ON SOCIALIST PLANNING
Carpenter, Luther
Socialists have always known the values they want to serve; they have had more difficulty working out an economic system that would have to serve them. Since the early days of the Labour...
...It is remarkable that as late as the end of 1943 the TUC was engaged in joint talks on reconstruction with employers' organizations, but not with the Labour party...
...of deciding what to make and provide on grounds of social benefits and social costs...
...But Cole did not reach this point...
...The more sophisticated proposals tried to calculate indirect impacts on the private sec 1 Beatrice and Sidney Webb, A Constitution for the Socialist Commonwealth of Great Britain (London, 1920), p. 119...
...Pressure for postwar planning built up early in the war and was met by a dogged repetition of the General Council's belief that planning was the government's problem, the TUC's role limited to consultation...
...The TUC gave no indication how this notion of planning would fit into overall planning of 1 5 Ibid., pp...
...Cole, Dobb, and Wootton all supported efforts to incorporate markets for consumer goods into socialist planning...
...Simultaneously the Trades Union Congress pursued its own effort to get economic decisions to reflect social needs...
...Planning was often secondary to individual thinkers' main work—Colin Clark's studies of national income, for example, outweighed his interest in a National Investment Board...
...But planning was not simply reduced to something to be thought about in one's spare time...
...It listed the Board's functions as preparing estimates of the National Income "and of the desirable scale of National Development . . ." using surveys of proposed .public and private capital development schemes...
...But the Tories had no intention of permitting anything other than a restoration of the industrial status quo, and Labour ministers fought a mild rear-guard action that entailed frequent efforts to quell their own militants...
...And then there was investment...
...Nevertheless, the idea also survived to cut across proposals for comprehensive planning...
...Cole insisted, and Wootton and Dobb agreed, that many decisions were already made in social terms that went beyond calculable costs...
...He also started with a national development plan...
...Second, socialists cannot abandon need and social cost in the short run without abandoning their basic yardsticks...
...One or more resources— energy, land, food—may become a bottleneck that would determine economic possibilities...
...To make a start, most would-be planners tacked some sort of planning commission pr supreme economic authority onto their current image of national ownership of essential industries...
...The slim chances of getting any comprehensive planning implemented, or even accepted as Labour policy, were undercut still further by the lack of cooperation within the movement...
...Often this was combined with proposals for a minister of Economic Development...
...Socialist economists spent more energy working out how an unfettered price system could work under public ownership than on developing concepts of need and social cost...
...What is suprising is the prevalence of a model of socialist planning that was dedicated to make markets more efficient and more dominant over economic decisions...
...His notion of the public budget was orthodox...
...However, he made no effort to indicate what goods might be covered and how their production might be planned...
...Socialists periodically suggested making milk or other goods free, but no one worked out a concept of a sector of free necessities...
...By introducing such a broad concept of social cost, Cole left the whole idea of costs indeterminate...
...If these costs could be calculated in advance, they could enter into an overall calculation of costs as a charge upon an industry, along with the costs of abandoning public facilities in declining areas while building new homes and schools in growing areas...
...Part of their consid erations was the problem they called "coordination...
...On its side, the TUC thought ON SOCIALIST PLANNING of reconstruction in an entirely different vein until early 1944...
...The percentage of the national income set aside for investment is inherently arbitrary...
...Mayhew was aware that all licensing was negative...
...In practice, applying a standard of need looked as if it would only modify the calculations of demand that al ready went on...
...need, rather than demand, will become the primary criterion of the worthwhileness of productive effort...
...Capitalist production decisions, if one could believe orthodox economists, were the result of comparing monetary costs of production with anticipated prices...
...When she wrote Plan Or No Plan, Barbara Wootton shared a common skepticism about the ability of Parliament to deal with economic issues...
...A Board of National Investment would have considerable resources behind it—funds from the Post Office Savings Bank and from social insurance, the National Debt, and the Sinking Fund...
...But it was through this word that socialists tried to work out what they could control in the economy, the actual controls this would require, and the degree to which they could guide production by considerations of need and social cost...
...Planned investment was an article of socialist faith, constantly invoked...
...The obstacle was that one could not classify whole industries as producing simply needs or luxuries...
...But how would the supreme economic authority decide what to put into a plan of production...
...It could prepare preliminary plans of output based on parliamentary directives and on local projections of possible production...
...he hoped to get them to lend money through the Board in return for its bonds, rather than submitting them to formal controls...
...1 In the late 1920s the Labour movement dabbled with two kinds of policies that came closer to the problem but ultimately evaded it...
...Trying to encourage investment by manipulating taxation has led to "stop-go" cycles and has generally aided profits and speculation as much as real investment...
...Market socialism had to admit that it could not deal with the basic parameters that shaped the economy, but could only achieve equilibrium once those parameters were set...
...so many factories, mines, and other fixed capital assets in good working order...
...but the alternative has been to shift the problems back onto the community, which either ignores them or tries to solve them out of general taxation, thereby effectively subsidizing the industry responsible...
...Can life be put back into the idea of planning...
...Market socialists envisioned a perfectly competitive market for labor...
...However, the Labour movement failed to arrive at a firm commitment to planning based on any of the ideas of the 1930s...
...312 scarcity of resources and the numbers of possible combinations...
...Colin Clark provided the fullest evaluation of investment in "The Control of Investment...
...It could prevent undesirable microeconomic development, but by itself could not secure full employment...
...After the 1943 Congress, Citrine provided research assistants and an Advisory Committee of Economists to assist the Economic Committee...
...This picture made sense in Britain's depressed state, with large amounts of manpower and fixed capital going to waste...
...its impact on the economy as a whole was too obvious...
