CAN BRITAIN'S WELFARE STATE BE SAVED?
Carpenter, Luther
Since 1945 the British welfare state has had special meaning for Americans. Liberals have praised its accomplishments as typical of welfare states; conservatives have used Britain's relatively...
...The Tories eliminated most of this assistance...
...others are more subtly infected by bitterness and frustration...
...Nationalization becomes a threat to hold over a company's head...
...it would cover five years with annual revisions...
...Much of Britain still seems comfortable and relatively calm...
...2 Current services have been maintained, at the cost of a deteriorating physical plant...
...Finally, a package of policies for public investment and expenditure that is in line with all these proposals was tested out econometrically on the Treasury model of the economy...
...This is the famous "Stop-Go" cycle...
...The government-created rise in unemployment has raised such public expenditures as unemployment benefit...
...providing selective grants to local governments for imaginative projects using structurally unemployed workers...
...Labour's Alternatives LABOUR'S TRADITIONAL RESPONSE to Thatch er's recession would be to increase public expenditure in a Keynesian manner, aiming at full employment...
...The unions have made several useful suggestions...
...2 National and Local Government Officers Association, "Public Expenditure into the '80s" (1979), pp...
...The TUC's reasoning appears to be that a country cannot afford to depend completely on imports of these goods, and that they are necessary bases for other industries...
...An alternative economic strategy has been the official position of the Labour party's National Executive since 1973...
...20 But isn't this what selective nationalizations add up to...
...There is another basic problem in a Keynesian expansion: there is no guarantee that the expansionary stimulus will find its way into productive new investments...
...This conclusion is confirmed by the parallel case of aid to the old industrial regions...
...It is equally clear that an incomes policy cannot be the government's only weapon against inflation...
...In the recent past Labour speakers have not offered devaluation as a panacea, even when the pound was so overvalued in the summer of 1980...
...The TUC argues that private services, with the exception of tourism, create little employment...
...between children in private schools and those in state schools...
...Nevertheless, an incomes policy is an essential part of any politically acceptable expansionary package...
...Like Reagan, Thatcher and her Chancellor of the Exchequer Geoffrey Howe want to return to a classical economy...
...As Colin Crouch shows in The Politics of Industrial Relations, a corporatism in which unions are strong and active can benefit socialist objectives...
...As we saw earlier, the NEB proved too useful for the Tories to destroy in their first two years in power...
...Sir Raymond Penrose of the Confederation of British Industries warned the government of the consequences of mass unemployment months before the riots, as did some Tory democrats...
...Blake is economics editor of the Times and Ormerod a research officer at the National Institute for Economic and Social Research...
...The next Labour government will have to create a consensus between itself, the TUC, and industry...
...Britain's National Health Service and social security are in a stronger position than Medicare and Food Stamps in the U.S...
...they clearly felt that the NEB offered more support than the investment markets...
...In turn, rising imports will cause problems for the balance of payments...
...For years both have been underfinanced...
...Walker and Prior and their allies are the remnant of the Butler-Macmillan Tory democrats who broadly supported the welfarestate bargain...
...I believe their attack is failing, because of the built-in resilience of the public sector and because the economy can no longer be run on classical lines...
...Unused factories will be reopened in the Tories' preelection expansion— where they have not been permanently closed...
...Volcker's policies at the Federal Reserve are having the same effect in the U.S...
...These aspects of the welfare state have proved resilient...
...The Social Democrats tacitly accept the beliefs that Britain's social expenditures are too burdensome and that social progress will not come from expanding them...
...The Tories are disrupting the ways in which businesses learned to use the welfare state to obtain stability and an assurance that investment would be profitable...
...In turn, the growth of public expenditure raised the PSBR, the Tories' primary index of fiscal rectitude...
...Some unions have even joined this alarming trend toward a two-class medical service...
...Replacing tax exemptions with a cash grant for children could become a cornerstone of the positive family policy we so urgently need to rival the punitive policy of the Moral Majority...
...The consequence of this pattern of industrial closures, many observers feel, is that Britain will be left with an insufficient industrial base when the Thatcher government tries to reflate the economy to win the 1984 elections—or when Labour gets another chance to govern...
...replacement of Sealink's aging cross-Channel fleet...
...Part of the Tory leadership and of the business community disagree with some of Thatcher's budget cuts and with her savage attacks on business...
...The government cannot just declare its independence from the TUC and the CBI, as both the Tories and the Social Democrats want to do...
...For example, housing built or assisted by local authorities has been sharply hit over the last few years...
...How does one overcome business resistance to Labour's plans...
...for in this sector the Tories have made the most radical break with both the goals and the mechanisms of the welfare state...
...They liked subsidies for investments in development zones covering most of the country...
...12 Hughes's version of these ideas deserves careful study because he has calculated their costs and benefits...
...The last Labour government in fact abandoned it for a "pink" version of monetarism...
...Without pushing this idea to the extreme of autarchy, a balanced economy is a reasonable image of what an economy should provide...
...Imports are the other hole through which a Keynesian expansionary stimulus has leaked in the past...
...The social contract had some striking results, notably cash allowances for all children, and wage restraint accepted by the unions as a conscious sacrifice to fight inflation...
...Guardian, August 29, September 19, September 23, 1980...
...This is true, but it is too confrontational to be the whole answer...
...It announced a fixed target for the growth of the money supply...
