Pains of Prosperity

"We cannot go on like this," warned the Tory Daily Mail. "Ordinary men and women . . . are accusing the government of doing nothing," said the Tory Daily Sketch. Last week the government of Prime Minister Anthony Eden got even more pointed reminders of Britain's increasing dissatisfaction. In three by-elections for "safe" Conservative seats, the Tory percentage of the vote dropped by a surprising 7%.

The trouble was economic. The British public was bewildered and resentful. Only two years ago the Tories were boasting of a boom. Last fall Chancellor of the Exchequer Rab Butler had put on an "amber light"--nothing to worry about, just a little caution needed. Last week, though no Tory minister dared use the term, the word on the tip of their tongues was "crisis."

Greedy Economy. Butler's amber light had obviously not been enough to slow down Britain's course towards inflation. Last month Britain's gold and dollar reserves dropped to a figure lower than at any time since 1952. Instead of closing, the trade gap was widening alarmingly. Vital coal production, which had dropped 2.000,000 tons last year, was still dropping. Harold Macmillan. the new Chancellor of the Exchequer, said ruefully: "One of the Prince Regent's physicians earned a certain notoriety, though not perhaps very large fees, by telling his royal patient that all that was wrong with him was that he was too greedy. That was no doubt unpopular, and politicians have no occupational bias in favor of unpopularity. But I must confess that something of the sort seems a fair description of us and our economy."

The government concluded that it could not wait for remedies until the April budget. Pale and worried, Chancellor Harold Macmillan rose in Commons one day last week and announced his new measures. The day before, he had raised the bank rate (equivalent to the U.S.'s Federal Reserve discount rate, now at 2 1/2%) to 5 1/2% -- highest since the depression days of 1932--in a move to tighten the supply of borrowable money. Now he jumped on the British consumer, who has been enthusiastically snatching up goods on the "never-never" (British slang for the installment plan). The minimum down payments on cars, TV sets, radios, dishwashing machines and photographic equipment were raised to 50%. To slow down industrial borrowing, he increased down payments on capital goods to 50%, with a maximum two years' repayment time.

Macmillan also announced a $196 million cut in government spending. Items: cutbacks in construction programs for nationalized railroads and coal mines, delay in school building. To save another $106 million, he cut the government subsidy on bread and milk. Result will be to make British housewives pay one penny more for each loaf of bread and quart of milk. "Inflation must be mastered if our personal lives are not to be darkened by continual anxiety and uncertainty, and our country's position in the world seriously undermined," he warned.

Macmillan's move on the householder's budget brought cries of "Shame!" from the Socialist benches. "How prosperity hurts under the Tories!" mocked the Laborite Daily Herald. Other critics, however, pointed out that while cutting food subsidies, the Tory government was simultaneously adding $280 million to the costs of Britain's welfare state by increasing health and education services.

"Some Slump." Macmillan's short-range remedies achieved one short-range objective: the pound stopped its decline on the world's money markets. But they did not attack the deeper illness: the failure of British productivity to keep pace with world competition. In a nation where even Tories seem hypnotized by the problem of slicing up the available cake rather than increasing its size, the problem is seldom even discussed. But last week a stocky, grey-haired manufacturer named Harry Pardoe, from Lancashire's textile industry, spoke up.

In his retirement speech as president of the Manchester Chamber of Commerce, Pardoe pointed out that for years the Lancashire textile trade has been calling itself "depressed," and screaming for government protection from foreign competition. The fact was, Pardoe said, that the average dividend of 62 leading spinning concerns last year was a whacking 23.4%--only a fraction less than 1954, when dividends were at a 3O-year peak. "Some slump," said Harry Pardoe sardonically.

Then he went to the heart of the matter. The industry had achieved these profits by deliberately maintaining its mills at only 65% of capacity. "Just what has this policy of high profits and a small turnover cost the whole industry?" demanded Pardoe, and answered his own question: it has priced British textiles out of the world market. "I do not believe that wages are too high, but rather that production is too low. The unit cost is too high." He concluded: "It really is time a little competition was introduced into the official policy of the industry ... If we are going to enjoy a good standard, we must earn it."

Last week the Tory government moved gingerly to tackle Pardoe's problem. It published its "Restrictive Trade Practices Bill," which in theory strikes down the intricate system of price fixing, market sharing and clubby restraints ("I won't produce more if you won't") that has been built up to shield British producers and sellers from the uncertainties of competition. The new bill was only a feeble imitation of U.S. antitrust legislation. And it had one gaping loophole--any "restraint" could continue if it was found "reasonably necessary" for such reasons as "maintenance of employment" or "the protection of the public."

If Britain is to support its welfare state in a competitive world, it would have to relearn how to compete at home.

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