Perspectives on the British Welfare State: from Hobson to Thatcher
Total Page:16
File Type:pdf, Size:1020Kb
Perspectives on the British Welfare State: From Hobson to Thatcher Alan Booth University of Exeter, UK 1 It is a great honour to be in Tokyo again and especially to be giving a paper to a conference that features Professors Nishizawa, Komine and Eriguchi. They have been friends for many years and it is a privilege to be on the same speaking platform as them. It is also extremely pleasant to be once more in the grounds of Hitotsubashi University, where I spent a very happy year in 1998-99. The title of my paper is ambitious to the point of being foolhardy. We would be here for an eternity if I interpreted my title very broadly and tried to give a full overview of the range of opinions on Britain’s welfare state in the twentieth century. Rather than spread my survey very thinly, I hope to select authors who will complement those surveyed by my Japanese colleagues. I have drawn on those who, like Beveridge and the Webbs, were engaged in political and economic discourse and who were concerned with broad questions about the role of the state in modern society. I have chosen three prominent contributors to the debates that raged during the twentieth century, in part, because they have been highly prominent figures, in part because they illustrate the main problems confronted in the period. For the period in which the foundations of the welfare state were laid the obvious choice is J.A. Hobson, one of the foremost critics of modern capitalism. The second personality, Anthony Crosland, ‘was one of the small group of men whose thought has shaped the whole outlook of British socialism’.1 He was tutor in economics at Trinity College Oxford from 1947 until he began a political career in the 1950 British general election. His place in British history hinges upon the publication in 1956 of The Future of Socialism, a major re-evaluation of the social democratic tradition in British politics. He made the case for social democratic egalitarianism and redistribution in a period of economic growth, full employment, relative affluence and expanding consumer choice. The third figure upon whom I wish to focus, Sir Keith Joseph, was from the centre-right of British politics and a pivotal figure in the re-appraisal of British conservatism of the 1970s, which has become popularly known as Thatcherism. From the later 1950s, Joseph served in successive Conservative cabinets that operated under the so-called ‘postwar settlement’. However, his commitment to ‘consensus politics’ was that of a rational political calculator rather than of a committed theorist.2 His growing disenchantment with the messy compromises of interventionist policies led him to the New Right and a new role for the state (and therein for welfare policy) in an advanced capitalist economy. Thus, we have three personalities at the interface between politics and economics and engaged at key moments in the re-appraisal of centre-left and new right approaches to economic policy. 1 Obituary, The Times, 21 February 1977. 2 As is evident from his essay ‘The Quest for Common Ground’ in Sir Keith Joseph, Stranded on the Middle Ground, London, Centre for Policy Studies, 1976, pp. 19-36. 2 John Anderson Hobson, 1858-1940 J.A. Hobson is probably the best-known to a Japanese audience of the three commentators on British capitalism covered in this essay. He was born to a comfortable upper middle class family in Derby, a provincial industrial centre in the British midlands.3 His views on imperialism have been much studied by generations of students of British economic and political history and more recently he has been the focus of much scholarly endeavour from a range of academic disciplines.4 Much of this work was inspired by Keynes’s (apparent) acknowledgement of Hobson as one of the economists who had an intuitive grasp of the principle of aggregate demand.5 Indeed, the early work on Hobson made significant claims for his contribution to economic theory.6 However, the major reassessment of Hobson’s work in recent years has tended to emphasise the inconsistencies and limitations in Hobson’s treatment of theory while acknowledging the breadth of his interests and the fertility of his intellect. In truth, Hobson was better suited temperamentally to the role of propagandist, and the most recent of the major studies of Hobson has described him as one of the chief intellectual inspirations behind the mixed economy and the welfare state created in Britain during and after the Second World War.7 The foundation of Hobson’s advocacy of the welfare state lay in his analysis of the condition of British (and world) capitalism in the late 19th century. Hobson’s career began relatively quietly, with spells of school-teaching at Faversham (Kent) and Exeter (Devon). In Exeter he met A. F. Mummery, mountaineer, businessman and controversialist. Mummery believed