David Lloyd George – the great Liberal Chancellor and Prime Minister of the early 20th Century – is often credited as the ‘founder of the welfare state’. This is entirely fair: he and the Liberal Reformers created the state pension, a scheme for national insurance against sickness and unemployment, and new legal protections for workers. Meanwhile, his controversial People’s Budget established the foundational principle that the wealthiest must fund public services, beginning a constitutional showdown which saw the House of Commons triumph over the conservative House of Lords.
However, the prevalent view that Lloyd George was simply a ‘first-step’ on the inexorable path to Attlee’s post-war government undermines the profound, independent significance of his liberal reforms. This was not just Labour-lite: the Liberal Reformers had a distinct philosophy, and their policies presented a real alternative both to socialist nationalisation and conservative inaction.
Liberal Democrats should reclaim the record of past Liberal governments on social justice – and challenge the narrative which paints Labour as the sole progenitor of public services.
A People’s Budget
Introducing his ‘People’s Budget’ to the House of Commons, Lloyd George addressed the House:
There are hundreds of thousands of men, women, and children in this country now enduring hardships for which the sternest judge would not hold them responsible …
Is it fair, is it just, is it humane, is it honourable, is it safe to subject such a multitude of our poor fellow countrymen and countrywomen to continued endurance of these miseries?…
This is a War Budget. It is for raising money to wage implacable warfare against poverty and squalidness.
In so committing himself to the cause of social justice, Lloyd George reinvented liberalism for a 20th Century politics, characterised by escalating dissatisfaction with rampant, abject poverty. Cloaking himself in the rhetoric of redistribution, the Chancellor grasps the bellicose mood of the age and marshals it not against some European foe, but against the ‘5 giants’ later identified by William Beveridge: want, squalor, ignorance, idleness, and disease.
In less than a decade or so, the Liberals affected a substantial reduction in elderly need for ‘outdoor relief’, covered at least fourteen million vulnerable workers with health insurance, and put 14 million children on regular free school meals. Crucially, they achieved all this with a far lower share of national income than Labour would employ to finance Attlee’s reforms after World War Two.
Two approaches to public services
The Liberal Reformers therefore achieved great social change, but crucially they did so without forsaking their liberal philosophy, a philosophy which respected personal economic autonomy. Take National Insurance for example, the standout liberal policy of this period. Workers were allowed to insure with any ‘approved society’ (including trade unions), giving individuals broad choice over their insurance and coverage. Moreover, whilst the scheme was supported by general taxation, it was primarily contributory – functioning like a private insurance scheme with government support for those in need. In many ways, the initial National Insurance scheme was something of a long-forgotten precursor to the social insurance systems which now work so well in European countries.
Compare this to the approach to healthcare services adopted by Labour’s postwar government. We must never forget that all parties had committed to a comprehensive national health service, indeed it was the Liberal William Beveridge who so famously proposed that very idea. But there were two paths to achieve that common end: an expansion of the preexisting insurance system into a comprehensive framework – “the road followed by nearly all other Western societies” – and a novel model “consistent with the collectivist approach to the provision of healthcare”. Labour adopted the latter approach, breaking with a 1944 compromise White Paper supported by the Ministry of Health and the recommendations implied in Beveridge’s report. So set was Nye Bevan on the full centralisation of the healthcare system that he faced opposition from his own Cabinet colleagues, with one criticising his determination to turn the entire national healthcare apparatus into “mere creatures of the ministry of health”.
Social Classical Liberalism
By 1945, the Liberal welfare reforms had proven insufficient and the case for universal coverage was clear. But the lasting achievement of those Liberal governments in the early 20th Century was defining a distinct liberal philosophy which sought equality without state domination, liberty without starveling poverty. Lloyd George was a passionate advocate of free trade, a man staunchly opposed to nationalisation, and he knew “that you must make wealth in the country before you can distribute it”. But he was also imbued with a vigorous spirit for social justice.
It is often claimed that economic freedom and social justice are conflicting ideals; the Liberal Reformers showed that this was not so.
* Will Lawson is a Liberal Democrat party member and a former two-term president of the Oxford University Liberal Democrats.
