge, his
old University, on June 3, 19....7, recalled that the President of the Boat Club
had told him that boats and oars were practically unavailable because of the
export drive. He continued, " I am glad to say that, following a telephone con-
versation I had before leaving this evening, an exception is going to be made
in the case of boats for the Olympic Games n. Dr. Summerskill announced in
the House of Commons on June 17, 1947, that licences were to be issued to
obtain wedding cakes free from price control for the celebration of golden
weddings.
130 THE NEW ORDEAL BY PLANNING
understand. He must confine himself to tinkering with those
parts of the plan in which he has special interest.
In his tinkering he will be subject to powerful pressure
groups. His own constituency must be closely watched. His
own administrative duties, such as that of a Minister of
Agriculture or of Fuel and Power, inevitably make him the
guardian of some vested interests. His own political up-
bringing may have linked him with one group in the com-
munity whose troubles he understands and whose loyalties he
esteems more than others. His activities, therefore, in relation
to the whole of the plan, must essentially be irrational and
disruptive. Since he is concerned directly with A (let us say
the interests of the miners), and not with B, C, D, E, F, etc.,
he may insist that A be altered without B, C, D, E, F, etc.
being modified. The logic of the plan is therefore endangered.
It is important to recognise that, in this analysis of what is
likely to happen in a planned economy, nothing derogatory
is implied regarding the statesman as such. He is simply the
victim of a system which places upon him the impossible task
of seeing everything at once and of forming a judgment, on
highly conflicting matters, without allowing his own personal
experiences to count or his own special knowledge to have
weight. Indeed the greater the honesty and integrity of the
Minister, the more difficult he must find it to put on one side
his own beliefs in deference to the views of others which he
cannot hope to comprehend so completely as his own.
So far we have discussed only the dilemma of one Minister,
assuming that he were in fact an economic dictator. But, of
course, in the early stages of a planned economy there will
be many Ministers. Each one will have the same personal
difficulties, but when they sit around a table to pool their
common knowledge in approving or modifying the plan, other
forces are set in train which further disrupt the integrated
scheme. The Ministers will have somewhat conflicting
interests, each is bound to have a group of special loyalties.
What appears to one Minister to be his own special know-
 PLANNING AS A SCIENTIFIC METHOD 131

ledge of a given subject, giving him the right to speak with

authority on what he understands best, will be regarded as
bias by other Ministers. Thus the Minister of Health, the
Minister of Fuel and Power, the Minister of Agriculture, the
Minister of Supply might, for example, make competing de-
mands for labour. Each sincerely believes that, in the interests
of the community, more houses, more coal, more food respect-
ively are urgently needed. How are these differences to be
resolved?
They can only be resolved in committee. The outcome
of the clash of rival views must then be settled, partly by the
inherent strength of the case which each Minister has to make,
but largely by the plausibility and knowledge of committee
tactics which each Minister can bring to bear. An honest and
zealous Minister must do his best in putting forward his own
case. But in doing this, he creates the danger that the relative
claims of consumers of houses, coal and food will be decided,
not on the real merits of these claims, but by reference to the
forensic skill of the different Ministers. This, in itself, is
bad enough, even where Ministers are most scrupulously
seeking to limit their demands to what they regard as reason-
able. But it will be difficult, if not impossible, for a Minister
to avoid some bias, particularly in the stress of argument.
Then the whole basis of discussion degenerates. For if it
comes to be considered that one Minister, for the purpose of
bargaining, asks for more than he really needs, all Ministers
must, in self-defence, adopt the same technique, and a
scientific solution of the problem of distributing scarce
resources is made even more impossible. Out of such an
impasse the only escape routes are those which must inevit-
ably destroy the integrated plan. There may be an Arith-
metical Compromise. This, of course, is a confession of the
impossibility of reaching a scientific answer to the problems
of planning. Or, the discussion having exhausted itself, the
final decision may be left to the Supreme Minister. In this
case, of course, all the difficulties recur of one man making a
132 THE NEW ORDEAL BY PLANNING
sound decision in matters where personal bias cannot be
eliminated.
In the hurly-burly of this kind of procedure the interests
of the consumer must either be lost sight of altogether or
relegated to a secondary place. The reactions upon millions
of consumers of a compromise which has to be accepted or
rejected forthwith in committee cannot be foreseen. And a
compromise once reached in committee is difficult to modify,
for all the parties to it are bound to defend it against outside
attack. Moreover, in such a procedure, innovation and
change will stand a poor chance of acceptance~ For it will
be the abnormal and unusual claims which will be most
severely attacked and most readily relinquished. A committee
nearing exhaustion will inevitably fall back, for agreement,
upon what has happened in the past. Changes, therefore,
will be at a discount.
So far we have discussed procedure in the making of the
plan at the highest level. Ministers cannot be expected to
follow slavishly the advice of experts, and British experience
provides many illustrations of economic disorder following
the refusal of Ministers to take politically unpopular courses. I
But it by no means follows that if the experts were always
obeyed (i.e. if the experts were made the real Ministers) that
all would be well.
Preparatory discussions regarding the plan on an inter-
departmental level will reveal the same features as those on
the Ministerial level: conflicts of opinion in which there
is no obvious right or wrong; decisions which reflect the
debating power of the various committee members; a final
resort to compromise to solve the insoluble. The presence of
the official level of discussion, however, means further delay
in reaching decisions. For the discussions at the Ministerial
I It seems clear, for instance, that the balance of payments crisis of Autumn
1947 was largely the result of the delay of Ministers in following the advice,
given by their experts as early as February, to cut imports in order to reduce
dollar expenditure. The consequence was that the world lost confidence in
British recovery and a flight from sterling followed. The story is told in the
Manchester Guardian, September 4. 1947.
 PLANNING AS A SCIENTIFIC METHOD 133

level may get into such knots that the matter is passed down
again for reconsideration at the official level. In such cases
the real issues may well become more obscure. Each civil
servant must, out of his professional and departmental
loyalty, seek, to find ways of defending the position taken up
by his Minister and to establish a case which will give his
Minister most help when the matter once again comes before
Ministers. All this must, of course, take time.
Once the plan has been agreed and put forward by the
Government it must, in a democratic community, be sent
forward for discussion and amendment by the Representative
Bodies. Here again the difficulty arises that an integrated
scheme must inevitably be examined by those whose interests
and knowledge are essentially local and piecemeal. The plan
will be subjected to distortion through the activities of press-
ure groups. If amendments are made at this stage, it then
becomes the task of the Government to determine what
consequent changes in other parts of the plan will be required.
Theoretically an endless process of shuttle-cocking would go
on, only to be limited by the exercise of arbitrary power at
some point.
Finally, in the operation of the integrated plan, reference
must be made to the position of autonomous or semi-
autonomous Boards. It has become the fashion, particularly
in Great Britain, for a planning Government to seek to solve
its problems by farming out different parts of its economic
control to Boards which may have very wide powers in
carrying on day-to-day work - such as the Coal Board or
the Transport Board - or by creating organisations to exer-
cise oversight in industries nominally still operating under
free enterprise - such as the bodies to be set up under the
Industrial Organisation Act. How would the plan affect
these? It is sometimes argued that each Board could be
given general directives and left free to operate within them.
But in practice the Boards, in anyone of their detailed
activities, may conflict with the main plan or the detailed
134 THE NEW ORDEAL BY PLANNING
activities of other Boards. A very pertinent illustration has
arisen in Great Britain regarding the siting of new electricity
generating stations. Public discussion became so confusing
and so acrid on this subject that the Chairman of the Central
Board declared in December 1945 :
Today there seems to be a tendency for, perhaps, too many
different planning authorities and they are planning our future
from different points of view. They may be perfectly proper
points of view but they are essentially different. What was
wanted was . . . satisfactory machinery for dealing rapidly with
any difference of views of those whose responsibility it was to
plan from the point of view of economy and those whose responsi-
bility it was to plan from the point of view of aesthetics.
If such difficulties can arise on one minor matter, it can
easily be imagined that the activities of semi-autonomous
<

Boards would create innumerable embarrassments in relation

to a master plan covering all economic activities. A central
plan cannot operate through semi-autonomous Boards. For
so soon as such Boards exercise their autonomous powers they
are likely to conflict in policy either with other Boards or the
central plan itself.
To sum up. The purely logical and intellectual diffi-
culties of running a planned economy have not yet been
solved. It is not yet apparent that they can be solved. The
use of a socialist price system, whilst theoretically possible,
does not take us very far. There are still fundamental differ-
ences between the theoreticians as to how that price system
would operate. It is far from certain that the economic
rulers in a planned economy would favour the use of such a
system. Even if they did, the socialist price system would
probably be used for restricting, rather than maintaining,
fundamental economic liberties. In the nature of things
Supreme Economic Planners will be highly confident that they
know what the people want and what is good for the people :
their sense of duty will, therefore, lead them to usurp the
individual rights of consumers. In a democracy, the pro-
cedure by which the plan is prepared and finally agreed must
 PLANNING AS A SCIENTIFIC METHOD 135
tend to push the consumers' interests into the background
and to reflect, not the consumers' wishes, but the relative
dialectical skill of conflicting planners each pushing the vested
interests of a particular group. Under these conditions, if
there is a socialist price system, it will be not the impersonal
system of the competitive free economy but a price system
gear~d to implement the outcome of a shouting match.

Central Economic Planning is essentially Unscientific

There is one corollary of this. The idea that a central
economic plan can be drawn up with the precision or the
knowledge of ends or means that goes with (say) the building
of a bridge is false. Central economic planning cannot be
scientific. First, because the only proper target for such a
plan cannot be ascertained except through the operation of a
price system of a kind which is unacceptable to planners.
Second, because the planners must always be extremely
reluctant to admit mistakes, an attitude in itself unscientific.
Third, because in the planned economy scientifically con-
trolled experiments in the field of industrial organisation will
always be difficult to carry out in an unbiased way. Fourth,
because in a planned economy there is no obvious objective
test of success or failure.
A central economic plan can only really have a scientific
purpose if it is designed to give the consumers what they
want and when they want it, and to provide freedom for the
consumer to decide whether he wishes to spend his money
now or in the future. But in the kind of planned economy
which is almost certain to emerge in practice, those who
possess the ultimate planning powers will have little to guide
them save their own prejudices of what others may want
or what is good for others. In extreme cases the consumer
may become simply a mechanism for the undiscriminating
absorption of the products of an industrial system which has
no rational objective but the observance of the planners'
behests.
136 THE NEW ORDEAL BY PLANNING
Apart from this, the centrally planned economy is un-
scientific in that those who take the final decisions must always
avoid the confession of failure. For, to a politician, a public
confession of failure is tantamount to political suicide. The
aim must always be, therefore, to cover up mistakes at all costs. 1
A business man in a free economy must constantly submit
himself to the test of the market. Unless he provides the kind
of goods which the consumer wishes, then he will cease to
make profits. The final test for him lies in the presence of the
bankruptcy court. But there can, of course, be no such test
for a statesman in whom is vested economic powers in a
planned system. It is true that ultimately the planned
economy may outrage public opinion and the statesman be
swept out of office. But before that happens the politician
will clearly strive to justify himself in public. Z And that may
be seductively easy. It is extremely difficult for the public to
criticise State economic plans in any informed way. The
public may feel that the shoe is pinching but the exact causes
of the trouble may not be apparent. Only the State has in its
possession the whole of the facts which would make a balanced
judgment possible and which would enable blame to be
properly placed on those responsible for mistakes. The
politician, therefore, will not find it difficult to establish alibis
where his plans have gone wrong. He can always argue that
on particular economic matters there are many conflicting
interests and that only the State can assess fairly between
these conflicting interests. It will always be possible for him
to point to certain acts of God, such as the failure of a harvest,
I Thus Mr. Shinwell, in speaking of the scheme for nationalising the Coal

Industry, said on January 23, 1946, "The scheme would succeed because it
must succeed ".
• The simplest way of doing this is to make sweeping claims of success
whatever the evidence. Thus Mr. Morrison on June 28, 1947, in the lull
preceding the balance of payments crisis and widespread criticism of the
National Coal Board and B.O.A.C., said: " It was up to both nationalisers and
anti-nationalisers to show that their policies best served the public interest. We
have satisfied the bulk of our fellow countrymen that our policy in this field is
sound." Again, October 13, 1947, after admitting that" we are in a mess"
and forecasting further grim and distasteful cuts in the standard of living, he
claimed that the difficult transition from war" has been magnificently handled".
 PLANNING AS A SCIENTIFIC METHOD 137
or a strike, or the unreasonable attitude of some group in
the community or of another government. He may indeed
seek to establish scapegoats. Where the economy still contains
some elements of private enterprise they would be the
obvious targets for attack. All centrally planned economies
in the past have found it necessary from time to time to raise
the cry of sabotage. Or a planner who finds his schemes going
astray may seek to cover up deficiencies by going further along
the same road, much in the way that a clerk who has been
robbing the till often finds it necessary to go from bad to
worse. For instance, if the State has nationalised the coal-
mining industry and the alleged advantages of nationalisation
in the way of increased efficiency, lower costs and lower prices
do not eventuate, then the obvious next step is to declare that
distribution costs are excessive and to move forward to the task
of nationalising the distribution of coal. There can, in brief,
be no comparison whatsoever between a scientist in his
laboratory objectively weighing evidence and systematically
rejecting hypotheses which do not fit the facts, and a statesman
committed by public utterance to a particular form of economic
organisation and determined to justify his beliefs at any cost.
Indeed, under socialism, it is difficult to carry out restricted
or controlled experiments in industrial organisation at all.
It is true that lip-service is always paid by the socialist to
the conception of controlled industrial experiments. I Mr.
Morrison, for instance, and other Labour Ministers in the
British Government have argued that they intend to nationalise
only those industries where it is clear that nationalisation will
bring increased efficiency. Where private enterprise can be
assumed to be carrying out its functions reasonably well, then,
I Sir Stafford Cripps, Democracy Alive, p. 112, has said, " In the political,
social and economic fields we need not be appalled by the uncertainty of the
results of our experiments provided we enter upon them with an inquiring
scientific mind rather than with a stubborn conviction that they must prove the
accuracy of our theories ". It would be interesting to know into what errors
the central planners would have to fall and to what degree of poverty they would
have to reduce the people of Great Britain, before Sir Stafford's stubborn
conviction that central planning was the best form of economic organisation
would be shaken.
138 THE NEW ORDEAL BY PLANNING
according to this theory, nationalisation is not necessary. But
the experience of the British Labour Government in the first
years of office suggests that, in fact, no objective economic
principles were being applied in choosing industries for
nationalisation. The list of industries for nationalisation ran
as follows: the Bank of England, Coal-mining, Iron and Steel,
Cables and Wireless, Transport, Gas and Electricity, Civil
Air Services. On that list are to be found industries new and
old, allegedly efficient and inefficient, expanding and contract-
ing, essentially export and essentially domestic, large scale and
small scale. If there is a case for nationalising these industries,
then there is a case for nationalising all industry. It seems
clear that the choice was made not on economic but on
political grounds. Similarly, whilst the operation of a world
market in raw cotton was destroyed by the British Govern-
ment by their taking over the Liverpool Cotton Market, other
raw materials, such as wool and rubber, have been freed
although it was impossible on economic grounds to distin-
guish between them. Take another illustration. There was
no need on economic grounds to nationalise the whole of the
British coal-mini~g industry at one step. It would have been
much easier and much more convenient to Cl:lrry out experi-
ments in public ownership operating in one or more fields.
Certain parts of the coal-mining industry were admittedly
extremely efficient, others were notoriously inefficient. If
the case of the Government for nationalisation was that the
industry was inefficient, then it would have been sufficient
for their purpose to take control of the poorer fields and
determine by experiment whether any improvements could
be effected through public ownership and control. That
common-sense approach to the matter was clearly quite
unacceptable to a Government which had already declared,
despite the facts, that the whole of the industry was inefficient.
Finally, the planned economy cannot be scientific, because
there is, in the long run, no way by which the public can
decide whether it has succeeded or failed as a whole. To
 PLANNING AS A SCIENTIFIC METHOD 139

reach a conclusion on these matters would involve comparisons

of some sort. The only satisfactory comparison which could
be made would be, of course, that between the economic state
of the community under a central plan and the economic
conditions which would have existed if there had been no
such plan and the free economy had been allowed to operate.
In the nature of things' that comparison cannot be made.
The only possible comparisons are, first, that between condi-
tions at the inception of the planned economy and conditions
at some subsequent time, and, second, that between conditions
in the planned economy and conditions in other parts of the
world operating within a free economy. Both· these com-
parisons, of course, are likely to lead to wrong conclusions.
Nevertheless, it is significant that in all the centrally planned
economies which have operated up to now the State has gone
to very great trouble to falsify the progress being made and
to prevent its citizens from comparing conditions within the
country with conditions outside. It was perfectly logical for
Russia or Germany to misinterpret the information about
economic conditions in other countries and to prevent its
own citizens from moving freely between its own country and
other countries. For by these devices it was possible to stifle
the only approximate tests that the members of the com-
munity could make regarding the success or failure of their
planned economy.

The Misdirection of Production in Great Britain

Central planning is not a mature method of organising the
economic system but, even at best, the benevolent but un-
scientific bungling of the few, striving vainly to decide for
the many consumers what those consumers can only decide
rationally for themselves. It is, therefore, to be expected
that in the communities where attempts are made to impose
a central plan there will be gross misdirection of production
and widespread neglect of the needs of the consumer. That
has certainly been the experience in Great Britain.
140 THE NEW ORDEAL BY PLANNING
In the case of specific consumer goods, there were con-
stant and widespread complaints in 1946 and 1947 that the
things being made were not the things wanted. There were
general shortages of sizes other than the average in personal
articles such as clothing, boots and shoes. The need for
special types of fuel adjusted to the equipment of the industrial
or domestic user was widely ignored, which led to much
waste of scarce resources. The principle of joint demand
was neglected so that there were cups without saucers, cups
without handles, lots of mugs but no vegetable dishes, egg-
cups galore when there were few eggs, and so on throughout
the whole range of domestic appliances. 1
Despite the constant assertion that first things were to
be produced first, it was patent to all that last things were
often being produced first. Lots of trousers in the shops for
women when men had the greatest difficulty in buying them. 2
The views expressed by one Labour M.P. well summarised
what was obvious to all.
The amount of junk and unnecessary articles in our shops
today is astonishing. On the ground floor (of one of our largest
general stores in London) I found acres of floors pace and heaven
knows how many assistants selling all kinds of expensive knick-
knacks and all sorts of odds and ends - cigarette lighters at a
guinea a time; ladies' compacts, beautifully made; every possible
and conceivable shape of ash-tray and personal ornament.
The more general evidence of 'the maldistribution of
economic effort was equally clear. The numerous pro-
duction bottlenecks was one of the signs: a bottleneck is
simply an indication that something which should not have
been made has been made, and something which ought to
have been made has not been made. Another sign was that
although in Great Britain in 1947 there were more people at
work than in 1938, and although the aggregate output had
increased by 15-20 per cent, as measured by National Income
figures, it was palpable that the people were worse off than
I See the debate in the House of Commons, June 26, 1947.
Z House of Commons, July 8, 1947.
 PLANNING AS A SCIENTIFIC METHOD 141

before the war. The Economist I put the point thus: "the
country is producing in larger volume but the wrong things" .
The correct way of looking at such a situation is to realise that
producing the wrong things is not really producing at all.
The economic state of Great Britain in 1947 should have
caused no surprise. The surprising thing would have been
if conditions had been otherwise. For if productive resources
are distributed through the decisions of a few planners,
anxious to be our fathers and mothers, instead of through
the expressed preferences of forty million consumers in the
market, it is only by an infinitely tiny chance that the right
distribution will be arrived at. It is an unscientific gamble
with all the odds against success.
I August 16, 1947.
 CHAPTER VI

PLANNING AND PROSPERITY

If we were rich enough we would not want to have free
medical services, we could pay the doctor.-MR. A. BEVAN,
Labour Party Conference, 1945.
We have turned our backs on the economics of scarcity.-
MR. H. MORRISON, Labour Party Conference, 1946.
Yes, I am pretty sure that we shall have a fine Autumn.
There will be beautiful autumn tints of happiness in many
a home and many people will say \vith increased conviction,
.. Labour gets things done" .-MR. DALTON, Labour Party
Conference, 1946.