...Economists farther to the Left had little to add...
...316 works, housing, and public utilities...
...and so much fertile land...
...Until 1921 the burning issue had been whether a single industry should be run by civil servants or managers representing the community, by representatives of the workers in the industry, or by some joint body...
...Market socialists accepted the orthodox definition of economic rationality: meeting consumers' preferences at a minimum cost...
...One further consequence flowed from this deification of the wage market...
...Virtually all socialists agreed that the inequality of incomes meant that monetary demand was not a true measure of need...
...III M arket socialism was a rigorous, even fanatical, application of points broadly accepted by all British socialists...
...The physical transition to peacetime conditions offered, theoretically, an opportunity to apply planning ideas...
...The Labour party's Executive included trade unionists but had only sporadic contact with the General Council of the TUC...
...Despite the appearance of a program of national development in the 1944 statement, the Labour party did not seem able to use Mayhew's proposal of combining physical planning of the location of industry with overall planning...
...Basic socialist considerations pointed toward production as the central variable...
...each time it has drifted farther away from either the concept of making production meet needs at minimum social cost, or the dream of pure market allocation of resources...
...In the near future, he thought, it would become more important to prevent inflation...
...and, in such a world, Mayhew agreed with Cole that the Board would be reduced in stature as other planning agencies took over...
...they had been unable to get beyond general discussion on any problem...
...Geographical planning was approached from both directions...
...But this dislike may have led him to miss one contemporary development that might have integrated indirect effects into costing...
...It would be less useful in deciding to increase the production of shirts as opposed to toothpaste in a state of near-full employment...
...310 logical starting point, a variable that could be planned in itself and then made the focal point to which other variables were adjusted...
...In a world dominated by poverty and unemployment, surely the essential task was to produce all that could be produced, using all the manpower and productive capacity that was available...
...The idea of social cost also calls out for development...
...He had written as if licensing would be sufficient to get industries to locate in depressed areas without positive inducements...
...The need for bread will take precedence of the demand for cake, up to the point at which the entire community is in a position to consume enough bread to satisfy all reasonable needs...
...The best Communist economist, Maurice Dobb, joined other British observers in looking for modifications in Soviet practice— most notably the use of markets...
...The argument that Western economies are being planned, incoherently, by and for corporations and narrow elites is true—but not strong enough to revive comprehensive planning...
...Cole had faith in his capacity to compare disparate kinds of social costs with each other and with social utility...
...H. D. Dickinson, espousing the rival concept of market socialist planning, did...
...Nor could investment be planned on a purely ad hoc basis...
...Socialists had grave doubts about these variables...
...It would have left out half of this concept of cost, "the indirect effects of the particular uses to which the labour and capital are put...
...But this did not provide a "rational" answer to the issue of the size of the public sector...
...But incomes policies, social dividends, and family allowances had a checkered career...
...However, successive drafts of the "Interim Report on Postwar Reconstruction" added provisions that sought to bring the performance of socialized industries into national planning of major economic variables...
...At the end of 1942 Walter Citrine met with William Jowitt...
...the amount of leisure time...
...Thus the TUC carefully refrained from giving the Board a strong power to decide what investment was in the public interest...
...Market-oriented socialists could not abandon wage differentials to direct the flow of labor...
...Since the 1930s the meaning of the phrase itself has changed, as the ambitions expressed by it have eroded...
...The supreme economic authority would then calculate demand schedules for capital at these rates...
...Labour spokesmen talked of a long-term program of housebuilding that could stabilize the construction industry for 20 years...
...and to the impact of the war...
...The third possible focal point for planning as something distinct from traditional budgetary policy had been a National Investment Board...
...Clark pinpointed insurance, savings banks, and buildings societies as important sources of new capital...
...Orthodox marginalist economists had as much influence on English socialists through the London School of Economics as had Keynes and the Cambridge economists...
...14 Such a minister could have become the minister of Production, with proponents of centralized planning of production such as Cole had wanted...
...Even Cole did not make them the basis for planning but used them as supplements for demand and production costs...
...But this agreement got them no closer to an understanding of the problem...
...Dickinson treated investment not as the motor of industrial development but as an arbitrary element whose allocation should be tamed...
...the ad hoc creation of national health and other benefits won out over ideas that could have been used in comprehensive planning, such as a minimum standard of civilized life...
...They aroused fears based on the doctrine of parliamentary sovereignty, which account for much of the resistance...
...The commonsense notion of basic needs looked as if it could be made scientific...
...cost calculation was primitive and left out costs that could not be imputed directly to the firm...
...He was ready to consider an example in which three-fifths of the total purchasing power was distributed in the form of social dividends.7 This would have left relatively little room for variations in wages and salaries...
...The Board should have the duty of drawing up such a program...
...G. D. H. Cole had in mind a much more radical notion of costs: The social valuation of the "costs" of any service has to be made ultimately in terms...
...Their acceptance of the word "planning" coincided with the left-wing search for legal powers that could override the opposition of bankers and industrialists to nationalization and an expansionary monetary policy...
...However, many socialists still cling to it...
...Instead Clark was drawn toward what became Keynesianism, measuring the impact of public investment on public and private employment...
...Furthermore, planning physical investment would unite industrial planning with town planning...
...What was wrong with monopoly was not that it was monopoly, but that it was private...
...the alternative for them seems to be the abandonment of basic socialist goals...
...It is possible that he had nothing more in mind than the frequent criticism of overinvestment in declining industries, such as textiles immediately after World War I. But the notion of trading state-raised capital for industry acceptance of public regulations offered a chance of getting social costs into the investment process...
...to the movement's difficulty in coming to grips with the problem of what England should look like...
