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CHAPTER
â 1 â
The Economic and Social Philosophy of âA Free Societyâ
Beveridge was never a grand social theorist. As the titles of his books and articles show, he always favoured a practical problem-centred approach to specific issues. He was writing Unemployment: a problem of industry (1909) in the years when his Edwardian contemporaries Hobhouse and Hobson were writing books on Liberalism (1911) and The Crisis of Liberalism (1909). Towards the end of his career, in 1945, some of his journalism was collected into a short book titled Why I am a Liberal. But the contents of that book only prove our point about practical preoccupation because this was not a text of political theory; in its introduction Beveridge explained âwhy I have joined the Liberal partyâ and in its conclusion argued âwhy you should vote Liberal in the 1945 general election. It would, however, be wrong to represent Beveridge as a mere technician of social reform who was belatedly converted to party politics. Beveridge always occupied a position which was in some sense liberal and in his work of the 1930s and 1940s his underlying political philosophy was increasingly formalized and elaborated. From this point of view our main interest must be to define Beveridgeâs positions and examine their development.
Even by the standards of problem-centred Edwardian writers, Beveridgeâs pre-1914 work was remarkably untheoretical. He produced nothing like Rowntreeâs1 book on The Land Question which both rested upon and investigated a radical theory of property. And the treatment of theoretical issues which Beveridge could not avoid, like Hobsonâs2 theory of underconsumption, was flaccid and unconvincing. But, of course, the world is such that those with an inferior theoretical formation and worse arguments often have more influence, and Beveridgeâs success illustrates that point. We disagree with Freeden about the nature of this influence; Beveridge in the 1900s was less philosophical and well to the right of advanced new liberals like Hobson whose demands for redistribution were grounded in radical economics and a liberal political theory of citizenship. But, as we have argued, that does not make him any less of a liberal. The central proposal of Unemployment for âreorganization of the labour marketâ was designed to perfect the working of a liberal institution and finally make reality correspond with economic theory. The corollary policy of insurance was less distinctively liberal but was, in practical terms, crucial exactly because it inaugurated a very limited redistribution of income which was politically acceptable to a broad range of opinion. This latter part of Beveridgeâs original programme constituted immediately feasible politics and the principle of insurance could then be extended so that, as Chapters 2 and 3 show, this technique of welfare became the cornerstone of the British system of income maintenance. The extracts in these later chapters show that, by the 1940s, Beveridge was well aware that insurance rested on the liberal principle of a contract between the individual and the state which offered maintenance in exchange for contributions.
Beveridgeâs position of the 1900s is mainly of interest therefore because it represents a right liberal position which is capable of development within the mainstream of British politics. Indeed, Beveridgeâs achievement was that he redirected this mainstream after 1945 through his development and articulation of the right-wing liberal position in the 1930s and 1940s. The extracts in this chapter are designed to illustrate that development over these two crucial decades when Beveridge was converted to liberal collectivism. The first extract (1A) is taken from his economic writings of the mid 1930s and illustrates a kind of intellectual blockage; in 1935 Beveridge could not see how planned capitalism offered a âthird wayâ and might be preferable to either unregulated capitalism or socialism. Subsequent extracts (1B, C and D) from the two classic reports of the 1940s on full employment and social insurance illustrate Beveridgeâs conversion to a new and rather different kind of planning than that which he had earlier criticized. These extracts also demonstrate the character of Beveridgeâs mature and increasingly explicit political philosophy; liberal collectivism underpins the proposals for minimal state intervention to abolish poverty and unemployment. The final extract (1E) is taken from the neglected and unread third Beveridge report, on voluntary action. It gives us Beveridgeâs distinctive final view on the nature of a âfree societyâ where the business motive would be restrained and an altruistic voluntary sector would play a major role.
