The Age of Austerity

There was a strange period immediately after VE Day (Victory in Europe) and VJ Day (Victory over Japan), lasting some years before the 1950s really got under way.
The United Kingdom was one of the victors in World War II.
The cost of the war was very heavy, however, and the late 1940s were a time of austerity and cut-backs.
”We have been the dreamers, we have been the sufferers, now we are the builders.”
Aneurin Bevan - Labour Conference - 1945
This was the optimistic hope of the socialists, (and 'fellow travellers', and communists), directly after the end of the Second World War - the world into which Pete was born.
The question, of course, was whether the country was intent on building a 'New Jerusalem', based on the principles of social democracy; or whether, as some believe, the very attempt to do so without securing a solid foundation of industrial success was to be the source of many of the country's later woes.
The Socialist Government of the day believed that it knew what the British people wanted.
The trouble was, however, that the people often did not want what the Government thought they wanted, or thought they ought to want.
Eton Boys
It is significant that 30% of cabinet ministers at the time were public school educated, (for non-English readers 'public school', paradoxically, means 'expensive private school') - so in reality they knew very little about the needs of ordinary people.
'Ordinary' people, however, were profoundly uninterested in the 'dialectics of socialism' (who is ?), and the politics of civic uplift; indeed, the level of political knowledge was pitiable.
At the time, just 49% of the electorate could name a single British colony, while, in a sample survey in the borough of Greenwich (in London), during the 1950 General Election, barely half could name the party of their local MP (Member of Parliament).
Voting was 'tribal' and 'instinctive', based largely on inherited attitudes or, most significantly, social class.
The middle classes, in particular, was highly class-conscious, and many of its members thoroughly loathed the Labour (Socialist) Government and all its works.
Not only were the middle classes unimpressed with the new Socialist Government, the working class also ignored the sermons regularly given by the 'great and the good', and retained a healthy suspicion of the motives of those in authority over them.
The aims of the ordinary people were, understandably enough, concentrated on concrete improvements - a decent job, eking out their ration books, and, above all, somewhere to live.
Labour MPs, rather naively, were prone to identify their own keen supporters - politically conscious and class-conscious Labour men - with the mass of the people, who were very much against austerity, utterly uninterested in nationalisation of steel, and heartily sick of excuses, and being told to work harder.
By 1951, the large Labour majority of 1945 had been squandered.
Socialism, as it was conceived pre-war (along with Communism) was dying, and Labour was quite obviously losing touch with the aspirations of the British people.
The party was turning inwards upon itself, asking how far nationalisation should extend, and what socialism really meant.
Labour was 'talking to itself', not to the British people.
A party of the Left could only hope to prosper if it based its policies on a real understanding of popular aspirations.
That is an easy moral to formulate.
The history of the 20th century Britain shows how difficult it was to put it into practice.
In the 1940s the meaning of 'austerity' was quite clear.
It meant holding back the growth of private consumption so that resources could be transferred from the war effort to civilian uses, with most of those resources flowing into exports and investment.
In economic terms this policy was very successful; between 1946 and 1952 consumer spending rose by 5.9 per cent, but fixed investment by 57.9 per cent and exports by 77 per cent.
Politically, however, the consequences were problematic for the Labour Government.
The holding back of consumption, and the rationing and controls which accompanied this restriction, allowed the Conservatives to mount an effective campaign to as they put it - ‘set the people free’.
This campaign mobilised the Conservative vote, and seems to have been especially effective amongst women who bore the daily brunt of dealing with austerity, and the frustrations of shortages of goods for everyday consumption.