...and it reduced budgetary policy to a single number, the Public Sector Borrowing Requirement (PSBR), rather than analyzing all the connections between the budget and the economy...
...Both are mistaken...
...In its testimony to the Wilson Commission on the financing of industry, the Confederation of British Industries (CBI) said that there was a short87 age of viable projects requiring investment...
...As it stands, the EEC is costly to the British government, has not adopted expansionary policies, and does not provide an alternate way of protecting jobs...
...Furthermore, the Thatcher government has disrupted the patterns of consultation with business that had developed over the last 35 years...
...In the 12-point policy statement they issued in March 1981 they refrained from promising to spend more money on social services...
...The TUC does not endorse planning agreements as enthusiastically as it endorses the NEB, but it did say in its 1980 Economic Review that the idea was worth pursuing...
...Only one was signed, with Chrysler, and it didn't meet the left's stand88 ards...
...Keynes Plus: A Participatory Economy (a study drawn up for the European Trade Union Institute by a committee that included TUC representation) accepted this point, and Tony Benn has also conceded it when challenged...
...and personal social services, such as community centers, residential homes for the aged and for disturbed teenagers, and household helpers...
...19 In other words, the Social Democrats assume that the welfare state as it is provides the basis for social harmony and that the task is to manage it harmoniously...
...Labour's interim policy statement "Peace, Jobs, Freedom" begins by saying ". . . we believe that Labour's strategy of expansion will help to curb inflation...
...2) the kind of economic structure and policy proposed to generate jobs and resources that can be allocated to social needs...
...Several points must be made about these fiscal and monetary policies, which the Reagan administration avidly copies...
...Its opposing slogan is a "balanced economy...
...The Tories have ignored construction companies' protests that these cuts are economically pointless...
...American reformers can learn from this example...
...TUC unions have tried to put this into practice for years in joint unionmanagement Sector Working parties and Economic Development commissions in specific industries...
...In other words, Labour has to turn the welfare state into a genuine bargain, in which it is openly admitted that Britain is a mixed economy...
...Is the notion of a balanced economy precise enough to indicate where the government should direct public investment and selective import restrictions...
...16 The TUC has tried to get the Confederation of British Industries to join it in asking for import restrictions...
...Not to put forth other antiinflationary policies makes the wage earners the only fighters against inflation, and thus implicitly accepts the view that wage increases cause inflation...
...They use it to attack Labour's alternative economic strategy, but they have not developed their own strategy and therefore have no alternative to "pink monetarism...
...Such investments would create jobs in construction, form part of a Keynesian expansion, and in many cases make British industry more competitive...
...Now Thatcher's government bends over backward to avoid using its powers to aid business, such as preference in assigning government contracts...
...If the Tories wanted to destroy these sectors, they would first have to remove them from enough people so that they were no longer universal, and then mop up the remnants...
...It is important to see that Thatcher's government is not just attacking the unions or the working class, the social services or the poor...
...It reduced funds for local governments and then left it up to them to make the actual cuts...
...In describing Britain as an incomplete welfare state, I am employing the approach Norman Furniss and Timothy Tilton used in their excellent book The Case for the Welfare State...
...The strongest part of the Social Democratic analysis is their awareness that Britain is a mixed economy and will remain so...
...Thatcher's victories, first over the Tory democrats and then in the 1979 election, were in part an expression of the bitterness of some skilled workers and some members of the middle, entrepreneurial, and managerial classes...
...Thatcher's lack of an investment policy and her fiscal and monetary policies threaten the basic structure of the welfare state...
...The TUC emphasizes nontariff controls: ". . . quotas, antidumping duties, licenses, certificates of origin or other administrative controls, price controls and restrictions on imports by the Government or industries in which it has an interest...
...The left does not accept the standard of profitability that has been applied to these investments, which in turn forces the NEB to "guess the winners...
...80 Three Roads THE BRITISH ELECTORATE iS now being shown three roughly sketched maps of the future...
...It involves the third dimension of the crisis of the welfare state: the need to create a sense of cooperation...
...19 Guardian, March 27, 1981, p. 3. 20 Tony Benn, Arguments for Socialism, Chris Mullin, ed...
...The last Labour government offered Special Incentives and a Regional Employment Premium to bring new industries to them and tried to modernize their old basic industries such as textiles and steel...
...Yet the Thatcher government forced the NEB to dispose of its profitable investments in both companies...
...The sequel shows how fetishistic the PSBR is...
...Localizing the budget cuts can make it appear that the welfare state as a whole is not imperiled...
...We have seen, for example, that only one company signed a planning agreement with the last Labour government...
...In terms of comparative prices for goods, the pound was overvalued by at least 25 percent relative to the dollar for most of 1980...
...By themselves, social services do not make a welfare state...
...They feel that selective public ownership could be used to check the outflow of capital from private companies by taking over some companies that have used Britain to generate profits that are then invested abroad...
...However, the Social Democrats appear to defend membership in the EEC and oppose import controls in terms of a general belief in free trade, rather than out of a wish to plan for British expansion...
...Import controls are part of the alternative economic strategy, and selective import controls were endorsed at Labour's 1980 Annual Conference...
...Ideally, a planning agreement would involve both the unions and the government...
...They are more precise than the alternative strategy on many details, and they make it clear that this investment policy is an addition to Keynesianism rather than a replacement for it...
