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STUDIES IN ECONOMIC AND SOCIAL HISTORY

Editedfor the Economic History Society by T. C. Smout

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Bill Albert Latin America and the World Economy from Independence to 1930
B . W. E . Alford Depression and Recovery? British Economic Growth, 1918-1939
Michael Anderson Approaches to the History of the Western Family, 1500-1914
P.J. Cain Economic Foundations of British Overseas Expansion , 1815-1914
S. D . Chapman The Cotton Industry in the Industrial Revolution
Neil Charlesworth British Rule and the Indian Economy, 1800-1914
J. A. Chartres Internal Trade in England, 1500-1700
R . A . Church The Great Victorian Boom, 1850-1873
D . C. Coleman Industry in Tudor and Stuart England
P. L. Cottrell British Overseas Investment in the Nineteenth Century
Ralph Davis English Overseas Trade, 1500-1700
M . E . Falkus The Industrialisation of Russia, 1700-1914
Peter Fearon The Origins and Nature of the Great Slump, 1929-1932
T . R . Gourvish Railways and the British Economy, 1830-1914
Robert Gray The Aristocracy of Labour in Nineteenth-century Britain, c. 1850-1900
John Hatcher Plague, Population and the English Economy, 1348-1530
J. R . Hay The Origins of the Liberal Welfare Reforms , 1906-1914
R . H. Hilton The Decline of Serfdom in Medieval England
E. L.Jones The Developm ent of English Agriculture, 1815-1873
John Lovell British Trade Unions, 1875-1933
J. D . Marshall The Old Poor Law , 1795-1834
Alan S. Milward The Economic Effects of the Two World Wars on Britain
G. E. Mingay Enclosure and the Small Farmer in the Age of th e Industrial Revolution
Rosalind Mit chison British Population Ch ang e Sinc e 1860
R .J. Morris Class and Class Consciousness in the Industrial Revolution , 1780-1850
J. Forbes Munro Britain in Tropical Africa , 1880-1960
A . E . Musson British Trade Un ions, 1800-1875
R. B . Outhwaite Inflation in Tudor and Early Stuart Engl and
R .J. Overy The Nazi Economic Recovery, 1932-1938
P. L. Payne British Entrepreneurship in the Nineteenth Century
G. D . Ramsay The English Woollen Industry, 1500-1750
Michael E . Rose The Relief of Poverty, 1834-1914
Michael Sanderson Education , Economic Change and Society in England, 1780-1870
S. B . Saul The Myth of the Gr eat Depression , 1873-1896
Arthur J. Taylor Laissez-faire and State Interven tion in Nin ete enth-century Britain
Peter Temin Causal Fa ctors in American Economic Growth in the Nineteenth Century
Michael Turner Enclosures in Britain, 1750-1830
Margaret Walsh The American Frontier Revisited

OTHER TITLES ARE IN PREPARATION

The Economic Effects of the
Two World Wars on Britain
Second Edition

Preparedfor
The Economic History Society by

ALAN S. MILWARD
Professorof European Studies
University of Manchester Institute of
Science and Technology
and
Professor of Contemporary History
European University Institute

M
MACMILLAN
 © The Economic History Society 1972, 1984
All rights reserved. No part of this publication
may be reproduced or transmitted, in any form
or by any means, without permission

First edition 1972

Second edition 1984

Published by
Higher and Further Education Division
MACMILLAN PUBLISHERS LTD
London and Basingstoke
Companies and representatives
throughout the world

Typeset by
Wessex Typesetters Ltd
Frome, Somerset

British Library Cataloguing in Publication Data

Milward, Alan
The economic effects of the two world wars on
Britain.-2nd ed.-(Studies in economic and
social history)
1. Great Britain- Economic conditions-19l8-l945
I. Title II. Series
330.941'083 HC256.8
ISBN 978-0-333-36954-8 ISBN 978-1-349-07300-9 (eBook)
DOI 10.1007/978-1-349-07300-9 - - -0730
Contents
Acknowledgements 6
Note to the Second Edition 6
Note on References 6
Editor's Preface 7
The Subject 8
Its Changing Interpretation 9
The Domestic Impact 27
The International Impact 50
Notes and References 76
Select Bibliography 78
Index 85
Acknowledgements
A work of this kind cannot pretend to any originality, but the
form which it took persuaded me how much it owed to my
former colleagues, the late Professor M. W . Flinn, Professor T.
C . Smout and Professor S. B. Saul. When I had written it it
seemed only right that they should read it. They all very kindly
did so, thereby making it even more their own work.

Note to the Second Edition

Over the thirteen years since the publication of the first edition
scholars have continued to discuss the subject of this book and,
particularly in regard to the First World War, have added
substantially to the literature on it. More significantly, the
focus of interest has changed with the marked changes in the
British economy and the international position of the country.
This has meant not merely a revision of the existing text but the
production of what is virtually a completely new book, no
matter how closely it adheres to the pattern of the first edition.

Note on References-
References in the text within square brackets relate to the
numbered items in the Select Bibliography, followed, where
necessary, by the page numbers in italic, for example: [5:27].

6
Editor's Preface
SINCE 1968, when the Economic History Society and Macmil-
lan published the first of the 'Studies in Economic and Social
History', the series has established itself as a major teaching
tool in universities, colleges and schools, and as a familiar
landmark in serious bookshops throughout the country. A
great deal of the credit for this must go to the wise leadership of
its first editor, Professor M. W. Flinn, who retired at the end of
1977. The books tend to be bigger now than they were
originally, and inevitably more expensive; but they have
continued to provide information in modest compass at a
reasonable price by the standards ofmodern academic publica-
tions.
There is no intention of departing from the principles of the
first decade. Each book aims to survey findings and discussion
in an important field ofeconomic or social history that has been
the subject of recent lively debate. It is meant as an introduc-
tion for readers who are not themselves professional resear-
chers but who want to know what the discussion is all about-
students, teachers and others generally interested in the
subject. The authors, rather than either taking a strongly
partisan line or suppressing their own critical faculties, set out
the arguments and the problems as fairly as they can, and
attempt a critical summary and explanation of them from their
own judgement. The discipline now embraces so wide a field in
the study of the human past that it would be inappropriate for
each book to follow an identical plan, but all volumes will
normally contain an extensive descriptive bibliography.
The series is not meant to provide all the answers but to help
readers to see the problems clearly enough to form their own
conclusions. We shall never agree in history, but the discipline
will be well served if we know what we are disagreeing about,
and why.
T. C . SMOUT
University ofEdinburgh Editor
7
The Subject
IN the history of the United Kingdom in this century the two
world wars have been so terrible a reality that historians have
related to them, directly or indirectly, an astonishing number of
developments . The difference in economic organisation and in
social life between wartime and peacetime has been so huge
and so encapsulated in the personal consciousness of so many
still alive that the wish to produce a comprehensive theory of
the relationship between war and history starts from the soil
turned by even the most aridly factual oflabourers. It is to these
theories as they relate to the history of the British economy in
this century that this pamphlet is directed. What changes in the
economy have historians and economists laid to the account of
the two world wars? And what changes may justly so be laid?
At the outset appears a methodological problem of no great
complexity. So great was the economic effort need ed to win
both wars that whil e those wars were being fought, and under
the pressure of fighting them, on each occasion the economy
was quite transformed from what it had been in peacetime. The
aim was to win, for most of the Second World War to win no
matter what the cost. Therefore the main economic priority
was to produce the necessary quantity of goods to defeat the
enemy. Consequently the ultimate economic purpose was quite
different from that of peacetime, and the kind of economy
which was created has come to be known loosely by the term
'war economy' . The term is a loose one, for it is a matter of
historical fact that most of the 'war economies' which have
existed have neither had such simple priorities as, nor much
resemblance to, the war economies which existed in Britain. It
may even be questioned whether historians have not exagger-
ated the degree of unanimity of purpose which informed the
economy in Britain during the two world wars. Nevertheless it
must be stated that it is a matter ofalmost universal agreement
that the British nation twice bent its united energies to creating
8
an economy whose dominating purpose was to defeat the
enemy, sweeping aside, gradually in the First World War, and
almost from the beginning in the Second, most other claims on
that economy.
The result of this apparent clarity of purpose was to create a
form ofeconomic organisation for the duration ofthe war which
was sharply different from that ofthe preceding and succeeding
periods of peace. Those changes in the economy and in society
which did not endure, the short-term changes, will not concern
us very much here. They are not the subject of controversy
except in their more minute details. Indeed they have been
described in such detail, with government help, for the Second
World War so effectively as to stop all but the most interested of
historians from considering them at all . There are many
perfectly adequate summaries in textbooks and the like of what
the short-term changes in the economy were.' We may
therefore resolve our methodological difficulty by concen trat-
ing on the more controversial problem ofthe long-term changes
in the economy and society brought about by war in this
century, considering the short-term changes only when neces-
sary and in this wider context.
It is as well that we should be able so to simplify the issue. For
the opinions about these long-term trends are often vague,
differing enormously in their ultimate implications, but some-
times having a quite misl eading resemblance to each other.
The differences between them reflect the changes in British
society, and in the way we have come to think about that
soci ety, over the last seventy years . For that reason th ey are
considered first in roughly chronological order. They represent
a set of changing concepts, each concept a framework wherein
the actual historical events and economic facts may be fitted
more or less successfully.

Its Changing Interpretation

FROM the second quarter of the eigh teen th century econom-
ists evolved the idea that war was an almost unmitigated
9
economic disaster. By the end of the century that view had
become almost generally established and, excepting the not-
able dissent ofMalthus, it remained more or less unchanged in
Britain until the outbreak of the First World War. The earliest
writers to consider the impact of that war on the economy took,
therefore, an unrelievedly gloomy view of its results. They
would have echoed what was already becoming received
opinion when SamuelJohnson published, in 1749, his imitation
of J uvenal's tenth Satire:

Yet Reason frowns on War's unequal Game,

Where wasted Nations raise a single Name,
And mortgag'd States their Grandsires' Wreaths regret,
From Age to Age in everlasting Debt."

Many of them did indeed afterwards echo this idea almost

exactly. 'Thus the Great War', wrote Hirst and Allen in 1928,
'brought a load of debt, taxes and misery incalculable. The
expenditure during the four years that it lasted reached a total
incomprehensible and inconceivable to the ordinary mind' .
[32: 18].
This interpretation, which we may call the classical liberal
interpretation, saw war in relatively simple terms as a loss.
However complex the event, the net result was always a loss to
the economy, of cash, ofproduction, ofcapital and ofpeople. R.
H. Brand, himselfa merchant banker, summarised this view in
the series of analyses ofgovernment policy which he published
throughout the First World War. 'They were not able to see
that all this outpouring of our substance on the war was
accompanied by a constant deterioration of our economic
situation, by a vast loss of national capital, and by the creation
of a huge load of debt, internal and external- in fact that we
were like a spendthrift, living more or less at our ease by
wasting our capital' [9: 256]. Although, he conceded, war on
such a scale as the First World War represented an immense
productive effort, what was produced was essentially 'non-
productive wealth' . Meanwhile 'productive wealth' was being
destroyed and capital allowed to depreciate. The inflation
accompanying the war with its effect on money wages and
10
nati on al inco me was only dis gui sin g th e fact that in th e lon g
run th e country's producti ve ca pacity a nd purchasing power
were bein g stead ily reduced to th e point whe re a d epression
would certai nly be produ ced a fte r th e war. W hen th at d epres-
sion did arrive in 1920, Brand, a nd ot hers wh o shared his
sta nd po in t, th erefor e blamed it on th e war. That th e d epression
of the 1920s was to be bla med di rectl y or indirectl y on th e First
Wo rld War was all too easy a deducti on from th e th eoreti cal
ass um p tions underl yin g thi s view of war. Lloyd George,
introducin g th e first budget of th e war, prophesied a bri ef
peri od of prosperity a t th e end of th e war followed by a severe
ind us tria l crisis. The most a rde n t, alt ho ugh not th e most
p rofound, ad voc a te of thi s well-established interpretation was
F . W . Hirst, wh ose book , The Consequences of the War to Great
Britain, was published in 1934. H e also ca tego rised the
d epression of 1920 as bein g th e 'a uto ma tic' result of th e war,
agg ravated by th e foolish policy pursued by th e gov ern me n t of
not raisin g a sufficient p roportion of th e war expe nditure by
high er taxation. Great er tax ati on wo uld have meant less
borrowin g, less borrowi ng wo uld ha ve mean t a less cr ippling
public debt in th e 1920s. 'The expe nses of a war' , sa id
Glad ston e, introducin g th e C rimean wa r budget to th e H ou se
of Co m mo ns, 'are th e mor al chec k which it has pleased th e
Alm igh ty to impose up on th e a m bition a nd th e lust of
conq uest th at are inheren t in so man y nations.' This, however,
did not absolve th e pu blic from the duty to suffer th e sa me
mor al chas tise me n t whe n resisti ng a n agg ressor. The conse -
quen ce of th eir refusal in 1914-1 8, Hirst argued , was a burde n
of debt paym ents under which the 1920 s foundered [33] .
Since wa r was a loss, th e best way its effects on th e eco no my
co uld be finall y expressed was to ca lcula te th at loss as
accurately as possibl e. Hirst a nd othe r writers sharing his
liberal viewpoint th er efor e tri ed to ad d together th e various
ele me n ts of th at loss a nd to 'cost' th em . The effects of th e First
World War in th eir eyes could be exp ressed as wh at it had 'cos t'
th e eco no my, or wh at sum of mon ey would be sufficien t to
restor e th e economy to its previous state were that possible.
H owever , whereas so me ele me n ts of the tot al loss could be
va lued reas onably acc urately witho u t grea t difficulty, suc h as
II
the value of the ships sunk and the cargo they contained, other
elements were more elusive. The actual sum of money needed
to pay for the war proved difficult to determine, and it was this
problem which led Bogart, following the same interpretation as
Hirst, to the notion that the total loss to the economy was
compounded both of ,direct' and 'indirect' costs [6].
The 'direct costs' comprised the physical destruction of
capital due to enemy action. For Britain a considerable part of
this was the loss of armaments and shipping, the damage to
capital within the national frontier being very small. But at this
stage of evaluation the knotty question arose of how to
value the human capital destroyed by enemy action. The
liberal writers were perfectly justified in facing up to this
question in the way they did, even though to our eyes their
proceedings may suggest a certain heartlessness, for within
the concept of ' direct costs' the loss of people was so obvious a
fact that it could not be dodged. From the outbreak ofwar to its
close the British Army and Navy lost at least 616,382 men,
excluding those of colonial or dominion nationality, through
enemy action or other forms of death. Over the same period
1,656,735 men were wounded, some of them so seriously that
they would never be able to work again. Most of these people
were in the prime of their working life and the proportion of
officers killed and wounded was higher than that of men.
In developing the concept of 'human capital' Bogart and
Hirst opened up a fertile field ofeconomic enquiry but it was to
prove more fruitful in other directions than in measuring the
effect of the war." Those killed or maimed in the First World
War in Britain were far from a homogeneous group and when it
is considered that conscription operated mainly on the basis of
age and fitness the problems ofdetermining the average capital
value ofa dead soldier will readily be seen. The values on which
Bogart and Hirst finally settled were arbitrary. They attributed
an average percapita value to the citizens of various belligerent
countries." That is to say that a dead American soldier was a
much greater loss to the economy than a dead Serbian soldier,
since not only was he a piece of human capital who had been
much more expensive to educate and train to the moment ofhis
death, but his subsequent productive capacity, had he not died,
12
would have been much grea ter. Bogart estima ted th e percapita
value of a dead British sold ier a t $ 1,4 14, or $260 mor e th an a
d ead German soldier , or mor e than twi ce th e value of a dead
Ru ssian soldier. The eleme n ts in the calculation wer e th e
length of tim e th e soldier would have been likely to live, th e
pot ential va lue of his lost labour, or th e value of his pot ential
savings plus his pot ential purchasing power plus his pot ential
tax able capacity, a nd th e cost to th e state of suppo rting his
family after his d eath or maiming." The differ en ces in va lue
represent roughly th e differ en ces in the level of econo mic
development of th e co untries conce rned, th e gene ra l conclusion
bein g th at in this resp ect th e effect of th e war on a highl y
devel op ed coun try suc h as Britain was much mor e serious than
on a n underdevelop ed country.
T o accept this method of p rocedure it is ne cessary to ac cep t a
number of hypotheses. These a re, th at it is possible to ca lcula te
an av erage duration of life which is valid for a ll, th at it is
possibl e to calculate a pot ential av erage net in com e of those
killed or maimed whi ch would em brace th e ve ry wid e differ-
ences in social cla ss which existed in the British arm ed forces,
a nd th at it is possibl e to calcula te an average potential
cons um p tion and exp ress it in mon etary terms. Nor will th e
critic be slow to indicat e th at nati on al product per capita is not
th e sa me as th e incom e received by th e population. No r ca n it
be a rgued that th e 'cos t' to the eco no my ca n be sho wn if th e
cas ualty's pot ential cons um p tion be d educted from his pot en -
tial production , for it is only true that th e loss of a man eq uals a
certai n reduction in nation al p roduct if th er e is full employ-
ment a nd if the cond itions of wo rk rem ain th e same for the tim e
sp an of th e ca lcula tion, th at is to say until he would have di ed
naturally. H ad he been un employed befor e th e wa r th e
econo my might actuall y ha ve ga ined by his d eath, a nd th er e is
little likelihood th at, in wh atever sector of producti on he had
been em ployed, th e product ion fun cti on in that sector would
ha ve remained unchanged for a further thirty yea rs . Indeed , he
would have been more likely to hav e been un employed after th e
war. In add ition th er e a re th e d oubts cast on th e procedure by
d em ographic studies. Althou gh so little comparative work on
th e d em ographic effects of war has been done th at it is difficult
13
to ge ne ra lise, th e birth-rate immediately aft er th e war appears
to leap sha rply, although tempor arily, up wards [20]. Further-
more, in both wars th ere was a fall in infant mortality rat es.
And it is a lso possibl e th at th e wars produced a better sta ndard
of nutrition a nd health a mong th e poorer classes, suc h th at th e
be ne ficial effects ofa healthier gene ra tion of child ren we re th en
rep roduced in successive d em ographic cycles [70]. Ther e is
evide nce th at , in this resp ect a t least , th e d em ogr aphic ' loss'
was not as great as might be ass u med .
Of course, many of these method ological probl em s of
evaluating th e loss of hum an ca pita l occ ur in a tte mp ting th e
sa me exe rc ise for othe r parts of th e ca pi ta l st ock destroyed.
Much of it , like th e peopl e, might h av e been surplus to ca pacity
in th e eco no mic cond itions of th e 1920s. By blaming th ese
cond itions on th e debts accum ula ted during th e war th e lib eral
schoo l avo ide d this a wkw ard qu esti on by assuming, fal sely,
th at it was tautological. T o th e rela tionship bet ween post-w ar
cond itions a nd th e eve n ts of th e wa r itself we shall re tu rn in th e
last sec tion of thi s pamphl et , whe re it will be see n th at th e
question is mu ch more complex th an Bogart or Hirst ass umed.
Ther e is also a furth er difficulty which applies eq uall y to th e
meas ureme n t of th e ' ind irec t cos ts' . The relati ve va lue of th e
major curre ncies, which had re maine d mor e or less tied to each
othe r for a long peri od , began to fluctuat e wild ly after 1914, so
th at no country' s curre ncy had th e sa me purch asing power in
1918 as in 1914 a nd non e retained th e same relation to a nothe r.
T he unit of cu rre ncy was th erefore a rather un sati sfactor y
medium in which to evaluate th e 'cos t' of th e wa r. In
ca lcula ting ' indirec t cos ts' Bogart's object was to arrive a t a
tot al of 'war expe nses'. The sums of mon ey officia lly allocated
in 'war budget s' or rai sed by ' wa r loans' m ight not , however ,
effective ly be sp en t purely on th e prosecution of th e wa r. Som e
part of th e tot al mi ght a lso serve as post-war inves tme n t. In an y
case th e extens ion of th e pow er of th e gove rn me n t over
eco no mic life in directing th e ' wa r eco nomy ' of th e First World
War was so great that th e wh ole scope and purpose of th e
budget changed in th ose yea rs . Bogart th er efor e ca lcula ted a n
average a nn ua l level of peacetime expe nd iture and d educted

