W. Keith Hancock and Margaret M. Gowing

“ Not merely would it widen the budgetary gap and aggravate the problems of government accountancy, but it would throw into confusion the social accounting of all households and classes of the nation; it would generate economic waste, and social injustice of the most embittering kind; it would hinder and distract the orderly mobilisation of the nation’s power in war, and after the war would heap upon the nation a heavy burden of suffering and discord. ”

“ The men who understood modern war knew that the armed forces of the nation were no more than ‘the cutting edge’ of a mechanism that included all the departments of state and all the national energies that those departments controlled. Since modern war demanded mobilisation of the total resources of the nation, the task of studying it and preparing for it must involve investigations penetrating every sector of the national life. ”

“ To what extent would the demands of the Services and war industry siphon away the manpower, materials and other productive resources that in peace time were employed, directly or indirectly, in satisfying consumer need? Until the answers to these questions could be forecast with some show of quantitative precision, it would be vain even to guess at the probable dimensions of the gap that might be expected between the nation’s expanding monetary income and its contracting supplies of purchasable goods and services. ”

“ The historian of the United Kingdom’s war economy will recognise this deeper historical theme. He will recognise it, but will not himself pursue it; he must keep within the boundaries of his own more measurable task.
Even within these boundaries, he must resist the temptation to explore too far the comparative measurement of British preparations against those of other nations, whether hostile or friendly. A genuinely comparative study of war economy as a non-national phenomenon would have great scientific value, and will in later years become achievable ”

“ The real conclusion is that the problem of banking and general financial policy in time of war and the problem of controlling profits and the price of labour (including remuneration for personal services of all kinds) must be dealt with together. The limitation of wages is probably more important than the limitation of profits, since all other methods failing taxation can be applied more easily to correct inflated profits than to correct inflated wage payments. ”

“ To prepare plans for war is to prepare moulds into which the fluid strength of the nation may be poured when the time of danger comes. The mould that had been prepared for the nation’s manpower was proved in the event to be inadequate: following the crisis of 1940, a stronger and more capacious mould had to be made. Industrial conscription was imposed and accepted then. Would it have been practical policy to impose it before the nation’s danger was immediate and extreme? Even after September 1939, it was generally agreed in public discussion that British people ‘go better led than driven’. ”

“ Labour would never accept stabilisation of wage rates unless workers’ cost of living and employers’ profits were stabilised at the same time. Especially in the expanding war industries the control would need to be firm. These general propositions were universally accepted; but it was hard to give them firm substance so long as planning was for an undefined ‘great war’, not for a specific war that would demand a specific expansion of the munitions industries. ”

“ And when the Ministry was challenged to produce its plans for shifting labour into the centres of war industry, it contended that the solution of this problem also lay chiefly in the hands of the production departments, which could, at any rate, immensely reduce the dimension of the problem if only they had the wit to site their new factories in areas of abundant potential supplies of labour: when war work could be brought to labour, surely it was foolish to make plans for pulling labour up by the roots and shifting it to war work. ”

“ A parallel doctrine of economic practice, which may be called ‘the doctrine of normal trade’, was operating simultaneously to impede the mobilisation of economic resources in the war sector. Believing that; industry ought not to be interfered with, the Government was attempting to impose rearmament upon recovery within an uncontrolled economy. In consequence, the Service departments discovered that their increased votes of money were inadequately reflected in additional supplies or additional productive capacity for the expansion of supplies. ”

“ The Treasury memorandum of 1929, as has been seen, discussed the effects of labour shortage as a constituent of the inflation problem. Failing control, scarce labour would mean higher payments for labour and in consequence higher prices in the shops: conversely, higher prices in the shops—for the necessities of life [15] at any rate—would create an irresistible pressure for wage increases. ”

“ In the sphere of financial policy, it was the Treasury’s own responsibility to plan the appropriate precautions—a programme of taxation without any misjudged mercy in it, and a programme of borrowing to bring in the genuine savings of the people. ”

“ As the nineteen-thirties wore on, the Ministry of Labour argued with a growing insistence that wage control was unthinkable, that reliance must be placed instead upon the realism and moderation of organised Labour and upon the processes of persuasion and conciliation, operating through the joint industrial machinery that ever since the previous war had been linking employers’ and workers’ organisations ever more closely. ”

“ The narrative that started with the Treasury’s memorandum of 1929 on The Course of Prices in a Great War has been permitted to cross the ‘watershed’ of 1935 into the territory of rearmament, and has ended by emphasising the maturity of preparations in the sector of food control. Upon the evidence so far submitted, the reader might be tempted to conclude that the men responsible for British preparedness had learnt ‘the lessons of history’ so well that they were ready to start fighting the new war at the point where they had stopped fighting the old one. ”

“ At the end of 1936, when the German economy was already in the stage of full employment or at least very close to it, the Minister for Co-ordination of Defence warned the House of Commons: ‘ ... Remember that we depend upon the resources of finance for the successful fighting of a war as much upon the production of munitions’. ”

“ Nevertheless, the Government, like any private purchaser, will still find itself compelled to pay a price for the materials it demands and the labour it hires; it will find it itself no less compelled to make money payments to the nation’s conscripted soldiers and to their families. ”

