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Published online by Cambridge University Press: 07 November 2014
Most discussions of the control of investment during the late 1930's and the Second World War had their origin, for obvious reasons, in the desire to regulate the aggregate level of economic activity. An unfortunate consequence of this preoccupation was that insufficient consideration was given to another problem of great importance: the determination of the uses to which investment resources are put.
It was precisely this problem of the allocation of investment resources which became a matter of major concern to the Labour Government in Great Britain in the years after the Second World War. This paper will examine the manner in which the problem was handled with respect to investment in building, investment in plant and equipment will be ignored since no serious attempt was made to regulate it. The Government did not go much beyond entering into “gentlemen's agreements” with engineering firms respecting the percentage of their output which they planned to devote to export purposes-agreements of the sort which D. H. Robertson has delightfully described as “… the characteristic English processes of jollying along—of encouragements which are not quite promises, frowns which are not quite prohibitions, understandings which are not quite agreements.”
The control of investment in building, by contrast, was a very ambitious venture. The Labour Government's experience in operating these controls is interesting for the light it sheds on problems of government planning for a major private industry. Moreover, this experience is particularly important since the industry concerned is one which is likely to play a crucial role in the programmes for development and welfare undertaken by many governments. The central focus of this paper, therefore, will be on the problems which arose in the attempt to control the pattern, as well as the volume, of activity in construction.
1 An important example of excessive preoccupation with the purely anticyclical aspects of investment control may be found in the British Coalition Government's White Paper on Employment Policy, Cmd. 6527 (05, 1944)Google Scholar, especially chap, v, “Methods for Maintaining Total Expenditure.”
2 “The Problem of Exports,” Economic Journal, 12, 1945, 322–3.Google Scholar
3 Cmd. 6707, Statistical Material Presented During the Washington Negotiations (12, 1945), 14.Google Scholar This figure includes external as well as internal disinvestment. It does not, however, include any estimate of the very substantial arrears in normal maintenance and repair of private residential property.
4 Cmd. 7099, National Income and Expenditure of the United Kingdom, 1938–1946 (04, 1947), Table 19, p. 33, and n. 23, p. 39.Google Scholar
5 Cmd. 6707, p. 13.
6 Kohan, C. M., Works and Buildings (London: H.M.S.O., 1952), App. I, 488.Google Scholar
7 Monthly Digest of Statistics (H.M.S.O.), no. 14, 02, 1947, Tables 76, 77.Google Scholar 8Cmd. 7099, Table 16.
9 Balogh, Thomas, Dollar Crisis (Oxford, 1949), 235.Google Scholar This may be compared with an estimated national income for the U.K. in 1945 of £8,340 million. Cmd. 7099, Table 15.
10 For a detailed study of building controls during the Second World War see Kohan, Works and Buildings.
11 For a convenient summary of these arrangements see Government and Industry, written and published by Political and Economic Planning (London, 1952), chap, vGoogle Scholar, “Government Organisation.”
12 Cmd. 7279, Summary Report of the Ministry of Works for the Period 9th May 1945 to 31st December 1946 (Dec., 1947).
13 Cmd. 6609, Housing (March, 1945), par. 13.
14 Monthly Digest of Statistics, no. 25, Jan., 1948, Table 78.
15 Ibid., Table 78. For Great Britain as a whole, 450,847 permanent houses had been put under construction between the end of the war in Europe and December 31, 1947. Yet, in this two and one-half year period, only 197, 812 houses were completed.
16 The following figures refer to permanent houses under construction and the workers employed on their construction:
Compiled from Monthly Housing Returns for England and Wales, April, 1946,–Jan. 1947, and Monthly Digest of Statistics, Jan., 1947, Table 80. The pre-war average was slightly less than two workers per permanent house.
17 Cmd. 7113, Housing Return for England and Wales, 31 March 1947 (May, 1947), 3.Google Scholar
18 Monthly Digest of Statistics, no. 25, Jan. 1948, Table 78. At the end of March, 1947, there were 218,773 permanent houses under construction. At the end of the year there were 253,035.