14
thi s for five yea rs from th e ac tual expe nd iture in th e First Wo rld
Wa r, thus exp res sing th e wa r expe nse s as $44,029,000 ,000.
It is ea sy to see th e weaknesses in th is method of procedure.
Do th e expe nses of a wa r reall y begin with th e d eclaration of
wa r? And do th ey end when the fighting sto ps? W hat a re
' normal' budgetary expenses? j eze, who performed sim ila r
calcula tions for Fra nce, cons ide red th e 'w a r expe nses' to be th e
differ en ce in th e public d ebt be twee n th e beginning a nd th e end
of war." But th e sa me qu esti on s must apply, apart from a
further questi on a bo u t th e size of th e external d ebt. H owever ,
we are not so conce rned her e with th ose weaknes ses as with the
as sump tions th at father ed th em . The nature of these assump-
tion s ca n be sim ply reveal ed by posin g a questi on th at a ny
eco no mist would now pose. Is th e extra expe nditure en ta iled by
war wholly a loss to th e eco no my, or is some part of it ac tua lly
ben eficial in so far as it ge ne ra tes in com e by stim ulating new
employme n t a nd p roducti on ?
Yet th e assum p tions whi ch underlay th e classical liber al
in terpretation wer e the curre n t intellectual coin not only of
histori an s but of th ose who m ad e policy. Altho ug h in such a
war as th e First Wo rld War it was inev itable that th e
gove rn me n t co uld not raise th e who le 'cos t' of th e war from
taxa tion but had to borrow mon ey, th e C hancellor of th e
Excheq ue r, M cKenna , a pplied to thi s bor rowin g policy the
ru le which ca me to be known as th e ' M cK en na ru le' , not to
borrow witho u t im posing new taxatio n sufficien t to p rovide for
the in teres t on, a nd a sinking fund to reduce, th e new loa ns .
Mo re se rio us th an thi s, th e who le id ea of th e 'cost' of war was
embod ied in th e d em and for re para tions from G erman y. And
thi s d emand , em bodied in gove rn me n t policy through ou t th e
1920s, created suc h in ternati on al eco no mic havoc as to be one
of the main a nd most di sastrou s co nse q ue nces of th e war itself.
The dom estic eve n ts of th e First Wo rld War led man y of
th ose who wer e involved in th em or who later stud ied th em to
questi on this conce p t of wa r as mer ely a 'c ost' to th e eco no my.
In th e first place th er e wa s th e exa m ple of th e United Sta tes .
Even if th e cost of th e dead service me n added to th e cost of th e
sunk merch ant ships a nd th at of th e supposedl y lost for eign

15
trade was computed in the most generous fashion it was less
than the upward mov ement in the value of industrial output
over the same period. In Britain, too , in spite of the addition of
five and a half million men to the armed forces at very low pay,
national income per head after a steep drop in the first year of
the war, increased from 1915 to 1918. I n the Second World War
it was to increase very steeply; in current prices it was 39 per
cent higher in 1943 than its 1939 level, in real terms an increase
of more than a quarter. Measured in this way the First World
War represented a cyclical downturn followed by a vigorous
upturn, the Second World War a vigorous and continuous
boom the equal of any of the nineteenth-century booms.
The driving force of the boom was the war; 54 per cent of the
national income in 1944 was spent on the war effort whereas in
1939 only 15 per cent had been spent on rearmament and war.
What was 'lost' in certain sectors was more than replaced by
much higher levels of output and employment in manu-
facturing industry (although by no means in all sectors of
manufacturing industry) and by much higher levels of income
and output in agriculture. During the First World War, in the
absence of any overall concept of national income accounting
these economic phenomena were observed only as isolated
instances of prosperity in what was thought of as a world of
sacrifice and it was these isolated and unsystematic observa-
tions which gav e rise to so much hostile agitation and
propaganda against 'war profiteers'. In the Second World War
the idea that the war might, in fact , be paid for out of the
increase in national income which it engendered became the
guiding light of policy. So quickly did ideas change!
However, the strict liberal concepts of Hirst or Bogart were
not always slavishly accepted by governments even before 1914
when it came to vital questions of national defence and during
the First World War certain social and administrative
phenomena gave rise to the idea that war was not an entirely
negative experience and in doing so brought the wholly
pessimistic economic interpretation of war into question. The
full-time employment ofa large part of the male population of
whom few had previously experienced so long a period of
regular employment at relatively high wages, the increase of
16
about 1.6 million in the number of women brought into
full-time employment, as well a's the involvement of the civilian
population in the war by aerial bombardment, by unrestricted
submarine warfare against food supplies, by the enormous
increase in employment in armaments 'industries, and by the
impact of conscription on family life, all acted to change the
kind of emotional involvement with war and its economic
mechanisms. No longer were civilians hurrahing spectators;
they became, like combatants, people who must be motivated
by some clearly perceived objective to the struggle. There had
to be a moral purpose. The administrative skills which geared
the economy to allowing what had previously been thought of
only as an economic waste to continue for so long, began now to
be thought of as a means of achieving the moral purpose. For
many, the purpose of the war became 'a better society' and if
that required the economy to function differently from before
1914, it began to be argued, especially by those who had been
involved in the remarkable administrative successes of the war
effort, that this was essentially an administrative problem
which could be solved and that, if politicians and adminis-
trators would will it, a better society could be created.
It is hardly surprising that under the conjoint pressures of a
highly-charged emotional response and rapid and visible social
change the views ofeconomists and historians about war began
to change. The change was one aspect of the growing interest in
groups and in society as a whole rather than in individuals,
but in this movement away from the mechanical accounting of
Bogart to a concern with less strictly defined aspects of the
human condition the experience of the First World War played
a major role. By 1917, as feats ofindustrial output which would
have been considered impossible before 1914 still allowed the
immense and pitiful armies offoot-soldiers to be hurled at each
other through the mud and debris of northern France, the war
was coming to be seen not as a struggle between specialised
fighting forces but as a 'total' war of one society against
another, testing the very fabric of those societies at their
weakest points .
The first steps towards this more sophisticated interpreta-
tion of the relationship between the economy, society and war
17
were taken in the work of A. L. Bowley [7; 8]. His careful
statistical analyses of the effects of the First World War have
stood historians in good stead ever since. They are a fine
example of the superiority of research over opinion, for in his
general opinions Bowley differed scarcely a jot from Hirst,
although his work repeatedly pointed the way to a widening of
Hirst's views. He was convinced that 'whoever wins on the
field, both sides lose in wealth' [8: 31]. The size of the loss as far
as Britain was concerned he put at between two and four years'
normal accumulation of capital. He attributed the low level of
employment in the 1920s to the scarcity of capital brought
about by its destruction and depreciation in the war. The other
long-term effects of the war which he was able to demonstrate
proved the starting-point of much discussion. He agreed that
the expenses of the war had resulted in a much greater burden
of taxation, but demonstrated that the cumulative effect of this
taxation was to redistribute a certain amount of income from
the richer to the poorer. Taken together with the high level of
employment during the war, the long hours and the high
wages, and even when all allowance had been made for the
wretched pittance paid to the soldiers, the net result was a
narrowing ofthe gap between the poorer classes and the richer.
Bowley also drew attention to the technological conse-
quences of the war for industry and society as a whole. Even
during the war itself for many of those engaged in organising
the supply of equipment to the armed forces the war had
seemed to represent a miracle of production brought about by
remarkable changes in technology and its application. The
most striking example was perhaps the advances in aircraft
manufacture. An industry which had scarcely existed before
1914 developed into a major mass-producing industrial sector.
The consequences of this for civil life were not noticeable on any
scale until after the Second World War which saw a great and
lasting revival of the aircraft industry. But the development of
radio, leading to the mass production after 1918 of the
household receiving set, had a more immediate impact on
civilian existence. So, too, did the numerous advances in
production and managerial techniques, especially those of

18
serial production, which th e high levels of demand for certain
goods and the tight labour market encouraged.
Lastly, Bowley drew attention to the social changes brought
about by th e war. Not only had th e war reduced th e ga p
betw een the classes a nd eve n brou ght into existe nce a syst em of
taxation th e effect of whose ope ra tions would be to continue to
reduce that gap, but its even ts, and the involvement of so large
a part of th e populati on in th em , had cha nged th e gene ral
outlook of societ y. They had provided a perception of another
syst em . 'T he economic position of women and th eir mor e
complete enfranchisement a nd independence with its multi-
form consequence, would no doubt have d eveloped in a
differ ent manner if th eir Claims had not been substantiated by
th eir ability to replace men . In a somewhat similar way th e
services of all ranks in the Army and Navy, and th e more
gen eral intermixture of class es, stimulated th e sentiment of
d emocracy and led to a mor e serious realisation of possibly
av oidable econom ic in equalities a nd hardships, thus paving
th e wa y for the development of th e insurance sch em es and of
more socialistic legislation ' [8: 22].
As that enormous enterp rise, th e Carnegie Econ omic a nd
Social History of th e First World War, began to appear, man y
of th e ph enomena to whi ch Bowl ey had drawn attention
received further em phas is, but from a som ewhat different point
of view. Several of th e volu mes were written by wartime
ad m inistra to rs and th ey were frequently concerned to explore
th e con nec tions between go vern me n t intervention in th e
eco no my, th e d evelopment of direct eco nomic co ntro ls a nd th e
social and eco nom ic cha nge s whi ch Bowley had obse rve d . This
was th e case for exa m ple with th e volumes by Beveridge and
LIoyd [4; 42] . The producti on ' miracles' during th e war wer e in
fact primarily th e result of th e con trol and diversion of
resources by th e cen tra l govern me n t. Indeed , in th e case of
munitions th ey were th e outco me of a sp ecially created
Ministry of Munitions with remarkable legal powers and at
first a large degree of financial indep endence from th e Treas-
ury. Its powers extende d across th e whole field of industrial
production and raw mater ials control and all ocation. The

19
changes in the fiscal system also depended, of course, on a
change of purpose by central government. Employment too
became the responsibility of a special ministry, and eventually a
system of national food control and rationing was imposed over
the most important foodstuffs in daily consumption.
The extension of government control was only a pragmatic
response to the unforeseen stresses on the economy produced
by a change of strategic plan. Many of the more successful
administrators, Lord Rhondda, the Food Controller, or
Beveridge, for instance, were dyed-in-the-wool liberals. The
problems which they were called upon to solve began to present
themselves as soon as the idea of fighting only a naval and
amphibious campaign was abandoned and the army allowed to
recruit a million new men between September and December
1914 [13; 25]. Even the smallest pragmatic acts ofintervention
turned out to have world-wide ramifications. The classic
example is given by Lloyd [42]. The change in military tactics
towards trench warfare at once produced a massive increase in
the price of jute sacking, the material out of which the
kilometres ofsandbags stretching across northern France were
made. Government intervention to force down the price
immediately had a serious impact on the main supplier ofjute
fibre , India, whose economy had played a pivotal role in the
pre-war network ofinternational payments. Similarly, control-
ling the food supply meant controlling th e purchase of imports
from all over the world as well as the shipping in which they
were carried and revealed at once the interconnections between
levels of consumption in Britain and welfare in much poorer
economies.
The way in which these problems were solved was on the
whole seen in th e Carnegie histories as a very positive
acquisition of skill and confidence by gov ernment adminis-
trators. It was interpreted as a learning process in which the
large numbers of businessmen and the other experts hastily
recruited into the civil service had a beneficial effect on what
had previously been a very small and decidedly conservative
group of experts. Wholesale grocers, coalmine owners, ship-
ping magnates, bankers, were given key executive positions
and because their habits of thought and action were so different
20
from th at of th e civil ser vants the functi on of govern me nt
ad ministratio n a nd its relatio ns hip to th e eco no my wa s never
likely to be see n in the sa me passive light again. O n th e othe r
hand it can no t be sai d th at th e im pact of th ese eve nt s on th e
str uc ture of th e civil service a nd its positi on in gove rn ment was
very great. The T reasury soo n bro ugh t th e powerfu l new
ministries a nd d ep artments under con tro l a nd afte r th e wa r
they mostl y d isappeared from th e sce ne [13J,
That govern me nts learned th at th ey could do well things
which th ey had previou sly regarded as beyond their com pe-
ten ce is obvious. If th e purpose was th ought of as unfortunat e,
exce p tional and tempor ary, th at mattered less th an th e fact
th at knowledge a nd confide nce once acquired co uld be broug h t
into pla y again if need ed , as indeed th ey were straight a way in
th e Second World War. The ultim at e implicati on s, spo tte d by
only a few of th e a utho rs of th e Carnegie volumes, were more
complica ted. They did not conce rn th e debate, cond uc ted with
so much vigo ur, as to wh ether con trols ove r the peacetime
eco no my wer e or were not mor e effective than absen ce of
govern me n t inter vention. Rather th ey conce rned those a reas
whe re th e extensio n ofsuccessful govern me n t cont ro ls ca me up
agains t the bounda ries of a wide r wo rld whe re gove rn me nt
con tro l could not so effectively ope ra te . It is to th ese inter-
nat ion al considerations tha t this essay will turn a t th e end.
Su ffice it to say here th at in th is wide r con tex t govern me n t
in ter ven tion a nd control had necessarily to be mo re fumbling
a nd d oubtful. No matter how dominant Brit ain 's role in th e
pre-war internati on al eco no my th er e wa s no real possibility
th a t Britain wo uld be able to bend th e eco no my of th e world to
suit British purposes. The resolute, pragm atic solving of
probl ems by government in tervention in th e eco no my was very
succes sful in th e narrower nation al con text in which it was
impleme n ted, but it could not by itself solve th e fund amen tal
strategic a nd eco no m ic p robl em s of a small island so heav ily
dep endent on foreign tr ad e. German strategy conce n tra ted on
exac tly thi s weakness by launching a large su bma ri ne fleet
against British shipping a nd supply.
This was a probl em whose implicat ions escaped Bowley and
altho ug h it was not ignored by Lloyd , like others who shared
21
his wartime experience he nevertheless felt th at th e su ccessful
ope ra tion ofcon trols pointed th e way towards a less was teful, a
m ore efficient, ca pita lism, if only th at way could be found.
Lloyd 's attitude mi ght be characterise d as one of regret that
th e expe rime n ts in eco no m ic ad mi nistra tion undertak en dur-
ing th e war had been abando ne d after 1918 a nd also as one of
certa in ty th at , d espite th eir a ba ndo n me n t, th ey rep resen ted a
long-t erm trend in th e modifi cation of lib er al ca pita lism in
Britain a nd thus th at th eir a bando n me n t would prove only
tempor a ry. The p rin cip al effect of th e Fi rst World War was
th er efor e, he argued, to accelerate a tr ansformation in th e
eco no mic sys te m. 'T hird ly', he wro te, ' I am di sin clin ed to
ad m it th at all th e measures of ind us tria l a nd com me rcia l
organisa tion ado p ted during th e wa r, which a re com mo nly
lumped together under th e term sta te control, were mer ely
necessary evils to be go t rid of as soo n as possible a nd never to
be th ou ght a bo ut again . A conside ra ble extens ion of co-
operative a nd collec tive ente rp rise see ms to me p robable a nd
d esira ble in times of peace; a nd I bel ieve th at th ere is so me thing
to be learnt from th e expe rime nts in sta te con tro l during th e
wa r which ma y be of positi ve va lue in th e di fficult time s a head .
. . . When th e tim e comes for comp ut ing th e total ne t cost of th e
wa r a nd its after-e ffects , what littl e th ere is to be se t down on th e
cred it side will need to be sifted with mi cr oscopi c ca re from th e
evil conse q ue nces which leap a t once to th e eye; a nd amon g
these change s a nd d evelopments tha t may ap pear to som e to
con ta in th e germs of a better orde r of soc iety a place may
perhaps be found for so me fea tu res, at a ny . ra te, of th e
expe rime n ts d escribed in thi s volu me' [42:priface].
Lloyd did not think th at th e Fi rst Wo rld War foresh ad owed
a ny fu ndamen ta l change in th e eco no m ic sys te m, bu t that it
foresh ad owed th e grow th of larger firm s organised in associa-
tions a nd trusts, oflarge r tr ad e union s negoti ating at a nation al
rather th an a local level, a nd of th e d evelopmen t of sta te con trol
as a regul ating force in th e eco no my , of th e elim ina tion of th e
wast es which he a tt ribu ted to th e more inten sely compe titive
syst em whi ch had prevailed befor e 1914 . The greate r con cen-
trati on of firms and the grea ter size of tr ade union s have been the
results of so man y converging tr ends in th e twentieth-centu ry
22
economy that it is hardly possible to measure the part played by
the war in these processes, but the interest of his book and its
subsequent influence depended not only on his excellent
account ofth e development ofstate interference in the economy
but also on the extent to whi ch his forecasts appeared to have
been fulfilled in the 1930s. H e himselfgloomily reflected that all
that was left of the war economy were protectionist and
nationalist tariffs 'and the economic clauses of a Treaty which
threatened to destroy the possibility of stable reconstruction'
[42: 371]. But certain measures of control abandoned betw een
1918 and 1920 did indeed reappear in various disguises in the
1930s, agricultural price supports and certain tariff devices for
example, and those that had not done so by 1939 were quickly
reimposed wh en th e Second World War broke out. Organised
competition, Lloyd argued, pitted like with like and measured
th eir comparative efficiency with precision; the free play of the
competitive system conferred its rewards and punishments
indiscriminately. He would certainly have acknowledged the
type of capitalism which d eveloped in Britain aft er th e Second
World War as being the result, in part, ofthe First World War.
The rapid abandonment of state controls after 1918 was
equally disappointing to those historians who beli eved that the
pressure for social change built up by th e war amounted to
more than a mere desire to modify the type of capitalism in
Britain. R . H . Tawney argued that the dismantling ofeconomic
con trols was both inevitable and mistaken in so far as it was
against th e long-term historical trend. His summary of th e
effects of the war is almost exactly like that of Lloyd. 'The
period of war economy accelerated the demise of the indi-
vidualist, competitive phase of British capitalism . It stimulated
organisation and combination among manufacturers ; ad ver-
tised rationalisation; strengthened the demand for tariffs; and
encouraged, in another sphere, th e settlement of wages and
working conditions by national rather than by local agree-
ments' [64; 69]. Tawney exp ressed his views cautiously,
perhaps conscious that he was a specialist in another period,
but more likely impressed by th e speed with which the country
had returned to 'normal' . There had been, he ruefully admit-
ted, no 'intellectual conversion' to economic control.
23
 But the gross failure of the return to 'normality' in the 1920s,
the growth ofcollectivisation in the 1930s and the success of the
economic controls applied in the Second World War cheered
those of Tawney's outlook; it may be no coincidence that
Tawney should have published his article in 1943. The Second
World War was so much more 'total' even than the First that it
reawakened interest in the work not only of Lloyd but also of
Bowley. Under the pressure ofwar the same social changes that
Bowley had identified earlier took place again and seemed, as
before, related to the greater involvement ofthe population as a
whole in the war. This observation provided a further concep-
tual framework to explain these changes in the functioning of
the capitalist economy.
In 1954 Andrzejewski published his theory of the 'military
participation ratio' [3]. This was derived from the general idea,
frequently discussed after 1914, and implied in Bowley's work,
that there was some inherent connection between the extent to
which war involved the total population and the extent ofsocial
change. Andrzejewski argued that the extent ofsocial welfare in
any society varied with the extensiveness of the social groups
required to fight in its wars. There is always a gap between the
actual military participation ratio, the proportion of those who
take part in the fighting to those who are not involved, and the
optimum military participation ratio, the ratio that would
allow a society to fight its wars most effectively. The relevance
of such a theory to the twentieth century is easy to see . Adam
Smith had believed that the maximum possible ratio of
combatants to civilians was one in a hundred." In both World
Wars in Britain the ratio was nearer to one in five. By
measuring the gap between the actual and the optimum ratios
Andrzejewski argued it would be possible to show which social
groups would become involved in future fighting and, more
importantly, which social groups would therefore benefit by
being able to make their claims on the state felt and thus alter
the way in which it functioned . '
Titmuss, more cautiously, proposed roughly similar conclu-
sions which he held to have been demonstrated by the changes
in social policy during the Second World War [65; 66]. Less
crude than Andrzejewski's theory, Titmuss's views are
24
nevertheless closely related. 'Total war' is war of a total
society. Previously social policy had been concerned with
alleviating the lot of particular groups or classes, the unem-
ployed, the widowed, the old, the orphaned and so on . Only
some were involved in unemployment or widowhood; all were
involved in war. The bomber did not discriminate. Against its
menace the only remedy at first seemed to be to minimise the
general panic which would ensue. In March 1939 the Ministry
of Health had asked the India Office for the loan of an official
used to dealing with large crowds, of the kind that might pour
in panic from bombed London. By summer 1940, however,
practical relief on the spot was provided for all. School meals
were no longer provided only for the 'necessitous', issues of
special welfare foods and vitamins were made to all. Old-age
pensions were generally increased even in war. The hated
household means test for social service payments was
abolished. From 1942 onwards, in spite of the war, the general
health of British society began to improve strikingly." The
implication of Titmuss's views is that the Welfare State as it
came to exist in the late 1940s owed its existence by that date to
the Second World War. It should not be forgotten that when,
during the war, Beveridge issued his more or less freelance
report proposing a comprehensive social insurance system
which would be obligatory for all citizens it became, for all its
arid nature, a bestseller." And the administrative foundations
ofthe future National Health Service were greatly strengthened
by the need to organise a national hospital system for civilians
during the war,
Andrzejewski's theory has proved too precise for most others
to swallow, and historians who are sympathetic to its general
implications have found much evidence to tell against it. The
aspirations of those caught up in the process of economic and
social change generated by both World Wars were vague,
formulated within the conventional bounds of the existing
political system, and sometimes anachronistic [1; 46; 47; 48].
The Ministry of Reconstruction issued a wide-ranging series of
slight reports in 1918 and 1919 outlining and advocating
reforms in almost every aspect of administration and policy,
but achieved nothing except its own disappearance in the first
25
 post-war depression [36]. The 'homes fit for heroes' movement
initiated by LIoyd George evoked a peasant smallholding world
which in Britain had disappeared for ever. Abrams suggests
that the only group which appears to have benefited in terms of
Andrzejewski's hypothesis was that of middle-aged propertied
women, to whom the franchise was extended [1). After the
Second World War, however, the political change was more
marked and in its reconstruction policies the Labour govern-
ment responded over a longer period of time and with more
effort to aspirations for change which had developed in the war.
Full employment became a prime political objective, although
that is not the reason why it was achieved. Enormous resources
at a time of great competition for them were poured into
working-class housing. The creation of a much more com-
prehensive and generous system of social security and health
care likewise reflected the apparent popularity of such recon-
struction programmes during the war.
In short, the 'military participation ratio' theory is much too
crude to explain a complex process of political, social and
economic interaction stimulated by large-scale war and the
return to peace. Marwick has suggested a more complex matrix
in which this interaction might be measured [47; 17]. This
matrix would embrace four measurements. It would include
firstly the disruptive effects of the war, secondly the testing
effects of the war which determine whether any society is
capable of adaptation to the new challenges, thirdly the
tendency of war to increase participation in the way Andrze-
jewski suggested, and fourthly the psychological effects, the last
being extremely important because, Marwick argues, total war
is a 'psychological experience comparable with the great
revolutions in history' [17: 4). Measured in this way the world
wars would appear as discontinuities in an historical pattern of
gradual economic and social change, greatly accelerating
changes under way and abruptly producing new ones also.
Many of these changes have been usually considered wholly
desirable.
Present interpretations of the impact of the wars on Britain
have thus left Hirst a long way behind. His economic analysis is
universally seen as far too narrow to comprehend the
26
 phenomenon which he was seeking to describe and analyse.
Indeed, the two wars themselves are usually held by historians
to have been a major cause of the decay ofliberal politics and of
liberal economic thought. What has replaced Hirst and his
numerous like-minded fellows has been an increasingly com-
plex attempt to link the processes of social, technological and
organisational change in twentieth-century economies to the
economic changes generated by the wars. How far is this
justified by our economic knowledge of the wars and how far
does it explain the pattern of British history in this century?
In the following section it is argued that the speed and degree
of social and organisational change in Britain caused by the
wars has been much exaggerated, especially when compared to
the economic changes generated by the wars. These economic
changes, however, had their impact not so much on the
domestic aspects of the British economy as on its international
aspects. In that sense the major consequences of the wars for
British economy and society have been and are mostly
overlooked by the changes of interpretation and in the mode of
analysis which have just been described. This does not mean
that these changes have not had their own value, or that they
are not significant improvements on the liberal analysis as it
prevailed before 1914. But to comprehend fully the effect of the
world wars on Britain a more comprehensive and less parochial
approach is needed and one better founded in the study of
international economic change. This further problem is con-
sidered in the last section.

