its end the real value of the gold and dollar reserves of the nation
had been reduced to about one half of the pre-war level. But the
physical destruction of the war had increased Britain's dependence, and
that of other sterling-area nations and other countries, upon supplies
of all kinds from the United States. Yet the dollar earnings by these
countries were not enough to pay for their supplies.
Finally, and perhaps most important from the standpoint of a country
that must live by trade, the terms of trade changed. The price of raw
materials imported into Britain rose sharply after the war. By 1948
about 20 per cent more goods had to be exported than in 1938 to pay for
the same amount of imports.
As a result of these changes in her position, Britain emerged from the
war as an empty-handed victor. The banker of the world was deeply in
debt. The market places of the world were crowded with other nations,
and her own goods were few in number and out of date. Shabby, tired,
undernourished, the island people, not for the first time, began the
long road back.
The road chosen was longer and more arduous than it might have been
because the British, government and people, Socialist and Tory, did
not wish to abandon their position as a world leader. War might have
impoverished them, circumstances might have made them dismiss the maid
and do their own washing up, but to an incurious world they turned a
brisk and confident face. For years the world had recognized that the
British never knew when they were licked. Now, it seemed, they did not
know when they were broke.
They knew, all right. On visits to London during the years I spent
chiefly in Russia and Germany I would meet friends in the services or
the ministries. "We're in a hell of a mess, old chap," they said, "but
we'll work out of it somehow." No one seemed to know just how; but no
one doubted it would be done.
The first problem then--and it is the first problem today--was the
balance of payments. Exports had to be increased quickly, for the terms
of trade continued to be against the United Kingdom. It was in the
years 1946-51 that American aid counted most. Loans from the United
States and Canada, it is estimated, paid for about 20 per cent of the
imports of the United Kingdom between 1946 and 1950.
Simultaneously, the drive to increase exports made headway. The
country, and especially the industrial worker, was, in the modern
jargon, made "export-conscious."
"Export or die"--the slogan may have seemed exaggerated to some, but
it was, and is, an accurate statement of Britain's position. British
exports had recovered their pre-war volume by 1947, only two years
after the end of the war. Three years later they were two-thirds higher
than in 1947. Thereafter, as Germany and Japan began their remarkable
economic recovery, exports rose more slowly. But they did rise, and by
1954 they were 80 per cent higher than in 1938.
The upswing in exports was accompanied by two other processes.
The pattern of industrial production for exports began to change.
Textiles were no longer a dominant export product. Instead, emphasis
shifted to the engineering industries: electric motors, factory
machinery, electronic equipment, precision instruments, chemicals, and
shipbuilding. At the same time, imports--including importation of some
raw materials essential to the export trades--were severely restricted,
and consumer rationing at home directed British production to foreign
markets.
Five years after the war Britain had made great strides toward
recovery. There was in that year a surplus of £300,000,000, or
$840,000,000, on the balance of payments. But the Korean War, which
began in June 1950, was a serious setback for Britain's economy. The
country, resolved to play its part, began to rearm. At the same time
there was a world-wide rush to stock raw materials, and this forced
up the prices of the imports Britain needed for her export trade.
The satisfactory balance of payments in 1950 became a deficit of
£403,000,000 by 1951.
Import prices began to fall after 1951, and in the next three years
there was a balance-of-payments surplus. This recovery was accompanied
by a steady rise both in industrial production and in the real national
product.
The average rate of increase in industrial production from 1946 to
1954 was 5 per cent, while the real national product increased by 3
per cent. The nation used this increased output, first, for exports;
second, to make good the capital losses of the war years by new
investment; and, finally, for rearmament. Those who wonder at the
rocketing German economic recovery after 1949 and the relative slowness
of British economic advance should ponder the fact that in 1950-3
defense expenditure gobbled up _approximately half_ of the British
total output.
The rationing and other restrictions held over from the war held
personal consumption at bay until 1954. Wages rose, but these were
offset by a sharp increase in prices, which by 1952 were about 50 per
cent above those of 1945. After that year, however, earnings rose more
rapidly than prices. With the end of wartime controls after 1952 the
standard of living, especially that of the industrial working class,
rose perhaps more rapidly than it had ever done before.
The increase in production, the end of rationing, the rises in wages
and prices, and the boost in internal consumption all took place
against a background of full employment. In the United Kingdom
unemployment averaged less than 2 per cent of the working population in
1946-54.
This, then, is the short story of British recovery since the war.
By the summer of 1956 the Central Statistical Office could announce
that from the beginning of 1946 through the end of 1955 the national
output of goods and services had increased in volume by one third.
