Introduction

Sir Samuel Brittan is one of Britain's best known economic journalists and political commentators. He has been the principal economics commentator on the Financial Times since 1966 and was appointed assistant editor in 1978. His ideas span the fields of political philosophy, ethical debate and economic history. Brittan is well known for his critique of Keynesian economics and advocacy of market friendly and politically libertarian ideas. But his thinking cannot be neatly pigeonholed in ideological terms: he remains an iconoclastic libertarian, as concerned with moral and ethical questions as with formal economic arguments.

Brittan attended Kilburn Grammar School and Jesus College, Cambridge University, from which he graduated with first-class s honours. Though he was taught by Milton Friedman and Joan Robinson whilst an undergraduate at Cambridge, he did not espouse neo-classical views until some time later. His original political sympathies lay with the left, and he was especially interested in foreign policy questions. After Cambridge he joined the Financial Times and published his first book, The Treasury under the Tories.2 In 1965 he left journalism briefly and worked for the newly created Department of Economic Affairs. He was subsequently appointed to the post of economics editor at the Financial Times. During this period he propounded his belief that the pound was overvalued. But he became increasingly critical of the underlying assumptions of Keynesian orthodoxies, especially of the idea that the state could orchestrate growth by spending to increase demand. These views were expressed in the final edition of his book, Steering the Economy.3 After 1969 his thinking on inflation was taken up by the Conservative intellectual Keith Joseph, among others, and Brittan became an important sceptical voice within economic policy circles. He began his study of the relationship between a "free" economy and a "free" society (a relationship which has become a key theme in his ; work), published as Capitalism and the Permissive Society in 1973.

In certain respects Brittan's heterodox economic ideas overlapped with the free market policies and monetarist ambitions of the Thatcher administration elected in 1979. Yet he has always been critical of aspects of Thatcherite politics, notably over what he perceived to be their "illiberal" nationalism. During the mid-1980s he became a convert to the idea of the European Exchange Rate Mechanism, though he has indeed expressed regret at the timing of British membership which was delayed until 1990. In 1993, his contribution to political and economic debate in Britain was recognised in the form of a knighthood. Several themes have flowed consistently through his writing. Perhaps most importantly, he remains a skilled economic analyst who is sceptical of many of the assumptions of fellow professional economists.

He has always sought to broaden the scope of economic debate, adroitly incorporating traditions of political and ethical theorising in his writing. He has thus been concerned to think through the ethical implications of his liberalism, especially how economic "freedom" can be connected with socially and politically liberal policies. From the late 1960s, he played a key role in attacking the intellectual foundations of orthodox Keynesian economics: his critique of the "conventional" belief that there was no long term trade off between unemployment and inflation was a critical component of first New Right and subsequently New Labour thinking. Yet he did not view government policy in the post-war period as simply "Keynesian" in inspiration. He argued that in this period policy was shaped most of all by the Bretton Woods system which fixed currencies against the dollar (and the latter against gold) and which ensured low inflation while it lasted.

Brittan has made indirect contributions to the decline debates that became prevalent from the late 1960s. In the 1970s he was very critical of corporatist thinking and incomes policy. Yet his work has always undercut some of the central assumptions of "declinism" too. Critical of those who have fretted about balance of payments deficits, for example, he argued that strong economies can run deficits whilst important features of national economic life are not measured in such a calculation. Even more important is his critique of the notion of national economic competitiveness - which for him, as for many economic theorists, is almost meaningless. He has repeatedly observed that the only level where competitiveness can be measured is that of the economic enterprise. He explains why in the statement which follows: "I reject the whole notion of competitiveness. W e cannot all be more competitive". Equally, he dislikes the "chauvinistic" assumption behind competitiveness talk. Trade, he has repeatedly asserted, should not be conducted as a form of economic war.