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44 Comments
Thank you for a most important and timely article!
It makes a compelling case for the Party to return to its historically proven, best for Country and Party, guiding root policy which is that of Social Liberalism.
The evident failure of the 2010 policy of Austerity/Neoliberalism is ever more obvious with a sluggish to basket case economy and ever spreading and deepening poverty.
Now is the time to promote Social Liberalism!
Such would also make the party obviously and attractively different from the S. T. P. (Single Transferable Party)
comprising the Neoliberal addicted parties a.k.a. the Labour and Conservative parties.
P. S. Increasing poverty always weakens the nation’s economy although it makes the very wealthy even wealthier.
Hi Will,
Thank you for your article. It makes a lot of very sound points. The one thing I would add is that every aspect of social advancement has to be built on the hard work and achievements of past generations. However, as times progress (and hopefully continue to do so) weaknesses and other areas for improvement can be found. Those of different political persuasions portray these as failures by those past figures and demean them as inadequate, deliberately ignoring how hard it actually is to make progress (as opposed to change which any fool can do, to tie in with another party’s slogan as the answer to everything).
We should indeed be proud of what past generations of Liberal Democrats (both liberals and social democrats) have achieved and proclaim it wherever we can. They all had their strengths and their flaws, but they actually moved things in a positive direction, and we need to proclaim it out loud wherever we can.
The first step is always the hardest on any new path, however small it may seem to today’s eyes and our predecessors took many of them.
All the best,
David
P.S. As an aside, challenging the narrative which paints Labour as the sole progenitor of public services is probably just a bit hifalutn even for most Lib Dem policy motions. 🙂
Sorry, Will, whilst I very much agree with the drift of your article, Lloyd George did not create the state pension. Credit for that must go to his predecessor as Chancellor, Herbert Asquith.
The state pension was part of the 1908 Budget (not the so called People’s budget of 1909). It was prepared and drafted by Asquith (as Chancellor) shortly before the death of his predecessor as PM, Sir Henry Campbell-Bannerman. LLG was appointed by Asquith to be Chancellor in April, 1908, but it was Asquith himself (by now PM) who actually drafted, spoke to and took the 1908 Budget through the Commons.
It’s a matter of debate how much Asquith was ‘a New Liberal’, but credit must be given to him for the state pension…………… there’s actually a recording of Asquith speaking to the 1908 Budget on You Tube for those who wish to hear it.
@Steve Trevethan
“Increasing poverty always weakens the nation’s economy…”
Not necessarily – it depends on whether there has been an actual decline in living standards of those defined as being ‘in poverty’, or if the definition of poverty has just been changed to include a larger proportion of the population.
To explain, the UK currently uses two definitions of poverty and both of them define poverty relative to median incomes rather than to any sense of ‘lacking basics for life’. One measure, called relative poverty, defines families as poor if they have an income of 60% of median incomes or less. The other measure, called absolute poverty, uses the 60% of median income standard for 2011/12 and then adjusts for inflation. Therefore both these measures of poverty actually measure the degree of unequal distributions of income, rather than the degree of ‘lacking’ or ‘hardship’.
To illustrate the nonsense of this approach, if inflation were 2% and the incomes of the poorest half of the population increased by 5%, we would all conclude that this section of the population we’re doing better and would be able to afford a higher standard of living. However, if we then discovered than median incomes had actually increased by 10%, the conclusion would be that poverty was increasing and absolute increasing particularly.
So, is our goal to improve the living standards of the poorest or to reduce income inequality – these two objectives are not one and the same.
“So, is our goal to improve the living standards of the poorest or to reduce income inequality”?
Right now I think there should be two objectives:
1 resist and defeat the authoritarianism rising across the world; and
2 stabilise the environment by achieving net zero and maintaining biodiversity.
I doubt these will obtained without appeals to social justice on the one hand and without properly managed liberal capitalism on the other – but that makes liberal democrats well qualified to develop appealing solutions.
“It makes a compelling case for the Party to return to its historically proven, best for Country and Party, guiding root policy which is that of Social Liberalism.”
