by Tony Judt
Fascism and war were thus the bridge linking heterodox, marginal and often controversial notions of economic planning with mainstream post-war economic policy. Yet this compromised heritage had little impact on planning’s appeal—whatever its associations with far Right, far Left, occupation or war, planning was quite distinctly not associated with the discredited politics of the inter-war years, a point widely held in its favour. What planning was really about was faith in the state. In many countries this reflected a well-founded awareness, enhanced by the experience of war, that in the absence of any other agency of regulation or distribution, only the state now stood between the individual and destitution. But contemporary enthusiasm for an interventionist state went beyond desperation or self-interest. The vision of Clement Attlee, the British Labour leader whose party defeated Churchill’s Conservatives in the dramatic election upset of 1945, nicely captured the contemporary mood: what was needed now were ‘well-planned, well-built cities and parks and playing fields, homes and schools, factories and shops.’
There was a great faith in the ability (and not just the duty) of government to solve large-scale problems by mobilizing and directing people and resources to collectively useful ends. Obviously this way of seeing things was particularly attractive to socialists; but the idea that a well-planned economy meant a richer, fairer and better-regulated society was taken up by a very broad constituency, including the Christian Democratic parties then rising to prominence all over Western Europe. The English historian A. J. P. Taylor told BBC listeners in November 1945 that ‘[n]obody in Europe believes in the American way of life—that is, private enterprise; or, rather, those who believe in it are a defeated party which seems to have no more future than the Jacobites in England after 1688’. Taylor exaggerated as always, he was wrong in the long run (but who isn’t?) and he might have been surprised to learn about the planist enthusiasms of many New Dealers prominent in the contemporary US administration of Germany. But at the time he was broadly correct.
What was ‘Planning’? The term is misleading. What all planners had in common was belief in an enhanced role for the state in social and economic affairs. Beyond this there was great variation, usually a consequence of distinctive national political traditions. In Britain, where very little actual planning ever took place, the real issue was control—of industries and social and economic services—through state ownership as an end in itself. Thus nationalization—notably of mines, railways, goods transportation and utilities—and the provision of medical services lay at the heart of the Labour Party programme after 1945. The ‘commanding heights’ of the economy, in short, were taken over. But that was all.
In Italy the Fascist institutional legacy—which had brought large tracts of the economy under state oversight—was left largely intact after the war. What changed was the political colour of the parties now benefiting from the industrial and financial power base afforded them by holding companies and state-owned agencies. In West Germany, after 1948, the economy would remain mostly in private hands but with detailed, publicly-approved arrangements for factory management, employer-employee relations and conditions of employment and distribution. In the Netherlands central planning entailed a variable mix of predictive and prescriptive edicts for the use of private enterprise.
Most countries of western Europe had rapidly growing public sectors, when measured by government expenditure or the number of public-sector employees. But only in France did rhetorical enthusiasm for state planning translate into the real thing. Like the British, post-war French governments nationalized: air transportation, banks, thirty two insurance companies, utilities, mines, munitions industries, aircraft manufacturing and the giant Renault concern (as punishment for its owner’s contribution to the German war effort). One fifth of France’s total industrial capacity was in state ownership by May 1946.
Meanwhile, on December 4th 1945, Jean Monnet presented President De Gaulle with his Plan de Modernisation et d’Équipement. A month later the Commissariat Général du Plan was established, with Monnet at its head. In the course of the following months Monnet set up Modernization Commissions for various industries (mining, electricity, transportation, building materials, steel and agricultural machinery; oil, chemicals, fertilizers, shipping and synthetic fibres would later be added) and these in turn delivered proposals and sectoral plans. Exactly one year after its creation, in January 1947, the Commissariat saw its first national Plan approved by the French Cabinet—without discussion.
The Monnet Plan was unique. It was the work of an unusual man.18 But above all it was the product of a political culture already favourably disposed to authoritarian decision-making and consensus building by governmental fiat. Under its auspices France became the first western country to commit itself wholeheartedly to economic growth and modernization as public policy. The Plan depended heavily on assumptions about French access to German raw materials and markets, and thus the story of its success is part of the narrative of France’s relations with Germany and the rest of Europe in the post-war decade: a story of many false starts, constraints and frustrations.
The first Monnet Plan was largely an emergency measure to address France’s post-war crisis. Only later was it extended and adapted to the terms of Marshall Aid. But the basic outline of post-war French economic strategy was present from the start. French planning was never more than ‘indicative’: it only ever set targets, not production quotas. In this respect it was quite unlike Soviet planning, whose characteristic feature (and prime defect) was its insistence upon arbitrary and rigid output figures by sector and by commodity. The Monnet Plan confined itself to providing government with a strategy and levers for actively fostering certain favoured objectives. At the time this was a strikingly original undertaking.
