A bonfire of Wilsonism The abolition of the £50 foreign
travel restriction on New Year's Day has been widely interpreted as the first shot in Mr Wilson's general election campaign. For once there is no reason to doubt the con- sensus view. This mean-spirited brain- child of the previous Chancellor, Mr Callaghan, was always of supreme econo- mic irrelevance, a paradigm example of the politics of envy which is Labour's besetting sin.
Yet the event does provide an occasion for taking stock of the present economic state of the nation. And the first and most obvious fact is that, as a direct result of devaluation, there has been a dramatic improvement in the balance of payments. For the Tories to suggest that somehow this is not so, that the Govern- ment has cooked the books, is politically inept, an unwarranted slur on the official statisticians responsible for preparing the figures. and plain nonsense. The fact is that, during the first nine months of last year (figures for the fourth quarter of 1969 are not yet available) the balance of payments on current and long-term capital account showed a surplus (season- ally adjusted) of £225 million. The aver- age figure for the preceding decade (1959-68), on a comparable basis, was a deficit of £160 million. In other words. there has been an improvement of some £385 million—or more than £500 million at annual rates.
What is equally interestin9--and signi- ficant—however, is the composition of this £385 million improvement. The ex- port-import balance, towards the trans- formation of which the whole apparatus of Wilsonian 'purposive' and 'structural' intervention has been directed, has re- mained well in the red, improving by a mere £19 million. The capital account— thanks to the change from a net outflow of private investment capital during 1959- 68 to a net inflow in the first nine months of 1969—improved by £95 million. But the lion's share of the turn-round was provided by an increase in Britain's so- called invisible surplus (the overseas earn- ings of the service industries, plus dividends and interest on our overseas investments, less the comparable pay- ments we make to other countries) of no less than £271 million. And the only 'pur- posive' government intervention in this lector of the economy has been to dis- criminate against it, notably through the Selective Employment Tax.
The improvement on the capital account is probably a temporary phenomenon— and certainly ought to be: Britain's future is clearly as a net exporter, and not importer, of capital. But there is nothing emphemeral or unreal in the con- trast between the relatively staid behavi- our of the export-import balance and the sparkling performance of this country's 'invisible' earnings. Certainly it is some- thing to which Mr Wilson would do well to address himself when he opens his pre- election speechmaking campaign in Car- diff this Saturday. No doubt he will recall another speech he made at Cardiff, on another Saturday in January six years ago, when he launched his 1964 pre-elec- tion campaign. And so he should.
'The urgent need' he said on that occa- sion' is to make these structural changes in British industry that will help us to strengthen our export-import relationship . . . we should also want to use the tax system vigorously to encourage improved productivity among those industries or parts of industries which have it in their power to increase exports, or to save imports . . . It might or it might not be possible- to indentify individual firms who should be encouraged to expand produc- tion because there is a ready market for their goods overseas, particularly in the field of developmental capital for Com- monwealth and other countries. But even if it were difficult to indentify firms, in any case it would be possible to identify industries and we should be quite ruthless in discrimination . . . The other instru- ment we shall use is the creation of new publicly owned industries based on science.' And much more in the same vein.
Yet what has happened? At tremend- ous cost in terms of real resources and the proliferation of bureaucracy. this petty interventionism—the aluminium smelter. Wedgwood Benn, approach to economic management—has been impos- ed upon us, and with unerring accuracy the Government turns out to have 'identi- fied' all the wrong industries and been 'ruthless in discrimination' against just that sector of the economy that has proved able to contribute most to the country's balance of payments improve- ment, an improvement brought about by a devaluation whose avoidance was Mr Wilson's prime economic objective during this Government's first three years of existence.
Nor is this the only lesson to be drawn from a re-reading of that 1964 Cardiff speech. In it, Mr Wilson quite rightly relegated the balance of payments to a secondary position. The whole panoply of detailed interventionism and ruthless dis- crimination and the improvement in the export-import balance through socialism and science were but a means to an end— economic expansion: 'Last week, I spoke about our vision of. a new Britain. To-night. I want to say how it can be guaranteed. There is one way only, it depends on our national produc- tion. Why do we give such a high priority to expanding production? The answer is that all else in our programmes and our vision for the new Britain depend on what we turn out front our factories . . . The argument in the next election will not be whether we can afford these pro- grammes . . . The argument will be this: can the conservatives or Labour best galvanise our sluggish. fitful economy? Why. Aneurin Bevan asked, look into the crystal when you can read the book?'
Why indeed? When what the 'book' shows is that during the first five years of the Wilson administration the nation's production expanded by 11 per cent, com- pared with 20 per cent during the pre- vious five fitful, sluggish Tory years.
The course of the economy over the coming year is uncertain. That Mr Wilson is looking to it to save his electoral bacon is plain, although whether it will remains to be seen and must be considered un- likely. But what is now clear beyond peradventure is that purposive interven- tion, or scientific socialism, or whatever Wilsonism is nowadays called, has miser- ably failed to bring economic expansion. that the balance of payments has improved in spite of (and not because of) it, and that the whole futile exercise has been a costly disaster. In the last days of the last Labour government Mr Wil- son's most valuable act was his celebrated 'bonfire of controls'. He now has the opportunity to redeem the last days of his own administration by inaugurating a bonfire of Wilsonism.
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