The Domestic Impact

WERE we to ask a citizen of Germany, the Soviet Union or
Japan if he perceived much change in our society over the
period from 1914, and were he to use his own society as a
yardstick, he would surely reply that he did not. The actual
social changes which Titmuss can unequivocally attribute to
the wars are neither very numerous nor very impressive: the
27
free tr eatment of venereal dis eas e, free immunisation against
diphtheri a , an in cr ease in th e number ofchild ren provided with
milk a nd meals at schoo l, part of whi ch provision has since been
withd ra wn, and th e a bo lition of th e househ old means test for
social security provision , a test whi ch has in any cas e tended to
cree p back in va rious disguises. On the other hand it is clear
th at, in a mor e gen eral way, th e Second World Wa r did have a n
important influen ce on the tr ansformati on of th e social security
sys tem into som ething much mor e compreh ensive which took a
much hi gh er sh are of government expe nditure.
Beveridge, in most resp ects as firm a representative of th e
schoo l of laissez-Jaire lib er al th ou ght as Hirst, wh en asked in th e
Second World War to produce a rep ort on th e social services,
took th e same pragmatic view as he had of food con tro l and
rationing in the First World War and advocated policies of
state intervention and help in th e normal life cycl e of th e
individual, something whi ch had a lso become th e programme
of British socialists. Indeed , in som e directi on s, as in sta te
provision for th e ag ed , his proposals went furth er th an th ose
which th e Labour Party subsequently enacted . Lik e many he
had becom e con vinced th at th e future of lib eral d em ocratic
society ac tually required th e a bando n me n t of th e strict ac tuar-
ial a pplica tion of ins urance sche me s to la rg e sec tions of th e
population if th ey were full y to p articipate in it. Indeed he
en uncia ted what has since been one of th e few identifiable
id eological stand poi n ts of the British Labour Party by implyin g
that the com p re he nsive state provision wh ich he advocated, th e
Welfare St ate as it ca me to be ca lled, would d em and th e
a pplication of th e same eq ual fiscal rul es to all members of
socie ty no matter what th e advan tages whi ch th ey might
otherwise be a ble to bu y for th ems elv es. Similarly, th e wartime
ch an ges in hospital a nd ot he r medical provision , which
Titmuss d escribes, clearly did make possible th e p rovision after
th e war of universal, cheap, eq ual medi cal provision throu gh
medi cal insurance to whi ch a ll were forced to con trib u te
whatever their incom e or position. Yet, at th e mom ent of
writing, th ese new principles of welfare, celebrated at th e time
as a permanent social and eco no mic reform in consonance with
long-t erm tre nd s, hav e not only been constantly erode d but a re
28
now on th e po int of bein g d ecisi vely rej ected . It is a ca utionary
not e against stressing too stron gly th e pressures towards suc h
reforms during and after th e Second World War to remind
ourselves that Beveridge, who had by 1945 becom e, a nd has
rem ain ed , a popular symbo l of th e Wel fare St ate, was exclude d
from go vern me n t influen ce, pu sh ed ou t of his Oxford college,
a nd whe n he stood for parliament d efeated in a left-wing
landslide not by th e left but by a right-win g co nservative . T o
read works like th ose of T itm uss now is to be awa re how much
his expla nations of a ppare n tly irreversible social change a re
ca lled in to questi on by th e fact th at th e changes have not
proved irreversible at a ll. Likewise, wo rks written in th e 1920s
d em onstrating th e way in whi ch war had change d th e position
of wo me n in soci et y must have rung hollowly in th e heads of
th ose many wom en wh o were driven ou t ofem ployme n t in 1921
never to find a j ob again.
If we ask ourselves whi ch social cha nges produced by th e
wa rs have proved long-t erm th e m ost obvious is one not
di scu ssed a t all by most com me n ta to rs. It is th e d ramati c
change in fortune which th e wo rld wa rs b rou ght to th e
ag ricultura l sector of th e eco no my. The effects of th e German
submarine blockade in the First Wo rld War we re to lead th e
Briti sh Government in 1917 , by th e use of finan cial incentives
a nd by comp ulsory power s whic h were hardly used , to a ttemp t
to rever se th e tr end of ag ricultu ra l development in Britain over
the p revious forty years. That tr end had been a rapid red uction
of th e importan ce of ag ricult ure, a rapid sh rinking of the labour
for ce, a n in cr ease in grass land a nd in th e prod ucti on of som e
meat s a nd of d airy food s, a nd a drasti c decr eas e in man y ara ble
cro ps, pa rti cularly cerea ls. The a ttem p t to reco nve rt to ara ble
fa rming in orde r to com ba t the German stra tegy of cu tt ing-off
food supply was relatively successful a nd th e cro p a rea in 1918
was grea ter by 3 milli on ac res th an in 1916. The various
finan cial in centives were em bodied in th e Co rn Produ ction
Act , 1917 , which fixed minimum prices for wh eat a nd oats. The
Ministry of Reconstructi on advocated th e retention of th ese
measures on th e st atute book in pea cetime and th e Agri culture
Act , 1920, esta blished a system of a nn ual price reviews for farm
p roduce which wo uld maintain th e wartim e struc ture of
29
ou tp ut. Less th an one year la ter, with th e onse t of the
d epression , thi s Ac t was re pealed a nd th e previou s trend of
agricultural developmen t reassert ed itse lf.
Befor e the Second Wo rld War the govern me nt's ass um p tion
was th a t it wo uld be a ble to ma nage th e eco nomy whi le st ill
retaining agricultural prices a t th eir pre-war level. There were
two reason s why thi s p roved impossibl e: th e in cr eas e in
imported fodder prices a nd th e powerful a nd successful
pressure which far mers were a ble to bring to bear on th e
govern me n t in th e new circu ms ta nces , pressure to which th e
govern me n t rapidly yielde d ;" The occasion of its ca pitula tion
was th e d ecision inJ un e 1940 to la y down a minimum nation al
wage for agr icult ura l workers in st ead of minimum local wages,
itse lf a reflecti on of th e sudde nly in creased importance of
ag ricult ure. Fa ced with thi s add itional in cr eas e in cos ts, whi ch
would have meant a n extra a nn ua l wage bill for th e industry of
£ 15 milli on , farme rs d em and ed a wid e range of high er a nd
guaran teed prices. The effect of th eir pressure, which was
con tinued throu gh ou t the war, a ppears in a n in ter est ing book
by Seers [60]. Dividing the in com e-receivers into va rious gro ups
a nd comparing th e va lue of th e per capita pre-t ax income
received by each group, he is a ble to dem on st rat e th at th e
in cr ease in far mers ' incom es between 1938 a nd 1949 on a n
average was seve n-a nd-a-half-fold , Cer tai n p rofession al gro ups
alone d id be tter, bu t whe n allowance is mad e for taxa tion th e
im p rovemen t accruing to th em was easily ou tdistance d by th at
accru ing to farmers . By co mparison th e im prove me n t accruing
to wage-earners on a n average per capita pre-t ax basis was
two-and-a-half-fold . Agricult ura l la bourers, of course, did
much less well th an farmers.
T he re ca n be no d ou bt th at not only did th e fa rming
com m unity eno rmo usly im prove its positi on in th e eco no my as
a result of th e Second World War, but th at th at improvem ent
has been a long-t erm one . The sys te m ofg ua ra n teed pri ces a nd
a nn ua l price reviews, ac ting, as it were, as a n in su ran ce tak en
out by th e st ate on behalf of th e farmer aga inst th e risk of cro p
failu re, has been maintained in full vigour sin ce 1940 . Since th e
ad he rence of th e United Kingd om to th e European Eco no m ic
Comm uni ty th e gua ra nteed prices have been internati on ali sed
30
and the mechanisms of protection adapted to conform to those
of th e Community's Common Agricultural Poli cy, on e of th e
rare examples where the workings of th e capitalist economy
have been managed by international agreement. As in the rest
of western Europe, in th e immediate aftermath of th e Second
World War agricultural protection on a massive scal e became
an inherent, almost an unquestioned, aspect of British politics
and society. It should be noted, however, that in this transition
the influence of th e pattern ofinternational trade and payments
left behind by th e war was also very strong. When only th e
United States had food surpluses, maximising th e amount of
food produced in Britain, at whatever cost, could be repre-
sented as saving dollars at a time when th ey were th e scarcest
curre nc y, and thus helping to resolve th e international pay-
ments problem. This had not been th e cas e in 1920-1 wh en th e
Agri culture Act, em bodying many of th e same principl es, was
abandoned.
If we turn to other social groups apparently in a position to
ben efit , th e outcome is less obvious, partly because suc h groups
were more a morphous and often more divided amongst
th ems elves than farm ers. Bowl ey originally id entified wage-
ea rne rs as a group wh o ben efited from th e First World War,
and subsequent writers suggest ed that to them should be added
thos e who lent money to th e gov ernment. The two groups
ca nnot be sepa ra ted, for th e conseq uences for both were
gen erated by th e highly inflationary method by whi ch th e
gov ernment chose to finan ce th e First World War. Infl ation is a
most pow erful cause of social change, and in a period wh en
what was produced by th e economy a nd th e rewards distri-
buted for producing it wer e su bject in th emselves to drastic
change, inflation could onl y in cr ease th e sen se of a changing
order.
The ca uses of th e inflation in the First World War have
received sufficient attention to merit a furth er book. Simplify-
ing drasticall y, it could be said th at th e impact of th e war on th e
international econom y was inflationary and th at th is was
exacerbated by domestic financial poli cy. The d emand from all
the pow ers involved for raw materials and finish ed products
was so great as to ca use a gen eral ris e in th e price of imports
31
which in turn caused British wh olesale prices to move upwards
sharply in th e spring of 1915. International dem and was
susta ined on this level through out the war, but its impact on
Britain afte rwa rds was probably less important than th e
government's own cons ta n tly in creasing d em ands on th e
dom estic economy. The go vern me n t was able to sa tisfy this
dem and by borrowing on a massive scale, until 1917 in th e form
of three separa te long-term loans a nd aft er that date more by
sho rt- a nd medium-term bor rowing. All th e forms of paper
which th e gov ernment issu ed to finance th e gap betw een
expe nd itu re and revenue from taxation wer e in th emselves
so urces of cred it. The d eficit thus provided for a gen eral
in creas e in purchasing power, th e effects of which th e govern-
ment struggled to modify through fiscal policy and con trols on
th e supply ofgoods . These efforts were noticeably unsuccessful
in the first two and a half years of the war and th e sp ect acl e of
luxury sp ending by a sm all number of the especiall y fav oured
sh arpen ed th e ed ge of soci al a nd eco no mic criticism. T o ensure
a n ade q ua te supply of fund s to th e government, mor eover, th e
inter est rate on mon ey had to be in cr eased rep eatedl y, only
falling aft er 1917 whe n eco nom ic controls became reall y
effective. Those wh o lent to th e governmen t wer e th erefore a ble
to p rot ect th em selves against inflation , while a t th e sa me tim e
th e govern me n t provid ed th em with important conce ssions in
th e pa ym ent of d eath duties a nd , after th e war, whe n reducing
th e burden of d ebt, offered th em relatively favourable terms of
conversion [39; 52]. ,
Hirst , whil e lamenting th e in cr eas e in government d ebt,
believed that this p rocess had had on e ob viously ben eficial
effect, a wid er di stribution of ca pita l [33] . Not only were people
who had not been accu st om ed to in vest attracted into th e
in vestment market by the flood of government paper on
favourable terms , but many workers , particularly th ose in
munition s factories , wer e able to accumulate a considerable
fund of sa vings for th e first tim e in their lives. Ther e was of
course a di stinct probability that this would be th e result of an
eco no my where production for civilian purposes was in cr eas-
ingly restricted and wh er e foodstuffs were rationed and control-
led whil e ea rn ings ros e. The id ea that such an op po rtunity
32
should be in fact exploited lay behind Keynes's now celebrated
articles, How to Payfor the War, which appeared in The Times in
1940 [38]. There he pressed for a system ofcompulsory savings,
whereby the increased incomes accruing in the course of the
war would be temporarily withheld until after the war. The
result would be that the government would be able to borrow
more easily during the war and without such apparent social
injustice, and after the war, by releasing the extra income,
would be able to combat the post-war depression by increasing
purchasing power. The working classes would thus be made to
liquidate their claims on goods when goods were available
instead of liquidating them during the war to the embarrass-
ment of the government. The payment would be made from the
results ofa capital levy. Wage-earners would be made to reduce
some of the inequalities of the capitalist system instead of
merely indulging in pleasure. '
His ideas were only in part accepted by the government, and
in that part wherein they were anti-inflationary [59]. Fear of
another inflation of the same kind as in the First World War
was the mainspring of Treasury policy. The abandonment of
the gold exchange standard in the 1930s and the acceptanceof
exchange controls, making the impact of international mone-
tary movements on Britain much less direct, together with an
immediate strict imposition of physical controls, enabled the
government to maintain the interest rate on government
long-term borrowing at 3 per cent throughout the Second
World War. The whole-hearted acceptance that it was neces-
sary to impose a battery of restrictions and physical controls on
the civilian economy and to increase taxation from the outset
did mean that the more glaring social inequalities of the First
World War were avoided. But the same demand for labour and
the same increase in money wages existed even if the incidence
of fiscal and financial policy was different; the underlying
pressure towards social change was still there.
There is some evidence that Hirst was correct in his
supposition that capital became more widely distributed. The
War Savings Certificates issued in 1916 were originally
intended to be issued only to those who had satisfied a means
test, but the government abandoned that test as unnecessary.
33
The number of small savers did increase, as witnessed by the
continuation and success of the National Savings Movement
after the Second World War. But these facts have to be seen in
proportion. The War Wealth Committee calculated that 68 per
cent of the total increase in wealth during the First World War
went to that class which already possessed fortunes of more
th an £5,000, thus suggesting that the previous inequalities may
have been intensified. There is a more careful check on these
calculations in the work of E. V . Morgan [52]. Before 1914
government securities in private hands were about 2! per cent
of total private property; in the 1920s they had risen to almost
25 pet cent. The main owners of all this government paper,
however, were extra-budgetary funds and private investment
companies, such as the National Health Insurance Fund,
insurance companies, banks and firms in the money market.
Between 1914 and 1919 small savers absorbed about £487
million of the National Debt, and between then and 1924 a
further £ 131 million. The total debt was £6,592 million . In th e
tax year 1924-5, £67,923,000 of securities changed hands on
the death of their owners; only £ 1,385,000 were in estates to the
value ofless than £100. Nevertheless it should also be said that
the proportion ofsecurities to the total size ofesta te was greater
in the smaller estates.
Rough measurements of the holdings of capital show that
there has been a tendency to redistribution in this century but
that that tendency has been very slight. The percentage of the
national stock of capital owned by those owning between
£ 1,000 and £5,000 was just under 16 per cent in the period
1911-13; in the period 1924-30 it was about 17! per cent. There
was little change between that date and 1936-8, but between
1946 and 1947 the percentage was about 2I! per cent. That
proportion of the national stock held by those holding less than
£1,000 increased only very slightly, but the proportion held by
those holding over £100,000 fell most markedly [40). There is
thus considerable evidence in favour of a redistribution of
capital accelerated by the world wars, but little evidence that
this touched the poorest groups . Looking outside the bound-
aries of Britain again, it is impossible not to be more impressed