The Labour Party's majority was minimal in the general election of 1950, and the government lost office in 1951.
The 1940s 'austerity strategy' was driven by two imperatives: to correct the balance of payments, and to invest, in order to expand the economy.
Contemporary arguments about the balance of payments focused on the private sector, and the current account - the slogan of ‘export or die’ obscuring the extent to which foreign exchange was flowing into overseas military spending and foreign investment, but within this framing of the issue, the policy was highly successful, with the payments position corrected, until the onset of the Korean War brought further problems.
The improvement in the current account was greatly aided by the inability of the devastated economies of Germany and Japan to fully compete in expanding world markets, and by devaluation of the pound in 1949.
While conditions were undoubtedly favourable, the political commitment to correcting the payments position, despite the consequent starving of the powerful demands of the home market, is striking. The commitment to a rise in investment flowed from a strong sense in the Labour leadership that their commitment to full employment and expanded welfare provision as the centre of the post-war settlement was only politically feasible in an expanding economy.
Some of the investment was itself part of delivering on that settlement, most notably in housing, where construction was overwhelmingly concentrated in the public sector (Council Housing).
While the number of houses built was impressive, reaching a peak of almost 200,000 per annum, the targets of 1945 were not achieved, and after 1947 the programme was cut back in order to release labour and timber for other uses.
The biggest increase in investment was in plant and machinery, and the sector that benefited most from the government’s priorities was manufacturing and construction.
In addition, the overall 'austerity' of the 1940s was accompanied by expanding welfare provision.
The 1940s were the years of the inauguration of the NHS (National Health Service), expansion of education, and a major increase in social security provision, both through National Insurance and National Assistance.
Three points about this expansion of the welfare state, however, are worth noting.
First, because of buoyant demand for labour, expenditure on social security rose much more slowly than had been budgeted for in wartime planning; payments of unemployment pay and sickness benefit (demand for which rises when the labour market is slack) had been based on unemployment levels of 8.5 per cent, while the trend rate in the 1940s was around 2 per cent.
Second, this expansion was of entitlement to very low standards of support.
The newly-expanded National Insurance system, constrained to offer flat rate benefits for flat rate contributions, had to have contribution levels affordable by the low paid, and hence offered benefits which mean we can rightly talk of an ‘austerity welfare state’.
Third, while entitlement to welfare greatly expanded in the 1940s, physical provision in the form of schools and hospitals, especially the latter, was heavily constrained by the priority given to industrial investment.
Thus, for example, despite the hopes entertained at the founding of the NHS, no new district general hospitals were built until the 1960s.
The 1940s austerity was driven by a 'macroeconomic' problem of demand outrunning supply, and therefore the need to restrict private consumption in order to prioritise exports and investment.
This excess demand accounts for the low unemployment levels, and also for the Government’s supply-side initiatives, in areas such as subsidies for research and development, expansion of technical education, and a drive to import what were perceived as the superior techniques of American industry for achieving high productivity; this was the 1940s version of ‘supply-side socialism’.
This excess demand was countered not only by continued rationing and controls, but increasingly by tight fiscal policy, so that for most of its years in office the Labour Government was running a budget surplus, and reducing the national debt.
The public sector was therefore a big contributor to aggregate savings in the economy, as was the company sector, which was highly liquid from accumulated wartime profits.
The household sector also saved, but this was mainly driven by the unavailability of consumption goods, and as rationing and controls slackened, household savings fell sharply.

