On the back of this worldwide imperial division of labour, the City staged a remarkable recovery after 1947. In just two years after the advent of the Marshall Plan, it sent £1500 million, or 8 per cent of national income, abroad – even as rationing in Britain continued for bread.65 No capital levy on financial profits made out of the war ever materialized. Nor was the Economist concerned about Labour’s most visible sign of trespass into the Square Mile – its nationalization of the Bank of England in 1946. ‘Business Notes’ blandly reported that the Bank, though answerable to the Treasury, ‘as now, is free to conduct its affairs according to its own judgment of what is in the national interest and will not be subjected to day-to-day interference’. The appointment of the Scottish businessman and banker Lord Catto as the Bank’s governor, showed the ‘government does not contemplate revolutionary changes’ – with Crowther, in any event, having backed a form of public control of the central bank since 1935.66
Why, in light of all this, did the Economist turn so swiftly against Labour? A short answer would be Hugh Dalton. The paper engaged in one of its bitterest polemics with the Chancellor of the Exchequer, blaming him in startlingly personal terms for the economic crises that buffeted Britain. Nicholas Davenport, Crowther’s Economist colleague in the 1930s, was also a close friend of Dalton’s: the XYZ alumnus, LSE professor and Fabian socialist, who, after many years of thought, he hoped to see ‘shake up’ the City. ‘Crowther was the fiercest critic of Hugh’s cheap money policy and wrote blistering articles against it’, Davenport recalled. ‘Hugh hated him and used to call him “Little Piggy Crowther” because he looked at that time rather like a well-fed porker.’67 An advocate of ‘practical socialism’ (which he had contrasted in the 1930s with the impractical or leftwing kind), Dalton sided with Attlee inside the cabinet on the need for scaling back defence spending, rapidly reducing the size of the British armed forces serving abroad, and accepting a smaller role in the Middle East – a stance that put him at odds with the majority of his colleagues, who agreed with Ernest Bevin and the chiefs of staff that Britain’s great power status hinged on the region (the bombers based there could strike Russia) and was worth the costs even if they required belt-tightening elsewhere.68
Dalton was a target from the start. The Economist recommended he be fired from the Board of Trade and not promoted to the Treasury, and objected to his ‘sneering denigration of his opponents’.69 Dislike veered towards hatred as Dalton refused to check a small uptick in inflation in the standard way by raising interest rates. When he intervened in the gilt-edged market, ‘oozing suave confidence’, to convert 3 per cent local loans to 2.5 per cent undated Treasury stock – soon after monetizing part of the national war debt – he asked ‘the investor to give a complete hostage to the policy of ultra-cheap money for more than a generation’.70 In March 1947, scoffing that ‘the song in Mr. Dalton’s heart is wind on the national stomach’, the Economist demanded a swift dose of deflation, two months after the ‘Big Five’ bank chairmen took up the same refrain.71 By the time a run on sterling began in July, its patience was at an end. A belated attempt to slow the economy left it cold: raising taxation to an ‘incentive-crushing’ 40 per cent of national income while failing to eliminate costly food subsidies was ‘illogical’, ‘uncourageous’, ‘irresponsible demagoguery’.72 Dalton quit, with the Economist kicking ‘the worst Chancellor of the Exchequer in modern times’ as he exited. Stafford Cripps, his replacement, was suitable, but what could he achieve in ‘a party that likes neither austerity, nor intellects’?73 It was kinder to Cripps when he devalued the pound by 30 per cent two years later, but attributed his delay in doing so to the ‘uncommon stubbornness’ of socialists, and insisted that devaluation was not enough to overcome the ‘rigidities’ Labour had imposed on the economy.74
Dalton, for his part, was convinced the Economist had sabotaged his chancellorship, complaining bitterly that it refused to give him credit even when he had followed its prescriptions in his last supplemental budget. ‘Little Piggy Crowther tells statistical lies … his personal animosity towards me is such that he can’t even get his arithmetic correct when I’m about.’75 Dalton was not far off. Fourteen years later he still had a target on his back. Looking for a reviewer to savage the final volume of Dalton’s (gossip-filled) memoirs, the Economist’s editor turned to Herbert Morrison, who declined, saying it ‘would be paying an undue compliment to the muckraker’ and it ‘reads to me like the memoirs of a failure with the result that bitterness has entered his soul.’76
