on the World Today
QUIZZED by a quartet of hostile newsmen on television, Transport Minister Harold Watkinson stayed cool and relaxed, answering questions quietly between long puffs at a Sherlock Holmes pipe. Just once he jerked forward and snapped an answer. When pressed and re-pressed about the full effects of the fuel cuts to come, he suddenly said, “ Perhaps when they do come they will teach the people that Suez really is our lifeline.”
Then Watkinson recovered both poise and the official Government line. The line has been to minimize the effects of Egypt. The crisis at first barely touched life in Britain, although it was obvious that motorists would find their gas rationed before long. The Government meanwhile was at pains to be reassuring. Fuel Minister Aubrey Jones explained that the first oil cuts to industry represented but a one per cent cut in the total fuel supplies. Chancellor of the Exchequer Harold Macmillan declared that there was no reason why the budget should be affected or his expected surplus of £400 million reduced.
But the country remembered uneasily the emphatic words of Eden earlier when he said that Middle East oil and Suez were “literally matters of life and death to Britain.”
How much rationing?
The rationing scheme which was announced on November 20 gave motorists gas for 200 miles a month. Oil for non-industrial use and central heating was cut 25 percent; diesel oil for tractors, fishing boats, and buses, 10 per cent. Rationing books run for an initial period of four months, giving some hope that Britain can get back to normal by spring.
All depends on three things: 1) how long the Suez Canal stays closed; 2) how long the flow of Iraq oil is reduced; 3) how much oil and other aid Britain can get from the United States.
At best, Britain need suffer only a slight, temporary inconvenience with oil supplies, and the situation will be more or less normalized by the time Britons come to take their cars and scooters to the Continent for their roving vacations. But at worst — if the Canal is reblocked or British ships are banned or Middle East oil is cut off or American oil is not available in large enough quantities — wartime austerity could return and the whole future of the sterling area would be placed in jeopardy as Britain faced ruin. If it takes as long as six months to clear the Canal, an economic war — and perhaps a dangerous economic war—will develop in Europe.
Disquiet grew as Britain ran into early difficulties in buying American oil. Richard Crossman, a Labor Party M.P. and columnist of the Daily Mirror, wrote: “The United States is now employing economic sanctions against Britain and France.”It looked to some Britons as if Ike were determined to cause Eden’s fall. Would Nasser be allowed to emerge the victor? The British prepared to tighten their belts, for in spite of official confidence it seemed likely that things would get decidedly worse before they got even a little better.
Industrial oil is the cause of much concern. Britain ought to be able to get at least three quarters of the oil it would like. But while some industries use little, some, like steel and glass, use a great deal. Users who are low down on any scale of priorities will have to get along with 30 to 40 per cent less oil.
Again all depends on how long the Middle East trouble lasts. In the short run Britain is in a fairly good position to substitute other fuels for oil. Its coal stocks are higher than they have been for many years — an unexpected bonus due to the fact that in Britain, unlike the rest of Europe, industrial production this year has been static; so the country has not used as much fuel as expected. Britain, in fact, is in a stronger position to face oil cuts than the rest of Europe. Some countries, like Sweden, use much more oil in proportion. Italy depends 96 per cent for oil on the Middle East. German expansion has run down German stocks. None of these countries have any big share in international oil companies.
All the same, British unions are expecting one million unemployed by summer. The present number is 300,000. The unions are preparing to battle for jobs for their members. They are also preparing demands for wage increases to counteract the expected rise in living costs. Thus the greatest immediate threats to Britain probably don’t come directly from oil, but from the increase in British costs, from the slowing of exports, and from the dollar emergency.
The price of oil may be rising, but it is more important to workers that the price of bread is rising, and the price of tea and wool, and of almost everything that must be carried by ship. Industrialists also sadly watch freight rates rising, thereby adding to the costs of rubber, copper, tin, lead, and zinc. They expect to be squeezed on all sides.
Working Britain out of trouble
One of the great questions of the new year is likely to be: Will labor, fired by patriotic zeal or simply by self-interest, throw back its shoulders and seek to work Britain out of trouble? Or will the political fight against Eden be reflected industrially?
Working out of trouble is not quite as easy as it sounds anyway. Vauxhall Motors, the British branch of General Motors, announced in November that it would have to cut production since cars are piling up at the docks, waiting for ships. For the same reason the Rootes group fired several hundred workers and put others on short time. Pressed Steel of Oxford fired 350 people. It was only the beginning as shipping grew scarcer.
It was fortunate that this series of blows to the export trade came after British exports had soared to record heights. The trade balance was in good shape just prior to the crisis. There was at least some room for maneuver. Yet the implications of delayed shipments and higher export costs could be very serious if the Canal should be blocked for a long time. Then Japan could begin to take over British supremacy in Southeast Asia and India.
Britain’s own trade balance is not the only significant factor in the pressure on the sterling area. India and Ceylon already have a deficit. The effects of Suez must cause India’s exchange position to weaken further and may bring a serious food shortage and the threat of severe inflation. Ceylon, too, faces mounting import costs.
British dollar reserves, which are also the reserves of the whole sterling area, are thus beginning to come under external pressure. They are expected to drop below two billion dollars, which is considered a dangerous level, although they may be supported by drawing on the International Monetary Fund and perhaps on the sale of some U.S. securities held in Britain.
There is another factor to be considered— dollar oil costs dollars. The world oil industry is built in such a way that all oil costs are in dollars to some extent. But oil from North and South America costs more in dollars than oil from the Middle East. Britain is also losing sales of oil to America and Europe. The net effect of the new drain may be 20 to 30 million dollars a month. This can not be borne for long.
Uncertain as to the true American attitude, the British have wavered between thinking that Britain would have to go it alone because the Americans simply did not understand, and reassuring themselves that the United States just could not afford to see its strongest single ally go down.