...The price of a finished product would allow the producing unit to draw up demand schedules for the producers' goods it needed...
...In addition, combining the national determination of the volume of investment with physical controls could give more assistance to outlying and declining regions, especially if the Board used the investment grants and regional employment premium developed by the 1964 Labour government...
...It did reserve the power to fix prices and to limit entry into the industry to the government, and made provision for a minister to order an investigation of abuse of a board's powers...
...The TUC consistently felt that large-scale industry was more stable, offered greater security of employment, and could pay higher wages than small firms—thus achieving many of the objectives of direct, comprehensive planning...
...perhaps the idea cannot be made to fit in with Western definitions of purely political democracy...
...but, except at one point in 1942, the Executive did not put this idea at the center of reconstruction...
...it then could submit the preliminary plans for criticism by local units, by Parliament, and by public opinion, and then could issue a final version...
...but the National Investment Board had to possess powers that could expand the economy as well as restrict it...
...Was there a 2 Barbara Wootton, Plan or No Plan (London, 1934), p. 307...
...but its loans should transform the Board into a public holding company, and should carry a measure of public control...
...Decisions concerning collective consumption would be "arbitrary" and "political...
...b) the supply and availability of cash and credit money...
...It is that an authority must be constituted which has the power both to draw up plans and to supervise their execution...
...The party's Executive stopped thinking about planning as a whole...
...VO ne would have expected the idea of planping to make more headway than it did during the war...
...It would have subjected workers to a more rigorous discipline from the labor market than existed in capitalist Britain...
...Clark had not worked out how the Board could decide what rates of expansion were proper for various industries...
...Such a society would find it necessary to revise the assumption of consumer sovereignty that now makes planning appear rigid and arbitrary...
...As an example, let us look at the way Dickinson thought that capital should be allocated...
...Dickinson talked of driving workers out of a declining industry by lowering wages in it...
...To expand investment, Mayhew returned to traditional proposals: public works policy, and an IssueandPlacing Committee to assist private ventures...
...Wartime controls included manpower rationing, the scheduling of raw materials for priority uses, forced lending on the part of banks, and the production of "utility goods...
...Mayhew's underlying reason for restricting the Board's financial powers was that he had become convinced of the benefits of a mixed economic system...
...This example did not even explicitly refer to the need to invest enough to ensure full employment...
...For a wide range of industries—including textiles, chemicals, cement, capital goods industries (electrical engineering, aircraft, automobiles, and shipbuilding, among others), and others that were declining and coming under concentrated economic control, or were important to consumers—the TUC recommended the formation of industrial boards...
...First, comprehensive planning of production may become necessary, and therefore much more feasible politically, if nations have to ration resources...
...In a parallel report, the TUC took over the limited version of a National Investment Board that was featured in the Labour party's 1944 statement...
...The Board should have the power to reduce taxation on undistributed profits, if the institution holding them would invest them through the Board...
...General invocations of planning abounded among the promises of a new world...
...They discussed slum clearance, but did not bring it within the purview of the Board...
...The 40hour week was part of the Labour canon...
...and investment could be related to the plan of production...
...From the beginning, voices within the Labour party's Executive and its Research Department tried to get the party to take up postwar planning...
...they could only hope to reach greater equality by abolishing unearned incomes...
...it comes close to being a utopia erected around markets...
...The Webbs stumbled on it: Finally, there would be the necessary financial co-ordination and direction of the nation's ways and means, including such arrangements as the currency, prices and charges, the provision required for the future, the allocation of particular resources to particular needs, the equitable distribution of the national rent or surplus value, and, where necessary, the levying of taxation for the making up of deficits...
...Most socialists felt that national ownership would permit more accurate calculation of costs, so that the nation could be sure of using efficient plant ahead of inefLUTHER CARPENTER ficient plant...
...The second draft added a paragraph listing "economic vantage points" that the government "must have adequate control over...
...ON SOCIALIST PLANNING tion of resources and the bookkeeping of productive units...
...If each decision were made on its own merits, weighing all the variables would take an impossible amount of time and effort...
...Private companies and institutions accepting loans should have to follow trade union rates and working conditions, and accept some control over their rates of expansion, location of new plants, and prices...
...Thus in calculating the number of houses to put in a long-term program, one could not simply calculate the number of families without housing or living in substandard housing...
...Nor did they propose converting the Ministry of Production into a peacetime agency...
...Does the work of the 1930s suggest any promising avenues to explore...
...in the sphere in which demand has become collective...
...These boards would be composed of representatives of employers and workers, with a government-appointed chairman and "a small number of other members also appointed by the government in consultation with the general interests affected...
...When Dickinson called them "arbitrary," he indicated that he had no willingness to talk about them...
...Markets for consumer 7 Ibid., p. 258...
...It would have to use concepts of need and social cost, or turn to authoritarian politics to protect a distorted distribution of resources...
...Sovietstyle planning would also reduce the unions' independence and their chances of intervening in economic decisions...
...The challenge of fascism, the conduct of the war, and the promulgation of traditional Labour policy all took precedence over planning for most of the thinkers we surveyed...
...Each industry would submit a series of activity schedules for capital at rates of 6 percent, 5 percent, and so on...
...A social fund would have to be financed from industry: it would be calculated to balance collective expenditure and to prevent inflation...
...They assumed the collective ownership of the means of production, with a supreme economic authority supervising the alloca 8 H. D. Dickinson, The Economics of Socialism (London and Oxford, 1939), p. 204...
...he had reached a point at which he could have gone beyond the idea of a large public works program with which he started...
...14 Ibid., p. 10...
...its own funds, provided out of taxation, to use in implementing it...
...Maximizing welfare in this sense would not have satisfied Cole...
