Modern Mind: An Intellectual History of the 20th Century

21

NO WAY BACK

It was perhaps only natural that a war in which very different regimes were pitched against one another should bring about a reassessment of the way men govern themselves. Alongside the scientists and generals and code breakers trying to outwit the enemy, others devoted their energies to the no less fundamental and only marginally less urgent matter of the rival merits of fascism, communism, capitalism, liberalism, socialism, and democracy. This brought about one of the more unusual coincidences of the century, when a quartet of books was published during the war by exiles from that old dual monarchy, Austria and Hungary, looking forward to the type of society man should aim for after hostilities ceased. Whatever their other differences, these books had one thing in common to recommend them: thanks to the wartime paper rationing, they were all mercifully short.

The first of these, Capitalism, Socialism and Democracy, by Joseph Schumpeter, appeared in 1942, but for reasons that will become apparent, it suits us to consider first Karl Mannheim’s Diagnosis of Our Time, which appeared a year later.¹ Mannheim was a member of the Sunday Circle who had gathered around George Lukács in Budapest during World War I, and included Arnold Hauser and Béla Bartók. Mannheim had left Hungary in 1919, studied at Heidelberg, and attended Martin Heidegger’s lectures at Marburg. He was professor of sociology at Frankfurt from 1929 to 1933, a close colleague of Theodor Adorno, Max Horkheimer and the others, but after Hitler took power, he moved to London, teaching at the LSE and the Institute of Education. He also became editor of the International Library of Sociology and Social Reconstruction, a large series of books published by George Routledge and whose authors included Harold Lasswell, professor of political science at Chicago, E. F. Schumacher, Raymond Firth, Erich Fromm, and Edward Shils.

Mannheim took a ‘planned society’ completely for granted. For him the old capitalism, which had produced the stock market crash and the depression, was dead. ‘All of us know by now that from this war there is no way back to a laissez-faire order of society, that war as such is the maker of a silent revolution by preparing the road to a new type of planned order.’² At the same time he was equally disillusioned with Stalinism and fascism. Instead, according to him, the new society after the war, what he called the Great Society, could be achieved only by a form of planning that did not destroy freedom, as had happened in the totalitarian countries, but which took account of the latest developments in psychology and sociology, in particular psychoanalysis. Mannheim believed that society was ill – hence ‘Diagnosis’ in his title. For him the Great Society was one where individual freedoms were maintained, but informed by an awareness of how societies operated and how modern, complex, technological societies differed from peasant, agricultural communities. He therefore concentrated on two aspects of contemporary society: youth and education, on the one hand, and religion on the other. Whereas the Hitler Youth had become a force of conservatism, Mannheim believed youth was naturally progressive if educated properly.³ He thought pupils should grow up with an awareness of the sociological variations in society, and the causes of them, and that they should also be made aware of psychology, the genesis of neurosis, how this affects society, and what role it might play in the alleviation of social problems. He concentrated the last half of his book on religion because he saw that at bottom the crisis facing the Western democracies was a crisis of values, that the old class order was breaking down but was yet to be replaced by anything else systematic or productive. While he saw the church as part of the problem, he believed that religion was still, with education, the best way to instil values, but that organised religion had to be modernised – again, with theology being reinforced by sociology and psychology. Mannheim was thus for planning, in economics, education, and religion, but by this he did not imply coercion or central control. He simply thought that postwar society would be much more informed about itself than prewar society.⁴ He did acknowledge that socialism had a tendency to centralise power and degenerate into mere control mechanisms, but he was a great Anglophile who thought that Britain’s ‘unphilosophical and practically-minded citizens’ would see off would-be dictators.

Joseph Schumpeter had little time for sociology or psychology. For him, insofar as they existed at all, they were subordinate to economics. In his wartime book Capitalism, Socialism and Democracy, he sought to change thinking about economics no less than John Maynard Keynes had done.⁵ Schumpeter was firmly opposed to Keynes, and to Marx as wed, and it is not hard to see why. Born in Austria in 1883, the same year as Keynes, he was educated at the Theresianum, an exclusive school reserved for the sons of the aristocracy.⁶ Schumpeter was there by virtue of the fact that his mother had remarried a general after his father, an undistinguished man, had died. As a result of his ‘elevation,’ Schumpeter was always rather self-consciously aristocratic; he would appear at university meetings in riding habit and inform anyone who was listening that he had three ambitions in life – to be a great lover, a great horseman, and a great economist. After university in Vienna (during its glorious period, covered earlier in this book), he became economic adviser to a princess in Egypt, returning to a professorship in Austria after he had published his first book. After World War I he was invited to become finance minister in the newly formed centre-socialist government, and though he worked out a plan to stabilise the currency, he soon resigned and became president of a private bank. In the debacle after Versailles the bank faded. Eventually, Schumpeter made his way to Harvard, ‘where his manner and his cloak quickly made him into a campus figure.’⁷ All his life he believed in elites, ‘an aristocracy of talent.’

