The Atlantic Report on the World Today: Washington

ON THE WORLD TODAY

LITTLE has been said about the uses to which the _ American loan to Britain will be put. This Washington observer went to Britain to ask about them. He talked with Sir Stafford Cripps, President of the Board of Trade. Cripps is one of the Cabinet trio — the others are Foreign Secretary Ernest Bevin and Chancellor of the Exchequer Hugh Dalton — that conducted the loan negotiations at the London end. No step was taken by the HalifaxKeynes mission, which handled the negotiations in Washington, without the O.K. of the Cabinet trio.

There was some surprise that questions about the use of the dollars should be asked. The inquirer was told that there are obligations that Britain must meet — to the members of the sterling bloc of nations, who look to Britain for dollars to spend in America, and to American suppliers of necessary food and commodities. Both needs are undoubtedly urgent. But financial aid used in this way would be non-productive: the American loan would not yield a more efficient and more competitive industrial plant for Great Britain.

This observer ventured to remark that unless the American money is used for reconstruction, Britain may be in the market for another dollar loan in half a dozen years. Cripps’s answer was that reconstruction would be attended to independently.

Britain must tool up

The modernization of British industrial equipment is the key to Britain’s economic future. Lord Keynes has been saying in Washington that all the old industries, with the possible exception of shipbuilding, are antiquated, but that the new industries, such as rayon, are in a competitive position. This picture of conditions is not borne out in Britain itself. Efficiency — that is, man-hour production — is steadily on the decline.

The over-all loss since war broke out is put at 15 per cent by Britain’s automobile magnate, Sir Miles Thomas. In his own industry the loss is said to run above the average. Thomas thinks one reason for the decline in efficiency is war-weariness. Another factor is that work is guaranteed. A shortage of manpower, he says, has robbed the workers of the incentive that comes from competition for jobs, and loafing has become common. Thomas believes that this is the chief reason for the lowered efficiency in the motorcar industry.

There can be no question that Cripps is bent upon modernizing British industry and bringing efficiency back to it. He hopes to accomplish this in two ways: (1) by subjecting every industry to study by so-called “working parties,” and (2) by skimping the home market in favor of the export markets.

Working parties already are active in a number of industries. They are composed of economists, businessmen, and civil servants. In some cases laborunion leaders are included. One may imagine the reception that the working parties are getting within the affected industries. It is not unlike the reception that greets an outside efficiency expert in an American establishment.

The industrialists complain about the lack of knowledge of conditions in the particular industry by members of the working party attached to it. Time, in consequence, has to be taken in briefing the inquirers. This complaint may be due to spleen on the part of the industrialists, for the members of the working parties, judging from their names, appear in general to be men of high caliber. In this respect experience will have to be the judge.

Meantime Cripps is working energetically to stimulate the export market. In pre-war days Britain paid for her necessary imports of foodstuffs by the proceeds of overseas investments and the provision of shipping, insurance, and other services to foreigners, as well as by exports. These mainstays are no longer available, at least in the same volume.

Foreign investments in the main were liquidated for war financing. Services to foreigners lapsed during the war and, given strong American competition, will be difficult to regain, as America’s bid for air supremacy in the Atlantic bears out. As a result Britain must increase her exports by at least 50 per cent in order to buy on her pre-war scale in world markets.

Cripps puts the screws on

Cripps’s way of going about his task of encouraging exports is anathema to British industrialists. The struggle has recently come into sharp focus. Cripps wants the automobile manufacturers to build cars specifically for foreign markets.

The manufacturers say the assignment is impossible. They are accustomed, they say, to building cars for Britons to ride in. The cars are small, with a low operating cost, and they are suited to Britain’s roads, short distances, and thin purses.

One manufacturer gave an example of the impossibility of building and marketing foreign-style cars at a profit. He had imported a Dodge Victory-6 model, he said, in order to build a similar model. The car was made, but it cost so much more than its American prototype that he could not possibly sell it in competition. After this experience, he settled down to build British-style cars.

But Cripps intends to put the screws on the manufacturers by denying a home market to them by the tax route. In Britain the taxes on motorcars make ownership a luxury. The levies include a purchase tax, a horsepower tax, and a petrol tax. There is talk of modifying the horsepower tax, but this change will not ease the burden.

The over-all result is to deny any expansion of the home auto market to the auto makers; in fact, the market will be contracted. Whereas one American in five owns a car, only one Briton in twenty-five owns one, and there is no real likelihood of increasing the ratio.

Thus the export plans of Sir Stafford Cripps have already struck a snag. What the New Statesman and Nation calls a sit-down strike in this particular industry is in progress. But the auto industry happens to have logic on its side. This is appreciated by Britons in general.

How does Britain live?

This pro-industry feeling is not governed solely by economics. It is colored in part by the human desire for improvement in living conditions after the war ordeal. The denial of cars is not the only thing the British object to. They resent the filtering of imports which has of necessity to be practiced while the struggle to capture export markets is in progress.

Britain is living little better now than during wartime. More fish is obtainable, and oranges can be seen again, but little else. On the other side of the picture, clothes and shoes and household furniture are in worse condition, and replacements are difficult. The shops show goods in their windows, but the goods are often dummies.

One of the American correspondents in London sought unsuccessfully to get a pair of shoes in a tour of half a dozen stores. Governor Tobin of Massachusetts, to whom the story was told, left one of his extra pairs for the correspondent. Cases can be heard of mothers who are getting shoes for their children from soldier relatives serving in Germany. Whether they buy them or loot them — that is a question.

