John Brunner, “The Plan that failed,” in I.E.A., Growth through Industry: A reconsideration of principles and practice before and after the National Plan (London: Institute of Economic Affairs, 1967), pp. 50-70.
1. THE SETTING
— THE GENESIS
— A POLITICAL JUDGEMENT
2. THE FIRST STAGE — THE QUESTIONNAIRE
— UNCERTAINTIES OF DEMAND
— MANPOWER FORECASTING
3. THE NEXT STAGE — “MUTUAL ADJUSTMENT”
— RECONCILING SUPPLIERS AND CUSTOMERS
— RECONCILING EVERYTHING WITH EVERYTHING ELSE
4. FINAL STAGE — IMPLEMENTATION
5. PRETENSIONS OF THE PLAN (AND OF PLANNERS)
— DOUBTFUL CLAIMS
— PROFESSIONAL BIAS OF PLANNERS
— NOTHING NEW
John Brunner was born in 1927 and educated at Eton and Oxford from which he graduated in Politics, Philosophy and Economics in 1950. From 1950 to 1953 he was on the staff of Political and Economic Planning, after which he worked for five years with the BBC where he was responsible for economic and industrial talks and discussions. From 1958-61 he worked in the Economic Section of the Treasury. From 1961-66 he was on the management of The Observer. In 1966 he emigrated to Australia.
He has been a contributor to New Society, Statist, 20th Century, Lloyds Bank Review and other journals. He wrote an essay, “The New Idolatry,” published in Rebirth of Britain, Pan Books, 1964. This essay is a shortened version of his The National Plan — A Preliminary Assessment, published by the IEA in 1965 as Eaton Paper 4.
1. THE SETTING
During the early months of 1965 almost every firm of any size in the country was busy filling in a lengthy questionnaire drawn up be the DEA asking for forecasts of output, investment, employment, etc. from then until 1970. With few exceptions industry meekly complied. If market research is so desirable for the individual firm, what is wrong with market research on behalf of the economy as a whole? The answer of course is nothing (though this is not to pretend that all money spent on such research is money well spent) but the Plan is not just a gigantic essay in market research. Au fond it is normative.
This becomes clear as soon as one examines the objectives of the National Plan. The cornerstone of the Plan is that Gross Domestic Product will grow by 25% between 1964 and 1970. Only the credulous could believe that such a nice figure was the invention of science.
— THE GENESIS
The origins of 25% will have been something like this. When the present government came to power dedicated to this form of national target practice, they found that the earlier equally unscientific target had fallen into disrepute. This half-baked pursuit of 4% by the previous incumbents had landed us in the worst economic crisis for years without apparently even achieving its aim. A newer and rather more modest figure was called for, at any rate for the time being. This suggested a figure nearer to 3.5%. But such an uninspiring target was hardly calculated to fire the nation’s imagination. A figure more worthy of its endeavours had to be found. This could obviously only be done by taking a period of several years. The compound interest tables were therefore consulted and, hey presto, 25% emerged by don’t of taking a six-year period and assuming a not impossibly over-optimistic rate of 3.8% per annum.
4% remains the objective for the year 1970 — thus the 3.8% average implies an acceleration in the annual rate from 3.6% or so at present1 — and there are those in the DEA who seem to feel that they may have been too ready to abandon the 4% target immediately, now that last year’s (1964) indices of economic activity have been revised upwards so sharply. (This of course begs the question whether a 4% growth rate that can be achieved only with a balance-of-payments deficit of £745 million, subject to correction, is really a viable proposition. Moreover it seems a trifle incongruous to start solemnly revising our destination when we have to admit, not for the first time, that we did not know where we were starting from or how we got there.) However, for the moment at any rate, 25% in six years is the basis of the Plan.