19 A useful summary of the changes in the Labour Government's machinery of planning may be found in Chester, D. N., “Machinery of Government and Planning” in Worswick, G. D. N. and Ady, P. H., eds., The British Economy, 1945–1950 (London, 1952), chap. XV.Google Scholar
20 This should have been abundantly clear from the wealth of experience with systems of priority during the Second World War. The attempt to operate such a system for building workers and the almost childlike faith in categories of priority as a panacea foi shortages are neatly summarized in the following quotation from one of the official histories of the war ( Kohan, , Works and Buildings, 132 Google Scholar): “More and more jobs were being imposed on an ever-shrinking labour force, and there were long lists of further jobs still waiting to start. Most of the works in progress had been given super-preference, but this was no longer a guarantee that the labour requirements of a job would be met; indeed, nearly all jobs were below strength, with little hope of building up. The volume of work in hand was, in fact, once more hopelessly in excess of the capacity of the building industry. The departments pressed for a new priority category above super-preference with which to overcome their labour shortages. …” (Italics added.)
21 This immobility was itself partly the result of the housing shortage.
22 Cmd. 7021, Housing Programme for 1947 (Jan., 1947), par. 23.
23 SirSimon, Ernest, Rebuilding Britain-A Twenty Year Plan (London, 1945), 254.Google Scholar
24 Ministry of Works, The Placing and Management of Building Contracts (1944)Google Scholar, Technical Paper no. 5, “Site Organisation.”
26 Cmd. 7268, Capital Investment in 1948 (Dec., 1947). Cf. also Cmd. 7344, Economic Survey for 1948 (March, 1948), especially chap, III and Table XXI, p. 44, indicating the proposed changes in the distribution of manpower.
26 Gross investment in building which was specifically allowed for in the Government's plans increased from an estimated £825 million in 1947 to £915 million in 1948. Approximately one-half the increase was due to a rise in prices. National Income and Expenditure, 1946–1952 (London: H.M.S.O., 08, 1953), Table 42.Google Scholar Manpower in the industry had been scheduled to decline from 1,364,000 in December, 1947, to 1,200,000 in December, 1948. In the latter month the actual figure stood at 1,357,000. Cmd. 7647, Economic Survey for 1949 (March, 1949), Tables 7, 18.
27 Working Party Report: Building (London: H.M.S.O., 1950), Tables I, III, IV, V.Google Scholar
28 Not only did the total of manpower in building remain virtually unchanged during 1948, as was pointed out in an earlier footnote, but there was a substantial increase in repair and maintenance work. In announcing its plans for 1948, the Government stated that “… the volume of maintenance and small works in 1948 must be strictly controlled since any significant expansion of this class of work would clearly impede the transfer of resources to more essential purposes” (Cmd. 7268, p. 6). Nevertheless, employment on small-scale repair and maintenance work actually increased by well over 30,000 during 1948. The exact amount cannot be determined because of the use of certain “miscellaneous” categories in the reporting of statistics on employment in building. (Monthly Digest of Statistics, no. 37, Jan., 1949, Table 91).
29 Cmd. 7647, especially Table 7, p. 17; for details of the programmes see pp. 14–16 and Appendix. The value of construction work in the principal sectors was scheduled to increase from £.915 million in 1948 to £985 million in 1949. At the same time non-housing work was scheduled to increase from £440 million in 1948 to £565 million in 1949, an increase of almost 30 per cent in one year. Since total employment in the building industry was scheduled to remain unchanged, a wholesale transfer of labour from housing projects of all kinds was required. Earlier experience in the industry indicated that such a transfer in so short a period of time was extremely unlikely, and it was even more improbable in view of the considerable relaxation of controls over small building projects which had taken place during 1948.
30 cmd. 7647, par. 45.
31 Compare the detailed figures on building output in 1949 in the Appendix to Cmd. 7915, Economic Survey for 1950 (March, 1950) with the Government's programme for 1949 in Appendix to Cmd. 7647. In virtually every instance where a large increase in output was planned for, the actual increase fell far short. On the other hand, the decline in housing output in 1949 was far smaller than the amount presupposed in the Government's building plans.