Decline . . . and Fall?
H Y/II MA (U
A SPECIAL SURVEY
By LAIN MACLEOD, MP
WHEN first I promised to write this piece I planned it as a pensive essay on the Economic State of the Nation. Events have been changing so rapidly—indeed, are changing so rapidly as I write—that it will inevitably have something of the character of a diary.
Let us go back to the beginning. How was this latest and most serious crisis born? Who are its true parents? Could more skilled care have led to a less tortured delivery? At first, the warning signs were hard to see: within days the crisis was on us. Let me abandon metaphor and talk about people. Especially Messers Wilson, Brown and Callaghan, and, as Mr Heath ob- served at. the Brighton conference, `Messers' is the word. When the Labour party came to power in October 1964 and examined the books, it declared that 'there was no undue pressure on our resources calling for action.' It seemed at the time a curiously complacent phrase and it led Mr Wilson into the confidence crisis of November 1964 which still endures. There have been moments of relief (usually when we dis- covered that someone else was still prepared to bail us out), moments of relaxation and arrogance to coincide with our local and national elections, but there has been no respite.
And still those who have to trade in sterling play the game we remember from our child- hood, 'Hunt the Slipper.' If you have it, you pretend you have not; and if it comes to you, you pass it on as quickly as possible. The leads and lags in sterling alone can hobble us, but there is a deeper pessimism at work. People— and not only those who trade in sterling—are losing or have lost confidence in us. They be- lieve we have settled for a place in the second or even the third division. I think, paradoxically, that there is a grain of comfort to be found here. The crisis is real enough and serious enough, but it need not be as fundamental as our knockers believe. If there is a poverty of desire in this country, it will pass. If there is a weariness of spirit, we shall recover from it. We always do. Yet for the moment these doubts weigh down the scales against us. What matters in such a crisis is not so much how things are, but how people think them to be.
It is comparatively recently that the Chan- cellor's whole budget judgment has been every- where called in question, especially in relation to its timing. 'The Treasury, it is now clear,' thundered The Times's leading article a week ago, 'made a fundamental error in their budget recommendations . . .'—the error being to assume that nothing need be done until the autumn and then that the fierce deflation of SET would take care of what might be by then a rising tide of consumers' demand. With dutiful respect to The Times, and indeed most national newspapers, I made just this criticism the day after the budget on May 4, 1966, in the House of Commons: 'Now, with reference to the whole budget, I ask the Chancellor quite seriously whether he does not think that he is taking a grave risk in his timing. . . . Is the Chancellor really satisfied that he has not taken a far greater risk than he ought to do in making these pro- posals? Perhaps he would like to have brought them in earlier—no doubt he would—but has he not created that risk by his proposals yesterday which do not operate at once on the level of demand in this country?' This has been from the first day our criticism of the budget strategy, this and our detailed assault on the absurdities of SET.
It is no comfort to be proved right. And J doubt if it comforts Mr Heath to read the ver- dict of the Sunday Times's leading article this week : 'Even at this stage, however, it is only right to point out that the last election was fought by Mr Heath on the basis that the economy was in danger and that strong measures would be needed, while the Prime Minister argued that this just showed that the Conservatives would resort to high unemployment. Whatever else this crisis may show, it is the most complete vindication of the justice of the central theme of Mr Heath's election campaign. He was right and Mr Wilson was wrong.' Earlier action, of course, could have been less deflationary than now it must be. Indeed, if the many budgets and deflationary actions of Mr Callaghan had been concentrated instead of scattered, and if they had been un- accompanied by the soothing noises which com- forted the Labour left wing and alarmed our creditors, not more than one-half need have been done of all that has been done. I have little in common with the left fringe of the Labour party, but I have for two years been carrying the banner they paraded as our Prime Minister was given an honorary degree at Sussex Uni- versity—Wilson, Doctor of Double Talk.'
It is no doubt unfair that a Socialist govern- ment and a Socialist Chancellor should so often be distrusted where a Tory Chancellor would be believed, but this, too, is one of the factors in the situation. When Thorneycroft or Selwyn Lloyd announced tough measures to cope with their periods of strain on sterling everyone believed them. Now no one believes poor Jim. Instead, they look to other evidence—to free drugs and the nationalisation of steel, for ex- ample, to prove to themselves that Socialists behave like Socialists. The 7 per cent Bank rate had already been discounted. The measures an- nounced on Wednesday were, only a few days before, unthought of. And what excuse can there be for this general paralysis? The seamen's strike? Of course not. If anything, it should have worked towards the formation of a defla- tionary package which could have been announced two weeks ago. Was nothing pre- pared? Yes, of course it was. It was prepared by officials and ignored by ministers. It is very sad to see a Prime Minister of this country groaning against the press and accusing his critics of being unpatriotic. Sadder still to see the world yawn at him while he shuffled into his old routine about knocking hell out of our competitors. They know him at last.
Before I heard the Prime Minister on Wed- nesday afternoon a friend asked me what I thought he would say. I replied, 'He will start, "As my Right Hon and Learned Friend the Member for Wirral said in 1961. . .".' And of course in effect he did. Hire-purchase regula- tions, building curbs and holiday travel form a hurriedly prepared meal and the 10 per cent extra surtax (which is in effect a capital levy) was a typical piece of Wilsonian malice to season the dish. What he said about defence spending was no more than bluff. The key proposal of course is for the standstill in wages and prices (in 1961 we called it a 'pause'), but the most significant remark came by accident or design in a supplementary reply. Mr Wilson's comment that he was prepared to see to 2 per cent un- employment became within minutes the real talking point of his statement—particularly on the Labour benches.
Has he done enough? I hope so. Perhaps sterling will have a short respite, unless of course words begin once more to shuffle away from action. In other words he has done more, and probably much more, than a Tory Chancellor need have done, but with Harold Wilson one must over-insure. The fear now is that he will give away in speeches what he has tried to save from the folly of his recent actions.
And while we wait and see whether Wed- nesday's medicine works, let us brood over the two unmentionable words, unemployment and devaluation. I have long pleaded for a new atti- tude towards unemployment and, ideally, for a new definition. The present labour market situa- tion is tighter even than it looks, for in times of inflation employers do not bother to notify vacancies and the percentage of unemployables among the unemployed rises sharply. There are rough times coming and probably now they will be rougher than they need have been. As Nicholas. Davenport wrote in last week's SPECTATOR, Mr Callaghan has . planned a sacrifice this winter when the British people are due to pass from a full-employment society to a stagnating under-employed society.'
And devaluation? The SPECTATOR has its own views. Perhaps because I am an inhibited poli- tician rather than an independent editor, I do not share them. But I do share the dread Nigel Birch expressed in a Norfolk speech ten days ago: 'I have a recurrent nightmare and it is this: that in the end we shall have to devalue, but after spending all the proceeds of all the Government's dollar holdings in America, after spending a large part of private investment hold- ings in America and after contracting still more astronomical debts.' Mr Birch is as good an eco- nomic forecaster as I know. He may be wrong this time. I hope with all my heart that he is. But the ghost walked this week.
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