It was the occasion on which Dalton sparred directly with Crowther, however, that reveals the issues at stake in their quarrels – for it came just after the fall of the Labour government in 1951, between two self-professed Keynesians over how to interpret Keynesianism in a Britain bereft of Keynes. This great economist ‘was extremely unfortunate in the moment of his death’, observed Crowther in a review of the first full biography of Keynes by another former pupil, Roy Harrod.77 For he left implementation of theories worked out in the inter-war years of mass unemployment to disciples without ‘a readiness equal to his own to change their minds’, so that already the post-war period was ‘plagued by chronic inflation, by an excess of the wrong sort of planning and by an aversion from thrift’. Keynes was being pressed into the service of this ‘New Illiberalism’ despite having been a passionate liberal, argued Crowther, who seized on a now famous letter from Keynes praising Hayek’s The Road to Serfdom: ‘a grand book, morally and philosophically I find myself in agreement with virtually the whole of it, and not only in agreement with it but deeply moved agreement.’ Dalton was the only person singled out by name for crimes against Keynesianism, with Crowther adding a knife-twist: ‘His old Cambridge friend “Daddy” Dalton scattered to the winds, in a few months of roaring boom, the American credits which he [Keynes] literally gave his life to win for Britain.’78
‘I write to you to supplement and to correct some false impressions on Maynard Keynes, at once my teacher, my friend and my advisor at the Treasury’, Dalton replied to what he privately called the ‘Editor of the Prig’s Weekly’. ‘Of course, much of his economic thought goes against the grain of the editorial policy of the Economist’, while ‘his teaching has certainly inspired and sustained the Left in British politics more than the Right’. Above all there was no reason for supposing that had he lived, Keynes ‘would have moved your way’. ‘In the last nine months of his life, when he was with me at the Treasury, he never wished, as you did and still do, to see money less cheap or employment less full.’79 That year Crowther tilted the Economist to the Conservatives, with such fierce attacks on Labour that they even disconcerted loyal reader Harold Macmillan.80
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The Labour government of 1945–51 has been criticized for failing to have a more robust plan to nationalize industries in line with its manifesto promises, but what was more striking was its lack of any plan at all so far as finance was concerned. Indeed, Labour adopted the export strategies of the City, hoping that the sterling area would allow Britain to continue to play a leading and independent role in world affairs. For its complacency, Labour received a rude shock as the most important journal of City opinion quickly rounded on it anyway. In one sense, this was not unlike 1931, when the Economist pressured the second Labour government to abandon reform and balance the books, or else see British hegemony vanish in a crisis of confidence. But in fact, the fallout between the Economist and Labour was much more profound in the post-war period than it had been after 1931. Contextual differences go some way to explaining this. In the wake of the Second World War, Britain faced a new sort of economic crisis, on three fronts at once: an acute dollar shortage; a decline in its invisible earnings, and so a growing trade deficit; and, exacerbating both, heavy foreign outflows. These stemmed partly from military commitments, with over half a million troops still overseas in 1947. But they also reflected high levels of capital export to the sterling area and beyond (at £1.5 billion, ‘well in excess of re
ceipts from the US loan’), adding to pressure on the balance of payments, which not even Labour’s success in raising export of goods (up 75 per cent in the five years after 1945 over the five before) could overcome.81
Crowther’s taunt that Dalton had wasted the dollar credits Keynes had died to obtain would have been especially galling in this light. Not just because Dalton had sided with Keynes in one of his last memoranda in February 1946, arguing for rapid reductions to the service budgets in order to avoid a balance of payments crisis – even if, as Keynes put it, that meant cutting less of a ‘dash in the world’ – but because one of the biggest dollar-drains came from this expenditure, along with foreign lending. The irony is that the City’s renaissance not only undermined Crowther’s desire to see ‘Stalinist-levels’ of inward investment, but also the possibility of mutual development inside the commonwealth. Either of these would have required deliberate planning (or ‘somewhat comprehensive socialisation’) of investment far beyond anything the Economist – or Labour – had ever seriously contemplated. In reality, most capital export in these years went to white dominions like Australia and South Africa, while Britain bought up colonial resources at below market prices to earn dollars. During Labour’s years in power, investment in the colonies was just £40 million – even as colonial sterling balances rose to £160 million.82
