The Conservatives and Industrial Efficiency, 1951-1964: Thirteen Wasted Years?

THE

CONSERVATIVES

INDUSTRIAL

AND

EFFICIENCY,

195 1-64

It is widely recognised that Britain’s relative economic growth has slowed drastically since the end of the Second World War. The 1950s are often seen as the significant decade in this respect, when a strong government could have checked economic underperformance in its earliest stages. However, in 1964 Labour alleged that the Conservative government had sorely failed to do just this and had led the nation through ‘thirteen wasted years’. Many commentators have agreed with such judgements, yet until now their views have been subject to little serious empnical scrutiny. The Conservatives and Industrial Efficiency, 1951-64 responds to the need for a full assessment of the Conservatives’ performance in this crucial period. Drawing upon a wide range of archival sources, Nick Tiratsoo and Jim Tomlinson explore the different aspects of the efficiency question. Beginning with the major issue of attempts in the 1950s to ‘Americanise’ British industry, the authors also discuss Conservative policy on competition, education and training, investment, and research and development. This new survey reveals that the Conservatives were informed about each of these issues, yet shrank from effective reform. They were, rather, reduced to inertia by ideological dilemmas, internal party antagonisms and conflicting strategic objectives. Tiratsoo and Tomlinson conclude that 195 l-64 were indeed ‘thirteen wasted years’. The Conservatives and Industrial Efficiency, 195 l-64 will be of interest to all those concerned with the post-1945 economic and political history of Britain. The wealth of archival material brought together by Tiratsoo and Tomlinson and the quality of their analysis lays a vital foundation for further research into this important area. Nick Tiratsoo is Senior Research Fellow at the University of Luton, UK, and Visitmg Research Fellow at the Business History Unit of the London School of Economics and Political Science. Jim Tomlinson is Professor of Economic History and Head of the Department of Government at Bmnel University, UK. Their previous co-authored work, Industrial Effictency and State Intervention: Labour 1939-j 1, was published by Routledge in 1993.

ROUTLEDGE EXPLORATIONS ECONOMIC HISTORY

IN

1 ECONOMIC IDEAS AND GOVERNMENT Contributions to contemporary economic Sir Alec Cairncross

Modernity,

2 THE ORGANIZATION culture and governance

POLICY history

OF LABOUR MARKETS in Germany, Sweden, Britain Bo St&h

and Japan

3 CURRENCY CONVERTIBILITY The gold standard and beyond Edited by Jorge Braga de Macedo, Barry Eichengreen and Jaime Reis 4 BRITAIN’S PLACE IN THE WORLD A historical enquiry into import controls 1945-60 Alan S. Milward and George Brennan 5 FRANCE

AND THE INTERNATIONAL From Vichy to the Treaty of Rome Frances M. B. Lynch

6 ONETARY

STANDARDS M.C. Marcuzzo,

7 PRODUCTION

EFFICIENCY

8 FREE

AND EXCHANGE L. Officeq A. Rosselli

IN DOMESDAY 1086 John McDonald

TRADE AND ITS RECEPTION Freedom and trade: Volume Edited by Andrew Marrison

ECONOMY

RATES

ENGLAND,

1815-1960 I

9 CONCEIVING COMPANIES Joint-stock politics in Victorian England Timothy L. Alborn

10 THE

BRITISH Edited

INDUSTRIAL

by Jean-Pierre

DECLINE

Dormois and Michael

11 THE CONSERVATIVES

AND INDUSTRIAL 195 l-64 Thirteen wasted years?

RECONSIDERED Dintenfass

EFFICIENCY,

Nick Tiratsoo and Jim Tomlinson

12 PACIFIC CENTURIES Pacific and Pacific Rim economic history since the 16th century Edited by Dennis 0. Flynn,

Lionel Frost and A. J. H. Latham

Books published under the joint imprint of LSE/Routledge are works of high academic merit approved by the Publications Committee of the London School of Economics and Political Science. These publications are drawn from a wide range of academic studies in the social sciences for which the LSE has an international reputation.

THE CONSERVATIVES AND INDUSTRIAL EFFICIENCY, 195 l-64 Thirteen wasted years?

Nick Tiratsoo and Jim Ton&non

London and New York

First

11 New Simultaneously 29 West 0 1998 Prmted

published 1998 by Routledge Fetter Lane, London EC4P

4EE

published in the USA and Canada by Routledge 35th Street, New York, NY 10001 Neck

Tiratsoo

and Jim

Tomlinson

Typeset in Garamond by Routledge and bound m Great Britam by TJ International, Padstow, Cornwall

All rights reserved. No part of this book may be reprmted or reproduced or utilised m any form or by any electromc, mechanical, or other means, now known or hereafter invented, mcludmg photocopymg and recordmg, or m any mformation storage or retrieval system, without permission m writmg from the publishers.

A catalogue

Brttuh Lzbray Cataloguzng m Publtcatmn Data record for this book is available from the British Ltbray

Library

of Congress Catalogmg tn Pubhatmn Data Tiratsoo, Nick, 1952The conservatives and mdustrial efficiency, 1951-64 : thirteen wasted years? / Nick Ttratsoo and Jim Tomlinson. Includes bibliographical references and index. 1. Industrial producttvity - Government policy - Great Britam Htstory - 20th century. 2. Industrial policy - Government pohcy Great Britam - History - 20th century. 3. Great Britatn - Economic policy - 1945- 4. Great Britain - Politics and government 1945-64. 5. Conservative Party (Great Britam) - History 20th century. I. Tomlmson, Jim. II. Title HC260.152T368 1998 98-16857 338.941’009045dc21 CIP ISBN

o-415-15870-2

CONTENTS

. ..

List of tables Preface Acknowledgements 1 The Conservatives

2 Conservative management

VI11

ix x

and industrial

efficiency,

economic policy, 195 l-64: and long-term growth

3 The American and impact

productivity

1900-5 1

1

short-term

gospel in Britain:

20

agencies 35

4 The American productivity gospel in Britain: implementing change in business practice and shopfloor technique

50

5 The American productivity gospel in Britain: management professionalisation

the quest for 66

6 The American productivity reactions and responses

explaining

7 The Conservatives 8 Education 9 Investment 10 Overview

gospel in Britain:

82

and competition

126

and training and technical

102

change

141 164

and conclusions

171

Notes Index

204

vii

TABLES

2.1 2.2 3.1 7.1 8.1 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9

Macroeconomic performance, 195 l-64 Excess of French, German and Italian growth over that of the UK, 1873-l 973 The Benton-Moody programme British export and import patterns, 195 l-65 Public expenditure on education, 195112 to 196314 Share of GDFCF in GDP, 1950-64 Sources of investment funds, 1948-5 1 to 1961-5 Gross fixed investment by sector, 195 l-64 Industrial distribution of investment, 195 l-64 Fixed investment in ‘social services’, 195 l-64 Measures of R&D, 1962 Growth of enrolment in scientific and engineering courses in higher education, 1950-63 Public expenditure on civil R&D, 1950/l to 1963/4 The finance of R&D, 1955/6 to 1964/5

Vlll

22 34 42 108 127 145 150 152 154 155 156 157 157 161

PREFACE

This book follows on from our previous volume, Indzlstrial Efficiency and State Intervention: Labour 1939-51 (Routledge, 1993), in which we examined the wartime and Attlee governments’ strategies for raising industrial productivity and efficiency. While the outcome of this effort was mixed, its scope and seriousness cannot be denied. After 1951 the Conservatives too were faced with the challenge of raising the performance of the economy, especially in the light of the evident American productive superiority. Their response to this challenge over the next thirteen years is analysed here, with attention being given both to attitudes towards the wide range of US-supported techniques advocated to reform British industry, and the more aggregate issues of policies relevant to efficiency. Is it the case, as one prominent historical economist has recently argued, that policy errors were costly in this period? Is it ‘surprisingly’ true that ‘supply-side policy did not focus effectively on addressing market failures in human capital formation or the diffusion of technical knowledge’? (N. Crafts, Britain’s Relative Economic Decline 1870-l 995 (Social Market Foundation, 1997), pp. 44-5). Stimulated by such questions, we have consulted a wide range of archives in order to try and understand the complex and diverse logics which underlay government policies, and the responses of other major actors, principally employers, managers and trade unions.

ix

ACKNOWLEDGEMENTS

The research on which this book is based was partly funded by ESRC grant no. R/000/22/1 183, a grant from the British Academy, and resources provided by Warwick and Brunel universities. We would like to thank the various archival experts who have helped us locate documents, especially Sharon Barker and Jennie Butters at the Institute of Management library, Corby; Martin Maw at the Conservative Party archive, the Bodleian Library, Oxford; Richard Storey and staff at the Modern Records Centre, University of Warwick; David Pfeiffer and Victoria Washington at the National Archives, Washington; and staff at the Public Records Office, Kew. Finally, we are most grateful to Paul Bridgen, Terry Gourvish, Christine Hayhurst, Tony Hubert, Rodney Lowe, Helen Mercer, Vera Zamagni and Jonathan Zeitlin for discussion, suggestions and support.

1

THE CONSERVATIVES AND INDUSTRIAL EFFICIENCY, 1900-51

Introduction At the 1925 Conservative Party conference a delegate criticised the Baldwin government in the following words: ‘We are dissatisfied. We want a strong government - a government with a strong industrial policy. . . . If the government falls it will not fall because of its industrial policy, but because it has no industrial policy.‘1 The delegate was quite right; it would be an anachronism to ascribe anything that today would be called industrial policy to the Conservative Party in the early twentieth century. But equally, as the very use of the term by this delegate suggests, the term was coming into use in the 192Os, and arguably around that decade something which could be called industrial policy was beginning to evolve in Conservative circles. The purpose of this chapter is to examine this policy evolution, over the period from the turn of the century up until the Conservatives replaced the Attlee government in 195 1. In looking at the notoriously ambiguous term industrial policy the focus here will be a broad one, and in particular will embrace Conservative perceptions of the contemporary efficiency of the British economy and what, if anything, governments could and should do to increase such efficiency, as well as actual policy devices.

The Conservative

Party and efficiency

Before looking chronologically at the development of Conservative attitudes and policies on industrial efficiency it is important to set those issues in the broad context of modern Conservatism. Before the late 1970s the Conservative Party has never been dominated by an ideology of economic liberalism. Rather, this has been one current of thought amongst several. Modern British Conservatism until recently has been self-consciously ‘non-ideological’. Of course such claims should not be taken at face value: there has been a persistent belief in certain principles, notably patriotism, leadership, authority, the rule of law, anti-egalitarianism and private property.2 On the other hand, the Party has, very successfully, adapted those principles in order to obtain and

CONSERVATIVES

AND

INDUSTRY,

1900-5

1

retain power, which in many ways is its raison d’tre. In contrast with both its opponents, the Liberal and Labour Parties, the Conservatives have in consequence been much less of a programmatic party. Equally, whilst by no means a party of conservatism in the literal sense, they have been concerned to defend the existing order rather than radically reform it. All this means that policy development is much more difficult to pin down than in the other parties. Especially before 1939, there are no real Conservative equivalents to Labour and the New Social Order of 19 18 or For Socialism and Peace of 1934. The pre-1979 Party was not only guided by a ‘principled pragmatism’ which excluded the dominance of the ideology of economic liberalism, but key aspects of that particular ideology were actively resisted by many in the Party. This is most evident in Party positions on competition, a core doctrine of economic liberalism. On the issue of international competition, the Party majority was clearly protectionist for almost all the years from the early 1900s to the Second World War. Only during that war did a major shift towards free trade views take place, beginning with the leadership and only slowly, it would seem, winning over the rank and file. Julian Amery, the most prominent advocate of protectionism and Imperial Preference amongst senior postwar Conservatives, cited the 1954 Conservative Party conference as a key date for defeat of his cause, but even this may be too early.3 On domestic competition the picture is more complicated but not dissimilar. Conservatives had few problems with the growing trustification and cartelisation of the British economy evident from the late nineteenth century, and in the 1920s and 1930s Conservative governments actively encouraged such movements. Again the Second World War seems to have been something of a watershed, especially amongst elements of the Party leadership, with growing support for the need to formulate some kind of anti-monopoly policy. But this again was an argument resisted by many in the Party, and strong doubts about the merits of competition are evident right down to the dispute over the abolition of Retail Price Maintenance in the early 1960s.~ The attraction of economic liberalism, and its emphasis on competition, is that it gives a straightforward answer to the question: what determines efficiency? Non-liberals, like the Conservatives, lacked any simple alternative vision, and the cause of efficiency became more problematic and historically relative. However, and in common with the Labour Party,5 the Conservatives, especially before 1939, seem increasingly to have believed in the ‘American model’ of industrial efficiency, in which scale economies and mass production play the key part. ’ As will be argued in greater detail below, this perception of the sources of efficiency was more important in shaping Conservative attitudes to industrial efficiency, especially in the inter-war period, than the nostrums of economic liberalism and competition. The corollary of this scepticism about economic liberalism was an ambiguity about the role of the state - Middlemas describes the nineteenthand twentieth-century Conservative Party as having ‘a tension between paternal2

CONSERVATIVES

AND

INDUSTRY,

1900-5

1

istic regulation and market economics . . . which is virtually endemic’. Belief in the rights of private property gave Conservatives a disposition against state action. But lacking the economic liberals’ belief in the always beneficial outcome of the free market, there was a compelling pressure to intervene where the electoral consequences of not doing so threatened to be adverse. Conservatives always wished to balance ‘liberty and order’, or what Anthony Eden called ‘Order and Freedom’.’

1900-1914 At the turn of the century Britain under a Conservative government was engaged in the Boer War, a war which in the broader context of inter-imperial rivalry seemed to reveal many weaknesses in British society. Friedberg has provided a compelling account of the fears that prevailed in British politics about economic, financial and military weakness around this period.8 But this concern with economicperfowzance, did not translate into the issue of economic efficiency, at least for the great majority of contemporaries. The central reason for the absence of such a linkage was that economic performance was almost entirely measured by trade performance. This focus derived in part from the fact that economic data at this time were extremely sparse, and apart from some figures on labour conditions, the (visible) trade figures were about the only systematic national economic data available. More important, however, was the fact that the debate about economic performance in this period was inextricably bound up with the tariff reform versus free trade debate. The attempt by Joseph Chamberlain to convert the Conservative Party to tariff reform in the early years of the twentieth century is one of the most frequently analysed episodes of modern political history.9 Most emphasis has been on the character and paradoxical legacy of that campaign, resulting in the Party decisively losing the 1906 election whilst ensuring that the leadership and majority of Conservative MPs were now protectionists. For the concerns of this chapter, the key feature of the tariff reform debate was that neither side in that debate based their case on any perceived inefficiency of British industry. The tariff reformers for their part wanted to argue that poor British trade performance was the consequence of tariffs elsewhere allied to ‘dumping’ in British markets. Thus for them the trade problem had its roots not in British industry, but in the inactivity of government in the face of those adverse external forces. Free traders on the whole responded by arguing that British trade performance was much better than tariff reformers alleged, and that free trade had none of the disastrous consequences alleged by Chamberlain and his allies. If some trade and industries had declined, this was the normal working of comparative advantage under free trade, and had been compensated by the rise of other successful sectors. This generalisation about the tariff reform debate requires some small qualification. Asquith, for example, a key figure on the free trade side, was willing 3

CONSERVATIVES

AND

INDUSTRY,

1900-5

1

to concede that some industries had been lacking: ‘Defective knowledge, inferior processes, lack of flexibility or versatility, a stubborn industrial conservatism, these are the real enemies of British trade, and have done us infinitely more harm than all the tariffs and all the dumping syndicates that were ever created.‘lO Similarly, the economist Alfred Marshall reckoned the problem of British industry had been exacerbated by what later generations were to call ‘entrepreneurial failure’. l1 But these were minor aspects of the debate. By focusing on the international trade side of British economic performance, contemporaries ‘strengthened a proclivity for finding the sources of Britain’s problems outside its borders. What could have developed into a broadly drawn discussion of the nation’s economic future became instead a debate about export growth. . . . By their very nature the trade returns encouraged Englishmen to look outward instead of inward and to find fault with their neighbours rather than with themselves.‘12 To put the matter in a slightly different way, we may say that Chamberlain and the tariff reformers saw the problems of export performance largely as a ‘demand-side’ rather than supply-side problem. Protection would expand domestic markets, and Imperial Preference, by easing access to Empire markets, would help British industries achieve economies of scale.13 The protectionist wing of the Conservative Party did raise the problem of ‘efficiency’, but in a sense peculiar to the time. The strategy of the tariff reformers was to use the revenues from the tariff for social reform, to raise the health and educational standards, and therefore the ‘efficiency’ of the working classes. In this way working-class support for the Conservative Party would be enhanced without the need for the progressive taxation advocated by the Liberals.‘* Economically, the provision of a healthier and better educated workforce would aid the workings of British industry. This latter notion was the one enthusiastically embraced and propagated by the ‘Efficients’, a small, cross-party group of the intelligentsia who put the issue of ‘national efficiency’ at the centre of their concerns.‘s The Efficients offered a broad critique of British institutions, but their main thrust was the inadequacy of government in the broad sense - the civil service, the local authorities, the army - rather than the economy. In particular, they offered no critique of the workings of British companies, and in that sense they were far removed from most later twentieth-century critiques of Britain. However, as part of their criticism of government they did attack what they saw as the paltry efforts in education and in support of technical change. The Efficients suffered because their cross-party base was unstable in a period of growing party conflict, especially over the tariff. They attempted to be neutral on this issue, but eventually fell victim to the force of this central fault line of domestic politics in the early 1900s. However, two of their concerns did find some echo in Conservative Party policies before the fall of the government in 1906. The leading Efficient, Rosebery, a committed free trader asked: ‘How are 4

CONSERVATIVES

AND

INDUSTRY,

1900-5

1

we to fight those hostile tariffs? I believe we must fight them by a more scientific and adaptive spirit - by better education. ‘16 The 1902 Education Act, which brought education within the control of the new local authorities, was partly driven by such ‘efficiency’ calculations, though whether the continuation of local control, and hence the limits imposed by local finance, aided educational development is a moot point. I7 A linked initiative was the creation of the National Physical Laboratory in 1899, based on a German model. Here, too, an ‘Efficient’ concern found an echo within and beyond the Conservative Party. l8 These two cases mark only minor exceptions to the general point that the tariff reform debate largely diverted the attention of those concerned with economic performance away from efficiency issues. In addition, it led the Conservatives to play down the importance of competition as a force for efficiency, given that tariffs obviously involved a reduction in competition. Finally, we may say that for pre-1914 Conservativism, in a period of growing, if inchoate worries about British economic performance, tariffs were an alternative rather than a complement to addressing issues of industrial efficiency. After 1906 the tariff reform debate was settled for the foreseeable future, and the domestic political agenda focused elsewhere. But the Conservative Party was now a protectionist party,19 and the coming of the war in 1914 provided an opportunity for that protectionism to gain increased support. The First World

War

The First World War exposed the vulnerability and weaknesses of the British economy. Externally, that vulnerability was shown by the problem of obtaining key materials for the war effort previously imported from Germany, and by the more general problem of securing enough imports to feed the population and the war machine. This vulnerability increased support for protectionism. This growth has been carefully analysed with respect to businessmen by Marrison. As he notes ‘there can be little doubt that the War itself both encouraged protectionist sympathies amongst businessmen and allowed them to crystallise . . . it certainly allowed latent protectionists to come out into the open’.20 A Board of Trade Committee in 1916 recorded that: ‘Practically all the representative firms and associations consulted by us asked for a measure of protection.‘2’ This shift of opinion drew support from the wartime government, which in 1915 imposed the McKenna duties, putting tariffs on luxury goods like cars, in order to reduce the demand for foreign exchange, generate tax revenue and save on shipping space. Yet much of this shift of opinion and policy was related to the short-term impact of war, and the expectation that once the war was over Germany would engage in a ‘trade war’ with the Allies, who would need short-run protection whilst pursuing postwar reconstruction. But whilst this aggressive, strategic use of tariffs as an expedient 5

CONSERVATIVES

AND

INDUSTRY,

1900-5

1

necessitated by war conditions was widely endorsed, and alongside the McKenna duties, led to quantitative controls on a range of ‘strategic’ imports, the long-run trade policy appropriate for Britain remained a matter of dispute. The key body on postwar trade policy, the Balfour of Burleigh Committee, reflected this uncertainty. It noted that ‘whilst the economic strength of the country has so far borne with remarkable success the strain upon our material and financial resources resulting from an unparalleled war, certain defects in, and dangers to, the great future of British trade and Industry have been revealed’.22 The Report rejected general protectionism, but called for a range of measures falling short of this. These included anti-dumping rules and a much vaguer call for protection of a range of industries ‘important for the maintenance of the industrial position of the U.K.‘.*’ The war thus consolidated business support for tariffs, whilst wartime official pronouncements left the long-run issue still open. At the same time the war consolidated business support for the Conservative Party, as the bastion of anti-Socialist opinion. But Conservative views on tariffs, as in other areas, were not simply a projection of business opinion. Before the war the Party had been more protectionist than such opinion. During the war it was probably ‘overtaken’ by business opinion in this regard.24 The Party had to balance both the interests of the City and the demands of the electorate against the pressure of industry.25 It was not only on the external account that the war showed weaknesses in the British economy. At home the drive to maximise output led some to question the efficiency ofBritish industry. The issues raised included industrial relations, in its broadest sense, the relations between industry and finance, and the technical performance of British firms. 26 In all these areas, questions about the extent to which government should take a more active role were raised. In the war itself such an extended role was inescapable, but as with the external account, the question was how far wartime measures were to be regarded as temporary, for the duration of the war, or as permanent changes. This in turn depended on whether perceived weaknesses were seen as long term, and whether, if so, they could and should be addressed by government. Some small but significant long-term increases in the role of the government were made, as with, for example, the foundation of the Department ofscientific and Industrial Research in 1916, designed to encourage collaborative research in private industry, especially amongst smaller firms. But on the broad issue of the role of government both business and Conservative opinion was divided. On one side were people like Dudley Docker, a key figure in the foundation of the Federation of British Industry in 1916, and one who called for an ‘industrial Prussianism’ in which the state would play an active role not only in protecting British industry but also in encouraging industrial concentration to secure greater efficiency. But this agenda was problematic for both business opinion and the Conservative Party. Much of the former hankered for a reversal of wartime interventionism not its 6

CONSERVATIVES

AND

INDUSTRY,

1900-5

1

intensification. Equally, the Conservative Party, whilst divided, had clear memories of the 1906 defeat on protection, as well as fearing the implications of the ‘corporatist’ aspects of the productioneers programme. At the close of the war, with the end of the wartime mobilisation, and the absence of the anticipated trade war with Germany, the failure of the Docker programme was almost absolute.*’ This failure was also contributed to by the Conservative alliance with Lloyd George, an alliance requiring that tariff policy be given a low priority. In the last period of the war ‘reconstruction’ focused not on industry, but on social reform proposals deemed necessary in respond to the growing working-class discontent with the war.28 However, as Kirby and Rose have emphasised, this largely abortive ‘social’ Reconstruction movement was, during the war, underpinned by a widespread concern with the reconstruction of industry, which to a large extent fell outside the prewar parameters of debate on tariffs. For the Ministry of Reconstruction, from which many wartime plans emanated, industrial efficiency seems to have been largely seen as an issue of industrial relations in the broadest sense. Wartime breakdowns of employer-worker relations led to the view that any meaningful reconstruction of industry would have to be based on a radical improvement in those relations. This concern with industrial efficiency led back to the kind of ‘corporatist’ proposals advocated by Dudley Docker, and which were to be realised only in a pale form by Whitley Councils in the postwar public sector.29 However, this did not exhaust the agenda of wartime industrial reconstructionism. For many observers the war had demonstrated the benefits of scale for efficiency, whether this be by units of production, or by greater co-operation between legally separate firms. The Balfour of Burleigh Committee reflected this view with its advocacy of both more standardisation of production, and more co-operation in such areas as research and marketing.?’ These proposals were not just rhetoric; the wartime Ministry of Munitions had encouraged mergers and the adoption of best-practice techniques in the engineering industry as part of its wartime efforts.31 The general failure of the ‘productioneers’ to secure their desire for a more active state role in industrial issues was not the result of a reawakened political commitment to all the tenets of laissez-faire. It was certainly true that the Conservatives and the majority of business quickly achieved a reversal of most of the wartime controls over business, and ‘decontrol’ triumphed rapidly, especially after the collapse of the boom of 191’$20.32 On the other hand, neither the strength of protectionist feeling nor the enthusiasm for scale economies resulted in any enthusiasm for policies to encourage competition. This was illustrated by debates on profiteering and trusts around the end of the war. Wartime concerns with ‘profiteering’ led, amongst other measures, to the setting up of a Committee on Trusts to look at the implications of the wartime expansion of combination in industry. This suggested that such trusts were largely benign in their efforts, but to conciliate hostile public opinion 7

CONSERVATIVES

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INDUSTRY,

1900-5

1

suggested that a body be established to investigate their actions, though explicitly repudiating the setting up of tough anti-trust measures as in the USA.33 The 1919 Profiteering Act established an investigative body, and a number of reports were produced, but from 1919/20 the collapse of the boom and the related government desire to conciliate labour and ‘progressive’ opinion led to the abandonment of any such policies. At the beginning of 1921 the President of the Board of Trade, CunliffeLister, cited the Committee on Trusts in support of the contention that ‘combinations in the great majority of cases are not abusing the position they have got’. He went on to suggest that legislation on this issue could be introduced ‘in the next session of Parliament’, but nothing came of this.34 Overall, the legacy of the war was to reinforce Conservative and business belief in scale economies as a route to efficiency, and to weaken further any liberal views about the benefits of competition, whilst at the same time greatly strengthening the political division between Labour, as the party of government intervention, and the Conservatives, the Party opposed to such meddling. Initially after the war, it was the latter element which predominated, summarised in the contemporary cry for a return to prewar ‘normalcy’. The

1920s

After a frantic boom in 1919/20, there followed a collapse in the economy which drove unemployment up to unprecedented levels, from which recovery throughout the following decade was slow, halting and incomplete. The response of the government (Conservative or Conservative-dominated for all but a brief period in 1924) for most of the 1920s was to try and restore the conditions of the prewar international economy, in the belief that it was wartime disruption of this system which underlay Britain’s problems. This strategy logically followed from the concentration of the unemployment problem in the export-oriented staple industries of coal, cotton, iron and steel and shipbuilding.35 Most famously this strategy led to the British-led attempt to rebuild the gold standard system, symbolised by Britain’s ‘return to gold’ at the prewar parity in 1925. In the British case the prewar international economy had also, of course, been characterised by free trade. During the 1920s this feature was more problematic, at least for Conservative opinion. However, down to 1929, and indeed until the slump of 1931, the Conservatives largely continued with free trade policies, though this was a cause of considerable dispute in their ranks. The exceptions to this generalisation were threefold. The 1915 McKenna duties were continued postwar, despite their allegedly emergency character3’ Second, a small number of ‘key’ industries of strategic significance were protected by the Key Industries Legislation 1919, which was quickly declared unlawful but re-enacted as part of the Safeguarding Act of 1921. (Dyestuffs had their own Act in 1919 with similar intent.) Third were Safeguarding 8

CONSERVATIVES

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INDUSTRY,

1900-5

1

duties. These had originally been framed very much in the strategic context noted earlier of an expectation that at the war’s end there would be a trade war with Germany against which defences would have to be erected. Thus, Safeguarding was initially aimed at providing a ‘level playing field’, with provisions for protection against depreciating currencies, subsidies, dumping and low wage labour.37 Safeguarding came to be a considerable bone of contention in the 1920s both within the Conservative Party and between it and its opponents. In 1923 Baldwin, the new leader of the Party, precipitated a general election on the protection issue, and, as in 1906, though less dramatically, this led to the opposition (this time Labour) coming to power. There has been much debate on Baldwin’s motives for this seemingly quixotic act. Partly it was an attempt to unite the Party, partly a response to the level of unemployment, partly it seemed the only ‘positive’ policy available. As John Ramsden comments: ‘The only way forward seemed to be to go back to the politics of tariff reform, the Party’s only positive contribution to political economy, its only real point of positive belief, and a policy that might have been made popular by years of rejected by the electorate, depression. ‘38 With the idea of general protection the Conservatives, who returned to power at the end of 1924, were left only with the ambiguities of Safeguarding as protectionist devices. Despite the attacks of free trade stalwarts like F.W. Hirst, the amount of protection actually delivered under Safeguarding in the 1920s was minimal, and restricted to eight small industries such as lace and gas mantles.39 In this area the Conservative leadership was apt to try and face both ways, promising the Party faithful that Safeguarding could deliver significant benefits to industry, whilst ensuring that they could not be accused of introducing ‘general protection’ against the verdict of the electorate in 1923. Official publications of the Party paraded Safeguarding as a major plank of policy, whilst on the other hand the appointment of the firmly free trade Churchill as Chancellor of the Exchequer emphasised the Party’s public recognition of the impossibility of putting protection at the centre of its policies. 40 The forum of the Safeguarding legislation did raise the issue of industrial efficiency, because one clause of the 1925 re-enactment of the legislation stipulated that to qualify for such protection, an industry must ‘prove it is conducted efficiently’. 41 The Safeguarding enqu iries that looked at this issue tended to have a common view. They suggested that the industries did have deficiencies in their productive methods, but that this stemmed from the limitations and uncertainties of their market position, deriving from the intensity of competition. 42 Although somewhat circular, these arguments do bring out the way in which it was becoming much more common by the mid1920s to recognise the inefficiencies of British industry, a marked change from before the First World War. (This point is returned to below.) Discontent in the Conservative Party on ‘industrial policy’ has already been noted in the quotation given at the beginning of this chapter. Inside and

9

CONSERVATIVES

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INDUSTRY,

1900-5

1

outside the government the inadequacies of current policies were increasingly emphasised and alternatives suggested as the 1920s wore on, and the failure of ‘normalcy’ to return became more apparent. On the left of the Conservative Party, Boothby, Macmillan and Loder in 1927 characterised Conservative policy on industry as ‘chaotic’. Further, they argued, ‘To many Conservatives government help to industry means first and foremost Protective Tariffs’, whilst they thought such a policy was both electorally impracticable and against the tide of tariff reductions elsewhere in Europe.43 They sought to avoid the protection issue, and proposed a ‘third way’ between individualism and socialism, to include compulsory amalgamation in some industries, and an active Board of Trade becoming ‘economic adviser to the nation’.** This combination of faith in industrial concentration and a mild corporatism typified much centrist opinion in this period, as for example represented in the Liberal’s Yellow Book of 1928 or the Balfour Committee, whose final report appeared in 1929. *s Although such positions gained some rank-and-file support, many Conservatives regarded them as semi-socialist.46 Whilst it is difficult to summarise a complex of opinions, the rank and file seemed more inclined to favour two other policies. On the one hand, they supported Safeguarding, which, as already noted, the leadership tended to greatly overstate as a practical solution to Britain’s problems, certainly on the scale on which they were willing to apply it. The Conservative conference expressed opposition to the slowness with which the policy was applied, especially to such vital industries as iron and steel.*’ Alternatively, the emphasis tended to be on cost-cutting. This, in fact, was the main basis of the criticisms in the debate already noted at the Conservative conference of 1925. It was a common term of Conservative analysis in the 1920s that the rise in taxation as well as labour costs over the war period was fatally undermining the capacity of British industry to compete. The General Election Manifesto of 1922, for example, proclaimed that the burden of taxation was the ‘greatest clog upon the wheels of national industry’.48 This was a view widely shared amongst Conservatives of all shades in the 1920s and its effects are evident in such events as the ‘Geddes Axe’ of 1922, the setting up of the Colwyn Committee on National Debt and Taxation, which reported in 1927,49 and most strikingly the de-rating of industry of 1929. This latter is particularly important because it signalled a clear belief on the government’s part that ‘demand-side’ explanations of British industry’s problems, which led to an emphasis on policies for reviving the international economy, had proved disappointing. Certainly by 192718 it was becoming widely accepted in government and Conservative circles that the problems of the staple industries were not going to go away, and this is evident also in the Industrial Transference Act of 1928. Although on a very small scale, this Act recognised that demand was never going to expand sufficiently to re-employ many of those previously working in such industries as coal, and encouraged migration of such workers to other parts of the country. 10

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The De-Rating Act reduced the rates levied on industry by two-thirds, cutting annual bills by about &27m. It followed from complex negotiations between the Minister of Health, Neville Chamberlain, who was responsible for the rating system and local authorities, and Churchill, as Chancellor of the Exchequer. Churchill saw the measure as part of equity in rewards for different sectors of the population - the bankers and merchants had had the restoration of gold, the personal taxpayer cuts in income tax, the old better pensions, and industry therefore deserved a cut in costs.Jo But whatever the politics of de-rating, it was clearly an industrial subsidy by another name. This was especially clear in the case of railways, where relief was granted explicitly on grounds that it be passed on to industry. For a free trader like Churchill it was ‘dammed clever protection’, a useful measure to fight off those who wanted explicit controls on trade. In economic terms it was hardly a rational form of protectionism, benefiting most those with either high rateable values or heavy railway freight charges.51 But it provided a useful method of doing something in response to the range of pressures, within and without the Party, from those who believed too little was being done to revive industry and reduce unemployment. Whilst leading to little action in the 1920s one final feature of Conservative views on industrial efficiency must be mentioned, indeed emphasised. This was the evidence of growing belief in the need for the ‘rationalisation’ of industry. This term, imported from Germany, was highly ambiguous, but became associated with the idea that British industry was organised on too small a scale, and that it could only revive its efficiency if considerable concentration took place.s2 As noted above, this idea had taken root during the First World War, and never entirely disappeared in the 1920s. It may in broad terms be seen in the government’s creation of the Central Electricity Board in 1922, or in the encouragement of the creation of ICI. But it became a much broader issue in the late 1920s when it appeared evident that the old staples with their typically small scale of production were failing to compete with their counterparts abroad.53 In fact the government took the first step in recognition of this problem in the staples by the Mining Industry Act of 1926, which allowed compulsion to be applied to minorities who opposed pit amalgamations, but left the initiative for change with the industry. This indeed was the great problem for the Conservatives, to fully unfold itself in the 1930s: how were they to combine a belief in the economic benefits of ‘rationalisation’ with a political unwillingness to get involved in the rights of private industry to run their own show? This dilemma was only just beginning to appear in the 1920s and is best dealt with in the following section, on the 1930s below. Rationalisation was never a coherent ideology, but it did undoubtedly draw upon the enthusiasm for the (alleged) manner in which the USA conducted its industry. As so often in twentieth-century Britain, feelings of domestic failure led to a search for a foreign model to be praised and hopefully emulated. In the 11

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1920s enthusiasm for America went far beyond Conservative ranks, with many, though not all, Labour Party supporters also feeling the USA had much to offer them.54 This broad measure of interest and support reflected in part the fact that the US model seemed to offer support for all kinds of prescriptions. Those on the left favoured it as a high-wage economy, those in the centre praised its co-operative relations between employers and workers, those on the right (and others) enthused over its scale-based efficiency. Both of these latter two views are apparent in Conservative circles. Boothby, for example, who visited the USA in 1925, extolled the benefits of worker participation, benefits and welfare as the key domestic features of the American system.55 Others saw this as only part of the story, and wanted to encourage a proper investigation into the American system, and in 1926 the Cabinet agreed to send an official mission to the USA for this purpose.56 The American example for most Conservatives reinforced the case for rationalisation, and in doing so also encouraged hostility to any pro-competitive, anti-Trust policy. Cunliffe-Listen President of the Board of Trade, attacked the opposition in 1929 for not accepting the logic of this position. We must have rationalisation. It is necessary for efficiency and it inevitably involves the creation of larger units and the making of agreements. Honourable members must make up their minds which horse they are going to ride. You cannot in one speech lecture industry and say ‘It is your duty to rationalise and reorganise and enter into these agreements and combine yourself in the most efficient units’ and proceed in the very next speech you make to attack people or cast aspersions on them for doing exactly what you have invited them to do. He went on to argue that as long as excess capacity existed, this provided sufficient safeguard for the consumer against any exploitation which might otherwise follow.57 Whatever else it might be perceived to be about, the American example was not regarded by inter-war Conservatives as providing a case for rigorous anti-trust policies. On the contrary, by the end of the 1920s there had been a substantial loss of faith in the capacity of competition to resolve Britain’s economic difficulties.

The 1930s The return to power of the Conservatives in 1931 (notionally m a National government until 1935) coincided with a sea change in British economic policy. The year 1931 saw departure from the gold standard and the imposition of a general tariff on manufactures. From the point of view of this book the latter was by far the most important. As earlier parts of this chapter have made clear, and as, for example, Capie has emphasised, the protectionism 12

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which was introduced in 1931 can only be understood against the background of earlier pressures for such policies. By this time most industrialists seem to have been protectionists, and most Conservatives also.s* In that sense 1931 was the triumph of long bottled-up forces rather than a sharp change of direction. But what was the relation between this measure and the issue of industrial efficiency? It has been argued above that in the pre-1914 period protection was usually seen as an altemutive to any discussion of efficiency. British industry was not inefficient, but rather unfairly undermined by perfidious foreigners. s9 By the 1920s however, protection and efficiency had become intertwined issues. The discussion of Safeguarding commonly saw protection as a pre-condition for other measures (rationalisation, higher investment) necessary to raise efficiency. The dilemma posed by this inter-relationship was well understood in Conservative circles. When the iron and steel industry in the 1920s had made a claim for Safeguarding, the Minister of Labour had argued against this, saying that the industry was slowly beginning to cooperate in order to rationalise, but that ‘any promise of safeguarding or other alleviation, which may ease the pressure, will undoubtedly retard the whole movement and awake the old reactionary individualism’.60 From this point of view, the granting of protection to iron and steel in 1931, and its extension in 1932, removed the leverage government may have had to force the industry to change its ways. This problem was soon recognised by ministers, but faced with the political impossibility of withdrawing protection in the circumstances of the 1930s the government found there was little it could do. It had no ‘credible threat’ to deploy.” The Import Duties Advisory Committee (IDAC) set up to administer the 1932 tariff had an explicit duty ‘not merely to exclude troublesome imports, but to encourage the industries that came to it for exceptional treatment to reorganise and re-equip themselves’, and it has been argued that in a third of the cases where this body gave a duty above the across the board 10 per cent granted in 193 1, this ‘had a specific object of encouraging development or reorganisation ‘.62 But whilst we lack any study to match Tolliday’s on steel to know definitely whether other industries delivered on such promises, the general evidence suggests it is unlikely that they did. In the absence of the use of tariff as a persuasive bargaining weapon, and a reluctance to use state power directly on industry, the Conservatives in the 1930s had two possible instruments to deploy in trying to ‘rationalise’ the old staples apart from private pressure by ministers or industrialists - ‘industrial diplomacy’ and the Bank of England. Industrial diplomacy is the term helpfully used by Roberts to describe the role of government in the 1930s attempting to persuade employers to put their house in order. The terminology of diplomacy suggests accurately that the government was concerned not to be seen coercing industry, but persuading it, like another sovereign power, to do what the government wanted.63 This policy, while fulfilling the 13

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political need not to be seen interfering in industry, relied upon business to put together plans which could then be endorsed by government. Yet the staples were internally far from homogeneous, so that the likelihood of their presenting a united policy was always small. These divisions were perhaps particularly acute in iron and steel, 64 but evident to a greater or lesser extent in all the staples. It is difficult to point to any obvious success for such ‘diplomacy’, though the Cotton Spinning Industry Act of 1936 was one piece of legislation which built upon a considerable degree of agreement within the industry itself, and provided aid for scrapping surplus spinning equipment. Like most rationalisation in the 1930s this was aimed ‘not at overcoming market conditions, but at easing and hastening the operation of market forces 7. 65 Cotton, like other staples, had already from the 1920s been affected by the other source of pressure for rationalisation - the Bank of England. The Bank originally became involved in the issue due to its banking relationship with some companies in engineering and shipbuilding, but more broadly because of its desire to defend the banking system against the effects of bad debts accumulated in the staples. This role had expanded in the late l92Os, not least to try and pre-empt any more radical intervention by an incoming Labour government. The Bank created both the Bankers Industrial Development Corporation and the Securities Management Trust to finance and help plan rationalisation schemes. But this did not bring a coherent industrial policy as ‘these agencies proved not to be agencies of rationalisation through a great array of industries; their principal task was rather to oversee the unwinding of commitments into which the Bank had already ventured, or into which it was about to be driven by political pressures ’ . 66 From these various avenues nothing that can sensibly be labelled an ‘industrial policy’ emerged. Roberts argues that: ‘By the mid-1930s Government had not got an industrial policy, but rather had an industrial policy for each industry with which informal discussion had been held.“’ There was no forum for an overall policy on industrial issues to emerge, and the most that can be discerned is a broad recognition of industrial weakness, but little sign of policies or institutions emerging to tackle these weaknesses. This approach, as already noted, included a willingness to grant significant tariff protection, even though this undercut any bargaining with industry. Second, it involved a lack of willingness to get overtly involved with industrial decision-making, a desire to act indirectly and informally. Third, it involved legislation only when a strong case could be made that the industry itself had originated a plan, and the government was coercing a small, intransigent minority. This latter was itself treated in an adhoc fashion. The government strongly resisted the idea put forward by bodies such as the Industrial Reorganisation League and Political and Economic Planning, and endorsed by a wide range of Conservative opinion, from Amery to Harold Macmillan, and industrialists like Lord Melchett and others, for an ‘Enabling Bill’ to give a general power 14

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for such minorities to be coerced. This proposal was first put forward in 1934, and repeated in 1936. On both occasions the government opposed it, saying that given the diversity of conditions in industry, it was imperative that measures were treated individually, and that industry did not have a threat of compulsion hanging over it. 68 On the second occasion that the issue came to the House of Lords, the government representative emphasised the difficulties the government had encountered in getting the Cotton Spinning Bill through the Commons, and rightly stressed the depths of Conservative opposition to such interference in private industry. 69 Thus the attempt to gain explicit government support for ‘planning’ via self-government in industry failed, not through lack of sympathy with the idea, but because of worries about the political dangers of such a degree of government interference in private industry. There was also explicit repudiation of the need for legal restraints on monopoly and restrictive practices.” In the 1930s overall, rationalisation became the basis of a policy encouraging defensive measures, rather than a means of recapturing lost markets. Alongside tariffs, cartels and market-sharing agreements were encouraged. This approach may be seen as embodying a relatively coherent policy of trying to raise prices in order to raise profits, and thus boost the economy.71 The same actions can be seen as a government-industry conspiracy to exploit the consumer.72 Economic historians have been much divided on the results of this strategy on the staple industries.73 From the point of view of the long-run evolution of Conservative policy on industry, the 1930s mark the furthest distance reached from economic liberalism in this century. The loss of faith in the market (though not, of course, in private ownership) emerging in the late 1920s was consolidated, protection against international competition being combined with anti-competitive measures at home. The underlying assumption of this was the incapacity of competition to generate efficiency in the British economy.‘* The scope of this policy stance should not be exaggerated. Whilst protection against imports was general to the manufacturing sector, officially encouraged domestic cartelisation and market-rigging was largely confined to the staples - ‘new’ industries largely fell outside government policy.75 Nevertheless, across broad swathes of British industry this was a period when Conservative governments encouraged ‘industrial self-government’, and the Party saw ‘its ideal of an economic system in an orderly organisation of industries, each ruled feudally from above by the business firms already established in it, linked in associations and confederations and, at the top, meeting on terms of sovereign equality such other Estates of the Realm as the Bank of England and the Government’.” As the pro laissez-faire Economist went on to note this was ‘emphatically not a set of ideas that can be expected to yield the maximum of production, or to give the country wealth in peace and strength in the war’.”

15

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War and opposition The wartime Coalition government’s approach was to focus almost all efforts on winning the war, throwing economic caution to the wind. This strategy was not wholly bad for the long-term prospects of the economy, with, for example, a huge increase in the employment of machine tools and the expansion of engineering capacity which would yield postwar dividends.‘* But the conflict, like the First World War, exposed some of the weaknesses of the economy in stark fashion, and this exposure fed into the investigations which were launched during the war into the problems likely to arise in the postwar reconstruction period. Churchill was notoriously reluctant to give serious attention to such issues whilst the war remained to be won, but others in Conservative ranks recognised the political importance of responding to the pressure to put forward programmes which would attract an electorate that seemed to be expecting that peace would bring a better world than that of the 1930s. As Rab Butler saw the Conservative predicament, it was ‘to convince a broad spectrum of the electorate, whose minds were scarred by inter-war memories and myths, that we had an alternative policy to socialism which was viable, efficient and humane, which would release and reward enterprise and initiative but without abandoning social justice or reverting to mass unemployment’.79 The Conservatives, like Labour, accepted that any improvements in social conditions would have to be based on better industrial performance than had been achieved in the inter-war years, but no clear view emerged on how this was to be achieved. Bodies such as the Tory Reform Committee on the left of the Party were willing to proclaim expansion as the keynote of future Conservative policy, but official party opinion was much more cautious.*’ Many Party members and also many industrialists remained cautious about whether any radical change from the restrictionism of the 1930s would prove possible.81 For political reasons the Coalition endorsed the prospectus of full (or at least ‘high and stable’) employment, which was embodied in the 1944 Employment Policy White Paper, but the nature of the policies which would deliver this happy outcome remained obscure. This is evident, for example, in the sharp differences on the desirable scope of competition, and the extent to which this should be pursued by legislation. Thus, for example, Oliver Lyttelton, wartime Minister of Production, and senior Party figure, argued at the Reconstruction Committee that there was ‘no evidence to show that monopolies had proved more damaging to employment than free competition. Indeed, it was his view that the object of firms entering into monopolistic agreements was usually to preserve continuity of employment.‘82 Such a view, widely echoed in the Party, seemed to look back to the contractionary 1930s rather than forward to the hopefully expansionary postwar years. Conservatives were also ambiguous about the future role of the state in the economy. Whilst few, if any, anticipated an immediate destruction of wartime controls when peace

16

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INDUSTRY,

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came, the extent to which the state’s role would be permanently expanded was not defined. One area where the division between the parties was evident in the 1945 election was nationalisation, but in most other respects the manifestos on which the parties fought were similar. 83 Both emphasised the need for economic reconstruction to underpin postwar reform, both agreed controls would have to be continued for some time. Neither party at this stage went into great detail about how the performance of British industry might be improved. Under the Attlee government a diverse agenda of policies did eventually emerge aimed at improving that performance. Nationalisation, whilst of course highly charged politically, was in many ways a ‘technocratic’ policy pursued as a means of ‘rationalizing’ the ailing staple industries. During the war ‘expert’ groups such as the Reid Committee on coal had presented nationalisation in this light, so that the Conservatives felt unable to resist all Labour’s proposals for public ownership as simply the result of dogmatic socialism. As a result they often accepted the main thrust of Labour’s policies, whilst waging a ‘bitter and uncompromising struggle over unessentials’.84 The dominant Conservative view of the sources of economic efficiency were not very different from those in the Labour Party which underpinned nationalisation; both parties believed in the economic virtues of scale, high investment and new technology. Labour’s other initiatives in the drive to increase efficiency aroused less public debate but often more intransigent opposition from the Conservatives. Proposals for Development Councils to try and generate co-operation in fragmented consumer goods industries were portrayed by most of the employers in the industries concerned as the thin end of the wedge of a government takeover, and Conservative politicians echoed this stance.85 The idea of the Anglo-American Council on Productivity was bitterly attacked by the Conservatives when proposed by Stafford Cripps in 1948, with suggestions both that it demonstrated the supineness of the government in the face of American overtures, and that it diverted attention from the ‘real’ problems of the economy, such as taxation and excessive controls.” In other policy areas the Conservative response to Labour initiatives was more ambiguous. On Joint Production Committees, set up to encourage worker co-operation in production issues, the Conservatives were sympathetic to proposals for encouraging workplace co-operation in principle, as long as management prerogatives were not infringed.87 In the case of monopolies, where the Attlee government brought in legislation in 1948, Conservatives remained divided, although there is some evidence of a shift towards a slightly more pro-competition stance in the late 1940s. In wartime debates the Conservatives had generally been unenthusiastic about legislation in this area, with some Labour ministers being much more enthusiastic.88 In the face of Labour’s proposals, attitudes shifted somewhat, and indeed by the end of the Attlee years the Conservatives were supporting calls for more effective action 17

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to be taken against monopolies than resulted from the 1948 Act.89 But this shift in opinion should not be exaggerated. A widely accepted statement of Conservative policy in this area published in 1948 stressed that: ‘monopoly and restrictive practices are a significant feature British industry today. In most instances they exist as the result of the legitimate pursuit of sectional interests . . . in some cases these devices have helped to make possible the reequipment of important industries and they have brought other advantages.19’ This statement was followed by a summary of possible disadvuntages of monopoly, but its tone makes clear that there was no great support for the ‘trust-busting’ enthusiasm of a few Labour ministers. For much of late 1940s politics was defined by the Conservative responses to the reform programme of Labour. But there were attempts at positive policy-making by the Conservatives. Most famously, the Party in 1947 produced an ‘Industrial Charter’, which sought to overcome the dilemma posed by Butler outlined above through combining a recognition of the role of the state in maintaining full employment and welfare provision with the traditional Conservative enthusiasm for free enterprise. The significance of the Charter probably lay less in the policies it proposed than the political signal it was designed to give that the Conservatives accepted in large degree the ‘postwar settlement’ and were not planning to take Britain back to the 193os.9l Within the Industrial Charter was a ‘Worker’s Charter’, which sought to establish Conservative support for worker’s rights, including the right to security of employment, the right to incentives for raising production, and the right to ‘status’ whatever the job. In Butler’s words, this Charter ‘sought to combine the Conservative Party with the YMCA’.92 Here again one can see some overlap with Labour’s contemporary enthusiasm for ‘human relations’ and the idea that the happy and involved worker is a productive worker.93 But the Conservative emphasis was on individual rights and voluntarism in this area, and the ideas had little impact when the Conservatives came to power after 195 1. How far did the Conservatives have an agenda for raising efficiency by the end of the 194Os? In trying to answer this question it is important to distinguish political rhetoric from serious policy proposals. Harris, for example, has diagnosed a significant shift towards economic liberalism in the years after the peak of ‘radical etatist’ expressions of opinion in the Industrial Charter9* This seems exaggerated, for two reasons. First, the Charter was not much different from the 1945 Conservative manifesto - it was the political packaging which had altered. Secondly, the higher level of economic liberal rhetoric evident m Tory circles in the late 1940s seems to be more part of the tactical emphasis on ‘setting the people free’ from Labour’s austerity and controls, rather than a major shift in underlying attitudes. An alternative positive vision might have developed at this time around the idea of ‘the property-owning democracy’, which became a popular phrase from 18

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about 1947. Such a phrase could logically have embraced policies for ‘democratising’ share ownership, and encouraging co-partnerships and other forms of industrial organisation which moved away from the traditional capitalist firm. Such ideas were not absent from Conservative circles in this period, but ultimately ‘property-owning’ democracy came to mean little more than state support for the middle classesto buy their own houses.95 The Conservative rhetoric of ‘set the people free’ was treated also as a recipe for economic success. In most debates on economic efficiency, Conservatives suggested that it was only the weight of taxation, controls and bureaucracy that was preventing a rapid expansion of the economy.96 Positive proposals were thin on the ground. The acceptance of full employment undermined the restrictionist instincts still widely prevailing in Conservative circles, but there was no wholesale conversion to economic liberalism, nor the devising of any other agenda which would contribute to increased efficiency by state action.97 Conclusions By the time the Conservatives came to power in 1951 they cannot be said to have developed a clear ‘industrial policy’. While they had increasingly recognised some of the weaknesses of British industry, their response had been limited. Partly this reflected deep divisions over the extent to which they should present themselves as advocates of the free market. There had been some movement away from the restrictionst policies of the 1930s partly because of the rhetorical emphasis on freeing Britain from the shackles of the state imposed by Labour. On the other hand, many Conservatives realised that untrammelled market forces were likely to be a destabilising rather than conserving force in society, and also that too much emphasis on economic liberalisation might threaten the electoral appeal made on the basis that the Party had changed since the ‘bad old days’ of the 193Os, widely (if inaccurately) seen as a period when the free market was destructively rampant. It is also important to note that the Conservatives had been highly suspicious of the Attlee government’s emphasis on productivity. This was not, of course, because they were opposed to higher productivity, but because they believed, to some extent rightly, that emphasising this objective was likely to lead to an enhanced role for governmental bodies in trying to persuade the private sector to mend its ways. Such a consequence was more likely if the alternative proposed route to higher productivity, greater competition, was not adhered to. All in all, greater efficiency and productivity were not top of the Conservative agenda in 195 1, and even in so far as the issue was one of policy concern, the Party had failed to find agreement on the best way forward.

19

2

CONSERVATIVE POLICY, Short-term

ECONOMIC 195 l-64

management growth

and long-term

Introduction Conservative policy on industrial efficiency and productivity can only be understood against the background of general economic performance and policy. Productivity and efficiency concerns never dominated the economic policy agenda in this period, but existed as part of a wider policy mix, within which these issues broadly grew in importance over time. The shift in the significance of efficiency resulted from a combination of changes in the economic environment, both nationally and internationally, and changes in policy goals. Where in the early 195Os, short-term macroeconomic issues largely dominated official and ministerial thinking, by the early 196Os, at least at the level of rhetoric, growth and efficiency had come to the fore. The emphasis on macroeconomic concerns for the majority of the time was largely a matter of political choice, rather than the result of an absence of information about British supply-side deficiencies or potential policy responses. These weaknesses had been publicised by the Attlee government, and a wide range of initiatives for improvement pursued. Much of this activity was linked to a desire to learn from the USA, and the American interest in persuading the British to follow its lead continued as an important input into the debate throughout the 1950s. Indeed, much of the productivity debate at that time can be characterised as being about how far British industry should be ‘Americanised’. After 195 1 the efficiency and productivity agenda was kept alive by some government officials, and occasionally surfaced in ministerial discussions. But there was a complete absence of a drive on this point from a senior minister as had occurred with Stafford Cripps under the Labour government. The Conservatives did, of course, favour higher productivity; few are ever likely to argue against it in principle. Even so, policy action was extremely 1imited.l However, in one area concern with productivity fitted well with the rhetoric of the Conservatives, namely that of alleged labour restrictive prac-

20

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AND

LONG-TERM

POLICIES

tices. These were a perennial concern of Conservative ministers, beginning with Lord Woolton, Lord President of the Council, in 195 1, only a few weeks after the general election. 2 But this consistent theme of Party propaganda yielded little in the way of practical measures. Primarily this was because, for all the enquiries and investigations that were undertaken, it proved impossible to show that such restrictive practices were widespread and significant across most of industry. While plausible cases could be made for the impact of such practices on printing and shipbuilding, elsewhere the evidence provided was unpersuasive, even when employers were asked to report restrictionist devices to their own organisations on a confidential basis.3 For the most part Conservative attacks on organised labour in this respect were a matter of a political instinct, grounded in little more than middle-class hostility to a working class made ‘uppity’ by full employment.

The international

environment

Viewed from the perspective of the late twentieth century, the 1950s and early 1960s appear as Halcyon days, sandwiched between the crisis-ridden period of postwar reconstruction under the Attlee government, and the increasingly desperate attempts to deal with perceived economic ‘failure’ from the late 1960s. All the macroeconomic aggregates for these years paint the same picture. Unemployment was low by any standards, as was inflation, especially in comparison with what was to follow. Although there were periodic balanceof-payments ‘crises’, these were much less fundamental than those of the 194Os, where the issue had been whether Britain could finance a full-employment level of imports, and reflected less profound problems, largely relating to monetary movements or election-driven booms (Table 2.1). (There were general elections in 1955, 1959, and 1964.) The good performance largely reflected the benign international economic context. This was the ‘golden age’ of modern capitalism, with the whole of the Western world experiencing a simultaneous boom of unprecedented dimensions. The reasons for this boom remain controversial. Some writers have drawn attention to the technological and investment opportunities created by the combination of wartime technical breakthroughs and widespread capital destruction and depreciation. Others have emphasised the ‘once-off’ benefits from the huge transfer of resources from low-productivity agriculture to highproductivity industry.* The degree that policy was responsible for this happy state of affairs has also been much disputed. The simultaneity of the boom in so many countries, with different policy regimes, suggests that the importance of variations in national stances can be overstated. On the other hand, most of these countries shared a new political commitment to full employment which encouraged a general tendency to expansionism. (Compare, for example, the merciless deflationary defence of the French franc in the 1930s with the willingness to subordinate 21

SHORT-TERM

Table 2.1 Macroeconomic

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964

AND

performance,

LONG-TERM

POLICIES

195 l-64

Unemployment (%)

Inflation

1.2 2.0 1.6 1.3 1.1 1.2 1.4 2.1 2.2 1.6 1.5 2.0 2.5 1.6

9.9 6.3 1.6 1.6 3.5 4.3 3.2 2.8 0.6 1.1 2.7 4.0 2.0 3.2

(%)

Balance of payments, current account (Gn) -369 163 145 117 -155 208 233 350 164 -237 1:: 114 -372

Sources: Unemployment: B MachelI, Ewopun Hzstwmzl Statrstzcs (London, 1978) Table B. Inflarmn. Intwnatnmal Fmznctal Stattstrcs Yearbook 1980 (London, 1980). Balance of Payments. Economtc Trends Annul Su#ment 1994 (London, 1994).

its value to growth in the 1940s and 195Os.)> Policy had an international as well as national dimension, and the creation of a ‘liberal’ international economic environment, albeit one which was achieved only gradually through the 1950s may well be seen as encouraging if not causing the boom.’ Stable exchange rates under the Bretton Woods system, the gradual reduction of foreign-exchange controls, and the even more gradual liberalisation of trade, facilitated an integration of the Western economies which, whilst posing new policy issues, in this period was overwhelmingly favourable to growth. However, for Britain this positive context was somewhat offset by the fact that a large proportion of her exports went to the Sterling Area. This market grew more slowly than others, especially Europe, so that although Britain lost market share at equal rates in both, the initial distribution restricted export growth.’ The booming world economy enabled British exports to expand at about 2 per cent per annum, This growth was despite the loss of advantage stemming from the re-entry of Germany and Japan into world markets and the end of the early postwar sellers market. However, with imports also growing fast, the pattern of current account surpluses in most years was helped by the improvement in the terms of trade, although 195 1 was an atypically bad year in this respect, as import prices reflected the crisis purchasing of commodities occasioned by the Korean War.’ Whilst there was a growing realisation, and some worry, about the trend of Britain’s declining share of world trade in manufactures from the early 1950s (a point returned to below), for the most part the balance of payments in this period was seen in a short-term framework of

22

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AND

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demand management. The periodic ‘crises’ of the balance of payments was usually responded to by restrictions on domestic demand, trying to slow the growth of imports. The dominance of this particular approach reflected the constraint on the use of other policy instruments. Devaluation of the currency was ruled out by the commitment to a ‘strong pound’, whilst exchange controls were gradually lifted, though full de jwe convertibility of the pound was not achieved until 1958, and some residual controls continued until 1979. Tariffs and quotas on imports remained significant throughout the period, but the trend was towards liberalisation, especially with respect to quotas, the use ofwhich declined sharply in the late 1950s. These various constraints on action with regard to the international aspect of the economy reflected a combination of worldwide commitments and domestic policy concerns. The Conservatives had inherited the support for freeing trade and liberalising payments from the Attlee government’s adherence to Bretton Woods and the GATT arrangements. Coupled to these explicit obligations was a general Conservative commitment to free trade and maximising international transactions, subject to the need to maintain some sort of balance-of-payments equilibrium. This broad stance was not without its difficulties. Whilst the long-term Conservative fantasy of protectionist arrangements like Empire free trade, or Empire Preference, eroded rapidly in the 195Os, the plight of particular industries in the face of trade liberalisation could still provoke considerable dispute in Party and government ranks, as with the cotton industry at the end of the 1950s.” The defence of the value of the pound is one of the most contentious aspects of Conservative policy in this period. Many have seen this as part of an anachronistic attempt to maintain sterling as a major world currency, without the requisite economic strength to support such a role.” This commitment has in turn been criticised as imposing costs on the economy, the rejection of devaluation being seen as linked to damaging periodic bouts of deflation. In the growing criticism of economic policy which appeared from the late 195Os, a strong pound was often bracketed with Britain’s high overseas military expenditure as twin symbols of an archaic search for ‘great power’ status.‘l How far devaluation would have been an appropriate response to the balanceof-payments problems in this period is disputable. Devaluation would have been compatible with the Bretton Woods agreement if the balance of payments was suffering from ‘fundamental disequilibrium’, but this hardly seems an accurate description of the British situation. As already noted, in most years there was a comfortable current account surplus, the pressure on the balance of payments arising from the non-trading account, and in particular the combination of heavy long-term overseas investment, large-scale military expenditure, and short-term runs on the reserves. Britain, of course, had a long-standing role as a capital exporter, and this had been quickly rebuilt in the 1940s. l2 In the 1950s the scale of capital exports was, as always, basically driven by private profit, but the government

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encouraged this growth, especially investment in the Sterling Area, whose investors had traditionally looked to London for capital, and to which the British government remained committed. There was lively debate at both the official and broader level about the scale of investment, but the government continued to allow it to grow, essentially for political reasons.13 Critiques of the outflow of investment related to both its immediate balance-of-payments consequences and its impact on domestic investment. The second of these issues is returned to in Chapter 9, but on the former it should be noted that capital outflow does, of course, generate foreign-exchange receipts in the form of interest profits and dividends. In purely balance-of-payments terms, all outgoing overseas investment means short-term costs but long-run benefits. However, whilst the dual aspect of the impact of foreign investment led some to argue its overall balance of payments benefits, the information on this remained poor until 1968. ‘* The policy of encouragement was based on political calculations more than detailed economic knowledge. The same, of course, is true of overseas government expenditure notably on the military. This was a major part of international transactions throughout the period, and like overseas investment, had been a large component of the balance of payments in the 1940s. Manser rightly emphasised that in most years the private sector in Britain generated a substantial balance-of-payments surplus, whilst this was usually wholly offset, or at best reduced, by an ‘official’ deficit.15 Here there was a straightforward relationship between political pretensions and economic consequences. Only reluctantly did Conservatives concede the scale of burden this expenditure was placing on the economy.16 Finally, monetary movements were a major feature of the balance of payments throughout the period. This stemmed in part from the huge accumulation of liabilities to countries like India and Egypt during the Second World War but also from the longer-term role of sterling as a reserve currency. These factors left postwar Britain with a surplus of liabilities over assets, which undermined confidence in the pound, and no doubt exacerbated ‘runs’ on the currency when doubts about Britain’s international economic position arose. However, Schenk has persuasively argued that, at least in the 1950s the Sterling Area balances did not have a significant de-stabilising impact on the British balance of payments, as most of these sums were held as monetary reserves or by government for long-term purposes, and so did not readily move in and out of sterling. l7 The periodic crises of confidence in the pound were therefore not mainly due to the maintenance of the Sterling Area system. The Conservative government, then, boxed itself in during this period by simultaneously supporting the exchange rate, encouraging overseas investment and spending considerable amounts of foreign exchange in overseas military and political purposes. This stance became all the more problematic as the commitments to free trade and a convertible currency were gradually fulfilled. The most important attempt to break out of this ‘box’ was made by senior Treasury and Bank of England officials in 1951/2 with a proposal 24

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known as ROBOT (after the initials of its key proponents). This would have involved simultaneously blocking or funding the sterling balances (to prevent their conversion into dollars), allowing full convertibility of externally held sterling, letting the pound float, and restricting capital outflow to the Sterling Area. But such ideas flew in the face of Britain’s International Monetary Fund (IMF) commitment, and were seen as likely to lead to a sharp drop in the value of sterling and thereby stimulate inflation and instability in the British economy. ‘* Rather than making such a dramatic leap, sterling was maintained at a fixed rate throughout the period, and convertibility achieved in stages as the dollar position eased. Equally undramatic was the liberalisation of trade, which proceeded only as fast as the balance of payments (given all other commitments) seemed to allow. Even at the end of the period quotas dominated trade relations with the Soviet bloc and Japan, but most trade with OECD (Organisation for Economic Co-operation and Development) countries was affected only by quite low tariffs. (Another major step in liberalisation began with the ‘Kennedy round’ of GATT negotiations, started in 1963 but not completed until 1965 .)19 The pace and pattern of liberalisation, it should be emphasised, was set by balanceof-payments considerations not those of industrial policy. The sectoral pattern of trade restrictions at the beginning of the 1950s was largely established in the 193Os, and such restrictions were not used to privilege particular sectors of the economy. In this sense macroeconomics and external political considerations dominated trade policy.*’ In the eyes of contemporaries, the balance of payments was a persistent problem throughout the years of Conservative rule. Policy failed to achieve its objective of a current account surplus sufficient to finance all the commitments without running into periodic crises of confidence. The Treasury committed itself to a target surplus of &350m. in 1953, and raised this to &450m. in 1958.*l Neither of these was achieved. This was a policy failure, and perceived by the government to be a serious one, but the meaning of this ‘failure’ must be seen against the ambitious objectives of international economic policy set out above.

