Instability and Progress

I. Instability and Progress NO sensible man "plans" his arrangements "uneconomically". Nobody sets out deliberately to use methods which employ morę than is necessary of those resources which he is anxious to conserve. In this sense, all intelligently conceived plans are "econ-omic", sińce they are intended to gain the planner's ends with the least expenditure of time or scarce commodities. Economical con-duct is thus the essence of any plan for any purpose. If "economic planning" meant no morę than planning economically we should all be economic planners! But the two expressions are not synonymous. An "economic plan" clearly has a narrower and more highly special-ised meaning than a plan which is "economical". The dictionaries give no guidance. The enąuirer must look elsewhere, into the naturę of the economy out of which arise the economic problems the plan is designed to resolve. The words "economic plan" were first used to describe the massive experiments in economic and industrial organisation undertaken by the Russians in the late nineteen-twenties and early nineteen-thirties. The First and Second Five Year Plans were heroic.1 Cast on the grand scalę, the object of the Russian plan seems to have been nothing less than the transformation of a backward agricultural country in the course of a few years into an advanced industrial power. The cost was fearful; but the experiment was undoubtedly successful judged by the ability with which the Soviet economy later withstood invasion and total war. A plan, being itself only a scheme of action, a method of proceed-ing—an instrument, in fact—must necessarily be intended for some purpose. The framers of the plan must have some object in view, something to arrange beforehand; or they must fear some untoward event against which they can prepare in advance. A plan, essentially, is a plan for or against something; and if the plan, the means or instrument, is to be defined, then the object which the plan is in­tended to secure or prevent must also be definite. The British plan grew out of a determination, widespread during the war, that the second peace should not be marked by the slump, depression and unemployment which had so marred the first. But events did not follow in the same seąuence. In the years after the fighting had ended in 1945, the dragons confronting the British economy were not unemployment and want but rising prices, shortages and an apparently chronić deficit in the balance of payments. Discussion of the British economic plan and the direction of economic affairs sometimes suffered, in these changed circumstances, from a failure to formulate precisely what were the ends to be reached and the catastrophes to be prevented. The economic achievements of industrial capitalism in the Western world during the past century and a half have been immense. Popu-lation in Britain increased from 9,000,000 in 1801 to 37,000,000 in 1901. The generał level of real wages—wages, that is, measured in terms not of money but of what that money will buy—are supposed to have quadrupled in the century, representing at the least a sixteen-fold increase in gross income. From 1870 to 1913, according to a recent estimate, net national income rose from £929 million to £2,368 million and the share of wages from £365 million to £857 million. With due allowance for variation in prices and increase of population, these figures represent an increase of 85 per cent in real income per caput in the course of forty-three years. The population of Britain by now is well over 50,000,000. Income a head (measured again in terms of money's worth) is estimated to have increased by one-third from the turn of the century to the outbreak of war, and the statistics indicate an apparent rise sińce the end of the war.1 Across the Atlantic, the growth of income and population in the United States have been still more impressive. The materiał progress which the statistics of wages and national income attempt to measure has been neither steady nor uniform. The economies of the Western world have been marked by instability. Short periods of activity and boom, often culminating in crisis, have been followed by slumps and relatively long periods of depression. From 1856 to 1913, the generał unemployment rate was below 2 per cent only in 14 years out of the 58, that is to say in about one year out of four. During the last four complete cyclical fluctuations from 1883 to 1913 it was as Iow as that only in five years out of 31, that is, in one year out of six.2 'A. R. Prest: "National Income of the United Kingdom, 1870-1946" {Eco­nomic Journal, March 1948). Central Statistical Office: National Income and Expenditure, 1946-1953, Tables 11 and 12. 2 Beveridge: Fuli Employment in a Free Society, London, 1944, p. 43. There was no assurance of steady work and regular income for the whole of the working population throughout the whole of their use-fullives. Theshadowofinsecurityfelloverall. The distress suffered by the minority who had lost their jobs obscured the rise in the materiał circumstances of the majority who, at any one time, were in fact in work. Unemployment and want, not improvement in materiał circumstances, appeared as the uncomfortable concomitants of that increase in the necessities, conveniences and comforts of life of which the West had such just cause to be proud. Victorian economists and statesmen alike deplored the conse-ąuences of depression and unemployment upon the workless. But neither considered the prevention of depression nor the stimulation of recovery to be any part of the province of government. Econom­ists were convinced of the paramount need for accumulation as the only means of enabling an expanding population to support them-selves at a rising standard of comfort; and orthodoxy had to oppose measures which might lessen the rate of accumulation or weaken the restraints upon procreation. Expenditure by Government on works intended primarily to provide employment for those who could not otherwise find it, offended against these canons. Income spent in the present could not also be saved and added to the capital reąuired to maintain the larger populations which were to be expected in the futurę; and to support the unemployed on the same terms as those in regular work furnished no inducement to limit families among the very classes by whom such prudence should have been most strictly exercised, sińce their futurę was least certain! The alleviation of distress, the result of unemployment, was left to charity and the Poor Law; and the activity of Government in the trade cycle was confined to balancing the budget and upholding the gold standard. At the end of the first world war, the prevention of inflation, the preservation of the value of the pound and the restoration of the exchanges at the former gold parity were again the overriding objects of economic policy. Mr. Austen Chamberlain, the then Chancellor of the Exchequer, called for co-operation in every quarter in order to maintain the policy on which the Government had set their hearts, of first stopping further inflation and then beginning gradually to deflate.1 That deflation was successfully carried out. One of its conseąuences, the slump of 1921, has sińce served as an awful warning. Unemploy­ment before 1914 had seemed to fluctuate between 2 and 8 per cent. 1 126 H.C. 2073. Report of Cunliffe Committee, March 16th, 1920. For the next two decades, from 1921 to 1939, the annual rate was only once less than 10 per cent and twice more than 20 per cent. The two sets of statistics are not strictly comparable. The earlier returns had shown only the rate of unemployment reported by those trade unions which paid benefit to members when out of work. The later figures measure unemployment among the three-quarters or so of the working population who, sińce 1923, were compulsorily in-sured under the Unemployment Insurance Act. The first was much less comprehensive than the second figurę, and the real rate of unemployment was probably greater. The trades unions of the nine-teenth century had organised skilled workers rather than the un-skilled, and the incidence of unemployment was almost certainly greater among the latter than among the former. But whatever may have been the true comparison, the facts of unemployment after the first world war were kept well before the public by the issue, each month, of a return from the Ministry of Labour, which showed the distribution both geographically and industrially of the numbers of the insured who were registered as unemployed. The views of econo-mists and statesmen alike were profoundly altered during these twenty years; and the Government, by the end of the second world war, were ready to accept "as one of their primary aims and respon-sibilities, the maintenance of a high and stable level of employment after the War".1