Britain went to war convinced of the power of what Adam Smith described as the invisible hand: relying upon private enterprise and the law of supply and demand to secure the most effi cient outcomes, even in war. E. M. H. Lloyd, a civil servant employed in the British war offi ce, described the British establishment’s approach to the war eff ort: “the doctrine implicitly acted upon was that the higher the price and the greater the freedom allowed to the private contractor, the greater would be the increase in the supply; it followed that if only the Government paid high enough prices and left private fi rms to their own devices, munitions would be forthcoming in abundance” (Lloyd 1924, 23). Before long, business as usual did not deliver. By 1916 the failure of laissezfaire and the free price mechanism was unmistakable. Increased government demand and price increases led to profi teering, but did not bring increased supplies. While the country suff ered supply shortages and infl ation, private businesses diverted resources to the more profi table business lanes of the moment— luxury goods and exports.

Clara E. Mattei, The Capital Order, loc. 123