Reckoned in monetary value, the increase was even greater: the figure
for 1946 was £8,843,000,000 ($24,480,400,000), while for 1956 it was
£16,639,000,000 ($46,589,200,000). The difference between the increase
in value and the increase in production is due to the continuous rise
in prices since 1946.
These are impressive figures. But no one in authority in Britain
believes that the nation can rest on them. The double problem of
maintaining exports abroad and defeating inflation at home remains.
The two are closely related. In 1950 Britain had grabbed 26 per cent of
the world market for manufactured goods. German, Japanese, and other
competition has now reduced the British share to about 20 per cent, the
pre-war figure. To maintain it, Britain must continue the export drive,
and this, in turn, involves the attack on inflation.
Inflation began at the time when the British people were emerging from
years of war and post-war austerity. There was more money, and suddenly
there was plenty to buy as one by one the controls on raw materials,
building licenses, food, and clothing disappeared. By 1955 cars and
other products that should have gone for export were being sold in bulk
in Britain, and gasoline was being imported for them. Industries that
should have been almost totally devoted to export trades were producing
for a lucrative home market.
The "squeeze" applied by the Conservative government early in 1956
to halt the buying boom is not, as so many Britons hope, a temporary
affair. Until British industry can increase its production and adjust
itself to the demands of world-wide competition, the country will have
to restrain its home purchases in the interests of overseas sales. The
preservation of the present standard of living depends directly on
exports. If this hard fact is rejected by the British people, then the
economy will deteriorate rapidly.
Those interested in the future of Britain, both Americans and British,
have been looking at the nation's industry for a decade and sadly
shaking their heads. It is too traditional, it is unenterprising, its
workers don't work as hard as the Germans or the Japanese, it is
restricted by the trade unions or the employers, monopolies and trade
rings stifle it. There is a little truth in each of these accusations.
But if all were true or even one completely true, how is the sharp
increase in volume of production and the general economic recovery to
be explained?
Early in 1956, about eleven years after the last Allied bomber flew
over the Ruhr, German steel production outstripped British steel
production. This caused a good deal of "viewing with alarm" in Britain,
much of it by people who failed to realize that before the war Germany
yearly produced about five million more tons of steel than Britain.
The health of the British economy today does not rely primarily on its
output of basic products such as steel or coal but on the nation's
ability to sell its manufactured products.
If the number of employees is taken as a criterion, the most important
of these manufacturing industries are: (1) engineering, shipbuilding,
and electrical goods, with 1,695,000 employees; (2) motor and other
vehicles, 934,000; (3) textiles, 898,000; (4) food, drink, and tobacco,
654,000; (5) precision instruments and other metal goods, 531,000; (6)
clothing, 524,000; (7) metal manufactures, 519,000; (8) manufacture
of wood and cork and miscellaneous manufacturing industries, 472,000;
(9) paper and printing, 445,000; (10) chemicals and allied industries,
402,000.
All of these industries contribute to the export drive, including food,
drink, and tobacco. There has been no overwhelming demand for such
Northern delicacies as toad-in-the-hole or Lancashire hot pot from
British markets, but the demand for Scotch whisky seems to be holding
up reasonably well.
These industries are the meat and potatoes of the British economy.
Since the war there has been a steady increase both in production
and productivity (output per man in industry) in these industries.
Fortunately for Britain, the greatest rises in over-all production have
taken place in the engineering-shipbuilding-electrical-goods group, the
vehicles group, and the chemicals group.
Productivity was a more serious problem. Lack of maintenance and
capital investment during the war, antiquated machinery, the
understandable physical weariness of a labor force that had been
working at top speed since 1939 all contributed to a relatively low
rate of output per man year in industry compared with the United States.
In 1948 the Labor government took an important step to meet the problem
when it formed the Anglo-American Productivity Council. Its goal was to
increase productivity in Britain through study of manufacturing methods
in the United States. Teams representing management, technicians, and
shop workers went to the United States to study American methods. They
returned to boost British productivity.
The effort did not stop there. An independent body, the British
Productivity Council, was established in 1952 to continue the work.
Represented on it are the British Employers' Confederation, the
Federation of British Industries, the Trades Union Congress, the
Association of British Chambers of Commerce, the National Union of
Manufacturers, and the nationalized industries. Under the aegis of
the Council, Local Productivity Committees have been formed and the
exchange of information and visits between groups from industrial firms
have been encouraged.
The Council is a good example of the British approach to a national
problem in modern times. The nation's difficulties have gradually,
but not entirely, eased the old enmities between some employers and
workers. Aware of the extreme seriousness of the situation, they are
working together to boost productivity, and they are making headway.
Employer-worker consultation is becoming the rule. When the rule is
broken by either side there is trouble.