...Early Labour versions were often less innovative...
...Finally, a good case can be made for the kind of National Investment Board that Christopher Mayhew outlined...
...They found qualitative decisions "arbitrary" and therefore irrational...
...In an important sense, postponement turned out to be an informal choice against planning...
...Most of these were ad hoc powers, whose application was roughly coordinated but hardly planned...
...it was the repository for public expenditure...
...Such a National Industrial Council could only advise, not plan...
...The supreme economic authority had to prevent productive units from adopting monopolistic price policies...
...Like many socialists, he felt that financial control of industry distorted it...
...to the extent of more than £ 20,000 in any one year...
...Planners could emphasize the location of industry, attacking the decaying industrial regions an expansionary monetary policy alone could not revive, and reconciling growth with the preservation of amenities...
...Instead, the report gave the Board the power of licensing new issues for capital investment...
...Both the leaders who joined the government and those who remained on the Executive resisted efforts to draw up bold plans for reconstruction...
...he said that he wanted a place on a socialist National Planning Commission...
...The first surprising point is that it took English socialists until the 1930s to try to work out the economics that would be needed to make their values real...
...Socialists also hesitated to carry over wartime planning measures...
...Thus the most ambitious efforts to work out new variables for planning—need and social cost—ultimately failed...
...Cole suggested a combination of social dividends and publicly determined wages...
...the allocation of resources between present consumption and investment...
...Finally in April 1944 the General Council of the TUC admitted the overall failure of this approach...
...The idea of a National Investment Board first surfaced in the Liberal Yellow Book in 1927...
...Cole effectively conceded this 0 G. D. H. Cole, The Principles of Economic Planning (London, 1935), p. 224...
...it could lead to instability and underuse of capacity in public works contracting, and to insecurity in public employment...
...The strength of this argument was that it identified as social costs the social consequences that outrage socialists...
...tee began by affirming that nothing had happened since 1932 to require the TUC to modify its position that planning was a matter of obtaining the correct structure for each industry, with several basic industries coming under national ownership...
...they resembled authoritarian planning, and seemed ill-suited to achieving a plurality of ends...
...many, such as Colin Clark, soon became suspicious of Soviet statistics and uncertain whether the Soviet Union had a coherent economic policy...
...In this case, comprehensive planning would mean trying to calculate the 9 G. D. H. Cole, Economic Tracts for the Times (London, 1932), p. 189...
...Other observers had pointed out the dangers of expanding and contracting public investment...
...If a technique could be invented for charging industries for pollution, transportation of workers in congested areas, redundancies and retraining, industrial diseases, and the abandonment of social assets such as schools and hospitals, industrial development would be more rational...
...licensing new issues of securities...
...Two alternatives were left...
...the State, in deciding to embark on some public work, or in giving one such undertaking preference over another, is to some extent guided, not by their respective money costs in relation to any return that can be expressed in prices, but by weighing their social utility against the amount of the social resources their creation will use up...
...In this proposal Clark sought to implement Keynes's argument that all the money saved did not find its way into investment...
...This requirement effectively took precedence over the argument that incomes had to be approximately equal, so that consumer demand would approximate need...
...They argued that the domination of industry by finance led to monopoly pricing, gambling on the stock exchange, and industrial stagnation...
...In addition, both models created uncertainties in the minds of both trade unionists and intellectuals...
...It had not drawn the attention of a group of economists or politicians who would put it at the center of their thinking...
...In dealing with industries not ripe for nationalization, the TUC returned to and expanded quasi corporatist ideas which it had shared in the early 1930s...
...Since 1945, the word "planning" has been revived several times, from Herbert Morrison in 1947 to Harold Wilson...
...its bookkeeping would replace direct competition for scarce resources...
...The Board should try to find enough uses for capital to dry up the amount of available savings, to stabilize the trade cycle...
...The TUC proposed a National Investment Trust in their evidence to the Macmillan Commission (1931), but it was merely designed to fill a gap in the provision of intermediate credit to industry...
...This assumes an astonishing degree of labor mobility, ignoring both the existence of trade unions and other factors that bind workers to their jobs and towns...
...However, the concept of the National Investment Board did not continue to develop...
...Both of the global models of planning we have described above put little emphasis on investment...
...Socialists have always known the values they want to serve...
...Mayhew had not said much about the relative weight to be given to different criteria for investment...
...They also hoped for a voice in deciding the priorities for releasing factories and natural resources, but found the government unwilling even to give them an indication of its ideas so that they could comment...
...There are serious problems in attributing such costs to particular industries...
...The emphasis on physical needs in the 1930s suggests that socialists made a mistake by shifting their attention to a minimum monetary income...
...Within the ranks of the market socialists, the only real controversy was whether equilibrium should occur when prices equaled average or marginal costs...
...The epitome of this attitude was the Executive memorandum of 318 December 16, 1941, urging that, because of the wartime electoral truce, plans for reconstruction should not become a matter of "platform propaganda...
...The TUC opposed any version that might decrease wages and hamper efforts to increase medical coverage and unemployment benefit...
...A faith in qualitative planning with no technique for making comparisons would not be convincing, while market socialism and the feeble forms of indicative planning that have been tried in England both failed to plan those variables which are intrinsically political...
...In the 1930s many socialists in England, like their counterparts elsewhere, thought they had found the answer in economic planning...
...Nor did the Labour movement back up individuals' pioneering suggestions with collective research, except in the case of the New Fabian Research Bureau...
...LUTHER CARPENTER 320 the economy...
...This of course was a mild echo of the TUC's policy of the late 1920s—a National Industrial Council...