Domestic

economic

policy

Most domestic economic policy in this period was concerned with the regulation of aggregate demand. On the one hand, this was driven by concern with the balance of payments. Under a fixed-exchange-rate regime the balance-ofpayments problem can be seen as a reflection of an inflation problem (inflation above the level of international competitors), but it tended to be the balanceof-payments situation which was the immediate trigger for restrictions on aggregate demand, even if inflation was a growing concern through the period. On the other hand, an ‘unacceptable’ rise in the figures for unemployment was the usual stimulus to the expansionary ‘go’ phase of the cycle. There

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was a slow drift upwards in what was deemed ‘unacceptable’ unemployment, but this never exceeded 2.5 per cent even in the eyes of those who regarded a little more unemployment as a ‘price worth paying’ for its possible effects on inflation. The other stimulus to the management of demand was the general electoral cycle. Even if correlation does not prove causation, the fact that current account deficits in this period occurred around or just after the elections of 1955, 1959 and 1964 (Table 2.1) suggests how far governments recognised that macroeconomic policy could also be a powerful weapon of electoral management. The main instruments of macroeconomic management were fiscal and monetary policy. On the fiscal side, the Conservative governments followed their predecessor which, especially after 1947, had placed growing reliance on fiscal policy to control inflation, albeit alongside significant continuing use of physical controls. How far this use of fiscal policy deserves the epithet ‘Keynesian’ has caused much dispute. Undoubtedly the use of the budget to manage overall demand in the economy, in line with Keynesian precepts from the war period, marked a major shift of policy from the 1930s. On the other hand, fiscal policy in the 1950s and 1960s did not involve a deficit on the current account of the budget, and Conservative ministers and the Treasury were reluctant to even countenance the idea of such deficits at this time.** Cairncross aptly summarises the position: The Conservatives accepted in principle the use of monetary and fiscal policy in managing the economy but they were reluctant Keynesians and practised demand management only so long as it did not conflict with what they took to be sound principles. Thus they were never prepared to budget for a deficit . . . demand management relied on gentle nudges rather than body blows.23 The Conservative commitment to using economic management, especially fiscal deficits, to deal with mass unemployment was never put to the test. The sustaining of demand by private investment (helped, perhaps, by the commitment to full employment) and exports (helped, perhaps, by the international economic institutions established by governments in the 1940s) meant there of this argument is that if was no threat of a slump. ** A further implication the Conservatives had been faced by a major collapse of demand in this period, they might well have failed to respond with the use of fiscal policy, given the priority they attached to financial confidence.25 The idea of a Keynesian consensus between Labour and Conservatives, the idea of ‘Mr. Butskell’, is much exaggerated. Conservatives and Labour remained significantly divided on policy, above all on the role of government in the economy.26 Active fiscal policy was accompanied by considerable growth of the absolute level of public expenditure, but until the mid-1950s spending fell as a proportion of national output. By contemporary definitions this proportion 26

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went from a low of 32 per cent in 1955 to 36 per cent of GDP by 1964.*’ Growth was thus mainly concentrated in the later years of the period. Up until 1957/8 the rise in welfare spending was at least offset by cuts in military expenditure, so that the Conservative aim of tax stability, if not huge cuts, was achieved. However, after the rejection in 1958 of the idea of substantial cuts in military expenditure, the overall trend was upward.28 The growth of welfare expenditure was a source of concern and periodic enquiry throughout the Conservative period in office, but despite Treasury and backbench enthusiasm for cutting back, neither a convincing administrative case for the existence of wasteful and unnecessary expenditure nor political support for cuts was forthcoming. On the former, the Guillebaud Committee into the National Health Service (NHS) in 1954-6 is a classic case of body set up to back a case for expenditure reductions making a powerful case for expansion.29 On the latter, the ‘crunch’ came in 195718 when Macmillan accepted the resignation of his Chancellor of the Exchequer and two junior ministers rather than agree to cuts in welfare spending.30 Macmillan and most of the Conservative leaders thereby accepted, implicitly at least, the growth of public expenditure, and hence taxation, if neither defence nor welfare were to be cut. This was by no means the view of the Treasury, and the Plowden Committee of 1960-I was set up fundamentally to try and impose a stop on the growth of expenditure, by strengthening the Treasury’s role and trying to force ministers to link individual spending projects to long-term projections of the relation between total spending and GDP. It did not, however, succeed in constraining expenditure growth, which accelerated in the early 196Os, even if it did reveal the extent of the Treasury’s unease with much of the postwar settlement.31 On the tax side the Conservatives were able in the early 1950s to reduce the ratio of taxation to GDP, but thereafter it was stationary. There was some emphasis on shifting the tax burden from direct to indirect forms, but overall the picture is one of very substantial stability, both in the share of output taken in tax and in the sources of that taxation. 32 One exceptional area was the taxation of profits, where from 1953/4 the government began a policy, which was to be long continued, of cutting the effective tax rate on profits, offsetting a parallel trend in the decline of pre-tax profits.33 This reflected both traditional Conservative views on taxation and a growing concern with the aggregate level of investment in Britain. The latter point is returned to below. Right from the beginning of their period in office the Conservatives reintroduced the use of monetary measures as a policy weapon, ending the era of ‘cheap money’ which had lasted two decades. Thereafter, ‘stop-go’ usually involved the use of monetary instruments as a back-up to fiscal manipulation. However, the use of monetary policy was of a particular kind, to be clearly distinguished from later versions. It did not involve focusing on ‘the money supply’ or targeting money-supply aggregates. Rather it centred on trying to manipulate the overall demand for credit by the use of bank rate, the interest rate level set 27

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by the Bank of England. This approach came under pressure in the late 1950s with the growth of concern about inflation, which led to the appointment of the Radcliffe Committee on the monetary system. j4 The report of this committee largely endorsed the existing approach to monetary policy, though there were many critics who wanted a more ‘monetarist’ emphasis. Finally, the Conservatives eventually added the pursuit of an incomes policy to their policy repertoire. Again, this emerged from the growth of attention to inflation after the 1955 election. Initially this concern was reflected in the Report on the Economic Implicatzons of Full Employment of 1956 which emphasised the wage inflation consequences of postwar full employment.35 After this, a debate ensued about how far such inflationary pressure could be reduced either by a small rise in unemployment or, to avoid such an increase, by an agreement with the trade unions. The Cohen Committee of 1957, set up to look at the issue, came to no clear policy conclusions, though its focus on wage pressure as the source of inflation antagonised the trade unions. ” In 1961 the Conservatives attempted to get union agreement to a National Incomes Commission which would oversee trends in wage and salary movements, but they would not co-operate, and the government had to resort to unilateral action. However, the establishment of a tripartite (government/ union/employer) National Economic Development Council in 1962 was seen by ministers as a way of trying to continue the search for an agreement with the trade unions on incomes. This summary of the main lines of macroeconomic policy after 1951 underlines the growth of uncertainty. Whilst some may look upon the 195 OS and 1960s as a ‘golden age’, Conservative ministers and senior civil servants increasingly saw the economy as performing badly on the balance of payments, inflation and growth fronts. Growing criticism of the ‘stop-go’ cycle and its alleged detrimental effects on long-run performance added to the perception of failure. This was accompanied by strong criticism of the Treasury, as the major economic policy-making part of the state.37 By 1960 such criticism was finding a response in at least the rhetoric of the government. Worries about the stop-go cycle were reflected in characteristic terms by Macmillan: following the Budget of last year and the election last autumn, a deflationary Budget would either be very foolish or very dishonest. Unless it is supposed that we would be thought very modern and upto-date; like those young ladies who oscillate daily between the stimulant and the tranquilliser. The new Progressive Conservatism will then turn out to be a policy of alternation between Benzedrme and Relaxa-Tabs. I don’t like it a11.38 Over the succeeding rethinking of both policy

couple of years there was much talk of a major and its instruments, as well as some new initiatives, 28

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ranging from the setting up of the Plowden Committee on public expenditure to the application for British entry to the EEC. But the stimulation to these efforts was not just criticism of stop-go and the existing macroeconomic policy regime. It also reflected the growing sense of (relative) economic decline which was coming to pervade public and governmental discussion of economic policy and performance. The emergence of this idea of decline is then deserving of detailed analysis.

Growth

and decline

Whatever the differences between the Attlee government and the succeeding Conservative administrations on issues such as the appropriate scope for market forces or monetary policy in the management of the economy, it was clearly accepted by both that such management was desirable. A crucial legacy of the postwar settlement was a shared understanding that the national economy was both manageable, and that such management was politically inescapable. The electorate came to expect that their economic welfare would be actively sought by government. Commitment to management of the national economy left open the question of what the aims of that management should be. Initially, in the 1940s the answer was clear: mass unemployment had driven economic management to the centre of the political agenda, so full employment seemed to be the policy objective that all governments would have to achieve to secure their political popularity. However, the threat of a return to mass unemployment after 1945 proved chimerical. Consequently, full employment was increasingly taken for granted and other objectives more actively sought. In the 1951 General Election, the Conservatives made great play of Labour’s tight controls over consumption, attacking the extent of rationing, controls and general austerity that Labour’s policies involved.39 From this perspective, the economic welfare of the mass of the population was threatened not by unemployment, but by a failure to allow consumption standards to rise, fundamentally because of socialistic, over-bureaucratic control of the economy. Whilst really only implicit at this stage, the logic of the Conservative argument was that maximising popular consumption could and should be an objective of policy. From this starting point Conservative thinking increasingly focused on the possibility and desirability of a major growth in the standard of living - famously encapsulated in a speech by the Chancellor of the Exchequer in 1954, which held out the possibility (without too much extra effort) of a doubling of the standard of living in twenty-five years. This prospect became something of a Conservative catch phrase, and was repeated in the party’s General Election manifestos for 1955 and 1959.*’ This emphasis on consumption and living standards led to a growing government commitment to economic growth. If popular welfare was assumed to be no longer threatened by mass unemployment, it could be 29

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positively expanded. Enthusiasm for growth had other roots, too. It seemed, for example, to offer the possibility of resecuring the foundations of Britain’s world role, threatened as they were by economic weakness. It also offered an ‘easy’ way of solving conflicts over the use of economic resources, as, for example, between the public and private sectors. *’ The 1956 White Paper on the Economic Implications of Full Employment included the following pronouncement: ‘This government is pledged to foster conditions in which the nation, if it so wills, realises its full potentialities for growth in terms of production and living standards.‘42 By the end of the decade the Radcliffe report was noting the prevalence of talk of the desirability of faster growth, both in government pronouncements and in more general public discussion.43 Growth had obvious attractions to the Conservative Party, both because of the objectives noted above, but equally because it offered a useful contrast with the Labour Party’s ambivalence about the ‘affluent society’ that growth seemed to promise. Not until after the 1959 election defeat did much of the Labour Party seem willing to accept the possible benefits of such affluence, and seek an adjustment of attitude that would appeal to the electorate in a richer society.** However, the enthusiasm for growth was not without its difficulties for the Conservatives. First, the same period of the mid-1950s which saw the rise in concern with growth also saw mounting evidence of poor economic performance by the British economy. Whilst the standard of living in Britain was both significantly higher in absolute terms than most of the rest of the world, and growing in an unprecedentedly sustained manner, in relative terms it increasingly emerged that British expansion seemed to be lagging behind its competitors. Evidence for this ‘relative decline’ of the economy came from a variety of sources, but particularly from a range of comparative economic statistics generated by international bodies such as the UN and the Organisation for European Economic Co-operation (OEEC, later OECD). Both bodies were involved in compiling and publicising economic statistics to assess the economic performance of their member countries, creating an unprecedented calculation of comparative economic performance. These statistics most notably covered shares of world trade, the growth of industrial production, productivity, as well as GNP.*s From the early 1950s the poor performance suggested by all these statistics was recognised in British government circles. For example, by 1954 ministers were alert to the evidence of relatively slow growth in terms of both national income and productivity. 46 The inadequacy of British industrial production in comparison with Germany was noted in the major public statement on the economy, the Economic Survey, in 1956.*’ Because of contemporary sensitivity on the balance of payments, figures showing Britain’s declining share of world trade were given particularly close attention in Whitehall, and the Working Party on Export Trends, established in 1953, analysed in detail the dimensions and significance of what was occurring.** 30

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The meaning of the data was a subject of some dispute in Whitehall, but the figures received wide publicity - in, for example, the Board of Trade Journal and in the EconomicSurveys of 1954 and 1956.49 Such diverse statistical evidence, whilst its precise implications could be disputed in particular cases, conjured up a picture of relative decline which increasingly fitted poorly with the enthusiasm for growth. If the government, as its own rhetoric implied, was responsible for Britain’s economic performance, what was it doing allowing decline to take place? This question posed a dilemma for the Conservatives, which increased as their period of office extended. Combined with this dilemma was the problem of what policies could be pursued in order to improve the British growth rate. The Attlee government had focused much of its attention on raising productivity, and set up a range of bodies with this aim in mind. But for most Conservatives this seemed to threaten too much state meddling in the private sector (see chapters 3-6). To some, but by no means all Conservatives, the answer was more competition - this logically flowed from the rhetoric of attacking Labour’s bureaucratic, over-interventionist policies. Nevertheless, an enthusiasm for competition had to be tempered by the fact that any particular practical measure was likely to face significant opposition in Party ranks. For example, the attempt to increase competition in the domestic economy by toughening up policies on restrictive practices or monopolies aroused much dispute. The same problem arose during the attempt to abolish Retail Price Maintenance (see Chapter 7 below). The encouragement of international competition by reducing trade controls was equally fraught with difficulties, as illustrated by the row over the growth of imports of cotton textiles at the end of the 1950~.~’ The other general strand of the approach to enhancing growth in the 1950s was a belief in the importance of raising the investment level. Britain’s relatively low proportion of GDP devoted to capital spending was a common theme of OEEC reports, and though the interpretation of the figures was disputed, generally higher investment was accepted both by the government and its opponents as a key underpinning for faster growth (see Chapter 9 below). But higher investment obviously means that, for a given national income, consumption will be lower. So the emphasis on the growth of popular consumption (the usual meaning given to the ‘standard of living’ in this period) conflicted with the desire to raise investment -at least in the short run. Partly because of these difficulties, the Conservatives were eventually put on the defensive about the growth issue. From the late 1950s a stream of publications appeared criticising both the British economic performance, the government which was deemed responsible for this performance, and the institutions, such as the Treasury, also seen as culpable.51 In addition, after their successive election defeats in 1955 and 1959, the Labour Party slowly took up the ‘decline’ issue. The long ‘stop’ phase of economic management which followed the 1955 election encouraged Labour to attack Tory ‘stagnation’ and to couple that with evidence of the long-run deficiencies in economic 31

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performance. For example, Labour’s Plan for Progress in 1958 broke new ground by featuring comparative figures on economic performance (industrial production and the cost of living, 1953-T). It also emphasised Labour’s commitment to speed up the growth rate - to provide employment, meet the demand for a higher standard of living, and strengthen Britain’s international position.52 After the 1959 election, the desire to reconstruct Labour’s agenda became much more powerful. By the time of Signposts for the Sixties in 196 I, poor relative economic performance was at the centre of Labour’s attack on the government, and faster growth was now the key Labour promise. ‘Thirteen wasted years’, the Labour slogan in the 1964 General Election, was to be based on a critique of the Conservative’s failure on growth. The Conservatives had little option but to respond to this rhetoric, and by 1964 both parties were presenting themselves as forces for economic and industrial modernisation, on the predicate that Britain’s relative decline had to be reversed.53

1960: going

for growth?

By 1960 a number of pressures had built up on the Conservative Party to change their approach to economic policy. The growing evidence of decline, together with the related attacks from the chattering classes and the opposition on stop-go and its consequences, was increasing in volume. But the pressures were not all external to the government. Within the civil service there was a particular concern with the problems of controlling official spending, and, stemming from this in 1959, came the establishment of the Plowden Committee on the Control of Public Expenditure. In principle, at least, this committee was designed to reassess a key part of the state’s economic agenda, following growing dissatisfaction with how the increasing size of the public sector in the economy was being controlled and managed. The key outcome of the committee was the idea that government spending should be planned over a period of years in relation to prospective resources (essentially GDP)?* Within the Conservative Party and government itself, despite the 1959 General Election victory, there was a sense of loss of direction over economic policy. A Tory Research Department memorandum in 1961 spelt this out: ‘We have virtually exhausted the neo-liberal seam in economic policy. The existing armoury of economic weapons . . . is admittedly deficient. . Yet . . . we have done nothing visibly to examine the problems and search for new ones.‘55 The battle over the appropriate response to inflation and public expenditure growth had been lost by the deflationists in 1958, with the resignation of the Chancellor of the Exchequer and his supporters. A tough ‘stop’ was hardly an electorally attractive option, but how was ‘go’ to be sustained given its usual inflationary accompaniment? The government’s answer was incomes policy, designed to reign in wage growth and thus avoid the need,

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driven by the balance of payments, for deflationary policies. This was to eventually result in the National Incomes Commission in 1961. A constituency usually sympathetic to the Conservatives, the Federation of British Industry (FBI), also played a key part by its criticisms of government policy. In 1960 the FBI annual conference saw vociferous attacks on the government’s stop-go policies and their alleged impact on growth. Against this background, the government in 1961 signalled a change of tack with the creation of the National Economic Development Office (NEDO) as a focus for a ‘tri-partite’ effort to raise growth in the economy. Decline was to be tackled by a version of French ‘indicative’ planning, with the government playing a leading but not controlling role in trying to ‘talk-up’ the growth rate.s’ The creation of NED0 was the most obvious symbol of the new growth consciousness. From the government’s point of view some such initiative was politically unavoidable, given the various pressures, enumerated above. How far it represented in itself a major shift in the basic conduct of policy may be disputed. It appears that the Chancellor of the Exchequer himself regarded this new creation as ‘old wine in new bottles’. In 1961 he noted: ‘There appeared to be a growing weight of public opinion that the economic direction of the country suffered from the lack of suitable machinery for long-term forecasting. He hoped that the machinery he had in mind would be of value in creating a climate of opinion in which the economic facts were better understood.’ The following year he suggested that the ‘positive idea of growth is a valuable means of presenting many politically difficult decisions, emphasising that such decisions are a means to enrich people and not to impoverish them’ (the decisions referred to related to the desire to achieve an incomes policy and restrict the growth of public expenditure).s’ The creation of NED0 is not the only evidence of a change of direction (at least in the rhetoric of economic policy) during the late 1950s and early 1960s. Later chapters will explore Conservative worries on such topics as education and technical change and their impact on economic growth which surfaced in this period. Particular attention will be given here to Brittan’s oftquoted assertion that many of the policy changes proclaimed and pursued by Labour after 1964 had already emerged in the ‘reappraisal’ of 1960/6 1 .s*

Conclusions Retrospective calculations make clear that this period saw Britain performing relatively very badly in comparison with near European neighbours. The figures in Table 2.2 undermine the popular but too simple idea of a continuous deterioration of ‘ 100 plus’ years of the British economy, certainly if this is measured, as is usual, in terms of relative GDP growth. Rather they suggest that decline was at its most significant in the 1950s and 1960s. It is important to emphasise , as has been suggested above, knowledge and recognition of this relative decline was evident in government circles from the early to

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Excess of French, German and Italian growth over that of the UK, 1873-1973 (% increase in GDP/man per annum) France

1873-99 1899-1913 1913-24 1924-37 1937-5 1 195 l-64 1964-73

AND

Germany

0.1 1.1 0.5 0.4 0.7 2.0 2.0

Source: R.C.O. Matthews, C.H. Femstein 1856-1973 (oxford, 1982), p. 31.

Italy

-0.9 2.0 -0.4 0.8 0.4 3.3 2.4

0.3 1.0 -1.2 2.0 0.0 2.8 1.8 and J. Odling-bee,

Brrtrsh

Economrc Growth

mid-1950s. Thus, in assessing the Conservative policies of these years in negative terms we are not being anachronistic; contemporaries were far from ignorant of the kinds of problems of economic performance that later commentators have highlighted. The central aim of this book is to explore the responses to this recognition - both weaknesses and strengths, and character and consequence. The following chapters deal thematically with the major aspects of the governments’ policies, whilst the conclusion attempts to draw the strands together and assess how far and with what results the Conservatives in this period were able to address the issue of economic ‘decline’.

34

3 THE AMERICAN PRODUCTIVITY GOSPEL BRITAIN

IN

Agencies and impact

Introduction Throughout the 1950s and early 1960s determined and unprecedented efforts were made to convince British business that it should modernise on American lines. Much of the campaigning was directed by US government agencies, though British and European organisations also played a part. The overall objective was to help Britain improve its productivity. Those involved often raised grand themes - the great advantages of competitive markets, for example - but much of their everyday effort went into promoting highly specific techniques, ranging from new methods of accounting to advanced forms of welding. A key belief was the possibility of incremental and selfsustaining gains. As productivity evangelists were fond of reiterating, the search for greater efficiency did not necessarily imply large-scale or disruptive changes. Improved results could usually be achieved fairly easily through relatively simple modifications of organisation and technique, or the removal of artificial restrictions. Chapters 3-6 examine how this productivity drive developed and what it accomplished in practice. The aim is to gauge whether the multiple initiatives were successful or not, and uncover the various influences that determined their impact. The following pages serve as an introduction to the later, more detailed discussion. They focus first on some of the key institutions involved and then begin to look at the question of efficacy.

The origins

and early development campaigns

of the productivity

In the immediate aftermath of the Second World War, the United States devoted great attention to furthering European recovery.’ Much of the continent lay in ruins. Surviving industrial capacity was often antiquated or inefficient. Moreover, many Americans feared that impoverished populations 35

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in the Western European countries might turn to communism. The immediate need was for finance and resources, which led to the Marshall Plan initiative. However, American officials recognised that money was not enough. Longer-term economic prosperity and political stability required that Europeans modernise their industries and internalise the kind of productivity consciousness that was common across the Atlantic. This strategy also promised benefits for the United States itself. After all, American manufacturers needed well-off Europeans to buy their exports. The upshot was a second component of US policy, a government-organised technical assistance programme, projected to be worth many millions of dollars per year.* Henceforth, most Western European governments were encouraged to cooperate with US agencies whenever possible and help implement their prescriptions for boosting productivity. British reactions to these developments were fairly positive. The Labour government elected in 1945 considered Washington to be its major ally. Moreover, Labour was keen to modernise British industry. As Attlee and his ministers had rapidly concluded, their desired welfare reforms would not be feasible on the back of a weak economy. In fact, substantial steps to encourage efficiency had already been taken. 3 Thus, when US officials suggested that Britain could benefit from technical assistance, they were in effect pushing at an open door. In 1948, after initial discussion between Stafford Cripps, the Chancellor, and Paul Hoffman, the Director of the US Economic Cooperation Administration (ECA), had concluded amicably, the way was open for the Americans to begin serious operations in Britain. The first main initiative was the Anglo-American Council on Productivity (AACP) launched later the same year. This sponsored sixty-six joint employer-trade union teams to visit the United States and investigate specific sectors or particular business practices (for example, production engineering). Altogether, the effort involved 956 British participants at a cost of $3 million, 70 per cent of which was supplied by the US government. Teams were encouraged to do as much as they could to publicise their findings once they returned to Britain, amplifying the results. Each was expected to produce a full report and a popular version, and some 650,000 of these documents were eventually distributed throughout industry. All addressed a range of conferences, embracing trades, groups of firms or representative associations. By the mid1950s more than 3,000 such meetings had been held. While the AACP was operating, the London Mission of the ECA decided to launch its own programme of visits to the United States. It made contact with a variety of British ministries and educational establishments to recruit suitable candidates and in the end sent a further twenty-nine teams with sixty-seven members across the Atlantic. The focus here tended to be on specific techniques such as work study or marketing. To complement this activity, the Mission paid for a number of British managers to study in America, using schedules which combined placement with firms and enrol36

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ment in university courses. By the early 1950s the Mission had sponsored eighteen such educational programmes, involving 3 11 students and an expenditure of $1.3 million. Finally, this branch of the US effort, too, was alive to the need for publicity. The London Mission imported numerous American documentary films on productivity as well as twenty-five new projectors, and was willing to lend either for token payment. In addition, Mission staffers produced at least four films of their own, for example Over To Yoti, a record of the AACP hosiery team’s visit to the United States. One estimate was that films from the Mission library had been shown 41,000 times by 1955, reaching an audience of perhaps 1.8 million.* A new phase of the productivity drive began during 1952-3. By now, American programmes were running in several other European countries, and Washington officials could assess what was successful and what had failed. The general conclusion was that a ‘broad brush’ approach to the productivity problem, based simply on demonstrating the superiority of American methods, would only ever achieve limited results. Real and lasting gains meant turning productivity into something of a moral crusade. Wide sections in each society, from both sides of industry, must be persuaded to take part and if possible assume responsibility for their own programmes. Moreover, the question of what issues needed to be tackled in which countries required more thought. Participation and involvement, it was concluded, would only grow in so far as policies addressed local conditions and problems.5 These fresh perspectives produced changes in American policy at every level. In overall terms, Washington decided that its priority must be the creation of national productivity centres, if possible linked together by some kind of umbrella body. Amongst other things, this led to the creation of the British Productivity Council (BPC) in November 1952, and the launch of the European Productivity Agency (EPA) early the following year. More specifically, local staff were encouraged to rethink their own objectives, in line with the drive for relevance. The London Mission’s response was to begin developing a new strategic orientation. American officials serving in Britain agreed that they had been so far unable to influence a wide enough spectrum of opinion. As one staffer recorded in August 1952, there were not enough real converts: During the past two years I have talked with more than 200 British businessmen . . . {and1 officers of the Board of Trade, the Monopolies Commission, AACP, officers of Trade Associations and other industrialists. No one has uttered the words so dear to the heart of the Evangelist, ‘What can I do to be saved?’ In future, the Mission would have to take more care with publicity. Furthermore, it was argued, there needed to be greater clarity of purpose. The current policy stance was too diffuse and should be replaced by a tighter focus. 37

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A Mission committee was appointed to look into the matter and it concluded that improving the quality of management in Britain seemed to be the most urgent task. It recommended as follows: be based on the principle that an action programme . . . should the main problem in the productivity fields at the present time in the UK is on the management side - i.e., it is necessary to overcome the considerable apathy and lack of interest and perhaps hostility in large segments of management, particularly in the small and medium-sized enterprises, to innovations in production techniques, to the subject of improved management-labour relations, to modifying existing attitudes toward competition, etc., and to impress upon management the necessity of taking steps to increase productivity by appropriate action in the above fields.’ In practical terms, this pointed to the need for better training. The Mission would have to persuade the British that they should follow the American example, and develop thorough-going systems of management education. This evolving period of reassessment had one final twist. In 195 2, Senators Benton and Moody successfully sponsored two amendments to the Economic Cooperation Act of 1948, the effective basis for all US technical assistance activity in Europe. These stipulated that American aid was in future to be administered in such a way as to encourage ‘free enterprise’ and ‘free trade unions’, and discourage ‘cartel and monopolistic practices’. Moreover, funds worth $100 million were earmarked specifically to achieve these purposes. Governments in Western Europe were encouraged to bid for this money, after having discussed their ideas with the local Missions.8 From the early 1950s onwards, therefore, technical assistance programmes in Britain grew larger and more complex. There were new organisations and objectives, and a greater sense of urgency. The following sections look at some of these developments in a little more detail.

The British

Productivity Council and the European Productivity Agency

The BPC was charged with stimulating ‘the improvement of productivity in every sector of the national economy by every possible means’.9 It was viewed as a direct successor to the AACP and ran on broadly similar lines. The BPC brought together representatives from peak organisations on both sides of industry in a common forum and stood entirely independent of any government department. As with the AACP, finance came from constituent members, the Treasury and Washington (with the latter providing about 30 per cent of the organisations’ income between 1953 and 1960).” Where the BPC departed from the established pattern was in its mode of working. The

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BPC leadership believed that the AACP had demonstrated the importance of collaboration. The AACP’s greatest successes had been achieved by getting managers and shopfloor workers, sometimes in more than one firm, to solve problems together. l1 The immediate need, therefore, was to find a way of extending, and perhaps institutionalising, such co-operation. To BPC strategists, the obvious solution was decentralisation. Much responsibility for improving productivity would have to be handed to specially created Local Productivity Committees (LPCs) in the regions. The drive to establish LPCs began soon after the BPC’s launch, and by the late 1950s there were over 100 in existence. Each committee decided its own programme, but most concentrated on propaganda and education. The events held by the Grimsby and District Productivity Committee in 1957 were fairly typical: May - productivity week with competition for shop window displays, illustrating productivity both in the home and in the factory, special supplements in the local press and evening meetings. October Trade’. November Control’. December Common

- public

meeting

- meeting

- public Market’.

with

MP

for managers

meeting

with

on ‘Britain’s

on ‘Work

Place

Study

MP on ‘Britain

in World

in Management

and the European

December - five day appreciation course and practical by the BPC work study unit, especially for the fishing

exercise put on industry. ‘*

One important innovation which the LPCs pioneered was the so-called ‘circuit scheme’. This was part of the drive to encourage discussion about productivity-improving ideas. An LDC would set up a circuit of about ten firms and then arrange for teams from the participants to visit each other in fixed rotation. These exchanges were modelled on the AACP example and involved trade unionists as well as managers. One novel feature was that the circuits usually encompassed companies in different sectors. Such mixing, it was declared, stimulated lateral thinking and protected all parties from the scrutiny of competitors. The circuit scheme was particularly popular in the mid-1950s. The BPC claimed that 500 firms were affiliated at this time and that there had been 7,000 visits during the initial eighteen months of operations. In later years, levels of enthusiasm seem to have declined, and by the early 1960s it was reported that visits were running at a total of only 100-200 per year. ’ 3

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Alongside its local campaigning, the BPC developed two other kinds of activity. First, much emphasis was placed on the dissemination of information. The BPC created its own film unit and this produced an impressive forty-seven documentaries in the years to 1964. Several BPC films were shown on television. Most notably, six medium-length programmes on the general principles of productivity were made specifically for the BBC in 1953-4, and these allegedly attracted an audience of 3.5 million.‘* The BPC was equally active with regard to publishing. Each year saw an extensive output of reviews, pamphlets on industrial techniques and case studies. During the early 196Os, 40,000 of these items were being sold every year.15 In addition, BPC staff continued to organise a constant stream of meetings, lectures and rallies. A high point was ‘British Productivity Year’, beginning in November 1962, which involved inaugural ceremonies in seventy industrial centres, a national rally in London addressed by the leaders of the three main political parties, and nearly 2,400 other events.” Second, the BPC was notably concerned with work study. It set up a special work study unit in 1953 and provided funds for this to grow fairly quickly. The unit gained considerably when ICI, a pioneer in the field, presented it with a substantial amount of data from past investigations. By the early 1960~, the level of activity was substantial. In 1961-2, unit staff organised a total of sixty-two one-day conferences, twenty-seven three- to five-day appreciation courses, and seventy single lectures or film shows.” The EPA was created by the Organisation for European Economic Cooperation (OEEC) in 1953, using Benton-Moody money.” It was given three aims: 1

2

3

To try to bring about a change of attitude in the management, supervisors, staff and workers of firms, both individually and in co-operation with one another; To concentrate on those sectors which, while of relatively high importance for the economic and social life of member countries, have markedly lagged behind in the modernisation of their methods and are faced with special difficulties hampering a rapid rate of progress; fandl To decide on the most suitable action to be taken to provide the necessary assistance to national productivity centres and to international nongovernmental organisations in the performance of their own tasks.

This was an ambitious remit and, as a result, the Agency quickly expanded. By the mid-1950s it employed 100 full-time staff with the same number of consultants, and was running about ninety projects.19 The Agency’s programmes took in a wide variety of issues and problems. Attention was given to both agriculture and industry, while methods used ranged from team visits to seminars and conferences. The scale of work was impressive. Between 1953 and 1957, EPA activity on management questions

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alone encompassed 340 training courses, one mission to the US, three summer schools, seven international conferences and forty published reports.*O Many EPA projects ran for relatively long periods. Thus, the ‘Joint Mission on the Teaching of Management-Labour Relations in America and Europe’ visited the United States in 1959, Britain, Sweden and The Netherlands in 1960, and France and Germany in 1961, only then reporting.*l British participation in the EPA’s activities was by no means automatic. The BPC sometimes struggled to raise interest in suggested programmes. Furthermore, not every EPA project was relevant. Some were specifically aimed, for example, at the underdeveloped Mediterranean fringe. A survey of 1954 found that Britain had representation on fifty Agency projects, about 60 per cent of the total. This was less than France, Italy and Germany, though still a substantial degree of involvement.**

The Benton-Moody

programmes

Negotiations between the American and UK governments over BentonMoody money proceeded during 1953, and, in the end, the British were able to secure about $9m of aid, which was used to finance 163 projects involving 81 organisations. The grants issued tended to be ‘of a pump priming nature’, aimed at stimulating interest and thus hopefully leading to ‘the more permanent establishment of services and facilities benefiting smaller and less efficient members of industry and commerce’.23 Some of those projects supported stretched well beyond 1958, the formal end-date of the programme. Benton-Moody money underwrote the establishment of activity and research in many different fields, as Table 3.1 illustrates. Major sums were committed to advisory services, education and training, and economic and social research. In general, grants were fairly small, averaging about &12,000. However, large sums were provided if the project was felt to be particularly important. Imperial College, London, received &190,000 to establish senior positions in heavy electrical and production engineering, while the College of Aeronautics at Cranfield and Loughborough College of Technology were each given &50,000 for new staff appointments. Established research bodies, both in the public and private sectors, also benefited from substantial funding. 24 The Benton-Moody programme had two unique features. First, it was the only technical assistance initiative which involved a substantial academic component. Washington officials believed that the British lacked understanding of competition, human relations and management issues, and accordingly insisted that a proportion of Benton-Moody money be spent on projects which would deal with the more theoretical aspects of these questions. Typically, funds were channelled to existing research teams or organisations. Considerable sums, for example, were given to the Joint Committee on Human Relations in Industry, a body run by the Department of

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T&b/e 3.1 The Benton-Moody 1956

programme:

AND

components

IMPACT

and amounts

committed,

Component

Number of projects

Amount committed (f)

Advisory services Economic research Social research Production economics Agricultural research Education and training Publicity Revolving loan fund for agriculture Revolving loan fund for industry EPA Implementation of programme (Unallocated)

36 37 30 15 10 15 16 -

523,648 227,750 189,659 64,018 106,750 520,100 224,941 700,000 300,000

-

272,143 45,000

-

55,000

Source:Rogers, pp. 23-33 Scientific and Industrial Research and the Medical Research Council. These, in turn, were used to finance work in the universities of Birmingham, Cambridge, Edinburgh, Leeds, Liverpool, London, Manchester, Oxford and Wales. Joint Committee contracts with such well-known figures as J.A. Banks, Tom Burns, C.F. Carter, Tom Lupton, Rosemary Stewart and Joan Woodward produced over seventy books and articles in the 1950s and ensured the circulation of new ideas in publications ranging from the Financial Times to the Operational Research Quarter/y. 25 The second novel aspect of the Benton-Moody programme was the revolving loan fund. It was agreed that a proportion of the monies available would be used to support firms that wanted to introduce small-scale innovations in their everyday operations. Adverts were placed in the general and specialist press, and this produced several hundred individual proposals. By the end of 1955, loans worth &0.5m had been granted to forty-two firms. The terms stipulated were usually advantageous: the average loan was for three and a half years at an annual interest rate of 5 per cent, less than that charged on the open market. Most of the firms that received funds were in the engineering industry. A typical case involved a Manchester manufacturer of handling plant for coal mines. It was lent 225,000 to purchase new machinery and reorganise at shopfloor level. Such innovation, it was said, would guarantee considerable gains in productivity.26

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The question

AND

IMPACT

of impact

Taken together, these various initiatives represented a formidable attempt to change British methods and attitudes. In the first phase, the Americans had provided an enormous amount of basic know-how about best practice in a wide cross-section of industries. All the different phases of manufacturing were covered - from design, through production engineering, production planning and production control, to the details of actually making the product, and finally marketing and distribution. In the second phase, there had been a gradual shift towards reforming business practice, pivoted around a strong emphasis on management, and involving a plethora of innovative organisational forms. The whole offensive had cost unparalleled sums. Between 1948 and 1958, direct US technical assistance to Britain alone was probably worth about $15 million. 27 To what extent did all this activity actually provoke change? This is not an easy question to answer for a number of different reasons. First, it needs to be emphasised that official programmes were certainly not the only conduit spreading American ideas in Britain at this time. Some British companies had made their own arrangements for monitoring developments across the Atlantic and as a result had access to a wide range of information about US practices. Meanwhile, American private companies operating in Britain continued to provide a significant ‘demonstration effect’. This was particularly pronounced because their number was increasing dramatically: between 1950 and 1962, US direct investment in the UK grew by a factor of four and a half, totalling $3,805 million at the later date.28 Finally, this period also saw US consulting companies begin to gain a toehold in Britain. McKinsey started work for Shell in 1957, and then completed contracts for Dunlop, ICI and IPC. Emerson and Booz, Allen and Hamilton were equally successful in gaining British clients. By 1964, the American ‘big three’ employed eighty qualified consultants in London, only 5 per cent of the number with the British ‘big ten’, but still a powerful and prestigious force for spreading transatlantic ideas. 29 Each of these developments quite obviously complicates any attempt to trace how official initiatives actually worked. Second, attention must be drawn to the fact that little systematic work on what particular programmes achieved was ever completed by contemporaries. The issue of follow-up certainly surfaced on occasion in both Washington and Whitehall, but it remained controversial. For while the Americans favoured quantification whenever possible, the British were aware that any kind of measurement might provoke significant hostility from important interest groups. The result was a series of reports which tended to focus on impressionistic descriptions of cause and effect rather than hard data. The ECA first raised the question of evaluation during the AACP programme. It proposed reviews of team visits which would give the results in ‘statistical form, i.e. increases in output per manhour or decreases in cost’.

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Accordingly, the AACP began approaching firms in twenty different industries. However, those involved quickly concluded that the whole idea was in reality ‘both impracticable and impolitic’. To begin with, firms would not or could not supply the series required: ‘it was found that there was unwillingness to give figures of costs and that figures showing the trend of productivity were frequently not available in any form, and where available were not in a comparable form’. Behind this reticence lurked a strong antipathy to placing any commercial information in the public domain, and a resistance to the overall objective of making comparisons between firms on either side of the Atlantic. In the end, the ECA was forced to accept what it viewed as a highly unsatisfactory compromise. Reviews of productivity trends were completed for a number of industries, but these largely depended upon assessments provided by trade associations, without any external monitoring.30 The need for follow-up was returned to during the Benton-Moody programme. The Americans were worried that money was being given to disparate organisations without any checks being imposed upon their operations. However, once again, British officials underlined their unwillingness to intervene. The Board of Trade informed the Americans of Whitehall’s general stance: It is one of the main conditions of the research projects carried out under Conditional Aid that the results should be published freely in accordance with academic practice and great importance is attached to independent publication. It is the Government’s view that they will carry greater weight if they appear as independent, academic studies than if there were any suggestion that the Government had been connected with their production or had exercised any right to vet the results before publication.31 This approach coloured views on the more specific question of measuring impact. It was argued that such work would be costly and might antagonise research teams. Those involved should be left to liaise with industry about their findings. 32 Given such resistance, the Americans were once again frustrated in their desire for appraisal.

Assessments

and evaluations:

the American

programmes

These are important caveats, but there is still a vast amount of evidence that concerns the question of impact. Civil servants, independent experts and industrialists all discussed the productivity drive and held opinions on its efficacy. The following sections summarise some of the more pertinent views, concentrating first on those that dealt with the various American efforts. Government officials on both sides of the Atlantic believed that the US programmes had been largely beneficial. A thorough British enquiry of 195 1,

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based upon detailed investigations by several different ministries, reached typical conclusions. It argued that technical assistance needed to be evaluated from two viewpoints - ‘direct and indirect effects on the U.K. economy’ and ‘broader social and political implications as a contribution towards European co-operation and good relations with the U.S.’ Existing initiatives had produced varied results. The AACP seemed to have been of considerable value. It was judged ‘a most effective instrument for collecting and disseminating information about American industrial practice, and for stimulating thought on productivity problems at all levels in U.K. industry’. On the other hand, the activities of US consultants in Britain had only been ‘of very slight importance’. As a whole, however, the exercise had produced positive results. The enquiry concluded: Technical assistance proper as furnished direct to the U.K. has played a useful part in relation to productivity problems. It is not possible to assess its contribution quantitatively, but it has certainly played its part in the rise of productivity in the U.K. over the past eighteen months. Its cost has not been heavy either in public money or in manpower.33 Five years later, a British assessment of the Benton-Moody initiative was equally favourable. The British delegation to the OEEC told the Director of the EPA that it was ‘impossible to identify precisely the effect which any individual grant may have had’ but added that gains were certainly being made. It continued: For instance, the popularity of the phrase ‘work study’ is no doubt largely due to the support . . . given not only to work study but to all the allied managerial techniques of layout, production planning, quality control etc. There is also evidence that the importance of a proper understanding of these techniques is becoming appreciated: demonstrations, appreciation courses and training courses are well supported .. The delegation concluded that though there was ‘still a very long way to go’, Benton-Moody aid had certainly changed attitudes in an important and constructive way.34 American technical assistance staff in Washington and London occasionally felt disheartened by the pace of change, but they, too, were in no doubt of the programmes’ overall worth. A senior US official reported in 1949 that the onslaught was ‘achieving results in England’, with the ‘intangible and psychological influences’ being probably ‘even more important than the many tangible contributions in technique and methods’.35 Two years later, William Joyce, the ECA’s Director of Operations, was reported to be ‘deeply impressed’ 45

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with the success of the AACP, and convinced that the UK contribution to this body constituted ‘an inspiration ’ . 36 Later reviews tended to make similar points. Surveying the entire history of postwar productivity policy in 1956, a senior London Mission staffer argued that much had been achieved: ‘The cumulative effect . . , has been the stimulating of wider interest in improved managerial methods and better techniques and the development of a fresh outlook on the industrial problems facing the country.’ Moreover, he suggested, most of this had occurred directly because of the American government’s policies: the employment of. . . U.S. aid was necessary to strengthen the hands of those few {British) government officials and . . . officers of trade and research associations, and educational establishments who recognised the urgency of the need for greater efficiency and improved management but who lacked adequate moral support or financial resources to put into effect schemes that would help overcome deficiencies3’ These official assessments need to be taken seriously but they cannot necessarily be accepted at face value. British civil servants were always sensitive about offending their American counterparts and so tended to downplay problems or failures. Those involved in the ECA feared criticism from Congress or the American press and were thus also inclined to be generally positive in all circumstances. In this situation, it is obviously sensible to look outside government circles and examine what other participants and commentators thought of the various programmes. British trade associations were intimately involved in technical assistance (mediating between firms and government) and so their views offer an important perspective on events. Some felt quite sure that the American offensive was producing identifiable results. The British Steel Founders’ Association collected data on what the AACP had achieved in its industry, and demonstrated that progress was being made under six main headings - sales, design, equipment, methods and research, and industrial relations? layout, Nevertheless, others saw the matter in rather different terms. Several trade bodies pointed out that their members had a long-standing interest in modernisation and so were unlikely to be overly impressed by the sudden appearance of the American proselytisers. The footwear trade asserted: ‘Even less than in other industries did the Productivity Team’s Report come as a bolt from the blue. It has been one of a series of important influences on post-war developments.‘39 In other cases, it was frankly admitted that the new ideas had been actively disregarded. Progressive manufacturers in the bronze and brass casting industry were aware of this problem and their pessimism coloured a BPC review of 195 5 :

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From a cross-section of the industry . . . it would seem that the adoption of new techniques has not greatly extended in the last two years, although many more firms have come to realise their value. While the more enlightened firms have continued a policy of purchasing new plant, or reconsidering their production programmes, others have been content to look on with an ‘it costs too much’ attitude or have ignored the recommendations entirely.* The specialist and trade press held equally heterodox opinions. Some journals were quite sure about the US programmes’ effectiveness. In 1950, the Times Review of Industry commented on the AACP: ‘There is little doubt that each of the reports so far issued has made pertinent recommendations which, if adopted, could raise average productivity substantially.‘41 Others took a more discriminating line, believing that progress had been rather uneven. The Economist concluded that the AACP’s most important contribution had been psychological: young managers and workers, in particular, were now more aware than ever of the benefits that high productivity could deliver. 42 The Engineer agreed in an editorial of 1952: The true value of the [AACP team) visits has lain less in the collection of new technical knowledge than in the stimulus to new thought brought about by the contact of executives and men from the shopfloor with ‘the American Way of Life’. For the enthusiasm of Americans of all grades for increased productivity and the high degree of productivity ruling in jobbing as well as in mass-production factories proved a revelation to a11.43 Finally, a few titles were rather doubtful that anything much was being achieved. The journal Engineering came to the following distinctively downbeat conclusion in 1953: ‘Expenditure on the activities of the . . {AACP] must be regarded as a long-term investment which will eventually pay for itself, but from which the annual returns are likely to be small.‘** A parallel observation was that the Americans had only interested a small minority. The Statist claimed: ‘There is now a wealth of examples of what can be done . . . But for every enterprise which has taken some trouble to improve the quality of its management - and through that, its productivity - there are probably a score which have been content to carry on in a traditional way. .45 What all of this shows is that there was no real consensus about the question of impact. Many believed that the Americans were achieving change, but there were persistent doubts about both the nature and the extent of their successes. How were the BPC and the EPA rated?

47

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Assessments

AGENCIES

and evaluations:

AND

IMPACT

the BPC and the EPA

Early comment on the BPC tended to be rather negative. The organisation had been created in a rush, it was noted, and lacked coherence and strategy. In 1953, an American Mission official told Washington: ‘There was general agreement that the BPC is a relatively limited and ineffectual organization and that it requires considerable strengthening. All agreed that it lacks dynamic leadership, sufficient drive to see a sustained program through, and funds to organite and mount a sustained program.‘46 Later, as the BPC extended its operations, opinions began to change. Initiatives like the circuit scheme and the work study unit were widely applauded as imaginative and fruitful. *’ Moreover, it was generally felt that the decision to build up local organisations was entirely appropriate. Surveying LPCs in the mid-1950s, one US veteran of the technical aid programme came to generally positive conclusions: As in all community undertakings, the success of these local . . . [groups) appears to be varied. Some are still feeling their way, many are carrying on diverse and useful activities, a few demonstrate imagination, enterprise, {and] dynamism in carrying out a far-reaching program which not only stimulates interest in higher productivity but also provides practical means of helping firms to attain it.48 Nevertheless, there were those who remained rather less convinced. Some pointed out that the BPC was only reaching a fairly small part of industry. It was very indicative, they argued, that 70 per cent of the 1,340 BPC events put on in 1961-Z attracted fewer than fifty persons.49 At the same time, there were doubts that the BPC was really reaching those in most need of its services. The Financial Times believed that ‘a very high proportion’ of those active in the circuit scheme were from ‘big firms already converted to productivity ideas’.>’ Whatever the truth here, research on participants at BPC work study unit seminars quite clearly showed that the organisation had failed in its attempt to involve both sides of industry. One report noted: It is difficult to express an opinion upon the nature and the complement of the audiences, but . . . [there) have been few Full Time Trade Union officials. In the main middle management and supervisory levels have been chiefly represented. As far as representation from the shop floor is concerned the main difficulty is without doubt, with particular reference to trade union representatives, the payment for lost time.51 Finally, commentators in the early 1960s were critical of the BPC’s inflexibility. In this view, ‘revialist meetings’ and the relentless promotion of a

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limited repertoire of techniques like work study were no longer relevant to industry’s requirements, and the BPC was in considerable danger of being marginalised.52 Evaluations of the EPA were almost universally negative. In the mid195Os, The Economist dubbed it ‘a little known child of the OEEC’, and both the Times Review of Indzlstry and the Statist published similar assessments.s3 British civil servants were equally damning. In a letter to the Board of Trade at the end of 1955, a senior Treasury official declared: ‘It seems doubtful whether in a material sense the United Kingdom gets a very good money’s worth out of the E.P.A. It does not seem to have many strong supporters in this country and in particular there are few signs that British industry rates it at all highly.“* Four years later, the Cabinet Mutual Aid Committee bluntly recorded that the EPA’s achievements, when balanced against cost, ‘could not be regarded as outstanding’.ss

Conclusions Using contemporary opinion to measure impact, it would appear, offers few easy answers. Those who participated in or reported on the technical assistance programmes quite often held very different views about their efficacy. Complicating matters further, few of these assessments were anyway based on hard evidence. The whole discussion tended to revolve around impressions and anecdotes. Even optimists could usually only point to relative intangibles like a changing psychological climate. Convincing examples of cause and effect were few and far between. As a result, judging today between the contending claims remains virtually impossible. One way round this problem is to adopt a rather different approach and focus on the details of the American effort. The US productivity missionaries were keen advocates of particular techniques and methods, ‘best practice’ ways of making products and doing business. The following two chapters concentrate on a range of these specific recommendations, and trace how they fared in British circumstances.

49

4 THE AMERICAN PRODUCTIVITY GOSPEL BRITAIN Implementing

IN

change in business practice and shopfloor technique

Introduction The American technical assistance programmes were predicated on the central belief that Britain’s firms were very often backward in the way they organised and conducted the production chain. ’ The British might have real strengths in areas like research and development, it was argued, but these were frequently betrayed by deficiencies at the design, manufacturing and marketing stages. The need, therefore, was for the British to adopt US best practice techniques and methods wherever possible, both on the shopfloor and in the manager’s office. This chapter looks at these American prescriptions and traces what happened when they were applied in British circumstances. It does not claim to be a comprehensive account but rather presents a series of discrete case studies, chosen to illustrate problems and successes across the spectrum of initiatives. Each topic is approached in a similar way, with attention being given in turn to British practice in the 1940s; the American intervention; and the resulting pattern of impact.

Production

engineering

and control2

During the immediate postwar years, production in many UK industries was regulated on lines which had remained essentially unaltered since the late nineteenth century. The immediate shopfloor area tended to be controlled by works managers. Such men had often started out as apprentices and then risen through the ranks. Few possessed formal management qualifications and their thinking was thus usually governed by experience and tradition3 They also had considerable autonomy, for, further up firms’ management hierarchies, there was relatively little interest in production. Senior managers came from a variety of backgrounds, but only a minority had much real experience of

50

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manufacturing. Directors had always seen themselves as responsible for policy rather than arbiters over the minutiae of practice. Moreover, the general conditions dictated that a range of other questions required priority treatment. Firms faced considerable difficulties in the first years of peace - there were raw material shortages and new demands from labour - but they also had the promise of healthy profits because of the pent-up demand in many markets. The natural outcome was an emphasis on getting goods to the customer, however this might be achieved. In such circumstances, those in charge of production often felt themselves overlooked, of real importance to their firms but lacking in status and influence. A.P. Young, a well-known manager from Rugby’s BTH company, complained: ‘In a large well organised unit, say, in the Engineering Industry, probably about 85% of the total personnel come under the direct control of the Works Manager. He is thus able, by his authority and responsibility, to exert a powerful influence on the productivity problem - and yet he is often the “forgotten man”!‘* Of course, some firms were rather less neglectful of manufacturing than others. Knowledge of production engineering had spread slowly in the interwar years but the Second World War gave the subject a considerable boost. Significantly, the Institution of Production Engineers (IPE), which had been founded at the beginning of the 192Os, saw its membership grow from 1,200 in 1935 to 7,300 in 1948. However, the influence of new techniques should not be overestimated. Production engineering and control methods were commonly used by some big firms in certain sectors (for instance, the motor industry) yet were almost completely unknown amongst medium and small firms. Moreover, the scope of production engineering as it was understood in Britain tended to be rather restricted, especially compared to the situation in the United States. British production engineers typically focused on machines, and did not deal with the wider questions of factory lay-out and materials flow that were the staples of their transatlantic counterparts.5 Britain’s relative backwardness in these matters was highlighted during the Anglo-American Council on Productivity (AACP) programme. Some fortyone teams visited specific American industries and most returned very impressed with their hosts’ use of production engineering and control systems. For example, thirty-four commented on the importance of mechanical aids in the United States, while thirty were impressed by the modern methods of costing that they saw.’ As a result, the AACP decided to send two specialist teams to investigate US trends in more detail, and their reports were published in 1953 and 1954. In general, both teams confirmed that American practice was superior: there were no major novelties amongst the techniques used, but all were applied with a rigour which was almost unknown in Britain. Unsurprisingly, therefore, the general conclusion was that British companies should try harder. Both the teams went out of their way to stress that small as well as big manufacturers could gain by re-examining production procedures and each underlined that useful changes might be 51

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implemented at relatively little cost. Finally, it was also emphasised that nothing should be done without due reference to each firm’s overall position. Production needed to be harmonised with the design, accounting and marketing functions.’ These were themes that subsequently reappeared in many of the other technical assistance initiatives on production engineering that followed in the 1950s. A $30,000 grant from Benton-Moody funds allowed the IPE to put on Britain’s first national production and productivity exhibition during 1954, an event which attracted 40,000 visitors. Meanwhile, the European Productivity Agency (EPA) was also actively involved. For example, it paid for two American consultants to run a series of seminars on ‘company planning and production controls’ during 1956-7.8 To what extent did this activity actually produce tangible results? Some degree of change was certainly evident. The IPE continued to grow and had 18,000 members by 1970.9 Knowledge about theoretical aspects of production engineering and control techniques also increased and was collected in a series of popular and widely sold textbooks. However, accepting this, it is equally clear that much of industry remained largely unenthusiastic about what was being proposed. If some firms innovated, many stuck by traditional techniques. To begin with, it was commonly noted in the 1960s that firms were still often treating production as a rather subordinate part of their overall operations. Control of the shopfloor, in many cases, continued to be in the hands of relatively unqualified managers, and there was a general reluctance to employ trained specialists. lo As before, those responsible for machine shops remained convinced that they were undervalued and ignored when it came to deciding company policy. Ray Wild, an ex-engineer who worked at Bradford University’s business school, ended his 1972 book Management and Production with the following observation: Production occupies a fairy-tale position in both industry and education, but unfortunately the role played is that of Cinderella rather than Prince Charming. Few people would seriously dispute the importance of the production function in business but this importance is frequently unrelated to the importance attached to it in the board-room, and is certainly not reflected in the importance attached to the subject in educational circles.” Some years later, two academics who had surveyed the relevant literature came to very similar conclusions. They reported: ‘A leitmotif of the studies is the idea that production management is a “Cinderella function” . . . is disadvantaged with regard to pay and prospects, status and fringe benefits, image and mobility, and . . . is an area of work the young and ambitious manager will keep out of.‘12 52

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Given this situation, it is unsurprising to find that enquiries which dealt more directly with the diffusion of production engineering and control techniques frequently came to overtly gloomy conclusions. A Department of Scientific and Industrial Research examination of seventeen printing firms in 1961 found that ‘work planning of all kinds’ was ‘grossly inadequate’.13 National Economic Development Office (NEDO) enquiries later in the decade painted a similar picture. ‘* The disappointing rate of progress is best illustrated by looking at two specific weapons in the production engineer’s arsenal - work study and materials handling.

Work

study

Work study (an amalgam of method study and work measurement)‘s had been widely promoted in the immediate postwar years as part of Labour’s productivity drive. Nevertheless, many companies had not adopted this technique by the early 195Os, and so the Americans decided that it needed to be pushed much harder. The potential gains seemed enormous: studying each job systematically and from an ergonomic standpoint would allow very much more efficient working at virtually no extra cost. Moreover, the general conditions seemed propitious. Work study had originated in Britain, and the country had both a fully functioning specialist society and several world-class experts (notably ICI’s R.M. Currie and the consultant Ann Shaw).” This seemed to be a case where an American-inspired renewal of vigour really might produce results. The campaign to popularise work study involved a number of initiatives. The British Institute of Management (BIM) was pivotal in the early 1950s organising several big conferences and publishing a popular handbook called Ozltline of Work Stzldy in 1956. Colleges put on special work study courses, often aimed at beginners and tailored accordingly. Finally, the British Productivity Council (BPC) work study unit was also very active, spreading information and engaging in consultancy investigation (see above p. 40). Some of this effort had an obvious impact. BIM conferences were well attended and provoked enthusiasm. l7 Moreover, there was an obvious increase in applications. Work study spread through some parts of industry and was widely used in the armed forces. Even the trade unions became interested, with the TUC deciding to create its own work study courses. However, it was also clear that the degree of change continued to be rather less satisfactory than many had expected. Some firms claimed to have adopted work study but were in fact misapplying the technique, confining themselves to measurement as part of piecework bargaining, and thus neglecting the rationalisation of effort. Many others were not even at this stage. Indeed, quite a large residue seemed to be completely oblivious to work study’s very existence. l8 Later detailed enquiries confirmed the extent of inertia. An enquiry by the Welsh College of Advanced Technology in 1966-7 examined 200 firms,

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mostly in engineering, and found that half had no work study department. There was, the investigators reported, ‘still widespread apathy in industry to work study practices’. Certainly, the position in Britain seemed to be lagging far behind that in the United States. While firms in the Welsh sample employed an average of 3.7 1 work study personnel per thousand workers, the comparative American figure was said to be nearly four times larger.19 Writing in 1983, Keith Lockyer, John Oakland and Clive Duprey from the University of Bradford’s Management Centre came to rather similar conclusions. They analysed questionnaires completed by 1,866 members of the Institute of Industrial Managers and found that though there was consensus about the need for work study, less than half of the sample were employed by companies that actually applied the technique regularly. The Bradford team concluded: Perhaps the most disturbing finding of this survey is the overall low usage of. . . work study, particularly in the small to medium firms, when compared to the knowledge which is available. A high proportion of production operations managers have learned about work study and have proceeded to ignore it.20 The propagandising

of the 195Os, it seems, had produced

Materials

only mixed

results.

handling

It had long been recognised that materials handling - the name given to ‘the art of rationalising handling and movement’ in the factory21 - could have a vital bearing on productivity. An enormous amount of effort was expended on moving raw materials, components and finished goods around plants. One estimate for engineering was that fifty tons of materials had to be handled for every ton of finished goods produced. This might represent anything from 15 to 85 per cent of total costs, depending on the particular process.22 What excited British production engineers (and visiting American observers) in the late 1940s was the fact that the potential for making gains in this area seemed enormous. British industry remained wedded to very old-fashioned handling techniques. Indeed, brute strength frequently predominated. It was believed that as much as 80 per cent of movement was done by human muscle.23 Consequently, the experts agreed, any measure of change was simply bound to bring swift and significant rewards. The AACP Materials Handling team did much to confirm these impressions. It reported that US practice was superior but emphasised that this was not because of some magic formula. The Americans were successful simply because of their rigour. As the team explained: ‘No new or unknown mechanical device not available on the British market is responsible for this increase in manufacturing efficiency; it comes mainly from an extensive and intensive 54

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application of known methods and equipment. ‘** The lessons for Britain were therefore clear. Manufacturers in every sector, the team advised, must review their existing handling arrangements and mount campaigns to innovate and economise. The need was for thought and planning rather than large-scale investment. It was a question of making improvements without necessarily changing existing manufacturing equipment or factory space. As the team emphasised, this was ultimately a management question since managers would have to take responsibility for designing and introducing the new systems. 25 If those involved found this daunting, it was added, then they should take courage from the likely benefits. Better materials handling could deliver seventeen identifiable benefits - from ‘Reduced volume of work in process’ to ‘Improved outlook of men as a result of their operating mechanised equipment instead of doing hard manual labour’ - and these were all obtainable for every manufacturer. 26 In the team’s view, there was simply no doubt about the importance of the issue: ‘Better materials handling offers a greater opportunity to cut production costs and to increase productivity than any other single factor.‘*’ This was a striking message and there appeared to be several reasons for thinking that it would be heeded. Britain had a strong and well-developed industry producing handling equipment of every type, from conveyors and fork-lift trucks to simple gravity chutes and trolleys.28 There was an informative trade periodical (Mechanical Handling) and a regular exhibition for producers and consumers at Olympia. It was also apparent that Britain possessed some real experts in the field, most notably Frank Woollard, an innovative practitioner at Morris Motors and author of a classic text-book called Principles of Mass and Flow Production. 29 Finally, it was obviously of great significance, too, that many of Britain’s European competitors were taking the issue seriously. Teams from various countries had visited the United States at this time and virtually every one was impressed by the importance of mechanical handling. The emphasis was usually on the low costs but high benefits involved. A specialist Organisation for European Economic Cooperation (OEEC) team reported: ‘It appears to be possible, by applying correct materials handling techniques, to raise productivity by as much as 15 per cent in an average factory without any replacement of existing buildings or equipment.‘30 In the years that followed, it was quite apparent that some of British industry was taking notice of the proffered advice. The AACP team’s report received much coverage in the press and provoked a good deal of discussion. Mechanical Handling noted: ‘Undoubtedly the Report did a lot . . . to make executives more conscious of the necessity for more efficient methods.‘31 Furthermore, there was an obvious growth in creative applications. At one end of the scale, motor companies introduced new transfer machinery. At the other, some small companies were known to be enthusiastically experimenting with better lay-out and simple methods like pulleys and pallets.32 In 55

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an editorial of 1955, Mechanical Handling was in no doubt that progress had occurred. It declared: ‘There can be few of Britain’s leading industrial firms who have not introduced some kind of improved handling facilities within the past few years.‘33 However, after the early euphoria had worn off, many observers concluded that much less had been achieved than was initially predicted. Writing in 1958, F.R. Ford, the Chief Production Planning Engineer for Austin’s Midland area factories, produced the following balanced but rather pessimistic assessment: A visit to a number of different factories will, I believe, convince many people that on the whole the progress in material handling lags behind the general level of improvements in the processes of manufacture. There are, of course, many exceptions, such as the cigarette and bottling concerns where automatic handling has been developed to a very high degree. I am, however, primarily referring to engineering concerns, and in particular, to the motor car industry. 34 One year later, Mechanical Handling substantially revised its earlier rather optimistic assessment. Change was occurring, it noted, but only in a minority of cases. An editorial speculated on the balance of innovation and inertia: At a guess, we would say that for every commercial or industrial firm having a vigorous and continuously developing handling policy, there are a dozen or more which have scarcely the haziest notion of the importance of the handling function from the viewpoint of time and cost.35 Later studies, once again, reinforced the impression that the impact of American-inspired activity had been fairly limited. In 1974, the Department of Industry’s Committee for Materials Handling established a working party to examine current practice in UK industry. This focused on thirty engineering companies and reported amongst other things as follows: 1 2 3

Storage and materials handling cost at the median value was found to be 12 per cent of conversion cost . . . Materials handling appears to be costing many of the companies more than it ought . . . From the sample surveyed there was little evidence to suggest that firms engaged in engineering production in the United Kingdom are aware of their true costs of storage and materials handling ..

