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John Palmer

The Economy

(Spring 1967)

From The Notebook, International Socialism (1st series), No.28, Spring 1967, pp.5-6.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

John Palmer writes: The first three months of 1967 will be as cheerless as any since the end of the second world war. Although industrial output is unlikely to fall much further in the immediate future it is also very unlikely that there will be any improvement in either production or employment. As it is total output at the end of November had already fallen to its lowest level for any month since the return of the 1964 Labour Government.

The unemployment figures now look set for between 650,000 and 700,000 by mid-March and although this figure will contain about 150,000 men who are officially described by the Ministry of Labour bureaucrats as ‘temporarily laid off or seasonably unemployed’ the hard core of workless is not likely to sink much below 500,000 for the whole of the summer. The highest unemployment may develop next autumn unless Wilson has by then injected a far bigger dose of reflation than his banking creditors look like sanctioning.

Just how much the Government will feel free to try and raise output will depend on the trade figures over the next few months. In spite of the improvement in the last three months of 1966 further progress will perhaps be won with much more difficulty.

In the first place, ending the 10 per cent surcharge on imports will, in the next few months release the import shipments deliberately delayed last autumn. Second, the acute overproduction of steel throughout the industrial world seems certain to lead to a big increase in steel dumping by continental and American firms. As a whole, therefore, it is most unlikely there will be any more significant savings on the import bill.

The outlook for exports is more difficult to foresee. On the one hand recent shipments of ships and aircraft have inflated the underlying trend in exports, yet there is no reason to believe that this will not continue for some time yet. In general, however, it is difficult not to draw gloomy conclusions from an examination of Britain’s most important overseas markets.

The most dramatic decline has been in hitherto booming West Germany. Production, investment and employment have all been falling steadily in the past four months and as a consequence West Germany’s import requirements have fallen as well. The same can be said of Holland and Belgium, while France, Italy and Japan are now taking fiscal and monetary action which might also lead to reduced economic growth rates. Most important of all is the question mark over the American economy. It is becoming clear that, even without the tax increase Johnson has announced to help pay for the Vietnam war, there will be a slowdown in industrial activity in 1967. The real question now is how soon all this will be reflected in Britain’s export performance.

At present there is two or three months’ export work for the engineering and machine tool industries and somewhat more for the motor vehicle manufacturers, but further ahead the outlook is not encouraging. The prospects are that by the spring the trade gap could become an awkward problem for sterling just at the time when overall payments are expected to balance and the long term banker loans starting to be repaid.

In terms of unemployment it is clear that while the present level may not rise above 600,000, it will stick at a level of about 500,000 through the summer. A further jump in the level of unemployment next autumn and winter may then occur when the effects of the falling rate of new capital investment – now taking place – have their effect. Further ahead there is evidence that Wilson intends to keep a consistent level of workless at about two per cent – a fraction under half a million – as a permanent reserve weapon to keep the wages straightjacket on.

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