— A POLITICAL JUDGEMENT
Having chosen this figure for the increase in GDP, the planners then set about dividing the imaginary spoils among the various components of final demand. There is no necessary relationship between them, so this exercise is perfectly legitimate within reason, however subjective. If as an act of political choice the government of the day plans to increase investment, exports and public consumption of goods and services by more in percentage terms than GDP and private consumption by less, so be it. The government is fully entitled to express what it takes as the people’s will in this way, even though others are equally entitled to challenge it. All that intellectual honesty requires is that the figures for final demand written into the Plan should be seen as the political judgements they are.
Having chosen their overall objectives, the planners then had to find ways of matching them with industry’s own plans. The questionnaire was the chosen means of ascertaining the intentions of individual industries. Since the success of the Plan does in practice depend to a considerable degree on good forecasting, and since the answers to the questionnaire are likely to be taken down and used in evidence against industry, it is worth considering in some detail just how much weight should be attached to them.
2. THE FIRST STAGE — THE QUESTIONNAIRE
In the memorandum accompanying the questionnaire, which incidentally bears a striking resemblance to the questionnaire used by the French Plan,2 industry is asked to take account of a number of the DEA’s general assumptions. Besides being requested to believe that GDP will increase by a quarter between 1964 and 1970, industry is urged to assume that exports will have to increase up to twice as fast as in the past, and that 1970 will be an average year with “overseas markets in an average state”. A forecast is also given for the increase in the available labour force — a mere 1.5% by 1970. All this is no doubt to ensure consistency and the minimum of subsequent revision.
Alas, such macro-economic assumptions mean little to most firms. That there may or may not be an increase of x per cent in total exports or y per cent in the working population seems far removed from the prospects of the individual firms, and even the assumption of a 25% increase in GDP is not much help unless a firm has dome idea of what the income elasticity of demand for its products will be in 1970. Understandably very few have because, even if firms calculated the income elasticity for their products in the past, it would be an unreliable guide to the future. The Table illustrates the extent to which elasticities of demand can change over short periods.
What is significant is not that a rise in real national income of 15 or 16% over six years should lead to changes in consumer spending ranging from an increase of 260% in car in 1951-57 (144% in 1957-63) to a fall of 37% in cinemas in 1951-57 (52% in 1957-63). It is a commonplace that the elasticity, or responsiveness, of demand varies between wide limits for different products. The significant lesson is the sharp contrast between rates of exchange in expenditure on the same product groups in the two 6-year periods. Forecasting the likely level of demand in 1970 runs into baffling problems even if we knew the rate of growth of total incomes: will expenditure on food or cigarettes rise at about the same rate (as in 1951-57) or at about half that rate (as in 1957-63)? Will expenditure on telephones and postal services rise at about the same rate as incomes (as both did 1951-57) or at twice the rate (telephones in 1957-63) or not rise at all(postal services in 1957-63)? Will expenditure on books rise faster than total incomes and magazines fall at about the same rate (as in 1957-63) or will both remain static (as in 1951-57)? Will expenditure on fuel and light rise at half the rate of incomes (as in 1951-57) or by nearer three times the rate (as in 1957-63)? To the extent that 1964-70 lives up to the promises of “dynamic change”, all estimates of future changes in demand for product groups (let alone for one firm’s brand) are more than ever sheer speculation.
One, but only one, reason for these changes in income elasticities is changes in relative prices, and the fact that answers to the questionnaire are to be expressed in terms of constant (1964) prices itself introduces an extremely unreal element into the whole exercise. Relative prices can change very markedly even over a period of six years. Between 1958 and 1964, for example, wholesale prices of commodities produced in the UK rose about 12 per cent, but this increase was made up of falls in a few sectors such as general chemicals and domestic electrical appliances (the price of polyvinyl chloride fell as much as 24% and that of refrigerators 30%) and rises in the others ranging in some cases up to three or four times the average. Again, if industries were subdivided further into what many might regard as more meaningful categories, the divergencies from the mean would be all the greater.