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On the basis of these findings, the Committee felt ‘justified’ in urging British industry ‘to take a new look at manufacture by focusing attention on materials flow as well as on the production processes’.36 As will be immediately obvious, this was a very similar exhortation to the one produced by the AACP team some quarter of a century earlier.

Quality

control

British companies had traditionally tried to enforce quality standards by specification and inspection. 37 Blueprints collating data on, for example, dimensions and tolerances would be supplied to all departments and then used to check finished goods. During the Second World War, many firms in engineering decided that this system was too lax and so began utilising simple statistical quality control (SQC) techniques. The most popular instrument was the control chart. Machine operators would sample their output, plot variations as a graph, and intervene to correct equipment settings when the trend line moved beyond pre-determined magnitudes measuring acceptability. The move to SQC was widely hailed as a major step forward, but in the late 1940s it seemed that the impetus to innovate was faltering. As several observers noted, there was a ‘lull’ in SQC applications, with some firms even discarding the technique altogether. 38 Much of this inertia, it appeared, stemmed from market conditions. As a correspondent to the journal Engineering Inspection later explained, industry had little incentive to worry about quality: We were faced with a seller’s market, material shortages, shortage of machine tools, to say nothing to shortage of skilled labour; many manufacturers had fine fat order books. The net result of all these circumstances was inevitably a ‘take-it-or-leave-it’ and ‘get-it-outanyhow’ attitude.39 Those involved in the productivity initiatives found this situation rather worrying. Manufacturing without rigorous reference to quality standards was highly inefficient, generating significant amounts of rework and scrap. Moreover, the drive for short-term gain, particularly in export markets, appeared to be jeopardising the chances of longer-term success. Some British goods were acquiring a poor reputation abroad and there was a strong likelihood that many overseas consumers would simply switch allegiances when German and Japanese competition finally re-emerged.*’ For these reasons, it was concluded, the quality issue must be included in the technical assistance remit. As a mark of their determination on this point, the AACP decided to dispatch a team across the Atlantic charged with examining current US practice. The visitors were impressed with what they discovered. Many American

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firms were using SQC techniques. Some had gone further and were pioneering a ‘new and broader conception’ of quality control, built around ‘a continuous cycle of make-test-adjust. ‘*’ They had recognised that inspection by itself was incapable of delivering fully satisfactory results. Even vigilant inspectors routinely passed a proportion of faulty goods. Anyway, siting a control station at the end of the manufacturing process did nothing to diminish the amount of rework and scrap. The ideal, these firms had understood, was to build quality concerns into every stage of production. This meant convincing both managers and workers that quality was ‘their business’. The team was very struck with just how much was being done to put these insights into practice. Slogans noted in American factories included ‘Quality depends on me’; ‘Price will soon be forgotten, Quality will long be remembered’; ‘Quality - where do we get it? It walks into our plant everyday on two legs’; and ‘Quality is your baby too 9. 42 The team recognised that these developments pointed to the future but it also accepted that many more prosaic things would need to be done in Britain before they could be even contemplated as practical measures. One important requirement, the team argued, was an expansion in quality control courses, particularly those that dealt with statistical engineering (statistical methods apphed to production, inspection and experimentation). However, the team emphasised, firms did not have to wait for better educated experts but could do much to promote improvements almost immediately. Greater care was required over the positioning and responsibilities of existing inspection staff. Simple SQC could be introduced and gradually diffused throughout any organisation. Above all, it was stressed, managers must take ‘a continuing interest in the quality of the products’. The planning and execution of quality control procedures needed to be accorded ‘the same careful attention in terms of equipment and facilities’ as was given to other facets of business activity.43 Many in the field were excited by these recommendations, and over the next few years some effort was made to keep them in the public eye. The BPC took up the quality control issue and promoted it where possible. The organisation brought experts over from the US to visit British factories; published manuals and case studies, covering industries as diverse as hosiery and brewing; and put on a string of conferences and seminars, some forty in 1958-g alone. This activity in turn provided the impetus for the launch of the National Council for Quality and Reliability (NCQR), an umbrella organisation of those interested in quality issues which was active in campaigning until well into the 196Os.** However, despite all this agitation, there was little sign that the wider business community had been stirred. BPC and NCQR events attracted the converted but were largely shunned by the ordinary industrialist. The NCQR’s newsletter had a circulation ofonly 2,700 in the mid-1960s while its first national conference in 1963 was attended by a mere 270.45 Indeed, a good deal of evidence suggested that many firms were quite content to 58

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continue using highly traditional quality control methods. For example, much of the engineering industry dealt with the increasing complexity of production by simply employing more and more inspectors, without ever really questioning how inspection fitted into their wider organisations. Meanwhile, experiments with SQC techniques or attempts to involve the worker over quality remained rare. 46 Writing in 1964, Frank Nixon, a senior manager at Rolls Royce and a tireless proponent of modern methods, regretted that British industry had lost an enormous amount of ground through tardiness ‘compared with those countries which embraced statistical quality control with enthusiasm much earlier’.*’ The extent of inertia was revealed by several detailed quantitative studies of the 1970s and 1980s. Lockyer, Oakland and Duprey’s survey of members of the Institute of Industrial Managers revealed that less than halfof their sample used statistically based sampling schemes at any stage of manufacture. As the researchers noted, the ‘lack of use of SQC at the process stage (c. 38.5 per cent of respondents)’ was ‘particularly striking’ since it was here that labour, material and capital equipment were ‘committed’.48 Further investigation of current attitudes and practices added to the rather gloomy picture: Some 20 in-depth, structured, in-company interviews with quality control managers were carried out as follow-up work to the questionnaires. These confirm that there is scope for considerable improvement in QC in British manufacturing industry and that there are rich rewards to be gained both in terms of enhanced quality and increased profits. Several of the companies which claimed, in answering the questionnaires, to use SQC, are either not using it correctly or are in fact not using it at all. There was generally a lack of knowledge and understanding of SQC.49 A further enquiry by Oakland in 1986 was equally revealing. at 123 firms and found that less than 10 per cent made ‘extensive’ techniques. The author commented:

This looked use of SQC

The major reason for the low usage . . . is lack of knowledge, particularly among senior managers. Although they recognise quality as important to corporate strategy, they do not appear to know what effective steps to take in order to carry out the strategy. Too often quality is perceived as an abstract property and not as a measurable and controllable parameter.50

Human American essential

productivity for shaping

relations

missionaries saw the ‘human the internal life of the company. 59

relations’ approach as British and European

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firms, to US eyes, were often run on autocratic and unscientific lines, which ultimately contributed to their overall inefficiency. ‘Human relations’ solutions promised improvements. The Americans were insistent on two principles. First, they believed in the need for teamwork and consultation at all levels of the firm. Complex problems could only be solved by joint action from different specialists within management. Involving workers in decisionmaking would boost morale, integrate a previously unused source of relevant knowledge, and ultimately advance efficiency. Second, they insisted that choices should be made on as rational a basis as was possible. Too many executives acted on the spur of the moment. The enlightened way to solve problems was to appraise the facts, refer to the most up-to-date corpus of relevant theoretical knowledge, and only then act.51 Much British comment on these proposals was enthusiastic. The Attlee government had encouraged ‘human relations’ thinking in industry, and many civil servants in Whitehall (particularly at the Ministry of Labour) remained committed to the approach in general terms. Britain had important research bodies in the field, most notably at the Tavistock Institute. However, as time passed, it became obvious that, once again, the real impact of American proselytising was much more limited than the productivity missionaries had wanted. The converted minority attended seminars and conferences, but the great majority of managers and directors were simply uninterested. It is quite apparent, first, that human relations principles exerted little influence over the character of internal management functioning. Many companies of all sizes were dominated by charismatic chief executives, in line with the generally accepted belief that the senior manager should be ‘an allpowerful, thrust&l personality, whose very genius overshadows and detracts from the more modest performance of his subordinates’.52 At lower levels, managers were organised into ranks, differentiated by varying privileges and badges of position. Outside observers were habitually astonished at the elaborate distinctions. Sizeable businesses frequently operated six or seven restaurants and canteens, differentiated by price and comfort, while lavatories, too, were organised hierarchically. 53 Nevertheless, the symbols of status rarely stopped here. One study claimed that micro-distinctions coloured virtually every activity both inside and outside the office. For example, the company car was a potent indicator of prestige: the make and number of cylinders of cars figures largely in the mind of the social climbing employee. Another point is the reception given to him once he has his car . . . does he drive up to the door (and if so which entrance)? Does the commissionaire park it for him or does he have to do it himself? Where in the car park is the precious vehicle

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the managing director’s prestige rating.>*

car it is

This kind of structure clearly discouraged consultation and team-working, but managers were anyway far from eager to engage in such activity. The codes which bound firms together emphasised duty and obedience. Much reference was made to the ways of the military. The ethos of ‘command and control’ had permeated deep into the collective consciousness.55 Consequently, most managers expected to give and carry out orders rather than indulge in independent thinking. Seniors might discuss issues with juniors on occasion but this was entirely at their discretion. At the beginning of the 196Os, it was sometimes claimed that these arrangements were finally changing. A number of companies were known to be taking management development much more seriously, employing systematic procedures to discover and nurture talent while discouraging nepotism. 56 Moreover, there appeared to be a degree of fresh thinking about decisionmaking. Various commentators heralded the arrival of what they referred to as ‘the new management’.57 An article in Management Today during 1967 argued that the past few years had been ones of dramatic progress: Under the pressure of increasing world competition, many major UK firms have now recognized the need to make . . . [a) basic change in management philosophy. . . How revolutionary and fundamental this change is can only be seen by comparison with the past. The chief executives who have successfully carried through this quiet revolution . . have made four major changes. They have (1) set stretching targets (2) pushed down responsibilities to middle management (3) demanded fact-founded decisions [and] (4) encouraged a philosophy of constructive dissatisfactions8 However, these claims were almost certainly exaggerated. Many small and medium-sized companies continued without management development schemes, as the 1965 National Economic Development Council enquiry demonstrated.59 Similarly, power in organisations was still usually highly centralised. Indeed, 52 per cent of the UK’s top 200 companies in 1970 were headed by a chairman who was also the chief executive.” Change may have been occurring but it had yet to transform the mainstream. ‘Human relations’ principles were little more evident during this period in dealings with the shopfloor. Personnel managers were the great evangelists of the new approach but they had struggled to gain influence. According to a survey of 1959, the discipline was in crisis; if not ‘bankrupt’ then certainly ‘insolvent’.” The problem was that personnel managers too often found themselves relegated to a peripheral role. At the British Motor Corporation, for example, they were not allowed to attend major negotiations with the 61

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unions, and this seemed to be fairly typical.62 Research by Michael Poole of Sheffield University in the early 1970s confirmed that most managers continued to attach ‘comparatively little importance to personnel work, particularly in comparison with production and sales activities’.63 Other classic components of the ‘human relations’ approach to labour were equally underdeveloped. Joint consultation in plants had spread quite widely in the 1940s but thereafter languished. An investigation by the Industrial Welfare Society in 1961, which examined ninety-eight member firms, came to gloomy conclusions. More than half of the sample had no formal consultation machinery. About one-third were using their committees merely as ‘a forum for managerial announcements and employee’s minor grievances’. The author of this study commented: ‘There is an air of disillusionment in industry about the work of formal consultation. ‘64 The position with regard to parallel methods of involving the workforce was very similar. For example, firms were rarely willing to share financial information with their workers.‘s The majority even balked at basic suggestion schemes. An enquiry of 1960 reported: ‘It is probable that well over 500 suggestion schemes now exist in Great Britain. It is, however, quite certain that the number of successful schemes is less than a hundred.“’ Indeed, in most firms, the treatment of the workforce proceeded without almost any reference to ‘human relations’ prescriptions at all. Dorothy Wedderburn and Christine Craig’s research at the end of the 1960s showed that there was ‘considerable inequality in all aspects of the employment relationship’.‘7 A few years later, the experienced journalist Simon Caulkin told readers of Management Today: It has become a truism to say that the factory gates are democracy’s last great frontier, in the loose sense that people who wouldn’t dream of denying a worker’s right to vote for a government also wouldn’t dream of asking him what colour the factory walls should be. But its not just a question of who makes what decisions. There exists within industry a whole range of petty, niggling discriminations which have long since disappeared outside . . . In his view, the gulf between manual workers and virtually everybody else in industry was ‘not one of degree, of simple differentials on the same scale, but one of kind’. Workers, he concluded, were ‘on a different ladder altogether 9.68 This was hardly what the productivity missionaries had envisaged twenty years before. Inter-firm

comparison

As has already been suggested, the Americans were always keen that the impact of technical aid should be accurately measured. This led to a good deal 62

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of theoretical work on the calibration of productivity improvements 69 as well as to some practical measures aimed at helping firms make their own diagnoses. Of particular importance in this latter category was an initiative by the US Bureau of Labor Statistics. It had been engaged in compiling case studies of how US firms were performing in relation to productivity, and in 1952 decided that these should be distributed in Britain, so as to provide local industrialists with a standard of comparison. Quite unexpectedly, the reaction was relatively positive. Some 5,000 copies of the Bureau’s studies were distributed in the next four years and, moreover, it appeared that these were having some real influence. Hired to evaluate the programme, the BIM declared: ‘In our view the reports are so valuable because they have succeeded in stimulating managers.17’ Inspired by these events, the BIM, BPC and other interested parties began considering what could be done to keep the momentum going. They agreed that comparison with US data was useful, but accepted that some firms found this difficult because of differences in production processes and product ranges. ‘I The priority, it was concluded, must be a wholly British series of measurements, which would allow those in any given industry to make unambiguous assessments of their own relative performances. One obvious way forward was for Britain to follow its continental neighbours and adopt a benchmaking technique called inter-firm comparison (IFC).72 The advantages of this strategy were obvious. IFC was relatively simple to operationalise, since it depended on collating information from firms and then supplying them with a few key ratios relating to average and leading performance. 73 Equally important, applications seemed to bring impressive results. After attending an EPA conference on IFC in 1956, an executive member of the National Union of Manufacturers was so enthused that he made the following public declaration: I believe this . . . [event) has shown the reason why German industry has made such an astonishing recovery since the war, and why the rate of improvement in British industry in the last few years has slowed down. . . . For various reasons many British trade organisations are like convoys sailing at the speed of the slowest ship. In regard to German industry, it was quite clear that the Germans were forced by wartime circumstances to take greater measures of standardization in their costing and accounting methods, and this led to IFC on a wide scale after the war. Not only has the German industrialist been forced to work through the necessity of recovering from disaster; he has an incentive shown by IFCs.‘* However, as those working in the field knew, the wide-scale introduction of IFC into Britain would not necessarily be easy. Several trade associations had already experimented with the technique but there were reasons for thinking 63

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that British industry as a whole might well be resistant. Two BIM specialists reported that there were several major factors holding firms back from taking part in comparisons: 1

2 3

Indifference: this seems to be mainly due to a lack of imagination on the part of managers and trade association officials, who find it difficult to envisage what good a comparison can do for the industry and its firms. Fear that the information supplied will fall into the hands of competitors or others who might use it to the disadvantage of the firms concerned. Failure of the organisation conducting the comparison to present the results in such a way that firms can clearly see their usefulness.75

Mindful of such difficulties, the BIM and the BPC decided that they needed a spearhead for change and so launched the Centre for Interfirm Comparison (CIFC) in the spring of 1959. The new unit offered a number of services. It acted as a clearing house for information about IFC, and publicised developments through courses and conferences. However, most effort was put into direct consultancy work. In exchange for a small fee (&30-&50), firms could obtain packages of information summarising how others in their industry were performing together with advice about achieving improvements. Great emphasis was placed on the fact that the CIFC’s operations were entirely confidential. Each firm taking part was given a code number and never referred to by name. In addition, the industry data supplied comprised percentages and rates, formats that defied disaggregation and thus masked the identification of individual participants. The objective was to build trust in IFC, and thus allow firms to become their own ‘management doctors’.” In the years that followed, the CIFC developed into a powerful voice for change. It argued that British companies were often routinely working at suboptimal levels. Two ‘striking points’ had emerged from the detailed consultancy work: 1

2

The wide range of results as between one firm and another in the same industry; for example, in one industry the time taken to produce a ‘standard product’ shows a variation of 2% to 1; in another industry the number of days required by firms to collect outstanding debts ranged from 54 to 107 . . . Typically, no one firm is best at everythtng; it usually turns out that all those taking part in a comparison could improve in some respect, even the ‘best’ firms.”

In the CIFC’s view, some of this unevenness could be explained by reference to structural factors (for example, size and location), though most stemmed directly from ‘differences in managerial efficiency’ and was therefore entirely avoidable.‘* Thus, what the whole exercise demonstrated, the CIFC believed,

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was that many firms could become a great deal more efficient if they took some simple steps to organise themselves better. This was a message that gained publicity and some loyal clients, but it was not one that British industry as a whole apparently wanted to hear. Some 1,000 companies from forty trades had used the Centre’s services by the end of 1964. Nevertheless, most of the potential market remained uninterested. An editorial in the Engineer was frank about the very limited scale of take-up: it is estimated that even within the industries covered not more than about five per cent of firms have subjected themselves to interfirm comparison. This figure . . . applies even where the Centre has cooperated (as it prefers to do) with a trade association.79 Conclusions Taken together, these case studies demonstrate that the American technical assistance programmes had a rather uneven impact on British industry. The US agencies certainly helped spread knowledge of new methods but their impact on applications was less straightforward. There were many success stories. Both big and small companies found that American prescriptions really could improve productivity. On the other hand, there is no doubt that the scale of change was generally disappointing. Wild and Swan looked at fifty small and medium-sized manufacturing companies in West Yorkshire at the beginning of the 1970s and were struck by the ‘low utilisation of accepted and well-proven techniques’. The truth, as Management Toddy reported in 1971, was that the response of ‘the large mass of British companies’ to innovations in know-how and management could only be described as ‘halting, uncomprehending and limp’.”

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5 THE AMERICAN PRODUCTIVITY GOSPEL BRITAIN The quest for management

IN

professionalisation

Introduction During the late 1940s and early 195Os, many American technical assistance personnel who crossed the Atlantic were shocked at the poor quality of British management. Fairly typically, a team that visited Lancashire in 1951 concluded that the cotton industry’s managers were mostly ‘dominated by . . . inertia’.’ As the Americans saw it, the obvious solution to this problem was the introduction of reforms that would make the British manager more professional. The need, they argued, was for a greater degree of training. Britain must follow the American example and teach its managers how to perform. The following chapter describes what happened when the US missionaries tried to implement their prescriptions. It deals with both the push for management education and the history of the British Institute of Management (BIM), since this latter organisation was believed to be crucial in establishing professional values.

Management

reform in the immediate attitudes and initiatives

postwar

years:

At the end of the Second World War, few in Britam had much inclination to discuss management issues. The journalist Oliver Roskill reported that ‘a small but distinguished minority’ of industrialists was interested in ‘research and questions of organisation generally’, but he also stressed that most of those in business ‘would not have an organisation chart in their office at any price’.* Symptomatically, activists in the ‘management movement’ - a loose aggregation of progressive practitioners, consultants and academics - quite readily admitted that they remained isolated. An editorial in the Manager during early 1945 regretted: ‘For three decades, at least, a band of undaunted enthusiasts have toiled for the acceptance by industry of scientific principles of management. It would be foolish to deny that hitherto the results have been

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disappointing’.3 In further education, the position was equally uninspiring. A few technical and commercial colleges provided courses, mainly for the qualifying institutions, but these were of variable worth. In addition, one or two universities had commercial degrees, or offered management options to economics and engineering students. However, many within the sector remained decidedly hostile to any vocational orientation. The Cambridge University Appointments Board, for example, emphasised that its economics syllabus was meant to address theoretical rather than practical questions: for business even in the Economics does not provide . . . training sense in which, say mechanical science does for engineering or medicine for the medical profession. It is concerned with the broad social aspects of industry and commerce rather than the problems of day to day administration.* The incoming Labour government viewed this situation with dismay and, as part of its productivity drive, determined to implement reforms. One idea was to establish a national focus of excellence, and this was realised with the launching of the British Institute of Management in 1948. Additionally, Labour also decided to do something specifically about management education, and appointed the distinguished and pioneering consultant Lyndall Urwick to head a committee charged with making recommendations. This conducted extensive discussion with a variety of professional bodies and eventually reported in 1947. The Urwick committee confirmed that much was wrong with the current position. Britain had between 400,000 and 450,000 managers and required an annual intake of some 12,000 recruits to maintain parity. However, current training facilities were inadequate to provide for even a small fraction of this total.5 The way out of this dilemma, the committee concluded, was to launch a new diploma, and thus replace the existing multiplicity of provision with one syllabus and one course path. Such a qualification would be awarded after five years of part-time study. Students were first to concentrate on ‘background’ subjects (for example, economics) and ‘tool’ subjects (for example, accounting), subsequently proceeding, if proficient, to courses on ‘management’ subjects (for example, factory administration), and thence examinations.’ As a rider, the committee acknowledged that instituting this scheme would require some increase in the supply of competent teachers. It therefore endorsed the recommendation of the earlier Percy enquiry into higher technological education that ‘at least one institution should be selected as a centre for post-graduate study of industrial administration’.’ When Labour accepted these proposals, there were some who concluded that a new era was about to begin. The government received fulsome praise from those in the management movement.’ Moreover, private interests seemed to be following Whitehall’s lead: the Administrative Staff College

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(AK), set up in 1946 by a group of industrialists, was the most prominent of various fresh initiatives.9 However, as more sober observers recognised, the superficial signs of change masked a less encouraging reality. For example, it was clear that the BIM remained largely isolated, essentially ignored by those in business. lo Moreover, the new courses were only attracting a very small number of students. Some 500 were studying for the Urwick diploma at the beginning of the 1950s a total which dwarfed the even less impressive 80 who usually passed through the ASC during any one year.ll Most of industry, indeed, was still overtly doubtful about the value of all formal management education. Surveys revealed that the majority of executives, for example, favoured ‘practical’ over ‘bookish’ training. l2 The General Secretary of the Institution of Works Managers was one of several who argued this point in print: Good management is mainly an art and, being an art, is largely an innate capacity which cannot be acquired; good managers certainly have qualities of personality and character which enable them to direct an enterprise. These characteristics are developed and enriched by first-hand experience of the job of managing; there is no substitute for ‘going through the mi11.13 For Urwick, therefore, the The job of managing people, be learned, using systematic ‘picked up’ by someone with with Labour’s reforms tended accept this, largely because ‘amateur’ tradition.‘*

whole situation seemed to be rather depressing. he constantly reiterated, was one that needed to educational techniques. It could not just be ‘a good eye’. On the other hand, the experience to suggest that many in business would never they themselves were often products of the old

The American

offensive

It was at this point that the influence of the United States began to be felt in discussions about British management. The US view was that existing British reform initiatives were on the right track. Management could be taught. Improving standards was therefore largely a matter of creating an adequate level of provision. What Britain needed was new institutions, modelled on the kind that had already proved successful across the Atlantic. l5 The first step in the US campaign was the dispatch of an AACP team led by Urwick to study American university and college courses. Some members of this group had visited the United States in the 1930s and were known to have been impressed by its business schools. Not unexpectedly, their final report emphasised the crucial role of management education:

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The Team was deeply impressed by the steps taken by American business to educate, train and develop its future business leaders, and is convinced that the results of these efforts have had, and will continue to have, a vital bearing upon American productivity.16 The Americans followed this up with the suggestion that Britain should use Benton-Moody funds for management education purposes. Senior mission staff advocated the creation of a ‘British Harvard’, an institution which would be able to conduct high-level research and produce management teachers.” In addition, they wanted to create several chairs of management in British universities, and were particularly keen that one should be established at Cambridge because of its prestigious position. Finally, the Americans made it clear that they wished to see the BIM prosper. This led to the organisation being awarded grants from 1954 onwards, some totalling as much as &40,000 per year. l8 From the mid-1950s onwards, US pressure was also exerted through the European Productivity Agency (EPA). This jointly funded body was seen as important because it already operated a large number of programmes on management subjects. Nine of these dealt specifically with education. Soon after its foundation in 1953, the EPA had decided that it ought to connect existing management training centres, and the result was a series of conferences and meetings on subjects like teaching curricula which ran until 1958. At the same time, the Agency continued to be active on the more specific question of how business education teachers should be trained. This entailed taking European practitioners across the Atlantic so that they could gain from an involvement on American courses, as well as providing funds for proven US experts to visit Europe. A final area of activity involved trying to promote greater co-operation between individuals and organisations across the continent. A report of 1958 noted: the Agency seeks to become an information exchange not only between centres for elementary and advanced management training in member countries, but also between member and associated countries. It is already in contact with about 150 European centres and every major American university, has planned an inter-European Exchange Scheme for teachers and has secured the co-operation of American liaison offcers.‘9 All of this amounted to an impressive effort to promote transatlantic ideas and particularly the ethic of professionalism. To what extent were the Americans successful in achieving their goals? Were the British converted to the notion that their managers should be trained? To answer these questions, the next sections look first at management education and then at the fate of the BIM. 69

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the impact the 1950s

of US initiatives

in

Some of those who reviewed the evidence on training concluded that the Americans had indeed made an immediate difference. A significant number of British educational institutions began to offer management courses in the late 195Os, and by the turn of the decade it was estimated that about 6,000 students were studying the subject at some level.*’ Big firms also seemed to have become galvanised. Many were experimenting with their own in-house schemes, while several dozen had gone one step further and invested in creating a company college.*l Finally, it was apparent, too, that teachers of management subjects had become both more competent and better organised. After meeting on an EPA course, one group had subsequently founded the Association of Teachers of Management, and this was gradually building a reputation as ‘a network for interchange to facilitate understanding and to encourage innovation in a sustained attempt to raise . . . standards’.** Each of these developments, it could be persuasively argued, would not have occurred without outside stimulation. However, as the Americans themselves acknowledged, the real degree of change was in fact very much less impressive than this suggested. First, there was no doubt that the Urwick scheme had continued to struggle. About 1,500 students were studying for the diploma in 1959, but most attended classes part-time in technical colleges, institutions that notoriously suffered from poor funding and low prestige. In these circumstances, there was a general feeling that the qualification carried little weight. As one management educationalist observed, it had been ‘slow in gaining the full esteem of employers’.23 Meanwhile, courses run in universities suffered from rather similar problems. Many senior academics refused to concede that management studies had real coherence or merit, and so remained wary about granting the discipline any degree of recognition. Reporting on the position in 1961, a professor at Bristol frankly admitted: ‘Management’ has not yet passed the test of being a study discipline in the universities. It lacks an adequate technique of analysis and there is a shortage of usable material on which to apply such analysis as we have.** In overall terms, therefore, progress towards an American-style system had been distinctly unimpressive. George Robbins, from the Graduate School of Business Administration at the University of California, visited Britain at the end of the 1950s and was struck by a feeling of dismay. He noted that the British still tended to see management education in narrowly instrumental terms. It was viewed as a way of helping existing managers to improve,

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thereby boosting their chances of promotion. The American ideal of a subject that could be taught in universities had simply not caught on. Robbins noted: There is very little evidence of recognition of need for or value of postgraduate teaching and research in a truly professional school environment aimed at . . . preparation of highly-qualified persons for careers in management that will lead to the most responsible positions in industry and commerce, and . . . development of a professional faculty , . , 25 The Americans’ problems were symbolised by their failure to establish a management chair in Cambridge. Negotiations with the university had dragged on for several years during the mid-1950s and ended in stalemate. The Cambridge authorities seemed quite happy about the prospect of an endowment from the Benton-Moody account, but could not be persuaded to actually make an appointment. The London Mission was astonished at this prevarication and the prejudice that lay behind it. In the end, one US official proposed that Cambridge should employ an American, as this would side-step the source of the problem. He explained: It should not be difficult to find a professor of repute in the U.S., skilled in this subject, who is perhaps due for retirement and who would be able to set up this course. . . . This has a psychological advantage. We quite understand that professors of management, industrial relations, and the like are rather looked down upon by the other faculty members at the ancient universities in the U.K. This makes it rather difficult for them and their families socially. An American, being more thick-skinned and perhaps not so perceptive of this class distinction would not be adversely affected and would be able to get on with the job. As I put it to one of the university authorities some months ago, . . . the Cambridge faculty would not expect an American to be a gentleman and it would therefore present no great problem!26 Not unexpectedly, this suggestion did no more to break the deadlock than any other, and in the end the Americans were forced to leave Cambridge to its own devices.*’ What made this whole situation even more depressing for the proponents of management education was the fact that there seemed to be little hope of change. To begin with, it was clear that Britons who wanted an expansion of provision held very different views about what this actually meant. Some favoured the American model but others did not. Indeed, criticism of transatlantic solutions appeared to be becoming more strident. In 195 5, a high-level EPA team returned from America expressing rather muted feelings of unease. 71

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It reported: ‘while a great and, on the whole, successful system of business training exists in . . the U.S., there is, in that country, some concern that the teaching methods and standards are no longer completely appropriate to the needs of commerce and industry’.28 Five years later, a British student who had studied at Stanford told the Director that ‘overcrowded classrooms . . . generally indifferent faculty, poor quality textbooks, [as well as) fundamental disagreements on policy’ could be found ‘in even the best of the U.S. graduate schools’, and warned that Britain must not under any circumstances ‘ape the American pattern’.29 To make matters worse, there was little sign of any softening in business opinion. Many directors continued to believe that ‘a manager was born not bred’, and so were highly dubious about education in general.30 The Federation of British Industries (FBI) took a slightly less dogmatic line but disputed the need for any major change. The organisation’s view was that few of those who wanted to become managers really had the required innate characteristics for such a calling. Thus, multiplying courses and facilities would simply lead to the squandering of resources. An official made this point forcefully at a conference in 196 1: The . . . view widely prevails in industry that it is wasteful and possibly damaging to give large numbers of people management training at the undergraduate level - when there has been no kind of test as to whether these men are destined to be managers or not. It has to be proved that the leadership element in the manager is present before it is really worth spending any time on management training.31 If there was to be any expansion at all, trated on post-experience schemes, since manager who had already proven his or could not be denied, as those involved effect ‘the opposite view to that generally

Management

education:

the FBI opined, it should be concenthese catered for precisely the kind of her credentials in practical terms. It openly recognised, that this was in held in the United States’.32

the impact the 1960s

of US initiatives

in

At the end of the 1950s a new organisation was founded in an attempt to break out of this impasse. 33 The Foundation for Management Education (FME) brought together a group of Harvard alumni, several Tory MPs, and the chairman of the University Grants Committee (UGC) (the body responsible for higher education funding). All were passionately committed to the American model but also highly realistic about the scale of difficulties that had to be faced before this could be replicated in Britain. If the FME was to be successful, they agreed, it would have to lobby behind the scenes, gradually 72

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converting influential politicians, civil servants and industrialists, so as to create a climate where business schools might be formed. There was little point in public campaigning or bold exhortation: the FME was to operate via the private dinner party and the personal aside. After a year or so of agitation, it was apparent that this strategy was yielding results. An initial approach to sympathetic business contacts raised nearly &30,000 and allowed the FME to support entirely new management courses at the universities of Bristol, Cambridge and Leeds. Encouraged by this success, the Foundation decided to extend its operations even further, launching a second fundraising campaign to finance more academic programmes. An approach was also made to the government, with the aim of persuading it to provide matching funds. The Conservative administration which held power in the 1959-64 Parliament at first had no very definite views about management education. Some senior figures were certainly very worried by Britain’s faltering growth rate and saw management weakness as part of the problem. The veteran businessman and politician Lord Chandos, for example, told the Minister for Education that the government must do something quickly to put the matter right: He said that there was an urgent need to improve the quality of management training, and complained that the universities were not taking the subject seriously. He advocated the establishment of something on the lines of the Harvard Business School suitably adapted to British needs. He felt that if such a School were set up, industry would be willing to pay for it.‘* Nevertheless, this was by no means a majority view. Lord Hailsham, the Lord President, warned that intervention would bring its own difficulties. Academic prejudice against management studies was, he noted, ‘deeply ingrained’, with many even maintaining that there was no such subject. Moreover, the universities were ‘also extremely suspicious of government initiative and ready to regard it as interference’.35 Others felt that, if funding was to be increased, then the bulk of the new resources should go to the existing technical colleges, since these had kept the flag of management education flying in the dark days of the 1950s. However, in the end, the FME view emerged triumphant. Keith Joseph, a prominent figure in the group, had entered the government as a junior minister at the Board of Trade and he was able to use his influence to gain allies. It was announced that the Treasury would provide &lOO,OOO in conjunction with the FME to support a further nine university management courses. The FME’s success, and the government’s evident sympathy for its goals, convinced many that further progress was now virtually inevitable. Articles in the business and specialist press discussed the possibility of a ‘British Harvard’

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and speculated where it might be situated. At the same time, various universities began positioning themselves to head the field. Manchester expanded its existing facilities and appointed new staff. Cranfield, a college of aeronautics and engineering, sent a senior lecturer to participate in the Harvard International Teachers Programme during 1961-2 and then launched a course that was modelled on the first year of an American MBA. The academic in charge of this development told the press: ‘we need a Harvard-type institution for outstanding men in the 22-33 age group . . . it is not a question of slavishly copying American methods - we can improve on them . it is a question of filling a gap that exists in no other industrialised country’.36 Meanwhile, Lord Rootes, head of a large car company and the force behind the newly designated University of Warwick, had also become involved. He argued that Warwick, on a greenfield site and near the engineering centres of Coventry and Birmingham, was ideally suited to be a business university.37 All the parties involved were encouraged further during 1963 with the publication of two government reports. In April, the National Economic Development Council (NEDC), set up a year earlier to review Britain’s growth performance, issued a document which made some play of the need for enhanced business education. The key paragraph, which had allegedly been partly drafted by a leading academic seconded from Manchester’s management department,38 made an absolutely unambiguous recommendation: There is a need in this country for at least one very high level new school or institute on the lines of Harvard Business School or the School of Industrial Management at the Massachusetts Institute of Technology, either as an independent institution or as part of some existing University or College . . . This should help to provide better trained managers for industry, more trained teachers for technical colleges, and a much needed national centre for research into problems of management and administration.39 Six months later, the Robbins Committee, which had been appointed to review the entire field of higher education, reinforced the NEDC’s argument that Britain needed better management education. However, Robbins raised the stakes even further by suggesting that not one but ‘at least two’ major post-graduate institutions should be created, and this ‘in addition to other developments already probable in universities and other institutions’.*’ These two publications caused great excitement but also exacerbated longstanding tensions and divisions. As those involved began to seriously consider what the magic word ‘Harvard’ really meant, it became obvious that there were still two very different - even mutually exclusive - conceptions of management education in circulation. The FME, its allies in the universities, and the management movement were insistent that Britain should follow the American example. As The Economistexplained, they wanted one or more busi-

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ness schools which would ‘(a) have outstanding prestige, (b) cater only or primarily for graduates, (c) operate on a scale that would make most present British university experiments in business education look like penny packets . . . and . . . (d) rely heavily on the case study method of teaching’.*l Their intentions were clear. Students would be drawn from a wide variety of backgrounds, and might or might not have business experience. The curricula were to be broadly constructed and include social science subjects like psychology. Staff research was to be vigorously encouraged in order to provide links with the outside world. Those gaining qualifications would be able to prosper in virtually any area of business activity. As one protagonist explained, the aim of exercise was ‘to fit a man to pursue his own self-improvement, and to put him as far along the road to it as fast as possible’.** However, little of this made much sense to the industrial lobby. It was determined that management education should deal with practical matters. Academic indulgence and theoretical speculation must be avoided at all costs. The need was for short (one to three month) post-experience courses on specific techniques, aimed at managers in the 28 to 35 age range. 43 In this view, the only issue that required further thought had to do with administration: who would actually be responsible for running any new provision? Lord Rootes held to his belief that the best solution was a business university, but he had to acknowledge that the rather conservative UGC was unlikely to support such an experiment. Other industrialists were in favour of simply going it alone. They argued that any contract with the universities would open the door to unhelpful interference. The ‘Savoy Group’, a loose coalition of executives led by senior directors from the major engineering company GKN, attracted support with its contention that industry should create its own facilities from scratch and then keep them wholly independent.** In the end, a group of leading figures co-ordinated by the FBI - Rootes, together with representatives from the FME and NEDC - decided that the only way to resolve these controversies was to appoint a mediator, and ask him to recommend a possible way forward. 45 Lord Franks, the current Provost of Worcester College, Oxford, and ex-chairman of Lloyds Bank, agreed to take on this role and in December 1963 produced a short report, with five main recommendations. These were: 1 2 3 4

That two Business Schools of high quality be established in Britain. That each be part of a university but enjoying considerable autonomy as a partnership between the universities and business. That these Business Schools be situated within major industrial and commercial conurbations. That these Business Schools offer courses for both post-graduate and postexperience students.

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That one Business School be associated jointly with Economics and Imperial College of the University other with Manchester University.46

the London of London,

School of and the

It was immediately obvious from this list that Franks had effectively opted for a lowest common denominator solution. He had rejected certain particularly partisan suggestions - for example, that put forward by the Savoy Group -but made every effort to satisfy the biggest constituency possible. His hope was that the various factions would now see compromise as unavoidable. A civil servant who talked with him at this time reported that he was ‘deeply struck by the ignorance and suspicion in industry of the academic world and vice versa’. In these circumstances, Franks had concluded, it was important ‘to force both sides to a better understanding of the others’ attitudes’.*’

A management

education

revolution?

In the years that followed, great efforts were made to expand British management education. Funds gathered via an appeal to industry, together with government support, meant Franks’s proposals could be realised, and the London and Manchester Business Schools were launched in the mid196Os.*’ Other courses proliferated at an unprecedented rate. One survey at the beginning of the 1970s found that management education was being provided by as many as 37 schools or designated management departments in universities; five independent colleges; 45 polytechnics; and 150 technical colleges. All told, it was estimated, Britain had 2,300 students on post-graduate management courses, small by comparison with the USA (where 15,000 MBAs graduated annz&y) but large if measured against the position barely twenty years before, when there were probably fewer than 200 studying management subjects of any kind in the country’s universities.49 Excited by thes e kind of statistics, some suggested that Britain had finally embraced the American way and was experiencing nothing less than a management education revolutions’ Such claims are worth taking seriously, but they cannot be accepted at face value. The position in Britain was obviously evolving. Some of the new courses were successful and drew in real support from industry. Nevertheless, in the majority of cases, far less satisfactory conditions predominated. The unpalatable truth was that, outside of a small circle, neither the academy nor industry showed much sign of having broken with their long-standing prejudices. This point can be illustrated by looking at each side in turn. The universities continued to be distinctly unenthusiastic about management education. Some recognised that they could make money out of the new discipline, but f ew felt that it deserved mainstream status. Academics tended to see management studies as intellectually inferior. Some worried that any dalliance with business would compromise traditional freedoms. The 76

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consequences were predictable. Management was kept very much at the margin. Faculty hired to teach on the new courses often had below average qualifications. Moreover, the syllabuses offered notoriously lacked rigour. Many institutions cobbled together curricula from whatever was at hand, regardless of whether this made any intellectual sense or not. Students were in effect simply offered a selection of modules from other departments. Elsewhere, subjects had been incorporated largely because they reflected staff interests. A visiting American business school professor came across courses that contained components on ‘meat anatomy and science’, ‘poultry inspection’, and ‘footwear and fitting’.s1 Finally, and most damagingly, laxity also coloured assessment procedures. Many qualifications were offered without gradation. High pass rates seemed to be normal. A later survey estimated that even the most prestigious business schools were only failing about 5 per cent of their students annually. ‘* Management might have arrived as a university subject, but it still remained largely in the shadows. Industry was equally unimpressed by the new provision. The appeal to business in the wake of the Franks report raised 54.5 million, but it was widely recognised that a relatively small group of companies had been responsible for most of the total collected. A detailed breakdown of contributors revealed the following: ‘Large’ donations from the private sector were represented by those of forty-seven industrial and commercial companies. About forty of these were among the 100 largest firms of the day, which suggests that there were a significant number of large firms which did not support Franks’s proposals or at least did not back them with a substantial donation. Whilst companies such as Ford, ICI, Shell, Unilever, GKN, AEI, Courtaulds, Dunlop, English Electric, and Imperial Tobacco gave sums of flOO-f150,000, there were others who seem to have treated the Appeal much as they would have any ‘worthy cause’. EMI, for example, gave a mere &500.s3 Outside the converted, opinions continued to Reaction to the first crop of MBAs was indicative. enquiry in 1969, reporting on the views of senior Financial Times’s top 500 companies, discovered that ification highly:

be much more critical. A Taylor, Nelson Group executives in 325 of the few judged the new qual-

In large areas of industry, attitudes towards any form of graduate are still ambivalent, while those towards business graduates range from

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blank incomprehension (‘I don’t really know hostility (‘business schools are over-rated’).54

what

they are’) to open

Researchers commissioned by the Council of Industry for Management Education reached very similar conclusions. They investigated what fortyseven medium and large manufacturing companies felt about business graduates, and found that most could be described as ‘agnostic’. The new business schools were certainly not evaluated favourably. Indeed, the ‘most common view’ was that post-graduate training provided little or nothing that industry really wanted. A typical comment was reported to be: ‘we let him go to a business school for a year, but he would probably have learnt more by staying here’.s5 By the early 197Os, therefore, little of the post-Franks optimism remained in view. Academics from Sussex University believed that a ‘backlash’ was in progress, noting: ‘Hardly a week goes by without some major attack being launched in the press against business schools.“’ For the President of the Confederation of British Industry (the FBI’s successor), the problem was that those involved simply had ‘irreconcilable’ objectives. It had to be finally recognised that ‘business education’ and ‘management training’ were ‘two quite different things’.>’ Such controversy and disagreement would continue to hold back progress in the field for many years to come. As all of this shows, the US campaign to promote management education in Britain was ultimately only partly effective. The Americans had won some battles but could hardly claim victory in the war. Successive developments had been achieved by coup d’etat - in the later stages, behind the scenes manoeuvring involving conspirators from the FME and the FBI. The mass ranks of industry were barely either involved or interested. These conditions shaped what emerged. The British had gained an infrastructure for enhanced provision but continued to disagree about what it should aim to achieve. Were the US missionaries any more successful in their plans for the BIM? To answer this question, it is first necessary to look at how the organisation was developing in the period shortly before their interventions began.

The BIM

in the early 1950s

At the beginning of the 195Os, the BIM appeared to be gradually overcommg some of its earlier difficulties. The organisation had acquired a new headquarters in the West End of London, complete with restaurant, consulting rooms and library, and was embarked upon an ambitious programme of educational work. Its roster of publications was selling well; for example, the Munager had a circulation of nearly 10,000 per month. Moreover, each year’s annual conference received more praise than the last. A civil servant present at the 1953 event recorded:

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This was the first . . . [time) I had attended. I went more or less as a matter of duty. . . . I was completely converted. The discussions were on the whole intelligent and interesting . . . and the organisation was superb.s8 Some hoped that the institution might now be poised to gain real influence as a centre of excellence. However, these outward signs of success hid grave inner problems. Part of the organisation’s troubles were financial. The BIM had always aimed to be self-sufficient but continued to experience difficulty over raising income. Individual subscriptions were buoyant, largely because of an amalgamation with the Institute of Industrial Administration (IIA), a well-established qualifying body. On the other hand, much less progress had been made with attracting corporate interest. In fact, only about 450 of Britain’s 50,000 medium and large manufacturing firms were members.s9 As a result, the annual subvention from the Treasury remained crucial. The central worry for the BIM’s leadership was the fact that this was about to be significantly cut. The Churchill Cabinet had mixed feelings about the BIM. Some believed it was making a valid contribution to Britain’s productivity drive. Nevertheless, it was also generally agreed that the organisation had become too dependent on public money. The Chancellor, ‘Rab’ Butler, minuted his colleagues: ‘I like the B.I.M. What is clear is that they are not in earnest about relieving the Government contribution. I am; so any discussions calculated to show the red light will have my support. “’ With this in mind, the Cabinet decided that the level of funding should be considerably reduced. The BIM had received &7 5,000 in 195 1 and 195 2, but over the next quinquennium the annual grant was to fall in stages to &30,000. The government wanted to signal that state aid would be eventually withdrawn and yet it would not administer any sudden fatal blow.” Nevertheless, the BIM’s problems were by no means only financial. In fact, the organisation was most troubled by the increasingly obvious division that existed within its own ranks. The controversy centred on means and ends. One faction, composed of ex-IAA members and management movement veterans, wanted the BIM to concentrate exclusively on raising professional standards amongst managers. In other words, it wished to prioritise the development of formal qualifications gained through taught courses and examinations. However, most corporate members had very different ideas. They argued that talk of professionalisation was entirely misplaced. Management could not be taught by formal methods, and those who thought otherwise were simply cranks without business experience. The BIM needed to forget abstract theorising and concentrate on what industry really wanted, developing servicing functions as appropriate. Moreover, it was added, there must be no further reliance on state aid. Too many firms believed that the BIM was controlled by the government and shunned membership as a result. Establishing financial 79

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self-sufficiency would be a vital first step in encouraging a more positive business response. 62 BIM staff did their best to mediate between these two groups but found it difficult to make much headway. The Director, Leo Russell, an ex-civil servant who genuinely tried to accommodate all points of view, became increasingly isolated and subject to personal attacks. Every important level of the BIM’s internal machinery gradually succumbed to factionalism. In this situation, attempts at reconciliation inevitably foundered. To make matters worse, each side began looking for allies amongst outside organisations. Fairly typically, a civil servant reported that the British Employers’ Association was conducting a ‘feud’ against the BIM, in order to discredit the current leadership and prepare the way for the corporate members to gain full controLG3

American

support

for the BIM

and after

The American Mission in London knew of these various problems but it still believed that the BIM could play a useful role. In spite of the current schism, the organisation seemed to be the only one capable of spreading modern the Americans argued, there was management techniques. Nevertheless, certainly need for a new strategic direction. The BIM had too much of a metropolitan bias. In the future, it must build a regional network and attempt to reach those small and medium-sized enterprises in provincial centres that had previously proved most resistant to modernisation.‘* From 1954 to 1959, therefore, some &l23,OOO of Benton-Moody money was allotted to this purpose. 65 The Americans hoped to create a virtuous circle. By operating in the regions, the BIM would both maximise its impact on the productivity problem and gather the extra income that was necessary for financial solvency. However, it soon became clear that the Americans were no more capable of transforming the BIM than anybody else. In fact, the arrival of US funds in some ways increased the organisation’s problems. Both internal factions now felt they had more to fight for, and redoubled their efforts accordingly. A Treasury official told a colleague in 1956: ‘My impression is that the Institute is . a very unhappy place, torn by intrigues, and that the atmosphere is not conductive to good work.’ He believed that a ‘process of disintegration was at work’.66 In the end, the situation became so serious that the government was forced to act. Faced with damning reports from civil servants, the Conservatives finally decided that Treasury support would have to be withdrawn. The BIM was instructed to pursue retrenchment6’ In these circumstances, the organisations’ priorities inevitably changed. Some effort was made to pursue the American idea of regionalisation, and BIM offices were opened in Birmingham, Leeds, Manchester and Glasgow, but the general conditions of austerity meant that this initiative produced nothing like the effect intended. Otherwise, the priority remained survival. By the end

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of the decade, cial observed:

the BIM

MANAGEMENT

had stabilised

PROFESSIONALISATION

but at some cost. A Board

of Trade offi-

As regards the general affairs of the B.I.M., we here still feel that the Institute has not yet established its prestige with industry and really found its right function. Financially, its affairs have I think been put in reasonable order. But to some extent this has been at the expense of the calibre of its work, and I have found little confidence recently in its ability to make a real impression on industry in this country.68 The US decision to back the BIM did not, therefore, produce the desired results. The Americans had wanted to create a dynamic organisation capable of reaching ordinary firms. Instead, they found themselves bankrolling something of a pariah which was both impecunious and self-destructive. It is a measure of their failure that, ten years after the events described, the BIM was still being characterised as ‘in search of a role’.69

Conclusions In the 195Os, the Americans did much to promote the professionalisation of British managers. Some of their initiatives were partly successful but overall much less was achieved than had been planned. British industry remained wary about training and education. In 1956, the management educationalist Elizabeth Sidney estimated that a mere 1 per cent of the country’s 400,000 to 450,000 managers had received ‘any formal training for their job’. Fifteen years later, Alistair Mant reported that little had changed. He discovered that only 7 or 8 per cent of British managers attended ‘in- or out-company courses of a week or more’ during any given twelve-month period.‘o Even the most senior grades largely conformed to this pattern. A 1970 survey of directors at the top 200 UK companies found that while 9 per cent had been to business school, 68 per cent were without professional qualifications of any kind.‘l Indeed, when questioned closely, many managers clung tenaciously to the idea that management could never be taught. It was, they asserted, much more about instinct than expertise. The British, it seemed, were quite happy to remain devotees of what one consultant called ‘folk management’, regardless of the advice that was so avidly proffered from across the Atlantic.‘*

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6 THE AMERICAN PRODUCTIVITY GOSPEL BRITAIN Explaining

IN

reactions and responses

Introduction The previous chapters have demonstrated that the US productivity gospel had only a relatively modest impact in Britain. The American effort produced new institutions and no doubt helped make productivity a public issue in the 1940s and 1950s but its effect on the ground - in factories and boardrooms can only be described as variable. If real change occurred, it seems usually to have involved a small ‘head’ of already forward-looking firms, with a much larger ‘tail’ continuing to follow their time-honoured conventions. This judgement is in some ways surprising, given the degree of US commitment and the magnitude of Britain’s economic problems during these years, and it clearly needs some careful explanation. The following pages discuss a number of factors that may have inhibited the various productivity programmes, beginning with a close scrutiny of the ways and means through which aid was proffered.

The transmission mechanisms implementation

and policy

Technical assistance was, in essence, a social process. It required experts, on one side, to convince target audiences, on the other, that their prescriptions were logically correct and practically viable. Perhaps surprisingly, these minimum conditions were rarely easy to achieve. The free dissemination of information could be marred by many forces - political, logistical, cultural and personal - and while this ‘friction’ certainly varied in scale, it was rarely ever entirely absent. Taking the American programmes first, it is clear that these had much going in their favour. The US economy was unarguably the most powerful and vibrant in the world and this gave an obvious prestige to those who advocated its constituent methods and techniques. As individuals, too, Americans had 82

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great advantages. The British were certainly doubtful about some aspects of life across the Atlantic (a point that will be returned to) but they tended to be impressed by American friendliness and openness. Washington’s emissaries were, therefore, usually liked, an important first step in establishing effective communication. Finally, the whole American effort was, of course, underpinned by an impressive array of organisational and material resources. The Economic Cooperation Administration (ECA) Mission in London consisted of over 180 officials in the peak year of 195 1.’ They could call on almost unlimited supplies of paper and hospitality products like cigarettes and whisky, important in a country where rationing was still extensive. Those showing British teams around America were similarly endowed with emollients. Visitors typically expressed astonishment at the amount of food and entertainment offered.2 However, the US effort also suffered from a number of characteristic flaws. First, there were ambiguities in American policy itself. Government officials operating at home and abroad frequently disagreed about priorities. One American observer contrasted the ‘rather ridiculous optimism’ of some European missions with Washington’s ‘extremely toughminded’ insistence on asking ‘What is in this for Uncle Sam ?‘3 In addition, conflicts could easily break out within the technical assistance agencies, particularly since these normally included personnel on secondment from both business and the trade unions. Officials with labour backgrounds were furious when Washington encouraged the European Productivity Agency (EPA) to organise a conference on human relations in 1956, because they believed ‘experience in the U.S. demonstrated . . . so-called human relations activities were only a device employed by capitalists to undermine trade union activities and to weaken the bargaining position of unions’.* Implementing policy produced a second category of difficulty. Links across the Atlantic were occasionally tenuous. An evaluation exercise in 1953 found one case where ‘it was 521 days from the time the project was started until goods were obtained to initiate the program’.s The high rate of turnover amongst staffers in missions was another source of uncertainty. A British civil servant complained: ‘there are so many changes in . . . personnel that we are constantly being confronted with new men with new ideas they want to plug’.6 Nor were interactions between Americans and their audiences necessarily free of problems. Those hired from business to explain new techniques were sometimes patronising or extraordinarily ignorant of local conditions. One was described as having created ‘active resistance’ because of his overbearing and insensitive manner.’ Conferences, too, could easily prove unsatisfactory. Complaints about poor organisation, weak speakers and banal debate were by no means unknown. An American report of one event noted that it had been ‘amorphous’, with few of the papers stimulating ‘really useful discussion’. The US experts present had not helped, failing to establish much contact with the delegates and resorting to ‘dogmatic utterance’ when 83

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challenged about details.8 Finally, team visits, so important in the first phase of US policy, were plagued by their own troubles. The Americans constantly worried about the selection of participants. They did not want shopfloor radicals or boardroom reactionaries, but frequently lacked enough local knowledge to make confident selections. 9 Once in America, the teams were usually shown several different plants in a variety of states, and many complained of feeling rushed. lo Snags and hitches cropped up with regularity. The drop forging team’s decision to experiment with a dictaphone was not a success due, as their report explained, ‘to lack of experience of its use and to the difficulty encountered by an American typist in attempting to transcribe unfamiliar British dialects and the technical terms of the industry’.” Unsurprisingly, too, some visitors did not enjoy being thrown together with comparative strangers in a foreign land, while others simply succomed to the pleasures on offer and neglected work. The Anglo-American Council on Productivity (AACP) team sent to investigate American management education proved particularly controversial, since members not only bickered amongst themselves but also took time off from official engagements to do private business. A confidential report on the group concluded: They have acted as a bunch of individualists, not as a team, have frequently pursued their own interests and not followed the team program, have been discourteous to their hosts and cynical of many of the things they have seen. ‘* The EPA was hampered using funds from both the Co-operation (OEEC), and American policy prescriptions ries. l3 The whole situation after its launch but neglected A later report described the

by rather similar problems. It had been created US and the Organisation for European Economic this in itself was an obvious source of tension, as collided with simmering intra-European rivalworsened because the EPA expanded very rapidly to build appropriate administrative foundations. resulting chaos:

At the end of the 1953-54 financial year, that is after six months of effective activity, 86 projects had been adopted. In many cases they were in no way connected with one another and the importance of the problems involved varied considerably; finally in many cases it was by no means certain that the results expected would have any practical effect.‘* In many ways, the EPA never recovered from this period, and spent much of the later 1950s juggling with organisational reform. Operational activities inevitably suffered. The EPA was very keen to boost participation in its programmes but rather lax about selection criteria. One American noticed a ‘small population of seminar-goers and jaunt takers who avidly encourage 84

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these activities for personal reasons’. l5 Conferences, too, were sometimes run without much structure. A gathering to discuss productivity measurement in 195 5 produced paltry returns for this reason: Despite . . . [a clear] mandate, and despite the presence of extremely able European and U.S. technicians, no concrete recommendations were forthcoming. Country needs were not adequately surveyed and the problem of what the Agency should do was not adequately set forth before the experts for their comments and recommendations.” Even internal EPA activities suffered. A review of the organisation’s Productivity Committee in 1961 was characteristically self-critical, arguing dryly that too much of this body’s work had been ‘based on oral exchange of views whose length was not always matched by an equal degree of precision’.” The British Productivity Council (BPC) was obviously in a rather different position as it did not depend upon any degree of international collaboration. Nevertheless, debilitating practical problems existed here as elsewhere. Some argued that the BPC lacked focus. It should concentrate on either propaganda or the provision of practical services, but could not encompass both.” Moreover, organisational difficulties continued to hamper progress. Establishing local productivity committees proved particularly exacting, as an internal report of 1954 documented: It was perhaps inevitable that, in view of the method of their inauguration, on a very wide scale within a short period of time, the most suitable people were not always attracted to serve on them; indeed, in some cases, they were even unaware that . . . [a committee) was being formed in their area. It is clear that not really enough preparatory work was done in many areas. . . . In too many cases there seems to have been no personal approach to leading firms or individuals to secure their support and interest in advance. The normal procedure has been to issue invitations to a large number of local firms to attend an inaugural meeting, many ofwhich did not find it worthwhile to be represented or sent a junior member of their staff to hold a watching brief. The approach to the trade unions was also faulty in many cases.19 In later years, the BPC did much to rectify matters, but its reliance on volunteers at the local level remained a source of weakness. An official enquiry of the late 1960s showed that the organisation was still not fully effective.2” The existence of these tensions and difficulties suggests that the American technical assistance message was, to some extent, dissipated in the telling. The transmission of information and advice proceeded using various mediums, but none was perfect, and a range of obstacles interposed between the parties 85

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involved. Nevertheless, this only partly explains why take-up was so modest. The programmes may have been flawed but they still managed to fulfil much of their purpose. An enormous amount of new and detailed know-how was made available to those who wanted it. The question that needs to be answered, therefore, is why the British reaction was so unenthusiastic? Explanations:

the economic

context

One obvious starting point here is a body of recent work that emphasises the allegedly pernicious features of modern Britain’s business and institutional arrangements. In a very well-known thesis, Alfred Chandler argues that family dynasties still dominated many British companies in the postwar years, with damaging consequences for innovation. As he sees it, families were more interested in immediate cash returns than long-term growth or profits, and so remained unwilling to experiment with new methods.*l Stephen Broadberry and Nick Crafts, influenced by Mancur Olson, identify a rather different set of pathologies. They believe that a cosy system of restrictive labour practices and encompassing cartels, formed during the 1930s continued long after 1945 and suggest that this strongly discouraged change of any kind. Hedged in by trade unions and feather-bedded by collusive agreements in what was anyway a sellers’ market, British businesses of the late 1940s and early 1950s simply lacked the will or outside stimulant to become dynamic.” Are these arguments as useful as they seem at first sight in understanding the response to technical assistance? Chandler’s strictures on the family concern are certainly of some relevance, particularly in relation to Britain’s considerable small-firm sector.23 For example, companies without elaborated management hierarchies rarely employed technical specialists and so were at a degree of disadvantage in handling new information about methods and processes.** Moreover, borrowing or imitating techniques was not always feasible in financial terms. An article on the pottery industry in 1948 noted: A shortcoming on the part of management which sounds almost incredible is that they find the costing of individual articles to be impracticable because no sufficiently inexpensive system has been devised for allocating accurately to individual items the cost of losses in production, which averages 20-25 per cent of total cost.*> Finally, there is no doubt that some owner-managers were particularly intent upon protecting their own status and power. One civil servant charged with extending the employment of personnel managers in the Birmingham area noted that many firms had extremely unsophisticated industrial relations practices. Several employers told him that they operated on the following

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maxim: ‘I am the Boss, and they [the workers} have to do what they are told.‘26 On the other hand, the argument should not be pushed too far. Productivity agencies were well aware of the problems experienced by small firms and did their best to tailor programmes accordingly.27 A series of publications was aimed at the sector. For example, the EPA published technical digests, which summarised key points from over 1,000 periodicals - more than even the biggest firms would have been able to monitor2* Steps were also taken to encourage take-up. A Benton-Moody grant financed the creation of the National Union of Manufacturer’s advisory service NUMAS in 1953, and this gradually grew into an important consultancy organisation specifically for small businesses, with a roster of nearly fifty trained specialists available for secondment.29 Second, it is important to stress that many of the techniques being recommended were not expensive. Indeed, one advantage of technical assistance was precisely the fact that it focused upon relatively uncomplicated measures which could often be adopted incrementally. As several trade journals constantly reiterated, there were no real barriers preventing small firms from adopting at least some of the measures being proposed.30 Finally, reviewing the albeit imperfect data on applications, it is difficult to find any evidence that companies with professional managements incorporated the new techniques better than those without. In fact, a number of well-publicised examples demonstrated that individual entrepreneurs were quite capable of using what was on offer in highly creative ways. The journal Business, for example, featured an owner-manager in the brass and copper industry who had completely transformed his firm’s operations after taking part in an AACP team visit.31 The Broadberry and Crafts’ thesis also has its limitations. The part of their argument relating to trade unions and restrictive labour practices has little resonance in relation to the technical assistance programmes. Indeed, the reaction of unions and their members to the new initiatives, both in rhetoric and in reality, suggests an almost opposite conclusion. At a formal level, there were certainly few signs of any negativity. Most unions had enthusiastically backed Labours’ ‘battle for production’ in the late 1940s with its various associated productivity initiatives, and they tended to see American assistance as a continuation of what had already been begun. The Trade Union Congress (TUC) underlined the positive mood by sending its own team to investigate US methods. The result was a report which confirmed the relevance of several American techniques without being simply uncritical. Thus, unions were advised to co-operate with the introduction of ‘scientific management’ systems, since these would boost productivity, but also warned to remain vigilant for any ‘abuses’ that might occur in the process.32 This degree of compliance at first astonished visiting American officials, particularly since unions in other parts of Europe tended to be much more antagonistic. A briefing paper on attitudes to productivity in Britain,