I
THE. choice of the best type of economic organisation should
not tum wholly on the material benefits arising from it.
There are other relevant criteria: the extent to which the
organisation commands the moral support of those who work
in it; the range of individual liberties it makes practicable for
its members. But the poverty of the world is, and always has
been, so appalling that it would be irresponsibility to ignore
the crying need for a rapid increase in productive power.
Without that it will be impossible, in the next one hundred
years, to equip the whole world with those material things
that westerners already consider the bare minimum for civil-
ised living. Some inhabitants of those very restricted parts
of the world - such as the United States and Great Britain
- where there is comparative affluence, may be inclined to
belittle the need for increased productivity. But in so doing
they show a niggardly international attitude, for they ignore
the claims of three-quarters of the globe where life is still
nasty, brutish and short. Those in relative comfort in the
great industrial countries who make a claim to too much
leisure or who deliberately sacrifice efficient methods of pro-
I4Z
 PLANNING AND PROSPERITY 143
duction for inefficient, do so only at the expense of the less
fortunate in other parts of the world.
On this question of productivity the collectivists fall into
two groups. Some recognise that the free economy did
deliver the goods in the past but believe that it is becoming
progressively incapable of doing so in the future. I Others
consider that the free economy might well continue to bring
great material results but that the price in social and moral
values is not worth while paying.
What are the facts? In Great Britain in 1913 the ordinary
person was four times as well off in real commodities as the
person in the corresponding stage in the social scale at the
beginning of the nineteenth century. The bulk of this
advance was secured in the first part of the century.Z In the
half-century before 1913 real income per head of the occupied
population increased by about 60 per cent. Between 1924
and 1937 there was a further increase of about 30 per cent in
real income per head. 3 These are the bare bones of the story
of economic progress in a century and a half of a free economy.
With it went many other improvements in the normal lot
which cannot be measured precisely in figures: a substantial
reduction in weekly hours of work, a general fall in the pro-
portion of those living below the poverty line, a steady
improvement in the quality of consumer goods and services.
No unbiased observer would wish to overlook the social
blemishes of this turbulent period of expansion and increasing
wealth. But he cannot deny the almost unbroken trend
towards higher standards of living.
In the United States the progress is also spectacular-a 60
per cent increase in income per head in the thirty years before
the first World War; a 20 per cent increase in the decade
following this war; 4 a much more rapid reduction in hours
I This group differs in the date at which the decline of the free economy
began. The Webbs date it from 1850; others would put it as late as 1930.
• Stamp, Wealth and Taxable Capacity, p. 95.
3 Clark, The Conditions of Economic ProgreSl, p. 83 .
.. S. Kuznets, NatiOfllll Income: A Summary of Findiflll" p. 32.
144 THE NEW ORDEAL BY PLANNING

of work than in Great Britain. All this was bound up with

swift improvements in agricultural and industrial technique I
which almost doubled the output per man-hour in industry
between 1923 and 1939, increased that in agriculture by about
40 per cent and generally made the law of diminishing returns
look silly.
After 1930, indeed, there appeared to be one dark cloud
on the American horizon. Economic progress seemed to
have received a check, output was increasing less rapidly
than population. So striking a reversal of previous trends
naturally excited the interest of economists, some of whom
found in it proof that the free economy was at last revealing
its fundamental defect, the failure to maintain investment at
a level sufficient to provide full employment and the maxi-
mum income of which the community was capable. The
war temporarily set these doubts at rest. And the present
position (1947) provides no foundation for pessimism of this
kind. Industrial production is now about 80 per cent above
the pre-war average, employment greater by 7 or 8 million
workers and other indices are up in proportion. It is difficult
to take seriously the theory of secular stagnation in the light
of these conditions or to close one's eyes to the fact that
the largest free economy has once again set the rest of the
world targets to attain in the way of standards of living. For
whilst on one side of the world Russia patiently plods towards
its dialectical goal of a classless society in the shape of an
impoverished proletariat, on the other side of the world the
United States is moving swiftly towards the one-class society z
by turning the whole community into a prosperous middle
class.
I Arthur F. Bums, Economic Research and the Keynesian Thinking of Our
Times.
2 Schumpeter, Capitalism, Socialism and Democracy, p. 66, reaches the con-
clusion that " if capitalism repeated its past performance for another half-
century starting with 1928, this would do away with anything that according
to present standards could be called poverty, even in the lowest strata of the
population, pathological cases alone excepted ".
 PLANNING AND PROSPERITY 145

II
In the light of this evidence of great and continuing eco-
nomic achievement in the main centres of the free economy,
what solid grounds are there for the pessimism of the socialists
regarding its future potentialities ?
The overriding reason which they advance is that the free
economy has never been able to claim the respect of the
worker and can no longer enforce its iron laws of discipline
upon him. The system has ceased to be sustained by the
voluntary co-operation of the different sections of society.
In the nineteenth century, the argument runs, starvation and
fear drove men to work in factories. But the masses, with
their growing political power, have broken these whips: they
are not prepared any longer to collaborate with their former
slave-masters. The growing absence of voluntarily imposed
discipline rots the system at its roots. Socialism, with all its
works, is the only method of restoring discipline and recreating
the spirit of co-operation. I In the absence of it there can be
nothing but universal friction and perpetual ca' canny.
This is a spectacular and, it must be admitted, a widely
accepted view of the social processes at work. It certainly
records faithfully the view of many socialist intellectuals who
believe that they alone understand the relations between
employers and workers. And there are some cases in which
it fits the facts. For example, it had become patent by 1945
that the workers in the British coal-mining industry were not
prepared to go on working to effect unless they were granted
some measure of nationalisation. Whether their troubles really
arose from the capitalist system in which they worked and
whether these troubles will be removed by nationalisation is
another matter. But, assuming that Britain wishes the coal-
mining industry to survive and that these particular ideas
had taken hold firmly of the coal-mine workers, there was no
1 See Tawney, Acquisitive Society; and Webb, Decay of Capitalist Civilisa-
tion.
p
146 THE NEW ORDEAL BY PLANNING
option but to experiment in nationalisation.
But how general is that attitude? It by no means follows
from one or two illustrations that it is found universally. If
it really is universal, how has the free economy managed to
produce its economic results in the past forty years? There
are many industries in both the United States and Great
Britain which have an unbroken record in the past twenty
or thirty years of industrial peace, of confidence between
employers and trade unionists. Is this conceivable if the
workers considered the employers as slave-masters now
bereft of powers and the employers considered workers as
emancipated slaves newly equipped with lethal weapons? Is
it really irrelevant to point to numerous firms where em-
ployers and workers have a healthy respect for each other's
functions or to suggest that this sense of collaboration might
continue to grow throughout industry ?
Further, since the point we are discussing is that of
economic efficiency, is it true that if the worker refuses to
co-operate in a free economy he will automatically do so in a
socialist State and a planned economy? If he will, why was
it necessary in Russia to drive the workers on to increased
efforts by terror, ballyhoo and appeal to cupidity? Why is it
now necessary in Great Britain for Ministers to spend so
much time urging the workers to work harder under national-
isation? Why the need of threats to push young British coal-
miners into the Army who are not sufficiently assiduous ?
Why do British Ministers need to spend so much time in
conducting abortive campaigns in favour of increased pro-
ductivity ?
The other general argument by which it is sought to
establish the superiority of a planned economy is that there
are in competition certain wastes which would not exist under
a plan.
There is one C waste' attributed to the free economy
which can, for the moment, be set on one side, because what is
true of the past need not be true of the future: the waste of
 PLANNING AND PROSPERITY 147
unemployment. There are now methods available by which,
within a framework of a free society, mass unemployment can
be avoided.
As regards the other charges of waste, it is important to
be clear what this term means. All production, all progress,
involves using up machines and materials. Ford once said
that the greatest weapon in economic progress was the junk
heap. Much of the ' waste' attributed to the free economic
system really represents efforts to go for long-distance results,
to hurry on economic progress, to beat the clock. Thus, for
instance, the 'waste', of surplus capacity in industry may
simply be a reflection of the speed at which newer and more
efficient means of production are introduced. Much waste is
the inevitable cost of experiment. The waste involved in the
short life of many firms and the frequency of bankruptcy may
be inevitable if an industry is to be kept efficient by the
constant infusion of new blood and if sufficient new things
are to be tried out on the consumer in order to pick a few
winners which will ultimately heighten consl.\mers' satis-
faction. Much of the socialist complaint about competitive
waste is as little justified as would be the complaint that
thousands of different moulds are being examined and dis-
carded in order to improve penicillin, or that researchers often
must throw down the sink chemicals used in abortive experi-
ments. The rapid, and apparently wasteful, exploitation of
raw materials may well be justified if technical progress is
going on rapidly enough to support the assumption that if
these raw materials are not used up quickly they will become
obsolete and valueless.
Other alleged wastes and weaknesse& are arguable or, on
closer examination, are found to be common to all systems of
economic organisation. Thus it is argued that, in a free
economy, there is both a private and a public sphere. Friction
between these two spheres is inevitable. It is summed up by
the term Government interference. l But is this' waste' any
greater than that created by friction between different
I Schumpeter, op, cit. p. 197.
148 THE NEW ORDEAL BY PLANNING
Government departments in a planned economy? Is not
everyone aware of the mixture of fear, exasperation and in..
dignation with which any Government department approaches
the British Treasury? It is said that in the free economy
the friction between the public and private sections calls for
the work of groups of lawyers, work which would be un-
necessary in a planned economy. But is it not true that a
planned economy, in which the vested interests will work out
compromise by debate, will create a demand in every depart-
ment for the lawyer type to put the case? 2 It is said that in a
planned economy the waste of the process of taxation would
be obviated; taxes would vanish, since " it would clearly be
absurd for the central board to payout incomes first and,
after having done so, to run after the recipients in order to
recover part of them".3 In fact, of course, the centrally
planned economies up to date have adopted, for the purposes
of creating incentive, the most elaborate devices for giving
money to people and taking it from them again in other ways.
Moreover, if, in a socialist State, wages (ex-tax) are to be
fixed in a manner which conforms with socialist egalitarian
sentiment, it will be necessary, as Professor Schumpeter him-
self points out, to supplement the salaries of the higher strata
of officials by payment in kind, " official residences staffed at
public expense, allowances for official hospitality, the use of
Admiralty and other yachts, etc." It is well known that the
administrative cost of checking the abuse of such facilities is
very heavy, perhaps heavier than the cost of taxing the same
individual.
Z One interesting instance of that was provided in the last war. British
Government departments ranged round frantically to find statisticians when
they discovered that their case could be strengthened by the skilful deployment
of lots of figures.
3 Schumpeter, op. cit. p. 199.
 PLANNING AND PROSPERITY 149

III
Even under the most favourable conditions, there are
wastes and weaknesses in planning. The instinct of many
planners to set their jaws and be prepared to pay for a planned
economy in terms of increasing poverty, or to belittle the
advantages of material wealth altogether, is a sound one.
There would probably be little dispute that, in the
transition from a free economy to a planned system, there
would be sufficient disorganisation and disruption to reduce
the standard of living. For either the planned economy is
introduced piecemeal or it is introduced suddenly as a whole.
If the latter, then there would, at least for a time, inevitably
be chaos and loss of effectiveness. If the former, then the
private sector of industry becomes less efficient. No busi-
ness man can foresee the future with certainty; he becomes
less inclined to take risks, he refrains from embarking
upon capital expenditure or changes in organisation which
do not yield a quick return. He devotes a great part of his
energy to so arranging his business affairs that he gains most
under the Government's compensation scheme. Innumerable
cases of this kind could be quoted from the experience of
British industry in the first years of the Labour Government's
socialisation programme. Indeed the socialist economy is,
here, presented with a serious dilemma. It is often argued by
socialists that the psychological moment for the introduction
of socialism is when the free economy which is to be replaced
is rich, ripe and prosperous: then the newly hatched chicken
can live on the yolk it has already absorbed into its system.
But, in practice, this will almost certainly be impossible. For
a sudden and complete introduction of planning would give
a shock to the system as a whole, not to mention the sabotage
against the new system into which other countries might be
precipitated by the sudden move. This paralysis would, in
effect, prevent the revolutionaries from taking over a healthy
and going concern. If the plan is introduced piecemeal, then
ISO THE NEW ORDEAL BY PLANN ING
the steady deterioration of incentive in what remains of the
private sector will dissipate economic assets before they can
be realised. In either case, the socialist State must take over a
relatively enfeebled economy and, at least in the transition,
the consumer must pay the price.
Among the long-distance wastages of the planned economy
the obvious and clearly undeniable one is the cost of the
bureaucracy set up to exercise control. A planned economy
rightly calls for a large bureaucracy, but, in practice, the
possibilities are remote of restricting its demands for man-
power to its vast and legitimate needs. Each Government
department working within an integrated plan finds it needs
advice on each part of the plan. It must, therefore, accumu-
late specialists on every conceivable subject under the sun. I
The economic plan must not merely be drawn up, it must be
enforced: the staff required for enforcement may be larger
than that for preparing the plan. It is well known that,
in private business, the larger the corporation the greater
the proportion of administrative officials to workers. The
planned economy pushes that process on much further. It
is the natural inclination of anyone department to double up
on its staff: each director will hanker after a deputy director
and so on: claims will be made for additional staff to cover
the needs for holidays, for possibilities of sickness. All these
are perfectly legitimate claims, difficult to resist. Meanwhile
the State department controlling the employment of officials
will be faced with a task of enforcing economy which, in any
fair-sized country, would be insuperable. There are, for
example, a million persons employed in National Govern-
ment services in Great Britain, almost twice the corresponding
number before the war. The task of weeding out the un-
necessary officials from such a gigantic group, when no one
I The need for the ' doubling up , of staff is particularly great where, as

in Great Britain, the State hands over the operation of industries or services
to Public Boards. For then the Boards must have their specialists. But the
Central Government department which is ultimately responsible for the Board
must also have its specialists. Otherwise its functions of maintaining general
oversight of the working of the Board would become ineffective.
 PLANNING AND PROSPERITY
has any particular financial interest in weeding them out, is
really hopeless. Indeed, the first step that the Treasury would
have to take to try to do this would be to expand enormously
its own staff. It is not an accident that all centrally planned
economies find it necessary to wage steady war against
bureaucracy, or that, despite such efforts, the number of
Central Government officials steadily expands. There are
now apparently over 800,000 economists and statisticians in
Russia. And the British Government, in pursuing its
policy, has been forced to tolerate over 2,000,000 workers in
National and Local Government in a period of the most acute
shortage of labour.
It is indeed doubtful whether serious attempts would be
made to weed out the bureaucracy vigorously, for it has
political advantages for the ruling powers. Each official
represents a vested interest in planning: his political support
can be relied upon. Each official must act with discretion and
restraint in public discussion regarding the activities of the
Government: free discussion is thereby blanketed.
The economic consequences of the existence of a large
bureaucracy are obvious. Overhead costs are increased.
Perhaps of equal importance, those overheads are in such a
form that they cannot be properly or directly attributed to
the specific items of production in which they are incurred. I
Maldistribution of effort is consequently made likely. The
costs of an industry fall into two parts: those incurred from
the normal functions of an industry as it would operate under
a free economy, and those incurred by the administration at
the centre. It becomes possible to make transfers between
these two sets of costs in a way which may deprive any
socialist pricing system of its effectiveness.
I Thus Mr. Shinwell, in a reply in the House of Comrnons,January 25, 1946,

in a question as to what the expenses of the process of nationalisation of the

coal-mining industry would be and what effect they would have on the price of
coal to the consumer, said: " It is not practicable at the present stage to estimate
what the costs in question may amount to. The Bill provides that such costs
are in general to be met out of monies provided by Parliament, and they will not,
therefore, affect the price of coal in any way."
152 THE NEW ORDEAL BY PLANNING
The losses associated with the essential instability of a
planned economy, even where the same planners remain in
power, are commented upon elsewhere. I But in the long
period two other forms of waste arising from instability are
to be expected. In the planned economy, the form and
direction of the economy are greatly influenced by the pre-
dilections of the Supreme Planners. If the personnel of the
supreme planning group changes, then disrupting and costly
changes in policy will follow. 2 Even greater dislocation is to be
expected where a socialist government, committed to plan-
ning, is replaced by a non-socialist government which favours
the free economy. So long as representative government is
maintained this possibility cannot be ruled out. Unless,
therefore, the highly undemocratic assumption is made that
the community will never change the political colour of its
government, it can expect, in the long run, to lose much
through subjection to periodical surgical operations upon its
economy. And the very possibility that these may occur will
tend to destroy confidence and the taking of long-distance
views so vital for steady economic progress.
There are other minor wastes associated with the planned
economy. It seems almost certain that technical progress
will be slower than it might be. This is not merely because a
planned economy tends to be destructive of the atmosphere
in which pure research can go on, but also because the very
size of the administrative machine, with its tendency to play
for safety, will inhibit the practical application of new
branches of knowledge. In 1907 Marshall concluded that" it
is notorious that, though departments of central and muni-
cipal governments employ many thousands of highly paid
I See Chapter VII.
2 The Coalition Government in Great Britain had planned to produce a
very large number of small prefabricated houses after the end of the war. When
the Labour Party was returned to power at the end of the war Mr. Bevan, the
Minister of Health, was made responsible for housing. He attached great
importance to maintaining the standard for new housing. He was, therefore,
much less enthusiastic about the temporary prefabricated house than his pre-
decessors. The result was a muddle in the planning of such houses, much
ireater than would otherwise have occurred.
 PLANNING AND PROSPERITY 153
servants in engineeering and other progressive industries, very
few inventions of any importance are made by them, and
nearly all those few are the work of men who had been
thoroughly trained in free enterprise before they entered the
government service". That conclusion is still true. In the
development of the internal combustion engine, the jet
engine, the motor car, the aeroplane, wireless telegraphy,
radar, television, domestic appliances of every kind, the
design of houses and buildings, plastics, medical science,
agricultural technique, the path has been blazed by inde-
pendent workers, the part played by the State insignificant.
In the two world wars many of the technical improvements
have been forced upon the notice of an unreceptive bureau-
cracy, either military or civil.
A planned economy will tend to waste human effort in the
holding of large stocks. The disinclination on the part of all
to take risks, the elimination of the merchant, the distrust
of the signals flown out to the economic system through
price movements, the particularly great difficulties in obtain-
ing statistics of stocks and of controlling stock policy: all
these explain why in the centrally planned economies which
have operated to date in peace-time and in the planned war
economies, hoarding has been a quite ineradicable disease.
I t must also waste through the uneconomic location of
its production. Obsession with large units of production
and the need, for political reasons, to cultivate the spectacular
in economic reorganisation, will lead to the comparative
neglect of the cost of such ancillary services as transport. It
is not an accident that in Russia transport has always been
a difficulty: that, in itself, is evidence of the break-down of
the plan. Finally, of course, the ancillary services will be
provided, but they remain a permanent cost incurred by
the original location mistakes. In those planned economies
where human beings have ceased to have rights the move-
ment of labour to accord with the re-Iocation of industry is a
simple matter: political prisoners, the chain gang, the grant-
154 THE NEW ORDEAL BY PLANNING
ing and withdrawal of ration cards, can easily settle the pro-
blem. In communities seeking to graft a planned society
on to democratic customs, the tendency will be to 'take the
work to the worker " in order to reduce the social costs of
transfer. This may also lead to uneconomic production.
For those social costs cannot be measured and current location
policy becomes a game of blind-man's buff.1

IV
In the last analysis the answer to the question with which
we are concerned depends upon which type of economic
organisation ,will provide the greatest incentive to effort.
There the planners are most coy. For although there are
vast libraries on such subjects as the constitution of the
socialist commonwealth, the preparation of plans, the en-
forcement of plans, planning and freedom, planning and
democracy, there is a significant absence of volumes upon
planning and incentive.
Whether, in fact, planning can evoke sufficiently powerful
incentives to enable it to match the economic results of a free
economy depends upon many physical, psychological and
even spiritual factors which are bound up with why men work
at all. These factors are so complex and difficult to assess
that by far the wisest course would be to set on one side
general theoretical reasoning and to rely upon past experience.
Unfortunately that would involve an examination of the
Russian experiment, where apparently the spontaneous and
voluntary incentives aroused by participation in the plan have
proved so inadequate that they have had to be supplemented
by the most monstrous State dragooning of labour. That type
of evidence, however, is not likely to affect the views of the
latter-day planners. There is, therefore, no choice but to
I There seems to be little doubt, for instance, that the plans drawn up in

1946 for the modernisation of the British steel industry made such concessions
to the claims of the established centres of production that economic loss was
the inevitable result.
 PLANNING AND PROSPERITY ISS
discuss this question in general terms.
It would probably be widely accepted that there are two
groups of workers whose output would be adversely affected
in the planned economy of a socialist State. The first is that
group which presses for socialism, among other reasons,
because it believes that this will make life easier, that bigger
returns will come for less effort. This group may be quite
large. When the socialist State is created they will natur-
ally expect their dreams to come true. If their expectations
are frustrated, then their disillusionment will weaken their
voluntary response to appeals for harder work. The second
group is, perhaps, more important. The highest type of
intellectual effort, such as pure research in the sciences, can
only be carried out where the individual is virtually auto-
nomous. Those who are to do the path-breaking work for
society, those upon whose success progress so uniquely
depends, must in their activities be allowed to go their own
gait, to follow their own intuitions wherever they lead. Now
it is logically impossible to permit these liberties in a planned
economy. They outrage the general principles of orderly
control; no sincere and authentic planner can be expected to
sympathise with the idea that one group in the community
does not fit in with the general scheme and is up to tricks
which the State knows nothing about. Pure research must
inevitably wither in the planned economy for a double reason.
It cannot go on in that sort of environment. And, in any case,
it will not go on, because those who are capable of it will be
disgruntled by what appears to them the foolish policy of the
State in failing to provide the only environment in which they
can work. l
Leaving these two groups on one side, what of the vast
mass of brain and hand workers in a planned economy?
Will they work more or less hard? Can it really be assumed
'One of the most striking illustrations of this is provided ,by the wholesale
resignation of the experts on jet propulsion, who had given Great Britain a
substantial lead in this field, when the Government took over this type of
research.
156 THE NEW ORDEAL BY PLANNING
that the clerk at his ledger will scribe with less diligence
because the State now employs him instead of the employer ?
I believe that it can.
It seems evident that the active minds will be frustrated
by the more rigid controls upon each individual's initiative
which a large State bureaucracy must properly and logically
impose. There can be no greater stimulus to effort than the
feeling that one ' is getting a move on '. But in a planned
economy those who get a move on can, all innocently, do
untold damage. Almost as much damage as would arise if
some part of a watch suddenly decided to move more quickly
than the speed ordained for it by the general synchronisation
of the mechanism. Those who exceed programmes in a
planned economy are just as disruptive as those who fall
below them. The ideally conditioned worker in a planned
economy must get used to the idea of keeping in line. This
taming of the spontaneous urge to effort will slow down effort
as a whole. For by the time that thecontrols have been fitted
to the system, the motive force has mysteriously vanished.
To quote a modern poet: "I can see the harness and the
reins alright, but where's the bloody horse?" In a society
where the emphasis must be on conforming to rules, the
youthful, the vigorous and those who suffer from creative
impatience have no adequate role to play.

