World news

The World

Britain: the sick man of Europe takes another turn for the worse

ALAN HARVEY June 14 1976
World news

The World

Britain: the sick man of Europe takes another turn for the worse

ALAN HARVEY June 14 1976

The World

World news

Britain: the sick man of Europe takes another turn for the worse

People, including the British themselves, have been writing Britain’s economic obituary for centuries. Somehow, though, the country has always "muddled through” and somehow its citizens have continued to improve their living standards, albeit by going ever deeper into debt. Suddenly, this summer, the pessimists are looking better as the “sick man of Europe” looks progressively worse. Whether Britain is now a terminal patient or can make a recovery is moot. But certainly the economic crisis which has burst over James Callaghan’s Labor government is the worst in years, perhaps since World War II. The question now is whether Callaghan and his brains trust of Chancellor of the Exchequer Denis Healey and government House Leader Michael Foot will be able to cope.

The problems facing Callaghan, who took office in April after Harold (now Sir Harold) Wilson unexpectedly stood down, are staggering in their scope and complexity. The once proud pound has become an international joke, lurching downward day-by-day to ever-more-incredible lows. (By June 3 it had reached $1.71 U.S.—a devaluation of almost 40% against other major currencies in the past five years—and the notorious satirical magazine Private Eye was muttering about the inevitability of the “10-cent pound.”) Inflation, though improved substantially from the 30%-plus rates of a few months ago, continues twice as high as it does in most of Britain’s competitors—a fact which dashes the country’s always forlorn hope of trading its way out of trouble. Unemployment is at 1.2 million and climbing. The government itself has just budgeted for a staggering $12 billion deficit this year (government spending in Britain has reached the giddy heights of 62% of gross domestic product) and the country faces the unsavory prospect of going, cloth cap in outstretched hand, to its wealthier allies for a loan. These are dark days indeed for Sunny Jim, as the 64-yearold Callaghan is popularly known.

The problems, and their essential causes, are familiar enough: A manufacturing sector only one third as productive per man as West Germany’s; the stubborn and divisive nature of Britain’s class structure; a crippling tax schedule which, its critics insist, stifles initiative but which is essential to pay for Britain’s massive social-welfare programs; a dearth of many resources essential to powers with industrial pretentions; and, perhaps most important of all, a shortage of confidence both at home and abroad that Britain can stop the rot. Nevertheless, there were a few hopeful signs. Last month Britain began pumping and marketing oil from the North Sea, a potential bonanza that ought to work wonders on the nation’s chronic balance-ofpayments problem. The trade unions appeared resigned to Chancellor Healey’s further restrictions on pay increases. And there was evidence that the three great estates of modern Britain—parliament, organized labor and industry—were determined to work together where, in the past, they tended to pull in different directions. No less a figure than Prince Philip commented not long ago: “Everybody knows we are in this mess,” and then went on to remark that the United Kingdom had been like a soccer team with 11 coaches sitting on the bench while only one player took the field.

Gloom is not new to Britain, of course. If anything, the country has been badly served by a surfeit of it for decades. But, while the press trumpets every new disaster and the leaders of British society fret and argue publicly about how much worse matters will become, visitors to Britain continue to wonder why everyone is so upset. The shops in London’s glittering West End are chock-full of beautiful things at what seem to be bargain prices. The streets and highways are clogged with cars, many

of them luxury models. The pubs, as ever, are packed every night. Britons in their hundreds of thousands jet away to sun spots along the Mediterranean and even farther afield. The impression overall is one of a happy-go-lucky nation of good times and better fun.

Below the surface, though, another, more troubling, pattern exists. It is the Britain of the beggared gentry, moving into ever-less-impressive quarters in the country to avoid the brutal costs of life in London; the Britain of the frustrated workingman, who earns an average of only $6,000 a year and sees one third of that seized instantly by his government in income and social security taxes; the Britain of new racial tensions, where 1.8 million Asians, Africans and West Indians make up 3.2% of the population and compete with unskilled Britons for increasingly scarce jobs; the Britain of rapidly escalating crime (violent crimes were up 18% last year, homicides have doubled in a decade) and soaring alcoholism (consumption was up 37% in the first half of this decade); the Britain, indeed, that the doom-and-gloom brigade has been forecasting for so many years. Poorest country in western Europe, save for the Iberian peninsula; Europe’s least thrifty nation, according to a European Economic Community survey of 40,000 households; a nation so badly managed that its output grew only marginally during the 1960s, at a time when production trebled in Japan and doubled in the other members of the Organization for Economic Cooperation and Development (the 20 richest nations).

