11 NOVEMBER 1966, Page 29

Britain with the Brakes Off and On

rA. momami aliTED

By NICHOLAS DAVENPORT

ExAc-rt.v what type of society Mr Wilson is trying to create—authoritarian socialism, corporate state, managerial society—no one really knows least of all perhaps the pragmatic Mr Wilson. but who can be in any doubt that the typical top man of the new age is Mr H. F. R. Catherwood. one time Chief Industrial Adviser in the Department of Economic Affairs and now Director General of the National Economic Development Council? It is therefore good that he has written a book,* or rather published a collection of speeches and lectures with explana- tory introductory notes. which reveats what he stands for and what the new age should be like. It appears to be exactly like Mr Andrew Shonfield and I am glad to see that the author expresses his gratitude to that economist 'for all his advice and help. It is a revealing book which ought not to be missed.

The opening speeches deal with management in industry—scientific, professional, entrepre- neurial—and 'the curious attitude tat the educated Englishman to industry, which is due to those exclusive snobbish public schools. Mr Cather- wood. by profession an accountant, became man- aging director of British Aluminium before join- ing the civil service and should know what he is • BRITAIN wint THE BRAKES OFF. By H F R Catherwood (Hodder and Stoughton. 30s - talking about. His theme here is that entrepre- neurial decisions are not yet taken on a sufficiently rational, professional and scientific basis. 1 he controlling power of the shareholder in a big company has gone and the only way to get improved management. he says, is eithei by public ownership or by the creation of self- imposed professional standards. Mr Catherwood obviously has a high regard for public ownership and the civil service and a rooted distrust ot the market economy and the forces at competition. which are a shock treatment which can kill as well as cure. but he admits that management can he transformed by the right educational processes and that the profit motive can be useful (though you won't find the word 'profit' .n the index). Why not, then, rely on the new universities— Warwick, etc.—and the new highIN educated institutional body of shareholders (the life fund and unit trust managers) to improve the profes- sional standards of management? Why question 'whether the nineteenth-century version of the limited liability company is the best institutional framework'? Why not just improve it? The limited liability company with its equity share is the most sophisticated technique ever devised for the entrepreneur to extract finance from a highly developed capital market. For heaven's sake let us use it and not destroy it !

The second part of the book becomes more fascidating because it reveals Mr (...therwood's frustration and shock over the July deflationary 'budget: He deals with it in notes to his speeches on macro-economics (the National Plan), micro- economics (the Little Neddies) and the policy for productivity, prices and incomes. His heart and soul and life-work had been in the National Plan —he still believes that the British economy can grow at a faster rate than 4 per cent per annum —and it must have been a great pain for him to write: 'At the date of going to press it is quite clear that the most publicised part of the national economic plan—the 25 per cent growth between 1964 and 1970—cannot survive the government n.easures of July 1966. lie had been convinced that the 1966 budget which together with the 1965 budget had 'brought the amount taken out of the economy in two years to the highest figure since the 'forties' hac! been sufficient to make sure that the rate o! increase in money wages would slow down. Certainly, he admits, prices were beginning to show the strain of the increase in wages but he did not believe that they had begun to affect our competitiveness abroad_ Exports had gone even Ilene' than had been expected-6 per cent up in 1965 and 9 per cent up in the first five months of 1966—but alas! our foreign creditors did not share his confidence and sterling was heavily sold. The real lesson of the July crisis, he says. is that It our current allocation of national resources does not give us enough liquidity without uncer- tain foreign help and prevents us from expanding at more than 3 per cent a year without running short of liquid funds, then we had better make up our minds once and for all that we must change our current allocation of resources until we have the liquidity we need. If we have put the strength of the currency ahead of the growth of our industrial resources, then we are at least entitled to put the growth of oiler own industrial resources ahead of some of the demands made on them by third parties.

By this he means the demands of overseas invest- ment and overseas spending by the Government on defence.

On government spending overseas on non- productive military account—over £270 million a year—Mr Catherwood's economics are sound enough, although his over-dramatic remark about planning to be a strong industrial power or a weak imperial power is really meaningless, but on overseas investment he seems to be suffering from Mr Shonfield's chronic delusion that every £ spent on industry abroad is a £ withdrawn from industry at home. Certainly we may have spent too much on direct investment abroad under the Tory regime but this and portfolio investment abroad, which Mr Catherwood plainly does not understand, are responsible for the only strong growth item in our 'invisible' account. Interest, profits and dividends (net) from overseas are now approaching £500 million a year.

Mr Catherwood must clearly be appalled by the compulsory powers over prices and wages taken under Part IV of the Prices and Incomes Act. It is most unusual, he says, in our country for a policy which most people agree is right to fail simply because it is voluntary. If it does fail on this account, then 'we really have taken a long step backward.' His remedy for all our ills is more and more industrial investment of the right sort which will lead to greater and greater productivity and higher and higher exports. He still believes in the reasonableness of labour but asks the trade unions to base their wage claims more on productivity and less on comparability. If our financial reserves are not big enough to carry a high wages policy until it pays off in higher productivity, he argues, non-inflationary productivity bargaining could achieve the same objective. Obviously Mr Wilson and Mr Stewart

are not so trusting or so optimistic. Having seen wages and salaries increase by £1,300 million last year although only £600 million was earned by increased production they appear to have become as cynical as some of our foreign creditors. This is an attitude which Mr Catherwood as 'one of the small minority of practising Christians' must deplore. It would be awful if Mr Wilson's coming Utopia had no place in its hierarchy for a practis- ing Christian like Mr Catherwood, who is making a fine contribution to the work of our industrial reorganisation.