I think this needs a bit more analysis given that Lloyd George split the party and by the end of the 1920s we had lost our status as one of the natural parties of government. I think that now the historic failure of democratic socialism and communism is plain for all to see, there is a real opportunity for a real liberal party again, combining economic AND social liberalism – as Lloyd George plainly did.
It’s worth recalling at this time of international instability, that Liberals (Lloyd George and Churchill – yes we should reclaim him) ) were central to the British effort in both WW1 and WW2.
A Joseph Rowntree Foundation (JRF) compressed definition of poverty is:
“When a person’s resources (mainly their material resources) are not enough to meet their minimum needs (including social participation).”
https://www.jrf.org.uk/what-is-poverty
Here are 12 common root causes of poverty:
https://www.humanrightscareers.com/issues/root-causes-of-poverty/
All, with the partial exception of 4 can, could and should be managed to drastically reduce/eliminate poverty when the will is there.
4 refers to natural disasters which can be seriously mitigated by decent governance/government.infrastructures.
The remaining 11.5 can, could and should be within the management/control of government.
No less of validity is that the presence of the 11.5 common root causes of poverty also result in those societies which have them, being less effective and efficient than they would be without them.
No less serious and valid is that the children living and growing up in root poverty are being set up, very largely, to being less healthy, skillful and dynamic than they would have been without the multiple, cumulative disadvantages resulting from early years poverty, as graphically indicated for children aged 4 and under in the JRF Report above.
I like the core thrust of this post, but a crucial first step – partly addressed here – is the creation of a liberal concept of social justice. I have some academic and practical expertise around this, and one of the problems is that everyone uses the term social justice without necessarily interrogating the meaning. We’ve had the IDS version, the Blair version, the Corbyn version – none of them appeal to me in their entirety. If we can decide what social justice looks like for us, and on what we are basing it, we can from there decide what practical approaches are needed (in policy, strategy and campaigning terms) to get there.
Sorry Will, my comment reads as mor dour than it was meant. I think this is a cracking post, and was aiming to develop upon it 😊
“a crucial first step – partly addressed here – is the creation of a liberal concept of social justice”
May I suggest something along the lines of: “balancing the fundamental values of liberty, equality and community, while ensuring no-one is enslaved by poverty, ignorance or conformity while acknowledging everyone’s right to freedom of conscience and their right to develop their talents to the full. “
That’s a pretty healthy start 🙂
Tristan Ward,
While Lloyd George may have combined economic and social liberalism before 1916, he had given up on economic liberalism by the time of the 1929 general election. I hope that we as a party will again reject economic liberalism and the increasing in inequality it brings.
Jack,
The party has a clear ambition with regard to social justice – ‘ending deep poverty within a decade’.
Tristan Ward Got in one, preamble of the constitution nicely defines social justice , we do shout it loud enough given our roots .
@Michael BG
The attempt in the late 1920s to ape the labour party’s socialism by suppressing liberal economics was unsuccessful because the voters preferred “the real thing alternatively ran to tje Tories out of fear of it. After all, liberal party without liberal economics wouldn’t be a liberal party at all. Free trade and gree markets, properly regulated/managed are fundamental to modern liberalism.
Besides, I suspect giving up in liberal economics would just hand the political debate over to Farage and the Tories.
Beso
Tristan Ward,
Economic liberalism is what the Labour Party and the National Government implemented from 1929 to 1939. It ended in 1945 with a new consensus to implement Keynesian economics. The main tenets of economic liberalism are the government not intervening in the economy, balanced government budgets, low taxes, reduced government spending and minimising government debt. Another name for it is neoliberalism. Indeed, properly regulated/managed markets not free markets are fundamental to modern British liberalism. Economic liberalism is the economics of the Tories and Farage.
@Michael: I don’t think it’s correct to say that properly regulated/managed markets are not free. Practically no-one (even in the Tories) would dispute the need for some regulation, for example to ensure companies don’t misrepresent products, to maintain safety standards, to keep consistent standards and measurements etc. I don’t think traditional classical liberals of the time would have disputed that either. The point of economic liberalism is more that, you don’t intervene in the markets unless the market is failing in some way/there’s a strong specific benefit to some specific intervention.