The Economist remained devoted to the ideal of a liberal commonwealth (‘as inspiring and full of hope in its economic aspects as in the political’) after the defeat of Labour, warning the Conservatives in 1952 that while the sterling area could not be relied on as a ‘magic incantation’, it could be the basis for rebuilding the national economy, until such time as it was strong enough to restore free trade and convertibility. ‘The other members are attached to the United Kingdom by the market it provides for their exports and by the capital it provides for their development’, the latter being the most important element. For though ‘it may not be true any longer that trade follows the flag, it is certain that trade follows the loan.’83 Dalton and Crowther clashed over the constraints this system imposed on their ambitious plans for the post-war British economy. But their inability to theorize an alternative had for each man very different consequences, something captured in the lament of Davenport in August 1945, on the day he drove Dalton to his first day at the Treasury:
The silencer had broken down and the noise was deafening but Hugh did not appear to notice. He was in fine shouting form. He boomed away about his job and when we got to Great George Street he said to me: ‘I have got your XYZ papers in my bag and I am going to put them on my desk, press the button for my new slaves and ask them why we should not put them into practice.’ I knew that the slaves would soon become his masters. ‘Come and see me,’ he shouted, ‘whenever you like’. But I knew that would be impossible: the monastery guards would bar the way. Agnostic as he was, Hugh before long would be taking the vows of an office whose high priests were ordained to worship the pound sterling and the Crown as the twin pillars of the British Establishment. Their worship of pound sterling in its convertible holiness in August 1947 was to be the beginning of Hugh’s downfall.84
The fallout from the convertibility crisis was even more dramatic than this suggests. In its wake, the US redrafted plans to stabilize the international capitalist order. Not only did it agree to easier terms for Britain, but for its other main allies in Western Europe, as the Cold War began in earnest. The significance of the Marshall Plan was not just that it provided dollars to these countries – with strings to purchase US goods, and remove leftists from office – but that it allowed them at the same time to discriminate against the US dollar in terms of trade and payments.85 For Britain, this meant domestic economic expansion could continue at the same time as the imperial trade and currency union to which it was linked. The consequences of Marshall aid for the politics of post-war Britain were thus just as momentous as elsewhere in Europe, if less obvious. The Economist can tell us a great deal about them, in particular the way the centre of the extreme centre now shifted right.
As Marshall aid began to flow, the Economist called for dismantling the restrictive microeconomic policies that the Labour government had carried over from the war – food subsidies, rationing, rent controls and industrial quotas – and by 1950–51, it was telling readers to vote Conservative, in order to end these ‘inflation-breeding’ distortions. If Keynes remained its preferred guide to macroeconomics, the Economist rejected interpretations of him that went beyond demand management. Labour was not to be entrusted even with that much.86 By 1955, Crowther was accusing Labour leaders of ‘surrendering common sense to doctrinaire obstinacy’ for refusing to admit the obvious wisdom of a shift in policy that Labour itself had initiated with health service charges and that the Conservatives had sensibly carried forward since 1951: the denationalization of steel, the lifting of price controls, and the rise in interest rates had all helped to tame inflation and plug holes in the balance of payments. The Economist again endorsed the Conservatives, appealing to all those who wished to ‘keep their place in the world’.87 Labour had acquired a powerful enemy, just as the growing circulation of the Economist was beginning to catch up to its Olympian tone. ‘Many readers of the Economist look upon that paper as an oracle, and so do its editorial writers’, Bracken teased in a Financial Times column in 1952. ‘There is no subject on which they are unwilling to lay down the law.’88
Extreme Centre Empire: Barbara Ward, 1939–50
Marshall aid seemed to secure Britain’s place in the world. As a result, the Economist no longer fumed about American hypocrisy. Rather it emphasized the joint role the British Empire could play alongside the US in the struggle against Soviet communism. This readily dovetailed with the liberal mission the Economist had already elaborated during the war – of a commonwealth built on investment from the City, a free association of people, based on mutual aid and development. If most of the Economist staff leaned to one side or other of this ideology of imperial purpose, none synthesized them more completely – or showed how they evolved along with the Cold War better – than its foreign editor Barbara Ward.