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produced for the London Mission in 195 1, observed with a degree of surprise: ‘It is unusual to find a strong trade union movement voluntarily advocating . . . measures for the good of the country while knowing full well the inconvenience they will cause to individual union members.‘33 Detailed discussions with the TUC productivity team revealed that some union leaders and executives were less committed to the introduction of new methods than others. Moreover, it was clear that rank-and-file members sometimes had quite complex opinions about American-inspired reforms. Typically, many liked effort-saving machines and gadgets but were less sure about suggested organisational changes, seeing them as emblematic of what they believed to be an American trade-union surrender to management. Nevertheless, as the US technical assistance staff concluded, none of this invalidated the central point that most trade unions in Britain were notably sympathetic to what was being attempted.34 Given these attitudes and dispositions, it is unsurprising to find that shopfloor resistance to productivity enhancing innovations was rarely very pronounced. 35 Some workers opp osed the introduction of production engineering measures, particularly work study, and were even prepared to strike in support of their cause. 36 However, it is quite clear that poor management and lack of consultation had often inflamed these situations.37 For the most part, change proceeded much as planned. Questioned at an open meeting in 1952, experts from the Institute of Materials Handling were adamant that workplace antipathy rarely proved a problem. They declared: There is far too much talk going around about the opposition received from the shopfloor on the introduction of mechanical or materials handling equipment. The converse is the case. We get pressed by the people who are less fortunate and who have not good materials handling equipment. They want to know what is to be done to relieve them of the fatigue and the out-of-date methods to which they are subjected.38 The second component of the Broadberry and Crafts thesis concerns the alleged lack of competition in postwar product markets. British firms, they suggest, faced ‘soft’ conditions both at home and abroad, and, moreover, were able to manipulate prices through collusive agreements, often maintained by a burgeoning network of trade associations. Are these observations consistent with the evidence? Broadberry and Crafts base their characterisation of the home market on the fact that British imports of manufactured goods at this time were extremely low. However, import penetration figures do not tell the whole story. An enormous member of foreign, largely American, enterprises set up operations in Britain during the 1950s and these inevitably tried to gain market share. Indeed, the government encouraged the influx in part precisely 88

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because it would increase competition. In the words of two eminent business historians: ‘The most idiosyncratic aspect of British policy was the pleasure which certain government officials felt about the pain that US investors would inflict on their “inefficient” British competitors.‘39 As a number of contemporary empirical studies confirm, therefore, home markets from about 1950 onwards were far less stagnant than the trade figures on their own imply.*’ Abroad, British firms certainly enjoyed a sellers’ market in the years immediately after the war, but this ended much more quickly than almost anyone had predicted. The Federation of British Industries (FBI) surveyed its members about competition overseas in early 1949 and was shocked at some of the replies received. The Director of the Telecommunication Engineering and Manufacturing Association reported: ‘we are seriously perturbed by Japanese competition, as their prices are quite definitely below the international level’. His counterpart at the Foundry Trades’ Equipment and Suppliers Association was equally gloomy: ‘We have already learned from our members that such competition is fierce, particularly on the Continental markets, where prices are in the region of 30% below our own. ‘*’ A few months later, the Engineering Advisory Council was perturbed enough about this situation to lobby the Board of Trade, in particular underlining its concerns about ‘the German competition now arising in foreign markets’.42 By 1952, the Iron and Coal Trades Review was arguing that a watershed had been reached: Every year since the war we have been warned by one Minister after another about the growing threat to our overseas markets from Germany and Japan. And almost every year has seen production rising in Britain, Germany and Japan, while a sellers’ market was maintained throughout the world. British exporters have been feeling competition from these ex-enemy countries for some years, but so far the markets have been able to absorb the growing output from all of them. There are now signs that the whole picture is changing. In one trade after another the sellers’ market has gone, or is about to go. This year may well see the first head-on clashes between the world’s large exporting nations. 43 Within two or three years, it was quite evident that these predictions were 44 coming true. What about the charge of collusion? Evidence unearthed by the Monopolies Commission shows that restrictive agreements bound some industrialists but it is by no means certain that every sector was equally effected. Broadberry and Crafts cite Gribbin’s contention that in Britain in the late 1950s ‘between 50 and 60% of. . . manufactured output may have been produced in cartelised industries ’ 45 However, this seems to have been a rather provisional estimate.*’ Gribbin included resale price maintenance agreements in his calculations, even though it has always been known that these were

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often broken in practice - as in the case of cars, for example.*’ There are also problems of coverage. Some of the agreements cited by Gribbin relate to only parts of the industry concerned, while others exclude export activity, an important lacuna where competition for overseas sales was fierce.** The related issue of trade associations is similarly less straightforward than it appears. The number of such bodies certainly grew after the war, but it is clear that in many casestheir prime purpose was essentially political - the representation of a particular trade’s interests to government. 49 The research group Political and Economic Planning exhaustively investigated these organisations in the mid-1950s and found that ‘restraint of trade’ objectives were only present in a minority of cases: So far as the prevalence of price agreements is concerned available evidence . . . [suggests) that rather less than a quarter of the total number of manufacturer’s associations are engaged in this activity to a greater or lesser extent.s’ Broadberry and Crafts are correct in maintaining that collusion existed, therefore, but far less convincing on its scale and importance. Explanations:

applicability

In general terms, therefore, neither structural nor contextual factors of an economic nature fully explain why the British were so reluctant to emulate US techniques. Is what happened any better understood by looking at the issue of applicability? W ere British managers wary of adopting American solutions simply because they judged them largely inappropriate? To answer these questions, it is necessary to look in some detail at exactly how US prescriptions were received. During the early phases of the technical assistance programmes, most British participants tended to be rather uncritical and passive about what was on offer. The AACP teams, for example, were often enthusiastic about almost every aspect of American life, ignoring any evidence of economic or social difficulty.51 H owever, by the early 1950s more realistic and discerning attitudes had begun to dominate. Some argued that the gap in technique between Britain and the US was not always overwhelming: it had frequently been overestimated by comparing worst practice at home with best practice across the Atlantic. Others observed that the US system had drawbacks as well as advantages. For example, American employers were quite obviously less concerned about safety than their British counterparts.52 Nevertheless, few of those directly involved took these criticisms to extremes. Indeed, visitors with technical backgrounds continued to stress that, disregarding the hyperbole, the US example illustrated many important lessons.53 The measured assessment produced by a team of managers who studied business administration at the 90

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University of Cincinnati and toured surrounding plants during 1952-3 was fairly typical. The group recognised that ‘the varying efficiencies of. industrial concerns in Great Britain’ meant that the scope for improvement differed ‘widely’. However, they also agreed that much of what had been seen should not be ignored. The techniques that were judged ‘beneficial’ ranged from ‘a different method of performing a clerical operation to a radical change in top management policy with regard to budgetary control’.54 Having said this, it is also clear that one or two elements in the US package continued to be genuinely controversial. The most animated debate occurred over the American advocacy of the ‘3 Ss’ - standardisation, simplification and specialisation. The critics’ case was that these were being promoted far too dogmatically. The United States had an enormous domestic population which demanded cheap goods and thus encouraged mass production to the greatest degree possible. Britain’s position was very different. It depended on supplying numerous, fairly small home and export markets with ranges of specialised products. Like all those in business, British manufacturers inevitably worried about cost and price, but they also had to offer variety and quality. Accordingly, encouraging blind pursuit of the ‘3 Ss’ was both foolish and harmful, threatening rather than boosting commercial prospects. The Engineer made these points forcefully in an editorial of 195 3: British firms must make the best of the economy in which they dwell and the very varied and far from homogeneous world markets to which they sell their goods. That does not mean that high productivity should not be sought . . . it does mean that the methods employed cannot be those appropriate in America. The means must be adjusted to the circumstances. High productivity must be sought without necessarily and always associating it with high production, and without necessarily carrying specialisation and simplification so far as they have been carried in America.S5 These points provoked argument at the time and continue to do so today.56 Were the critics speaking for British industry as a whole or merely one or two atypical sectors? Was their case made on the basis of real expertise or was it just a reflex defence of custom and practice? One way of distinguishing between the various claims is to examine the way in which discussion of the ‘3 Ss’ developed in Britain. The potential benefits of these techniques were first raised during Labour’s productivity campaigns in the late 1940s. After some reflection, key mu-usters like Cripps and Morrison decided that variety reduction was both possible and desirable, and so a number of investigations were carried out to determine how it could be encouraged. These revealed a situation of some complexity. Several trades were quite definitely prevented from pursuing changes because of their overseas customers’ stipulations. The British Internal Combustion Engine 91

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Manufacturers Association, for example, reported that its members sent 92 per cent of their output abroad, but stressed that they had ‘to meet the varying needs of users’, each of whom held ‘very definite preferences’ and would not accept standard models. s’ On the other hand, there was little doubt that this kind of constraint often tended to be exaggerated. Ministers knew from other enquiries that many exporting companies had little understanding of their product markets and were successful only because they faced temporarily restricted competition. 58 Moreover, surveys of overseas buyers’ preferences revealed that most made choices about British goods on the basis of factors like price, quality and delivery time, while only a few were interested in variety above all else.59 In fact, it seemed apparent that what really prevented action in many caseswas simply conservatism and lethargy, a dogged determination to continue working in time-honoured ways. Typically, few exporters had explored the possibility of encouraging their customers to accept narrower ranges by offering them lower prices. 60 This left the government in a difficult position. As a special correspondent of The Economist remarked, the case for reducing ‘the variety of products of the average British factory’ was ‘unchallengeable’.61 Nevertheless, actually achieving satisfactory change would clearly not be easy. Successful implementation of the ‘3 Ss’, it was recognised, required detailed cost and marketing data. Some firms had this kind of information already but many did not and would require time to learn about collecting it. Moreover, as ministers were aware, most of industry was very hostile to the idea that the pace of change might in any way be forced. Some of those who advised the government had recommended using the semi-official British Standards Institution (BSI) as a focus for reform, but those engineering employers who were consulted stressed that this must not even be contemplated: Standardisation to be effective must be carried out voluntarily and as a result of the co-operation between manufacturers and users. . . . No support can thus be given to any idea of Government enforcement of standards. The suggestion that the BSI should take a more active part in initiating standards and producing draft specifications is not agreed. . . . The knowledge as to when and where a standard could usefully be prepared must reside within industry, amongst those regularly so employed.62 In this situation, the government had no choice but to move slowly. Progress with introducing the ‘3 Ss’ would have to occur by persuasion and discussion, involving the maximum number of relevant players. The AACP programme refocused attention on the whole issue. Some twenty-four of the first fifty-eight teams crossing the Atlantic felt ‘simplification and standardisation of products’ was important in explaining high US productivity, and many recommended that British manufacturers should 92

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adopt similar measures. 63 The metalworking machine tools team, for example, argued for ‘a ruthless and realistic application’ of the ‘3 Ss’, in both ‘each individual firm and the industry as a whole’, and promised that this would be ‘of tremendous benefit’ to all concerned.‘* Nevertheless, few of the teams advised that standardisation should be pursued on its own, and most suggested that it should be seen as part of a broader strategy aimed at improving consumer satisfaction. The drop forging team made a fairly typical observation on this theme: Co-operation exists between the user and the manufacturer . . . in the United States. This often results in modifications in design which in turn permit reasonable prices to be charged for articles that might otherwise be expensive. It is strongly, recommended that British Drop Forgers and their customers should co-operate to design forgings which will be cheap and easy to produce.‘s The same point was made by the specialist simplification team. New product strategies, it emphasised, could only be developed if there was a genuine integration of sales and production functions. The need, above all, was for better castings techniques, which would allow managers to make sensible judgements about their options. 66 Firms were not being asked to slavishly copy American mass-production methods, it was underlined, but merely be more efficient at what they were already doing. There would always be a trade-off between variety and cost. The point was to explore seriously where the optimum position lay. A member of the locomotive team recommended the proactive strategy that was used by one famous American manufacturer: At General Motors locomotive works they are building six diesel locomotives a day . . . we asked them ‘How do you get over the demands of Chief Engineers in different lines who have their own ideas?’ and they said ‘we have had all that, but we do it this way. If you want a special locomotive you can have one. We have designed it and guaranteed it; if you want knobs on it you can have it, but you pay, and you can go back to your Board and tell them that . And the answer {from the Board] is “Why should we pay for your ideas on this if it is doing the same job?“.‘67 The AACP programme gave an impetus to the ‘3 Ss’ and encouraged some companies to re-examine their practices. Nevertheless, it was clear that many firms remained resistant to change. An editorial in Engineering during 1956 regretted the lack of progress: A distressingly high proportion the way to high production

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variety of designs, accumulated over years, sometimes over more than half a century. They embody the ideas of designers who have improved on this, or added that, or created something new. They embody the wishes of customers from all types of industries in countless markets. It is notoriously easier to sell what the customer wants than what the company makes. Investigation often reveals that thousands of part numbers are used where hundreds would suffice. . . . Each part number has a drawing, which has to be filed, and a bin in the stores, and tools in the tool store. . . . Catalogues are crowded. .. . The indigestion is so chronic that modern patent industrial medicines cannot cure it.“* Proponents of the ‘3 Ss’ found this inertia frustrating but they were not persuaded that their original strategy should be abandoned. Firms, it was reiterated, needed to make changes that were consistent with their cost structure and market situations. The official US mission handbook on standardisation underlined that it could be ‘applied unwisely’ and recommended moving with care. It counselled: ‘objection to standardisation on account of the cost of new or different equipment, or changes in plant layout, is a valid argument and must be weighed against the resultant savings’.69 A few years later, the BPC again warned against rash or hurried applications. The objective, it emphasised, must be ‘to cut out wasteful variety, not to eliminate variety altogether’, since that would lead to ‘the narrowing of consumer choice’ and the deterioration of ‘skill in design and inventiveness’.” Apprehensions about the American emphasis on the ‘3 Ss’, therefore, often seem to have been exaggerated. Some companies did service highly specialised markets and so had to be extremely careful about product modification. On the other hand, there were many instances where variety proliferation was the outward manifestation of an inward malady in the business process. Policy makers and experts understood this difference and tried to tailor their prescriptions accordingly. The ‘3 Ss’ were not to be applied mechanically and did not represent ends in themselves. As with much other American-inspired advice, the idea was to improve specific practices in whatever ways were appropriate, not advocate the adoption of blanket solutions. In this sense, the ‘3 Ss’, like most of the other techniques promoted, cannot be viewed as inappropriate in a British context.

Explanations:

management

culture

and employer

politics

As the previous sections have shown, Britain’s indifference to technical assistance cannot be understood solely by reference to economic calculation. In fact, there are good reasons for thinking that the crucial barriers to implementation were often cultural and political. Employers and managers, in other words, reacted against the American programmes not for financial reasons but 94

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because they were judged to compromise long-standing beliefs about how industry should be organised and run. Prejudice and narrow self-interest held sway, as the following discussion will illustrate. To begin with, there is little doubt that many British executives disliked the US initiatives simply because they were American. British attitudes to the United States were complex and sometimes contradictory, but negative evaluations always remained near the surface.‘l In the early 1950s some UK managers on technical assistance courses at US universities offended their hosts by reporting, amongst other things, that ‘the Americans worship the dollar’ and ‘the American undergraduates spend most of their time taking their girl friends to gin parties’.72 Nearly fifteen years later, a columnist in the Director regretted: ‘Hardly a month appears to go by without its outburst of anti-Americanism somewhere on the British business front.‘73 Such attitudes were fuelled by a number of interlinked perceptions. At a personal level, Britons felt Americans were ‘open’ and ‘friendly’, but also over-materialistic and prone to ‘boastfulness, bumptiousness and baloney’.‘* More generally, there was widespread unease about America’s ultimate international objectives. Washington, some believed, was intent on destroying Britain’s economic and political power, thus opening the way for the colonisation of the country by US corporations. Anyway, it was asserted, America was hardly a suitable model for Britain to follow: William Whyte’s The Organisation Man was only one of a number of signs that democracy was being rapidly extinguished across the Atlantic.‘> Finally, there was the not insignificant question of corporate style. British executives aspired to be relaxed and patrician, capable of enjoying other refined pursuits. They judged that Americans were over-committed to their companies and ultimately rather vulgar in matters of taste.76 However, disregarding anti-Americanism, there were other potent reasons why British managers disliked US prescriptions. An understanding of what was at stake here can be gained by looking at some basic features of UK management culture. ” British managers rarely spent much time ruminating about management during this period, but they did share an intuitive grasp of what their calling demanded. Managers must, above all, be leaders, akin to military generals. A common maxim was: ‘Men who can manage men, manage men who can only manage things.‘78 Accordingly, they needed to be ‘characters’, able to inspire subordinates in the firm. Additionally, they had to possess sound judgement - a ‘good brain’ as it was usually described - and a capacity to act decisively. Prevarication was not admired, even if quick thinking caused problems. Compared to this emphasis on leadership, much less was made of issues relating to technical competence. Although junior managers might need to know about specific processes or functions, at the apex of the firm, most believed, no such proficiency was necessary. Indeed, the ascent of the management ladder was popularly viewed as a movement away from the mundane 95

AMERICANISATION:

world of specialist skills. Management Review:

REACTIONS

As one correspondent

AND

told

RESPONSES

readers

of the Britzsh

The higher we go in the management hierarchy, the more we should look for educational breadth, the less, perhaps for technical depth. For the higher the level the greater the artistry required, the greater the culture.79 Given this pattern of understanding, it is not difficult to see why British managers were relatively unsympathetic to some fundamental aspects of the US aid package. The Americans, it will be remembered, stressed that managers needed to be professionals, schooled in their subject. The British, on the other hand, opined that this was anathema. Management was not really a coherent discipline. Some principles were involved, the journal Business allowed, but these were ‘so obvious and so elastic in practice’ that they ‘hardly . . . [made] up a complete body of learning’.80 Accordingly, there was very little call for a formal system of management education. As Lyndall Urwick, the prominent management consultant, explained, most insisted that the only way to become a manager was by experience - ‘by entering a particular business undertaking and by forcing your way upwards through the ranks by sheer drive and personality, picking up what knowledge of the art you can as you go, by . . . trial and error’.“’ A similar difference of opinion existed about consultation. The American position here was that managers needed to work collaboratively and consult as widely as possible. The British, on the other hand, with their emphasis on the lone leader, disagreed. Specialists like scientists and engineers could doubtless provide detailed information but they would not be able to view issues strategically and so should be kept in subordinate positions. Labour had even less claim to be heard. Typically, one British manager told a visiting American academic that if a trade union representative came to see him about their firm’s balance sheet, ‘he would kick him out of the offrce’.s* The consequences of this difference of approach were particularly evident on the shopfloor. Technical assistance personnel wanted to modernise wherever possible, but they found that British senior managers were frequently unable to understand how new techniques worked and what each might deliver. A group of experts who reviewed materials handling procedures in Britain during the early 1950s found that ‘amazing misconceptions’ were ‘common-place amongst responsible executives and directors’. They reported:

Apparently, despitethe very considerableamount of educatzonal and publicity work already carried out throughout Britain, there are stzll considerable numbers of industrialists . . . who have not yet appreciated the fact that

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AND

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tremendoussavings and zmprovementsare to begained by systematicstudy and rectification of materials handling inefficiencies.83 Several enquires about statistical quality control (SQC) applications came to similar conclusions. Frank Nixon of Rolls Royce believed that the “‘professional” nature of this work’ was ‘undoubtedly one reason why British industrialists did not adopt it with the enthusiasm of their American and Japanese counterparts’. Academic researchers in the 1980s concurred. One recorded: the most frequently occurring barriers to the acceptance of SQC techniques were either lack of knowledge of quality control and quality assurance or a lack of support for quality from the senior management. . . . Lack of support from the senior management was itself often due to a lack of knowledge.** British employers also had reasons for resisting the American programmes. They had been deeply scared by the Attlee government’s nationalisation measures and even in the 1950s remained anxious and defensive about any degree of state involvement in the economy. 85 The US initiatives were not, of course, judged comparable to Labour’s onslaught, but they did nevertheless contain several unwelcome components. Many British employers resented the American government’s pressure against monopoly and restrictionism.*’ There was general unease, too, about the US emphasis on the importance of management. Managers, it was believed, should be the servants of the firm no more and no less. Little would be gained by giving them ‘ideas above their station’.87 Thirdly, most were critical of the US preference for including trade unions in discussions about productivity. Labour could be rewarded if output grew but did not have a right to consultation about the issue. Management, it was asserted, must retain control over its traditional prerogatives.88 Finally, there was the difficult matter of confidentiality. The Americans encouraged openness about data on performance and indeed advocated techniques like inter-firm comparison (see above pp. 62-5) which depended upon the free exchange of information. However, few in Britain responded with enthusiasm. Most British firms had always been very secretive about their operations and commercial prospects. 89 Moreover, there was now apparently a danger, given the existence of organisations like the EPA, that valuable information might be handed to the country’s European competitors. In this situation, there were some who concluded that the American emphasis on openness could only have ulterior motives. In response to these anxieties, British employers’ associations continued to campaign against what were seen as the excesses of the American position. The FBI had a ‘minimalist and defensive’ attitude to the AACP and this set the tone for later responses long into the 1950s.” The tactics used varied 97

AMERICANISATION

REACTIONS

AND

RESPONSES

according to the occasion. Employers’ representatives often attended EPA conferences and educational programmes so as to present their own ‘line’ and counter any American-inspired ‘over-enthusiasm’. The organisations operated behind the scenes, too, lobbying government departments in Whitehall. Thus, when the Board of Trade canvassed business opinion about the future of the EPA in 1959, the FBI urged that it should be wound up. The Federation’s spokesman advised: ‘No doubt [the EPA’s work] . . . was of some benefit but he did not think it by any means commensurate with the cost. If the Agency were to stop now, after six months it would not be missed.‘91 Finally, international networks and contacts were used as a further method of exerting influence. The FBI had been instrumental in creating the Council of European Industrial Federations (CEIF) during 1949, and over the following few years this body became a conduit for making British and European views known in the US. Links were formed with American manufacturers and, through them, the American government. A typical strategy, outlined by an FBI official, was to exert pressure through the CEIF on those Washington officials concerned with the EPA, in the hope that they would then ‘channel its activities in constructive lines’.92 Of course, not all of this activity proved effective. Nevertheless, the US Mission in London was aware of a climate of opposition, and often complained about the ‘indifference, verging on antipathy’ of British business organisations and the negative behaviour that this encouraged.93 Explanations:

British

government

attitudes

The final ingredient that needs to be added to the analysis is something about the role played by successive British governments. American officials were aware that, given the depth of business antipathy to their plans, attitudes in Whitehall might well prove vital. Vigorous support from politicians and senior civil servants would possibly make all the difference in eventually winning over recalcitrant industrialists. However, persuading the British government to take a positive approach proved far less easy for much of the time than at first seemed likely. The Labour administration that negotiated the AACP was, of course, well disposed to the idea of US technical assistance. It had good general relations with Washington, and was committed to the idea that British productivity needed to be improved. Moreover, Labour had no problem about intervening in the economy: it was quite ready to use official agencies as instruments for modernising private enterprise. In the three years to 1951, therefore, US missionaries and the British government were largely working in harmony, agreed about ends and means. The election of the Conservatives in 195 1 changed the nature of this relationship, making it very much more complex. As has already been suggested, Conservative politicians were not keen on any degree of state-sponsored 98

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AND

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modernisation, for financial as well as ideological reasons. Moreover, they were less convinced than Labour about Britain’s productivity problems. If the administration created the right framework for private enterprise to flourish, it was argued, lags would quickly disappear. On the other hand, the Tories certainly believed in ‘the special relationship’ and were sensitive about possibly offending a country which they saw as Britain’s major ally. At a venal level, too, co-operating with the US obviously made sense. The government would be foolish to pass up the chance of obtaining funds for projects it might otherwise have to finance itself. All in all, there seemed to be valid arguments both for and against the continuation of the technical assistance programs. In this situation, actual policy in the 1950s tended to follow no fixed pattern but be driven by expediency or particular balances of interest. At one level, there was a constant drift towards the path of least resistance. An early episode, concerning the creation of the BPC, provided a telling example. When the AACP programme was completed in 1952, the British government had to decide how its work should be continued. American policy favoured national productivity centres, as has been noted, and so the Conservatives created the BPC as a tripartite body which would keep the momentum going. On the surface, therefore, they had honoured their ally’s wishes. However, in reality the level of official commitment was very much less than it appeared. An American assessment of 1953 was damming about the indifference that lay behind the rhetoric: Among the evidence adduced to support the contention that the UK Government was not sufficiently concerned are the following points: limited financial support for the BPC; the fact that Chancellor Butler was the only senior Government official present at the recent BPC meeting and he left immediately after delivering his address; the weakness of the BPC both in its personnel make-up and its financial resources; the limited amount of personnel available in the Board of Trade for productivity operations; {and} the lack of co-operation of the Treasury in making funds available for desirable productivity projects . 94 On the other hand, the British government was quite capable of taking a more active stance if it felt this to be advantageous. American officials who discussed with Whitehall how Benton-Moody money should be spent were astonished at some of the projects suggested. It appeared that British civil servants were trying to include schemes that had little to do with productivity and might otherwise have to be financed from domestic sources. During the negotiations, a Mission staffer recorded the following laconic exchange about a suggested grant to the food industry:

99

AMERICANISATION.

REACTIONS

AND

RESPONSES

I said that it was difficult to relate the ‘hygienic implications arising from the introduction of new machinery and layout’ to the objectives of the Benton Amendment. Miss Stevens la British civil servant) advised that the relation lay in the fact that the food industry was an important export trade. I pointed out the names of manufacturers subscribing to the Food and Manufacturing Association {which) indicated very substantial financial interests who I suggested were able to provide all the funds necessary to carry on this particular type of service.95 A second occasion when the British government was interventionist, but this time in a negative sense, concerned the question of business collusion and anti-competitive behaviour. The American view, to repeat, was that collusive agreements were rife in Britain, with very damaging consequences for productivity. Labour had passed the Monopolies and Restrictive Practices Act in 1948 but this was judged an ineffective piece of legislation. One American official saw it as ‘little more than window dressing meant to silence those zealots who from time to time say that the government is not doing an effective job in coping with restrictive practices’. To US eyes, the new investigating organisation - the Monopolies Commission - seemed both understaffed and uncertain in orientation, charged with examining each case on its own merits rather than setting out from the American presumption that monopoly was damaging per se.96 A key objective for the Mission, therefore, was to persuade the British that they should take further action aimed at promoting competition. However, the Conservative government was simply not prepared to heed such appeals, disliking both the ideological overtones of the American position and the idea of being told what to do on such a delicate issue by a foreign power. Thus, when the Americans raised the question of using Benton-Moody funds for anti-monopoly purposes, they met considerable resistance. The Conservatives were prepared to include one or two research projects on monopoly in their bid for funds, but underlined that this would be a fairly minor part of a much broader programme. Outlining the proposals to the Cabinet, the Chancellor declared that ‘it was not possible for [the Government] to go any further towards fulfilling the {Benton-Moody} anti-monopoly conditions because of the accepted policy of the empirical approach’. A few months later, when Senator Benton visited the country, the Americans were again warned not to pursue the matter: using dollars to change attitudes towards monopoly would merely cause ‘a tremendous rumpus’. After these experiences, the London Mission decided that any further pressure would be futile.97

100

AMERICANISATION:

REACTIONS

AND

RESPONSES

Conclusions This chapter has reviewed possible reasons for the American productivity gospel’s relative failure in Britain. It has suggested that several factors played a role. The US ‘message’ was not always transmitted clearly. However, the central blockages appear to have been cultural and political. British managers and employers simply disliked the ideas that shaped the American programmes, while the UK government remained unprepared to expend any energy in combating their prejudices. This was a case where rational economic calculation played second fiddle to a nexus of assertions about power and position, about the way business and government in Britain worked separately and together.

101

7 THE

CONSERVATIVES COMPETITION

AND

Introduction The Conservative party has long had an ambiguous relationship to competition as a feature of economic organisation. On one, liberal, wing the encouragement of competition has been seen as central to the whole approach to economic issues. However, other strands in Conservative thinking have put more weight on sustaining social stability, and seen ‘excessive’ competition as a threat to this goal. As suggested in Chapter 1, the inter-war slump strengthened the hand of those who feared the impact of de-stabilising competition on employment and economic activity, and who believed that policy should encourage the private ‘organisation’ of the market. Along with tariffs, such policies had indeed been central to the Conservative agenda pursued in the 1930s. The postwar concern with efficiency raised old issues in a slightly altered form. Did the perceived need to encourage growth require a much tougher attitude to anti-competitive practices, or should the desire for economic and political stability still lead to limits on the extent to which market forces should be allowed to determine the pace and pattern of economic change? For the 195 l-64 period, treatment of the Conservative approach to competition has often taken second place to debates on the extent of ‘Keynesian’ influence on policy.1 Political historians have focused on the general role of the state in the economy, but have provided little more than broad generalisations about a free market trend in the 1950s followed by a more dirigiste stance in the early 196Os.* Detailed archival studies of policy in this period are very thin on the ground, but those that exist show a much more complex picture than the broad-brush portraits of an ‘advancing’ or ‘retreating’ state suggest.? This chapter gives a detailed analysis of one area of Conservative economic policy-making, that of competition. Policy on competition is an important part of the economic policy repertoire in any modern economy, and deserves attention for that reason alone. But, in addition, the nature of competition policy is one index of the ‘liberalism’ (in the economic sense) of policy, so that

102

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AND

COMPETITION

by assessing the extent of commitment to competition we can offer one guide to the overall nature of the policy regime. In existing analyses of competition policy two broad approaches are apparent. Nigel Harris has focused on the ideas and beliefs that animated Conservative policy on industrial matters generally. Helen Mercer, in her study of anti-trust policy in Britain up to the end of the 1950s emphasises the role of big business and organised labour, but especially the former, in shaping policy.* This chapter offers detailed analysis of aspects of competition policy covered by neither of these authors, especially policy on international competition, but also on domestic policy in the early 196Os, which the opening of the public records under the thirty-year rule now makes possible. But it also has regard to the issue of the forces shaping Conservative policy - did the fortunes of competition policy reflect the outcome of a ‘battle of ideas’ within Conservative ranks, or was it more a matter of the relative power of various external influences?

General

pressures

for international

liberalisation

In the 1940s the Labour government, after much agonising, accepted in principle the broad thrust of postwar American policy towards a more liberal international economic system. s In fact this proposed regime was the product of joint American-British discussions begun in wartime with the creation of the International Monetary Fund (IMF) and continued in the late 1940s with the setting-up of the General Agreement on Tariffs and Trade (GATT). In practice this new regime proved very difficult to install, and after the abortive freeing of the pound in 1947, British policy continued to be highly restrictive both of trade and payments. The disequilibrium between the USA and the rest of the world, coupled to growing US fears of communism, meant American acquiescence in widespread discrimination against the dollar which continued until the ‘dollar gap’ began to disappear in the late 1950s. Nevertheless, the eventual goal of liberalisation was embedded in US policy and informed much of US foreign economic policy in the period of Conservative government.’ The British acceptance of liberalisation in the 1940s had been qualified by two particular concerns. One was the evident weakness of the balance of payments, the other the fear of unemployment, especially arising from a possible depression in the United States. In the 1950s these fears gradually lessened. Whilst the balance of payments in some respects remained weak, the position was vastly improved over that inherited by the Labour government. Equally, whilst fears of a US recession never quite disappeared in the 1950s after the rather limited impact of the (small) US recession of 1953, this worry also diminished. Indeed, in the 1950s the British increasingly took the view that they should liberalise their economy to encourage the US government on

103

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AND

COMPETITION

the same road, as it was perceived that Congressional protectionism often inhibited presidential good intentions in this regard.’ The important general point here is that economic liberalism is much easier for governments to pursue in generally expansionary conditions, where the losers from enhanced competition are likely to be fewer than the gainers, and can be absorbed in a rising tide of economic activity. As officials noted in 1956 in regard to the issue of freer trade in Europe: ‘The process of adjustment would of course be easier if the UK economy as a whole was expanding rather than contracting or static.‘* This condition was normally fulfilled in the Conservative years. If the economic environment favoured liberalisation in this period, so too did the thrust of economic advice. Most importantly, official economic opinion, now entrenched in the government machine, tended to see competition (both international and domestic) as a major route to enhancing economic efficiency. Such advice was pragmatic and undoctrinal, but it broadly followed a ‘Keynesian’ pattern, promoting government activism in the macro-economy but believing in the efficiency of market forces at the micro level. Both the Chief Economic Advisers in this period (Hall to 1961, Cairncross thereafter) fit this pattern, and this was clearly the dominant view in the Economic Section of the Cabinet Office (absorbed by the Treasury in 1961), the major source of economic expertise.9 The impact of this view should not be exaggerated, especially in comparison with the politics of economic policy-making. But this advice did tend to reinforce the pro-competitive element of political thinking within the Conservative Party. This strand was plainly weaker in the 1950s than it was to become in the 1970s and 1980s. One index of weakness is that the pro-market Institute of Economic Affairs, though founded in 1957, was to remain a disregarded and often derided body by most Conservatives into the 1970s. Indeed the perceived need to found such a body reflected the extent to which such ideas were regarded as subversive of the existing policy stance.” On the other hand, economic liberalism had gained some ground in Conservative ranks from the late 1940s in reaction to the dirigisme of the Attlee government. By 1951 the successful electoral appeal, whilst supporting full employment and the welfare state, also stressed the need to ‘free’ the economy. I1 Whilst many pressures limited the ‘freeing’ that the government actually undertook after 195 1, the attachment of the Labour Party to planning and controls (though to an ambiguous degree), tended to push Conservatives into the ‘liberal’ space on the spectrum of economic policy ideas.

International

policy:

from

the Empire

to Europe,

195 l-6

At the time of the Conservative accession to power in 195 1 import controls, by quota and government purchase, were extensive but declining. In that year perhaps 45 per cent of all imports were free from quantitative control.‘* 104

CONSERVATIVES

AND

COMPETITION

However, because of the impact of the Korean War in raising both the quantity and price of British imports, and hence radically worsening the balance of payments, the Conservatives had little choice initially but to reverse the process of de-control, imposing successive rounds of cuts in imports in late 195 1 and early 1952. This reversal was clearly seen as temporary, and decontrol was resumed in 1953 as the payments position eased, and though some controls (especially on dollar goods) lingered on until the late 1950s quantitative controls probably ceased to be significant after the mid-l 950s. l3 However, this de-control only related to quotas and other ‘physical’ controls. The extensive system of tariffs erected in the 1930s remained intact, and whilst de-control was largely uncontroversial,‘* policy on tariffs was the basis of serious debate both in the government and the Conservative Party. In the assessment of economic policy options in their early days in office the Conservatives evinced no great enthusiasm for trade liberalisation as a viable alternative. Thorneycroft, the President of the Board of Trade, argued early in 1952 that ‘the fundamental assumptions of GATT are unrealistic’ because of imbalance in trade between the USA and the rest of the world. For him, the shape of long-term commercial policy was an open issue, on which a committee should be appointed.‘> However, this stance seems to have been overtaken by events. First, the failure of ROBOT in 1952 led to a recognition that the policy aim of currency convertibility would require a long haul, and could only be achieved by a ‘collective approach’ from the whole Sterling Area. Second, it was recognised that currency convertibility and trade liberalisation were interdependent: convertibility without liberalisation would be open to a constant threat that pounds would be accumulated by foreigners by restricting imports from Britain, and then converted into dollars. As a senior official noted, ‘if countries are free to restrict trade, there will be implicit in convertibility a serious danger of a world-wide intensification of import and exchange restrictions, and a descending spiral of world trade’. This was the view endorsed by the Commonwealth Economic Conference in December 195 2. l6 This liberalisation policy was strongly supported by the government’s economic advisers.” Ministerial enthusiasm was more muted, but the Chancellor of the Exchequer put liberalisation at the centre of the government’s strategy for improving the balance of payments and moving towards sterling convertibility. He argued: ‘We have set ourselves through discussions with other countries, to bring about a progressive removal of the obstacles to trade and to bring into being a system of freer trade and payments covering the whole of the free world.“’ This approach, it should be noted, was borne out of balance-of-payments considerations in general, and concern for the role of the pound in particular. It did not stem from a strong feeling at this time that British industry needed to feel any blasts of competition to improve its efficiency. The issue of general

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COMPETITION

economic efficiency was only just beginning to creep back onto the economic policy agenda in the early 195 OS. For the Conservative leadership, commitment to trade liberalisation implied commitment to GATT, the institution which embodied and encouraged that process. GATT had been established in the 1940s to take forward the liberalisation agenda. Conferences (or ‘rounds’) in 1947, 1949 and 195 1 had yielded only slow progress, though they had reinforced the trend away from quantitative restrictions in trade. From the Conservative point of view the most problematic feature of GATT was the ‘no new preference rule’, which attempted to put a block on any further expansion of the preferential trade regimes which had developed before the Second World War. Most important of these was the system of Imperial Preference created by the 1932 Ottawa Conference, and reinforced by the postwar Sterling Area discrimination against the dollar. In fact the growing trade links between Britain and its Empire pre-dated Ottawa, going well back into the nineteenth century. Capital flows, sentimental ties as well as trade preferences all contributed to this pattern.r9 Linked to this was, of course, enthusiasm in Britain, and especially the Conservative Party, for building up the Empire as an economic unit. Dating back to Joe Chamberlain’s campaigns at the turn of the century, this feeling culminated in the Ottawa preferences being seen as an integral part of the protectionist regime of the 1930s. Such Empire enthusiasm had been politically reinforced by the war effort and economically by the Sterling Area system begun in the 1930s but greatly enhanced in the late 1940s. Conservative advocates of liberalisation thus faced a major problem given the strength of both economic ties with the Empire at the beginning of the fifties, and of the political attachment to the Empire as the foundation of Britain’s role as a world power. On the other hand, proponents of strengthening the Empire as an economic unit had, from the days of Chamberlain, faced two obvious obstacles. One was the intention of the White Empire in particular to build up its own industries, which inevitably meant behind tariff walls. Second was the British desire not to shut itself off from cheap food and raw materials from outside the Empire by giving preference to Empire imports. After 1951 both these arguments retained their force, though the latter point was complicated by the concern to protect British agriculture from cheap imports. The idea of furthering the trade integration of the Empire was put forward by Britain at the 1952 Commonwealth Economic Conference, only to be rejected by other members. They refused to support Britain’s proposed application to GATT to get release from the ‘no new preference’ rule, because they felt ‘such an approach would not advance the agreed objective of restoring multilateral world trade’. Hence, the Commonwealth countries agreed that they had ‘no intention of seeking the creation of a discriminatory economic

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AND

COMPETITION

bloc: rather, their object is, by strengthening themselves, to benefit the world economy generally’.*O This posture by the rest of the Commonwealth was no great surprise to the government. The President of the Board of Trade, for example, had noted their lack of enthusiasm for preferences in early 1952.*l But this realism was not easily accepted by the broad mass of the Conservative Party. At the three Party Conferences of 1952, 1953 and 1954 anti-GATT and pro-Commonwealth trade motions were moved. In 1952 and 1953 the reply of ministers was to agree that GATT should be amended, whilst trying to play down excessive hopes about the development of Commonwealth trade.** At the 1954 Conference the tension reached its peak, with impassioned pleas by Leo Amery for the development of the Empire as an economic bloc. He accurately measured the large distance between Conference support for encouraging Empire economic unity and the fact that ‘this Conservative Government in three previous years has done nothing whatever either to advance their declared policy or even to make sure of keeping it alive’. In reply Thorneycroft, after stressing the strength of Empire trade links, repudiated the idea of amending GATT, emphasised its benefits for Britain, and stressed the lack of Commonwealth support for its amendment.23 He won overwhelming support, and whilst amendment of GATT reappeared on the Conference agenda in 1956, it was really a dead issue in practical policy terms. 24 However, hankering after the Empire as an economic unit continued in Conservative circles. Alec Douglas-Home, Foreign Secretary and later Prime Minister, repeatedly reacted unfavourably to claims that the conditions for a commercial policy based on the Commonwealth no longer existed. In 1956, for example, he called for a return to a policy of ‘UK producer first, Commonwealth producer second and foreigner last’.*s Such views gained plausibility in the 1950s from the fact that they seemed to reflect the scale of existing trade (and other financial) links with the Commonwealth. As Thorneycroft noted in his 1954 Conference Report, around 5 0 per cent of both British imports and exports came from or went to the Commonwealth.*’ However, it is clear that this linkage was already weakening, in the sense that the percentages were falling from the early 1950s largely as a consequence of the rapid growth of Western European markets (Table 7.1). The erosion of Commonwealth Preferences probably contributed only a small part of this trend, the main explanation being the rapidity of Western European growth and the convergence of income and demand patterns between Britain and other Western European countries coupled to the ending of the dollar discrimination. *’ In that sense the forces causing the shift were largely outside government control, and certainly would not have been much affected by the ‘act of leadership’ on Commonwealth integration called for by Amery.28 Of course, it is possible with hindsight to be too deterministic about the erosion of the Commonwealth link. 29 In 1960 Streeten noted the absence of efforts by the Conservative government to try and offset this trend by devices 107

CONSERVATIVES

Table 7.1 British

export and import

AND

patterns,

COMPETITION

195 l-65

(%) Exports

Imports

Sterling Areaa (of which) l Developed l Developing Western Europe (of which) l EEC . EFTA North America

1955

1965

1955

1965

39.4 16.6 22.8 25.7 12.6 11.4 19.5

30.1 13.7 16.3 33.0 17.3 13.6 19.7

45.0 23.4 21.6 28.9 15.0 11.6 12.0

33.6 17.7 15.9 37.4 20.0 14.0 14.9

Source:A. Prest and C. Coppock, Manual qfAppIiedEconomm Note: a Approximately Commonwealth minus Canada.

(London, 1972), p. 119.

such as commodity price stabilisation, large credits and other forms of aid.30 But the evidence of official and ministerial discussions suggests that in private the Empire was regarded as a wasting asset. As a senior Board of Trade official noted: ‘there is now little dynamic left in the Commonwealth preference system’.31 Of course, in public this recognition had to be strongly qualified by prevailing political sentiments, and right through the period, even after the ‘turn to Europe’ and affecting how that trend was managed, the Conservative leadership had to plead their continued commitment to the Commonwealth. Down to the last Conservative conference in this period (1963) the leadership had to defend themselves against charges that, in looking to strengthen the Western European connection, they were turning their back on the possibilities of Commonwealth Preference, provoking one defender of the leadership line into claiming : ‘It would be little short of a scandal if we became so ridden with neurosis and introspection about the Ottawa Agreement and Imperial Preference that it was inflated into some kind of clause four for the Tory Party.‘32 Unlike the contemporary Labour leadership’s unsuccessful efforts on clause four, in the 1960s Imperial Preference was defeated by the Conservative leadership, not so much by direct frontal assault as by a crab-like movement which, whilst claiming political allegiance to the Commonwealth, increasingly stressed the economic dynamism of Europe. Up until 1956 the arguments about protectionism had been little affected by the issue of domestic industrial efficiency. Partly this reflected the fact that the Empire and Commonwealth loomed so large in Conservative ideology that it crowded out other aspects of the possible impact of trade liberalisation. In addition, of course, the de-control of trade in the early 1950s was slow, so that few sectors of the economy suffered major problems of import penetration (though some were suffering serious losses in export markets). In this period, the impact of liberalisation on specific industries rarely aroused much concern,

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AND

COMPETITION

and the pace of the process was largely guided by balance-of-payments erations rather than the repercussions for industry.33

The turn

to Europe,

consid-

1956-63

The growing recognition of the importance of Western Europe to the economic future of Britain was very publicly symbolised by British support for discussion of a European Free Trade Area in 1956. However, this was by no means a sudden change of stance in British thinking. In 1953, for example, Thorneycroft called for a British initiative for freer trade in Europe. He was worried by the possibility that the ‘Schuman countries’ (the six members of the European Coal and Steel Community) would reverse their previous policies of trade liberalisation, and create an exclusive trade bloc.34 At the same time he noted US pressure for trade liberalisation. This latter point was not just one-way diplomatic pressure by the US; the Conservative government saw Britain as having a strong interest in using liberalisation at home as a bargaining weapon to get reciprocal movement in the USA. This combination of positions led to a growing emphasis on liberalisation as a policy objective, and a definite decision to stay in GATT as the best framework for pursuing that policy.35 The failure of the 1955 GATT round to produce significant benefits for Britain left unchallenged the ministerial view that it remained the most likely avenue to achieve tariff stability, avoidance of other forms of protection and non-discrimination.36 The link between the growing interest in Europe and increasing emphasis on the benefits of GATT-based tariff-reduction was the belief that the drift towards European integration threatened to lead to a high-tariff bloc which would both damage British trade directly and threaten the whole trend towards liberalisation. While Britain’s initial reaction to the Messina talks of 1955 (which eventually led to the Treaty of Rome and the EEC) was very much informed by political views about the country’s role in the world, and hostility to the derogations from national sovereignty envisaged, at the economic level it was also affected by the worry that Western European unity would be protectionist and exclusive. Hence, in part the emergence of a counter proposal in 1956 for a European Free Trade Area without a Common External Tariff. (Obviously this proposal also reflected Britain’s desire to continue with its system of Imperial Preference.) The long and tortuous attempts of Britain between 1956 and 1963 to establish closer links with Western Europe have been discussed in great detail elsewhere.37 The focus here will be on the economic aspects, and more especially the relation between these discussions and the aim of raising British economic efficiency. These discussions can be divided into three phases. First was the attempt to create, via negotiations in the OEEC, a Free Trade Area (FTA), embracing both the Messina countries and the Scandinavian countries, Switzerland, Britain and (eventually) Portugal. This ultimately failed because 109

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the ‘Six’ insisted on a Common External Tariff as integral to their aim of creating an Economic Community, and their recognition that the FTA was in large part an attempt to prevent the emergence of a Customs Union. This was followed in late 1959 by the creation of the European Free Trade Association (EFTA), embracing the ‘outer Seven’, with no Common External Tariff and no pretensions to be anything but a free trade zone. EFTA was clearly very much second best to the FTA proposal, with a much smaller population than the EEC to provide a market for British goods. In British eyes its creation was partly to provide a bargaining counter in negotiations with the EEC. Even before EFTA was fully functioning in 1960 Britain was moving towards application to join the EEC. This crystallised in a formal Cabinet decision in July 1961 to apply for membership. Detailed bargaining on the approach did not begin until the following summer, and the application was rejected with de Gaulle’s famous ‘non’ in January 1963. The initiative to create an FTA seems to have come from the Board of Trade, and fits in with the previously noted attitude of Thorneycroft, the President, towards the dangers of the growth of a protectionist Europe, with Britain on the outside. In proposing the initiative to the Cabinet, Thorneycroft, supported by the Chancellor of the Exchequer (Macmillan), argued that recent commercial policy had been based in part on the principles of multilateral trade embodied in GATT and in part upon the principles of Imperial Preference. Both were now under threat, the former from Messina, the latter from the erosion of Imperial Preference and the desire of countries like Australia to renegotiate the preference structure.38 Whilst presenting their proposal in broad political terms as ‘a creative and imaginative policy which might well steer a fresh course for a generation’ they also emphasised the economic benefits of a larger market whilst still allowing the free entry of Commonwealth goods to the UK. An official committee had been set up to consider these proposals, chaired by Frank Lee, Permanent Secretary to the Board of Trade. Part of its brief was to assess the likely effects of such an FTA on British industry. Their initial assessment was that the plan: would not be disastrous for any principal sectors of the UK economy. Whether the gains would exceed the losses is a hazardous prediction. Much would depend on the resourcefulness and adaptability of UK management and labour. The process of adjustment would of course be easier if the UK economy as a whole was expanding rather than contracting or static. The adjustment, they stressed would be complex: ‘There might be a great deal of political protest but the total result (leaving aside such individual problems as motor cars) would not be large in relation to our total industrial turnover.‘39 This relatively optimistic prognosis was backed by a detailed assessment of 110

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the prospects of different sectors. For cars, for example, the potential power of German competition was recognised, but the overall upbeat view was bolstered by the hope that ‘the free entry of European cars should act as a valuable incentive to efficiency in production, design and lower costs and might provide the stimulus which is needed to spur the industry to fresh efforts both at home and in the export market’.*’ The most pessimistic assessment was that of the paper and board industry, which was deemed highly vulnerable to Scandinavian competition. This assessment seemed to chime in with that of the industry itself. The Federation of British Industry (FBI) report on the industrial response to the FTA proposal was generally favourable, but within the paper and board industry the response was one of total hostility.*l The generally favourable response was explained by the FBI in the following terms. The supportive posture, they said, ‘did not mean that there had been a sudden reversion to Cobdenism in British industry. Rather it was the feeling that our association with Europe was inevitable as we should be hurt more by staying out of any new FTA arrangements than by going into it.’ Despite this negative and rather grudging position, the FBI accepted that their report was a ‘green light’ for the negotiations to continue. 42 The Committee’s views on the viability of the FTA were also bolstered by an Economic Section report. This looked at the scale of structural shifts in British manufacturing over the period 1948-5 5, and argued that the changes had been largely painless: ‘The only hardship experienced has been in the textile industries and even there, though there have been constant complaint there has been no crisis, no catastrophe.’ The conclusion was clear: ‘Individual expansions and contractions are a necessary part of an overall expansion; and so long as this expansion continues they can, within wide limits, be accommodated without serious loss or hardship.‘43 The extent of the consultation with industry and the examination of the likely impact of the enhanced competition under an FTA suggests a government moving cautiously in increasing such competitive pressure on British industry.** This caution was not just a reaction to industrialists’ views, but reflected the fact that the government itself felt there were many dangers in the FTA, but that the alternative might be worse. Few ministers seem to have shared the enthusiasm of David Eccles, the Minister of Education, when he denounced protection as the ‘darling child of the uneducated mass’, and asserted that ‘Tariffs will not save the British motor car industry. The sooner this and other industries face the competitive European industry the better; better before than after the structural changes which will result from the common market’45. Rab Butler, the Lord Privy Seal, for example, was not only worried by the downgrading of the role of the Commonwealth implicit in the FTA proposal, but also by the threat it posed to full employment. In response, Thorneycroft urged that full employment would be facilitated by the FTA, as it would secure larger markets for British goods, and by imposing more market stimulus would achieve the necessary goal of making British industry more 111

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competitive. He recognised that shifts of resources would be necessary, but asserted: ‘If national income and production are expanding at a normal rate (and the formation of a free trade area would itself be an expansionary force) there is not likely to be much difficulty in total in making the necessary shifts.‘*’ There is no doubt that the economic ministries, the Board of Trade and the Treasury, were the most enthusiastic about the FTA. As noted above, such enthusiasm reflected in part a negative feeling of the danger of Britain being excluded from an expanding and protected European market. This should be seen in the light of the growing recognition in the civil service and amongst the economic ministers of the rapidity of growth of the Western European economies, especially that of West Germany. It is notable, for example, that in the same months that the FTA was at the centre of economic policy debate in Whitehall, the Economic Policy Committee considered a report by the Working Party on Export Trends on ‘German Competition, with Particular Reference to the Engineering Industries’. This concluded that ‘German progress in world trade has been so rapid that there must now be an early response to this challenge by the UK if it is not to be finally overtaken by Germany as the leading trading country in Europe’.*’ The reality of Britain’s ‘decline’ relative to Germany was beginning to permeate policy debate, though at this stage only in the economic ministries were the full implications of this for Britain’s whole foreign economic policy being seriously addressed. The doubts of many ministers, abetted by the caution of industrialists they consulted, mitigated against a very positive approach to the FTA. But in any event the whole project was probably doomed from the start by the failure of the British to recognise that its negotiating position, stressing the need for agriculture to be excluded and the right to give preferential treatment to Commonwealth goods, was too negative for the ‘Six’.** After the failure of the FTA proposals, Britain moved quickly to negotiate a European Free Trade Association, embracing the ‘Seven’, worried that others of this group would join the EEC and leave Britain isolated. But this was plainly a very negative posture. EFTA could make only a modest impact on Britain’s trading position. Agriculture was largely excluded, and Commonwealth preferences continued. As a market it was too small to make much difference to the potential scale of British industry. Equally, the competitive pressure it would exert on British industry would be limited mainly to the relatively minor cases of paper and watches, facing imports from Scandinavia and Switzerland respectively. The economic limitations of EFTA as a substitute for FTA were well recognised in Whitehall from the beginning. A Treasury paper in June 1960 summarised the position by stressing the economic dynamism of the Six and the scale of the market it involved, compared with the relative insignificance of EFTA.49 As Macmillan told the Chancellor of the Exchequer, ‘the Seven is a defensive measure to prevent us being isolated if the rest of Europe were 112

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sucked into the Six, and to give us a base for bridge building’.50 These perceptions were shared by the major employers’ organisation, the FBI. Having played a significant role in pushing for EFTA, the majority of employers soon saw that it was a poor substitute for closer links with the Six, and their views on possible membership of the EEC seem to have evolved broadly in line with those of the Conservative leadership.>l The evolution towards application for EC membership was ultimately the result of complex mix of political and economic calculation. Growing recognition of Britain’s political weakness led to the idea of attempting to reinvent a great-power status for the country as a member of the EEC5* In addition, the economic arguments for EEC membership, if broadly drawn, seemed quite persuasive in the early 1960s. The Six were growing faster than Britain, they offered a huge market of 250 million people, and their competitiveness would push British industry into greater efforts. British efficiency was by this time widely recognised to be lagging, especially behind Germany and France. These perceptions had become commonplace in the Board of Trade and the Treasury by the time Britain’s first application was made in 1961.53 Unlike in 1956, the government by this time was confident of the backing of most industrialists. The FBI was consulted in 1961-3, but worries about the response of industry seem to have been much less evident than previously. Some employers continued to oppose EEC membership, but the majority were pulled into line by the FBI and the (much smaller) Institute of Directors, which became enthusiastically pro-EEC. Even the cotton industry came out in support - though their reasoning seems to have been that the EEC’s Common External Tariff would give them protection against Commonwealth imports from India, Pakistan and Hong Kong.54 The government’s relation to attitudes within the Conservative Party was more complex. For some, EEC entry fitted neatly into the new rhetoric of growth and expansion. A good example of this is a Bow Group pamphlet in 196 1, in which David Howell argued: If labour needs a sharp dose of one medicine, industry itself badly needs another - foreign competition in the home market. It is hard to the beneficial effect which juxtaposition of over-emphasise Continental and American design and ingenuity with our own sad efforts in consumer goods, would have in increasing the discrimination of the British public and spurring industry to greater efforts. .. It is precisely this effect which closer economic association with the European mainland would bring.55 Though by no means the predominant view in the Conservative Party in the early 196Os, this kind of pro-competitive rhetoric aided the support gained by the government for its EEC application. It is certainly striking how little Tory opposition there was to this application on straightforward protectionist 113

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grounds (outside agriculture). As Lieber notes: ‘historic Conservative protectionism played a residual role in shaping Party attitudes’.s6 The opposition feared by the government was that from the proCommonwealth groups. But this proved weaker than seems to have been anticipated. Partly this was because the leadership represented the EEC as a means of strengthening Britain economically, which would mean that it had more to offer to the Commonwealth. s’ Partly it was because the leadership, whilst having made the decision on largely political grounds, emphasised these economic benefits of EEC membership, rather than the political reorientation it represented in Britain’s view of its place in the world.58 This line was pushed strongly by Butler at the 1962 Conservative Conference: if we are to pay our defence bills, if we are to export more capital to the commonwealth, if we are to help underdeveloped countries, if we are to balance our overseas payments, and, finally, if we are to raise the standard of living - as I promised we should double it in 25 years when I spoke to you in 1954 -we must have a wider home market for our modern and complex exports. This is the absolutely vital economic reason for going forward with this.59 Against this kind of rhetoric, the calls to reinvigorate the Commonwealth as an economic unit appeared forlorn. 6o The claim by a proponent of Commonwealth economic unity that ‘the betrayal of British agriculture and Colonial Preference destroyed the Party of Peel. The betrayal of British agriculture and Commonwealth Preference will destroy the Party of Macmillan’ was little more than empty bombast. The Party swallowed potential EEC membership, helped by the fact that the Labour Party was opposed to membership.61 Of course, this striking capacity of the Conservative leadership to mobilise support for the EEC was not sufficient to guarantee the achievement of entry. And the perceived need to emphasise the special needs of Britain with respect to agriculture and the Commonwealth did not help the chances of progress in the negotiations. As Young suggests, the British were unwilling to give enough on the political aspects of EEC membership to make their application likely to succeed.‘*

Growth

and Europe,

1960-4

The decision to move closer to Europe from 1956 onwards was driven partly by a broad reassessment of Britain’s place in the world, and this was especially important in the belated application for EEC membership in 1961. Britain had (almost) lost an Empire, and was seeking a great power role via the EEC. Economically, this change of tack was encouraged by a growing recognition of the conjunctural aspects of the closeness of Empire ties in the 1940s and early 114

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1950s and the working of centripetal forces in undermining those ties as international economic growth and liberalisation raced ahead in the period of Conservative rule. But also important was the growing recognition that in the new world order British economic performance was lagging, especially in comparison with Western European neighbours. The failure was given public recognition in 1960/l by the government’s turn towards at least the rhetoric of growth. The question here is what part did international competition play in generating and sustaining that rhetoric, and what if any, policy consequences flowed from this? Prior to the opening of the public records, Middlemas argued that the turn of the Conservatives in the early 1960s towards economic growth was lacking in coherence. 63 The public records seem to bear this out. The components of the package of proposals such as indicative planning, incomes policy, greater action on regional inequalities, reforms of research and development policy, and the expansion of education and training - flowed from largely separate concerns. Entry into the EEC as a spur to greater competition was just one more ingredient thrown into the mix, giving a growth-oriented twist to a decision made on quite other grounds. However, there were some amongst the Conservative leadership who saw EEC entry as an opportunity to ‘shake-up’ British industry. As noted above, this view is evident early on in Thorneycroft’s advocacy of an FTA in 1956. He argued that the removal of tariffs against European goods would create a difficult transitional period for British producers, but added: ‘If, however, we were to survive as a major trading nation, our industry must in the long run inevitably be brought to compete on level terms with that of Western Europe.“* This perspective affected not only attitudes to Europe, but wider spheres of trade liberalisation. Thus, in the context of the easing of controls over dollar imports, the potential benefits in terms of domestic efficiency were urged, albeit as with the EEC, the key issue was seen as political - a desire to conform to American expectations. ” Even the much-battered textile industry was deemed likely to improve in this way. As an official argued: ‘There may also be positive advantages in exposing the cotton and clothing industries to the stimulus of North American competition, not least in the fields of marketing and design.“’ This kind of approach to competition and efficiency became less problematic politically as the consultations with industry exposed the extent to which the leaderships of the employers’ organisations were willing to go along with liberalisation in Europe. By 1959 the Chancellor could claim that ‘previous experience has shown that the domestic difficulties in the way of further liberalisation could be exaggerated’.67 But if some ministers in the late 1950s were becoming convinced that increased international competition was both desirable and politically tolerable, this idea was not at the centre of the growth debate in 196112. Within the rhetoric of planning, that debate tended to focus on three main policy areas - control of public spending, incomes policy and a range of policies designed 115

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to affect the labour market. The Treasury tended to focus attention on the first two of these, whilst politically the last was very important, not least the desire to reduce unemployment in ‘depressed’ regions by attracting industry there. Discussions of growth policy in this period tended to mention the desirability of ‘more competition’, but with little attention devoted to the meaning of the term. Also important was the absence of discussion of EEC membership in economic policy forums. 68 This latter feature may partly reflect the fact that whilst in 1956-60 policy on Europe was conducted mainly by the Board of Trade, the EEC negotiations were much more the concern of the Foreign Office and the Treasury.69 (Though at a p ersonal level, Edward Heath, who conducted the EEC negotiations, was strongly pro-competitive - see below). The relative limited weight accorded to international competition in the debates about Britain’s lagging growth rate in the early 1960s is reflected in private Conservative discussions. As an example of this small role, we can take the Policy Committee on Economic Growth, established by Butler in the Conservative Research Department in 1961. Paul Chambers, of ICI, the Chairman of this Committee, argued that: much of the restrictionism both in industry and in trade unions could be eliminated to the great advantage of productivity and competitive efficiency. Action of this kind to open out British industry to external competition could be more effective in coping with these problems of restrictionism than action under the Monopolies and Restrictive Practices legislation or by prodding the TUs.” In the (unpublished) report of this committee, enhanced international competitiveness was advocated as a route to greater efficiency, but only as one measure in a package of proposals dominated by calls for changes in macroeconomic and budgetary policy. However, here at least, the measure was linked directly to the Common Market issue. The report declared: Inefficient businesses survive too easily and industries no longer economic survive too long. If we succeed in getting into the Common Market, the pressure of competition spurring industry forward will be increased. Whether we go into the Common Market or not, competition within Britain should be made more intense.” The failure of the first EEC application in 1963 left British policy in disarray. Whilst the National Economic Development Council (NEDC) had been established and other reforms were still being discussed, those who had seen entry into the EEC as the basis of Britain’s economic salvation were bitterly disappointed. One such person was Edward Heath, the chief EEC negotiator. For him the collapse of the talks required new ways to be found to improve the efficiency of the British economy. His programme to do this 116

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involved domestic unilateral

a number of components, and foreign competition. tariff cuts:

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but especially the enhancement of both In support of the latter he advocated

The chief attraction of unilateral suspension is that it is one of the few positive actions wholly in the Government’s control which would subject British industry to stronger foreign competition and thus stimulate it in some degree to the greater efficiency that exposure to free trade within an enlarged Common Market would have stimulated.‘* In the event, this strategy was not followed, both because of fears about the short-run impact on the balance of payments, but more significantly because of the desire to preserve Britain’s bargaining power in the Kennedy round of GATT negotiations which began in 1963. Heath accepted the logic of this latter point, but emphasised the need to press for the largest possible cuts in tariffs, especially around the EEC, in the GATT talks.73 Prior to 1963 Britain had participated in the periodic GATT rounds, but its enthusiasm for the organisation was limited. In the early 1950s as noted above, membership had been questioned within the Conservative Party because of the implications for Commonwealth Preference. In 1956 Eden, then Prime Minister, had reluctantly agreed to a US proposal to try and make GATT more effective, scribbling on a memo: ‘I have no objection if this is the view of the Economic Committee. But GATT has few allurements for opinion here.’ Three years later Macmillan, the new Prime Minister, questioned Britain’s membership of GATT, saying: ‘I know the Americans always cheat where their interests are concerned. . . . Some people feel that on the whole we do better without all these various agreements’.‘* However, Britain stayed in GATT, not least because of the diplomatic importance of keeping on good terms with the USA. In addition GATT provided a framework within which quantitative restrictions on trade were reduced, and this was a process seen as clearly to the British advantage.75 Through most of the 1950s and early 1960s the GATT rounds had little impact on reducing tariff levels. This was partly because of the difficulties of reducing agricultural tariffs, in a world of general agricultural protectionism, and partly because of the very different starting points different countries had in tariff levels. Such problems stymied discussion, and led to a general air of disappointment about the role of GATT.76 British enthusiasm for GATT increased in the early 1960s because of a desire to bargain down EEC tariffs and thereby reduce discrimination against non-members. Thus, during Britain’s bid to enter the EEC it also pursued tariff cuts in the ‘Dillon round’ of GATT, though the main participants were the EEC and USA. However, like previous rounds, Dillon produced much less than initial hopes suggested. ” In fact, the Kennedy round, begun in 1963, 117

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was to prove by far the most successful so far in reducing tariffs, but this was only after long negotiations whose results were not felt until 1968, long after the Conservatives had left office.78 As already noted, the shift in British perceptions on Europe and the EEC was partly motivated by the fear that it would turn into a protectionist bloc, excluding British goods with a high Common External Tariff. However, whatever the strength of these fears, they rather obscured the point that Britain was a significantly more protectionist country at the end of the Conservative period of office than the EEC. Whilst Britain had largely eliminated quantitative controls on trade by the end of the 1950s she had changed her tariffs strikingly little, and they remained high. Although assessment of an ‘average’ tariff is very difficult, the fact that in 1963 Britain had higher tariffs in 80 per cent of categories of imports than the EEC is probably a reasonable measure of its relative standing.79 The pattern of th is tariff protection is complex. What matters for the impact of tariffs on trade is the rate of ‘effective protection’, which takes into account the input structure of protected goods. Usually the ran&g of tariffs in terms of nominal and effective protection is similar, but the absolute levels can differ substantially. One calculation for 1963 showed effective protection rates from tariffs (excluding the effects of taxation) as reaching as high as 61 per cent for motor vehicles, though the typical level was in the 10 to 20 per cent range.80 So by the time the Conservatives left office in 1964, Britain remained, by the standards of the developed countries, a highly protected country. Quotas had been largely ended by 1959, but this move seems to have reinforced reluctance to remove tariffs. ” Those who advocated enhanced competition as the route to increased efficiency seem to have made little headway. How is this to be accounted for? Oulton has persuasively argued that the pattern of British tariffs in this period can only be explained in terms of the historical legacy of the 193Os, or even before. He can find no plausible economic or political variable that would explain that pattern. 82 What seems to have occurred under the Conservatives was that they largely preserved existing tariff levels, with no attempt to rationalise the structure. Changes in protection were largely dictated by balance-of-payments considerations, with a lesser role for international diplomacy, and with the impact on any particular industry usually of little account. Even in the case of the highly politically sensitive cotton industry, protection was refused, though this was a specially complex issue because the problem was low-cost imports from within the Commonwealth.83 But this case was typical in the sense that protection was not generally used as an instrument of industrial policy. Whilst the maintenance of the tariff structure may be seen as a reflection of the lessening pressure from industrialists on the government, there is little evidence in the archives for any view that either the level or pattern of protection reflected strong producer pressure on the government. Pressure was exerted, but by and large it does not seem to explain 118

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much of the tariff history of the period. ‘* To repeat, this seems to be explained largely by the historical legacy, combined with worries over the balance of payments. The consequence of this was that policy on tariffs was used systematically neither to pursue higher efficiency by exposing industry to greater competition, nor to pursue a discriminatory industrial policy by selective protection. Arguably the result was the worst of both worlds, with little industrial logic in the policies pursued.