...It would be desirable to bring the health of the worker, urban crowding, and the withering away of old industrial areas directly into the decision of what and how to produce, instead of allowing problems to arise and then trying to cure them by palliative legislation...
...Behind this power lay a limited notion of what investment controls could do: It would aim at smoothing out undue fluctuations in the demand for capital...
...Many left-wingers, notably Stafford Cripps and the Socialist League, never got beyond this negative, defensive idea...
...geographical planning and the price imputed to land...
...but it should have no authority to fix prices...
...only in a socialist community...
...Individual short-run interests become more immediate and obtain fierce support...
...Using the Gosplan to guide her thoughts, Barbara Wootton tried to envision the operations of a supreme economic authority that put production first...
...ON SOCIALIST PLANNING satisfactions to be obtained from different combinations of the available resources...
...Purchasing power could be made ample to consume all that was produced...
...For that explanation, we may turn to the Labour movement's distrust of financial control over the economy...
...On the other side of the equation, Cole and other nonmarket planners hoped to replace demand with a more accurate calculation of need...
...Here, as in its interpretation of nationalized industry, the TUC put largeness over other concepts of planning according to the national interest...
...Market socialism was too obviously an intellectuals' fantasy that did not take account of the unions' efforts to reduce workers' vulnerability to market forces...
...The actual strength of the Board would depend greatly on whether the last clause was interpreted to include public lending to private developments, and the use of such lending to achieve social purposes...
...The dominant approach to leisure and collective consumption was ad hoc...
...A broad, qualitative notion of social cost made obvious sense when it was applied to projects that involved large lumps of capital and manpower, where the problem was whether or not to act...
...Nor did Clark's 1935 pamphlet, "A Socialist Budget," go further...
...Such boards "would be concerned with the general planning of the industry so as to secure maximum efficiency of production...
...The Liberals' idea was to unify existing government borrowing and creation of capital assets, to form a single fund that could be managed in a countercyclical manner and could draw up an annual budget of capital expenditure for government...
...Through the Reconstruction Joint Advisory Council the TUC hoped to pressure the government into issuing statements that wartime controls would be maintained...
...As Cole pointed out, a civilized standard of life required "a very wide range of goods and services that can be classified neither as necessaries nor as luxuries...
...The economists and town planners of the 1930s made a start on calculating specific "external diseconomies...
...Capital would be supplied automatically, according to the original activity schedules—which left little room for considerations of social cost and the location of industry...
...Qualitative planning was rational with respect to the shape of society, while market socialists tried to provide a precise mechanism for maximizing welfare and achieving equilibrium...
...The word "plan" had a promising vagueness, with impressive overtones of prudence, foresight, consciousness, and rationality...
...II L eft-wingers generally agreed that a supreme economic authority would be an "all-in" authority...
...This picture of the Board's role was more positive than the Executive's image, which saw the Board restraining unwise new issues and concentrating upon abuses of speculation and waste...
...Unlike money, buildings and orders for machines could not easily evade control...
...However, most efforts to work out a version of planning that the Labour party could apply rapidly emphasized investment...
...In such an economy, the costs of not planning—unin tended side effects, wastage of resources in low-priority production, an impoverished public sector, overlapping and confusion, the abandonment of assets in decaying areas coupled with the sprawl of growing areas, irrational transport patterns—all these are submerged, only to reappear as individual anxieties...
...the next step would be to create a common procedure for calculating costs, as the New Fabian Research Bureau wanted to do...
...More optimistic Labour parliamentarians insisted that the Cabinet itself, or a Cabinet subcommittee or inner Cabinet composed of the ministers whose departments would be involved, should be the supreme economic authority...
...The Webbs simply gathered up all the problems of managing a national economy to dump on somebody else's doorstep: "The Department of Finance must be in fact one of the most important parts of the national administration...
...The National Executive's Policy Report, "Currency, Banking, and Finance," presented to the 1932 Conference of the party, recommended a National Investment Board...
...It merely meant that any public expenditure should be matched by purchasing power drawn from market consumption by increased prices...
...East European planners who have taken up the problem sound remarkably similar, with some maintaining that computers make it possible to solve the equations while others prefer to use markets for the same purpose...
...But before we look at those efforts let us bring together what we've said about the alternate global model of planned production— market socialism...
...But one cannot leave the problem there...
...The information that the Board gathered to regulate physical investment would give it a clear picture of overall investment...
...This omission is somewhat surprising, as many other socialists would have supported it as a way of getting additional control over private investment that could lead to public ownership...
...In contrast, it becomes hard to draw up and support a list of priorities...
...While it satisfied many intellectuals by integrating the economics they had learned into the socialist future, it offended others...
...As SSIP News commented in January 1932, "the most recent universal remedy is apparently contained in the word 'Plan.'" (SSIP, the Society for Socialist Inquiry and Propaganda, twin of the New Fabian Research Bureau, merged with the [LP to form the Socialist League in 1932...
...Churchill's War Cabinet bore an obvious resemblance to socialist proposals for a planning committee of the Cabinet...
...of the amount and quality of the labour and real capital resources which it uses up, the quality of the life which it affords to the labourers, the real value of the product to the consumers, the indirect effects of the particular uses to which the labour and capital are put—e.g...
...Labour could follow the lead of the growing town and country planning movement, with its doctrines of garden cities and green belts as ends in themselves...
...d) the location of industry and general physical planning...
...Predictably the Economic Commit 12 The material in these paragraphs is drawn from the minutes of the Economic Committee of the General Council of the Trades Union Congress, at Congress House...
...It deserved much more detailed commentary than it obtained, and perhaps could provide an alternative to socialism's retreat from planning...
...Socialists could only plan, and sell the idea of planning, in such a situation by making their concepts of need and social cost much more objective than they stand at present...