This observer heard of a British officer on duty in Germany who was looting systematically in order to furnish a house he had bought to live in after his demobilization. In the circumstances of the presentday barrenness of England, his action was hardly surprising.

Venture capital

Investors have been discouraged from risking money in new enterprises. It was not unusual to hear City men say: “With nationalization schemes in the air, it is difficult to get investors interested in new ideas and processes and better plants.” The complaint is that Attlee’s Government will not set limits to nationalization.

The result is that the nationalization sword is kept dangling over all industry. Thus, unless limits are set to the program, there is bound to be the same unwillingness to invest in general industry which in the past has kept new money out of the coal industry. To cap it all, there is a cleavage between employers and labor, and wildcat strikes are general.

While this observer was in England — and he was there only a week — he ran into a gas strike which kept most of London in a blackout, a coal strike in the north of England, and an automobile strike in the Morris automobile works. There is little vim in this industrial strife. The strikes are called by local shop stewards, and the men obey, as much for the rest they get as for the prospect of better pay. They know they won’t be fired.

This is a picture of Britain in the doldrums, unable to get off dead center as a result of the terrific struggle she has been through. How Britain will be helped by the American loan is, in these circumstances, problematical. She will eat better, of course. But she is not likely to be aided to any great extent in developing a sturdy industry able to compete again in world markets.

Britons discuss the loan

The loan, indeed, is a source of endless conflict in British government circles. The Socialists feel that a loan will cramp their ambitions. They are right. The main object of the loan was to fulfill Article 7 of the master Lend-Lease agreement.

This article reads that the two countries shall cooperate in the expansion, “by appropriate international and domestic measures, of production, employment, and the exchange and consumption of goods, which are the material foundations of the liberty and welfare of all peoples”; in the “elimination of all forms of discriminatory treatment” in international commerce; in the “reduction of tariffs and other trade barriers”; and in the attainment of the objectives of the Atlantic Charter.

Ostensibly the loan is needed in order to enable Britain to achieve these objectives. Clearly the end of exclusionism and discrimination in economic relations is not compatible with progressive socialization. You cannot have controls internally if you leave your citizens freedom to trade and to invest externally. Accordingly the 100 per cent Socialists in the Government are opposed to the American loan and all that the loan implies. They want to regiment Britain and to develop the sterling area as a closed bloc.

It is said in Britain that Foreign Secretary Bevin was talked out of this camp by Lord Keynes. The story is that after a conversation with Keynes, Bevin said, “You have convinced me, but I regret you have.” However, Bevin’s behavior in the course of the conversations shows that he is only half-convinced. The pulling and hauling during the protracted negotiations in Washington was due in great part to the split personality in the British Cabinet. The British want a loan, but they don’t want a loan that will tie their hands too severely.

Other difficulties are of a more personal nature. Mr. Churchill after his July defeat at the polls offered to head the mission to Washington. The offer was declined. It is this observer’s view that Mr. Churchill would have got a grant-in-aid, such as Senator Taft suggested last spring.

He was not chosen, perhaps, because the Labor Government did not intend to give the envoys plenipotentiary powers. All steps, even the least, had to be referred back to London for decision. On this understanding Lords Keynes and Halifax came to Washington.

But they were bedeviled by the split personality which shines through all their instructions from London. Cripps is straight enough, because Cripps, as his domestic policy shows, is intent upon forcing a way back for Britain into the international trading community, though his methods are open to question on grounds of feasibility. Bevin is not so consistent. Nor is his near namesake, Aneurin Bevan, who, incidentally, is spoken of in Britain as a potential Labor prime minister.

Lord Keynes, moreover, is not an ideal ambassador He has two strikes against him. One is his criticism of President Wilson in his Economic Consequences of the Peace, which earned him the undying hostility of Americans like Bernard M. Baruch who revere the memory of Wilson. The other is his contribution to the Roosevelt thesis of spending your way back to recovery.

In the Washington negotiations he showed extraordinary ability, but his acid wit was resented. The most charitable explanation of his tartness is that he has not been feeling well and that he must have been irritated by the hot-and-cold reactions from London.

THE MOOD OF THE CAPITAL

The mood of the Capital on the Anglo-American negotiations does not jibe with this estimate of the situation. Bernard M. Baruch set the pace of the critical thinking when he warned Congress against loans to countries which were “nationalizing against us.” Financial aid to Britain is thought of as destined to help socialization.

President Truman was right when he said that this was a “perfectly silly conclusion.” Actually the loan is the way to hold off socialism in Britain. If it be thought that a denial of the loan would upset the Labor Government, the mistake is grievous.

There was no question in Britain that the Labor Government would last out this Parliament, loan or no loan. The defeat of the vote of censure on December 6 indicates that the Labor Government is stronger than ever. There will be changes in personnel, but the country has definitely gone left. There is, to be sure, some reaction, but it is a normal post-election reaction.

The best way to live with the Labor Government is to extend a helping hand in actual reconstruction. We can best help Britain by persuading the British to develop a reconstruction plan for their industry based upon political certainty on the one hand and economic modernization on the other. It is a pity that aid was not offered on these terms when the war was over.

As usual, we are not clear as to where our true interests lie. If they lie in the restoration of a place in the sun for Britain, then we shall have to keep an eye on the job, for Britain is in process of political and economic deterioration.