In Czechoslovakia a Central Planning Commission with some Monnet-like features and aspirations was established in June 1946 to guide and coordinate the sizeable public sector nationalized by President Benes in 1945. In the year before the Prague Communist coup of February 1948, 93 percent of all those employed in transport and 78 percent of those in industry already worked for the state. Banks, mines, insurance companies, major utilities, steel and chemical works, food processing industries and all large enterprises had been taken over: 2,119 firms comprising some 75 percent of all manufacturing output.
In the Czechoslovak case nationalization and state planning of the economy thus began well in advance of the Communist take-over and represented the policy preferences of a genuine majority of the electorate—only in February 1949, a year after the Communist coup, was the Planning Commission purged and renamed as the ‘State Planning Office’, with a very different remit. Elsewhere in the region large-scale nationalizations, like those mandated under Poland’s January 1946 Nationalization Law, were the work of coalition governments in which Communists dominated. But here, too, there were pre-Communist roots: back in 1936 the authoritarian government of the pre-war Polish Republic had inaugurated a ‘Four-Year Investment Plan’ with a rudimentary system of centralized directive planning.
The chief purpose of planning in post-war continental Europe was public investment. At a time of acute capital shortage and with huge demand for investment in every sector, government planning consisted of hard choices: where to place the limited resources of the state and at whose expense. In eastern Europe the emphasis was inevitably upon basic expenditure—on roads, railways, factories, utilities. But that left very little over for food and housing, much less medical, educational and other social services; and nothing at all for non-essential consumer goods. This was not a pattern of expenditure likely to endear itself to any electorate, especially in countries that had already suffered years of material deprivation, and it is not surprising that this sort of planning under conditions of dire shortage was almost always accompanied, sooner or later, by authoritarian rule and the police state.
But the situation in the West was not so very different. The British, as we shall see, were constrain
ed to accept years of ‘austerity’ as the price for economic recovery. In France or Italy, where there was almost no long-term private capital market, all major investments had to be publicly funded—which was why the first Monnet Plan was skewed towards capital investment in major industries at the expense of domestic consumption, housing and services. The political consequences of this were predictable: by 1947 France, like Italy, was threatened with strikes, violent demonstrations and a steady increase in support for the Communist Party and its trade unions. Deliberate neglect of the consumer goods sector and the diversion of scarce national resources to a handful of key industrial sectors made long-term economic sense: but it was a high-risk strategy.
The economics of Planning drew directly upon the lessons of the 1930s—a successful strategy for post-war recovery must preclude any return to economic stagnation, depression, protectionism and above all unemployment. The same considerations lay behind the creation of the modern European welfare state. In the conventional wisdom of the 1940s, the political polarizations of the last inter-war decade were born directly of economic depression and its social costs. Both Fascism and Communism thrived on social despair, on the huge gulf separating rich and poor. If the democracies were to recover, the ‘condition of the people’ question must be addressed. In the words of Thomas Carlyle a hundred years earlier, ‘if something be not done, something will do itself one day, and in a fashion that will please nobody.’
But the ‘welfare state’—social planning—was more than just a prophylactic against political upheaval. Our present discomfort with notions of race, eugenics, ‘degeneration’ and the like obscures the important part these played in European public thinking during the first half of the twentieth century: it wasn’t only the Nazis who took such matters seriously. By 1945 two generations of European doctors, anthropologists, public health officials and political commentators had contributed to widespread debates and polemics about ‘race health’. population growth, environmental and occupational well-being and the public policies through which these might be improved and secured. There was a broad consensus that the physical and moral condition of the citizenry was a matter of common interest and therefore part of the responsibility of the state.
As a consequence, rudimentary welfare provisions of one kind or another were already widespread before 1945, although their quality and reach varied widely. Germany was typically the most advanced country, having already instituted pension, accident and medical insurance schemes under Bismarck, between 1883 and 1889. But other countries began to catch up in the years immediately before and after World War One. Embryonic national insurance and pension schemes were introduced in Britain by Asquith’s Liberal governments in the first decade of the century; and both Britain and France established ministries of health immediately following the end of the Great War, in 1919 and 1920 respectively.
Compulsory unemployment insurance, first introduced in Britain in 1911, was instituted in Italy (1919), Austria (1920), Ireland (1923), Poland (1924), Bulgaria (1925), Germany and Yugoslavia (1927) and Norway (1938). Romania and Hungary already had accident and sickness insurance schemes in place before World War One, and all the countries of eastern Europe introduced national pension systems between the wars. Family allowances were a key element in plans to increase the birth rate—a particular obsession after 1918 in countries badly hit by wartime losses—and were introduced first in Belgium (1930), next in France (1932) and in Hungary and the Netherlands just before the outbreak of war.
