THOUGH the British and American forms of government descend from a common ancestry, British democracy is younger than our own. Those who devised the American republic after the Revolutionary War gave a great deal of thought to establishing a democratic form of government which should avoid the danger -- then feared -- of pure majority rule. The result, the system of checks and balances, marks the main difference between the American system and the modern democratic government which began in Great Britain in 1841, and which has developed and expanded ever since. That was the year when the Tory Government took office, accepting fully the principles of the Reform Act. The British were not as conscious as had been our own Founding Fathers that they were creating a new kind of state. After 1841 the power of Parliament expanded without any explicit, ceremonious assertion that the power of the Crown was being reduced. The Crown waned, it was not extinguished. And steps by which authority was transferred to Parliament could become fixed because the British had discovered the "unwritten constitution," one of the most useful ideas born of the abstract Anglo-Saxon mind. Since the British did not, at a given moment, by a formal and fully aware decision, launch out upon a system of unmitigated parliamentary rule, a birthday cannot be assigned to it. It unfolded. And its unfolding continued until the Lords were shorn of their veto rights in this century.

Thus democratic government in Great Britain not only is younger than our own, it renews its youth more easily. Those who complain about America being a quarter of a century behind the British in social policy state the matter unfairly. The British are ahead because they turned to actual democracy later than we did, and because they have a simpler formula for keeping abreast of changing needs. We are not behind because we are backward, but because our democracy is older, and is embedded in the less elastic and considerably more fearful concepts of an earlier period.

Certain acts of the Roosevelt Administration have marked a departure from the American system of government. The departure was widely attacked in the presidential campaign as leading the nation down the wide path to dictatorship. This conjunction of ideas is noteworthy. Departure from the American system, it was assumed, could lead only in the one direction, toward the anti-democratic state forms of the continent in Europe. It was not appreciated that most of the Roosevelt novelties were bringing our practice more into line with those of British democracy.

A strong protest, for instance, was made against Mr. Roosevelt's scheduling of "must" legislation in Washington. Since in the field of legislation the Chief Executive has only the right of advising Congress, and of interposing a veto, the protest was legitimate, but it was wrongly worded. Mr. Roosevelt in scheduling "must" legislation has not been like a fascist dictator. As head of a party as well as of the government, and as a creator of policy who must answer to the people at the next election, the President took up a position similar to that of a British Prime Minister. "Must" legislation, of course, is the standard practice in Great Britain. To vote against a "must" bill is to defy the party "whip," and that in turn is to lose the official support of the majority party's organization in the next election. Only an occasional rebel does so often without forfeiting his seat. The President lacks most of the Prime Minister's disciplinatory powers over legislators. He cannot keep a congressman from being nominated. And his discipline is limited to an exercise of his own prestige or to the withdrawal of patronage. The President, in scheduling "must" bills, is being a Baldwin, not a Hitler. The difference, of course, is in the ultimate appeal to the free electorate, which Mr. Baldwin faces but Herr Hitler does not. No president can become dictator unless elections cease to be free. The bulwark of democracy is not decentralization, certainly not the system of checks and balances, but the full exercise of civil liberties. Even though centralization and greatly strengthened state powers are essential to dictatorships, they are not what distinguish them from democracies. The trend toward them has been and is being accepted in Great Britain without any weakening of democracy. It is not enough to say that there can be a centralized democracy; Great Britain is one.

Now I am not asserting that Great Britain will for all time remain a democracy. But I am startled by the ease with which some American writers, conjuring up the dangers which they see lurking in any course that would modify the old American system, land in their imagination in an Italian or German or Russian port, sailing past London as though it did not exist. Or if they refer in passing to British experiments with centralization and state initiative it is only to argue that Great Britain, being a small, compact country, has nothing to teach a country which is as vast as a continent. The smallness of Great Britain is not a justification for British centralization, only an explanation of Britain's greater ease in getting it. A large country may need more of some kinds of centralization than a small one if it is to carry out a national policy. The British have a vast experience to offer any democracy which by the use of government action is trying to shape capitalism to meet modern human needs. For that has been the task to which they have devoted themselves, save for the years of the World War, for a generation.

