Oxford Reclaimed

Clark made an unexpected return to Oxford after he was appointed Director of the AERI. Before he started there in early 1953, he spent a term at the University of Chicago as a Visiting Professor where he gave a series of lectures on “The Development of Backward Economies: Taking Account of Population Problems”.

While the ambit of the AERI encompassed the study of the economics of the production, distribution and consumption of agricultural products and rural industrial conditions, its brief had been broadened to include the pro­cesses of economic growth, more particularly the role of the agricultural sector in that process as well as the economics of irrigation and the dynamic interac­tion between food supplies and global population. It was on none of these matters, however, upon which Clark announced his presence back in England.

In a pamphlet, Welfare and Taxation (Clark 1954a), Clark told working men and women that, under Beveridge’s welfare reforms, they would end up paying more taxes than they received in social benefits. The pamphlet created a furore in the British newspapers by suggesting that, if the welfare state was dismantled and families left to manage their own affairs, they would end up better off. Clark also argued that this would result in national production ris­ing by 10% in two to three years. The National Health System, which had only been introduced in 1948, would be wound back except for those in seri­ous ill health or who had been the victims of an accident. In Clark’s schema, the State was to be given the minimum of powers and duties.

The intellectual origins for the pamphlet sprang not just from Hilaire Belloc’s The Servile State (Belloc 1912) but John Stuart Mill and Catholic social teaching.

As noted, the pamphlet created waves. However, the reception was mostly negative. One sympathetic response came from Milton Friedman, who found the general approach in Welfare and Taxation ‘congenial’, and stated that few people had examined the welfare state in such a fundamental way (Friedman to Clark, 30 March 1954, Milton Friedman Papers, Hoover Institution, Stanford University (MFP, HI, SU hereafter)). Clark’s response to Friedman was an interesting one; he had discerned that, since the Second World War, there had been a slow and steady decline in the moral standards of British politics and society generally (Clark to Friedman, 9 April 1954, MFP, HI, SU). Put simply, Clark was referring to how politics was adulterating public policy. Another interested party was Arthur Seldon, who said that Welfare and Taxation marked the first reaction against the welfare state and foretold how a new political movement would rise up against it. With the businessman Antony Fisher, Seldon would later establish the Institute of Economic Affairs (IEA). Clark involved himself with the Institute by being on its Advisory Board but also by authoring three Hobart Papers, entitled Growthmanship (Clark 1961), Taxmanship (Clark 1964) and Poverty Before Politics (Clark 1977a).

“Growthmanship” was described as ‘an excessive preoccupation with growth, the advocacy of unduly simple proposals for obtaining it, and also the careful choice of statistics to prove that countries with a political and eco­nomic system, which you favour have made exceptionally good economic growth' (Clark 1961: 12).

Economic growth, Clark stressed, ‘should be a slow and gradual process' and attempts at ‘forcing the pace' (ibid.: 13), with investment drives and attempts to expand purchasing power, would merely result in waste and, just as importantly, inflation. Empirically, Clark showed that investment in nationalised industries in economies such as Britain had been wasteful while a pattern of over-investment in developing countries was typical of tyrannical governments. He was dismissive, therefore, of claims that the Soviet Union had recorded strong growth rates because of high investment ratios. In any case, statistics about capital accumulation and growth were hard to interpret; some data showed that the amount of capital per unit of output could fall, thus discrediting the fashionable view that growth depends on prior invest­ment. Clark duly compiled evidence from a number of countries showing that additions to investment had yielded only small additions to output. Moreover, a great deal of growth came from knowledge and innovations that were both capital-saving and labour-saving.

Two years later, Clark returned to the theme of excessive taxation in the IEA pamphlet, Taxmanship (Clark 1964). This contained his trademark views that high taxation impairs productivity and aggregate supply, as well as his espousal of the 25% tax limit, including Keynes's tacit support for it.

The pamphlet was re-issued in the 1970s and was given some traction by the worsening rate of inflation in the UK. Clark insisted that workers suffered neither money illusion nor tax illusion but were savvy to the value of their post-tax real wage. This meant that tax increases directly fed into wage increases. In an IEA forum on The State of Taxation, Clark (1977b: 25) expati­ated on governments upholding social justice and how this meant respecting the rights of different groups but did not warrant attempting equality or the redistribution of funds from one group to another.

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