...Here, as so often, reconstructing the economics of the welfare state becomes the problem of restoring the welfare state as a conscious social bargain...
...this is especially true of the financial services that dominate the private sector in Britain...
...Harmondsworth: Penguin, 1980), p. 52...
...They applied deflationary policies and reduced total public expenditure from approximately 46 percent of Gross Domestic Product in 1974-75 to 42 percent in 1978-79, acting on the theory that the public sector was too large...
...The upper and middle classes, including many skilled workers, often resisted using public services to integrate the nation...
...q 92...
...They would carry on the existing bargain without enthusiasm, as a kind of lowest common denominator...
...Yet Labour does not present its "map" with much conviction...
...The Thatcher government invented one trick the Reagan administration has embraced enthusiastically...
...Instead, exports only grew slowly, while imports did not decline despite their higher cost...
...15 European Trade Union Institute, Keynes Plus: A Participatory Economy (Brussels, May 1979), p. 39...
...for example, overhead costs per unit of output should go down as unused capacity is brought back into use...
...but some cuts and manipulations of coverage show how gradual erosion could eventually destroy the social insurance state...
...The Third World dimension of this challenge is important, but secondary...
...The National and Local Government Officers Association (NALGO) argues for investment in the capital goods needed by the health service, the railways, and other services that have grown shabby...
...16 Trades Union Congress Economic Review 1980, p. 42...
...The advocates of social benefits admit that they are on the defensive: ". . . the obstacle to a positive programme of reform of the social security scheme is not just the cost, it is also the lack of political will which, in turn, reflects a widespread antipathy towards social security claimants...
...However, British publishing has 85 been hit hard by the state of the pound and by cuts in local-authority spending on education...
...This technique was used to put pressure on public workers, making it appear that they must reduce wage claims or face additional firings...
...Britain is the social insurance state most like the United States, not only in the limited scope of benefits but also in regard to slow economic growth and a conservative government inspired by individualism and monetarism...
...Social peace cannot simply be made by agreement at the top...
...A full range of social services cannot be provided without full employment, and work is itself a basic right...
...They have received various forms of assistance since 1945...
...since World War II efforts to raise the level of growth through Keynesian methods have quickly led to inflation and balance-of-payments problems, followed by a sharp squeeze...
...Planning for investment was inadequate...
...17 Of the major declining industries that one would protect, only textiles face significant Third World competition, while most of Britain's imports come from the developed world...
...Home Secretary William Whitelaw expressed the hard-line reflex when he opposed employment and social programs to heal the discontent shown in the riots...
...The party has not launched a dramatic attack on poverty and inequality...
...Tony Benn expresses frustration at using "carrot and stick" methods to deal with multinational corporations...
...This rhetorical anticorporate populism is now often counterproductive...
...4 Anna Coote, "Fixing Up the Family," New Statesman, March 20, 1981, p. 6. 5 David Blake and Paul Ormerod, eds., The Economics of Prosperity (London: Grant McIntyre Ltd., 1980), p. 216...
...3) the welfare state's crisis of legitimacy...
...For now, public ownership distracts both the left and the media from this fight...
...Budgeting in constant pounds ostensibly meant that inflationary price increases would be covered, but the Thatcher government set cash limits on all social spending so that inflation above 14 percent in fiscal 1980-81 was not covered...
...New machinery bought with government grants is being auctioned off to foreign competitors as the textile industry shrinks...
...When the last Labour government created cash allowances for children, they also eliminated the income tax deduction for children...
...However, the authors still calculated that their package would produce 3-4 percent additional inflation per year on top of the base rate for a nonexpansionary economy, and that inflationary pressures would get especially strong toward the end of the exercise...
...The alternative economic strategy thus tries to combine the unions' fear of unemployment and desire for 86 expansion with the left's desire for a further move toward socialism...
...Inflation offers opportunities...
...The final dimension of the TUC's notion of a balanced economy is regional balance...
...While there is now a lot of unused capacity in the British economy, much of the slack will be gone by 1984...
...If they had been allowed to close, Britain would have been totally dependent on the multinational giants and would have had no footholds in these technologies...
...The authors of The Economics of Prosperity estimated that their package of current and capital expenditure by the government would reduce unemployment by a million over a four-year period...
...The TUC and the unions are powerful allies for economic expansion...
...On September 18, 1980, it laid off one-seventh of its total work force in the U.K.-10,000 jobs lost...
...and subsidizing a tapering-off from full- to part-time work for older people to free more jobs for the young...
...Most British socialists have not considered this argument, but the TUC rejects it...
...The more important part of the Social Democrats' criticism is inherent in their fear of "permanent general import controls...
...The Tories have ignored business leaders, and they have steadfastly refused to engage in the normal consultation with the TUC on economic and social policy...
...I think it can—if it does not have the exaggerated expectations of profit that are responsible for shifting potential investment funds into nonproductive purchases of real estate, gold, and collectibles...
...Yet the Labour governments of Wilson and Callaghan did seek to bring workers into the decision-making process through a "social contract" with the Trades Union Congress (TUC...
...Planning agreements are another level the Labour left intends to use to make private corporations respond to the need for economic expansion...
...Machine tools and engineering components have traditionally been major British exports, but even those companies that managed to keep up the volume of exports have reported lower profits because of the strength of the pound and high interest rates...
...but in the current recession it makes no sense...