Rivalry
The great majority of active efficient men of the ordinary
type, the type that keeps the ball moving all over the world,
find their main stimulus to work in rivalry and reward.
" Rivalry does nine-tenths of the work of the world." The
competitive striving with a desire to win can be wholesome
and needful to the great majority of men. The struggle of
two foot-runners to reach the tape first, of two scientists to
solve a problem, of two civil servants to be first to reach
a knighthood, of two trade-union officials for the highest
post in the union, of two employers for the favours of the
 PLANNING AND PROSPERITY IS7
consumers, of two statesmen for a post of special responsi-
bility and distinction, of two politicians for the support of
the electorate - all these are normally agreeable to watch,
bracing to take part in and conducive to the progress of the
community.
If, however, this rivalry is to operate to maximum effect
it must satisfy certain criteria. It must take place on roughly
equal terms. The rivals must start level and run under
roughly similar conditions. The results of the competition
must confer status and reputation which is related to the
character of the test. It would be futile, for example, to
choose Cabinet Ministers by submitting the candidates to a
loo-yards race. And the rivalry must take such a form that
the maximum number of people have a chance of winning
some sort of a race: otherwise interest and incentive is
destroyed. This last condition is the most important. It
implies that lots of different kinds of races should be run, with
freedom for each person to take part in a race of his own
choosing according to his interests and aptitudes.
It is not to be supposed that any free economy of which
we have had experience has satisfied these conditions per-
fectly. Inequality of wealth has meant inequality of oppor-
tunity. Monopolies always deprive somebody of a chance to
compete on equal terms. In every democracy there have,
however, been great improvements in recent years, and at
least it can be said that a free economy is not inherently
inconsistent with the broad satisfaction of the ideal con-
ditions.
Nor can it be doubted that a planned economy is not
entirely lacking in beneficial rivalry. The worker may slave
for the title of ' Hero of Socialist Toil', the Commissar for
power against his colleagues, the better to serve the socialist
State.
The planned economy, however, will find it more difficult
to satisfy these required conditions and will find less room for
stimulating rivalry. It must exclude, openly or covertly, one
ISS THE NEW ORDEAL BY PLANNING
group of people, the politically unreliable, from aU the
competitions. It must cut out a group of races, all those
where men are at work with their own tools and their own
property. It must limit by edict the number of entrants for
each race - for the moment a plan is made to produce a
given quantity of a commodity it must find some way (prob-
ably labour compulsion) of restricting the number of workers
producing that commodity. Most important of all, it must
so cut down the number of different types of races that most
of the participants are so inherently unsuitable for that type
of test that they have no opportunity of success and, therefore,
no interest in the competition. In a free economy there are
many ways of seeking to satisfy ambition - business, law,
politics, religion, the services, medicine, the stage and so on.
In Great Britain politics is perhaps the main attraction, in
the United States business. But other walks of life hold out
almost equal ways of gaining the respect of one's fellows. In
the planned economy, ambition must be more narrowly
channelled. The overwhelming preoccupation of the ambi-
tious person is to be one of the planners, to be in a position
to exercise power over others, since otherwise power will be
exercised over him. The real work of the world - the patient
fostering of the efficient organisation of a factory, the cultiva-
tion of craftsmanship, the extending of scientific knowledge,
the teaching of the young, the healing of the sick - falls in
public esteem. The glittering prizes are for those who stand
above such humdrum tasks controlling the work of others.
To this end attention must be devoted to skilful committee
work, to steady progress upwards through the hierarchy of
control. Those who find such a life disagreeable, or who find
it impossible to divorce themselves sufficiently from their
craft or intellectual interests to devote themselves whole:-
heartedly to scaling the hierarchical ladder, must be prepared
to find that their own activities are controlled by others whom
they consider technically and scientifically inferior. For the
race must inevitably go to the weak.
 PLANNING AND PROSPERITY 159

Reward has a close relation to rivalry, but it touches

another mainspring of effort for it leads the individual to look
in upon himself rather than outwards to his neighbour. One
may grow carnations to beat the man next door, one may grow
them for delight in their intrinsic beauty.
No one, I fancy, would doubt that an economic system in
which reward and effort were completely divorced, in which
everybody received the same weekly wage, would destroy
much incentive and lower the standard of living. Such an
arrangement would be universally felt to be unfair, it would
be considered as tantamount to an official belittling of effort.
It would certainly reduce the effort of the great mass of people
who are drawn on to do more work or more onerous or difficult
work, by the prospect of being able, in consequence, to educate
their children more adequately and surround themselves with
more ample means of material satisfaction.
It by no means follows that all these rewards need come
in terms of money. The respect of one's profession, whether
it is expressed in the form of public declaration or not, can
partly, but, I believe, not wholly, replace the money incentive.
If there is to be inequality in income, reflecting the varying
abilities of different people and their devotion to work, it does
not follow that great inequality is necessary. The ideal
arrangement, difficult as it is to establish in practice, would be
one which the able and energetic members of the community,
those who drive the system on, would never be paid less or
more than was necessary to evoke their full efforts. Over a
long period smaller income differentials than we have had in
Great Britain and the United States in the past may well
serve to evoke full effort.
Now the socialist is in a very difficult logical position on
this question of rewards. His social philosophy is strongly
based upon the principle of equality. The recent writings of
socialist economists seem to provide a strong logical pre-
sumption in favour of equality in the distribution of income.
But, in practice, all socialist systems seem to be driven to
160 THE NEW ORDEAL BY PLANNING
accept differential economic rewards as an inevitable in-
centive. The range of money incomes among the wage
earners is probably greater in Russia than elsewhere. The
higher officials in a socialist State invariably draw a substantial
part of their real income from perquisites of one kind or
another. We can, therefore, safely assume that in both the
planned and the free economies some differentials in reward
will be found.
The differentials in the planned economy are, however,
likely to be less effective than in the free economy:

(a) In the planned economy the range of consumer goods

will almost inevitably be narrower than in the free economy.
The restriction of variety must reduce the attraction in
the possession and consumption of goods and, conse-
quently, in the inclination to work to acquire them. The
socialist slogan 'bread before circuses' illustrates this
point to pedection. The application by the State of this
principle, at first sight unexceptionable, may lead to
serious loss. If, for instance, the people who can best
make bread are not prepared to do so unless they are
allowed to attend circuses, then it may result in ' no bread
because no circuses '. Or if, for instance, those who are
interested in acting as circus performers cannot make
bread, or make it indifferently, the principle may boil
down to ' no circuses but no more bread in consequence'.
The greatest difficulty in applying the principle is, how-
ever, that one man's bread is another man's circus.
Individual tastes varying as they do, it is impossible, after
the most primitive needs have been met, to divide goods
into bread and circuses. And in seeking to do so the
planned economy will inevitably deprive the economic
system of some part of its internal driving force.
(b) In the planned economy the ownership of the means of
production by the State will rob personal possessions of
much of their interest. The commonest form of private
 PLANNING AND PROSPERITY 161

property is a house, a garden, household equipment.

House property would probably be denied in the socialist
state. But even if it is not it will no longer be possible to
get small constructional changes carried out to suit one's
conveniences. For the small jobbing carpenter and
builder can hardly have a place in the planned state.
Ownership will be deprived of some of its deepest
satisfaction and may therefore be expected to provide
weaker incentives.
(c) The socialist state will, at least for a time, underpay and
therefore discourage the bourgeoisie - the class which is
most resp~nsible for the higher tasks of administration,
organisation and research in any wealthy society. For,
to the socialist, the bourgeois is the real enemy. It is
hardly likely that, with the socialist state achieved, those
in power will feel it incumbent upon them to reward
adequately the class which the socialist has always in-
tended to remove. I Ultimately, of course, this mistake
may be remedied, or the socialist group may build up a
, bourgeoisie' of its own. But the loss in the transition
may well be great.
(d) More generally, the planned society will lessen the
obvious connection between reward and effort and
thereby reduce incentive. Under existing conditions each
trade union conducts its own wage negotiations with
employers. One consequence is that each worker is
conscious of a certain degree of control over, and responsi-
bility for, his own affairs. The reasons which lead him
to demand higher wages or resist a wage reduction are
always complex, but he is at least brought up against such
questions as what the employer can afford to pay, what
competition the goods in the industry must meet, etc.
which are bound up with his own productivity. In a
I The penalising by the Labour Government of the middle classes, to the

point at which their incentives are being seriously weakened, is already obvious.
in Great Britain. The crippling war rates of taxation have been maintained.
House-building for the middle classes has been virtually prohibited.
162. THE NEW ORDEAL BY PLANNING
planned economy, however, a planned distribution of
labour is prescribed. This involves a planned national
wages policy. Unless compulsion of labour is to be
imposed, wage rates must be moved up and down by
central action to encourage workers to move into this
industry, to avoid that industry. All this would operate
high up above the heads of the workers. Their responsi-
bility for wage changes would become remote. At times
they would receive windfalls, wages would be moved up
because, in conformity with the plan, that industry
needed to be expanded. At others, wages wouid be
moved down to bring some necessary retraction. All this
would weaken, in the mind of the worker, the connection
between personal effort and reward and, thereby, weaken
incentive.

Destruction of the Sense of Responsibility

The planned economy can never produce a widespread
feeling of personal responsibility. It II\ay for a time, provided
the state propaganda is powerful enough, create a sense of
participation in common effort, of being one of the crowd,
which can be so exhilarating for the timid, the confused and
the adolescent. In the long run it must deaden individual
effort just as participation in any too large and too centralised
an organisation will deaden it. The plan is itself an anodyne.
When each has his prescribed place in a vast system, effort
devoted to anything but the performance of an allotted task
is futile and dangerous. The plan provides a place for every
man, it breeds the feeling that far away up in the hierarchy
are exceptionally able and exceptionally powerful Supreme
Planners who can take the worries and carry the burdens of all.
And, almost inevitably, the system moves round in a vicious
circle. For the lack of a sense of responsibility weakens
incentive; the state is then called upon to try to create new
incentives ranging from propaganda to the firing-squad. The
propaganda may be ignored, even joked about. But safety
 PLANNING AND PROSPERITY
from the firing-squad is best obtained by complete anonymity;
it is upon managers and bosses that the penalties are likely to
fall. So that the average man finds it best to burrow deep
down into the mass in which he can no longer be identified
by character, by personality or by function.

There is no evidence to be derived,· either from history

or from an examination of the motives which underlie effort,
to suggest that the centrally planned economy will give us
greater economic wealth than the free economy. The case
for the planned economy must be based on other grounds. I
I It is only fair to point out that many socialists would admit this. Thus
Mr. Wilmot, Minister of Supply, is reported as saying, "as a member of the
Labour Government he was first and foremost interested in the question of
social justice. As Minister of Supply he was concerned with production.
There was an apparent conflict between these two things. If their criterion
was merely production - the amount of goods which could be produced in a
given time - then the answer would be something which he regarded as pro-
foundly anti-social" (The Times, September II, 1946). Or Sir Stafford Cripps,
House of Commons, June 706, 1947: "It really is no use comparing this
country with America, either before or after the war. Our standards have
never been the same as those of America. We do not expect them to be so
today." The point Sir Stafford Inisses is that the margin between the standards
of living in the two countries has much widened since Great Britain became a
planned economy.
 CliAPTER VII

PLANNING AND ECONOMIC STABILITY

You really cannot run a complicated modem civilisation
on a basis where the whole machine is crazily accelerated
for a few months and then has to swerve violently or be
braked almost to a standstill because some perfectly foresee-
able snag or fluctuation has not been foreseen and tackled
in time.-MR. MORRISON, Economic Planning, p. 13.

I
THE causes of the growing faith throughout the world in
the benefits of a centrally directed economic system are
numerous and complex, but one is undoubtedly the belief
that only through detailed central planning can stability and
security be provided. The lure of balance and order in our
economic arrangements is proving irresistible even to many
people of deep liberal instincts who recognise some of the
social and political dangers of regimentation but who are so
desperately anxious that men should be masters of their
economic destiny that they are prepared to delegate to poli-
ticians control over the means of production and over the
freedom of consumers. They may have doubts as to
whether the State will be a competent receiver but, shudder-
ing at the bogy of chaotic competition and ignorant of the
working of the price system in a free economy, they close
their eyes and plunge for the plan.
Many writers, notably A. G. B. Fisher in his Economic
Progress and Social Security, have shown conclusively that
rapid economic expansion cannot be expected if the claims
for individual security are pressed unduly and that some
economic untidiness is the price we must pay for the
general gains of economic progress. The thesis of this
chapter is a rather· different one. It is that the centrally
164
 PLANNING AND ECONOMIC STABILITY 165
directed economy must inevitably tend to wasteful dis-
continuity and disruption in the process of production.
The outward manifestations of such waste can often be
concealed. The waste of labour need not result in open
unemployment. It may simply mean under-employment,
hoarding of labour and the performance of useless tasks. Or
it may be cloaked by imposing slavery on the individual
worker, by savagely bustling him about from one occupation
to another with little regard for his convenience, aptitudes
and inclinations. On other occasions, however, the disloca-
tions may be so great as to defy concealment. Planning
, crises' supervene in which violent upheavals are called for
in order to 're-balance' the economy, and in which the
enthusiasm of the Supreme Planners to discover and punish
the scapegoats is matched only by their anxiety to find
alibis for themselves.
What does the planner mean by economic stability?
What is it that is to be stabilised: income, prices, profits,
money wages, real wages, employment, output, the distribu-
tion of income, the technical methods of production or all or
some combination of these? And what is implied by stability :
a complete absence of change, a constant rate of change
upwards, or simply the absence of any change which the com-
munity itself has not arranged and ordered? One striking
paradox is evident at the outset. When the planner demands
a stable economy he is not asking for a stationary society.
He wants wealth to increase, industries to be progressive,
population and the labour force to grow. He wants rapid
change and progress as well as stability. He wants his bread
buttered on both sides. Unfortunately for him, and for the
rest of the world, the methods he proposes to employ must
prevent him from having it even on one side.

II
Why must a centrally directed economy inevitably prove
highly unstable? First for political reasons. So long as the
166 THE NEW ORDEAL BY PLANNING

community claims to be democratic then it must retain its

powers to change its government. When a government
pledged to planning is superseded by one which favours the
free economy, the change-over will involve surgical operations
on industry, the actual performance of which must weaken,
and the very prospect of which must partially paralyse, the
process of risk-taking and the exercise of forethought in
industrial operations. The present position in Great Britain
provides a good illustration of this. The Conservative Party
is committed to the reversal of certain schemes of national-
isation already carried out by the Labour Government in
their first term of office. The Conservatives would almost
certainly be compelled, if they ultimately came back to power,
to restore the free economy in those further sectors which the
Labour Party has in mind for nationalisation if given a second
term of office. Long-term industrial projects cannot flourish
in such an environment of political uncertainty any more
than can sober living among those persons who expect every
day to be their last.
Even where one planning government is succeeded by
another, sudden switches of policy are to be expected. For
where the rival parties all subscribe to the idea of a directed
economy they will compete for the claims of the electorate by
offering plans with different sets of figures embodying the
different views of the would-be Supreme Planners as to the
correct distribution of national production between con-
sumption and investment, home consumption and export,
essential and inessential industries. The prospect is thus
opened up of chaotic competition between rival plans. I
There is no escape from such a dilemma unless one party
has the courage of its convictions and, in the interests of the

I This is no fanciful suggestion. The Times has already declared itself in

favour of it. In its leader of October 3, 1946, after declaring that laissez-faire
was dead, it asserted, .. if the opposition is to perform its constitutional function
there must be a choice between two national plans". And in some countries in
Europe in the past two years several rival plans have competed for the support
of the public.
 PLANNING AND ECONOMIC STABILITY 167
continuity of its economic programmes, deprives the electorate
of the right to change the government.
A centrally directed economy is subject to the full impact
of political instabilities. But these are no more dangerous
than its inherent tendency to create confusions for itself and
to pass from one production crisis to another. The point
can be most easily explained by considering the nature of the
production programmes which, in the planned economy, must
be laid down for each industry and each firm. The absence,
in such a system, of the more normal incentives makes the
achievement of the programme one of the main incentives
- it is upon the comparison of actual output with planned
output that workers and managers must be rewarded or
punished. So long as the Supreme Planners are pressing for
the maximum industrial production they are bound to raise
all the integrated programmes of the different industries to a
level which will keep the system as a whole at full stretch.
The carrot must be dangled so nicely in front of the nose of
the donkey that he will never lose hope of reward, but never
be allowed to attain it without putting forth his maximum
effort.
In a system in which there are many thousands of pro-
grammes this inevitably means that some of the programmes
will not be achieved. Since they are, in any case, guesses
which are just as likely to be wrong as right, and since, in
addition, they are infused with a strong element of wishful
thinking, only by a miracle could they all be just achieved
and no more than achieved. I If one programme is not
achieved all other programmes are thrown out of balance and
waste and unemployment result. If the steel output is not
achieved, then some machine tools which should have been
produced cannot be made for lack of raw materials. Some
labour in the machine-tool industry will then be unemployed.
I It must be bOrne in mind that to exceed a programme in an integrated
plan is just as wasteful as to fall short of it. Just as if, when a bridge is planned,
the workers on one of the piers exceed their programme and build their par-
ticular pier 5 feet higher than the other piers.
168 THE NEW ORDEAL BY PLANNING
If the machine-tool programme is not achieved then some
industries will be short of machine tools and their production
will fall short of the target. General disequilibrium will
result. If the programme for railway-wagon wheels is not
reached then there will be a shortage of wagons with the
consequent effect throughout industry. There are only two
possible ways out of this dilemma. The first would be to
change the whole of the detailed industrial programmes the
moment one of them is not achieved or is recognised to be
unachievable. That, however, is never practicable. For the
preparation of the Master Plan is a mighty work taking much
time and labour in a bureaucracy which, in the nature of
things, must move slowly. The plan itself is the enemy of
readjustment. The second would be to keep very large
stocks so that mistakes could be rectified before crucial
shortages occur. These stocks, however, would have to be
stocks of everything - since no one can forecast where the
planning mistakes will be made. If the mistakes could be
foreseen, they could be avoided. The maintenance of such
stocks is itself a confession of weakness, goods in store are
temporarily lost to the community. Moreover, when tech-
nical progress is rapid, a large stocking policy may lead to
sheer waste since the goods may become obsolete. But the
crucial objection to stocking is that the most important
factor of production, labour, cannot be stocked: unem-
ployment means that effort is lost beyond recall. If, as a
result of bad planning, labour is found to be badly distributed,
either there will be under-employment or the workers must
be switched around like cattle.
If the plan and all its constituent parts were capable
of rapid day-to-day readjustments, original failures would be
of little moment. That, it is argued above, is impossible
because of the intricate nature of the plan. But even if this
were theoretically possible, it would still remain impossible
in practice because impending break-downs will be concealed
up to the last moment and suddenly revealed only when it is
 PLANNING AND ECONOMIC STABILITY 169
too late for the economic system to turn the corner smoothly.
It is characteristic of all planned economies that policy
changes come as bolts from the blue.
Thisconcealtnent will go on at many points in the State
hierarchy. A production chief who fears that he is likely to
fall short of the target set him will tend, for a time, to hope
for the best. He will not wish to confess failure, with all its
possible penalties, until he is quite sure of it. He may hope
that something will occur at some other point in the planned
economy, as for instance a failure of raw material supplies,
which may provide him with a good alibi to cover the
deficiencies for which he is responsible. Hope makes for
confused planning and hope can never be stifled. When,
however, the deficiencies can no longer be concealed from
the Supreme Planners their first reaction also will be to avoid
the unpopularity which comes in the train of an admission
of defects in the plan and of unpleasantly disturbing upsets
to workers. If, finally, the defect is too grave to be hushed
up then there is a production ' crisis' . Charges of sabotage
may be levelled against the production chiefs involved. They
will probably be dismissed, new blood will be brought in and
given a free hand to fill the gaps in production.
So long as the vast economic blunders of a centrally
directed economy are not accepted for what they in fact are
- the logical results of the planning process - then the
remedies applied are likely to magnify the original errors.
For the Supreme Planners will strive, as a first line of defence,
to make a positive virtue of their failures and to welcome the
economic vicissitudes to which they have exposed the people. I
They then argue that the best way to keep the economic
system moving smartly along is to adhere to the plan, watch
for shortages as they arise and deal with these shortages as
I Thus Mr. Morrison, speaking on November 30, 1946, when universal
shortages were already threatening a break-down of the economy, which came
two months later, said, "it is not at all my view that this array of bottlenecks is
a cause for gloom or discouragement. On the contrary, the fact that we see so
many bottlenecks is evidence that we are expanding our economy."
170 THE NEW ORDEAL BY P.LANNING

quickly as possible. This is the policy popularly known as

creating a vacuum, pushing hard all along the production line
and hoping for the best. It explains why a planned economy
is always in some sort of a crisis, why there is always a ' battle'
going on for something. I Special efforts are flung into the
economic system at the point of weakness. This, however,
can only heighten the confusion and waste of the system as a
whole. For special efforts can only be efforts outside the plan,
they really amount to scrapping the plan without openly
admitting it. Frantic last-minute scrambles to repair the
breaches naturally play havoc with the disposition of the other
factors of production in the economy. The confusion is
spread far and wide.
Planning crises are self-perpetuating, they set up disturb-
ing reactions which persist over a long period. In the
hysteria of combating unexpected shortages, steps will be
taken which must, in the long run, be uneconomic. 2 When
a shortage occurs, the tendency will be to put some new man
in charge of the threatened section. He will be granted extra-
ordinary powers for the purpose of overcoming the shortage
as quickly as possible. New industrial capacity and more
labour will be called for with a peak production sufficient not
only to meet current requirements but also to make good past
deficiencies. When these deficiencies have been met, there-
fore, the industry will have a potential output which is now
too large for current needs. This industry must then be
partially liquidated; workers who have been called upon to
make special efforts in production must now be told that they
I We have already had C The Battle for Coal', C The Battle for Output' and

CThe Battle for Dollars'. More battles are clearly in the offing.
• Mr. Bevan, the Minister of Health, has put this point very clearly. When
his 1947 Housing Programme broke down, mainly because it was based on
over-optimistic views about the supply of timber, and he was suddenly com-
pelled to put a violent brake upon those from whom, a month before, he had
been calling for a maximum effort, he made the comment, cc Critics who say
the programme was too big fail to appreciate that you cannot do two contra-
dictory things at once. You cannot say to local authorities both C Go' and
eStop '. Last year we said C go ahead '. This year we say C let us adjust the
programme to the physical possibilities of the situation" (Manchester Guardian,
May 5, 1947).
 PLANNING AND ECONOMIC STABILITY 17 1

are redundant, and moved elsewhere. If the politicians jib

at this unpleasant task, then unwanted goods must continue
to be produced.
The constant preoccupation with day-to-day achievements
and the unending and frantic struggles to make the plan work
at all costs, forces everybody to think in terms of immediate
results and ultimately destroys foresight. I Since the plan has
constantly to be changed, it rapidly loses its sanction among
those who bear the responsibility for carrying out the different
parts of it. Each production manager keeps his eye on two
things: his own performance and the chance that, if he fails
to reach his own target, then the failure of some other part of
the plan will provide him with a suitable alibi. Rumour and
speculation as to impending changes in the plan run riot.
The almost wistful hopes that sooner or later conditions will
become orderly when the economic system has got' round the
corner' are doomed to endless frustration, for the directed
economy is inevitably creating corners more rapidly than they
can be circumvented.

III
Recent history, particularly m Great Britain, provides
many illustrations of the inner turbulence of the centrally
directed economy. Between the wars many governments
embarked upon restrictive practices, in the supposed interests
of economic stability, which produced more disastrous
fluctuations in output, prices and employment than had ever
I Maj.-Gen. J. R. Deane, who had a unique opportunity of watching the
Russian bureaucracy at work during the war, brilliantly analyses this sense of
confusion and insecurity associated with the directed economy in his The Strange
Alliance. " The Soviet Administrative system results in waste and inefficiency.
The watchful eye of the secret police promotes a feeling of personal insecurity
which stifles initiative. Industry is hampered by outside interference. Charges
of sabotage result from failure to meet the prescribed norms of production or
from overburdening and destroying machinery in attempts to meet or exceed
them. Continuity of management is lost in the upheaval of political purges and
the full effectiveness of labour is lost by overtaxing its power. The urge to
curry favour with those in authority and the fear of punishment induces padded
reports of accomplishment and deception in covering mistakes. Immediate
results are all that count, so the future suffers from lack of foresight."
172 THE NEW ORDEAL BY PLANNING
been known before. If any reader doubts that, let him study
the consequence of the policy of the British Government
with regard to rubber, or the policy of the United States
Government with regard to cotton. And anyone who had
close contact with the working of the planned economies
during the war will recognise the conditions summarised
above: the logical and administrative futilities of a directed
economy, the paralysing influence of orders and counter-
orders from above, the jerks and jolts thus administered to
the productive system, the waste that had necessarily to be
tolerated in the form of unused resources, the sense of
frustration created by the exhausting game of blind-man's
buff in which one plan after another chased madly after the
facts.
The most significant evidence, however, is to be found
in the post-war experience of economic planning in Great
Britain. There does not seem to be the slightest doubt that
the Labour Ministers who came to power believed that,
having equipped themselves with a few good statisticians and
economists, they would be able to foresee economic events
and make such timely preparations that serious economic
disturbance would be avoided. Thus Mr. Morrison : I
When we went into the economic and financial smash of 1931
we did not know we were going there . . . because there was
no proper machinery of the State to tell us, and when we got
there we did not know fully what to do about it. . . . We are
determined that we are not going to be caught unawares by
blind economic forces under this Administration.
Clearly, there were shocks coming to those holding such
naive views about the nature of the economic system. They
can be best illustrated by three major planning blunders in
1946 and 1947.

