Finance & Industry

Rents and the Price Index
As most rents have risen during the past three or four years, some of them by enormous amounts, it may be a matter for surprise that this does not seem to have shown itself in the Ministry of Labour’s Index of Retail Prices, which now stands at 12 per cent above the level of January 1956.

The fact is that the Ministry’s separate Index figure for “housing” costs, which consist mostly of rent and rates but allows also for the cost of repairs etc., has risen continuously for 10 years and particularly since 1956. It is now a third higher than in January 1956 and two-thirds higher than it was in 1950.

This sharp rise has had comparatively little effect on the final Retail Price Index because people are assumed on average to spend over nine times as much on all other items of expenditure as they do on rent, rates, etc. So a rise of 66 per cent in the rent figure would raise the final Index by about 6 per cent only.

A movement of food prices would have four times as much effect on the Index because people are assumed to spend four times as much on food as on rent etc.

Of course many people will find that they spend far more than the assumed proportions on rent etc.; which would not of itself invalidate the Ministry’s assumption because there are some rents etc. which represent a very much smaller percentage, and both extremes enter into the average. It was recently shown in an official publication that the average council house rent in Scotland is 9s 10d. a week (the lowest being Dumbarton, only 2s. 10d). Corresponding averages for say London would be about 35s. to 40s.

Nevertheless, with the rapid rise of housing costs in recent years it is probable that a larger proportion than the official 8.7 per cent of expenditure goes on rent, rates, water charges and repairs.

Yet despite the rapid rise in recent years the average increase of rents since 1938 has been far less than the percentage increase of food prices, clothing prices, or drink and tobacco.

American Depression
Politicians and Economists giving their views on the course of trade and business prospects are curiously like doctors telling the relatives how the patient is fairing—probably for the same reason, that they arc not sure.

If the doctor felt perfectly confident that his diagnosis is correct, and that he knows precisely what to do he would be able to say “I have administered the remedy and by 9.30 a.m. exactly tomorrow morning the patient will start improving rapidly and will be out and about a week from today”.

And if the governments and their economic advisers could make exact diagnoses and prescribe specific and certain remedies, they could be equally confident. But as it is, they are never quite sure whether things are getting better or worse. If they fear the worst it is best not to say so because something may turn up, and in any event spreading gloom may itself help on a downward slide.

So it is not surprising that the reassuring statements of last autumn have slowly given place to admissions that American industry is in a rather bad way.

Last September Mr. Per Jacobson, Managing Director of the International Monetary Fund, at an interview in Washington was sure that the United States was not heading for a full-fledged recession, only a slackening in business activity, and on February 20, 1961 the Financial Times correspondent in New York could report, “U.S. business still optimistic. Belief that upturn is not far off”. But only a week later the President’s council of economic advisers was informing Congress that it would be unreasonable to expect recovery until after mid year and simultaneously the news of six million unemployed, the worst since before the war.

And the chairman of the council disclosed other reasons for not taking an optimistic view. He pointed out that even when the upturn in business docs lake place it will not be the solution to the longer term problem of a growing gap between production and productive capacity.

“Since 1955 the economy’s “chronic slack”—a gap between what the country can produce and what it actually produces had shown a “distressing” upward trend.” (Guardian, 7.3.61).

The Slum problem
The American President is going to do something about the slums, and the Times correspondent in Washington, writes, with unintended humour; “That something has to be done and done quickly has for years been evident to those driving through slum areas to the trim suburbs (Times 10/3/61).

What makes the Times correspondent think that because an evil has been obvious for years, that something has to be done about it quickly or at all? It is over a century since the British government and philanthropic agencies started to abolish the slums and they are still with us.

Anyway in America, according to President Kennedy there are “40 million families living in sub-standard houses”. but at the same time “one out of every six construction workers is unemployed, and house building dropped by 18 per cent last year to the lowest level in the past decade”.

Innocence of Journalists
If the Times correspondent in U.S.A. is naive in supposing that capitalism and slums are incompatible, his Daily Mail colleague Mr. Don Iddon is worse; he writes like a true innocent abroad. In the issue for 10 March he tells of having been stopped by beggars on Broadway. “shabby men asking not for ‘a dime for a cup of cawfee’. but for a quarter (about 1s. 9d.) for food”. Because of this and other things Mr. Iddon says. “Kennedy’s America is beginning to puzzle me”. But why should he be puzzled because queues are lengthening at the employment exchanges, and the motor show rooms are almost deserted, or because 166.000 car workers are unemployed and there are a million brand-new unsold cars? Mr. Iddon has lived for quite a while and has had abundant opportunities to get around and see things in different parts of the world so why should he be puzzled because America shows the same kind of happenings as other countries and other times?

Mr. Iddon tells how stock exchange speculators can make fortunes with a few telephone calls (he himself made $1,500.) “Yet good men, not drifters or drunks, are panhandling in the streets and women and children are queuing up for food in the Bronx and Brooklyn at relief centres”.

May we let Mr. Iddon into an open secret about this country? That about two million people a year, including unemployed and impoverished pensioners, go to the Assistance Board for help!

What Next?
The big political parties and the Labour Party above all have long been stressing the need for more investment to expand and modernise factories, plant and equipment. The argument is that this will make production larger in the years ahead and that it is absolutely necessary in order to be able to sell at low prices and meet the competition of other countries, which are, they say going in for investment on a larger scale than does British industry.

When therefore the Treasury announced in February that investment in manufacture has been rising very fast and that the building of new factories this year is expected to be 40 per cent above last year, there was quite a lot of satisfaction, not to say pride among those who wanted this to happen.

Two elementary factors seem however, to have been overlooked. The first is that all countries are engaged in the same competitive rat race of hoping to be better off in the future but not now.

The second is that a sudden burst of 40 per cent more factories will be followed by a slackening off of factory building and by a burst of additional output when they are completed, and this in a situation in which the “sellers market” phase after the war has long since passed and been replaced by a phase of greater difficulty in selling, and keener competition.


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