When Sir Charles Trevelyan and Sir Stafford Northcote referred in their famous report of 1853 to the British Civil Service, they were undoubtedly indulging in wishful thinking. Applied to the administrative branch, the term suggested a degree of uniformity in conditions of service and a centralization of controls which was completely lacking. Horace Mann, first secretary to the Civil Service Commission, described the Service to the London Statistical Society in 1868 as “a chaotic mass of unorganized elements … an aggregation of separate departments governed, in many points, by no principle.” Nevertheless, three generations later, in 1931, the Royal (Tomlin) Commission on the Civil Service could point with justifiable satisfaction to the gradual process by which “a measure of common regulation and common staffing” had been achieved.

While this unification has been the work of reformers who succeeded Trevelyan and Northcote after the middle of the last century, it is clear that the foundations of a centralized bureaucracy were laid much earlier. Under the banner of “economical reform,” Burke, Pitt, Lord Liverpool, and others introduced measures which not only reduced administrative expenditures but also cleared away the feudal barnacles, which had clung so long to the ship of state. Economical or administrative reform was the conservative counterpart of parliamentary reform, the two alternating in popularity during the century following 1780. The removal of pensioners and sinecurists (1780-1850), the abolition of the sale of public offices (1809), and the extinction of the casual system of paying civil servants out of fees and perquisites were typical constructive changes fostered by the economical reformers. These preliminary measures were necessary before the modern bureaucracy could be erected on stable foundations.

In 1886 a large gold field was discovered in the heart of South Africa. This led not only to a significant change in the comparative advantage of the country, but also to a considerable inflow of both labour and capital. The movements of these productive factors came in spurts and for many, years set the pattern for, or at least synchronized with, the cyclical swings in the South African economy.

One of the most striking of the capital movements of this period was occasioned by the gold mining boom of 1894-5. The initial wave of foreign investment in the gold mining industry came in 1888-9. However, the excessive exuberance of the early speculators, the difficulties arising from the occurrence of pyritic ore below water level, and the development of a world-wide business crisis in 1890 all conspired to make this initial boom short lived. Furthermore, the gold mining industry needed to acquire maturity and respectability before it could arouse the interest of more conservative investors. It was therefore not until the middle nineties that the major wave of foreign investment developed.

The problem of deciding upon a national wage-price policy has become increasingly urgent in recent years both because of the growing importance of “full employment” as an objective of economic policy in the United States and elsewhere, and because of the economic conditions accompanying and following the war which have had the effect of creating a “full employment” situation. Many economists, including some with such widely divergent views on public policy as Sir William Beveridge and the late Professor Henry Simons, have in recent years expressed concern over the possibility that labour unions might create inflationary pressures by demanding large wage increases in time of “full employment.” (The problem may arise before full employment is reached; this possibility is mentioned below.) However, the economists who are concerned with this possibility are by no means agreed as to what policy can or should be adopted to cope with it. In this paper we shall analyse various possible alternative policies and the theoretical problems that underlie them.

Traditionally the government, as regulator of the currency, has been responsible for maintaining its value, i.e. controlling the general price level. While discharging this responsibility is by no means an easy task, it is, theoretically at least, capable of achievement. However, to couple this responsibility with that of maintaining continuous full employment of the labour force, is to saddle the government with two responsibilities which it may be impossible to discharge simultaneously. The following argument will serve to clarify the nature of the difficulty.

Modern war has frequently been described as “total” war. While such a description may not be precisely meaningful, it serves to emphasize the magnitude of the social changes which are now inevitably associated with a major war effort. Modern war has been well described as an industrial art, whose effective prosecution necessitates fundamental alterations in the manner of operation of the democratic peace-time economy.

The basic problems which confront a country in time of war may be classified as follows: (1) producing the goods and services necessary for carrying on the war; (2) paying for the goods and services used for war purposes; (3) supplying the everyday needs of the civilian population. While it is with the second problem, that of financing the war effort, that we shall be directly concerned in this paper, the fundamental and most immediate problem is that of production, to which all others must always be subordinated. Because of the enormous technological advances in the methods of modern warfare, World War II presented all of these problems on a scale vastly greater than ever before.

In time of war there occurs a revaluation of social ends, and maintenance of the state itself becomes the supreme social objective. To accomplish this objective under conditions of modern warfare, it is essential that, the organization and expansion of war production be accomplished with the utmost, possible speed. This point was well illustrated by the experience in World War II, where the problem of mobilizing the required quantities of productive resources was extremely complex, and where various nations with superior economic war potentials found themselves in imminent danger of suffering defeat before their full economic strength could be directed effectively against the enemy. Under these circumstances, where speed is the essence of effective economic mobilization, the sudden demand for an ever-increasing quantity and variety of war goods and services is likely to be highly inelastic, since the needs must be satisfied, if at all possible, regardless of price. But in the short run, supply is also relatively inelastic, and the government consequently finds itself confronted with immediate problems of procurement.