Finance and Industry
Who are the share-owners
Last month we reported on the new campaign being organised to encourage British workers to buy more stocks and shares. We also quoted the estimates made by the organisers about the number of shareholders in the country.
The New York Stock Exchange has now provided details of the number of shareholders in the United States. These are estimated at about 17 million, an increase of over 10 million in the last ten years.
The U.S. correspondent of the Financial Times, giving these figures, comments that in happier times they might have been a cause for congratulation, but that recent events have given “people’s capitalism” a rather tarnished look. Judging by the panic and disillusionment that hit many of these small investors in the recent Wall Street shake-up, he is certainly right.
High pressure salesmen
One result of this shake-up has been the questioning of the methods that have apparently been used by many U.S. Stock Exchange firms to get business. They have been using a large army of part-time salesmen to go round getting people to buy stocks and shares just as they would soap or toothpaste. Some of them have even been selling extremely doubtful issues in such industries as electronics, automatic vending machines, etc., which have turned out to be virtually worthless. We wonder how many of the 17 million have been accounted for by this sort of dubious activity?
Beyond the curtain
In view of the way production and distribution are carried on in Russia and her satellites, Socialists would not suppose that the trading and financial problems there would differ essentially from what we have here.
It suits ill-informed writers in the Press to keep plugging the theme that it is quite astonishing that capitalist Russia should behave like a capitalist power—but what else would they expect?
In the early part of July, a two-week international summer school of bankers was held in Moscow to enable the foreigners to learn about the Russian banking system. (Last year they met in Oxford). The British visitors numbered 35 and represented the big five joint-stock banks as well as the Bank of England and the merchant banks. More than 50 countries were represented, including the U.S.A. and many of the newly formed African and Asian countries.
Innocents who suppose that things are really different in Russia may wonder why Russia needs to encourage such an affair. But Russian industry is engaged in producing goods for sale at a profit in home and foreign markets and has just as much need of a vast banking and finance apparatus as has the rest of the world. It has not at all been able to escape the necessity of finding markets for exports and has been no more successful than its Western rivals. If Britain has problems which lead some industrial groups to favour entry into the Common Market, Russia has her own difficulties in COMECON (The Council for Mutual Economic Assistance, established in 1949 by Russia, Poland, Czechoslovakia, Hungary, Bulgaria, Rumania, Yugoslavia and Albania).
An article by Norman MacKenzie in the New Statesman last month maintains hat these countries have been unable to achieve the degree of common planning already attained by the six European countries in the Common Market—hence Krushchev’s apparent anxiety lest Britain’s entry into the Common Market and the further development of the Market may make great difficulties for the exports of the Comecom countries, including Russia. Mr. MacKenzie’s view is that each of the Comecom countries is concentrating on industrial self-sufficiency rather than on integration into the whole group. One outcome has been that “with the exception of Poland, these predominantly rural countries are now chronically short of food.”
One ironical accompaniment of the relationship between Russia and the other Comecom countries related by Mr. MacKenzie is that their internal price systems are so complex that when they enter into trade agreements between themselves they have to make use of world prices as a common basis of measurement, which “explains why the trade attaches of communist embassies in the West spend so much time collecting invoices and catalogues which are sent to Moscow for analysis.”
The mailed fist
It is the fashion these days for managing directors, Ministry of Labour officials and politicians to congratulate themselves and everyone else on the harmony and amity that is supposed to mark industrial relationships. To the extent that things have changed it is mostly the result of years of low unemployment and shortage of labour—employers have had to hide the mailed fist a little. But Mr. Peregrine Worsthorne, of the Sunday Telegraph, recently scented a wind of change. He noted that the Wall Street Stock Exchange collapse alarmed the workers at the Ford Motor Works at Dagenham with whom Mr. Worsthorne had been talking.
This is what he had to say about it:
“The men I talked to were frightened and malleable, as if they had been suddenly awakened from a deep sleep, and scarcely knew where they were. If the mood at Ford’s is any guide, now would seem to be the time to put industrial relations on a sounder footing. At the risk of being called all sorts of unpleasant names, I should like to suggest that this means, in blunt terms, putting the working man in his place, which is a very much lower one than he has been encouraged to enjoy for 15 years.”
Don’t say you haven’t been warned!
Going up or down?
On the whole economists and politicians claiming to understand the workings of the economic system have lived in a mood of sustained optimism for the past twenty years, based on the sanguine belief that things would never get really bad again because there is more knowledge and experience available than there used to be. Bernard Harris, writing recently in the Sunday Express, on prospects of a slump in America like that in the ‘thirties, dismissed it, not precisely because there aren’t danger signals, but because “the cause of business fluctuations is better understood. The techniques for dealing with them are better developed.”
But there are dissident voices. Mr. Enoch Powell, who has been “saving the country” by resisting the nurses’ demand for higher pay, went on record two years ago to the effect that the Government’s techniques for handling the crisis of 1958-9 had had no effect whatever. (As he had resigned from the Government he was exercising the right to be critical of what his ex-colleagues were doing). And Mr. George Schwartz has been wondering in the Sunday Times whether we aren’t “back to the old trade cycle” (Powell’s view appears to be that we never left it.)
Mr. Samuel Brittan in the Observer goes further than Powell, who thought the Government’s actions had no effect, because he (Brittan), thinks they make the problem worse:
“Government financial measures have in recent years actually accentuated the trade fluctuations that they were supposed to control.”
The Financial Times (June 15) pointed out another difficulty about prescribing cures for whatever ails the patient, namely, the difficulty of diagnosis. How do you prescribe for an unhealthy state of trade if you can’t decide what is its state?
“At present British industry is operating on a plateau, and one can make out an almost equally convincing case for saying that the plateau is sloping downwards as upwards.”
East-west trade
For many years after the war, and particularly when the Western governments rigidly prohibited the export to Russia and her allies of products and materials useful for armaments, never a trade union conference went by without resolutions being moved demanding more trade with Iron Curtain countries. Many workers who were enthusiastic about it had a somewhat mixed idea of what it meant: to them “more trade” meant more British goods being sold abroad without its counterpart of more foreign goods being marketed here. (Some supporters of joining the Common Market have the same blurred vision.)
In the last year or two, with more exports from Russia and Eastern Europe coming into world markets, zeal for East-West trade has cooled off considerably. British coal miners who had supported the idea had never anticipated that it might take the form of the large quantities of cheap Russian oil hastening still further the decline of coal as a fuel for manufacture and domestic lighting and heating. And workers in engineering concerns doing big business in exports were not counting on the steady increase in the amount of machinery and equipment that now figures in Russian exports. A recent, development has been the Russian invasion of the watch market. Soviet Weekly (June 28, 1962) tells how Russian exports of watches have increased from 12,000 in 1938, to 250,000 in 1955, 1,147,600 in 1957 and 4] million in 1961. They go to 50 countries in all parts of the world and “in price and quality Soviet watches are challenging the long-standing pre-eminence of the Swiss watchmakers in this field.”
H.