Economic home truths
Patrick Cosgrave
The other evening, at dinner, I sat opposite a middle-ranking government minister, serving in one of the non-economic departments. He is an able, civilised man who does not often go in for the harsher polemics of politics; and he was honest in confessing that he simply could not understand either the origin or the nature of the sudden cloud that was threatening the carefully engineered run-up to a general election. He could not understand, he said, how an inexplicable balance of payments result came about, the news that our oil was worth only half what he and his colleagues had imagined, the fact that suddenly City and Westminster opin ion, having, for some months and after much travail, finally accepted the views of the Chancellor and Mr Hattersley that inflation was on a steady and long-term downward trend, were now convinced that single-figure inflation would be a very temporary phenomenon; and he could not understand other things. He was symptomatic of the unease that suddenly characterises the private conversation of many Labour members, an unease that has caused a sudden pricking up of those Tory ears and tails so drooping only weeks ago.
However, I do not want to use my companion's discomfiture and puzzlement to make a narrow party point. Many Tories (those of the drooping ears and tails) have been convinced for months that the Gov ernment was finally getting things more or less right; and that Mrs Thatcher's electoral hopes had been consequently blighted.
Some of them, when they were in office, betrayed the same incomprehension in the face of economic trends as did my Labour friend. The large question is — what is the factor or factors in our economic structure (if any large and general factors can be iden tified) which has made our economic performance so generally one of decline and, in the short term, so unpredictable?
Some of the material that might help us towards an answer is to be found in a remarkable new book, A Return to Free Market Economics?, by Professor John Jewkes.* It is important to stress, at the outset, that ProfessorJewkes is no academic outsider, no foreigner who can be dismissed (as Hayek sometimes is) for his evident foreignness, or his unBritish ebullience (as Fried man is). Apart from a string of distinguished academic appointments (which might, given the general condition of economic studies in our universities since the war, be taken as a disqualification from making pronouncements about the national economy), John Jewkes has held posts in the real world as well — in the Economic Section of the War Cabinet Secretariat; in the Ministry of Aircraft Production; in the Ministry of Reconstruction, and on a whole host of official bodies. And over the whole period of a most distinguished career he has been singing the same song, and it has been falling on the same deaf ears.
All the essays in the present volume are concerned with the direct and deliberate intervention of government in the economy, either to achieve particular social ends, or in order to enhance efficiency, productivity and profitability. And, although his is mainly a catalogue of disaster and folly (proven disaster and proven folly; folly and disaster proven by the event), he is no fanatic, no extremist, no doctrinaire of the monetarist school. Thus, for example, in a painstaking 'Defence of the White Paper on Employ ment Policy 1944' he argues that today's monetarists (those who believe that the level of inflation is determined mainly or wholly by the level of the money supply), although they have won the intellectual battle, may be running into danger. 'The less thoughtful monetarists may be running us into another set of errors by assuming that there can never be an occasion when increased public expenditure may be desirable in order to stimulate employment and by suggesting that there is a simple set of arithmetical rules which could enable governments to specify, and measure and control exactly, the supply of money in order to keep unemployment at the level below which it should not fall and above which it should not rise.'
He is no proponent of an allencom passing counter-ideology to the collectivist nco-Keynesian ism of post-war years. Rather, every piece in the book is the witness of a careful, a judging, an experienced mind; and it is this very sobriety, this very judiciousness that makes the Jewkes conclusion even more startling. For it is his conclusion that British economic and industrial policy (not to mention large tracts of social policy) hasquite simply been set on the wrong lines since during the war. 'The central proposition', he writes, 'some may describe it as a prejudice, which I claim can be found running through the papers is that any large community which sets out to maintain and enhance liberty for the individual and to combine this with material prosperity will, in the long run, only succeed in its dotible aim if it makes a full and constantly extending use of free markets.' Now, although since the war the Conservative Party has constantly been, in its rhetoric at least, on the same side as Professor Jewkes, most of its actions in office —and a good-deal
*Macmillan £12.00 of the rhetoric too — have set the emphasis elsewhere, on the mix in the mixed economy, not on the freedom of the free market. And, as Mrs Thatcher is fond of observing, in a cocktail it's the mix that counts.
We should note, however, that there are two points to Professor Jewkes's thesis. It is not merely that he argues — as many of a like mind almost solely argue — that collectivisation of the economy strangles freedom, that 'there is no freedom without economic freedom'. He also argues the inefficiency, on purely pragmatic grounds, of collectivism. It is central to his thesis that, as government advances more and more into economic life (and as its supporting bureaucracy advances), so we see a steady decline of standards, not only in every area where government intervenes but — and perhaps more importantly — in those areas where men of all schools would accept that government should intervene, and should intervene effectively.
And, as yet another storm cloud gathers over economic Britain, as Mr Edwardes's brave little plan for persuading people to buy British Leyland founders; as the Steel Corporation's losses mount and its rulers beg for more (they are currently taking ten pence in every pound of government borrowing); as ministers resort to ever more desperate expedients to cover up and compensate for failure; and as even a Socialist-led committee of the House of Commons exclaims in horror at the disasters, then who is to gainsay Jewkes? The truth seems to be that both the failure and the unpredictability that I mentioned at the beginning are inherent in the mix we have chosen forour mixed economy.
Now, in modern Tory company — in the company, I mean, of the kind of people who enthusiastically supportMrsThatcher,or Sir Keith Joseph -= argument about the solution to our dilemma would probably begin with the individual freedom on which I earlier quoted Professor Jewkes. You would not expect my Labour Party dinner companion to start in the same place: for even the more libertarian members of the modern Labour Party shy away from an individualist stance, and attempt so to question the meaning of freedom, or at least its range (as in Mr Callaghan's adage, 'Freedom for who?'), as to fudge all discussion. But my friend's bewilderment, and the bewilderment of his colleagues, is a fact. He would not, and they would not, share the views of, say, Mr Bea!' and the Tribune Group, to the effect that it is not too much collectivism we have had, but too little. He, like his colleagues, and like the Tories, is seeking a way out, and seeking. it honestly. Oil, it appears, has failed. An historian could have told them, of course, that 3 natural resource does not, of itself, make a country rich, or powerful: its richness and power are above all determined by its policy, and its social cohesion. Now we are again heading towards another last gasp. And
had to say to my friend at dinner, albeit that it does not sound like a clarion call, is that we might as well try the free market, because we have no other expedient left.
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