Tony Judt - Postwar

The first Monnet Plan was largely an emergency measure to address France’s post-war crisis. Only later was it extended and adapted to the terms of Marshall Aid. But the basic outline of post-war French economic strategy was present from the start. French planning was never more than ‘indicative’: it only ever set targets, not production quotas. In this respect it was quite unlike Soviet planning, whose characteristic feature (and prime defect) was its insistence upon arbitrary and rigid output figures by sector and by commodity. The Monnet Plan confined itself to providing government with a strategy and levers for actively fostering certain favoured objectives. At the time this was a strikingly original undertaking.

In Czechoslovakia a Central Planning Commission with some Monnet-like features and aspirations was established in June 1946 to guide and coordinate the sizeable public sector nationalized by President Benes in 1945. In the year before the Prague Communist coup of February 1948, 93 percent of all those employed in transport and 78 percent of those in industry already worked for the state. Banks, mines, insurance companies, major utilities, steel and chemical works, food processing industries and all large enterprises had been taken over: 2,119 firms comprising some 75 percent of all manufacturing output.

In the Czechoslovak case nationalization and state planning of the economy thus began well in advance of the Communist take-over and represented the policy preferences of a genuine majority of the electorate—only in February 1949, a year after the Communist coup, was the Planning Commission purged and renamed as the ‘State Planning Office’, with a very different remit. Elsewhere in the region large-scale nationalizations, like those mandated under Poland’s January 1946 Nationalization Law, were the work of coalition governments in which Communists dominated. But here, too, there were pre-Communist roots: back in 1936 the authoritarian government of the pre-war Polish Republic had inaugurated a ‘Four-Year Investment Plan’ with a rudimentary system of centralized directive planning.

The chief purpose of planning in post-war continental Europe was public investment. At a time of acute capital shortage and with huge demand for investment in every sector, government planning consisted of hard choices: where to place the limited resources of the state and at whose expense. In eastern Europe the emphasis was inevitably upon basic expenditure—on roads, railways, factories, utilities. But that left very little over for food and housing, much less medical, educational and other social services; and nothing at all for non-essential consumer goods. This was not a pattern of expenditure likely to endear itself to any electorate, especially in countries that had already suffered years of material deprivation, and it is not surprising that this sort of planning under conditions of dire shortage was almost always accompanied, sooner or later, by authoritarian rule and the police state.

But the situation in the West was not so very different. The British, as we shall see, were constrained to accept years of ‘austerity’ as the price for economic recovery. In France or Italy, where there was almost no long-term private capital market, all major investments had to be publicly funded—which was why the first Monnet Plan was skewed towards capital investment in major industries at the expense of domestic consumption, housing and services. The political consequences of this were predictable: by 1947 France, like Italy, was threatened with strikes, violent demonstrations and a steady increase in support for the Communist Party and its trade unions. Deliberate neglect of the consumer goods sector and the diversion of scarce national resources to a handful of key industrial sectors made long-term economic sense: but it was a high-risk strategy.

The economics of Planning drew directly upon the lessons of the 1930s—a successful strategy for post-war recovery must preclude any return to economic stagnation, depression, protectionism and above all unemployment. The same considerations lay behind the creation of the modern European welfare state. In the conventional wisdom of the 1940s, the political polarizations of the last inter-war decade were born directly of economic depression and its social costs. Both Fascism and Communism thrived on social despair, on the huge gulf separating rich and poor. If the democracies were to recover, the ‘condition of the people’ question must be addressed. In the words of Thomas Carlyle a hundred years earlier, ‘if something be not done, something will do itself one day, and in a fashion that will please nobody.’

But the ‘welfare state’— social planning—was more than just a prophylactic against political upheaval. Our present discomfort with notions of race, eugenics, ‘degeneration’ and the like obscures the important part these played in European public thinking during the first half of the twentieth century: it wasn’t only the Nazis who took such matters seriously. By 1945 two generations of European doctors, anthropologists, public health officials and political commentators had contributed to widespread debates and polemics about ‘race health’. population growth, environmental and occupational well-being and the public policies through which these might be improved and secured. There was a broad consensus that the physical and moral condition of the citizenry was a matter of common interest and therefore part of the responsibility of the state.

As a consequence, rudimentary welfare provisions of one kind or another were already widespread before 1945, although their quality and reach varied widely. Germany was typically the most advanced country, having already instituted pension, accident and medical insurance schemes under Bismarck, between 1883 and 1889. But other countries began to catch up in the years immediately before and after World War One. Embryonic national insurance and pension schemes were introduced in Britain by Asquith’s Liberal governments in the first decade of the century; and both Britain and France established ministries of health immediately following the end of the Great War, in 1919 and 1920 respectively.

Compulsory unemployment insurance, first introduced in Britain in 1911, was instituted in Italy (1919), Austria (1920), Ireland (1923), Poland (1924), Bulgaria (1925), Germany and Yugoslavia (1927) and Norway (1938). Romania and Hungary already had accident and sickness insurance schemes in place before World War One, and all the countries of eastern Europe introduced national pension systems between the wars. Family allowances were a key element in plans to increase the birth rate—a particular obsession after 1918 in countries badly hit by wartime losses—and were introduced first in Belgium (1930), next in France (1932) and in Hungary and the Netherlands just before the outbreak of war.

But none of these arrangements, not even those of the Nazis, represented comprehensive welfare systems. They were cumulative ad hoc reforms, each addressing a particular social problem or improving upon the demonstrated shortcomings of previous schemes. The various pensions and medical insurance systems introduced in Britain, for example, had very restricted benefits and applied only to working men: wives and other dependents were excluded. Eligibility for unemployment benefits in inter-war Britain rested on a ‘Means Test’. This drew on the nineteenth-century Poor Law principle of ‘least eligibility’ and required an applicant for public assistance to demonstrate his virtual destitution in order to qualify. Nowhere was there yet any recognition of an obligation upon the state to guarantee a given set of services to all citizens, whether male or female, employed or workless, old or young.