...Thatcher treats the Confederation of British Industries with great coolness, refusing to discuss broad economic policy with it...
...Taking over some offenders would intimidate others...
...Instead they emphasized the "quality" of health services, education, and housing, and gave a special priority to family support services and to eliminating racial and sexual discrimination (without spending more money on them...
...The TUC adds several cases where existing public industries can invest: . . . the telecommunications network where a new generation of digital exchanges is about to be introduced and where, on the basis of a secure home market, System X could capture a large share of the massive world market...
...John Hughes, the principal of Ruskin College (the trade-union college at Oxford), recommends implementing the 35-hour week...
...Individuals scrabble to get special benefits for themselves and to deny them to others, breaking down the willingness to guarantee everyone a basic standard of living...
...The Economics of Prosperity, p. 13...
...instead, they talk vaguely about getting more out of existing expenditures...
...that the money supply cannot be controlled by the limited powers the government has retained...
...In health care, the government is encouraging the use of private hospitals for some types of illness...
...8 The Government's Expenditure Plans 1979-80 to 1982-83 (London: HMSO, January 1979), p. 6. 9 Trades Union Congress Economic Review 1980 (London: February 1980), p. 36...
...How else can a mixed economy be made to work...
...Plugging the Holes HISTORICALLY, much of a Keynesian economic stimulus has been dissipated into inflation and imports...
...Consequently, expansionary pressures will overflow, as usual, into imports and into inflation...
...The main emphasis falls on developing a better economic structure to generate new investment and full employment...
...Many details remain unsettled...
...And Labour is now debating whether the welfare state can be saved...
...That will be difficult, but the failure of Thatcher's economics may convey a lesson to some managers, and it may free some Tory democrats to support a revitalized welfare state...
...As I describe these ideas, I will cite some of the major criticisms, to see whether the alternative strategy can become a coherent program to apply in office rather than something to discard (as was done in 1974...
...So far, Walker and Prior have restricted their criticism to gentlemanly winks that Thatcher simply ignores, but they may have to act soon to avoid political extinction...
...The behavior of one staunch Tory contributor, the Guest Keen Nettlefolds corporation, is especially revealing...
...Labour's right wing often seems to fall into this trap...
...They defended the mixed economy, which "must be supported without Conservative sniping at the public sector or Labour threats to private enterprise...
...For the purpose of these cuts, they made no distinction between transfer payments, social services, and public investment...
...The Social Democrats evidently do not think so...
...It asserts that Britain is in a structural economic crisis requiring massive investment in industry, which in turn requires an expansion of public ownership and control...
...Corporatism can leave most people feeling that they aren't part of the bargain, even if they belong to interest groups that have a voice...
...This perception leads both socialist Labour people and the Social Democrats to discuss participation and decentralization...
...A hostile government has dozens of weapons at its disposal...
...Hence one message for American reformers is to concentrate on universal benefits as much as possible...
...They fear an isolationist Britain that turns in on itself and refuses to change economically...
...At the Eurosocialism conference in Washington in December 1980, Holland answered that it is Labour's job to mobilize pressure on companies to get planning agreements...
...one can build on the strengths that remain...
...In particular, social security expenditures have risen to deal with unemployment...
...They attacked violent swings in economic policy, the way each government undoes the work of its predecessors...
...In addition, both American reformers and British socialists should consider taxing social security benefits...
...In addition, many industries (such as construction) depended heavily on the government's consumption...
...this forces British socialists to emphasize economic policy over social services...
...These leaders also agree on the need to defend social security and public services...
...Among the most impressive are the left's alternative economic strategy and the post-Keynesian thinking represented in several TUC and other trade union documents...
...Over its last three years, the Labour government had adopted monetarist policies and reduced public spending—partly because of pressure from the International Monetary Fund, partly because it didn't know what else to do...
...However, a case-by-case approach is neither aggressive nor comprehensive enough to get the economy moving...
...Nonetheless, it is hard to be optimistic, given Britain's previous experiences with price commissions and the ETUI's emphasis on the 89 difficulty of administering a price policy...
...Britain is an incomplete welfare state under attack—a paradigm of what happens - when budget balancers and laissez-faire ideologues get their way...
...But the Tories have let it float freely, from under $2.00 to over $2.45 and back below $1.80...
...Wilson appeared to accept it as the basis of the social contract with the unions in the 1974 election...
...The virtues of the welfare state are part of the answer—full employment and basic services for all...
...81 Prospects for Social Services UNLIKE THE REAGAN ADMINISTRATION, Thatcher's government has not mounted a direct attack on transfer payments and health care...
...Britain would find it easier to reflate as part of an EEC converted to reflation...
...12 John Hughes, "The 35-Hour Week" and "Three Modest Proposals," in Barratt Brown, Coates, Fleet and Hughes, eds., Full Employment: Priority (Nottingham: Spokesman, 1978...
...Public investments can also be made less risky if they are assisted by selective import controls and by public purchase of their output, as many British socialists recommend...
...First, the exchange rate is not "neutral" and objective, as both governments pretend...
...The NHS sounds like New York City's subways . . . . Thus even an apparently healthy limb of the welfare state can be cut off surreptitiously...
...Private patients get special treatment in NHS hospitals, but their numbers are still relatively small...
...It would be possible to negotiate opportunities for Third World trade within a program of selective import controls, as Stuart Holland stated in an interview before the Social Democrats left the party...
