Shadowy Crisis

"I confess I am worried, but I am not afraid." Thus Prime Minister Harold Macmillan last week confided to a Tory caucus his feelings about Britain's deepening economic crisis. To the average Briton in pub and park, basking in the summer sun, there were few signs of anything even to worry about, let alone fear. Wage earners were enjoying record employment; their shopping mums were still savoring the longest stretch of prosperity since the war. Labor leader after labor leader has gone on record for another round of wage increases this summer. On the surface, everything seemed tickety-boo, as vacationers crowded the beaches from Brighton to Belfast.

But however shadowy the crisis seemed, bankers, brokers and the government knew it was real and worsening. Britain annually imports nearly $2.8 billion more than it exports, traditionally has paid for it largely out of "invisible" earnings such as tourist dollars, earnings of British companies in foreign countries, the fees garnered by British banks, shipping and insurance companies abroad. But in the past three years the "invisible" profits have fallen sharply: from $641 million in 1958 to a mere $62 million last year. To compound the trade gap, exports slipped dangerously in the spring. As a result, Britain, living beyond its means, has spent gold from its reserves to cover the gap five months in a row (at a time of the year when Britain is usually piling up gold). In world money marts, where a fraction of a cent can mean a fever crisis, the pound sterling's value has dropped from par $2.80 to $2.78 11/25, lowest point in four years. At home, the British worker's average wage has risen more than 4% in the past twelve months, while the nation's industrial output has barely moved at all. The result: a net loss in productivity for Britain, already laboring under one of the lowest growth rates in Europe.

Macmillan declared that the government would soon make a major announcement of measures to cope with the crisis. When a friendly Tory colleague pointed out that up to now the government has given an impression of complacency about the squeeze, Macmillan replied: "When you hear the announcement, you will not think we have been complacent."

Stiff though the emergency measures might be, they could only be stopgap as long as British management and labor continue their easygoing, old-fashioned way of doing business. An increasing number of British statesmen and economists insist that a lasting cure can be effected only by Britain's entry into the Common Market. Under the icy blast of aggressive European competition, they argue, British industry may be shocked into new life.

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