Economic Situation

Part of Orders of the Day — Supply – in the House of Commons at 12:00 am on 24th July 1974.

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Photo of Mr Ivor Clemitson Mr Ivor Clemitson , Luton East 12:00 am, 24th July 1974

At one stage in the speech made by the right hon. Member for Stafford and Stone (Mr. Fraser) I wished that we had a system of simultaneous interpretation. I promise that my speech will be entirely in English.

Day after day in this Chamber we debate problems which seem to be intractable, about which the only sensible thing that can be said is "If I were going there, I would not start from here." Economic problems are in that category. Our economic problems are intractable given two conditions. The first is that we continue to operate with the economic tools and the tools of management which we have traditionally used, and the second is that we continue to think within the confines of accepted economic dogma. If those two conditions are fulfilled, our economic problems are intractable.

The tools and the dogma have not served us badly in the not so recent past. For nearly a quarter of a century they served us reasonably well. From this distance the world of the 1950s and early 1960s appears to have been quite an attractive one. I imagine that to be so if one is looking back from the point of view of the Chancellor of the Exchequer. What we used to call inflation—which appears to have been trivial—and unemployment were two sides of a coin. The remedies for both were, apparently, understood and fairly clear-cut. The rules of the game were understood by all—a bit of acceleration when unemployment was rising and a touch on the brake when prices started moving up a bit sharply and when our balance of payments was in the red. We could argue about the time and the degree of pressure that should be applied to the pedal, but the basic tools were available, and, apparently, within their limited confines they worked.

There were longer-term problems which some people were concerned about, such as our poor investment record, our poor growth record and our sliding down the international league table, but the short-term tactics were clear. Political and economic considerations could be made happily to coincide every four or five years, to the benefit of the party in power.

What is a poor Chancellor of the Exchequer to do in these days when inflation, high unemployment and a massive balance of payments deficit coexist? Furthermore, the inflation, unemployment and balance of payments deficit are at levels which in the halcyon days of stop-go would have been considered to be intolerable and beyond imagination. The world has changed. As the Americans say, we are in a different ball game.

I am not talking about the oil sheikhs waking up to the fact that they are sitting on a fortune. The signs of change were there before the price of oil and other basis commodities started to go through the roof. The simple world of gentle waves on the graphs of the various statistical series came to an end in the latter half of the 1960s, well before the oil crisis. The reasons for the changes were not short-term aberrations. Long-term trends began to come to the surface, and long-term changes in economic structures and relationships began to affect the graphs of unemployment and prices.

I want to concentrate on one relationship which has changed greatly; that is, the relationship between investment and employment. We still glibly tend to assume that the way to increase employment is by increasing investment. The Opposition motion perpetuates that fallacy, criticising as it does the failure of Government measures— to encourage the industrial investment which along can safeguard the jobs and future prosperity of the nation". To an increasing extent investment means fewer and not more jobs. At the least, more investment is needed to preserve the same number of jobs. At the most, investment replaces jobs. All industries are moving along the spectrum from labour intensive to capital intensive. That happens not only in manufacturing industry, where there has been a considerable drop in the absolute numbers employed since the mid-1960s; it is happening in the tertiary sector, in the service industries, and so on. This has enormous social and economic implications.

The changes in the economic structures and policies which are needed if we are to deal with the underlying problems that we face are immense, and they have been touched on by my hon. Friends. Equally great are the changes in attitudes which will be required. Given our intensely conservative way of life, the time taken to make the radical changes in structures, policies and attitudes which we require will be considerable.

Our problem is to commit ourselves to the radical changes and to buy ourselves enough time so that we can put those radical changes into effect. Given the hopelessly inadequate tools and economic theory at our disposal, all that we can hope to do in the short run is to contain the problems of inflation, unemployment and the balance of payments long enough to allow the long-term radical changes to be put in train.

I am aware of Keynes's famous dictum that in the long run we are all dead. But the manner and timing of the death is of some significance and consequence. In the Litany we pray for deliverance from battle, murder, and sudden death. Let us hope that these awful possible consequences of the breakdown of our admittedly limited democratic structures do not occur, and that we can all die peacefully in our beds.

The challenge is no less than to achieve a revolution by democratic means in a very short space of time. We could spend our time debating the odds of our success or failure, but it would be more useful to spend it getting on with the job.