WESTERN EUROPE: Life on the Escalator

"Can we control inflation?" asked Britain's Prime Minister Harold Macmillan last week. "It is the problem of our time."

At the street-corner markets of Paris, the price of tomatoes, lettuce and strawberries was up 40% over last month. In West Germany, bread cost 1¢ more. In Spain, where many people have to hold two jobs to live, bus fares were up 33%. In Britain, householders were told that they must pay 8% more for their coal, 10% more for their cooking gas. In an announcement that Britons took as symbolic of the whole trend, the government itself last week announced an increase in postal and telephone rates.

"UP UP UP GOES THE COST OF LIVING," complained London's tabloid Daily Mirror. "Creeping inflation," said a West German Socialist leader, whose supporters in the steelworkers' union had just won a 5-5% Pay boost. The reaction of French workers, including even prison guards (see above) was to strike.

Something Nice? So far, the inflationary spiral is labeled a crisis only in Finland, where ministers call it "a crisis of prosperity." But all Western Europe is caught up in an exuberant wave of producing and buying, with fewer men out of work than ever in living memory. Their earnings are rising along with the prices, and what they cannot pay for they get by installment buying, which has lately become almost as fixed a feature of European as of U.S. economic life. Says a

Dutch housewife: "My husband earns 20% more than two fears ago but we don't save any. Formerly I needed 60 guilders ($16) for housekeeping money weekly. Now 80 is not enough. It's no use saving, because the guilder is worth less and less. Whenever my husband makes some extra money we invest it in something nice, like a scooter or TV set."

As an inflation brake, practically every central bank on the Continent has increased its discount rate, which now stands at 4½% in Germany, 5% in Britain, as compared to 3% in the U.S. Possibly because they remember the days of the '20s, when it took a wheelbarrow full of marks to buy a house, the German public has submitted to more financial restraints than most European nations. The French have the severest problem, not only because they are fighting a billion-francs-a-day war in Algeria, but also because they have enthusiastically accepted the U.S. doctrine of ever-greater productivity. Since 1953 France's growth in productivity has topped even West Germany's, but at the expense of huge foreign-exchange deficits in buying raw materials. Urging a curb on imports, France's No. 1 fiscal authority, Wilfrid Baumgartner, president of the Bank of France, recently lectured the government: "The maximum level of activity is not always the optimum level of activity."