Clement Attlee: Britain’s worst Prime Minister

No one else has ever had a bigger impact in decreasing national welbeing

The creator of the welfare state; the architect of the NHS; the man who oversaw the end of imperialism. This is the popular myth of Clement Attlee. Given this reputation, it’s no wonder that Attlee is consistently ranked as one of the finest Prime Minister’s that this country has ever had. However, a myth is all that this is. Most of the crises we felt after the war, and even those we can see today, can find responsibility with this revered post-war Prime Minister. 

In 1950, West German GDP per Capita sat at just 61.3% of Britain’s. By 1973 Germany led Britain by 9.3%. However, it wasn’t just Germany beating us. As the economic historian Nicholas Crafts writes, “UK growth was slower by at least 0.7 percentage points per year compared with any other country including those who started the period with similar or higher income levels”. 

So, why was this, and more importantly - why do I blame a man who many consider to be our finest Prime Minister? That lies largely in total factor productivity - simply, a measure of how much we can give out with what we put into the economy. Whilst Britain held a massive lead in TFP in 1950, by 1973 this had been completely eliminated. Under the Solow growth model, which I won’t go into but you can read a good summary here, this is the most important factor impacting growth and by limiting this we have limited overall welfare in the UK. 

Government Failure

Whilst some of this relative decline lies in problems like incompetent managing, as well as industrial relation issues, a huge amount of the woes lie solely in Government failure. In 1949 the highest rate of income tax sat at 97.5%, and there remained a large reliance on direct over indirect taxation. This is what led the public economist Vito Tanvi to conclude that Britain had the least growth-friendly tax system in the whole OECD. 

This failure is most apparent by looking at the success of the nationalisations. In just a 6 year period between 1945 and 1951, Clement Attlee oversaw the nationalisation of over 20% of the economy. This ranged from sensible nationalisations like the Bank of England to the downright insane like civil aviation, coal and steel. 30 years on from these nationalisations we can see the horrifying impacts. In 1971, nationalised industries accounted for 18.7% of investment yet just 7.2% of employment and 10.2% of GDP. 

This cannot be put down solely to mismanagement - failure is a fundamental characteristic of nationalised industries. As Hayek famously described - there are two types of knowledge: local and scientific. Although planners can become experts in the latter, the former can only be discerned through the price mechanism. Given nationalised industries work outside of this, and produce goods often for a sake other than profit, they inevitably fail to provide the same level of success. 

Protectionism

Moreover, his maintaining of protectionism was extremely unhelpful. Whilst there may be a serious case for not joining the European Union of today, such a case did not exist for the European Coal and Steel Community. This community is now known as the forefather of the European Union, but at the time was a great step in creating free trade. Just years after WW2 creating a union of countries willing to freely set prices with free movement of coal and steel without any restrictions was massive. 

But Attlee said no. He feared a loss of sovereignty much less than the loss that was suffered when we joined the EEC in 1973. As a consequence, Britain’s role in the creation of the European Economic Community was 0. All of these nations received massively reduced trade costs through the 1950s and 1960s allowing them to power ahead. Indeed, average tariffs in Britain in 1960 were still 14.5% in 1960 - about 2-3 times the amount in West Germany.

Nicholas Crafts estimates that joining the EEC raised British GDP by about 8-10%. Now imagine had we got this growth earlier and properly opened up our borders. We would today be a much much wealthier country today. 

Housing

Finally, the influence of housing has to be mentioned. Attlee’s Government were the ones who oversaw the passing of the Town and Country Planning Act. Before this was passed there was an automatic right to develop land - provided it was compliant with the relevant bylaws for an area.  This law abolished the automatic right to develop regulatory compliant housing and added an additional stage of planning permission. As a result, it became mandatory for one to require state permission to build on one’s own land. 

The reality of this is that now much much fewer houses are built. For comparison, in the 1930s London built about 4x as many houses per year as we build today.  This even played a huge direct role in economic growth at the time - in 1932 it amounted to 17% of the GDP growth we experienced. 

Moreover, the agglomeration effects cannot be ignored. I’ve already described this in a lot of detail in a previous blog - but this is effectively the process whereby where businesses and individuals cluster they each receive lower costs leading to greater investment.  I’d recommend you follow this link if you want to read more about this. 

Why this makes him the worst

From the arguments I’ve made above, I think it should be clear that Clement Attlee was amazingly influential in slowing down growth and making us all poorer. However, it would be a leap to assume that that must make him the worst PM. To me, our top moral priority should be preserving and improving humanity’s long-term future - this is best done by maximising the rate of sustainable economic growth (whilst maintaining human rights).

I’ve always found showing ethics as a progression is the best way to do it, so I’ll quickly do that below:

1. Life in a substantially wealthier country is better for the vast majority of people

2. If being wealthier makes life better, then we should aim to make countries wealthier

3. This, not only makes the majority of people today better off, but makes everyone in the future better off. 

4. Given the immense gains for future civilizations of economic growth today it must be our primary goal if we care about long-run wellbeing. 

(NB: If you want to hear this argument made better I’d recommend getting a copy of Stubborn Attachments by Tyler Cowen - it’s extremely readable and very convincing)

Given John Myers, of London YIMBY fame, has convincingly argued that the housing crisis has caused the greatest damage to GDP out of any event since the black death, and Clement Attlee is the cause of the system that has caused that crisis it is fair to say that Attlee caused more economic self-harm than any other Prime Minister, and has damaged the wellbeing of future Britons to an awfully high degree. 

Last Thoughts? 

Even if we ignore the above factors - Clement Attlee’s method of taking apart the empire was simply evil at times. Yes, the empire was abhorrent and he was right to begin the process of stripping it apart. But this needed to be done in a way that placed inclusive institutions into the regions and respected their cultures. The partition of India displaced 10s of Millions of people and killed as many as 2 million people. However, quantifying the impacts of this is beyond the realms of this essay so I’ll leave it at that.

No one else in the 20th century did more damage to GDP than Clement Attlee. By messing up our housing market he did more damage to GDP than anything since the plague. By not maintaining protectionism he put much needed growth off by about 20 years leading to us falling behind our friends in Europe. And by nationalising so much of the economy he made sure that innovation and increasing productivity would never happen in Britain.

Given GDP is the best indicator of national wellbeing for both present and future generations, and Clement Attlee has had the biggest negative impact on GDP, then it is safe to say that he is most certainly the worst PM in the 20th century.