One can date this phase of British development from the institution of the social services in 1912. And that is a good starting point for a review of those actions in Great Britain which throw any light on recent trends towards an increase of government initative in our own country. We shall find some of the British experiments startlingly similar to the improvisations of the New Deal. Our review will also show the British Government using loans and tariffs as a leverage to force industries to adopt reforms. It will show the direct delegation of legislative power to private associations. It will show a predilection for taking certain kinds of economic activities both out of politics and out of the field of free enterprise, transforming them instead into semi-public-service corporations. In other words, we shall find evidence that Mr. Roosevelt has not gone so far as his British predecessors and contemporaries in interfering with business and individuals.

II

In the matter of social services Mr. Roosevelt has not gone so far as the British. They have never accepted the idea of pure insurance. The state has always made a contribution to most of the services. In the case of the contributory unemployment scheme it amounts to a third of the total sum raised. The whole of old-age pensions after seventy is paid by the state. And now that "transitional" benefits paid after insurance "rights" are exhausted have been recognized as a permanent part of unemployment relief, the state takes on an additional and exclusive financial burden. As about three-fifths of British national revenue is derived from direct taxation, assessed according to ability to pay, the social services in Great Britain are a deliberate effort to redistribute wealth through government interference. Money is taken from the haves and paid to the have-nots. This is a recognition of the belief that capitalism does not distribute its rewards equably, and that it can be somewhat democratized by social action. Both the British and American systems of social security are confusing and hard to analyze. The redistribution of wealth is an element in both. But redistribution is much more stressed in the British schemes than in our own. Non-contributory old-age pensions under our social security act are paid by the federal and state governments; but as more of our tax revenue comes from levies on consumption than is the case in Britain, less redistribution of wealth occurs. Otherwise our scheme is nothing but enforced savings. And even our work-relief, since it is financed by loans, and since the method of servicing them is not defined, cannot be called the redistribution of wealth. The British Government pays around $600,000,000 annually toward the social services, and the rising cost of old-age pensions will probably bring the contribution to more than $800,000,000. Roughly three-fifths of this represents the redistribution of wealth, a tax on those who get more than their social share from the working of capitalism. We are nearly three times as large as Britain. If we undertook to do as much redistribution of wealth as she does it would cost close to two billion dollars and would considerably lighten the weight on the poor of our social insurances.

Though they are her most imposing instance of state interference, Britain's social services can hardly be called lavish. There is a limit, however, both to the amount of wealth subject to redistribution and to the possibility of enforced savings. The British after a generation of experience in this field have probably approximated the maximum that can be done with safety under their own standards. Under the unemployment insurance scheme, men workers make a weekly contribution of 18 cents a week, women of 16 cents; if out of work, they receive in benefits $4.25 and $3.75 a week; a married man is allowed $2.25 for a dependent wife and 75 cents for each child. This gives a married man with three children $8.75 a week. To qualify for these benefits he must have made 30 contributions in the preceding two years, and he is entitled to full benefits for 26 weeks of a year. Thus it is possible for a married man with three children, who has paid the minimum in contributions and receives the maximum in benefits, to draw from the system $235.50 in return for an outlay of $5.40. Obviously this is not insurance. And his security does not end at the expiration of his rights; he becomes entitled to "transitional" benefits towards which he has made no contribution.

Characteristic of the British system is the combination of employment agencies with unemployment insurance. A man's right to benefits depends on his willingness to accept work, which can be demonstrated only if there is centralized control both over available openings and over the insurance scheme. The vacancies notified to the National Employment Exchange system in 1935 were 2,911,000; and of these 2,512,000 were filled. The total number of insured persons was 12,560,000.