34
by the stability of the pattern ofcapital holding in Britain when
compared, for example, to Germany, where capital holdings
have twice been almost wiped out, than by these changes. Little
is known of the level of working-class savings in the First World
War, but studies at the close of the Second World War suggest
that there were great inequalities according to the level of
income. The poorer 52 per cent of a sample of working-class
families studied by Durant and Goldmann in 1944-5 owned
only 9 per cent of the aggregate savings total of the sample,
while at the other end of the scale 12 per cent of the families
owned 50 per cent of the total savings [19]. In general the
remarkable thing about the level of working-class savings is
how low it was.
So low was the level of soldiers' pay that it is reasonable to
suppose that ifthe wars did provide a boost to the working-class
standard of living and thus help to establish a trend towards
greater social equality, the rewards must have been distributed
arbitrarily according to the occupation of males or the possibil-
ity offemales taking advantage of the high demand for labour.
In certain mass-production processes there came a startling
increase in the employment of women. The chief government
munitions factory, Woolwich Arsenal, employed only 100
women in November 1916 but 30,000 a year later. At some
stages 400 new women a day were being taken on [13]. But the
total increase in female employment, about 1,600,000, during
the First World War was much less than the increase in male
employment in the armed forces. In both wars the increase in
civilian employment came also from the unemployed and
males at both ends of the age-scale who had previously been
excluded and were too young or too old to be taken into the
armed forces. 1 1 It has to be remembered that there were more
than a million people registered as unemployed in Britain in
April 1940. Nonetheless in the Second World War as in the
First the expansion of the armed forces to more than four and a
half million meant dramatic changes in labour markets and in
the nature of employment. In the Second World War the main
instrument ofcontrol and planning was the 'manpower budget'
which allocated labour resources to the different tasks. The

35
question we have to resolve is how far these bewilderingly rapid
shifts ofemployment had any long-term effect on the economy.
As far as the employment of women is concerned the
long-term effects were not very noticeable. Between 1911 and
1921 the total number of females in gainful employment
increased by only 234,000. There was a decrease of almost
200,000 in the clothing trade and an increase in metal
industries, engineering and shipbuilding. Together with the
increase in the civil service, 69,000, this does indicate a certain
willingness to accept women in occupations where they had
been unwelcome before. But the gains were extremely small.
There was very little diminution of the male prejudices which
dominated shop- and factory-floor [10] and no serious attempt
at all to invest in making it easier for women to work. What is
more, after 1921 female employment again declined. The
persistence of full employment after the Second World War
meant that women did not again fall out of employment to the
same extent. The level offemale employment in the I 950s was
noticeably higher than an extrapolation of the trend before
1939 would imply. Taking a category ofemployment where the
census classifications did not change too drastically, that of
transport and communications, the number of women em-
ployed was , in 190 I, 27,000, in 1911, 38,000, in 1921 between
72,000 and 75,000 depending on the classification used, in
1931, 82,000, and in 1951, 149,000. After 1921 a special
classification to indicate clerks and typists was introduced,
although it was not always observed in the same manner. The
number of women employed in public administration and in
commercial occupations increased from 105,000 in 1911 to
668,000 in 1921 by the old classification. Using the new
classification and combining the categories of public admini-
stration, commercial, financial and insurance occupations, and
clerks and typists in order to smooth out certain vagaries of
allocation, the number ofwomen so employed was 1,149,000 in
1921,1,152,000 in 1931 and 2,286,000 in 1951.
In both wars hours ofwork were long. Yet it cannot be simply
assumed that the impact ofthe demand for labour was to put up
the real wages and the standard ofliving of the largest section of
the community. The extent of rationing and other economic
36
controls, together with increasing taxation and rising prices,
makes the actual level of real wages and the wider issue of the
standard ofliving difficult to determine. In addition, as several
interesting studies have shown, demand for lebour was very
complex in its incidence.
The level of real wages in both wars has usually been
measured by the retail prices collected by employment
exchanges from 1914 onwards, which later became the Board of
Trade cost-of-living index. On this basis it appears that only in
the last year of the First World War was there a general
substantial gain in real wage rates as opposed to money wages,
although it must be remembered that because of overtime pay
earnings were often much higher than before 1914. Bowley
distinguished sharply between the fortunes of the unskilled
workers and those of the skilled artisans. Statistical investiga-
tions in five English towns made in 1912-14 and 1923-4
revealed that whereas in 1913 a considerable number of
workers, although in full-time employment, did not earn a
sufficient wage to keep them out of poverty, this had become
very rare by 1924 (7] . Bowley attributed this mainly to the
demand for labour during the war forcing up the wage rates of
the lowest paid. 'The skilled artisan', he wrote, 'had gained
little by 1924, except the reduction of working hours' [8: 160].
This observation could be taken further ; the technological
changes in production processes during the war went a long
way towards ending the distinction between 'artisan' and
'workman', and what the First World War did not complete the
Second World War did . War's high demand for large quan-
tities ofstandardised articles led to a great increase in the use of
single-purpose machine-tools and other mass-production
techniques. Nearly a quarter of a million .303-inch machine-
guns were manufactured in the First World War, all more or
less to a pattern; 849,923 were made in the Second World War.
Almost four million rifles were turned out in the First World
War [34: 10]. The tank, not really used in battle until 1917, had
by 1918 become a mass-produced good. The aeroplane, still an
object of curiosity in 1914, had also entered into the stage of
mass production by 1917. The size of the British aircraft
industry in 1918 is often forgotten . There were 52,027 military
37
aeroplanes manufactured in th e First World War, not much
less th an half the total manufactured between 1939 and 1944,
although of course th e ea rlier machines were simpler. The
massive scale of gov ernment ord ers and the urgency to fulfil
th em led at th e start of th e war to a great increas e in th e
insta lla tion of machine-t ools , particularly turret lathes, ca ps-
tan lathes and universal milling machines, many of whi ch had
to be imported from th e United States wh ere th e gene ra l level of
mechanisation within th e factory wa s much higher. As th e level
of orde rs gr ew , and as semi-skilled men who ope ra ted su ch
machines were taken into th e arm ed forces , th e tenden cy to
instal a u toma tic machine-t ools which could be us ed by en tirely
unskilled labour d eveloped. At th e same tim e olde r machines
were ad apted to use by unskilled labour. Not onl y was th ere a
great increase in the use of machine-tools but als o a gr eat
improvement in their depl oyment, especia lly aft er th e go vern -
ment census of machine-t ools in 1915. The gun, aeroplan e and
tank factories of 1918, in th eir eq uip me n t, layout, em ployme nt
structure, and methods of orga nisa tion , bore little resemblance
to most British factories of 1913.
This in creas e in mech anisation produced similar effects in
both wars. At the start, because of th e sudden shift of outp ut
towards en gin eering a nd ca pita l good s, th er e was a sh arp
incr eas e in th e d emand for skilled labour.P The high cost of
skilled labour th en produced a wa ve of investment, aid ed by th e
government, in mor e ca pita l-in tensive methods of producti on ,
for which th e ma chiner y had in large part to be imported from
th e United States. In th e very first stages of th e First Wo rld
War th er e was als o a n in crea se in th e number of those
employed in unskilled jobs. M eanwhile, women repl aced men
in clerical work and in retail trade. As mechanisation pro-
ceede d, th e need for semi -skill ed workers to opera te th e new
machines increased mor e rapidl y than the need for skilled
workers. It was this that ca used th e first 'dilution' agreem ents
of 1915, for the job pattern was changed by taking aw ay from
th e skilled artisan th e mor e mechanical parts of his job and
having them performed on th e new machines by th e semi-
skill ed . Since most wages were paid by piece-rates, or had
similar in centive bonuses a tt ac he d, th e skilled worker 's inc ome
38
was reduced relative to that of the semi-skilled worker. After
the conclusion of the Shells and Fuses Agreement in March
1915 the manufacturers began to instal large numbers of
automatic machines, which had made their first appearance in
boot factories and now began to transform shell factories . With
their appearance came the final stage of th e concept of the
mechanised production line, to spread rapidly from shell
factories into many other manufactures. These machines
needed only unskilled labour and it was with their installation
that women first moved into factory jobs in significant num-
bers. The Dilution Sch eme worked out in October 1915 finally
consigned the skilled artisan to the tool-room and saw the
replacement of semi-skilled workers by unskilled workers and
women [14].
This replacement was accompanied by constant improve-
ments in the earnings of the unskilled, whose whole function in
the factory had been changed by this rapid mechanisation.
They had achieved greater regularity and formality of em-
ployment, albeit at drearily monotonous tasks. This increased
formality in the employment structure was then ratified by the
changes in the social security system, the most important of
which had actually been introduced before the First World
War, which made it more difficult for employers to employ
unskilled labour on a casual day-to-day basis as and when
particular tasks needed doing. The bureaucratisation of the
employment structure which accident insurance and social
insurance meant, together with the greater formalisation of
wage bargaining with trade unions, as well as the increase in
numbers and strength of the unions representing unskilled
workers which high employment levels produced, all combined
to effect an important break in the pattern of employment and
existence of the pre-19l4 world. The impact of the war on
female employment was essentially only a part of this process,
not a special phenomenon. By 1917 women were undertaking
jobs in many industries which in a different form had been
carried out by semi-skilled and even skilled male workers
before the war. Indeed the category of 'semi-skilled' lost its
former meaning as the need for training diminished and
became merely an arbitrary classification for wage-setting.
39
Women simply became part, a small part, of the new industrial
proletariat. It is perhaps fortunate that the position and income
of all who made up this proletariat had been favourably
affected in the long term by the war.
With the particular talents of the semi-skilled worker made
superfluous on the factory floor , with the skilled artisans greatly
reduced in numbers and influence, with the ability of the
unskilled to command for five and a half years higher earnings
in regular employment, and with their much greater safety and
regularity of employment (if they had a job) in the inter-war
period, the gap in economic and social status between these
groups narrowed. Many of the fiercest labour disputes of the
First World War and not a few in the Second were caused by
these important social changes.
Concluding his chapter on changes in income distribution,
Bowley drew attention to three trends in particular: the
tendency to eliminate 'remediable poverty'; the tendency to
diminish 'excessive wealth'; and the tendency to a more equal
distribution of incomes. 'The changes are due to many factors ,
some of which are directly traceable to the war, while others,
such as the fall of the birth-rate and the extension of social
services, are th e contin uation ofprocesses that began before the
war, which, however, cannot have been without influence on
the manner and date of their development' [8: 165]. These were
wise words, borne out by all subsequent research. Winter [70]
has subsequently argued that the demographic evidence tends
to confirm the view that the First World War marked a
watershed in the elimination of'remediable poverty', especially
of the chief cause of such poverty observed in pre-war social
surveys."
The evidence for this rests mainly on the great improvement
in infant mortality rates in the industrial conurbations. A
similar, but less drastic, improvement in infant mortality rates
was observed between 1943 and 1945. In the First World War
this decline occurred when there was actually less medical
provision than before the war and may therefore be attributed
to the improved standard of living engendered by higher
earnings and more regular employment and to the improve-
ment in social provision. Part of this improvement in social
40
provision arose from the social reforms of the Liberal govern-
ment introduced immediately before the outbreak of war, such
as national health insurance, old-age pensions and the pay-
ment of maternity benefit. Another part, however, was directly
attributable to wartime intervention. This included family
allowances to serving men, free school meals for older children,
free milk and food for nursing mothers and infants, rent control,
and food rationing.
Could the war alone have had so dramatic an effect on the
labour market as to change radically a pattern of employment
and existence so long established in Britainr'" What weight
should we ascribe to other forces in this process? Ifthe war were
the driving force in such a change it could reasonably be held to
have changed the impact of the capitalist economy in a decisive
way on as much as a third of the population. Unfortunately the
spirit of accurate enquiry into the economic basis of all parts of
society which originated in the late eighteenth century has, for
most of the period after the Second World War, been replaced
by an obsession with 'images' ofsociety. These are much easier
for the historian to conjure up and provide a welcome
opportunity for fashionable self-indulgence since they usually
show a more revealing image of the historian than of society
itself. It is astonishing that, in the midst of the current political
debate about whether the changes in the social security system
attributed to the wars should be maintained, hardly any
historians have been interested or determined enough to find
out what differences these changes have continued to make."
Something maybe said ofthe effect of the Second World War
on wage-earners from the studies ofSeers [60]. That part of the
National Income embraced in the category of wages, forces'
pay and social income increased by some £900 million at 1947
prices between 1938 and 1947. The- gain was mainly attribut-
able to the redistribution of income, especially away from
salary-earners and from net property income. Working-class
income in 1947 was 59 per cent of private income, whereas in
1938 it was 55 per cent. The total real net income of the
category that Seers identified as working class rose by over 9
per cent, and of that category which he identified as middle
class it fell by more than 7 per cent.
41
 If, however, these calculations are made on a pre-tax rather
than a post-tax basis, the gain appears as relatively insignifi-
cant. It then appears that the greater equality is due more to
changes in the taxation system, including the institution offood
subsidies, than it appears to have been in the First World War.
Taxation had also become more progressive between 1914 and
1918, but to a much smaller degree, such that its most marked
effect, rather than to improve the position of those with the
lowest earnings, had been to reduce the number of very large
incomes. From the figures in the report of the Colwyn
Committee it would appear that the principal gainers from this
redistribution were those whose incomes were between £200
and £ 1,000 a year.!" The incidence of income and supertax
combined reduced the highest incomes by one-twelfth in 1914
and by almost one-half in 1925. The number of people with
gross incomes above £3,000 in 1913-14 was 32,500, but the
number above an equivalent income limit, allowing for the
change in prices, by 1924-5 was only 24,000 [8: 138]. It would
appear therefore that the most important force making for an
improvement in the working-class position in the Second
World War was the increase and greater progressiveness of
taxation, and that this was also a powerful influence in the First
World War but one whose effects were more limited. This must
be attributed in large part to the need to pay for war.
That this improvement was the result ofthe war more than of
the long-run development of the economy appears likely, for it
was dependent on certain incidences of fiscal policy. The
Inland Revenue criticised Keynes's ideas in 1942, remarking
that 'the purpose of the income tax is not the redistribution of
income', and in February 1941 Churchill raised violent objec-
tions to an increase in income tax on the grounds that taxation
ofthe middle and upper classes could go no further [59: 78]. The
improvement also depended on government policy in respect of
foodstuffs and rent. The old-fashioned and inadequate Board of
Trade cost-of-living index which measured prices on the level
of basic working-class consumption, that is to say on the
consumption of those who lived on little more than the
minimum standard necessary for existence, was carefully
stabilised, when it showed a tendency to rise too rapidly at the
42
start of the war, by the use offood subsidies and rent control. It
therefore ceased to measure the true cost ofliving as it came to
have even less resemblance to working-class consumption than
it had had before. Higher incomes meant that there was a
greater consumption of alcohol, tobacco and amusements, the
prices of which, not being included in the index, were not
stabilised and therefore were higher [29 : 500; 55]. It is thus very
hard to be precise about the movement of real wages during the
Second World War. But they do not appear to have played as
important a role as price control and taxation. 'The total effect
of income tax and price changes up to 1948 was to transfer
about £500 million at 1938 prices, some £ I ,000 million at
today's prices [1948], ofpurchasing power from one-sixth ofthe
United Kingdom to the remainder, cutting the real value of the
purchasing power in the hands of the top sixth by some 30 per
cen t, and increasing the purchasing power in the hands of the
remainder by about 25 per cent' [60]. A general fall in real wage
rates in 1947 marked the beginning of the end of this process,
since carried further by the gradual elimination of food
subsidies and rent controls. It is not so much true that a
long-run tendency to a redistribution ofincome in the twentieth
century has been very greatly accelerated by the two wars as
that a very considerable part of that redistribution, although it
may be a long-term effect, may have been limited in its
occurrence to the period of the two world wars themselves.
To sum up, there is evidence to support the general
arguments of Titmuss, Andrzejewski and Marwick. The
particular social reforms purely attributable to the war may be
few, but certain groups in society were able to bargain
successfully for a much better position. Two such large groups
were food producers, because of the danger posed by the
restriction of food imports, and unskilled workers, because of
the tightening of the labour market. In the second case,
combined with technological changes in manufacturing, this
was probably a social change of great magnitude. No doubt it
would be possible to point to other smaller groups in a similar
position, and not only armaments manufacturers. A few further
remarks about this process may help to put it in perspective.
Sociological research on the impact ofdisasters on industrial-
43
ised societies is instructive. Sorokin, whose work was the
starting-point for much subsequent research, considered that
disaster, of which war might be considered one example,
afforded a particularly favourable ground 'for the emergence of
radically different social forms' [62: 120]. This view has since
tended to be modified according to the type ofsociety at which
the disaster strikes and the magnitude of the disaster. Form and
Loomis in particular have drawn attention to the prevalence of
a concept of 'return to normalcy' [23; 24]. As long as there is
hop e for the future, society will hope that that future will
resemble the form of the society which is threatened by disaster.
The significance of this heightened sense of the need to recover
social equilibrium and to go back to 'normalcy' for the events of
the 1920s and the return to the gold standard needs little
indication here, the economic literature of the time being shot
through with such concepts.
It is here that the comparison with Germany, Russia or
Japan is especially interesting. In both wars British govern-
ment put up a relatively distinguished performance. It did
prevent disaster and it did maintain the hope that the accepted
norms of economic and social existence would be preserved.
The parameters within which changes in the functioning of the
economy would be allow ed to produce social ch ange were not
widened as they were, say, in Germany in both world wars and
the parameters of acceptable political change much less so.
That the general elections of 1919 and 1945 returned to
parliament a significantly different group of politicians from
pre-war is true. But compare that for one moment with the
even ts in Russia in 1917 or in Germany in the period 1918-20 or
even with the political change represented by the first post-war
parliament of th e German Federal Republic and the circum-
scribed nature of the changes in Britain is at once clear.
Indeed, a successfully-conducted total war probably means
that the political process analysed by Andrzejewski generates a
greater level of social and political harmony whose tendency is
to reject and chastise economic and political dissidence much
more severely. The Local Armaments Committees which
sprang up at the beginning of 1915 raised the spectre of
workers' control to the extent that employers refused in many
44
 places to allow them to function. The attitude of the employers
was bolstered by the Munitions of War Act of that year which
even went so far as temporarily to impose a pass-book system
on munitions workers whereby they were unable to secure
future employment without a report from their previous
employer. Those imprisoned and deported without trial in the
so-called 'revolt of Red Clydeside' no doubt took a rather
tangential view of the democratic process in wartime as
described by Andrzejewski, Titmuss or Marwick. Wartime
propaganda and post-war myth greatly exaggerated the degree
ofsocial unity within wartime Britain and in doing so probably
also exaggerated the extent to which post-war changes were
caused and politically sanctioned by the experience of war.
Was 'the Dunkirk spirit' so prevalent in the British economy?
Certainly the evidence of growing tax evasion during the
Second World War suggests it was not. It was during, not after,
the war that higher direct taxation produced the practice on a
large scale of rearranging financial affairs so as to pay as little as
possible of the tax burden.
That the government should seize the opportunity of war to
promote changes which it might consider desirable rather than
necessary was an idea which remained unaccepted, as witnes-
sed by the fate of Keynes's recommendations on deferred pay.
At the start of the First World War the state rejected the idea of
nationalising the armament firms, and the take-over of the
railway companies, which foreshadowed their later reorganisa-
tion and nationalisation, was based on merely military con-
siderations. The railway rolling stock remained the property of
its private owners. In general the boards and associations
which developed with the extension of physical controls were
essentially compromises with private interests, both sides being
driven to compromise by the desperate nature of the situation.
Either the methods and functions of private business were
grafted on to a government department, or a group of private
firms became temporarily a branch of the public service, as in
the case of the United Kingdom Oilseed Brokers' Association .
The differences in method of operation were mostly to be
explained by market factors . Even where the government ' took
possession', as in the case ofcoalmines or flour mills, the phrase
45
did not imply any effective change of ownership. The govern-
ment accepted financial responsibility for the results of control
and enjoyed the use of the plant for its own ends. As in the First
World War so in the Second, most controls were resorted to
only when unavoidable. Rent control had its origins in a rent
strike. In both wars the idea of a capital levy was rejected. In
both the British political system and society were held up as
vastly superior to those of the enemy powers.
If the success and stability of government provided a
framework in which the sociological tendency to seek a pattern
of normalcy could assert itself with especial force, it must also
be noticed that another tendency may have mitigated against
this. It is one which has received remarkably little attention
from historians. The very long periods of time over which
fathers and husbands were away from the family, the fact that
large numbers did not return, the effects of this on children and
on marriage, the changes in families when women became the
main bread-winner, may also have twice initiated a complex
generational pattern ofattitudinal and social change. Was this,
too, cut short by the desire to return as quickly as possible to the
normal framework offamily and the established conventions of
society? The psychological consequences of military experi-
ence, particularly that of combat, seem frequently, as in the
recent case of the Vietnam war where they have been studied,
to have been the isolation from the ' normal' social framework of
those who have undergone such experiences. For many conti-
nental countries after the First World War this is cited as a
cause of social and political disorder. Former soldiers were
prominent in many right-wing revolutionary movements in
such countries as well as in the terrorism which they practised.
This is an area where for Britain further historical research
might well lead us eventually to some clearer and more
convincing conclusions .
What sanctioned economic change politically was not its
desirability in itself, the sense that the economy functioned in
an unjust way and should therefore be adjusted, but the idea of
rational efficiency, a quality much needed to win wars. The
economic and social changes which lasted were justified
and accepted as a more rational deployment of resources. This
46
was th e principal argument for th e reorganisation of th e
rail ways and th e electricity supply industry after th e First
Wo rld War a nd for th e nation ali sati on of industries after th e
Seco nd . Collec tive bargaining for wages on a nation al ra the r
th an a local level, th e amalga ma tion of firms , banks a nd tr ad e
union s, pa ym ent of in com e tax a t source, full employ me n t
policy after 1945, a ll were j ustified by this a rg ume n t. The
Beveridge Report itself could be see n as th e apotheos is of this
a rg ume n t, a massive attempt a t rationalisation of th e whole
field of social policy, ac cep ted because th e irra tional in effi-
ciency of wha t had been develop ed in so piecem eal a way could
no longer be tol erated in a nation al eme rge ncy .
The closer con nec tion betw een science a nd industry whi ch
th e First World War ac hieved strengthened this movem ent
tow ards better managem ent of resources, especia lly as it was
itself encouraged by th e miscellaneous collecti on of sch olars,
writers a nd reformers wh o had for long criticised th e British
econo my and British societ y for th eir in efficien cy. The H ald ane
Co mm ittee appointed in Aug ust 1914 first moved th e gove rn -
ment along th e road to th e subsidisa tion of certain industries of
particul ar stra teg ic importan ce a nd whe re it was judged
German y had d evelop ed an advan tage. Su ch industries were
later sing led ou t for p rotecti on in Britain 's first breach with free
trad e, th e McKenna tariff. The Pri vy C ouncil Co m m ittee for
Scien tific a nd Industrial Research in th eir rep ort for 19 15-1 6
mad e no bon es a bo u t th eir views on ' the eco no m ic p ro blem '.
'T he re is already a cer ta in number ofla rge firm s in this coun try
who, reali sin g th e unity of inter est between employe rs a nd
em ployed, ha ve syst em ati call y striven to ra ise th e sta nda rd of
livin g a mo ng th eir wo rkers a nd to give them a direct interest in
the firm 's su ccess. Som e of th ese efforts ha ve not been
philanthropi c; a nd wh ere th ey have been so in intention th ey
have been proved by expe rience not to require an y suc h spur.
But th e small firm find s it as difficult to provid e pensions or
clubs as to pay for research labor at or ies or or iginal workers. We
believe that some form of com bina tion for both purposes may
be found to be essen tia l if th e smaller undertakings of this
co un try a re to compe te effective ly with th e great trusts a nd
com bines of Germany a nd Ame rica.' ?"
47
 The question might even be raised whether this tendency to
better management of resources did not have as strong an effect
on bringing about the reforms in public health, including the
institution ofthe National Health Service, as the social pressure
from below. Describing the fragmentary nature ofprovision for
social services in 1918, the Ministry of Reconstruction com-
mittee on these questions wrote, 'It must not be imagined that
the anomalies there discussed are but infractions of some
academic ideals of logical order, or are to be condemned as
merely falling short of abstract canons of constitutional or
administrative theory. The truth is that they touch the people
very gravely, and that both individually and collectively the
nation suffers through the cross-purposes and lack of system
which permeate this huge corpus of ill-organised public
effort.':" Their proposals were to reconstruct local administra-
tion in such a way that an approach to a more genuinely
national system of medicine could be created. The medical
profession was to be turned into an 'organised army'. Although
the wars influenced thinking on public health by making it
appear a more urgent problem, they urged it in directions in
which it had already been guided, and it ought to be wondered
whether the National Health Service did not eventually owe as
much to the Webbs as to the wars.
If this is true it may be that it is on the frailty and
impermanence of these political and administrative changes on
which we should dwell. It was the surge of change in economic
conditions which altered the balance of political power suffi-
ciently to force the political changes. But those economic
conditions, as is their nature, were not durable. The pursuit of
full employment, for instance, as a social and economic good in
itself has been abandoned. It is in any case not a policy that
could be pursued successfully within the confines of the British
economy alone. The pursuit of national efficiency as a goal
likewise came up against the infinite uncertainties of the
multifarious world in which the British economy earned its
wealth. It is a truism of history that one of the main
consequences of the two great victories won with such immense
effort was a reduction in the relative political and economic
importance of the United Kingdom in the world compared to
48
other powers, the United States in particular. In this way they
reduced the capacity of the British economy to pursue its own
goals when these were unacceptable in the rest of the capitalist
world. Those very economic and social changes which war
promoted in the national economy it likewise made more
difficult to achieve or sustain through its effects outside the
national economy.
Any attempt to harmonise rigid domestic economic controls
with an efficiently functioning international economic system
was likely to fail, unless the rules were set by one country alone.
At the end of the First World War there was a brief moment
when some of those concerned both in Britain and in France
hoped to use their military victory to introduce a system of
world-wide food and raw material controls even in peacetime in
order to solve their own strategic and domestic economic
problems. In effect, the problem which was posed, but not
solved, a problem which has haunted governments ever since,
was that of how to harmonise an apparent change in the
functioning of the capitalist economy at home with the fact that
elsewhere, on all the outer boundaries where that economy
functioned, the same changes had not only not occurred but
were not even wanted. When capitalist economies accepted
more or less the same rules and objectives as they had before
1914 this problem was one mainly for social reformers,
socialists and revolutionaries. As soon as the changes produced
by domestic economic intervention were thought of by those
who "had previously directed these economies as positive and to
be retained, a political problem which was to dominate
twentieth-century capitalism emerged. A change in the nature
and purpose of the capitalist economy at home might be
unachievable without a conscious effort to organise the inter-
national capitalist economy to at least allow such changes to be
maintained. How could the international workings of capital-
ism be consciously organised in such a way? This problem has
been beyond the frail degree of international political agree-
ment in our century except for very brief periods of time. If a
way out was to be found it was not in the power of the United
Kingdom alone to pursue it. It is therefore to the problems of
the British economy in the wider world and the way in which
49
they were altered by the world wars that we must finally turn if
we are to reach any proper judgement on the scope and
permanence of the changes which the wars produced in the
United Kingdom itself.