...In other words, the TUC accepts a mixed economy...
...Labour is reluctant to make inflation a distinct issue...
...If public services are so important to the welfare state, can they be made the cutting edge of programs designed to stabilize the welfare state or go beyond it...
...Even the man brought in by the Tories to whittle down the NEB, Arthur Knight, protested vigorously and ultimately resigned as the NEB was denied funds for further projects...
...91 Planning agreements will remain an empty exercise unless Labour wins over managers to considering the national welfare as they plan...
...The TUC strongly supports the NEB...
...Replacing imports and meeting basic needs are two criteria that surely deserve further study...
...This proposal could help redress one of the worst structural imbalances of late-capitalist economies, the disproportionate size of a speculative paper economy relative to industry...
...the TUC cannot conceive of simply abandoning the old industrial areas...
...Tory Economics and the Welfare State THE ECONOMIC POLICIES that provided the underpinnings of the welfare state are in disarray...
...Yet, despite it, social benefits are not the leading edge of Labour thinking...
...It makes the national interest less narrow than most conservative versions as, for example, in the emphasis on regional development...
...Lancashire, South Wales, Tyneside, and most of the North of England, Northern Ireland, and much of Scotland have struggled economically for 60 years...
...Full employment is at least as important...
...Slow growth and widening class differentials affect more people, as do inflation and the shabbiness of housing, mass transport, and health facilities...
...In making this argument, the TUC only dealt with the effects of private services, but it implicitly accepts the assumption noted earlier that such job-creating public services as transport, health, and education cannot lead the economy to full employment...
...The National Enterprise Board (NEB) was set up by the Labour government to provide capital for development in the national interest...
...The Thatcher government also has tried to scrap all the mechanisms its predecessors devised to increase investment...
...The PSBR is the government's total requirement for borrowing for all purposes—deficit on current programs, capital for public industry, and investment in social capital...
...The wisdom of imposing import controls is hotly disputed by the leaders of the Social Democratic breakaway...
...Labour will therefore require interconnected policies for inflation, imports control, investment, and the value of the pound if it is to have any chance of implementing an expansionary economic policy...
...Some socialists would turn to non-Keynesian devices to get faster results...
...Workers will have to take some responsibility for the health of companies, and management will have to agree to worker participation in decisions...
...This testimony was obviously tainted by the CBI's desire to block Labour proposals for public financing of investment, but companies are certainly not coming up with enough new ideas...
...However, if Labour cannot come up with clearer criteria for investment, the NEB will once again be used to bail out "lame ducks," because only the lame ducks will ask for assistance...
...The government's rationalization is that the strongest companies will survive and the rest will have to free labor and capital for use in new fields...
...Yet the resulting shock has not had the effects that the Tories want, partly because of the built-in stabilizers of the welfare state...
...Another reason for the survival of these services is that they have cushioned the effects of Thatcher's overall economic policy...
...This would make sense only if there were fields crying out for expansion that are being starved of resources...
...The mechanisms the alternative strategy would use to spur on investment are the National Enterprise Board and planning agreements with major corporations...
...Provisional results for public-sector housing show only 44,300 units started in 1980, as compared with 148,800 units just four years earlier...
...By this definition, Britain was not a welfare state even before the Thatcher government took over in May 1979...
...They wanted to say that added inflation is a reasonable price to pay for more jobs but had to admit that inflation causes dangerous instability and social divisions...
...The government does not even have an accurate measure of money supply...
...The result has been an undeclared cut in the National Health Service as well as in less favored services...
...new rolling stock and a greatly developed electrified network for British Rail, together with a Channel Tunnel...
...Can the alternative economic strategy possibly reemploy the 3 million unemployed and find work for new school-leavers and discouraged workers...
...The chemicals division of British Petroleum announced that they were utilizing only 55 percent of their capacity in September 1980...
...The National Enterprise Board had moderate successes in computers and microchips, but these industries threaten as many jobs as they create...
...Before the Thatcher government took over, the National and Local Government Officers Association (NALGO) wrote that only 25 percent of acute-care hospitals had been replaced since World War II, leaving some three-quarters technologically obsolete with over half the beds still accommodated in 19th-century buildings...
...They fear the consequences of mass unemployment and public polarization...
...Under the last Labour government, successive incomes policies became essentially wage policies, holding wage increases below the inflation rate and thereby reducing many workers' real incomes...
...Even Imperial Chemical Industries, Britain's largest manufacturer and exporter, reported a sharp reduction in turnover and profits for the first half of 1980...
...Most Social Democrats and dissident Tories appear to be Keynesians, for lack of a better alternative, but they have no appetite for an expansion of governmental powers over the economy...
...Local governments and public employee unions have fought tenaciously, in many cases raising local property taxes sharply or overspending their budgets to force the government to come through with more money...
...Many on the left and in the center of the Labour party share their reluctance on incomes policy...
...However, when the cuts are added up, it is highly probable that they have widened class differentials and reduced the standard of living of many people...
...and investment in the energy sector to achieve a balanced energy policy...
...I feel that these inequalities do not add up to two-tier medicine as practiced in the U.S...
...and that to keep the money supply within its target would require a quixotically savage assault on the economy...
...More public investment, a stronger NEB, planning agreements, and selective nationalizations would still leave the economy mixed, but Labour's left is unwilling to admit this...
...The measures it does have suggest that the money supply has grown more rapidly than the official targets...