The Planning of Housing

The handling of housing exemplifies the fundamental
dilemma of the planner in fixing his programmes, his anxiety
I Labour Party Conference, 1946.
 PLANNING AND ECONOMIC STABILITY 173
to press forward and hold back at the same time, and the
waste of resources incurred when the inevitable planning
mistakes come home to roost. During 1946 the Minister of
Health had resolutely refused to provide a housing pro-
gramme 1 although, since the whole of the production of
houses and building materials was under his control, it is
difficult to understand how, without a programme, the in-
dustry knew what to do or the Minister knew how rapidly
he should push forward in the training of labour for the
building industry, or what claims he should make on the
import programme for the import of such raw materials as
timber. On January 29, 1947, the Minister published his
Housing Programme for I947 which gave a figure of 240,000
houses to be completed in 1947. Warnings were given that
the rate of building would be reduced if it proved impracti-
cable to obtain increased imports of soft-wood timber. Then
comes the vital confession, " It has not been thought right,
however, to lower the estimate on account of uncertainty in
regard to a single factor". But what was happening to the
other factors? Were they being programmed and pushed
forward on the basis of the programme or were they not?
It soon became clear that in the case of the vital factor, labour,
the whole plan was falling out of phase. Less than a month
after the issue of the Housing Programme, on February 21,
the Government admitted in its Economic Survey for I947
that timber supplies would be only 75 per cent of minimum
requirements. They were not yet, however, prepared to
make an open confession of the implications of these facts.

It is not yet clear how far this will prevent attainment of the
housing target, but the Government proposes to meet the situa-
tion if it arises by moderating the further immediate expansion
of the building labour force and by taking up any slack which
may develop by relaxing restrictions on work which uses little
scarce material, including maintenance and repair.

I In the House of Commons on July 30, 1946, Mr. Bevan said, " I refuse to
give a target because I am content rather to rest upon perfonnance than promise" .
174 THE NEW ORDEAL BY PLANNING
On May 8,1947, when the industrial stoppage of February
and March could be used as an effective alibi, the Minister
of Health announced that " there seems now no possibility
of securing this year the 240,000 houses". There were,
indeed, last-minute attempts to put a gloss on the break-
down of the plan. The Minister of Health, as late as July 28,
1947, was prepared to argue-
I resist the suggestion that has been made in some quarters
that it is necessary for us to reduce our housing programme. I
believe that if we did that, we would gravely jeopardise national
progress. There is nothing which creates a sense of alarm and
despondency more than not to see new houses springing up all
over the country.
But the economic tide was running too strongly to be checked
by Ministerial eloquence. The Government had at last
recognised, and was to admit a few days later, that it had
embarked upon a fantastically high capital investment pro-
gramme which would have to be cut. Building labuur, which
had been the item in short supply in 1946, had now become
the surplus item. As a result of the drive for building labour
the force had risen to 943,000 by the end of 1946, although the
target was only 970,000 for the middle of 1947. In September
1947 it was announced that the Government training schemes
for building labour were to be discontinued. In October the
Minister of Works was engaged in organising the transfer of
building workers to other trades.
The consequences of the planning of house building
therefore could, by the autumn of 1947, be summarised thus:
(I) In a period of acute general shortage of labour, waste of
building labour had to be tolerated. The building force
was first increased swiftly by expensive training schemes
and then, having reached its peak, had immediately to be
reduced.
(2) Raw materials were wasted by being embodied for ab-
normally long periods in semi-finished houses. Due to
the failure to achieve smooth-flowing production, a sub-
 PLANNING AND ECONOMIC STABILITY 175

stantial proportion of the houses set in hand in 1946

were destined to remain unfinished for two winters.
(3) Raw materials and labour were wasted in the building-
material industries as a result of these miscalculations.
As Mr. Bevan himself said:
We are having to close down brickyards because they
cannot get orders, and the reason they cannot get orders·
is because the rate of bricklaying is not what we are entitled
to expect it to be . . . . There will be found on sites all
round London, wherever one likes to look, stacks of
bricks. l

The Fuel Crisis of February I947

It is, however, to fuel and power to which we must turn
for what will surely prove to be the classic example of a
planning crisis. On February 7, 1947, late on a Friday after-
noon when many members of Parliament had gone off to
their constituencies and when it was far too late for the news
to be spread quickly enough to enable factory managers to
inform their workers, Mr. Shinwell, the Minister of Fuel and
Power, announced almost as an aside to a dumbfounded
House of Commons that, as from the following Monday,
electricity supplies to industry were to be cut off completely
in London and the South-East, the Midlands and the North-
West. A Government pledged to planning and economic
stability was compelled to order, at a moment's notice, the
closing down of about two-thirds of British industry. At the
time the Minister, clinging to his false optimism to the last,
declared that the stoppage would "not last for longer than
three or four days, or at the most for a week", whilst " as
regards the Lancashire area, it may be possible to avoid the
cut - at any rate after the first day or so ". In the event the
ban on the use of electricity lasted for about three weeks.
No country has ever suffered from a more sudden or cata-
strophic economic seizure. Unemployment rose temporarily
to over 2,000,000. The crisis probably lost Great Britain
I House of Commons, July 28, 1947.
176 THE NEW ORDEAL BY PLANNING
£200 millions of exports. I The overall loss of production
cannot be estimated with any precision. It is sufficient
to say that Great Britain had suffered a crippling blow, the
effects of which were largely instrumental in precipitating
the balance of payments crisis suffered later in the year.
Looking back, it seems incredible that the whole system
could have been brought to a standstill in this way. In 1946
the average weekly consumption of coal in Great Britain was
3,567,000 tons. In the period 1935-39 the average weekly
internal consumption was 3,473,000 tons. Yet there was no
fuel crisis, no closing down of British industry in 1935-39.
To put it in another way. In September 1946 Mr. Shinwell
said:
What stands between us and success this winter? A matter
of 5,000,000 tons 2 of coal. That is what all the fuss is about.
But if that was the case, why did it prove impracticable for
the national economic plan to adjust itself to such a tiny
margin? Is it to be assumed that, under the planned regime,
if the British annual output of coal is 194 million tons, then
all is well, but that if the output is 189 million tons, then
a catastrophe of the kind suffered by Great Britain in early
1947 is inevitable and that the only role which then remains
for the planner is to close his eyes, wait for the crash and
then, when it comes, plead as did Mr. Shinwell that
The Government took due warning of the position and exer-
cised the greatest care and foresight in the preparation of a scheme
which would ward off the difficulty. We are not responsible for
the weather conditions or the short fall.
The fuel crisis brought a full crop of alibis. Some said
it was due to a shortage of coal. Some said it was due to a
deficiency of capacity at the power plants, though it is not
easy to see how such a shortage can be ameliorated by clos-
ing down the power plants altogether. Some said it was due
Sir Stafford Cripps, May 4, 1947.
I
In fact, as it proved, an extra 2 million tons of coal would have enabled us
2
to avoid the industrial crisis.
 PLANNING AND ECONOMIC STABILITY 177
to the bad weather. Some said it was due to a shortage of
transport. Some said it was due to the rejection by the
Conservatives in 1942 of the suggestion for fuel rationing.
Some said it was due to responsibility being divided among
three Ministers - the Minister of Fuel and Power, the Pre-
sident of the Board of Trade and the Minister of Supply.
Some said it was due to low output, others said it was due to
bad administration. Some said it was due to sinister business
men making frantic and exaggerated claims for more fuel in
order to throw political discredit upon the Government. Mr.
Dalton thought it was " entirely the responsibility of private
enterprise in the mining industry who flitted (i.e. after the
nationalisation of the industry) with stocks of coal lower than
ever before in our history ". I
Undoubtedly the Government contributed to its own
difficulties by permitting inflation to persist and by using the
price system to stimulate instead of restrict the consumption
of fuel. But the proximate cause of the trouble was that
Ministers gambled in the hope of avoiding measures which
were politically unpopular. The warnings of a probable fuel
crisis had flowed in from every quarter from the summer of
1946 onwards. Indeed the Minister of Fuel and Power
himself had said, on October 24:
Everybody knows that there is going to be a serious crisis
in the coal industry - except the Minister of Fuel and Power.
There is not going to be a crisis in coal, if by a crisis you mean
that industrial organisation is going to be seriously dislocated.
But even the Minister of Fuel and Power really knew the
facts. On January 6, 1947, he declared, " We must do the
best we can, but somebody must go short". Somebody did
not go short enough because that would have been unpopular.
The economy, like a ship, rudderless because of the absence
of a price system, and in charge of a crew not prepared
either to get the stokers to raise more steam or to put the
I Manchester Guardian, February 3, 1947.

G
178 THE NEW ORDEAL BY PLANNING
passengers to the tedium of taking to the boats, went smash-
ing helplessly on to the rocks.
The Ministers gambled, on a mild winter, on an increase
in output, on voluntary austerity. Ministers will perhaps
always gamble for popularity and the support of the people.
But, unfortunately, in a planned economy they have it within
their power to gamble not only with their own political future
but with the economic fortunes an<;l happiness of the people.
And so, in the middle of 1947, the British economy,
enfeebled by the collapse earlier in the year, was still struggling
with its coal crisis and still caught up in the coils of the funda-
mental lack of logic in a planned economy. The Economic
Survey for I947 had laid down a target of 200 million tons
of coal for the year. "Production of 200 million tons is
an indispensable minimum. It will be a hard target for the
miners to reach but it will meet only our minimum require-
ments." But no one was asking: what happens if, as seems
more than likely, this target is not achieved? No planning
was being done on the basis of a lower figure, for the Govern-
ment could not do that without the knowledge leaking out.
The very fact that the Government was prepared to conceive
of that situation would of itself have been regarded as
defeatism. And if a plan had been based on an output of
(say) 180 million tons, that would inevitably have involved
steps which would have made it the more likely that the
higher target would not be achieved. So a rigid attitude had
to be taken up. Two hundred million tons or bust. Great
Britain cannot have a plan unless its miners produce 200
million tons of coal. It is precisely this need for pinning the
whole system to one figure that turns the running of the
economy into a vast speculation in which security and
stability are at an end.

The Balance of Payments Crisis

The British balance of payments crisis which came to a
head in Mr. AttIee's speech in the House of Commons on
 PLANNING AND ECONOMIC STABILITY 179
August 6, 1947, could be used to illustrate many of the
characteristic features of a planning crisis - how one planning
crisis generates others, how Ministers will seek to minimise
the consequences to the people of the sudden change of plan,
how the disaster when it comes will be attributed to forces
outside the control of the Government, how the failure of
State authorities to use intelligently what powers they
already have will lead them to take on extended powers. But
it is, above all, a clear-cut example of the bolts-from-the-blue
which are to be expected under central planning and of how
a change from one plan to another cannot be gradual but must
always be sharp and disruptive. The price system brings
about gradual and continuous readjustment in a changing
economic world; the central planning technique means that,
from time to time, the economic system must be kicked down-
stairs. Mr. Dalton put the point succinctly. I "This storm
. . . has sprung up very swiftly but it has been brewing for a
long time." The storm, of course, sprang up swiftly precisely
because it had been allowed to brew for a very long time.
When Mr. Attlee spoke in the House on August 6
it was in effect to announce a new economic plan. The
nation, he explained, had been trying to do too much and
to live at too high a standard. Capital investment would
have to be reduced, imports would have to be cut (particularly
of food); higher export targets would have to be set; the
country would need to become more self-sufficient agri-
culturally, more controls would have to be imposed for
carrying out the new plan.
This involved a violent reversal of old plans. And yet
the old plans had to be defended and advocated in public up
to the last. Th~ contrast between Mr. Attlee's speech and
those of some of his Ministers immediately before the day the
plan was changed is very striking.
Mr. Attlee made it clear (August 6) that imports of food
would have to be cut and more austerity imposed. But the
I House of Commons, August 6,1947.
180 THE NEW ORDEAL BY PLANNING
following statements had also been made on official occasions
by the Ministers named within five weeks of this date.
June 30, Mr. Dalton in the House of Commons:
Whilst, therefore, we shall not be able to afford all the imports
of foodstuffs for which we had hoped, H.M. Government have
decided to maintain, and, indeed, in some directions slightly to
increase, the volume of these imports as compared with the year
which ends today. Owing to the unexpectedly large rise in prices
this means that a substantially larger sum, in terms of foreign
exchange, will have to be found for food imports in the next twelve
months.
July I, Mr. Strachey in the House of Commons:
There is no need whatever for the housewives or the people
of this country to feel that they will find it difficult or impossible,
as is sometimes suggested, to obtain, partly from at home and
partly from abroad, the food they need.
July 8, Mr. Dalton in the House of Commons:
I was asked: Why did I make a statement last week at all ?
The answer is very short and simple. It is, that each year . . .
we make an import programme to the best of our power and fore-
sight. . . . In that sense, therefore, my statement was a routine
statement. . . . I maintain that at this moment it was the right
thing not to cut into our import programme.
Mr. Attlee made it clear that there would have to be a
substantial cut in domestic investment.
July 3, Mr. Hall, Parliamentary Secretary to the Treasury,
in the House of Commons:
We are asking every type of legitimate business to plough
back its profits.
July 28, Mr. Bevan in the House of Commons:
I resist the suggestion that has been made in some quarters
that it is necessary for us to reduce our housing programme.
It is easy to understand how this dilemma arises and how
when a decision has finally been made and announced to the
community it gives the impression of a sudden landslide
which throws everything into confusion. It is more than
likely that all through the summer of 1947 some Ministers
 PLANNING AND ECONOMIC STABILITY lSI

believed that the programme finally outlined by Mr. Attlee

on August 6 was inevitable. Other Ministers perhaps dis-
agreed. But all Ministers necessarily continued to advocate
in public the old plan. This was inevitable since, until the
final decision was made, no one could be sure that the old plan
would not be continued. The only alternative would have
been for Ministers, in their publi~ utterances, to admit that,
for the time being, there was no plan at all, it was being
argued out in Cabinet. Most members of the community
would still be actively engaged in trying to carry out the old
plan. At the higher levels of the Civil Service, however,
there would be paralysis. For the higher civil servants
would know of the growing doubts of Ministers as to the
practicability of the old plan. They would naturally hold
back on too vigorous a prosecution of the old plan, making it
all the more certain that it could not be achieved. But they
could do very little in preparation for the new plan, for this
would involve inter-departmental discussions on assumptions
which had not yet been accepted as Ministerial policy.
The period, therefore, preceding a change of plan will be
one of stagnation among the planners. The period which
follows must be one of feverish activity. The lost time has
to be made up, all the implications of the new plan worked
out at double-quick time. All those unsuspecting people
who go to bed one night, after a conscientious day working
for the fulfilment of the old plan, and who wake up in the
morning to find a new plan awaiting them, will want to know
immediately what precisely the new plan means to them.
However energetically the planners work, these answers will
not be quickly forthcoming. I The result is a period of stagna-
tion now among those who are being planned. This is the period
when snap decisions will be likely to lead to further gross errors
in which will be sown the seeds of the next planning crisis.
I Thus Mr. Attlee announced the cuts in capital investment on August 6,

1947. The White Paper on Capital Investment was not published until
December I.
 CHAPTER VIII

PLANNING AND FREEDOM

I
WHEN Sir Stafford Cripps declared in the House of Commons
on February 28, 1946, that no country in the world has yet
succeeded in carrying through a planned economy without
compulsion of labour, he might, with equal truth, have gone
much further aI'ld admitted that no planned economy has yet
operated without suppressing free speech, destroying repre-
sentative government, robbing the consumer of free choice
and virtually abolishing private property. This is no accident.
It cannot be attributed to fortuitous events such as the wicked-
ness of the men in whom the economic power came to be
vested or the absence of an instinct for freedom on the part
of the people who were the victims of the plan. It is due to
the logical incompatibility of a planned economy and freedom
for the individual. I For the various strands of personal
liberty - economic) political and social - are bound to-
gether. Weaken or destroy one and the whole rope inevitably
snaps.
What are the essentials of a free society, what conditions
must be satisfied if we are to be able to say that, despite
anomalies and exceptions, a community has set itself upon a
course which makes for the fullest expression of personality?
This is the crucial question of our times to which no short
answer can be given. But one thing is certain. The answer
r If Britain ever slides. by insensible degrees. into a regimented economy it
will not be for lack of warnings. Professor Hayek in his The Road to Serfdom
portrayed the connection between planning and slavery in an analysis which
has never been confuted. And Mr. Churchill. in his opening broadcast in the
General Election of 1946. uttered a sincere warning which was received with the
same kind of indignant incredulity as his warnings. before 1939. that Germany
W8! bent upon world domination.
 PLANNING AND FREEDOM
cannot be given purely in terms of institutions, of adminis-
trative and representative machinery. We cannot sum up, in
terms of social organisation, the arrangements which will
guarantee that men shall not be slaves. A free society cannot
exist unless people want to be free. Without this, the whole
paraphernalia of democratic organisation becomes a dreary
mockery.
We can, however, point to certain vital pre-requisites in
the social machinery which must be present if failure is not
to be certain and absolute. Because of its organic nature, the
essence of a free community can never be fully described in
terms of a simple set of rules: the conditions for success are
too complicated for that. But we can say, in a negative sense,
that there are some types of society in which, merely because
they fail to provide certain minimum conditions, freedom
would rot away however inherently liberty-loving the people
in that society might be.
The fundamental forms of freedom are these:
(I) Freedom of expression in all its forms.
(2) Freedom to choose and to change the members of the
governing body of the community.
(3) Freedom in the choice of occupation.
(4) Freedom in the disposal of incomes.
(5) Freedom to acquire and to hold property.

II
It is important to recognise what is meant by the last
three of these, the so-called ' economic' freedoms, for there
is, in contemporary discussions, great confusion regarding
their content.
Freedom in the choice of occupation means the right to
make the financial sacrifices necessary to order one's working
life as one wishes. It means the right to choose between
work and leisure, the right to choose what work one shall do,
184 THE NEW ORDEAL BY.PLANNING

when it shall be done, where it shall be done and for whom it

shall be done. It means the right of the individual to hold on
to his own assessment of the inherent worth-whileness of his
work whatever valuation may be placed upon it by others.
Such freedom has, of course, like all other freedoms, to be
paid for. It may be that the products of the work a mim
chooses are not highly esteemed by the consumer, that little
will be paid for them. In that case the worker has no right
to insist that the consumer shall pay more. Similarly the
consumer, or anyone else in the community, has no right to
insist that the worker must do other work. The fundamental
economic right is the right to sacrifice income either for
leisure or for the advantages of working at a self-chosen
occupation. It is a form of slavery to insist that a man must
work ' for the sake of the community' or that a man must be
a baker, instead of a carpenter or a circus performer, in ' the
interests of the nation'. For, in forcing such sacrifices upon
the worker, the State is disposing of the person of the worker
in a wholly arbitrary and irresponsible fashion, since the State
cannot assess the values involved in the decision.
Freedom for the consumer in the disposal of his income
means that the individual has the right to make an offer to
other members of the community to work for him. It is the
converse of the worker's right to turn to any job he thinks
fit. The consumer has no right to insist that goods shall be
provided for him below their cost, i.e. below the price at
which the worker is prepared to make them. The consumer
distributes his income between the different possible uses
according to a set of valuations which no one else can possibly
measure or balance. It must, therefore, be both unscientific,
if not irrelevant and impertinent, for the State to counter-
mand or frustrate these subtle and intangible valuations on
the part of the consumer. The consumer's freedom can be
infringed by a direct control over his income - e.g. by
rationing. But it can be just as effectively, and anti-socially,
restricted by so controlling the productive resources of the
 PLANNING AND FREEDOM ISS

community that they can no longer move and adjust themselves

to satisfying the consumer's declared preferences.
Freedom to own property consists partly of the right of
the individual to decide when he shall spend his income
and partly of his right to surround himself with durable
goods best fitted, according to his own valuations, to his
own personality. In a general· sense this right must be all-
embracing. In particular the distinction which socialists
make between the ownership of personal property - clothes,
furniture, houses, etc. - which they regard as harmless, I
and ownership of property in the means of production-
factories, machines, tools, taxis, barber's scissors, etc.-
which they consider immoral, Z is a distinction which is both
logically. meaningless and socially dangerous because it leads
to policies which destroy the functions of property. The
distinction between personal property and property in the
means of production is logically without content. First,
because some goods are both personal property and the means
of produ<;tion. If I own a pair of overalls or a kit of tools
suitable for my work, or a set of law books, or a house
and garden which provides leisure and recreation and thus
increases my economic efficiency, these goods are both per-
sonal property and a part of the means of production. If
an employer now provides my overalls or my tools, can it
really be said that the economic system has suddenly been
debauched? Second, those who own the means of pro-
duction do not necessarily make a contract of service with
those who use them and, in such cases, no exploitation can
possibly arise. If I hire out a building or a machine to
another man I am not necessarily exploiting him, he may
be exploiting me. Third, contracts of service may involve
exploitation although property in the means of production does
not enter into the matter. Whether I make a hard bargain

1 The Webbs, however, consider the unequal ownership of personal pro-

perty as immoral. See Decay of Capitalist Civilisation, p. 30.
Z Sir Stafford Cripps, Towards Christian Democracy, p. 53.
186 THE NEW ORDEAL BY PLANNING

with a lawyer, a doctor or a private singer does not turn on

who owns the means of production.
The ownership of the means of production is not neces-
sarily an instrument of exploitation. There was slavery
before machines made their appearance. The machine age
indeed has, on the whole, been one in which individual free-
dom was lifted to new levels. A contract between two free
agents involving the use by the one of the property of the
other is perfectly consistent with freedom and dignity. On
the other hand, the potent form of exploitation has always
been that of the State where, as in the planned economy, the
few have been able to use the power of government against
the many.
The association of exploitation with ownership of the
means of production, and hence with the employing class,
has been one of the most successful red herrings employed
by the socialist. For it has enabled him to avoid the un-
palatable truth that, in a free economy, where monopoly is
kept in check, it is the consumer who determines the contracts
of service between employers and workers. The remedy for
exploitation is for competition to be enforced between
employers, and for the workers to use those methods which
for a long time have been open to them to equalise their
bargaining power with the employer. Beyond that, to argue
that the consumer is exploiting the producer is tantamount
to a declaration that the producer should be allowed to
exploit the consumer.
The social function of property as a bulwark of freedom
inheres in all forms of property. These functions have long
been well understood. The institution of property is the
device, and indeed the only known device, by which an
individual can freely make his choice as to how he will spend
his resources, when he will consume, when save. Property
is the means by which the individual creates independence
for himself against the powers of the State and the powers of
organised opinion in the community. I t is fundamentally
 PLANNING AND FREEDOM
bound up with freedom of occupation, freedom to choose
between work and leisure.
Property of the type commonly known as personal
property would of itself be quite inadequate to serve these
important purposes. It is an unsuitable form in which to
save. The essence and value of personal property to the
individual lies in its peculiar adaptation to his own person-
ality which in itself reduces its value in the market. The
more exactly my suit fits me the more certain it is that it will
fit no one else, that its market value will be low. Personal
property, by its nature, is largely non-tra,nsferable. It is not
an appropriate means whereby one can save now so that
one may spend in the future. Transferable property must
largely consist of land, of the means of production directly,
of rights in those means in the form of shares or of State loans.
If only State loans are available, to the exclusion of the first
three, then the whole community is placed, as in Russia,
under the direct thumb of the State, thereby destroying the
atmosphere of independence by the individual without which
State power must inevitably run riot.
The abolition of private ownership of the means of pro-
duction would constitute the abolition of the institution of
property itself, and that in turn would involve the destruc-
tion of all forms of freedom. It would wipe out the one-man
show and with it the solid core of independence and non-
conformity which has traditionally been bred in such sur-
roundings, not to mention the steady flow of enterprise and
variety which it has infused into the economic system. It
would wipe out the merchant. It would impose cramping
restrictions on those who are temperamentally attracted by
the task of taking risks, organising or innovating. It would
restrict all choice of occupation except that approved by the
State. It would deprive people of the right to save except
under conditions which make them more completely sub-
servient to the State. And, by preventing the creation of a
class with a measure of financial independence, it would
188 THE NEW ORDEAL BY PLANNING
enfeeble the expression of unpopular minority views which
represent the salt and savour of any society and so often
constitute, in one generation, what comes to be accepted as
the wisdom of the following.

