The 1960s have seen the British economy in a whole succession of open crises. It is high time that some attempt be made to analyse what basic developments in the Conservative decade of the 1950s have culminated in the complex crisis of recent years. This is vital, too, for any adequate understanding of probable developments in the national economy and of the alternative economic policies which are now being offered in so many fields—not least that of external relations, where the issues have been dramatised by the abortive bid for Common Market entry.

The deep and manifold nature of the crisis is evident both in statistics of performance and in even the most summary review of events. Writing in mid-1963, it is only now that industrial production is beginning to rise after three years of stagnation. This protracted stagnation itself only repeats that of 1956–1958, for then, too, overall industrial output was almost stationary for over three years. In all, the last eight years, since the Tory electoral victory of mid-1955, have seen a total of six years of stagnation. Only 1959 to mid-1960 were years of growth.

In retrospect it is surprising how those brief years of growth at the end of the decade served to sustain the myths of an “affluent economy”, of the alleged adequacy of post-Keynesian devices for the control of the economy, and of the advantages of “freedom” for the businessman. It is surprising and also important, for the political consequences of these myths included the Conservative electoral victory of 1959, and the attempt of the Labour Right to come to terms with affluence by abandoning—even as an ultimate goal—the socialist objectives of Clause Four.

For the fact is that the short boom period of the late 1950s was a manipulated one, and could not be sustained either internally or externally. Internally, it was largely based on the deliberate organization of a consumer-durable boom by a once-for-all expansion of credit. Between the last quarter of 1958 and mid-1960 hire purchase debt increased by over £500 million; of course, consumers could not go on adding to debt at such a rate and once debt stopped rising, consumer-durables went into recession. Externally, the current balance of payments (i.e. payments for goods and services) plunged catastrophically from plus £329 million in 1958 to minus £308 million in 1960: imports increased violently under the impetus of the home market boom and associated stock-building. It is significant of the malaise of the economy that the only period of rapid expansion since the mid-1950 had such insecure foundations!

Subsequently, the wave of capital investment associated with this distorted boomfootnote¹ emerged in a general context of idle “surplus” capacity, and this in turn has generated a slump in capital goods industries as orders for new equipment have been cut back. In the private sector, capital investment spending has been falling since the third quarter of 1961. Seasonally adjusted, capital spending by manufacturing industry had fallen by 2½ per cent by the last quarter of 1962. Mass unemployment has reemerged, and at the peak period of February, 1963, ran at 933,000 registered unemployed in the UK, besides considerable non-registered unemployment. On a seasonally adjusted basis there are nearly 600,000 unemployed even now.

The persistence of internal and external problems is thus evident. In foreign payments and trade, there were serious deficits in 1955 as well as in 1960. Both in 1957 and in 1961 there was widespread loss of confidence in the exchange value of sterling, and the speculation which followed was the signal for orthodox (and, as we shall see, obsolete and damaging) deflationary policies and an open clash between State and Trade Unions. Amid all this, Britain’s share of world manufacturing exports has fallen steadily, from 22 per cent a decade ago to 15 per cent now.

The desperation of the Conservative government is revealed in its violent shifts in policy—from the organization of EFTA and Commonwealth preferences to the bid for Common Market entry, and back again; from the 1961 attempt at dictating a wages-stop to the rearguard but equivalent policy represented by the National Incomes Commission and the still shadowy “new” approach of the NEDC. In other fields the switches have been no less erratic and violent, moving, for instance, from a policy of holding down nationalized industry prices and forcing them into deficit (1956–1957) to one of setting them targets for surpluses to be achieved by price increases (1961–1963).