THE POLITICS OF ENVY

Surrounded by seedy peep shows, pinball parlors and bingo halls, the aging, garish Blackpool Opera House usually gives billing to vaudeville acts and variety shows. Last week, however, it housed a sober assembly of 1,000 delegates who had come to Blackpool for the annual conference of Britain's Trades Union Congress. Casting their votes on behalf of Britain's 10.3 million trade union members, the delegates overwhelmingly ratified an "incomes policy" that will limit workers to wage increases of no more than $12.60 a week in the next twelve months. The vote was 6.9 million to 3.4 million.

Prime Minister Harold Wilson proposed the incomes policy in July as a last-ditch measure to curb the nation's disastrous 26.3% annual inflation rate. The TUC's willingness to look beyond narrow conceptions of economic self-interest raised at least tentative hopes that the nation might be moving finally toward recovery. Chancellor of the Exchequer Denis Healey warned, however, that cost increases already in the pipeline will go on pushing up prices for several months before "the benefits of the lower pay settlements are reflected in the shopping basket." Continued price increases almost inevitably will bring on a rise in unemployment, which Healey indicated the Labor government does not intend to combat by reflating the economy. With unemployment already heading toward 1.5 million and beyond, the unions' resolve to cooperate with the government's program may weaken well before the twelve-month agreement expires. Left-wing Union Boss Ken Gill has already protested that "this wage control is about as voluntary as rape." His was a minority voice last week, but it may not remain so.

Failure to achieve consensus on economic policy could be catastrophic. By virtually every measure of economic performance and social wellbeing, Britain is already far behind its chief rivals in Europe -West Germany and France -barely ahead of Italy, and apparently set on a course that could soon make it one of the poorest of the non-Communist industrial nations (see chart). Between 1967 and 1973, when growth rates were soaring in the U.S., Japan and most of Western Europe, Britain's economy expanded by an annual average of only 2.2%. At the same time, Britain was struggling with a chronic balance of payments deficit. As a result, it was especially hard hit by the 1973 rise in oil prices.

Among the main causes of Britain's poor performance was its low rate of investment in new plant and equipment. Between 1968 and 1972, Britain's gross fixed investment averaged 19.6% of annual gross domestic product, v. 25.9% for Germany, 26.3% for France and 38.7% for Japan. Investment bankers argue that ever-rising wages, combined with production slowdowns, have made British industry a risky home for capital. In fact the British penchant for investing overseas rather than at home goes back more than 50 years, and has prevailed in times of prosperity as well as depression. Investment money pried loose has too often been channeled into inefficient industries. A recent government example: Labor's plan to pump some $2.3 million per day into the British Leyland Motor Corp., which is currently losing $264 million a year.

Britain's economic distress has been aggravated by lavish increases in public spending, which has risen from 44.2% of the G.N.P. in 1963 to an estimated 58.4% this year. Since tax revenues have not kept pace with this upsurge and Britain's balance of payments ledger has been almost constantly in the red, much of the difference between income and outgo has been made up indirectly by borrowing from abroad.

Despite the postwar emphasis on welfare-statism, Britons are no better off than their European neighbors, who were able to finance their social benefits with revenues that accompanied faster economic growth rates. While Britain's pioneering National Health Service covers 100% of the population, between 90% and 98% of the people in Germany, Italy and France are protected by a combination of state and private medical insurance schemes. Whereas British state pensions provide only 30% of previous annual earnings to a retired couple, the rate is 50% in France, 60% in Germany.

For many Britons, the nation's high public spending has meant a steady decrease in private income. Most British workers are in a 33% income tax bracket. The top tax rate for singles is 83% on the portion of taxable income over $38,000. This compares with a 70% maximum rate on taxable income over $100,000 in the U.S. Even in socialist Sweden, the highest tax rate is 69%. And when they venture abroad, Britons find that their money buys increasingly less; last week the pound was worth $2.10, v. $2.35 only last May.

How did this situation develop? Observes TIME London Bureau Chief Herman Nickel: In the three decades since the war, probably no Western European country has placed a higher priority on achieving equality than Britain. This was a direct response to the unifying experience of World War II, when it seemed that the deep scars left by the Industrial Revolution had finally been healed. The Tories saw equality mainly in terms of equal opportunity. Labor felt that it could not be achieved without extensive redistribution of wealth. But the lofty policy of equality through taxation and redistribution degenerated into the petty politics of envy. With less and less wealth to redistribute, the policy of leveling up became in effect a process of leveling down.

As Douglas Fairbanks Jr., a lifelong Anglophile, recently observed: "In America, the workingman will see someone drive by in his Cadillac and he'll say, 'That guy has a Cadillac and I don't. Some day I am going to have two Cadillacs.' In Britain, the instant reaction is: 'That man has a Rolls-Royce and I don't. He is going to come down to my level.' "

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