The British system of old-age pensions, as in our own Social Security Act, is dual. A contributory system is combined with a so-called pension. In Britain the workers pay toward the pensions they receive between the ages of 65 and 70, but after 70 the state bears the entire cost. In both periods pensions are small, $2.50 a week for a single man and another $2.50 for his wife. The pensions received after 70 are subject to the means test, and are not in reality old-age pensions at all but a form of old-age relief. However, the cost to the state of the non-contributory pensions, which was $125,000,000 in 1925, has already reached $225,000,000 a year; and due to the increased expectancy of life it will ultimately be $400,000,000 -- all of it, be it noted, raised from taxation. The contributory pension received between the ages of 65 and 70 is not subject to the means test. In addition, there are widows' and children's pensions, and orphans' pensions. Widows are entitled to $2.50 a week, with an allowance of $1.25 for the oldest child under 14, and 75 cents for each younger child. The allowance for orphans is $1.82, paid until the age of 14.

The pensions schemes are part of the Health Insurance system, which derives the rest of its revenue from a weekly payment of 20 cents by each male worker and 14 cents by each woman, with a like payment by the employer. The part devoted to medical care and sickness benefits is neither enforced savings nor redistribution of wealth. It is the financing of socialized medicine, the state delivering to the entire working population better medical care than it otherwise could afford. It does so by exercising its power of compulsion, as the contributions must be made by everyone with an income of $1,250 or less. A worker need not use the "panel" physician employed under the act, but he must help support the system. From the "panel" doctor he has free medical attendance and medicine. If incapacitated by sickness, the worker draws $3.75 a week ($3.50 for women) as sickness benefit, up to twenty-six weeks. If still unable to work at the end of the 26 weeks, he becomes entitled to a disablement benefit of $1.82 a week. A straight maternity benefit of $10.00 is paid to mothers.

This brief summary is enough to show that the British system goes beyond the New Deal's social security program in two particulars. One is the point already stressed, the element of redistribution of wealth; the other is the socialization of medicine. Both differences are important. One represents a deliberate effort toward democratizing capitalism through government intervention; the other makes national health a government concern. In both instances, the function of the democratic state is widened beyond any concept yet tolerated in this country.

III

The story of the British social services is widely though superficially known in this country. Less has been told of the state's intervention in British industry and agriculture. To understand the motive of the various interventions one must recall that British industry, supreme in the nineteenth century because it was fairly free from effective competition, began to suffer as other countries became industrialized. And a structure already shaky was then pushed badly out of shape by the terrific strain of the war. After 1919, four of the major activities on which British industrial supremacy had largely been based were in a pitiable condition. Coal, iron and steel, shipbuilding and textiles were partially paralyzed, and because of plant redundancy and world changes they seemed beyond hope of complete recovery. The core of British unemployment was in these industries, and a considerable number of the unemployed in them will probably never find work there again. This is particularly true of coal; its problem has yet to be solved. If one adds agriculture to these four, one sees the magnitude of Britain's postwar task of reconstruction and recovery.

The assumption is often made that the British recovered by adhering to the old-fashioned wisdom of letting things alone. This view is grotesquely mistaken. The government has stepped in, gingerly it is true, but with utter disregard of the proprieties of laissez-faire. The obstacle to recovery often lay in the stubborn resistance of manufacturers, who dallied long before they would accept sacrifices for the good of their own industries, not to mention the common welfare. If there was an excess of plant capacity, said the individual owner, let the other fellow shut down his plant. In other words, capitalists squirmed before taking their losses. The minority could keep the majority in the red, without the majority being able to do anything about it. This was something like the "unfair competition" and "chiseling" which led to the NRA in this country. The British went about their matters in a much more tentative way, without street parades and ballyhoo, and without increasing the bureaucracy. Their task was easier than ours in that they did not need codes for the benefit of labor in most industries, because labor unions had long been accepted as a basic element of industrial stability. What they needed was adjustment between plant capacity and the market. They could reduce the capacity or increase the market, or do both.