On both sides of the Atlantic one thing was clear: the breach of understanding with the United States must be healed. Neither country could afford to let the Kremlin succeed in its efforts to break up the Atlantic Alliance.
It may be proved that Western Europe cannot live in freedom without the United States. Nevertheless Europe in 1956 turned inwards, Great Britain with it. The close liaison with France over Suez was only one symptom of t he process. There were others. There was the fact that the dollar gap had been giving way in urgency to the mark gap, as Western Germany piled up ever greater surpluses. There was the plan — initiated by the British government — that Great Britain should join an area of European free trade.
At home, before the November crisis broke, there had been the sudden decline of “Mr. Bulskell.” This composite of R. A. Butler and Hugh Gaitskell represented an identity of economic views held naturally by all moderates in a time when there “were simply no alternatives.”But in the fall the Tories moved toward a new philosophy, touched with the magic of good old-fashioned liberalism. They were led by Mr. Butler.
The Socialists, searching for a new socialism, simultaneously moved left. They were led, perforce, by Mr. Gaitskell and escorted by the turbulent Aneurin Bevan, newly restored to eminence amid thunderous applause. And Suez made the Socialists more urgently “anticolonial ” than before.
Change was in the air. And Great Britain became much preoccupied with greatness. Is it the smallest of the great powers, or the greatest of the small? Harold Macmillan assured it that it was “the second richest country in the world.” Ahead of all, with the opening of the Calder Hall nuclear power station by Queen Elizabeth II on October 17, Britain was entering the atomic age. It had the H-bomb. Surely it could stand on its own feet? The question was asked again and again. On television a series “The British — Are We in Decline?” won peak ratings. The question fascinated Britons.
The startling ultimatum to Egypt may thus be seen as a gesture of independence. It may also be seen as a tragic gamble; as a resolute police action to halt war; as the alarm that woke the world; as a desperate act endangering peace. Time will produce the verdict.
The challenge of Germany
For Britain there is another inescapable challenge — that of the West German mark. The Germans, with an understandable but almost pathological fear of inflation, maintain dear money by keeping interest rates higher even than those in Britain. And while British wages have been pushed up faster than British output, wages and output in Germany have kept pace with each other.
German prices are low, but buying is restricted. German exports boom while German imports are more or less static. The continuous reduction of tariff barriers and the lowering of taxes have not halted the continuing pile upon pile of German surpluses. America has bridged the dollar gap with loans and Marshall Aid and defense aid. Must Germany do the same for the mark gap? An alternative, the upward valuation of the mark, would amount to a devaluation of the pound. Again Britain’s position in the world is significantly involved.
This problem of balances of payment has clearly to be overcome before a free-trade area in Europe can pass the point of talk. Britain’s reservations — it would exclude food and agricultural products from the bargain in order to maintain Commonwealth preferences — and its alliance with France, which would like to make exceptions of its own to protect its weak industries, have given rise to a rumor on the Continent that Britain, while pretending to join, really means to make the free-trade area impossible. The plan would die stillborn from a surfeit of exceptions.
Yet Britain is genuine enough. Its skills are wasting for want of a big enough home market. It has to learn to be competitive. A common market among the six Schuman Plan countries, if it excluded Britain, would give untold advantages to Britain’s competitors. It would be more difficult for Britain to compete outside the area than inside it or in partial association with it.
And the gradual introduction of such competition (over a period of twelve to fifteen years) fits with the new Conservative liberalism. The Conservatives are trying by taxes and credit restriction to force labor and capital from declining to expanding industries, from '‘home” to “export.” They are also trying to bring more realism into the economy, the elimination of rent control being the latest example of that policy.
Inflation under control
To hold wages steady the Tories are offering industrial as opposed to national or state security, proposing for instance to establish “by legislation if necessary ” a contract of service for every wage earner. This would include a right to adequate notice before dismissal according to length of service.
Labor troubles apart, in 1956, up to the Suez crisis, Macmillan had had a good year. Production might be static but so were prices. Inflation seemed to be under control. Labor was beginning to move to what Macmil Ian considered the proper industries. The reserves teetered but at least there was a trade surplus of $300 million in the first half of the year to offset a probable deficit in the second half. The middle-class revolt against high taxes with rising prices had simmered down.
Labor holds the key
The middle classes still hold the political balance. The key to the economic future, however, lies with labor. Great new wage demands are in the offing. The Labor Party has nailed up its plank of “more equality.” Restrictions and price rises due to the crisis, coupled with the reduction of subsidies and the elimination of rent control, are expected to lead to stronger pressure than ever to raise wages irrespective of output. To labor, the squeeze seems mainly due to “Eden’s war” as the Daily Mirror has slugged it.
One cheering factor is the split in the British Communist Party. This is directly due to the barbaric crushing of the revolt for freedom in Hungary. Never has the Communist Party’s star been so low in Britain. Dockers in London, whose last two strikes were led by Communists, rough-handled two speakers who came to the Surrey docks to justify the Russians, tried to overturn their truck, and threatened to throw them in the river if they came back.
The British these days are not as phlegmatic as they have been thought to be. Liberate, drawn to London from Southampton in a. special train, ran into uninhibited criticism from critics and unequaled adulation from idolators.
When the movie Rock Around the Clock was shown in various British cities there were more arrests for disturbing the peace than for any other misdemeanor or crime. Thirty-seven young people were arrested in London for rock-and-roll riots on a single evening. Jive fans were restrained by police from tearing the Empress Hall, London, completely apart when Lionel Hampton played there, and rock-and-roll rhythm was wisely banned when “Hamp” moved on to Kilburn. Perhaps the national character is changing after all.