The increase in productivity has been steady. Taking 1948 as the base
year with a figure of 100, output per man year in industry rose to 105
in 1949. Save for 1952, when there was a slight relapse, the figure has
improved steadily ever since.
Production has shown a corresponding rise. The general index of
industrial production, using 1948 as the base year of 100, rose from
114 in 1952 to 121 in 1953 and then jumped to 136 for 1955. But
production leveled off in 1956. As that year ended, the expectation
was that 1957 would see a new rise in production as the capital
investment of the previous five years began to show results.
These figures are one answer to questions often asked abroad: "Why
don't the British boost production? Why don't they work?" The answer is
that they have boosted production and they are working. Early in 1957
the factory where Jaguar cars are made was almost entirely destroyed
by fire. Great efforts by both management and labor put the factory
back into production two weeks later. Production and productivity are
rising fastest, of course, in the new industries such as electronics.
But the economy is burdened by elderly industries such as coal-mining,
where extra effort by labor and management cannot, because of existing
equipment and conditions, produce dividends in production as they would
elsewhere.
Britain's long predominance in both industry and commerce, especially
during the last half of the nineteenth century, fostered a lack of
enterprise and lethargy in management that is highly unsuitable to the
nation's present economic situation. This attitude lingered until the
period after the last war when the situation became plainly desperate.
Changes of styling and packaging abroad failed to impress British
business. "We make a much better product than some of this flashy
foreign stuff," one was told loftily. "Let them have their fancy
wrappings."
Memories of the golden days of the last century also encouraged a
conservative attitude toward change in business methods or the routine
of production. Some of the larger industries, however, emerged from
the war intent on drastic changes, and others, less progressive, were
forced to change by the increased competition for export markets and by
the new necessity of using the restricted quantities of raw materials
to greatest advantage.
Industrial engineering, including work study, work simplification,
plant layout, and planned maintenance, has become a primary concern of
industrial management. Many of the managers--the managerial class is
about half a million strong--are much more interested in new methods of
industry than are the workers. Any innovation that seems to disturb
the happy condition of full employment and high wages can provoke
discontent among the workers. The more progressive unions are doing
their best to explain and advocate change. It is in the middle ranks
of labor's officer class, the ranks most interested in the emotional
support of "the lads," that the strongest resistance to change is
located.
Management in industry, therefore, is beginning to assume some of the
importance and standing that it attained long ago in the United States.
Facilities for training in management are increasing, although the
majority of today's managers never received any special training. Trade
unions, employers' associations, and individual concerns are pressing
forward with training schemes.
There is a relationship between this development and the arrival
in British society of the new middle class. Many of the leaders of
this class are in management work in industry and commerce. As their
position is solidified by Britain's increasing reliance on the export
industries they serve, their social and economic importance is bound to
increase. In the past their social position has been well below that of
the lawyers, doctors, soldiers, and civil servants who were the elite
of the old middle class. That, too, is changing.
Gross fixed capital formation recently has been at about 14 per cent of
gross national expenditure. By 1954 its volume was 17 per cent above
that of 1938 and about 30 per cent greater than in 1948.
In 1951 and 1952 the government responded to the pressing needs of
defense and exports by taking measures to curtail certain kinds of
investment. In 1953 and 1954 the policy was reversed, and incentives
for investment were written into the Budget. But the wave of home
buying in 1955 made it necessary for the government again to impose
restraints on investment. In particular it sought moderation in
capital outlay for municipal and local building and improvements and a
deceleration of investment programs in private industry.
These and other actions taken at that time were the result of the
Conservative government's preoccupation with the balance of payments,
the nation's gold and dollar reserves, the inflationary trend in the
national economy, and the need for investment and expansion in the
export industries. These objectives will dominate the economic approach
of any government, Socialist or Tory, that achieves power in Britain in
the foreseeable future.
British industry has many problems of finance, of production and
productivity, of management. But to an outsider it appears that the
gravest problem of all is the indulgence by the two main partners in
industry, labor and management, in restrictive practices. By preventing
the most effective use of labor, technical ability, or materials, or
by reducing the incentive for such use, these practices gravely damage
the industrial efficiency of the country. Restrictive practices seem to
many competent observers a far greater danger to the British economy
than strikes.
It is important to understand that such practices are almost as
prevalent among management as among labor. Each group has the same
basic motivation. They seek a reasonably stable economic life free from
the strains and stresses of competition. The psychological explanation
may be unspoken desire to return to the old easy days of Britain's
unquestioned economic supremacy.
The employers' restrictive practices are less widely advertised than
those of the workers. Their classic form is the price-fixing agreement
which insures that even the least efficient manufacturing firms will
have a profit margin. To maintain the price-fixing system, employers
maintain private investigators and courts of inquiry; they can and do
discipline the maverick who breaks out of the herd.
