Robert Mundell is Dead: A Mixed-Economy Recap to December 1950 with a Look Forward Six Years

 

On the one hand, the (Canadian-born, UBC-educated) "Father of Supply Side Economics" died last week. On the other, December of 1950 saw something of a peak in the American commitment to a (Keynesian) managed war economy. It won't long survive Robert Taft's passive-aggressive resistance, but for the moment we are absolutely throwing money at aviation.

Which brings me to the other thread I want to pull on here, which is the continuing flowering of the Buck Rogers moment of the Second Elizabethan Age, and why, in a childish show of disrespect, I am recycling my triumphalist Farnborough spread above, and not giving you the late Robert Mundell. I mean, I'm sure that Dr. Mundell was a great guy, but can he compete with the Canberra?

No, he can't. Thanks for asking. 

So December of 1950 is when "defence mobilisation" kicks into high gear. The Atlee government is putting together estimates that will almost double British defence spending,  Above is a chart I stole from UKpublicspending that illustrates the steep upward curve beginning with the Estimates tabled on 6 March 1951, and here is a link to Arthur Henderson introducing the Air Estimates of

£328¾ million. This is an increase of £105¾ million  . . . net increase of £95¾ million. The Estimates themselves are based on the £3,600 million programme which was drawn up last summer and do not provide for the additional expenditure that will result in 1951–52 from the further measures recently announced by the Prime Minister . . . .

. We tend to think of high British defence spending and all the fancy planes as natural companions, but it seems that the planes come a good eighteen months ahead of the emergency. In fact, as far as one can tell, it is all downhill from here! Okay, that's not exactly true unless your view of aviation is drably utilitarian and focussed on airliners, but even here the downward slope is not at all far away. Specifically, the story of the VC7 airliner will serve as my eulogy for Dr. Mundell. 

 

Before I start in with planes, I want to point out that it isn't just a story of planes, but also of where they land and how they land. Specifically, British Aviation Modernism doesn't just involve heedless Labourites throwing money at state capitalism in the form of airlines and airliners. They also heedlessly threw money at paving England's green and pleasant land for the convenience of state-owned airlines and state-subsidised airliners. Heathrow has shown up in these pages mainly so that I can joke about how no-one is sure what to call it, and with respect to the endless discussions over expansion, but it's a pretty big public expense, too and a huge part of the story of the evolution of London as a modern metropolis. It simply wouldn't have the real estate prices and Russian oligarchs it currently benefits from without Heathrow! Heathrow is also a pretty foggy airport, so Autolanding is a huge part of the story and of the British Information Revolution that wasn't. Autolanding didn't get into the VC7, being first trialled on the VC10 and successfully implemented on the Trident, but it's part of the story insofar as it didn't get into the VC7 at least in part because the VC7 never existed, which is always bad news for the avionics package.

With all of these big public expenses, it's no surprise that the British public deficit began to grow in 1952. After all, that's why you call in the Tories, to save the public finances through austerity and sacrifice!

(The original has a nice slider that makes the story a bit more comprehensible than the graph. British revenue as a proportion of GDP falls from 36.86% in 1950 to a low of 30.8% in 1954. The United States proportion, meanwhile, goes up from 20.63% to a high of 24.71% in 1954.)  

Now I want to savour the last paragraph of the paper (MEASURING THE UK FISCAL STANCE SINCE THE SECOND WORLD WAR, Tom Clark and Andrew Dilnot,) from which I filched the national debt charge, above:

"Is there anything we can learn from all these alternative measures apart from concluding that measuring the fiscal stance is complicated? Well, the cyclically-adjusted deficit, it seems that fiscal policy was tighter through most of the 1950s and 1960s than it has tended to be since. This is, perhaps, in contrast to what might have been expected, given that the 1950s and 1960s are often associated with especially expansionary (and perhaps unsustainable) policies. One possible interpretation of this apparent puzzle is that the autonomous and underlying policies, and that since that time its underlying weakness has had the opposite effect. Another view would be that the strength of the economy itself in part flowed from the fact that the government was committed to expansion, an interpretation that could have the curious implication that the government’s willingness to countenance substantial borrowing actually helped contain the scale of borrowing that was eventually required."  (Clark and Dilnot, 7.)

So, anyway, like I was saying, 

British defence spending began to increase in 1950, and the VC7 was cancelled in 1955. I have already quoted from the Statement on the Air Estimate for 1951--2, I have also held the page open. Let's look at what Mr. Henderson has to say in a bit more detail with a particular attention to the various "failures" of Labour aviation procurement revealed by American aircraft loans under MAP. 

