The Bad News

It was Gloom Week in Britain. The Labor Government got around to telling the people some of the hard facts of their economic life. On the eve of Parliament's reassembly it issued a White Paper, chocked with black news. Britain's position was "extremely serious." The U.S. and Canadian loans "only give us a short breathing space." The country was "still running into debt Abroad." In 1946 its imports exceeded exports by $1,312,000,000. Its manpower shortage was grave: 500,000 to 700,000 more workers were needed in export industries if the trade balance was to be attained.

What would save Britain from the threats of inflation and bankruptcy? The White Paper offered one familiar generality: increased production. But there was a new note in the White Paper's theme. Increased production would have to be achieved without increasing costs, i.e., wages.

Down: Meat & Beer. All week long Britons were bombarded by bad news, dark predictions and more austerity. The Government served notice of a cut in fresh meat rations, and warned that bread and bacon rations might be cut. Mrs. Rose Wood of Arrington, Cheshire, sent Food Minister John Strachey two ounces of bacon and an ounce of cooking fat with a sizzling note suggesting that he "take this back and export it with the other things."

Added Mrs. Wood: "Why don't you export yourself with it?" The pubs got word of a cut in beer deliveries, perhaps by as much as 50%, because breweries were hard hit by conservation cuts in coal allocations. So were thousands of homes, Stores, offices, factories. (There was one chirpy note. London's Tribune whistled: "Now let's be reasonable. This wide-eyed enthusiasm for bad news can be overdone".)

Neither the White Paper nor any other British announcement reported the gloomiest fact of all: the rate at which Britain is using up her medicine, the U.S. and Canadian loans. The $3,750,000,000 U.S. loan is being spent at the rate of $120,000,000 a month; at that pace it will not last beyond 1948. The $1,250,000,000 Canadian credit is being spent at the rate of $50,000,000 a month; at that pace it will be exhausted by March 1948. (The rate of expenditure was not specified in the loan agreements, but, unofficially, British spokesmen said a year ago that the U.S. loan might last until 1951.) Lord Woolton, chairman of the Conservative Party, bluntly told a London audience that he could now see "no chance" of Britain's repaying the U.S. loan.

Have the dollars been wisely spent? British insiders sadly recalled the wrath of Lord Keynes when he returned from negotiating the Washington loan and learned of commitments Britain had made. These included exchange arrangements with France, Belgium and Denmark, credits to Greece, help for the British zone in Germany. Keynes stormed that these were "Foreign Office frivolities," which would fritter away too many dollars. He scolded: "The Foreign Office must learn that we have become a poor nation and must cut our foreign policy accordingly. It is useless to have grandiose ideas that we cannot afford to put into operation . . . and our first duty to ourselves and to the world is to safeguard our solvency." They were his last words of advice; he died soon after.

Down: Dollars & Exports. Last week the results of some "follies" were officially recognized. Austere Sir Stafford Cripps's Board of Trade confirmed that the bulk of Britain's exports have been going to nations inside the sterling bloc. The balance of payments with "hard money" countries (the U.S., Canada, Switzerland) is more unfavorable than was calculated a year ago. The hard fact is that Britain has sold too little in the "hard money" markets (only about 14% of her exports), while buying heavily (about half of her imports) in those markets. A sore point in her U.S. buying: prices went up about 31% in 1946. That is why Sir Stafford keeps urging: "Save dollars."

Almost 30% of her 1946 American imports had been in tobacco and Hollywood --a statistic which portended more austerity. Most of the rest of Britain's loan spending had gone into food and other consumer items instead of into the stuff out of which real economic recovery could be built--steel, industrial raw materials, machinery.

As a result, Britain was far short of her export goal (175% of her 1938 average). The export drive, off to a brave start, reached 120% of the 1938 average last July, then leveled off to 117%. But in December it slumped to 103%.

The coal shortage, prime factor in most of Britain's troubles, was mostly to blame in December. Last week the Cabinet discussed employing displaced Poles already in Britain, to work the man-short mines.

Discussion of another proposal revealed the vicious circle of reasoning underlying the whole manpower shortage debate. When some repatriated Italian prisoners of war indicated that they would like to return to Britain and work on the farms, the semi-official objection was that Britain's food shortage was so grave that the nation could not take responsibility for feeding extra mouths. In fact, importation of foreign labor was political dynamite because labor's rank & file jealously opposed it. The alternative--a deep cut in the Armed Forces and Auxiliaries (1,510,000 men & women)--would mean a serious shrinkage in Britain's foreign prestige and policy.

Gloom Week was clearly a turning point for the Laborite Government. Now it would have to face decisions that would change its role from labor's protector to labor's prodder. Clement Attlee's regime was in for a hot time in the next few weeks, not only from the Loyal Opposition but also from the ranks of labor, on whose loyalty it depends.

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