Schumpeter’s main thesis was that the capitalist system is essentially static: for employers and employees as well as for customers, the system settles down with no profit in it, and there is no wealth for investment. Workers receive just enough for their labour, based on the cost of producing and selling goods. Profit, by implication, can only come from innovation, which for a limited time cuts the cost of production (until competitors catch up) and allows a surplus to be used for further investment. Two things followed from this. First, capitalists themselves are not the motivating force of capitalism, but instead entrepreneurs who invent new techniques or machinery by means of which goods are produced more cheaply. Schumpeter did not think that entrepreneurship could be taught, or inherited; it was, he believed, an essentially ‘bourgeois’ activity. What he meant by this was that, in any urban environment, people would have ideas for innovation, but who had those ideas, when and where they had them, and what they did with them was unpredictable. Bourgeois people acted not out of any theory or philosophy but for pragmatic self-interest. This flatly contradicted Marx’s analysis. The second element of Schumpeter’s outlook was that profit, as generated by entrepreneurs, was temporary.⁸ Whatever innovation was introduced would be followed up by others in that sector of industry or commerce, and a new stability would eventually be achieved. This meant that for Schumpeter capitalism was inevitably characterised by cycles of boom and stagnation.⁹ As a result, his view of the 1930s was diametrically opposite to Keynes’s. Schumpeter thought that the depression was to an extent inevitable, a cold, realistic douche. By wartime he had developed doubts that capitalism could survive. He thought that, as a basically bourgeois activity, it would lead to increasing bureaucratisation, a world for ‘men in lounge suits’ rather than buccaneers. In other words, it contained the seeds of its own ultimate failure; it was an economic success but not a sociological success.¹⁰ Moreover, in embodying a competitive world, capitalism bred in people an almost endemic critical approach that in the end would be turned on itself. At the same time (1942), he thought socialism could work, though for him socialism was a benign, bureaucratic, planned economy rather than full-blooded Marxism or Stalinism.¹¹

If Mannheim took planning for granted in the postwar world, and if Schumpeter was lukewarm about it, the third Austro-Hungarian, Friedrich von Hayek, was downright hostile. Born in 1899, Hayek came from a family of scientists, distantly related to the Wittgensteins. He took two doctorates at the University of Vienna, becoming professor of economics at the LSE in 1931, and acquired British citizenship in 1938. He too loathed Stalinism and fascism equally, but he was much less convinced than the others that the same centralising and totalitarian tendencies that existed in Russia and Germany couldn’t extend eventually to Britain and even America. In The Road to Serfdom (1944), also published by George Routledge, he set out his opposition to planning and linked freedom firmly to the market, which, he thought, helped produce a ‘spontaneous social order.’ He was critical of Mannheim, regarded Keynesian economics as ‘an experiment’ that, in 1944, had yet to be proved, and reminded his readers that democracy was not an end in itself but ‘essentially a means, a utilitarian device for safeguarding internal peace and individual freedom.’¹² He acknowledged that the market was less than perfect, that one shouldn’t make a fetish of it, but again reminded his readers that the rule of law had grown up at the same time as the market, and in part as a response to its shortcomings: the two were intertwined achievements of the Enlightenment.¹³ His reply to Mannheim’s point about the importance of having greater sociological knowledge was that markets are ‘blind,’ producing effects that no one can predict, and that that is part of their point, part of their contribution to freedom, the ‘invisible hand’ as it has been called. For him, therefore, planning was not only wrong in principle but impractical. Von Hayek then went on to produce three reasons why, under planning, ‘the worst get on top.’ The first was that the more highly educated people are always those who can see through arguments and don’t join the group or agree to any hierarchy of values. Second, the centraliser finds it easier to appeal to the gullible and docile; and third, it is always easier for a group of people to agree on a negative program – on the hatred of foreigners or a different class, say – than on a positive one. He attacked historians like E. H. Carr who aimed to present history as a science (as indeed did Marx), with a certain inevitability about it, and he attacked science itself, in the person of C. H. Waddington, author of The Scientific Attitude, which had predicted that the scientific approach would soon be applied to politics.¹⁴ For Hayek, science in that sense was a form of planning. Among the weaknesses of capitalism, he conceded that the tendency to monopoly needed to be watched, and guarded against, but he saw a greater practical threat from the monopolies of the labour unions under socialism.

As the war was ending, a fourth Austro-Hungarian released The Open Society and Its Enemies.¹⁵ This was Karl Popper. Popper’s career had an unusual trajectory. Born in Vienna in 1902, he did not enjoy good health as a young man, and in 1917 a lengthy illness kept him away from school. He flirted with socialism, but Freud and Adler were deeper influences, and he attended Einstein’s lectures in Vienna. He completed his Ph.D. in philosophy in 1928, then worked as a social worker with children abandoned after World War I, and as a teacher. He came into contact with the Vienna Circle, especially Herbert Feigl and Rudolf Carnap, and was encouraged to write. His first books, The Two Fundamental Problems of the Theory of Knowledge and Logik der Forschung (The Logic of Scientific Discovery), attracted enough attention for him to be invited to Britain in the mid-1930s for two long lecture tours. By then the mass emigration of Jewish intellectuals had begun, and when, in 1936, Moritz Schlick was assassinated by a Nazi student, Popper, who had Jewish blood, accepted an invitation to teach at the University of Canterbury in New Zealand. He arrived there in 1937 and spent most of World War II in the calm and relative isolation of his new home. It was in the Southern Hemisphere that he produced his next two books, The Poverty of Historicism and The Open Society and Its Enemies, many of the arguments of the former title being included in The Open Society.¹⁶ Popper shared many of the views of his fellow Viennese exile Friedrich von Hayek, but he did not confine himself to economics, ranging far more widely.