 First of all, money isn't the only limiting factor on the number of extremely cool aircraft the British taxpayer can own. The RAF is going to need to staff them, which is going to entail an expansion in its Vote A strength by 55,000 men to 270,000, which is more than a half percent of the entire British population, which is a lot. a lack of personnel goes some what to explain the planes that aren't in the RAF inventory, but that is in the past. The new staffing levels will allow the RAF to double its fighter squadrons. Henderson cannot yet announce the bruited F-86 procurement, but he can talk about it:

Discussions are taking place with the United States Government in respect of the bid which has been made for a substantial number of F.86s. I want to make it clear to all concerned that there is no question of our saying that the Meteors and Vampires with which our squadrons are now equipped are out of date and of no use. Quite the opposite is the case. We are seeking to supplement the present fighter squadrons, in which we have every confidence so far as the Vampires and Meteors are concerned, with this additional number of F.86s. I think that the right hon. Gentleman would be the first to admit that not even the Russian Air Force or the American Air Force is composed 100 per cent. of any one type of fighter. Every Air Force is mixed, and ours will be.

It is interesting that at this is the point at which Anthony Eden leads off the official reply. The Front Benches come in when they choose, and it has been left to the usual stable of air shadow critics to burble about flying boats. when the conversation arrives at buying American fighters, it is time for a future Prime Minister to start laying down markers for a likely new Conservative government. Eden shows his qualities as a parliamentarian by putting the Minister on the ropes as he tries to defend the honour of the Meteor and the Vampire against the American interloper, and, hanging over the discussion, the MiG-15, with its British-derived engine. 

After Shinwell steps in to give Henderson a break, Eden moves on to the Auxiliary Air Force, about which Tories seem to care to excess before moving on to bombers. Here, Henderson has positioned the government as taking credit for the  the Canberra, a noteworthy success story given American license manufacturing that will unfortunately remain unique in spite of hopes for some other candidates including the Beverley and the Hunter, to the Lincolns, and of course the lent B-29 Washingtons for heavy bombing and "special duties." This coy reference is pretty unfortunate as far as partisan politics go, as it will be left to a new Tory Prime Minister to finally set off Britain's atomic Christmas cracker and earn such credit as is to be reaped, and this may be why Eden in his reply spends a good paragraph passing gas about bombers and deterrence In due time.

In his statement, Henderson had Bomber Command introducing the new 500mph+ jet bomber that the Prime Minister announced "was being ordered off the drawing board" in the House on 29 January. Here I'm resorting to quoting Aviation Week  because I need to make it clear that contemporaries really are positioning a plane that will make its first flight in May, after being ordered to  B.9/48 of 9 April 1948 is being positioned as somehow tardy. Aviation Week goes on to speculate that the Prime Minister's statement is meant to imply that the planes that Avro and Handley Page are working on, are licensed versions of the Valiant. In reality the Avro Vulcan and Handley Page Victor were ordered before the Valiant and will enter service after it due to their more ambitious design and higher performance, and the Victor B2 in particular will be a next-half-generation strike vehicle thanks to its ability to operate BLUE STEEL, as well as drop one helluva lot of bombs, which would have come in handy if the British Army had ever decided to occupy Khe Sanh. Eden implicitly acknowledges tat there is not actually much room to attack the government here by moving on to Coastal Command after a very brief sally into the matter of Transport Command, where Henderson is allowed to stand on the position that Britain can't afford too many transport aircraft squadrons because of manpower, and the country can rely on charter airlines instead. Not much Eden can say about that, because, after all, free enterprise is good.  

Henderson has had to cover another flank on the Coastal Command front. The new British really, really, really long range ASW aircraft is the Avro Shackleton, but deliveries will stretch through 1953. In the theoretical case in which the Communist submarine menace actually exists (the first Whiskey hit the water in '51; peak launch rate was 67 in 1956), this would be quite bad, so Coastal will receive PV2s under the Military Assistance Programme while the Shackletons are delivered. So here we have one of the failures of Labour air policy, of which I was unaware as of five minutes ago. While the Parliamentary critics have previously adopt the line that this reflects the failure to replace the Sunderland with a more modern flying boat, to which Mr. Henderson, after very cutely pretending that MAD and sonobuoys are secret, focusses on the P2V's range, which in turn goes back to the Americacn decision to pursue the turbocompound while the  Napier Nomad-powered Shackleton IV is years off, and will in the event neve be built at all. It's hard to disagree with this as industrial policy, but the upshot is a distinct lack of British-built, really, really, really, really long range ASW aircraft over the Atlantic in 1951--53. And although the threat against which the P2V was procured was a phantom, the Admiralty Historical Branch's adroit two-step in relocating its argument about long range ASW aircraft to WWII makes this a real policy issue. 