The problems created by the attempt (or failure) to take account of price changes came home to the French planners quite late in the day when they were forced to send out a technical note “to overcome the distortions introduced by projections of constant prices, due either to anomalies in the price structure in the base year or, more important, to changes in relative prices over the period of the Plan”.3 There is, however, no altogether satisfactory way out of the dilemma. The use of current prices poses the familiar problem of what allowance to make for inflation. Since the planners would presumably be quite unwilling to provide a realistic forecast of the likely fall in the value of money, each industrialist would be left to make his own estimate, an arrangement hardly conducive to consistency. On the other hand, volume is an even less suitable criterion. It lacks any common denominator — some industries measure their output in tons, some in yards, some in numbers of articles produced. Measuring output by volume is to risk confusing chalk with cheese by failing to draw any distinction between, say, a car or computer in 1964 and subsequent much more sophisticated models in 1970, and it can produce downright perverse results.4 The choice of contrast prices may therefore be the least of three evils, but it introduces one more joker into an already overcrowded pack.
— UNCERTAINTIES OF DEMAND
The memorandum states that one of the purposes of the “process of consultation” is “to establish the extent to which a higher rate of growth in the national product would be feasible”. There are many industries which could expand their output materially even today (shipbuilding and cotton being obvious examples) but the problem is one of finding markets. It is not physical capacity, however measured, which is the limiting factor but design, price and product acceptability. This qualification applies a fortiori to the column in the questionnaire requesting output for export.
But given that forecasting output really means forecasting demand, industrialists are faced with two major areas of uncertainty — one concerning the total market for their product, the other the share they can expect for their own particular brand.
The overall growth rate is only one of the macro-economic factors they want to know about before forecasting demand for their product. For most employers much more relevant are possible changes in exchange rates and tariff levels and, more important still, the likelihood of our joining the Common Market by 1970. On all these crucial points the DEA memorandum is silent. Nor is it any more forthcoming about future tax changes and yet there is not a consumer goods industry in the country whose future would be unaffected by changes in purchase tax or a switch to a retail sales tax or value-added tax, both of which have been widely canvassed in recent years.
The other great area of uncertainty for most industrialists concerns the intentions of their competitors. For in taking a view on the prospects for his own particular article, an industrialist implicitly has to take a view on the prospects for his competitors’ lines, some of which he will not even have heard of. Indeed looking ahead as far as five years he may not even know who his competitors will be. New entrants to the industry could easily make their presence felt during this period. His forecast therefore will be little better than a guess based on a very partial picture of the known facts and on a considerable number of unknowns. Moreover he will almost certainly interpret the evidence differently from his competitors, so that his own forecast and that of his rivals will be mutually inconsistent. In particular there is more than a possibility that he will over-estimate his likely share of the market and hence the total demand for his brand. Even if in his heart of hearts he thought his market share would contract, the last thing he would do is admit it in reply to a questionnaire such as this, the answers to which could become more or less public property within his industry (any more than a boxer or parliamentary candidate ever admits he might be defeated). Output forecasts reaching trade associations and little Neddies may, therefore, often be prejudiced by such considerations and adding the forecasts up may provide a grossly inflated estimate of the future size of the market.
For many industries one of the principal domestic consumers is the government either qua nationalised industry or qua spending department. From all accounts neither the defence departments nor indeed any other big Whitehall purchasers have been particularly anxious to help their suppliers provide a reliable answer to this question; and who can blame them? Government departments are no readier than private firms to commit themselves to decisions that may be held against them at a later date. They are faced with the same need to adjust their demands to take account of new tastes and technologies (the TSR-2 was a spectacular case in point) and they are even more liable to find that their management has changed overnight and their policy with it.
— MANPOWER FORECASTING
A five-year forward look at employment prospects is subject to numerous imponderables. Changes in the length of the working week, redeployment and relaxation of restrictive practices, improvements in layout and working arrangements can all influence the productivity of existing plants and product lines. Where new plants and processes are concerned the uncertainties are all the greater. Productivity will depend on manning scales yet to be negotiated and work norms yet to be established. It will also depend very much on the management’s ability to recruit and train a suitable labour force. This particular unknown will have a special bearing on the figures for regional employment since firms breaking new ground may find themselves surprised, favourably or unfavourably, by the levels of productivity reached and hence by their employment needs.