III
In society none of these three economic freedoms can be
absolute. It is that fact which renders so difficult and subtle
the task of creating a society which is stable and which
also gives the maximum play to individual personality. The
freedom of expression must be limited by rules regarding
obscenity and libel. The democratic choice of governors is
subject to the rule of the majority. The choice of occupation
may be legitimately restricted in the interest of the worker, as
by legislation concerning hours and conditions of work. The
consumer cannot be allowed to spend his income on pro-
scribed goods, such as narcotics. It may be perfectly reason-
able to encourage him to spend his income on desirable foods
- such as milk for children - by using subsidies. In any
case, a part of this income must be taken away by the State
in taxation to pay for public services. Property is a bundle of
rights the use of anyone of which may need to be narrowed
down as to time, place and circumstance.
Here then is the baffling riddle. Individual freedom and
rules for controlling the individual are different aspects of the
same thing. Freedom for all and restraint for all are two
ways of expressing the same answer. Is there, in fact, any
solution of it? I suggest there are four working precepts that
contribute to a solution.
First, the restrictions imposed by the State on the funda-
mental freedoms must be strictly limited, they must be the
exceptions, they must be marginal. Each degree of restraint
imposed by the State multiplies the danger of taking a next
restrictive step. There is a· critical point beyond which,
although the shadow of liberty remains, the substance has
 PLANNING AND FREEDOM
disappeared. It is not necessary for all our actions to be
centrally regulated in order to produce a degree of regimenta-
tion which is virtually absolute. If freedom of expression is
permitted, except for the right to criticise the Government,
that is tantamount to the complete suppression of free speech.
Freedom to change the Government only once every twenty
years would constitute the effective abolition of representa-
tive government. Freedom to spend one's income but only
on the goods which the State has decided to produce destroys
the consumer's rights completely. Freedom to ch06se one's
occupation but only within the range prescribed by authority
is slavery.
Second, negative restraints, narrowly defining what men
cannot do, are less dangerous than restraints which prescribe
exactly what they may do. For the former still leaves the
possibility of growth and development, however contorted it
may be. The latter forbids it entirely.
Third, restraints should, as far as possible, be impersonal,
applying to all men of similar condition equally. Repression
most swiftly springs up when some men perceive the oppor-
tunity of restricting others without being themselves subject
to the rules.
Fourth, and most important for the present argument,
the restriction of one of these freedoms almost invariably
reduces others. The freedoms hang together, the living
social tissue of which they are a part can be destroyed by
an attack on them jointly or severally. It is futile to try to
distinguish between them on the grounds of their essentiality.
It is, in particular, vital to recognise that the economic
freedoms cannot be whittled away without destroying social
and political freedoms. One can begin at any point and trace
through the circle of dependence.
If the State, for example, forbids someone from working
as a writer - perhaps on the score that man-power is short,
that first things must come first and that bakers are more
urgently needed - the restriction of the choice of occupation
190 THE NEW ORDEAL BY PLANNING
undermines all other freedoms. The consumer is deprived
of the right of reading the works of that particular author.
At least one member of the community is prevented from
expressing his opinions in the manner he would have chosen.
Further, if the State is logical and is to enforce its restrictions,
it must prevent the writer from perversely following his own
bent and living upon any property he may have whilst
continuing to write. This can only be done by the State
drastically restricting the right to own and dispose of property.
It must do its best to prevent him from gaining access to
writing materials, from using the resources of the community
in publishing his work once it has been written.
It is just as dangerous to cramp the choice of occupa-
tion of the carpenter, the mechanic, the jockey, the football-
pool operator, the small shopkeeper. Directly or indirectly
the freedom of choice of work is bound up with freedom
of expression, freedom for the consumer, freedom for the
holder of property.
The same vicious circle of restriction is created where the
State makes its immediate attack on the consumer - by laying
down social priorities which declare that certain goods shall
not be made until certain other goods are produced. This
may seem at first sight unexceptionable. But it involves
the State in matters of definition and enforcement which
will throw their shadow across every aspect of social living.
This then is the reason why the free society always
appears so precarious, so pitifully defenceless against the
inroads of tyranny. Its position can be assaulted, sapped or
undermined from any angle. It can be destroyed simply by
denying free speech or by forbidding representative govern-
ment or by an authoritarian distribution of workers between
jobs, or by regimenting the consumer or by abolishing private
property. It can be defended only by a robust defence at
every point of the precious minimum circle of individual
rights.
 PLANNING AND FREEDOM

IV
The planned and centrally directed economy must in-
evitably undermine the economic freedoms and, with them,
the whole fabric of a free society.

Freedom of Occupation
If there is a plan in the sense of a closely integrated set of
controls to bring about a predetermined economic end, then
clearly there must be no recalcitrant element. For that
would upset the whole of the plan. Labour is one of the
resources which must be forced to fit into the scheme as a
whole. Some forms of State restriction, such as those on
raw materials, on consumer's income, on the use of property,
can often be imposed without creating, at least at the outset,
the sense of servitude. But direction of labour is one control
which, to most minds, stands out so grossly as slavery that
the battle for freedom will probably be lost or won at this
point. It is not, of course, true that a society is free so long
as there is, legally, no direction of labour. Other forms of
coercion may render the legal freedom of the worker meaning-
less. But if the worker is told what to do and when to do it,
then clearly nothing remains to defend.
Now direction of labour is inevitably bound up with a
plan courageously followed to its logical conclusion. How
powerful are the forces driving in that direction can be well
exemplified by the story of how the British planners, against
all their best instincts, were driven to the restoration of
conscription of labour in 1947.
At that time, largely due to the Plan, labour was seriously
maldistributed in the sense that consumers were being
offered the goods of one type of industry - notably engineer-
ing - when they would have much preferred the goods of
other industries - such as the textile industries. This
problem was variously, and misleadingly, described as 'the
problem of the undermanned industries' or ' the problem of
192 THE NEW ORDEAL BY PLANNING
the overall shortage of man-power'. The fantastic position
in which the economic system was making the wrong things
was clear to everybody. It was also clear that redistribution of
labour was required to avoid the enormous real economic
waste involved. What was to be done about it?
Every route appeared to be blocked. Mr. Attlee, than
whom there could be no sturdier democrat, tried to find his
way out of the dilemma by making a moral appeal, by throw-
ing the insoluble problem back on the worker. In a broadcast
appeal to the nation on March 18, 1947, he said:
Ask yourself whether you are doing the kind of work which
the nation needs in view of the shortage of labour. Your job
may bring you in more money but be quite useless to the com-
munity. You may complain of the shortage of coal or houses . . .
towels and underclothing ... but have you any right to com-
plain if you are content to do some better-paid but quite useless
work?
But, clearly, to ask the individual to decide what is socially
useful work, outside the price system, leads straight to chaos.
In the event few, if any, members of the public seem to have
taken any notice of the appeal. It is clear also that some
members of the Government were in favour of a ' national '
wage policy, that is central control of wage rates by the State
in order to create the necessary attraction towards the under-
manned industries without increasing the existing inflationary
pressure. It was never clear just how that policy could have
been operated. But, in any case, the trade unions were firmly
opposed to any domination of their functions in the sphere of
wage-fixing whether this meant direction of labour or not. I
At the beginning of 1947 no public figure would have
dared to declare himself in favour of labour conscription in
peace-time. By the autumn of that year it was the law of the
I Thus Mr. Deakin, Secretary of the Transport and General Workers'

Union, said at the Annual Conference on July 15, 1947, " trade unions must
be ready to accept a limited measure of direction to meet the nation's pressing
economic needs" . At the Labour Conference earlier in the year he said, .. under
no circumstances is the regulation of wages a matter for the Government. The
people that I represent are not prepared to play second fiddle."
 PLANNING AND FREEDOM 193

land that (with the exception of a small proportion of the

working population) no man between the ages of 18 and 50
years and no woman between the ages of 18 and 40 years
could change his or her occupation at will. Every such change
had to be registered at the Employment Exchange, and the
Minister of Labour had the power to direct workers changing
their jobs to the employment he considered best in the
national interest.
It is extremely significant, and indeed sinister, to watch
how, by the logic of events, the ardent planner, still retaining
his respect for individual freedom acquired from his up-
bringing in another type of society, was driven to hedge, to
temporise, to qualify and finally to capitulate before the
inexorable demands of the Plan. This can, perhaps, best be
seen through the speeches of Sir Stafford Cripps.
In February 1946 he had said:
Our objective is to carry through a planned economy without
compulsion of labour.
In the debate in the House of Commons on the Economic
Survey for I947 in March 1947, when the fuel crisis had given
us a foretaste of what was to come, he had said:
We are attempting to make a success of democratic planning
and, save for emergency measures such as are necessitated by war,
or may be necessitated by some urgent economic crisis, we have
decided not to employ, as a normal matter, methods of direction
or compulsion of man-power outside the necessities of defence.
(My italics.)
On August 7, 1947, during the debate on the State of the
Nation, and one day after Mr. Attlee had indicated that it
was intended to resume powers of direction of labour, Sir
Stafford made this statement:
It has been decided to stop, by negative control, further people
from going into the less necessary industries. If, at some future
date, further and more stringent measures become necessary, we
can then consider the question of the direction of labour, but my
right hon. friend the Prime Minister said it was only in a marginal
194 THE NEW ORDEAL BY PLANNING
case connected with the negative control that that power might
possibly be used under existing circumstances, not as a general
proposition.
On September 12, 1947, still refusing to face the fact that
the Government had been forced to choose between planning
and freedom of occupation and had plumped for planning,
he said:
We do not propose to introduce industrial conscription unless
it is proved there is no other way out.
Attempts were made to minimise the significance of what
had happened. The power of direction was to be employed
, to a limited extent'. The control was to be ' negative' and
, marginal '. Direction was not to be used as ' an instrument
in itself'. It was argued that we had never really been with-
out direction of labour because, in the past, it had come
through starvation. 1
The barriers, however, were down. For the first time
Great Britain had accepted labour conscription in time of
peace. It was evident from the start that if the direction
of labour was ' limited ' then it would not serve the purpose
of the Plan. Although it had been indicated that workers
would not be expected to leave jobs they were already in,
Mr. Isaacs, by the middle of September, was saying:
If more extensive direction were found necessary, the Govern-
ment would not hesitate to use it.
Although it had originally been understood that workers
would not be moved from their own districts, it was soon
announced that single men and women and married men ' in
special cases' would be liable to be sent away from home.
Although it had been originally stated that direction would be
applied only to unemployed persons refusing to take essential
work, it quickly became evident that the Government intended
to take full advantage of its slightly nauseating campaign
against 'spivs and drones' by including within this term
I Mr. Bevin, addressing the Trade Union Congress on September 3, 1947.
 PLANNING AND FREEDOM 195

workers who were making • no contribution to the national

well-being' as well as persons not gainfully employed who
were capable of work.
So long as the aim is a planned economy there can be no
doubt of the trend of social pressures: it will be towards a
progressive restriction in the choice of occupation. The path
can be cleared by very obvious devices: by imposing addi-
tional restrictions during the periodic planning crises when
sacrifices can be called for in the national interest; by claim-
ing that the control will be applied sympathetically; by falling
severely on the less well-organised workers who cannot resist
effectively; by running heresy hunts against the • drones '
in society who happen to be doing jobs of which the State
does not approve; by public belittlement of some kinds of
work as against others.
This further narrows the circle of choice of occupation,
which is, in any case, inevitably restricted with growing
socialisation. For, as the bureaucracy grows, the economic
horizon for the individual is cut down. What remains of
private enterprise is under a cloud. The big opportunities
are to be found as administrators in the State organisation.
It is safer to be a bureaucrat than a maker, and the young men
know it. As the ceiling of opportunity comes down, they will
be forced to stoop lower and lower over their official desks to
think of nothing but their subordination. It takes the heart out
of young men, and out of every woman who runs a home and not
an office. It is not only politically false but morally destructive. I

The Freedom of the Consumer

It has already been indicated 2 that the free consumer will
always stand between the planned economy and the achieve-
meht of its targets, and that every planned economy has called
for sacrifices on the part of the consumer and has used up no
little part of the resources of the community in devising ways
of curbing the total and minimising the variety of consumer
I Charles Morgan, Sunday Times, July 7, 1946.
• See Chapter IV.
196 THE NEW ORDEAL BY PLANNING

goods. The real economic waste of a system in which goods

are not being produced in the proportions in which consumers
would freely choose to buy them can never be measured.
But it may be enormous and it is likely to grow. For the
longer the system operates without consulting the consumer
the more at sea the whole economy becomes. In the early
stages of a planned economy the pre-plan preferences of the
consumer act as some sort of rational guide, but, gradually,
this indicator loses its validity.
The curbing of the consumer carries with it threats to
other forms of freedom. For when the shortages become so
acute that they cannot be wholly denied, opportunities are
provided for that strident State propaganda which is so un-
pleasing a feature of the planned economy. The propaganda
may be employed for the relatively innocuous purpose of
extolling the virtues of austerity. But it must mainly be
devoted to identifying and denouncing the enemies who are
threatening national survival. The culprit may be the person
who asks for something different from the standardised
article; I this helps to condition the public to the belief that
to be different is to be wrong. Or the culprit may be found in
the people of another country 2 who are blamed for eating too
much, or for not being generous enough, o~ for letting their
prices rise too high, and so on. This helps to deaden the sense
of individual responsibility without which respect for the
rights of others is impossible.
If the consumer is to have only limited rights in the home
market, then he must be carefully watched and controlled if
he attempts to travel to countries where the consumer is
permitted the license of spending what income he has on
I Thus the Parliamentary Secretary to the Ministry of Food declared on
February 25, 1947, when urged to provide a greater variety of cheese, " the
function of the Ministry of Food is not to pander to an acquired taste but to
ensure that people who have never had the time to acquire thcse tastes are
suitablv fed ".
2 Thus in 1947 a very large number of people in Great Britain (which had
within the previous eighteen months spent £1000 millions loaned by the
United States) sincerely believed that their troubles were largely due to the
actions of the American people.
 PLANNING AND FREEDOM 197

what goods he wishes. Such travellers may bring back to the

home country stories which throw doubts on the case for
planned production. So that exchange restrictions, currency
controls, postal censorship and elaborate passport arrange-
ments became a normal part of the planned system.

The Destruction of Free Enterprise

In some planned economies an attempt is made, at least
for a period, to retain some of the value of free economic
enterprise by leaving a certain field open for such enterprise.
In Great Britain, for example, the Labour Government
declared its intention of leaving 80 per cent of the economy
• free'. 1 This, in itself, was proof that the Government did
not understand what constitutes a free economy. Free enter-
prise is impossible where the State controls certain funda-
mental processes. Thus it can control the whole economy
through the control of investment, or the control of imports,
or the control of coal, or the control of transport. Even
where it actually owns no indus.try it can destroy the operation
of free enterprise by a set of controls which purport to replace
the price system. Z In a • mixed ' economy of this kind each
industry will necessarily organise itself to fulfil the general
orders of the Government; monopoly must be the order of
the day. Moreover, the constant threat of impending nation-
alisation will not only destroy incentive and lead to a failure to
take risks. It will also result in policies being pushed upon
industries which they recognise as uneconomical and which
they accept under duress of one kind or another. Once
the productive processes and their organisation become, in
this way, irrational to the managers, then cynicism and in-
difference creep in. A striking illustration of this is provided
by the policy of the British Government in seeking to force
the Lancashire spinning industry to form very large amal-
1 See M. Young, Labour's Plan/aT Plenty, p. 81.
a Anyone interested in a detailed account of the manner of operating one
such' free' industry should read a letter, • Chocolate Circus', in The Economist,
August 9, 1947.
198 THE NEW ORDEAL BY PLANNING
gamations. In the innumerable public and private enquiries
which have been made into that industry there has never been
any shred of evidence put forward to support the claim that
large amalgamations have any advantage over spinning mills
of about 100,000 spindles. The Cotton Working Party was
unable to discover any such advantages, and indeed one-half
of the members of the Working Party set forth sound reasons
why the amalgamations might well be less efficient. I Despite
this the Government sought to impose amalgamation on the
industry by offering large subsidies to them and by granting to
them priorities for the delivery of new machinery. Even these
bribes were insufficient to lead the greater part of the in-
dustry to adopt methods of organisation which it knew to be
uneconomical.

The Destruction of Independent Thought and Criticism

In the long run the planned economy destroys the in-
dependent habits and attitudes through which alone freedom
can be preserved. As private property diminishes in import-
ance through penal taxation, the lowering of the rate of
interest and the growing relative importance of State property,
fewer and fewer people are in the independent position in
which they can fearlessly criticise Government policy without
risking their livelihood and the security of their family. The
number of people grows whose incomes wholly or partly
depend upon keeping their mouths shut and their thoughts
private. The planned economy always involves a great
increase in the number of Government officials who can
hardly criticise their employer without risking their chances
of promotion. 2 Business men operating in what is left of the
I See Cotton Working Party Report, p. 220.
2 In January 19....7 the General Manager of the North-Eastern Division of
the National Coal Board sent out instructions that, in regard to their officials,
" all council work such as R.D.C., D.C., etc., must cease within three months
from today". Only as a result of public outcry was an undertaking extracted
from the Government that" the vast majority of those employed in nationalised
industries will be as free as those employed in other industries to participate
without restriction in political activities whether national or local". Mr.
 PLANNING AND FREEDOM 199

free economy know only too well that there are innumerable
ways in which outspoken critics of official muddles can be
penalised. They may tell in private their stories of planning
inefficiency but, in self-defence, they dare go no further. I
And some professional' classes, such as accountants and
lawyers, often stand to gain, at least for a time, out of the
conditions which exist under extensive Government inter-
vention.
Independence is further undermined by the deliberate
destruction or the progressive atrophy of voluntary organisa-
tions and associations. These forms of co-operation are not
'plannable instruments' and must, therefore, be frowned
upon in the planned system. Voluntary associations are the
life-blood of free society; they have in the past led to much of
our progress in education, social insurance and health services
because they have left the way open for groups of like-minded
people to experiment with new ideas and to criticise existing
methods by showing the way to do better.2 They are hardly
likely to survive in an environment in which it is assumed
that the State has taken upon itself the responsibility, often
to the deliberate exclusion of private effort, for all social
servIces.
The planned economy must finally destroy the very
instruments of free speech. The burden thrown upon the
legislature by the enormous mass of work involved in a
planned economy inevitably drives the executive to restrict
the freedom of debate in the Houses of Representatives. 3
Shinwell had been guilty of the following outburst, " I am bound to say that
for a mine manager to contest a seat in the Tory interest against a Labour man
in a mining constituency is a first-class piece of impudence H (Sunday Times,
February 2, 1947).
I There was an' interesting discussion in the House of Commons on June 23,

1947, as to whether officials of electricity supply companies who had opposed

nationalisation would be eligible for posts in the industry after nationalisation.
Mr. Shinwell, on that occasion, said, " I say quite frankly that . . . if I have to
appoint electricity boards it would be quite improper to appoint to such boards
a person who was definitely opposed to the nationalisation of the industry H.
Z See Braithwaite, The Voluntary Citizen.
3 The classic instance is the manner in which the Transport Bill was rushed
through the House of Commons.
200 THE NEW ORDEAL BY PLANNING

When resources have to be allocated between rival uses, the

claims of the instruments of free speech will be relegated to
second or third place.! Harassed by the interminable com-
plexities of their own system, the planners must finally be
driven, in order to keep economic life in operation at all, to
cut through their knots by making arbitrary decisions and
stifling unwelcome criticism.
Perhaps, however, for the mass of the people the whole
atmosphere of independence and freedom is most insidiously
destroyed by the proliferation of minor officials, essential for
the working of the plan, each of whom is charged with certain
powers over our everyday actions. These officials are no
better or worse than any of us. Most of them may be con-
scientiously anxious to carry out their duties and to use their
powers with discretion and understanding. But the system
which brings them into existence is dangerous. They are
conscious of their power, they (and those who are subject to
them) recognise the inconvenience of recourse to appeal
against the exercise of that power. These are the conditions
which may multiply petty tyranny of the most obnoxious
kind. The network of power may extend quietly without it
being remarked. The Prime Minister revealed in February
1947 that seventeen Ministries have power to authorise
inspections involving the entry into private houses and
premises without a search warrant. It later was admitted
that 10,916 Government officials were authorised to carry
out inspections and investigations without a search warrant.:l
The ' snooping' called for in enforcing regulations leads to
the creation of a new body of plain-clothed police whose work
may differ little from that of the agent provocateur. 3 This is
[ During the fuel crisis of early 1947 Mr. Shinwell forbade the publication
of periodicals even though, as it emerged subsequently, he had no power to do
so. During the growing economic crisis over the balance of payments in the
middle of 1947 the first really serious cut in imports was made in newsprint.
• House of Commons, March II, 1947.
3 The Evening News reported such a case on December 31, 1946 :
Mr. John Flowers, K.C., defending at East Sussex Quarter Sessions,
Lewes, a Hove restaurant proprietor accused of supplying meals over the five-
 PLANNING AND FREEDOM 201

the sordid atmosphere which breeds the anonymous informer

and everywhere sets one man against another. I

v
The modern planning movement sets out, with good will
and noble intentions, to control things and invariably ends
up by controlling men.
It is precisely because the centrally directed economy
breeds crises that it always brings about a continuous narrow-
ing of the rights of the individual. The errors in the plan and
the mistakes of the planners can be covered up if they can be
disguised as natural misfortunes, which strong nations should
meet manfully by accepting lower standards of living and
more personal restrictions. It often arises, therefore, that
economic disasters which are themselves due to the absence of
individual economic initiative result in even tighter State
control and less room for such initiative. There is no end to
this process of seeking to cure the evils of planning by more
planning except a totalitarian economy of the Russian type.
Such a prospect is terrifying unless one believes in the
shilling maximum, submitted that it was a shocking thing that people employed
by the Government should go into restaurants and deliberately attempt to bring
about an offence. . . .
He was commenting on the fact that a Food Ministry enforcement officer,
Henry J ames Reed, and a Miss Dickerson, his typist, went into Tommy Tucker's
Larder at Hove, on June 25th, and ordered meals costing a total of 14 shillings.
Reed agreed that he had tried to get the restaurant people to go over the
five shillings. When he asked the waitress, Mrs. Pelham, for trifle, she said:
" I'm not supposed to, but I'll try to get you one."
Mr. Flowers: "Did it occur to you to say' If you are not supposed to,
don't' ?" -" No."
Mrs. Pelham said Reed pestered her for trifle and she got one to get rid
of him.
At Carmarthen on December 30th Mr. Lewis was fined £2 for buying
rabbits at a price exceeding the maximum. The divisional enforcement officer
of the Ministry of Food admitted that, on the instructions of the Ministry, he
had taken a dozen rabbits to the market. The defendant approached him and
offered and paid him 2S. 6d. each for the rabbits. (The Times, December 31,
1946.)
I The Board of Trade receives 200 anonymous letters monthly about ration-

ing offences being committed by named individuals. The corresponding figure

for the Ministry of Food does not seem to have been made public.
202 THE NEW ORDEAL BY PLANNING
creation of a society in which the economic status and func-
tions of the individual are determined by the State. And
there are people who would argue that the economic freedoms
are unimportant and are not wanted. They may be right.
But the evidence is still strongly against them. The Army
provides security, status and an opportunity of service, but
when, in peace-time, did men flock in unlimited numbers
voluntarily into the forces? Can there ever have been a more
costly and futile experiment than that of the' Bevin' boys,
an attempt to apply war-time conscription in the coal-mines,
with its absenteeism and wholesale desertions? There
would be one way to test the truth of this monstrous slander
on the human race. It would be to throw open the frontiers
of all countries and to observe whether the movement of
population was outwards from or towards the totalitarian
States. I Until we are quite sure that people would flock away
from the countries which provided opportunities for economic
independence we must go on believing that people can only
be deprived of their freedom, either by their own intellectual
errors concerning the economic organisation of society, or
through the deceptions of their rulers.
I It is not without significance that in August 19-47, according to a state-

ment by Mr. Churchill, half a million British people had applied to emigrate to
the Dominions, and several hundred thousand more wanted to go to the United
States or South America.
 CHAPTER IX

THE MORAL SICKNESS OF A PLANNED

SOCIETY
The prime principle of the Socialism for which we stand
lies not in the methods of organisation of our society
that we adopt but in the high purpose at which we aim.
SIR STAFFORD CRIPPS, Democracy Alive.

