The Reinvention of Britain 1960-2016

A Political and Economic History

Scott Newton

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781351666527
• Topic: Storia
• Subtopic: Storia del XX secolo

The Reinvention of Britain 1960–2016 explores the transformation of contemporary Britain, tracing its evolution from the welfare state of the post-1945 era to social democracy in the 1960s and 1970s and the liberal market society of 1979 onwards. Focusing primarily on political and economic change, it aims to identify which elements of State policy led to the crucial strategy changes that shaped British history over the past six decades.

This book argues that since 1960 there have been two reinventions of the political economy of the United Kingdom: a social-democratic shift initiated by the Conservative government of Harold Macmillan and developed by Labour under Harold Wilson, and a subsequent change of direction towards a free market model attempted by the Conservatives under Margaret Thatcher. Structured around these two key policy reinventions of the late twentieth century, chapters are organized chronologically, from the development of social democracy in the early 1960s to the coalition government of the early 2010s, the Conservative election win that followed and the 'Brexit' referendum of 2016.

Providing a comprehensive yet accessible introduction to the political and economic history of this period, The Reinvention of Britain 1960–2016 is essential reading for all students of contemporary British history.

PART I

The rise and fall of social-democratic Britain

1

Conservative social democracy, 1961–64

The fall

The first major event to shatter the self-satisfaction of the mid 1950s was the 1956 Suez crisis. The story of this affair is well known and there is no need to go into detail here. Suffice it to say that the Anglo-French bid to use force to occupy the Suez Canal and overthrow Egypt’s President Nasser, in response to his decision to nationalize the waterway, was a fiasco. The expedition was halted short of its objectives not by military defeat but by diplomatic outcry. From the British perspective the most alarming aspect of this was the attitude of the USA and of Commonwealth nations.

British external strategy had been rooted in the ‘three circles’ doctrine, set out by Churchill in a speech to the Conservative Party conference in 1948. He had argued that Britain could best promote its welfare in the world by remaining at the point where three circles of influence intersected. The first of these was the British Commonwealth and Empire. The second was ‘the English-speaking world’, which included Canada, the British Dominions and (most important of all thanks to its wealth and military power) the United States of America. The third was ‘United Europe’. It was not accidental that Churchill had mentioned Europe last: European upheaval could certainly threaten Britain but the experience of the two world wars had shown that the nation’s security and prosperity depended in the last resort upon its military, political, trading and financial connections with the first two circles. At the time of the Suez crisis, however, the only members of the British Commonwealth to support Britain were Australia and New Zealand. India and Canada meanwhile condemned the operation. In Washington, where the incumbent President Eisenhower was fighting a campaign for his re-election, there was outrage. Neither Eisenhower nor John Foster Dulles, the Secretary of State, had been forewarned of the expedition. Dulles spoke out against the British. The pound came under pressure on the foreign exchanges, a development Harold Macmillan (now Chancellor of the Exchequer) attributed to US influence. Both Dulles and the President considered the action a betrayal of the Anglo-American relationship and a diplomatic blunder of the first order, a throwback to the crudest form of imperialist aggression which could only strengthen the determination of newly independent countries in the developing world to follow a neutral rather than pro-Western path in the Cold War. But the damage did not stop there: at the very moment the British and French forces were fighting their way towards Suez the Soviet Union had invaded Hungary in order to suppress an anti-Communist revolution. The USA led attempts to generate international condemnation of the Soviet move but given the actions of its closest ally these reeked of hypocrisy.

The episode distanced Britain from the two most important of the three circles. As John Young has commented, it revealed that Commonwealth countries could no longer be relied on to follow a British lead. It also showed that now, even in conjunction with France and despite the great network of bases and the appearance of military power, the country no longer possessed the resources to undertake large-scale military operations overseas in the absence of support from the USA.¹ Domestic opinion was split down the middle and there were powerful demonstrations against the expedition. At the same time many who had supported it were shocked by the experience of failure and by the country’s apparent weakness in the face of international pressure. Macmillan, who replaced Eden as Prime Minister in the wake of the crisis, liked to say that Britain was and would remain ‘a great power’, but he knew that the rebuilding of global influence required a repairing of the special relationship with the USA and accommodation with nationalist movements as a prelude to decolonization in Britain’s African and West Indian colonies.

The next blow to British pride came in defence policy. Like the Suez expedition, this was predicated for much of the 1950s on the assumption that Britain was a great power and had the weapons systems, in the form of nuclear weapons, to back up its pretensions. The delivery system for the British bomb was the ‘V’ force of Vulcan, Victor and Valiant long-range strategic bombers. However, the development of the ballistic missile by the USSR and the USA damaged the credibility of the British deterrent. In order to retrieve this position the government determined that the country should now have its own, and embarked on the construction of a British medium-range ballistic missile, known as Blue Streak, capable of carrying a nuclear warhead. Unfortunately the project ran into difficulties, the most serious of which was steadily escalating costs, going from estimates of £65 million in 1955 to £600 million in 1960. It became clear that the country lacked the financial resources needed to complete Blue Streak – unless the government was prepared to raise taxes or sacrifice budgets elsewhere. This was not deemed good politics, and cancellation followed in 1960. The government opted to buy the ready-made American Skybolt instead, designed for aerial launching. In the end even this deal collapsed, when the US government decided that Skybolt was unreliable. A somewhat desperate Prime Minister was, however, able to salvage Britain’s deterrent at Nassau in the Bahamas at the end of 1962, when President Kennedy agreed to provide the UK with the American submarine-launched Polaris ballistic missile programme (with the warheads to the British version being made in the UK, which amounted to a gesture in the direction of independence). This off-the-shelf choice was certainly cheaper than Blue Streak, but it was another blow to national perceptions of enduring British strength in the post-war world.