The immediate spur to The Open Society was the news of the Anschluss, the annexation of Austria by Germany in 1938. The longer-term inspiration arose from the ‘pleasant sensation’ Popper felt on arriving for the first time in England, ‘a country with old liberal traditions,’ as compared with a country threatened with National Socialism, which for him was much more like the original closed society, the primitive tribe or feudal arrangement, where power and ideas are concentrated in the hands and minds of a few, or even one, the king or leader: ‘It was as if the windows had been suddenly opened.’ Popper, like the logical positivists of the Vienna Circle, was profoundly affected by the scientific method, which he extended to politics. For him, there were two important ramifications. One was that political solutions were like scientific ones – they ‘can never be more than provisional and are always open to improvement.’ This is what he meant by the poverty of historicism, the search for deep lessons from a study of history, which would provide the ‘iron laws’ by which society should be governed.¹⁷ Popper thought there was no such thing as history, only historical interpretation. Second, he thought that the social sciences, if they were to be useful, ‘must be capable of making prophecies.’ But if that were the case, again historicism would work, and human agency, or responsibility, would be reduced and perhaps eliminated. This, he thought, was nonsense. He ruled out the very possibility that there could be ‘theoretical history’ as there was theoretical physics.¹⁸

This led Popper to the most famous passage in his book, the attack on Plato, Hegel, and Marx. (The book was originally going to be called False Prophets: Plato, Hegel, Marx.) Popper thought that Plato might well have been the greatest philosopher who ever lived but that he was a reactionary, who put the interests of the state above everything, including the interpretation of justice. For example, according to Plato, the guardians of the state, who are supposed to be philosophers, are allowed the right to lie and cheat, ‘to deceive enemies or fellow-citizens in the interests of the state.¹⁹ Popper was attacked for his dismissal of Plato, but he clearly saw him as an opportunist and as the precursor of Hegel, whose dogmatic dialectical arguments had led, he felt, to an identification of the good with what prevails, and the conclusion that ‘might is right.’²⁰ Popper thought that this was simply a mischaracterisation of dialectic. In reality, he said, it was merely a version of trial and error, as in the scientific method, and Hegel’s idea that thesis generates antithesis was wrong – romantic but wrong: thesis, he said, generates modifications as much as it generates the opposite to itself. By the same token, Marx was a false prophet because he insisted on holistic change in society, which Popper thought had to be wrong simply because it was unscientific – it couldn’t be tested. He himself preferred piecemeal change, so that each new element introduced could be tested to see whether it was an improvement on the earlier arrangement.²¹ Popper was not against the aims of Marxism, pointing out, for example, that much of the program outlined in the Communist Manifesto had actually been achieved by Western societies. But that was his point: this had been achieved piecemeal, without violence.²²

Popper shared with Hayek a belief that the state should be kept to a minimum, its basic raison d’être being to ensure justice, that the strong did not bully the weak. He disagreed with Mannheim, believing that planning would lead to more closure in society, simply because planning involved a historicist approach, a holistic approach, a Utopian approach, all of which went against the scientific method of trial and error.²³ This led Popper to consider democracy as the only viable possibility because it was the only form of government that embodied the scientific, trial-and-error method and allowed society to modify its politics in the light of experience, and to change government without bloodshed.²⁴ Like Hayek’s writings, Popper’s ideas may not seem so original today, for the very reason that we take them so much for granted. But at the time, with totalitarianism in full flood, with the stock market crash and the depression still fresh in the mind, with World War I not so far in the past as it is now, many people took the view that history did have a hidden structure (Popper specifically attacks Oswald Spengler’s Decline of the West thesis as ‘pointless’), that it had a cyclical nature, particularly in the economic sphere, that there was something inevitable about either communism or fascism. Popper believed that ideas matter in human life, in society, that they can have power in changing the world, that political philosophy needs to take account of these new ideas to continually reinvent society.

The coincidence of these four books by Austro-Hungarian emigrés was remarkable but, on reflection, perhaps not so surprising. There was a war on, a war being fought for ideas and ideals as much as for territory. These emigrés had each seen totalitarianism and dictatorship at close hand and realised that even when the war with Germany and Japan ended, the conflict with Stalinism would continue.

When he completed Christianity and the Social Order in 1941, William Temple was archbishop of York.²⁵ By the time the book appeared, in early 1942, published as a Penguin Special, Temple was archbishop of Canterbury and head of the Church of England. Leaders of the church do not often publish tracts of a social scientific, still less a political, nature, and the book’s high-profile author helped ensure its success: it was reprinted twice in 1942 and soon sold well over 150,000 copies. Temple’s book perfectly illustrates one aspect of the intellectual climate in the war years.

The main part of the book was rather general. Temple took some time justifying the church’s right to ‘interfere’ (his word) in social questions that inevitably had political consequences, and there was an historical chapter where he described the church’s earlier interventions, and in which he revealed himself as extremely knowledgeable about economics, providing an original and entertaining interpretation of what the biblical authorities had to say on that score.²⁶ He tried to sketch out some ‘Christian Social Principles,’ discussing such matters as fellowship in the workplace, God’s purpose, and the nature of freedom. But it was really the appendix to Temple’s book that comprised its main attraction. Temple thought it wrong for the Established Church to put out an ‘official’ view on what ought to be done once the war was over, and so in the body of the book he kept his remarks very broad. In the appendix, on the other hand, he set out his own very specific agenda.