In applying the description of "planning" to the actions leading to British recovery it must be explained that the term can mean the rigid and complete rule of a government over economic affairs, and it also can mean the analysis of economic ills and the deft intervention of government to effect essential changes. This latter can consist of prodding reluctant individuals to act of their own accord, or it can require the surrender of a balky minority. In order to succeed it must be accompanied by financial policies which provide conditions favorable to recovery. In this sense British recovery has been due to planning. After the abandonment of gold a cheap money market was established, and interest rates were kept so low that notable economists voiced the fear that a permanent twilight of capital earnings had set in. The next major step was the adoption of tariffs. But if Americans believe these were clapped on in the spirit of Smoot-Hawleyism they lose a subtle but vital lesson from the British experience. To begin with, the tariff barrier was not high. Secondly, it was set up in a manner so that it could be pierced with gateways for the admission of a controlled volume of imports in certain lines. And finally it was used as a highly persuasive means of inducing British industries to put their affairs in order. Protection, in other words, was a national policy for national and not particular ends. Above all, it was not to serve as the lifebuoy for inefficient producers.

A notable instance of the use of tariffs as a part of planning has been the reorganization of the British iron and steel industry. Forced to expand while making war munitions, the industry found itself after the war with far too much plant. It was weakened internally by the bitter rivalry of its small units, and outwardly it faced both a reduced foreign market and the stern competition of foreigners who had already learned the lesson of rationalization. To some extent, the industry responded voluntarily to economic necessity. Amalgamations did take place, vertical organizations were formed, and production to some extent was concentrated in the more efficient plants. But as long as foreign supplies and semi-manufactured goods could come in without limitation, and frantic competition remained, the industry could not complete its consolidation or deal as a unit with European cartels. So the government gave iron and steel the benefit of tariffs, hoping for voluntary consolidation. It did not ensue. The tariff of itself brought easement, and tended to slow up the efforts for voluntary reform. So the government had to threaten not to renew the tariff unless the industry produced a scheme for further reorganization. The threat is illustrative of the nature of state interference in Britain and of its success. The industry responded. What else could it do? A national committee drew up the plan for the British Iron and Steel Federation which was approved by the industry and then by the government, and now is in force. Each branch of the industry has its own autonomous association. These associations are affiliated with the Federation, which has power to give effect to the collective will in matters of general policy and in conducting negotiations. Once the Federation had been formed, negotiations could begin with the cartels of France, Belgium, Luxembourg and Germany. The level of exports and imports was fixed in 1935 for a five-year term. Plant is being extended and modernized, and an industry which a few years ago had one foot in the grave is now revitalized.

The British cotton industry in recent years presented an even more lamentable appearance than the steel industry. It had lost whole sectors of its foreign markets for good and all, but it could not bring itself to accept the changed conditions. Voluntary efforts were made to reduce redundant spindles. In 1929 the Bank of England took a hand and formed the Lancashire Cotton Corporation to acquire 10,000,000 spindles and concentrate production in efficient mills. By 1933 a total of 4,620,000 spindles had been scrapped. But the industry still languished, and in 1934 a conference was called under Lord Colwyn which resulted in 1936 in the passing of the Cotton Spinning Industry Act. This provides for setting up a Spindles Board with power to buy and dismantle redundant mills, and to borrow $10,000,000 for the purpose. The loan is serviced and the board's expenses are paid by an annual levy of about 2 cents a spindle. This must be paid for 14 years by every spindle owner in the country. Further, wage agreements made in the weaving section, and agreed to by two-thirds of the employers and employees, have legal effect and are enforceable in the courts. These grants of legislative power by Parliament to capital and labor went through Parliament without producing a shudder and, arresting though they are as a development under democracy, they have been unnoticed in the American press. Here is NRA in British disguise. Well may the British bless the absence of a written constitution, for none could have been framed a century and a half ago which would have foreseen such a delegation of the legislative authority to private persons. The story of the cotton industry is not one of state intervention, but of a reform which in the end needed a delegation of the state's powers. The reform is not unlike that made in the Guffey Act for the reorganization of the bituminous coal industry; but it differs in being immune from court inhibition.