...Trade unionists and intellectuals both shared fears that a command economy would be rigid and arbitrary and would override individuals' preferences...
...but their notion of public investment still restricted it to traditional public works and road building...
...The National Investment Board was also to be given powers over private sources of investment...
...This attachment to joint advisory bodies expressed the desire of workers' representatives for direct consultation, which they often felt would be jeopardized by centralized planning or by political control of the planning process...
...But many socialists essentially wanted to reduce the impact of investment on the economy and to prevent the destruction of Labour governments by "banker's ramps...
...He estimated that the largest share of new investment was already public—public 10 Labour Party, "Currency, Banking and Finance," Policy Report #1 (London, 1932), p. 10...
...Generally, then, the Soviet example influenced images rather than actual efforts to work out how to plan...
...Its willingness to turn back to an unconscious mechanism to run the economy appeared anti-intellectual...
...Delay came from the need to concentrate on the pressure of wartime needs on workers' rights, and from the loss of leaders and researchers to the war effort...
...Others, such as Douglas Jay, reacted against all ideas of planning because of their dislike of Soviet centralism...
...He did not propose giving the Board powers to lend for private developments...
...The first type of analysis asserted that the real cost of producing a particular good was the amount of scarce resources used up...
...They justified this in terms of individual freedom to choose one's trade...
...To win them over, Cole would have had to prove that qualitative planning would be more rational both in terms of the outline of society and in terms of the allocation of resources...
...VI Thus, when the Labour government came to power, no concept of planning had obtained common acceptance within the movement...
...the New Fabian Research Bureau explored particular industries more than it worked on central planning...
...The success of Soviet planned industrialization was used to support claims for national ownership of the means of production, rather than leading to a discussion of comprehensive planning itself...
...The TUC 13 Trades Union Congress, "Interim Report on Post-War Reconstruction" (London, 1944), p. 13...
...Clark had come much closer to envisioning an authority that could control both the total amounts and specific uses of capital...
...It would allocate capital either by setting the amount to be used in the society as a whole, which would then determine the effective interest rate...
...The Board received no mention in the party's statements on reconstruction in 1941 and 1943...
...Throughout the 1930s researchers such as John Boyd Orr tried to establish basic nutritional needs, while others tried to set objective minima for housing...
...if the decision is not made politically, it is made erratically as a by-product of market decisions...
...Market-oriented socialists emphasized the 5 G. D. H. Cole, Economic Tracts for the Times, p. 209...
...goods went well with the libertarian nature of British socialism, which emphasized freedom and the growth of the individual personality...
...In a full employment situation, the idea that real cost was the value of other goods and services that could be produced with the same resources would become more crucial...
...They differed from Clark's picture in The Control of Investment only in wanting the Board to obtain a monopoly over private lending, requiring all investment to conform to its plans for development...
...Liberal economists kept socialists on the defensive by hammering at these points...
...Virtually all British socialists accepted the argument...
...There were still considerable loose ends to be worked out...
...Earlier socialists had wanted to free workers from the ignominy of being a commodity...
...The first was to improve existing cost accounting...
...The idea of a National Industrial Council representing the unions and management grew out of the Mond-Turner talks in 1928...
...but they saw it as an activity in itself...
...Cole jumped to the conclusion that they were "considerations which will not directly admit of money measurement...
...Barbara Wootton's widely praised Plan Or No Plan shows how a supreme economic authority was an assumption in search of a policy: The second condition of successful planning is also a simple one...
...The Labour government did accept, a little uneasily, the controls that had been built up during the war, and the expanded notion of what could be done by manipulatON SOCIALIST PLANNING ing the national budget...
...Town planners reached a point at which they could make numerical estimates of the costs attributable to smoke pollution and traffic congestion...
...Neither of these models of planning fitted easily into traditional British policies...
...Several suggestive points had been raised...
...or by setting the rate, which would then determine the amount...
...Some significant efforts were made to apply need and social costs to sections of the planning process, most notably investment and the location of industry...
...One feels that market socialism would have left the public sector—both free goods and collective consumption areas such as health and education— as impoverished as it is under capitalism...
...Would-be planners did not swallow the Soviet example whole...
...However, their report never appeared...
...but even this limited kind of planning wasn't worked out...
...15, 17...
...When the word "planning" hit the scene, rather abruptly at the end of 1930, the temptation was to apply it to all the expedients then in sight...
...such effects as pollution by smoke, the promotion or destruction of the employees' intelligence or vitality, the disturbance of amenities as well as values caused by a particular localization of an industry.3 The difficulty with this concept was that it contained at least two major categories of cost that required very different analysis...
...These "substitutable necessaries" included tobacco, theaters, and beer—and additional amounts of necessities such as food and housing...
...While they made obeisances in the direction of "true economic cost in the sense of the relative scarcity of the means of production," 9 they introduced no major changes into the calculation of monetary costs...
...4 G. D. H. Cole, "A Plan for Britain," Clarion Texts (London, 1931), p. 14...
...It could decide on the total amount of investment needed to provide full employment overall, and distribute it to meet unemployment in particular regions and for particular public needs...
...But it seems more likely that conceding ministerial responsibility would erect a further line of defense for a particular industry against efforts to plan the overall development of the economy through the "economic vantage points" of the previous quotation...
...As is perfectly understandable, virtually any proposal that would provide jobs and consumer goods could hardly be made to await the establishment of national priorities, if the government had no intention of setting priorities...
...but in most cases they had not been turned into comprehensive proposals...
...it is an inherently wasteful and imprecise way of expanding investment and offers no way of checking excessive growth short of overall recession...
