Read “Joint statement of intent on productivity, prices and incomes”, which I have found on page 316 of Samuel Brittan’s book “Steering the economy”. It is the most extraordinary thing I’ve read this week. Signed in December 1964 by George Brown, Jim Callaghan, the TUC, the Chambers of Commerce, the Federation of British Industries and Association of British Manufacturers, it is the acme of a commanding-heights bargain:
- For the Government, there was
- – A promise to prepare a national plan, to provide for high investment, skills, modernisation, higher exports, and as high an expansion of real incomes as possible
- – A promise that they will focus hard on increasing productivity, facility labour mobility, and improve earnings related benefits
- – a promise “to keep a continuous watch on the general movement of prices and of money incomes of all kinds … they will also use their fiscal power or other appropriate means to correct any excessive growth in aggregate profits”
The Management and Unions agreed to keep prices and wages under control, to “attack obstacles to efficiency”, to raise standards at all levels.
They end with a rousing paragraph expressing their joint confidence that this will work and produce faster incomes and prosperity for all.
Compared to what we consider interference nowadays, it is very strong stuff. When a politician dares to express a view on setting of the Minimum wage, it is a gross invasion of due process. Sensible attempts to plan longer term conditions in various big industries are now labelled “picking winners”. Having any sort of view on the question of who owns a massive international pharmaceutical company is highly radical. As for the idea that the government should regulate the level of profits in the country – how bizarre is that?
The old school industrial policy failed, badly. For me the biggest structural weakness was naivety about how incomes and wages are settled, given that the overall envelope of money spending is mostly influenced by the Bank. Perhaps they took it as read. At the time, the strategy and the existence of its sponsor, the new Department for Economic Affairs, was smashed to bits on the hard rocks of Treasury hostility and balance of payments constraints. It was a sad, failed experiment.
But whether we had to swing quite as far away from interventionism as we have is another matter.