Still more spectacularly than in steel the British used the tariff wall to promote internal reorganization in agriculture. This was the work of Walter Elliot, now demoted from the Ministry of Agriculture to be Secretary for Scotland. To what extent his transfer forecasts a partial demobilization of the British marketing schemes is not yet clear. But the schemes are a signal example of government intervention and of the ease with which Parliament delegates it powers to a minister and authorizes the coercion of stubborn minorities. The parallel between the Elliot policies and the AAA is striking, though it is not to be drawn too closely. Britain did not suffer from general over-production but from a market surfeited by imports and from ruinous price-cutting due to internal disorganization. The cure was regimentation. Decried in this country, it produced no flurry in Great Britain. What ultimately was criticized was not the invasion of personal liberties, but instances of unwise planning.

The British formula in most cases was quotas plus regimentation. Parliament passed two Agricultural Acts covering the whole range of agriculture, and applicable to specific industries. "They are 'enabling' acts," Mr. Elliot once explained, "by which producers may agree to exercise the powers conferred by the Acts, but are not forced to against their will. The growers of any commodity may elect to set up what is called a marketing board to administer a marketing scheme for that product. If two-thirds of the whole industry vote for a marketing board, the remaining third must fall into line. This marketing board may exercise any of the powers which are set out in the act. Some of the chief of them are the sole right to buy and sell the product; the right to lay down the quantity which each individual producer may sell; the right to fix the price at which the producer may sell. Or the Board may simply control sales by determining what kinds or varieties the producer may sell at any time, as well as the persons to whom he may sell them. The board also may arrange for the producers to sell their wares at exceptionally low rates for special purposes."

Only in the case of potatoes did the British face a problem of over-production, and this they met by an excess acreage levy. Each producer was allotted a basic acreage, usually what he had employed in 1933. If he planted more than that he had to pay $25 an acre. The regulation of supply was obtained through requiring growers to put their potatoes through a riddle, or screen, and forbidding them to sell for human consumption the smaller potatoes that passed through. Prices for production were not fixed, but they were in other schemes.

With such sweeping powers, the marketing boards could and did dominate many branches of the industry under the supervision and guidance of the Minister of Agriculture. Though the industry in theory prepared its own schemes, the minister in fact drew them up and the farmers simply voted on them. He had charge of the quota negotiations, fixing, for example, the amount of bacon which Denmark should be permitted to lay on British breakfast tables, and politely inducing the Dominions, against whom quotas could not be enforced, to reduce their supplies voluntarily. Marketing schemes were adopted for pigs, bacon, hops, potatoes, and milk, and even for Scottish raspberries in 1936. About two-fifths of British production came under the new type of control. Farm prices rose, as did home production and agricultural wages. If the scope of agricultural planning now is to be reduced it will not be because Mr. Elliot curtailed British liberties, but because his economic tendency, being nationalist, is at variance with the deep flow of British economic habit. It runs counter to the inclination to buy food from the overseas countries which take British manufactures, particularly the Dominions.

IV

Government loans rank close to tariffs as potent persuaders in bringing about internal reorganization. Amalgamations which economic conditions make expedient can be expedited by the offer of financial help. Thus the Queen Mary could be built by subsidy; but the quid pro quo which the government demanded was that the long-deferred merger of the White Star and Cunard companies actually take place. Tramp shipping, a large industry in Great Britain, was saved from ruin by the same kind of government help. The British Shipping Assistance Act, 1935, supplied a subsidy of $10,000,000 in that year, and the same sum in 1936. To obtain the money, however, the tramp shippers not only had to agree between themselves to reduce surplus tonnage, they had to obtain international agreement to the same end. This done, the whole shipping position improved, since the shipyards already had worked out a scheme (for which they obtained government sanction) for buying and closing inefficient yards. The shipbuilders took a government loan after they had organized. It amounted to $50,000,000, repayable in 12 years, but it was by no means unconditional. The government insisted that for every ton of new shipping built two tons of existing ships had to be scrapped, and for every ton reconditioned one ton had to be scrapped. Owners were allowed to buy foreign ships for scrapping.

