United Kingdom

Labour rejoiced at its political triumph, the first independent parliamentary majority in the party’s history, but it faced grave problems. The war had stripped Britain of virtually all its foreign financial resources, and the country had built up “sterling credits”—debts owed to other countries that would have to be paid in foreign currencies—amounting to several billion pounds. Moreover, the economy was in disarray. Some industries, such as aircraft manufacture, were far larger than was now needed, while others, such as railways and coal mines, were desperately short of new equipment and in bad repair. With nothing to export, Britain had no way to pay for imports or even for food. To make matters worse, within a few weeks of the surrender of Japan, on September 2, 1945, U.S. President Harry S. Truman, as he was required to do by law, ended lend-lease, upon which Britain had depended for its necessities as well as its arms. John Maynard Keynes, as his last service to Great Britain, had to negotiate a $3.75 billion loan from the United States and a smaller one from Canada. In international terms, Britain was bankrupt.

Labour, nonetheless, set about enacting the measures that in some cases had been its program since the beginning of the century. Nationalization of railroads and coal mines, which were in any case so run down that any government would have had to bring them under state control, and of the Bank of England began immediately. In addition, road transport, docks and harbours, and the production of electrical power were nationalized. There was little debate. The Conservatives could hardly argue that any of these industries, barring electric power, was flourishing or that they could have done much differently.

More debate came over Labour’s social welfare legislation, which created the “welfare state.” Labour enacted a comprehensive program of national insurance, based upon the Beveridge Report (prepared by economist William Beveridge and advocating state action to control unemployment, along with the introduction of free health insurance and contributory social insurance) but differing from it in important ways. It regularized the de facto nationalization of public assistance, the old Poor Law, in the National Assistance Act of 1946, and in its most controversial move it established the gigantic framework of the National Health Service, which provided free comprehensive medical care for every citizen, rich or poor. The pugnacious temper of the minister of health, Aneurin Bevan, and the insistence of radical elements in the Labour Party upon the nationalization of all hospitals provoked the only serious debate accompanying the enactment of this immense legislative program, most of which went into force within two years of Labour’s accession to office. Bevan emerged at this time as an important figure on the Labour left and would remain its leader until his death in 1960.

Aneurin Bevan, c. 1950.ANL/REX/Shutterstock.com

Economic crisis and relief (1947)

Labour’s record in its first 18 months of office was distinguished. In terms of sheer legislative bulk, the government accomplished more than any other government in the 20th century save perhaps Asquith’s pre-World War I administration or the administration of Margaret Thatcher (1979–90). Yet by 1947 it had been overtaken by the economic crisis, which had not abated. The loan from the United States that was supposed to last four years was nearly gone. Imports were cut to the bone. Bread, never rationed during the war, had to be controlled. Britain had to withdraw support from Greece and Turkey, reversing a policy more than a century old, and call upon the United States to take its place. Thus, at Britain’s initiative, the Truman Doctrine came into existence.

Relief came with U.S. Secretary of State George C. Marshall’s announcement that the United States would undertake a massive program of financial aid to the European continent. Any country in the Eastern or Western bloc was entitled to take part. Although the Soviet Union immediately denounced the Marshall Plan as the beginning of a division between the East and the West, all western European countries, including Britain, hastened to participate. It can be argued that the Marshall Plan and the Truman Doctrine represent the permanent involvement of the United States in Europe.

Withdrawal from the empire