September 1956

on the World today

THE most striking change to take place in Great Britain has been the change at Number 10 Downing Street. Quite suddenly, Sir Anthony Eden is a new man. Whereas the Prime Minister had seemed fragile, so that many observers doubted his physical capacity to carry the office, he now appears robust. Whereas lie had seemed strained, he is now relaxed. Where he had been distant, he is now affable; where equivocal, decisive.

The change clearly does not leap from the assurance of dangers overcome, nor yet from popularity regained. The air is full of thunder. It seems much more likely that it has sprung from some intense personal experience; perhaps from a decision to stake even thing at fast on a course of action from which t here is no retreat.

Sir Anthony’s winter

Sir Anthony’s wager is threefold: that he can now stop inflation in its tracks and, in doing so, revive a national faith in “Tory freedom”; that he can quickly and safely lessen the burden of defense spending; that he can solve the twin problems of Cyprus and Suez. If he wins, the reward is greatness. Should he lose, the loss would equally be on the grand scale. Everything is at stake—his own position, his Government’s majority, his party’s future. “surrender,” it is conceivable that the rebels could bring down the Government.

In the country, outside Parliament, opinion in the summer swung violently against Sir Anthony over Cyprus. By June the Gallup Poll showed that only 25 per cent of the people approved of the Prime Minister’s policy. Labor voters were solid in angry disapproval of what they regarded as outright repression. Nevertheless, Sir Anthony continues on his own way. Sir John Harding, the eminent military governor, has convinced him that the “terrorists” are few, that they can be mopped up by the new year, and that the way will be opened for compromise.

Layoffs in the auto industry

Opposition to ihe Government other issues has been slowly mounting. It was intensified when out of ihe blue Sir Leonard Lord, head of the British Motor Corporation formed from the merger of the giant Austin and Nuffield interests, handed 6000 of his automobile workers their cards, one week’s pay in lieu of notice, and a note of thanks. Sir Leonard was censured in Parliament for his abruptness. The auto workers’ union called a strike, but it was only halfheartedly observed. More than half of those who still had jobs defied the picket lines and stayed at work.

It is over Cyprus that Sir Anthony has been accused of being most equivocal. Some Britons do not think him firm enough. In Parliament a rebel group, led by Captains Charles Waterhouse and Julian Amery, demands “no surrender whatsoever to the Greeks.” The rebels today claim to number more than 50. Sir Anthony’s majority in the House is but 60. Should negotiations fail or result in

To many Socialists the incident seemed proof that employers, encouraged by the Government. are actively engaged upon a counterrevolution. In a sense the Socialists are right. The Government has not deliberately induced unemployment, but it has deliberately induced a “mobility" of labor which means that many workers will lose their jobs and be forced to find others. In part the recession that started in the automobile industry may be the result of inflated wage demands, but in much larger part it is the result of economic policy. Not only is installment buying restricted by law, but there is a 60 per cent sales tax on new cars sold in Britain, which is discouraging to would-be purchasers.

One object of such “curtailment of demand” is to free labor for other industries where there is a shortage of men. A second is to reduce imports, notably of steel. A third is to drive home the lesson that competitive efficiency is the real paymaster, not, as many have imagined, “the boss” or “the State.” A fourth is to deep-freeze the majority of the year’s new wage demands.

Pegging the barometer

Having already put the squeeze on credit, raised interest rates (several times), boosted taxes, and budgeted for a revenue surplus of $1.25 billion, the Government in the summer encouraged the nationalized industries — coal, rail transport, gas, and electric power — to peg their prices for a year. To peg prices as a cure for inflation is like pegging the barometer as a cure for weather, unless wages are also held.

And unless wages are held — or the policy of full employment abandoned — another devaluation of the pound sterling is probable. The testing time for this hypothesis may come in the fall. Then the balance of payments is seasonably at its most precarious. And then, with factories opening up again after the vacation period, the true extent of the recession will become more apparent.

Already some Conservatives have doubts as to whether prices, wages, and the balance of payments can, or should, be held in this conservative way. Sir Robert Boothby has urged an immediate return to physical controls. Cyril Osborne has proposed legislation to prohibit increases in either wages or dividends, except as a reward for increased output. But to others, including Sir Anthony, the Tory disinflationary policy is a matter of principle. These men believe that Britain is very close to true prosperity and could quickly find it if only people would behave with sense and resolution.

If disinflation proves politically possible, it will be because this recession has in fact been rigged inside a boom. “Consumer durables” may be stagnating, but the capital goods industries are going great guns. Western European buying power, which is more and more important to Britain, has been steadily increasing, although more slowly than last year. Exports to America have been running at record levels. The colonies clamor for development.

The fact that by the summer very few workers, even in Coventry, the capital of recessed cardom, had yet been forced to sell house and home, or to leave friends and family in a distant search for work, gave an air of unreality to the first strident calls of the agitators outside the factories. And as the situation became a little more tense, by a happy coincidence Khrushchev, in exposing Stalinists to ridicule and contempt, weakened the power of the British Communists just when they seemed likely to be most dangerous.

Cut spending for defense?