The record of manpower forecasting has been conspicuously bad. Much time was spent by the post-war Labour government in bewailing the shortage of workers in the coal and cotton industries. Both shortages proved to be wholly illusory and the net effect of the drive to dispel them was that the rundown of these two industries proved even more painful than it need have been.5
Nor has crystal-gazing been any more successful for scientific manpower. The Scientific Manpower Committee’s 1962 Report admitted that it had failed to assess even the current state of demand for scientists, let alone the future:
In our 1961 Report we were able to indicate for the first time that … the total supply of qualified manpower was beginning to approach the total of identifiable demand … the information now  available to us … suggests that we are still some way from a satisfactory balance of supply and demand, particularly as regards technologists.6
Doctors were another such case, albeit one where the expected surplus turned out to be a serious shortfall. One explanation is suggested by similar disappointments in France. “There is no rigid relationship between a man’s training and the function he exercises.”7 To the tidy mind of the planner this breakdown of demarcation lines is very distressing but it is one reason among many for caution in interpreting the answers to a question on future manpower requirements.
Predicting investment outlays is in some ways even harder than predicting sales. Although there are exceptions such as chemicals and electricity where it may take up to five years to bring new plant into commission from the moment it is conceived, for most industries forecasting investment in 1970 is tantamount to guessing what they will be thinking in, say, 1968 about their prospects for the period 1971 onwards. Since business men have shown in their replies to the Board of Trade’s regular investment intentions inquiry that they are capable of modifying their plans quite significantly within one or two years, any five-year view is clearly subject to huge margins of correction. And the reasons are legion. It is not only that trading prospects may change in the interval, that new opportunities and competitors may emerge. The same uncertainties concerning future taxation, credit and tariff policy afflict investment forecasts as they do sales forecasts. The return on new investment can be considerably influenced by changes in indirect taxation on the goods it is designed to produce. Equally changes in company taxation can seriously upset forecasts of net return. Those companies which completed the questionnaires before the recent budget may already be reconsidering their investment forecasts in the light of the reduction in the effective value of investment allowances.
Finally forecasts of investment up to five years hence can be gravely prejudiced by the use of constant prices. Owing to the comparative lack of mass-production techniques in the manufacture of capital goods, the prices of many of them tend to rise faster than the general price level.
We observe in the questions on efficiency and use of resources the same rather simple-minded obsession with what can be produced rather than what can be sold. Any answers which fail to distinguish between under-utilisation of resources due to inability to sell the product and under-utilisation due to, say, restrictive practices will be highly misleading.
But even assuming that it is the latter which are holding back output, who is to say by how much? Are answers to this question to have the backing of the unions concerned? If not, what value can be placed on them? The firm of management consultants employed by the Shawcross Commission investigating the newspaper industry considered that 34% if the production and distribution workers employed were surplus to requirements. The unions have never accepted this figure even coming from such an apparently independent source. What likelihood is there of their accepting the word of an obviously interested management? There is after all no truly objective measure of “a fair day’s work” and both sides of industry know this.
The request for firms’ comments on their completed questionnaires hardly seems to call for comment. It is interesting, however, that at no point are respondents invited to comment on the confidence limits that should be put on their figures. Thus the final returns will be a fearful hotch-potch of the fairly probable and the purely speculative, of the firm intention and the pious hope.
3. THE NEXT STAGE — “MUTUAL ADJUSTMENT”
The memorandum states quite explicitly that the information is being sought “to give some guide to the amount of revision of firms’ existing plans which will be required to bring them into line with the National Plan.” No great harm can come of inviting firms to state their intentions. Indeed the stimulus may provide quite a valuable therapy to those firms which are not accustomed to think ahead.8 The trouble starts when attempts are made to reconcile their forecasts, first with each other and secondly with the objectives of the planners.
