In the 1930s, the progressive atmosphere spilled out from the office to the Mecklenburgh Square flat Graham Hutton shared with New Statesman and Nation editor Kingsley Martin. Parties at the flat often featured two young Hungarian economists: Thomas Balogh, who, armed with a letter from Joseph Schumpeter, was given a job at the London bank O. T. Falk & Co. in 1930, and the nickname ‘Oxballs’ by Keynes; and Nicholas Kaldor, a researcher and instructor at the London School of Economics since 1927.108 Both men became key post-war advisors to Labour (later trying to press the General Theory into service under Harold Wilson as industrial and incomes policies aimed at boosting growth). Nicholas Davenport, a broker and a columnist at the New Statesman and Nation, was another ‘City radical’ swept into this milieu, seeing mainly to the money market and Stock Exchange sections at the Economist, along with Hargreaves Parkinson, Norman Crump and Henry Hodson (Hodson also moonlighted for the liberal imperialist journal Round Table as assistant editor, and on Ramsay MacDonald’s Economic Advisory Committee).109
The 1930s Economist was packed with radicals, in other words, and was providing nearly as much brainpower to Labour as it had to the Liberals. How surprising was this development? The answer lies in the peculiar meaning of socialism for British intellectuals like these, and of a break to Labour among those of liberal bent hoping to achieve it after the debacles of 1931. Douglas Jay may have written The Socialist Case in 1937 while at the Economist, but chose that title to ‘emphasize the extent to which Marx was a revisionist, whose dogmatism and stridency were not shared by earlier socialists such as Robert Owen’.110 Not only did Jay praise the social utility of the entrepreneur; his actual proposals for achieving equality – nationalizations limited to mines and utilities, the taxation of inherited incomes – would not have been out of place in a Liberal Party manifesto from 1906. Nicholas Davenport fussed about sacrificing his beliefs at the ‘gates of Mammon’, but during the 1926 General Strike saw no problem joining other stockbrokers in unloading docks, running buses and offering to chauffeur the police. ‘My personal sympathies were with the miners who were having a raw deal, but as a responsible Keynesian and financial writer I could not support revolutionary action which might upset the economy and throw up a huge deficit on the balance of payments.’111 (Layton took a similar line: having negotiated with the Miners Federation general secretary A. J. Cook to avoid a strike, he condemned it as ‘unconstitutional’.)112 Davenport’s entry point to socialism was ethical and religious, like that of many other recruits to Labour: his father was a pious churchman who gave up a brewing business to preach to the downtrodden of Leicestershire. Graham Hutton, meanwhile, emerged from the London School of Economics in the late 1920s as an early market fundamentalist without renouncing the socialism of his teenage years – a stance he elaborated in Burden of Plenty in 1935. (In 1953, he and Geoffrey Crowther published We Too Can Prosper, a salute to US-style capitalism as an example to laggardly Britain, after which Hutton became involved with the neoliberal Institute for Economic Affairs.)113
On the rare occasions that Keynes came in for censure from these disciples in the 1930s, it was not on theoretical grounds, but for his decided chilliness towards the lower classes and their anointed party, which had not changed much since the Liberal Summer School in 1925. ‘Above all, I do not believe that the intellectual elements in the Labour Party will ever exercise adequate control’, Keynes had said, declaring his allegiance to the educated bourgeoisie. ‘Too much will always be decided by those who do not know at all what they are talking about.’114 By the 1930s, figures like Douglas Jay probably accepted Keynes’s argument that governments could manage total effective demand so as to blunt the edges of the economic cycle, but they flinched from such overt displays of hauteur, especially given the Liberals’ electoral decline. Daily Herald editor Francis Williams invited Jay to a meeting with Keynes in 1937, hoping to convince the economist to compromise with Labour and trade union leaders, to get them to adopt the General Theory’s main lessons. ‘I never appreciated until today’, said Jay afterwards, ‘how much Keynes thinks like a rich man.’ ‘Not, of course, in his economic thinking’, Williams commented, ‘but in his attitude to the uneducated working classes among whom he was prepared to go slumming if need be but to whom he found it virtually impossible to make any concession of understanding.’115