The International Impact

THE extent of the economic loss or gain which a country can
expect from any war is not only determined by the hazard of
battle. {\. country can and should try to control the economic
outcome through the strategy with which it chooses to pursue
the war. Consider the case before 1914 of a small, highly
industrialised island with an insignificant agricultural sector
faced with the possibility of a war against a larger, equally
industrialised and agriculturally more self-sufficient economy.
The advantage of the island lay in its higher level ofoutput and
wealth per head, representing both a higher level of productiv-
ity (although mainly in the agricultural sector) and a greater
and more profitable involvement in international trade and
investment. This advantage depended, however, on the ability
of the island to continue to earn even in wartime conditions the
wherewithal to pay for the imports which sustained its
economy, which meant continuing to playa major role in the
international trade and payments network from which its
superior levels of national income were in part derived.
Considered purely as a battle between two rival manufacturing
sectors, the advantage lay with Germany, for the structure ofits
manufacturing industry was more favourable to the sudden
increases in the output of capital goods which the war
demanded.
For governments before 1914 the conceptual framework of
the problem was expressed in different language and, in the
absence of any proper basis of national accounting, was not so
sharply focused. It was further blurred by a haze ofchauvinistic
sentiment derived from a national acculturation process which
stressed the great military and naval successes ofBritish history
50
without any accurate assessment of the process of economic
development which had made them possible. The hazy minds
of politicians were, nevertheless, penetrated by some fear, not
ofdefeat, but that even victory might result in a fatal weakening
of the economic basis of British society or, for narrower and
more selfish minds, the loss of those privileges and pleasures
which that society accorded to them. I t was from this mixture of
somewhat dimly perceived economic realities and political
selfishness that the strategy of 'business as usual' evolved.
It rested on the proposition that the war must involve the
minimum amount of disruption to the world-wide network of
trade and payments which sustained the British economy and
it was true that this did, indeed, as far as possible have to be the
basis of any British strategy. But to suppose that there would
not, however well conceived the strategy, be a very serious
disturbance to the international situation of the British
economy was crassly optimistic. And to suppose that Germany
might be defeated without a military campaign on the main-
land on such a scale as to produce major economic changes in
the way the international economy functioned was foolish and
escapist. In such a war, no matter how correct the initial
strategic premisses, there could be virtually no 'business as
usual'. Britain's international advantages had to be exploited
and that meant abandoning many of them to maximise the
gains from others, a process which was bound to have the most
serious repercussions, not on Britain alone but on all the other
many countries whose economies were largely involved in the
same network of trade and payments.
About half the meat consumed in Britain, more than half the
dairy produce, more than two-thirds of the bread grain and
flour, about halfof the iron ore and all the cotton were imported
before 1914. A Royal Commission on the Supply of Food and
Raw Materials in Time of War, reporting in 1905, opined that
with enough money and enough ships there would be no
danger." The cost of these imports was easily met by the
earnings from exports together with invisible earnings. The
Chancellor of the Exchequer gave his opinion in 1914 that
Britain could pay for five years of war from the earnings of its
foreign investments alone.
51
 But the value of foreign investments in time of war is an
uncertain affair. In 1917 some of the massive investments
which had built up the infrastructure of the economy of the
United States in the nineteenth century were being sold offon
the New York stock exchange at values far lower than the book
values they had had in the Treasury reckoning in 1914, in order
to obtain dollars to purchase essential imports from America.
The other major source ofinvisible earnings, shipping receipts,
suffered from the fall in the volume of world trade caused firstly
by the disruption of well-established trades and later by the
great danger on the high seas, particularly from attacks by
German submarines. Germany's strategy increasingly concen-
trated on attacking Britain's international supply lines. These
developments, not hard to foresee , caused a drop in Britain's
invisible earnings in the first full year of the war. This would not
have been so serious had there not also been a steep fall in
visible exports. This was mainly caused by the fact that
'business as usual' had been so little thought out as a strategy,
indeed it amounted to little more than a slogan, that it was
tacitly abandoned almost from the start. By Christmas 1914
more than a million men had been recruited into a new army to
fight on the continent. The production effort needed to supply
them led to a fall in exports and, more importantly, to the
beginning of a series of interventions in the economy which
made international 'business as usual' no more than a dream.
In 1915, too, the inadequacy of pre-war planning and the
assumptions on which it had been based was also shown up by
a severe balance ofpayments problem with the United States, a
steep fall in the value of sterling, and a run on the reserves.
In that year a problem which had become inherent in the
British economy from the mid-nineteenth century onwards,
but which until the start of the First World War had been easily
coped with, presented itself in full force and has seldom been
long absent since. How could an economy, so large a propor-
tion of whose national income originated in international
transactions, between 25 and 30 per cent, continue to pay for
the great excess ofimports over exports which it consumed, once
the network of international transactions by which this had
been managed in 1914 began to break apart under the
52
 pressures of war? For Britain the impact of the world wars on
patterns of international activity has been often seen by
historians as harmful in two different dimensions.
The first has been the generalised impact of the wars on the
whole international mechanism of trade and payments. Before
1914 this was still very much a product of the nineteenth-
century development of the British economy itself and thus
worked in many ways to Britain's advantage, but the inter-
national payments mechanisms which have succeeded the
pre-1914 'gold standard' have been less flexible, less com-
prehensive, less durable and have not always operated to the
advantage of the United Kingdom. In part this has been
because the economic weight of the United Kingdom com-
pared to other economies which influence these mechanisms,
particularly to that of the United States, has shrunk. I t is this
which has given rise to the second area of historical discussion.
Were the economic gains which both world wars brought to the
United States and the economic difficulties which they brought
to Britain such as greatly to accelerate what might otherwise
have been a much more gradual change? And did this
acceleration fundamentally weaken the British economy by
facing it suddenly with a set of international circumstances to
which it would otherwise have had a much longer period of
time to accommodate itself? To these two issues raised by
historians should be added a third, obvious in the context of the
previous section. What connections have there been between
the domestic economic and social changes so far discussed and
the changes in the pattern of international exchanges? It is an
interesting irony of the wars that they appear to have acceler-
ated a set of domestic economic and social changes in Britain
which have been generally construed as beneficial, while at the
same time accelerating a set of international economic changes
which may have made these changes in the domestic economy
more difficult to support and maintain.
Although the First World War proved a highly inflationary
experience the upward movement of prices was not consistent
over different categories of goods and values and therefore a
precise financial measurement of the changes it brought to
Britain's external position is difficult to make. Even rough
53
calcula tions, however , show how different th e reality turned
ou t from th e way pre-wa r stra teg ic thinking had for eseen . In
spite of th e sharp up ward movem ent of prices th e va lue of
dom estic expo rts fell even in cu rre n t prices in 1915. In real
p rices it fell to th e level of ten yea rs befor e, wiping ou t in one
yea r th e gains from th e great expo rt boom of th e last d ecade
befor e th e war. By contra st, re-ex po rts, goo ds p roduced
elsew here but brou ght in to Britain so lely to be expo rted again,
fell only slightly in va lue in real terms . The weakness in
Britain 's trading positi on lay, firstl y, in th e high levels of
dom est ic d em and ge ne ra ted by th e wa r and espec ially by th e
a rm ing and eq uipp ing in so sho rt a period of tim e ofla nd for ces
ofa size not see n for a century a nd, second ly, in th e unregulated
struggle for labour a nd ra w materi al s in whi ch th ose with
m ilitary con trac ts could outbid exporters. The subsequent
wartime history of expo rts was erra tic. In 1916 th ey made a
powerful recovery alt ho ug h eve n in current prices th ey
rem ained well below th e 1913 level. In 1917 th ey fell again a nd
in th at yea r th ere wa s a lso th e sta r t of a precipitou s fall in
re-exp orts which con tin ued in to 1918 , making th eir level by th e
end of th at yea r in real terms a bo ut a quarter of th e 1916 level.
Dom estic expo rts also cont inued to d ecline in th e last year of
th e war.
T he performan ce of th e differ en t expo rt sectors tells us more.
In the mor e importan t a reas of pre-wa r expo rts th e steepes t fall
was in mach in er y a nd in shi ps . By con tra st, cotton goo ds, after
falling very stee ply in 1915, th ereaft er recovered strong ly.
There wa s not in th e First Wo rld War the almos t total sacr ifice
of sta ple expo rts on th e altar of wa r production th at th e Seco nd
Wo rld War witne ssed . After th e nasty sh ock to Bri tain 's
external positi on in 1915 th e eco no my showed much resili en ce,
dem onstrating th a t the strateg ic conce p ts of th e pre-wa r peri od
were not en tire ly foolish. Bu t th e d amage don e to invisibl e
ea rn ings a nd expo rts in 1915 had , as we shall see, important
politi cal rep er cu ssion s. And once we turn to th e othe r side of
th e external problem , imports, it becom es clear that th er e th e
p robl em was one of much greate r magnitude with mor e
far-reac hing implication s.
The manufacturing base of th e British eco no my p rov ed
54
inad equat e to sustain both th e mili tary effort a nd expo r ts at th e
sa me tim e witho u t add itions to th e import bill of a who lly
unforeseen dimens ion. The va lue of imports in real term s
in creas ed in eve ry yea r of the war. In 1914 exports a nd
re-ex ports fell short by £ I 70.4 million of payin g for the tot al
im port bill. In 1915 th e ga p wa s £367.9 milli on ; in 1918, £78 3.9
milli on . Wo rse, changes in th e directi on of for eign tr ad e meant
th at a greater p rop ortion of imports had to co me from th e
United Sta tes a nd thus be paid for in d ollars. In 1914 imports
from th e U nited St ates were 18 per cen t of Bri tish impor ts; in
1918 th ey we re 39 per cen t of th e total. The reason was not so
much th e closure of large a reas of Eu rope to British tr ad e.
Firstl y, it was th e fact th at only th e United St ates could supply
ca pital good s a nd a rmame n ts on th e sca le whi ch th e British
eco no my need ed to import th em . Secondly, as th e ag ricultural
sec tors of less-d evelop ed eco no m ies wer e cu t off from th e
supply of inputs from th e d evelop ed world on which th ey
d ep ended th eir ou tp ut fell, but th e less fragile ag ric ultural
sec tor of th e Am eri can eco no my produced a n in cr easin g sh are
of th e wo rld's food surpluses . Britain had alread y had a la rge
deficit , £82.2 milli on , on visib le trade with th e U nited Sta tes
before the wa r, bu t this had been partly sett led th rou gh British
export surpluses to third ma rkets, pa rt icul arly India , which in
th eir turn had export surpluses to th e U nited States , a nd pa rtl y
by a large volume of Bri tish inv isible ea rn ings in th e U nite d
States. The visible tra de deficit with the Uni ted States in 19 18
was £488 .6 milli on .
Yet both th e ge ne ra l tr ad e d eficit a nd the speci fic d ollar
deficit were only p ro blem s in so far as they could no lon ger be
met by rece ip ts from invisible ea rnings. On th e eve of the wa r,
at th e end of a period whic h had seen a rem arkabl e boo m in
for eign in vestment, inv isib le ea rn ings from U nited Sta tes
sources a mo un ted to a bo ut £ I ,948 milli on annuall y, far mor e
eve n th an th e tr ad e deficit of 1918. The tot al book va lue of
British in vestments th er e, bu ilt up through th e nineteenth
cen tury, was betw een ten a nd eleven times as much. The
quantity of inv estments sold off to purchase Am eri can import s
or d ep osit ed as securities agains t loans from th e U nited Sta tes
a nd not red eem ed was small in co mpa riso n to th e pre-war
55
quantity. It amounted to about £250 million, so that the overall
post-war earning capacity ofBritish foreign investment was not
seriously weakened. It was, indeed, far more weakened by the
general damage which the war did to the whole of the pre-1914
trade and payments network through which international
capital transactions had flowed with such ease. Nevertheless,
the fall in dollar earnings combined with the increase in the
need for dollars to pay for imports weakened the exchange rate
of the pound against the dollar, threatening to make dollar
imports relatively more expensive.
This tendency was vigorously reinforced by the exceptional
arrangements made between Britain and her allies to pay for
the costs of the war, arrangements to which the United States
became a party after it joined the war in 1917. Normal
accounting and payments settlements were suspended between
Britain and France, Britain providing liberal loans to cover the
cost of exports to France to sustain the war effort there. France
followed the same principle with Russia and, eventually, the
United States did the same for Britain, and to a smaller degree,
for France, each country allowing massive debts to accumulate
with one of its partners on the assumption that in the post-war
world the international position of the debtor would soon be
strong enough to regulate the situation. Britain lent its allies
about £1,419 million and borrowed, mainly from the United
States, about £ I,285 million. The overall financial position ofthe
country therefore justified the pre-war optimism; a nation
whose markets were of major importance to so many suppliers
and with so much international financial leverage could,
indeed, pay its way through the war. But the specific financial
relations of Britain and the United States were another matter
altogether. Here Britain had very little leverage. The United
States became a creditor on a massive scale and saw no reason
not to demand the advantages which its position gave it. This
stance was upheld after the war as well. When the new Russian
government repudiated its war debts the United States con-
tinued to demand repayment in full from Britain and France, so
that the apparently basically sound overall British balance of
payments position proved illusory and the events in Russia left