Reconciliation can take many forms. At the level of the firm, it may consist of trying to adjust the investment plans of rival companies to ensure that forecast demand and forecast capacity are matched, not too little, not too much, just right. The desire to avoid the so-called waste of resources implied by the emergence of surplus capacity is understandable, but there are serious dangers in over-indulging it. It can quickly degenerate into a conspiracy against the consumer, into legalised market sharing. For this reason alone the enthusiasm for the Plan of the representatives of British industry needs to be treated with some misgiving. We are entitled to be slightly cautious when we see the industries whose market-carrying activities have brought them under the critical eye of the Monopolies Commission now eagerly supporting the plan “in the national interest”.
I say “so-called” waste of resources because often so far from there being any actual waste, an anticipated shortfall in demand is almost a condition of a thriving economy. It not only spurs business men on to find new markets, it helps restrain prices. For it cannot be emphasised too often that every forecast of demand is related consciously or, more often, unconsciously to an assumption about prices. If demand fails to match potential supply at the anticipated price level it can frequently do so at a lower level (there are few if any products the demand for which is wholly unresponsive to price changes). Firms which cannot make ends meet at the lower price level may then go out of business, but before we can say that this constitutes a waste of resources we have to be sure that the remaining firms would have been equally inclined to find new markets and keep down prices had this other and ultimately unremunerative plan not been built. This we can never really say.
— RECONCILING SUPPLIERS AND CUSTOMERS
Another way in which reconciliation can take place is between the expectations of customers and suppliers. It is widely imagined that firms are blundering about in the dark unaware of what their suppliers and/or customers are up to. No real evidence has been adduced for this supposition, at least in the large-scale industries, and for all intents and purposes it is the major oligopolistic industries which interest the planners. What may be true is that suppliers and customers often disagree. It is in the nature of the beast that suppliers should be cagey about the, to them, optimistic hopes of their customers, inclined to adopt a believe-it-when-I-see-it attitude. Consumers, on the other hand, whether final or intermediate, like to see their suppliers with plenty of capacity. It tends to keep them on their toes and anxious to give their customers the best possible service.
It is not at all clear that a better balance could be struck between buyer and seller as a result of some sort of collective horse-trading than is struck by the decentralised judgements of the market.9
However, the problems of adjusting the rival plans of competing firms or those of supplier and customer are a relatively small part of the process of reconciliation as the planners seem to see it. Far more ambitious is the wish to reconcile the forecasters provided by industry with the DEA’s ideas about final demand in 1970.
— RECONCILING EVERYTHING WITH EVERYTHING ELSE
There is a fairly widespread myth that at this point the operation can be more or less handed over to the model builders and computer programmers. This is not so unless it is intended that the DEA should arbitrarily lay down output figures for individual industries in the way that they have settled the main components of final demand. There is no evidence that this is intended and indeed it would make nonsense of the questionnaire if it were.
But if the problem is one of forecasting demand for individual industries within the total pattern of demand decreed by the DEA, computers have only a limited role to play. They may be admirable manipulators of figures. Where, for example, relationships remain constant computers can tell almost at a glance what happens when one assumption is altered, but their predictive value is slight. Today’s or, to be more precise, yesterday’s co-efficients are not tomorrow’s and no amount of extrapolation from past trends will enable computers to predict tomorrow’s relationships with any certainty. Moreover, there are considerable problems about precisely how to extrapolate as was shown in the paper, “Planning for Expansion in Electricity Supply,” prepared in 1962 by Professor R. S. (now Sir Ronald) Edwards and D. Clark: “A variety of different mathematical curves can be show to fit the past trend of growth.” In the case of electricity, the investment of hundreds of millions of pounds hinges on the choice of curve, which remains essentially a matter of judgement.
But although the DEA have proudly depicted “the Cambridge ‘Atlas’ computer on which the Plan statistics are processed” on the front page of their Progress Report,10 it is likely that other more pragmatic methods will also be employed in the cause of mutual adjustment. These are known in the trade as iterative procedures. The process of successive approximation can provide hours of innocent enjoyment, but the outcome depends once again on the initial assumptions. If one or other of them is misjudged the final figure will be misleading. Consistency is no guarantee of accuracy.