To begin with, he agreed with Mannheim over planning. Right at the beginning of the appendix, Temple writes, ‘No one doubts that in the postwar world our economic life must be “planned” in a way and to an extent that Mr Gladstone (for example) would have regarded, and condemned, as socialistic.’²⁷ Temple had concluded the main part of his book by outlining six fundamental principles on the basis of which a Christian society should be governed; he now set about describing how they could be brought about. His first principle was that everyone should be housed with decency, and for this he wanted a Regional Commissioner of Housing with power to say whether land should be used for that purpose.²⁸ Draconian powers were to be given to these commissioners, who were to prevent speculation in land. The second principle was that every child should have the opportunity of education to the years of maturity, and for this Temple wanted the school-leaving age to be raised from fourteen to eighteen. The third principle concerned an adequate income for everyone, and here he advocated straight Keynesianism, with a certain number of public works being maintained, ‘from which private enterprise should be excluded,’ and which could be expanded or contracted according to need. Fourth, all citizens should have a say in the conduct of the business or industry where they worked; Temple advocated a return to the mediaeval guilds with workers, management, and capital represented on the boards of all major undertakings. Fifth, all citizens needed adequate leisure to enjoy family life and give them dignity; Temple therefore recommended a five-day week with ‘staggered’ time off to help enterprises cope; he also proposed holidays with pay.²⁹ Last, he advocated freedom of worship, of speech, and of assembly.

This last provision was by far the most unexceptional. As for the others, Temple was anxious to make it plain that he was not anti-business and went out of his way to say that ‘profit’ was not a dirty word. He also underlined his awareness that planning could lead to a loss of freedom, but he thought that certain freedoms were hardly worth having. For example, he quoted figures which showed that ‘three-quarters of the businesses which are started go into liquidation within three years. Frankly, it would seem to be a gain all round that there should be less inducement to start these precarious businesses, of which the extinction must cause inconvenience and may cause real distress.’ He thought that a percentage of profits should be used for a ‘wage-equalisation fund,’ and he looked forward to a time whereby the capital accumulated by one generation was made to ‘wither’ away over the next two or three generations by death duties. For Temple, money was ‘primarily an intermediary.’ The prime necessities of life, he said, were air, sunshine, land, and water.³⁰ No one claimed to own the first two, and he made it plain that in his view the same principle should apply to the others.

The huge sales of Temple’s book reflected the wide interest in planning and social justice that lay behind the more immediate contingencies of war. The scars of the stock market crash, the depression, and the events of the 1930s ran deep. How deep may be judged from the fact that although ‘planning’ was anathema in some quarters, for others it wasn’t strong enough. Many people in Britain and America, for example, had a sneaking respect for the way Hitler had helped eliminate unemployment. After the experience of depression, the lack of a job seemed for some more important than political freedom, and so totalitarian planning – or central direction – was perhaps a risk worth taking. This attitude, as was mentioned earlier, also transferred to Stalin’s ‘planning,’ which, because Russia just then was an ally, never received in wartime the critical scrutiny it deserved. It was against this intellectual background that there appeared a document that had a greater impact in Britain than any other in the twentieth century.

Late on the evening of 30 November 1942 queues began to form outside the London headquarters of His Majesty’s Stationery Office in Holborn, Kingsway. This was, to say the least, an unusual occurrence. Government publications are rarely best-sellers. But, when HMSO opened the following morning, its offices were besieged. Sixty thousand copies of the report being released that day were sold out straight away, at 2 shillings (24 old pence, now 10 pence) a time, four times the cost of a Penguin paperback, and by the end of the year sales reached 100,000. Nor could it be said that the report was Christmas-present material – its title was positively off-putting: Social Insurance and Allied Services. And yet, in one form or another, this report eventually sold 600,000 copies, making it the best-selling government report until Lord Denning’s inquiry into the Profumo sex and spying scandal twenty years later.³¹ Why all the fuss? Social Insurance and Allied Services became better known as the Beveridge Report, and it created the modern welfare state in Britain, stimulating a whole climate of opinion in the postwar world. The frenzy that attended its publication was as important an indicator of a shift in public sensibility as was the report itself.

The idea of a welfare state was not new. In Germany in the 1880s Bismarck had obtained provision for accident, sickness, old age, and disability insurance. Austria and Hungary had followed suit. In 1910 and 1911, following agitation by the Webbs, Bernard Shaw, H. G. Wells, and other Fabians, Lloyd George, then chancellor in a Liberal British government, introduced legislation that provided for unemployment and an old age pension insurance. At Cambridge, in the 1920s, the economist Arthur Pigou held that, so long as total production was not reduced, the redistribution of wealth – a welfare economy – was entirely feasible, the first real break with ‘classical economics.’ In America in the 1930s, in the wake of Roosevelt’s New Deal and in light of Keynes’s theories, John Connor, Richard Ely, and Robert La Folette conceived the Wisconsin Plan, which provided for statewide unemployment compensation, with rudimentary federal provision for the old, needy, and dependent children following in 1935.³² But the Beveridge Report was comprehensive and produced in wartime, thus benefiting from and helping to provoke a countrywide change in attitude.³³

The report came about inadvertently, when in June 1941 Sir William Beveridge was asked by Arthur Greenwood, Labour minister for reconstruction in the wartime coalition, to chair an interdepartmental committee on the coordination of social insurance. Beveridge was being asked merely to patch up part of Britain’s social machinery but, deeply disappointed (he wanted a more active wartime role), he quickly rethought the situation and saw its radical and far-reaching possibdities.³⁴

