FINANCE AND INVESTMENT
By NICHOLAS
DAVENPORT
VERY little attention seems to have been paid to an important speech recently made by Mr. Harold Watkinson, the Parliamentary Secretary to the Ministry of Labour, at a conference of the Manchester branch of the Institute of Industrial Administration. I suppose that editors thought it waste of time to send reporters to such a dull occasion. But it produced a statement of Government policy for industry which showed that the Conservative Party has been giving some thought to the problem of the new capitalism. It is evident from the agenda at Scarborough that the Labour Party has been giving no thought at all to this vital question. Resolu- tions for more nationalisation are not taken too seriously because the Party managers know that such a policy would lose votes. Indeed, if the Labour Party were to be returned at the next general election it would. I think, literally pour cold water on nationalisation by just nationalising the Water companies—a piece of industrial rationalisation which should have been carried out years ago. But investors would still be scared of a Labour victory because they feel that the Labour Party has no new ideas on how to run a mixed economy and improve the efficiency of the private sector— but a lot of old ideas on how to upset it. Now Mr. Watkinson disclosed that the Conservative Party has been drawing up new rules for the industrial system. It appears that we are going to hear much more about them when Mr. Butler returns to this country from America, for the Chancellor is planning to make a series of speeches on industrial efficiency, productivity and invest- ment. 'Change is our ally' is apparently becoming the official Conservative slogan.
Rules for the New Capitalism A new capitalism has evolved in this country because the old capitalism refused obey the Marxian dictate and destroy itself. It has made adjustments which were thought impossible and it has not only Made itself more efficient but more moral. Although the pursuit of profit remains the motive force of private enterprise the new managers of the great industrial combina- tions are amenable to the ideas of the modern welfare state and seem prepared to follow Government direction on social policy. What Mr. Watkinson was asking them to do at Manchester was to apply the results of increased efficiency and produc- tivity first to reducing prices. Wages would come next—dividends last. Since 1947, he said, weekly wages in the principal industries had risen 60 per cent. but allowing for the rise in retail prices the advance in real wages was only 13 per cent. This could be bettered. Mr. Butler said not long ago: 'In conditions of full employment there is no need to be afraid of investing too much or of producing too much . . . . Why should we not aim to double our standard of living in the next twenty years and still have our money as valuable then as now?' To reduce prices is to raise; real wages. On this aim the Conserv- ative party and the TUC are agreed and if the workers felt that this policy was being implemented there would be less cry for the restriction of profits and dividends. Managements, said Mr. Watkinson, must make greater efforts to reduce costs and prices 'as a deliberate act of policy.' I stress these developments as Mr. Butler's coming speeches will probably set the tone of the equity share markets this autumn—and it is likely to be bullish.
Convertibility Deferred One more bouquet must be handed to Mr. Butler. At the meeting in Washington of the International Monetary Fund he has happily removed our fears that the Treasury might make too hasty a plunge into con- vertibility. I have previously expressed the view that it would be most unwise to risk full employment for the sake of full con- vertibility. We are getting on very well with the limited degree of convertibility which the £ now enjoys. The EPU clearing system, which convertibility would scrap, has enabled European-sterling area trade to expand and more than offset the decline in trade with
North America. What was fuller converti- bility in aid of? Just the foreigner holding transferable sterling? Or the bankers who wanted to give the £ a 'snob' value in the exchange markets? But no one could say how our trade would benefit. Mr. Butler has apparently been persuaded that the lack of political support for convertibility at home, the threat of competition from dollar goods which it would bring and the inadequacy of our gold reserves, made convertibility at this stage a foolhardy operation. So he told the International Monetary Fund, whose managers showed no readiness to support the operation with extra credits, that 'further decisive and irreversible steps to freedom must depend on reciprocal actions by- others and on reasonable prospects of a dependable and continuing balance in international payments and trade.' He gave a plain hint to his hosts that until American tariffs were lowered there would be no safe balance in world trade.
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