A REGIMENTED NATION
By HONOR CROOME
THE economic regimentation of Great Britain has reached a point, after only two weeks of war, which it took two years to reach from August, 1914. The Government has taken power to regulate the transfer of labour, and the Trade Unions have raised no fundamental objection. It has taken control, more or less directly, of public transport and power of all kinds, and the private interests concerned have acquiesced. It has entered the world's commodity markets, working, it is true, through the existing trade organisations, but reducing them virtually to the status of agents. Directly or indirectly it is the chief buyer, seller, employer and investor. What does this signify, economically speaking, now and for the future? Have we turned Socialist or Fascist overnight?
Of course we have not, though there are superficial resemblances to both regimes. The maintenance of the principle of private profit, the waiving of Trade Union authority, have nothing in common with Socialism ; and one only has to consider the extent to which the modification of our economic life remains voluntary, the freedom of debate in Parliament and of comment in the Press, to see that we have not yet, at all events, sacrificed all the freedom we fight for by the very act of fighting for it. But quite apart from military contingencies the problems of a war economy have hardly begun to grow acute. There have been minor miseries over meat or fish here, sugar there—considerably more exasperating to retailers than to the general public. There have been some sectional price-rises where the meaner sort of tradesman has seized the golden opportunity to drive Jacob's bargain, and others more or less justified by new A.R.P. or insurance costs. The discomforts of rationing have been discounted in advance, though probably inade- quately. But the main difficulties are to come, and upon their solution it depends whether our economy can maintain such elements of liberalism as it possesses, whether when peace returns it can (whatever its nature by then) be turned efficiently to the work of reconstruction, or whether it will collapse in a chaos wherein there will be little to choose between the plights of victor and vanquished.
These main difficulties present themselves under two heads ; that of public finance, which is largely a matter of the general price-level, and that of rationing and particular price-controls, which is an aspect of the economic problem of all time—the distribution of the factors of production between different uses. Essentially these questions are one ; the problem of ensuring that, for every• new call on the nation's resources, either equivalent new resources shall be made available (e.g., by longer hours, women's work, &c.) or an equivalent old demand shall be squeezed out. If the huge new demands of the Services were to be superimposed on a demand for ordinary consumers' goods, not only main- tained at the old level but actually swollen by new purchas- ing-power derived from loan-financed Government expendi- ture, the result could only be an inflationary price-rise all round, on the old model. We have seen that happen once. That is one reason why we—meaning both ourselves and the unfortunate German people—are now facing, among worse things, the chance of its happening again. There is no easy way out of this problem. Once the limited " slack " of suitable unemployed men and equipment has been taken up there can be no question of the standard of living being maintained. Time and material spent on war purposes simply are not available for other things. As the Red Queen said, " The more there is of mine, the less there is of yours? " But how effect the transfer? Here rationing has an important part to play. If the things the State wanted were just those which the individual would automatically forgo, and if (a less obvious condition) incomes were equal, we should only need a policy of stiff taxation. Control would be strategic only—a matter of convoys, black-outs, and so forth. What the citizen was unable to buy because the Government had taken his money, the Government would with that very money buy for itself. But unluckily there is no such automatic coincidence. To release petrol-supplies it is not enough to tax motorists ; that will help, but many may react less by reducing mileage than by forgoing other things. To make sure. petrol must be rationed—and so. perhaps, with other commodities still freely bought and sold today. Moreover, lower incomes all round do not mean a lowered demand all round for necessities. Rich men may forgo cigars, but they will not reduce their consumption of foodstuffs ; poor men must do so, having no luxury margin for retrenchment. Here, too, rationing must supplement the transfer of incomes from citizen to Government, if only in the interest of national stamina. It is interesting to note that this principle has been followed by Russia, strictly during the stress of the first Five Year Plan, less strictly now ; it does not depend for its importance on the possibilities of blockade.
So much for the economics of rationing, given the austere financial policy of paying for the war as we go. But the war is not being wholly financed from current account ; and the large Government loan programme brings new needs for regimentation—this time of the capital market. New pur- chasing-power is being injected into circulation, and future liabilities are being incurred. The obvious desideratum is to make the one elicit new goods and services rather than raise the prices of old, and to keep the other as low as possible. In the absence of control, new purchasing-power begins by duly eliciting the goods the Government wants—whether in large or in small quantities depending on how easy it is to attract men and plant ; but with the new profits and over- time pay in the hands of the producers, there follows an increased demand for the things these individuals want, and consequently an incentive to divert men and plant to pro- ducing them. The Government is, in fact, providing its competitors for the national resources with the wherewithal to compete. In the absence of control, the inflationary sequel follows. With the embargo on rftw capital issues this particular problem is solved for the moment ; but home industry cannot be indefinitely starved of capital. There must be not merely a more or less elastic embargo, but positive control—in short, a Central Investment Board. And once that has been set up it is unlikely ever to be abolished.
Supposing this achieved, what is the position ? Necessities are rationed, commodities and services essential to warfare are rationed, essential labour supplies are controlled, capital markets are organised to give priority to Government needs. What then is to happen to the additional purchasing-power pur into circulation by the Government's use of its credits? Doubtless much will be taxed back; the rest will be concentrated on those outlets which are not controlled, and we may see price-rises in the oddest quarters. But what son: of price-structure will eventually emerge? Without knowing how long the war will last, in what circum- stances it will end, or what by that time will be the political temper of the nation, one cannot tell either how far the normal price-system will have been distorted, how fast—if at all—each control will be relaxed, or to what peace-time uses they may be put. Optimistically, one envisages a real Ministry of Reconstruction using the whole impetus of the war effort, harnessing whatever remains of the willing spirit of service and sacrifice of today, devoting the experience of co-ordination and co-operation—not, let us hope, confuted to national boundaries—which war will have given, to the task of overcoming war's havoc. Pessimistically—even if the spectre of hyper-inflation is exorcized—one sees a clutter of obsolete restrictions matched by a clutter of ill- conceived subsidies, the fall of the next " axe " amid universal disillusionment, and the emergence of a per- manently impoverished, debt-laden, monopoly-ridden economy beside which 1931 will seem a year of halcyon prosperity. Either possibility is implicit in today's develop- ments.
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