In response to the coronavirus crisis, governments across the developed world have expanded beyond anything seen in peacetime. In Britain, a Conservative Government has forcibly shut down almost the entire economy. In what was unthinkable three months ago, welfare payments have substantially increased, the state is guaranteeing business loans, and even paying the wages of furloughed workers. The total cost is staggering, and this year’s budget deficit could well exceed £200 billion. Some now wonder if these measures will permanently alter the relationship between the state, society, and the economy. To answer this, it is worth re-examining what happened on the last two occasions where the state suddenly and dramatically expanded during a crisis: the two world wars. The experience after these two conflicts suggests that while it will likely prove impossible to return completely to normal, we should not expect the revolutionary changes many expect.
The First World War
While the state had been growing even before the outbreak of hostilities, the pace of state expansion picked up dramaticallyduring the conflict. In 1914, the railways were taken under state control. After 1915, in response to riots in Glasgow, rents were fixed. Unemployment insurance, which only had been introduced in 1911, was made available to a far wider range of occupations than ever had been envisaged. As the conflict dragged on, rationing was introduced. And that is before any discussion of the state’s role in massively expanded armaments production. As the private sector failed to satisfy military requirements, the newly-created Ministry of Munitions took control of armaments production and increasingly large sections of the economy. These included raw materials, factories, labour, and power supplies. As the private sector struggled in other ways, the state moved in on grounds of military necessity. As labour unrest beckoned in the coalfields, then Britain’s main source of power, the state took over in early 1917. By the end of the conflict, the Allied Maritime Transport Council controlled 90 per cent of the globe’s merchant shipping. Unsurprisingly, government spending went through the roof.
Change was not limited to the economic sphere. A new Education Act, known as the Fisher Actafter the President of Board of Education who steered it through, raised the school leaving age to 14. The state started funding the universities for the first timein any serious way. Even in both those instances change came not because of any great desire to reshape the state. While there were keen reformers, for others, the extension of elementary education and the subsidising of university research was more about strengthening the country than popular welfare. To combat the housing shortage that its own rent restrictions had exacerbated, the government began to subsidise council housing, again for the first time on any significant scale.
The longer-term consequences were less pronounced than some reformers had hoped. Some measures survived unintentionally. Rent restrictions proved impossible to scrap, and only started to be wound back in the 1930s. The Government hoped to get out of housebuilding, optimistically viewing its 1919 housebuilding programme as a temporary fix to a market distorted by war and subsidies, but never completely managed to do so. Even more significantly, unemployment insurance never totally returned to its pre-war model. Sensing that it might not be wise to send large numbers of demobilised soldiers to the workhouse—workhouses were not abolished until 1929—the government allowed those who had exhausted their contributions to continue accessing payments even after they had exhausted their entitlements.
Other reforms were either wound back or never got off the ground. Subsequent pressure on the rightfor retrenchment led to the scaling back of the Fisher Act. No further serious primary or secondary education took place before the 1944 Butler Act.
There were economic consequences too. Already suffering from unnecessarily duplication owing to having built without any planning, and having been run down by wartime use, the railways were restructured. One hundred companies were consolidated into four. The wartime measures arguably created a precedentfor greater state intervention in the 1920s than would have been conceivable before the war. Thus in 1926, a Conservative Government created the Central Electricity Board. By doing this, the Conservatives effectively nationalised the distribution of electricity, though it left the actual generation and retail market in private hands. The creation of the BBC in 1926 is another example.
It should be noted that while the Central Electricity Board was itself a novelty, state intervention was not. The last Liberal governments had introduced the first old age pensionsand National Insurance. Even the Conservatives, a party we now associate with small government, had, since the early twentieth century, embraced the introduction of protective tariffsto cement imperial ties, protect British industry, and finance social reform without taxing the wealthy. While some wartime measures were deliberately retained, many were viewed as temporary expedients justified either directly by military needs or to rectify short-term distortions created by the war.
Overall, the First World War accelerated the trend towards an expanded state but did not lead to a fundamental rethink of its appropriate role.
The Second World War
When conflict broke out once again in September 1939, the state once again ballooned. Even more rapidly than in the previous conflict, rationing was introduced, production of consumer goods switched to military needs, and everyday life brought under increasing state control. As in the previous conflict, a coalition government formed, this time headed by Winston Churchill and with Labour as a junior partner.
In contrast to the First World War, however, there was a stronger government commitment to post-war reforms. The Beveridge Report, which took a flexible approach to its original terms of reference, proposed a universalised welfare system with comprehensive unemployment insurance, to be supported by comprehensive health service. Quite unexpectedly, the Report generated much interest, and the government, despite Churchill’s preference to focus on winning the war, felt compelled to agree to its implementation. In this environment, some Conservatives worried that ‘if you do not give the people social reform, they are going to give you social revolution’.
Far more so than in 1918, societal expectations of the role and responsibilities of the state changed significantly after 1945. Debated for years, family allowances, now known as child benefit, were introduced by the caretaker Conservative government before the famous 1945 Labour landslide. Universal National Insurance and means-tested National Assistance payments followed in 1946. Despite the best efforts of the British Medical Association, the much-celebrated National Health Service followed in 1948. The modern British welfare state came into being. The Government also accepted responsibility for maintaining full employment, something it had never explicitly done before 1939. Because of these changes, a powerful myth subsequently took told that the Second World War marked the emergence of a new consensusaround the state. While this since has been debunked, the idea lives on in popular imagination.