Beveridge was a remarkable and well-connected man, and his connections were to play a part in what he achieved. Born the son of a British judge in India in 1879, into a household supported by twenty-six servants, he was educated at Charterhouse and Balliol College, Oxford, where he read mathematics and classics. At Balliol, like Tawney, he fell under the influence of the master, Edward Caird, who used to urge his newly minted graduates ‘to go and discover why, with so much wealth in Britain, there continues to be so much poverty and how poverty can be cured.’ Like Tawney, Beveridge went to Toynbee Hall, where, he said later, he learned the meaning of poverty ‘and saw the consequence of unemployment.’³⁵ In 1907 he visited Germany to inspect the post-Bismarck system of compulsory social insurance for pensions and sickness, and on his return several articles he wrote in the Morning Post about German arrangements came to the attention of Winston Churchill, who invited him to join the Board of Trade as a full-time civil servant. Beveridge therefore played a key role in the Liberal government’s 1911 legislation, which introduced old-age pensions, labour exchanges, and a statutory insurance scheme against unemployment. Churchill himself was so taken with social reform that he declared liberalism to be ‘the cause of the left-out millions.’³⁶ After World War I, Beveridge became director of the LSE, transforming it into a powerhouse for the social sciences. By World War II he was back in Oxford, as Master of University College. His long career had brought him many connections: Tawney was his brother-in-law, Clement Attlee and Hugh Dalton had been hired by him at the LSE, and were now in Parliament and the government. He knew Churchill, Keynes, and Seebohm Rowntree, whose alarming picture of poverty in York in 1899 had been partly responsible for the 1911 legislation and whose follow-up study, in 1936, was to help shape Beveridge’s own document.³⁷ His assistant at Oxford, Harold Wilson, would be a future prime minister of Britain.³⁸

A month after his meeting with Greenwood, in July 1941, Beveridge presented a paper to the committee he chaired, ‘Social Insurance – General Considerations,’ in which there was no mention of patchwork. ‘The time has now come,’ Beveridge wrote, ‘to consider social insurance as a whole, as a contribution to a better new world after the war. How would one plan social insurance now if one had a clear field … without being hampered by vested interests of any kind?’³⁹ Over the ensuing months, in the darkest days of the war, Beveridge’s committee took 127 pieces of written evidence, and held more than 50 sessions where oral evidence was taken from witnesses. But, as Nicholas Timmins reveals in his history of the welfare state, ‘only one piece of written evidence had been received by December 1941 when Beveridge circulated a paper entitled ‘Heads of a Scheme’ which contained the essence of the final report a year later.’⁴⁰ This influential report was essentially the work of one man.

His paper envisaged two things. There were to be a national health service, children’s allowances, and unemployment benefits; and benefits were to be paid at a flat rate, high enough to live on, with contributions to come from the individual, his employer and the state. Beveridge was totally opposed to means tests or sliding scales, since he knew they would create more problems than they solved, not least the bureaucracy needed for administering a more complex system. He was familiar with all the arguments that benefits set too high would stop people from seeking work, but he was also sympathetic to the recent research of Rowntree, which had shown that low wages in large families were the primary cause of poverty.⁴¹ This was not what the government had asked for, and Beveridge knew it. But he now began pulling strings with his many connections, calling in favours – in broadcasting, the press, Whitehall – all designed to set up a climate of anticipation ahead of the publication of his report, so that it would be an intellectual-political event of the first importance.

In terms of impact, Beveridge succeeded in everything he set out to achieve. Besides those sensational sales figures in Britain, the report had a notable reception abroad. The Ministry of Information got behind it, and details were broadcast by the BBC from dawn on 1 December in twenty-two languages. All troops received copies of the report, and it sold so well in the United States that the Treasury made a $5,000 profit. Bundles of the report were parachuted into France and other parts of Nazi-occupied Europe, and two even made their way to Hitler’s bunker in Berlin, where they were found at the end of the war, together with commentaries, marked ‘Secret.’ One commentary assessed the plans as ‘a consistent system … of remarkable simplicity … superior to the current German social insurance in almost all points.’⁴²

There were two reasons for the report’s impact. Beveridge’s title may have been dry, but his text certainly was not. This was no governmentese, no civil servant’s deadpan delivery. ‘A revolutionary moment in the world’s history,’ he wrote, ‘is a time for revolutions, not patching.’ War was ‘abolishing landmarks of every kind,’ he said, and so ‘offered the chance of real change,’ for ‘the purpose of victory is to live in a better world than the old world.’ His principle line of attack, he said, was on Want – that was what security of income, social security, was all about. ‘But … Want is only one of five giants on the road of reconstruction, and in some ways the easiest to attack. The others are Disease, Ignorance, Squalor and Idleness…. The State should offer security for service and contribution. The State in organising security should not stifle incentive, opportunity, responsibility; in establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than the minimum for himself and his family.’⁴³ But that minimum should be given ‘as of right and without means test, so that individuals may build freely upon it…. [This] is one part of an attack upon five giant evils: upon the physical Want with which it is directly concerned, upon Disease which often causes that Want and brings many other troubles in its train, upon Ignorance which no democracy can afford among its citizens, upon Squalor … and upon Idleness which destroys wealth and corrupts men.’⁴⁴