“ Permeating the whole document is a fundamental assumption about method: supply-and-demand prices cannot be trusted in time of war to perform their customary function of allocating productive resources, determining production priorities, and distributing the final products amongst purchasers. All these processes must be governed by explicit government decision and administrative direction, inspired always by one firm purpose: the maximum concentration of the nation’s dispersed economic resources in the zone of effective war-making power. ”

“ This multiplication of sub-committees arose by necessity from the facts of modern war:
The problems of defence are so many and so varied that no single man and indeed no fixed body of men, however numerous or however well informed, can of themselves possess the knowledge to arrive at correct decisions, unless they are provided with expert advice on the various aspects of each particular problem. Such advice can only be obtained by assembling the team most appropriate to each case. ”

“ There were these differences of emphasis; but nobody doubted at that time that price control and wage control were interdependent, and that both must be placed side by side at the foundation of economic policy. (And yet, later in the nineteen thirties, the foundation stone of wage control slipped quietly away.)
If there were to be control of prices and wages, there must also be control of profits. ”

“ There existed in 1936 a crying national need to use finance as an instrument for accelerating the production of munitions by bringing into the sector of defence economy, resources which were employed elsewhere, or were not as yet employed at all. When war broke out in September 1939, there still remained in the United Kingdom over a million unemployed men and 300,000 unemployed women. ”

“ Wage problems, important though they were, were only a part of manpower policy. The Manpower Sub-Committee had to make plans for performing the most challenging of all the tasks that would be laid upon Government and people in a great war—the mobilisation of the fighting strength and the working strength of the men and women of Great Britain. ”

“ This perhaps may partly explain a paradox in the history of preparations for managing industrial labour: as the Second World War grew more imminent, so did the proposals for labour control grow more attenuated.
It may be helpful to review quickly how these proposals stood in September 1939. There are three main headings to be considered: labour supply, labour productivity, labour earnings. The last has been already discussed in outline; the Government’s decision not to impose control left over for future solution problems that would in due course become insistent. ”

“ In the industrial field there was, for example, the rapid growth of trade associations in wide areas of British industry—a phenomenon that was bound to modify the terms of partnership worked out haphazardly between Government and industry during the First World War. The Government was also compelled to reckon with the changed conditions of some basic industries. Coal is a good example. In 1914 the industry was still expanding rapidly, but in 1939 it had behind it many years of painful contraction ”

“ A full-blown Ministry of Supply, the authors of the document contended, would not be necessary: a Ministry of Material Resources, together with expanded production departments in all three Service ministries, would be sufficient support for the United Kingdom’s war plans, assuming that they were based ‘ ... on what may be terms a war of limited liability, i.e. for example, that there will be no such expansion of the Army, and consequently of military supply, as occurred in the last war ... ’—or at least, that such an expansion need not be anticipated in advance of war. ”

“ For the United Kingdom, the figure of armaments expenditure in the same year was £358 millions out of a total national income at market prices of £5,242 millions. In the aggregate, German expenditure on armaments in 1938 was nearly five times as large as British expenditure and it was absorbing nearly a quarter of national income as against a bare seven percent in the United Kingdom. This striking statistical contrast, although it fall short of exact statement, goes far to explain military events in the first period of the war. It is, of course, chiefly a product of the contrast in policy ”

“ The programme must include fixation of wages and prices so as to reduce to the smallest possible dimensions the demand for additional credit; it must include a strict control of imports and rationing of consumable goods so as to reduce possible objects of expenditure, and lastly, it must seek to bridge the gap that yet remains between the national revenue plus national savings and the war expenditure by increasing taxation and borrowing additional funds without the artificial creation of credit. ”

“ The Ministry of Labour was clinging to the old faith in wage inducement and the other economic incentives as sufficient means of bringing about a satisfactory distribution of labour at a satisfactory speed. Just before the war, a representative of the Ministry told the Stamp Survey that ‘individualism’ would do the job. ”

“ The British machine of government had been drastically overhauled and reconditioned to meet the strain of war, and there were many persons of experience who thought that the same reconditioned machine should be retained to serve the nation in peace. ”

“ And some of these sub-committees would themselves be at the head of immensely complicated family trees of subordinate committees. There would, however, be little profit in composing a systematic diagram of all these ramifications. The trouble with such a diagram is its tendency to suggest that a place has been found for everything and that everything is in its place—a blessed situation which occurs very infrequently in human affairs. Moreover, an organisation chart is necessarily a flat thing; it does not show the picture that really matters—the moving picture of work in progress. ”

“ In the strategical field, change was even more rapid, and an excessive deference to past experience would have been even more dangerous. Since 1919, the sensational advent of massive air power and the mechanisation of land forces had loosened that constipation of war in which the armies of the western front had been bound after the battle of the Marne ”

“ If the answer pointed to Japan, it would carry with it consequences of particular comfort to the Admiralty: emphasis would of necessity be placed on the naval side of rearmament, because, according to the accepted strategical doctrine, a war against Japan would make full demands on British naval resources but would not require the employment of land and air forces on a national scale. If, on the other hand, the answer pointed to Germany, expert opinion would press strongly for the maximum preparation of each fighting service. ”

“ A separate Ministry of National Service would therefore be created to control recruitment and hold the balance between the armed forces and industry. A new Ministry of Supply would handle the dilution of labour and the other labour problems of war industry. ”