XYZ, or Making Labour Respectable
It was the socialism of stockbrokers that was making headway at the Economist, whose radical recruits aimed to supply Labour with men who did know what they were talking about. The Labour leadership was just as keen, and in 1932 a group of journalists and bankers formed the XYZ club to provide it with informal advice. Vaughan Berry, a bill-broker for the Union Discount Company, was looking for a place where, according to Nicholas Davenport, ‘City men could meet the Labour leaders and instruct them in the mysteries of City finance so they would not make a hash of it when they came to power’.116 The XYZ club held dinners above the Lamb, a pub on Mitre Street, and included the journalists Francis Williams, Davenport, Jay and the Guardian City Editor Cecil Sprigge; assorted bankers, brokers and company directors (several of whom were also MPs or local councillors); and the economists Hugh Quigley and Evan Durbin. Labour politicians played a prominent role from the start, and many went on to become senior members of the post-1945 government: Hugh Gaitskell was secretary, while Hugh Dalton, Clement Attlee, F. W. Pethick-Lawrence, Stafford Cripps and Herbert Morrison all attended regularly. A measure of the club’s success was its change of address in 1945, when it moved to the House of Commons, and the impact of its ideas on the post-war Labour governments. Proposals to nationalize the Bank of England and set up a National Investment Board and Industrial Finance Corporation were eventually implemented under Attlee and later Harold Wilson.
Memoirs left behind by the XYZ club’s journalist participants are strikingly consistent. Nicholas Davenport called all the Labour politicians he met, except Sir Stafford Cripps, ‘sublimely ignorant of the City and suspicious of its institutions, especially the Stock Exchange which they regarded as a casino’.117 Douglas Jay saw XYZ as ‘an effort to re-educate the Labour Party out of its 1931 failures’. Both Vaughan Berry and Francis Williams were convinced by ‘the events of 1931’ of the need for a new approach: Labour, though ‘badly winded by the results of the 1931 General Election’ and ‘woefully short on expert knowledge’, was ‘passionately anxious to find a respectable alternative both to the economics of scarcity practiced by the National Government and Marxism’.118 The embrace seemed mutually beneficial. Labour, seen as badly mishandling the crisis years of 1929–31, would burnish its image for economic competence, while the City gained assurances that any reforms it introduced would integrate finance into a mixed economy without endangering its largely private character. MacDonald and Snowden had shown incredible zeal on behalf of liberal economic principles. The XYZ club had no time for the defensive ignorance they had shown, pushing Labour to self-flagellating extremes in order to satisfy markets in 1931. They were at ease with Keynesianism.
The reason why this new politics did not translate into a clear shift in editorial line at the Economist was due to its editor, who systematically removed anything from it that might be controversial to the City, in part because of his dual role at the News Chronicle. ‘Slow, academic and indecisive’, recalled Nicholas Davenport – indecisive in every way, so that once on a trip to Strasbourg, Layton stood paralyzed in a hotel lobby, unable to choose between a room with a lavatory or one in the foyer, until Davenport decided for him.119 His silences could last for minutes: Geoffrey Crowther claimed to take editorial decisions over the phone based on subtle variations in them. If Layton felt a leader was too emphatic, late on Thursday, ‘he used to simply add the words at the end, “Time alone will show” ’.120
In its caution, the Economist stood in contrast to the mass circulation daily, the News Chronicle, which, after Layton put Vallance in charge of it in 1933, began to promote a weak version of the P