I also would say low taxes are misunderstood: I’d see myself as an economic liberal but I have no objection to paying higher taxes where necessary provided I can see that the money is being spent efficiently and put to good use.
It feels to me a bit like you’re taking the most extreme kind of economic liberalism as a way of dissing all economic liberalism. Remember, economic liberalism did give us tremendous growth and improvement in living standards through the 19th and early 20th centuries. And for all your apparent disapproval of balanced budgets, that is what the Government actually achieved through much of the 1950s and 60s, with debt rapidly declining as a % of GDP.
Edit: Should’ve said, imply that properly regulated/managed markets are not free, since you implied that without saying it directly.
@Michael BG.
I agree with Simon R. I don’t think I could have put it better.
Economics is an odd subject.
Only a few people really understand it, and most of them are wrong.
It is a subject that appears to over rely a lot on superheros, and many of them are misunderstood.
Adam Smith is considered to be a Liberal and a champion of the free market. However whether his modern representatives; the Adam Smith Institute (ASI) really have the correct understanding of his opinions is hotly disputed. Prior to the 20th century the main function of the state was to raise taxes to fund wars, so of course progressives back then were highly critical of the state.
In more recent times the Tory prime minister Margaret Thatcher was described as a Victorian Liberal but there was a key difference between her and the Liberal party at the time. Thatcher simply wanted to reduce the size of the state as an end in itself. The Liberal party was (and is) critical of the state as well, but then, as now, argued that it should be reformed to be more decentralised and democratic, a very different set of priorities.
So when we talk about economic liberalism I would like to point out that this should not in any way be confused with Thatcherism. We are not dogmatically wedded to privatisation, we might in some cases support nationalisation. But what we really support is industrial democracy, worker cooperatives, local government ownership. In short bringing power closer to people.
I fear that “economic liberalism” and “economic freedom” have become tainted terms and personally I never use them.
@GeoffreyPayne. The real problem with economics is that the dominant faction are orthodox economists, who believe there is only one correct solution to any economic problem. Thus the current government’s problems as the treasury is being run by arguably one of the most orthodox economists in modern times.
Heterodox economists, of which I am one, recognise that there may be a number of different solutions to any economic problem, and that may change depending on which outcome(s) you might wish to attain. So, there are always choices to be made and the size of the so-called government deficit is only one of them.
As a party we need to abandon traditional orthodox economics and seek economic solutions that are as close as possible to our Liberal values.
@ Simon R, “Remember, economic liberalism did give us tremendous growth and improvement in living standards through the 19th and early 20th centuries”.
For some people (the newly emerging middle class) that has some truth…… but nevertheless, Simon, it is what is known as the Whig version of history. For a great many people poverty and exploitation was still the norm..
I suggest Simon takes a look at pages 145/147 of Chris Cook’s, Britain in the 19th Century on occupations and social structure, Britain in the Nineteenth Century, 1815-1914 ISBN 0-415-35970-8.
I
Simon R,
I didn’t write that free markets are part of economic liberalism. I stated that properly regulated/managed markets not free markets are fundamental to modern British liberalism. We shouldn’t use the term free markets if we mean properly regulated/managed markets.
I can’t image social liberals wanting to intervene in a market if they didn’t believe there would be some benefit.
National debt declining as a percentage of GDP didn’t happen because the national debt was paid off in huge amounts, it declined because the government deficit was a lower percentage of GDP than economic growth.
It is good to know that you identify as an economic liberal, but I don’t believe economic liberalism can provide the liberal society I would like to see where no-one is held back by poverty, ignorance, conformity or homelessness.
Geoffrey Payne,
We can’t redefine what is meant by economic liberalism today. It does not mean any economic policy advocated by a liberal party. The tenets I set out were not ones I made up, but I found as being included in economic liberalism.
Mick Taylor,
I hope that the party’s new economics working group will reject that we can only follow the orthodoxy in economics.
@ Simon,
“And for all your apparent disapproval of balanced budgets, that is what the Government actually achieved through much of the 1950s and 60s, with debt rapidly declining as a % of GDP.”
It’s a misunderstanding of heterodox economics to say that anyone disapproves of balanced budgets per se. During the 50s and 60s there was a significant effort to maintain a balance in trade. The quarterly trade figures were always a major news item as many of us might remember.