Crowther hired the devoutly Catholic Ward in 1939 on the advice of Arnold Toynbee, her mentor at Oxford and then at the Ministry of Information. Ward’s first book, The International Share-Out, had just appeared, which argued against appeasing Germany, Italy and Japan with a repartition of the existing empires. Instead, she proposed a ‘colonial new deal’ in which Britain embraced free trade (abandoned at Ottawa), racial equality (a rebuke to South Africa) and the free movement of people, as well as the handover of some of its own colonies to the League, where Germans, Italians and Japanese could help administer them as mandates.89 Once war began, her Economist reports on Turkey and the Near East described the British Commonwealth as the ‘antithesis’ of fascist imperialism and exploitation, the only ‘confederation in which the unity necessary for planning and the autonomy necessary for free national growth co-exist’.90 By the summer of 1945, Ward was barnstorming for Labour with Herbert Morrison and Ernest Bevin, whom she moved to tears with her speech at Wandsworth on full employment. If that must be the goal in Britain, she declared, ‘abroad success turns on Britain’s ability to maintain a policy independent of both Russia and America and to associate with itself the like-minded nations of Europe and of the Commonwealth’.91
The idea of Britain suspended somewhere between America and Russia vanished in August 1947, however, as Ward moved in lockstep with Crowther to shore up support for the Marshall Plan. She exhorted Bevin in private and in the Economist to accept the aid, and appealed to the public in the US and Britain – the former wary that Attlee’s government was ‘pink’ (on the contrary, ‘nothing incongruous was found in the Archbishop of Canterbury opening a Labour Party Conference with a service of dedication and worship’), the latter that US dollars came with strings – by reminding both of the alternative: the Kremlin. In stark contrast to a year before, Soviet Russia was ready to ‘exploit
every weakness, every grievance, every economic disturbance to extend its own power and influence’.92 This, according to Ward, explained most of the unrest that now flared across the Empire, where it was fine to parlay with nationalists, so long as they were ‘reasonable’ – meaning that they were willing to stay inside the ‘liberal commonwealth’, and were not communists.
How did Ward translate this position into the paper’s coverage of colonial revolts from 1947, when it was often difficult to tell communists and ‘reasonable’ nationalists apart? In Greece, communist partisans who had fought the Nazis became for the Economist mere proxies for Stalin – out to sabotage European reconstruction, and overturn the royalist government that Britain had reinstalled by armed force in 1944. Amidst the economic crises of 1947, Attlee asked America to take over the role. In what became the Truman Doctrine, the US president asked Congress for funds to assist ‘free people who are resisting attempted subjugation by armed minorities or by outside pressures’. The Economist cheered. But it wanted more: an ‘unequivocal statement that maintenance of an independent Greece is a vital American interest’, for which it was ready ‘to clear out the rebels, not simply contain them’ even ‘if military action is involved’.93 The paper looked for a similar way out in Palestine, where the British mandate was due to end in 1948. The only hope of avoiding an immediate Arab-Jewish war was for a joint Anglo-American agreement to retain troops in Palestine after 1948 – with the US ‘to carry at least half the direct military burden and the lion’s share of the economic cost’ – until such time as Arabs and Jews were reconciled to a two-state partition or single federated system. This ‘purely humane’ stance, which ‘recoils horrified from the possibility that the Jewish people, already decimated by the Nazis’ should ‘be exposed to new violence in a war they cannot win’, was ‘reinforced by the realisation that Palestine lies dangerously near the frontline between Russian and Western interests in the Middle East’. 94
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