Big Benn: or putting the clock back
Nicholas Davenport
What is economic progress and how is it measured? It usually comes about when some technological innovation enables manufacturers to dispense with certain labour by installing new machines and it is measured by the increased productivity of the remaining but reduced labour force. But this is not Mr Benn's concept. He was shocked when Sir Monty Finniston, chairman of the Steel Board, told him that 20,000 steel jobs would have to be cut in the next few months. It is Sir Monty's claim that with a £4,500 million investment programme over the next few years he could produce 37 million tons of steel with a work-force of 50,000 against the present one of 220,000. Mr Benn told him to hold his hand until he, the Minister, had had discussion with the trade union concerned. So what Mr Big Berm really stands for is putting the clock back.
Is it any wonder thatthat responsible American journalists are telling their readers that Britain is "drifting slowly towards a condition of ungovernability". and "sleep-walking into a social revolution"? To quote Mr Eric Severeid: "Behind all this are the doctrinaire socialists for whom the picture in their heads is more real than the reality around them • • • The Socialists persist in thinking that a worker in a nationalised factory will feel he owns it and will joyously work the harder. The opposite happens, for everybody's property is nobody's property and is so treated."
The truth of this observation was nicely capped by Mr Sidney Weighell the General Secretary of the National Union of Railwaymen, who rejected as irrelevant to his union's excessive pay claim the fact that the Railway Board did not have the money to pay it. As the Evening Standard put it, Mr Weighell was perfectly entitled to say, "We want the cash you don't have." The unions do not recognise laws passed by Parliament which do not please them. The railwaymen do not accept the Act which says that public boards, like the railways, must pay their way commercially. Last week I ventured to suggest that if the workers are not intelligent enough to see that excessive wage claims can drive the nation into hyper-inflation and bankruptcy they must learn by suffering. Mr Healey endorsed this remark in opening the finance debate in the Commons by warning the trade unions that he would have to increase taxation again if they insisted on excessive pay settlements and that if they ignored the extra taxation by demanding an increase in their net take-home pay he would have to increase taxes again and cut more public expenditure and so increase unemployment.
Confrontation between the Government and the militant trade unions is therefore getting nearer and this, I believe, explains why the bull market on the Stock Exchange is still holding firm. A firm government is always a bull point. The return of Mr Wilson is therefore being closely watched. If he feels strong enough to move the dangerous Mr Benn after, for him, a favourable referendum vote has been secured, the bull market could then reach 400 on the index.
It is always possible that the crisis of confrontation with the unions will be preceded by an exchange crisis when foreigners refuse to hold sterling. This would probably force the Government to borrow from the IMF and impose a wage freeze as one of the conditions for an internationally guaranteed loan. Recently sterling has been extremely weak. About a month ago it was quoted at a discount of 21.2 per cent against the key currencies realigned in the December 1971 agreement. Last week it had slipped to a discount of 23.8 per cent. Although the Chancellor has declared in the House of Commons that he does not want to see any further deterioration in the rate — he raised the minimum lending rate by 'A per cent to 10 per cent as though he was ready to defend the rate by dearer money, which he is not — it does not appear that the Bank of England has been taking much positive action to protect sterling. The reserves in April were virtually unchanged, although the figures cannot be taken as a reliable guide to the extent of any intervention.
It seems that the Chancellor has adopted the sensible view that as our rate of inflation — now over 20 per cent per annum — is twice that of our leading competitors in world trade the sterling rate of exchange must be allowed to fall in order to maintain the competitiveness of British goods. The market guess is that it will fall by about 1 per cent a month until it reaches a discount of 25 per cent on the key currencies. The Economist believes that a 30 per cent discount may be necessary. One point we should all be agreed upon is that the Cambridge economic school — Professors Kaldor and Neild etc — who advocate high tariffs on manufactured goods (against the Oxford economic school — Professors Little and Oppenheimer etc — who advocate devaluation) must be wrong because they are in effect supporting Mr Bean's retrograde philosophy — the suppression of technological advance to preserve jobs in factories which cannot produce goods for export at competitive prices.
At the moment of writing there is no sign of an early exchange crisis when foreigners refuse to accept our sterling paper. But it could undoubtedly happen, for at the end of 1974 foreigners held a little over £5,000 million of sterling at call of which £3,200 million was accounted for by the Arab sheiks and other oil exporters. We have virtually exhausted the amount we can borrow abroad commercially — having so raised about $10,000 million — and we can therefore only look to the IMF who will impose conditions like a wage freeze. This would be the grand opportunity to make the TUC members understand the harsh realities of economic life for a world trading nation which cannot feed itself.
This would also be the grand opportunity for offering the workers a new deal, namely, that if they will recognise the importance of productivity, the necessity of investing in more new machines which will employ less labour, they will be given the chance to share in the resulting capital profit through participation in a public unit trust. I put this scheme forward in 1964 and have been pressing it ever since. One day a trade union leader will arise, we hope, who has the brains to see that workers will not get rich by taxing and confiscating the accumulated savings of those who have created wealth in the past but by sharing in the capital profit of the wealth creators of today, who are not only members of the CBI but the enterprising heads of public boards like the enterprising Sir Monty Finniston. If there had been a public unit trust at the beginning of this year the workers would have seen their units more than double in value. And that would only be a small promise of the capital gain to come if they dropped their egalitarian socialism and took up the productivity of a genuine mixed economy.
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