LORD BEAVERBROOK’S Daily Express joyfully greeted the defeat of the Socialists in the Australian and New Zealand polling as “The Great Unwinding” which would soon also rid Britain of Labor rule. Yet the result of Britain’s approaching general election remains unpredictable, with oracular pronouncements to be had for a penny a dozen.
Inside Britain the pattern of Parliamentary byelections shows Labor retaining its scats, usually with a declining majority. But the fluctuating character of this majority makes sweeping conclusions impossible. uncertainty persists because under the British system even a minor switch in each party’s total poll can cause an immense change in Parliamentary strength.
To assess Britain’s political climate in terms of world trends produces contradictions. A rightward shift in continental Europe has seen France, Italy, Western Germany, and Belgium brush aside socialism and restore free enterprise. Within the British family the new elections ended eight years of Labor government in Australia and fourteen in New Zealand. The swing to the right in the two dominions has been prompting British Conservatives to sniff the dawn.
Labor believes it can match tokens by contrary omens. Truman’s 1948 victory on a platform to the left of Roosevelt’s heartened the British Labor Party, which derived further cheer from New York state elections last November. British Socialists also find encouragement in the Norwegian Labor government’s return to power with an enlarged majority.
What made some British Labor politicians wince when they read the news from Australia and New Zealand was the realization that full employment was not enough to clinch a Labor government’s survival in a national election. With ninety-eight of every one hundred British workers now in jobs, full employment has been considered the Attlee Government’s biggest asset in the coming campaign.
The Conservatives point to the admission of the Socialist ministers that, without Marshall aid. unemployment would have risen from the present level of 300,000 to 1.5 million. Labor concedes that Marshall aid has helped materially to avoid mass unemployment in Britain. “But look at Belgium or Italy,” British Laboriles add, “and you will see two countries which have both Marshall aid and large unemployment. If Britain had swept away economic controls, even with Marshall supplies a ratio of unemployment corresponding to that in Belgium would have meant two million British out of work.”
As the campaign gets hotter, the Conservatives’ electoral ace is Winston Churchill. Even his most tenacious critics proudly acknowledge Churchill’s greatness. To them as to other Britons, Churchill personifies the British character with its mixture of toughness and sentiment.
The Conservatives have other able men, of course, several rungs down the ladder from their chief. There is Eden with his charm, good looks, and executive talent. Then they have Richard Butler, who wrote most of the Conservative Party’s statement of policy, The Right Road for Britain, and who, with Harold Macmillan, head of the distinguished publishing house, stands left of the Tory center, and whose espousal of planned economy is unacceptable to old-fashioned party mates.
Other outstanding Tories include the late Lord Derby’s son, Oliver Stanley, a brilliant debater; David Eccles, a banker and a gifted economist; Oliver Lyttelton, wartime production minister and a burly industrialist who enjoys reading Proust.
A half to nationalization
Space allows only short indication of the platform on which these Conservatives are asking British people to put them back in power. The Bight Road for Britain sums up its 68-page program in these words: “The need is to humanize organization rather than to organize humanity.”
Pledged to repeal the law nationalizing the steel industry, Conservatives would halt all fresh nationalization and sell back to private business the road haulage enterprises which the state took over. They promise to improve efficiency and eliminate waste in all state-run industries. As long as Britain faces crisis, the Tories would continue some economic controls, especially over foreign exchange and imports; but they would progressively reduce others.
Today, for every house built by private contractors, ten are being constructed by public authorities; the Conservatives would make greater use of private builders. They would abolish much government bulk buying, which nowadays accounts for one third of all British imports. The Tories are committed to upholding the existing social security system, embracing the state health service. Finally, they hold out the prospect of lower taxation.
The London Times asked how any Tory Government — as the Conservatives have promised — could curtail taxes and simultaneously raise pensions, boost teachers’ salaries, improve conditions in the Army, make small additions to the health program, and suggest equal pay for women and men in government services.
Labor can rightly claim, first, that with the support of Marshall aid it has maintained full employment ; secondly, that it has broadened and deepened a centralized system of economic planning. A striking omission, however, is Labor’s failure seriously to challenge the cartels.
A network of cartels spans Britain. The country is covered by a web of trade associations, said to number roughly 2500, a large proportion of which are engaged in price-fixing arrangements, often secret.
There is a clear contrast between the British and American attitudes. The American tends to regard all private monopolies as monsters. The British believe cartels may be beneficial to the public, for instance by pooling scientific research, concentrating capital investments, and conducting joint advertising campaigns.