In view of such unresolved difficulties it is far from self-evident as the memorandum would have us believe that anything is to be gained from fabricating what amounts to a statistical strait-jacket for British industry. The more everything is reconciled with everything else, the worse the confusion when a particular forecast is confounded. But this raises the question of the status of the Plan. Is the strait-jacket purely statistical — the Plan merely indicative — or are people supposed to keep to it?
There is a certain ambivalence in the planners’ answer to this question. On the one hand the DEA Progress Report already mentioned emphasises that “the implementation of any plan cannot of course be generally enforced by the government.” One must surely assume therefore that the planners will take what steps they can to achieve their targets.
4. FINAL STAGE — IMPLEMENTATION
If the planners are of the opinion that an industry is being too optimistic, this will not cause too much worry. With their general emphasis on investment and expansion they are unlikely to restrain the optimist unduly. The risk here is the one mentioned earlier, that individual industries, seeking to curb their expansionist members, may be able to quote the opinion of the planners in support of their restrictionism. As we have seen, optimism may anyhow be more apparent than real if it is based on the estimates of competitors each of whom hopes to increase his share of the market.
Optimism on labour requirements may be less readily tolerated. Already the NEDC (at its meeting on 5 May, 1965) has “spent some time discussing” the apparent shortage of labour in 1970 suggested by comparing industries’ forecast demands for manpower with the DEA’s predicted supply. A more fatuous waste of time would be hard to imagine. For reasons already mentioned industries’ forecasts must be subject to an error of at least 10% (or 2 to 3 million jobs) and even the forecast supply figure of 1.5% increase between now and 1970 could be at least 1% out, in view of the high elasticity of supply of women, the young and the old, and the unpredictable behaviour of migrants. To worry about filling an imaginary gap of a mere 300,000 jobs, or not much more than 1% of the labour forces, is therefore patently absurd. But unless it is intended to restore the Control of Engagement Order, it seems improbable that implementation here will amount to more than mild exhortation to economise on labour.
A more likely and more awkward eventuality is the case where the government feels an industry’s forecasts of future sales demand, and thus its investment intentions, are too pessimistic. What then? The impression is given that all good men will come to the aid of the country and that this situation will never arise; but at least it would seem worth considering what might happen in the event of such unseemly conduct.
One recurrent difficulty in all government dealings with industry is that while the negotiating body is the industry, the operating unit is the firm. If an industry therefore is to be bribed or cajoled into coming into line with the Plan, this can only be done by measures designed to activate individual firms.
At the moment apart from the various sanctions at its disposal for influencing the location of industry, there are virtually no such measures available for the government. About the only sanctions that have been mentioned are development contracts and the formation of publicly-owned concerns in competition with obdurate industries. The scope for development contracts is clearly very limited, particularly if the defence industries are going to be cut back. The publicity-owned fighting company is not going to be much help to the planner in anything but the long run.
The trouble with failures to reach output targets is that the culprits can invariably find someone other than themselves to blame and more often than not it will be the government. If the government would take off purchase tax or protect the industry from foreign competition, the target could be reached without difficulty. It will be very tempting for the authorities to underwrite demand in this way in the apparent interests of their Plan, but if they do so too often, they will find themselves so circumscribed that their ability to manage the economy will be impaired. The failure of the Government to control the economy and in particular to avoid trouble with the balance of payments will remain a much more serious threat to the success of the Plan than the failure of individual industries to reach their targets. But inevitably sooner or later things will get out of hand. What becomes of the Plan in these circumstances is another of those questions which it is regarded as bad taste to raise.11
The hope will of course by that any restrictions will be purely temporary and not such as to prevent targets being reached in the fifth year. For this reason alone it will be difficult to evaluate the success of the Plan much before 1970. If, however, the gap between performance and intention becomes too glaring, some recourse may have to be had to “rolling planning”, adjusting the Plan as we go along. This may seem a respectable, empirical procedure, but once it is adopted it spells death to the Plan. For so long as it remains largely a confidence trick, anything which undermines believe that the objectives of five years hence will really be reached is fatal.
