A Steady Performance

From the Common Market to the Far East and from Canada to South America, the steady and gratifying economic growth of the free world's industrial nations in 1963 provided a striking contrast to the widespread economic difficulties of the Communist bloc. There were economists, of course, who complained that one nation's boom was racing too fast, that another's was losing headway, or that still another's could not continue without strong medicines. But no one could gainsay the fact that most free, industrialized nations stood clear of crucial economic problems--while the Soviet Union's wheat crop failed, Red China's economy continued to falter at bare subsistence levels and Cuba proved a good showcase of how to ruin an economy in a hurry.

Scooters & Rice Cookers. If one key trend became evident during the year, it was that a certain sense of levelheaded stability has emerged to touch the economies of most free nations, even those that have not yet fully learned all the lessons of economic discipline. That stability enabled them to weather, with no more than a momentary flutter, crises that ranged in 1963 from outright revolutions and strong leftward shifts in government to Charles de Gaulle's rude exclusion of Britain from the Common Market and the assassination of the U.S. President.

Every national economy presents its own problems and opportunities, but common to the industrialized nations in 1963 was a source of strength that has grown abroad in recent years even faster than in the U.S.: the consumer. The U.S. tends to take consumer spending for granted, but a real consumer boom is a relatively new phenomenon in many parts of the world. What were once luxuries are becoming necessities in many places, motivating the Italian family to upgrade its motor scooter to an auto and the Japanese housewife to want an automatic rice cooker. This same desire drives Congolese men to insist on neatly starched white shirts and Venezuelans to save for a vacation at the seashore. Last year consumers almost everywhere had a bit more to spend, and provided the major push to their economies by spending it for a better life. Their spending helped push world production of autos, appliances, and the steel that goes into them, to new records.

Frightened Away. But there were problems too--in some places caused by the little man's desire for a better life and in others by his inability to realize that desire. Increased consumer spending touched off a worldwide rise in imports--an excellent tonic for the overall level of international commerce but a bothersome occurrence for nations struggling with delicate trade balances. Growing wage demands in Europe, Latin America and Asia far exceeded gains in productivity, causing serious threats of a new round of inflation in France and Italy, a rise of 23% in Japan's cost of living, and of a hopeless 70% in Brazil's.

Even the developing nations posted growth rates that looked good, but, with weaker consumer markets and little industry, they are still making slow progress toward the sort of prosperity enjoyed in most of the Western nations. Their economies remain tied to whimsical and widely fluctuating commodity prices, and many of their governments insist on policies that frighten away badly needed capital. As a result, most commodity-dependent nations of Asia, Africa and Latin America, for all their advances, did not grow fast enough economically to make actual gains against their exploding populations. In 1963 the gap between the haves and the have-nots continued to widen.

Despite these problems, 1963 looked good in most of the world's economies:

WESTERN EUROPE. The Common Market's gross national product grew by 4% (a healthy rate, though less than last year's 4.9%), but the big economic news of the year in Europe was the Market's ability to survive its worst crisis and equip itself with an agricultural agreement that is vital to the economic union of the Six. Shortages in skilled labor pushed up wages and prices throughout Europe and made inflation a serious threat. After rents in France had risen 82% and meat prices 33% in five years, Finance Minister Valery Giscard d'Estaing finally decreed a Plan de Stabilisation so that, he says, "every hole where inflation could infiltrate will be plugged." The Benelux countries face similar problems: and in Italy, wages rose 16% last year and consumers continued on a binge of credit buying. European governments plan to check inflation before it does too much damage, but higher prices have already caused Common Market exports to level--to the benefit of U.S. companies, which can now give the Europeans tougher price competition on their home ground.

Germany and Britain were the surprise performers of 1963. Both started out with bleak prospects, but Germany's wages and prices increased less than those of its neighbors, and its exports jumped 8.5% at the expense of the other Market members. In Britain, 1963 was summed up by a London editorial: "The year that started with a whimper ends with a bang." After the shock of its failure to get into the Common Market, the government eased credits and taxes, thus making possible a 6% increase in industrial output and a 1% rise in exports. Now a new round of inflationary wage increases threatens to slow everything down again.

Sweden's easy-credit policy last year helped cause a rise in business activity and a mild inflation. Denmark and Norway controlled prices and credit more closely, scored solid gains in exports. But payments deficits continue to plague the Norwegians, who are investing heavily in additional ships for their merchant fleet to attract more income from abroad. In Greece, the government's drive to eliminate unprofitable crops reaped an 8% rise in farm sales, the country's biggest moneymaker.

LATIN AMERICA. Runaway inflation and low world prices for commodities, which most Latins depend on for export income, made 1963 a dreary year for most Latin American countries. The bright spots: Argentina, recovering from a recession; Venezuela, riding an oil-export gusher; Peru, enjoying a virtual world monopoly in fish-meal production; and Mexico, newly bustling with outside investment.

ASIA. In the developing nations, economic growth is behind projections, and population increases are ahead of them. India's third Five-Year Plan is far short of its 11%-a-year growth aim, and the costs of its major projects have been grossly underestimated. In Japan, where Premier Ikeda is considered a wet blanket for trying to dampen growth to 7% a year, gross national product rose nearly 9%.

THE MIDEAST. Despite a total of twelve successful and unsuccessful government coups during the year, the Mideast nations' G.N.P. rose 6% and personal income 3%. Reasons oil income was up 12%, and a rainy year improved output of cotton, wheat, tobacco and fruit.

CANADA, like the U.S., had an excellent all-round year, especially marked by record auto sales and soaring exports. But tax increases to finance schools, sewage and electrical systems to keep up with the growing population, most economists feel, are apt to slow the growth rate this year.

AUSTRALIA started off slowly in 1963, finished with a dream year--G.N.P. up nearly 8%, prices stable, international trade in near-perfect balance. 1964 looks just as good.

AFRICA. Despite some industrialization, new African nations still depend almost completely on commodities for their income. Dropping cocoa prices caused trouble in West Africa; rising tea and coffee prices brought mild prosperity to East Africa. In South Africa, a strong rise in profits, production and exports made 1963 prosperous.

Throughout the free world, 1964 looks to be a year of continued economic advance, although the advance in many nations may be spottier and somewhat slower than it has been. The consumer's splurge again figures to be a major factor, and increased demand is already beginning to step up business spending for modernization and expansion. This should also be a spur to the income of the 80 countries that rely mostly on commodity exports for their livelihood, bringing them better prices in 1964. Despite a few obvious trouble spots, economic health is gradually becoming the world rule rather than the exception.

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