The private and the public sectors

Micro-management, involving manipulation of units within the overall economy, chiefly its component industries, had an ancient pedigree from the mercantilist days of the seventeenth century. But micro-initiatives had largely been abandoned by the mid-nineteenth century. They had begun to revive from the 1880s, not under state initiative, however, but under the local authorities. The war compelled the state into the heart of industry, making it a regulator on a grand scale. In the peace the British state, in spite of its eager dismantlement of the wartime controls, was drawn into an attempt to restructure major parts of industry and agriculture. It also took its first effective steps in the development of regional policy and spatial planning.

Nationalisation versus rationalisation

There were available to the state two general ways of restructuring the older industries: nationalisation on the one hand, and rationalisation (together with market regulation) on the other. Nationalisation meant assuming outright ownership, and with it the permanent decision-taking role within the industry. It required the formation of new administrative structures for industries, of a more or less centralised nature. Moreover the relationship between such structures and the state and the trade unions had to be defined. Rationalisation, on the other hand, meant setting the conditions for self-reorganisation within each industry, such that surplus capacity could be cut out and efficiency improved, with or without arrangements for the control of markets.