The Case for Devaluation
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From: Nigel Vinson, Ken Geering, J. M. Ramp- ton, Quentin de la Bedoyere. Mrs Constance Daw, L. A. Smith, John Vaizey, J. E. M. Gunning, R. A. Collier, Julian Budden, R. Brien Williamson, Nicolas Walter.
SIR,—Mr Pryke writes on the economic consequences of Mr Wilson, but wouldn't it be equally fair to write on the economic consequences of Mr Pryke . . . and his ilk? A great deal of the blame for the country's economic mess can fairly be laid at the door of our economic advisers, be they British or Hungarian, and I, like many, am becoming very disenchanted with the opinions of such backseat driving experts.
Whilst applauding Mr Pryke's courage in resign- ing from the Department of Economic Affairs, his article clearly shows that he hasn't changed his spots. I quote: 'Every time production falls British businessmen slash their investment programmes—on any rational view firms should go ahead with their investment in the expectation that the factory will not be ready until the slump is over. . . . However, experience of even our largest companies shows that firms are extremely short-sighted. This irrational behaviour is just one of the examples of industrial weaknesses . . . etc.'
If I ever saw an example of one who has only read a recipe book criticising the cook, this is it. It shows a profound misunderstanding of the realities of business finance and its disciplines. Many com- panies are at the moment anxious to continue to expand—the fact remains, however, that due to an extremely severe credit squeeze imposed by a Socialist government, they will be virtually prevented from so doing. I don't suppose Mr Pryke has ever
attended a company board meeting, but if he could have attended my last one. I would have welcomed his advice on the following: I. Where do we raise a large fixed-interest capital sum, and will it be worth raising at 81 to 9 per cent, even if we can raise it?
2. If we pay this sort of interest on the money, will the investment show a reasonable return, over and above it?
3. If interest rates fall in the next five years, we shall still be saddled with our loan at a very high rate—will this then make us uncompetitive?
4. Can we afford to service such a loan over the next three years, until the project starts to earn its keep? I.e., we stand a chance of not only depressing our existing profits through servicing the new loan. but seeing profits fall in any case through the general squeeze on markets and the downturn in business —we may therefore be doubly hard hit 5. Even if we do go ahead with the investment, can we be certain that our share of the market is going to increase, and thus the investment pay off? It may well be that our existing 10 per cent of spare capacity is all we need to see us through the crisis period of the next two to three years—would it be foolhardy therefore to expand at all?
6. Last but not least, if there is going to be a serious downturn in the country's economic activity, our company might find itself in serious economic difficulties through bring saddled with too high .a burden of debt Thus, to take the wild extreme, we might even jeopardise, through financial collapse, not only our business—but the livelihood of all that work for it.
Irrational not to expand under such circumstances, Mr Pryke . . . ? Not irrational, surely, but courageous to do so. I suppose the whole business of business is taking risks, but it is far easier to criticise businessmen, from a so-called detached and disinterested position, than it is if one is personally responsible for the success or failure of such decisions.
Isn't it time, sir, that we started listening to the wisdom of men of affairs, as well as to the wisdom —now questioned—of the men of ideas? Nobody is suggesting that all professors are mad, but, equally, neither are all businessmen.
NIGEL VINSON
The Old Vicarage, Upton Grey, Basingstoke, Hants.
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