Domestic

competition

The development of policy on competition in the domestic economy showed no more single-minded commitment to the virtues of market forces than policy on the international economy. But, as with the international aspect, the tendency during the Conservatives’ period of office was towards more emphasis on encouraging competition, a trend especially apparent in response to the emphasis on growth in the early 1960s which led to major debate, and some action on the issue. The picture of a broad trend to liberalisation contrasts with traditional interpretations, which suggest a liberalising movement in the 195Os, but a reversal in the 1960s in the context of the rhetoric of growth which then became prevalent.85 Alongside these shifting ideological sands were major changes in the structure and attitudes of British business which, Mercer argues, were the major factor changing policy on competition. As the economic expansion of the 1950s gathered pace, large companies, including large retailers, reduced their opposition to a more competitive environment, even if they did not fully embrace it. In Mercer’s view ‘big business’ was able to shape legislation on competition to serve its interests against those of smaller firms who benefited from the restrictionist, protectionist and cartelised arrangements of the 1930s and 1940s. For her it is the changing attitudes of business which largely explain the otherwise ‘inexplicable’ revival of competition policy after the war.86 When they came to office in 195 1 the Conservatives inherited the Monopolies and Restrictive Practices Commission, set up under the 1948 Act, which was the first piece of anti-trust legislation in Britain. However, the symbolism of the 1948 legislation was not matched by the results that flowed from its enactment. The Act was not based on a presumption that competition was necessarily good, but rather that its absence created a possible reason for enquiry. However, such enquiries only arose if the Board of Trade decided to refer cases to the Commission, and in turn any recommendations from the Commission had to be pursued by the Board. The result was that down to the mid-fifties the Commission was seriously hamstrung in its operations. Industrialists lobbied hard against being referred to the Commission, were tardy in supplying information if they were referred, and lobbied hard on the government not to follow adverse recommendations. The result was that only 119

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a small number of cases went to the Commission, mostly relatively trivial industries, they took a long time to be dealt with, and led to little action on the part of government. By 1955 action had taken place on only nine of the Commission’s reports.*’ This outcome was shaped by business hostility to the Commission, but also by the contending pressures on government policy. For example, because of the emphasis on expanding exports, the government was unwilling to investigate firms which made a major contribution to the trade balance. A similar prohibition related to firms with an important role in military production. So the selection of industries for investigation was not based on a simple calculation of the existence of anti-competitive practices but ‘involved estimation of the dangers and benefits to many areas of government policies and in particular to government industry relations’.88 The combination of industrial hostility, attacks on the Commission and discontent with the workings of the 1948 legislation led the Conservatives in 1956 to introduce a new Restrictive Trade Practices Act which represented a sharp departure from the established structure. As opposed to the administrative apparatus of a Commission, the new Act created a Restrictive Practices Court. The new law made restrictive agreements unlawful unless they passed through exempting ‘gateways’ defined in the Act. The expectations of industrialists and others was that a legal process would be kinder to restrictive agreements than a Commission affected by pro-competition ‘ideologues’ (such as economists). But in the event, the framing of the law to make such agreementsperse illegal, and a tight definition of the gateways by the courts, led to a rapid collapse of most agreements over the next few years, most before they came to court.89 But whilst the Act ‘laid the basis for the effective abolition of the British cartel system as it had existed in the 1930~‘,~” at the same time the size and scope of the Monopolies Commission was reduced. In particular, a significant process of merger was allowed to take place: the barriers to restrictive agreements under the Act encouraged this, while the Monopolies Commission had no powers to inhibit such a trend. Industrial concentration, which seems to have been stable for twenty-five years, started to increase in the 1950s a process that was to accelerate in the 196O~.~l The 1956 Act was criticised by the Labour Party as a ‘Charter for Big Business’, and this verdict has been endorsed by the most recent research.92 Certainly it was primarily aimed at the ‘old style’ restrictionist, cartel arrangements, often operated by trade associations. But as output grew, and trade expanded in the 195Os, and at the same time government was less involved in the day-to-day activities of industry, both the economic and political underpinnings of such arrangements were eroded. On the other hand, in this new age of increased international competition and pressures for expansion of the scale of production, government became wary of interfering with large companies which seemed to be technically efficient and important to the export 120

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business. Of course, large size is not necessarily a sign of monopolistic power, especially as imports were being gradually liberalised, but certainly the legal environment of the 1950s made it easy for big, oligopolistic firms to flourish whilst putting pressure on small firms that had relied on trade agreements to protect them from competition. A further feature of the 1956 Act was that it outlawed Retail Price Maintenance (RPM) by collective agreement, but reinforced its legality when used by individual suppliers. This was a complex political compromise between those who wanted as much RPM as possible to protect small shopkeepers (a position supported by the trade unions in the industry) and those who regarded RPM as blatantly anti-competitive (a position supported by, amongst others, the Co-operative movement). The result encouraged the growth of the multiple stores and in doing so strengthened the forces opposed to any form of RPM.93 From the end of the 1950s the question of the abolition of individual RPM agreements was widely discussed in ministerial circles. For example, at the end of 1959 the Economic Policy Committee discussed the future of such arrangements, including the possibility of referring them to the Monopolies Commission. But at that stage the majority view was to wait and see how things developed given the expected big impact of abolition on small shopkeepers. 94 The same argume nts were to be batted back and forth on this issue for the next four years. In 1963, following an inter-departmental enquiry, the Economic Policy Committee accepted that the economic case for abolition of all RPM was ‘overwhelming’ but stalled on the issue because of the political implications. But the pressure to act was growing: not only was the opposition putting a lot of stress on the issue, but the breakdown of the negotiations to enter the EEC intensified efforts to find an alternative source of enhanced competitive pressure.95 These points were both emphasised by Heath when he became President of the Board of Trade at the end of 1963. The Labour opposition introduced a bill to abolish RPM in 1963 and Heath noted that ‘the government’s apparent indecision over a number of years IS attracting increasingly adverse comment’. He also argued that ‘To give continued sanction to RPM was incompatible with our general policy of encouraging effective competition and keeping prices and wages down.‘96 RPM thus became entangled with other aspects of the modernisation debate of the early 1960s. The benefits for consumers of competition in the retail sector were coupled with the point that increased competitive pressure in that part of the economy would reduce the demand for labour to the benefit of more ‘productive’ activities. In 1962 the President of the Board of Trade argued that Britain had ‘too many retailers’ and noted that the rise in employment in distribution since 1950 had been 35 per cent, compared with 13 per cent for the economy as a whole.97 But it seems to have been the arrival of Heath as the responsible minister which ripped the balance

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in favour of legislating on RPM. After a bitter intra-Party struggle, the legislation was passed in 1964.98 On the monopoly and merger side of the competition policy issue there was no legislation before the 1964 election, though a great deal of debate. At the time of the 1956 Act there was a question mark over the continued existence of the Monopolies Commission. In the event, because of the anticipated adverse public reaction it was continued, but on a more limited scale.99 In the late 1950s few referrals were made to the Commission, and in 1959 it was put on a ‘care and maintenance’ basis, though this decision was not made public. loo As in the early 1950s the government at the end of the decade was reluctant to refer industries deemed to be important to the export effort or with whom it was important to maintain good relations. Thus, a series of highly political discussions ensued about what industries could be referred the President of the Board of Trade, for example, arguing on more than one occasion for wallpaper to be investigated, as an industry solely serving the home market, attracting consumer criticism, but having no ‘strategic’ importance. Eventually, however, the argument went in favour of investigating ‘solus sites’ i.e. tied retail outlets in petrol, a cause of considerable public debate at this time.“’ A review of the legislation was agreed in 1961, and in the meantime the government referred only enough cases to keep the Commission ticking over. At the end of 1962 the President of the Board of Trade was arguing for new references ‘in view of the political agitation earlier this year for a more active and positive policy towards monopolies’. But even then the cases to be referred were so controversial that the issue had to be sent up to the Cabinet.‘o* Early in 1963 the President of the Board of Trade put the report of the review committee to the Economic Policy Committee. He endorsed the arguments for the Monopolies Commission to itself decide which monopolies to investigate, for the setting up of a different tribunal to investigate mergers, and for the extension of the legislation to cover services. He argued in support that: ‘If we want a more vigorous and efficient economy we must be ruthless with restrictions on competition, whether resulting from monopoly power or from restrictive arrangements. Action on this field is bound to be controversial, and will be opposed by industry, but we must face this.’ But his colleagues were not willing to face the issue, and decided instead only to set up another 103 committee. That committee in turn reported in favour of legislation to allow the Commission to initiate enquiries into both monopolies and mergers, arguing that such legislation ‘has an important part to play in achieving the 4 per cent growth objective’. But again the Economic Policy Committee was unable to make up its mind. The merger issue was particularly controversial, both because of the saga of ICI and Courtaulds, and because of the fact that the government itself had recently encouraged mergers in industries like electronics and aviation.“* 122

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The need for reform was again emphasised by Heath when he moved to the Board of Trade in 1963. A Conservative Party committee had recommended in favour of a registrar to act as a ‘prosecution’ before the Monopolies Commission, but this was rejected by the Cabinet as leading to adversarial procedures, creating the need to establish precise rules on monopolies, and ending the carefully nurtured stance of government neutrality on the issue. Ministers also rejected the idea of the Commission initiating enquiries, stressing that the government itself must have that power, especially relating to mergers. The problem for the government was that they both wanted to encourage mergers where seen as economically advantageous, but discourage others. As Heath put the point: It had to be recognised that many mergers were positively beneficial to the economy, producing stronger units, economies of scale, better management, better research and adequate sales organisation, without impairing competition. But there was the occasional merger which might have harmful effects.“> In the event, the draft White Paper went through three versions before being accepted by the Cabinet. lo6 The eventual document reiterated the neutral stance vis-&is monopolies set out in 1948, established a registrar to set out cases against monopolies, and enlarged the Monopolies Commission to investigate mergers. Powers to order divestment were included, where a merger was believed to be against the public interest but this was stated to be a power ‘it would rarely if ever be necessary to use’. lo7 It was intended to introduce legislation ‘as soon as practicable’, but in the event the General Election came too quickly for this to happen. Overall, as far as domestic competition is concerned, the early 1960s saw a flurry of activity by the government, especially after the application to join the EEC was rejected and there was seen to be the need to find an alternative source of pressure on British industry to change its behaviour, as well as to bolster the government’s modernising credentials. The difficulty over RPM was purely political and reflected the strength of the ‘shopkeeper’ lobby in the Conservative Party. Monopolies and mergers raised more complex issues because the political lines of cleavage were less straightforward, and the economic aspects less clear cut. As in 1956, reform was partly pushed by industrialists themselves, from dislike of the ‘judge and jury’ aspect of the Monopolies Commission. On the government side, the big problem was mergers, which were often thought desirable as sources of economies of scale, but occasionally predatory and likely to arouse lots of public hostility. In both cases, therefore, there was substantial delay, and probably without the impetus given by the failure of the EEC negotiations, and Heath’s move to the relevant ministry, even less would have been done. In the event, of course, nothing that

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could change lost office.

AND

the path of the economy

COMPETITION

was done by the time

the Conservatives

Conclusions In both international and domestic spheres the picture is one of a slow but discernible trend towards a more pro-competitive government stance. In both areas major breakthroughs were to come in the later 1960s with the 1965 Monopolies and Mergers Act and the successful conclusion of the Kennedy round of GATT in 1968. These can reasonably be seen as the culmination of trends apparent under the Conservatives. How is this pro-competitive trend to be accounted for? First, it had relatively little to do with the official economic opinion provided to the government. This advice had been consistently more pro-competitive than actual policy, and it does not seem to be a change in the nature or force of such advocacy which lay behind policy change. Second, the above account suggests that any ideological shift in the Conservative Party over this period was very limited. There were committed pro-competition ministers, most obviously Thorneycroft, but such economic liberalism was untypical of the Conservative leadership. The role of Edward Heath in the early 1960s is instructive on this point. He was never a free market liberal, and his enthusiasm for competition policy seems to be mainly explicable in terms of short-term circumstances and politics. The rejection of Britain’s EC application seemed to block a major route to economic modernisation, and competition policy became a ‘second best’ solution in the face of that disappointment. The need to modernise (or appear to be modernising) derived in turn from the Conservatives reluctant embracing of the idea that the British economy was ‘declining’ and hence needed policies to reverse this trend. lo8 The Conservative political calculation of the early 1960s was that they had to embrace the rhetoric of modernisation or be outflanked by the opposition. Mercer’s contention that big business and organised labour played a significant part in the shaping of policy on competition is indisputable. However, the approach to international competition throughout the period, and to domestic competition in the early 1960s cautions us against giving too much weight to business pressure. Especially in the field of international competition, government calculation took into account a range of influences, including the macroeconomic (the state of the balance of payments), diplomatic (the Conservative enthusiasm for Empire links on the one hand, the US pressure for liberalisation on the other), as well as domestic political forces (business and labour). As suggested above, business opinion was perceived as very important by the government, but as something to be managed, not just acceded to. Similarly in the early 1960~, when some action on domestic competition policy appeared imperative to figures like Heath, the leadership faced down opposition both from within the Party and from business. In 124

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understanding the Conservatives’ policy on competition in this period it is important to stress the degree of autonomy of the political calculations of the Party’s leadership from economic ideology or social forces in the wider society. They were the creatures of neither.

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Introduction This chapter does not attempt to deal with the general history of Conservative education policy, but assessesthe debate on education and training only insofar as it was related to issues of economic efficiency, and excluding the specific issue of management education dealt with in Chapter 5.’ In the 1990s the belief that education and training are the key to economic performance has become one of the great cliches of the age, with improvement in this area seen as the panacea for Britain’s competitive failings. As so often happens with historical writing, current concerns have informed analysis of the past, constructing a historical story of failure to meet these contemporary criteria of what should have been done.2 The danger of such retrospection is that it may obscure the terms of debate as they existed in the historical era under study. In the context of the period dealt with in this chapter, a key point to emphasise is that it was only slowly, partially and unevenly, that education became seen as an ‘economic’ issue, crucial to Britain’s industrial performance. Another key introductory point in looking at this policy area is to stress the limits of central government power. It is a well-known feature of British educational history that, as regards schools, central government has played an enabling rather than directive role until the great centralisation of the 1980s. In the 1950s and 1960s there was no significant attempt to increase the role of central government at the expense of Local Education Authorities (LEAS), so that schools policy remained largely determined by local concerns and local politics, within a broad framework set by national legislation and guidance. The same lack of centralised directive powers is evident in relation to higher education, where the universities jealously guarded their autonomy. Thirdly and finally, whilst the impact of the Ministry of Education was constrained by traditions of local and institutional autonomy, there was a parallel lack of centralised power in the field of training. Throughout this period a sharp dichotomy was maintained in governmental responsibility for training and education, with training coming under the Ministry of Labour rather than Education. But the Ministry of Labour in turn stuck strongly to the view that

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the prime responsibility for training lay with ‘industry’, meaning employers in consultation with trade unions. This was part of its general policy to minimise legislative intervention in industrial relations in order to prevent the politicisation of labour issues, an approach endorsed by both employers and trade unions with their strong attachment to free collective bargaining over wages and conditions. Only slowly and reluctantly, as discussed in what follows, did the Ministry come to accept that this ‘voluntarist’ approach was inadequate, and that the government must play a more active role in the encouragement and organisation of training. Some idea of the scale of the state’s role in education is given by changes in money spent in this area, and figures on this are given in Table 8.1. This shows that expenditure growth was much faster at the end of the period than at the beginning, in real terms rising an average of 3.3 per cent per annum in 1951-5, compared with 6.3 per cent in 1959-63. The pattern in the early years reflected the attempt by R.A. Butler, the Chancellor of the Exchequer, to hold expenditure down coupled with a weak Minister of Education. From 1954, however, David Eccles took over the latter office, and became a key figure in the education issue in the period down to 1962. Largely under his aegis public spending on education was to almost double its share of public spending (from 6.9 per cent in 195 1 to 12.8 per cent in 1963), and to raise its share of GDP from 3.2 to 4.6 per cent.3 Within these totals, expenditure on primary schools continued its long-run proportionate decline, whilst the share spent on secondary schools rose, especially after 1958. This pattern reflected an expansion of the state’s responsibilities, including the impact of the raising of the school-leaving age in 1947, and the higher per capita cost of secondary schooling. The biggest

Table

8.1

Public

expenditure

on education,

195 l/2 to 196314

Year

Amount

195 l/2 195213 195314 195415 195516 195617 195819 1959160 196011 196112 196213 196314

416.1 449.0 472.3 517.7 576.4 671.3 758.2 821.9 888.8 1,013.2 1,140.5 1,261.4

S owce: C. Gordon, Table 4.

The WeI/&

State: Sourres

of Data

127

spent

(Sm)

on Government

Expendttwe

(LSE,

1988),

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percentage rise in the share of the budget went to universities, though they still accounted for less than 10 per cent of total spending in 1964.* Whilst expenditure patterns are an important facet of policy, they do not capture all the changes in such policy. For example, the politically and economically important decision to move towards a levy/rebate system to finance industrial training, which is discussed later in this chapter, did not involve any significant increase in government spending, as the aim was to redistribute money between firms, not provide government subsidies.

Schools In his account David Eccles, for educational White Paper of educational nical education The tone was which in part

of the politics of education in these years, Kogan argues that as Minister of Education in 1956, was the first to make the case spending as an economic investments5 Certainly, the 1956 on Technical Education should be seen as very significant in terms debate, with its very strong assertion of the link between techand Britain’s ability to compete in the international economy. set by Prime Minister Anthony Eden’s preface to the document, read:

The prizes will not go to the countries with Those with the best systems of education will are doing brilliant work. But if we are to make learning, we shall need many more scientists, cians. I am determined that this shortage will

the largest population. win . . . our scientists full use of what we are engineers and technibe made good.’

Yet for all its undoubted importance as a very public recognition of the shifting attitudes towards education and training in government circles, the White Paper’s pivotal role can be overstated. First, the document actually dealt with only a relatively small part of the total system of education and training. Second, its focus on the importance of technical education drew on a stream of debate, and to a lesser degree policy decisions, which went back to well before the Conservative accession to power. Third, the general idea that spending on education should be seen as crucial to economic performance was by no means readily accepted by either all Conservatives or all civil servants concerned with educational policy, despite its seeming endorsement by the Prime Minister. Because of the dispersion of powers in educational policy, these complexities of the debate about education and the economy are best dealt with on a sectoral basis. Schools comprised the sector of education where most money was spent and where public attention was greatest. The framework of school policy was set by the 1944 Education Act, piloted through Parliament by R.A. Butler who was to be an important Conservative Minister throughout the 1951-64 period. (Ironically, as noted above, he was to fight hard to cut public 128

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spending on education in the early 1950s.) The 1944 Act was generally regarded as the epitome of Conservative reformism, bringing about important changes, most notably making available free secondary education to all, whilst retaining the maximum of institutional continuity. Most significantly, it retained the grammar school as the apex of state education provision, and continued the system whereby local education authorities were largely autonomous of central direction. As a result, many of the detailed provisions of the legislation were advisory rather than mandatory for LEAS. The Act also did nothing to alter the status of fee-paying schools.7 Grammar schools were popular in most local areas, though Labourcontrolled LEAS, in particular, increasingly sought to introduce comprehensive schools as a superior alternative to the sharp division made between the ‘academically able’ who went to grammars and the rest who went to secondary moderns, which in most areas were an unambiguously inferior type of provision. Neither the selective nor the comprehensive policies left much scope for the provision of technical high schools as envisaged by the 1944 Act. The legislation had proposed a tripartite system, which alongside grammar and secondary modern schools would have seen the development of a third type of school for the bright, technically oriented child. The technical high school was strongly supported within the Ministry of Education under the postwar Labour government, but ministers in the Attlee cabinet were unenthusiastic, and generally endorsed pro-grammar school views.’ Very few technical high schools ever came into being, at most providing for about 5 per cent of secondary pupils, despite their seeming links to the kind of technocratic rhetoric embodied in the 1956 White Paper. Part of the reason for this outcome was the strength of local commitment to grammar schools, perceived as the traditional and proper destination for the bright child, and the best stepping stone into higher education. The local reluctance to build technical high schools was little challenged by central government. There was highlevel debate on the policy towards technical high schools within the Ministry of Education during the mid-1950s, as a result of which ultimately the ministerial decision went in favour of encouraging the provision of technical education within both grammar schools and secondary moderns, rather than in separate establishments9 Whether such a policy decision was ‘right’ remains disputable, but it undoubtedly cut across one important stream of proposals for improving technical education in Britain. In the 194Os, for example in the Percy Report of 1945, the technical high school was seen as the foundation for the expansion of higher levels of technical education. Though undoubtedly concerned with this objective, ministers in the mid-1950s closed off one route by which such expansion might have been fed and supported. The technical high school route was strongly supported by the Crowther Report of 1959, but by then the decision had already been made against the schools, and most of them were eventually absorbed into comprehensives. lo 129

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Alongside the desire to preserve the grammar school as the centre of the state education system, evident in Conservative circles at both local and national levels, the paucity of provision for technical high school provision was reinforced by the attitudes of industry. The Federation of British Industries (FBI) reflected general employer attitudes in favouring the public and grammar school pupil on the basis that they produced the ‘right type’ of employee. Such attitudes led to the paradox that whilst technical high schools were anxious to shape their pupils for industrial needs, industry showed little Without any powerful political interest in helping them survive.” supporters, it is not surprising that these schools tended to wither away. In the overall development of schools’ policy, the question of technical high schools was little more than a side issue. Central government policy on schools was, it should be emphasised, not primarily concerned with economic issues at any time in these thirteen years. Instead, much of the policy debate focused on coping with the demographic ‘bulge’ resulting from the postwar boom in births. This bulge underlay almost all of the increase in spending on schools in the 1950s evident in Table 8.1. In addition, more pupils were staying on at school beyond the compulsory leaving age, creating what in the jargon of the day was called the ‘trend’, so that the whole school system was under considerable demand-side pressure throughout the 1950s. The Treasury regarded this increase in expenditure largely as an unfortunate necessity, as in their view, until this attitude was challenged in the early 1960s expenditure on schools was social expenditure, no doubt desirable up to a point, but not to be allowed to expand beyond the economy’s capacity to pay for it.l* Such Treasury attitudes were not systematically confronted by a Ministry of Education trying to make the case for higher spending on schools on purely economic grounds. Even a minister like Eccles, whilst sensitive to the economic issue, was careful to make his case in different ways to appeal to different sections of Conservative opinion. For example, in calling for more spending in 1955, he suggested that this would allow the Conservatives to claim education as ‘their part of the welfare state’, at a time when the great Conservative housing boom of the early 1950s was being brought to an end. In addition, his arguments attempted to embrace the strong moralistic tone of discussion about education in Conservative circles by talking of the need to spend more on education to develop amongst children ‘a sense of responsibility towards the problems and pitfalls of full employment’.13 This latter remark serves to remind us that, especially before the late 195Os, the Conservative agenda on schools was not dominated by economic issues, but more by traditional questions about the maintainence of educational standards, the values inculcated by schools and the morals of their pupils. I4 Alongside these traditional concerns, the debate in governmental circles in the 1950s was predominantly about the ‘bulge’, and the ‘trend’. These were seen not just as raising the level of demand for provision, and hence expenditure, but also bringing about an increased

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concern amongst the electorate with schools, which the Conservatives would be wise to respond to. This directly political aspect became especially evident towards the end of the 1950s when it appeared the purely demographic pressure on provision was abating, so that if money were to be spent it could be on improvements in quality which might have a big political pay-off.15 Of course, such electoral considerations were not in conflict with the economic case for higher levels of educational spending, and indeed the two could be and were combined within the argument that the current system wasted too much talent, and that more provision would allow this ‘untapped talent’ to be used, to both economic and political good effect. The ‘untapped talent’ argument was prominent in the Newsom Report on schools (1963), as it was in the Robbins Report on higher education of the same year. 16

Higher

and technological

education

If economic issues can be said never to have predominated in Conservative discussions of schools policy, almost the opposite would be true of higher education. The belief that Britain was suffering from a severe shortage of graduate engineers and applied scientists was established by the Percy Report of 1945 and, reinforced by the Barlow Committee in the following year, was to inform discussion over the next two decades, though the two committees had different views about how the problem should be addressed.” The Labour government initiated the doubling of the number of such graduates, a target quite easily achieved because of the short-term bulge in demand caused by the delayed entry into university of those who had fought in the war.‘* By 1952 the figures began to show a slight fall as the bulge passed, and the government responded to this by announcing plans for expansion of provision, partly in the university sector, notably at Imperial College, and partly in a couple of upgraded technical colleges. The link between educational provision and economic benefit seems to have been regarded as less problematic in this area than for schools. Partly this reflected the existence of a high-powered committee, the Advisory Committee on Scientific Policy, which constantly emphasised the ‘manpower’ constraint on Britain’s scientific and engineering capabilities.19 Also, higher and technological provision aroused none of the moral and political disputes which infected discussions of schools. However, this did not mean expansion was without obstacles. The universities, operating through the University Grants Committee (UGC), resisted a rapid expansion of numbers in technological and scientific subjects, partly because they were sceptical about the availability of suitably qualified school-leavers, partly because they did not want central government dictating the pattern of subjects.20 Nevertheless, numbers did expand, with the rise in overall undergraduate numbers being accompanied by a marked proportionate shift towards sciences

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and engineering, largely at the expense of medicine and dentistry. Supply was commonly seen as lagging behind the rise in demand, though the assessment of this was crude, especially in ignoring the evidence on salary levels which did not obviously support the idea that industry was crying out for new recruits in these areas. *’ Alongside university caution, the Treasury in the early 1950s also acted to slow the expansion by keeping a tight rein on capital spending. This reflected a scepticism about whether there existed sufficient numbers of undergraduates with the ability to take advantage of a major argugrowth of university-level education. ** Only slowly did the economic ments seem to persuade the Treasury that such an expansion would be justified, an acceptance facilitated by the ‘bulge’ which was providing more and more school leavers, combined with the trend for more pupils to stay on at school and obtain better qualifications.23 Nevertheless, the Treasury was not easily persuaded that this economic case for expanded university funding should be allowed to overcome its natural caution, and in 1958, for example, the UGC only got the funds it thought necessary to keep pace with rising demand after a considerable political battle.24 This example also suggests that, as with schools, expansion in higher education generally was increasingly seen as responding to the demands of pupils (and their parents) for greater opportunities, as well as the demand by industry for more graduates. Unlike in the case of the technical high schools, employers seem to have had far fewer qualms about the nature and quality of the products of the university education system, though the penetration of graduates into higher management posts was still very sIow.~~ The clear if not unhindered expansion of higher education, especially for scientists and engineers, through the 1950s was closely intertwined with the attempt to overcome the perceived British weakness in R&D (see Chapter 9). As with the R&D debate, the sense that Britain was falling behind competitors was underpinned by the first serious attempts, notably by the Organisation for European Economic Co-operation (OEEC), to provide comparative statistics on the issue. These figures in the mid-1950s suggested that Britain had a low ratio of graduate technologists to total population, though a comparatively good figure in pure science. 26 Such comparative data were deployed in the 1956 White Paper and elsewhere to support concerns about Britain falling behind in the technological race, not least in relation to the perceived scale of Soviet activity in this area.27 In the early 1950s it seems to have been assumed in the debate about technological education that the most important British deficiencies were at the graduate level, the failures at lower levels being largely seen as providing inadequate numbers of well-qualified students to progress to higher education. One result of this perspective was a prolonged debate about whether the key aim in this field should be to create a new elite institution, the Massachusetts Institute of Technology being the common example of what was thought by some to be needed. The case for such a new creation was most vociferously put 132

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by Lord Cherwell, a close adviser to Churchill, but after considerable debate this was rejected as an option, largely because it was argued that an increase in graduate numbers would be more rapidly secured by expansion at an existing institution. ** Another strand of argument was that the existing technical colleges should be expanded and given enhanced status to provide undergraduate training in technology. This approach was supported by the Parliamentary and Scientific Committee in 1954, but met resistance from both the Treasury and the Ministry of Education, the former for financial reasons, the latter because of support for a more ‘evolutionary’ approach, with expansion largely in existing university institutions.29 What these discussions illustrate is that the rhetoric of the 1956 White Paper about the importance of technological education was grounded in a widespread presumption that something must be done to improve Britain’s efforts in this area, even if there was no consensus on how this was to be achieved. The issue of the appropriate response was partly driven by institutional and ministerial (and no doubt personal) rivalries and jealousies. But there were also serious problems of diagnosis once the general idea of a shortage of technically competent personnel was accepted. Whilst in the early 1950s attention focused on graduates, by the time of the 1956 White Paper the emphasis was on the need to expand across the board, from craftsman up to university level, but within that overall sweep, policy attention in the mid1950s seems to have settled on the ‘intermediate’, technician level as the one most urgently needing expansion and improvement.30 Institutionally, this meant that technical colleges became the centre of concern. Technical colleges were hybrid institutions with no clear place in the educational hierarchy. Under local education authority control, they had developed in very varied directions in different parts of the country. Some concentrated on day-release work for apprentices, whilst others had built up competence in much higher levels of instruction, up to and including degree level. The 1956 White Paper’s most definite proposal was for a 50 per cent rise in the output of the colleges over five years, with a doubling of those doing day-release courses. Alongside these strong commitments to growth at the intermediate grades, the government also proposed to expand the mechanism, begun in 1952, whereby central government funding for some colleges was significantly enhanced where they did a large amount of ‘advanced’ work, with the prospect of eventually becoming Colleges of Advanced Technology (CATS).~~ This path to expansion of degree-level technical education was welcomed by the universities, which did not want to increase their own provision rapidly for fear this would erode standards.32 Thus, the most obvious institutional result of the 1956 White Paper was the eventual creation of the CATS, which were freed from local authority control in 196 1, and the further evolution of some of them into the universities of Aston, Brunel, Salford and Strathclyde. In the 1950s the existing universities expanded, and, as noted above, a 133

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higher proportion of students were taking engineering and science subjects. But there was no ‘forced march’ in that direction imposed upon them by the government, despite the undoubted seriousness with which the issue of graduate technical training was taken. The expansion of higher-level work in technical colleges and the move to CATS provided a cheaper and less controversial route to expansion. At the same time, intermediate education (for example the HND and HNC schemes) also expanded fast as less attention was paid to the highest level of education, and more to those which so far had tended to fall outside the well-defined sectors of either schools or universities.

Apprenticeship Throughout the Conservative period of office the quantitatively most important part of technical education was apprenticeship. Though never as prevalent as in Germany, and accepting that the numbers of apprentices probably peaked around the First World War, apprenticeship was still the staple means for the provision of craft skills. 33 The issues raised by apprenticeship were broadly similar to those in other sectors of technical training - the quantity and quality of the skills acquired - but the institutional context was sharply different. Where the schools/universities/technical colleges debate largely involved the Ministry of Education, the Treasury, local authorities and the universities and colleges themselves, apprenticeship fell into the domain of the Ministry of Labour, which in turn emphasised a sharp distinction between education and training, with the primary responsibility for the latter falling clearly on industry itself.‘* The story of apprenticeship in the 1950s and 1960s is one of successive governments increasingly recognising the shortcomings of this way of providing craft training, but only slowly overcoming their reluctance to get the state involved. Apprenticeship had long been a target of criticism, but those criticisms mounted in the 1950s with the increasing emphasis on technical competence as a decisive factor in international competition. In 1960 Liepmann summarised the arguments of the critics. She stressed that apprenticeship rules were usually the outcome of bargaining between employers and trade unions, neither of whom had the incentive to maximise the quantity and quality of training. Many employers had no apprentices, happily ‘poaching’ those trained by others. Those with apprentices of their own often supported long years of apprenticeship (usually five) so that they could get their payback from employing those involved at low wages in the last part of the indentured period. Equally, unions tended to regard the number of apprentices as part of collective-bargaining strategies, which often meant keeping numbers down and the length of time up in order to restrict the supply of qualified workers. The other key aspect of the system in the critics’ eyes was that there were no standards of quality imposed on apprentices. Qualification for craft status came from time served, not the tested attainment of measured competences. 134

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Such a system did not, it is important to emphasise, lead to a system which completely failed to impart adequate craft skills. In some firms apprentices were given a very high quality of training. But such firms suffered especially severely from the ‘poaching’ process, which was a strong incentive either not to train at all, or to try and maximise the period of apprenticeship so that some returns were made before the worker moved to another job. It is important to emphasise that this very uneven, but on balance unsatisfactory, system had long been criticised; the Webbs at the beginning of the twentieth century had famously described it as ‘undemocratic in its scope, unscientific in its educational methods, and fundamentally unsound in its financial aspects’.35 There had been a degree of change in the first half of the century, but governments, as part of general support for voluntarist industrial relations and collective bargaining had not got seriously involved. The 1944 Education Act had envisaged compulsory day release of apprentices, but this had never happened, and the growth of such arrangements in the 1940s and 1950s were therefore slow and uneven.36 The 1956 White Paper gave a broadly favourable account of apprenticeship, calling for its expansion, coupled with more use of day release.37 But mounting criticism led to a further initiative soon after, with a Committee chaired by the Minister of Labour, Robert Carr, which reported in 1958.38 This report was not driven only by questions about quality. The postwar expansion of secondary education, it was commonly believed, had deprived apprenticeship schemes of many of their brighter members. On the other hand, the bulge in numbers of school leavers raised a question about whether the apprenticeship schemes would be able to absorb a significant proportion of these boys and girls. 39 However, the central issue tackled by Carr was whether the whole system was ‘out of date’ as a method of craft training. The answer given was unambiguous: apprenticeship had adapted and would continue to provide a broadly adequate framework. *’ The report went on to strongly defend the existing industrial responsibility for apprenticeship, and explicitly reject the role played by the state in such countries as Australia and Germany. The report deprecated poaching, and reiterated the long heard cry for more day release, but the only government action recommended was the setting-up of an overseeing National Apprenticeship Council, though this was to be without executive powers. 41 Within two years Carr’s complacency was coming under criticism, and Treasury ministers were calling for new initiatives, and gaining support from the new Minister of Labour, Ted Heath.** By early 1961 Heath had gained general ministerial support for the view that more should be done and that it was no longer possible to ‘leave it to industry’. A ministerial committee investigated the French levy-rebate scheme, but at this stage rejected it as a model, arguing that it operated in France ‘against a quite different fiscal and educational background from that of the UK’.43 However, despite Treasury opposition, the drive for reform was becoming irresistible, and an inter135

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departmental committee not only reported in favour of the principle of a levyrebate scheme, but also suggested that both employers and unions would support such a proposal. With strong urging from the Minister of Education, a White Paper was produced in 1963 proposing a levy-rebate scheme organised by Industrial Training Boards (ITBs) on a tripartite basis. The White Paper supported these proposals by arguing: ‘A serious weakness in our present arrangements is that the amount and quality of industrial training are left to the unto-ordinated decisions of a large number of individual firms.‘** The ITB proposal was directly concerned with addressing the poaching or ‘freerider’ problem, and did not directly address the quality of training. However, whilst the funding of training was still left to industry, with the ITBs redistributing industrial funds, it was nevertheless a significant intervention by the state in the labour market. Liepmann had concluded her book on apprenticeship by arguing that ‘the national interest would seem to require that the State must take the prime responsibility for training for industry’.45 The ITBs marked a somewhat reluctant acceptance of at least part of that case, though the hesitation about taking on such responsibility meant that the legislation only came just before the Conservatives left office. Modernisation? How far was this reformist urge eventually evident in training also characteristic of other parts of education policy in the last few years of Conservative rule? Certainly the period from 1959 to 1964 did see a great deal of governmental activity on education. In 1965 the FBI produced a document for its members entitled Education in Transition, which summarised eight significant reports or pieces of legislation in the previous five years. 46 This activity largely reflected the results of what the Conservative government called its ‘drive in education’, initiated by the Prime Minister, Macmillan, and Eccles as the Minister of Education in 1958, and, as noted above, intended to yield electoral benefits from continued expenditure at a time when the bulge was declining. The political calculation was that demand-side pressures on the education system should be responded to. As Eccles wrote: ‘we ought to swim with this tide of opinion’.*’ One result was an expansion of the school-building programme. This was justified partly to fulfil the promise of the 1944 Act to provide separate secondary schools for all pupils, as in 1958 7 per cent of such children were still in ‘all age’ schools. But there was also a strong economic argument: We need not only the first class scientists and technologists but also an ample supply of technicians and craftsmen. And we cannot hope to attain the objectives laid down in the 1956 White Paper on Technical

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Education unless all our secondary schools, modern schools, make their full contribution.

i$uding

the secondary

Yet this enhanced school-building programme was to raise crucial issues about the place of educational expenditure in the Conservative’s overall policies. Above all, the question was how far such expenditure could be seen as economically as opposed to socially (and politically) advantageous, and in consequence how far it should be seen as ‘welfare’ provision, to be allowed to expand only when economic circumstances permitted. Down to 1959 the argument that educational expenditure should be regarded as economically beneficial seems to have made little progress in Treasury circles. In that year the Treasury treated all spending on education as ‘social service’ spending, which put it clearly behind ‘productive investment’ in the queue for resources. 49 Its position proved hard to break down. In both 1960 and 1962 the Treasury voiced concern at the way education expenditure was growing, and on the second occasion this led to a complex wrangle between the Chancellor and the Minister of Education which was only resolved by Prime Ministerial intervention. 5o One part of the Treasury case was to argue that the key weakness lay in training rather than education, and that therefore what was needed was not to spend more public money on ‘the drive’ but to get industry to put their own house in order.51 Nevertheless, the Treasury was put on the defensive in the early 1960s by the Ministry of Education persistently making claims for resources for education on economic grounds, a trend that became particularly evident once the ‘great growth debate’ got going. For example, at the end of 1961 the Ministry linked educational provision to the contemporary drive to expand exports, and in addition argued that the attempts to secure agreement on an incomes policy would be weakened if the government was to be seen as not improving opportunities for children.s* In the face of such pressures, the Treasury line softened to some degree by accepting the link between educational provision and economic performance in the long ran, though it continued to maintain that there was still a need to prudently manage public spending in the medium term.S3 The argument that education was important for economic growth was becoming almost commonplace in the early 1960s. The important report by PEP on Growth in the British Economy in 1960 made the point, and in 1963 there appeared a pioneer attempt to quantify the relationship.54 But it would be wrong to assume that this argument carried all before it. As we have seen, in the drive for better school provision, though the economic argument played a growing role, demand-side arguments and political calculations remained important. The position with higher education remained similar. An important impetus for the setting-up of the Robbins Committee in 1961 was undoubtedly the perceived need to expand technical skills. But this was by no means the only reason for Robbins. The essentially social argument about a pool of untapped talent was also important, and this was manifest in politically 137

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sensitive terms because of the growing competition for university places. If the political motives for Robbins were mixed, so also were the responses to the idea it embodied of the need for a major expansion of higher education. Once again the Treasury remained unconvinced of the case made. Its evidence to Robbins argued that what was known on rates of return to educational expenditure could not justify anything larger than the existing system, and that on these grounds money would be better spent on part-time technical education for those at the technician level. 55 Once it became clear that the political case to accept Robbins was seen by the government as overwhelming, the Treasury responded by agreeing that it could be afforded, but only by cuts in other programmes, including schools, as well as by ways of reducing costs by such measures as student loans.56 The interface between training and industry continued to trouble would-be reformers in the early 1960s. For example, the Crowther Report of 1959 tried to revive the 1944 Education Act’s proposal for compulsory day release in college for those between school-leaving and 18 years of age. A committee was set up to look at this proposal, and was told by employers that ‘the general principle of placing the power in the hands of the young person instead of the employer is contrary to all our accepted ideas about the relationship between employer and employee - particularly in the field of further education’. But to leave the decision on day release to employers meant that little was likely to be done. The attitude of the Institute of Structural Engineers is perhaps illustrative of this problem, since it argued against any attempt by government to impose day-release because ‘the best boys in their offices - like themselves in their day - were the ones who wanted to work all day and study in the evenings’.57 Here again ministers accepted that with only 12 per cent of the age group in day release in 1961/2, participation ‘fell seriously short of need’, but there was no political will to legislate in this area. A further employer-dominated committee was set up, but this, whilst once again noting the scale of the problem, was content to recommend trying to encourage voluntary action by propaganda and target-setting.58 Crowther also recommended that the government set a timetable for raising the school-leaving age to 16, as also proposed by the 1944 Act. A Cabinet committee rejected this idea, partly because the strategy, as outlined above, was to use the easing of pressures from the bulge to improve the quality of provision, and this would obviously be undermined if a whole new age group had to be catered for. Worried by the political costs of seeming to reject the bulk of Crowther, the government proposed a significant increase in teacher training college places, but with the underlying intention to use these extra resources to reduce class sizes rather than to raise the school-leaving age.59

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Conclusions The argument that education and training are crucial to economic performance first emerges strongly in Britain in the 194Os, a decade when belief in salvation by science and technology was probably at an all-time high. The need to expand the numbers of graduate engineers and scientists became accepted generally by informed opinion, including by politicians of all colours. This fitted in with the Attlee government’s modernising rhetoric, and in the late 1940s a substantial expansion at the top end of technical education began. Though constrained by university conservatism, a Treasury only slowly persuaded of the need, and disagreements about the best institutional framework, expansion continued at a steady pace through most of the Conservative years in power. The Robbins Report was significant not so much because it heralded an expansion where none had previously existed, but more because it emphasised the convergence of the belief that there was much ‘untapped talent’ currently going to waste, and that its tapping could yield a substantial economic dividend. By stressing the demand side of the equation, Robbins also cut across the emphasis on the growth in numbers of graduate scientists and engineers which had dominated the debate in the 1950s - though it should be noted that even in that decade much of the growth in undergraduate numbers was in universities, which were not primarily technological.” At school level the picture is very much more complex. The secondary school provision most explicitly linked to economic benefits was the technical high school, but these schools were largely squeezed out of existence by the political commitments to grammar schools, or, in some Labour-controlled local authorities, to comprehensive schools. The political question over selection at 11 years of age was passionately debated in these years, but the fate of the technical high school was a little-regarded by-product of an argument which almost ignored their existence. This outcome goes some way to justify the idea of a ‘missing stratum’ in British school education. 61 On the other hand, the significance of this pattern of provision is difficult to assess.Two arguments should be distinguished. The belief that by concentrating bright pupils in grammar schools Britain was diverting talent away from science and technology into arts and humanities is a popular view, but one that is frequently exaggerated. Many grammar schools (like many public schools) had a very strong commitment to science education, with 60 per cent of grammar school boys doing science A-levels in the mid-1950s (compared with 40 per cent of public school sixth-formers). Most of the engineering and technological graduates in British universities came from these schools, and there is little evidence to suggest that they were unsatisfactory training grounds for such people.62 The idea of a British educational elite wholly devoted to the classics and arts is a hoary myth of educational history. On the other hand, the absence of both technical high schools and good provision of technical education for those who left school at the earliest possible age did

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leave a large number of young people with no qualifications, a gap especially evident at the craft and technician level where Britain’s weaknesses can be seen as most evident in a comparative perspective. 63 The latter were, of course, intimately linked with the failings of apprenticeship, and had long been diagnosed but only slowly and reluctantly faced by government. This was not for lack of ideas. The 1944 Act had proposed compulsory day release as a way of broadening the training of apprentices, the narrowness of much of this training being a constant focus of criticism, and this proposal, as noted above, was revived by Crowther at the end of the 1950s. The problem here was fundamentally political - the commitment of government to a system of ‘voluntarism’ in industrial relations, any deviation from which would be likely to arouse hostility from both unions and employers, though it should be said that the idea of ITBs was one which the unions keenly supported before the government’s actions. Only slowly did the government move at all on this front, and it remained probably the weakest area of training and education in 1964. The Conservatives were spending a lot more money on education in 1964 than they had spent in 195 1. Partly this flowed from the political calculation that, aided by the 1944 Act, many more young people would demand more education, and that the electorate would insist that this pressure be satisfied. Alongside the political pressure, and especially notable from the 196Os, was the evidence of weakness in Britain’s provision relative to competing nations, combined with the growing belief that in a world of heightened competition, education and training would count for a great deal. This perception, boosted by academic studies, and widely shared by informed opinion, had, however, by no means swept all before it by 1964. Obstacles included the extent to which employers remained slow to change their approaches to training and education, with little evidence that in any area they pioneered rather than responded to external pressure for change. But the government also was slow to respond to the case for reform, especially in the areas of craft and lower-level skills where new initiatives were most required.

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9 INVESTMENT TECHNICAL

AND CHANGE

Introduction During the 1950s and early 1960s investment was regarded as the key to economic performance and growth by many people, inside and outside the government. Indeed the behaviour of investment came to be deployed as a key index of the success or failure of both the economy itself and the government’s attempt to manage it. This in part reflected the new availability of data on investment (though the figures remained highly imperfect by current standards), and their use by international bodies to provide plausible comparisons for the first time. This data creation in turn flowed from the Keynesian emphasis on investment as the key to short-rzln economic performance, which in these years was extended to attempts to understand longer-run behaviour. However, the role of investment in economic performance came eventually to be much disputed, both inside and outside government, and by the end of the Conservative period in office was tending to lose ground in policy debates to issues around the question of technical change. This switch in emphasis arose from a growing belief that investment per se was not the key to efficiency, so that the debates and policies on these two questions tended to be intertwined, and are sensibly treated together. This chapter is divided into three: it looks at, first, the issue of the volume of investment, second, the distribution of that investment between different uses, and third, debates and policies on speeding up the pace of technical change. In looking at these issues,the role of economists is given some weight. In the arguments about the efficiency of the British economy in this period the two issues which economists persistently emphasised were investment and technical change on the one hand and competition on the other (Chapter 7). And whilst the role of economists in shaping policy in both areas can easily be exaggerated, it was not negligible in either.

The great In the Fourth

Report

debate

of the Organisation

on investment for European

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Co-operation

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(OEEC) in 1952, the section on Britain asserted that: ‘The level offixed investment in the UK is, and has been for several years, inadequate, amounting to no more than 13 per cent of the GNP.” By commenting in this way, the OEEC was setting the terms of a debate which was to continue throughout the next dozen years. Whilst the OEEC and the United Nations Economic Commission for Europe (UNECE) were important in initiating this argument, most obviously because of the quantitative international comparisons which underpinned their statements, British commentators soon became involved. By the end of the decade, ‘low investment’ was to be the staple of critiques of Conservative economic policy. Andrew Shonfield, for example, wrote: ‘The central failure of postwar Britain is inadequate investment. So many of our difficulties flow from this . . . ‘* Focusing on the aggregate level of investment in this way may be explained by the apparent ‘manageability’ of such a figure for both governments and theoretical economists.3 As will be argued in the section dealing with policy, such an approach fitted with the government’s emphasis on managing aggregate demand and distancing itself at least in part from intervention in the allocation of investment resources. For the theoretical economists, the concept of aggregate investment could be inserted readily into both Keynesian-style macro models and neo-classical growth models dealing with homogeneous capital goods as inputs into the production process. However, the 1950s were to see growing disputes amongst economists, especially of the applied variety, about both the usefulness of such a concept and its relevance to understanding economic performance. Arguments about the role of investment can best be seen in the context of the development of theories of economic growth. The classical economists, from the eighteenth to the late nineteenth centuries, were centrally concerned with the ‘Wealth of Nations I4 but the rise of neo-classical economics from the late nineteenth century led to a neglect of the subject until around the Second World War. Whilst Harrod in the 1930s provided some pioneering work, it was not until the 1950s and 1960s that there was a real explosion of growth theory. The academic discusion in these decades tended to be highly theoretical, and the field quickly became notorious for the abstractness of its procedures and conc1usions.s Certain theories developed at this time soon became the ‘orthodoxy’. Jn a policy context, two features were of great importance, the notion of diminishing returns to capital investment, and the ‘exogeneity’ of technical change - the idea that technical progress is a gift of the Gods, unconnected to the level of investment.’ These underpinned the beginnings of growth accounting, which is characterised by treating the growth of output as ‘accountable’ from the independent contribution of various factors, notably labour, capital and technical change (though the quantification of the latter was and remains extraordinarily difficult). Such accounting first appeared in the US in the

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1950s though it was not until the 1960s that the procedures and results were to be widely known.7 Very crudely put, the implications of these theories was that the level of aggregate investment was not the cause of growth, and that technical change was both more important than investment and also its development largely a separate issue. ’ While this literature was read by few people, and its direct impact on policy-oriented discussion remained close to zero, the problems it raised about the significance of aggregate investment levels certainly echoed through policy-making circles. The association of Britain’s poor comparative growth and investment record by the OEEC seems to have met a ready response in the Conservative government, reflected both in public rhetoric, and also in practical measures from the 195 3 budget onwards. As an official noted in 195 5 : The Government considers it has a particular responsibility to see that there is a high and rising level of investment, which will promote the expansion of national output and income. The Chancellor of the Exchequer has laid repeated emphasis on this in his budget speeches and other public statements.9 However, the simple relation between investment and growth suggested by the OEEC and voiced by Conservative politicians was strongly questioned by some in the government machine. The basis of the OEEC’s adverse statistics was disputed by some, not least by the Central Statistical Office, though others regarded these criticisms as ‘carping’ and not undermining the main thrust of the OEEC message. lo Officials were generally more concerned with how these figures were interpreted. As one stated: ‘free and easy international comparisons are apt to be used in a way which is damaging to the UK, since they tend to suggest that the UK is a played out economy’.” An alternative interpretation was offered by the economist Cairncross, who stressed: ‘Whatever the position abroad, new capital formation in Britain is higher than ever before . . . never has the rate of investment been greater and never has there been so much insistence on its inadequacy.‘12 Officials seized happily on such arguments, which seemed to put Britain’s investment performance in a more favourable light. This was also the case for material which argued not only for a different perspective to that employed by the OEEC, but challenged the basic premise of a causal relation between investment and growth. A good example of this is the favourable response to an article by Colin Clark (himself a pioneer of applied growth economics) in 195 5, which, drawing on evidence of falling capital output ratios in the USA, suggested this implied that the investment level was not closely correlated with growth. The same theme was reiterated by Clark in his later attack on ‘growthmanship’.‘3 While doubts about the accuracy and significance of the comparisons disturbed the official mind, and these doubts were increasingly fed by economists, at the level of the government’s public rhetoric the stance was to 143

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accept the implications of what the OEEC and UNECE were saying and call for more investment. This was especially so in the early and mid-1950s when the ‘space’ for such a rise seemed evident, with the strengthening of the balance of payments and the decline in defence expenditure post-Korea.‘* In the general policy review after the 195 5 General Election this comparative frame of reference was emphasised, and the crucial role of investment restated. The government’s Chief Economic Adviser stressed: ‘To achieve a really dynamic rate of growth so as to rival the Germans’ recent performance would require a larger increase in the share of investment in GNP, up to 20 per cent (by 1960) rather than the projected 17 per cent.“’ But by 1957 this expansionary prospect was gravely undermined: the ‘September Measures’ of that year marked the beginnings of a deflationary period which was to result in the major crisis over economic policy under the Conservatives, with the resignation in 1958 of the Chancellor of the Exchequer, Thorneycroft, and his supporters.” In the short-run stimulation of the economy before the 1959 election, increasing aggregate investment was again emphasised. However, in the debate from 1960 onwards about the growth of the British economy, the role of investment was treated much more circumspectly by all participants than in the discussions through most of the 195 OS. Partly this may have reflected the fact that, except in the 1957/S deflation, investment as a share of GNP had indeed risen significantly over the decade.” (Table 9.1 gives the retrospective figures which are, however, close to those deployed in contemporary policy debates.) Yet this rise in capital formation had not generated an accompanying improvement in Britain’s growth performance.18 Second, as noted above, there was growing scepticism amongst economists about the relation between aggregate investment and economic performance. Third, as the underlying balance of payments position deteriorated in the early 1960s the potential inflationary aspect of rapid investment growth increasingly worried policy makers. Fourthly, and related to the previous points, other agendas for improving economic performance came more to the fore, notably, technical progress and reform of the labour market. This change in policy perspectives should not be exaggerated. Just as right through the early 1950s some people questioned the enthusiasm for raising aggregate investment, so in the early 1960s a minority pressed for continuing priority for this goal. The Organization for Economic Co-operation and Development (OECD) (successor to the OEEC) seems to have been one body whose doubts on the investment/growth relationship were little evident. When in 1961 the member countries agreed to try to increase their collective GNP by 50 per cent in the period to 1970, the working party of officials which reported on the means by which this could be accomplished emphasised the ‘strong association’ between investment shares and GNP, calculating a simple correlation of 0.86 but implying a strong cazlsdl connection.19 A similar line emerged from the UN World Economic Szlrvey.20 Nevertheless, official doubts on this score 144

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Table9.1 Share of gross domestic fixed capital formatron in GDP, 1950-64 (1958 prices) Year

Shareof GDP (%)

1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964

13.0 12.6 12.7 13.5 14.1 14.4 14.8 15.3 15.3 15.9 16.6 17.6 17.3 16.9 18.7

Source:

C. F&stem,

Natumal Income, Expendzture and Output of the U.K., 1855-1965)

(Cambndge, 1972), Table5.

were by now quite widespread. For example, the Treasury drafter of the 1961 Report on Economic Growth stressed: ‘we have passed the days when it was thought that there was a direct relationship between the level of investment and the rate of output: it is now admitted by most people who have studied the matter that the relationship is far from simple and has large unpredictable elements in it’. His stance was endorsed by another official who wrote: ‘We seem to be in sight of an appropriate investment ratio, but there may be considerable maldistribution of resources used for investment.‘21 By 1961/2 the policy debate was shifting towards the distribution of investment rather than its aggregate volume, but also its efficiency in use. There is strikingly little in the official documents of the time about rates of return (at least in the private sector) but increasing doubts about whether the higher levels of investment had been efficiently deployed. This was both a sectoral issue (returned to below in the section on the distribution of investment) but also about the management and labour practices which accompanied investment. Thus, the Board ofTrade in 1962 argued that whilst some parts of the British capital stock were undoubtedly elderly: ‘Over British industry as a whole . . . there is probably more scope for cost reduction and labour economy at the present time by way of changes in layout and manufacturing methods (e.g. mechanical handling) than by substantial investment in new production plant.‘22 When, after long discussion, a major paper on ‘Economic Growth’ was produced for ministers in 1962, the eight courses of action outlined to boost Britain’s performance made no direct mention of investment, and half of them

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focused on changes in the deployment and use of labour. This theme was endorsed by the Cabinet when the document came to them.23 Whilst international comparisons continued to show British performance in a poor light, and low aggregate investment was to remain a popular diagnosis of the country’s problems for many years, ** by the early 1960s this view no longer dominated the policy debate. Attention was focused more on the reasons why, despite a very high level of investment by historic British standards, the performance of the economy still seemed to be so deficient.25

Aggregate

investment

Whatever the status and significance of international comparisons, investment in Britain under the Conservatives undoubtedly rose substantially both in absolute terms and as a share of GDP. How far was the government responsible for this trend? First, it is important to note that investment in Britain is affected by international capital flows, which increased in scale in this period, though long-term capital outflow had, of course, been very much greater before 1914. The build-up of capital outflow was largely uninhibited by government, as the general policy was to continue to rebuild Britain’s role as a major capital exporter, especially to the Commonwealth.*’ This period also saw a major expansion of long-term capital inflow, most significantly from an industrial efficiency point of view via the expansion of multinational operations in Britain. By 1963 foreign-controlled companies, predominantly American, accounted for just under 10 per cent of net output of all manufacturing, 13 per cent of UK capital expenditure, and 7 per cent of total manufacturing employment.*’ Like its predecessors, the Conservative government after 195 1 broadly welcomed such multinational investment, so that whilst the exchange controls were used to regulate inflows, few applications were turned down.** The main motive for this encouragement was the balance of payments. The Treasury recorded: ‘We approve investment applications when they promise to save imports, or stimulate exports, or encourage industrial productivity.‘29 However the evidence suggests that it was the balance of payments which was the predominant consideration, and that criteria relating to industrial efficiency were extremely vague. The government did not actively encourage such capital inflows, but by its light regulatory framework, combined with ownership-neutral industrial policies, plus the continuation of a high tariff regime, it willy-nilly created an attractive environment, especially for American companies.30 The great bulk of investment remained domestically sourced, and the government was extremely active throughout the period in trying to regulate what was occurring here. However, these controls did not seek to push investment in only one direction. Whilst, on the one hand, in all the rhetoric of ‘doubling the standard of living’ in the mid-1950s and the ‘growth debate’ of the early 1960s there was much talk of encouraging investment, in practice 146

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macroeconomic policy was one of ‘stop-go’, periods of encouragement alternating with attempts to slow the pace of increase. In their initial period in government the Conservatives felt forced to rein in investment to try and contain the inflationary consequences of the unsustainable expansion of defence spending unleashed by Labour at the time of the Korean War. The Conservative aim was to move to a situation where demand in general and investment in particular were controlled by fiscal and monetary policy, but in 1952 the attainment of this objective had to be postponed, and physical controls continued. 31 However, by 1953 there was a substantial easing of both building-licensing and steel allocations, the major instruments of investment control, and thereafter the regulation of aggregate investment was overwhelmingly by the mechanism of monetary and fiscal policy.32 In the 1953 budget there was a large ‘go’ stimulus to the economy, which included the reinstatement of depreciation allowances followed in 1954 by investment allowances. In 1956, after the previous year’s General Election victory, a ‘stop’ phase included the suspension of investment allowances and a cut in public investment. This approach was notably reinforced by the ‘September Measures’ in 1957, which were particularly striking for the tightening of fiscal policy. Following the resignation of Thorneycroft as Chancellor in 1958, a ‘go’ phase was inaugurated which took the government successfully through the 1959 election, and included a big increase in investment allowances. The normal post-election ‘stop’ culminated in the ‘July Measures’ of 1961. These were gradually removed from late 1962, and ‘go’ continued up until the General Election of 1964.33 How much difference did all this rather frenetic macro policy activity have on the level of investment? Whilst the biggest fluctuations in the period were in consumption, investment levels were significantly affected by ‘stopgo’, a point widely accepted and criticised inside and outside of the government by pattern was unavoidable given the the early 1960~.~* In part this fluctuating commitment to short-term regulation of aggregate demand, combined with the fact that investment was a significant and growing proportion of total demand, and could be affected quite significantly by some of the instruments of demand management, perhaps especially monetary policy, i.e. interest rates. 35 Also, with inescapeable capacity constraints combined with the persistent desire to improve the balance of payments, export of capital goods 36 could logically be given priority over their use for domestic investment. On some occasions, for example 1954 and 1958, the desire to expand investment was prominent in short-term management, and in 1960 investment allowances were exempted from the general deflationary pressure. But for the Conservative’ years as a whole it would be difficult to infer from the pattern of short-term management that the government was giving great priority to expanding investment in its overall policy stance. The hyperactivity of government policy in managing demand in this period has led critics to argue that short-term ‘stop-go’ inhibited investment and hence long-term growth. 147

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However, this case is significantly weakened by the fact that if it is output fluctuationsperse which inhibit investment, these were not actually any larger in Britain in these years than in other, faster-growing, continental European economies.37 Whilst policy makers by the early 1960s as well as many subsequent critics, have analysed the flzlctzlations in investment, these, of course, were superimposed on an upward trend. If governments undoubtedly played a considerable part in these oscillations, their role in determining the trend remains more problematic. This reflects both the complexity of the historical events of 195 l-64 and the more general problem of deciding what determines investment in any historical period. Matthews’ pioneer study of the impact of Keynesianism in the postwar years highlighted both the key role of the rise in investment in generating full employment, and the difficulty of deciding why this rise had taken place. 38 He emphasised that it was the rise between the late 1930s and the cyclical peaks of 1955, 1960 and 1964 which in a national income accounting sense largely explained the great improvement in the employment position, rather than fiscal policy. But the reasons for this shift were far from straightforward. Normally in a capitalist economy the expectation is that the level of profitability is important for investment, both for its direct incentive effects and for the provision of finance. Yet in this period, after reaching a peak in the early 1950s in the postwar sellers’ markets, pre-tax profits fell continuously.39 The public records do not suggest a strong consciousness of this trend, but nevertheless the actions of the government were effectively to offset this fall by reducing the taxation of profits, thereby flattening out the rate of return. The proportion of profits taken in tax fell by half, from 36% per cent in 1948-5 1 to 18 per cent in 1961-4.*’ This fall in the taxation of profits was attained both by tax exemptions for investment and by direct reductions in the tax rates. The first of these, depreciation and investment allowances, were the most straightforward way in this period that government tried to encourage investment, though their use and effects remained controversial. Initial allowances of 20 per cent, effectively postponing tax on company income spent on investment, were introduced in 1945 and doubled in 1949. They were cut back in 195 1, but restored to the pre-1949 level in 1953. In 1954 investment allowances were added, effectively giving a more than 100 per cent tax break on investment. These allowances were cut in 1956, but reintroduced in 1959 and increased in the early 1960s initial allowances conversely being increased in the late 1950s but cut back in the following decade.*l In 1945 and 1949 subsidies were seen as an encouragement to investment in the context of the long-term needs of postwar reconstruction. In 195 1 the cut was part of a short-term deflationary package. In 1953 and 1954 the increases seem to have had both long- and short-term aspects, though perhaps predominant were the beginnings of worry about Britain’s low investment 148

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proportion.42 However, such good intentions were offset in the 1956-9 period by the tough anti-inflationary policies pursued, in the name of which investment allowances were sacrificed. The reversal of policy after 1959 came only after considerable debate on the case for such fiscal incentives for investment. The 1959 arguments were in large part reruns of the disputes accompanying the original introduction of investment allowances in 1954. At that time the Economic Section, headed by Robert Hall, had pressed for them, but been opposed by the Inland Revenue, which in true nineteenth-century fashion, resisted the use of the tax system for economic purposes.43 In 1959, because of this contentious background, a committee was set up to look at the issue. It reported against the reintroduction of investment allowances, and this view was endorsed by the Budget Committee. This position was supported by the Federation of British Industry’s (FBI) survey evidence to the Radcliffe Committee, which had found that 77 per cent of firms thought the allowances made no difference to their investment behaviour. But Hall and Makins dissented from this view, arguing that investment needed a psychological boost,. and that despite the survey, the FBI was keen on the reintroduction of allowances. They won the day.** The arguments of 1959 were again largely short-term, and concerned the perceived need to reverse the long ‘stop’ of 1956-8. However, in the early 1960s there was a slightly longer-term tone to some of the discussion. In 1962 the Inland Revenue continued its principled opposition to the use of tax in this manner, as well as questioning the efficacy of allowances, but it was overborne by the view that such allowances appeared to be one of the few weapons at the government’s disposal in trying to boost investment levels. The debate in 1962 was particularly wide ranging, for example covering the desirability of Swedish-style investment funds, where the government played a larger role in determining the level and timing of investment expenditure, though these were rejected on the grounds that ‘industry would feel they were being deprived of the control of their own money’.*s The discussion of such funds emphasises that the debate over investment allowances was part of a search for more effective short-term demand ‘regulators’, that was an important part of policy debate in the early 1960s. However, the debate on allowances also embraced more long-term issues about investment. The Board of Trade, for example, argued that the efficacy of allowances was limited precisely because their use as short-term regulators undermined their effects, as companies had no confidence in their continuation. The Board’s solution was to reduce the overall tax burden on companies, and leave them to decide how to spend the money.*’ The increases in allowances during the early 1960s gave Britain one of the most generous sets of tax privileges for investment in Europe,*’ but whether these made much difference to the overall level of investment has been usually doubted by economists. Companies, as the FBI Survey suggested, tended to make their investment plans, and then treat any tax breaks as a gift from the 149

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TECHNICAL

CHANGE

gods. In the early 1960s Cairncross made the plausible suggestion that this evidence could be biased against the position of small firms, whose more 48 ‘marginal’ financial position might make the allowances more important. However, the evidence seems to suggest that no great significance should be attached to these measures, though the impact may have increased a little over time. 49 Investment and depreciation allowances were not the only tax privileging of investment in this period. There was a decline in the standard income tax rate from 47l/ per cent in 1951 to 383% per cent after 1959, with tax on distributed profits falling from 50 per cent in 195 1 to 15 per cent after 196l.s’ In this way the general tax environment for investment was made more favourable throughout the Conservative period of office. But again, how much effect this had on the overall trend of investment is unclear. For example, the fastest rise in private investment in this period was not in manufacturing but in the commercial sector, yet allowances were not available here at a11.51 Reductions in taxation could in principle encourage investment not only by offsetting the fall in the rate of pre-tax profit, but also by providing a source of finance. This is especially relevant as a possibility where internal finance dominates as a source of funds for capital formation, as it did in Britain in this period (Table 9.2). The figures show some movement towards higher external funding, but internal funding remained by far the most important source. This trend may have partly been affected by the major change in the tax regime relating to profits in 1958. Under the Attlee government, a system of profit taxation had been installed which imposed significantly higher taxes on distributed compared with undistributed profits. In this way the government sought to combine encouragement of investment with discouragement of high disbursement of company profits leading to increases in the inequality of income. But this system came under attack in the 1950s for, amongst other things, encouraging investment funding from ploughed-back profit and so, it was alleged, reducing the efficiency of investment decisions. The implication was that companies treated internal funds less carefully than those that had to be raised on an external market. However, evidence for this proposition was always thin on the ground.52 The change to a unified and low rate of profits tax from 1958 Table 9.2 Sources of investment

1948-5 1 1952-55 1956-60 1961-65 Sowce: W.A.