...It would aim at checking new issues which seemed likely to compete, for the savings available at any particular time, with the capital requirements of any programme of planned investment and industrial reorganization approved by the Government.10 By "a programme of planned investment" they meant little more than traditional public works...
...or it could emphasize the serious problem of the depressed areas, which called out for national planning of the location of industry...
...These economists were far from the growthmanship of the 1960s, in which a high rate of investment was virtually an end in itself, and often seemed to be the only meaning anyone cared to give to planning...
...The limits in this picture contributed to the rejection of the Executive's economic policy at the 1932 Conference...
...It would have to control output, wages and incomes, prices, and investment, because changes in one variable could throw off the balance of the economy...
...It was acceptable to stalwarts on the National Executive— in particular to Hugh Dalton, the chairman of the Executive's Policy Subcommittee for much of the 1930s—and to the young economists of the New Fabian Research Bureau...
...The short program that followed later in the year once again reduced the Board to getting new issues, eliminated references to a program of national development, and generally made it clear that the party did not intend to control investment...
...infringements of them are felt deeply...
...Part of the answer to that question will depend on whether there was life in the idea when socialists first turned to it, or whether it was intrinsically a flawed idea...
...In 1939 Christopher Mayhew returned to the subject...
...322 Designating certain goods to be produced directly for use or to be subsidized could make sense—if there were the political will to defend this sector of basic needs against political pressure and against erosion by the way a mixed economy channels wealth to speculators and oligopolies...
...and "to find finance for all schemes of national importance sanctioned by it...
...then one could design a distributive system that would get goods to those who needed them...
...The 1944 statement, "Full Employment and Financial Policy," reinstated and expanded the concept of a National Investment Board that we saw in 1932...
...At most she thought it could give general directives to a planning authority...
...9 Ibid., p. 71...
...The Executive -accepted Keynes's LUTHER CARPENTER point in 1933—but did not back it up by favoring the authorization of the Board to issue bonds...
...But these loose ends do not explain the lack of response to his proposals...
...Ultimately it could be said to be the other goods and services that could have been produced with those resources...
...Ultimately these development programs came to appear too fragile for all the hopes that had been pinned on them...
...This conclusion would be reinforced by East European drifting to a mixture of command planning and market features...
...There was no hint of such a strong policy in "Full Employment and Financial LUTHER CARPENTER Policy," however...
...The Liberals cautiously suggested that some private projects, such as railway electrification, and some cooperative ventures might be eligible for loans...
...An Industrial Board might concentrate production in the most efficient concerns, standardize products, pool research, and create joint marketing and purchasing agencies...
...Since all were agreed that the inequality of income distribution prevented demand from measuring need, the obvious point to try was moving demand closer to need by equalizing incomes...
...The two notions of planning diverged...
...prices could be adjusted to clear the market of all goods...
...A spectrum of socialist economists argued that the Board would have to play a broader role...
...Labour ministers were often touchy about their relationship to the rest of the movement...
...Dickinson LUTHER CARPENTER admitted the need for four kinds of arbitrary decisions: the allocation of resources between collective and individual consumption...
...Early in the 1930s, a committee of the New Fabian Research Bureau tried to solve the problem of costing by coming up with a uniform procedure...
...several writers gave an 314 astonishing example of expanding labor in a growing trade by raising wages sharply and then lowering them gradually as the industry filled up...
...15 In spelling out what this meant, the TUC borrowed heavily from the advocates of business rationalization...
...LUTHER CARPENTER when he did not support the idea of distributing necessities directly...
...a) The utilization of land, the supply of water, the use of other natural resources...
...The supreme economic authority would calculate aggregate demand schedules for producers' goods at each stage of production...
...all firms, companies, boards, and public authorities should be compelled to secure the permission of the Board before increasing or replacing their physical capital—buildings, machinery, etc...
...they have had more difficulty working out an economic system that would have to serve them...
...This faith in qualitative decisions disturbed those socialists who stressed the advantages of automatic, impersonal markets...
...it is surprising that no one challenged it...
...How could decisions between projects be made...
...It did not see the Board as an agency for controlling public investment, as the Liberals had...
...The Board would have only advisory powers over private investment, but the report admitted that it might have to ask for licensing powers if advisory powers proved inadequate...
...The Board should be allowed to lend to private industry...
...c) the rate of gross investment and the supply of capital for investment...
...this line of thought easily led to ignoring social costs and location of industry, by concentrating on investment totals...
...Price was only a pale reflection of the satisfactions or welfare produced by a particular good...
...q LUTHER CARPENTER...
...There must be some body [my emphasis] corresponding to the Russian Planning Commission and, like Gosplan, enjoying nation-wide authority as well as the support of local organs in every area and in every industrial unit 2 It was obvious that the Russian Gosplan would fit awkwardly into the British parliamentary system...
...Dickinson did agree that there was to be a sector of free goods, which would cushion the wage earner against inequality and declining relative wages...
...They agreed with laissez-faire theorists that one can only assign costs to factors of production through markets...
...The first was the preparation of lists of public works projects, usually including roads, the electrification of railways, and housing, which came to be called "plans of national development...
...The party called for planning the location of industry more consistently than for any other planning measure...
...Cole wished investment to become an adjunct to the planning of production, firmly subordinated to the supreme ON SOCIALIST PLANNING economic authority and its criteria of need and social cost...
...IVCollective consumption, investment, leisure, and geographical planning—if these variables were "arbitrary," then the Labour movement could either treat them in an ad hoc manner, separated from their effects on the rest of the economy, or could try to make them starting points for comprehensive planning...
...The other obvious influence was the example of the Soviet Union...
...The beautiful systems of economic equilibrium described by Bohm–Bawerk, Wieser, Marshall, and Cassell are not descriptions of society as it is, but prophetic visions of a socialist economy of the future...
