London
on the World Today
THIS year Great Britain’s fast-growing trade with Europe will probably exceed in value its trade with the entire Commonwealth, in spite of tariff preferences. Last year the European trade almost achieved parity (34.3 percent of total trade against 35.5 percent). To Prime Minister Macmillan, this striking economic development reinforces the obvious political strength of the case for Britain’s membership in a united Europe. For Britain to be omitted would imperil the British economy’s chance of growth. But all the other fifteen prime ministers invited to the greatest of all Commonwealth conferences this September assess the implications differently.
To them, the fact that Britain’s imports from Europe have risen more than 60 percent in seven years, while its imports from the Commonwealth countries have risen barely 3 percent, accentuates the still unanswered challenge to the free and capitalist West. It focuses the potential danger of Britain’s joining Europe on the wrong terms.
Khrushchev plainly fears the challenge upon his borders of a dynamic, democratic, and united Europe. Yet, to the less sophisticated citizens of the less developed parts of the Commonwealth, there seems to be something in what he says: that one of the inherent contradictions in international capitalism, which may finally bring it down, is that the rich inevitably get richer at the expense of the poor. And even the more sophisticated, who note that Khrushchev’s own recent actions show that Communism, like capitalism, has failed to solve the agricultural-industrial equation, would argue that this problem should have priority even over that of achieving more rapid and continuous growth in the major industrial countries.
The genuine enthusiasm for a united Europe in official circles in London has been tempered by this reminder issued in May by the National Institute for Economic and Social Research: “Unless present policies are modified in favor of primary producing countries, it seems fairly certain that their exports will rise much more slowly than in the decade 1950-60. . . . Anything that reduces their share in the British market will have a relatively big adverse effect.”
The Commonwealth in jeopardy
The prime ministers come to London knowing that the Commonwealth is changing. Time is eroding imperial preference anyway. The British market is, relatively, much smaller than it was. Already, quotas have had to be placed on some products (like New Zealand butter and Indian textiles). Already, the centuries-old right of free entry for Commonwealth citizens into Britain has had to be modified. If Britain does join, the essential thing still will be to ensure that the Common Market does not become just a modification in favor of industrialized countries.
While this is true in general for all the prime ministers coming to London, the details of the truth are different in each case. Nkrumah’s Ghana has taken the Khrushchev line. But Ghana, might be offered association with the Common Market, and refusal to associate could isolate the country. Its African neighbors and competitors would enjoy considerable advantages in trade denied to Ghana. To be associated or not to be associated is Nkrumah’s question.
Welensky of Rhodesia, however, may have no choice. Association will be denied Rhodesia “until the future of the country is settled.” What happens, then, to Rhodesia’s economy?
Diefenbaker of Canada, with a bare majority now, a delicately balanced currency, an unbalanced economy, and an increasing dependence on the United States, faces the certainty that Canadian manufactures will gradually lose their preferences in the British market and will have to compete after 1970 over a tariff with similar goods from Europe then entering duty-free. Although this Canadian trade is still small ($175 million in 1960), it is a growth trade and may represent the margin between a trade surplus and a deficit. Canadian wheat may also face difficulties.
Menzies of Australia has similar preoccupations, and in addition, new towns have been built in Australia on the basis of the growing trade in processed food with Britain. Holyoake of New Zealand has the most difficult problem of all. Dairy farming is his country’s greatest industry; Britain its only great market, taking almost 90 percent of its farm exports. With Britain inside a single European agricultural system, taking instead continental Europe’s increasing surpluses, what future is there for New Zealand? Yet all must also face the question, If Britain stays out of Europe and stagnates, where and how does it find future growth?
Macmillan’s answer
Macmillan’s answer is his own “Grand Design,” which is essentially an extension of President Kennedy’s. Macmillan’s plan has these main features: a completely united Europe (Britain would include the neutrals, whose association is opposed by the United States); a world commodity agreement; transitional arrangements to maintain Commonwealth exports until such an agreement is in force; free entry into Europe for the major raw materials; reduced world tariffs on manufactures through reductions in GATT; a farm price level in Europe set low enough to discourage surpluses and allow reasonable imports; association for the new African and West Indian states; special arrangements either in Britain alone or in the new Europe as a whole for New Zealand; greatly increased European aid for developing countries; and a constant review by the European Commission of the trade of India and Pakistan, so that their exports of low-cost manufactures are maintained and, where possible, improved.
The future of the Conservative government in Britain clearly depends on the extent to which Macmillan can persuade the Commonwealth prime ministers of the viability of this design. And, of course, the British parliament and public. And the existing Common Market of the Six. And the United States.
Changing the Tory image
For the government, the tide of favor has ebbed already. At by-elections the Conservatives have lost seats, and the possibility that the increasing Liberal vote might next year or the year after put in a minority Labor government at the next general election cannot be discounted. The fate of the Conservative Party depends on whether Macmillan can redress the discontent of the British electorate, and that of the Tory backbenchers.
