Growth Wanted
By NICHOLAS DAVENPORT IT is all very well for you to advocate planning for economic growth, said a petulant friend, but how do you know that the Tory Government or the British people want growth? It is an awkward question. This Govern- ment has only committed itself to a conditional full employment —dependent on price stability—, and it is quite possible to have conditional full employment without an expand- ing economy. We had it for the three years 1956 to 1958, and again in 1960. Indeed, if the Treasury were foolish enough to encourage uneconomic enterprise in distressed areas where unemploy- ment was abnormally high, it could go on having 'full' employment without real growth. But I will absolve the Government from harbouring any such perverse ideas. We have Mr. R. A. Butler's famous profession of faith, when he was Chan- cellor of the Exchequer, in our ability to double the standard of living in a generation. We now have Mr. Lloyd's gracious assurance in a speech at Leeds on January 27 that he believes in growth —conditional on a growth in exports. We must, therefore, believe that the Government wants to encourage economic growth even if it does not make a great success of it.
But what is economic growth? Primarily it is a function of the growth of population and pro- ro- ductivity. Because a nation cannot raise its standard of living if it does not increase its production at a faster rate than its population, it must go all-out to improve its productivity —that is, enlarge the amount of product turned out by a given amount of plant and labour. That in turn will depend first, upon the volume of capital invested in plant, next on the degree of skill and hard work of the labour employed, finally on the planning brains of the management. We usually measure economic growth in terms of the gross national product per head of popula- tion, which is taken as a very rough indica- tion of the advance in the standard of living. Now both the UK and the US come badly out of this test, as the figures show from 1950 to 1959 (1960 figures, when available, will tell the same story), but the UK, as President Kennedy has admitted, beats the US, which is at the bottom of the list.
VOI LIME INDICES OP GROSS NATIONAL PRODUCT PER HEAD
1950 1952 1953 1954 1955 1956 1957 1958 1959
UK .. ..
100 101 105 109 113 115 117 120 122 W. Germany..
100
118 125 133 146 154 160 164 171 All OEEC 100 105 110 114 120 123 129 135 139 US 100 108 111 108 114 114 114 110 115 (Source: OEEC Slailsilcs.)
At first sight it is not easy to explain these differences—why the UK should increase its standard of living over the past ten years by nearly 2+ per cent. per annum against nearly 71 per cent. for Western Germany and 4 per cent. for the whole of Europe and only If per cent. for the US. The rate of increase in popula- tion must be regarded as a factor in the rate of economic growth—the building of houses and factories to take care of extra workers providing a stimulus to an economy, which is missing when the labour force is stationary—but it will be found that the rate of increase in the American population was about as large as that in the Ger- man. The rate of capital investment is another, and perhaps more important, factor; yet the rate of increase in the gross fixed capital forma- tion expressed as a percentage of the gross national product (at market prices) is greater over this period for Europe as a whole than it is for Germany and Great Britain, which beats the US easily. Indeed, if you take industrial in- vestment per head of the population, Great Britain, according to Dr. T. Barna, is far ahead of both Germany and the US. Yet the index of in- dustrial production since 1950 has risen by 125 per cent. in Germany, by 65 per cent. in Europe as a whole, by 33 per cent. in the US and by only 30 per cent. in the UK. Even if we allow for the more intelligent planning for industrial develop- ment in continental Europe, we cannot explain the poor growth performances of the US and the UK except by reference to the unintelligent economic `stop-go' policies of their respec- tive governments. In each case the urgencies of economic growth have been ignored. President Kennedy rudely called the attention of Congress to this unpleasant truth in his first State of the Union message. Now it is up to Mr. Macmillan or Mr. Lloyd to awaken Parliament.
It is probably true, as a PEI' report on growth put it, that 'the chief impediment to a faster growth of the British economy is that we do not want it enough.' There certainly appears to be a great reluctance on the part of labour to work harder than the union norm or to move families about in pursuit of better-paid jobs. There also appears to be an equal reluctance on the part of capital, earning safe, if restricted, profits in a sheltered home market, to take bigger risks and go out for the world market. It may be that the British people prefer a secure, easy-going life with plenty of holidays (on pay) to enjoy the favoured sport or hobby. On the other hand, the reason why we do not work harder or take economic growth more seriously may be because we feel over-taxed or suffer subconsciously from a social conflict. It is said that Mr. Selwyn Lloyd is think- ing of raising the surtax level at long last in order to spur the harshly-taxed company executives on te greater productive efforts. Of course, if that is done without relieving the workers of their equally harsh tax on overtime earnings, the old capital v. labour conflict may flare up again into the open warfare of unofficial strikes or go-slow movements. Labour could then easily take up the ribald song: 'If Tory freedom works, then why should we?' And out goes any hope of raising British productivity.
The moral of this story is that Mr. Macmillan must emulate the realistic approach of the new American President and warn the country of the dangers of economic stagnation. He need not call for any rate of growth comparable with the Russian, for that would involve so many con- trols, including the direction of labour as well as of capital, that our cherished democratic freedoms would be lost. But he can plan for a much faster growth than we have been getting —and perforce sacrifice only a very few of his Tory freedoms.
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