...Instead it was a balance wheel to the economy, with almost all public and private investment outside its purview...
...11 Like Clark, Mayhew felt that efforts 11 Christopher Mayhew, "Planned Investment," Fabian Research Series #45 (London, 1939), p. 37...
...made no speculations about possible national planning machinery, such as a planning com mittee of the Cabinet or the drawing up of a national plan, or on authorities that might control investment, land, natural resources, physical planning, or credit...
...The Labour party's National Executive never could come to a final decision on the composition of a supreme economic authority...
...Production of goods whose selling prices exceeded cost would be expanded, and goods making a loss curtailed, as in a pure market economy...
...Hugh Dalton's belief that public control of the Bank of England was all that was needed for a socialist financial policy continued to dominate these statements...
...Even if one could not envision a comprehensively planned world at the present moment, there is good reason to get considerations of need and social cost into more public decisions...
...and (e) foreign trade and foreign lending and investment.13 The third draft admitted the need "also to provide for the ultimate responsibility of the managements of socialized industries to a minister in order to ensure the proper coordination of their policies and that the industries are conducted in full accordance with the government's general plans for the maintenance of employment, the control and the location of industry, and the furtherance of socially desirable expansions of consumption...
...he realized that it would mean the simultaneous solution of thousands of equations to simulate a market, but felt it was possible in theory...
...Since the early days of the Labour movement, socialists have talked of producing for use instead of profit...
...and the right to issue bonds to add to its funds...
...The Labour movement had rejected both global models: the market socialists' projections of economic orthodoxy as well as Soviet-style planning of production...
...is it possible to realize the true principles of economic valuation...
...tor, but did not claim to manage it...
...of aiming the economy directly at the needs of the people...
...Several war measures could have led to comprehensive planning...
...We have so many available workers, with their different skills and capacities...
...With this question in mind, I want to reexamine what English socialists said about planning between 1930 and the election of the Labour government of 1945...
...But both influences were weak and imprecise...
...The only power they would give the Board over private investment was control over overseas investment...
...Even the British Communist party failed to work out the ideas used in Soviet planning and to rethink their application to British conditions...
...but they remained part of the Labour party's vocabulary and a rival to more comprehensive conceptions of planning...
...Each type of labor had to receive the reward needed to equate its supply with the demand for it...
...Their first response to the demand for planning postwar reconstruction was to participate in joint advisory bodies attached to specific ministries...
...He suggested a new approach that could plant social considerations firmly in the foreground...
...The fervor that they imparted can be seen in H. D. Dickinson's invocation of marginal analysis...
...he reported that the paymaster general was receptive to the setting up of a joint committee of the TUC, the Federation of British Industries, and the British Employers' Confederation to consult and to advise him on postwar reconstruction problems...
...It did not develop the idea of guiding relative rates of expansion of various industries, or of using public investment to obtain social benefits...
...The fragility of the concept soon became clear—unions were not even able to obtain enforceable agreements controlling the impact of mergers and technological change upon jobs and conditions of work...
...industrial reorganisation" referred to the rationalization of basic industries, with or without public ownership...
...preparing public works projects that could be put into effect to increase investment...
...Thus the Labour movement's refusal to work out comprehensive models of planning may well indicate that the idea is not politically feasible in advanced economies—as long as they can provide more than basic needs for a large portion of the population...
...This clause attempted to give some priority to public works and public enterprise, but fell far short of building a criterion of need into investment policy...
...ON SOCIALIST PLANNING to license new issues of stock would merely enmesh public policy in the snarls of existing investment markets...
...12 This admission coincided with the TUC's first solid attempt to draw up its own picture of England after reconstruction...
...Planners would release resources as uses for them developed...
...8 Dickinson's The Economics of Socialism provides the most complete version of market socialism...
...Throughout the 1930s the TUC had been hostile to what it saw as grandiose conceptions of planning emanating from the political side of the Labour movement...
...Cole asserted that...
...While he did speculate on the possibility of the Board coming to supercede capital markets in a more socialized economy, this remained a speculation...
...The Executive explicitly refused to see the Board as an investor in its own right, drawing up a program of national development and borrowing funds to implement it...
...For them, the focal point was the role and powers of a National Investment Board...
...Mayhew's proposal cleverly combined many of the objectives socialists hoped to achieve through planning...
...The vast bulk of references to planning were mere rhetorical comparisons of conscious direction of the economy with blind drifting at the ON SOCIALIST PLANNING mercy of impersonal forces, and to the waste of misused resources and unemployed men...
...Qualitative decisions could not be made automatic or routine...
...But it passed over the chance to continue the wartime Ministry of Production, and stoutly refused to take additional powers over investment and banking...
...4 Cole appears to have considered this inventory as a kind of supply schedule for the productive resources of the community...
...Socialist economists watched Russia sharply...
...5 The public works example is revealing...
...These proposals left the awkward but unavoidable likelihood that a Cabinet subcommittee's secretariat would make the real decisions...
...In 1933-34 the General Council of the TUC again pushed for a National Economic Council...
...The cost analysis used in capitalist societies had failed to consider these effects as costs...
...Having accepted the premise, they then sought to deny the conclusion that markets required private, competitive ownership of the means of production...
...Consequently Cole asserted that a supreme economic authority would have to make an inventory of national resources...
...They embodied the desire to put the nation to work producing needed goods, but they limited the idea of needs to a sector of social capital projects...
...The 1941 statement actually was most precise on the kinds of priorities that could be applied to the release of raw materials and manpower for peacetime production and the establishment of priorities for new building...
Vol. 20 • July 1973 • No. 3