It is now almost time to skip ahead tothe key decisions made in November of 1955, but along the way I want to check in with the Valiant B.2. Aviation Week's February 1951 confusion about the V-bomber programme was understandable in that the Valiant first in the field and a highly satisfactory product of one of, if not the most strongly founded of the British aircraft builders. Ultimately, 102 Valiants were built, and while they were by design of mediocre performance compared with the follow-on aircraft, that need not have been true of the Valiant line in general. One of the three original Valiant prototypes was the lone B.2, designed as a  low-level penetrator with a longer fuselage, stronger wing, and more elaborate undercarriage. To support the greater weight of the new airframe, the Avon jet engines of the B. 1, although spanking-new cutting edge technology, were replaced by the even newer and more promising Rolls-Royce Conway, the first turbofan engine. Vickers received an order for 17 B.2s, which were conceived as "pathfinder" aircraft. This seems a bit ridiculous given that the main role of WWII pathfinders was to drop flares to direct saturation night bombing, but Pathfinder Force bombers led the main bomber force for other reasons, including defence suppression, and from that perspective even the TSR-2 was a "pathfinder" in that it blew up Warsaw Pact fighter bases with atom bombs ahead of V-bomber/B-52 penetrations. The decision is still quite defensible on the incoming government's frequent assertion that the industry was overburdened with projects and needed to rationalise in order to meet the needs of an urgent defence buildup. Considering that the entire V-bomber force will shift to low altitude penetration in ten years, this all seems tragically short-sighted, but unfortunately the parliamentary peanut gallery has not produced any Cassandras to make that point. The B.2 died a quite death, three years ahead of the more important aircraft projects it would spawn, and there is certainly no sense in the statements introducing the Air Estimates for 1952--3 or 1954--5 of a relenting in the air effort that seems apparent in retrospect, perhaps because the concept of inflation-adjusted (never mind GDP-adjusted) spending still seems alien to the House of Commons.  

Arthur Henderson, speaking in reply, confesses him completely in the dark about the state of the air force, but when it comes to industry, he has something more interesting to say:

I turn to the question of super-priority, to which the Under-Secretary made some reference. I notice in the Defence White Paper of March of last year that the labour force in the aircraft industry had been previously about 150,000. It was then 177,000 and it was stated that a further 50,000 would be required by March, 1953, making a total of 227,000. In this year's Defence White Paper, we are told that the numbers have grown to 206,000, which is 21,000 short of the number of technicians required. Can we be told what the effect of this labour shortage has been on the production programme?  

Henderson goes on to ask about quantities of Victors and Vulcans ordered, being content with the Valiant order, as it was placed under his ministry. The answer from the Government benches is evasive, but in the end 136 Vulcan B.1s and B.2s, but only 86 Victors were ordered. The Victor also made it to a B.2, wich became the first service aircraft to fly with the Conway, but I think there might be some dissatisfaction with the  ultimate size of the Victor order that is reflected in Henderson's comments above. 

I have left a fair amount of discussion of Transport Command aside here, including a short-lived controversy from 1950 over the Command's temporary inability to evacuate Commonwealth Brigade csualties home from Japanese hospitals due to a shortage of planes in, I think (we'll see in Postblogging) January. A general anxiety about procuring a jet transport for Transport Command is heard, and as rehearsed previously in these pages, a transport aircraft variant of the Valiant B.2, the V-1000, was ordered for Transport Command in January of 1953. Given the Secretary of State's strictures about how the number of Transport Command aircraft has to be held down, a big, fast plane seems to be just what the doctor ordered, although the modern view-from-seventy-years focusses on having a plane "compatible" with overseas deployments of the V-bombers, which makes the V-1000 order seem more specialised than it perhaps did at the time. As the Parliamentary Secretary put it in the March 1953 Transport Aircraft debate:

I want to say a word or two about Transport Command . . . The role of Transport Command is the rapid deployment of troops in an emergency; that is the first thing. The second is movement of ground crews and equipment for an emergency deployment. The third one is the movement of urgent spares, and the last, and a very important one, is the tactical role of the dropping of troops and equipment . . . . Hon. Members will notice that all these are operational or emergency roles, and though a certain amount of air trooping is done by Transport Command, the operational role must come first, and they must be trained to carry it out. At present, Transport Command is equipped with Hastings and Valettas which are designed to carry out all the roles about which I have been speaking . . . . there is a certain amount of new thought going forward. Instead of having one type, we are contemplating having

two different types  . . . [the] Vickers 1000 . . . and the Beverley.

This is where we stand as of the 11 November 1955 decision to cancel the V-1000. 