The tensions in such a society are inevitably severe, particularly when it operates on an adversary basis politically (in the past, Labor and the Conservatives took turns undoing each other’s efforts as first one party and then the other took office; nationalization of industry is the classic example, and, incidentally, a costly one in that Britain’s nationalized industries last year contrived to lose almost two billion pounds). Occasionally, and understandably, the tensions reach the point where tempers snap. Britons were startled to learn the other day that rowdyism and fisticuffs, normally the bane of soccer

matches, broke out on the floor of the House of Commons. The Labor government, which is one seat short of an absolute majority, had pushed through a bill dealing with nationalization of shipyards. When the bill passed by a single vote, cast by the Speaker of the House, the Labor backbenchers began singing the Red Flag, an old-time favorite of socialists. Some Tories were incensed, and in the ensuing melee punches were thrown and one MP even seized the venerable mace and began swinging it around (he didn’t do anyone serious injury). Add to the political tensions the worries over what has become a serious and bloody war over Northern Ireland and the incessant and now, apparently, unstoppable demands of the Scottish and Welsh nationalists for their own legislatures and it is easy to see why no one outside Britain envies Sunny Jim his job.

Callaghan, who has a strong union back-

ground, is not an inspiring figure—but there is every reason to believe he is a competent and, if need be, ruthless one. He is unique as a British prime minister in that he held all three major portfolios—the exchequer, the foreign office and the home office—before succeeding Wilson. The Guardian commented recently that Callaghan stands “in the calm, benign, somewhat inert centre” of the political spectrum—a strategic position to occupy if one hopes to achieve a consensus. This Callaghan must do, if Britain is to pull out of its nose dive. He and Healey have already managed to win the support of Jack Jones, head of the huge Transport and General Workers Union and perhaps Britain’s most powerful individual. Jones has embraced the government’s argument that inflation is a greater threat than unemployment and sees the collapse of foreign confidence in Britain as threatening “the very existence of the society we know and understand.” If the Prime Minister—supported by Jones, who recently called on Britain’s workers to display what he called the Dunkirk spirit in the nation’s hour-of-need—can keep the left wing of Britain (and Labor) on his side, then he will have a better chance of doing the same thing with the right wing, including business. Sheer self-interest and the will to survive ought to be enough to stimulate private-sector managers.

Callaghan’s image may well prove a bonus. Journalist George Gale, writing in The Spectator, observed: “He is all things to all men; he conveys a general air of amiability, he is not disturbing, he has a ruthless eye for the main chance and he can put on a good tough act when necessary.” The Prime Minister is spared one worry, at least: the opposition Conservatives, under Margaret Thatcher, are in no hurry to force an election and risk being saddled with the problems. Opinion polls show the Tories leading Labor slightly, at the moment, and Labor took a fearful beating in recent local elections. Nevertheless, Labor may be the party with the best chance of restimulating the economy and restoring confidence. Top union management remains deeply skeptical of Tory politicians, whereas top industrial management has been able to work passably well with Labor politicians.

As might be suspected, the British people themselves have mixed views about the problems and prospects. Londoner Martin Rowland-Village recently wrote to the New York Times, suggesting that the U.S. Bicentennial was an appropriate occasion for a daring gesture by the American people—admitting Britain as the 51st state. Other Britons were not amused, and at least some of them shared the attitude of Peter Wilsher, business editor of the London Sunday Times. ‘“Once there was an ideal known as blood, sweat and tears,’ says a striking and tendentious headline in the New York Times,” Wilsher wrote recently. “Well, once there was Iwo Jima and the cherry tree and the Federalist Papers. And then there was Watergate. So, which of us, do you think, will fade from the pages of history first?” The British, as Wilsher’s comments suggest, are becoming a trifle weary of others telling them they’re a collective disaster. Besides, as they increasingly remind one another, it’s always darkest just before the dawn. Sunny Jim may yet dispel the gloom. ALAN HARVEY