Of particular interest now are his views on the Thatcher "experiment" and what we are to make of this latest attempt to reverse Britain's perceived decline. His response to Thatcherism was ambivalent. Outspoken about some of the societal consequences of policy in the 1980s, he was also sympathetic to central parts of the Thatcherite programme - notably privatisation, the abolition of exchange controls, and trade union legislation. As he demonstrates in the interview below, he shares the Thatcherite hostility to union power and monopoly: "The unions played an important role in holding back British performance". Yet social equity and stability, he believes, can only emerge from a much more systematic attack on the fiscal privileges of pension funds, home owners and landowners on the one hand, and more targeted and generous distribution of resources to the less well off, on the other. The gravest error Thatcher and her ministers made, in Brittan's view, was to underestimate the rigid ties of the labour market which took longer to "loosen up" than was realised. In economic terms, the Conservative government's policies brought some, perhaps unexpected, benefits, engendering massive internal reorganisation within the manufacturing sector and increases in productivity during the 1980s and 1990s.

Interview

I have always thought that individualism represents a vital aspect of the climate of ideas which influence economic performance. If you look at my book, A Restatement of Economic Liberalism, there is an essay there, called Capitalism and the Permissive Society, where I point to the limits of individualism in the nineteenth century, how it affected only adult heads of families. There were not enough people then in a position to take advantage of individual freedom.

But by the late nineteenth century these ideas were being hotly disputed, and Gladstone and Joseph Chamberlain were partly falling out over them. Then along came the New Liberals, like Bosanquet, who somehow found their niche within the Liberal Party. But there was still a streak of tolerant individualism in the pre-1914 Liberal government.

But then the First World War brought back collectivism, militarism and dictatorship. And ever since, the right has succumbed to the great fallacy of trying to marry economic individualism with nationalism and a very pronounced non-pacifism. In fact, Michael Oakeshott said that the biggest influence in favour of what he disparagingly called the enterprise state, as distinct from a civil association, is war.5 War always leaves a legacy of more government authority, more rules and regulations, which it takes many decades to get rid of. And war played a major role in moving Britain down a collectivist path. There were other causes too. There was the triple alliance of the unions, the imperial preference movement and monopoly minded businessmen, all of which existed before World War One. But I do think that the war put back for many decades the prospects of a civilised capitalism.

Immediately after World War Two, the public spending proportion, after disarmament was over, was not much more than 30 per cent. Somehow, when nobody was looking, it started creeping upwards, and by the 1970s, governments had to fight very hard to stop it getting above 50 per cent. I am not against the postwar welfare state, but if we were starting again, would we not organise it on a different basis? This is a complex area of debate. But one aspect of collectivism involved the expansion of government services which in some ways went too far. Despite the concern about relative economic decline, by 1960 the UK was a prosperous society even though growth rates were not as high as they could have been. Nevertheless there was a great outcry about relative deprivation. I think we could have tried to consolidate the welfare state as it was about 1960 with some rule that increased expenditure in one direction would involve retraction in another. Equality took over from freedom, and that, I think, was what went wrong with progressive education too.

I have generally been very sparing in talking about the "British disease" in my work. But the unions played an important role in holding back British performance. They are not terribly significant now, except in odd areas like urban transport. One could not help noticing that the reason why British governments used to say that they had to put on the brake was because of inflation, which was then blamed on the unions. That was the argument used by Labour governments even more than Conservative ones. And though they sometimes blamed the balance of payments, the trade unions came in as a cause of every economic fault. Governments would say: "We would like to expand the economy faster, but we need pay restraint as a quid pro quo". But it always broke down, one way or another. The unions still seemed to exert an influence even within a more monetarist framework, because, it seemed to me, their habits increased the amount of unemployment involved in getting down the rate of inflation, and increased the amount of unemployment prevailing in a steady state once you had got the rate of inflation down. These are proximate influences on public events. I had always thought that unions are essentially monopolistic organisations. Just like monopolistic employers, they operate by control of entry. Even if they do not control entry: themselves, they do not go for a market-clearing pay rate: they try to fix it as high as possible. They settle for higher pay per head at the expense of lower employment. Some neo-classical economists, like Patrick Minford,7 say that this is only possible because of the benefits floor, but even if that is so, you could have the benefits floor doing much less harm to employment if labour markets were much more competitive.