Few people in those dark days expected a government report to be moving, still less exalting, but Beveridge seems to have grasped instinctively that because the days were so bleak, because the threat at the moment came so obviously from outside, that now was the time to spark a change in attitude, a change in feeling toward the dangers within British society, dangers that, despite all that had happened, were still there. From his vantage point, Beveridge knew better than most how little Britain had changed in the twentieth century.⁴⁵ As Beveridge well knew, after the Great War, Britain’s share of international trade had shrunk, spoiled still further by Churchill’s insistence on a return to the gold standard at too high a rate, bringing about sizeable cuts in public spending and a return of social divisions in Britain (67 percent unemployment in Jarrow, 3 percent in High Wycombe).⁴⁶ As R.A. Butler, the Conservative creator of the 1944 Education Act, itself the result of the Beveridge plan, wrote later, ‘It was realised with deepening awareness that the “two nations” still existed in England a century after Disraeli had used the phrase.’⁴⁷ The success of Beveridge’s plan, as he himself acknowledged, also owed something to Keynes, but the social and intellectual change that hit Britain, and other countries, was deeper than just economics. Mass Observation, the poll organisation run by W. H. Auden’s friend Charles Madge, found in 1941 that 16 percent said the war had changed their political views. In August 1942, four months before the Beveridge Report, one in three had changed their political views.⁴⁸ More than anything, the Beveridge Report offered hope at a time when that commodity was in short supply.⁴⁹ A month before, Rommel had retreated in North Africa, British forces had retaken Tobruk, and Eisenhower had landed in Morocco. To celebrate, Churchill had ordered church bells to be rung in Britain for the first time since war was declared (they had been kept in reserve, to signify invasion).

Despite the Great Terror in Russia, Stalin’s regime continued to benefit from its status as a crucial ally. In November 1943 Churchill, Roosevelt, and the Russian dictator met in Tehran to discuss the last phase of the war, in particular the invasion of France. At that meeting Churchill presented Stalin with a sword of honor for the people of Stalingrad. Not everyone thought the Soviet leader a suitable recipient for the honor, among them, as we have seen, Friedrich von Hayek and Karl Popper. But the extent to which Stalin was appeased in the middle of war is shown by George Orwell’s experiences in trying to get another slim volume published.

Subtitled ‘A Fairy Story,’ Animal Farm is about a revolution that goes wrong and loses its innocence when the animals in Mr Jones’s farm, stimulated to rebellion by an old Middle White boar, Major, take over the farm and expel Mr Jones and his wife. The allegory is hardly subtle. Old Major, when he addresses the other animals before he dies, refers to them as Comrades. The rebellion itself is dignified by its leaders (among them the young boar Napoleon) with the name Animalism, and Orwell, although he’d had the idea in 1937, while fighting in Spain, never made any secret of the fact that his satire was directed at Stalin and his apparatchiks. He wrote the book at the end of 1943 and the beginning of 1944, important months when the Russians finally turned back the Germans, ‘and the road to Stalingrad became the road to Berlin.’⁵⁰ The revolution on the farm is soon corrupted: the pigs, looking after their own, gradually take over; a litter of puppies is conditioned to grow up as a vicious Gestapo-like Praetorian guard; the original commandments of Animalism, painted on the barn wall, are secretly amended in the dead of night (‘All animals are equal/but some are more equal than others’); and finally the pigs start to walk on two legs, after months when the main slogan has been ‘Two-legs bad! Four-legs-good!’

The book appeared in August 1945, the same month that the United States dropped atomic bombs on Hiroshima and Nagasaki, and the delay between completion and release is partly explained by the difficulties Orwell experienced in getting the book published. Victor Gollancz was only one of the publishers who turned Animal Farm down – at Faber & Faber, T. S. Eliot did too.⁵¹ As a Christian, Eliot was no friend of communism, and he needed no convincing of Orwell’s abilities. However, in rejecting the book, he wrote, ‘We have no conviction … that this is the right point of view from which to criticise the political situation at the present time.’⁵² Four publishers rejected the book, and Orwell began to grow angry at the self-censorship he saw in these decisions. He considered publishing the book himself, but then Warburgs took it on, though not immediately, owing to the paper shortage.⁵³ Perhaps the further delay was just as well. When the book finally appeared, the war had just ended, but the terror of the atomic bomb had recently arrived, and following the Potsdam conference in July, the postwar – Cold War – world was emerging. The evidence of the Nazi concentration camps was becoming known, with its bleak confirmation of what man was capable of doing to man.

Animal Farm was no more a fairy story than Stalin was a political role model. Though he might have had sociopolitical aims very similar to those of William Temple, Orwell was more realistic and, like von Hayek and Popper, grasped that though the battle against Hitler had been won, the battle against Stalin was far from over, and so far as twentieth-century thought and ideas were concerned, was much more important. A whole mode of thought – the liberal imagination – was called into question by Stalinism, collectivism, and planning.