SOCIALISTS have always held that, apart from its other

deficiencies, the market economy is fundamentally immoral.
The profit motive, it is argued, is unchristian since it breeds
selfishness, acquisitiveness and the idolatry of wealth. In-
equality of income divides communities into non-sympathetic
classes and leads to exploitation. Competition puts a premium
upon dishonesty and deception and forces producers to make
shoddy and adulterated goods. The growth of big business
debauches public life and corrupts the legislature. The
ostentatious display of wealth by the rich destroys taste and
judgment in the arts. The rich become a ruling class to whom
the rest are subject through economic necessity. I The in-
justices which men create for themselves can only be removed
by the State, " which is, in fact, accepted as the nearest we
can get to an impartial judge in any matter". 2
Now the centrally directed economy is the ultimate
manifestation of State activity. Does the experience of
planning in Great Britain suggest that this form of economic
organisation stimulates the life of the spirit and fosters those
simple, upright human associations which are universally
regarded as the test of civilised living?
I Those who feel that this summary of the socialist attitude is overdrawn

should read the Webbs' The Decay of Capitalist Civilisation; R. H. Tawney,

Ths Sickness of an Acquisitive Society; Sir Stafford Cripps, Towards Christian
Democracy.
• Sir Stafford Cripps, Towards Christian Democracy, p. 55,
203
204 THE NEW ORDEAL BY PLANNING
The answer can be given very briefly. Since 1945 the
Supreme Planners have been increasingly engaged in search-
ing for alibis, in hunting for scapegoats and in trailing red
herrings. The public have increasingly devoted themselves
to the evasion of the law and to operations upon the black
markets. Contempt for authority has increased; class
consciousness has become more acute; cynicism regarding
corruption in public life more prevalent; personal and class
irresponsibility more in evidence; gambling practices more
widespread. Liberal society in all its aspects is being eaten
away.
This, of course, is not the fault of any individual or group
of individuals. It is the fault of an economic system which
multiplies unenforceable laws and hence the opportunities of
breaking them, ana which places upon the materialistic con-
ception of life so great an importance that the spiritual values
are weakened or stamped out. Under it, men of integrity and
good will may just as easily be dragged down to lower moral
standards as are the crooks and the law-breakers.

Alibis, Scapegoats and Red Herrings

In the centrally directed economy the Supreme Planners
take the crucial economic decisions; they must, therefore,
take responsibility for the consequences of those decisions.
They will be inclined to put the best possible gloss upon their
economic achievements and, since they alone are in the
possession of all the facts, this is not a difficult matter. But
when the inevitable mistakes are made they will be tempted
to conceal their errors, or to attribute them to forces over
which no one can have control or to ascribe them to the wrong-
doing of others. On such occasions the public, lost in the
labyrinth of highly technical questions and confused by
masses of statistics, is robbed of the power to judge either of
the competence of the planners or of the efficiency of the
system they are trying to operate.
British experience since 1945 provides many illustrations
 MORAL SICKNESS OF A PLANNED SOCIETY 20 5

of attempts on the part of planners to shift from their own

shoulders the blame which rightly belongs there. The dis-
cussion in late 1946 and early 1947 on the consumption of
food is an excellent example of the attempt to confuse the
issue. In May 1946 Sir Ben Smith I said frankly:
The food situation [of 1939-44] prevails substantially today
and its continuance imposes an increasing strain on the patience
and the good will of the public.
On November 13, 1946, Mr. Dalton 2 made this striking
statement:
Most of our people (my italics) are better fed under present
rationing than before the war under Tory rule.
Mr. Attlee had, on November 12, 1946, made a similar
statement:
Broadly speaking, the mass of the people (my italics) are better
fed than in the days of peace.
These statements raised a storm of protest among the
public, who wer,e acutely conscious, whatever might be said
about their calorie intake, that they were short of nearly all
the more appetising and popular staple foods and that they
were compelled to meet their physical needs by filling up with
larger quantities of the bulky and less attractive cereal food-
stuffs. The Government were finally forced to moderate
their claims to Mr. Strachey's statement on February 25,
1947, that-
The bottom third of the population (my italics) is better fed
now than before the war.
The truth was that, before the war, about one-third of the
population was below the' poverty-line' standard of food
consumption and two-thirds at or above that standard. In
1946 the whole of the population was at the poverty-line
standard: one-third had gained, two-thirds had suffered.
Mr. Strachey, even whilst ultimately admitting this, sought
I Huw Britain Was Fed in War-Time.
• In a lecture before the Fabian Society.
206 THE NEW ORDEAL BY PLANNING
to evade the issue by declaring that even if the people had not
sufficient food they had plenty of money: I
It was a splendid thing that the British people for the first
time were getting enough money to buy all the food they ought
to have.
In brief, the Government, finding it impossible to boast about
the supplies of food, sought to confuse the issue by boasting
that they had allowed an inflationary position to develop.
The fuel crisis in the winter of I947 also produced its
crop of alibis. For a time in I946 the shortages of heat, light
and power had been met by declaring that "people were
getting more coal now and will get more coal during the
winter than they got before the war. One of the reasons,
strangely enough, is that they can afford to buy it." 2 Fears
that a real shortage of coal would develop and affect electricity
supplies were brushed aside. "The shortage of coal had
nothing to do with the interruption of electricity supplies." 3
When the crash came early in I947 and the power stations
and industry had to be closed down, Ministers dodged about
from one explanation to another as it fitted their purpose:
the bad weather, the shortage of coal, the inadequacy of the
equipment of the power stations, limited transport facilities,
the plentiful purchasing power of the public, the earlier mis-
doings of private enteI'prise. Later Mr. Dalton sought to lay
part of the blame on the whole community. The breakdown
of the electricity supply had been made the more certain by
the failure of the plan to check the rapid growth in production
of electric fires. Mr. Dalton had contributed to this by taking
the Purchase Tax off them in his I946 Budget. In his I947
Budget he re-imposed the tax and said: 4
The gift of foresight is sometimes denied, not only to Ministers
of the Crown and Members of Parliament but to the whole
I October 16. 1946.
2 Mr. Shinwell. September IS. 1946.
3 Mr. Shinwell. October 28. 1946.
4 House of Commons. April IS. 1947.
 MORAL SICKNESS OF A PLANNED SOCIETY 207

community. . . . It is quite clear we were all wrong - all of us-

about these electrical appliances.

As the errors of the planned economy piled up, and the

balance of payments crisis of August 1947 supervened, the
excuses widened. Planning apologists argued that our
troubles were due to two hundred years of Tory misrule, to
the loss of man-power during the war of 1914-18, to the
failure to raise the school-leaving age and to reorganise
industry between the wars, to the economic policy pursued
between 1919 and 1939. The Government in the debate on
the State of the Nation on August 6 and August 7 explained
the crisis on four grounds.
First, without openly saying so, they sought to lay blame
upon the United States. The rise in prices in America had
reduced the value of the loan, but no one mentioned that when
the ioan had been granted all socialists believed that the
United States, with its unplanned economy, was certain to
go into a depression with a consequent fall in prices. There
was a universal C dollar starvation " but no Minister pointed
out that this was not due to any backsliding on the part of the
Americans but simply to the desire of other countries to buy
from the United States more than they could really afford
to buy.
Second, they pleaded the serious consequences to the
British economy of the fuel crisis earlier in the year. This is
the first recorded attempt to explain away one planning crisis
by reference to an earlier crisis.
Third, they made what they appear to believe is an
entirely novel discovery about the place of Great Britain in
the world economy. Our position from 1914 onwards, by
which we exported manufactured goods and imported food
and raw materials, was C artificial '.1 Something mysterious
had gone wrong with the C balance' between the Old World
and the New.
I Mr. Attlee.
208 THE NEW ORDEAL BY PLANNING
The world dollar-shortage is fundamentally a problem of
under-productivity outside the Western Hemisphere . . . . The
only permanent remedy is the restoration of the balance between
production in the Old World and production in the New. 1
This Government had at last probed to th~ heart of things.
The economic relationships of the world have vastly changed
since before the first world war. . . . On the present basis of
world production and consumption there is a balance of pro-
duction in the United States of 12-13 billion dollars a year
which must, however, be transferred somehow to the rest of the
world . . . .2
The truth up to now had been concealed from us.
The period of living on our 19th-century investments is
over. . . . This fundamental change in conditions of our national
life has been cloaked in recent years by many factors. 3
It is almost impossible to disentangle this appalling jumble
of false statistics, inaccurate economic history and bad
economics by which tired Ministers, worn out in the pursuit
of their unattainable aim of planning the economy, sought in
a new crisis to convince themselves and others that what had
happened could not be laid at their door. But it will suffice
to make three comments. The loss of British overseas invest-
ment was not the cause of the economic malaise. Great
Britain has not disposed of the whole of her investments. In
1946 the income from overseas investment was £ISO millions;
in 1938 it was £20S millions. The difference of £SS millions
is insignificant in relation to the real difficulties of the nation.
It is not true that it is artificial for a country to live by selling
some things and buying others. This is precisely how every-
body in the world does live. It is not true that there are any
special difficulties involved in poor countries trading with
rich, this kind of international trade went on throughout the
nineteenth century. It was the basis of the industrial emer-
gence of Great Britain and of the benefits which our free trade
policy brought to the world.
I Mr. Attlee. 2 Sir Stafford Cripps. 3 Mr. Dalton.
 MORAL SICKNESS OF A PLANNED SOCIETY 209
Prevarication may be the first line of defence of the planner
but it is rarely regarded as sufficient in itself, and planned
economies have always resulted in much talk of sabotage by
which the war can be carried into the enemies' camp. It is
beginning in Great Britain. Mr. Shinwell has accused the
mine-owners of a lack of patriotism. I Mr. Bevan has in-
dicted the private house builders for his own failures. z Mr.
Morrison 3 and Mr. Shinwe1l 4 have not even scrupled to
impugn the patriotism of Mr. Churchill. Sir Hartley Shaw-
cross attacked the Housewives League because they expressed
dismay at " the collapse of our standard of living". These
" were not the women of Great Britain at all ".5 Sir Stafford
Cripps described their activities as "unpatriotic propa-
ganda ".6
But perhaps the most sinister manifestation of this
defensive head-hunting was the hysterical drive that was
made in the middle of 1947 against • spivs and drones'. The
Government declared that increasing war was to be waged
upon these enemies of society.7 No one quite knew who or
what they were except that they frequented the Riviera,
Ascot or Soho, and got their photographs in the Tatler and
Bystander.8 So elusive, indeed, was the concept that Mr.
Isaacs described them as ' eels and butterflies'. 9 This was a
hunt in which the quarry was unidentifiable and the crime
I " I have a suspicion - not without solid basis - that some mine-owners
are more concerned about picking the eyes out of the pits while they are in their
possession than they are about the future" (October 3, 19....6).
Z " If . . . the completion of houses has not been as rapid as we expected
. . . then the indictment is an indictment of private economic adventure in
house building" (October 21, 19....6).
3 " [Mr. Churchill] chose to make a party political speech calculated to
weaken our solidarity and the will to win through and to damage us abroad "
(August 23, 19....7)·
4 " It is shocking that in this critical situation the Tory Party, led by Mr.
Churchill, are promoting the maximum amount of mischief."
5 June 8, 1947.
6 June 16, 1947.
7 Lord Pakenham, House of Lords, August 6, 19.... 7; Mr. Attlee, House of
Commons, August 6,19....7.
I Mr. Driberg, August 7, 19....7.
9 September 2, 19....7.

H
210 THE NEW ORDEAL BY PLANNING
undefinable. But the trail was good enough to divert attention
from the real architects of the economic chaos.

The Petty Restrictions

Whilst the major blunders of the planners can, at least
for a time, be concealed or passed off as acts of God so that
the public come to accept them patiently as they would
changes in the weather, the minor restrictions necessarily
imposed upon individuals by the smaller fry of the bureau-
cracy are more immediately vexatious and more easily trace-
able to their source. It is here that the public become most
acutely aware of the personal restriction and the waste of the
administrative controls.
No pen could fully describe and no mind could wholly
. grasp the vast mesh of controls in Great Britain that now
circumscribe everyday action. But a casual reading of news-
papers over a few months throws up sufficient cases to provide
some notion of the extraordinarily fine network of restraints
and hindrances that surround us.
A market gardener requires a new shaft for a wheel-
barrow, a piece of wood costing perhaps ninepence. A licence
must be applied for from the surveyor of the district council
on the appropriate form. The licence has to be registered
and filed by the district surveyor and then presented to,
registered and filed by the timber merchant. I A local author-
ity for roads wishes to improve visibility at a dangerous
junction by substituting some twenty yards of iron fence for
the existing hedge. To obtain permission to do this five
enormous forms and nine maps, some of them coloured, have
to be prepared and submitted. 2 The despatch of a small ship-
ment of six drums of lubricating oil involves the filling in of
forty-six forms, requiring forty-two signatures, not including
the customer's invoice or delivery notes. 3 A local authority
I Daily Telegraph, February 3, 1947.
2 Daily Telegraph, February 3, 1947.
3 jl,1anchester Guardian, June 26, 1947.
 MORAL SICKNESS OF A PLANNED SOCIETY 211

cannot increase the pocket-money of a child under its

care without first obtaining sanction from the Home Office. 1
Newspapers are fined for exceeding more than 55 per cent of
advertising matter. z A firm is fined for making 60,000 frying-
pans for the home market, although it is established by
evidence that the firm had done this only because of long
delays by the Board of Trade in providing an export licence,
a licence which in fact had been received after the fine had
been imposed. 3 A provincial corn merchant operates under
fourteen licences and 160 fixed prices. His books have been
minutely investigated five times since control began; in-
spectors drop in at least four times a year to see if they can
catch him; the Costings Department of his Ministry require
his trading accounts and balance sheets; he is expected to
remember the salient points of hundreds of Orders and
Regulations. 4 Orders are couched in language open to all
sorts of meanings so that the public could not know whether
they were acting legally or not unless they took counsel's
opinion or a solicitor's advice. 5 Four Lincolnshire farmers
are fined £1200 for growing canary seed. 6 Mrs. Shenton,
aged 79, is fined £ 1 0 for growing too few potatoes; 7 she
said she had responded to a Ministry broadcast appeal to
grow more wheat.
Producers struggle to work through a coil of regulations
that must defeat all but the hardiest or the most unscrupulous.
One authenticated case of this must suffice. 8
We apply to the Timber Control on a large form, in triplicate,
measuring 161 in. by 81 in., stating our requirements. We use
timber (hardwood) for a great number of lines, but as there is
I Manchester Guardian, July 2, 1947.
2 Manchester Guardian, November 8, 1946.
3 Manchester Guardian, November 9, 1946.
4 Sunday Times, January 19, 1947.
5 The Lord Chief Justice, discussing the Eggs (Control and Prices) Order as
amended by an Order dated June I, 1945 (S.R. and O. 1945, No. 645).
6 The Times, January 6, 1947.
7 Manchester Guardian, December 6, 1946.
8 Manchester Guardian, February 24, 1947.
212 THE NEW ORDEAL BY PLANNING
little room on the form we give a representative few. The Timber
Control returns the application stating that we must apply to the
Ministry of Supply for one line, to the Board of Trade for another,
and to the Ministry of Education for another.
We prepare new sets of the application forms, in triplicate,
for each Ministry mentioned and send them despondently to
London. After some weeks replies come from the Ministries.
One says that we are not permitted to make such articles without
a permit, though we have been making them for forty years and
they are essential to every business. Another Ministry says we
must apply to another section of the Ministry at another address,
though we sent it to the address given by the Timber Control.
We try to enlighten the first Ministry and we send a further
application to the second one.
But the third, the Ministry of Education, asks us to furnish
the actual orders from the schools which are going to use the
articles we wish to make. This is impossible as the schools do
not send their orders to us but to their own local education
authority. Neither do the local education authorities send us
orders - the business is not done that way, but the Ministry
seems singularly unaware of the manner in which schools get their
supplies.
The Ministry wants the actual orders to make sure that we
make only the actual quantities needed and leave none over for
stock. But we cannot make such things in ones and twos as they
are required, or the cost would be prohibitive. All this has to
be explained to the Ministry, and much correspondence follows ;
on our part, we reply by return, but the Ministry takes several
weeks to reply.
Eventually we may get a licence for part of our needs in one
or two cases, and in the others we give up in despair. Meanwhile
our woodworking department is desperately needing the timber,
and in one case it took seven months to get the licence through.
Even then, our timber merchants tell us we are only at the
beginning of the struggle, as the merchant has to battle with the
Timber Control to get an allocation even when he has our licence.
When we want further supplies for the same purpose it is
quite useless referring to previous correspondence; the whole
business of detailed explanations has to be gone through again.
Apparently the Civil Service does not possess any filing system.
With a first-rate filing system the Civil Service would probably
save thousands of clerks - but that is not the bureaucrats' way.
Criticisms of this kind are met by statements such as those
of Mr. Attlee at the 45th Annual Conference of the Labour
 MORAL SICKNESS OF A PLANNED SOCIETY 2 13

Party. "The demand for the abolition of controls is practi-

cally confined to the lunatic fringe."
The detail of the control is incredible. The Board of
Trade Journal warns retailers that it is illegal to embellish
utility furniture. I The women of Pangbourne wanted to
run a bazaar to raise funds for a village hall; they were
informed by the Board of Trade that a pair of boy's trousers
made out of an adult's skirt or trousers are regarded as new
and, therefore, coupons must be charged. z The Board of
Trade finds time to fix maximum prices for haircuts. 3
Churchers College, Peterfield, receives a form from the
Ministry of Fuel and Power informing them that their pre-
vious allocation of coke had been cancelled and that their
basic allocation for the twelve months to April 30, 1948, was
nil tons, that it was possible only to allocate nil tons, divided
as to nil tons a month in the summer and nil tons a month
in the winter, and that the name of the supplier was also
indicated. 4 Boxes containing fragments of wedding-cake sent
to friends abroad are emptied and sent on empty because the
export of confectionery is prohibited. s The Government seeks
to impose an Order preventing a householder from decorating
his own house, without getting a licence, if the cost of the
raw materials plus the estimated cost of his own labour comes
to more than £10. Strong protests forced the Government
to exclude the cost of labour but not to drop the control. 6
The owners of private gardens are prohibited, except under
licence, to bottle fruit and sell it to the public.7 A house-
holder cannot obtain a replacement for a cracked wash-bowl
without getting a licence from the local authority and having
the bowl examined to prove it is unusable.
The list of futile, harassing and costly prohibitions could
I Manchester Guardian, November 30, 1946.
2 Time and Tide, March 22, 1947.
3 Manchester Guardian, June 23, 1947.
4 House of Commons, June 19, 1947.
5 Manchester Guardian, November 25, 1946.
6 House of Commons, February 27, 1947.
? House of Commons, June 18, 1947.
214 THE NEW ORDEAL BY PLANNING
be expanded almost indefinitely. It represents the inevitable
outcome of a planned economy where the exceptional cases
can never be allowed for and the regulations are drawn up
for the average man who does not exist. This state of
affairs has two serious consequences on the morale of the
people. It breeds a feeling that the law is brutally inept and
leads sensible people to seek its circumvention. And it
creates in the minds of the public a contempt for the, quite
innocent, minor civil servant who is the instrument through
which the Supreme Planners seek to impose their will.

