ENGLISH SOCIALISTS A GENERATION AGO

...Nevertheless, a dollar's worth of deficit-financed public spending could be counted upon to increase community income at least two or three times that sum, and probably much more...

...The more or less free markets beloved of economists had always generated vast, unmerited inequalities of income and wealth...

...Market socialists differed endlessly over the scope of nationalization and the governance of nationalized enterprises...

...Socialist managers could be instructed to obey the same market signals as guided entrepreneurs...

...The multiplier promised a generous supply of free lunches...

...Oskar Lange, a Pole teaching in the 1930s at the University of Chicago...

...Drawing upon interviews with the period's survivors, election manifestos, Fabian pamphlets, correspondence, and her father's memoranda and unpublished manuscripts, Elizabeth Durbin recalls an exciting spell of ferment in the 1930s...

...Even if one in the end adopted Keynesian theory and practice, as most of Durbin's circle, though not Durbin himself, did, Keynes posed a problem of socialist strategy...

...Cole were economists and, with the exception of Cole, deeply impressed by the Cambridge's and London School of Economics' emphasis upon the power and virtue of competitive markets, the market socialist solution was essential to their peace of mind...

...But an economy capable of bumping along indefinitely at levels of private investment and consumer expenditure inadequate to employ the entire labor force, urgently needed outside intervention...

...There was nothing efficient about a system that shuttered factories, bankrupted farmers and businessmen, and laid off millions of men and women...

...32.00 For individuals of a certain age and experience, Elizabeth Durbin's sympathetic but clear-headed exploration of the British Labour party's attempt in the 1930s to define a program at once intellectually coherent and politically appealing recalls their own groping for a non-Stalinist, democratic socialist alternative to American capitalism...

...There were leakages along the way...

...When in 1945, the voters substituted Attlee for Churchill, the immediate agenda bore the stamp of Morrison and the nationalizers rather than that of the theorists...

...Conversely, diminishing sales and accumulating inventories dictated price reductions and shifts to more appealing items...

...People saved portions of added income...

...The latter, a highly successful London municipal administrator, was uninvolved in theoretical controversy...

...Enthusiastic embrace of the man threatened to prop up capitalism and indefinitely postpone the date of socialist transformation, a version of the Roosevelt problem across the ocean...

...Moreover, Keynes had failed to explain the business cycle, convincingly rebut charges that his policies courted inflation, or justify his acceptance of private markets as efficient resource allocators...

...We were confident that the seemingly interminable devastation of the 1930s had destroyed capitalism's strongest claim to legitimacy...

...His focus was upon the administration of the industries to be nationalized by a Labour government, a topic not neglected by the party intellectuals, but not usually at the center of their concerns...

...One of the riddles our small group tried to resolve was the management of the economy...

...Here, it might seem, was the answer to a socialist's prayer, a program validated by his generation's most prominent economist, Cambridge's own John Maynard Keynes...

...It was a technique difficult if not impossible to reconcile either with political democracy or economic efficiency...

...Insofar as Keynes had any party affiliation, it was to the Liberals...

...No monopolies would remain to misallocate resources and extract extortionate profits from helpless customers...

...There were hordes of desperate job seekers and numerous unfilled needs for new schools, hospitals, roads, and other public facilities...

...Because Durbin, Hugh Gaitskell, Hugh Dalton, and G.D.H...

...Should anyone care in the Reagan era, it remains intellectually valid...

...More nearly equal distribution of income and wealth would diminish the influence of the wealthy upon the cost and design of consumer goods...

...Socialist rules of competition would eliminate the deceptive advertising of frivolous or harmful products...

...The latter had good cause to press output to the limits of available manpower, raw materials, and machines...

...Clement Attlee and Herbert Morrison as senior leaders of the Labour party had to answer the question: How would they create large numbers of new jobs...

...Durbin and others tended to argue that nationalization of the Bank of England and possibly the major private banks would allow socialists to set investment priorities...

...As AN ABSTRACT DISCIPLINE, ECONOMICS demands of self-nominated innovators a theoretically coherent framework within which novel policies may be properly sponsored...

...As for the consumer sector, market socialists proved ultimately even to their adversaries that shadow markets could theoretically at least replicate the behavior of private capitalists...

...THIS WAS THE STORY I BORROWED IN 1939...

...When customers favored their merchandise, it was appropriate to increase prices and orders to wholesalers, jobbers, and manufacturers...

...He fretted over inflationary dangers as the economy moved toward high unemployment...

...in support of Lloyd George, then engaged in an attempted comeback, Keynes had advocated deficit spending on common sense grounds...

...Moreover, the man had a record of iconoclasm and abrupt shifts of position that disturbed such conventional souls as Durbin...

...Any socialist regime would vastly enlarge the scale of social provision—health care, old age and disability payments, family allowances, and subsidized housing...

...At the start of 1936, Keynes provided just such a framework in his epochal The General Theory of Employment, Interest and Money...

...and a group of Englishmen...