Perhaps I lacked the typical formation of a British economic intellectual who is brought up to denounce monopoly but who regards union monopoly as something different. Unions also always appeared to me in a threatening pose. When I was at university, I used to believe in a "socialist foreign policy", which really meant a liberal foreign policy. Now the great Praetorian Guard which protected the Labour right against the foreign policy liberals were also the union barons, who ruthlessly used the block vote to try to stop dissent. Later these people relished the thought of bringing London to a halt. There: are other lobbies of a similar kind: there is the farming lobby, for example. And I do not see any real distinction between the unions and the lawyers - organisations who stopped Lord mace from liberalising the law profession as much as he wanted.8 That is the nature of trade unionism. In the 1970s, it was impossible to imagine that the National Union of Mineworkers would become a minor organisation and that the Coal Board would be sold off to a small private company. It would have seemed a utopia. What I did not look at sufficiently were what the obstacles to performance would be if the unions were reduced in influence. But I do not want to take back anything I said about the unions. God help us if they return.

The 1972-79 period was one in which interest group coalitions increased in influence. Why were we able to have full employment earlier? One influence at work here was that for a long time in the postwar period there was a surprising amount of "money illusion". People thought that a 5 per cent pay increase was a good one, and did not say that they wanted it after inflation and tax. At a certain point that was punctured. Some commentators would say that this was because of a new generation of trade union leaders. More important is the fact that when inflation began to accelerate you had a shattering of "money illusion", and full employment could not be sustained because of this illusion. The postwar decades were characterised by mass production (I think the Marxists call it "Fordism") and for that period there was no great difference between the supply and demand situation for different types of labour, so you could conceive of an incomes policy with an average of 3 per cent or 5 per cent, without asking too many questions about some people needing to have minus 5 per cent and others plus 25 per cent. You could think of realising this through pay policy, as perhaps the Germans and the Scandinavians did for a time. Once we moved away from "Fordism", from mass production, to secure full employment it was necessary to have the pay of different groups of workers moving in radically different directions. Those on the losing end could not be expected to like that. So we had both more militant trade unionism, and also demands to use the public sector to redistribute income. But it is not possible to redistribute more than there is. Thus we got into problems in the 1970s which helped generate the over-extended state.

I have not really changed my values since the age of 16. I did support Keynesian full employment policies when I thought they would work. The difference between myself and some other people was that they thought these policies could be made to work by corporatist institutions. I did not. If an incomes policy simply meant some nice man in the Treasury working out that we all have to get a 3 per cent rise then that might be acceptable. But once it involved Jack Jones telling Denis Healey what he could put into the 1978 budget, it was too much.

Considering the 1970s from the vantage point of the 1990s, a number of developments have occurred which I did not anticipate. There is now an obstacle, not so much to growth and productivity, but to full employment in the preference of "macho" employers for what they call a small, highly paid labour force, rather than for a larger and less well paid one. They are acting almost as if they are internalising the union role. If you divide the union effect into two - first, the purely monopolistic effect on higher pay and lower employment; and second, the restrictive practices effect - the restrictive practices effect is now very much reduced, but employers themselves are very reluctant to take on a great number of low-paid employees. Clearly, one can see the temptations here. For if they have well-paid but scarce jobs, they can ration entry. And they can therefore discipline the people who are there. The internalising of labour monopoly by companies is perhaps something which I should have foreseen. But the other part which I could not have foreseen (although occasionally I did say it might be possible) was that technical progress would be so unfriendly to the less-skilled or less-lucky workers. l need to put this very carefully, because I do not buy all the propaganda about training and education. But clearly there are widening differentials. l do not mind widening differentials between the medium and the top, but the widening differentials between the medium and the bottom reveal that some workers are not trained, or are unlucky, or are simply not "street credible". The spread of market clearing pay has widened. And it has moved very much against the less skilled or unlucky workers. It may also have moved in favour of capital and against labour.

