Orders of the Day — Prices and Profits

Part of the debate – in the House of Commons at 12:00 am on 27th July 1951.

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Photo of Mr Harold Davies Mr Harold Davies , Leek 12:00 am, 27th July 1951

I listened with interest to the arguments put by the hon. Member for Cheadle (Mr. Shepherd), and I begin by saying that we on this side of the House are not trying to put forward any cheap arguments, and we never have. None of us have said that full employment does not create a problem. Those of us who have taken an interest in this matter know that full well.

Even in 1945, in the literature, pamphlets and economic arguments of the trade union movement, the Co-operative movement and the Labour movement, it was clearly pointed out that one of the problems of full employment was that there would be such a demand on the supply of goods available that the danger would be inflation, and it is untrue for the hon. Member to charge us with a lack of knowledge of this fundamental economic fact.

What we are worried about is not high prices but the standard of living. That is the real point with which we are concerned, together with the maintenance of the standard of living. Therefore, in this debate we are concerned with the apparently excessive prices which seem to be charged for certain commodities which are basic necessities for living today. I remember a famous debate in this House when an hon. Gentleman opposite said, "We are the nation," referring to the shareholders. In a way, the impression has been given, especially by the Aims of Industry Group, that nearly everyone in Britain is a shareholder. That is the impression created by the propaganda of a "property-owning democracy."

I have taken the trouble to check this to try to find out what truth there was in the assertion that the majority of our people were shareholders, and I discovered that 71 per cent. of industrial capital is in the hands of people with £500 and over of shares; 30 per cent. is in the hands of people with about £1,000 of shares, and over half the industrial securities of Britain are in the hands of people with fortunes of £50,000 or more. Out of a population of 30 million adults, there are in Britain 1,125,000 shareholders.

Do we on this side of the House want to punish shareholders? Do we want to punish a person for making an honest profit? Far from it. That has not been the crime that we wish to punish. We do not wish to impose punitive taxation upon people who at any period are making an honest and fair profit. What we are trying to ensure is that in this crisis and transition period, when we hear so much about freedom, democracy and the rights of the people, the burden shall be borne, as far as possible, according to the capacity of people to bear it.

The main contention of those interested in the philosophy of Socialism, and in the arguments put forward in "One Way Only," is that the burden of re-armament is not spread evenly, either between nation and nation in the Atlantic Treaty Organisation, or between people and people in Britain.

The E.C.E. Report, analysing the present Budget, said that one of its assumptions was that it would allow retail prices to mop up increased costs and prevent wages rising to the same extent. Another assumption of the Budget was that the inflation outside the United Kingdom will subside. Now that is a gamble; it may be a dangerous gamble, and it is one of the criticisms we make. That criticism is not made in order to secure cheap publicity. We have tried honestly to face the challenge of our times, to see whether we can get an answer to our problems, without claiming that all the answers are found.

One assumption of the Budget has already been proved wrong, and I should like to illustrate that in a simple way. The economic crisis of 1931 and the present crisis are two entirely different economic phenomena. The economic crisis of 1931 was a crisis in the raw materials production area of the world, when it took five bags of cocoa to buy what one bag of cocoa had previously bought for the industrial areas.

Today the raw materials production areas of the world and the so-called backward areas are in a very strong economic position, and their prices are higher in proportion to industrial prices. Mr. Lawrence Robson, in his presidential address at a cost and works accountant meeting gave an interesting figure. I could give other examples, but I do not want to weary the House. He gave an example of the way in which the terms of trade were against us in relation to the raw materials areas.

For exporting one Jaguar XK120 car, we received the equivalent of 4½ bales of merino wool. In other words, for 3,896 lb. of polished sophisticated motor car, turned out by the engineering skill, capital and entrepreneurs of British enterprise, we got only 1,125 lb. of wool grown by God Almighty on a sheep's back—clipped by man, granted, although that is now being done by machine. Here is a spectacular example of the challenge of our times.