Law-breaking and the Black Markets

As the planned economy unfolds its consequences the
ordinary member of the public is conscious of a group of
Supreme Planners making large errors, and a host of minor
planners who are enforcing regulations in which there seems
to be neither rhyme nor reason. It is in this atmosphere that
disregard for the law grows apace and the black markets
flourish.
Great Britain is not naturally a fertile field for black
marketing. The people are law-abiding by habit and tradi-
tion. There is no large agricultural population from which,
as in many other countries, food can be acquired illegally or
by barter. But there can be little doubt that, by the middle of
1947, a large part of the British population were breaking
some of the laws of which they were aware, a greater part
were breaking laws of which they were not aware, and a still
greater part would have been prepared to break the laws if
they had had the opportunity.
The anxiety of the Government regarding • spivs and
drones' was, in itself, good evidence of this. Responsible
and independent public men, not given to exaggeration, were
warning us of the decay of morals. I Thieving and petty
I Thus Sir John Anderson in the House of Commons, April 16, 1947: "A
proportion - I fear a growing proportion - are yielding to the temptation to
enter the black market . . . or to resort to various devices doubtfully within
the law". Or the head master of Clifton College, June 28, 1947: "In some
 MORAL SICKNESS OF A PLANNED SOCIETY 215

pilfering abounded. Barter, for those who had scarce com-

modities to exchange, became common. The use of pound
notes for the settlement of debts was employed as a method
of tax evasion. The black markets were particularly prevalent
in house repairing, food and clothing. A Minister lamented,
.. we cannot have a policeman behind every hedge".
The Decline in the Quality of Production
By the middle of 1947 it was a matter of common observa-
tion that a high proportion of the goods in the shops were
of bad design and poor quality. One indignant housewife
spoke the thoughts of many: "Enamelled store cupboards
and refuse bins, chromium ladles and fish slices that flake and
rust within a few weeks; knicker elastic that gives in after a
couple of weeks' washings; slippers and children's sandals
that part from their uppers after a little wear; scrubbing
brushes that moult; toys never intended for use by children;
aluminium saucepans that rust." She might have added
rubber hose which cracks within the first week, domestic
tools which fracture under strain, paint which cracks and peels
within the month, - and a mass of other equipment pitiful
in its ineffectiveness, heart-breaking in its wastefulness.
The trend towards the production of rubbish was un-
deniable, the causes of it obscure and diverse. In part it
was undoubtedly attributable to the existing inflationary con-
dition, for when manufacturers are certain that whatever
they produce can be sold, their anxiety to maintain the good
will of the consumer evaporates. In part it was due to the
shortages arising out of the bad distribution of raw materials
under planning which compelled producers to do their best
with the materials that came to them. In part it was a
reflection of the emphasis, common among planners, placed
on mass production and standardisation. The upshot was a
declining sense of service by the producer to the consumer,
homes the old English strict views on honesty and right dealing have been
allowed to go by the board. Transactions under the counter and in black
markets . . . are referred to by Borne parents in front of their boys."
216 THE NEW ORDEAL BY PLANNING
contributing to the dreariness of existence and representing a
real waste of economic satisfaction. I

The Growth of Class Consciousness

All real progress in society consists of the growth of
charity, freely and spontaneously expressed, through which
the material distinctions between individuals are smoothed
away in the consciousness of their common human heritage.
This was the philosophy providing the foundation for the
growing humanitarianism of the nineteenth century. At best,
it implied a classless society. At worst, it presumed that if
classes were created through differences in income, in occupa-
tion, in taste or in ability, the class distinctions should be
secondary in the sense that movement between the classes
should be unimpeded by privilege and that no class should
have it in its power to dominate another. The socialist
attacks on the social rigidities and privileges of Victorian
England were sound and, being sound, were successful in
paving the way for a greater measure of economic equality
and the break-down of many vested interests.
But it is becoming clear that the centrally directed
economy germinates a new crop of privileged groups and
thus weakens so~ial cohesion based upon consent.
There is, first, the clash between the planners and the
planned, between those who wield the power and those who
must submit to it. The planner is confronted with the
baffling administrative problems raised by the diversity of
individual needs and individual circumstances. He must
simplify and standardise, frame his rules in relation to the
average, aim at dealing with masses. By definition, therefore,
the rules will not fit individual cases. The planned, recog-
1 It is true that the Government sought to encourage Design in Industry
by setting up Councils and holding exhibitions. In this, however, they were
pushing against the grain of the economic organisation which they had created.
It is significant that the standards of design set before the British manufacturer
by the State were frequently those already achieved in the United States where
they had no such Councils and where competition was sufficient to bring about
steady improvem~nts in design.
 MORAL SICKNESS OF A PLANNED SOCIETY U7
nising the arbitrariness of the general rule and perceiving
how badly it fits his special case, strive to evade regulations
apparently neither just nor rational. The more widespread
the evasion the more stringent and repressive must be the
laws. The vicious circle is then complete. For whilst the
planner always sees the solution of his problems in just one
more set of controls to block some new form of evasion, each
member of the planned class sees his salvation in more
skilful evasion or the sweeping away of controls altogether.
The circle of mutual distrust can grow almost indefinitely.
This is why the British Civil Service, probably the least
corruptible and the most hard-working and able cadre that
has ever operated, is so popularly derided that Ministers
must come to its defence in public. This is why the civil
servant must constantly add to his unpopularity by seeking
for fresh powers of repression if he is to try to carry out the
behests of his masters, and why planners in all countries
have ultimately found it necessary to raise cries against the
recalcitrant classes - be they capitalists, Jews, kulaks, the
middle classes or merely spivs and drones.
Secondly, there are the jealousies and envies created
between the greater part of the public and those groups which,
for the moment, enjoy economic privileges. When planning
blunders are made, compulsion can be used to patch up the
broken system. But economic incentives are also useful. So
that when coal is short the coal-miner will be granted special
rations and other perquisites. But other groups in the
community will think that their work is as hard, as un-
pleasant or as necessary as that of the coal-miner and feel a
sense of injustice. Each group, therefore, will have a direct
interest in keeping down its production, in making its product
the crucial bottleneck in the economy. For in that way the
power of the group will be increased and the bounty of the
planners' largesse made more certain.
Thirdly, in an atmosphere of black markets and lawless-
ness each man's hand is set against another's. Those who
218 THE NEW ORDEAL BY PLANNING
have inherited habits of honesty from life in a liberal society
become first indignant at, and ultimately covetous of, the
profits going to the law-breakers. The common informer
comes into his own I and the free-and-easy contacts between
individuals are spoilt.
Fourthly, vested interests must organise themselves and
clash because, once the market economy is destroyed, that
is the form taken by social competition. In allocating the
national resources the planners can follow no guiding prin-
ciples. Since the price system can no longer pass back
messages concerning the proper allocation of goods and ser-
vices, the planners must either organise production without
regard for consumers' needs or turn themselves into a gigantic
listening-post through which they seek to record in other
ways the demands of the people. If the Government is
listening, it clearly pays organised groups to shout hard to
establish their claims to some sort of priority and to belittle
the claims of others. New class rivalries are, thereby,
created.
Finally, comprehensive national planning sets one nation
against another and engenders frictions which result in the
disintegration of the world economy and the danger of war.
This subject will be referred to in the next chapter.

The Obsession with Material Ends

At some periods throughout the vicissitudinous history of
socialist ideas, spiritual values have been highly rated and at
all times the solid support for socialist policy has come from
men of good will who dreamed of a finer and more humane
society. It is the more tragic that the contemporary efforts to
fulfil the socialist purpose through the central direction of the
economy is destined to drag down these fine aspirations to an
over-preoccupation with material things and physical satis-
factions.
The symptoms are always the same. Public discussion
I See pp. 200-1.
 MORAL SICKNESS OF A PLANNED SOCIETY 219
centres almost wholly on economic affairs; the community
lives in a distracting hullabaloo, momentarily stimulating but
ultimately exhausting; the leaders harangue and exhort in
ever more strident tones in an effort to picture economic effort
as a struggle for survival in which luxuries and refinements
must be cut off and individual liberty must temporarily go to
the wall; there is an anxious straining for more and more
effort, higher and higher targets; the public sadly yearns for
the promised land which steadily recedes.
This immitigable struggle leaves less room for the refine-
ments of life such as the delights of leisure, the pleasures of
solitude, the search for knowledge, the satisfaction of crafts-
manship. So the local soviets in Russia gather together to
applaud last month's steel output and pledge themselvpo to
ever greater effort. So the British citizen submits to bombard-
ment from cinema, newspaper, radio and hoarding urging him
to work harder and accept more sacrifices. In this there is
nothing which satisfies the spirit. The harvest festivals of the
past did at least confer a sense of a task well done, a purpose
fulfilled. But the industrial festivals of the planning age seem
to provide nothing but the occasion for once again laying the
lash on the backs of workers with the endless cry for more.
The keen and stimulating buoyancy of an expanding free
economy may at times be fretful and wearing but, at least, it
leaves wide individual horizons, opportunity and the right to
withdraw from the race at any time. In the planned economy
the anxiety neurosis is that of individuals who watch the circle
of their initiative §lowly shrinking.
The absence of an inner tranquillity in the planned
economy is commonly observed but the many and variable
reasons for it are perhaps not so well understood. The first
is that since planned economies will be poverty-stricken, the
minds of the people are much taken up with meeting element-
ary physical needs. The second is that the planners, in order
to cover up the deficiencies of the system and to achieve this
target or that programme, will seek to attach some mystical
220 THE NEW ORDEAL BY PLANNING
value to work for its own sake and will overlook the ele-
mentary truth that work is for leisure and the means to make
leisure purposeful. The choice between work and leisure
is not a choice between good and evil but between different
ways of gaining satisfaction. The third is that the planning
crises tend to be sharper, more unpredictable and more
catastrophic than any known in other economic systems, and
the sense of ever-impending disaster is as crippling as the
prospects, to an invalid, of the onset of some dread disease,
such as thrombosis or haemophilia.
But the most deep-rooted sickness of the planned economy
is that it seeks to bind together the community by an appeal
to an end which cannot provide any lasting social cohesion -
the pursuit of wealth. It is ultimately disastrous to expect
men to enjoy the communion of their common brotherhood,
their sense of playing their part in some satisfying joint effort,
their feeling of the unfolding of the full potentialities of their
personality by putting before them a target (incidentally fixed
by someone else) for the output of steel, coal, electrical
switches or paper bags. Yet this is precisely the religion that
is preached. Thus Lenin: I
We need a plan at once to give the masses a shining unimpeded
example to work for.
So Sir Oliver Franks: 2
The plans must become the plans of the nation and animate
the constructive endeavour of the managements and workers. . . .
Import and Export programmes must become symbols of the life
the people wills to achieve . . . . It is at once the task and the
miracle of statesmanship to translate them into terms which have
meaning and inspiration to ordinary men in ordinary circum-
stances.
So Sir Stafford Cripps: 3
We have got to engender in the people the same spirit of
determination to see this programme through that they have
displayed in winning victory in the war.
1 See p. 47. • Central Planning and Control in War and Peace, p. 37.
3 Labour Party Conference, 1945.
 MORAL SICKNESS OF A PLANNED SOCIETY 221

The planners seem to dig themselves out of one pit only

by digging themselves into another. They recognise, and rightly,
that the plan stands no chance of success unless the economic
affairs of the community are placed in the very forefront of
every mind in the group. Work, sacrifice and the achieve-
ment of targets must be hammered into the public sleeping
and waking, eating and drinking. The statesman must adopt
every trick and device to mould the ideal economic man for
the purpose. Cupidity (' the golden age is just round the
corner '); narrow patriotism (' our community must stand
on its own feet '); fear (' the struggle is one for survival ')
and hatred (' the laggards must be run to earth '); the use of
all these are now well-established methods of the planned
economy.
Let us assume that the miracle of statesmanship is
performed (which I submit is impossible in a free society)
and the life of the people is firmly centred on material
objectives. Let us further assume that the economic object-
ives are reached (which I submit are unachievable). Then
the community must disintegrate. For the pursuit of wealth
cannot bind men together, it is a centrifugal not a centripetal
force. The vow of poverty can bring social cohesion. Trap-
pists, Hindus, Christians, Buddhists - history is full of cases
where groups have voluntarily and willingly submitted them-
selves to deprivation because they believed their cause was
good. But not so the vow of plenty. There is never in this
the threads out of which can be woven the mutual respect and
comradeship constituting the stuff of stable and effective
communities.
So is destroyed the last hope of the philosophers of plan-
ning. For when all else fails - when the promise of plenty
is not fulfilled, when security and stability is not achieved,
when the claims of the plan to be scientific prove hollow,
when the effective employment of the resources of the com-
munity is not reached, when the targets prove to be will-o'-
the-wisps - it is still argued that the plan justifies itself
222 THE NEW ORDEAL BY PLANNING
because, woeful as may be its economic consequences, it still
makes it possible for each member of the group to feel him.
self" part of a united community. . . moving purposefully
towards known objectives". I But in the last analysis the
spiritual content of planning proves to be a sham.
These, of course, are precisely the charges which have
been laid against the free market economy. But in that
economy no one need ever claim that economic activity is the
highest form of activity or that the first aim of an individual
or a community is to become rich. The market economy is
simply a device for creating automatic regulations which will
enable us to provide for physical needs by the most economical
route, of pushing economic problems into a comer to be
forgotten, like the thermostat in a house, so that we can get
on as uninterruptedly as possible with the development of the
real art of living and the discovery of those forms of human
relations which will bring us the ideal society.
1 The Times, September I, 1947.
 CHAPTER X

NATIONAL PLANNING AND THE

WORLD ECONOMY
I T has long been known that planning by individual nations
must lead to international chaos, the degree of the chaos
being in direct proportion to the number, the completeness
and the efficiency of the separate national plans. The manner
in which the socialist State, beginning often with high aspira-
tions of international harmony, will contribute to the break-
down of the world economy has frequendy been described. I
National planning reduces international trade. It stifles the
free movement of capital and labour and thus undermines the
international specialisation of effort. International economic
relations become highly unstable because of the recurrence of
national planning crises and because trading is a matter of
high politics and thereby suffers from every twist and tum
in political relations. As each planned economy is driven
towards autarchy the problem of the ' have' and the ' have
not ' nations emerges and may well make for war. With the
sordid experience behind us of the inter-war years these are
axioms. This chapter is a postscript showing how Great
Britain under planning is, in international economic affairs,
being driven along a path which will damage her own eco-
nomic prospects and contribute to the impoverishment of the
whole world.

I
The illustration is apt. For the Labour Government
when it came into power firmly believed in freer world trading
I See, in particular, L. Robbins, International Planning and Economic
Order.
ZZ3
224 THE NEW ORDEAL BY PLANNING
and showed considerable courage in seeking to foster it. It
is true that immediate British interests coincided with this
policy. The traditional dependence of Great Britain upon
exports had been increased by the loss of some investments
during the war. The conditions attached to the American
Loan pledged Britain to multilateralism willy-nilly. But no
one could doubt the high motiv.es of the British Government
when they opted for freer world trading. Thus Sir Stafford
Cripps: I
If, on a basis of self-defence and timidity, trade and financial
restrictions of every kind are to spring up again, we shall all be
the sufferers however much we try by economic and financial
devices to protect our own people. The cumulative despair of
restrictionism has proved itself the worst friend of the masses . . .
and has been a powerful factor in bringing about the crisis of
war. We must do something better, more courageous and more
imaginative after this war than was done after the last.
This was in October 1946. By August 1947 the tune had
changed. The Prime Minister had announced an expensive
scheme for bringing Great Britain near~r to agricultural
self-sufficiency; imports were to be cut and a new drive for
exports begun. Stricter control of the migration of capital
and of persons was to be instituted. Mr. Wilson, then Parlia-
mentary Secretary to the Board of Trade, in language which
recalled the funeral orations over the world economy of
pre-war conferences, had said, at the closing session of the
International Trade Conference at Geneva:
We must face the fact that methods might have to be used
in the intervening months and years which might appear to be
opposed to the principles and methods of the draft charter. We
will certainly have to assist our position by agreements with
particular countries.
Why had the high hopes been dashed? The immediate
cause was, of course, the British balance of payments crisis in
August 1947. The American Loan had run out more quickly
than anticipated. The adverse trade balance had reached a
I October 3. 1946.
NATIONAL PLANNING AND WORLD ECONOMY 225

level of £600 millions per annum. The measures to meet

the immediate crisis included the abandonment of the con-
vertibility of sterling and a substantial cut in imports dis-
criminating against the hard currency areas. It may well
be true that administrative ineptitude in the British Treasury
and the insistence upon the part of the Americans on too
early a return to convertibility had precipitated the crisis pre-
maturely. But there was something much more fundament-
ally wrong. The doctors might have kept the patient going
a little longer, but the collapse was inevitable.
The collapse was inevitable because of a series of grave
errors in the British planning strategy.
The first of these lay in the fixing of export targets and in
pursuing policies based upon the assumption that the targets
would be reached. The export targets were never achieved
and had constantly to be reduced. The first figure which
gained currency was that of a 75 per cent increase in the
volume of exports over the corresponding figure for 1938.
It represented a simple arithmetical calculation of the volume
of exports which would be needed, on certain highly arbitrary
assumptions, to maintain the pre-war British standard of
living. I This figure was nailed as a flag to the planning mast.
It was assumed that the pre-war standard of living could be
reached (no one knowing on what grounds the assumption
was made) and, therefore, assumed that the 75 per cent
increase in exports was imperative and attainable. But
periodically the flag had to be lowered. In February 1947
Mr. Dalton was still declaring "75 per cent as soon as
possible". In the Economic Survey for I947 (March 1947)
the target was lowered to 40 per cent by the end of 1947.
In August 1947 Mr. Attlee, in the middle of the balance of
payments crisis, lowered the target to 40 per cent by the
middle of 1948 and 60 per cent by the end of 1948. Now
1 The whole story of th~ slap-dash methods of plannipg could be written
around the history of this one figure and the consequence it had for the British
public. A part of that story is told by Mr. Snow in The Times, January 23,
1947.
226 THE NEW ORDEAL BY PLANNING
a swollen and unachievable export target within a planned
economy may easily reduce exports below the level which they
might have achieved if there had been no plan at all. For
when the export target is fixed, consequential allocations of
raw materials and labour must be made. If the target is not
achieved, these resources will have been wrongly placed.
They might well have led to larger exports if they had been
placed elsewhere. Just as a moderate runner, by establishing
too high a standard, may take longer to run 100 yards if he
tries to run it in 10 seconds than if he tries to run it in 12
seconds. Export planning reduces exports.
The second planning error was the setting of too high a
domestic investment programme. For nearly two years the
Government encouraged investment by precept and example.
The cotton, coal-mining and iron and steel industries were
pressed to install much new equipment. The principle was
that, since Great Britain was short of man-power and since
machines saved labour, every industry should re-equip as
quickly as possible. It was overlooked that machines need
labour to build them and that an increase in output per head
in one factory may be obtained at the cost of a decrease in
output per head over the system as a whole. It was not until
the balance of payments crisis occurred that the Government
discovered that some re-equipment was better deferred and
that there is only a pint in a pint pot. The planning craze
for investment reduced exports and worsened the balance of
payments problem.
The third planning error was probably (it is impossible
always to be certain in these economic might-have-beens)
the maintenance. of an inappropriate rate of exchange. The
Government had pegged the exchange rate at 4'03 dollars to
the pound. Whether that was the right rate or not was any-
body's guess. No one could possibly know without leaving
the rate free to be fixed by market forces. What was known
was that sterling had deteriorated heavily in New York and
the pound could only be kept at its fixed rate by the strictest
NATIONAL PLANNING AND WORLD ECONOMY 227

exchange control. In the event, since the rest of the world

believed that sterling would have to be devalued, speculation
contributed to such a drain on the dollars of the American Loan
that convertibility of sterling had to be abandoned although
the plugged rate was maintained.
It was these three errors, combined with the domestic
inflation which increased imports and, as a consequence of
the physical anti-inflationary controls, reduced exports, which
finally produced the balance of payments crisis and forced
Great Britain, against all the best instincts of the Govern-
ment, into bilateralism.
What would have happened in the free economy? The
State would have confined itself to its legitimate role of
restricting the volume of money sufficiently to prevent
domestic inflation. Exports would have been stimulated
because that would have been the only outlet for goods. The
cramping effect upon industry of physical controls would
have been avoided. No export targets would have been fixed,
exports would have been left to find their own level. The
long-period exchange rate would have been left to determine
itself. A deficit in the balance of payments would have been
met by a fall in the exchange rate, thus increasing exports and
reducing imports. If the nation was living at a level beyond
its means, the fact would have been immediately signalled to
all and the increase in domestic prices would have pressed
down the standard of living to what was possible.
It is futile to argue that this is a theoretical model which
would not have worked in the peculiar circumstances of the
time. Help from America by way of the loan, the blocking
of post-war debts, these would still have been practicable
whilst leaving the international price mechanism to decide
what standard of living Great Britain could enjoy and what
level of exports was consistent with that standard of living.
This was not a choice for the British between taking their
medicine or not taking it. It was a choice between making
the readjustments gradually and in a fashion which did not
228 THE NEW ORDEAL BY PLANNING
disrupt the organic nature of the economic system or taking
it in the form of the balance of payments crisis with the
Government chopping hysterically at food supplies and,
incidentally, following courses which destroyed the chance,
which seemed so great at one time, that Great Britain and
America together would recreate a new world economy after
a quarter of a century's restriction.
How little the planners realised the consequences of their
own actions in the international sphere can easily be seen from
their conception of international economics as revealed in the
crucial debate on the State of the Nation on August 6 and 7,
1947, in the House of Commons. Reference has already been
made 1 to the smoke-screen of dubious argument by which the
Government sought to conceal the real causes of the inter-
national break-down. It led inevitably to the oldest and the
most deeply embedded fallacy in economic thinking: the
belief that, whatever the cost, it is always a good thing for a
country to produce its own food.
Mr. Attlee had announced that British agricultural output
was to be increased by [,100 millions (or 20 per cent), requiring
an additional 100,000 workers and a large amount of capital
equipment. A week later the Minister of Agriculture an-
nounced new and higher prices for farmers. The ostensible
reason for this policy was that " agriculture was a great dollar
saver", and even that growing food was equivalent to" grow-
ing dollars on our own soil ". Z At least four assumptions, all
of them unfounded, were embodied in this line of reasoning.
The first was that we could produce food domestically as
cheaply as we could buy it from abroad: but the very fact
that it was found necessary to subsidise British farmers dis-
proves this. The second was that if an additional 100,000
workers and a large amount of capital is invested in agri-
culture this will put more food into British bellies than if
this labour and capital were put into some manufacturing
I See Chapter IX, p. 179.
2 Minister of Agriculture, The Listener, September 4. 1947.
NATIONAL PLANNING AND WORLD ECONOMY 229

industry, say textiles, the additional product being exported

and food obtained from abroad in exchange. The third was
that if we cut off imports from abroad our chance of develop-
ing our export trade will be unaffected. The fourth was that
if our domestic food production is increased in value by 20
per cent it will be increased in volume by 20 per cent whatever
happens to unit prices. But, of course, saving one dollar of
imports by losing two dollars of exports is not good economics.
Neither is growing dollars on your own land at two dollars
a time.