Manufacturers in Britain hold that the cartels enable them to know where they stand, to arrange a steady flow of orders at an assured profit, and to plan next year’s production. What is more surprising to Americans is that British organized labor is inclined to sympathize with the cartels. Many workers think that cartels, by safeguarding high prices and profits, are a guarantee against wage cuts and unemployment. Trade-union leaders say it is easier and tidier to negotiate with a central body of manufacturers than with separate units of an industry.
The Monopolies Commission
Despite such pleas in defense of cartels, their evils and abuses are widely recognized. Although the Government is reluctant to do much about it, the problem weighs on the British conscience. In January, 1949, under a new Act of Parliament, a Monopolies Commission was set up to probe these recesses of the British economy and to report. The Commission, however, lacks the right to initiate an inquiry. It may open an investigation only when told to do so by the president of the Board of Trade, who corresponds to our Secretary of Commerce.
As its first task, the Commission was ordered to look into six trades: electric lamps, dental equipment, electric wires, match-making machinery, matches, and drainage goods. Those industries were chosen because they show a cross-section of products in which restraint of trade is alleged to be common.
Light bulbs and drugs
Light bulbs illustrate the working of a British price-ring. If you enter an electrician’s shop in England and buy a 60-watt lamp for home use, it costs you 19 cents, of which 4 cents is the purchase tax. But the manufacturing cost of this bulb is said to be only about 13 cents. The factory owners not only fix among themselves the prices they charge to wholesalers and retailers; they also have agreements with the dealers, regulating the minimum prices at which bulbs are sold to the public.
Pharmaceuticals are another typical field for such practices. Once the prices of a wide range of patent medicines or cosmetics have been decided, the producers coöperatively enforce them. A retailer is liable to be penalized if he disregards the rigged prices. If he sells a patented drug or tooth paste below the fixed price, he may be punished by the cartel: first, the manufacturers may cut off his supply of the specific articles he has sold too cheaply; secondly, the manufacturers may withhold from the “guilty” retailer or wholesaler all other pharmaceuticals marketed by the same cartel. This boycott is known by the elegant name of “collective re-sale maintenance.”
Sometimes the manufacturers and distributors sign definite agreements, setting minimum prices. On other occasions they reach informal understandings over a cup of tea or a highball.
British price-rings control a large number of commodities, including steel, building materials, textile machinery, electrical equipment, steam turbines, marine engines, non-ferrous metals. A Government-named committee in 1948 reported that restrictive practices permeate almost the whole field of building materials, exceptionally important in war-damaged Britain. The Government has stated that in 1946 the building cartel made a profit of 26.8 per cent on its capital. Under the Monopolies Act, a firm or combine can be prosecuted only if its restrictive practices cover at least one third of the products it markets. The government can then seek an injunction to prevent a cartel from pursuing illicit practices.
An injunction seems to be a mild enough penalty for restraint of trade. But to this must be added the slow pace at which the Monopolies Commission works and which makes the efficacy of the anti-cartel action even more questionable. Backed by money and talented legal advice, such a case may simply become a lawyer’s picnic. The Monopolies Commission expects to take at least two years to investigate and report on its first six items. Before an order is enforced against an offending cartel, four or five years may pass, and then the firm or combine may declare that it has mended its ways and changed its price arrangements, so that the accusations have lost their validity. In such a contingency, the Commission may investigate anew.
Nationalization hits the cartels
The Government appears to have hit upon one telling means for liquidating a private cartel, and that is to nationalize the industry. That is what Labor proposes to do with steel, the strongest cartel in the country, which controls the product from the iron mines to sheets for automobiles, plates for ships, and hundreds of other finished articles. By fixing January 1, 1951, as the date on which most steel production would be transferred from private to state ownership, the Labor Government has tossed this plan into the approaching general election. The British voters must decide this, among other issues, at the polls.
Labor is also committed to nationalizing the cement and sugar-refining industries if it wins a new term of office. But there is no suggestion of nationalizing the many other industries or wholesale and retail trades where price-rings prevail. It never seems to have dawned upon past Conservative Governments or the present Labor Cabinet that the best way to end restrictive trade practices is to forbid them and to punish their manipulators.
Meanwhile, a tariff wall protects the British price-combine against foreign competition. The cartel carries this further and eliminates much competition on the home market. Independent producers or dealers are blacklisted by the cartel if they undercut the ring’s selling rates. One result is that prices are set at levels acceptable to the least efficient members of the trade. British cartels keep alive many factories and wholesale and retail businesses which, by any fair test of competency, would long ago have been obliged to close down.
Another result is that artificially high prices hamper Britain’s exports and impede a solution of the nation’s number one economic problem: expansion of sales in the dollar region.