The cancellation has two implications. The first, already spelled out by Sir Miles Thomas, is that BOAC has already decided not to procure the VC7 development of the V-1000. Given that BOAC is still in receipt of significant state financial support, this is not entirely a decision by private enterprise, but now I surrender the floor to Paul Williams, a somewhat unlikely hero for these pages as a white supremacist, rock-ribbed Tory from Sutherland (South) who will resign from the government over the decision to withdraw from Suez next year. But on the subject of the V-1000/VC7, he is on fire.

My first point is that it is vital to Britain in every sense, in aviation—in the field of industrial work and in the earning capacity of our industry—that we should be able to produce in our home industry a long-range pure jet aircraft which will be capable of coping with the first-class Trans-Atlantic passenger demand. It is, therefore, opportune to ask what are the likely developments in aviation over the next ten or fifteen years in the various aircraft groupings of which we know—the long-range turbo-prop, the long-range pure jet, the medium-range jet and the medium range turbo-prop aircraft? I would have thought that it was almost inevitable that the long-range turbo-prop, which, even today, everyone admits will be able to cope in a few years' time only with the second-class traffic, will be swallowed up in the relatively near future by the pure jet aircraft.

Therefore, the medium-range jet, because of its specialised type of construction and because of the very decided limits of its range, will be superseded in its turn by the long-range pure jet. Meanwhile, the medium-range turbo-prop aircraft which is at present produced and marketed solely in this country will survive, but against inevitably increasing United States competition.

The conclusion I draw from these facts is that there is an urgent need for the British industry to be able to produce a long-range pure jet first-class trans-Atlantic aircraft. That can be produced by the British industry and, in fact, there is one potential aircraft available today. If my conclusion is right, that we shall see within the next ten to fifteen years developments to the point where the long-range pure jet aircraft scoops the pool, I would ask my hon. Friend what British aircraft is there which will be available in that period, other than the Vickers V-1000?

 The Government's position is that Transport Command has such an urgent need of transport aircraft that it needs to buy available Britannias right now instead of expensive V-1000s later, which are not need as much now that the V-bomber force is not to deploy overseas. This, it turns out, is the Air Staff's fig leaf covering a cost-based decision to cancel the V-1000, which the Government is perhaps understandably not willing to explore in depth. Meanwhile BOAC's position is presented as one of the Britannia being fine until the Comet 4 comes along. 

Nor is Vickers to be forgotten. One of the key Government arguments is that the British aviaition sector is too large, and too inefficient, and some types have to be sacrificed. Vickers, however, will be fine. It has the Vanguard in the works, and it will surely be a giant success. This argument that looks a lot less like an understandable failure only obvious in hindsight after we have seen Paul Williams has just predicted the imminent "swallowing up" of the long range turboprop, and one of the modern explanations for the V-1000 fiasco is the Government's desire to preserve Britannia work for the Short Belfast works, which otherwise have no contracts. 

Finally, the Government benches produce an additional defence: the all up weight of the V-1000 is steadily increasing. Williams ripostes that so far developments of the proposed engine, the Conway, has more than made up the difference. In predicting that this will continue, Williams is, once again, dead right. Indeed, one pauses to wonder how anyone could have argued differentlygiven the trajectory of Brish pure jet engines to this point. The only major failure --also signposted by Williams during the discussion-- was the Britannia's troublesome Proteus turboprop. 

At some point after an extended tussle between John Rankin and a member of the Government benches who also happens to be a director of Handley Page over the clearly sensitive question of the profits of manufacturers receiving government subsidies, Williams attacks on a different line, confidently predicting that BOAC will soon buy the American DC-8 in order to have an Atlantic jet liner with which to compete with American airlines. Not so, the   government gleefully replies. 

In October of 1956, BOAC ordered 15 Boeing 707s, so the reply was right! There is a minor silver lining in that Boeing and Douglas had placed small orders for the Rolls-Royce Conway to equip some of the new 707s and DC-8s. Quickly displaced from American manufacture by early American turbofans, the Conway was kept on life support by the Victor B.2 until the VC-10. 

So that's the industrial policy story. This adventure through the back pages of Hansard is intended to show that it's not a tragedy explicable in terms of failure to foresee the unforeseeable. On the contrary, it is a series of economising decisions made by the Churchill and Eden governments to reduce, and not "rein in" (in terms of spending as a proportion of GDP)aviation spending, and, in particular, public support for the aviation sector so that the tax burden can be very subtly eased, even at the cost of a rising national debt. 

Which is more or less the reason that this is an obituary for Robert Mundell. Good work on "inventing" supply side economics, dude, because it sure looks like you're the first guy to ever think of throwing Keynesian demand management on the trash heap in favour of increasing investment spending by cutting taxes! 

Hope that worked out for you, because it sure as fuck didn't work out for the British aviation industry.