But none of these arrangements, not even those of the Nazis, represented comprehensive welfare systems. They were cumulative ad hoc reforms, each addressing a particular social problem or improving upon the demonstrated shortcomings of previous schemes. The various pensions and medical insurance systems introduced in Britain, for example, had very restricted benefits and applied only to working men: wives and other dependents were excluded. Eligibility for unemployment benefits in inter-war Britain rested on a ‘Means Test’. This drew on the nineteenth-century Poor Law principle of ‘least eligibility’ and required an applicant for public assistance to demonstrate his virtual destitution in order to qualify. Nowhere was there yet any recognition of an obligation upon the state to guarantee a given set of services to all citizens, whether male or female, employed or workless, old or young.
It was the war that changed all this. Just as World War One had precipitated legislation and social provisions in its wake—if only to deal with the widows, orphans, invalids and unemployed of the immediate post-war years—so the Second World War transformed both the role of the modern state and the expectations placed upon it. The change was most marked in Britain, where Maynard Keynes correctly anticipated a post-war ‘craving for social and personal security’. But everywhere (in the words of the historian Michael Howard) ‘war and welfare went hand in hand’. In some countries nutrition and medical provision actually improved during the war: mobilizing men and women for total war meant finding out more about their condition and doing whatever was necessary to keep them productive.
The post-1945 European welfare states varied considerably in the resources they provided and the way they financed them. But certain general points can be made. The provision of social services chiefly concerned education, housing and medical care, as well as urban recreation areas, subsidized public transport, publicly-funded art and culture and other indirect benefits of the interventionary state. Social security consisted chiefly of the state provision of insurance—against illness, unemployment, accident and the perils of old age. Every European state in the post-war years provided or financed most of these resources, some more than others.
The important differences lay in the schemes set in place to pay for the new public provisions. Some countries collected revenue through taxation and provided free or heavily-subsidized care and services—this was the system chosen in Britain, where it reflected the contemporary preference for state monopolies. In other countries cash benefits were paid to citizens according to socially-determined criteria of eligibility, with the beneficiaries left to purchase services of their own choice. In France and some smaller countries citizens would be expected to pay up front for certain categories of medical provision, for example, but could then claim back much of their expenses from the state.
These differences reflected varying systems of national finance and accounting, but they also signified a fundamental strategic choice. In isolation, social insurance, however generous, was not in principle politically radical—we have seen how relatively early it was introduced in even the most conservative of regimes. Comprehensive welfare systems, however, are inherently re-distributive. Their universal character and the sheer scale on which they operate require the transfer of resources—usually through taxation—from the privileged to the less well off. The welfare state was thus in itself a radical undertaking, and the variations among the European welfare states after 1945 reflected not just institutional procedures but also political calculation.
In eastern Europe, for example, the Communist regimes after 1948 on the whole did not usually favour universal welfare systems—they did not need to, since they were at liberty to redistribute resources by force without spending scarce state funds on public services. Peasants, for instance, were frequently excluded from the social insurance and pension arrangements on political grounds. In western Europe only six countries—Belgium, Italy, Norway, Austria, the Federal Republic of Germany and the UK—introduced compulsory and universal unemployment insurance after 1945. Subsidized voluntary schemes remained in the Netherlands until 1949, in France through 1967, in Switzerland until the mid-1970s. In Catholic Europe long-established local and communal coverage against unemployment probably impeded the development of universal systems of insurance by reducing the need for them. In countries where inter-war unemployment had been especially traumatic—the UK, or Belgium—welfare spending was driven in part by the desire to maintain full or close to full employment. Where it had not been so sign
ificant—in France or Italy, for example—this was reflected in a rather different balance of priorities.
Although Sweden and Norway (but not Denmark) were in the vanguard of benefit provision across a broad range of social services, and West Germany kept in place the welfare provisions inherited from past regimes (including Nazi-era programmes aimed at encouraging a high-birth rate), it was in Britain that the most ambitious efforts were made to build, from scratch, a genuine ‘Welfare State’. In part this reflected the unique position of Britain’s Labour Party, which won an outright victory at the elections of July 1945 and—unlike the governments of most other European countries—was free to legislate its entire electoral programme unconstrained by coalition partners. But it also derived from the rather distinctive sources of British reformism.
The social legislation of post-war Britain was based on the justly famous wartime report by Sir William Beveridge, published in November 1942 and an immediate best-seller. Beveridge was born in 1879, the son of a British judge in imperial India, and his sensibilities and ambitions were those of the great reforming Liberals of Edwardian Britain. His Report was at once an indictment of the social injustices of pre-1939 British society and a policy template for root and branch reform once the war was over. Even the Conservative Party did not dare to oppose its core recommendations and it became the moral basis for the most popular and enduring elements in Labour’s post-war programme.