opular Front and attacked Oswald Mosley’s Union of British Fascists, offering to join forces with Labour’s Daily Herald on ‘an advanced progressive policy’ in 1934. Lloyd George agreed to invest in the project, deriding the Liberals at dinner with Layton as a ‘complete washout’, who ‘ran away at the last election, surrendering everything, and leaving all the bag and baggage behind’.121 The News Chronicle campaigned for the Peace Ballot in 1935 to rouse popular support for collective security and the League of Nations; from 1936 it gave space to William Forest and Arthur Koestler, who filed reports in favour of the republican side in the Spanish Civil War. Yet even this guarded form of progressive politics led to fallout. Vallance, who wanted a genuine popular front to comprise the entire left, communists included, was fired in 1935 after drunkenly cheering on the latest drubbing of the Samuelite Liberals (orthodox free traders, whose classical views allowed for little more than public works to combat the Depression) at an election eve party.122 For the Daily News trustees, this was too much. Clive Pearson, the second son of Viscount Cowdray, who ran S. Pearson’s global engineering and energy businesses, asked Layton for a statement of the line on Labour. ‘Sympathy and support in matters where they are in agreement with Liberal ideas’, but no backing for ‘the party as it at present exists.’123 By 1936, Layton was instructing the new editor, Gerald Barry, to avoid the phrase ‘popular front’ as too leftwing, in favour of ‘Peace Alliance’ – the sort of hedging that led the Daily Worker to mock a ‘refained front … communists keep out’, even as the Daily Express poked fun at Layton as a ‘knitted woollen statue coming unravelled’.124
But it was the effect these scuffles had on Layton’s position at the Economist that rankled him, as another Beaverbrook paper, the Evening Standard, pointed out at the same time:
If Sir Walter Layton has taken the decision that the News Chronicle shall turn Socialist, then his own position becomes extremely interesting, for he is also editor of the Economist. The Economist is owned half by Financial Newspaper Proprietors Limited, and half by leading financiers, including Sir Henry Strakosch, and it is believed, Rothschild and Cowdray interests. There can be, therefore, no prospect of the Economist turning Socialist, so Sir Walter Layton will have to ride two horses. It is a feat to which he is accustomed.125
Fleet Street rivals were not the only ones who took note. Strakosch was concerned enough about this moonlighting to ask Vallance – a baffling idea: was he ignorant of Vallance’s outlook? – to take over from Layton in November 1932, on the grounds that the Economist risked becoming a mouthpiece for a left Liberal Party, like the News Chronicle. Vallance declined, in a reply he copied to Layton, arguing the Economist benefited from the latter’s public engagements, on which he acted as a kind of elite salesman for it: no longer ‘a staid and colourless City weekly’, it was ‘a very definite organ of opinion associated throughout the world with the name of an editor who is not so much a journalist as an international public man’. Strakosch’s fears were unfounded, Vallance added, citing the diminished and divided Liberal parliamentary party. ‘The Economist is known as a “liberal” journal and “Liberalism” is now so indeterminate, unattached a thing that – to say nothing of the fact that Layton and I are both very jealous of the traditions of the Economist – I can see little danger of the News Chronicle being ever regarded as a party organ.’126 It is not clear here or later on, when Strakosch renewed his calls for Layton to quit, the precise nature of his objections; Strakosch certainly drifted to the Tories after 1931, becoming such a close confidant of Churchill that when the future prime minister lost a fortune on Wall Street in 1938, Strakosch bailed him out to the tune of £18,000 – but on those grounds his preference for Vallance, who was well to the left of Layton, is hard to explain.127
Roosevelt, Stalin, Mussolini
In the 1930s, the great challenge for the Economist’s brand of liberalism came less from political realignments at home, however – where, as Vallance argued, the liberal creed could no longer be confused with the party – than from abroad. Here, experiments, alternatives, and outright threats emerged, to which the Economist paid serious and sustained attention: the New Deal in America, the Five-Year plans in Soviet Russia, and the fascist programs in Italy and Germany. Differing in his assessments, Layton established a direct dialogue with each – in particular Rome and Berlin, where Mussolini and Hitler looked to the Economist as a conduit to the City, on which their own interwar economic and foreign policy aims to a great extent depended.