Gross trading

Other current

profits

income

65 i;

23 22 21 20

64 Thomas,

funds, 1948-51

The Finance

ofBntith

to 1961-5

Total tnternal

External

88 94

12 6 10 16

2 Industry (1978),

150

(%)

p. 218.

INVESTMENT

AND

TECHNICAL

CHANGE

led to a significant rise in the level of dividends, a change also encouraged by the growth of the takeover movement, and the desire of potential targets for such takeover not to have large ‘cash mountains’ to tempt predators.53 Whilst this tax change may have ‘recirculated’ more profits, it is far from clear that it helped investment. Other things being equal, higher pay-out rates should be used in part to finance private consumption, and hence reduce the availability of investment funds. On the other hand, there is little evidence that finance was a major constraint on investment. At the beginning of the Conservative regime physical controls still had serious effects, but were quickly dismantled. By the early 1960s firms complained more about shortages of skilled labour than about finance, 54 and this linked to the shift in focus, noted above, towards trying to reform the labour market. Generally there is little complaint from industry about finance, except at t-he bottom end of the size range where the ‘Macmillan gap’ was not eradicated.55 This may have been because industry had accustomed itself to the peculiarities of the British capital market, had ‘learned to love its chains’.56 But those chains weighed fairly light in the 1950s and early 1960s. Personal savings (for reasons which are not at all clear) rose notably through the period. Equity financing spread, helped by the provision of the 1948 Companies Act. Whilst notionally limited by the Capital Issues Committee, new issues control largely ceased to be of any significance after 1954 and was abolished in 1958.” Bank lending was subject to quantitative control through most of the period but this also was eased significantly in the late 1950s and bank lending to companies expanded significantly, albeit from a very low base.58 All in all, the explanations for high investment over the thirteen years would seem to exclude a large direct role for the efforts of government. Investment allowances and the softening tax regime may have helped a little by offsetting the fall in pre-tax returns. Improvements in the capital market were largely outside the government’s purview, and the major change to encouraging more distribution of profits is unlikely to have helped fund investment. Generally the government eased restrictions on the capital market, but did little to reform perceived problems such as the ‘Macmillan gap’. The main explanations for high investment would appear to lie on the demand rather than supply side. The arrears of investment from several decades of slow accumulation, coupled with the important wartime technical breakthroughs in areas like jet engines, atomic power and electrical engineering, may have stimulated part of this. A second point was the fact that, despite some contemporary arguments, investment was not capital saving, unlike the big surge of electrification in the inter-war period.59 However, probably the most important factor was the boost to confidence and expectations brought about by the commitment to full employment which seems central to the political and policy assumptions of this era. Retrospectively the strength of that commitment may be questioned, and it was certainly 151

INVESTMENT

AND

TECHNICAL

CHANGE

untried.‘o But contemporaries saw it as integral to the formulation of policy, and this attitude must account for the major upward shift in the investmentdemand function in this period.” Aided by the expansion of the world economy, the political commitment to full employment plays a substantial part in explaining the rise in investment in these years.

The pattern

of investment

The broad pattern of fixed investment in this period is shown in Table 9.3. A number of features are notable. First, from 1955 the private sector was a larger investor than the public, and the gap widened over time. This, in broad terms, reflected the fact that the capital-intensive parts of the public sector (coal, railsteel) were declining in relative importance, whilst the big ways, capital-intensive parts of the private sector (e.g. chemicals, oil-refining) grew rapidly. It was also affected by the fall in public sector house-building as a proportion of total investment in dwellings. The public/private mix was important insofar as it affected the capacity of government to control investment. The rise in the importance of the private sector, combined with de-control, meant that the composition of investment was becoming less closely regulated over time. The main exception to this was the privileging of manufacturing above the commercial and service sectors in investment allowances. The issue of a more finely tuned investment allowance system was raised periodically, but rejected as involving an unacceptable degree of discrimination.62 Control over investment in the public sector was, in principle, much Table 9.3 Gross fixed investment

by sector, 195 l-64

Publtc sector

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964

(Em. at 1958 prices)

Private sector

Dwelhgs

Total

Dwelhngs

384 434 519 478 380 344 319 269 270 278 282 317 349 463

1,274 1,364 1,524 1,515 1,437 1,456 1,508 1,474 1,580 1,648 1,742 1,812 1,951 2,290

72 112 192 258 286 305 304 322 400 484 527 515 512 625

Source.Natzonallncome and Expendtture (Blue Book)

152

1962,

Table

Total 1,187 1,110

1,218 1,457 1,678 1,836 1,958 2,019 2,169 2,484 2,739 2,631 2,637 3,031 51; 1965,

Table

49.

INVESTMENT

AND

TECHNICAL

CHANGE

greater, though not absolute. Only about 20 per cent of the total was by central government, the rest being split roughly evenly between nationalised industries and local authorities. This investment was programmed along with private investment from 1948, but the abolition of most direct controls after 1954 meant that the controls related only to the public sector thereafter. From 1960 onwards the public sector plans were published as White Papers.63 Whilst contemporary opinion tended to regard investment in manufacturing as particularly important, and almost all of this was in the private sector, there was no systematic favouring of private over public investment. The trend was evident in housing during the 195Os, where, after the great surge of both public and private elements in 195 l-3, there was a clear preference for private provision, though the public sector again expanded rapidly in the boom of 1962-3 (Table 9.3). But more broadly, whilst some commentators like the right-wing economist Graham Hutton tried to make a ‘private good, public bad’ argument, this attitude did not dominate policy.‘* Manufacturing, as is clear from Table 9.4, was never more than 25 per cent of total investment, and this fraction tended to fall, especially because of the growth of investment in the commercial (distribution and services) sector. Whilst the authorities slowly gave up the idea of public investment as a major regulator of aggregate demand 65 they were able to use this control to impose certain priorities. These bioadly speaking accepted the efficiency benefits of high investment in transport and communications, but tended to regard ‘social’ expenditure, in education, health and social services, as very much the last claimant on resources. However, such a broad generalisation glosses over many important changes within the period, which need to be looked at in more detail. As already noted, the first two years of Conservative rule saw a major boom in house-building, in line with an election pledge by the Conservatives to build 300,000 houses per annum. Within this boom the relative size of public sector building was scaled down, and during the lower levels of activity in the mid-1950s the private-sector overtook the public (Table 9.3). Many in Whitehall plainly regarded the scale of house-building as excessive, and wanted to give a higher priority to productive investment. ” This was done in the 1953-7 period, which saw manufacturing investment rise by nearly 50 per cent, whilst other areas were held back. But from the ‘stop’ beginning in 1957 government priorities were much more ambiguous. In particular, the surge in public-sector investment in housing during 1961-4 was accompanied by considerable talk about the need to hold such expansion in check to prevent the ‘crowding-out’ of private capital spending, and there was even a proposal by the Minister of Health to reintroduce building licensing to release resources for private, non-housing investment. ” As in the early 1950s a big expansion of subsidised house-building was seen as electorally desirable, despite the current concerns with industrial investment.”

153

INVESTMENT

Table

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964

9.4

Industrial

distribution

AND

TECHNICAL

of investment,

CHANGE

195 l-64

(&m. at 1958 prices)

Manufacturzng

Gas, electricity and water

Transport and Distribution communtcations and services

Total

716 684 666 703 779 914 961 922 867 1,024 1,229 1,098 993 1,118

284 284 309 356 382 358 367 389 426 431 439 493 614 698

281 257 311 325 323 396 481 467 496 535 501 423 402 466

2,461 2,474 2,742 2,972 3,115 3,292 3,466 3,493 3,751 4,134 4,481 4,443 4,588 5,321

Source: NationaL

Income and Expenditure

250 248 267 324 411 401 420 464 547 614 685 689 752 861

(Blue Book) 1962, Table 57; 1965, Table 5 5,

Elsewhere in the public sector there were also sharp changes in priorities. Whilst the importance of transport and communications for efficiency was recognised in Whitehall, this was overridden for most of the 1950s by the seeming ease of controlling road-building and railway investment, which fell in the public sector. Only from 1958 were these areas given a high priority in investment programming. Investment in the non-housing infrastructure was, by any standards, significantly neglected in the 1950~.‘~ If policies on public investment generally show little coherence over this period, the point can also be made in the particular area of ‘social services’ (especially health and education investment) (Table 9.5). In the early 1950s it was recognised that postwar investment in health and welfare services had been extraordinarily low, only 25-30 per cent of the prewar level. On the other hand, the early investment comparisons produced by the OEEC reinforced a determination to hold down such investment. Whilst housing had its striking boom of 1951-3, other ‘social’ investment, as it was described by ministers, was strictly restrained until the end of the decade (Table 9.5).” Thereafter, in relative terms at least, it boomed. The explanation of this rapid expansion cannot be found in any reorientation of official thought about what investment counted as ‘productive’. There is no evidence, for example, of a concept of ‘human capital’ which would put health and education investment in a quite different light from the ‘social’ categorisation that prevailed at this time.‘l So at the same time as the imperatives of growth were seemingly felt, what was regarded as non-productive, ‘social’ investment was allowed to expand at an unprecedented rate. ” The point is not that there is any evidence of ‘crowding-out’ of ‘good investment (from a growth point of view) by ‘bad’,

154

INVESTMENT

however coherent

AND

TECHNICAL

defined. Rather, this curious investment priorities in policy

CHANGE

episode suggests again the lack thro.u&ozlt the 195 I-64 period.

Technical

of

change

As in other areas of economic performance, perceptions of a British failing in the rapidity of technical change was felt early in the Conservative period in office. The Report of the Advisory Council on Science Policy (ACSP) in 195 3 noted the ‘widely held’ view that Britain’s current economic difficulties were due to technical backwardness, and made adverse comparisons with the US about the scale of the British research effort.73 This widely held view had a poor statistical foundation at the time. The FBI had previously carried out surveys of R&D in British industry, but their reliability was low. The first official estimates were made by the Department of Scientific and Industrial Research (DSIR) in 1955. This statistical effort was expanded in the late 1950s and in 1957 the OEEC made an initiative in this area. Partly because of the complexities of measurement the first OECD comparative calculations were not made until the early 1960s.‘~ As these data were developed, a number of features of the British effort became increasingly apparent. First, it was clear that whilst the absohte level of the British effort was substantially smaller than the USA, as a share of GNP there was a narrowing of the gap. Second, there was no doubt that in comparison with Western Europe, Britain was a big spender and on a per capita basis actually exceeded the French and Germans (Table 9.6). Third, the figures showed that whilst most R&D was financed and carried out by industry, the most striking feature of the British government’s policy was the emphasis on a Table 9.5 Fixed investment Untverstties 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 Source: National

7 i 6 7 8 10 14 19 23 26 34 41 54 lncone

in ‘social services’, 1951-64

Other educatzon 62 71 74 76 83 106 126 128 127 127 150 176 187 207

and Expendzture

Health 22 22 23 25 27

:: 36 41 45 56 65 77 100

(sm. 1958 prices) Local welfare

-

2 2

: 1 ; 5

10 13

Total 123 122 125 129 135 157 179 181 194 203 238 271 292 339

(Blue Book) 1962, Tables 57 and 58; 1965, Tables 55

and 56.

155

INVESTMENT

AND

TECHNICAL

CHANGE

few areas of R&D, both directly on military projects and sectors like aircraft and atomic power with mixed civil/military objectives.75 At the beginning of the 1950s the emphasis in policy discussion was on the total volume of R&D done in Britain, with the comparator being the USA.76 Also at this time the focus of the debate was on civil R&D alone. With the creation of the ACSP, which had responsibilities only in the civilian area, emphasis shifted to the supply of qualified manpower as the crucial constraint.” This approach drew on the work under the Attlee government of the Barlow Committee, which had recommended a big expansion in facilities for undergraduate engineers and scientists. Perceptions of a shortage of such personnel led to periodic surveys of such manpower based on questionnaires to employers, which right through the early 1960s showed excess demand. There was a powerful ‘science lobby’ at work which strongly pressed the claims for more graduate scientists and engineers to bridge this purported gap.78 The supply of graduate and/or professionally qualified engineers and scientists rose, but more gradually than demand and more slowly than in comparable countries, and also more slowly than proponents of a growing R&D effort wanted (Table 9.7). The reasons for this are complex. This flowed in part from government expenditure constraints, which until the Robbins report of 1963 led to a lukewarm view of the desirability of a major expansion of university education. There were also insufficient suitably qualified school leavers, with scientists and engineers being drawn away from teaching into industry.79 Manpower supply tended to be seen as something of a panacea for R&D problems. Partly this was because, as in the 1990s training seemed to provide a simple solution to economic deficiencies, and one requiring a minimum of government interference with the private sector. From 1956, with the White Paper on Technical Edzlcation, it could be said the Conservatives were taking the issue seriously, but it was only in the early 196Os, with the rhetoric of ‘growth’ and the acceptance of the Robbins Report, that public expenditure on this sector showed major expansion.80 Though manpower dominated the public debate on R&D in the early Table 9.6 Measures of R&D, Gross

1962

expendtture

Per capita

($4 US UK France Germany

source: llnron

17,531 1,105 1,108

1,775

C. Freeman and A. Young, (Paris, 1965), pp. 71-2.

(8)

Scientists engineers

and

Per 1,000 working

populat2on 93.7 33.5 23.6 20.1 The R&D

435,600 58,700 28,000 40,100 Eff or t m Western Europe,

156

10.4 6.1 3.8 3.9 N. Amerrca

and the Smmt

INVESTMENT

Table

AND

TECHNICAL

CHANGE

9.7 Growth of enrolment in scientific and engineering education, 1950-63 (per cent per annum) 1950-5

UK USA” France W. Germany

courses in higher

1955-9

1959-63

8.0 3.4 15.0 7.8

7.0 7.9 11.1 6.6

0.7 6.2 7.7 2.2

Source: M.J. Peck, ‘Science and Technology’, in R.E. Caves (ed.) Brztazn’s (Washington DC, 1968), p. 462. Note: a Engineering only.

Economzc

Prospects

1950s this was not the only area of activity. Whilst there are serious data problems, it seems quite clear that the total amount of government money spent on civil R&D rose throughout the period (Table 9.8). These figures bring out the quite rapid expansion of ‘traditional’ methods of government financing of R&D. The DSIR, founded in 1916, spent money largely on supporting co-operative research associations, set up on the initiative of industry. This was in line with the ‘hands-off’ philosophy of government, also clear in the relationship with the universities and research councils, and grounded on the ‘Haldane principles’ established in the First World War. The policy was one of general encouragement of scientific and research effort, whilst not attempting to determine priorities. In the 1950s this approach created tensions because of the growing belief that the research effort should be more closely linked to economic priorities. Such beliefs were reflected in a small way by the DSIR establishing an Economics Research Committee in 1957 to advise on economic aspects of its work.81 But beyond this small example, action flowing from the idea that government expenditure had grown without sufficient regard to economic priorities was little. In 1957 Aubrey Jones, the Minister of Supply had Table

9.8 Public expenditure on civil R&D, (Em. current prices) a

Total of above

to 1963/4

1955/6

1960/61

196314

4.9 7.5

7.5 11.2

16.0 26.6

25.4 40.3

8.3

11.0

19.4

31.2

20.7

30.7

52.0

96.9

1950/51 DSIR Research councils Universities and learned societies

1950/l

Sozlrce:P. Gummett, Snentzsts zn Whitehall (Manchester, 1980), Pp. 39-40. Note: a NB: these figures do not cover all categories of civil R&D, and especially ignore the Atomic Energy Authority: see below. 157

INVESTMENT

AND

TECHNICAL

CHANGE

proposed a Ministry of Technology to develop civil contracts for R&D parallel to those used in defence. However, this was rejected, and ended only in the appointment of a Minister for Science in 1959 ‘as a very weak alternative to Jones’ original plan’.82 Hailsham, the new Minister of Science, had very strong and explicit views about the issues of science policy, publishing a book in 1963 which defended the Haldane idea of independent research bodies, with a central government offering only the broadest of oversight,83 but this view was by no means universal in Conservative circles at this time. Apart from Aubrey Jones’ advocacy of a more dirigiste approach, which found FBI support, a Conservative Party committee report in 1962 emphasised science policy as the core of economic policy, and called for a concentration of effort in areas likely to yield a commercial pay-off. However, whilst some small movement was made in this direction, especially following the Trend Committee Report on the administration of civil sciences, overall such ideas had to wait for the advent of the Labour government.84 The debate was in any event curiously partial. On the one hand, whilst research and development was growing rapidly in the 1950s the emerging problem was not thescdleofthis effort but its direction. And despite Hailsham’s laissez-faire approach, government was having a major impact on the direction of that effort in two highly important respects: funding very large-scale mixed civil/military projects, most importantly in nuclear power and aircraft; and directing a large proportion of total R&D resources into defence. The emphasis on nuclear power and passenger aircraft while often portrayed as part of the civil R&D programme, was only so in a qualified sense. First, in practice it was difficult to separate R&D in these two areas from, respectively, nuclear weapons and military aircraft. The Atomic Energy Authority, established in 1955 to pursue the nuclear power programme, was excluded from the development or production of weapons, but not from ‘experimental work’ that might aid such output. Similarly, the overlaps between civilian and military aircraft were very large. Second, even as civilian activities, the scale of support for these two industries reflected political and strategic notions about what industries a first-class power should possess, at least as much as any calculations of commercial possibilities. Advocates of nuclear power in the 1950s (as always) made claims about the cheap electricity their technology could produce. But despite a total commitment of resources equivalent to that deployed in the USA, this proved chimerical. Whether the organisation of Britain’s nuclear effort was at fault, or whether it was just not technically feasible, the costs of nuclear electricity exceeded both estimates and competitor fuels throughout this period. The nuclear effort absorbed massive resources for low returns.85 A similar story can be told about civil aircraft. Unlike in nuclear power, however, the resources put into this industry were being widely questioned by the late 1950s. The government engineered mergers between firms in the 158

INVESTMENT

AND

TECHNICAL

CHANGE

industry in the late 1950s to try and reduce costs, and a more critical view emerged in the early 1960s about the scale of effort that Britain could support. However, such views did not prevent a commitment to Concorde in 1962, though this at least did represent an effort to share costs with France, and so recognised the limits of a single country’s capacity to support such ventures. The project was criticised by the House of Commons Estimates Committee in 1964, but continued.86 The precise scale of the R&D effort in these two sectors is difficult to establish. In nuclear power, Burn suggested that up to 1965 Britain had spent 90 per cent as much as the USA, totalling at least &950m. In aircraft, Freeman’s study of 1962 showed that about 35 per cent of all R&D was taking place in that industry, a proportion similar to the US but significantly more than France and especially West Germany.87 It should be emphasised that the economic burden of the scale of Britain’s military effort was recognised from the beginning of the Conservative period in office. One of the immediate acts of the new government in 195 l/2 was to scale down the extravagant proposals of the previous Labour government for rearmament, in recognition of the unsustainable pressures such expansion was putting on the civilian economy. But concern with the economic costs of the scale of military expenditure co-existed with a desire to continue the full range of military commitments appropriate to a self-styled great power. It was this tension which was to underlie Conservative policy on military expenditure in general and military R&D expenditure in particular. The overall picture of military expenditure is one of a fall in the ratio to GDP from its Korean War peak of over 10 per cent in 195 2-3 to around 6 per cent by the early 1960s. The absolute amount spent rose in most years rapidly in 1951/2, and again in the early 1960s. There were small falls in 1955,1957 and 1958.** In the early 1950s the concern with the economic effects of defence mainly focused on the balance of payments (especially by drawing resources from the engineering industry) and manpower. Whilst the end of the Korean War and the change in the terms of trade quickly aided the balance-of-payments position, much of the continuing concern was with manpower, given the very low unemployment rates prevailing. Total service manpower peaked in 1953/4 at just under a million, and then fell continually through the period to just over 400,000 by 1964.89 The fall was partly because of the desire to have a fully professional armed services, and to run down conscription, which finally ended in 1962. However, professionalisation was not a benefit in financial terms, because pay and conditions were much superior for professionals than national servicemen. Allied to this idea was the belief that, in a nuclear age, expensive conventional forces could be replaced by ‘cheaper’ nuclear forces. The nuclear strategy is usually dated to a paper by the Chief of the Air Staff (Slessor) in 1952, but initially his views found little support, not least because the early 1950s saw 159

INVESTMENT

AND

TECHNICAL

CHANGE

the sending of ground forces to Western Europe as part of the NATO commitment. 9” But post-Suez worries about the scale of British military efforts reawakened, and in 1957 a landmark White Paper on Defence was produced. This document set out as a precise objective the reduction of defence expenditure to 7 per cent of GNP by 1962. The driving force behind the plan was a belief that the economy was overstretching its resources with the current level of military expenditure. This was a matter of both the public expenditure aspects of military strength, but more particularly that the sector ‘was absorbing an undue proportion of qualified scientists and engineers’. Yet at the same time it was clear that the nuclear strategy that was to generate these savings would itself require a significant R&D effort in the areas of both manned bombers and rockets.9’ This policy prospectus takes us to the heart of the defence R&D problem of the period. On the one hand the post-1957 strategy was to reduce the burden on the economy, including trained manpower, but without reducing commitments. On the other hand, not only was the nuclear option quickly to prove far from cheap in public expenditure terms, but more importantly, it was very expensive in R&D terms, especially measured by use of scientific or engineering manpower. Precise figures for the proportion of such manpower in defence R&D are not available, but official estimates suggest that about 20 per cent of all R&D workers were in this sector both in 1962 and 1965.92 Thus, whilst defence R&D was declining as a total of both government-financed and total R&D from the late 1950s it was still rising quite rapidly in absolute terms (Table 9.9). It was also much higher as a proportion of total R&D spending than in any other major Western country except the USA and Sweden by the end of the period. In 1963-5 the British figure was 34.5, the French 26.2 and the West German 10.8 per cent.93 This scale of spending is not surprising, when the nuclear strategy, initially at least, involved the idea of independent development of missiles, aircraft and warheads, as well as all the accompanying paraphernalia of guidance and control technology. The great bulk of the money was spent by the Ministry of Aviation, and one breakdown of its spending for 1960-l found that &lSm. was spent on strategic missiles, &16.2m. on nuclear warheads, &15m. on bombers and strike aircraft, &8.2m. on fighters and &25.5m. on short-range weapons. A small number of projects predominated.94 This failure to reduce the demands of R&D on the economy was well recognised almost immediately. By 1958 there was serious questioning of the whole nuclear strategy for both public expenditure and R&D reasons. Thorneycroft, for example, after his departure from the Treasury, was very sceptical of the benefits of this stance.95 But the government would not agree to cut commitments, so that the late 1950s and early 1960s are punctuated by Treasury attempts to reduce expenditure, the Ministry of Defence replying, ‘yes, of course we can cut expenditure, but only if we cut commitments’ and the Cabinet eventually shaving the defence estimates by small sums, but refusing 160

INVESTMENT

AND

Table 9.9 The finance of R&D,

195819 %

CHANGE

195516 to 196415

195516 2378

TECHNICAL

J%i

1961/2

%

LE?n

196415 ?6

ZE’m

%

Government l Defence l Civil l Research councils

178 33

59 11

234 64

49 13

246 110

39 17

255 128

34 17

12

4

18

4

29

5

44

6

Subtotal

222

74

316

66

385

61

427

56

Universities

0.5

0.2

1.5

0.3

1.3

0.2

1.8

0.2

Private and public industry

77

26

160

34

248

39

328

43

Grand totala

300

100

478

100

SourcesReport on ScrenceandPohy, Cmnd. 3007, Parl. Papers Note: a Except in the case of the umverslties, these figures whole

534 196617, have

100

757

100

Vol. 48, p. 18 been

rounded

to the nearest

number.

to slim down any part of their world-power aspirations. 96 These problems multiplied in the early 1960s as much conventional military equipment, based on Second World War and Korean War designs, became obsolescent, whilst the technologies for nuclear capacity became ever more expensive. It was this that drove total military expenditure back on to an upward path in the early 1960s coupled, as it was, with the refusal to reduce the spread of forces.97 The central problem of military R&D was, then, one of overcommitment. The difficulty was well recognised in civil service and ministerial circles. Some attempts were made to suggest the problem was reduced by the ‘fall-out’ from defence R&D to civilian industries, but the evidence for such spin-off on a large scale is poor.” More important were the attempts to buy technology from abroad, notably the USA, though such a policy raised both practical problems of reliance on foreign governments’ procurement policies, and the rhetorical one of continuing to claim that Britain had an independent nuclear deterrent.99 The early 1960s combination of political commitment to economic growth with these pressures on the military budget was unfortunate for the

161

INVESTMENT

AND

TECHNICAL

CHANGE

Conservatives. Criticism of the economic burden of defence had become a commonplace of political debate at this time, and the government was continually on the defensive. Whilst unwilling to change policy, they did try and get more control of the R&D budget. The Treasury was persistently pressing for a more detailed scrutinising role in military R&D from as far back as 1957, but being strongly resisted by the Defence Policy Research Committee.100 As so often, it seems to have been in the Ministry of Defence that Treasury control met its match, though the Ministry itselfwas reorganised in 1963/4 to try and get more co-ordination of the different services’ claims on resources.

Conclusions Even before editorialising:

the

conclusion

of

the

Suez

adventure

The

Economist

was

The heaviest cost of defence to the modern British economy as has been said here before, is not the 10 per cent it takes of the National Income. It is the 60 per cent that defence pre-empts of all the resources this country can assemble to invest in technical progress.“’ This theme was to be a persistent one for the next eight The Ministry of Aviation, for example, noted in 1963:

years, at all levels.

A valid criticism might be, perhaps, that defence industries employ a disproportionate share of available technologists; defence takes up nearly 40 per cent of our total R&D, while defence equipment is no more than 5 per cent of our industrial output.lo2 The whole issue of R&D came close to the top of the ‘modernising’ agenda in the early 1960s but as far as defence was concerned, major changes were blocked by the military commitments. Hailsham, the minister most closely associated with the issue, confined himself almost entirely to proposals for civil R&D. Ministers might accept that ‘we are paying a heavy price for the neglect of higher technological education and research in the past’, but generally were reluctant to change policy directions in any significant way. The emphasis was very much on the faults of industry, the Board of Trade being particularly insistent that the problem could not be solved by government, but only by employers themselves.lo3 Yet such an attitude was at odds with the obvious role of government in putting so many resources into R&D, but also into certain types of civil R&D, which may be broadly characterised as ‘big science’, concentrated in areas where commercial pay-offs were meagre and strategic and prestige objectives pre-eminent. This argument was only just beginning to emerge in the early 1960s. It had, as noted above, led to some, equivocal, government 162

INVESTMENT

AND

TECHNICAL

CHANGE

action in the area of aircraft. But in the civil field, it was still a view rarely heard, though in 1964 the government’s Chief Economic Adviser criticised the ministerial decision not to buy US reactors and linked his comments to the general argument that ‘one of the most important causes of our present difficulties has been reckless use of scientists on ill-conceived ventures, paid for by the government’.“* This emphasis on big projects by the government, it should be noted, finally, was linked to a more general neglect of small firms. The government shared the view of most commentators that R&D was largely the preserve of big firms, and though there was talk of the need to spread projects from the big to the small, the assumption was that only big firms would have the resources to carry out much successful R&D. lo5 Such attitudes both reinforced the emphasis on big projects as the main recipients of government support for R&D and fitted with a general lack of policy to encourage small business, evident, for example, in the lack of enthusiasm for doing anything to reform financial provision for that sector, a recurrent area of complaint from the small-business lobby.lo6 Overall, it is important to emphasise that there is no evidence at all of an aversion to technology and science amongst political decision-makers or civil servants in this period. As David Edgerton has persuasively argued, such allegations of British cultural hostility to scientific advance are very wide of the mark. lo7 Britain under the Conservatives was a bigger spender on R&D than her continental rivals and the belief that science and technology were the keys to economic and social advance was widespread (indeed, as Edgerton suggests, a reasonable retrospective case can be made that at this time Britain was spending too mzlch on R&D). Although much is commonly made of the Labour Party’s talk of ‘the white heat of technology’, R&D was high on the Conservative political agenda, especially from the late 195Os, and was a central part of the ‘modernising Britain’ rhetoric of the early 1960s. But, whilst the government effort in this area, measured by expenditure, rose consistently throughout the period, the concern was not powerful enough to overcome the major political problem of the Conservatives wanting Britain to remain both a ‘world policeman’ and a major player in industries like aircraft and nuclear power, where the absolute size of resources needed to stay in the game was only reluctantly conceded to be beyond Britain’s means.lo8 The British R&D effort was by no means wholly determined by government, but insofar as government was involved in determining priorities, these were often poorly matched with the emphasis on growth and efficiency in contemporary rhetoric. Using such a high proportion of Britain’s technically trained personnel for political priorities may not have seriously reduced civil R&D, but it did reduce the supply of trained personnel to the economy generally, with unfavourable consequences. lo9

163

10

OVERVIEW AND CONCLUSIONS

The previous seven chapters have dealt with various aspects of the productivity question in the 1950s and early 1960s. The aim has been to show how the search for efficiency developed in a number of different microand macroeconomic settings. The following brief remarks return to some of the observations and themes that were raised at the beginning of the book. They focus on two particular questions: what can be concluded about the Conservative governments and productivity in the years to 1964, and how does the Tory performance rate in a wider perspective? It is quite apparent, to begin with, that the Conservatives were aware that Britain had a productivity problem. The facts of the situation were evident from the first. The Churchill administration inherited a set of productivity institutions and concerns from its Labour predecessor, and had to decide what should be done with them. In later years, other pressures kept the issue alive. The American technical assistance programme was an obvious catalyst. At the same time, domestic factors also played a part. A series of ministerial reviews demonstrated that Britain’s economic strength was increasingly insufficient to support its global ambitions. ’ One way out of this dilemma was to improve growth. Concentrating on productivity appeared to be a relatively painless way of attaining such an end. However, while the Conservatives perceived the general outlines of the problem, they were decidedly undynamic when it came to generating practical solutions. The intellectual case for an active programme of reforms became ever more compelling. Official and academic studies highlighted the burden of current military spending and argued for a redistribution of resources towards civilian industry. There was a growing consensus, too, that the stop-go cycle was damaging and needed to be tempered by greater government planning. At the firm level, the Americans had provided what amounted to a virtually complete agenda for change. While there was room to dispute whether some US propagandists’ obsession with competition or the ‘3 Ss’ was relevant in a British context, the balance of transatlantic advice remained clearly relevant. In every context, therefore, the requirement for change was being demonstrated. Nevertheless, for much of this period, the Conservatives 164

OVERVIEW

AND

CONCLUSIONS

were loath to even contemplate such logic, never mind apply it. Their reticence was based upon a variety of political and ideological considerations. The governments’ major strategic objectives formed one important set of constraints. The Conservatives were determined to maintain Britain as a global superpower. This involved, amongst other things, a commitment to the idea that sterling should be an internationally tradable currency. Quite clearly, such choices restricted what could be done on productivity. Retaining a sizeable military capability demanded adequate resourcing, for example a high level of spending on certain kinds of research and development. Similarly, defending sterling required interest-rate flexibility and an acceptance that the stop-go cycle might be unavoidable. Some ministers were aware of the tradeoffs being made here, but there was little sign of any real wish to change strategy. Even the Suez debacle had only a limited impact.2 Significantly, despite attempts at retrenchment in the late 1950s defence expenditure was again rising in the early years of the following decade. Domestic political considerations were equally important in shaping policy. Conservative backbench opinion had to be respected, and this meant listening, for example, to the sizeable number of MPs who sympathised with the small-business lobby and thus were opposed to the idea of extending unfettered competition. At the same time, the government remained susceptible to lobbying from the Federation of British Industries (FBI). This organisation became increasingly formidable during these years under the wily leadership of Sir Norman Kipping, and its views on the productivity issue were firm and well articulated. A close relationship with the British Productivity Council (BPC) - the two shared offices in the same London building until 19613 - produced extra leverage. In effect, the FBI acted as something of a ringmaster, co-ordinating initiatives so as to safeguard what it perceived as industry’s interests, particularly the twin principles of voluntarism and gradualism. Finally, there is no doubt that ministers’ ideological preferences also played a strong role in determining choices. By tradition, Conservatives were suspicious of any argument that the state should interfere in everyday economic matters. Tory ministers did not espouse blunt laissez-faire solutions, but nor were they willing to challenge private enterprise’s right to run its own affairs. Business might be coaxed or hectored, but the government had no legitimate grounds for any more active intervention. In policy terms, therefore, Conservative cabinets recognised that they could not go beyond an obvious threshold - the boundary of what industry defined as its sovereign domain. The government’s failure to exert real pressure on the industrial training issue, described in Chapter 8, is a good example of this self-denying ordinance in action. Taken together, these various influences were a recipe for lethargy. Productivity was discussed by ministers on several occasions in the years after 195 1, but there was always a good deal of resistance to the idea that Whitehall 165

OVERVIEW

AND

CONCLUSIONS

should play a leading role. As the President of the Board of Trade, Peter Thorneycroft, emphasised in 1954, there was no desire to resurrect the Attlee government’s policy of ‘exhortation and even intervention . . . in private industry’.* The result, as has been described, was a set of initiatives which essentially only tinkered with the problem. How should this performance be judged? In terms of productivity policy, were these in fact thirteen wasted years? Definitive answers to such questions are obviously very difficult, but it is possible to make two sets of observations which at least suggest conclusions. These concern the immediate and longerterm costs of British industry’s indifference to the American productivity gospel, and the scale of comparative programmes that were developing in other European countries at this time. Detailed studies of British manufacturing in the 1960s and 1970s confirmed that there was indeed a price to pay for persevering with outdated methods. Several investigations demonstrated how individual techniques caused problems. The literature on quality issues was particularly striking. The British insistence on using inspection alone as a means of control did not seem to be working. Some 50 per cent of washing machines ‘gave trouble’ before they were twelve months old. Cars, too, were notoriously unreliable. The Consumers’ Association tested ninety vehicles between 1962 and 1965 and found that they had an average of twenty-seven defects each on delivery.5 Surveying the overall situation in 1970, a British Institute of Management (BIM) researcher was struck by the frequency of serious failings: The quality calamity has been revealed as a regular event in industry. Over half the participants at BIM seminars are ready to supply the details about a calamity of which they have personal knowledge. Each calamity refers only to a single incident, yet about a quarter of these single incidents involve losses of &50,000 or more. Losses reaching 5% million-&l million are by no means rarities . . . Unless something is done about it the quality calamity must surely be here to stay.’ Some studies went beyond this simple diagnostic approach and tried to measure the gap between actual and theoretically possible performance. Norman Dudley examined firms in the West Midlands engineering and metalworking industries and found that they were underachieving to a significant extent. In his view, relatively simple and low-cost improvements had been frequently overlooked. He concluded: ‘If industry effectively used all the resources at its disposal it might result in productivity increases of 100 per cent.” Research in the 1970s on how the same industries coped with materials handling was equally revealing:

166

OVERVIEW

AND

CONCLUSIONS

For the purposes of the survey an estimate of potential savings was made. The conclusion was that savings of the order of between 1 and 2 per cent of turnover could be made by over half the companies in our sample. On a national basis this means that the potential saving for the whole of engineering and allied industries is estimated at &90m per annum.8 Enquiries that dealt with management capabilities rather than techniques made a series of analogous points. British managers’ lack of training, it seemed, was causing a number of identifiable difficulties. The semi-official Management Education, Training and Development Committee looked at how managers in senior positions dealt with industrial relations and concluded that a lack of formal instruction was debilitating. It argued: ‘there is considerable scope for improvements in the way that industrial relations are conducted in the UK and . . . training can make a major contribution to management performance in this field’. An Ashridge Management College survey of export staffing and training in Britain identified similar weaknesses. The analysis was forthright: ‘Ozlr main conclusion . . . is that . . . the export staffs of British firms (with some outstanding exceptions, mainly among the large and successful exporting firms) receive inadequate training. ‘9 By the mid-1970s such observations were commonplace, and encompassed, amongst others, specialists who dealt with the vital areas of design and production.l’ Taken together, therefore, this evidence shows that the failure to confront problems in the 1950s had quite clear consequences in later decades. The pathologies that were identified by American missionaries still afflicted British industry twenty years later. This hardly reflects well on the Conservative governments of 1951-64. N evertheless, before reaching any final conclusions, it is advisable to address one last point. For some will no doubt argue that the important question is how the Tory record compares in a wider perspective. The power of governments to shape productivity outcomes, in this view, will always be marginal. Most perform poorly because they are operating in areas they do not understand. If the Tories are to be held culpable, they must be shown to have acted in a way which was clearly worse than the European norm. Does the evidence show that this was indeed the case? One way of answering this question is to look at how other national governments reacted when confronted with the US productivity gospel. The major continental countries began from a rather different position to Britain. All were judged to be severely menaced by communism and so each received larger sums of overall aid. Technical assistance to France was worth $44.5m. between 1948 and 1958, nearly three times the sum given to the British, and sufficient to take over 500 teams and 5,000 personnel across the Atlantic.” However, in every case, the scale of domestic opposition to American ideals was also significantly greater. Germany had a long-standing productivity movement, centred around the RKW (ReichsKuratorium fur 167

OVERVIEW

AND

CONCLUSIONS

Wirtschaftlickeit or National Productivity Board),12 but comparable institutions elsewhere were much less developed. In general, business across the continent remained sceptical. Employers’ associations (as in Britain) feared state incursion into industry’s affairs. Managers, too, were uneasy. The American emphasis on the free exchange of information often grated. One French executive told Fortune: ‘If you want to live happy [sic) . . . you must hide yourself.‘13 Few believed, either, in the idea of management education. German entrepreneurs (the Unternehmer) held that a manager had to have ‘innate qualities or an inner calling’ in order to succeed. Their watchwords were ‘Managers cannot be trained, they have to be born.“* Attitudes on the shopfloor were equally unpropitious. Communist trade unions in France and Italy were bitterly opposed to every facet of US policy. German unions tended to be less overtly hostile, but they still remained ‘aloof from the productivity offensive.‘> Ordinary workers had mixed feelings, with anti-Americanism certainly always being clearly present. l6 Judged from the vantage point of the early 1950s therefore, the likelihood of progress in these countries appeared to be rather slim, whatever the Americans intended. Prime responsibility for changing this situation obviously lay with the various European governments involved, but at first their reactions were hardly very helpful. All subscribed to the American rhetoric regarding productivity, repeating in one form or another Monnet’s slogan, ‘modernization or decadence’. On the other hand, generating relevant policies to carry forward the US ideals proved much more difficult. Administrations found themselves hemmed in by a variety of factors, including the pressures of electoral politics, the complexities of local administrative structures, and the lobbying of powerful interest groups. I7 The result in most cases was a lack of focus. Writing in the mid-1950s, one observer noted of France: Governmental administration of productivity policies has frequently shifted over the last years. There have been long intervals during which the transfer of responsibilities from one board to the other, or a vast reorganization effort all but paralyzed official activities. The attempt at solving weighty problems of economic policy by consultative boards which seldom reach the required unanimity was once again frustrated by the basic divergencies dividing the main interest groups involved.” However, with time, such problems were gradually overcome. None of the governments concerned found optimal solutions, but each collaborated with various industrial partners to create a range of institutions which to some extent addressed the problems at hand. Typically, the chosen strategy was coordinated by a designated productivity centre, nourished by links to the European Productivity Agency (EPA), and operationalised through a series of regional networks. Thus, in Germany, the government part financed the

168

OVERVIEW

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CONCLUSIONS

RKW as its productivity spearhead, and this in turn built up links with other organisations. The scale of activity was impressive: in the late 1950s Germany had representation in some 160 EPA projects, while local initiatives in cities such as Berlin, Cologne, Dusseldorf and Frankfurt made rapid headway.19 A similar pattern could be detected in France and Italy.20 As a result of these emerging arrangements, there were perceptible changes in the way mainland Europeans reacted to the productivity gospel. Few, it is true, embraced what Americans called ‘modern business principles and practices’. As in Britain, there was considerable antipathy to ideas like the human relations approach. 21 On the other hand, interest in modern US manufacturing techniques certainly grew as the decade progressed. What their clients wanted, American missionaries increasingly accepted, was not ideology, or even theory, but practical information. Symptomatically, EPA projects that dealt with subjects like production engineering and statistical quality control appear to have been the most popular in almost every country from Norway to Italy.22 In the light of such progress, there was a pervasive feeling that Britain was increasingly being left behind. The contrast was not marked in every area, but it did seem that other European countries were generally taking the productivity issue much more seriously. A delegation from the BPC visited Germany in 1957 and was impressed at the effort being made. One participant reported: The basic budget for RKW this year is &6OO,OOO, about four times the BPC budget; and RKW has a number of ancillary sources of income. In fact, in round figures RKW will spend more this year than the BPC has spent altogether since it was established in 1953. Based on this substantial budget is a strong highly-centralised institution with a paid full-time staff of officials down to the local group level. The whole approach is in strong contrast to the lines on which we have been working in the UK.23 Similar assessments were made by at least some of those who had instituted technical assistance. One veteran US staffer, Sol Ozer, toured Europe in the mid-1950s examining the different programmes and concluded that they could be rated as follows against a ‘fully satisfactory or ideal’ score of 100: France 85, Italy 75, Germany 60, Austria 60, and the UK 5 5. As Ozer noted, when viewed in a relative light, the British programme could only be considered ‘a disappointment’.24 While later American investigations eschewed comparisons, there is little doubt that others would certainly have shared his opinions. There is some evidence, to sum up, that in a relative light, as well, the Conservative performance on productivity was distinctly unimpressive. Of course, more work needs to be done to establish this point fully: it would be necessary to examine how European governments handled all the policy areas 169

OVERVIEW

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CONCLUSIONS

that have been raised in this book. Nevertheless, the contrast in responses to American aid is surely indicative. Here was a key vehicle for change which foreign administrations were much more willing to embrace. Whatever perspective is employed, therefore, the conclusion seems to be the same. These years were a lost opportunity. Much more could have been done to modernise British industry. The impetus of the Attlee period was squandered. The business community and the government staggered on in complacent harmony. The Conservatives’ eventual movement to a more proactive stance at the beginning of the 1960s was too little, too late.

170

NOTES

References starting PRO BT, CAB, DEFE, DSIR, ED, LAB, PREM, RG, SUPP and T relate to files in the Public Records Office, London. References starting MRC relate to files in the Modern Records Centre, University of Warwick. 1 THE

CONSERVATIVES EFFICIENCY,

AND 1900-5

INDUSTRIAL 1

1 National Unions of Conservative and Unionist Associations (NUCUA), Conference Report, 1925,8/10/1925. 2 J. Barnes, ‘Ideology and Factions’ in A. Seldon and S. Ball (eds), Conservative Century: The Conservative Party Srnce 1900 (London, 1994), pp. 3 15-45. 3 J. Amery, L;f ofJoseph Chamberlain, Vol. 6 (London, 1969), p. 1,047; NUCUA, Conference 1954, pp. 5 l-8; see Chapter 7 of this book. 4 N. Harris, Competttion and the Corporate Soczety (London, 1972); H. Mercer, Constructing a Competitive Order: the Hidden History of British Anti-Trust Policies (Cambridge, 1995). 5 N. Tiratsoo and J. Tomlinson, Industrzal Efficzency and State Intervention (London, 1993); J. Tomlinson, Democratic Socralzsm and Economic Policy: The Attlee Years (Cambridge, 1997), Ch. 1. 6 R.H. Heindel, The American Impact on Britain 1898-l 914 (Pennsylvania, 1940), Chs 8,9. 7 K. Middlemas, ‘The Party, Industry, and the City’ m Seldon and Ball, Conservative Century, p. 446; J. Tomlinson, ‘Liberty with Order: Conservative Economic Policy, 1951-64’ in M. Francis and I. Zweiniger-Bargielowska (eds), The Conservatives and Britrsh Society 1880-l 900 (Cardiff, 1996), pp. 274-88; A. Eden, Freedom and Order (London, 1948). 8 A.L. Friedberg, The Weary Titan: Brztatn and the Experzence of Relattve Decline 1895-l 905 (Princeton, 1988). 9 Friedberg, Weary Titan, Ch. 2; Amery, Life of Chamberlain, Vols. 5 and 6; R.A. Rempel, Unzonist Dtvzded (Newton Abbott, 1972); A. Sykes, Tariff Rej&m in British Politics 1903-l 913 (Oxford, 1979); E. Green, ‘Radical Conservatism: the Electoral Genesis of Tariff Reform’, Historical Journal, 27 (1985), pp. 667-92. The best overall treatment of the Conservative approach to the economy in these years is E. Green, The Crisis of Conservatism: the Politics, Economics and Ideology of the British Conservative Party, 1880-l 914 (London, 1995). 10 Amery, Lzfe of Chamberlain, Vol. 6, p. 478.

171

NOTES

11 12 13 14 15

16 17 18

19 20 21 22

23 24 25 26 27

28 29

30

31 32

33 34 35

36

37 38

Friedberg, Weary Titan, p. 64. Ibid., p. 81. L.S. Amery, Empire and Prosperity (London, 1930), pp. 29-30. This is the theme emphasised by B. Semmel, Imperzalism and Soczal Reform (London, 1962). G.R. Searle, The Questfw National Efficiency (Oxford, 197 1). Cited Friedberg, Weary Titan, p. 77. Searle, Quest, pp. 207-16. S. Pollard, Britain’s Prime and Britain’s Decline (London, 1990), pp. 188-9. Only 16 ofthe 157 Conservatives elected in 1906 were free traders; R. Blake, The Conservative Party From Peel to Thatcher (London, 1985), p. 18 1. A. Marrison, ‘Businessmen, Industries and Tariff Reform in Britain, 1903-30’, Business History, 25 (1983), pp. 164-5. Report of a Sub-Committee of the Advisory Committee of the Board of Trade, Cd. 8 18 1, Parl. Papers, 1919, Vol. XV, para. 48. Final Report of the Committee on Commercial and Industrial Policy After the War, Parl. Papers, 1918, Vol. XIII, para. 212. Ibid., paras 213-15. Marrison, ‘Businessmen’. Middlemas, ‘The Party, Industry, and the City’, pp. 461-3. J. Tomlinson, Government and the Enterprise Since 1900 (Oxford, 1994), Ch. 3. R. Davenport-Hines, Dudley Docker: The Life and Times of a Trade Warrior (Cambridge, 1984), Chs 5-7; R. Davenport-Hines, ‘Trade Associations and the Modernisation Cross of British Industry’ in H. Yamazaki and M. Miyamoto (eds), Trade Associations in Business History (Tokyo, 1988), pp. 205-26. S. Newton and D. Porter, Modernisation Frustrated (London, 1988), pp. 52-3. M. Kirby and M. Rose, ‘Productivity and Competitive Failure: British Government Policy and Industry, 1914-19’ in G. Jones and M. Kirby (eds), Competitiveness and the State: Government and Business in Twentieth Century Britatn (Manchester, 1991), pp. 20-39; P. Cline, ‘Winding Down the War Economy: British Plans for Peacetime Recovery, 1916-19’ in K. Burke (ed.) War and the State (London, 1982), pp. 157-81. Final Report, para. 34. Tomlinson, Government and the Enterprise, pp. 74-7. S. Armitage, The Politics of De-Control of Industry: Brztazn and the US (London, 1969). For other aspects of industrialists’ relations with the Conservative Party m this period, see T. Rodgers, ‘Sir Alan Smith, The Industrial Group and the Politics of Unemployment 1919-24’, Business History, 28 (1986), pp. 100-23. Ministry of Reconstruction, Report of Committee on Trusts, Cd. 9236, Parl. Papers, 1918, Vol. V, paras 6-12. Hansard(Commons), Vol. 139, 1921, Cols 602-3. R. Boyce, British Capitalzsm at the Crossroads (Cambridge, 1987). The most important effect was to protect car production in Britain, and this protection was extended to commercial vehicles in 1926. For a summary of the duties and the political arguments about them, see PRO T17211496: ‘Report to the Chancellor of the Exchequer on McKenna Duties’ 1926/7. (Balfour) Committee on Industry and Trade, Factors in Commerctal and Industrial Efficzenry (London, 1927), pp. 399-427. J. Ramsden, The Age of Balfour and Baldwtn 1902-l 940 (London, 1978), p. 177; K. Middlemas and J. Barnes, Baldwin: A Biography (London, 1969), Ch. 10.

172

NOTES

39 F.W. Hirsr, Safeguarding and Protection in Great Britain and the USA (London, 1927), Chs 5, 6; NUCUA, Safeguarding: The Past, Present and Ftitwe (London, 1928), pp. S-9. 40 NLJCUA, Safgnarding; NUCUA, Fotlr Years Work: Record in Brzef of the Conservative and Unionist Government 1924-28 (London, 1929), pp. 34-41; Middlemas and Barnes, Baldwin, p. 28 1. 41 Safeguarding of Industries: Procedzlre and Enquiries, Cmd. 2327, Parl. Papers, 192415, Vol. XV. 42 For example, Report of Lace and Embroidwy Committee, Cmd. 2403, Parl. Papers, 192415, Vol. XV, para. 17; Report of the Commtttee on Cutlery, Cmd. 2540, Parl. Papers, 1924/5, Vol. XV, paras 34-9. Similar claims were made by a much more important industry, iron and steel, though this was not protected in the 1920s: see PRO CAB 24/197: Ministry oflabour, ‘Iron and Steel’, 23/7/1928. 43 R. Boothby, H. Macmillan and J. Loder, lndzlstry and the State: A Conservative View (London, 1927), pp. 6,20-l. 44 Ibid., pp. 13-14,56-7. 45 Liberal Party, Brztain’s Zndustrzal Future (London, 1928); (Balfour) Committee on Industry and Trade, Final Report, Cmd. 3282, Parl. Papers, 1928129, Vol. XV. See also A. Booth and M. Pack Employment, Capital and Economtc Policy (Oxford, 1985), Ch. 3. 46 R. Rhodes James, Bob Boothby: A Portratt (London, 1991), pp. 87-8. Contrast the views of Amery, who regarded Safeguarding as merely a change in the method of protection, not a change in principle, in his National and Imperial Economics (London, 1924), p. viii. 47 NUCUA, Annual Confwence Reports, 1925, 1928; PRO T175/10: ‘Safeguarding of Iron and Steel 1925-29’. 48 F.W.S. Craig, General Electton Manifstos 1900-74 (London, 1975), p. 37. 49 The Colwyn Committee report did little to support the view that tax levels were a major problem, arguing that ‘wider causes than taxation, however, and particularly the dislocation of our old export markets, must be held mainly responsible for the lack of buoyancy in recent years. Relatively, income taxation has not been a factor of high importance.’ See: Committee on National Debt and Taxation Report, Cmd. 2800, Parl. Papers, 1927, Vol. 11, paras 451,702. 50 D. Dilks, Neuille Chamberlain, Vol. I (Cambridge, 1984), pp. 541-2. 51 Ibid., pp. 556-7; PRO T172/1539: ‘Reduction in Railway Rates to Help Iron and Steel Industry’, 1926. 52 A ‘classic’ example of this view in the 1920s is to be found in Alfred Mond, Industry and Politics (London, 1927), Ch. 12. 53 W. Garside, British Unemployment 1919-39: A Study in Public Policy (Cambridge, 1990), pp. 209-15; Tomlinson, Government and the Enterprise, pp. 104-10; L. Hannah, The Rtse of the Corporate Economy, 2nd edn (London, 1983). 54 Boyce, Capitalism, pp. 101-6. 55 Rhodes James, Bootbby, pp. 78-9. 56 PRO CAB 24/180: ‘Enquiry into Industrial Relations in America’; CAB 23153, Cabinet Mins, 161611923. 57 Hansard(Commons), 192819 Vol. 227,6/5/1929, COI. 1,978. 58 S. Tolliday, Tartffs and Steel 1916-34: The Politzcs of Industrial Deche (Cambridge, Mass, 1987), pp. 289-94. 59 F. Capie, Depression and Protectionzsm (London, 1983), Ch. 5; Marrison, ‘Businessmen’, pp. 164-5. 60 PRO CAB 24/197: Ministry of Labour, ‘Iron and Steel’, 23/7/1928.

173

NOTES

61 Tolliday, Tar$j and Steel, Ch. 13; As Runciman, the President of the Board of Trade, noted in 1933, the government would not dare face the unemployment which would result from a withdrawal of the tariff, and this undermined their bargaining position: see PRO T172/1773, ‘Iron and Steel’, Runciman to Chamberlain, 10/3/1933. 62 H. Hutchinson, Tariff-Making andlndustrzal Reconstruction: An Accozlnt of the Work of the IDAC 193239 (London, 1965), pp. 43,44. 63 R. Roberts, ‘The Administrative Origins of Industrial Diplomacy: An Aspect of Government-Industry Relations, 1929-35’ in J. Turner (ed.), Businessmen and Politics (London, 1984), pp. 93-104. 64 Tolliday, Tarz’fi and Steel, esp. Ch. 9. 65 J. Bamberg, ‘The Rationalisation of the British Cotton Industry in the Interwar Years’, Textile Hzstory, 19 (19SS), pp. 83-102. 66 R.S. Sayers, The Bank ofEngland 1891-1944 (Cambridge, 1976), p. 547. 67 Roberts, ‘Administrative Origins’, p. 101. 1934); Hansard (Lords), Vol. 94, 68 PEP, National Reconstruction (London, 31/10/1934, Cols 25-56; 193516, Vol. 99,20/2/1936, Cols 715-25. 69 Hansard(Commons), Vol. 308,4/2/1936, Cols 73-182. 70 D. Ritschel, ‘A Corporatist Economy in Britain? Capitalist Planning for Industrial Self-Government in the 193Os’, Enghh Historical Review, 106 (1991), pp. 57-64. 71 A. Booth, ‘Britain in the 1930s: A Managed Economy?‘, Economic Htstory Revtew, 40 (1987), pp. 499-522. 72 E. Davies, ‘National’ Capitalurn (London, 1940). 73 On the effects of 1930s protectionism, see S. Solomou, Themes in Macroeconomic History: the UK Economy, 1919-l 939 (Cambridge, 1996), Ch. 6. 74 Though Runciman, President of the Board of Trade in the 193Os, seems to have kept the Liberal faith more than most Conservatives. See Ritschel, ‘Corporatist’, p. 59. 75 Hannah, Rise of Corporate Economy. 76

The Economist,

77 78 79 80

Ibid. A. Milward, War, Economy andSociety 1939-45 (London, 1987). R.A. Butler, The Art of the Possible (London, 197 l), p. 132. Tory Reform Committee, Tools for the Next Job: A Policy of Progress throzlgh Prodzlctivity (London, 1945). J. Ramsden, The Making of Conservative Party Polzcy: the Conservatzve Research Department stnce 1929 (London, 1980), Ch. 5. PRO CAB 8715: Reconstruction Committee, Mins, 41211944. A. Gamble, The Conservative Natzon (London, 1974), p. 29. R. Brady, Crisis tn Britarn (London, 1950), p. 146. Hansard(Commons), Vol. 433, 13/2/1947, Cols 561-75; Vol. 470, 15/12/1949, Cols 2,889-91. Hansard(Commons), Vol. 454,29/7/1948, Cols 1,566-73. Hansard(Commons), Vol. 473,5/4/1950, Cols 12,22-3. PRO CAB 87/6: Reconstruction Committee, Mins, 11/9/1944, 2711111944, 411211944. Hansard(Commons), Vol. 488, 15/6/1951, Cols 2,689-96. D. Maxwell-Fyte, Monopoly (London, 1949), pp. 2-3. Conservative and Unionist Central Office, The Industrial Charter (London, 1947); Harris, Competition, p. 77; Ramsden, Making, pp. 111-12; Ramsden, The Age of Churchilland Eden, 1940-1957 (London, 1995), pp. 148-53.

