In the City
The long revolution
Nicholas Davenport
James Morell, the economist of the Charterhouse Group, who is not averse to making highly tentative optimistic forecasts, has become very gloomy in his autumn bulletin. The growth of world output and trade will be lower in future, he says, and we have a difficult year ahead. This agrees with the thinking of the National Institute of Economic and Social Research whose latest Bulletin forecasts more or less stagnation for the British economy in 1979. The UK, it writes, now faces 'apparently intractable problems' in attempting to combine a full employment policy with a satisfactory balance of payments and a low level of inflation. Any sensible worker might have told the NIESR that full employment is out and inflation in.
We are moving, James Morell remarks, through a quiet revolution. The midSeventies were a turning point and we are now living in a period when there is a substantial surplus capacity in terms of both machines and men. After passing through the eye of the storm in the years 1974 to 1976 society, he thinks, is now gradually moving in a more conservative direction. I hope he is right. It is an opinion which is being expressed in the City through the rise in the equity share market which was the focus of my comment last week. But I think it is only right to caution the City against believing that the quiet revolution will have an easy passage. The phrase 'quiet revolution' was that used by Edward Heath in his major speech when he assumed power in 1970 — and look what happened.
The quiet revolution depends upon the leaders of union power coming to their senses before disaster takes hold. If you look at their faces — bovine, smug, setsquare —you will not be too optimistic. They persist in demanding free collective bargaining over wages and insist on the ghastly ritual of the annual wage round. The first step they might make towards a return to economic sanity would be to agree to what Mr Blackaby proposes in the NIESR Bulletin — an intelligent reform of the wage bargaining system.
Statistics should convince even the most stupid that there is such a thing as wage-cost inflation, although some of them still deny
it. After the collapse of the Heath government in 1974 average wage earnings under Labour went up 30 per cent in the year to mid-1975 and retail prices followed with a rise of 24.3 per cent. After the Labour government had taken fright at inflation and had imposed a stiff incomes policy, the rise in average wage earnings was brought down to 14 per cent in 'Stage One' and to 8 per cent in 'Stage Two'. The annual rise in retail prices in the year to September 1977 was slowed down to 15i per cent. In 'Stage Three' when the Government tried to impose a wage guide-line of 10 per cent — and put sanctions on employers who exceeded that figure — the rise in average wage earnings was nearly 15 per cent but the annual rise in retail prices in the twelve months to June 1978 had come down to 5.8 per cent. There can be no doubt that the deceleration in the rise of retail prices was mostly due — but the rise in the external value of sterling had some contribution to make — to the stiffer incomes policies which the Government had induced the TUC to accept.
There can be no doubt either that if the TUC" fails to get the unions to follow the
acceleration in the rate of price increases. The NIESR expects the rate of price infla; tion to edge up to 11 per cent by the end(); .1979 We just cannot live with that rate 01 inflation. Does the unemployment level have to rise to 2 million or to 2iill,to! before the stupid leaders of the TUC real'', that pushing up wages without a rise In put is suicidal for them as well as for the nation? In the last twelve months the workers have been paid 15 per cent more for producing 1 per cent more and in Maui ufacturing for producing 1.3 per cent less. (See Economic Trends of the CSO). A nation is crazy which allows such all arrant wage-cost inflation to continue. 13.11I we are up against union power with all its attendant worker-protective against political patronage, against the 010versal complacency nurtured by this comfortable welfare state. How on earth 0an get union leaders who are on the make to change their stubborn little minds? MI. Brendon Sewill, once head of the Cooservative Research Department and now; more sensibly, a banker, has a wonderful idea, which he developed in the SundaY Times, of summoning a Council of the Nthaetlioinnesanodf odIrdawminaggnuapcaanretaw rr
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olif Lords will be replaced by a Senate to white. the workers would elect their members secret ballot. The Senate would replace the National Economic Development Connell and would draw up a new industrial charter outlawing strikes, and giving the worker: joint control of their employing comPante etc. etc. It is sad to see the Tory intaligellts._lia hooked on the wrong form of industrial democracy. The workers don't want. to manage their companies. Management 1! a skilled job and must not be interfered with by incompetent mixed boards. It was go7 to see the Engineering Employers F% , eration protesting to the Government ag.aul'i their proposal to debase the professional skill and experience of management.. ,a What the workers want is a share in the profits, a slice of the equity, which would _ enable them to build up a dividend inc0n! not dependent upon the wages i of wiv.. incomes policy agreed between the g°.. ernment and the TUC. A slice of the Null!, can be secured either through errIP10Ye‘' shares allocated in each individual comParbY.. — on the lines advocated chiefly by the Linn erals — or by an allotment to workers of Alit per cent or 25 per cent of the units in a Str National Unit Trust on the lines which is have so often advocated in this column. i" equity-sharing does not need a Council ,o,f. the Nation or a new Constitution. It can u‘', • Ahidual put into practice at once either by in-I or companies, as many have already.dolle' a by a Treasury white paper setting urcen National Unit Trust. When action is ta on these lines, then society can be seen ing in a more conservative direction: fi James Morell would have it, and as the Dui market in equity shaies seems to predicate.
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