In 1936, the Economist published the most comprehensive survey of the New Deal to appear in Britain, framed as a sympathetic comparative assessment of efforts to combat the Depression.128 On the eve of Roosevelt’s re-election, ‘it may be of assistance, especially to observers who have watched the New Deal from afar, to summarise what has been done and to point to the morals which appear to emerge from the record’. The morals it drew revealed as much about ‘the vast experiment of the last three and a half years’ in the US as it did about the paper under Layton. Cautious – claiming, for once, ‘no absolute authority’ – it was also ahead of the president, urging him on to systematic reforms, in the voice of the younger City radicals. Thus far his was a ‘very moderate Liberalism’, and ‘if the criterion be Utopian, the achievements of the New Deal appear to be small’.129 Of public works, there had been too little: average annual expenditure on public construction was still only 60 per cent of its pre-Depression level; in housing, a bailout had prevented perhaps a million homeowners from being evicted, but done nothing for slum-dwellers, and ‘the slums of America are among the worst in the world’, reaching ‘their nadir in the coloured quarters’; industrial activity was anaemic, partly because the National Industrial Recovery Act had been a chaos of ‘divergent economic and social theories’ – taking positive steps to empower trade unions, for example, while also encouraging industrial cartels that raised prices and dampened demand.
Too timid in these areas, the New Deal had gone too far in others. After doing a masterful job to restore depositors’ trust in banks on taking office, Roosevelt had pursued ‘penal legislation’ that enforced a ‘complete divorce between banking functions and any form of security trading’, while failing to provide any legal framework for a system of national branch banking, out of ‘prejudice against bankers, especially big bankers’.130 Nor could the Economist stomach Roosevelt’s decision in 1933 to abandon the gold standard, which was ethically ‘a dangerous precedent and an incitement to the insanity of competitive depreciation’. Nowhere was the paper’s mixture of bold calls for experimentation and reluctance to depart from pre-war norms more striking, in this context, than in its treatment of Keynes, who went completely unmentioned. And yet, buried in the survey, the Economist had adopted most of his vocabulary, albeit safely, inside quotation marks: what recovery had occurred was due not ‘to the theory of credit creation and cheap money’ but to a ‘rival theory’ – that of ‘deficit financing’ which had expanded the ‘stream of purchasing power’ and ‘primed the pump’, citing research that ‘the multiplier’ had been two.
Layton had already steered the Economist towards a more thoughtful engagement with the Soviet Union around the time of Stalin’s consolidation of power in Moscow, which brought with it the first Five-Year Plan in 1928. The paper was now less exclusively concerned with the repayment of bondholders and more curious about planning, especially as the economic malaise in the West deepened after the crash of 1929.131 Layton had published a special report on Russia in 1927, praised by Ivan Maisky, the future Soviet ambassador to the Court of St James, who helped him put it together, ‘as objective material as possible … an act of civic courage and political far-sightedness’.132 In 1930 the paper carried ‘An Impression of Russia’, issued as a pamphlet, in which the country was said to be in the midst of a ‘remarkable experiment’, a nearly unprecedented drive to industrialize rapidly without substantial infusions of foreign capital; yet it held opportunities for investment so vast it could not be ig
nored, whatever the limits or risks involved.133 ‘Human nature being what it is, we have still to discover whether an attempt to create a completely new order of society based on a curious blend of Americanised hustle, idealistic propaganda and methods reminiscent of those of the tyrants of Syracuse, can be crowned with ultimate success.’ That would hinge on the agricultural effects of the ‘daring and fateful moving of the wheat belt up to the confines of Asia’, collective farming, and village communism.134
Layton scribbled speaking notes on the pamphlet version of this report at the ‘Society of Cultural Relations Between the Peoples of the British Commonwealth and the USSR’ in 1931; asked to keep his remarks apolitical, he introduced Mr Gourevitch, a member of the Supreme Economic Council, whose talk was entitled ‘The Third Year of the Five Year Plan’.135 Reports continued to stream into the Economist during the decade. One from Kharkov in 1933 observed a ‘cruel drain on energies and resources’ and ‘acute shortage of nearly all consumer goods’, but also progress: ‘new offices, new shops, new schools, new institutes, new hospitals, new crèches, new workers flats … a new theatre to rival Moscow’s.’ Most important, there were new factories like the massive Kharkov Tractor Works. ‘The Soviet boast that no loyal Soviet citizen need go idle is not an empty one, and it is true that the unemployment problem as we know it is non-existent in Russia.’136 Layton’s relationship with Maisky – who spent much of his time as Soviet ambassador to Britain cultivating City bankers and journalists – was such that by 1938 Layton could act as Maisky’s go-between with the prime minister Neville Chamberlain.137
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