Business Men in Russia
A team of business men from the Institute of Directors visited Russia to meet the heads of Russian industry, “to get an overall picture of top Russian management policy in industry and commerce.” An interview with one of the team, Mr. Geoffrey Kitchen, Chairman of the Pearl Assurance Co., by Mr. Alexander Thomson, City Editor of the Evening Standard, was published under the heading, “This Capitalist was so impressed by Russia” (Evening Standard, 8/7/60).
When we read what so impressed him we may surmise that he is rather naive.
He tells us:
There are no strikes. But not because they are forbidden, as we sometimes imagine. The reason is that everybody in Russia realises that strikes do more harm than good.
Mr. Kitchen accepts that this is true because his opposite numbers in Russia told him so, and, as he says, “all doors were thrown open to us. We were given every facility to ask questions. There were no barriers anywhere.” But are we to take this literally? Did Mr. Kitchen actually ask his questions of Russian workers themselves, in conditions safeguarding them against possible consequences? Or did he ask only the Russian bosses (rather like being assured by the governor of a prison that all the prisoners are happy!)
Did it not seem odd to Mr. Kitchen that in all the countries of the world where workers can organise and strike with comparative impunity they do so, yet the tens of millions of wage earners in Russia decide, unanimously, not to? And note the implied criticism of British, American and all other workers, all except those in Russia: every one of the latter realises that strikes are no good, but the rest of us just haven't enough sense to see it. Perhaps Mr. Kitchen hopes that British workers who have the habit of going on strike against the advice of the managements will be a little more co-operative when reminded of the example set by workers in Russia.
Mr. Kitchen was asked by Thomson to sum up his impressions of Russia:
Both our systems seem to be working towards the same end. We are approaching it from different directions. But we are both aiming at the prosperity and goodwill of our people.
Does it make Mr. Kitchen sad to see that while every Russian worker gratefully responds to the kindness and good intentions of his bosses, workers here still harbour unjust suspicions that their bosses have something else in view besides the “prosperity” of those they employ?
No Stability for Profits
In his last speech as Chancellor of the Exchequer, Mr. Heathcoat Amory, on 11th July, told the House of Commons that among his aims during his 2½ years of office had been to maintain full employment and price stability, and he was worried concerning the possibility that rising wages might endanger the stability achieved. One thing he did not achieve was stability of profits. According to an analysis of industrial company profits made by Exchange Telegraph Co. and reported in the Evening Standard (8/7/60) industrial profits of 2,387 companies were about 20 per cent. higher in six months of 1960 than in the first half of 1959. If the companies reporting on the rest of the year show a similar increase, 1960 will be a record year for shareholders since the end of the war. Though profits, with some setbacks, have been rising for a dozen years on no previous occasion has there been a jump of anything like 20 per cent. Between 1958 and 1959 the increase was about 6 per cent.
German Success Story
In Western Germany there are now almost no unemployed, though for years there were rarely fewer than a million. It is an interesting example of the way capitalism “proves” that there are first too many people and then too few. When trade was stagnant, work could not be found and many people in Germany deplored the inflow of refugees from Russian-controlled Eastern Germany. Then production and trade expanded, the unemployed were absorbed and hundreds of thousands of workers are now being brought in from neighbouring countries to fill the vacant jobs.
There are other instructive things to note about Western Germany. In Great Britain employers and politicians (including the retiring Chancellor of the Exchequer, Heathcoat Amory) warn us of the importance of boosting exports, of keeping up the exchange value of the £ and of piling up a larger gold and dollar reserve. They tell us that if these things are done all will be well, but if we fail to do them we shall be in trouble. Claims for a reduction of working hours to 40, and claims for higher wages are resisted on the ground that such measures would weaken the export position of the £ and be generally dangerous.
On occasion the employers have quoted Germany as a land in which the workers work harder and longer and complain less. Let us then look at Germany: truly a capital success story. Exports booming, the mark strong and getting stronger, a gold reserve twice as large as that in Britain and production increasing much faster. Surely in such a country the government and the employers must be coming forward to reward their diligent and faithful workers, showering higher wages on them and begging them to work less hard and take more leisure?
But not at all. The German Economics Minister, Professor Erhard, talks just like the British political and business heads. The following is from The Times (4/7/60), reporting Erhard:
He gave warning against the union's demand for a 40-hour working week, and wondered if a slump was necessary to bring people to their senses. He criticized employers for passing on increased costs to the consumer: an annual price increase of 3 per cent. was no bagatelle, he said, if it continued year after year.Automation was not the universal panacea. German workmanship was not what it was, and craftsmanship had an important role to play if quality was to be maintained.
Dr. Amory’s "Cures ”
In our issue for March of this year reference was made to the claim that Heathcoat Amory’s 1959 budget was successful in curing the growing industrial and trade stagnation; and to the retort by Mr. Enoch Powell that the government’s budget policy had nothing whatever to do with it because in the normal fashion of trade contraction and expansion recovery was already taking place before the budget could have had any effect. As he put it, “the patient was up and playing golf before he could swallow the medicine.”
Now we are presented with the reverse side of the same problem. After expansion had been going on for some time, and seemingly in a manner regarded by the Chancellor as satisfactory—after all the patient was supposed to have been restored to health and vigour by medicine prescribed by him—notes of alarm were heard again and the patient’s incipient fever was to be damped down by the credit restrictions and then by the higher bank rate. But if the evidence shows that the patient was on the upgrade before taking the medicine in 1959 it now seems that the fever was already passing away before the new medicine of 1960. For the idea of the credit squeeze was to lessen the hire purchase buying of consumer goods, but many critics of the Chancellor’s action are arguing that sales were already falling off before the squeeze was imposed so the squeeze was unnecessary. A Guardian editorial (4/7/60) said:
The past week has brought fresh support for those who questioned the need for the Chancellor's latest round of credit restrictions. The Board of Trade’s admission that hire purchase sales in May dropped below last year’s level simply confirms the view, expressed by many manufacturers and traders, that the boom in demand for consumer durable goods had already slackened off. Reports continue to come in of growing stocks of household appliances in the hands of retailers; and Vauxhall has announced the ending of overtime on its car assembly lines. Since the pressure of the consumer boom is letting up just at the time when capital investment by industry is beginning to rise sharply, the Government ought to have been congratulating itself on achieving a desirable balance in the economy, rather than imposing new restrictions.
Mr. Andrew Shonfield, Economic Editor of the Observer, wrote (3/7/60) in similar vein: “There is now firm evidence of the official figures showing that production of consumer goods by the engineering industries actually turned down in the first quarter of the year—well before the Budget.”
The Economist (2/7/60) took the line that the Chancellor had become alarmed about the prospect of demands for higher wages being met halfway by employers who hoped to be able to recoup themselves by charging higher prices, and that the credit restrictions were imposed by Amory in the desire to discourage that frame of mind and make wage increases more difficult. The Economist thinks that “once again, wages are becoming a key issue in British economic policy ”—as if there was ever a time when they weren’t.
Edgar Hardcastle
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