THE LABOUR PARTY'S EXTERNAL ECONOMIC POLICY IN THE 1940s

Abstract

This article challenges the view that, in accepting the 1945 American loan and its attendant commitments to international economic liberalization, the Labour party easily fell in behind the Atlanticist approach to post-war trade and payments. It is suggested instead that Labour's sometimes seemingly paradoxical behaviour in office was driven, not only by the very tough economic conditions it faced, but also by a fundamental contradiction inherent in its desire to ‘plan’ at both domestic and international levels. This contradiction – the ‘planning paradox’ – is explored with reference to pre-war and war-time developments, including Labour's reactions to the Keynes and White plans of 1943, and to the Bretton Woods conference of 1944. The decision to accept the US loan, and with it the Bretton Woods agreements, is then examined within this context. Finally, an assessment is made of whether, in this key area of policy, Labour's pre-1945 deliberations were effective in preparing the party for the challenges it would face in government.