81 82 83

84 85 86 87 88 89 90 91

151611940.

174

NOTES

92 Butler,

134; see also Conservative Political Centre, Work: A Report on the Industry (London, 1946). Tiratsoo and Tomlinson, Industrial Efficiency, Ch. 5. Harris, Competitzon, p. 77. J. Ramsden, ‘A Party for Owners or a Party for Earners? How Far did the British Conservative Party Really Change After 1945?‘, Transactions of the Royal HistoricalSoczety, 37 (1987), pp. 49-63. For example, Churchill’s in Hansard (Commons), Vol. 443, 28/10/1947, Col. 702. B. Evans and A. Taylor, From Salisbury to Major: Conttnuzty and Change in Consematrve Polittcs (Manchester, 1996), pp. 81-2. Future

93 94 95 96 97

Art, p. of British

2 CONSERVATIVE ECONOMIC SHORT-TERM MANAGEMENT GROWTH

POLICY 195 l-64: AND LONG-TERM

1 PRO BT64/4717: S. Dakin, ‘Proposed Productivity Campaign’, 12/B/1952; BT64/4742: Report of Productivity and Conditional Aid Committee, ‘The Role of Government in Promoting Higher Productivity’, 3013154; BT64/4896: ‘Briefing for Minister on UK Productivity’, Dec. 1954. 2 PRO T228/483: Woolton to R.A. Butler, 12/l l/1951. 3 N. Tiratsoo and J. Tomlinson, ‘Restrictive Practices on the Shopfloor in Britain, 1945-60: Myth and Reality’, Business Hzstory, 36 (1994), pp. 65-82. 4 For an account of the ‘golden age’ which emphasises investment and profits without ignoring other factors see A. Glyn, A. Hughes, A. Lipietz and A. Singh, ‘The Rise and Fall of the Golden Age’ in S. Marglin and J.B. Scher (eds), The Golden Age of Capitalism (Oxford, 1990), pp. 39-12 1; other major works include C. Kindleberger, Europe? Postwar Growth: The Role of Labour Supply (Cambridge, Mass., 1967); and N. Kaldor, Causes of the Slow Role of Growth of the United Kingdom (Cambridge, 1966). See also, M. Abramowitz, ‘Catching Up, Forging Ahead, and Falling Behind’, Journalof Economic History, 46 (1986), pp. 385-406. 5 A. Shonfield, Modern Capitalism (Oxford, 1965), pp. 84-7. 6 R.C.O. Matthews, CH. Feinstein, J. Odling-Smee, Brztzsb Economic Growth 1856-1973 (Oxford, 1982), pp. 522-30,545-7. 7 J. Tomlinson, Government and the Enterprise Since 1900 (Oxford, 1994), pp. 25 l-4. 8 A. Cairncross, The British Economy Since 1945 (London, 1992), p. 120; J. Black, ‘The Volume and Prices of British Exports’ in G.D.N. Worswick and PH. Ady (eds), The Brztisb Economy tn the 1950s (Oxford, 1962) pp. 114-32. On the terms of trade, see P. Ady, ‘The Terms of Trade’, in ibid. pp. 147-72. 9 M. Dupree, ‘Struggling with Destiny: The Cotton Industry, Overseas Trade Policy and the Cotton Board, 1940%1959’, Business History, 21 (1990), pp. 93-l 12. These issues are returned to in Chapter 6 in this book. 10 S. Strange, Sterltng and British Polzcy (Oxford, 197 1). 11 A pioneer in this argument was A. Shonfield, British Economtc Polzcy Szncethe War (London, 1958); see also A.C.L. Day, The Future of Sterhg (Oxford, 1954). 12 J. Tomlinson, ‘The Attlee Government and the Balance of Payments, 1945-5 l’, Twentzetb Century Britzsb History, 2 (1991), pp. 47-66. 13 C. Schenk, Britain and the Sterling Area: From Devaluatton to Convertibihy tn the 1950s (London, 1994), Ch. 4, which f ocuses on investment in the Sterling Area, but covers the main issues.

175

NOTES

14

15 16

17

18 I9 20 21 22

23 24 25 26 27

28

29

30 31 32 33 34

35 36

W.B. Reddaway, Effects of U.K. Dtrect Investment Overseas, Final Report (Cambridge, 1968). W.A.P. Manser, Britain in Balance: The Myth of Failure (London, 1971), Chs 4,9. Manser defended this expenditure as a price worth paying to sustain Britain’s world role. Butler, as Chancellor of the Exchequer, had raised the matter in Cabinet soon after the Conservatives came to power, in 1952, but little seems to have come of his concerns. See PRO CAB 129/52: Cabinet Memo, ‘Economic Policy’, 17/5/1952. Compare his ‘Future Economic Policy’ of 171511953 in CAB 134/848 where the issue is barely mentioned. Schenk, Britain and the Sterling Area, Ch. 2. A. Cairncross, Years of Recovery: British Economic Policy 1945-5 I (London, 1985), Ch. 9. P. Streeten, ‘Commercial Policy’ in Worswick and Ady (eds), Brutish Economy, pp. 76-113; A. Morgan, ‘Commercial Policy’ in ET. Blackaby (ed.), Britzsh Economic Policy 1960-74 (Cambridge, 1978), pp. 5 15-63. N. Oulton, ‘Effective Protection of British Industry’ in W.M. Corden and G. Fels (eds), Public Assistance to Indtlstry (London, 1976), pp. 46-90. Cairncross, British Economy, p. 119. N. Rollings, ‘British Budgetary Policy, 1945-54: A “Keynesian Revolution”?‘, Economic History Review, 41 (1988), pp. 283-98; G. Peden, ‘Old Dogs and New Tricks: the British Treasury and Keynesian Economics in the 1940s and 1950s’ in M. Furner and B. Supple (eds), The State and Economic Knowledge (Cambridge, 1990), pp. 208-38; J. Tomlinson, Employment Policy: The Cru-ial Years, 1939-X (Oxford, 1987), Chs 8,9. Cairncross, British Economy, p. 95. R.C.O. Matthews, ‘Why Has Britain Had Full Employment Since the War?‘, EconomzcJournal, 78 (1968), pp. 55-69. Tomlinson, Employment Policy, Ch. 8; Rollings, ‘Budgetary Policy’. N. Rollings, ‘Poor Mr. Butskell: A Short Life Wrecked by Schizophrenia?‘, Twentieth Century British History, 5 (1994), pp. 183-205. R. Lowe, The Welfare State in Britatn Since 1945 (London, 1993), Table A.l. Almost all this growth in the percentage of GDP was due to growth in transfer payments, not government spending on goods and services; see D. Heald, Public Expendzture (Oxford, 1983), p. 25. R. Lowe, ‘Resignation at the Treasury: the Social Services Committee and the Failure to Reform the Welfare State, 1955-57’, JozlrnalofSoclal Policy, 18 (1989), pp. 505-26. Report of the Committee of Enquiry into the Costs of the NHS, Cmd. 9663, Parl. Papers, 195516, Vol. X. Lowe, ‘Resignation’. R. Lowe, ‘Milestone on Millstone? the 1961 Plowden Committee and its Impact on British Welfare Policy’, Historical Journal, 40 (1997), pp. 463-93. I.M.D. Little, ‘Fiscal Policy’, in Worswick and Ady (eds), Brttisb Economy, pp. 278-85. M. King, ‘The U.K. Profits Crisis: Myth or Reality?‘, Economzc Journal, 85 (1975), pp. 33-47. Committee on the Workzng of the Monetary System, Cmnd. 827, Parl. Papers, 195819, Vol. XVII. Cmd. 9725, Parl. Papers, 1955/6, Vol. XXXVI. Council on Productivity Prices and Incomes, lst-4th Reports (1958-6 1).

176

NOTES

37 Major critiques of economic policy mcluded Shonfield, Brutish Economy Pohcy and M. Shanks, The Stagnant Society (London, 1961). Criticism of the Treasury appears in T. Balogh, ‘Apotheosis of the Dilettante’, in H. Thomas (ed.), The Establishment (London, 1959), Ch. 2. 38 PRO T171/506: Macmillan to Chancellor of the Exchequer, 271211960. 39 I. Zweiniger-Bargielowska, ‘Rationing, Austerity and the Conservative Party Recovery after 1945’, Historzcaljournal, 37 (1994), pp. 173-97. 40 National Union of Conservative and Unionist Associations, Conference Report 1954 (London, 1954), p. 66; F.W.S. Craig, Brutish General Election Manifestos 1918-66 (Chichester, 1970), pp. 163, 189. 41 H.W. Arndt, The Rise and Fall of Economic Growth (Melbourne, 1978); J. Tomlinson, British Macroeconomic Polzcy Stnce 1940 (Beckenham, 1985), Ch. 4. 42 Cmd. 9725, para. 25. 43 Cmnd. 827, para. 58. 44 N. Tiratsoo, ‘Popular Politics, Affluence and the Labour Party in the 1950s’ in A. Gorst, J. Johnman and W.S. Lucas (eds), Contemporary British Hzstory 1931-l 961: Pohicsandtbe Limits ofPolzcy (London, 1991), pp. 44-61. 45 J. Tomlinson, ‘Inventing “Decline”: the Falling Behind of the British Economy in the Post-war Years’, Economic History Review, 49 (1996), pp. 731-57 46 PRO BT64148963 ‘Briefing for Ministers on U.K. Productivity’, Dec. 1954. 47 Economic Survey fir 1956 (London, 1956), p. 2. 48 For example, PRO CAB 134/848: Economic Policy Committee, ‘UK Export Trends’, 251911953. 49 Board of Trade Journal, 271311954, 181811956; Economtc Survey for 1954, para. 79; Economic Survey for 1956, paras 54-5. 50 Dupree, ‘Struggling with Destiny’. 5 1 For example, Shonfield, British Economic Policy ; Shanks, Stagnant Soczety;Balogh, ‘The Apotheosis’. 52 Labour Party, Plan for Progress (London, 1958). 53 J. Campbell, Edward Heath: A Biography (London, 1993), p. 163. 54 Lowe, ‘Millstone’. 55 Cited in A. Horne, Harold Macmillan (London, 1989), p. 347. 56 K. Middlemas, Power, Competition and the State: Britain in Search of Balance 1940-61 (London, 1986), Ch. 10. 57 PRO CAB 134/1689: Economic Policy Committee, Mins, 10/5/1961; CAB 13411696: ‘Economic Growth’, 281611962. 58 S. Brittan, Steering the Economy (London, 1971), pp. 227-8. 3

THE

AMERICAN BRITAIN:

PRODUCTIVITY AGENCIES AND

GOSPEL IMPACT

IN

1 The following section is based upon N. Tiratsoo and J. Tomlinson, ‘Exporting the “Gospel of Productivity”: United States Technical Assistance and British Industry 1945-1960’, Business History Revxw (Spring, 1997), pp. 41-81. 2 Details of the US technical assistance programmes can be found m International Cooperation Administration, European Productivity and Technical Asszstance Programs. A Summing up (1948-1958) (Paris, 1958); J.M. Silberman, ‘The History of the Technical Assistance Programs of the Marshall Plan and Successor Agencies 1948-1961’ (Draft Report to the Industry Development Division of the World Bank, November 1992); and J. McGlade, ‘The Illusion of Consensus: American Business, Cold War Aid and the Recovery of Western Europe,

177

NOTES

3 4

5

6 7

8

9 10 11 12 13 14 15 16 17 18

19 20 21

1948-1958’ (unpublished Ph.D. dissertation, The George Washington University, 1994). Labour’s productivity drive is documented in N. Tiratsoo and J. Tomlinson, Industrial Efficiency andState Intervention: Labour 1939-51 (London, 1993). NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 5, File on ‘U.K. Productivity - General (Director’s Files) 1955-7’, F.E. Rogers, ‘Report of the United Kingdom Technical Exchange and Section 115-k Program’, 6/9/1956 [hereafter Rogers], pp. 21-2. See, for example, NAW, RG 469: ECA Productivity and Technical Assistance Division, Office of the Director, Technical Assistance Country Files 1949-52, Box 25, J.A. Hynes and C.R. Taylor, ‘Comments on the Productivity Drive’, 15/4/1950; and NAW, RG 469: Records Relating to Productivity Program Policy, 1949-55, Box 13, File on ‘Lennen. U.K. Policy’, anon. ‘U.K. Mission Production Assistance Program Report. Summary and Conclusions’, 9/7/195 1. NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 6, File on ‘U.K. Productivity. 115k Agreement’, F.E. Rogers to W.L. Batt, 51811952. NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 6, File on ‘U.K. Productivity. Section 115 (k) Productivity Attitudes 1953-55 (Director’s File)‘, A. Rivkin to L. Gordon, 241411953, pp. 2-3. Rogers, p. 23. Benton-Moody assistance was also referred to as ‘116-k’ or ‘Conditional aid’. The former formulation referred to the precise legislative paragraph which sanctioned the development, the latter to the strings that went with it. BPC, British Productivity Council Conference. . . March 19, 1953 (London, 1953), p. 2. MRC, MSS 200/F/3/S2/37/1: App. A. P.1343 (a), ‘The Future of the B.P.C.‘, l/6/1959, p. 1. BPC, Poluy andprogramme (London, 1953), p. 5. MRC, MSS 2OO/F/3/D3/7/96: ‘British Productivity Council. Grimsby and District Productivity Committee’, (n.d. but 1958), p. 1. Statzst, 281311953 and 121211955; ‘Local Productivity Committees’, Times Review of Industry (March 1954) [np]; Frnanczal Tines, 221711955; and BPC, Annual Review 196li62 (London, 1962), p. 4. BPC, Annzlal Review 1963164 (London, 1964), p. 14; MRC, MSS 200/F/3/S1136/43: ‘BPC. Progress Report for the year 1 April 1953-31 March 1954’, 261711954, Section 8. MRC, MSS 200/F/3/S2/37/1: App. A.P.1343 (a), ‘The Future’, p. 10. BPC, Annual Review 1963/64, pp. 6-8. MRC, MSS 200/F/3/S2/37/1: App. A.P.1343 (a), ‘The Future’, p. 6; BPC, Annual Review 1961162, p. 6. The EPA’s history IS summarised in B. Boel, ‘The European Productivity Agency and the Development of Management Education m Western Europe During the 195Os’, in T.R. Gourvish and N. Tiratsoo (eds), Missionaries and Managers: American Influences on European Management Education, 1945-l 960 (Manchester, 1998), p. 34-49. EPA, Annual Report. Part One (Paris, 1954), p. 5; EPA, Hzgher Productivtty Through European Co-operation (Paris, 1956), p. 3. EPA, Activities and Achievements (Paris, 1958), p. 35. EPA, Joznt Mission on the Teaching of Management-Labour Relations in America and Europe. A Report by Willtam Monaghan (Paris, 1961).

178

NOTES

22 EPA, Annual Report, Annex III. 23 Rogers, pp. 23-41. 24 Ibid. and MRC, MSS 200/F/3/S1/36/44: Copy of letter E. Ackroyd to Sir T. Hutton, 241411956 with addendum. 25 See Department of Scientific and Industrial Research and Medical Research Council, Final Report of the Jotnt Commtttee on Human Relations tn Industry 1954-57 and Report of the Joint Committee on Industrial Efficienv in Industry 1953-57 (London, 1958); and Department of Scientific and Industrial Research Lending Library Unit, Selected Short Reports on Research Projects Sponsored by the Department. . . and the Medical Research Council Joint Committee . . . 1953-l 95 7 (London, 1958), Appendices 1 and 2. 26 NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 2, File on ‘United Kingdom. EPA Jan. 1955-Feb. 1956’, EPA/ETH/S 1, ‘Use of Benton-Moody Funds. Reply of the United Kingdom Delegation’, 25/l/1956, pp. S-9; and ‘Loans to Small Manufacturers’, Tzmes Review of Industry (February 1955), p. 41. 27 Silberman, ‘History’, p. 34. 28 J.H. Dunning, American Investment in British Manufacturing Industry (London, 1958), pp. 154-230; and ‘The American Stake in London’, Director (July 1964), p. 39. 29 M. Shanks, ‘Management Consultants. Breaking through to the British Boardroom’, Director (May 1964), pp. 268-9; New Society, 271811970; and G. Turner, Business in Britain (Harmondsworth, 197 l), pp. 454-65. 30 MRC, MSS 200/F/3/S1/36/46: BPC Second Meeting of Directors, 211211952 and memorandum, ‘Review of Productivity’, 27/l 111952, pp. l-2. 3 1 NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 1, File on ‘United Kingdom - Anglo-American Consultative Group’, AACG (55) 7, Note by the Board of Trade, ‘Conditional Aid: Dissemination of Results . ‘, 24/l 111955, p. 2. 32 NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 1, File on ‘United Kingdom. . . ‘, AACG. (55) 3rd Meeting, Mins of Anglo-American Consultative Group Meeting, 29/11/1955, item 2. 33 PRO BT 195157: Cabinet European Co-operation Committee, E.R. (L) (51)12, ‘Survey ofTechnical Assistance and Similar Schemes. Note by the Chairman . .‘, 121211951, p.8. 34 NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 2, File on ‘United Kingdom. EPA . ‘, EPA/ETH/Sl, ‘Use. . ‘, pp. 7-8. 35 PRO BT 195153: W.A. Kimbel to W.J. Hoff, 19/10/1949, p. 4. 36 MRC, MSS 200lBl3l2lC1087 Pt. 1: Memo, ‘Dinner on Monday Evening 25th June Background Notes’, [n.d. but June 195 11, p. 2. 37 Rogers, pp. 48-9. 38 Iron and Coal Trades Review, 19/10/1951; and A.G. Northcott, ‘Productivity Pays: How the Galvanisers’ Service Works’, FBI Revzew, No. 98 (May 1958), pp. 36-9. 39 BPC, A Review OfProductivity in the Footwear Industry (London, 1953), p. 20. 40 BPC, A Revtew of Productivity tn the Bronze and Brass Casting Indasty (London, 1955), p. 7. 41 Times Review oflndusty (June 1950), p. 4. 42 TheEconomist, 131911952. 43 Engineer, 161511952.

179

NOTES

44 45 46

47 48 49 50 51

52 53

Engineering, 30/l/1953. Stattst, 281611952. NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director, Box 6, File on ‘U.K. Productivity. Section 115 (k) . ’ A. Rivkin to L. Gordon, 241411953, p. 2. S. Rose, ‘Britain v. Germany. The Race for Management Know-How’, Business, 87 (1957), pp. 69-74. Rogers, p. 39. BPC, Annual Review 1961f62, pp. 3-4. Financial Times, 221711955. Upon The Activities MRC, MSS 200/F/3lS1/36/46: BPC 6/F/24, ‘S econd Report OfThe Work Study Unit’, 141211955, p. 3. T.A. Prichard, ‘The Management Significance of NPY’, Manager Uanuary 1963), pp. 36-8. The Economist, 4/8/1956; Times Review of Industry (March 1954), p. 8; Statzst,

211011954. 54 55

PRO T 2281612: E.W. PRO CAB 13412203: Committee, 61411959,

Maude M.A.C. p. 1.

4 THE AMERICAN BRITAIN: IMPLEMENTING PRACTICE AND

to G.E. Peston, 911111955. (59) 4th Meeting, Mins of Cabinet

PRODUCTIVITY CHANGE SHOPFLOOR

Mutual

Aid

GOSPEL IN IN BUSINESS TECHNIQUE

1 For the development of this perception, see N. Tiratsoo and J. Tomlmson, ‘Exporting the “Gospel of Productivity”. . United States Technical Assistance and British Industry 1945-1960’, Business Hzstory Review (Spring 1997), pp. 43-6. 2 This section is based upon N. Tiratsoo and T.R. Gourvish, “‘Making it Like in Detroit”: British Managers and American Productivity Methods, 1945-c. 1965’, Business andEconomic History, 25 (1996), pp. 211-13. 3 J. Leigh, Production Planning and Control (Manchester, 1949); W.E. Morton, Education for Textile Technical Management (Manchester, 1952); British Productivity Council, Productivity Review No. 27. Iron and Steel (1956); for example, Barber, ‘Training Production Engineers for the Jobbing Industries’, Productron Engmeer, 39 (1960), p. 182. 4 A.P. Young, American Management Techniques and Practices and their bearing on Productivity in British Industry (London, 1949), p. 9. 5 Engineer, 511111954; and ‘Special Correspondent’, ‘Industrial Engineermg background to the productivity report’, Ttmes Reuiewoflndustry, 8 (1954), p. 43. 6 BPC, Brztrsh Productiwzty Council Conference. . . March 19, 1953 (London, 1953), p. 6. 7 AACP, Production Control (London, 195 3); AACP, Industrzal Engtneerzng (London, 1954). 8 NAW, RG 469: Mission to the UK, Office of the Director, Subject Files 1953-7, Box 5 , File on ‘U.K. Productivity-General . . ‘, F.E. Rogers, ‘Report of the United Kingdom Technical Exchange and Section 115-k Program’, 6/9/1956, p. 3 1; EPA, Company Planning and Production Control (Paris, 1957). 9 S. Caselton, ‘A History of the Institution - Its Formation and Development’, Production Engtneer, 50 (197 l), p. 207. 10 E.N. Corlett, ‘Production Engineers: their Education and Their Work’, Production Engineer, 44 (1965), pp. 79-91.

180

NOTES

11 R. Wild, Management and Production (Harmondsworth, 1972), p. 233. See also, I. Blain, Structure in Management (London, 1964), p. 22. 12 S.P. Hutton and PA. Lawrence, ‘The Work of Production Managers: Case Studies at Manufacturing Companies in the United Kingdom’ (unpublished report, 1982), p. 124. 13 DSIR, Productivity in Letterpress Printing (London, 1961), p. 43. 14 NEDO, Production Planning and Control. A Report on the Mechanical Engineering Development Committee Confwence (London, 1966). 15 K.G. Lockyer, J.S. Oakland and C.H. Duprey, ‘Work Study Techniques in UK Manufacturing Industry’, OMEGA, 11 (1983), p. 293. 16 S.J. Dalziel, ‘Work Study in Industry’, Polztical Quarter/y, 27 (1956), pp. 270-83; R.M. Currie, ‘Work Study in Great Britain today’, Work Study and Industrial Engineering, 2 (1958), pp. 370-8. 17 ‘The Boom in Work Study’, Manager, 22 (1954), p. 35 1. 18 Sir T. Hutton, ‘Work Study’, Manager(February 1960), pp. 126-7. 19 Metalworkrng Production, 11311967. 20 Lockyer, Oakland and Duprey, ‘Work Study Techniques’, pp. 301-2. 21 AACP, Materials Handling in Industry (London, 1950), pp. 5-6. 22 W.J. Dimmock, ‘Mechanical Handling in Industry and its Effect on Costs’, Mechanical Handling, 38 (1951), pp. 243-9. 23 Ibid. andstatist, 17/6/1950. 24 ACCP, Materials Handling, p. 9. 25 Ibid., p. 11. 26 Ibid., p. 7. 27 Ibid., p. 9. 28

Statist,

17/6/1950.

29 F. Woollard, Principles of Mass and Flow Production (London, 1954). This book grew out of a series in Mechanical Handling. 30 OEEC, Materials Handling Equipment and Methods m the U.S.A. (Paris, 1953), p. 123. 31 Editorial, Mechanical Handhg, 38 (195 l), p. 175. 32 Editorials, Mechanical Handling, 40 (1953), p. 467, 42 (1955), p. 619, and 43 (1956), p. 133; and anon., ‘A.A.C.P. Recommendations Increase Output. Cost little at jobbing foundry’, Mechanical Handling, 40 (10) (1953), pp. 498-501. 33 Editorial, MecbantcalHandling, 42 (1955), p. 619. 34 F.R. Ford, ‘Some Handling Problems in the Motor Industry’, Mecbanzcal Handhg, 45 (1958), p. 487. 35 Editorial, Mechanical Handhg, 46 (1959), p. 187. 36 Department of Industry Committee for Materials Handling (Management and Technology) Working Party on Materials - Handling Costs, Materials-Handlzng Costs: A New Look at Manufacture (London, 1976), p. 4. 37 F. Nixon, Managing to Achieve Quality and Reliahlzty (London, 197 l), pp. 26-38. 38 L.H.C. Tippett, ‘A View of Quality Control in the Urnted Kingdom’, Industrial Quality Control (September 1962), pp. 15-17. 39 G.C. Richardson, ‘Customers’ Inspection of Engineering Products and its Value to Industry’, Engineering Inspection, 18 (1954), p. 50. 40 See, for example, editorial, Tzmes Revjew of Trade and Engineerzng (April 1946), p. 2; editorial, BETRO Review, 3 (1949), pp. 279-80; News Cbronzcle, 221511949. 41 AACP, Inspection tn Industry (London, 1953), p. 7. 42 Ibid., p. 58. 43 Ibid., pp. 8-9.

181

NOTES

44 See editorial comments in Inspection Engineer, 20 (1956), p. 3,21 (1957), p. 1, and 22 (1959), p. 57; F. Nixon, ‘Control of product quality’, EB.I. Review, No. 116 (1960), p. 46; and B.G. Ralfs, ‘Quality and reliability’, Qz”ality Engzneer, 28 (196% p. 83. 45 NCQR, ThirdAnnual Report 1963-64 (London, 1964), pp. 4-7. 46 Nixon, Managing, pp. 188-9. 47 F. Nixon, ‘Spending to Save. Product Quality and Reliability’, Times Review of Indmtry and Trade, 2 (1964), p. 18. 48 K. Lockyer, J.S. Oakland and C.H. Duprey, ‘Quality Control in British Manufacturing Industry: A Study’, Qzlality Assurance, 8 (1982), p. 41. 49 Ibid. 50 J.S. Oakland, ‘Research into Quality Control in British Manufacturing Industry’, Business Gradzlate Journal, 16 (1986), p. 3 1. 5 1 For American thinking on ‘human relations’, see M. Herrymon, Great Enterprise: Growth and Behavzor of the Big Corporation (New York, 1955); W. Whyte, The Organisation Man (London, 1958); D. Carlson, Modern Management. Prznciples and Practices (Paris, 1960); and M.F. Guillen, Models of Management. Work, Authority and Organisation in a Comparative Perspectrve (Chicago, 1994). 52 M. Pritchard, ‘Can We Sell Our Way Out of Inflation’, Manager, 24 (1956), p. 884. See also T. Burns and G.M. Stalker, The Management of Innovatzon (London, 1961), p. 211 and K. Rogers, Managers - Personality and Performunce (London, 1963), p. 138. 53 R. Lewis and M. Stewart, ‘The Men at the Top’, Encotinter, 11 (1958), pp. 48-9. 54 y5y;tensen, ‘Are Status Symbols Inevitable?‘, Indzlstrtal Welfare, 64 (1962), pp. 5 5 ;8S;$;2‘Leadership

and Management’,

Management Today (May 1970), pp. 5 5,

56 NEDC, Management Recruitment and Development (London, 1965). 57 Editorial, Management Today (April 1971), p. 9. 58 J. Roger Morrison, ‘The Quiet Managerial Revolution’, Management Today (November 1967), p. 98. 59 NEDC, Management Recruitment, p. 19. 60 R. Heller, ‘Britain’s Boardroom Anatomy’, Management Today (September 1970), p. 84. 61 L. Urwick, Personnel Management in Perspective (London, 1959), p. 14. 62 PRO LAB 10/1627: Note K. Ashfold to Miss Towy Evans, 271111961, enc. memo, ‘The British Motor Corporation’. 63 M. Poole, ‘A Back Seat for Personnel’, Personnel Management, 5 (1973), p. 38. 64 D.L. Davies, Formal Conszlltation in Practice (London, 1962), pp. 6 and 14. See also A.L. Marsh and E.E. Coker, ‘Shop Steward Organisation in the Engineering Industry’, British Jownal of Industrial Relations, 1 (1963), pp. 183-5; and New Soczety, 161611966. 65 P.F. Dyer, ‘Presenting Financial Information To Employees’, Manager, 25 (1957), pp. 101-8; and G. Kemp, ‘What About (Telling) the Workers?‘, Bustness Graduate, 10 (1980), pp. 55-7. 66 W. Durham, ‘British Suggestion Schemes’, lndzlstrzal Welfare, 62 (1960), p. 275. 67 D. Wedderburn and C. Craig, ‘Relative Deprivation m Work’, in D. Wedderburn (ed.), Poverty, Inequality and Class Structwe (Cambridge, 1974), p. 154. 68 S. Caulkin, ‘Industry’s Class Divide’, Management Toduy (August 1974), p. 75. 69 See, for example, AACP, Prodtlctivity Measurement in British Industry (London, 1950) and T.E. Easterfield, Productivity Measwement in Great Britain (London, 1959).

182

NOTES

70 Anon., ‘The Use Made by British Industry of American Case Study Data on Productivity Measurement Review (June Productivity and Factory Performance’, 1956), p. 7. 7 1 Ibid., pp. 7-8. 72 For the history of IFC in Europe, see the various contributions in EPA, Inter-firm Comparison. An Incentive to Productivtty (Paris, 1957). 73 L. Taylor Harrington, ‘The Process of Interfirm Comparison’, Scientzfic Business 1 (1963), pp. 156-66. 74 Quoted in H. Ingham, ‘Inter-firm Comparison for Management’, Manager, 27 (1959), p. 314. 75 H. Ingham and L. Taylor Harrington, ‘Inter-firm Comparison - Some Conditions of Success’, in EPA, Inter-firm Compartson, p. 299. 76 The Times, 26/11/1959; and MRC MSS 200/F/3/D3/7/99: ‘The First Year of the Centre for Interfirm Comparison. A Report Prepared for Patrons of the Centre’, November 1960, p. 3. 77 ‘A Report on the Centre’s First Two Years’ in BIM, Annual Reportfor the Year ended 31 March 1961 (London, 1961) [n.p.]. 78 Engineer, 11/10/1963. 79 PEP, Attitudes zn British Management (Harmondsworth, 1966), p. 65; Engzneer, 11/10/1963. 80 R. Wild and K. Swan,‘The Small Company, Profitability, Management Resources and Management Techniques’, Jownal of Business Policy, 3 (1972), p. 149; editorial comment, Management Toduy (April 1971), p. 9. 5 THE AMERICAN PRODUCTIVITY GOSPEL BRITAIN: THE QUEST FOR MANAGEMENT PROFESSIONALISATION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

IN

U.S. Productivity Team, The Britzsh Cotton Industry (London, 1952), p. 27. O.W. Roskill, ‘Business and Businessmen. Pt. 3’, Scope(November 1945), p. 69. Editorial, Manager, 13 (January 1945), p. 11. Quoted in A. Sibetston, Education and Training for Industrial Management (London, 1955), p. 35. Ministry of Education, Education for Management (London, 1947), pp. 4-6. Ibid., pp. 21-8. Ibid., pp. 17-18. See, for example, editorial, Industry, 16 (1948), p. 11. C.S. Richards, Graduate Tratning for Business Management and Administration in Great Brztain, Europe andNorth America (Johannesburg, 1954), pp. 10-19. See, for example, R.A. Brady, Crisis in Britain (London, 1950), p. 649; and N. Tiratsoo and J. Tomlinson, Industrial Efficiency and State Intervention: Labour 1939-51 (London, 1993), p. 156. Federation of British Industries, Education and Trazning for Management (London, 1953), pp. 7-10. Anon., ‘Managers of Tomorrow’, Future, 6 (195 l), pp. 50-3. T.J. Wells, ‘The Institution of Works Managers’, Brztzsh Manufacturer (January 195 l), p. 36. L. Urwick, ‘From Amateurs to the Professional’, Industry, 17 (1949), p. 21. See, for example, L. Gordon, ‘Technology and the Admmistrative Arts’, AngloAmerzcan News, 20 (1953), pp. 477-8. AACP, Education for Management (London, 195 l), p. 18.

183

NOTES

17 See, for example, PRO T235/134: Representatives, 61811952, p. 2. 18 BIM, Report Appalsing the Aims Management

by a Committee [hereafter Mead), p.

Under

MAC

(52)153,

and Organisation the Chairmanshtp

Twelfth

Meeting

with

US

of the Brrtzsh Institute of of Sir Cecil Mead (London,

1968) 61. 19 European Productivity Agency, Activities and Achievements (Paris, 1958), pp. 30-l. 20 Sir 0. Wansborough-Jones, ‘Management Training in the Technical College’ in FBI, Stocktaking on Management Education (London, 1961), p. 23. 21 S. Hyman, ‘Residential Training Colleges. Are They Worth The Cost?‘, Manager (January 1963), pp. 44-5. 22 A. Henderson, ‘Private Network’, Management Education and Development, 2 (1972), pp. 117-27. 23 Wansborough-Jones, ‘Management Training’, p. 25. 24 R.C. Tress, ‘The University Approach to Management Development’ in FBI, Stocktaking, p. 16. 25 G.W. Robbins, ‘Education for Management’, Manager, 27 (1959), p. 402. 26 NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 2, File on ‘United Kingdom. Education and Training Feb. 1954Sept. 1956’, F. Rogers to N.B. Chipman, 7/11/1955. 27 The university eventually used American money to create a fairly Junior research post. See material in NAW, RG 469: M’ ission to the UK, Office of the Director, Subject Files ofthe Director 1953-7, Box 5. 28 NW, RG 469: Records Relating to the EPA 1953-7, Box 2, File on GregoireKing Visit, C (56)40 ‘Report by A. King and R. Gregoire on their visit to the United States of America (14th November-13th December 1955)‘, 2012/1956, p. 6. 29 D.C. St. M. Platt, ‘The Perils of American Business Education’, Director, 12 (1960), pp. 294-6. 30 See, for example, The Economist, 1711211955. 31 Sir N. Kipping, ‘Where do we go from here?’ in FBI, Stocktaking, p. 76. 32 Ibid. 33 The following two paragraphs are based upon material in P.F. Nind, A Fzrm Foundation. The Story of the FME (Oxford, 1985). 34 PRO ED188/155: Letter J. Hare to D. Eccles, 1 l/7/1962. 35 PRO ED188/155: Letter Lord Hailsham to J. Hare, 171711962. 36 G. Bull, ‘The Maze of Management Training’, Dtrector (August 1963), pp. 267-8. 37 Nind, A Fzrm Foundation, p. 21, and G. Bull, ‘Professor Houlden’s Business Egg’, Dtrector (October 1967), pp. 108-9. 38 J.F. Wilson, The Manchester Experzment. A History of Manchester Buszness School 1965-l 990 (London, 1992), p. 11. 39 NEDC, Conditions Favourable to Faster Growth (London, 1963), pp. 5-6. 40 Cmnd. 2154, Commzttee on Higher Educatton (1963), p. 135. 41 The Economist, 19/10/1963. 42 Arthur Earle, the first Principal of the London Business School, as reported in anon., ‘Management Education - The Next Five Years’, Manager (April 1965), p. 40. 43 NEDC, Management Recruztment and Development (London, 1965) p. 6. 44 See material in PRO ED46/962, especially R.R. Powell to Sir L. Helsby, 24/10/1963, enclosing memo, ‘British Business Schools. Lord Franks’ Enquiry’, 23110/1963.

184

NOTES

45 For these negotiations, see material in MRC, MSS 200/F/3/D3/10/42. 46 Lord Franks, British Business Schools (London, 1963). This summary appears in Engineering, 611211963. 47 PRO ED46/962: Minute by H. Andrew, 29/10/1963, p. 1. 48 See Wilson, Manchester Experiment and W. Barnes, Managerial Catalyst. The Story of London Business School 1964 to 1989 (London, 1989). 49 G. Turner, Business in Britain (Harmondsworth, 197 l), p. 88. 50 For example, M. Wheatcroft, The Revolution in Britzsb Management Educatzon (London, 1970). 51 D. Carson, ‘Britain’s Business Schools’, Management Today (August 1967), pp. 71-73 and 102-4. 52 K. Ascher, Masters of Business? The MBA and British Industry (London, 1984), p. 5. 53 R. Whitley, A. Thomas and J. Marceau, Masters of Business? BzcstnessSchools and Business Graduates in Britatn and France (London, 1981), p. 47. 54 H.S. Taylor, ‘How Business Uses Graduates’, Management Today (May 1969), p. 87. 5 5 BIM, Busrness School Programmes. The requirements of British manufacturing industry (London, 197 l), p. 7. 56 A. Robertson et al., ‘Business Schools: Is the Backlash Justified’, Management Deciston, 4 (1970), p. 14. 57 The Economist, 21/l l/1970. 58 PRO T228/627: Minute by S.A. Dakin, 21/11/1953, p. 1. 59 BIM Archive, London: C (56) M/6 Council Mins, 251711956. 60 PRO T2281627: Minute by A.J. Collier, 231111953, containing Minute by ‘R.A.B.‘, 15/11/1952. 61 Details of this settlement can be found in PRO T228/627. 62 PRO T228/627: J.R. Simpson to ‘Mr. Johnston’, 51611953; The Economzst, 161811958. 63 PRO BT258/96: Minute by S.A. Dakin, 281911954, p. 1. 64 See, for example, NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 5, F.E. Rogers to W.G. Brown, 71511956. 65 Mead, p. 61. 66 PRO T228/627: ‘A.J.’ to ‘Mr. Grant’, 141311956 and 281311956. 67 The Times, 30/l/1958; The Economist, 161811958. 68 PRO ED46l960: Letter E. Ackroyd to J.F. Embling, 811/1959. 69

British

Industry

Week,

29llll1968.

70 E. Sidney, ‘Evaluating Management Training’, Industrzal Welfare, 38 (1956), p. 164; A. Mant, The ExperiencedManager (London, 1969), p. 3. 7 1 R. Heller, ‘Britain’s Boardroom Anatomy’, Management Today (September 1970), p. 84. 72 T.K. Mullin, ‘Folk Management’, Manager (August 1965), pp. 22-3 and 48. 6

THE AMERICAN PRODUCTIVITY BRITAIN: EXPLAINING REACTIONS RESPONSES

GOSPEL AND

IN

1 NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 5, File on ‘U.K. Productivity-General (Director’s File) 1955-7’, ‘Summary of United States Assistance Programs to the United Kingdom. ‘, September 1955, p. 1.

185

NOTES

2 See, for example, AACP, Superphosphates and Compound

Ferthers

(London,

1950),

p. 3. 3 PRO BT 64/4181: Minute by S.A. Dakin, l/10/1953. 4 NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 6, File on ‘U.K. Productivity - EPA 1952-7, Director’s File’, F.E. Francis to M.M. Tank, 9/l/1956; and more generally W. Gomberg, ‘Labour’s Participation in the European Productivity Program. A Study in Frustration’, PoliticalScience Quarterly, 74 (1959), pp. 240-5. 5 C. Francis et al. for the M.S.A., Evaluation Report. March 24, 1953 (Washington, 1953),p. 11. 6 PRO BT 64/4181: W.A. Macfarlane to S.A. Dakin, 29/l/1953. 7 NAW, RG 469: EPA Project Files 1950-7, Box 11, File on EPA Project 349, S.L. Behoteguy to M.S. Belcher, 19/7/1956. 8 NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 6, File on ‘U.K. Productivity-EPA 1952-7, Director’s File’, F.E. Francis to M.M. Tank, 4/2/1956. 9 NAW, RG 469: EPA Project Files 1950-7, Box 10, File on EPA Project 329, K.F. Allen to S.L. Behoteguy, 29/7/1957. 10 NAW, RG 469: EPA Project Files 1950-7, Box 3, File on EPA Project 180, EPA/CS/376, ‘Technical Assistance. Facts and Figures on Mission Organisation’, 251511956, pp. 9-10. 11 AACP, Drop Forgzng (London, 1950), p. 4. 12 MRC, MSS 200/F/3/D3/7/29: S.A. Holme to N. Kipping, l/6/195 1. 13 See B. Boel, ‘The European Productivity Agency and the development of management education in Western Europe during the 195Os’, in T.R. Gourvish and N. Tiratsoo (eds), Missionawes and managers: American influences on European management educatton, 1945-I 960 (Manchester, 1998), pp. 34-49. 14 NAW, RG 469: Records Relating to EPA 1953-7, Box 1, Files on ‘EPA General Through 1957’, EPA (57) 11, ‘European Productivity Agency. Results Obtained and Future Prospects’, 3/9/1957, p. 24. 15 H.J. Leavitt, ‘On the Export of American Management Education’, Journal of Bustness, 30 (1957), p. 155. 16 NAW, RG 469: EPA Project Files 1950-7, Box 2, File on EPA Project 115, Report by ‘Perkins’, 10/12/1955, p. 2. 17 MRC, MSS 200/F/3/S2/48/2: EPAlDl9097, Productivity Committee Mins, 7-81311961, p. 2. 18 See, for example, T.A. Prichard, ‘The management significance of NPY’, Manager (January 1963), pp. 36-8. 19 MRC, MSS 200/F/3/S1/36/43: ‘BPC, P ro g ress Report for the year 1st April-3 1 st March 1954’, Section Two. 20 BPC, Review of Aims, Activitzes and Organtsation (London, 1970). 21 A.D. Chandler Jnr, Scale and Scope. The Dynamics of Industrzal Capttahsm (Cambridge, Mass., 1990), pp. 389-92. 22 S. Broadberry and N.F.R. Crafts, ‘British Economic Policy and Industrial Performance in the Early Post-War Period’, Business History, 38 (1996), pp. 65-91. 23 In 1949, Britain had 55,129 manufacturing establishments employing more than ten workers, but only 25 per cent of these employed over 100. See anon., ‘The Size of Manufacturing Firms’, Ministry of Labour Gazette, 58 (1950), pp. 189-90. 24 PRO RG 231170: H.D. Willcock ‘The Dissemination of Technical Information on Industry. A Pilot Inquiry’ (195 2).

186

NOTES

25 Anon., ‘Progress report on Pottery’, Business, 78 (1948), p. 41. 26 PRO LAB 10/1020: W.H. Temple, ‘Personnel Management in the Small Firm’, 12/10/1951, p. 2. 27 See, for example, US Department of Labour, Cost Saving Through Standardisation, Simplification, Specialisation in the Clotbzng Industry (Washington, 1953), p. 1. 28 Engineering, 30/9/1955. 29 S. Rose, ‘Britain v. Germany. The Race for Management know-how’, Business, 87 (1957), p. 72 and J. Drabble, ‘Strengthening the small firm’, Britzsb Industry, No. 19 (1965), pp. 24-5. 30 See, for example, editorials in Mechanical Handling, 40 (1953), p. 467, and 43 (1956), p. 133; and, more generally J.H. Dunning, American Investment in Brttzsh Manufacturtng Industry (London, 1958), p. 253. 31 G. Macrea, ‘New Ideas Enliven an Old Industry’, Business, 85 (1955), pp. 107-111. 32 TUC, Trade Untons and Productivity (London, 1950), pp. 58-61. 33 NAW, RG 469: Glenn Atkinson Papers, Box 6, File on ‘Productivity’, EM. Paride, ‘Briefing Paper on Productivity’, May 195 1, p. 6. 34 NAW, RG 469: Mission to the U.K., Office of Economic Policy and Planning, Labour Division, Subject Files of Glenn Atkinson, Box 5, File 10, H.L. Turtledove to J. Hutchinson, 5/12/1951, enc., ‘Survey of United Kingdom Productivity Team Follow-Up Activities’; and Glenn Atkinson Papers, Box 6, File on ‘Productivity’, J. Stein, ‘The United Kingdom Industrial Productivity Program’, Cn.d.1, p. 19. 35 The general situation is surveyed in N. Tiratsoo and J. Tomlinson, ‘Restrictive Practices on the Shopfloor in Britain, 1945-1960: Myth and Reality’, Business History, 36 (1994), pp. 65-82. 36 See, for example, T. Lupton, ‘A sociologist looks at Work Study’, Work Study and Industrial Engineering, 1 (1957), pp. 43-8; Department of Scientific and Industrial Research, Research and Development Requzrenzents of the Shipbuzlding and Marine Engineering Industries (London, 1960), p. 11; and Metalworking Production, l/3/1967. 37 See, for example, Department of Scientific and Industrial Research, Productivity in Letterpress Printing (London, 1961), pp. 13-l 5; and P. Hall, ‘Men, Women and Work Study’, Industrial Welfare, 38 (1956), pp. 5-6. 38 Anon., ‘Institution of Materials Handling’, Mecbantcal Hand/zng, 39 (1952), p. 588. 39 F. Bostock and G. Jones, ‘US Multinationals in British Manufacturing before 1962’, Business Htstory Review, 70 (1996), p. 252. 40 D. Burn, ‘Retrospect’, in D. Burn (ed.), The Structure of British Industry. Volume Two (Cambridge, 1958), pp. 429-54; and G. Maxey and A. Silberston, The Motor Industry (London, 1959), pp. 99-150. 41 MRC, MSS 200/F/3/T4/2/14: Director, Telecommunication Engineering and Manufacturing Association to E.W. Hunnisette, 21211949, and Secretary, Foundry Trade’s Equipment and Suppliers Association Ltd to E.W. Hunnisette, 271111949. 42 Anon., ‘Engineering Advisory Council-German Competition’, Progress Report of the Society of Motor Manufacturers and Traders (March 1949), p. 4. 43 Iron and Coal Trades Review, 91511952. 44 Significantly, the extent of this increased competition was registered in that most important of indicators, the bottom line. See anon., ‘Income and Finance of Quoted Companies’, Economic Trends, 162 (1962), pp. ii-xvii; and M. King, ‘The Profits Crisis-Myth or Reality?‘, EconomicJournal, 85 (1975), pp. 33-54.

187

NOTES

45 J.D. Gribbin, ‘The Post-war Revival of Competition as Industrial Policy’, Government Economic Service Working Paper, No. 19 (London, 1978), p. 24. 46 Ibid. and see also D.C. Elliott and J.D. Gribbin, ‘The Abolition of Cartels and Structural Change in the United Kingdom’ in A.P. Jacquemin and H.W. de Jong (eds), Welfare Aspects of Industrial Markets (Leiden, 1977), pp. 345-65, where Gribbin suggests that cartels may have been less important in the early post-war years. 47 J. Tomlinson, ‘The Role of Government in the Decline of the Post-War British Car Industry’, Journal of Transport Hzstory (forthcoming). 48 D. Swann, P. O’Brien, W.P.J. Maunder and W.S. Howe, Competrtzon in British Industry: Restrictive Practices Legisbtion in Theory and Practice (London, 1974), especially pp. 146-9. 49 See H. Mercer, Constructing a competttive order. The bidden history of British antttrust policies (Cambridge, 1995), passim. 50 Political and Economic Planning, Industrial Trade Associations. Acttvtties and Organisation (London, 1957), p. 164. 5 1 W. Campbell Balfour, ‘Productivity and the Worker’, British Journal of Sociology, 4 (1953), pp. 257-65. 52 See various reports from sponsored British visitors to the US m MRC, MSS 200/F13/73/29/4-6; and AACP, Frezgbt Handhg (London, 195 l), p. 5 1. 53 For example, T.G. Elliott, A Survey of Production and Industrial Engineering Organisation and Practice in the U.S.A. and Canada (London, 1952). 54 MRC, MSS 200/F/3/73129/4: ‘Interim Report to the Mutual Security Agency by the British Industrial Management Group, College of Business Administration, University ofcincinnati’, 121511953, p. 18. 55 Engineer, 21111953. 56 Cf. N. Tiratsoo and J. Tomlinson, Industrial Efficiency and State Intervention: Labour 1939-51 (London, 1993), pp. 144-52 and J. Zeitlin, ‘Americanization and its Limits: Theory and Practice in the Reconstruction of Britain’s Engineering Industries, 1945-55’, Business and Economzc History, 24 (1995), pp. 277-86. 57 PRO SUPP 141141: ‘Industry Comment 7. Internal Combustion Engines’, [n.d.], p. 1. 58 N. Tiratsoo, ‘Standard Motors 1945-55 and the Post-War Malaise of British Management’, in Y. Cassis, F. Crouzet and T.R. Gourvish (eds), Management and Business in Brttain and France. The Age of the Corporate Economy (Oxford, 1995), p. 99. 59 PRO RG 231185: H.D. Willcock, ‘Overseas Buyers’ Experience of British Goods’, (1953), p. 45; and, for example, N. Covey, ‘German Competition m Turkey’, Glasgow Chamber of Commerce and Manufacturers Monthly Journal, 33 (7) (1950), p. 95. 60 The Economzst, 2911211951 and 51111952. 61

The Economist,

29/12/1951.

62 PRO SUPP 14041: ‘Report of the Lemon Committee for Standardisation of Engineering Products - Comments by the Employer Members on the Engineering Advisory Council’ End.], p. 1. 63 BPC, British Producttvtty Council Conference. . . March 19, 1953 (London, 1953), p. 7. 64 AACP, Metalworking Macbzne Tools (London, 1953), p. 48. 65 AACP, Drop Forgzng (London, 1950), p. 9. 66 AACP, Simphficatzon zn British Industry (London, 1950), pp. 5-6.

188

NOTES

67 MRC, MSS 200/F/3/T3/28/7: Typescript of Meeting at Birmingham, [n.d. but 19501, p. 9. 68 Engineering, 81611956 and Sir S. Rawson, Variety reduction’, FBI Review, No.115 (1959), pp. 57-9. 69 Mutual Security Agency Productivity and Technical Assistance Division, increasing Productivity thru Simpltficatton, Standardzsatzon and Speczalisatzon (Washington, n.d.), p. 75. 70 BPC, Better Ways. Nineteen paths to Higher Productivity (London, 1957), p. 34. 7 1 H. Hopkins, The New LooR (London, 1964), pp. 109-10. 72 MRC, MSS 200/F/3/T3/29/2: G. Withers to ‘Mr. White’, lO/lOl1952. 73 ‘Gulliver’, ‘Across the Board’, Director (January 1966), p. 45. 74 H.D. Willcock, ‘Public Opinion: Attitudes Towards America and Russia’, PolittcalQuartwly, 19 (1) (1948), pp. 61-2. 75 Ibid. p. 63; anon., ‘Anglo-American Economic Co-operation’, Manage (January 1945), pp. 31-2; W. Clark, Less Than Kin. A Study of Anglo-American Relattons (London, 1957), pp. 146-59; and R. Lowenthal, ‘The American “Model”‘, TwentietbCentuty, 163 (1958),pp. 361-71. 76 R. Lewis and R. Stewart, The Boss. The Life and Times of the British Business Man (London, 1958), pp. 175-95. 77 The following two paragraphs are based on material m Tiratsoo, ‘Standard Motors’. 78 Anon., ‘Salute to Production Engineers’, Future, 6 (1951), p. 22. 79 J.L. Orr, ‘Providing the Conditions of Efficiency’, British Management Revtew, 9 (1950), p. 41. 80 Editorial, Business, 84 (1954), p. 65. 81 L. Urwick, ‘The American Challenge in Industrial Management’, British Management Review, 12 (1954), p. 166. 82 D. Granick, The European Execzkve (New York, 1962), p. 234. 83 Anon., ‘Institution of Materials Handling’, Mechanical Handling, 42 (1955), p. 42 1. The italics in this quote are in the original. 84 F. Nixon, ‘Spending to Save. Product Quality and Reliability’, Tzmes Review of Industry and Trade, 2 (1964), p. 18; J.S. Oakland, ‘Research Into Quality Control m British Manufacturing Industry’, Business Graduate Journal, 16 (1986), p. 3 1. 85 Tiratsoo and Tomlinson, Industrial Efficiency, and Tiratsoo, ‘Standard Motors’, passim. 86 Mercer, Constrzlcting a competitive order, passim. 87 See, for example, R. Appleby, ‘Management and Work’, British Management Review, 10 (1952), pp. 20-3. 88 See, for example, NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director, Box 5, G. Pollock to F.E. Rogers, enc., ‘European Productivity Agency’, Cn.d.1, p. 1. 89 See above p. 64, and J. Shinn, ‘The Sealed Lips of Brutish Business’, Dzrector (January 1963), pp. 96-7. 90 Tiratsoo and Tomlinson, lndustnal Efficiency, p. 141. 91 MSS 200/B/3/3/944.1 Pt.9: BT/EPA (59)M, Mins of Board of Trade Committee on E.P.A. matters, 5/10/1959, p. 2. 92 MRC, MSS 200lFl3/P3/11/1: ‘Notes of Sir Harry Pilkington’s speech . on 21 April 1955’, p. 7. 93 NAW, RG 469: Records Relating to EPA 1953-7, Box 1, Files on ‘EPA ‘, Airgram from L. Gordon to FOA, 231211955. 94 NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 6, File on ‘U.K. Productivity. Section 115 (k) -

189

NOTES

Productivity Attitudes 1953-55 (Director’s File)‘, A. Rivkin to L. Gordon, 241411953. 95 NAW, RG 469: Mission to the U.K., Office of the Director, Subject Files of the Director 1953-7, Box 5, File on ‘U.K. Productivity - General 1954’, ‘Memorandum of conversation with Mr Hill, Board of Trade, November 16, 1954’. 96 NAW, RG 469: ECA Subject Files, Box 21, ECA London to Washington, 14/10/1949, pp. 4 and 7; and Mercer, Constructzng a Competitive Order, Chs 5 and 6. 97 PRO T 235/134: ‘Notes of a Conversation with MSA reps’, 13/10/1953; and PRO CAB 128/25: Cabinet Mins, 111911952. 7

THE

1 N. Rollings,

3 4 5 6 7 8 9

10 11 12 13

14

AND

‘Poor Mr. Butskell:

COMPETITION

A Short Life Wrecked by Schizophrenia?‘, 5 (1994), pp. 183-305; J. Tomlinson, ‘Keynesianism and the Conservatives 1945-64: An Unfortunate Alliance’ History ofPolitical Economy, 38 (1995), pp. 61-85. J. Barnes, ‘Ideology and Factions’ in A. Seldon and S. Ball (eds) The Conswvatzwe Century (Oxford, 1994), pp. 330-6. , R. Lowe, ‘Resignation at the Treasury: the Social Services Committee and the Failure to Reform the Welfare State, 1955-7’Journal of Social Policy, 18 (1989), pp. 505-26. N. Harris, Competition and the Corporate Society: British Conservatives, the State and Industry 1945-l 964 (London, 1972); H. Mercer, Constructing a Competitive Economy: The Hidden Histmy of Anti-Trust (Cambridge, 1995). J. Tomlinson, Democratic Soczalism and Economic Polzy: The Attlee Years (Cambridge, 1997), Ch. 1. C. Schenk, Britain and the Sterling Area: from Devaluation to Convertzbthy in the 1950s (London, 1994), pp. 12-16. For example, PRO CAB 134/1681: Economic Policy Committee, Mins 15/71959. PRO CAB 134/1239: Economic Steering Committee, ‘Plan G: Report by Officials’, 23/7/1957. A. Cairncross (ed.), The Robert Hall Dtarzes, Vol. I (London, 1989), Vol. II (London, 1991); A. Cairncross and N. Watts, The Economic Section 1939-61 (London, 1989). For discussion of the role of economic advice, Tomlinson, ‘An Unfortunate Alliance’. R. Cockett, Thinking the Unthinkable. Think Tanks and the Economtr CounterRevolution, 193 l-l 983 (London, 1995), ch. 5. I. Zweinger-Bargielowska, ‘Rationing, Austerity and the Conservative Party Recovery after 1945’, HistoricalJournal, 37 (1994), pp. 173-97. J.C.R. Dow, The Management oftbe British Economy 1945-60 (Cambridge, 1965), pp. 154-5. Ibid., pp. 156-S; PRO CAB 134/841: E conomic Policy Committee, Mins 5/l l/1952. For a recent reassessment of the significance of import controls, see A. Milward and G. Brennan, Britain’s Place in the World: A Historical lnquzry tnto Import Controls 1945-60 (London, 1996). Apart from those on dollar imports, controls on goods from Japan and the Communist bloc continued without occasionmg much argument, but in the later 1950s a considerable controversy arose on the issue of controls on the import of cheap textiles from Commonwealth producers (see below). Twentieth

2

CONSERVATIVES

Century

Brutish

Hzstory,

190

NOTES

15

16

17

18

19 20 21 22 23

24 25 26 27

28 29

30 31

32 33 34 35 36 37

PRO CAB 134/843: Economic Policy Committee, ‘Future External Economic Policy’ by President of Board of Trade 19/3/1952. The Committee’s discussions are recorded in: CAB 134/787: ‘Committee on Commercial Policy’, but it never produced a report, and was absorbed into discussions about the Commonwealth Economic Conference. On ROBOT see A. Cairncross, Years of Recovwy (London, 1986); PRO T23614359: ‘Collective Approach to Freer Trade and Currencies’, 6/4/1954; Commonwealth Economic Conference: Final Communique, Cmnd. 87 17, Parl. Papers, 1952/3, Vol. XIII. PRO CAB 134/787: R. Hall, ‘The Basis of Postwar International Economic Reconstruction’, 16/6/1952, and ‘The Effects of World Economic Conditions on GATT’, 17/6/1952. PRO CAB 1341848: Economic Policy Committee, ‘Future Economic Policy’ by Chancellor of the Exchequer, 15/5/1953. For a discussion of this, see CAB 134/846: Economic Policy Committee, Mins, 20/5/1953. F. Capie, Depression and Protectionism: Britain Between the Wars (London, 1983), Ch. 2. Cmnd. 8717, paras 16,3. PRO CAB 134/843: Economic Policy Committee, ‘Future External Economic Policy’ by President of Board ofTrade, 19/3/1952. NUCUA, Conference Report 1952, pp. 5 1-5; Conference Report 1953, pp. 59-66. NUCUA, Conference Report 1954, p. 55, pp. 55-7. In fact Britain did get a waiver to the GATT allowing an increase in the margin of performance, but only so long as no substantial diversion of trade resulted! This led to some small changes in horticultural trade. See PRO T236/4033: M. Dean, ‘The Tariff’, 9/l 111954. NUCUA, Conference Report 1956, pp. 37-44. PRO PREM 11/2136: Home to Macmillan 3/9/1956; also PREM 11/2133: Home to Macmillan, 1 l/7/1957. NUCUA, 1954, p. 56. L.B. Krause, ‘British Trade Performance’ in R.E. Caves (ed.) Brztatn’s Economtc Prospects (Washington, 1968), pp. 2 15-l 8; D. Sanders, Losrng an Empire, Fzndzng a Role (London, 1990), pp. 118-19. NUCUA, 1954, p. 55. L. Butler, ‘Winds of Change: Britain, Europe and the Commonwealth, 1959-61’ in B. Brivati and H. Jones (eds), From Reconstruction to Integration (London, 1993), pp. 157-8. P. Streeten, ‘Commercial Policy’ in G.D.N. Worswick and P.H. Ady (eds), The British Economy tn the 1950s (Oxford, 1962), pp. 99-101. PRO CAB 13411231: Economic Policy Committee, ‘Tariff Legislation and Commonwealth Duty Free Entry’ covering note by F. Lee, 6/6/1956. See also PRO T236/4033: M. Dean, ‘The Tariff’, 9/l l/1954. NUCUA, Confwence Report 1963, p. 54. For example, PRO CAB 134/850: Economic Policy Committee, Mins, 20/5/1954. PRO CAB 129159: President of Board of Trade, ‘Commercial Policy in Europe’, 191211953. PRO CAB 134/853: President of Board of Trade, ‘Tariff Negotiations’ 31/12/1954; CAB: 134/869: C ommittee on External Economic Affairs, 1954. PRO CAB 134/855: President ofBoard ofTrade, ‘Review of GATT’, 1 l/3/1955. An early, detailed account prior to the release of the public records is M. Camps, Britain the European Community 1955-63 (Oxford, 1964). A recent account is in J.W. Young, Britain and European Untty, 1945-92 (London, 1993), Chs 2, 3.

191

NOTES

38 PRO CAB 129/82: President of Board of Trade and Chancellor of the Exchequer, ‘UK Commercial Policy’, 28/7/1956. The erosion of preference, and Australia and other countries’ desire to renegotiate derived from the fact that whilst Britain’s preferences were mainly in money terms, and had therefore been eroded by inflation, those in most other Commonwealth countries were ad valorem (proportional) and therefore kept their value. The major government statement on the FTA was A Free Trade Area, Cmnd. 72, Parl. Papers, 195617, Vol. XXVI. 39 PRO CAB 134/1239: Economic Steering Committee: sub-committee on Closer Economic Association with Europe, ‘Plan G: Interim Report by Officials’, 23/7/1956. A parallel assessment was made by the Economist Intelligence Unit, Brztatn and Etlrope (London, 1957). 40 Ibid., ‘Plan G’, Appendix D. 41 R.J. Lieber, British Politics and European Unity: Parties, Elites and Pressure Groups (Berkeley, 1970), p. 63. 42 PRO CAB 134/1240: ‘Sub-Committee on Closer Economic Association: ‘Discussion with FBI’, 8/l l/1956; Lieber, British Politzcs, pp. 54-68. 43 PRO CAB 134/1239: Sub-C ommittee on Closer Economic Association, ‘Is the Readjustment of the UK Economy called for by Plan G Practicable?‘, 7/8/1956. 44 PRO CAB 134/1229 Economic Policy Committee, Mins, l/8/1956, 5/9/1956; M. Camps, Britain and European Community, p. 100. 45 PRO CAB 134/l 23 1: Economic Policy Committee, ‘Plan G and the Moment in British History’, 231811956. 46 PRO BT11/5516: ‘Plan G’ R.A. Butler to P. Thorneycroft 9/8/1956; Thorneycroft to Butler, 23/8/1956. 47 PRO CAB 134/1231: ‘German Competition’, 5/7/1956. 48 Young, Brrtatn and European Unity, pp. 57-66. 49 PRO CAB 1853: Economic Steering (Europe) Committee, ‘The Six and the Seven: the Long Term Objective’, 28/6/1960. 50 PRO PREM 1 l/2985: PM to Chancellor, Dec. 1959. 5 1 Lieber, British Politics, pp. 74-83, 92-105. 52 Camps, Brztazn and European Community, Ch. 9; Young, Britain and European Unity, pp. 69-76; P. Norton and A. Aughey, Conservatives and Conservatism (London, 1981), pp. 138-9. 53 PRO CAB 1340852, 1853, 1854: E conomic Steering (Europe) Committee, 1960-3. 54 Lieber, British Polttics, pp. 132-3, p. 102. 55 D. Howell, ‘Expanding Prosperity’ in L. Beaton (ed.) Principles in Practice (London, 1961), p. 25. 56 Lieber, British Pohcs, p. 138. 57 NUCUA, Conference Report 1963, pp. 59-61; J. Campbell, Edward Heath: A Biography (London, 1992), pp. 117, 124; H. Macmillan, Britain, the Commonwealth and Europe (London, 1962). 58 Young, Britain and European Unrty, pp. 84-5. 59 NUCUA, Conference Report 1962, pp. 52-4. 60 For example, D. Walker-Smith and P. Walker, A Call to the Commonwealth: The Constructtve Case? (London, 1962). 61 John Biggs-Davidson, of the Commonwealth Industries Associated, cited in Lieber, Britzsb Politics, p. 102; Camps, Brttain and European Communzty, pp. 452-4. 62 Young, Britazn and European Unity, pp. 84-5. 63 K. Middlemas, Power, Competition and the State Vol. 2 Threats to the Postwar Settlement: Britain, I961 -74 (London, 1990), p. 17.