The strong men in what is virtually a new government are an interesting mixture. Besides Macmillan they include Butler, Macleod, Maudling, Thorneycroft, Boyle, Home, and Hailsham. Butler, the philosopher of the party, is now designated as Macmillan’s successor, although, of course, he cannot be guaranteed the post.
Macleod was too liberal about Africa as colonial secretary to suit many faithful Tories, yet he is now considered responsible, along with Macmillan himself, for the decline in party fortunes, because he was not liberal enough. Maudling is remembered in Europe as chief designer of the ill-fated scheme for a free trade area. He is an expansionist. Thorneycroft is a convinced “European,” but is best known for resigning when Chancellor of the Exchequer because the government would not deflate firmly enough. Boyle resigned over Suez. Home is a traditional Tory; Hailsham is the most unorthodox. The central task of these men is to make it manifest that Britain is going to be what Macmillan says it already is, “one nation.”
Macmillan made eleven changes in a Cabinet of twenty-one members, bringing into the Cabinet eight new faces. He made twenty-four changes among junior ministers, elevating for the first time eleven backbenchers. Among the newcomers are Edward du Cann, 38, organizer of successful mutual funds, who is now economic secretary to the Treasury; Basil de Ferranti, 32, a member of one of Britain’s greatest family industrial firms, who is now parliamentary secretary in the Ministry of Aviation; Christopher Chataway, 31, a fourminute miler and a popular television personality, who is secretary to the Ministry of Education.
The first reaction to the drama was one of doubt. The London Times said the changes would be meaningful only if the Tories now give the British people a new sense of purpose. No newspaper waved its hat. Selwyn Lloyd was cheered in Commons after his dismissal. Macmillan, entering a few minutes afterward, was received almost in silence. Gaitskell called on him to go, but he remained in command, and once again Tory ranks began to close.
The atmosphere of doubt was made heavier, however, by an awareness that the new government will not meet with Parliament again until October, except in case of emergency. Yet the greatest issues of all will be decided meanwhile. The outlines of European agreement will have been reached. The prime ministers of the Commonwealth will have given their judgments. Electors will be preparing to give theirs in three fall byelections. The fate of the Macmillan government could be decided by what the Commonwealth prime ministers say and how the public reacts to that, instead of by the reaction to a new party image.
Growth in Britain’s economy
The obstinate refusal of the British economy to show signs of dynamic growth has obscured some undeniable improvements. All this year, trade itself has been in surplus, and the balance of payments has been favorable. In five out of the first six months of the year the gold reserves grew substantially: and in the sixth the deficit was due to a special credit to Canada.
Investments in Britain from abroad, notably the United States, have been mounting steadily. Last year they topped one billion dollars. The stock market break on Wall Street, although reflected in London, has not seriously diminished them. The long fall in Britain’s invisible exports has been halted and reversed. The export price level has not risen for twelve months, in spite of the much-publicized failure of Lloyd’s “pay pause.” Exports have inched upward. The Treasury believes they will now accelerate. Import costs have recently fallen. In terms of stability and opportunity Britain now may actually be better placed than either West Germany or France, where, although the growth records are better, the costs and prices are rising.
Car production is back at the record 1960 levels. This is of particular importance to Scotland and Wales, Britain’s own underdeveloped areas. England’s past monopoly of growth and of consumer industries proves now to have been a main cause of the long impoverishment of the other members of the United Kingdom. Now, established in Scotland, Wales, and Northern Ireland, these industries bring real hope for the future.
In Wales that hope has already burst into life. In 1946, eight out of ten of all the able-bodied men in the valley around Merthyr were out of work. Some had been out of work for ten or twelve years, A few had never had a job. Today Welsh unemployment is figured at 3 percent.
Wales revitalized
Coal and steel, still basic to Wales, have been modernized. Most of Britain’s sheet steel and tinplate consumer’s steel — are made in Wales now. To coal and steel have been added textiles, television, packaging, aluminum, oil, electronics, and automobiles. The number of students studying science at high levels in Wales has been more than doubled. Welsh farming, too, has taken on a new expansionist air.
It is difficult to pinpoint the moment of break through, but the first vital decision was that of the late Lord Dalton in the wartime coalition government. (He was then Labor’s man at the Board of Trade, as Mr. Hugh Dalton.) The accepted view then was that the answer to unemployment was to remove the obstacles to mobility of labor. Dalton produced a bill to give himself power over the location of new industry. Steps were taken to create conditions that would make business people want to come to Wales. The strength of character of the Welsh people had much to do with it, and their adaptability. With these, and new plant, the statistics of individual productivity in Wales began to show a growth rate of twice the national average between 1952 and 1960.
A development corporation for Wales was set up to encourage new industries further and retrain workers. Government factories were provided at low rentals. Technical education was improved. And the roads and railways to Wales have been improved faster than anywhere else in the United Kingdom.