...conservatives have used Britain's relatively slow growth and international decline as proof that welfare states cannot succeed...
...8175, p. 79...
...4 All these cuts show the necessity of employing a broad definition of the welfare state rather than thinking only of health and transfer payments...
...It is Britain's very backwardness as a welfare state that makes it relevant to Americans...
...Social Democratic leaders have not promised to rescind budget cuts or expand services...
...The Economics of Prosperity concluded that the inflationary effect of its expansionary package would be less than many economists would expect...
...These are the most explosive people...
...Between Anger and Social Peace I DO NOT WANT TO OVERDRAMATIZE the grow ing crisis of legitimacy in Britain's welfare state...
...But both increases reflect a steady growth in the number of old people rather than an improvement in services...
...Freeing the pound" included abolishing special controls over the export of capital, which had been maintained by previous Conservative governments...
...it was lowered to 14 percent in November...
...The Labour party is at least one step closer to depending on social programs as a major part of revitalizing the welfare state...
...Peace, Jobs, Freedom" also demands strong price controls...
...We want to get away from the politics of outdated dogmatism and class confrontation," Roy Jenkins said at the new party's first press conference...
...Industries and companies suffering from the combined effects of domestic recession, a high pound, and high interest rates include strong companies with modern plants and industries important both for export and Britain's future...
...Its features add up to a reorganization of the welfare state...
...The TUC's proposals agree with this emphasis...
...But part of the argument is supportable...
...Consequently, restoring full 83 employment has become the highest priority...
...Social services, of course, provide many new jobs, but they do not appear capable of generating enough jobs for full employment in Britain—or in the United States...
...The commission could recommend increasing imports, or restrict a company's credit while making it more available to potential rivals (including public industries...
...The TUC's ideas appear in its annual Economic Review, while the ideas behind them are outlined in a European Trade Union Institute report, Keynes Plus: A Participatory Economy...
...The new Social Democratic party and many on the right of the Labour party have the same overall position...
...10 Labour's left tends to ignore these suggestions because of its populist hostility to the public corporations, but these proposals do make reindustrialization more precise and convincing...
...Worldwide experience has shown that it is quite impossible to buy oneself out of difficulties of this kind," he said...
...and Ferranti (electronics) were both on the verge of closing before the NEB stepped in, because the private market astonishingly would not provide funds for them...
...Private health insurance is growing, because privately insured patients get surgery more rapidly at National Health Service hospitals...
...By almost any objective measure, such as the percentage of Gross National Product devoted to social services, Britain is the least developed welfare state in the European Economic Community (EEC)—with the exceptions of Italy and Ireland...
...budget...
...However, such measures could only be effective if a price commission were established permanently, which means that it would have to be accepted by business and the Tories...
...This may have been a factor, but it is also true that Keynesianism has not been an unalloyed success...
...Thus the British government is actually spending a larger share of Gross Domestic Product than its predecessor did in its last year in office...
...The 'alternative strategy' of permanent general import controls cannot possibly be reconciled with our socialist commitment to the Third World and the abolition of poverty," they wrote in August 1980...
...unemployment was allowed to rise to a level incompatible with the welfare state...
...Labour politicians have often sounded jingoistic, especially on the related issue of withdrawing from the EEC...
...But des the Labour movement have additional anti-inflationary policies...
...The fact that business has benefited from the social insurance state makes no difference to Thatcher...
...Of equal importance is a sense of public service and something to work for...
...This would keep social security a universal benefit, yet reduce the net amounts paid to the wealthy and concentrate the benefit on those who pay little or no tax...
...The Tories made a great show of their firmness in ignoring business demands for lower interest rates until November 1980, and in maintaining exchange rate policies that hurt business...
...Although they are non-Keynesian ideas, they can be integrated into a Keynesian expansion...
...Reindustrialization FIRST, IS THE COLLAPSE of British industry really a crisis, or is it an evolutionary process that can be accepted...
...The value of the pound will also be affected by an outflow of speculative funds from British financial institutions...
...Consequently they were forced to consider an incomes policy...
...Their desire for more nationalizations is unconvincing, for they are uncomfortably aware that public corporations have not furthered planning and democratic participation...
...because they are universal services...
...It was maintained at this level partly by the effects of North Sea oil, but also by the government's use of high interest rates and the resulting inflow of "hot" money...
...In order to bring it into line, the Tories decreed more spending cuts...
...With it the TUC shows signs of returning to and perhaps revitalizing the classical socialist slogans of production for use and the satisfaction of basic needs...
...A welfare state bargain cannot be created simply by Labour's ceasing to make demands, as the Social Democrats seem to believe...
...between fully employed workers and marginal citizens...
...5 Given what appears to be a political limit on the size of social spending, British reformers often look for ways to reduce the net effect of a proposal...
...Benn and Holland do not state categorically that newly nationalized companies would invest more...
...The gap between needs and benefits was more pronounced in pensions than in the National Health Service, which came closest to a welfarestate standard...
...Even 19th-century governments intervened in foreign exchange markets to manipulate the value of the pound...
...In the 1981-82 White Paper on Expenditures, total public expenditure on health (in constant 1980 pounds, ostensibly to eliminate inflation from yearly comparisons) is scheduled to increase by some 2 percent, while social security is budgeted for a 7 percent increase...
...The Tories' contempt for failing companies is yet another sign of the depth of their ideological crusade against the practices that developed within the welfare state...