No longer. It is mistake to try to balance the government’s budget at the same time as money is leaving the country to pay our net import bill. The current and capital accounts do balance. Otherwise the currency shifts in value. All is returned via the capital account. This explains why many of our capital assets are foreign owned, and why the government runs a deficit or is in debt. The purchase of govt securities creates the debt as money is recycled back into the economy.
Unless the trade issue is addressed directly this is how it will be.
It isn’t the desire of governments to borrow that creates the debt but rather the desire of others to lend us money they don’t want to spend.
@Mick Taylor
“As a party we need to abandon traditional orthodox economics and seek economic solutions that are as close as possible to our Liberal values”
I’m all in favour of looking at new approaches to economics, but they had better explain the world better than the orthodoxy and deliver useful and practical solutions to the problems the world throws at us. Right now and so far as I can see economic orthodoxy best describes the world (*) and so we are stuck with it.
(*) I don’t claim to have any special economic expertise but I would like to see natural capital, social capital and intellectual capital integrated into orthodox ecomonics to supplement financial capital,
@David Raw
@ Simon R, “Remember, economic liberalism did give us tremendous growth and improvement in living standards through the 19th and early 20th centuries”.
For some people (the newly emerging middle class) that has some truth…… but nevertheless, Simon, it is what is known as the Whig version of history”
I’d go further – liberal economics (ie properly regulated and managed free markets and free trade) has delivered increasing prosperity across the world up to (say) 2010 taking millions out of poverty and helped deliver increasing freedoms. And nobody can say the working class is not materially better off in the UK now than it was in the 1920s.
David – have you read either or both of “the End of History and the Last Man” and/or “Enlightenment Now”? If so what do you think of them?
Tristan Ward. You’re wasting your time trying to change orthodox economics. Orthodox economists try to ensure heterodox economists never get jobs in universities or any other places where they might have an impact. They are utterly dogmatic in their insistence that they are right and anyone else is wrong.
Exactly why we’re in the mess we are now.
MichaelBG. I wouldn’t hold up much hope about the working group. As a heterodox economist I was rejected when I applied to join it.
@ Tristan Ward Never got round to it, Tristan………………. though tend to agree with Eliane Glaser’s review in the Guardian back in 2014, that,” capitalism pretends to love free markets; in reality, it rigs markets for elites”.
Twas ever thus, and I’m sure the Donald would agree and want to be part of that process. His Scottish golf courses illustrate the point.
What I would like to see by the Lib Dems is a genuine revival of industrial participation and democracy as advocated by Grimond in the early sixties – and before that practised by Theodore Taylor in his Birstall textile factory.
In my somewhat jaundiced view, modern politicians (when they’re not falling in the water or bungee jumping) tend to put on a hard hat and a dayglo jacket to pretend they’re interested and knowledgeable about industry…….. when they’re more interested in tabloid headlines and thirty second sound bites.
@ Mick Taylor,
” They (orthodox economists) are utterly dogmatic in their insistence that they are right and anyone else is wrong. Exactly why we’re in the mess we are now.”
Exactly right.
The frustrating thing is that they understand perfectly well how the economy really works when a war breaks out! No-one ever suggests surrendering because there’s no money in the kitty to fund it.
@Martin: That’s a poor analogy: If there’s a life-or-death emergency (such as a war) then you are going to act in a different way from normal life. If you’re a sensible person then you probably take care to (usually) live within your means. But I’d bet if your living room ceiling suddenly fell in, you’d borrow whatever you need to get it fixed, and worry about how to pay it back later. That doesn’t mean it’s a good idea to borrow like that all the time!
@Mick: That’s a pretty serious allegation against mainstream academic economists. Do you have any evidence for it?
Even if it’s true, that begs the question, why. Is it because orthodox economists en masse don’t like to be challenged? (Seems unlikely but I admit it’s possible – groupthink does happen, even in academic circles), or it is because heterodox economists are actually proposing stuff that they haven’t justified and presented evidence for in a way that follows good academic standards? I don’t have enough expertise to know either way, but the impression I have from a lot of reading and thinking is that a lot of heterodox economics seems to be based at least in part on wishing the World was different from how it actually is, and thereby coming up with solutions that look emotionally appealing but which rational analysis shows will not work. If you want to convince me that I’m mistaken and that heterodox economics is actually correct, then the way to do that is by careful, reasoned, logical, analysis (angry diatribe is never going to work, at least on me).