If one thinks about these issues on a comparative basis, it is clear that nobody has solved these problems entirely. The Americans have a more flexible labour market, but they have a greater problem of poverty at work. The Europeans have much less poverty at work, but they have worse unemployment than we have. And they have managed to keep a so-called safety net but at the expense of very low employment rates. They even have more retired workers than we have. And with the tendency for the population to age, they will have a problem of very few productive workers to produce the national income on which all the rest will depend. I would like to see more of the social security budget spent on top-up payments for people in work; and therefore less spent on the dole. But if you ask me whether there is a society which has got there and from which we can learn, there might be a little trick which we can learn from one country and another little trick from another. But there is no obvious role model. In fact, I think that the problems of Britain, France, Germany and, to some extent, the United States are very similar.

I reject the whole notion of competitiveness. We cannot all be more competitive. I remember somebody saying: "Whom should the whole world be more competitive against?" We can all perform better, we can all be better off. We cannot all be more competitive. "Competitive" is a comparative notion. If you restrict it to a very boring macro-economic sense, each country needs to have a real exchange rate that is competitive enough not to have a current payments deficit greater than what can be met from long-term foreign capital imports. But the fixation upon competitiveness is not merely a mistake, it is harmful because it makes trade into a form of war. And it suggests that Britain cannot do "better" without other countries doing "worse". Now, I do think that - partly because of Thatcherism - there is less difference between the various European countries. There is talk about Rehash capitalism being on the wane. Problems now are common ones. The question is no longer why Britain is performing so badly in relation to other countries. Studies are appearing on German economic performance, French development, and even on the Japanese economy, making many similar critical points about each. In a sense, I would have been more prepared to accept the "What's wrong with Britain?" conversation in the 1960s or the 1970s than I am now; l do not think it is a very helpful approach always to be wearing the dunce's cap and asking why you are the dunce. It is really more sensible to ask why the whole class is not doing better. Today a discussion of the economic and social problems of one country is much like a discussion of those in another. And by asking what is wrong with particular countries you get the wrong emphasis because the argument always then hangs on slight differences. And it always assumes that the country in which one is having the conversation is much worse than all the others, which is untrue. There is a major difference between Europe and North America, with Britain coming somewhere in between. There was supposed to be at one time a distinctive Scandinavian model, but that has gone.

Thinking specifically about the decline debate, it is important that after the Second World War Britain started with a higher standard of living and a higher GDP per head than most other European countries. Now you would have expected some catch-up by these other nations after the war, but the catch up continued for a suspiciously long time and by about the late 1960s about fifteen to twenty years after the war, and going by very imperfect statistics - they seemed to catch us up and then carried on overtaking us. So there did seem to be a performance gap.

British institutional peculiarities have also been historically important. I have already discussed the unions. We could also consider the class system. In the 1950s and perhaps early 1960s people did get jobs because they were somebody's nephew or had been to a certain school. Oddly enough Wilson and Thatcher between them symbolised the end of that. A culture dominated by union obstructionism on the one hand and upper-class twits on the other was not a great recipe for success. Britain is now much less "class-ridden" than it was. I suppose what "class-ridden" means is that the vicar who comes to sherry regards himself, and is to some extent so regarded, as socially superior to a cockney industrialist who could buy him out a million times over. This has implications, because this cockney industrialist will want his son to go to Oxbridge, and then go into the civil service or go into one of the professions, and will have some sort of bias against business. All that has declined; it still exists, but is much less prevalent than before.