Changes were not confined to welfare. It was now expected, and expressly acknowledged, that governments had a responsibility to tackle unemployment. The government’s role in industry expanded too, with the Labour government nationalisingcoal, the railways, the Bank of England, road haulage, civil aviation, cable and wireless, gas, electricity, and iron and steel. While the Conservative opposition was not thrilled by nationalisation, it only put up minor resistance, save for iron and steel. The industries concerned were either struggling, like coal or the railways, were publicly owned elsewhere, like the Bank of England, or were public utilities. After they returned to power in 1951, only steel was privatised, or, in the language of the day, denationalised. Iron and steel were somewhat different as it was both a manufacturing industry and had recently been profitable. Even there the Conservatives were not entirely clear on why they were doing it.
Why did all this happen? First, it is worth highlighting that the post-war changes were not as revolutionary as they seemed at first glance. By 1939 Britain already had one of the world’s most comprehensive welfare systems, even if it was complicated and its coverage left many gaps. As just one example, manual workers earning to £250 per year could claim health insurance, but their spouses and children could not. Viewed from this context, the change in 1945 was to universalise the existing welfare system, not create it from scratch.
Government intervention in the economy also crept up during the interwar years.From the early 1920s onwardsas rising economic nationalism hindered access to export markets, old and inefficient industries struggled to modernise, and global demand for key British exports began to fall. This was made worse by increased foreign competition and, in the case of the railways, from competition from newer rivals, namely road vehicles. Successive governments, mostly Conservative or Conservative-dominated, increasingly turned to the state action to facilitate the restructuring of those struggling industries, as my DPhil (PhD) explores. By 1940, for example, the Conservative-led National Government nationalised coal mining royalties. While it is certainly difficult to imagine a Conservative-led administration to go as far as the Attlee Labour Government did, there was a clear long-term direction of travel. In short, the war forced an acceleration, even if a major one, of existing change.
Secondly, 1945, unlike 1918, took place after not one but two world wars, and a depression thrown in for good measure. Collective memories of disappointed hopes after 1918, a sense that a community that had made so many sacrifices deserved something in return for those sacrifices, and the idea that if the state could mobilise so effectively in wartime then it could do so during peacetime created a powerful driving force for change. Or at the very least, it created a powerful sense among even many Conservatives that the desire for change was too powerful to ignore. In such circumstances, change was likely. This contrasted with the period after 1918 when many measures, like those in housing, were only viewed as temporary and driven by political/military necessity.
Covid and the State
While it would be dangerous and ahistorical to overstate the parallels between wartime conditions and those created by the present crisis, there are similarities.
Returning entirely to pre-Covid normal is most likely impossible, at least in the short term. As with the government’s First World War measures, the damage caused to some industries by the enforced shutdowns may force at least some restructuring. Like the railways of 1918, the airlines of 2020 are unlikely to emerge unscathed, and some have already failed. Cutting back increased benefits and assistance to struggling forms is unlikely to prove straightforward. As it proved after 1918, economic conditions may well take a good deal longer to return to normal than hoped.
Even if, as seems unlikely, all the social distancing measures were scrapped by the summer, economic recovery will not instantly follow. Many consumers have lost their jobs or seen their income fall and will dip into savings as a result. Business too will likely burn through reserves. Neither business nor consumers will therefore have the capacity to spend. Even those who do not may prove reluctant to spend until they feel safe to do so. Moreover, different sectors will reopen at different times. Those like travel will be the last to return to normal. This means that suddenly cutting off state aid will prove difficult.
There may also be some increased state intervention aimed at domestic medical supply chains in to reduce dependence on Chinese imports. Pressure on drug companies to repatriate production is growing in the United States. The British Government could well attempt to subsidise a domestic medical industry. Similarly, the government may decide to throw more cash at the NHS to bolster capacity rather than try to run it as efficiently as possibleduring normal times.
While we can expect change around the edges, a wholesale shift in the role of the state seems unlikely. Even under a worst-case scenario, the present crisis is likely to end after a vaccine is developed. This could be a soon as September, but even if takes the expected 12-18 months, this is much shorter than either of the world wars. In contrast to 1945, we are not coming out of a 40-year period of state expansion. While arguably under Theresa May and Boris Johnson the Conservatives have abandoned the Thatcherite obsession with shrinking the state, we clearly have not been experiencing the four-decade period of state growth that we had by 1945.
Moreover, for all the talk of green new deals, or of the crisis as a transformative moment, there is no great appetite for or expectation of a change in attitudes towards the state. The state may have grown massively, but, as with earlier crises, this growth has been tied to meeting the needs of a specific crisis. When faced with national collapse, even Conservatives can live with a very large state. It would be delusional to expect that support for such a bloated state will remain once the crisis has abated, though perhaps we can hope that some crisis-induced changes, like the attempts to address rough sleeping, will survive. While fiscal hawks seem to have lost the public argument over austerity, the events of the 2010s hardly compare to those of the 1930s depression. Finally, unlike 1945, there is also no widely accepted, or at least widely tolerated, blueprint for what such a transformation would look like. There is, in other words, no 2020 equivalent of the Beveridge Report. We should not expect a sudden return to normal, but neither should we expect to wake up in utopia.