...The welfare state had grown stale...
...One of its basic suppliers, the paper industry, has virtually disappeared from Britain with the closing of Bowaters' newsprint plant at Ellesmere Port...
...Why should Britain struggle to keep a large part of its labor force in arduous, hazardous mines and factories...
...The results are widened differentials between car owners and users of public transportation...
...The left, however, cannot conceivably desire an East European system, nor could it mobilize enough strength to replace the mixed economy...
...The Tories want to slash the services of the welfare state, restore fiscal soundness, and leave room for economic individualism...
...As faith in devaluation declined, import controls became more popular within the Labour party...
...Ferranti's management resisted the sale...
...The Government's Expenditure Plans 1981-82 to 1983-84 (London: HMSO, March 1981), Cmnd...
...8 Many on the left have portrayed this "pink monetarism" as a failure of nerve that a change of leaders would cure...
...The Labour party is sketching a more coherent road map...
...Second, the government's monetarist policy is in a shambles...
...Then, in August 1980, they once again proposed designating a much smaller number of central urban districts for tax relief to encourage industrial development...
...In the two areas where Thatcher's government still admits a responsibility, it is trying to reduce the government's powers by making the policy instruments "automatic...
...Cooperatives are worthwhile in themselves, but they do not make public ownership a necessary tool for economic expansion and full employment...
...Another central purpose could come from reviving G. D. H. Cole's 1929 slogan: "Clean Up Britain...
...Since this study was based on 1979 figures, there may be room for a larger stimulus...
...For two years journalists have expected that Peter Walker, minister of agriculture, or James Prior, until recently minister of employment, would lead a revolt within the cabinet...
...Every political party and interest group had begun to rethink its attitudes toward the institutions and policies that make up the welfare state...
...British social services, though extensive, did not provide all citizens with a basic minimum of civilized life...
...There is no effort to subject the health service, unemployment insurance, and basic pensions to means tests...
...Beyond such disagreements, Labour's enthusiasm is sapped by the fact that many on the left would prefer to arrive at something other than a welfare state...
...This emphasis could avoid the poor results that came out of earlier Labour efforts to plunge into expensive, untried high-technology sectors such as the Concorde plane...
...It is attacking the welfare state in its broadest sense by trying to restore a competitive economy whose faults the social insurance state was designed to remedy...
...It proposes an additional public lending authority that is to raise £1,000 million a year from pension funds and financial institutions...
...The wealthy and middle classes do enjoy substantially better health, but economic and social conditions explain most of the difference...
...Modernization will keep them alive but will usually reduce the labor force they need...
...the results are contained in The Economics of Prosperity, edited by David Blake and Paul Ormerod...
...While all agree in theory on the need to consult the unions on planning and to generate more democratic participation in the society, in practice TUC officials want a kind of left corporatism, while many in Labour's left preach an uneasy juxtaposition of participatory democracy and further nationalization of industry...
...And companies also are not likely to generate so many news ideas that a Labour government could simply choose the best...
...Business grew accustomed to the high level of demand made possible by full employment and public expenditure...
...They are now trying to restrict the government's economic tasks to two—targeting the money supply and the volume of public borrowing...
...Resentment accumulated and unions eventually broke out of the government's guidelines...
...His resistance signifies that the NEB was doing an essential job and that government intervention in investment had become a normal part of economic life...
...education (budget cuts are clearly affecting quality, while the Tories are giving new subsidies to children going to private schools...
...These projections placed the authors of The Economics of Prosperity in a real bind...
...By contrast, a "positive" country such as the United States uses its services to stigmatize and divide...
...However, the riots that erupted in most major cities in the summer of 1981 signified that the disintegration of the 90 welfare state has reached a point where it cannot contain the anger of youths excluded from full membership in society by unemployment, lack of training, race, and class...
...18 In general, the Thatcher government has prided itself on its toughness and its refusal to try to create a consensus, not only with marginal groups but among all the major interest groups that have obtained a voice in the welfare state...
...Labour (and the American left) cannot avoid the "carrots and sticks" that annoy Benn...
...A few days later, it announced the building of a new factory in France for automobile components, ostensibly to be near its market...
...There is no reason to expect that the structural weaknesses of the British economy, which have conditioned this cycle, will have disappeared when Labour gets to govern again...
...The alternative economic strategy of the Labour left resembles the "Keynes Plus" strategy of some TUC officials: a neo-Keynesian economic stimulus, which must be guided toward investment in industry by a stronger National Enterprise Board and protected against diversion into imports...
...Third, interest rates and budget cuts are used to create a recession as shock therapy for British business and unions...
...6 Reagan has made the same moves as he tries to balance the U.S...
...Anything that stands in the way of this ideological objective, such as consultation with trade unions and business, has been sharply attacked...
...This pallid acceptance of the status quo now wins a plurality in public opinion polls, but I don't believe it can work...
...The immediate problem with planning agreements is that they failed under the last Labour government...
...Now Labour has to accept the necessity more graciously and to integrate it into its proposals, in effect reconstructing the social contract that led to victory in 1974...
...Furniss and Tilton define the welfare state in terms not only of public services and social insurance but also of the ways these services integrate workers and nonworkers into the society...
...The left, however, still recoils from these lessons as corporatist...
...Most investments in the old core industries would be defensive...