On this question of anti-business bias, I liked Martin Wiener's book.9 He makes very good observations about how the business classes reached their high point at the time of the Great Exhibition in 1851, and from then on were mainly hoping to join the landed gentry. Now, this book has supposedly been answered by W. D. Rubinstein.10 I do not think it has been actually. People might expect me to think so, but I do not. Wiener laid himself open to criticism by talking about the industrial classes, and the industrial spirit. If he had said business or commercial spirit, his argument would not seem so out of date. But at the moment if you draw a graph relating GDP per head to the proportion in manufacturing, you will find that it is an inverse graph - the higher the GDP per head the fewer the number of people in manufacturing. Wiener was nevertheless largely right, more so with his literary illustrations perhaps than with his numbers. He has all these wonderful quotations from Baldwin saying the Englishman was a countryman at heart. And Ramsay MacDonald was not much better: he was supposedly a Scottish countryman. But by then well over 90 per cent of the British population was urban. And to some extent this myth was held by people lower down who as soon as they could afford a car, would take a picnic and sit in it on the fringe of the road thinking they were in the country. What has gone wrong with the Wiener argument is that the word "industrial" in his title has been taken too literally.11 I am not sure how far you could apply the Wiener critique today. When he was writing, the typical City company director would, by mid-Friday afternoon, have long been in the country. Today, however, he would be unnecessarily in his office at seven o'clock in the morning to keep in touch with the 0 Japanese market and stay there in case something from the USA comes in later. Now, it is not clear that this makes for any greater efficiency than reading Trollope or hunting, shooting and fishing because it is the sort of thing that you could leave to an assistant. Probably those do best who do not frenetically try to follow every twist of the market which you cannot forecast in 0 any case. Most of it is noise. If you substitute the word "business" or "commercial" in place of "industrial", then I think Wiener's thesis would apply from about 1850 to about twenty years ago, which is quite a good run. Then came "Thatcherism", though in fact a lot of people, including many in the civil service, will tell you that the real change came in 1976, triggered by the International Monetary Fund. If you look at the Denis Healey period, you might well feel that Thatcherism had come in then, because there were clear commitments to reducing the public spending proportion, and the borrowing requirement. So at the macro-level it started then.

It is obvious that I have never been a Tory. I have never liked the Conservatives very much. So I was not dancing in the street at the prospect of a Thatcher government. T here was something paradoxical about using authoritarian means to bring in a liberal order. If you look at her speeches, you will find that she rarely spoke about a liberal order. She always used language which she thought would mean more to people in the street. She left it to Keith Joseph to put it in other ways. She did not talk of a liberal order, but about people's responsibilities, the need to wake them up and to see that the state could not provide them with everything. In her view, of course, decline came to an end in 1979 and started again in 1990!

In economic terms the Thatcherite record looks quite good, better than I was prepared to admit, in fact. Privatisation was more important than I perhaps realised at the time. And so were the union reforms. Now, it would be perverse to say that it was "fortunate" that there was a recession at this juncture, but sometimes chance lends a hand. The fact that the union reforms came at a time of recession meant that people thought the effects of the laws were greater than they really were. There should be no apologies whatever for taking on the unions. Thatcher made a lasting contribution in challenging the unions. She made enterprise profit respectable. People felt S less apologetic about making profits. And she did raise a query about whether more state spending was the answer to every problem. These are much longer cultural changes that you cannot "graph" in terms of national income figures.

There are less-favourable aspects of her governments' record though, especially concerning some "technical" issues. They were, for example, looking for a magic monetary solution, but did not discover it, and in fact no one has found it. There was also the fact that under Thatcher herself there were lots of reserved areas in policy terms, such as mortgage interest relief. Thatcher's great advantage was that she could ignore the paradoxes of her position on questions like this. She was in favour of getting the state off the backs of the people, and so encouraged people to buy their own houses, which meant that she did not tax mortgage interest. This is not entirely a minor point. This "special favours" approach to housing had quite a lot to do with the housing boom of the late 1980s. Now you might say that credit 0 expansion was more important; but when you remove credit controls there i s bound to be an outburst of lending and it would have been better if mortgage interest relief had been removed in the early or mid-1980s.

She was utterly confident about the link between economic liberalism and a strong sense of nationalism. So we had the Falklands war, which I was totally against, because I think people lost their lives for insufficient reason. This nationalism became important in economic policy towards the end, with Thatcher's attitude first to the European Exchange Rate Mechanism and then European Monetary Union ("I will not have my monetary policy controlled by Belgians"). She began this chauvinistic response, but it has been exacerbated by other people. This is a definite inhibition on the conduct of British macro-economic policy and on other matters too.