The visit of Bulganin and Khrushchev to Britain had lent Communists in trade unions an influence they had not previously achieved. They have since lost a great deal of it. The visit of B and K is more likely to be remembered for what it did to Sir Anthony than for what it did for the Communists. During the endless meetings in Downing Street the British Prime Minister became more than ever aware of the Soviet threat to the British Commonwealth, and he became more convinced that the supreme threat is not military but economic.

Added to Britain’s fresh possession of the H-bomb (several will be tested next year in the Pacific), this conviction encouraged the Cabinet to consider a big reduction in defense expenditure. “We in Britain devote 9 per cent of our national income to defense; the figure for all other Western European countries is 5 per cent,” Harold Macmillan said in May. “Suppose our figure, too, was 5 per cent. Our defense program would be, not over £1500 million, but about £800 million, giving £700 million worth of spare resources.

“If we got only half shifted into exports it would completely transform our foreign balance ... it would resolve one of the Treasury’s main dilemmas ... I would certainly be able to make a considerable reduction in taxes.”

The feeling grew that a cut in defense spending would solve almost everything. If the Commonwealth is to be “defended” economically, Britain needs a great surplus of trade. A cut in defense seems the only way of ensuring such a surplus. At the moment there is a bare balance.

A second item, which may provoke even more discussion, is the strong British desire to bring the embargo on strategic goods for China into line with that governing trade with the Soviet Union. The British have already used the “exceptions procedure” in the NATO agreement to send token quantities of British tractors and Malayan rubber to China. This is not a deliberate flouting of the alliance. At present the British simply feel as if they were out on their own in the world.

Taxes and the middle class

A concrete example of pro-Americanism was the jettisoning of Clause Nine in the Finance Bill. This clause would have made foreign nationals resident in Britain liable to British taxon their full incomes, instead of that part brought into Britain. Several American firms at once made tentative arrangements to transfer their European headquarters elsewhere, and one foreign correspondent just up and left for home.

No company in the United States is rich enough to pay the salaries that would have been needed if top employees left in Britain were to pay the extra tax and yet keep their accustomed living standards. With horror it was discovered that to leave a $30,000-a-year American with as much money as he had before would have meant paying him $161,000 a year, some $140,000 of which would have gone to the British Government. Clause Nine was intended simply to tidy up the tax system. When its catastrophic effects were explained to him, Mr. Macmillan agreed to leave the system untidy.

One effect of the consequent publicity was to draw fresh attention to the plight of the British middle classes. The middle-class revolt is not a revolt for privilege but rather a revolt against equality. The British today are more equal than any other peoples in the world. The trouble with economic equality is that it denies the cash value of that extra bit of efficiency, of education, of sharpness, skill, brains, or elbow grease.

This frustration found political expression in a by-election at Tonbridge, in Kent. The middle class simply stayed away in large numbers. A safe Tory seat with a guaranteed majority of 10,000 was turned into an insecure post held this time by a fluky majority of a few hundred.

The British middle classes have ever been driven to overcome their inbred isolationism, of which those thick, high suburban garden hedges are the outward symbols. The Middle Class Alliance, founded by Henry Price, M.P., attracted 25,000 members in the first three days of its existence. Even more successful is the People’s League for the Defense of Freedom headed by Edward Martell and Lord Moynihan, both political liberals. This League claims it is going to fight “trade union ty ranny and arrogant bureaucracy.” Just how is not yet clear.

Nasser seizes his opportunity

Nasser’s grab in late July was so sudden, so redolent of danger and decay, that it made a new look at NATO seem even more imperative than before. While the Middle East was in a turmoil, Britain’s main forces were in Germany on a front where all was quiet under the shadow of the H-bomb.

Equally imperative, the British felt, was a new look at Anglo-American relations in the Middle East. The British have been deeply suspicious of American activities in that area. They claim that it is Aramco money paid Saudi Arabia that powers the virulent campaign to drive the British from the oil fields. Now it has become obvious that it was either “competitive appeasement” or at least a lack of joint Anglo-American policy in the Middle East that presented Nasser with his opportunity.

The first immediate consequence of the coup was the rally of a divided country behind Eden snorting flame. Another consequence was to strengthen the voice, and perhaps the position, of the Waterhouse rebels in Parliament. A third was to make British control of Cyprus seem doubly justified. But all except the second seem likely to prove temporary phenomena. For has British possession of the “vitally strategic island” deterred Nasser? Has it, in fact, “secured the lifeline”? These questions will have to be answered, hurtful as the answers may be.

At the outset, economic reprisals were taken, a few warships were moved in the Mediterranean, and it seemed as if there were nothing more to be done by Britain. In Commons, Churchill sat silent, a brooding figure in the background, a member of Parliament for the age of greatness gone. Eden places his faith, however, in international action to guarantee freedom of the Suez waterway, in order not only to secure the lifeline of the Commonwealth but also to increase British prestige.

Nasser’s coup underlined Britain’s reliance on Middle East oil and consequently, in new circumstances, its almost total economic insecurity. And it struck another direct blow at the pound sterling, so much of the value of which depends on foreign confidence in British stability.