ABSTRACT
In the mid-1950s, British policy-makers became more growth-conscious as comparative economic growth-rates suggested that British productivity levels continued to trail those in the United States. While some British politicians and economists started to call for a doubling of national income within a generation, other economists and observers started to analyse why Britain was lagging behind other countries.1 An early contribution to this debate, Andrew Shonfíeld's 1958 book British Economic Policy since the War, linked Britain's low investment rate to its excessive defence effort. In his analysis of this relationship, Shonfíeld singled out Korean war rearmament as the crucial period in which government policy on investment undermined the country's long-term economic prospects. While siding with the government's critics over the scale of rearmament, he bemoaned the fact that the political dispute between Hugh Gaitskell and Aneurin Bevan over the rearmament programme distracted from the Labour government's assault on productive investment through the economic policies introduced in Gaitskell's 1951 budget.2 With respect to Britain's defence effort, Shonfíeld criticised successive British governments for preferring to procure military hardware domestically rather than taking up the offers of American military aid. If they had asked for more American military aid in the form of end-items, British policy-makers could have reduced the economic burden imposed by the Korean war defence programme. Instead, the British government wasted valuable resources on developing three strategic bombers. For their part, American policy-makers supported the British defence industry, because it could serve as a convenient arsenal close to the potential European battlefield. Therefore, Shonfíeld suggested that this relationship amounted to "... a happy marriage between British national pride and American military convenience."3 While Shonfíeld also highlighted other detrimental effects of the British defence effort such as
Table 8.1 Gross Fixed Investment by Type of Asset, 1949-54
£ million at 1953 market prices
Vehicles, ships and aircraft Plant and machinery New housing Other new building and works Total
1949 353
730 410 502
1,995
1950 338
796 397 559
2,090
1951 300
840 401 529
2,070
1952 267
801 489 524
2,081
1953 323
833 619 549
2,324
1954 359
853 631 606
the impact of overseas bases on the balance of payments, this chapter will concentrate on his analysis of the economic impact of the Korean war rearmament programme on postwar British economic development.