56
the United Kingdom with far bigger dollar debts than had been
foreseen .
The large war debts, made worse by the demands that
Germany pay 'reparations' for the loss supposed to have been
inflicted on the economies of the Allies, proved a heavy burden
on the international payments mechanism when it was pain-
fully reconstructed after the war. The question to be resolved,
however, is whether it was the impact of the war on the
channels of international trade and payment which was
responsible for the relatively poor performance of the British
economy in the inter-war period . The war, it was commonly
argued, had caused a great expansion in the output of certain
industries, coal mining, shipbuilding, steel manufacturing and,
above all, in the output ofagricultural produce, but in the 1920s
demand for such high levels of output was no longer present."
Under these strains the international financial system col-
lapsed in th e great crash of 1929. The corollary of this theory
was that per capita incomes were too low and thus produced
'underconsumption'. These arguments seemed to have a
peculiar relevance to Britain in the 1920s in view of the fact that
unemployment was so heavy in a certain limited number of
industries . It should be remarked that these phenomena did
not reappear after the Second World War and therefore this
argument needs to be examined very closely. The growth in
world production over the period 1913-25 appears to have been
approximately 1.5 per cent per year, which does not seem
excessive. Before these arguments are made to have a special
applicability to Britain alone, the meaning of 'overprod uction'
and 'underconsumption' should be carefully defined. When
this is done they will be found to be only relative concepts,
dependent for their definition on certain more important
aspects of the international economy.
This was the view taken, although rather vaguely, by the
Balfour Committee on Industry and Trade which examined
the permanent harm done by the loss of markets to British
exporters during the First World War. 21 The most serious loss,
statistically at any rate, was the decline of 53 per cent in the
export of cotton piece goods to India between 1913 and 1923.

57
Only one-quarter of that decline, however, was attributed by
the committee to the development of the Indian cotton-goods
industry during the war or to problems of international
payments. The total value of British exports to South America
fell by over one-third over the same period, allowing for the
change in value of the pound, the biggest part of the drop being
attributable to the loss of the Argentinian market to the United
States, which was much more attributable to the war. The
question of the impact of the war on Britain's overseas position
was not finally resolved, but the war was not seen as a main
cause of the weakening of that position. Of course this does not
eliminate the argument that, had it not been for the First World
War, 'British industry would have had more time to adjust to a
situation in the 1920s which might have developed more
gradually.
After the Second World War the acute difficulties in earning
dollars which beset the British economy were also attributed to
the effects of the war on the pattern of foreign trade. It was
argued that the British economy could no longer earn dollars
by its exports to third markets, such as India or Malaya, to pay
for its import surpluses from the United States, because the war
had not only made the United States a more self-sufficient
economy but had altered the geographical pattern ofits foreign
trade. American imports, it was argued, were a smaller
proportion of national income than before 1939 and now came
more from the 'dollar zone': Latin America and the Carib-
beari." In fact, however, these changes in the pattern of
American foreign trade were temporary and by 1947 the
pre-war pattern was already reasserting itself. The difficulty in
earning dollars in foreign trade, part ofa world-wide phenome-
non, had other causes. I t was the result of a remarkable
investment boom in the whole of western Europe including
Britain, and perhaps elsewhere, which in turn led to a great
increase in dollar imports. It is true that this increase would
have been less had Germany not been eliminated as a supplier
ofcapital goods on the world market, but not so much less as to
eliminate the payments problems which arose for Britain;"
The investment boom was by no means simply caused by
replacing the capital 'lost' in the war and the international
58
payments difficulties which Britain experienced were as much
or more a consequence of these domestic decisions as of the
impact of the war on international trade and payments.
As for the problem of international payments, it can be
readily agreed that the collapse of multilateral trading mechan-
isms and the subsequent arrival of currency and trade controls
on a massive scale from 1931 onwards was in part due to the
consequences of the First World War. But did the British
economy actually perform worse in the 1930s within a much
more fragmentary international payments mechanism and
with world trade stagnating than it had after 1925 when
multilateral trading mechanisms and currencies freely convert-
ible into each other or gold had been restored according to the
pre-1914 pattern? I t does not seem so. There was, indeed, a
powerful undertow of opposition in Britain after 1945 to the
American plans to recreate currency convertibility and a
multilateral trading mechanism as the basis of the post-war
settlement. This opposition was precisely on the grounds that
entry into such a system would prevent the United Kingdom
from safeguarding the beneficial social and economic changes
which the Second World War was thought to have brought.
There would, it was argued, be no protection in such a system
for full employment and the Welfare State against the depres-
sion which would emanate from the American economy. The
multilateral payments system which was agreed on, the
so-called Bretton Woods System, was, however, a victim ofvery
early infant mortality. It collapsed straight away in 1947 under
the weight of the vigorous investment boom. Bilateral trade
and currency controls came back in greater force than in the
1930s. Trade controls were effectively modified after 1952, but
only within western Europe, by the trade liberalisation pro-
grammes of OEEC and from 1950 onwards the European
Payments Union provided a mechanism for multilateral trade
within western Europe alone. It was not until 1958 that a
world-wide system of currency convertibility similar to that
before 1914 or between 1925 and 1931 was restored, and un til
that time Britain was able to discriminate massively against
American trade. It is not possible to see any correlation
between the performance of the British economy and these
59
abrupt changes in the international trade and payments
system.
By the meanest calculation the boom which began in 1945
lasted for twenty-three years and although there were cyclical
troughs, by earlier standards they were insignificant. Of
'overproduction' nothing was heard, although the industries
which were expanded in the Second World War were much the
same as in the First. The idea of 'underconsumption' would
have been an absurdity. It is impossible to accept the
suggestion that damage done by the world wars to the
international network of trade and payments weakened the
international position of the British economy. Indeed, there is
some evidence that the economy performed better in more
restrictive and less flexible international systems, better in the
1930s than in the 1920s, and better before 1958 than after.
The most dramatic change wrought internationally by the
First World War was that in the position of the United States
from international debtor to international creditor on a large
scale . I t was accompanied by a change in the relative
manufacturing strengths of Britain and the United States. The
United Kingdom's manufacturing base had proved inadequate
to sustain a war of mass production on such a scale and its
deficiencies had been made up by imports of capital goods ,
ships and steel from America, with a consequent stimulus to
output there. Much the same was true of the relationship
between France and the United States. American steel output
rose by 15 million tons during the war, about the equivalent of
Britain's total output. The output of the American shipbuild-
ing industry by 1919 was half as great again as that of the
British. Many of the armaments used by the British forces
could only be mass produced by imported American machine-
tools . In effect, the war exposed as a weakness a characteristic
ofBritish manufacturing industry which had been noticeable in
the previous three decades.
The nineteenth century had been so dominated by both the
image and the reality of Britain as the world's most powerful
industrial nation, 'the workshop of the world', that only
sharper insight had perceived that it had remained just that,
the world's workshop rather than its factory. The serious
60
 labour disputes discussed in the previous section showed how
entrenched the position of the artisan had become in the British
economy. They reflected important differences in the structure
of industry in the major combatant powers. The comparative
international advantage of the British economy before 19141ay
precisely in the high level oflabour skills on which it could draw
and it had been good economics, in the short run at least, to
exploit that advantage. In wartime it proved no advantage at
all; German and American manufacturing industries at the
start of the war were more modern, more capital-intensive,
specialised more heavily in capital goods, and proved better
suited to cope with the demands of war. The general tendency
of export growth in the twentieth century has been for the ratio
ofexports to output to be higher in those manufacturing sectors
where productivity was higher, so that the pressures towards
greater capital-intensiveness in wartime manufacturing indus-
try were in accordance with long-term trends in international
export growth in peacetime. Britain's international payments
difficulties with the United States were not a transient wartime
phenomenon caused by a temporary, and reparable, break-
down in the multilateral payments network in which the British
economy had functioned. They were but the international
symptom of a fundamental shift in the relative domestic
economic strengths of the two countries which had already
taken place.
What historians have significantly failed to do has been to
undertake a coherent long-term analysis of the extent to which
the experience of the world wars did force British industry away
from the world of the skilled artisan and towards a situation
where it was able to find comparative advantages through
higher levels of productivity. This failure is the more astonish-
ing because of the acrimony of the present political debate in
Britain. All through the general election campaigns of 1979 and
1983 the point was stridently made that it was those social
changes, loosely called 'The Welfare State', which have been
discussed earlier in this book which had increased costs and
lowered the level of productivity in British industry to the point
where it was no longer able to compete in international
markets, unless some of those changes were undone. Yet, as all
61
historians have observed, the rapid mechanisation of many
sectors of manufacturing industry in the First World War was
such as to produce a sharp upward movement in productivity.
What impact did this have on exports of manufactured goods in
the 1920s? Did Britain remain essentially ' the workshop of the
world' in the 1920s or was there a significant change in the
commodity composition of British exports in that period
related to changes in the manufacturing process and to
consequent higher levels of productivity, compared to the
period before 1914? And what was the effect of trade con trois
and changes in the geographical distribution of exports after
1931 on this process if it occurred? This last question is of
particular importance because, as we shall shortly see, once
rearmament began again on a large scale in the 1930s the need
for imports of capital goods from the United States again
produced a balance ofpayments crisis with that country similar
to that of 1915. Had the manufacturing changes in the First
World War not, in fact, by 1938 effected any significant
alteration in Britain's position? This pamphlet is short and only
about the wars , but from the numerous other books on this
question no clear answer emerges because the question does
not seem to have been very clearly put.
In the Second World War the tensions over increased
mechanisation seem to have been very much less, and occurred
as frequently between government and employers as between
government and labour. There were some similar examples to
the labour problems of the First World War, the displacement
of riveters in shipyards for example. But the delay in switching
to mass production of vital armaments was much less evident.
Indeed, for many items such as shells which had caused
problems in 1915, the government had prepared 'shadow
factories' in advance, into which unskilled female labour was
eventually drafted. Yet the pattern of imports associated with
rearmament indicates clearly that these successes still
depended on a very large increase in imports of machine-tools
and machinery. In that respect the United Kingdom economy
had not overcome by 1938 the weaknesses which became
apparent in 1915.
The present situation of the United Kingdom is that of a
62
 rapidly declining- industrial power whose output and exports
are no longer of central importance to the world economy and
which is dependent for the defence of its vital interests on
American nuclear armaments over which it may itself have no
proper control. Its domestic economy, however, is as subject as
ever to the influence of the changing patterns of international
economic transactions on which the dominant influence is also
that of the United States. All this is a stark contrast to the
apparent relative position of the two countries in 1913. The
stages of this transition and the role which the world wars
played in it are now becoming an interesting issue of debate
amongst historians. Is it because of the two world wars that the
United Kingdom has become in the space of seventy years no
more than an occasionally awkward satellite of the United
States?
Burk has traced the development of British-American rela-
tionships during the First World War and her conclusion is that
the American government calculatedly seized on Britain's
dollar payments difficulties and, by refusing to maintain the
sterling-dollar exchange rate at its existing level in 1917,
pursued a policy of replacing London by New York as the
world's leading financial centre [12]. That such an opportunity
would present itself did not look too probable at the start of the
war. Although the outbreak of war provoked a financial crisis it
was soon alleviated by the government placing its own credit
behind approved commercial bills payable by enemy debtors
or by debtors who were unable to meet their liabilities or meet
the sudden increase in shipping insurance costs. After that the
movement ofsterling was towards London until November and
the Bank of England's gold reserve increased almost threefold
in that time. Before 1914 the Bank of England's gold reserves
had never been very large, because a small increase in the
interest rate had been enough to bring short-term capital
flooding back into London. The differential interest rates
offered to attract foreign deposits after August 1914 appeared
to be having the same effect. The marked deterioration in the
trade balances in 1915 and the rapidly growing volume of
imports from the United States, however, began a slide in the
value of the pound against the dollar in September of that year.
63
By 1916 almost all British imports of munitions, iron and steel,
oil, cotton and grain were coming from the United States so
that by the time the United States entered the war, in Brand's
words, 'The British Government, with commitments in the
United States running into hundreds ofmillions ofpounds, was
at the end of its tether. It had no means whatever of meeting
them' [9: ix]. The enormous purchases made in the United
States by all countries had transferred a large part of the
world's gold reserves to that country. The mechanism by which
gold had previously been brought back into London no longer
worked and without American support the pound would have
to be devalued against the dollar thus putting up the cost of
British imports. Although with the American entry into the war
the volume ofU nited States lending to Britain was increased to
enable the United Kingdom to meet its commitments the
United States Treasury still refused to include in its purchases
of British Treasury bonds sums intended for the support of the
exchange rate. Eventually in March 1919 the pound was
officially devalued and taken off the gold standard. Any new
multilateral payments system would be at a different
pound-dollar relationship. The United States in fact retained
all the British securities which had been deposited as collateral
against war loans until 1923 when Britain finally, with great
reluctance, agreed to the schedule of war debt repayments
proposed by Washington.
However, as all studies of the 1920s have shown, Washing-
ton's attempted seizure of the dominant role in world financial
markets was not very firm. New York banks co-operating in the
post-war financial reconstruction of the European economies
did so very much in a private capacity and their liaisons with
their government even at the time of the Dawes Plan were
almost covert. Britain's international financial situation, as
measured by the overall balance of payments, had remained
relatively sound during the war. If the relative economic
strengths of the two countries on international markets con-
tinued to alter in America's favour, as they did during the
1920s, this was not because of successful American efforts to
exploit Britain's dollar payment problems during and immedi-
ately after the war, but because of the different domestic
64
experience of the two economies. It was because productivity
levels and growth in the Am erican economy wer e higher than
those in Britain. And although there were important inter-
national reasons for lower productivity and growth in th e
British eco nom y th ey were not by any means all, or eve n
mainly, to be as cribed to th e cha nges wrought in the inter-
national economy by th e war. Burk's analysis is essen tia lly of
Americanpoliry; Britain's ca pacity for econo m ic indep enden ce
may have been d et ermined more by th e complex a nd swiftl y
changing economic realities of th e post- war world.
The dom estic eco no mic rec overy in th e 1930s was not ,
compared to that in Germany, in th ose sectors which we re
particularly rele vant to a no the r war of mass producti on . After
th e colla pse of th e reconstructed internation al paym ents
system in 1931-3 th e British econ omy did not find in imperi al
preferences and the Sterling Area a promising alternative to the
internati on al benefits of a gen uinely multilateral internation al
trade and paym ents sys tem. As th e likelihood of a no the r wa r
with G erman y or Japan or both in crea sed th ere wa s now less
possibil ity th at th e necessary dollar imports could be fin an ced
by ea rn ings from expo rts and in visibl es. In th e a bsen ce of a
multilater al paym ents syst em settlem ents with th e U nited
States had to be mad e in doll ars or go ld. O ver th e period
1934-8 th e a verage a nn ual trade deficit of th e United Kingd om
with th e United St a tes was £62.2 million , while th e St erling
Area had a surplus of £ 15.8 million. The main source of d olla r
ea rni ngs in the St erling Ar ea , however, was M ala ya , India
being th e only othe r substantial d ollar ea rner. It wa s no lon ger
possible to imagine th at ' b usiness as usu al ' would permit th e
con tinuance of th ose di st ant tr ad es. T ot al ea rn ings in all
currencies from shipping a nd overseas investment a mo un ted to
a n a nn ual a verage ove r th e same per iod of £345 milli on . The
proportion of thi s ea rned in dollars is impossible to d et ermine
p roperl y, but in vestments in th e U ni ted St ates a nd C a nada in
1938 wer e subsequently valued a t £4 ,674 million.f" The tot al
value of th e gold reserves was £836 million in M arch 1938. If
this last sum were to be conside red as th e ultimate war ch est by
th e Treasury, as it was , th e situation was d anger ous, for its
va lue was a bo ut as high as that of to tal expe nd iture on th e First
65
World War up to the end of March 1915. On the other hand, as
in the First World War, the sale of dollar-earning investments
would provide a much greater margin for the purchase of
imports, at the expense, of course, of the post-war balance of
payments.
Parker argues that American financial policy in 1938 and
1939 compelled the United Kingdom to reduce its gold reserves
in order to maintain the pound-dollar exchange rate (unavail-
ingly as it proved) as the trade balance with the United States
worsened under the pressure of rearmament. Thus, he argues,
even before the war Britain finally lost its capacity for
independent action, being forced into subservience either to the
United States or to Germany [57].
There are several difficulties with this argument. Before
considering them it is important to emphasise that Parker is
certainly right in stressing that American policy, as in the First
World War, sought to dominate the United Kingdom as an
influence on the reconstruction of an international framework
for economic activity after the war. All American plans for
reconstruction were aimed at the recreation of a multilateral
international payments system. This was seen as the guarantee
of a democratic capitalist world order which in turn would
serve as a guarantee of America's own future economic and
political interests. After the events of the 1930s it was feared
that the United Kingdom would be a major obstacle to a
reconstruction on these principles, that the second successful
experience of wartime planning and controls there, combined
with Britain's growing international difficulties, would lead the
British government to maintain its bilateral trading arrange-
ments, its trade and exchange controls, and its other dis-
criminatory trade arrangements which had been evolved in the
1930s. Given 'the enormous weight of Britain in international
trade this would make American post-war plans impossible to
achieve. Accordingly, the United States used all the leverage it
could to bend Britain to its will and establish it and the pound
sterling as a second pillar of a new post-war multilateral
payments system. Between February and May 1940 the British
government struggled against American pressures by diverting
economic resources to an export drive to build up its reserves.
66
But this new version of ' business as usual' was abandoned with
the German invasion ofFrance. The policy which America had
pursued in 1938 and 1939 was continued even after American
entry into the war. Continuous pressure was exerted through-
out the war never to let British reserves go above $1,000 million
(£250 million), so that at the end of the war Britain's
bargaining position would be weaker. Similarly, there were
more forceful measures than in the First World War to make
the United Kingdom strip itself of its American investments,
even at low prices, to pay for dollar imports or secure dollar
loans. The Mutual Aid Agreement of 1942 which systematised
the conditions for mutual military supply in wartime extracted
a promise that there would be no post-war discrimination in
international trade. By this was meant the imperial preference
agreements which made it harder for American exports to
penetrate Sterling Area and Canadian markets. '
Whether Parker's conclusions are ultimately justified, how-
ever, depends on Britain's overall dollar position during and
after the war and also on the actual outcome of events after the
war. The value of United Kingdom imports from the United
States rose from £118 million in 1938 (which in itself was
one-third of the level to which the reserves had been reduced at
the start of the war) to £532 million in 1944. Exports to the
United States fell from £50 million to about £25 million at the
same time. Britain's overall deficit on commodity trade
increased from £387 million in 1938 to £994 million in 1943, so
that the dollar trade deficit was an even larger part of the total
trade deficit than in the First World War. This, however, was
very much a function of the special financial arrangements
which were made even before America's entry into the war. At
the end of 1940, the Lend- Lease programme began. Under this
programme the United States provided supplies without
current payment but against a post-war reckoning, not unlike
the arrangements which had prevailed towards the close of the
First World War. It was , of course, only this arrangement
which permitted so immense a deficit on visible trade with
America. The total net book value, after the value of British
supplies to the United States have been deducted, of American
Lend-Lease supply to Britain was about £5,210 million.
67
 Supplies under Lend-Lease were, nevertheless, at a lower
level than imports paid for in cash until the end of 1942. The
cash imports were paid for by loans, mainly raised against the
value ofBritish investments in the United States and by the sale
of British dollar investments. As before 1914, the idea that the
volume of supply needed from the United States could be paid
for out of the reserves, an idea which was still considered even
in spring 1940, looks ludicrous in retrospect. The value of
French aircraft orders in Am erica taken over after the collapse
of France was £ 152 million alone, a third of the available
reserves! Large sums therefore still had to be raised by
borrowing and the sale of dollar investments . The sale of
securities is estimated to have brought in about £ 1,100 million.
In addition, before Lend-Lease goods began to arrive there was
a loan of about £ 105 million from the Reconstruction Finance
Corporation.
None of these devices would have coped with the overall
situation had not the United Kingdom been able to obtain a
massive volume of supply from Sterling Area countries against
the accumulation of sterling balances by those countries in
London. The consequence of this was to transform many of the
Sterling Area countries into creditors to Britain on a massive
scale. For example, British exports to India dropped from £34
million in 1938 to £ 18 million in 1943, many British invest-
ments in India were sold off to th e Indian government, and
India accumulated a sterling balance by the end of 1945 of
£ 1,321 million. By the same date and through a similar process
Middle Eastern countries, in particular Egypt and th e Sudan,
accumulated sterling balances of over £500 million. Not only
did these transactions substantially reduce Britain's future
.invisible earnings, but they represented a heavy claim on
Britain's real resources after the war. Post-war exports would
have to pay for a large part of the imports of the war years as
well as those of the post-war period. Yet these transactions
themselves show what scope the Sterling Area still gave Britain
for manoeuvre independently of the United States. It is true
that if these balances were to be paid back at the end of the war
this could only be done with American financial help. But they
were not paid back and there was an important body ofopinion
68
 which wished to retain them together with the Sterling Area
exchange controls as they had evolved during the war precisely
as a defence of the British economy against American post-war
reconstruction policies;"
One uncertain area in Parker's arguments concerns the
actual volume of British dollar investments and how utilisable
or saleable they were. The amount of dollars realised by their
sale during the war was three times the size ofthe reserves at the
outbreak of war. British income from all foreign investments in
terms of gross receipts from interest payments was only about
£50 million less in 1946 than before the war. Interest payments
of this kind vary of course, according to the profitability of the
investment in anyone year, itself a function of the state of the
economy in which the investment has been made. What is
needed to resolve this question is a full study of how much
British investment there was in North America in 1938, how
much was sold, under what conditions and at what prices.
Until that is undertaken the American argument in 1938 that
Britain was far from dependent on its reserves to pay for dollar
imports remains unrefuted and Parker's arguments unestab-
lished .
A further problem with Parker's arguments is that the
post-war multilateral trade and payments system into which
the United States was determined to force Britain as the price of
wartime aid never in fact came into existence. Its general
principles were agreed to by the countries, including Britain,
attending the United Nations Conference at Bretton Woods in
July 1944. In August 1945 the Lend-Lease agreements were
abruptly terminated by the United States without any pro-
vision for Britain to pay for those commodities on order or in
the course of being delivered. Their value amounted to £ 161
million. Exports had been reduced to an extremely low level. In
1944 domestic exports were only £266 million, about 60 per
cent of their 1938 value, and although in 1945 they recovered
very strongly under the pressure ofgovernment policy and high
demand to £399 million this was hardly enough to cover a total
import bill in that year off I, I 04 million. In terms of the need to
pay for dollar imports the imbalance was greater. Domestically
produced exports to the United States in 1945 amounted to
69
£18.6 million; total imports from there amounted to £320.8
million. If Britain were to honour its commitment to the
creation of a new multilateral payments system, and the
majority of political opinion in the country felt that this would
be in Britain's long-run best interests, there appeared no
alternative but to seek a further American loan to cover the
period until exports and invisible earnings had risen to well
above pre-war levels in order to payoff all the international
debts which had been accumulated as well as sustaining the
high post-war import needs.
The terms of this loan and the terms of settlement of
Lend-Lease were agreed together in the Anglo-American
Financial Agreements of December 1945. The debt for goods
supplied in wartime under Lend-Lease was wiped out. Ameri-
can surplus property in Britain was sold cheaply to the British
government. The Lend-Lease goods on order or 'in the
pipeline' at the time the Lend-Lease agreements were cancelled
had to be paid for in full. In return for this generous financial
settlement, which was in vivid con tras t to the aftermath of the
First World War, the United Kingdom had to agree to make
sterling earned on current account freely convertible into
dollars under certain safeguards by July 1947. This would
ensure that the two currencies would be the centre of the new
multilateral payments system into which other countries and
currencies would be drawn. To make this system operable
Britain would also have to subscribe to the ending of all other
forms of trade discrimination. To enable the British economy to
go through with this drastic change from the restrictive trade
controls of the 1930s at a time when the dollar payments
problem looked so severe an open 'line of credit' on favourable
terms of $3,750 million (£931 million) was established in
Washington, plus a loan on similar terms to pay for the
Lend-Lease goods 'in the pipeline'.
There was opposition from both right and left to the
acceptance of these terms, chiefly on the grounds that the full
employment policy as well as the various social and economic
reforms which accompanied it would be made impossible if the
British economy were tied by a convertible currency in a
multilateral trade system at a time when the dollar was so
70
prep onderant to th e notoriou sly vola tile eco no my of th e U nited
States, whose social a nd eco no m ic objectives might prove
different. The op po ne n ts of th e Ame rica n loan as serted th at
this was th e final loss of a ny worthwhile scop e for indep endent
domestic econo mic ac tion in Brit ain . They would , for th e most
part, hav e ag reed with Parker a bo ut th e ea rlier conseq ue nces
for Britain 's international a u to no my, in as mu ch as alt ho ugh
for four a nd a half yea rs Lend-Lease, financial ingenuity a nd
acc um ula ted wealth had allowe d th e U nited Kingd om to pl ay
th e role of a gr eat m ilitary power , th e doll ar loan marked the
ultimate tr iumph of Ame rica n policy.
In the even t things turned ou t quite differently. The Bretton
Woo ds multilateral paym ents sys tem colla pse d completely in
1947 only six weeks afte r th e British govern me n t had hon oured
th e Finan cial Ag reem ents a nd made th e pound con vertible
ag ain st th e dollar. By th at tim e th e ' line of cred it' was a lready
almost exha usted . T he powerful surge of inv estment in all
wes tern Euro pean eco no mies doubled th e size of wes tern
Europ e's d olla r deficit s in 1947 co mpared to th ose of 1946 a nd
Britain itse lf was more resp onsible for th e in cr ease th an others.
At th e same tim e as Ame rica n pl an s for post-w a r internati on al
reconstruction colla pse d Ame rica's stra teg ic inter est s in th e
eme rging cold war dem anded th at wes tern Europ e be stre ng-
th en ed eco no mica lly a nd recon struct ed politicall y as a defen ce
ag ainst th e Soviet Union , eve n if thi s meant postponing a
further a ttem p t to esta blish th e principles agr eed a t Br ett on
Wood s. T he outco me was th e Eu rop ean Recover y Programme
(T he M arsh all Plan ) whi ch conce n tra ted th e ou tflow of do lla rs
from th e United St at es eco no my on to wes tern Europe while
allowing weste rn Euro pean eco no mies, in cludin g Britain , to
con tin ue to expand while di scrimin ati ng in tra d e a nd pa ymen ts
agains t th e dollar.
In effect th e M arsh all Plan backed up the expans ionist
p rogr ammes of th e British a nd othe r wes tern Europ ean
econo mies while a bso lving Britain from most of th e inter-
nation al obliga tions it had relu ct antly accepted from 1938
onwa rds as th e price of Ame rica n support a nd whi ch mi ght in
othe r circ umstances have slowe d d own eco no m ic expans ion.
The pri ce for thi s change of policy was th at Britain should ta ke
71
the lead in creating an ' in tegra ted ' western Europe, but since
that never happened and, indeed, was expressly renounced at
the time of the devaluation of the pound in 1949, that price was
not paid either. The chance ofhistory meant a radical change in
the policy the United States had pursued since 1938 and meant
also that Britain had fresh room for autonomous policies.
Parker's arguments must be seen in this wider perspective,
wherein they appear as marked exaggerations. Yet they do
focus on a question ofcentral importance. In the Second World
War as in the First the problem of international adjustment to
the extraordinarily rapid changes in the relative positions of
Britain and the United States was a severe one and dominated
in each case the immediate post-war world, raising the most
profound questions about the future of the British economy and
society. That a nation still considered a great power in 1913 and
which, indeed, again functioned as a major military force in the
world between 1940 and 1945, should in so short a space of time
afterwards have to question so fundamentally the terms on
which it might survive into the future is a powerful testimony to
the scope of the effects of the world wars on the world as a
whole.
The domestic economic and social changes in Britain which
the war produced were only durable in so far as the inter-
national situation of the United Kingdom continued to permit
large surpluses ofimports over exports while also allowing for a
continued increase in wealth. This remained true in spite of the
perceptible change in the commodity composition of British
manufacturing output and exports in the first five years after
the Second World War compared to the five years before it, as
well as the remarkable, roughly 75 per cent, increase in the total
value of exports over the same period. The manufacturing
experience of the Second World War did increase the propor-
tion ofcapital goods and machinery in British industrial output
and exports compared to textiles and other consumer products.
Again, however, the questions are how durable these changes
were and whether they went far enough. In practice the balance
of payments problems remained acute, more so than those of
other western European economies of a similar size and over
the post-war period as a whole they worsened. It may be that
72
the tendency of British manufactures to be exported to softer
non-European markets after the war mitigated against the
changes in productivity and commodity composition which the
war may have brought about. Although the contribution of
income from foreign investments to paying for the import
surplus was much lower in the immediate aftermath of the
Second World War, British foreign investment very soon
resumed and has remained at a high level since, although not at
the pre-1914 levels, so that the cause of these endemic balance
of payments problems does not lie there. The evidence
repeatedly suggests that in booms Britain's imports are
comparatively greater than economies of similar size and
structure and that the import content of British exports is
higher. While trade controls and trade discrimination persisted
these problems were held in check, although at the time many
politicians and economists argued that they nevertheless held
back the rate of growth of national income compared to other
European economies. After 1958, when there was a return to a
world-wide multilateral payments system and when foreign
trade restrictions were for a while genuinely removed on a more
impressive scale, the balance of payments problems became
noticeably worse and there is everything to indicate that once
the fortuitous effects of the discovery of the North Sea oil fields
are no longer there they will be worse still.
If the world wars did induce in the British economy the
domestic economic changes ascribed to them here, did they in
doing so increase the weakness of Britain's international
position, or is that to be attributed to other causes which may,
in fact, have been partly mitigated by the wars? It is now
alleged loudly that the Welfare State increased the level of
internal costs in the economy and made successful inter-
national competition more difficult and, in some only vaguely
specified way, lowered the level of initiative and dynamism in
the economy. The party which is currently in power with a
large majority specifically wishes for these reasons to undo
many of the changes which to most historians even ten years
ago appeared as an irreversible long-term trend. By contrast,
fifteen years ago, when the first edition of this pamphlet was
conceived, the existence of counter-cyclical employment
73
policies and the Welfare State was most frequently given as a
cause for the unprecedented prosperity and stability of west
European economies. The domestic changes engendered by the
two world wars have thus in one decade passed from being
considered a substantial advantage to the workings of the
international capitalist economy to being considered, in Britain
at least, as a severe handicap to the country's capacity to
survive in that economy.
That this could be the case in itself testifies to the serious and
accelerating deterioration in Britain's international position of
which the first symptoms became publicly evident in 1915.
Although the composition of manufacturing output was
changed by both wars, the changes were not such as funda-
mentally to change the composition or direction of British
foreign trade or to offer a better solution to the problem of
paying for imports. By their impact elsewhere, especially in the
United States, the wars compressed into a short space of time
what might have been a much longer drawn out process of the
relative diminution of Britain's international economic impor-
tance. This problem was always most evident with respect to
the relative positions of the United Kingdom and the United
States, but there were equally sudden adjustments in economic
relationships with less mighty nations. In posing these sudden
adjustment problems (which were not solved) the world wars
called into question, at the least, the durability of those very
domestic economic and social benefits which they had brought
to Britain. At the extreme of the argument, by promoting false
benefits they may have eliminated all hope of successfully
making the necessary international adjustment. It is on finding
the correct point on the scale of this argument that historical
discussion is likely to be concentrated in the future.
Another constantly underlying theme of the general election
of 1983 was the implicit questioning as to whether the United
Kingdom had made correct choices in opting after the last war
for a multilateral payments system rather than choosing to
persist with trade discrimination : the same questions were
asked about the later option for the European Economic
Community. Opponents of the American loan in 1945, like
opponents of the EEC, were divided amongst themselves and
74
subject to the reproach made by Keynes in 1944 that they were
advocating for a long time into the future 'a siege economy'.
They also had to face the reality that what they were
advocating was tantamount to a reversal of the whole path of
the United Kingdom's modern economic development, a
reversal which perhaps now seems to some a more justifiable
risk. During the great boom of the post-war years argument
was stilled, re-emerging only in the 1960s when it became clear
that Britain's performance in the great boom had not been as
impressive as that ofother European countries . With the end of
the great boom and the return of violent depressive movements
in the economy, accompanied by cruelly high unemployment
and the stagnation ofreal income growth, many politicians and
some economists who wish above all to retain the domestic
changes which have been analysed here now advocate a return
to trade and exchange controls and protection. Another war
would not, presumably, solve the problem. As the once
seemingly irreversible social and economic trends which the
two wars produced in Britain continue to be reversed the
question as to whether the international economic choices
made after the wars by Britain properly took account of the
whole impact of the wars on Britain and the world will
increasingly be posed. For it was on those choices that the
future welfare, the future survival indeed, of the very large
number of people in this old, complex and now increasingly
divided society depended.
The liberal interpretation ofwar has been wholly discredited
and discarded but its great advantage lay in its universality.
Only when the debate on the effect ofthe wars on this country is
widened to acknowledge the interaction of the rest of the world
with Britain and the impact of the war outside these islands will
a more satisfactory, but equally universal, interpretation be
produced. The trends of economic and social change in Britain
may in the long run prove to be as much explained by the
impact of the world wars on the rest of the world as by their
impact on British society alone.

