Britain in the 1950s: A "Keynesian" Managed Economy?

Leading authorities on comparative political economy see Britain in the 1950s as a classic example of Keynesianism. Peter Hall (1989), Margaret Weir (1989, 65–69), and Peter Gourevitch (1986, 175–76) have all argued that the deep political and social upheavals of World War II “shifted the tectonic plates of the political order in ways that made for economic experimentation” (Hall 1989, 388). This perspective supports the view in standard texts from the “Keynesian era” (Brittan 1971; Stewart 1967; Winch 1969). It has, however, come under attack from more recent policy research based on items in the Public Record Office (PRO), which has tended to argue that Keynesian ideas had only a limited influence on policy (Howson 1993, 321; Peden 1990, 236–37; Rollings 1988, 295–96; Tomlinson 1987, 156).¹ The contrasts between the work of Hall and his colleagues, who used a comparative approach, and PRO-based work are stark. Peter Hall (1989, 370–76) has noted that new economic ideas will be absorbed into policy if they are viable in economic, political, and administrative terms. The new archival work has, however, implied that Keynesian ideas fail these viability tests. George Peden (1990, 224–25, 228) and others have suggested that there was nothing distinctively Keynesian about the anti-inflationary and exchange rate support policies followed in Britain after 1945 (Rollings 1988, 295–96; Tomlinson 1984; 1987, 54–57). Neil Rollings (1994, 1996) has argued that the consensus on Keynesian macromanagement was more apparent than real. The main thrust of the new work has been to identify continuing resistance from Treasury officials to Keynesian ideas in key areas.

This essay argues that Treasury opposition to Keynesianism is undeniable but was effectively marginalized for much of the decade by the Keynesian economists working in the Economic Section. The key phase was the rejection of the plan by Treasury and Bank of England officials to run the economy with higher levels of unemployment to protect the exchange rate. When the Treasury's dire warnings of catastrophe proved empty, ministers began to turn much more willingly to the Economic Section and its head, Robert Hall, for policy advice. Treasury resistance to new ideas about the role of both the budget and public expenditure did not prevent the fine-tuning of the economy, using Keynesian analysis and techniques. The Economic Section helped ministers to develop a set of policies that curbed inflationary tendencies without the political and economic costs implicit in the Treasury view. In Whitehall in the 1950s there was something like a market for economic advice, and Keynesian approaches held a dominant, but never a monopoly, position. However, these findings rest upon a distinctive approach to the problems of definition that beset this research area.

Problems of Definition

Two terms and their definitions are relevant: Keynesian and influence.

Keynesian

The failure to agree on definitions of Keynesian and influence has been a fundamental problem (Rollings 1988, 283–84; Tomlinson 1984; Booth 1984; 1985, 101–2). For the comparative studies, definitional flexibility is a prerequisite. Thus, Weir (1989, 56) discusses “Keynesian” and “Keynesian-style” policies in the same breath; Gourevitch (1986, 1989) is interested in the broadest definition of “Keynesian” policies as a focus for the creation of inclusive political coalitions; Peter Hall (1989, 7) concentrates on “contra-cyclical management,” as if this were obviously synonymous with Keynesian.² For detailed, documentary-based studies of national policy, however (and especially of the United Kingdon), alternative approaches have been essential. The pioneering study by Susan Howson and Donald Winch (1977, 158–64) established the methodological rules. They took Keynesian to mean the views of John Maynard Keynes and measured “influence” by the extent to which Treasury officials used Keynes's vocabulary and concepts. For their period (the 1930s) there was no realistic alternative; Keynes was easily the most forceful critic of government policy and doggedly pursued an intellectual victory over Treasury officials. To borrow Peden...