...Among the latter was the author's father, Evan Durbin, whose life was cut tragically short by drowning...

...Deficits and public works were of course the sovereign Keynesian remedies...

...When as a 1939 Columbia College sophomore I entered the New Republic essay contest for undergraduates, the title of my earnest piece was "Toward a Democratic Socialism...

...Market socialists quickly embroiled themselves in a wrangle with Ludwig von Mises and the still living Friedrich Hayek...

...Rudely attacking his teachers, the twin Cambridge icons, Alfred Marshall and A.C...

...We thought so...

...Keynes's 1933 manifesto The Means to Prosperity incorporated the investment multiplier invented by his younger Cambridge colleagues R.F...

...However, the practical politicians who sought power for themselves and the Labour Party badly needed macroeconomic help—rather more than triumphant demonstrations that socialism and efficiency were compatible...

...Unlike the market socialists, Morrison had no qualms about nationalizing coal mines, railroads, utilities, and the remainder of the economy's commanding heights...

...American democratic socialists took their lead from the theorists of market socialism: Fred Taylor, an American...

...q...

...Kahn and James Meade...

...Still, until the Great Depression, admirers of capitalism could claim with some plausibility that the untrammeled pursuit of profit had fostered economic growth and, despite interruption by recessions and depressions, had vastly improved living standards for workers and their families...

...The benign multiplier guaranteed large bangs for new bucks...

...Pigou, Keynes denied that the economy normally operated at full employment and that temporary aberrations from that condition would spontaneously correct themselves...

...Keynes had not yet convinced respectable colleagues that economic theory sanctioned governmental meddling into the delicate, self-equilibrating, automatic readjustments of private markets...

...Enter then, this time with full theoretical justification, 114 deficit spending...

...Democratic socialists did not cast themselves immediately into Keynes's arms...

...As Elizabeth Durbin usefully reminds us, the Labor party was a frequently uneasy alliance of middle-class Oxbridge and public school intellectuals and working-class leaders like Ernest Bevin and Herbert Morrison...

...Stalin had given central planning a bad name...

...Durbin in particular had questioned the merits of deficit-financed public works as a cure for unemployment...

...A dollar of public investment would be income to its initial recipient, more income to the retailers whose merchandise he bought, still a third increment of income to wholesalers as retailers refilled their shelves, and yet a fourth bit of income to manufacturers whose orders from wholesalers rose...

...As early as his 1929 pamphlet Can Lloyd George Do It...

...Incomes paid to workers returned as sales to their employers...

...What mattered was not the locus of ownership but the operating rules obeyed by the leaders of enterprises...

...As Elizabeth Durbin explains in fascinating detail, it was not that easy...

...He wrote to Keynes's formerly close coworker Dennis Robertson that "I must register here my belief before I read the book that I do not think that any man really gets back beyond or wholly invalidates a century of scientific thought...

...113 In principle, market socialism was far more efficient than market capitalism...

...The influential British Treasury argued that public deficits simply diminished private investment in order to produce an arbitrary list of projects instead of market-directed alternatives...

...No doubt these readjustments were occurring more slowly than usual but Lionel Robbins, an influential voice at the London School of Economics, was disposed to blame persistent depression on inflexible wages and prices, and inappropriate budgetary policy...

...No need to trouble one's head about esoteric price theory when mass unemployment afflicted the economy...

...The Austrian duo demonstrated to their own satisfaction the impossibility of designing under socialism markets as sensitive to consumer preferences and as efficient in the allocation of resources as the genuine capitalist article...

...In England, where a mildly socialist Labour party stood a realistic chance of forming a government, practical considerations easily triumphed...

...If workers accepted wage cuts, sellers cut prices, and Whitehall balanced the budget, recovery was certain...

...In his demonstration that equilibrium could and frequently did occur when workers and factories were substantially unemployed or underutilized, Keynes invalidated Say's Law, the venerable early nineteenth-century allegation that supply generated its own demand...

...The policies that the timid Ramsay MacDonald government had feared to adopt lest conventional opinion be outraged could now be incorporated into the socialist arsenal...

...Here loomed the imposing intellectual presence John Maynard Keynes...

...It made excellent sense to put the idle to useful work...

...The pity is that neither in her country nor ours has there been a contemporary parallel to the energy, originality, and hopefulness of democratic socialists half a century ago...

...It won honorable mention— rather better than socialism has fared in the real world of electoral politics...

...WAS THERE A THIRD WAY, a more efficient and more equitable alternative to central planning, Soviet style, and Anglo-Saxon anarchic capitalism...

...In the unlikely event that in the twenty-first century democratic socialists attain power, they have blueprints available to manage the economy...

...DURBIN'S NEW FABIANS WERE IN CLOSE TOUCH With the Keynesians, notably Roy Harrod and James Meade...

...Durbin and his associates were the politest of revolutionaries...

...My friends excoriated FDR on the ground that the New Deal in the nick of time had defused radical progress toward socialism...

...State guidance of financial and investment policy was certain to eliminate the hardships inflicted by downswings in the business cycle...