“No-one ever suggests surrendering because there’s no money in the kitty to fund it.”
I’m not sure this can be right. Economic collapse (ie when the money to runs out or when you can’t beg or borrow any more) ends a war because you can’t afford to build or buy the weapons necessary to fight it.
Hence all the fuss about funding Ukraine – they will lose if their allies don’t provide cash and/or weapons.
I should say that the previous comment was mine. The auto-filler missed out Peter!
@ Simon R
Your comment rather assumes that the Government operates like you and I, except perhaps on a much larger scale.
@ Tristan Ward,
You might want to take a look at Keynes’ short book “How to Pay for the war”. This was published in 1940 when many were wondering where the money was going to come from to pursue the war effort. It was then at around 139% of GDP and so considerably higher that it is now. Keynes shortly afterwards made the comment:
“Let us not submit to the vile doctrine of the nineteenth century that every enterprise must justify itself in pounds, shillings and pence of cash income … Why should we not add in every substantial city the dignity of an ancient university or a European capital … an ample theatre, a concert hall, a dance hall, a gallery, cafes, and so forth. Assuredly we can afford this and so much more. Anything we can actually do, we can afford.”
So what was he getting at? In both his book and in this comment he was making the point that we are only constrained by the resources which are available to us.
So if all economists can understand this in wartime there is no reason why they can’t now.
Keynes turned out to be quite right. The post war generation didn’t suffer by having to repay debts. They might have suffered because they lost a father but this is a different matter.
I should have said “the National Debt was around 139% of GDP……”
Tristan Ward and Simon R
Are you aware that the assumptions for micro economics and free markets are not true? I have heard Bobby Dean saying that the assumption that people always act rationally is incorrect.
Tristan Ward,
Are you aware that there has not been free world trade for centuries? The UK had a policy of free trade from sometime in the nineteenth century until about 1932, but I remember my history lecturer talking about tariffs being imposed by Germany and the USA in the 1870s.
It was Keynesian economics not liberal economics that decreased inequalities from 1945 until about 1980 and I believe in some foreign countries since 1980 for example India.
Mick Taylor,
I didn’t get accepted for the economics working group either.
@Michael: If you mean that the basic theory of free markets is based on assumptions that in the real World are at best only approximately true (such as perfect competition, no barriers to entry to the market), then – yes, I am well aware of that. And it’s correct that people do not always act rationally.
But lots of theories – particularly in science – are only approximately true: That does not invalidate them, as long as you are careful not to use them in situations when they completely break down. And the theory of free markets and supply and demand has proven itself as a good description of how markets (usually) generate wealth more efficiently than any other system yet devised. The overwhelming weight of evidence is that without (approximately) free markets, it becomes impossible to achieve the growth that is needed to give everyone a good standard of living (as lots of left wing Governments around the World have found out the hard way)
Of course, you also need some kind of welfare and tax system to ensure that inequalities don’t become too great and everyone has the opportunity to build a decent life: I don’t see anyone here denying that. (By the way, it’s the tax and benefits system that reduces inequalities, not Keynesian economics)
@ Simon R,
“By the way, it’s the tax and benefits system that reduces inequalities, not Keynesian economics”
It’s all these things including the application of sensible macroeconomic policies. I know this from personal experience. Child benefits have helped of course but so did the fact that I was, unlike previous generations, lucky enough to never experience any periods of unemployment or even underemployment.
@ All,
One way I could perhaps be more rational is to support a more successful football team 🙂 However, I’m stuck with the one I’ve started with as a child!
There’s just as much emotion as rationality in many of our choices. I often think the Francophilia of the relatively well educated middle classes is the major reason for their support of the EU rather than any considered logical choice.
I don’t see how this affects the freedom, or otherwise, of markets though!
