The ‘golden age’ of the British Labour Party, so they tell us, was the 1945-51 Labour government. Even people who identify with Marxism, like Ken Loach, regard this as a halcyon period of social democracy or even ‘socialism’. This was a time in which the British welfare state was introduced – although much of the thinking behind this came from Lord Beveridge, a Liberal not a Labourite. The NHS (National Health System) and the modern pension system were also established. At the time Britain was essentially bankrupt, due to the ocsts the British state had to bear in the Second World War. There were thus economic problems in spending on welfare and public services. Labour certainly weren’t going to undermine capitalist profits – so how did they do it. Well, using British imperial power was a key element.
by Tony Norfield
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!
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.
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 ‘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.
 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.
 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.
The above piece is slightly edited for a non-British readership from Tony’s Economics of Imperialism blog, here.