that the problems of the British economy since the end of the mid-Victorian boom (falling prices and squeezed profits) resulted from excessive saving. Hobson attempted by the orthodox economics he had studied to counter these arguments, but Mummery gradually brought him round and they worked together on The Physiology of Industry, published in 1889.8 Their argument identified two forces in the British economy of the 1880s leading to excess saving. The first was uncertainty, which induced some to hoard money rather than spend it. The second was the strong drive to accumulate, which forced individual capitalists into excessive investment and overproduction, producing under-consumption and recurrent crises. The former bears some relation to Keynes’s liquidity preference and the latter has Marxian overtones. However, it is unwise to read too much consistency into Hobson’s thinking. Roger Backhouse, for example, has demonstrated very clearly that Hobson’s monetary theory is not 3 Jules Townshend, J.A. Hobson, Manchester, Manchester University Press, 1990, p. 3. 4 For an excellent review of this work, see P. J. Cain, Hobson and Imperialism: Radicalism, new Liberalism and Finance, 1887-1938, Oxford, Oxford University Press, 2002, pp. 1-6. 5 J. M. Keynes, The General Theory of Employment, interest and Money, London, Macmillan, 1936, pp. 364-70. 6 See D. J. Coppock, ‘A Reconsideration of Hobson’s Theory of Unemployment’, Manchester School, 21, 1953, pp. 1-21. 7 Cain, Hobson and Imperialism, p. 14. 8 Confessions of an Economic Heretic: The Autobiography of J. A. Hobson, edited by Michael Freeden, Hassocks, Harvester Press, p. 30. J. A. Hobson and A. F. Mummery, The Physiology of Industry: Being an Exposure of the Fallacies in Existing Theories of Economics, London, John Murray, 1889. 3 entirely consistent with the Mummery and Hobson discussions of saving and investment.9 In The Physiology of Industry there are passages that imply a distinction between savings and investment and incentives to hoard rather than invest, but they seem to be from Mummery rather than from Hobson. His publications after The Physiology of Industry deny the possibility of both hoarding and related Keynesian concepts like the multiplier. Hobson repudiated many of the more interesting heretical elements of The Physiology of Industry in the publications under his own name in the years immediately after 1889, and instead developed the analysis of over-accumulation resulting from the changing nature of mature capitalism.10 Nevertheless, Hobson suggested that over-accumulation, or under-consumption as it is more commonly known, was an economic heresy, which put him beyond the pale of a university post in economics.11 In reassembling his analytical perspectives after the Physiology of Industry, Hobson drew widely from both progressive liberalism, notably in the Ethical Movement and the Rainbow Circle, and Fabian ideas. With most new liberals he saw the growth of state intervention as the key to solving the problems of contemporary capitalism.12 From the Fabians, he drew the analysis of rent that underpinned his analysis of the maldistribution of income.13 The evolution of Hobson’s ideas in the 1890s has been much discussed, and it is clear that from the early 1890s he clearly distinguished between elements of income that were necessary to provide for future growth (rents that were necessary to bring scarce factors of production into use) and those which were unearned and unnecessary and could be redistributed to other social strata without disturbing enterprise and economic growth.14 This in turn was influenced by his appropriation of the notion of ‘parasitic behaviour’ or ‘parasitism’ from studies in evolutionary biology published in the 1890s. The essence of Hobson’s position was that profits made in the manufacturing sector by means of what amounted to workshop methods using skilled labour and relatively traditional techniques were conducive to 9 Roger E. Backhouse, ‘J. A. Hobson as a Macroeconomic Theorist’, in Re-appraising Hobson, ed. Freeden, pp. 116-36. 10 Cain, Hobson and Imperialism, pp. 30-46. It is also worth noting that Keynes believed that Mummery’s contribution to The Physiology of Industry was more powerful than that of Hobson, whom Keynes believed to have been side-tracked into the idea of under-consumption leading to over-investment. See Peter Clarke, ‘Hobson and Keynes as Economic Heretics’, in Re-appraising Hobson, ed. Freeden, pp. 112-13. 11 Confessions, pp. 30-1. However, Cain and Kadish have recently questioned Hobson’s interpretation and suggested that the breach with orthodoxy was exaggerated: Cain, Hobson and Imperialism, p. 29; Alon Kadish, ‘Rewriting the Confessions; Hobson and the Extension Movement’, in Reappraising J. A. Hobson: Humanism and Welfare, edited by Michael Freeden, London, Unwin Hyman, pp. 143-9; Alon Kadish, ‘The Non-canonical context of the Physiology of Industry’, in J.