THE ECONOMY & THE CITY
Economic Thoughts on Congress
By NICHOLAS DAVENPORT
TP the Government really wants to put teeth 'into its incomes policy, it should first take statutory powers to compel Mr. George Wood- cock to make a coherent statement in intelligible English. It is unfortunate that at this critical hour the TUC should have a General Secretary who falls naturally into circumlocution. The proposal that wage claims should be submitted for 'vetting' to Mr. George Woodcock's office instead of Mr. George Brown's is surely intended to make nonsense of the early warning system and to substitute for a sharp clear call a con- fusion and babble of voices. This would be worse even than the 'present system of haphazard pub- licity. One appreciates Mr. Woodcock's reluc- tance to admit any element of state interference in the glorious free-for-all fight for higher wages, but all that the Government is asking for is com- pulsory information. As the trade unions have• been pressing for a planned economy, they should realise that planning an economic climate is im- possible without more advance information about approaching storms.
It is certainly just as important to insist on advance information about wages and prices as it is about investment intentions. But there com- pulsion should stop. I was shocked to see the Economist arguing last week that when the early warning system is working the reference of bad- looking claims for higher wages or prices to the Prices and Incomes Board would only make sense if the Government took statutory powers to enforce the Board's findings. The whole point of our democratic way of life is that we are not prepared to give up our personal freedoms for the sake of a quicker rate of growth in output and productivity. We would sooner suffer the consequences of wrong wages and prices than become slaves to some new Master of the Rolls in the Department of Economic Affairs.
It was no doubt the fear of compulsory powers being taken for the Government incomes policy that caused the rush of wage claims in the past nine months. In the first quarter of the year the average rise in wage rates was 5.9 per cent and in the second quarter 6.2 per cent. The average rise in weekly earnings over this period was over 7 per' cent. The fact that the rise in wage rates was nearly double the DEA 'norm' may be the measure of the terror inspired by Mr. George Brown's powerful propaganda. There was, in other words, a rush to cover. If the 31 per cent 'norm' had been compulsory the rise in weekly earnings would probably have been greater, for, when the workers feel victimised, they are always careful to go slow and pile up overtime. As Mr. George Woodcock has tried to say, it is impossible to compel the men to work an incomes policy they resent---at least in our free democracy. This is another way of saying that an incomes policy is quite impossible to ad- minister. A compulsory 'norm' for wage rates would merely bring a greater wage 'drift' in weekly earnings through organised overtime and special allowances. The only degree of compul- sion which the unions are likely to tolerate is the early warning system, and if this is agreed to Mr. George Brown will have won a victory.
It may be well to recall the resolution which the TUC passed at its special conference on April 30: 'The General Council have throughout the discussions [on the incomes policy] made it clear to the Government . . . that trade unions would co-operate in a prices and incomes policy only if it appeared to them likely to secure broad trade union objectives more effectively than present policies.' Now the great trade union ob- jective is a 'planned' growth in incomes, and sooner or later the more intelligent of the trade union leaders will wake up to the fact that a planned growth of incomes is difficult, if not impossible, in a country which from time to time runs into huge deficits on its international trading and capital accounts and has to apply the economic brakes with a jolt. What makes the trade unionist 'mad' is that the deficits are not apparently due to the rise in workers' in- comes which he is being asked to restrain. The prices of British manufactures are not visibly uncompetitive abroad: design, delivery dates and after-sales service are the questionable factors. According to the indices of the National Insti- tute of Economic and Social Research, the hourly earnings of workers in manufacturing have since 1960 risen faster on the Continent and in Japan than in the UK—by 70 per cent in Italy, by 60 per cent in Japan, by 53 per cent in West Germany, by 42 per cent in France and
only 30 per cent in the UK. (The comparable figure in the US is 12 per cent!) Wage costs per unit of output in the same period have advanced by 17 per cent in Italy, by 14 per cent in Wes! Germany, by 12 per cent in France. by 8 per cent in JaWn and only 7 per cent in the UK. (The comparable figure for the US is a fall of 4 per cent!) On productivity we do not come out so well. Output per man-hour in manufacturing has risen in the same period by 38 per cent it Japan, by 37 per cent in Italy, by 25 per cent it) West Germany, by 22 per cent in France and bY 19 per cent in the UK. (The comparable figure for the US is 17 per cent.) These statistics may have their faults, but they do not suggest, as the fraternal delegate at Congress (the Minister of Labour) seemed to think, that disaster lies round the corner for poor Britain if the trade unions do not agree to the stabilisation of wages and the early warning system. One cannot help feel, ing that this wages policy may have been promised in Washington as the price for current support of the £ without a proper appreciation of the real cause of our present troubles.
I tried to explain in The Split Society the underlying causes of our present troubles—partlY financial mismanagement, partly industrial mis' management, partly civil service mismanagement, particularly the Treasury failing to understand money and how to stabilise prices. The result Is the alienation of the so-called working class, who have the feeling that they are always being asked to suffer far the mistakes of -their rulers. The are partly right, but it would be a blessing if they would only become a little more co-opera- tive on the daily job. As the Prime Minister has said, high wages go with high productivity.
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