THE PLAN-AND THE PROSPECT
THREE VIEWS OF THE GOVERNMENT'S NATIONAL ECONOMIC PLAN
St. George and the Economic Dragon
By NICHOLAS DAVENPORT
s state documents go the National Plan, with ./„its 492 pages and masses of tables and charts, is the most formidable ever issued. That the economic staff of the Department of Economic Affairs should have been able to produce such a book in nine months, having first had to conduct a massive industrial inquiry and consult with other government departments, with individual managements and unions, with economists and industrial experts and all, is nothing short of a miracle. It reflects the greatest credit on Sir Donald MacDougall and the academics he re- cruited. It is also a tremendous plume in the hat of the First Secretary of State who has been the driving force and final editor. Mr. Brown's per- sonality is undoubtedly stamped on the section which is called 'Check-list of action required.' Under six headings—balance of payments, indus- trial efficiency, manpower policy, regional policy. Public spending and periodic reviews—Mr. Brown has had noted in a column labelled 'Action' the names of the bodies required to take Positive steps—from the Government down- wards. Indeed, the most impressive feature of the book is the practical guide for action which it keeps giving as it goes along. There has been nothing like it before in any government white paper on our economic affairs. I would say that the much-praised French Commissariat du Plan never produced anything so good, useful and practical. As a life-long advocate of state eco- nomic planning, I therefore give, it a big welcome. The modernisation of Britain has made a start. Let no foreign banker suppose that Mr. Brown has been aping the state planners of the Com- munist world. This is a plan for a mixed eco- nomy. Public spending may be a large part of total expenditure, but most manufacturing industry and trade will continue to be governed by market forces, and Mr. Brown promises to take care not to destroy the complex market mechanism. Private enterprise. he says, will have to be influenced but not forced. The point is that as both government and private industry have to 't Plan several years ahead it is very desirable to co-ordinate the forward estimates of both. Neither can plan realistically without some idea of the rate at which the economy can be expected to grow. But growth cannot be maintained unless the balance of payments problem is solved. The Plan therefore sets out to remove the underlying weaknesses of the economy, which have caused the balance of payments defiCits, and to promote the changes which will secure better and more sustained growth. Briefly the plan is to achieve a 25 per cent increase in the national product between 1964 and 1970. This requires a growth rate of 3.8 per cent per annum compound.
Now I do not suppose for one moment :hat this target will be reached on the due date. in the first place, the deflationary measures recently taken by Mr. Callaghan to protect sterling and Correct the payments deficit will involve, as the book says in what seems ro be a hastily written addendum, 'some slowing-down in the rate of expansion in the next year or so.' (The National Institute of Economic and Social Research esti- mated a 1 per cent growth for. 1966.) The achievement of the target may therefore be delayed—unless private industry miraculously ac- celerates the rate of change required to increase efficiency and re-deploy labour. Secondly, the plan assumes a growth in exports (by volume) of 51 per cent a year. (The industrial inquiry in- dicated a growth rate of 5-1 per cent as possible.) But the growth in international trade has recently been slowing down, partly because of the defla- tionary measures taken in some European coun- tries, partly because of the fall in commodity prices which has hit the primary producers over- seas, partly because of the elimination of the American payments deficit which has hitherto been helping to finance the world export trade. The National Institute lately reported: 'Nearly all [industrial] countries are expanding a little less rapidly in 1965 and the decline in France, Italy and Japan, as well as the UK, has been quite sharp.' This is an unfortunate trend and even if it lasts only a short time it may put Mr. Brown's forecasts out. Even so, I do not in' any harm in having a largo of 25 per cent in output by 1970. Who would have been inspired by the story of S. George and the dragon if an undersized dragon had been ordered for the kill? St. George Brown is not one to flinch at fearsome economic monsters.
And what a monster of a problem is the 'man- power gap'! To, achieve the desired rate of growth we need the extra labour of 800,000 and only 400,000 are likely to become available with- out changes in policies. The Government hopes to reduce the gap to 200,000 by redeployment of labour. This involves vast movements of labour from agriculture, coal mining and railways, from aircraft, textiles, clothing and footwear, into con- struction, mechanical and electrical engineering, chemicals, etc., not to mention pUblic administra- tion, education and services like electricity and gas distribution. Will labour co-operate freely to that extent? The Government will have to speed up its training centres and housing plans (500,000 houses by 1970) and introduce quickly its system of wage-related unemployment benefits which it calls 'redundancy compensation.' The balance of the manpower gap will finally have to be filled by an improvement in the productivity of labour.
This is not at all impossible— given the right sort of industrial investment—but it draws heavily on the fund of goodwill among the workers who might well be disgruntled by the Government's compulsory 'early warning' system for wage claims. I find the whole of this piece of planning a very optimistic project for a split society.
The determination and drive which per- vade the whole National Plan can be seen from this summary of the action programme required to right the balance of payments and secure more rapid and sustained growth: (I) Government spending overseas on defence has to be cut quite drastically and aid to developing countries re- strained until the deficit is eliminated. (2) Private investment abroad is to be cut, reducing the net outflow of private capital by £150 million next year. (Whether this will have an adverse effect on exports remains to be seen.) (3) The 'Little Neddies' have to work out for each major group of industries schemes by which output per head can be increased. imports saved and exports , boosted. (Fiscal restraints on imports and fiscal incentives for exports will. I am sure, have to be added to achieve the targets.) (4) Manufacturing investment will have to be increased by about 7 per cent in real terms from 1964 to 1970 in order to achieve the increase in capacity and the growth of productivity required for the addi- tional exports and import replacement. Mr. Brown is apparently relying on new productive invest- ment by foreign companies, especially in the underemployed areas. to help create the new in- dustrial capacity. The City will be delighted to see that while the Government intends to get rid of restrictive practices and prevent the abuse of monopoly power it will welcome industrial mergers which promote greater efficiency and in- ternational competitiveness. And all of us will be relieved to read that over half the £8,000 million increase in the national product between 1964 and 1970—if. the 25 per cent growth target is ever achieved—will go on personal spending. It may be pie in the sky but it is attractively baked and immense in size. It may even make us all work a little harder.
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