Britain: Suffering

Seven times since World War II Britain has deliberately throttled its seesaw economy to battle inflation or defend the pound. In the 14 months since Prime Minister Harold Wilson intro- duced the severest repression of all, the country has stumbled into an agonizing business slump. The self-inflicted wounds increasingly have fired acrimonious debate over what the London Times calls "the new theory of nobility through suffering."

Industrial profits fell sharply last year —by one count more than in any other major manufacturing country—as the economy's growth rate sagged to a mere 1½% (after discounting for 3.9% price inflation). Though overall growth has picked up a bit since then, industrial production and private investment have not. The country's trade gap, a major source of its pound-threatening balance-of-payments deficit, has actually increased. Last week the Treasury announced more discouraging news about the pound's health: a $2,500,000 drop in reserves of gold and convertible currencies during September to the lowest level in two years.

New Distortions. Confirmed optimists can find selected areas of statistical com fort. Though 555,000 workers remain jobless—a worrisome 2.4% of a labor force accustomed to full employment —the ranks of newly unemployed are now growing only moderately. Because fewer workers are turning out about the same amount of goods, output per man has climbed. But amid rising prices and escalating taxes, few Britons quarrel with Harold Wilson's forecast: 'This is going to be a difficult winter."

Before he squeaked into office three years ago, Wilson promised the country economic growth to finance both more socialism and more private affluence. He has delivered only the former: welfare spending has soared by 45%. The continuing troubles of the pound led him to change panaceas in mid-crisis. The switch to classic austerity was supposed to give Britain time to rid itself of such long entrenched weaknesses as industrial inefficiency, featherbedding unions, drowsy management and overstaffed business. Instead, complain businessmen, government tinkering has proved so inept as to create new economic distortions. When Royal Dutch/Shell decided to build a new refinery at Teeside in Yorkshire, the government rebated 45% of the cost be cause it lay in a depressed region. On top of that, notes a Shell managing director, F. S. McFadzean, "the Selective Employment Tax and another scheme known as the Regional Employment Premium reward hiring more labor at the plant in spite of the subsidy it already has for laborsaving equipment—and somebody else pays for it in higher taxes." He adds: "Profit is still a dirty word with this government."

By charging service industries $3.50 a week per male employee, the controversial S.E.T. was supposed to help channel more labor into tax-subsidized manufacturing jobs. Instead, service industries have added the tax to their prices and kept their help—while manufacturing employment has dwindled. All by itself, the S.E.T. has so far boosted the cost of living by 0.5%, according to Treasury estimates. Though pledged with the advent of North Sea natural gas to push Britain toward a cheap-energy policy, the government this month raised the price of nationalized electricity by 101%.