Centralization under government supervision was encouraged in the British railway system, where the 123 existing companies were merged into four by the Railways Act, 1921. A Railway Rates Tribunal was set up under the same act. The further elimination of competition has been authorized by a still later pooling agreement. Faced with competing road transport, the railroads were authorized to buy out their competitors or establish their own road services; and in 1935 all road transport was licensed and put under public control. In this case private ownership has been maintained, and so it has in the latest government intervention in the transport field, the London Passenger Transport Act. This Act took all the companies serving the London area -- bus lines, subways, street cars, and the railroads carrying suburban traffic -- and welded them into a unit. There was no confiscation of property, and as the plan promised steady though low earnings in place of precarious returns, the stockholders rejoiced. But they did lose their rights over their properties. London transport now is managed by a board not chosen by them, but by "appointing trustees" named under the act. Hereafter their one individual liberty is to draw dividends, strictly limited by law.

The solution of the London transport problem is characteristic of the tendency to centralize by inventing new non-governmental entities, working under state supervision, but retaining the aspect of private ownership. The Central Electricity Board and the British Broadcasting Corporation are other examples. The power fight we have had in this country has been circumvented in Britain by the electricity board, a semi-autonomous organization financed by government loans, which has now completed building the "grid" that links up all the main power resources of the country. It is working on a long-term program which ultimately will weed out inefficient plants, and bring down the cost of current.

The broadcasting problem was met by the creation of the British Broadcasting Corporation, operating under charter and financed by a $2.50 fee collected from each owner of a receiving set. Political control is kept at a discreet distance; the Postmaster General is answerable in Parliament for the broad policy of the B.B.C. but in the main the government keeps its hands off -- except from the funds of the corporation, which have been quietly raided to help stop gaps in the national budget. The fact that the charter is renewable at stated periods keeps the B.B.C. from abusing the power of its position. It also commits it to conducting its affairs in a safe manner calculated to make as few enemies as possible. Whether this is the happiest way to deal with broadcasting in a democracy is not under discussion here. The point is that the British, without fear that they might be undermining their liberties, made broadcasting a monopoly, socialized it, and chartered a new kind of semi-public body to administer it.

While the British have enormously increased the intervention of government, they are (as the nature of these autonomous entities suggests) unwilling to load onto Parliament the increased work of managing a centralized society. Parliament is painfully aware of the growth of its burdens and of its incompetence to do justice to them. For that reason it has been far less reluctant than our own Congress to delegate powers, either to ministers who already have much more authority than do members of the President's cabinet, or to commissions and boards, or even to organizations of industry and labor. The state lays down the broad principles and thereafter is inclined to leave wide discretion for those persons and groups who have to deal with problems in the concrete. There is an increased exercise of authority by the state, but it is balanced by diffusion of authority. The fact that the authority is delegated by Parliament shows no signs so far of leading to autocratic practices. There are some in Great Britain who are disturbed by the trend. But they are a handful. The British public does not feel that it is losing control over its own affairs.

The face of many lands has changed in recent years, but not only those where democratic government has been overthrown. The urge toward centralization, under the name of rationalization, gripped big European industry long before Fascism became an acute issue. Stronger centralized industrial power and grave national economic difficulties alike forced governments to deal with problems which previous generations had not dreamt would exist. In some European countries, democracy was not able to cope with the new tasks. In Great Britain, France, Switzerland, Holland and the Scandinavian countries, the older democracies, and in Czechoslovakia among the younger ones, it has succeeded. In all of them, centralization has proceeded apace, along with increased government direction in economic affairs. And in Great Britain, the solidest of them all, the success has enhanced rather than weakened the principle of popular self-government.

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  • RAYMOND GRAM SWING, for ten years London correspondent of the Philadelphia Public Ledger and the New York Evening Post; now New York correspondent of the London News-Chronicle
  • More By Raymond Gram Swing