19.2

NOTES

64

65 66 67 68

69 70

71 72 73 74 75 76 77 78 79 80 81 82

83

84

85

PRO CAB 134/1229: Economic Policy Committee, Mins, l/8/1956; also CAB ‘Plan G: Supplementary Report’, 134/1231: Economic Policy Committee, 311811956. PRO CAB 1340678: Economic Policy Committee, Mins, 2/7/1958; CAB 1340681: Economic Policy Committee, Mins, 15/7/1959. PRO CAB 134/1683: Economic Policy Committee, ‘Liberalisation of Imports’, 131711959. PRO CAB 134/1681: Economic Policy Committee, Mins, 151711959. PRO CAB 134/1696: Economic Policy Committee, ‘Economic Growth’, 281611962; CAB 13411693 Economic Policy Committee, Mins, 41711962, 50211962; 1111211962. A.D. Morgan, ‘Commercial Policy’ in ET. Blackaby (ed.) Brztzsh Economic Polzcy 1960-74 (Cambridge, 1978), p. 524. Conservative Party Archive, Bodleian Library, Oxford (hereafter CPA), CRD 219147 Policy Committee on Economic Growth, ‘Preliminary Notes by Chairman’, May 1961. CPA CRD 219147 Report of the Polzcy Commrttee on Economic Grmutb, 241811961, para. 21. PRO CAB 134/1698: Economic Policy Committee, ‘Economic Policy After Brussels: Unilateral Tariff Suspensions’, 4/3/1963. PRO PREM 11/5155: Burke Trend to P.M., 29/4/1964; PRO CAB 134/1808: Economic Policy Committee, ‘The Kennedy Round’, 20/4/1964. PRO PREM 11/5155: Eden to Macmillan, 24/2/1956; Macmillan to President ofBoard ofTrade, 25/10/1959. Ibid., President ofBoard ofTrade to P.M., 270011959. For example, PRO CAB 34/855: Economic Policy Committee, ‘Review of GATT’, 21211955. Morgan, ‘Commercial Policy’, p. 526. E.H. Preeg, Traders and Diplomats (Washington, 1970). Ibid., pp. 224-5. T. Barker and S. Han, ‘Effective Rates of Protection for UK Production’, Economtc Jownal, 81 (1971), pp. 282-93. Milward and Brennan, Britain’s Place in the World, p. 28. N. Oulton, ‘Effective Protection of British Industry’ in W.M. Corden and G. Fels (eds), Pzlblic Assistance to Industry (London, 1976), pp. 46-90. His calculations of effective protection levels in the early 1960s are broadly in line with those of Barker and Han. For example: PRO CAB 1341846: Economic Policy Committee, Mms, 20/5/1953; CAB 1341850: Economic Policy Committee, Mins, 201511954; CAB 134/1682: Economic Policy Committee, ‘Dollar Liberalisation by the UK’, 3/4/1959; and CAB 134/1686: Economic Policy Committee, ‘The Cost of Liberalising Imports’, 2/6/1960. Th e industry negotiated ‘voluntary’ export restraints, but these made little impact. The government provided subsidies for re-equipment of the industry: see J. Singleton, Lancashwe on the Scrapheap (Oxford, 1991). For discussions with specific industries, see for example paper and board PRO BT 11/5569: ‘EFTA: Impact on Paper and Board Industry’; and BT 1115736: ‘Watch Industry’. The latter case is also discussed in detail in Milward and Brennan, Britain’s Place zn the World, App. IV, pp. 268-78. The industry had quota protection until the late 195Os, when Britain’s turn to a nuclear military strategy undermined the ‘strategic’ grounds for its protection. Harris, Competition, p. 19, Ch. 15.

193

NOTES

86 Mercer, Constructing, Chs 6-8. 87 J. Jewkes, ‘British Monopoly Policy 1944-56’, Journal of Law and Economzcs, 1 (1958), p. 2; Mercer, Constructing, pp. 104-9. Also A. Kilroy, ‘The Tasks and Methods of the Monopolies Commission’, Manchester School, 22 (1954), pp. 37-61. 88 Mercer, Constructzng, p. 113. 89 S.R. Dennison, ‘Restrictive Practices and the Act of 1956’, Lloyds Bank Review, 59 (1961), pp. 35-52. 90 Mercer, Constructing, p. 12 5. 91 L. Hannah, The Rzse of the Corporate Economy (London, 1983), pp. 143-50. 92 Mercer, Constructing, pp. 125-35. 93 Ibid., pp. 149-64. 94 PRO CAB 134/1681: Economic Policy Committee, Mins, 15/12/1959; CAB 134/1684: President ofBoard ofTrade, ‘R.P.M.‘, 11/12/1959. 95 PRO CAB 134/1697: Economic Policy Committee, Mins, 20/2/1963, 11/7/1963. CAB 134/1698 President ofBoard ofTrade, ‘R.P.M.‘, 181211963. 96 PRO CAB 134/1806: ‘Monopolies, Restrictive Practices and R.P.M.‘, 6/l/1964; CAB 134/1805 Economic Policy Committee, Mins, 81111964. 97 PRO CAB 134/1693: Economic Policy Committee, Mins, 4/4/1962. 98 Campbell, Edward Heath. 99 Mercer, Constructing, p. 129. 100 PRO CAB 134/1681: Economic Policy Committee, Mins, 61311959. 101 PRO CAB 134/1685: Economic Policy Committee, Mins, 25/5/1960, 27/7/1960; CAB 134/1687: President of Board of Trade, ‘New References to the Monopolies Commission’, 19/5/1960, 18/7/1960; CAB 13411691: President of Board ofTrade, ‘New References to Monopolies Commission’, 12/6/1961. 102 PRO CAB 134/1696: President of the Board of Trade, ‘New References to Monopolies Commission’, 5/l l/1962; CAB 134/1693: Economic Policy Committee, Mins, 7/l l/1962. 103 PRO CAB 134/1698: ‘Legislation on Restrictive Practices and Monopolies’ 18/2/1963; CAB 134/1697: Economic Policy Committee, Mins, 20/2/1963. 104 PRO CAB 134/1701: ‘Report of Sub-Committee on Monopolies’, 5/7/1963; CAB 134/1697: Economic Policy Committee, Mins, 1 l/7/1963. 105 Conservative Party, Monopoly and the Publzc Interest (London, 1963); PRO CAB 134/1807: ‘Draft White Paper on Monopolies and Mergers’, 25/2/1964; CAB 134/1805: Economic Policy Committee, Mins, 8/l/1964; CAB 128138 Economic Policy Committee, Mins, 15/l/1964. 106 CAB 129/l 17: ‘Draft White Paper on Monopolies, Mergers and Restrictive Practices’, 251211964, 2/3/1964,4/3/1964. 107 Monopolies, Mergers and Restrictive Practzces, Cmnd. 229, Parl. Papers, 196314, Vol. XXVI. 108 J. Tomlinson, ‘Inventing “Decline”: the Falling Behind of the British Economy m the Postwar Years’, Economic Histovy Review, 49 (1996), pp. 73 l-57. 8

EDUCATION

AND

TRAINING

1 On the general development of education in this period see B.Simon, Educatzon and the Social Order 1940-90 (London, 1991), Chs 3,4; R. Lowe, The Welfare State zn Britain Sznce 1945 (London, 1993), Ch. 8. 2 D. Aldcroft, Education, Training and Economic Performunce (Manchester, 1992); M. Sanderson, The Mzssing Stratum (London, 1994).

194

NOTES

3 R. Middleton, Gmx-rnment versus the Market: the Growth of the Public Sector, Economic Management and British Economic Performance, c. 1890-l 979 (Cheltenham, 1996), p. 506; N. Timmins, The Five Giants: The Biography of the Welfare State (London,

1995), pp. 198-9. 4 J. Vaizey, K. Norris and J. Sheehan, The Pohtical Economy of Education (London, 1972), p. 155. 5 M. Kogan, The Polrtzcs of Education (London, 197 1) pp. 20-l; Simon, Education,

pp. 198-9. 6 Technical Education, Cmnd. 9703, Parl. Papers, 195516, Vol. XXXVI. 7 On the impact of the 1944 Act, see Lowe, Welfare State, pp. 196-203. 8 Sanderson, Missing Stratum, pp. 130-3; M. Francis, ‘A Socialist Policy for Education: Labour and the Secondary School 1945-51’, Hzstory of Education, 24 (1995), pp. 319-35. 9 Ibid., and Sanderson, pp. 133-9. 10 Report on Higher Technological Education (1945); Sanderson, Missing Stratum,

pp. 139-41. 11 Sanderson, Missing Stratum, pp. 146-7. 12 For example, PRO CAB 130/153: Treasury, ‘Social Investment’, 221911958. 13 PRO PREM110785: D. Eccles to Prime Minister, 6/6/1955. 14 On these aspects of Conservative education policy, see C. Knight, The Making of Tory Educatton Policy in Post-war Brztatn, 1950-86 (Lewes, 1989). 15 PRO CAB 129/93: ‘A Drive in Education’, 14/7/1958; PRO PREM 1112643: B. Trend to Prime Minister, 23/7/1958 and, Prime Minister, ‘The Education Drive’, 14/l/1959. 16 Newsom Report, Half Our Future (London, 1963): Robbins Report Higher Education, Cmd. 2154, Parl. Papers, 1962/3, Vol. II. 17 Higher Technological Education (London, 1945): Barlow Report, Scientrfic Manpower, Cmd. 6824, Parl. Papers, 194516, Vol. XIV. 18 M. Sanderson, The Universities and British Industry, 1850-l 970 (London, 1972), pp. 349-5 1. 19 PRO T234/153: ‘Training and Education of Scientists, 1956-8’. 20 PRO PREMl l/2283: ‘Technical Education, 1952-8’. 21 Sanderson, The Unzversities, p. 352; K.G. Gunnicott and M. Blaug, ‘Manpower Forecasting since Robbins: a Science Lobby in Action’, Hzgher Education Review, 2 (1969), pp. 56-74. 22 PRO T227/841: ‘Higher Technical Education in Universities, 1952’; T227/1157: Memo by H. Brittain, 23/12/1955. 23 PRO T227/1159: J. Slater, ‘University Building Programme’, 2/12/1956. 24 PRO T2271868: ‘Grants to Universities: Quinquennial Review 1957-62’. 25 See Chapter 5. 26 PRO T227/707: ‘Technical Education in Certain Foreign Countries’, 27/l/1956. 27 Tecbnzcal Education Cmd. 9703, Parl. Papers, 195516, Vol. XXXVI, appendix 1, states that technological graduates per million of population are: the UK, 57; USA, 136; USSR, 280; France, 70 and West Germany, 86. On such comparisons, see PRO T227/707: ‘Appendix to White Paper on Technical Education’, 15/2/1956. See also, Conservative Political Centre, Technical Education (London, 1956). 28 PRO T227/707: ‘Development of Technological Education, 1956’; T2271708: ‘White Paper on Technical Education, 1956’. 29 PRO T227/280: ‘Higher Technological Education, Report of Parliamentary and Scientific Committee 1954’.

195

NOTES

30

para. 6: S. Cotgrove, Technical Education and Soczal Change 1958), p. 184. Techntcal Education, paras 65-75. Cotgrove, Technical Education, p. 178. ‘Human Capital and Productivity in S. Broadberry and K. Wagner, Manufacturing During the Twentieth Century: Britain, Germany and the USA Aspects of Post- War European Growth in B. van Ark and N. Crafts (eds), Quantitative (Cambridge, 1996). K. Liepmann, Apprenticeship: an Enquiry into its Adequacy under Modern Con&tons (London, 1960); G. Williams, Recruitment to Skilled Trades (London, 1957); and Williams, Apprenticeship in Europe (London, 1963), Ch. 1 Industrial Democracy (London, 1897). p. 481, cited in Liepmann, Apprenticeship, pp. 196-7. Ibid., p. 109: Williams, Recruitment, pp. 151-5,162-70. Technical Education, paras 76-86. Carr Committee, Trainingfor Skill (London, 1958). The great majority were boys. Training far Skill, pp. 3-4. Ibid., pp. 5-6,30-l. for Craft Training’, PRO T227/834: Ministry of Labour, ‘Apprenticeship 1959/60; PRO LAB 19/621: National Joint Advisory Committee, ‘Apprenticeship’, 1961-3; LAB10/1488: NJAC Mins, 26/7/1961. PRO CAB1340689: Economic Policy Committee, Mins, 3/5/1961; CAB 134/1690: Ministry of Labour, ‘Shortage of Trained Manpower’, 28/4/1961; CAB 13411694: Ministry of Labour, ‘Shortages of Skilled Manpower: LevyRebate System’, 5/7/1963; PRO LAB 18/744: ‘First Year Apprenticeship Training Scheme’ 1958-62. PRO CAB 13411695: Ministry of Education, ‘Industrial Training’, 71511962; CAB 134/1696: Ministry of Labour, ‘Industrial Training Arrangements’, 9/10/1962 and 16/11/1962; CAB 134/1701: Ministry of Labour, ‘Industrial Training Bill’, 5/7/1963; PRO PREM 1 l/4169: ‘The Ministers New Education Proposals’, 81511962. Liepmann, Apprenticeship, p. 198; Williams, Apprenticeship, p. 206. FBI, Education In Transition: the Implications for Industry of the Government Reports on Education and Training, 1959-l 964 (London, 1965). PRO CAB 129/93: ‘A Drive in Education’, 14/7/1958. PRO CAB 129/95: ‘Social Investment: Education’, 21/11/1958. PRO CAB 128129: Cabinet Mins, 611211955; CAB 129195: Ministry of Education, ‘Social Investment: Education’, 21/11/1958; CAB 130153, GEN 657: ‘Social Investment, 1958’. PRO PREM 1 l/3290: ‘Financial Policy, 1959-61’; PREM 1 l/4169: ‘Education, 1960-63’. PRO PREM 1 l/4169: 0. Clarke, ‘The Minister’s New Educational Proposals’, 81511962. PRO CAB 1291107: Ministry of Education, ‘Educational Expenditure’, 11/12/1961. PRO CAB 129/107: Chief Secretary to Treasury, ‘Civil Public Investment, 196314 to 1965/6’, 18/12/1961. PEP, Growth in the British Economy (London, 1960) p. 73; M. Kaser, ‘Education and Economic Progress: Experience in Industrialised Market Economies’ in E.A.G. Robinson and J. Vaizey (eds), The Economics of Education (London, 1966), pp. 89-173. Technical

Education,

(London, 31 32

33

34

35

36 37

38 39 40

41 42 43

44

45 46 47 48 49 50 51 52 53 54

196

NOTES

5 5 PRO CAB 130/92, GEN 8 11: Treasury Evidence to Robbins Committee, 196 1: Robbins Report Higher Educatzon, Evidence Cmnd 2 154-X1, written evidence of Treasury, pp. 1,956-2,000, oral evidence pp. 2,001-17; PRO T 298/272: National Resources Group ‘Robbins Committee Draft Treasury Memo, “A”: Economic and Financial Issues’, Sep. 1961. 56 PRO CAB 134/1667: Committee on Education Policy, Treasury, ‘Robbins Report’, 24/9/1963. 57 PRO ED 46/1008: Memo. by employers, Sep. 1961; ibid., note by D. Eccles, l/1/1961. 58 PRO ED 46/1009: press statement on ‘Day Release’, 26/7/1962; ED 204/4: ‘Day Release: the Report of a Committee set up by the Minister of Education’, 1963. 59 PRO CAB 134/1664: Committee on Education Policy Mins, lO/2/196O, 24/2/1960, 14/3/1960. 60 Sanderson, Universities, p. 35 1. 61 Sanderson, Missing Stratum. 62 Conservative Political Centre, Technrcal Education, p. 6. 63 S.J. Prais, ‘Vocational Qualifications of the Labour Force in Britain and Germany’ National Instztzlte Economic Review, 98 (198 l), pp. 47-59. 9

INVESTMENT

AND

TECHNICAL

CHANGE

1 OEEC Fourth Report, Europe: The Way Ahead(Paris, 1952), p. 340. 2 A. Shonfield, British Economic Policy Since the War (London, 1958), p. 267. Note that Shonfield criticised the Attlee government alongside the Conservatives on this issue. 3 A. Cairncross, ‘Reflections on the Growth of Capital and Income’, Scottish Journal ofPolitical Economy, 6 (1959), p. 99. 4 W.A. Eltis, The Classical Theory of Economic Growth (London, 1984). 5 F. Hahn and R.C.O. Matthews, ‘The Theory of Economic Growth: A Survey’, Economtc Journal, 74 (1964), pp. 779-80. Expounders of growth theory tend to be highly defensive on the question of its ‘usefulness’; see, for example, H. Jones, Modern Theories of Economic Growth (London, 1975), pp. 8-10. 6 M. Scott, A New View of Economic Growth (Oxford, 1989), pp. 70-81. 7 Pioneers mcluded M. Abramowitz, ‘Resource and Output Trends in the US Since 1870’, Amerzcan Economic Revzew, Papers and Proceedings 46 (1956), pp. 5-23; J. Kendrick, ‘Productivity Trends: Capital and Labour’, Review of Economics andstatistics, 37 (1956), pp. 248-57; also E.F. Domar, ‘On the Measurement of Technical Change’, Economic Journal, 7 1 (1961), pp. 709-29. The key text in the popularisation of this approach was E.F. Denison, Why Growth Rates D$,fw (Washington DC, 1967). 8 There has recently been renewed emphasis on both the importance of investment and its inseparability from technical change: see Scott, New View of Economzc Growth and P. Romer, ‘Increasing Returns and Long-Run Growth’, Journal of Polzttcal Economy, 94 (1986), pp. 1,002-37. For the implications of this new approach see, for example, N. Crafts, ‘Productivity Growth Reconsidered’, Economic PO&, 15 (1992), pp. 388426. 9 PRO T230/284: ‘Long-Term Economic Trends in the UK’ (n.d. but 1955); for example, PRO BT190/2: Chancellor of the Exchequer’s statement to NPACI, 11511953. 10 PRO CAB 139/491: Discussion of ‘Report of Working Party on Economic Growth’ 1961; PRO T298/49: H. Campion to R. Hall, 61111961. These calculations were of gross investment. Calculations of net investment, inherently more

197

NOTES

11 12

13 14 15

16 17

18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

problematic, were in their infancy, though a key article was published in 1955: J. Redfern, ‘Net Investment in Fixed Assets in the UK, 1938-53’, Journal of the Royal StattrttcalSociety, 118 (1955), pp. 141-82. PRO BT213/90: P. Vinter to H. Campion, 2/10/1957. A. Cairncross, ‘Saving and Investment Since the War’, Westminster Bank Review (February 1955), pp. 4,s; see also Calmcross, ‘The Place of Capital in Economic Progress’, Internattonal Socral Science Bullettn, 6 (1954), pp. 232-6. For a dogmatic assertion of the need to invest more, P. Wiles, ‘Growth versus Choice’, Economic Journal, 66 (1956), pp. 244-55. PRO T230/346: D.M.B. Butt, ‘Colin Clark on the Declining Importance of Capital’, 16/3/1955. C. Clark, Growthmanship (London, 1961). PRO T230/284: CR. Ross, ‘Can We Double our Standard of Living?‘, 29/10/1954. PRO T230/306: R. Hall to B. Gilbert, 13/7/1956, covering discussion of PR (56)3, ‘Future of the UK in World Affairs: Needs of the UK Economy’. Note that Hall thought such an increase implausible, because of inflationary and balance-of-payments consequences. S. Brittan, Steering the Economy (London, 1970), pp. 214-17. In 1961 a senior treasury official, R.W.B. Clarke, stressed the recent rapid rise m investment and suggested optimistically that ‘before we know where we are we shall be bursting out the top of the league table’. See PRO T298/50: Note by Clarke, 23/2/1961. Contemporary calculations suggested no trend increase in the rate of increase in GDP in the 195Os, though some increase in the per worker figure. See PRO CAB 134/1816: Treasury, ‘Economic Growth’, 3/l/1961. Cited in PRO CAB 134/1816: Treasury, ‘Economic Growth’, 3/l/1961. See also CAB 134/1817: discussion of above document at Economic Planning Board, 30/l/1961. United Nations, World Economic Survey (New York, 1962), pp. 5-6. PRO T230/579: P. Vinter to R.W.B. Clarke, ‘Elements of a Policy for Economic Growth’, 27/l/1961; F. Atkinson to P. Vinter, 9/3/1961. See also T2301584: ‘W.P. on Economic Growth, Draft Report to Ministers’, 12/5/1961. PRO T171/595: 1962 Budget Papers, Board of Trade, ‘Tax Reliefs on Industrial Investment’, 5/2/1962. PRO CAB 134/1696: ‘Economic Growth’, 28/6/1962; CAB 129/110: Chancellor of the Exchequer, ‘Economic Growth’, 5/6/1962. For example, A. Lamfalussy, Britain and the Six (London, 1963); S. Pollard, The Wasting of the British Economy (London, 1982), Chs 2, 3. R. Hall, ‘Britain’s Economic Problem’, Economist, 23/9/1961. C. Schenk, The Sterling Area (London, 1994). M. Steuer et al., The Impact of Foreign Direct Investment in British Manufacturzng Industry (London, 1973), pp. 189-90. G. Jones, ‘The British Government and Foreign Multinationals before 1970’ in M. Chick (ed.), Governments, Industries and Markets (Aldershot, 1990), pp. 201-4. PRO T230/306: Treasury, ‘Overseas Investment Policy’, 25/7/1956. Jones, ‘British Government’, pp. 201-2,208-10. PRO CAB 134/842: Economic Policy Committee, Mins, 2/l/1952; PRO T229/341:‘Review of Control of Investment’, 1952. {2bFj3T The Management of the Brutish Economy (Cambridge, 1965), pp.

33 A ‘blow-by-blow’ Brittan, Steering,

account ofthe stop-go cycle in the 195 l-64 period is given by pp. 187-290; and for 1952-60 in Dow, Management, Ch. 3.

198

NOTES

34 PRO T1711592: Budget Committee, 221211962; PRO T230/605: ‘British Response to OECD Questionnaire on Economic Growth’, 1 l/l l/1961. 35 A. Cairncross, Essays in Economzc Management (London, 197 l), p. 119. 36 It was a recurrent theme of debate in this period whether constricting domestic demand ‘squeezed-out’ exports, or by reducing domestic output, raised costs and so reduced exports by decreasing their competitiveness. 37 A. Whiting, ‘An International Comparison of the Instability of Economic Growth’, Three Banks Review, 66 (1976), pp. 26-46. 38 R.C.O. Matthews, ‘Why Has Britain had Full Employment Since the War?‘, Economic Journal, 78 (1968), pp. 555-69. Also R.C.O. Matthews, C.H. Feinstein and J.C. Odling-Smee, Brutish Economic Growth 1856-l 973 (Oxford, 1982), pp. 386-419. 39 M. King, ‘The Profits Crisis: Myth or Reality?‘, EconomzcJozlrnal, 85 (1975). 40 Matthews et al., Economic Growth, p. 364. 41 A detailed account of these allowances and other aspects of company taxation is given in C.L. Melliss and P.W. Richardson, ‘Value of Investment Incentives for Manufacturing Industry 1946 to 1974’ in A. Whiting (ed.), The Economtcs of lndzlstrial Subsidies (London, 1976), pp. 2343. 42 PRO CAB 134/847: ‘Report by the Investment Programmes Committee on Investment in 1953 and 1954’, 30/l/1953; PRO T170/414: ‘Incentives for Industry’, 17/2/1953. 43 PRO T171/442: Budget Papers, 1954; A. Cairncross and N. Watts, The Economic Section 1939-46 (London, 1989), p. 264. 44 PRO T171/498: Budget Papers, 1959, Vol. 3. 45 PRO T171/592: Budget Committee, Mins, 2/11/1961; T171/595: F. Lee to G. Hubbach, 12/3/1962. 46 PRO T171/595: Board of Trade, ‘Tax Relief on Industrial Investment’, 21211962. 47 Brittan, Steertng the Economy, p. 277. 48 PRO T171/592: Budget Committee, Mins, 22/2/1962. 49 Matthews et al., Economic Growth, p. 366; C. Blake, ‘Some Economics of Investment Growth and Allowances’ in Whiting, Economics of Industrial Subsidtes, pp. 89-104. 50 Mellis and Richardson, ‘Value of Investment Incentives’, Table 1. 5 1 Matthews et al., Economic Growth, p. 396. 52 Thomas, Finance of British Industry (London, 1978), pp. 233-7; T. Balogh, ‘Differential Profits Tax’, EconomicJournal, 68 (1958), pp. 528-33. 53 Thomas, Finance, pp. 220,236-7. 54 Matthews et al., Economic Growth, p. 396. 55 B. Tew and R.F. Henderson, Studzes in Company Finance (Cambridge, 1959), Ch. 16; Radcliffe Committee, Report of Committee on Working of the Monetary System, Cmnd. 827, Parl. Papers, 1958/9, Vol. XVII, paras 932-52. 56 K. Williams, J. Williams and D. Thomas, Why Are the Brztisb Bad at Mantlfacturing? (London, 1983), pp. 58-76. 57 P.D. Henderson, ‘Government and Industry’ in G.D.N. Worswick and P.H. Ady (eds), The Brztisb Economy zn the 1950s (Oxford, 1962), pp. 332-4. 58 Matthews et al., Economic Growth, p. 348. 59 Matthews, ‘Why Has Britain?‘, pp. 562-3; Matthews et al., Economtc Growth, p. 388. 60 J. Tomlinson, Employment Policy: The Cruczal Years 1939-5 1 (Oxford, 1987). 61 Matthews et al., Economic Growth, p. 389.

199

NOTES

62 PRO T171/592: Budget Committee, Mins, 22/2/1962; T1711414: ‘Tax Relief for Industry’, 16/2/1953; T230/305: R. Hall to J. Downie, 31/l/1956. 63 The first of these White Papers (Cmnd. 1203, Parl. Papers, 1960/l, Vol. XXVII, pp. 4-9) offers an overview of the scale and control of public investment. 64 G. Hutton, ‘The Capital Question’, Westminster Bank Reutew (May 1956), pp. l-6; PRO CAB 134/844: ‘Investment in Productive Industry in 1953’, 91611952. 65 Cmnd. 1203, para. 9; PRO T171/576: Budget Papers, 1961. 66 PRO CAB 134/844: ‘Investment in Productive Industry in 1953’, 171511952; CAB 134/847: ‘Investment Programmes Committee, Report on Investment in 1953 and 1954’, 30/l/1953. 67 PRO CAB 134/1689: Economic Policy Committee, Mins, 9/11/1961; CAB 134/1693 Economic Policy Committee, Mins, 31/l/1962. 68 Harriet Jones, ‘New Tricks for an Old Dog? The Conservatives and Social Policy, 1951-5’ in A. Gorst, L. Johnman, and W. Scott Lucas (eds), Contemporary British Hzstory, 1931-61 (London, 1991), pp. 33-43. These booms still left housing investment below its inter-war level. Matthews et al., Economic Growth, pp. 409-10. 69 Dow, Management, p. 216; Matthews et al., Economic Growth, pp. 376,405. 70 PRO CAB 134/844: Ministry of Health, ‘Capital Investment m Health and Welfare Services’, 16/6/1952; CAB 134/847: President of Board of Trade, ‘Investment Programmes’, 21/2/1953; PRO T229/668: Treasury, ‘Investment Review, 1953/4’; T234/334: ‘Investment: General Policy and Information, 1956-8’. Beginnings, but no more, of such an approach may be seen in the Crowther Report on Raising the School Leaving Age in 1959 and in Treasury evidence to the Robbins Committee in 1962. R. Clarke, Public Expenditure (London, 1978), pp. 16, 194-5. 71 PRO CAB 134/1849: ‘Director General of NEDO’s Report on Expansion of the British Economy, 1961-66’, 1962. 72 Perhaps some complacency about British levels of investment may help explain this seeming paradox. PRO T230/579: F. Atkinson to P. Vinter, 9/3/1961; A. Cairncross to F. Lee 18/8/1961. Also important was the public support for the 4 per cent growth target, which meant that future public expenditure was planned on this basis. R. Clarke, Pzlblic Expendzture, Management and Control (London, 1978), Chs 7,8. 73 6th Annual Report of the ACSP 195213, Cmd. 8874, Parl. Papers, 195213, Vol. XVII; PRO T229/535: ‘ACSP, Investment: Research and Development’; PRO CAB 132/107: ACSP Mins 1953. 74 PRO BT258/996: Board of Trade Committee on EPA, ‘Survey by EPA of Research’, 22/10/1959; PRO DSIR 17/661: DSIR Economics Research Committee, ‘Note on Enquiry into R & D Expenditure’, 12/11/1957; DSIR, Industrial Research and Development Expendtture, 1958 (London, 1960); C. Freeman and A. Young, The R&-D Effort in Western Europe, N. Amerzca and the Soviet Union (Paris, 1965). UNESCO was also active in this field; DSIR, Overseas Notes (London, 1964). 75 Freeman and Young, The R&D Effort; D.H. Edgerton, ‘Science and Technology in British Business History’, Business History, 29 (1987), pp. 84-103. PRO CAB 132/166: ACSP Memo. by Ministry of Science, 30/l l/1962. 76 Though the first detailed comparison with the USA was not until C. Freeman, ‘Research and Development: A Comparison Between British and American Industry’, National Institute Economic Review, 20 (1962), pp. 21-39. A DSIR

200

NOTES

77 78

79

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99

Survey of 195 5 on Scienceand Technology in West Germany was not concerned with comparing experience there to that in Britain. 6th Report of ACSP, para. 3. Scientific and Technical Manpower in Great Britain 1962, Cmnd. 2146, Parl. Papers, 196213, Vol. XXIV, Report of the 1965 Triennial Manpower Survey of Engineers, Technicians, Scientists and Technical Supportzng StafA Cmnd. 3 103, Parl. Papers, 196617, Vol. XxX1X. C.F. Carter and B.R. Williams, Science and Industry: Policy for Progress (Oxford, 1959), Ch. 11; N. Vig, Science and Technology in Brutish Politics (Oxford, 1968), pp. 19-22. Note that, contrary to a common perception, an increasing proportion of graduates in this period (as throughout the twentieth century) were in science and engineering. See Chapter 8, above; PRO PREM 11/3290: Education Policy Committee, ‘Further Advances in Scientific and Technological Education’, 1960; PRO BT190/12: NPACI Mins, 21211962. PRO DSIR 17/66 1: the first Chairman was Professor E.A.G. Robinson. Vig, Science and Technology, p. 31; Civil development contracts were begun but very slowly, the first only in 196 1 and the total involved by 1964 was only & 1 m. Vig, Science and Technology, p. 63. Lord Hailsham, Science and Politics (London, 1963), Ch. 1. Vig, Science and Technology, pp. 74-80. D. Burn, The Political Economy of Nuclear Energy (London, 1967); C.M. Buckley and R. Day, ‘Nuclear Reactor Development in Britain’ in K. Pavitt (ed.), Tecbnzcal lnnovatton and British Economic Performance (London, 1980), pp. 252-66. P. Mottershead, ‘Industrial Policy’ in ET. Blackaby (ed.), British Economic Policy 1960-74 (Cambridge, 1978), pp. 450-7. Burn, Political Economy, p. 85; Freeman and Young, R&D Effort, p. 73; Peck, ‘Science and Technology’, pp. 47 l-6. D.C. Paige, ‘Defence Expenditure’, National Instttute Economic Review, 10 (1960), p. 28. M. Chalmers, Payingfor Defence (London, 1985), p. 68. D. Greenwood, ‘Defence and National Priorities Since 1945’ in J. Bayhs (ed.), Bntisb Defence Policy tn a Changing World(London, 1977), p. 186. Ibid., pp. 186-S; M. Dockrill, British Defence Since 1945 (London, 1988), pp. 45-58. Defence: OutlineofFuture Policy, Cmd. 124, 1957, paras 7, 59. Report on the 1965 Triennial Manpower Survey, para. 29. Chalmers, Paying for Defence, p. 119. PRO CAB 131/24: ‘Defence R&D programme in 1960/61’, 20/12/1960; PRO DEFE 7/1419: ‘Control ofDefence R&D 1960/61’. C.J. Bartlett, British Forezgn Policy in the Twentieth Century (London, 1987), p. 149 ; The Economist, 1/2/1958. For example, PRO CAB 13lilS: Defence Committee, Mins, 27/2, 31/7/1957; PRO DEFE 7/1644: ‘Review of Defence R&D 1959’; PRO T2341330: ‘LongTerm Review, 1956-9’. PRO PREM 11/3707: ‘Defence, 1961/2’; PRO CAB 131/28: Defence Committee, Mins, 9/2/1963, 10/7/1963; PREM 11/4726: ‘Defence, 1962/4’. PRO BT190/10: NPACI, Office of Lord President, ‘The Government and Technology’, Feb. 1958; BT190110: Lord President, ‘Government Support for Industry, 19/4/1963. Independent in this context commonly appeared in quotation marks m government documents from 1958 onwards. See, for example, PRO PREM 1113723: ‘Blue Streak’.

201

NOTES

Research Committee: Treasury 100 PRO DEFE 7/1394: ‘Defence Policy Representation, 1957/S’. PRO T230/475: ‘DSIR 1960’; PRO CAB 131/25: Defence Committee, Mins, 27/4/1961, 19/12/1961. 101 The Economist, 8/9/1956. 102 PRO CAB 134/1851: Ministry of Aviation, ‘Modernising Britain’, 18/2/1963. 103 PRO CAB 134/1849: Hogg to Maudling, 6/11/1962; CAB 134/1851: Ministry 24/l/1963; Ibid., Board of Trade, of Education, ‘Modernising Britain’, ‘Modernising Britain’, 51311963 and PRO BT258/1811: ‘Review of the Organisation for the Promotion of Civil Science: the Trend Committee, 196213’. 104 PRO T230/583: A. Cairncross to R.W.B. Clarke, 3/4/1964. 105 On small firms and R&D see C. Freeman, The Role of Small Firms in Innovation in the UK Since 1945, Bolton Committee Research Report No. 6 (197 1). 106 The Board of Trade responded negatively to the idea in the Radcliffe Report of 1959 that small business should be helped by a government insurance scheme for financial institutions lending to small firms. PRO DSIR 17/803: ‘Note on the Proposal for an Industrial Guarantee Corporation’, 25/5/1960. 107 Edgerton, ‘Science and Technology’; idem.,‘Libetal Militarism and the British State’ New Left Revww, 185 (1991), pp. 138-69; idem., Science, Technology and the British Industrial ‘Decline’ 1870-l 970 (Cambridge, 1996). 108 Edgerton, Science, p. 63 109 John Dunning had suggested the need for a ‘division of labour’ in R&D between Britain and the USA as early as 1956, based on his pioneering work on the role of US multinationals in Britain, ‘Anglo-American Research Co-operation and Industrial Progress’, District Bank Review, 118 (1956), pp. 3-22. However, his proposal was based on the idea that Britain had a clear comparative advantage in basic research, the US in development work, which through a well-established cliche by the 1950s was strongly attacked in the important work of Carter and Williams from the same period. C.F. Carter and B.R. Williams, Industry and TecbnzcalProgress (Oxford, 1957), pp. 5-7. 10

OVERVIEW

AND

CONCLUSIONS

1 See material in PRO CAB 129/52, CAB 134/1315 and CAB 13411929. 2 A. Gorst and L. Johnman, The Szlez Crisis (London, 1997), especially Chapter 5. 3 MRC, MSS 200/F/3/D3/7/96: C orrespondence between N. Kippmg and C. Norris, 13/l/1961 and 7/2/1961. 4 PRO BT6414742: Minute 5 by EW. Glaves-Smith, l/3/1954. 5 Anon., ‘It All Comes Out In The Wash’, Focus, 1 (1966), p. 15; Research Institute for Consumer Affairs, Car Defects (London, 1965), pp. 6-7. 6 R.M. Belbin, Quality Calamities and their Management Implications (London, 1970), p. 8. 7 N.A. Dudley, ‘Comparative Productivity Analysis-Study in the United Kingdom West Midlands Engineering and Metalworking Industries’, Internatzonal Journal of Production Research, 8 (1970), p. 400. 8 J.M. Williams, ‘Materials Handling and Manufacturing Management’, in Department of Industry Industries Technologies Secretariat (ed.), Manufacturzng Management and Industrial Technologies: Symposium Papers (London, 1976), p. 30. 9 Management Education, Training and Development Committee, Management Trainmg in Industrial Relations (London, 1975), p. 1; D. Tookey, E. Lea and C. McDougall, The Exporters. A study of Organisatton, Staffing and Tratntng (Ashridge, 1967), p. xii.

202

NOTES

10 11

12 13 14 15

16

17

18 19

20

21

22

23 24

See, for example, C.C. New, ‘The Missing Education Link’, Management Today (October 1976), pp. 3%9,42. J.M. Silberman, ‘The History of the Technical Assistance Programs of the Marshall Plan and Successor Agencies 1948-1961’ (Draft Report to the Industry Development Division of the World Bank, November 1992), pp. 34,61. M. Nolan, Vistons of Modernity. American Business and the Modernization of Germany (New York and Oxford, 1994), pp. 133-7. J. McDonald, ‘French Business Talks Back, Fortune (April 1952), p. 178. H. Hartmann, Authority and Organization zn German Management (Princeton, New Jersey, 1959), p. 166. A. Carew, Labour under the Marshall Plan. The Politics of Productivity and the Marketing of Management Science (Manchester, 1987); International Cooperation Administration, European Productivity and Technical Assistance Programs. A Summing Up (19481958) (Paris, 1958), p. 175. See, for example, NAW, RG 469: Economic Cooperation Administration, Officer of the Administration, Subject Files 1948-49, Box 1, File on ‘ECAAnalysis of Opinion Studies’. The Italian situation is well described in L. Segreto, ‘Sceptics and Ungrateful Friends v. Dreaming Social Engineers: The Italian Business Community, the Italian Government, the United States and the Comitato Nazionale per La Produttiva’, in T.R. Gourvish and N. Tiratsoo (eds), Missionaries and managers: Amerzcan Influences on European Management Educatton, 1945-l 960 (Manchester, 199% pp. 77-94. H.W. Ehrmann, Organized Buszness in France (Prmceton, New Jersey, 1957), p. 340. NAW, RG 469: Records relating to EPA 1953-7, Box 3, File on ‘Productivity and Applied Research Committee: Committee Meetmgs through 1957’, PRA/M (5 5)7 Annex, Memorandum and Expose by the Delegation for Germany, ‘Productivity in Germany’, 221911955, pp. l-6; and EPA, Community Action in Western Europe (Paris, 1957), pp. 15-16. Segreto, ‘Sceptics and Ungrateful Friends’; R. Kuisel, Seduczng the French. The Dilemma of Americantzation (Berkeley, Los Angeles and London, 1993), pp. 70-102. See, for example, M.F. Gulllen, Models of Management. Work, Authority, and Organization in a Comparattwe Perspective (Chicago and London, 1994), pp. 126-37. This point is also stressed in 0. Bjarnar and M. Kipping, ‘The Marshall Plan and the Transfer of US Management Models to Europe: An Introductory Framework’, in M. Kipping and 0. Bjarnar (eds), The Americanisatzon of European Business (London, 1998), pp. 1-17. E.L. Tuff, ‘Men Who Know How - Productivity Volunteer Force’, FBI Review, No. 93 (1957), pp. 37-8. NAW, RG 469: Mission to France, Office of the Director, Communications and Records Unit, Subject Files 1948-56, Box 170, File on ‘Productivity Program June-Dec. 1953’, Memo. by Sol D. Ozer to W.F. Russell, 17/8/1954, PP.

1, 8.

203

INDEX

Australia, authority

Administrative Staff College (ASC) 67-8 Advisory Committee on Scientific Policy (ACSP) 13 1, 15 5 AEI 77 agriculture 21, 106, 114, 117 aircraft industry 158-9, 163 Allen and Hamilton 43 America see United States Amery, J. 2, 14 Amery, L. 107 Anglo-American Council on Productivity (AACP): achievements 39,45-7, 93, 99; activities 36-7, 43-4, 51, 54, 57, 68, 92-3; attitudes 90; Conservative attitude to 17; FBI attitude to 97; influence on BPC 38-9; influence on ECA 45-6; origins 17, 36; problems 84 applicability of American techniques 90-4 apprenticeship 134-6, 140 Ashridge Management College 167 Asquith, H.H. 3-4 Association of Teachers of Management 70 Aston University 133 Atomic Energy Authority 158 Attlee, C. 36 Attlee government: economic policy 23, 104; education policy 129; industrial policy 1, 166, 170; monopoly legislation 17; postwar reconstruction 21; productivity policy 19, 3 1; profit taxation 150; R&D policy 156 Austin company 56

apprenticeship 1

schemes

135

balance of payments (1951-64) 21, 22-3 (Table 2.1), 25, 103, 105 Baldwin, S. 9 Baldwin government 1 Balfour of Burleigh Committee 6, 7, 10 Bank of England 13, 14, 24, 28 Bankers Industrial Development Corporation 14 Banks, J.A. 42 Barlow Committee (1946) 131, 156 Benton-Moody programmes 41-2 (Table 3.1); aims 38,41, 99-100; BIM role 80; British assessment of 45; follow-up 44; funds 38,41-2, 52,69,99-100; management education 69, 7 1; NUMAS, 87 Board of Trade: EPA policy 98; European policy 112, 113, 116; international competition issue 89, 113; investment policy 145, 149; monopoly policy 119, 122-3; R&D policy 162; RPM 121-2 Board of Trade Journal 31 Boer War 3 Boothby, R. 10, 12 Bow group 113 Bradford University 52, 54 Bretton Woods 22, 23 Bristol University 73 British Drop Forgers 93 British Employers’ Association 80 British Institute of Management (BIM): American support for 69, 80-l; in early 1950s 78-80; inter-firm

204

INDEX

comparison 63-4; isolation 68; launch (1948) 67; management education 66; quality control research 166; work study initiatives 53 British Internal Combustion Engine Manufacturers Association 92 British

Management

Review

Central Statistical office 143 Centre for Interfirm Comparison (CIFC) 64-5 Chamberlain, J. 3-4, 106 Chamberlain, N. 11 Chambers, P. 116 Chandler, A.D. Jnr 86 Chandos, Lord 73 Cherwell, Lord 133 Churchill, W. 9, 11, 16 Churchill government 79, 164 Cincinnati University 91 Clark, C. 143 coal industry 10, 11, 17 Cohen Committee 28 Colleges of Advanced Technology (CATS) 133, 134 Colwyn Committee on National Debt and Taxation 10 Committee for Materials Handling 56-7 Committee on Trusts 7-8 Common External Tariff 109-10, 113, 118 Commonwealth 111, 114 Commonwealth Economic Conference (1952) 105,106 Commonwealth Preferences 107-8, 114; seealso Imperial Preference communism 103, 168 Companies Act (1948) 15 1 competition: Conservative policy 2, 17, 19, 102-3; domestic 2, 119-24; European policy 109-19; international 2, 89, 103-9 Concorde 159 Confederation of British Industry (CBI) 78; seealso Federation of British Industry Conservatism, ideology 1 Conservative Party Conferences 107 Conservative Research Department 116 Consumers’ Association 166 consumption 29 control systems 5 l-2 co-operation, worker 17 Co-operative movement 12 1 cost-cutting 10 cotton industry 14, 15, 23, 31, 66, 113 Cotton Spinning Industry Act (1936) 14,15

96

British Motor Corporation 61 British Productivity Council (BPC) 38-41; aims 38; assessments and evaluations 48-9; bronze and brass industry review 46-7; FBI relationship 165; funding 38; interfirm comparison 63-4; origins 37, 99; problems 85; quality control issues 58; standardisation issues 94; work study unit 53 British Standards Institution (BSI) 92 British Steel Founders’ Association 46 Brittan, S. 33 Broadberry, S. 86, 87, 88, 89-90 bronze and brass casting industry 46 Brunei University 133 BTH company 5 1 Budget Committee 149 Bureau of Labor Statistics (US) 63 Burn, D. 159 Burns, T. 42 Business

87

Butler, R.A.: education policy 127, 128-9; European policy 111, 14; on BIM 79; on Conservative policies 16; on Worker’s Charter 18; Policy Committee on Economic Growth 116; support for BPC 99 ‘Butskellism’ 26 Cabinet Mutual Aid Committee 49 Cabinet Office 104 Cairncross, A.K. 104, 143, 150 Cambridge University 69, 7 1, 73 Cambridge University Appointments Board 67 Capie, F. 12 Capital Issues Committee 15 1 car industry 111, 166 Carr, R. 135 cartels 15, 38,86, 89-90, 120 Carter, C.F. 42 Caulkin, S. 62 Central Electricity Board 11

205

INDEX

Council of European Industrial Federations (CEIF) 98 Council of Industry for Management Education 78 Courtaulds 77, 122 craft skills 134-5, 140 Crafts, N.F.R. 86, 87, 88, 89-90 Craig, C. 62 Cranfield, College of Aeronautics 4 1, 74 Cripps, S. 17, 20, 36, 91 Crowther Report (1959) 129, 138, 140 Cunliffe-Lister, P. 8, 12 currency convertibility 22-3, 24, 105 Currie, R.M. 53 day release 138, 140 decision-making 60 defence spending seemilitary demographic issues 130 Department of Industry 56 Department of Scientific and Industrial Research (DSIR) 6,41-2, 53, 155, 157 depreciation allowances 148 De-Rating Act (1929) lo-11 devaluation 23 Director 7 2, 95 Docker, D. 6-7 domestic: competition 2, 119-24; economic policy (1951-64) 25-9 Douglas-Home, A. 107 Dudley, N. 166 dumping 3,6 Dunlop 43, 77 Duprey, C. 54, 59 dyestuffs 8 Eccles, D. 111, 127, 128, 130, 136 Economic Cooperation Act (US 1948) 38 Economic Co-operation Administration (ECA) 36-7,43-5, 83; seealso London Mission Economic Growth paper (1962) 145 Econonuc Implications of Full Employment White Paper (1956) 30 Economic Policy Committee 12 l-2 Economic Surveys 30-l Economist, The 15,47,49, 74, 162 Eden, A. 3, 117, 128 Edgerton, D. 163

Education Act (1902) 5 Education Act (1944) 128-9, 135, 136, 138,140 education and training 126-8, 165; apprenticeship 134-6; growth of enrolment in scientific and engineering courses (1950-63) 15 7 (Table 9.7); higher and technological education 131-4; management 50, 68, 70-7; modernisation 136-S; public expenditure 127 (Table 8.1), 140; schools 128-31 Edzlcation in Transition (1965) 136 efficiency, Conservative Party and l-3 Efficients 4-5 egalitarianism, opposition to 1 Egypt 24 elections: (1906) 3; (1922) 10; (1951)

29; (1955) 26, 29, 144; (1959) 26, 29, 32; (1964) 26, 32, 123, 147 Emerson and Booz 43 EMI 77 employer politics 94-8 employment, full 19, 21, 28, 29-30, 104, 130; seealso unemployment Employment Policy White Paper (1944) 16 Engineer 47, 65, 91 Engineerzng 47, 93 Engineering Advisory Council 89 engineering industry 166 Engineerzng Inspection 5 7 English Electric 77 Europe, Conservative policy: (1956-63) 109-14; (1960-4) 114-19 European Coal and Steel Community

109 European Economic Community (EEC) 29, 109-10, 113, 114, 116-18, 124 European Free Trade Area (FTA) 109-l 1 European Free Trade Association (EFTA) 110,112-13 European Productivity Agency (EPA) 40-l; activities 40-1, 52, 97-8, 168-9; assessments and evaluations 48-9; education and trammg policy 69, 70, 71-2; funding 84; human relations conference 83; Inter-firm comparison 63; origins 37,40; problems 84-5; production issues 52; publications 87

206

INDEX

evaluations 48-9 exchange controls 23 exchange rates 22 exports 23-4, 108 (Table 7.1), 112

GKN company 7 5,77 gold standard 8, 11, 12 government: attitudes 98-100; role of 6,13-14,126-7,165-6 Gribbin, J.D. 89-90 growth: and decline 29-32; and Europe 114-19; going for 32-3 Growth in the British Economy 137 Guillebaud Committee 27

Federation of British Industry (FBI): attitude to AACP 97; attitude to education 72,78, 130, 136; attitude to EPA 98; attitude to international competition 89, 111; CEIF strategy 98; European policy 111, 113; investment policy 149; origins 6; relationship with Conservative policy 33, 165; seealso Confederation of British Industry (CBI) Financzal Times 48, 77 First World War 5-8, 16, 134 footwear trade 46 Ford, F.R. 56 Ford company 77 Foreign Office 116 Fortune 168 Foundation for Management Education (FME) 72-3,74-5,78 Foundry Trades’ Equipment and Suppliers Association 89 France: competition 113; economic growth (1873-1973) 34 (Table 2.2); levy-rebate scheme 135; productivity policies 168; technical assistance to 167; value of franc 2 l-2 Franks, Lord 75-6 Franks report 77 free: market 19; trade 3, 8 Freeman, C. 159

Hailsham, Lord 73, 158, 162 Haldane principles 157-8 Hall, R. 149 Hall, R.L. 104 Harris, N. 18, 103 Harrod, R. 142 Harvard Business School 69, 73 Harvard International Teachers Programme 74 health expenditure 155 (Table 9.5) Heath, E. 116, 117, 121, 123-4, 135 Hirst, F.W. 9 HND/HNC schemes 134 Hoffman, P. 36 housing 15 3 Howell, D. 113 human relations 59-62, 83, 169 Hutton, G. 153 ICI 11,43,77,122 ideology 1, 169 Imperial College, London 41, 76, 13 1 Imperial Preference 2, 4, 23, 106, 108, 109; seealso Commonwealth Imperial Tobacco 77 Import Duties Advisory Committee (IDAC) 13 import quotas 23, 25, 104-5, 118 imports, British 88, 108 (Table 7.1) incomes policy 28, 115 India 24 Industrial Charter 18 industrial relations 7, 96; seealso trade unions Industrial Reorganisation League 14 Industrial Training Boards (ITBs) 136, 140 Industrial Transference Act (1928) 10 Industrial Welfare Society 62 inflation (1951-64) 21, 22 (Table 2.1), 25, 26,28, 32

Gaulle, C. de 110 Geddes Axe 10 General Agreement on Tariffs and Trade (GATT): Attlee government 23; Conservative policy 105-7, 109-10, 117; Dillon round 117; Kennedy round 25, 117-18, 124; origins 103 General Motors 93 Germany: apprenticeship schemes 135; competition 111, 112, 113; economic growth (1873-1973) 34 (Table 2.2); postwar recovery of industry 63; productivity movement 167-8, 169; re-entry into world market 22

207

INDEX

Inland Revenue 149 Institute of Directors 113 Institute of Economic Affairs 104 Institute of Industrial Administration WA) 79 Institute of Industrial Managers 54 Institute of Materials Handling 88 Institute of Structural Engineers 138 Institution of Production Engineers (IPE) 51, 52 Institution of Works Managers 68 interest rate 27 inter-firm comparison (IFC) 62-5 international: competition 2, 89; liberalisation 103-4; policy (1951-6) 104-9 International Monetary Fund (IMF) 25, 103 investment: aggregate 146-52; allowances 148; debate 141-6; distribution 141, 145; domestic/overseas 24; gross fixed investment by sector 152 (Table 9.3); industrial distribution (195 l-64) 154 (Table 9.4); levels 3 1; pattern of 152-5; share of GDP 144, 145 (Table 9.1); social services 154, 15 5 (Table 9.5); sources of funds 150 (Table 9.2); volume 141, 145 IPC 43 Iron and Coal Trades Revmo 89 iron and steel industry 13-14 Italy, economic growth (1873-1973) 34 (Table 2.2)

Kogan, Korean 161

105,

144,

147,

159,

Labour Party: attitude to affluent society 30; clause four 108; defence policy 159; election defeats 30, 3 1; interventionist policies 3 1; monopoly legislation 100; productivity campaigns 91; relationship with US 2, 12, 98; technology policy 163 laissez-faire 7, 165 leadership 1, 95 Lee, F. 110 Leeds University 73 Liberal Party 2 liberalisation, international 103-4 liberalism, economic 1, 2, 19 Lieber, R.J. 114 Liepmann, K. 134 living standards 29 Lloyd George, D. 7 Local Education Authorities (LEAS) 126, 129 Local Productivity Committees (LPCs) 39,85 Lockyer, K. 54, 59 Loder, J. 10 London Business School 76 London Mission of ECA: achievements 46; activities 36-8, 83, 88; relationship with BIM 80; relationship with Cambridge University 7 1; relationship with employers’ associations 98; relationship with government 99-100; resources 83; US visits 36 London School of Economics 76 Loughborough College of Technology 41 Lupton, T. 42 Lyttelton, 0. 16

Japan, re-entry into world market 22 Joint Committee on Human Relations in Industry 41 Joint Mission on the Teaching of Management-Labour relations in America and Europe 4 1 Joint Production Committees 17 Jones, A. 157-8 Joseph, K. 73 Joyce, W. 45 July Measures (1961) 147 Key Industries Legislation Keynesian policy 26, 102, 142, 148 Kipping, N. 165

M. 128 War 22,

McKenna duties 5,6, 8 McKinsey 43 Macmillan, H.: education policy 136; European policy 110, 112; on Conservative industrial policy 10, 14; on GATT 117; on stop-go 28; welfare policy 27 Macmillan gap 15 1

(1919) 8 104, 141,

208

INDEX macroeconomic performance 20, 22 (Table 2.1), 124 Makins, R.M. 149 management: American offensive 68-9; culture 94-8; education (1950s) 70-2; education (1960s) 72-6; education revolution 76-8; reform (postwar) 66-S; structure 60-l; training 50, 68, 167, 168 Management Education, Training and Development Committee 167 Management Today 6 1, 62, 65 Manager 66, 78 Manchester Business School 76 Manchester University 74, 76 Manser, W.A.P. 24 Mant, A. 81 market-sharing agreements 15 Marrison, A. 5 Marshall, A. 4 Marshall Plan 36 Massachusetts Institute of Technology 132 materials handling 54-7 Matthews, R.C.O. 148

Mechanical Handhg

Monopolies Commission 89, 100, 119-23 monopoly policy 2, 17-18, 100 Moody, Senator 38,41-2 Morris Motors 54 Morrison, H. 91 National Apprenticeship Council 135 National Council for Quality and Reliability (NCQR) 58 National Economic Development Council (NEDC) 28,61, 74, 116 National Economic Development Office (NEDO) 33,53 National government 12 National Health Service (NHS) 27 National Incomes Commission 28, 33 National Physical Laboratory 5 National Union of Manufacturers 63,87 National Union of Manufacturers Advisory Service (NUMAS) 87 nationalisation 17 Newsom Report (1963) 131 Nixon, F. 59, 97 nuclear power 163

5 5-6

Medical Research Council 42 Melchett, Lord 14 Mercer, H. 103, 119, 124 mergers 122-3 Messina talks (1955) 109 metalworking industry 166 Middlemass, K. 2 military expenditure 24, 27, 147, 158-62,164 Mining Industry Act (1926) 11 Ministry of Aviation 160, 162 Ministry of Defence 160, 162 Ministry of Education 126, 129, 130, 133,134,137 Ministry of Labour 60, 126-7, 134 Ministry of Munitions 7 Ministry of Reconstruction 7 Ministry of Technology 157 monetary policy 27-8 money supply 27 Monnet, J. 168 Monopolies and Mergers Act (1965) 124 Monopolies and Restrictive Practices Act (1948) 100

Oakland, J. 54, 59 Olson, M. 86 Organisation for Economic Co-operation and Development (OECD) 25, 30, 144,155 Organisation for European Economic Co-operation (OEEC, later OECD): British delegation 45; EPA creation 40, 84; FTA negotiations 109; reports 30, 31, 132, 1414, 154, 155 Ottawa Conference (1932) 106, 108 Ozer, S. 169 pensions 11 Percy Report (1945) 129, 131 personnel managers 6 l-2,86 Plan for Progress (1958) 32 Plowden Committee 27, 29, 32 Policy Committee on Economic Growth 116 policy implementation 82-6 Political and Economic Planning (PEP) 14,90,137 Poole, M. 62

209

INDEX

pottery industry 86 printing 2 1 production engineering 50-3, 169 productivity: Attlee government policy 17, 19, 31; campaigns 35-8; Conservative attitude to AACP 17; Conservative policy 17, 20, 164, 165-6, 169; European policies 167-8; FBI influence 165; US influence 65, 82,91, 164; seealso Anglo-American Council on Productivity (AACP), British Productivity Council (BPC), European Productivity Agency (EPA), Local Productivity Committees (LPCs) profiteering 7-8 Profiteering Act (1919) 8 property-owning democracy 18-19 protectionism 2,4-5, 12-13, 108, 117-19 public expenditure: control 115; education 127 (Table 8.1), 140, 155 (Table 9.5); levels 26; military 24, 27,147, 158-62,164; Plowden Committee 32; R&D 156, 157 (Table 9.8); welfare 27, 155 (Table

Retail Price Maintenance (RPM) 2, 3 1, 121 Robbins, G. 70-l Robbins Committee 74, 137-S Robbins Report (1963) 131, 139, 156 Roberts, R. 13-14 ROBOT proposal (195 l/2) 24-5, 105 Rolls Royce 59, 97 Rome, Treaty of 109 Rootes, Lord 74 Rosebery, Lord 4-5 Roskill, 0. 66 Russell, L. 80 Safeguarding legislation S-9, 10, 13 Salford University 133 Savoy Group 7 5-6 Scandinavian competition 111 Schenk, C. 24 schools 128-31, 139-40 Second World War 2, 16-19, 24, 35, 142,161 Securities Management Trust 14 September Measures (1957) 144, 147 Shaw, A. 53 Sheffield University 62 Shell 43,77 shipbuilding 21 Shonfield, A. 142 Sidney, E. 81 Szgnpostsfor the Stxtzes (1961) 32 Slessor, J.C. 159 sovereignty 109

9.5)

quality control 57-9, 166 quotas 23, 25, 104-5, 118 Radcliffe Committee 28, 30, 149 Ramsden, J. 9 rationalisation 1 l-12 Reconstruction movement 7 ReichsKuratorium fur z$tschaftlichkeit (RKW) 167-8, Reid Committee

Statist

17

Report on the Economic Employment 28

Implications

47, 49

statistical quality control (SQC) techniques 57-9, 97, 169 sterling, defence of (1951-64) 23, 105 Sterling Area 22, 24, 25, 105-6 Stewart, R. 42 stop-go 27, 28, 32, 33, 147, 164 Strathclyde University 133 Streeten, P. 107 Suez (1956) 160, 162, 165 suggestion schemes 62 Sussex University 78 Swan, K. 65

of Full

research and developmenr (R&D) 155-63; British position 50, 132; finance 161 (Table 9.9); measures (1962) 156 (Table 9.6); public expenditure 156, 157 (Table 9.8) restrictive practices 20-1, 86, 87, 120 Restrictive Practices Court 120 Restrictive Trade Practices Act (1956) 120

tariffs: First World War 5-7; (1930s) 12-13, 25; (1950s) 105, 117-19; reform debate 3-5; seealso Common

210

INDEX

External Tariff, General Agreement on Tariffs and Trade (GATT) Tavistock Institute 60 taxation 4, 10, 11, 27, 150-l Taylor Nelson Group 77 technical change 15 5-62 technical colleges 70, 73, 76, 13 l-4 Technical Ed.uation White Paper (1956) 128, 132-3,156 Telecommunication Engineering and Manufacturing Association 89 Thorneycroft, P.: attitude to competition 124, 111-12; attitude to productivity 166; FTA policy 110, 11 l-12; nuclear policy 160; on GATT 105, 107; resignation 144, 147,160 ‘3 ss’ 91-4, 164 Times Review of Industry 47,49 Tory Reform Committee 16 Trade Union Congress (TUC) 5 3, 87 trade unions: British management relations 96; European 168; productivity policy 87-8; restrictive practices 86; training role 127, 134; US policy 38, 87-8 transmission mechanisms 82-6 Treasury: AACP funding 38; balance of payments policy 25-6, 146; BPC funding 38; Economic Section of Cabinet Office 104; education and training policy 130, 132, 133, 135, 137-8; FTA policy 112-l 3; growth policy 116; investment policy 146; military expenditure 160, 162; ROBOT proposal 24-5; Thorneycroft’s resignation 144, 147, 160; welfare expenditure 27 Trend Committee 158 trusts 7-8

Unilever 77 United Nations (UN) 20, 30 United Nations Economic Commission for Europe (UNECE) 142, 144 United States (US): American model of industrial efficiency 2, 1 l-12, 20, 50; economy 82; productivity campaigns 35-8; recession (1953) 103; technical assistance programmes 43,44-7, 50, 164, 167-9; seealso Anglo-American Council on Productivity; Benton-Moody programmes universities 70-1, 73-4, 76-7, 1314, 155 (Table 9.5) University Grants Committee (UGC) 72,75, 131-2 Urwick, L. 67,68,96 Urwick: committee 67; scheme, 68,70 Warwick University 74 Wedderburn, D. 62 welfare: expenditure 27, 155 (Table 9.5); state 104 Welsh College of Advanced Technology 53-4 Whitley Councils 7 Whyte, W. 95 Wild, R. 52,65 Woodward, J. 42 Woollard, F. 55 Woolton, Lord 2 1 work study 5 3-4 Worker’s Charter 18 Workmg Party on Export Trends 30 works managers 50-l World Economic Survey, UN 144 world trade, share of 22 Yellow Book (1928) Young, A.P. 5 1 Young, J.W. 114

unemployment: (1923) 9; (195 l-64) 21,22 (Table 2.1), 25-6, 103

211

10