As for the Conservatives in government post-1990, there was much less of a U-turn in policy than a change of tone. For instance, Michael Heseltine would say that manufacturing industry was very important. But he did not have a large enough budget to do much about it. And in some respects, such as in denationalising in areas where Thatcher did not dare to go, there was some progress. What went wrong is something that cannot be shown in the numbers, but is what happens when a conviction politician is replaced by a manager. When Margaret Thatcher was leader of the Conservative Party, she did not have to work over the weekend to think about how to answer Labour. She would tell you for an hour or two, and there was no stopping her! Major's Conservatives tried a different approach. First they said that Labour represented just the old type of socialism. Then they claimed that Blair had stolen their ideas. Subsequently they moved to a third position, that he had got a new set of ideas but they were dangerous. The fact that the :: Conservatives moved from one argument to another the whole time suggests that they were troubled by the question "What should we be thinking and saying?" Sometimes people have convictions which prudence prevents them from uttering. But these people seemed to have no convictions, except u the desire to retain power.

If you were to look at the numbers in the 1970s, the British growth rate was very low indeed. You could say it was because this was between the oil crisis and the discovery of North Sea oil. After 1979 two major developments occurred. First, the British growth rate reverted back to the trend of the 1950s and 1960s. Second, the European and Japanese growth rates slowed down. So there was no longer a significant growth gap. It is possible that in the 1990s the British expansion will be stronger. So the Conservatives were not just talking nonsense. On the other hand, if you look at some of what James Callaghan was saying from 1976 to 1979, he had the same sort of ideas about shaking up labour in Britain. A similar point could be made about what Peter Jay was then arguing as Britain's Ambassador to the USA. It looked as if such thinkers were inaugurating a new era. The big difference was that Callaghan was politically indebted to the unions and he knew it. He grew up within the labour movement, and if he went against the unions he felt bad about it. So his emphasis was always on aiming to get union leaders to come out with some statement which supported his views.

Economic liberalism and other forms of liberalism should be tied together. You get, on the one hand, so-called liberals, who are mostly interested in equality, and who do not see that the liberty to change your money into a foreign currency, to start a business, to go where you like, even to determine how to spend your income, are important liberties. On the other hand, you get so-called economic liberals, who draw up tables of economic freedom, in which South East Asian dictatorships become tolerable. They are both in danger of making themselves absurd; these views are not convincing if held in isolation. l am a little bit out on a limb here, because you will find that most of the economists around the Institute of Economic Affairs either find reasons for supporting the non-economic side of the Conservative project, or they just keep very quiet about it. My view is that it is important to consider the non economic aspects of liberalism in conjunction with economic liberalism itself.

Notes
1. The breadth of his interests is well exemplified in his recently published collection of essays, Capitalism with a Human Face (London, 1995); and Essays, Moral, Political and Economic (Edinburgh,1998).
2. S. Brittan, The Treasury under the Tories 195144 (Harmondsworth, 1971).
3. S. Brittan, Steering the Economy (London, 1971).
4. S. Brittan, Capitalism and the Permissive Society ( London,1973).
5. S. Brittan, A Restatement of Economic Liberalism (London,1973).
6. M. Oakeshott, On Human Conduct (Oxford,1970).
7. See, for instance, P. Minford, The Problem of Unemployment, Selsdon Group pamphlet, Selsdon Group Policy Series, no.5 (1981).
8. A reference to Lord MacKay of Clashfern, Lord Chancellor from 1987-97.
9. M.J .Wiener, English Culture and the Decline of the In dustrial Spirit 1850-1980 (Harmondsworth, 1992; Ist edn, 1981). See also the interview with Wiener, pp. 25-36 of this book.
10. W.D. Rubinstein, Capitalism, Culture and Decline in Britain 1750-1990 (London, 1994; 1st edn, 1993). See also see the interview with Rubinstein, pp. 61-75 of this book.
11. This is an a particularly interesting comment when considered in the light of Wiener's observation about the title of his study, in the interview in this book, p. 32.