In the 1930s Beveridge began to discuss the broad choice between capitalism and socialism for the first time in a serious and fluent way. His lectures and journalism of this period form a commentary on the 1930s discussion of planning. Like many contemporaries Beveridge was at first attracted by the concept of a planned capitalist economy which would be a kind of âhalfway houseâ between a centrally regulated socialist economy and a capitalist market economy:
Most people are looking for a compromise between free prices and planning â for a halfway house between Cobden and Lenin; they want planning in part, without going the whole way to Russia. (extract 1A)
The political orientation of the planning project in the 1930s was epitomized by the dust-jacket design of Harold Macmillanâs3 1937 book The Middle Way where the title appeared between the hammer and sickle on the left and fasces on the right: Beveridgeâs appraisal of this project in the 1930s was determined by Von Misesâs4 criticism of all socialist planning which abridged the allocation of resources through the price mechanism. These arguments about the necessary inefficiency of a centrally regulated socialist economy were domesticated for English consumption by academics like Hayek5 and Robbins6 who taught at the LSE where Beveridge was director. Beveridge simply observed that the arguments against âcomplete socialismâ could be extended and applied to planned capitalism.
In so far as planning under capitalism means monopolies, partial or complete ⌠competition is prevented from executing the judgements delivered by the pricing process [and] the doubts raised by economists against the efficiency of socialism apply to planned capitalism with equal force, (extract 1A)
Beveridgeâs economic doubts about discarding âthe pricing process as governor of productionâ were reinforced by political doubts about whether planning could be made to work without the abridgement of âessential libertiesâ.
At the same time, it should be emphasized that Beveridge in the 1930s was never a right-wing apologist for the market economy. He recognized that if socialism or planned capitalism would be inefficient, free market capitalism had not delivered full employment because labour and capital were everywhere idle. Unregulated capitalism was caught in a kind of double bind because the pricing mechanism which promoted an efficient allocation of resources also generated economic depression:
the pricing process necessarily works through money, and money in advanced capitalist countries, taking the form of credit, has got out of hand. As a consequence, all such countries suffer from recurrent.inflations followed by depressions, in which a large proportion of the means of production, so far from being used to best advantage in yielding welfare, is not used at all. (extract 1A)
Beveridgeâs position of the mid 1930s was one of agnosticism; he could not conceive of any kind of economic system which would deliver an efficient allocation of resources and full employment. This defeatist conclusion was inevitable in the economic problematic within which he was working. Intervention within a capitalist economy was equated with forms of planning which abridged the price mechanism necessary to efficiency and cyclical problems were attributed to problems about credit which was a form of money necessary to advanced capitalist economies. Within the circle of these assumptions it was not possible to sustain positive and progressive conclusions.
The emergence of Keynesianism in the early 1940s liberated Beveridge. Keynesâs General Theory in 1936 had identified demand deficiency as a cause of unemployment and had proposed the solution of stabilizing investment expenditure through the âsocialization of investmentâ. If this was technically and politically difficult, Keynes in his 1940 pamphlet How to Pay for the War suggested that consumption expenditure could be manipulated through fiscal policy. And, if the immediate problem was to deal with wartime excess demand, fiscal policy could also be adopted to deal with demand deficiency. At this point Keynesianism and a new concept of economic management (rather than planning) were born. Beveridgeâs own conversion to Keynes and Keynesianism can be dated fairly precisely from his journalism of 1942 and 1943, which was collected together and published in a volume entitled Pillars of Security and Other Wartime Essays and Addresses. The 1942 report on social insurance identified âthe avoidance of mass unemploymentâ as a precondition for the successful operation of social security (extract 1D). But, in December 1942 when the report was published, Beveridge admitted he did not know how this end might be achieved.
I simply do not believe that it is impossible to abolish unemployment in Britain; but I do not yet know exactly how it ought to be done, and I donâtknow whether anybody yet knows how it ought to be done. (Pillars of Security, 1943, p. 88)
By March 1943 Beveridge wrote altogether more confidently: âI do not believe there is the slightest reason why we should have as much unemploymentâ as the 10 per cent assumed by the government actuary in costing the 1942 report (Pillars of Security, 1943, p. 140). A broadcast on âthe prevention of unemploymentâ in October 1943 demonstrated that the new optimism had a coherent theoretical basis (Beveridge on Beveridge 1944, pp. 36â40). âThe direction in which we should look for a solutionâ was the work of Keynes which contained the insight that the level of employment is determined by the level of spending by consumers, businesses and government. For full employment, âthe sum total of all these separate spendings must be such as to set up a demand for all the labour and other productive resources of the communityâ. Even if the policy implications are blurred, this broadcast marks the point of Beveridgeâs conversion to Keynes, with Keynesianism to follow when he had worked out the policy implications of his new position.