...On a case-by-case basis, it is a reasonable translation of "national interest...
...She appeals to those who want to punish "scroungers...
...17 Guardian, August 1, 1980, p. 7; December 3, 1980, P. 7. 18 New York Times, July 7, 1981, p. A-1...
...To get around this problem, they recommend other forms of public ownership such as cooperatives...
...Admitting these facts would strengthen Labour's case...
...Influential groups close to the party, notably the Child Poverty Action Group, press for improved benefits...
...This trend is bound to accelerate as long as the government refuses to finance capital-outlay projects and maintenance...
...Many people are tired of the atmosphere of discord and conflict...
...Business is a major target of these attacks...
...Thatcherite Tories want a radical revision of Britain's economic and governmental structure...
...13 Labour Party, National Executive Committee, "Peace, Jobs, Freedom" (May 31, 1980), p. 6. 14 The Economics of Prosperity, p. 51...
...It makes investment, rather than the social services, the focal point...
...An enterprise board seems a natural part of the welfare state...
...As we have seen, transfer payments and public services were hard to cut, so the cuts fell on public investment—and that, ironically, threatens the whole infrastructure of the British economy: telecommunications, power, roads, railroads, gas pipelines, and aviation...
...They have virtually ended the government's responsibility for the economy...
...10 Ibid., p. 53...
...A true welfare state would also be characterized by full employment and national planning to achieve it, and by business acceptance of these goals...
...Many companies complain that the government has made their fuel costs the highest in Europe while their European competitors have been assisted by their governments with lower energy costs...
...The Social Democrats' stand on the EEC is very revealing...
...I talked with Tories who would love to cut them, but dared not...
...In practice, most of its efforts went to rescue bankrupt companies, but some of these rescues did occur in new, high-technology industries...
...The TUC envisages reducing import penetration and saving jobs in such core industries as iron and steel, cars, and textiles...
...A second part of the notion is the refusal to choose between services and industry: ". . . industrial and service activities are complementary to each other rather than interchangeable . . . ."9 Services cannot simply substitute for industry...
...3 In the fall of 1980, Michael Heseltine, the minister of the 82 environment, took the further step of freezing local government spending on both renovation and new public housing, thereby restricting further the housing opportunities for the poorer half of the population...
...The Social Democrats have made national unity their central theme...
...Are there any signs that this is happening...
...and it would deal with projected investments, location of facilities, employment, social costs, and imports and exports...
...Many proposals to fill these gaps are swirling around within the Labour movement...
...This was not so much an economic as a political failure...
...Keynes Plus recommends "a comprehensive policy for monitoring prices," 15 and special efforts to increase competition where appropriate...
...Publishing is one of the "knowledge industries" that should thrive in postindustrial societies, according to those economists who feel that countries should not protect their old industries, no matter how basic...
...Stuart Holland's book The Socialist Challenge is still the fullest statement of many of the theories behind this strategy...
...However, many in the Labour party no longer believe in this policy...
...At the end of the 1960s many Labour politicians felt that devaluation of the pound was not only the answer to imports but the key to sustained economic growth through exporting...
...This charge has some validity...
...84 Imperial Computers Ltd...
...In the NHS, the doctors got an increase of well over 14 percent—and the nurses backed down...
...The Conservatives' abdication is amazing...
...Many low-paid women workers in community centers, school meal programs, and other services have been fired, reducing their chances of achieving a full adult status in the community...
...Manipulating prices as part of comprehensive planning would theoretically give a price commission more leverage...
...providing more shift work in existing plants, part-time as well as full-time...
...The EEC could conceivably be useful to an expansionary economic policy...
...In fact, the left's insistence on more nationalizations fits awkwardly into their program of economic expansion...
...This asserts that there are "core" industries producing such goods as steel, motor vehicles, and machine tools, which a modern economy must make for itself...
...Expansion will make it easier for industry to contain its costs . . . ." 13 There is a lot of wishful thinking in these sentences...
...the project grew out of a Fabian Society committee...
...These simultaneous actions reduced the net cost and concentrated the benefits on working-class and poor families, whereas the previous tax deduction had given more money to well-to-do families...
...In his book Britain: A Future that Works, Bernard Nossiter argues that Britain may be evolving into the first postindustrial society, in which a majority of the population works in services, importing the bulk of the industrial goods it needs...
...For the purpose of analysis, I shall speak of three issues with which these road maps must deal: (1) the extent and nature of the services offered...
...People on Labour's left would give the NEB more capital to work with, and the power to take full or partial shares in profitable companies...
...Specific mechanisms for some of these industries are now being established under the Thatcher government, notably an EEC cartel for steel and voluntary restrictions on Japanese cars...
...Other sectors that have been hit hard are public transportation (many localities have had to restrict their bus services at the same time that the National Bus Company, British Rail, and London Transport are cutting back...
...By the winter of 1978-79 most unionists felt they were not being genuinely consulted on economic policy, and the social contract disintegrated...
...Instead, many critics feel that the Labour party has to put more effort into defining its priorities within the social services...
...6 Throughout most of 1980 the prime rate was 17 percent...
...It still sees social services as part of an expansionary economic policy...
...In the process, however, the social consensus upon which the welfare state rests is eroding...
...Many old people and many families headed by single parents live in despair...
...The obvious question is, can it be used to make investments that capitalists won't make...
...and in France...
Vol. 29 • January 1982 • No. 1