One expression of the employers' approach is the tender of contracts
identical to the last farthing. Britain in 1955 lost the contract
for the Snowy River hydroelectric plant in Australia largely because
the eight British firms among the twenty that submitted tenders all
submitted exactly the same amount. In New Zealand nineteen out of
twenty-six companies bidding for an electric-cable contract submitted
identical figures.
The practice is embedded in British industry. Legislation to combat it
was introduced into the House of Commons in 1956, but objective experts
on the subject believed the legislation fell far short of the drastic
action necessary.
Restrictive practices are only too evident in the larger field of
relations between the worker and the boss. The importance of problems
in this area of conflict is multiplied by their political implications
and by the fact that Britain, like other countries, is entering a new
period of industrial development. The industrial use of nuclear energy
for power and the advent of automation can produce a new industrial
revolution in the homeland of the first industrial revolution. But
this cannot improve the British economy--indeed, the revolution cannot
really get under way as a national effort--without greater co-operation
between organized labor and employers and managers.
Throughout this book there have been references to organized labor and
to the Trades Union Congress. Now we encounter them in the special
field of industrial relations.
Organized labor in Britain is big. There are 23,000,000 people in
civil employment, and of these over 9,000,000, nearly the whole of
the industrial labor force, are union members. They have an enormous
influence on the economic policy of any British government; they are,
according to Sir Winston Churchill, "the fourth arm of the Estate"; in
the view of Mr. Sam Watson, the tough, capable leader of the Durham
miners, they are "the largest single organism in our society."
But organized labor is not a single force, an orderly coalition of
unions. It is an extraordinary mixture. Politically some of its leaders
are well to the right of the left-wing Tories although they vote
Labor. One important union and a number of smaller ones are dominated
by Communists. The Transport and General Workers Union has 1,300,000
members; the National Amalgamated Association of Nut and Bolt Makers
has 30. Some unions are extremely democratic in composition. Others
are petty dictatorships. Many are not unions in name. If you are
civil-service clerk, for instance, or even a member in good standing
of the Leeds and District Warp Dressers, Twisters and Kindred Trades,
you join an association.
The Trades Union Congress is the most powerful voice in British labor.
Only 186 of about 400 unions are affiliated with it, but as these
186 include almost all the larger ones, the TUC represents nearly
8,000,000, a majority of the country's union members.
The outsider's idea of the typical trade-unionist is a horny-handed
individual in a cloth cap and a shabby "mac." But there are 1,500,000
white-collar workers, including 500,000 civil servants, among the
unionists affiliated with the TUC.
The tendency of the white-collar workers to affiliate with the TUC
probably will continue. In March of 1956 the London County Council
Staff Association decided to apply for affiliation. We can expect
that the clerical workers in this type of union will exert increasing
influence within the TUC and upon its Council. The TUC's claim to
represent the industrial working class thus is being watered down by
the admission of the white-collar workers' unions. As this class of
worker generally believes that the industrial workers' pay has risen
disproportionately and that inflation has hurt the office worker more
than it has the industrial worker, the new composition of the TUC may
produce sharp internal differences. At any rate, the old position of
the TUC as the spokesman only for the industrial worker is a thing of
the past.
The TUC is a powerful voice. But it is only a voice. It has great
responsibilities and little formal power. It can, for instance,
attempt to moderate demands for higher wages and urge restraint, but
it cannot prevent any union from pressing such demands. The TUC can
advise and conciliate when a strike begins, but it cannot arbitrarily
halt one. When two member unions are in a dispute--and such disputes
can seriously damage both the national economy and labor's position in
British society--the TUC can intervene, but too often its intervention
is futile. Each union is self-governing. The TUC's influence,
nonetheless, is enormous. The restraint shown by the major unions
after the war and during the war on the question of wage increases
was largely due to the influence of the TUC. The general growth of
responsibility on the part of many unions can also be attributed, to a
great extent, to the missionary work of the TUC.
In recent years the General Council of the TUC has moved toward
assuming a stronger position in the field of industrial strikes. It has
tried to show the workers that the strike is a two-edged sword that
wounds both worker and employer. The TUC maintains that the strike,
the workers' great weapon, should not be used indiscriminately because
of the damage a strike by one union can do to other unions and to the
national economy.
At the 1955 TUC conference the General Council won acceptance of a
proposal that it intervene in any case of a threatened strike when
negotiations between the employers and the unions seem likely to break
down, throwing the members of other unions out of work or endangering
their wages, hours, and conditions. This is a significant step forward.
Formerly the TUC could move only after negotiations had broken down and
a deadlock had been reached. In other words, the TUC acted only at the
moment when both sides were firmly entrenched.