The break of 1943 opened up the economic terrain of liberal collectivism which Beveridge advanced to occupy in his second major report, on Full Employment in a Free Society, published in 1944. As the title suggests, the discussion of the technically economic is in this report integrated with a broader economic and social philosophy. This point emerges very clearly if we consider the prime objective of full employment. This target is defined in technical economic terms as ânot more than 3 per cent unemploymentâ (extract 1B). But the goal is not simply a technical one because Beveridge insists that it is only worthwhile if it can be achieved in a liberal capitalist political context. This context is specified in terms of a list of âessential libertiesâ which must be preserved.
For the purpose of this Report they are taken as freedom of worship, speech, writing, study and teaching; freedom of assembly and of association for political and other purposes, including the bringing about of a peaceful change of the governing authority; freedom in choice of occupation; and freedom in the management of a personal income, (extract 1B)
The existence of such liberties defines the non-totalitarian âfree societyâ with democratic politics, free trade unions and consumer sovereignty. The list of political liberties is in one respect interesting because Beveridge explicitly excludes âprivate ownership of means of productionâ on the grounds that this liberty ânever has been enjoyed by more than a very small proportion of the British peopleâ (extract 1B). Beveridge characterizes private ownership of the means of production as an âeconomic deviceâ (extract 1B). But this heresy is less significant than it first appears because by 1944 Beveridge is convinced that liberal collectivist economic policies can in practice deliver full employment without encroaching on private ownership of the means of production. Even so, the point would have to be conceded that in Full Employment in a Free Society Beveridge carried acceptance of intervention to the very limits of comparability with liberal collectivism. His conviction that full employment had become a necessary condition for the stability of democratic liberalism forced him to re-examine and recategorize the fundamental freedoms. Private property was not questioned but private ownership of the means of production was seen to be a âsecondaryâ freedom. This was because Beveridge then thought it might occasionally be necessary to interfere with private ownership in order to maintain full employment (e.g. to implement a policy of regional development). The concession was, however, only to permit, and then only if it should prove necessary, such intervention as was required for a minimalist management of an essentially capitalist economy.
If Marx had put the comprehensive socialization of production on to the socialist agenda, Keynes put the selective socialization of demand on to a new liberal collectivist agenda. Full Employment illustrates Beveridgeâs conversion to the new minimalist âpolicy ⌠of socializing demand rather than productionâ (extract 1C).
The policy set out here is one which might be adopted by a community which held firmly to private enterprise, and accepted the principle laid down by an American economist: âPrivate industry can and will do the job responsibility of the Government to do its part to ensure a constant demand.â⌠There is every reason for hoping that full employment could be secured in place by the policy outlined here, while leaving the major part of industry to private enterprise, (extract 1C)
Beveridge did carefully reserve the right to encroach further upon the liberties of capitalists and workers. Effective socialization of demand might require selective nationalization and regulation of the investment plans of large private corporations. Furthermore, the state should intervene to curb any abuse of privilege by private business or trade unions in a full employment economy. But Beveridgeâs hope was that a minimalist economic policy would be sufficient.
Beveridgeâs first major report of the 1940s, on Social Insurance and the Allied Services in 1942, rested on the assumption of âthe avoidance of mass unemploymentâ. Beveridgeâs liberal collectivism was rounded and complete only when he specified how this objective would be achieved in the second report of 1944 on Full Employment. Nevertheless, in the sphere of the social, Beveridge had already worked out a liberal collectivist strategy in the 1942 report. SIAS is a tour de force because the design of the social insurance scheme is at every stage subordinated to the requirements of the liberal a priori. A fuller demonstration of this point is reserved for the next chapter of this reader. But extract 1D in this chapter should in a preliminary way establish the liberal collectivist paternity of the strategy.
The first step is to clear away Beveridgeâs misrepresentation of the political pertinence of his social insurance scheme. As scientists must try to understand their discoveries, so social reformers must try to interpret their reform strategies. In both cases, the accounts may be misleading because intellectuals do not know, or do not want to know, what they are doing. Beveridgeâs own account...