II
By instinct the British planners favoured freer world
trade. But the addicts to planning are not always masters of
themselves and, in this case, certain of their preconceptions
helped to frustrate their better purposes. Of these the most
dangerous were the reliance upon bulk purchase and the habit
of planning exports.

Bulk Purchase of Imports

In any over-simplified and mechanistic conception of
economics, State trading in imports seems to have many
advantages. Large-scale operations enable the one mono-
poly purchaser to make better bargains, price fluctuations
can be levelled out, speculation can be obviated, merchants'
margins can be abolished. In addition, a grip on imports
provides a grip on every phase and aspect of the whole
economy. It is, therefore, not surprising that the Socialist
Government held on to the war-time system of State pur-
chase which they found in their hands when they came to
power in 1945. 1
I In 1946 the following items were still being purchased in bulk by the

British Government: Timber; Raw Materials for Textiles; Hides, Skins and
Tanning Materials; Paper, Board and Paper-making Materials -; Rubber
(Natural and Synthetic); Materials for Fertilisers; Chemicals; Chromic Ore,
Molybdenum Concentrates; Tungsten Ore; Lead; Zinc; Copper; Tin Ore ;
Aluminium; Pig-Iron; Steel; Fruits and Vegetables; Fish; Meat and Bacon;
Tea, Coffee, Cocoa; Cereals; Pulses; Starch ; Sugar; Milk Products ; Eggs.
230 THE NEW ORDEAL BY PLANNING
It is still too early to assess the full consequences upon
world trade and the world economy of the British system of
bulk purchase, but some items in the price that will un-
doubtedly have to be paid can already be listed.
Whilst small, short-period price fluctuations can clearly
be avoided by bulk purchase, when an error is made by the
State's purchasing agency very violent and disruptive price
changes occur. The Ministry of Food increased the price
overnight of linseed oil from £55 a ton to £135, subsequently
the price rose to £200. In October 1946 the Cotton Control
raised its prices suddenly by 5id. a pound, a rise unheard of
when the world's futures markets were operating normally,
and a rise all the more confusing when, on the same day,
the price of cotton in America declined by Jfd. a pound.
This confirms the pre-war lesson that large-scale intervention
by the State in trading will mean serious upsets to world trade,
due to the catastrophic nature of delayed price adjustments.
Uncertainty in the markets is increased by State trading.
Prices are dependent upon the unforeseeable outcome of
international negotiations in which political as well as
economic forces are at play. Governments are free to impose
price changes unilaterally. In early 1947 the Government
of Ceylon threw over their bulk-purchase arrangements for
tea and copra and raised their prices suddenly against us.
Mr. Strachey was forced to admit "the Government of
Ceylon has a perfect right to do this ".1 In March 1946 the
Argentine suddenly demanded an extra £7 millions on a
meat contract for which prices had already been fixed.
When the House of Commons protested, Dr. Summerskill
replied, " I do not think it is necessary to explain . . . that
today we have a sellers' market ".2 Uncertainty of the future
of prices is further increased by the growing secrecy which
surrounds the international bargaining. Before the war the
statistics of stocks of food and raw materials were generally
I House of Commons, February 6, 19+7.
2 March 7, 19+7.
NATIONAL PLANNING AND WORLD ECONOMY 231

available. Trading governments must for obvious reasons

now suppress these figures. The Minister of Food when
pressed in the House of Commons to reveal British wheat
stocks refused: "I have to go out into the world and buy in
a sellers' market - and to come here and reveal stocks openly
to the House makes my position very difficult unless I want
to force the prices up to sky-high positions".1 But since, of
course, a market is always a buyers' or a sellers' market, some
government always has an interest in concealing the facts
which must be public if markets are to be stable. Ministers
have also refused to disclose stocks of tea (although in this
case it was a very simple matter for anybody to calculate them
with fair accuracy), edible oils, wheat, petroleum products, or
to reveal prices paid for food. This growing obscurantism
turns the world markets into a grim wrestling of giants in the
dark. Uncertainty is finally increased by protracted negotia-
tions. The squabble between Great Britain and Denmark over
food prices had, in October 1947, already been going on for a
year and a half, and had, on more than one occasion, resulted
in a complete stoppage of vital food imports from Denm~rk.
Bulk purchasing by one country encourages retaliatory
bulk sales by others. The Governments of Ceylon, Siam and
the Argentine replied in this way to British efforts to gain the
bargaining advantages of bulk purchase. These govern-
ments all followed the very obvious practice of charging the
British Government a higher price than was allowed to the
producer. So that the British consumer, in paying the higher
price, did not even derive the benefit, automatic in a market
economy, of increased output following from increased
prices.
International frictions are exacerbated by bulk trading.
Hard bargaining, country by country, means that some
countries will receive a lower price from a bulk purchaser
than others. There has already been grumbling by our
Dominions that we are paying them lower prices than those
I February 6, 1946.
232 THE NEW ORDEAL BY PLANNING
offered to other countries. Prolonged wrangling between
governments makes for bad blood; one side always feels
that the other has put on the screw. History may still have to
record that Britain's high-handed attitude with Denmark over
the prices of bacon and butter forced Denmark into economic
dependence on Russia and pushed behind the iron curtain a
country with a long tradition of democratic living.
Bulk purchase destroys the futures market, one of the most
highly specialised weapons of a world economy. Perhaps the
most disastrous case in Great Britain was the closing down,
against the wishes of the vast majority of the manufacturing
end of the cotton industry, of the Liverpool Cotton Futures
Market on the grounds that large-scale buying by the State
is " the modern 'method", that " in future there will be no
opportunity for outsiders to dabble in the fort~nes of this
great industry", and that the State purchase and distribution
of cotton would reduce employment by some 2500 persons. I

The Planning of Exports

Bulk purchase of imports by the State is, in the long run,
destructive of a free world economy. So is the State planning
of exports. Indeed the planning of exports does not seem to
have any meaning except in terms either of bilateral bargaining
or of a quite impracticable world economic plan in which all
countries voluntarily agree upon some allocation of world
markets. In all other circumstances what one country will
export will be determined, not by the government of that
country, but by the consumers in the importing country.
Export targets then become either mere estimates of what the
exporting government thinks will happen anyway or wishful
longing for unattainable ends.
Up to the middle of 1947 British export planning took
the form of estimates. No one could know, and perhaps
least of all the Government, what volume of British goods
would be taken by other countries. The officials of the
I Mr. Marquand, House of Commons, December 2,1946.
NATIONAL PLANNING AND WORLD ECONOMY 233
Board of Trade went to the different industries to ask each
what volume of goods it thought it could export. Business
men did not find it easy to give an answer. The markets
of the world were, in any case, highly disorganised. The
domestic planned economy was equally unstable. No pro-
ducer knew what supplies of raw materials and labour he
could expect. Some business men, moved by patriotism or
by the thought that a high export quota might give them a
higher priority for raw materials and labour, were inclined to
give optimistic estimates. Others, more cautious or more
anxious to take advantage of the plentiful demand in the home
market, were inclined to give lower estimates. The Govern-
ment officials were in no real position to check or query these
estimates, but out of them they had to frame an export plan.
There was no particular reason why the plan should be right:
very many reasons why it should be wrong. The second form
of export planning was revealed during the balance of pay-
ments crisis of August J 947. Faced with a given deficit,
the Government made what import cuts it thought practi-
cable and then chose as the export target a figure large
enough to cover the remainder of the deficit. It is not sur-
prising that the British export targets proved so unreal as to
become an object of derision.
There was, indeed, one legitimate purpose behind the
British export targets - the counteracting of some of the
effects of the domestic inflation. The purchasing power at
home was so large and was so persistently seeking out the
goods available that industry would have found it easy to sell
most of its products internally. It was necessary, therefore, to
force exports by cutting down quotas for the home market.
But this, of course, was the clumsiest conceivable method of
attaining the desired results. If there is inflation, the obvious
remedy is for the State to withdraw purchasing power by
taxation, in which case the demand of the home market is
restricted. But to strive to reach the same end by fixing
export quotas for each firm, and by allocating raw materials
234 THE NEW ORDEAL BY PLANNING
and labour on the basis of these quotas, is as devious a method
as going to Glastonbury by way of Goodwin Sands.
Export plans in a multilateral world are a ludicrous waste
of time. They can, however, be given real meaning if the
State is prepared to make bilateral bargains. It is not sur-
prising that those who begin with an article of faith that exports
must be planned finish by discarding multilateralism.
The planned economy is driven remorselessly towards
self-sufficiency. It is exasperating for planners who have
established rigid controls in the home market, by allocating
raw materials, factory space, machines and labour, by con-
trolling investment and by rationing consumers, to contem-
plate the freedom of foreign consumers who can take or reject
goods at their own wish. This, to their minds, is old chaos
breaking out again. The license of the foreign consumer
disturbs the best-laid domestic plans.
Moreover, the encouragement of exports involves the
planner in what are, to him, highly distasteful practices and
attitudes. Competition is immoral. Yet exports have to be
gained through a fierce competitive struggle. The planner is
never very happy at the thought that ' inessentials' are being
produced. Yet the exports of a manufacturing country must
increasingly consist of high-quality and even luxury goods,
since the agricultural countries are beginning to produce their
own low-quality goods. Exporting calls for elaborate dis-
tributive and market organisations, good packaging, adver-
tising, high-pressure statesmanship - all the practices which
the planner has always frowned upon as evidence of the decay
of capitalist civilisation. It was not some boosting advertising
manager giving a pep talk to his salesmen but Sir Stafford
Cripps himself who said:
We cannot afford . . . to adopt the old ' take it or leave it '
line. We have got to go out to get markets and make sales, and
we must see that our products are reasonably competitive in
every way.l
I Democracy Alive, p. 59.
NATIONAL PLANNING AND WORLD ECONOMY 235
A planner trying to adhere to multilateralism is, therefore,
working to a double moral code.
Bilateralism is always at hand to solve his difficulties if he
will only embrace it. Export trade then becomes a known,
although of course a smaller, quantity. It need no longer
disturb the domestic plan. The painful competitive struggle
of the market can be transfQrmed into calm discussion of
officials round a table at an international conference. The
country can feel that it is standing on its own feet. It is not
surprising that the planner succumbs to the temptation.

III
One other way out is sometimes advocated: a world plan
in which the determination of each country's exports and
imports would fall into place as a part of the authoritative
control of all the economic activities on the globe. This might
come about either through wide political federation or through
the planning nations retaining their political autonomy whilst
voluntarily agreeing to make their different plans fit together.
World political federation has much to commend it,
although it is not a subject that can be discussed here. But
one thing is certain. If the nations ever agreed to merge their
sovereign rights in a common Government, the life of that
Government for many years would be precious but fragile,
the political forces tending to pull it apart would be strong
and unwearying. But the federation's chance of survival would
be nil if, in addition to its other preoccupations, it were called
upon to operate a world economic plan. For this plan would
suffer, in an even more serious way, from all the defects which
are inevitably attached to a national plan. A player who finds
it difficult to play one game of chess does not make things
easier for himself by undertaking to play one hundred games
simultaneously. A world political federation could only sur-
vive if it delegated to the market and the price system the
control and regulation of the economic system.
236 THE NEW ORDEAL BY PLANNING
In any attempt, on the other hand, by planning bodies
still retaining their sovereignty, to fit together their national
plans, the world economy is doomed from the outset. For
the plans will not fit and the attempts to make them fit will
degenerate quickly into cynical and unscrupulous bargain-
ing, in which the only men not allowed to speak at the con-
ference -the ordinary customer and the free producer and
merchant - will be squeezed flat against the wall. Each
planned economy will be trying to do the same thing: to
increase exports and reduce imports; to invest heavily in
capital equipment and in the basic industries, and, for this
purpose, to borrow from the others; to build up uneconomic
industries so that it can bargain more effectively at the table
of the international conference. The prolonged negotiations
will always be outstripped by the economic facts of the time.
So the conferences will break up in confusion with binding
agreements, always subject to waiver, phrased in grandilo-
quent but meaningless terms, I and with arrangements to set
up futile 'study groups' which can only waste more time.
And so the delegates will go home, wearied with their life
on the treadmill, convinced of the unreasonableness of the
foreigner, and more than ever certain that in the international
babel their country must stand on its own feet, which means
in effect that it must also stand on the economic jugular vein
of some other country.
I Such as " the maintenance of supplies ample to the needs of consumers
without creating a burden of unwanted surpluses and without uneconomic
incentive to high cost producers", or " orderly distribution at prices fair to
both producers and consumers".
 INDEX
Administrative geometry, 12, 121 Coal-mining industry, 29, 98, 101,
Agriculture, 34, 228 138, 145
Alibis, 13, 204-10 Cohen, R., 115 n.
Amalgamations, 198 Competition, 8, 22-3, 41, 203
American Loan, 224 Conservatives, 3-4, 8-9, 8 n., 12-13,
Anderson, Sir J., 214 15,24-6,29
Consumer, freedom of, 18, 19, 41, 53,
Balance-of-payments crisis, 14, 178-81 64, 82, 91, 98, 100, 103-5, 184,
Balfour, A. J., vii 195-8
Barnes, A. J., 117 Control of economy, see State inter-
Baykov, A., 81 n. vention
Belcher, J. W., 115 Cotton industry, 101, 197
Bevan, A., 121, 142, 152 n., 170 n., Cotton Working Party Report, 75 n.,
173 n., 174-5, 180, 209 II9, 198
Bevin, E., 105 n., 128 n., 194 n. Cripps, Sir Stafford, xii, 58 n., 82,
Bilateralism, 234-5 88 n., 89-90, 95, 96, 102 n., 114,
Black markets, 214-15 129 n., 137 n., 163 n., 178 n., 182,
Bottlenecks, 86 185 n., 193-4, 203, 208-9, 220, 224,
Boyle, SirE., IS, 24-5, 27 234n.
Braithwaite, C., 199 n. Czechoslovakian Plan, 88 n.
Bricks, supply of, 27
British Industry, 20 n. Dalton, H., 84, 98 n., 129 n., 142,
Brittan; S., 3 n., 35 n. 177, 179, 180, 205, 206 n., 208, 225
Brown, G., 13, 15-20 Day, A., 16 D.
Brunner, J., 16 n., 35 n. de Gaulle, Gen., 6
Bulk purchase, 229-32 Deakin, A., 192 n.
Bureaucracy, 38, 98, 151 Deane, J. R., 171 n.
Burke, E., 45 Denmark,23 1
Burns, A. F., 144 n. Devons, E., 59 n.
Business men, 3-4, 7, 16-18, 23-4, Direction of labour, see Labour
27-8, 62-79, 144 n. Driberg, T. E. N., 209
Durbin, E., 80 n., 90
Cairncross, A. K., 33 n.
Callaghan, J., II, 14, 22, 36 Economic Considerations affecting rela-
Capital Investment, White Paper on, tions between Employers and Wor-
181 kers, 102 n.
Carr, E. H., 46 n. Economic efficiency, 55, 68, 99-105,
Catherwood, H. F. R., 22 n. 110, 146
Chemicals and chemical engineering, Economic fashions, 45, 49, 97, 98
25-6 Economic General Staff, 127-8
Chesterton, G. K., 58 n. Economic growth, 4-5, ll-9, II-22,
Churchill, Winston, 182 n., 202 n., 209 24-6, 28-34, 35-9, 52
Civil Servants, liS, 151 Economic Planning Board, 96
Clark, C., 99 n., 143 n. Economic Survey for 1947, 94, 103 n.,
Class consciousness, 216-18 173, 178, 193, 225
237
 THE NEW ORDEAL BY PLANNING
Economist, The, 4 n., 93, 141, 197 Imports, 8, II, 25-6, 38
Education, 33 Incentives, 39,41, 73-4
Edwards, Sir R., z8 n. Incomes policy, 3, 38-1), 19Z
Electricity, 19, 27-31, 42, 47, 100 n., Industrial Organisation Act (1946),
102 n., 105 n., 107, 134 133
Employment policy, see Full employ- Industrial relations, 145-6
ment Inflation,s, 21, 22, 40-1, 60
Equality, 40-1, 52, 103, 105 Intellectuals, 71-3, 78
Experts, 8, II, 16, 26, 38, 83, zzS-6, International trade, ZZ3-36
23Z-S Investment, 6, 8-1), II, 16-17, 19,
25-6, 30-1, 33, 38, 41, 45, 100
Fabians, 46 Isaacs, G. A., 194, 209
F.B.I., 3, 9
Financial Times, the, 9 n. Jay, D., vii
Fisher, A. G. B., 164 Jerome, H., 100 n.
Fleming, M., 91 n. Jewkes, J., IS n., 19 n., 33 n., 40 n.
Foreign exchange control, 38
Fortune, 126 n. KaIdor, N., 35 n.
Franks, Sir 0., So n., 220 Kosygin, A., 37
Freedom: and the consumer, see Kuznets, G., 33, 33 n., 143 n.
Consumer; essential nature of,
182-3; of expression, 96, 198-2el; Labour, direction of, 38, 90, 96, 182,
of occupation, 183, 191-5; and 193-5; supply and mobility of, 8,
property, 185-'7 17,34,41
French economic planning, 4-8, 19 Labour Government, 3, 8 n., IZ-14,
Fuel and power, 28-30 20-4, z7, Z9, 34-8,40-2, 87, 93-6,
Fuel crisis, 107, 175-8 98-1), 102 n., 105 n., 1I9, IZ7-1),
Full employment policy, 41, So, 60 133, 137-8, 14!rSI, 161 n., 166,
Galbraith, J. K., 42 173-81 , 19Z-4, 197-200, zoS-8,
Gas industry, 29-31 Z13, 216 n., ZZ3-33
GennanY,46,49, So, 139 Laski, H., 75-8, lIS n.
Government control, see State inter- Law-breaking, 40, ZI4-IS
vention Lees, D. S., 35 n.
Government (or public) expenditure, Lenin, V. I., 46, zzo
3, 21-2, 38, 41 Lerner, A. P., 91, 12Z n., IZS n.
Guild Socialism, 45 Liverpool Cotton Market, 138, 23Z
Lloyd, Selwyn, 36 n.
Hackett, J. and A. N., 6 n. Lloyds Bank Review, 7 n., 19 n., 35 n.
Hall, G., 180 Local Government, lIS, 151
Hayek, F. A., xiii, 80 n., 182 n. Location of Industry, 153
Health Scheme, National, 98 London and Cambridge Economic
Heath, E., 12 Bulletin, zz n.
Henderson, A. M., 122 n. Lutz, V., 6 n., 8 n.
Henderson, P. D., 36 n.
Hobson, J. A., 103 n. Macleod, I., IS
Hogg, Q., IZ Manchester Guardian, the, 75 n.
Housing, 17z-S Market system (private enterprise,
Hubball, W., 101 n. free markets), x, 3-5, 18, Z3-S, z7-8,
Huxley, A., 99 n. 30 ,4 1
Marquand, H. A., Z3Z n.
Import Duties Advisory Committee, Marshall, A., ISZ
1I9 Marx, K., 46
 INDEX 239
Marxist theory, 33 Rivalry, function of, 156-9
Masse, P., 6-8 Robbins, L., 223 n.
Maudling, R., 11,21 Robinson, E. A. G., 35 n.
Meade, J., 91 n., 122 n. Russia, 4, 45, 47, 49, 50, 54,55, 80 n.,
Milk Marketing Board, 104 81-2,89, 107, 139
Mirabeau, Comte de, 7
Monnet Plan, 88 n. Savings, 125
Monopoly control, 23,41,68 Scapegoats, 204-10
Morgan, C., 195 n. Schumpeter, J. A., 48 n., 54 n., 62-'78,
Morrison, H., 50 n., 80 n., 83-'7, 95, li2 n., 125 n., 144 n., 148
107, 127, 136 n., 137, 142, 164, 172, Schuster, Sir G., 109 n.
20 9 Scientific research, 33, 65
Selective Employment Tax, 35 n.
National Economic Development Service occupations, importance of,
Council, 8-1I, 14, 22 n., 23 n., 37-9 1I0
National income, 9-1I, 19, 21-2, 99, Shackleton, Lord, 37
143 Shanks, M., 42
'National Interest', 1I6 Shawcross, Sir H., 105 n., 209
Nationalisation, 98, 138 Shinwell, E., 136 n., 151 n., 175-7,
New Towns Committee Report, 118 n. 199 n., 200, 206 n., 209
Shonfield, A., 42
Obscurity of language, lIS Smith, A., 1I6 n.
Observer, the, 16 n. Smith, Sir B., 205, 231
Social costs, 79, 109, 122
Pakenham, Lord, 209 'Spartacus', 16 n., 35 n.
Parliament, distribution of interests, Specialisation, 111-12
70-1 Spectator, the, 75 n.
P.E.P., 7 n. Spivs and drones, 209
Planning establishment, 36 Stalin, J., 81
Polanyi, G. M., 30 n. Stamp, Sir J., 143 n.
Powell, Enoch, 34 n. Standard of living, 32, 39-41, 65
Pratten, C., 7 n., 19 n. State, intervention, 4, 6-8, 12, 16-23,
Price system, free, 51, 80, 92, 99, 25-30, 34, 36 n., 38-42; role in
105-9; Socialist, 91, 93, 122, 124-6 society of, 45, 47, 50-2, 55, 68, 79,
Prices, 18, 25, 38-9 89, 95, 106, 109
Private property, 41 State factories, 46
Process Plant Working Party, 26 State trading, 229-32
Production, decline in quality, 215-16; Stewart, M., 36
mass-, 66-7; misdirection of, 139- Stocks, under planning, 153, 168
41 Strachey, J., 92, 103, 104 n., 180, 205,
Productivity, 17, 19 23 0 - 1
Public Boards, 133-4 Summerskill, E., 129 n., 196 n., 230
Public investment and expenditure,
see Government Tawney, R. H., 145 n., 203 n.
Taylor, A. J. P., 105 n.
Quesnay, F., 7 Telegraph, Daily, the, 23 n.
Terborgh, G., 100 n.
Re-equipment, 45, 100 Textile industries, 67
Regional development, 38 Times, The, 3 n., 12 n., 22 n., 36 n.,
Restrictions, petty, 210-14 37 n., 42 n., 56 n., 87, 166 n., 222 n.
Restrictive Trade Practices Act (1956), Tinplate industry, 67
23 n. Transport Advisory Council, 1I9
 THE NEW ORDEAL BY PLANNING
Transport Bill (1947), 92, 98, 199 n. Widdowson, Dr., 103 n.
Williams, Mrs. S., 16 n.
Unemployment, 17, 50, 60 Williams, T., 228
United States, 4, 19,45,47,55,60,64, Wilmot, J., 163 n.
70, 81, 99, 110, 143 Wilson, H., 91 n., 224
U.S. Survey of Current Business, 19 n. Wilson, T., 35 n., 122 n.
Wootton, B., 105 n.
Webb, S. and B., 73 n., 74 n., 75-8, World Federation, 235
121, 123, 143 n., 145 n., 185 n.,
203 n. Young, M., 197 n.