75
Notes and References

Unless otherwise indicated, London is the place of publication.

1. That there is general agreement on these matters can be seen by

comparing the accounts of the Second World War in S. Pollard, The
Development oftheBritish Economy 1914-1967 ( 1969) and A.]. Youngson,
Britaill's Economic Growth 1920-1966 (1967), books written from
different political standpoints. W . Ashworth, An Economic History of
EnglmuJ, 1870-1939 (1960) and Pollard both have clear and com-
prehensive accounts of the First World War.
2. It was a completely eighteenth-century gloss on what ]uvenal
had written, which is more nearly rendered in Dryden's translation:

Of every nation, each illustrious name,

Such toys as those have cheated into fame;
Exchanging solid quiet, to obtain
The windy satisfaction of the brain.

3. The origins of the idea are found in Sir R. Giffen , Economic

Inquiries and Studies (1904), pp . 1-74, where the author attempted
something similar for the Boer War. But there the numbers involved
were smaller and the 'human capital' more homogeneous.
4. The values were taken from calculations by a French actuary, P.
Barriol, published in Revue Economique Internationale (December 1910
and May 1911).
5. Whether these elements were all real costs or merely transfer
payments was never considered.
6. G.]eze, Les Dipenses deguerre de la France (Paris, 1926).
7. A. Smith, The Wealth ofNations (Edinburgh, 1776).
8. United Kingdom, Ministry of Health, On the State ofthe Public
Heo1th During Six Years of War (1946).
9. Sir W . Beveridge, Social Insurance and Allied Services, in Parlia-
mmlllry Papers, 1942-3, VI.
10. E. F. Nash, 'Wartime Control of Food and Agricultural
Prices', in National Institute of Economic and Social Research,
Lessons ofthe British War Economy (Cambridge, 1951).
76
 II. In this respect there are some interesting calculations in Sir G,
Ince, 'The Mobilization of Manpower in Great Britain for the Second
World War', in Manchester School of Social and Economic Studies, XIV
(1946) .
12. The same effects were produced in the United States in spite of
the greater level of mechanisation of industry. A. F. Hinrichs, 'The
Defence Program and Labor Supply in the United States', CantUlion
Journal of Economics and PoliticalScience, VII (1941).
13. The most typical and the standard for many other such surveys
was B. Seebohm Rowntree, Poverty: A Study of Town Life (1901).
14. Rowntree surveyed the same population, York, in 1935 as a
control, a convincing demonstration. B. Seebohm Rowntree, Pov"'.J
and Progress. A Second SocialSurvey of York (1935) .
15. Rowntree tried again in a much slighter work, B. Seebohm
Rowntree and G. R. Lavers, Poverty and the Welfare State (1951) . But it
was undertaken too early to answer these questions.
16. Report ofthe Committee onNational Debt and Taxation, Parliammltlry
Papers, 1927, XI.
17. Report ofthe Committee ofthePrivy CouncilforScientificandIndustrial
Research for theyear 1915-16, p. 42, Parliamentary Papers, 1916, VIII.
18. Ministry of Reconstruction Pamphlets, no. 23.
19. Parliamentary Papers , 1905, XXXIV.
20. J. H . Kirk, Agriculture and the Trade Cycle, 1926-1931 (1933).
21. Final Report of the Committee on Industry and Trade, Parliammltlry
Papers, 1928-29, VII.
22. United Nations, The European Economy in 1947 (Geneva, 1948).
23. For detailed calculations to support these assertions see the
author's forthcoming, The Reconstruction of Western Europe, 194~1952
(1984).
24. Statistical Material Presented During the Washington Negotiations,
Cmnd .6707 .
25. Sir R. Clarke, Anglo-American Economic Collaboration in War and
Peace, 1942-1949 (ed. Sir A. Cairncross, Oxford, 1982).