I do not want to make a cheap political "crack," but there are times when I feel that I should like to get hold of some pairs of false teeth free from the National Health Service and present them to some hon. Members opposite so that they can snap back at us more quickly and more intelligently in their interruptions. I have not yet heard or read a constructive approach by hon. Members opposite of how to maintain a re-armament programme of the present extent and at the same time maintain the standard of living—forgetting for the moment the words "prices" and "costs." It cannot be done. Neither side can pretend at the next General Election that we can have a re-armament programme of this size and maintain the present standard of living. Consequently, I believe that some risks have to be taken, and that they are worth taking.

Barclays Bank Review said that the problem of the armed State and the welfare State was causing current consumption to gallop through the world's raw material reserves. Let me give one example. In 1921, the oil consumption of the world was 20 million tons. In 1950, this orthodox old world of ours is consuming 523 million tons of petroleum oil. We have stepped up in one generation the consumption of world oil from 20 million tons to 523 million tons.

The estimated known reserves of sulphur, tin and petroleum are limited. That of sulphur is about 15 years, tin 35 years and petroleum possibly 20 years. An hon. Member below the Gangway said that prices were controlled by supply and demand. I agree. Here is one of the factors that affects the entire problem of world prices.

I agree with the late Foreign Secretary, Mr. Ernest Bevin, when he said, in a great speech of a non-political and economic character, that the time must come when the world must share the raw materials at its disposal, otherwise we should completely undermine our civilisation. We know full well on both sides of the House, when we do not try to make cheap political cracks, that there are factors in rising prices over which no government in power in Great Britain can have direct control unless there is some international system of dealing with raw materials and commodity prices, and therefore we suggest that rather than exacerbate and irritate the international situation by making speeches—I do not care from which side of the House they come—that tend to drive the nations further and further apart, we should continually try to make the type of speech which will bring the nations together and realise the economic destiny of mankind. We must realise that international economic interdependence exists, and unless we work together we shall be destroyed together.

I believe that the Labour Government is right and that all of us are right who are trying to encourage the possibilities of rapprochement between the so called antagonists in the present cold war. If we do not do that, we can visualise a cold war in perpetuity. Economists and politicians in America and Britain talk as if a cold war is something which will last in perpetuity. If that is so, life is going to be what it was in the threadbare 30's for those who exist in the time to come. That will destroy the civil liberties and creative evolution of mankind.

When we are talking about the cost of living and trying to make cheap political cracks, the honest truth which has to be realised is this: That neither political party can lower the cost of living when we envisage a re-armament programme to the extent of which we have already committed ourselves in this House. I believe, therefore, that I and my hon. Friends have the right to try to point out—granted we may be wrong because none of us is omniscient—that this means the destruction of our standard of living and, maybe, will lead us ultimately to war.

Do not throw back at me the argument that by being strong we maintain peace. I am prepared to say that this kind of re-armament is weakness through strength, because if we cannot maintain the cost of living and give our people decent standards of life, and if we cannot maintain civilian production, then what is the good of huge armies if we cannot keep them supplied, the factories ticking over, full employment and an enthusiastic and well-fed people. There are much better defences for democracy and against communism than having a Spartan system of society which when the first shock came would not be able to maintain supplies to keep a war going.

We had yesterday the spectacle of the Chancellor of the Exchequer having to admit that the Budget already brought to the Statute Book has to be altered to meet the exigencies of the present economic situation. A little less economics and more common sense might help this world to deal with some of the intricacies of these international problems. To me this is very simple.

The system of society called capitalism served a purpose, like the feudal system did, but in the late 20th century we cannot bring the economy and philosophy of the 17th, 18th and 19th centuries to bear on these problems. Capitalism showed us what could be done by initiative and enterprise. Now we are struggling for a philosophy of life that can take the best of this and apply it to a world which, in the 20th century, is no bigger than a parish was in the 17th century.

If we do not face these problems all the documents turned out by the economists and all the oratorical statements of the right hon. Member for Woodford (Mr. Churchill) will not answer the challenge of our time. Those who have tried to think these problems out in all honesty and good purpose believe that the one hope of mankind is rapprochement between East and West and the opening up of trade with China, Eastern Europe and other places. That alone will maintain the standards of living and help to reduce costs.