Whether we can live both with the Plan and a fixed exchange rate remains to be seen.
5. PRETENSIONS OF THE PLAN (AND OF PLANNERS)
Clearly a very large number of manhours are going to be spent working on the Plan. Will they be justified? It is impossible to give a final answer even if its objectives are accepted. The evidence from elsewhere is inconclusive.
— DOUBTFUL CLAIMS
It is often argued that the Plan is necessary for a higher rate of economic growth, but French experience provides no very convincing evidence of cause and effect. The countries most analogous to France are Germany and Italy. All three ae much the same size; all three had their economies devastated by war, all three have been able to deploy vast reserves of labour — Germany from the East, Italy from the South, France from the West and other agricultural areas. France’s rate of economic growth has been less than the other two. This is not to say, however, that it might not have fallen still further behind but for the Plan.
If a higher rate of capital formation is the criterion of success — and there seems to be an increasing readiness to regard quality as being at least as important as quantity — again the evidence is ambiguous. Investment as a proportion of GDP is high in France, but not higher than in several countries without a Plan.
Similarly, if the object of the Plan is to put an end to “stop-go”, French planning has not been particularly successful. Growth was brought to a halt in 1958 and again a year ago, since when the French economy has been becalmed.
Finally there are those who seek to justify planning by reference to its contribution to equality. Again it may make such a contribution but it is not a necessary corollary. The case for planning seems to derive about as much or as little support from its supposed egalitarianism as does the case for nationalisation. We were perfectly capable of introducing a capital gains tax in advance of the Plan and we could equally well bring in a wealth or expenditure tax without benefit of planners.
— PROFESSIONAL BIAS OF PLANNERS
Against the potential gains there are certain risks involved in employing large numbers of planners. These arise from the professional bias planning gives its practitioners. This bias is quite distinct from the political prejudices encapsulated in the aims of the Plan. That planners seldom seem to recognise their occupational bias for what it is, makes it all the more dangerous.
An almost ludicrous example of the pretence of objectivity — that planning can be wertfrei — is provided by M. Pierre Bauchet in his widely regarded and highly partisan book Economic Planning — The French Experience:12
Some people reading between the lines will inevitably claim to discover value judgements. They will be mistaken …
Planners have an inevitable prejudice against anything liable to upset their predictions. Competition, for example, can play hell with the best laid plans; planners therefore have a penchant for monopoly. Foreign trade can be particularly intractable; hence a preference among planners for autarchy. (Even in France, where they are much less dependent on foreign trade than we are, the planners have been gravely disconcerted by the inaccuracy of their export and import forecasts.) Public consumption tends to be given priority over private consumption because the former is more amenable to control. Private consumption is liable to break out in unexpected directions and though in theory it can be restricted by fiscal means, private consumers have an awkward habit of insisting on maintaining their standard of living by means of wage rises.
Again there is the prejudice very rife among economists, and among planners in particular, in favour of the measurable. Given that economic growth is invariably at least one of the ends of planning, planners tend to value those human activities (essentially transactions) which contribute to GDP to the detriment of those which do not because no monetary value can be placed on them. Similarly, in analysing the factors conducive to growth, planners tend to take more seriously those who are susceptible of measurement, the prize example being investment. Those which defy conventional statistical yardsticks — confidence factors, managerial quality, entrepreneurial flair — are discounted consciously or unconsciously.
Most serious of all perhaps is the impatience which many planners seem to feel with politics. Although they may admit that the objectives of the Plan are politically determined, they are naturally loath to accept the right of politicians to tamper with their Plan once it is under way. But the implications of this attitude are deeply undemocratic, threatening the whole supremacy of the legislature.
Any claim that the planners may make to objectivity is therefore spurious.