For children of Pete's age, 'austerity' had very little meaning.
They were too young to remember, to any extent, the rationing and shortages of the immediate post war period.
The bitterly cold winter of 1946- 47 occurred when Pete was in his first years.
Rationing, one of the main indicators of  'austerity', continued as the end of the war saw additional cuts.
Bread, which was never rationed during wartime, was put on the ration in July 1946.
It was not until the early 1950s that most commodities came 'off the ration'.
Meat was the last item to be de-rationed, and food rationing ended completely in 1954, when Pete was eight years old.
For Pete the only remnants of the austerity and the war were certain 'utility' items which were to be found around the house.
These included pencils and blanket, and yards of 'blackout material'.

The CC41 Utility logo was  British Board of Trade requirement that appeared on footwear, utility furniture, textiles and utility clothing for just over ten years from 1941. CC41 meant "Controlled Commodity", and designated that the item met the government's austerity regulations. The CC41 logo was designed by Reginald Shipp. Though the Conservative Government had hoped to scrap the Utility System after the war, with the Labour victory in the 1945 General Election, the scheme ran until 1952 ( and was withdrawn following the Conservatives returning to government that year).

To understand the effects on the British public of the Government policy of austerity it is useful to consult the findings of 'Mass Observation' - which operated throughout this period.
The creators of the 'Mass Observation' project were anthropologist Tom Harrisson, poet Charles Madge and film-maker Humphrey Jennings.
Collaborators included the critic William Empson, the photographer Humphrey Spender, the collagist Julian Trevelyan, the novelist G.B. Edwards, and the painters William Coldstream and Graham Bell. Run on a shoestring budget with money from their own pockets, and the occasional philanthropic contribution or book advance, the project relied most on its network of volunteer correspondents. Harrisson had set up his base in a working-class street in the northern English industrial town of Bolton (known in 'Mass Observation' publications as 'Worktown'), in order, with his collaborators, to 'systematically... record human activity in this industrial town', using a variety of observational methods.
Meanwhile, Madge, from his London home, had started to form a group of fellow-poets, artists and film-makers under the name 'Mass Observation'.
The two teams began their collaboration in early 1937.
In August 1939 'Mass Observation' invited members of the public to record and send them a day-to-day account of their lives in the form of a diary.
No special instructions were given to these diarists, so their contributions vary greatly in style, content and length.
Initially 480 people responded to this invitation, and their diaries are now held in the 'Mass Observation Archive'.
During the Second World War, 'Mass Observation' research was occasionally influential in shaping British public policy.
In 1939 'Mass Observation' publicly criticised the Ministry of Information's posters, which led to their being replaced with more appropriate ones.
In addition, their study of saving habits was used by John Maynard Keynes successfully to argue for tax policy changes.
During the war, there were also a few cases of Mass Observation doing research on commission for government authorities trying to shape recruiting and war propaganda: Mary Adams, for example, employed MO on commission for the Ministry of Information.
Mass-Observation was criticised by some, though, as an invasion of privacy.
Participants were not only reporting on their own lives; they often commented on their neighbours and friends as well.
Such an atmosphere of 'surveillance' was in keeping with the rising culture of espionage, which dominated the Second World War, although Mass Observation was an independent, not a Government effort, aimed at education rather than manipulation of the public.
Mass Observation had set out to turn the tools of anthropology used to study foreign cultures to study Britain's: to be 'The Science of Us'.
Criticism of the scientific validity focusing on the experimental parameters began fairly early, continued throughout its existence.
Although geographically and occupationally diverse, the participants tended to be middle-class, educated, literate, and (although it was not always obvious) left of centre.
Many of the contributions to Mass Observation make interesting, and in some cases surprising reading.
Immediately after the end of the war, many respondents doubted that Adolf Hitler was dead, suggesting that somehow he and his wife, (Eva Braun), had escaped from Berlin, and possibly even Europe.
There was also much comment on the legality - or otherwise - of the Nürnberg Trials of leading National Socialists.
Surprisingly some respondents clamoured for the most barbaric forms of punishments for the accused who were found guilty.
Some, however, suggested that the death penalty for William Joyce, 'Lord Haw-Haw', was too severe, considering him to be more a 'figure of fun' that a 'traitor' (in fact his execution for 'treason' was technically illegal as he was not, at the time of his 'offences', a British subject). 
There was, even in the immediate aftermath of the war, also a conviction that there would soon be a Third World War - this time instigated by the Soviet Union against the West.
Many of the respondents had contact (eventually permitted by the Government) with German prisoners of war - who had at that time had not been repatriated.
It is possibly surprising to note that these one time members of the German armed forces, who had so recently been enemies of the British, were looked upon very favourably by many of the Mass Observation respondents, and were praised for their good manners and excellent 'work ethic'.
Even more surprisingly some respondents even had occasional guarded, but positive, comments about Hitler.
On the same theme, despite the news (and Newsreels) about the German concentration camps, and the treatment of the Jews in Europe, there were many openly anti-Semitic views expressed - many of which were related to the problems faced by British Troops at the time in Palestine - and it should be noted that anti-Semitism was quite common in Britain, immediately after the war, particularly among the middle classes.
The Government (Socialist), as expected, came in for a great deal of criticism, as even the literate and well educated respondents had expected living standards to improve, rather that deteriorate after the end of hostilities.
There had been a decided swing to the left in the country as the war drew to a close,  which had effected all classes.
Those famous words - 'we have won the war - now we must win the peace' - were full of promise for a better tomorrow.
What most people didn't realize (as the truth had been hidden from them to a great extent), was the fact that the country a virtually bankrupt, and there was simply not enough money to 'win the peace' in the manner that people were hoping for.

to be continued......

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