The Road Back

In the May issue of FORTUNE, Editor John K. Jessup takes a long and discerning look at Britain's economic position. Jessup concludes that Britain is on the road back, that she may achieve relative economic independence by 1952 or very soon thereafter. If she does, says Jessup, it will mark a decided triumph for British capitalism, still surprisingly strong despite five years of Socialist rule. Some of the highlights of the FORTUNE report:

The comeback of Britain from here on will not be a triumph for Socialism, but for British private business, which alone can bring it off. The Socialists, who know they are licked, are no longer obstructing the businessman's recapture of a large part (not all) of his-former social power. That is the important fact about Britain in 1950. The original capitalist country is rediscovering capitalism . . .

Crippled, propped, cushioned and controlled though it is, the British economy is still the second most productive industrial machine in the Western world. It is as superior to the wrecked or backward economies of France and Germany as ours is to it ... Britain's economy is still predominantly private, autonomous and unpredictable, the sum of many individual business decisions just as in the U.S. . . .

When inflation began to get out of hand (1947), they [i.e., the Socialist planners] cut the investment program. When the overseas balance got critical (1949), they tried to ... increase investment that would earn or save dollars. But this is an essentially creative act, and the planners have discovered to their chagrin that they cannot perform it. Their day is therefore over, and that of the businessman--who can do it--has arrived . . .

Dog & Rabbit. The private decision to invest and the Treasury forecast of gross private investment are not made at the same time or in the same room. "The dog never sees the rabbit," explains one industrialist whose company is building a very large new plant. "What happens is this. [The Treasury] sends a directive to what is known as the 'appropriate ministry,' where an official keeps it three weeks, rewrites it so the main point is obscured, sends it to the wrong man in our company, who rephrases it in trade jargon so that it is perfectly harmless, and acknowledges it in that form to the ministry, where it is later released as an agreement. Meanwhile, our investment program, which was decided on by us some time before, is well under way."

At humbler levels, too, British ingenuity still finds a way to defy or bypass the government. A woman who was determined to found the first diaper laundry and supply service in England (The Rockabye Nappy Service at Enfield, Middlesex) could not buy diapers in quantity in England because the mills were then subsidized to make other kinds of cheap piece goods ... So she went shopping in the guise of an expectant mother . . . When clerks asked for her "green card" (a mother's special ration book), she just looked more pregnant. Anyway, despite all the government could do, she's in business now . . .

The amount of new investment in Britain since 1945 is rather impressive . . . More important, this rebuilding of Britain's capital plant has been paying off in increased productivity . . . The government [productivity] figures give an average 5 1/2% gain m 1949; other estimates show that the gain ranges from 2% in textiles to 15% in precision instruments and 21% in the automobile industry . . . The productivity figures . . . help explain the surprising remark of left-wing Socialist M.P. Dick Crossman."I thank heaven," Grossman said, "that the motor car industry is still under private enterprise." .. .

It would be perhaps too much to say that the British Socialists have ceased to believe in Socialism. But they have certainly abandoned it as an instrument or aim of government policy . . . [There is] a deeper dilemma which can only be escaped by a retreat along the whole Socialist front. It is simply that everybody--not just the well-to-do--is and feels overtaxed. The EGA has calculated that the taxes paid by ... 80% of the population . . . amount to 67 shillings per family per week, while their share of government welfare expenditures--food and housing subsidies, social insurance, free medical care, etc.--amount to only 57 shillings. In other words, the fact that nothing is really free is borne in on all classes of British society . . .

Flight from Fact. The problem [of Britain's dollar export drive] is so crucial . . . that the Treasury is leaving no stone unturned, not even that of encouraging private enterprise. Even if this be regarded as a change in planning technique, rather than a true retreat from planning, it means a greener light and a rosier prospect for the British businessman than he has had since before the war . . .

Even on the most favorable assumptions, British progress is a race between rising productivity and rising costs, a flight from the fact that real British incomes are higher than Britain yet earns. But as of the spring of 1950, all signs and statistics suggest that Britain can make it.

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