The Good Old Days

With the British ruling elites tearing themselves apart over foreign policy these days (regarding the European Union), I thought I would take a brief look back into happier times. Here are some choice quotations from major politicians and newspapers that stressed how much Britain’s position in the world produced big benefits.

First, Winston Churchill in April 1929. He is talking in Parliament about the City’s revenues, and its role as a global broker, as well as the big returns on British foreign investments:

“The income which we derive each year from commissions and services rendered to foreign countries is over £65,000,000, and, in addition, we have a steady revenue from foreign investments of close on £300,000,000 a year, 90 per cent of which is expressed in sterling. Upon this great influx there is levied, as a rule, the highest rates of taxation. In this way we are helped to maintain our social services at a level incomparably higher than that of any European country, or indeed of any country.”

Note that both kinds of revenue do not all come from the colonies, at least not directly, and most will have derived from transactions with and investments in other major countries. Nevertheless, such revenues were important for social services even before the post-1945 ‘welfare state’. I give an updated, contemporary assessment of these in my book, The City.

After 1945, the British Empire was somewhat diminished, as was its investment and dealing revenues. However, these remained important. As Ernest Bevin, the Labour Foreign Secretary, put it to the House of Commons in February 1946, stressing the importance of imperial stability as well as the revenues coming from the Empire:

“When I say I am not prepared to sacrifice the British Empire, what do I mean? I know that if the British Empire fell, the greatest collection of free nations would go into the limbo of the past, and it would be a disaster. I know, further, it would mean that the standard of life of our constituents would fall considerably.”

This concern about the ‘standard of life’ of British constituents was a key point for Labour’s social imperialism, and tallied with the views of the arch imperialist Churchill.

The importance of the Empire was also stressed in major UK newspapers at the time, for example in noting how US dollar-based earnings from the exports of commodities from Malaya (later Malaysia) were important for keeping Britain’s Sterling Area financial system in place:

“It is Malaya’s dollar earnings which keep the sterling area afloat.” (Manchester Guardian, 13 December 1950)

and

“Malaya is Britain’s biggest source of American dollars.” (The Times, 9 June 1950)

Malaya, of course, did not have access to these dollars, which were deposited in London, and from which, in general, only the UK and the ‘white’ dominions could draw. Malaya saw its funds translated into (depreciating) sterling and had to use this sterling to buy British goods.

Professor W Arthur Lewis summed it up in a Financial Times article, ‘The Colonies and Sterling’ in 1952:

“Many Colonies must sell their produce to Britain at prices below the world price, and, through exchange control, must buy from Britain at prices above the world price, or pay an ever-increasing sum into the Bank of England, because Britain will not deliver goods in return for what she receives.

“Britain talks of colonial development, but on the contrary, it is African and Malayan peasants who are putting capital into Britain. … The British colonial system has become a major means of economic exploitation. …

“The Colonies are exporting far more than they import, and are building up large balances. They cannot get all the imports they need, especially of capital goods, and their development programmes are in consequence retarded. They are in effect paying Britain for goods which she does not deliver.”[1]

His only error in this was to say that the colonial system ‘has become’ a major means of exploitation, whereas it had always been one. Other examples of Britain’s colonial exploitation post-1945 are given in my articles on Labour’s colonial policy and on how the welfare state was funded in 1945.

Tony Norfield, 18 July 2018

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[1] Cited in R Palme Dutt, The Crisis of Britain and the British Empire, Lawrence & Wishart, 1953. The Manchester Guardian and Times quotations are also from Dutt. The remainder are from Hansard.

Origins of the UK Welfare State

The golden age of the British Labour Party was the 1945-51 Labour government. So it is worth noting some little known aspects of its policies to cast some light on the political background to the modern day resurgence of ‘Corbynism’. Highlights of this administration in British popular consciousness are the introduction of the welfare state, establishing the NHS and a pension system. While there were economic problems in spending on welfare, since the UK was essentially bankrupt in 1945, the Labour government rose to the challenge. How did they do this? By using British imperial power!

One of the 1945-51 Labour government’s priorities was to maintain Britain’s imperial role. For good measure, this also included re-establishing French and Dutch colonial power in Asia, as a sign that the status quo ante could be revived in Burma, Malaya, Vietnam, Indonesia, etc. Using colonial Indian troops and Japanese troops to bring this about highlighted British politicians’ pragmatism and flair. Who else would have come up with the idea of defeating anti-colonial nationalists with soldiers both from a colony and from a recently defeated imperialist power? A stroke of imperial genius![1]

Although these events might seem to be an unfortunate foreign policy to liberal souls, having nothing to do with progressive social policies at home, in fact the two things were closely linked. Just look at how the new welfare state was financed.

Britain’s finances in 1945 depended upon foreign loans in 1945 amounting to £2,100m, or a massive 20% of GDP (note that £1 used to be worth something in those days). Of this sum, £1,100m was from the US. It was not exactly enthusiastic about Labour’s spending plans, but it was happy that the Brits were playing a necessary role worldwide in suppressing ‘communism’. For example, apart from the colonial efforts, think of Britain’s role in the defeat of Greek radicals and establishing a military dictatorship after 1945. So, history will record that the US played a role in funding the setting up of the UK welfare state! Another £250m was from Canada, which was both politically close to the UK and had done well out of the Second World War. Significantly, Britain’s colonies ‘lent’ £750m through the financial mechanism of the Sterling Area that gave them no choice but to do so. These were borrowings by Britain whose international value was reduced when sterling’s exchange rate against the US dollar fell in later years.[2]

After 1945, the welfare system quickly became unaffordable on the basis of Britain’s economy, especially when Labour increased defence spending during the Korean War. Apart from charges for prescriptions of medicines, something that led to ructions in Labour’s ranks and the resignation from government of Labour saint Aneurin Bevan in 1951, it also led to several years of rationing goods even more stringently than during the war. Above all, it prompted ever more nefarious plans to milk the colonies for economic resources in addition to the previous Sterling Area financial rip offs. Details on the former are set out in my article on this blog, 'Labour's Colonial Policy', 7 December 2014.

That is some of the historical background to typical Labour ‘progressive, alternative’ policies. It is based on using Britain’s privileged position in the world economy to deliver benefits to the British populace, completely consistent with Britain’s imperial role and nothing that could be described as a socialist view of policy in the world economy, far less anything that is anti-capitalist.

Jeremy Corbyn may know the history, in which case being a longstanding, proud member of the Labour Party raises a few questions. If he does not know the history, then it would reflect the more widespread arrogance, all appearances to the contrary in his case, of assuming that the rest of the world owes the Brits a living.

Tony Norfield, 8 October 2015

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[1] I am not making this up. See Christopher Bayley and Tim Harper’s book, Forgotten Wars: the End of Britain’s Asian Empire, Allen Lane, London, 2007.

[2] There are few studies of these embarrassing (for Labour loyalists) events. One accessible source, written from a pro-capitalist market, although strikingly critical, perspective, is Edmund Dell, A Strange Eventful History: Democratic Socialism in Britain, Harper Collins, London, 1999, especially Chapter 7.