Jim Callaghan and Andrew Shonfield’s Alternative View of the British Economy

Simon Matthews begins an article on the career of Jim Callaghan in government, ‘Jim Callaghan: the Life and Times of Solomon Binding’ in Lobster 49 for summer, 2005, with a discussion of Andrew Shonfield’s critique of the British economy in the 1950s:

It is still possible to find an interesting Penguin Special that appeared in 1958, British Economic Policy Since the War, by Andrew Shonfield, then economics editor of The Observer, remains a striking piece of work. Among his conclusions were: that the maintenance of a separate Sterling Area, giving the comforting feeling and appearance of great power status, actually hindered the UK economy; that the UK should be more closely involved with Europe; that UK governments and the UK private sector failed to invest sufficiently in their own country and invested instead elsewhere in the Sterling Area; the City of London had a poor and distorting effect on the UK economy; that public spending in the UK was more restrained than in other European countries for reasons that did not make much sense; that the Treasury possibly had too much power; that although industrial relations in the UK were poor, days lost through strikes were often no higher than in other countries, but too much power resided with individual shop stewards (a fact that some employers actually quite liked); that the national offices of the big trade unions had surprisingly little input in either planning or negotiation within significant industries, with matters being handled at a purely local level; that because of the low level of pay and facilities offered by major employers a better relationship with the trade unions was difficult to attain; an that the UK spent too much on defence.

In 1958 this was prescient. Shonfield anticipated the essential economic debates of the 1970s and 1980s, some of which remain unresolved to this day. (P. 21). He notes that ultimately Shonfield’s views had little effect, though that doesn’t mean they went unnoticed. He considers that Harold Wilson arrived at some of Shonfield’s conclusions independently.

These issue are still, with some caveats, very much with us. Britain does not invest in public services at the same level as the other European countries. Spending on the NHS, for example, in the 1970s was below what other European nations spent on their health services. The City does not like investing in Britain, and most of the investment networks are geared towards the Developing World. As for government investment, you can see how reluctant the British government is to support British industry by the desperate efforts to find a foreign buyer for failing British companies or factories. The most recent example of this is the closure of the Tata steel plants in Bridgend and elsewhere. However, Cameron is cutting the defence budget to ludicrous extremes, and we have been saved much of the chaos that has overtaken some of the Continental economies because we kept the Pound instead of joining the Euro.

Matthews also has a broadly positive view of Callaghan’s government in the 1970s, which has been blamed for the economic failures that led to the rise of Maggie Thatcher.

It is convenient for contemporary politicians to say that the Thatcher years were something that Britain either needed or could not have avoided. But had it not been for Callaghan’s decision to postpone the election from 1978 to 1979 Thatcher might never have got to 10 Downing Street; or, if she did, would have been ousted very quickly. It is also true that the 1974-1979 Wilson-Callaghan governments made a reasonable job of recovering from the inflation caused by Heath and Barber in 1971-1973. ‘Old Labour’ id OK. It was just a shame it didn’t have a better leader. (P. 23).

So much for the conventional Tory wisdom that Thatcher was needed to sort out the chaos Labour caused. In this view, Callaghan was needed to sort out the chaos Heath had caused.

Tags: 'British Economic Policy Since the War', 'Jim Callaghan: The Life and Times of Solomon Binding', Andrew Shonfield, Bridgend, City of London, David Cameron, Defence, Developing World, Harold Wilson, Investment, Lobster, Margaret Thatcher, NHS, OLd Labour, Shop Stewards, Simon Matthews, Strikes, Tata, Ted Heath, the Euro, The Observer, the Treasury