Simon R,
The assumptions regarding free markets and micro economics, to quote you, are ‘based at least in part on wishing the World was different from how it actually is’. However, the theory of micro economics is a useful tool, so long as you remember it is a tool and not how most markets work in practice.
Monetary economics increase inequalities, however inequalities in the UK reduced the most 1945-79 when Keynesian economics were pursued. This happened because there was full employment and wages couldn’t be held down making the pay differentials between the lowest earners and top earners in a company as large as they are today. The tax and benefit system can be used to reduce inequalities but the benefits system in the UK makes little difference as the basic rates are not adequate. Hence the rise of the use of food banks. It could make a lot more difference.
@Mihale BG
Are you aware that the assumptions for micro economics and free markets are not true? I
Obviously. But – “All models are wrong. Some are useful.”
The current model of Liberal Economics- which is generally agreed means free markets and free trade properly regulated and management (and certainly includes where appropriate Keynesian demand management properly carried out) is a really useful model open to improvement as it no doubt is.
It’s also entirely possible that an economic/political/social revolution would produce a totally different model that is even more useful in delivering useful solutions to the problem of promoting liberty, equality and community while ensuring no one is enslaved by reason of poverty, ignorance or conformity. While we wait we have to stick with what we have. I think there are cogent theoretical reasons for believing that there is no such new model out there.
@Peter Martin
“Anything we can actually do, we can afford.”
How would this work in Ukraine if no other country actually delivers arms or money any more and the Russians keep going?
“How to Pay for the War (published in 1940 before the US joined) Keynes argued that the war effort should be largely financed by higher taxation and especially by compulsory saving (essentially workers lending money to the government), rather than deficit spending, to avoid inflation so I’m not sure exactly what your point is in referring to this. The money to pay troops and make/buy weapons had to come from somewhere. In the event the UK war effort 1939-45 was largely funded by sale of assets, borrowing, increases in tax and lend-lease from the US and Canada.
@ Tristan,
Money starts off as an IOU of government. The purpose of taxation is to divert resources from the private to the public sector without creating inflation. Keynes meant that we had to divert more resources towards the public sector to support the war effort.
So his phrase “Anything we can actually do, we can afford ” didn’t mean without tax rises. Many of those who use this quote with approval don’t seem to appreciate this, though!
A saving scheme increases the Govt’s deficit and debts. If you buy up £100 of govt bonds it’s a loan to government. The point is that you aren’t spending the £100 rather than the government is receiving it. The effect is the same if you keep the money in a safe -except that the government doesn’t know about it. This is hidden saving.
Any saving scheme can be viewed as temporary taxation. It’s usually voluntary but clearly wasn’t during WW2.
Spending by creating money can be justified at times if there is enough hidden saving in the economy. Otherwise it will likely lead to inflation.
The problem anyone has during wartime is one of resources. Not money. Local resources can be directed to best effect, but if resources from elsewhere are needed others will have to be prepared to accept IOUs.
Fortunately for us the US did largely accept ours during WW2 and the same is happening, to an extent, with Ukraine now. It’s a political issue.
David Raw (19th August). You want the Lib Dems to seek ‘a genuine revival of industrial participation and democracy’ as advocated by Jo Grimond in the 60s, David. You will be pleased to know that this was at least warmly proposed and advocated by participants (who included myself and MBG and many experts) in a three-day Summer School on Liberalism organised on Zoom by the John Stuart Mill Institute and the Social Liberal Forum last week. Bobby Dean MP for example gave an excellent lecture on ‘Liberal Economic Empowerment’, which will be made available on the J.S. Mill website. Now we need our party to follow up and pursue the proposals, which indeed you and I remember Grimond advocating when we were young!
Many thanks for that information, Katharine, and yes, I used to be young, (in my head I still am) but you certainly still are. D.
Thanks for the kind word, David! But yes, I should say the party in recent years has been fairly radical, for example wanting workers to be considered as ‘stakeholders’ in their firms, along with the board members and the investors. In last week’s discussion not only places on the boards but also possibly compulsory giving of shares to workers was proposed, along with some reform of trade unions for greater empowerment of the workers. Where Liberals should be advocating greater social justice and democracy in the economy was a major theme.