If you listen, as I do, to the American economist Richard Wolff’s one man alternative news service, you’ll find one historical theme and name referred to with metronomic regularity. That of the New Deal and Franklin Roosevelt. During the last deep crisis of capitalism during the 1930s, Wolff relates, the American state didn’t react by embracing austerity but rather became prodigiously more generous. Even though tax receipts shrunk markedly as unemployment hit 23%, the government spent more money and reinvented itself as the guardian of public welfare. In the depths of the Great Depression, unemployment benefit and old age pensions were created and 12 million unemployed people were given jobs in state conservation or cultural projects.
Last time it was different.
Although the action takes place a decade or so later, Ken Loach’s documentary, The Spirit of ’45, provides, for Britain, a similar corrective to pervasive historical amnesia and the fatalistic assumption that austerity is the only conceivable response to economic hardship. The film is about the achievements of the Labour government elected in the immediate aftermath of the Second World War.
Here is the trailer:
Then the country really was broke. Britain, as government minister Douglas Jay relates in the film, had sold all its foreign investments, lost all its ships in war and run out of dollars. Yet there were no homilies about inescapable hardship and living within our means. Rationing continued but the government, in the six years of its lifetime, was still able to achieve a phenomenal amount. The National Health Service – free healthcare – was created, 2-300,000 council houses built a year and the transport system and gas and electricity were nationalised.
People came back from the war imbued with the spirit that “anything was possible” says one contributor. And so politics changed.
Where did the money come from?
But whatever the moveable limits of the possible, you can’t defy economic gravity. How were the accomplishments of the ’45 Labour government afforded?
One explanation is that many of its landmark policies didn’t cost a great deal. The NHS was formed, although it still lacked medicines, and the railways were nationalised. But neither cost the earth. By contrast, it has been estimated that the cost of creating a market in public healthcare, which current UK government legislation is doing, is a cool £20 billion a year. Nationalise the railways now in Britain, and you would save £1.2 billion annually and wouldn’t have to gift billions in subsidies to Richard Branson. Squirreling away tax in contriving private profit, is not, shockingly, a money saver.
But a more complete explanation would have to take account of the fact that the ’45 Labour government was not in thrall to supply side fixations and so taxed the rich and business. The highest rate of personal taxation back then was 97%, in contrast to 45% now. Corporations were taxed by a mixture of income tax and a tax on profit distributed to shareholders, set at 50%. Present corporation tax was created by another Labour government, in 1965. It was 53% in 1979. Now it stands at 20%.
Thus a lot of money was available to the ’45 Labour government that is now siphoned into consumption by the very rich and to the shareholders of large companies.
But tax rates are not set in a vacuum. The reason why they were so high after the war on corporations and the rich is that the holders of private economic accepted, for a time, that they were a price worth paying to escape a far worse fate. As the Conservative, Quentin Hogg, rationalised in 1943, “if you do not give the people social reform, they are going to give you social revolution.”
According to Richard Wolff, a similar modus vivendi was reached during the New Deal in the US. Roosevelt essentially gave an ultimatum to economic elites. Either you accept high tax rates – the highest band in personal income tax was 96% - and cough up the money for job and social insurance programmes, or the other people coming down the road after me – socialists and communists – will cut you a far worse deal. Enough of them accepted the bargain.
Now economic elites are not remotely threatened. There is no danger they can spy on horizon. So the result is austerity.
Sepia tinted history?
But though The Spirit of ’45 conveys the ‘where there’s a will, there’s a way’ post-war atmosphere, it also brushes over the limitations of the ’45 Labour government and embraces a deliberate amnesia of its own.
“The central idea was common ownership,” explains Loach in the insert that accompanies the DVD. “Production and services were to benefit all.”
Clause 4 of the Labour Party’s constitution (the part that Tony Blair abolished, anointing New Labour) is emblazoned on the screen.
“To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange.”
And there it ends. But Clause 4 doesn’t, in reality, end there. The film mysteriously omits the last phrase – “and the best obtainable system of popular administration and control of each industry or service”.
According to Wikipedia, Clause 4 is generally assumed to refer to nationalisation, but “close reading of the text shows that there are many other possible interpretations” – “common ownership” could mean municipal ownership, worker cooperatives or consumer cooperatives. But such a close reading is not possible from viewing The Spirit of ’45 because the viewer is given a truncated version of Clause 4.
The reason, I think, the film overlooks this element of Clause 4 is that the ’45 Labour government did precisely the same thing. The interpretation of Clause 4 it chose was state ownership. The public corporation in which ownership switched but, very often, the senior management remained the same.
This is very important. There are allusions to this in the film. “I’m not saying it wasn’t a better system because it was,” says Tony Benn, “but the idea that people who worked in an industry should have any say in how it was run was completely foreign.” A miner, in archive footage, says that the “same tyrants” were in charge after nationalisation.
But The Spirit of ’45 does not dwell upon these flaws and they were the very features that enabled the ’45 settlement to be overturned. By the 1970s, companies like BP, ostensibly nationalised, were not only intrinsically undemocratically organised, they were actively working against government policies when it conflicted with their commercial interest.
The top down nature of these “public corporations” mirrored the way their private sector equivalents were organised. The only way the public could exert influence was very indirectly through electing a government, and even that method, as BP shows, was very much honoured in the breach. When Margaret Thatcher came along promising to abolish “socialism” the senior managers in these public corporations, encouraged by the prospect of mushrooming pay and share options, were very happy to oblige with the new project, while the wider public did not see enough to defend. There was something intrinsically wrong with British “socialism” and The Spirit of ’45 seems to want obscure what that was.
Then and Now
Nearly 70 years have elapsed since the election of that Labour government and while there are clearly analogies between then and now, in significant respects the situation we are facing in 2013 is vastly different.
“The economy had to grow very rapidly as the end of the Second World War,” says one interviewee, Raphie de Santos. Britain, not completely decimated by war, in contrast to continental Europe, had a vital role to play in producing things. “The world actually needed a lot of manufactured goods to be made,” de Santos goes on. Britain had to fill this gap in production and that is why full employment was an aspiration that could be fulfilled.
This situation is in wild contrast to now where there no dearth of manufactured goods. Quite the opposite, there is a glut of products. There is no lack, for example, of cars in the world. “Too many cars, too few buyers”, as The Economist magazine puts it. Last time really was different.
The government is indebted now as it was in 1945. In fact, the government was far more indebted in 1945 and still managed to achieve and create; the polar opposite of austerity. But corporate and consumer debt are inescapable feature of today’s landscape, absent in 1945. Real wages in Britain have dropped by 8.5% since 2009. There was scope for massive growth in the economy in way that doesn’t pertain now.
But The Spirit of ’45 is, ultimately, about an intangible, yet real, social atmosphere. You were your brother’s and your sister’s keeper, says one contributor. It was all for one and one for all, says another. If anything should be imported, unadulterated, from that age into this, it is surely that spirit. Because we need it.