Britain glows with confidence about its future as London summit opens

By , Staff writer of The Christian Science Monitor

As Prime Minister Margaret Thatcher sits down with six other heads of government for the economic summit, Britain itself glows with an economic confidence not seen here for years, perhaps decades.

There is even talk among economists of Britain's catching up in productivity and affluence with West Germany. Alan Budd, for instance, a professor at the London Business School, sees ''quite a good chance'' for productivity in British manufacturing to reach the standards of France or (West) Germany in five, perhaps 10 years.''

A top banking economist comments: ''People are beginning to understand that the world doesn't owe them a standard of living. I see no reason why the British ability to work should be any less than in any other country.''

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And Roy Batchelor, a senior research fellow at the City University Business School, says the British have acquired the will to work, to please customers, and to do a good job.

At the same time, he sees some tendency in West Germany for workers to see something more in life than hard work, as shown partially by the current drive for a 35-hour workweek. ''I wouldn't be surprised if the German growth rate goes down,'' he said.

As a result, Mr. Batchelor suspects Britain could be ''more equal in Europe'' by the year 2000.

Creation of the gap between British and German living standards took two or three decades, he points out. The latest comparative statistics show that the Britain still lags in per capita output (goods and services produced). The British figure for 1981 was $8,886, compared to $11,076 per person in West Germany, $10,552 in France, and $12,647 in the United States. Economists assume this is already narrowing.

Public opinion in Britain probably has not yet caught up with the surge of confidence among economists. But here is some of the evidence of change several economists offered:

* Productivity in Britain in manufacturing has been growing at a high rate of 5 to 6 percent a year since 1981. That compares with something like 2 percent per year in the 1960s and 1 percent annually in the 1970s.

Last year some economists argued that this productivity surge was merely a short-term cyclical result of the deep recession of 1980-1981. Companies, they said, shed their least productive facilities during these hard times. But once the recovery proceeded, productivity would fall back again. That hasn't happened.

''This is genuine productivity growth,'' Batchelor says.

Nationalized as well as private companies have done much to improve their efficiency. British Steel Corporation, for example, was the least productive steel company in Europe. Now its officials claim it to be the most efficient. Rolls-Royce Ltd., maker of some 20 percent of the jet engines for the world's large commercial aircraft, figures it is within 1 or 2 percent of the productivity level of its American competitors.

* The trend in growth in national output has stepped up. Gross domestic product is expected to increase somewhat more than 3 percent this year, which is high by British standards.

More important, the Thatcher government's conservative economic policies have ended, at least for the time being, the stop-go business cycle that has plagued the British economy for decades. This current policy involves a steady but gradually reduced growth in the nation's money supply, plus a gradual trimming of the budget deficit.

''Things look as good as I can remember in dealing with the British economy, '' notes a senior banking economist with decades of experience.

* The government's strong support of the free market has greatly reduced regulation that has often hampered growth.

''There has been a big bonfire of controls over the economy,'' a high government economist says. ''That undoubtedly helps.''

Controls over wages, prices, and dividends have been ended. The abolition of foreign exchange controls has meant the British can invest abroad freely. Regulation, mostly self-regulation, of the financial industry is being loosened at government insistence.

One result is that management has a much greater feeling of being responsible for its own success or failure. Further, the top tax rate on earned income has been reduced from 83 percent to 60 percent over the past five years, and on unearned income from 98 percent to 60 percent.

An official comments with typical British understatement: ''The rewards for high income taxpayers and risk takers have changed quite a bit.''

* High-tech industry, particularly electronics, is growing faster in Britain than anywhere else in Europe. Some suspect Mrs. Thatcher's free market policies have helped in this regard.

''We have a mushrooming of thousands of small firms,'' Mr. Batchelor notes. Curiously, many high-tech executives complain that the government doesn't do enough to help them.

* Union power has been dramatically weakened.

''By and large, union power and the desire to stand up and fight the government has gone,'' says Batchelor. He regards the current mineworkers' strike as ''a bit of a sideshow.''

He adds: ''Management now can get away with good working practices.'' However , this change has required the shock of a serious recession and high unemployment.

This also explains why friction between management and employees has also lessened. Economists here point out this is partly because labor is weaker and willing to go along with management to save the company and their jobs, and also because management positions are no longer an exclusive enclave of the upper crust.

Another reason for the weakening of the trade unions has been the massive drop in the number of workers in manufacturing, particularly in the heavily unionized traditional industries such as steel, metalworking, and shipbuilding. Manufacturing employed 7.25 million in 1979, but only 5.55 million this year - down 1.7 million.

Nonetheless, a public opinion survey just published shows that 43 percent of ''Brits'' figure it is ''indispensable'' to modernize industry as quickly as possible, even if the decline of obsolete sectors increase unemployment. That is a higher percentage than in any other of eight industrial countries surveyed by Louis Harris for the Atlantic Institute and various news media.

Also hurting the trade unions is the fact that the new growing industries tend not to be unionized.

* Inflation has been brought under control. Consumer prices were rising faster than 20 percent when Mrs. Thatcher took office. Now it is closer to 5 percent.

* Real wages (after deducting the inflation rate) of those working have increased about 2 percent each year since 1979, even during the past severe recession.

Economists have mixed feelings about this trend. Obviously, it has brought increasing prosperity to Britain. However, if real wages had not gone up, labor would be cheaper and business might have hired more people.

As it is, Britain has an unemployment level of some 12.4 percent. That is the major criticism of the Labour Party opposition to the Conservative government's economic policy. Productivity has been rising so fast that British industry has had to hire relatively few people to boost output.

* Britain now is expected to be self-sufficient in its supply of oil and gas longer than previously expected - perhaps to the year 2000 or beyond. New estimates have boosted oil reserves by between 16 and 25 percent and gas reserves by between 8 and 28 percent.

* Britain has been rapidly rebuilding its importance as a world investor with the end of exchange controls. The island nation's net overseas holdings amounted to about $15 billion at the end of 1979. They are some $50 billion today as the summit begins, a reflection of Britain's economy standing as solid economically as the nation's symbol, a bulldog.

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