Britain: Still Freezing

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At pay-for-your-own drink parties in the London Hilton, the typical tippler has cut his intake from six to four. Already four Mayfair hotels have received cancellations on eight major Christmas celebrations. Christmas buying usually begins in mid-November, but this year it has not begun yet. The nation of shopkeepers grumbles that sales of television sets are down more than one-third from last year, and sales of autos are down more than onequarter. These are a few of the outward results of Prime Minister Wilson's program to achieve national economic strength through deflation. And the indications are that the Prime Minister has given his country too big a dose of austerity.

With the economy at a real crisis point, Wilson's government last summer imposed a "freeze" on wage and price increases. The main aim was to make Britain more competitive overseas by reducing consumption and costs, while raising exports and investment for industrial modernization. At the start, the government said that beginning Jan. 1, the freeze would thaw into a mere matter of "severe restraint." Most Britons took the freeze with stiff upper lip, but they also looked forward to New Year's Day, by which time business as usual—or almost as usual—could be resumed.

It has not turned out that way. Exports rose only $93 million from July through October, and Britain's gold and foreign currency reserves went up only $64 million last month. Meanwhile, the production index in October fell 3%, worst plunge in four years. Capital investment is declining, primarily because businessmen lack confidence in the economic future. Even Wilson's best friends have begun to tell him off. Last week the Socialist-leaning New Statesman called his deflationary policy "the most reactionary kind of bankers' philosophy," and asked rhetorically: "How long can we afford Harold Wilson?"

New Stranglehold. What disturbed critics was a White Paper in which the government made plain that for the most part the freeze would persist at least through mid-1967, and perhaps for long thereafter. The decision may or may not have been wise, but it took some courage. "There is no joy in this White Paper," said the London Times. "It all adds up to a squeeze that is becoming a stranglehold."

The White Paper blackened everybody's holiday mood. Unions were upset because the government's policy for the next six months calls for generally continuing the freeze on wages. Businessmen were mad because theoretically the clampdown continues on prices as well, and the authoritative magazine Management Today has forecast that profits in 1967 will drop 12½%. Corporate chiefs cannot understand how the government expects them to increase investments while profits and consumer demand are weakening. And economists are none too happy because the policy for next year has so many discriminatory exceptions that it threatens to frustrate the British battle for solvency.