— NOTHING NEW
The reason most commonly given for the new acceptance of planning is that the bright new Plan of today is quite different from the jaded old controls and licences of which Mr Wilson himself made such a bonfire at the Board of Trade. Modern planning is said to be co-operative, expansionist, scientific. The National Plan is designed to release the nation’s energies, not cabin and confine them. The scientific pretensions of new-style planning have already been examined. Whether it proves co-operative and expansionist, only time can tell. In many ways the look-no-hands school of planning is much less convincing than planning with teeth, whatever the objections to the teeth.
But the notion that is really preposterous is that there is anything very new about the five-year plan. It was after all in 1949 that Professor Sir Arthur Lewis, no mean Fabian, was writing as follows:13
A five-year plan cannot be more than a vague indication of aspirations. … How can one plan a national income within limits of error so wide that they can swallow up the whole allocation to investment, or to public expenditure, or to exports, or to any major industry? Again the national income five years from now will depend on the terms of trade and the demand for exports, which may affect the balance of payments 20% either way. One must plan five years ahead all those parts of the economy which need five-year plans — afforestation, power stations and so on — and one can usefully plan specific investment projects, but a general five-year plan for the whole economy is no more than a game. One plans for as far ahead as one can see — and this means that even an annual plan must be subject to review.
The margins of error affecting future productivity trends may have narrowed slightly; it is still too wide to pretend that the National Plan can be other than “a vague indication of aspirations”.
- Some intellectual respectability is lent to this hoped-for acceleration in the rate of growth by an article in the NIESR’s Economic Review (August 1964) by W. A. H. Godley and J. R. Shepherd. They suggested that the rate of growth had itself been growing slightly in the last decade, but even accepting their interpretation of some fairly shaky statistics for the past, their analysis offers no reason for thinking 4% growth can be reached by 1970 with a virtually stable labour force. ↩
- French industry is also questioned about output, demand broken down by end use, consumption of raw materials, investment, employment by occupations, regions, etc. The similarity even extends to the terminal year of the Plan — the next French Plan also runs to 1970. ↩
- John and Anne-Marie Hackett, Economic Planning in France, Allen and Unwin, 1963, p. 142. ↩
- A good illustration was provided by Mr S. P. Chambers in his Presidential Address to the Royal Statistical Society in November 1964 (reprinted in Journal of the Royal Statistical Society, vol. 128, part 1, 1965). ICI found that they were much better of producing copper strip in finer gauges, even though output measured in terms of tonnage suffered considerably from the change. ↩
- Labour is however coming to be regarded more and more as an overhead with a growing proportion of salaried employees and an increasing reluctance to discharge people. To the extent that this trend continues, demand for labour may be less sensitive to small changes in output than demand for fuel and materials. ↩
- Report on Scientific and Technological Manpower in Great Britain, 1962, Cmnd. 2146, HMSO, 1963, para. 46. ↩
- See Hackett, op. cit., p. 149. ↩
- As one French planner quoted by the Hacketts put it: “Drawing up a plan is for the industrialist like going to see a psychiatrist” (Op. cit., p. 171). What M. Chapel does not seem to realise is that the desire for self-knowledge may easily degenerate into a desire for reassurance. ↩
- The best-known case of a supplier and customer disagreeing was the expansion programme of the motor industry in the second half of the 1950s. The component firms by and large took the view that the assemblers were being too sanguine in hoping to employ their new capacity to the full. A number of the current planners agreed with them. But they were wrong very largely because under the threat of surplus capacity the assembly industry with the aid of cuts in purchase tax (one object of the operation?) got its prices down. Demand shot ahead and capacity has since been increased further. ↩
- April 1965. ↩
- In a Postcript for the second edition of his paper Mr Brunner advocated “letting the exchange rate go”. He thought an excellent opportunity to do so had been missed by the incoming government in October 1964. ↩
- Heinemann, 1964, p. xv. That this book is not to be dismissed as egregiously silly is underlined by the distressing fact that a previous Economic Adviser to HMG gives it a distinctly favourable foreword: “A distinguished book”. ↩
- The Principles of Economic Planning, prepared for the Fabian Society and published by Dennis Dobson and Allen and Unwin, 1949, p. 110. ↩