A further blow to British perceptions of the country’s ability to exert significant influence in its own right on the world stage came with the disastrous Paris summit of May 1960. Macmillan was eager to mediate between the USA and the USSR, just as Churchill and Eden had done, with some success, in the 1951–55 period. The Prime Minister had played a central role in the organizing of a Four Power meeting between the heads of the US, Soviet, British and French governments. He hoped the result would be a reduction in the international tensions resulting from disagreement between the USSR and the West about Berlin, from an escalation in the arms race (seen in the development of ballistic missiles and the testing of nuclear weapons on both sides in the Cold War), and from US anxieties about the implications of the recent revolution in Cuba. Progress towards a resolution of these issues would have the beneficial result of making the world a safer place. Beyond this, however, in demonstrating that Britain retained the power to achieve such a change in the climate it would reassure a domestic electorate anxious about the country’s declining capacity for unilateral action on the world stage and show the growing numbers supporting the Campaign for Nuclear Disarmament that the government cared about peace as much as they did.

As is well known, the summit collapsed without reaching agreement on any of the issues it had been convened to discuss, following the revelation that an American spy plane had just been shot down over Soviet territory. Instead of progress towards a more harmonious world there had been a major international incident – and Britain had been powerless to do anything about it. The setback was a big shock and upset to Macmillan, who now became preoccupied with how to develop a national strategy which would enable Britain to continue playing a major role in world affairs. According to his Private Secretary, Philip de Zuleuta, the Prime Minister’s thoughts turned increasingly to the question of Britain’s relationship with the newly formed European Economic Community (EEC, also known as ‘the Common Market’) in Western Europe and the feasibility of joining the organization.²

Suez, Blue Streak and the Paris Summit all gave a strategic dimension to a growing conviction of economic vulnerability, shared by the major political parties, both sides of industry and sections of the press. There was increasing evidence that Britain’s economy was underperforming. In 1950 Britain’s real GDP was 158 per cent of its closest continental rival, France.³ Yet by the late 1950s it was clear that the advanced industrial states of Western Europe, apparently in ruins not much more than a decade earlier, were experiencing rapid annual growth. Britain however was not sharing in this progress, averaging annual GDP growth of 2.5 per cent between 1955 and 1960 against 5.3 per cent on the part of the nations making up the European Economic Community (Belgium, France, West Germany, Italy, Luxembourg and the Netherlands) over the same period.⁴ Although the record was certainly respectable by comparison with the country’s past, the statistics show a relative decline from economic leadership in Western Europe to a position of apparent mediocrity by the end of the decade.

In recent years historians have expressed doubts about whether Britain was ever in a position to match the achievements of the continental economies in the 1950s and 1960s. These were able to take advantage of the movement of workers from the countryside to the cities. They were exchanging work on what were often small and uneconomic farms, generally characterized by low productivity (low output per head), for labour in industry.⁵ Although this tended to pay better than agriculture, rates initially were low compared with wages in the USA and the UK. In consequence costs were held down, allowing for an expansion of investment in plant, equipment and machinery. Productivity in industry therefore rose sharply, without which the growth ‘miracles’ would not have occurred. This was not a development that the British economy could easily reproduce (although as we shall see the Labour government of 1964–70 made an ingenious attempt to do just this), given that here the migration of labour from agriculture to industry had peaked in the decades prior to 1914. It is arguable, therefore, that the continental states were merely ‘catching up’ with Britain and once they had reached comparable levels of income their growth would drop back towards the British level.⁶

These subtleties were not employed by economists any more than they were by politicians in the late 1950s. The figures were taken as evidence of Britain’s slide downhill from its position in the first half of the decade. Prime Minister Macmillan’s comment in the summer of 1957 that ‘most of our people have never had it so good’ was not a complacent comment but intended as the prelude to a warning that the new status quo was threatened by inflation – in other words, persistently rising prices. Were full employment and price stability compatible? The Chancellor, Peter Thorneycroft, agreed with Macmillan and expressed anxiety about the nation’s tendency to ‘live beyond its means’, with increases in incomes outstripping those in output by a factor of three over the previous eight years.⁷ Thorneycroft’s anxieties about the economy were reinforced in the autumn of 1957, when fears of a sterling devaluation from the current rate of £1 = $2.80 (fixed in 1949) flared after holders began a wave of panic selling, many of them deserting the currency for the German deutschmark.

This run on sterling was especially disturbing to opinion within the City and the Bank of England. During and after the war the convertibility of the pound for current and capital transactions had been suspended. This meant that official permission had been necessary before pounds could be exchanged for other currencies and that balances of sterling could not freely be transferred outside the ‘sterling area’, namely the association of states (most within the Commonwealth and Empire) which continued to use sterling as a trading and reserve currency. This had been inescapable given the heavy import requirements of the war and reconstruction eras. The need to divert production to the military effort meant that offsetting earnings from exports became exiguous. In 1944 export values were 33 per cent of their 1938 level. It followed that there was real danger of Britain’s reserves suffering rapid depletion in the absence of restrictions on the use of sterling. This would have left the nation unable to buy the volume of food, raw materials, capital goods and machine tools needed to fight the war and rebuild afterwards without falls in living standards which were already austere.

By the early 1950s opinion in the Treasury, the Bank of England and the City was turning against the regulations. Within all these organizations there was a desire to see sterling resume its pre-1939 role as an international currency whose attractiveness derived from its reliability as an asset and the lack of restrictions governing ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of illustrations
• Acknowledgements
• Introduction: Why a political and economic history?
• PART I: The rise and fall of social-democratic Britain
• PART II: Neo-liberal Britain
• Bibliography
• Index