77
Select Bibliography

T he Carnegie Endow me nt for In terna tion al Pea ce, Division of

Eco nomics an d H istory, began du rin g th e co urse of th e Fi rst Wo rld
War to com mission certain st udies on th e eco no mic a nd social history
of that wa r. At the end of th e wa r thi s d evelop ed into a plan for
commissioning a co mplete eco no mic a nd social hist ory of th e war for
all th e natio ns invo lved . This a m bitious scheme pet ered ou t in th e
1930s. The books wh ich we re pr oduced under its aeg is a re, effectively,
ind ividual mon ographs rather than pa rt of a general work . They a re
like other books , so me goo d, so me ba d a nd so me aw ful. Books which
a re in thi s series a re indi cat ed with a n as te risk (") .
T he Ca bine t Office Histori cal Secti on undertook a simila r task for
Brit ain a fter th e Second World War. In thi s case all th e volumes are
part of a common plan a nd all have a com mo n sta m p. They a re th e
records of minist eri al policy written by indep endent a utho rs. All,
without exce p tion, th er efor e, irr esp ecti ve of th eir quality as books,
ha ve a parti cul ar an d spec ial usefulness. I hav e indicat ed her e only
th ose which a re immed iat ely relevant to th e th em es tou ch ed on in thi s
pamphlet ; bu t no d isr esp ect is meant to th e a utho rs of th ose omitted.
Books in th is series (H istory of th e Second Wo rld War, United
Kingd om Civil Ser ies) a re in dica ~ed with a dagger (r) .

[ I] P. Abra ms , 'The Failure of Socia l Reform, 1918-1 920' , Past and

Present, no. 24 ( 1963 ). Arg ues th at th e a bility of pa rticu la r soc ial
groups to benefit from wa r d ep ends on the degr ee to which they
particip ate, whic h varies widely, and on th eir power to in fluen ce
politi cal d ecision s. H e tak es the view th at previou s th eori es
abou t wa r a nd soc ial change, in p articul ar th at of And rzejews ki,
have been too undiscriminating.
[2] * I. O . Andrews, Economic Effects of the War upon Women and
Children in Great Britain (Ne w York , 1918 ). For all its br evit y, th e
best book on its subject.
[3] S. And rzejewski, Military Organisation and Society (1954). Pro-
poses th e th eory of th e ' m ilitary p articipation ratio' , that th er e is
in eve ry societ y a n op tim um ratio of military particip ation in
78
 war and that the gap between that optimum ratio and the actual
ratio enables us to see which social groups will benefit in future
wars by becoming involved.
[4] *Sir W. H. Beveridge, British Food Control (1928). Has much
wider importance than its title suggests. It is indispensable for
its information on consumption levels during and after the war
and is also interesting because of the role its author subsequently
played.
[5] *E. L. Bogart, Direct Costs ofthePresent War (New Yark, 1918). Is
a preliminary study for [6].
[6] *---, DirectandIndirect Costs ofthe Great WorldWar (1920) . The
most complete attempt actually to calculate the financial cost of
all aspects of the war within the terms of classical liberal theory.
Although Bogart draws heavily on statistical procedures and
methodological concepts first employed by others the com-
prehensiveness of his work is such as to make it represent the
culminating point of a whole approach to the subject.
[7] *A. L. Bowley, Prices and Wages in the United Kingdom, 1914-20
(1921) . The best attempt at measuring the true movement and
distribution of real wage rates and earnings in its period.
[8] - - - , Some Economic Consequences of the Great War (1930) is a
summation of much earlier published work and touches on
almost all the themes which had interested Bowley. His
approach is fiercely statistical, but his thoroughness and his
determination to measure everything that could be measured
has made his work the starting-point of much subsequent
discussion which is neither as thorough nor as cautious.
[9] R. H. Brand, War and National Finance (1921). A series of essays
published throughout the war by an international financier who
was able to view the situation both with the involvement of a
businessman and the detachment of an Oxford Fellow. A
resolutely liberal approach; only in the very last essay does he
perceive the social change which the war brought about.
[10] G . Braybon, Women Workers in the First World War. The British
Experience (1981) . Argues convincingly that very little long-run
change in the position of women in the economy arose out of the
First World War.
[II] K. Burk, 'J. M. Keynes and the Exchange Rate Crisis ofJuly
1917', Economic History Review, XXXII, 3, 1979.
[12] - - , 'Great Britain and the United States, 1917-1918: The
Turning Point', International History Review, I, 2, 1979. Argues
that the inability of the United Kingdom to sustain the exchange

79
 rat e of sterling against th e dollar in th ose yea rs marked th e
repl acem ent of Britain by the United States as th e leading power
on world finan cial markets.
[13] - ,- - , (ed .), War and the State. The Transformation of British
Government, 1914-1919 (1982). A collection of essays illustrating
th e impact of th e war on governmental and administrative
pr acti ce.
[14] *G . D. H . C ole, Trade Unionism and Munitions (1923) . A stud y of
th e impact of mech anis at ion on th e trade uni on movem ent and ,
occas iona lly, on th e workers.
[ 15] rw. H . B. Court, Coal (195 1). An excellen t study of an industry
which failed to improve eithe r its production or its productivity
in wartime .
[16] G. A. B. Dewar, The Great Munitions Feat, 1914-18 (1941). Not
intended as a scholarl y study, but a very good summary of what
actuall y happen ed in wartime factories.
[17] N . F. Dreisziger (ed.) , Mobilizationfor Total War. The Canadian ,
American and British Experience 1914-1918, 1939-1945 (Wate rloo,
Ontari o, 1981). Co ntains the most recent and concise statem ent
of M arwick's hypothesis and an int er esting a rticle by Burk.
[18] *S. Dumas and K . O . Ve de l-Petersen, Losses of Life Caused by
War, Part II : The World War (1923 ).
[19] H. Durant and J. Goldmann, 'T he Distribution of Wo rking-
C lass Savings' , Bulletin of the Oxford University InstituteofStatistics,
V II (1945) . Shows how un equal th eir distribution was and how
low th ey were.
[20] R. Eas terlin, The Postwar American Baby Boom in Historical
Perspective, National Bureau of Econo mic Research, Occasional
Pap er 79 (Prince ton, 1962 ). Sh ows the impact of the end of th e
wa r on th e Am erican birth-rat e and rai ses man y intriguing
qu estions a bout the dem ographic im pa ct of wars generally.
[2 I] *C . E. Fayle, The War and the Shipping Industry ( 1927). M akes a
useful factual contribution to th e deb at e on th e rela tionship of
the Firs t Wo rld Wa r to the following dep ression.
[22] A. W. Flux, ' O ur Food Supply befor e a nd after th e War' ,Journal
oftheRoyalStatisticalSociety, LXXXX (1930) . Sh ows the changes
in ag ricult ura l producti on and di et which were furthered by the
First World War.
[23] W. H . Form and C . P. Loomis, 'T he Persistence a nd Em ergence
of Social and Cultural Systems in Dis asters' , American Sociological
Review, XXI (1956) . See also [24] .

80
[24] - - - , and S. Nosow, Community in Disaster (New York, 1958).
Shows the deep resistance to cultural and economic change
which 'disaster' can produce, together with its tendency to
accelerate such changes.
[25] D. French, British Economic and Strategic Planning 1905-1915
(1982). One of the few studies of the First World War with a
wide enough definition of strategy to do justice to its subject.
[26] M. Gowing, Britain and Atomic Energy 1939-1945 (1964). An
official account of what turned out to be the most important of
the wartime research and development projects.
[27] tHo D. Hall, North American Supply (1955) . Important for the
international effects of the Second World War.
[28] t - - , and C. C . Wrigley, Studies of Overseas Supply (1956). See
[27] above.
[29] two K. Hancock and M . M . Gowing, The British War Economy
(1949). A most successful attempt to summarise the important
themes of the other official histories, although at times rather
bland.
[30] J. Harris, William Beveridge (Oxford, 1977). A biography with
occasional interesting sidelights on the war.
[31] *B. H . Hibbard, Effects of the Great War upon Agriculture in the
United States and Great Britain (New York, 1919). A useful factual
study.
[32] *F. W. Hirst and J. E. Allen , British War Budgets (1928) . An
angry liberal denunciation ofgovernment policy and its harmful
effects.
[33] *F. W. Hirst, The Consequences of the War to Great Britain (1934).
Hirst turned what should have been the summary volume in the
Carnegie Series into a passionate statement of his own views
which were by that time becoming discredited.
[34] tWo Hornby, Factories and Plant (1958). Shows the scale of
production and organisation required in the Second World War.
[35] S. J . Hurwitz, State Intervention in Great Britain, 1914-18 (New
York, 1949). Very much a study of opinion.
[36] P. B. Johnson, Land Fit for Heroes. The Planning of British
Reconstruction, 1916-19 (Chicago, 1968). From which we also see
how limited the long-run change wrought by the First World
War was .
[37] J. M . Keynes, The Economic Consequences of the Peace (1920). A
study of the probable effects of the peace treaty on the
international economy.

81
[38] - - -, H ow to Payfor the War (1940) . Origin all y published as a
seri es of a rticles in The Times, thi s essay con ta ins the a utho r' s
p rop osals for deferred pay.
[39] A. W. Ki rkaldy (ed .) , Br itish Finance, during and after the War,
1914-21 (192 1). One of the first and sternest criticisms of
fina ncial policy in th e Firs t Wo rld War.
[40] K . Lan gley, 'The Distribu tion of Ca pita l in Private H ands in
1936-8 and 1946-7' , Bulletin of the Oxford University Institute of
Stat istics , XIII ( 195 1).
[41] C . E. V . Leser , 'C ha nges in th e Level and Diver sit y of
Employm ent in Regions of Great Britain, 1939-1 947' , Economic
J ournal, LIX (1949) .
[42] * E. M. H . Lloyd , Experiments in State Control (1924). Whil e
describing excellen tly th e slow process by whi ch th e gove rn me nt
was drawn into econo mic life in the First World War, Lloyd also
used those even ts as a parabl e to preach in a most spirited way
his own views on eco no mic management and 'efficien cy' . The
most int er esting a nd p rovocative of all th e Carnegie histori es,
marking a turning-p oint in th e interpretation of the war.
[43] A. M . Low , B enefits of War ( 1943). The titl e speaks for itself
[44] D. F. M cCurrach , ' Brita in's U.S. Dollar Pr obl em , 1939-45' ,
Economic Jo urnal , LVIII (1948) . A sta temen t of th e movem ent
and size of th e dollar debt during the Second Wo rld War.
[45] A. Marwick, The Deluge ( 1965). The first gen er al sta temen t of
M a rwick's hyp othesis on"wa r and social cha nge .
[46] - - -, Br itain in the Century of Total War (1968). A simila r but
brie fer survey .
[47] - - -, War and Social Change in the T wentieth Century. A Compara-
tive Study of Brita in, France, Germany, Russia and the United States
(1974). Looks at social cha nge in a less strictly econo mic
persp ecti ve th an in thi s book and explores th e relationships
between psychological and socia l change during and after the
world wa rs.
[48] - - - , The H ome Front: The B ritish and the Second World War
(1976).
[49] - - , Women at War, 1914-1918 (1977).
[50] R. C . O . Matthews , C . H . Feinstein and J. C. Odling-Smee,
British Economic Growth , 1856-1 973 (O xford , 1982 ).
[51] A. S. Milward, War, Economy and Society 1939-1945 (1977 ).
Att empts to defin e a wid e ran ge ofgeneral relati onships betw een
war and econo my by exa mining th e experience of all th e maj or
com ba tan ts in th e Second World Wa r.

82
[52] E. V. M organ , Studies in British Financial Policy, 1914-25 ( 1952) .
The clea res t expos ition of that policy.
[53] t K. A. H . Murra y, Agriculture ( 1955). A clear accoun t of th e
change s in British ag ricult ure during the Second Wo rld Wa r,
prefaced by an expos ition of previou s trends .
[54] Nation al Institute of Econ om ic an d Social Research , Lessons of
the British War Economy (Camb ridge , 1951). A seri es of ess ays on
th e d ay-t o-d a y ad m inistra tive fun cti oning of, a nd changes in,
th e eco no mic ad m inistratio n during th e Second Wo rld War.
[55] ] . L. Nich olson , ' Emp loyme n t a nd Nation al In com e during th e
Wa r', Bulletin of the Oxford University Institute of Statistics, V II
( 1945) .
[56] - -- , ' Ea rn ing s and H ours of Labour, 1938-1 945' , Bulletin of
the Oxf ordUniversity Institute ofStatistics, VIII ( 1946). Nicho lson' s
a rticles con ta in a comp re he nsive examination of th e official
' cost- of-living' index.
[57] R. A. C . Parker, 'The Pound St erling, th e Am erican Treasury
a nd British Pr ep arati on s for War, 1938-1939' , English Historical
Review , XCVIII ( 1983). Ar gu es th at thefailure of th e Am eri can
Treasury to support th e pound on th e foreign exc ha nge s in th ese
two yea rs effectively ma rk ed th e end of British eco no mic
ind ep enden ce.
[58] t M . M . Postan, British War Production (1952) . O ne of th e mor e
revealing of th e official hi stories whic h is also a n exce llent
su mmary of subjec ts ha nd led in othe r volumes .
[59] t R. S. Sayers, FinancialPolicy, /939-45 ( 1956) . An exce llent study
which reveals th e esse ntia l con tin uity of gove rnment policy a nd
the extent to which that policy had al ready been perm eat ed by
' K eynesia n' ideas before th e wa r eve n th ou gh th ose ideas had
had less effect on th e T reas ury .
[60 ] D. See rs , Changes in the Cost of Living and the Distribution of Income
since 1938 (O xford, 1949). A collec tio n of th e a u tho r's articles in
th e Bulletin ofthe Oxf ord University Instituteof Statistics, cons tituting
th e bes t a tte mp t a t act ua lly measuring th e social cha nges
broug h t a bo ut by th e war since Bowl ey's a tte mp ts to do th e
sa me thing for th e First Wo rld Wa r.
[61] R. P. Shay (l r .), British Rearmament in the Thirties. Politics and
Profits (Prince ton, 1977 ). A useful d ocumenta ry study of th e
government's fear of th e eco no mic disruption s of rea rm ament.
[62] P. A. Sorokin, Man andSocietyin Calamity (New York, 1942). The
sta rting-po int of mu ch subsequent research on thi s topic.
[63] Sir] . St amp, The Financial Aftermath of War ( 1932). Is useful for

83
 its consideration of the changes which the First World War
brought in the taxation system.
[64] R. H . Tawney, 'The Abolition of Economic Controls,
1918-1921', Economic History Review , XIII (1943) . Tawney
regarded their abolition as inevitable but unwise, since it was
against the long-run trend of the economy, which he regarded as
desirable. A fuller version is in [68] .
[65] tR. M . Titmuss, Problems of Social Policy (1950). A most
instructive book on war. It is here that the author's theories on
the social results ofthe Second World War are most fully set out.
[66] - - - , Essays on the 'Welfare State' (1958) . Two of the essays
discuss Titmuss's view of the relationship between war and
social change, the theme which binds all the essays together.
[67] M . Van Creveld, Supplying War. Logisticsfrom Wallenstein toPatton
(Cambridge, 1977) . A highly interesting book about the eco-
nomic consequences of particular military tactics .
[68] J. M . Winter (ed.), War and Economic Development. Essays in
Memory of DavidJoslin (Cambridge, 1975). Its title itself shows
the change in concepts which had taken place by that date.
There are several apposite essays.
[69] - - - , (ed.), History and Society: Essays by R. H. Tawney
(1978). Contains a fuller version of[64] .
[70] - - - , ' Aspects of the Impact of the First World War on Infant
Mortality in Britain' ,journal of European Economic History, XI, 3,
(1982) . One of the first serious demographic studies of the
consequences of the war and one with far-reaching conclusions.
[71] *H. Wolfe, Labour Supply and Regulation (1923) . A useful study of
the changes in the labour market in the First World War.

84
Index

Abrams, Philip 26 Du rant, H en ry 35

Agricul tu re 29-31
Agr iculture Act 1920 29-3 1 Economi c cont rols 22- 4, 33, 43,
Andrzejewski, Stan islaw 45,59-73
Leon a rd 24-6, 43-5 Egyp t 68
Ang lo-American Fina ncial Eu rop ean Econom ic
Agreements, 1945 70 Co mm un ity 74
Argentina 58 European Paymen ts U nion 59
Eu ropean Recovery Programme
Balan ce of paym ents 52, 54-5, 62, (Ma rshall Plan ) 71
64-6, 72
Foreign inves tmen t 52, 55-6,
Balfour Co mmittee on Industry
and T rad e 57
65-73
Foreign trad e 5 1- 60, 65-72
Bank of Eng land 63
For m, Willi am Humbert 44
Beverid ge, Sir William
Fr an ce 15, 17, 56, 60,67-8
H en ry 19-20,28-9, 47
Bogart, Ernes t Ludlow 12, 16 Ge rma ny 27,29,35,44, 47,50-2,
Bowley, Arth ur Lyon 18-20, 24, 57-8,65-7
31, 37,40 G ladstone, Rt Hon . Willia m
Brand , H on. Rob ert Ewa rt I I
H enr y 10-11 ,64 Goldmann , John 35
Brett on Woods Agreemen ts 59,
69,71 H ald an e Com mitt ee 47
Burk , Kat h leen 63 H irst , Francis Wrigley 10-1 2,1 6,
18, 26-8, 32-3
Ca na da 65, 67
Ca sualt ies I 2- 13 In com e and wealth
Church ill, Rt H on . Sir Winston red istribution 32-5, 4 1-3
Spe ncer 42 India 20,55,5 7-8 ,65,68
Co lwyn Co mmi ttee 42 Inflati on 31-3,53-4
Comm itt ee for Scientifi c and Intern a tion al war debts 56-7 ,64
Industrial Resea rch 47
Co rn Prod uction Act 1917 29 Japa n 27,44,65
Cos ts of wa r 10- 15 Jeze, Gaston Pau l Ame dee 15
C rimea n War II J ohn son , Sa muel 10

Dawes Plan 64 Keynes,John Maynard 33,42,

Dev alu at ion 64, 72 45, 75

85
Lend-l ease 67- 70 Royal Co mmiss ion on th e Supp ly of
Lloyd , Edwa rd Mayow Food and Raw M aterials in T ime
Hastings 19-2 4 of Wa r 5 1
Lloyd Geo rge, Rt H on. David 11, Ru ssia 44,56
26
Local Arm aments Committees 44 Savin g 33-4
Loom is, C ha rles Pri ce 44 See rs, Dudley 30, 41
She lls and Fu ses Agr eem ent ,
Mal aya 58, 65 1915 39
Malthus, Thom as 10 Socia l ins ura nce 25-6, 28, 4 1, 47
Ma rwick, Arthu r 26, 43, 45 Soro kin, Piti rim
McK enn a, Rt Hon. Reginald 15, Aleksa nd rovitch 44
47 Soviet U nion 27,44,56,7 1
Military par ticipation rat io 24, 26 Sterling Area a nd ba lances 65,
Mi nist ry of Health 25 67-9
Min istry of Munition s 19 Suda n 68
Minist ry of Recon struction _ ~ , 29,
48 T ar iffs 23, 47
Morgan , Edw ard Victor 34 T awn ey, Richard H enry 23
Mun ition s of War Act , 1915 21 T axation and fiscal policy 15-1 6,
Mutual Aid Agreement , 1942 32-3, 42-3
(Lend-lease) 67 T echn ological inn ovation 18-1 9,
37
Na tiona l H ealth Servi ce 25, 48 Titmuss, Rich a rd Morris 24-5 ,
Na tiona lisat ion 45, 47 27-9,43,45
Trad e uni ons 22,44-5, 47
Old-age pen sion s 4 1
Organ isat ion for Europ ean
United Kin gd om Oi lseed Brok ers'
Econ omi c Coo pe ra tion
(O EEC) 59 Associ ation 45
U nited States of Am er ica 31, 38,
47, 49, 52-3,55-6,58-72
Parker , Rob ert Alastair
C larke 66--7, 69
Publ ic d ebt 33-4 Vietna m wa r 46

Recon st ru ction Finan ce \Vages 30,33,36--7,42-3

Corpo ra tion 68 War Wealth Co mm ittee 34
Rep ar ati ons 57 Win ter, ]. M. 40
Rhondda, Viscount (Dav id Alfred Wo me n, inc rease in employme nt
Thom as) 20 of 16-1 7, 19, 29, 38-9, 55-6, 62

86