Many of the Nazi and Japanese wartime atrocities were not fully revealed until hostilities had ended. They set the seal on six grim years. And yet, for the optimistic, there was another silver lining amid the gloom. Almost all the major belligerents in the war, including the remoter areas of the British Empire, such as Australia and New Zealand, had achieved full employment. The curse of the 1930s had been wiped out. In America, where the depression had begun and hit hardest, unemployment by 1944 had shrunk to 1.2 percent.⁵⁴ Except among his grudging opponents, this was regarded as a triumph for Keynes’s ideas. Wartime governments had everywhere run huge public expenditure programs – weapons manufacture – which consisted entirely of waste (unlike roads, say, which lasted and went on being useful), and combined this with vast deficits. The U.S. national debt, $49 billion in 1941, escalated to $259 billion in 1945.⁵⁵

Keynes had been fifty-six at the outbreak of World War II, and although he had made his name in the first war, his role was actually more crucial in the second. Within two months of the outbreak of hostilities, he produced three articles for The Times of London, rapidly reprinted as a pamphlet entitled How to Pay for the War. (These actually appeared in the German press first, owing to a leak from a lecture he gave.)⁵⁶ Keynes’s ideas this time had two crucial elements. He saw immediately that the problem was not, at root, one of money but of raw materials: wars are won or lost by the physical resources capable of being turned rapidly into ships, guns, shells, and so forth. These raw materials are capable of being measured and therefore controlled.⁵⁷ Keynes also saw that the difference between a peacetime economy and a war economy was that in peace workers spend any extra income on the goods they have themselves worked to produce; in war, extra output – beyond what the workers need to live on – goes to the government. Keynes’s second insight was that war offers the opportunity to stimulate social change, that the ‘equality of effort’ needed in national emergency could be channelled into financial measures that would not only reflect that equality of effort but help ensure greater equality after the war was over. And that, in turn, if widely publicised, would help efficiency. After Winston Churchill became prime minister, and despite the hostility to his ideas by the Beaverbrook press, Keynes was taken on as one of his two economic advisers (Lord Catto was the other).⁵⁸ Keynes lost no time in putting his ideas into effect. Not all of them became law, but his influence was profound: ‘The British Treasury fought the Second World War according to Keynesian principles.’⁵⁹

In the United States the situation was similar. There was an early recognition in some influential quarters that wartime was a classic Keynesian situation, and a team of seven economists from Harvard and Tufts argued for a vigorous expansion of the public sector so that, as in Britain, the opportunity could be taken to introduce various measures designed to increase equality after the war.⁶⁰ The National Resources Planning Board (with planning in its name, be it noted) set down nine principles in a ‘New Bill of Rights’ that sounded suspiciously like William Temple’s Six Christian Principles, and magazines like the New Republic made such declarations as, ‘It had better be recognised at the very start that the old ideal of laissez-faire is no longer possible…. Some sort of planning and control there will have to be, to an increasing degree.’⁶¹ In America, as in Britain, the Keynesians didn’t win everything; traditional business interests successfully resisted many of the more socially equitable ideas. But the achievement of World War II, coming after the gloom of the 1930s, was that governments in most of the Western democracies – Britain, the United States, Canada, New Zealand, Australia, Sweden, and South Africa – all accepted that preserving high levels of employment was a national priority, and it was Keynes and his ideas that had brought about both the knowledge as to how to do this and the recognition that governments should embrace such responsibility.⁶²

If Keynes had won the day in regard to the regulation of domestic economics, his experiences were to be less happy in dealing with the problems facing international trade. This was the issue addressed by the famous conference at Bretton Woods in the summer of 1944.⁶³ Around 750 people attended this conference, in the White Mountains in New Hampshire, which gave birth to the World Bank and the International Monetary Fund – both part of Keynes’s key vision, though their powers were much diluted by the American team. Keynes understood that two problems faced the postwar world, ‘only one of which was new.’ The old problem was to prevent a return to the competitive currency devaluations of the 1930s, which had had the overall effect of reducing international trade and adding to the effects of the depression. The new problem was that the postwar world would be divided into two: debtor nations (such as Britain) and creditor nations (most obviously the United States). So long as this huge imbalance existed, the recovery of international trade would be hampered, affecting everyone. Keynes, who was in brilliant form at the conference, clearly grasped that a system of international currency and an international bank were needed, so as to extend the principles of domestic economics into the international field.⁶⁴ The chief point of the international bank was that it could extend credit and make loans (provided by creditor countries) in such a way that debtor countries could change their currency ratios without provoking tit-for-tat reprisals from others. The plan also removed the world from the gold standard.⁶⁵ Keynes didn’t have everything his own way, and the plan eventually adopted was as much the work of Harry Dexter White, in the U.S. Treasury, as it was of Keynes.⁶⁶ But the intellectual climate in which these problems were thrashed out at Bretton Woods was that created by Keynes in the interwar years. It was not planning as such – Keynes, as we have seen, was a great believer in markets – but he saw that world trade was interlinked, that the greatest prosperity for the greatest number could be achieved only by recognising that wealth needs customers as well as manufacturers and that they are one and the same people. Keynes taught the world that capitalism works on cooperation almost as much as on competition.

