Wanted—An Industrial Revolution
By NICHOLAS DAVENPORT
THERE is !laic doubt that one of the reasons for our slow economic growth in the past has been the poor quality of our industrial investment. By this I mean that it has been concerned too much with tax-saving and the duplication of plant and too little with the introduction of new industrial techniques and the saving of labour through automation. The explanation is simple. First, the top people run- ning British industry have been for the most part lacking in technical expertise. The tendency has been to rely on practical men of the entrepreneur type with family or 'old school tie' connections and, if these are not available, to invite to the chairman's seat an accountant or an ex-civil servant with a title. Secondly, the practice of the Treasury has been to encourage industrial investment by indiscriminate bribery: that is, by offering investment allowances with- out scrutiny of the purpose of the investment. This was carried a stage further last year when the Government offered new inducements to business people to set up in the development dis- tricts of high unemployment. The Boards of Trade and Inland Revenue have just issued a pamphlet reminding business people going into the development districts that under their joint schemes they can recover up to 73 per cent of the cost of plant and machinery within two years (60 per cent in the first year) and up to 71 per cent of the cost of the building over the life of the asset (34 per cent in the first year). The local develop- ment districts may benefit from this State bribery, but the nation as a whole will be saddled with more and more industrial invest- ment which contributes to the potential inflation at home, but does not advance our competitive position in the world markets. Yet our industrial future depends on that competitiveness. Why are we so complacent about it?
I was not surprised to read in the Sunday Times of March 1 an article by an American management consultant, Mr. W. W. Allen, who has lived and worked here for the past six years, claiming that virtually every worker in British industry is under-employed, that basic wages and salaries are too low, that the normal work-week is too long, that overtime is un- necessary, that there is a potential 'vast surplus' of labour, but an insufficient supply of the right capital equipment and that the existing equip- ment is under-employed because the labour is under-employed. In support of his thesis he quotes the following ugly facts: that for each man needed to produce a ton of steel in America three are needed in Britain; that ships could be built here with about 40 per cent fewer men if labour were employed efficiently and that it takes three to six times as long to build a house in Britain as it does in America. He found the hous- ing target of 350,000 houses a year a particularly sordid figure. If an investment of around £2,000 million were carried out it would be possible, he said, in three to four years to produce an addi- tional 500,000 houses and flats a year. Perhaps Mr. Maudling, who is so worried by an excess demand for labour, would study these figures and consider whether his plan to increase our tax- ation is the right one.
Obviously, the sort of industrial revolution we require is impossible without much more in- telligent planning of industrial investment, much more application of science to industry, much wider use of university-trained technicians and scientists in company managements—and perhaps more employment of American industrial consultants. The French have been able to carry out an industrial revolution on the initiative of their own State Commissariat du Plan—without the help of American experts. Our late-coming NEDC with its limited academic economic staff is still struggling and has so far only set up five of the expert industrial commissions which were to plan scientifically the investment of nine industries.
The Opposition has, of course, tumbled to this dilatoriness and has sworn to put a reformed NEDC on its feet and on its job. Mr. Harold Wil- son has condemned the indiscriminate investment allowances and local bribes. He has promised to be 'ruthless' in his tax discrimination, giving the investment allowances only to those firms which install automation and other labour-saving devices, which boost exports or save imports by the introduction of new industrial techniques. He has also proposed making the local tax in- ducements subject to an overall national invest- ment plan. He seems to be contemplating a kind of French Commissariat du Plan with a little less persuasion in it and rather more State direction.
The Government's answer to the urgent call for more scientific and better-planned investment is to rely on the good effects of more competition in a free market. Surely this laissez-faire attitude is out of date. In the White Paper it has just issued on. Monopolies, Mergers and Restrictive Practices, the Government claims that 'competi- tion has an essential role to play both in stimulat- ing innovation and efficiency.' This is not to be denied and the proposals it is making for streng- thening and extending the field of its legislation on monopolies and restrictive practices and bringing to an end resale price maintenance (ex- cept where exemption is granted by the Restric- tive Practices Court) are certainly to be welcomed. But they are not enough.
What do these proposals amount to but a mild supervision of the present trend towards mergers and monopolies? A Registrar of Monopolies is to be set up to make the investi- gation into the facts, so that the companies do not feel that the Monopolies Commission is both 'judge and prosecutor.' The Commission is to be given power to inquire into mergers and to make the 'monopoly' firm divest itself of an in- terest if required—subject to the approval of Parliament. The Restrictive Practices Court is to be given power to register and make orders in respect of 'information agreements,' bilateral agreements and maximum price agreements which still manage to limit competition. All this is reasonable and wise. But it is certainly not wise to imagine that the great industrial revolu- tion we require will be brought about by the free play of competition enforced by the little more biting Monopolies Commission and Restrictive Practices Court or by the free enterprise stimu- lated by taxation bribes from the State. We are all getting far too complacent in our top management—perhaps our top people really do read The Times—and until we have a shake-up we shall remain what Mr. Allen calls 'a half-time country getting half-pay for half-work under half-hearted management.'
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