The end of World War II was the high point of Keynesian economics. People thought of Keynes as ‘a magician.’⁶⁷ Many wanted to see his principles enshrined in law, and to a limited extent they were. Others took a more Popperian view: if economics had any pretence to science, Keynes’s ideas would be modified as time went by, which is in fact what happened. Keynes had brought about an amazing change in intellectual viewpoint (not just in wartime, but over a lifetime of writings), and although he would be much criticised in later years, and his theories modified, the attitude we have to unemployment now – that it is to an extent under the control of government – is thanks to him. But he was just one individual. The end of the war, and despite Keynes, brought with it a widespread fear of a rapid return to the dismal performance of the 1930s.⁶⁸ Only economists like W. S. Woytinsky saw that there would be a boom, that people had been starved of consumer goods, that labourers and technicians, who had spent the war working overtime, had had no chance to spend the extra, that massive numbers of soldiers had years of pay saved up, that huge amounts of war bonds had been bought, which would now be redeemed, and that the technological advances made in wartime in regard to military equipment could now be rapidly turned to peacetime products. (Woytinsky calculated that there was $250 billion waiting to be spent.)⁶⁹ In practice, once the world settled down, the situation would meet no one’s expectations: there was no return to the high unemployment levels of the 1930s, though in America unemployment was never as low as it had been in wartime. Instead, in the United States, it fluctuated between 4 and 7 percent – ‘high enough to be disturbing, but not high enough to alarm the prosperous majority.’⁷⁰ This split- level society puzzled economists for years, not least because it had not been predicted by Keynes.

In America, although the Keynesian economists of Harvard and Tufts wanted to promote a more equal society after the war, the main problem was not poverty as such, for the country was enjoying more or less full employment. No, in America, the war merely highlighted the United States’ traditional problem when it came to equality: race. Many blacks fought in Europe and the Pacific, and if they were expected to risk their lives equally with whites, why shouldn’t they enjoy equality afterward?

The document that would have as profound an impact on American society as Beveridge’s did on Britain was released just as the war was turning firmly in the Allies’ favour, in January 1944. It was a massive work, six years in preparation, entitled An American Dilemma: The Negro Problem and Modern Democracy.⁷¹ The report’s author, Gunnar Myrdal (1898–1987), was a Swede, and he had been chosen in 1937 by Frederick Keppel, president of the Carnegie Foundation, who paid for the study, because Sweden was assumed to have no tradition of imperialism. The report comprised 1,000 pages, 250 pages of notes, and ten appendices. Unlike Beveridge’s one-man band, Myrdal had many assistants from Chicago, Howard, Yale, Fisk, Columbia, and other universities, and in his preface he listed scores of distinguished thinkers he had consulted, among others: Ruth Benedict, Franz Boas, Otto Klineberg, Robert Linton, Ashley Montagu, Robert Park, Edward Shils.⁷²

Since the 1920s of Lothrop Stoddard and Madison Grant, the world of ‘racial science’ and eugenics had shifted predominantly to Europe with the Nazi rise to power in Germany and the campaigns of Trofim Lysenko in Soviet Russia. Britain and America had seen a revulsion against the simpleminded and easy truths of earlier authors, and doubts were even being thrown over race as a scientific concept. In 1939, in The Negro Family in the United States, E. Franklin Frazier, professor of sociology at Howard University, who had started his researches in Chicago in the early 1930s, chronicled the general disorganisation of the Negro family.⁷³ He argued that this went all the way back to slavery, when many couples had been separated at the whim of their owners, and to emancipation, which introduced sudden change, further destroying stability. The drift to the towns hadn’t helped, he said, because it had contributed to the stereotype of the Negro as ‘feckless, promiscuous, prone to crime and delinquency.’ Frazier admitted that there was some truth to these stereotypes but disputed the causes.

Myrdal went much further than Frazier. While accepting that America had certain institutions that were an advance on those in Europe, that it was a more rational and optimistic country, he nonetheless concluded that even these advanced institutions were too weak to cope with the special set of circumstances that prevailed in the United States. The dilemma, he said, was entirely the responsibility of the whites.⁷⁴ The American Negro’s lifestyle, every aspect of his being, was conditioned, a secondary reaction to the white world, the most important result of which was that blacks had been isolated from the law and the various institutions of the Republic, including in particular politics.⁷⁵

Myrdal’s solution was every bit as contentious as his analysis. Congress, he judged, was unwilling and/or incapable of righting these wrongs.⁷⁶ Something more was needed, and that ‘something,’ he felt, could be provided only by the courts. These, he said, should be used, and seen to be used, as a way to enforce legislation that had been on the statute books for years, designed to improve the condition of blacks, and to bring home to whites that the times were changing. Like Beveridge and Mannheim, Myrdal realised that after the war there would be no going back. And so the neutral Swede told America – just as it was rescuing democracy from dictatorship across the world – that at home it was unremittingly racist. It was not a popular verdict, at least among whites. Myrdal’s conclusions were even described as ‘sinister.’⁷⁷ On the other hand, in the long run there were two significant reactions to Myrdal’s thesis. One was the use of the courts in exactly the way that he called for, culminating in what Ivan Hannaford described as ‘the most important single Supreme Court decision in American history,’ Brown v. Board of Education of Topeka (1954) in which the Court unanimously ruled that segregated schools violated the Fourteenth Amendment guaranteeing equal protection under the law, and were thus unconstitutional. This played a vital part in the civil rights movement of the 1950s and 1960s.

The other reaction to Myrdal was more personal. It was expressed first by Ralph Ellison, the black musician and novelist, who wrote a review of An American Dilemma that contained these words: ‘It does not occur to Myrdal that many of the [Negro/black] cultural manifestations which he considers merely reflective might also embody a rejection of what he considers “high values.” ‘⁷⁸ In some respects, that rejection of ‘high values’ (and not only by blacks) was the most important intellectual issue of the second half of the twentieth century.