Has Britain turned the corner?
London — If I were to state that Great Britain has turned the corner already and that recovery will very soon being I suspect that few readers would believe me. Unemployment rose by 100,000 in October, now is well over the 2 million mark, and may go as high as 3 million early next year. Food prices seem to have been rising faster than ever. Only this afternoon before writing this I noticed a renovated Victorian chair, not even a true antique, in a repro shop priced at $1 ,142 (and this was not in Mayfair but out of London in a suburban factory town).
Industries like steel and textiles may never recover even half their former strength. The car industry teeters on the brink of catastrophe. As a volunteer bus driver for the Age Concern organiation taking housebound pensioners to the local day center I know just how hard-hit the families of many wage earners are.
And yet. . . .
The current rate of price inflation, officially put at more than 15 percent, actually is less than half that. (It depends how you measure it.)
A leading London firm of financial advisers recently took space in the press to warn people against putting their money in what are called here "Granny Bonds ,"m inflationproofed, tax-free government bonds for the over-6os. Yes, against!m
They quoted the highly respected Financial Times as stating that "inflation now is in free fall" and the Daily Telegraph reporting that "measured over the past six months, inflation now is in single figures." Economist Patrick Minford of Liverpool was quoted as projecting inflation down to 8.1 percent in 1981 and 2.9 percent by 1984.
Measured over the past quarter, the rate at which prices are rising appears to be more like 7 percent.
While many of those employed in the public services are claiming pay increases in double figures, the government is aiming for little more than 6 percent on average. Already over much of private industry that rate applies.
Now the official figures for the volume of money in the economy show an increase rather than a fall, which would appear to presage a return to double-figure inflation next year. But, I assure you, these figures are phony. Once again It all depends how you measure the volume of money, and when. And all other indicators reflect a sharp deflation.
The actual position is that if you measure the rate of inflation by backdating to 12 months ago the rate is around 15 percent. If you backdate only six months it is about 9 percent. If you backdate three months it is 8 percent. And if you take a month's figures it is 7 percent.
The recent strength of the pound sterling, which exporters have been criticizing so sharply, has made imports cheaper, including imports of many raw materials. With cheaper materials and more moderate pay increases a basis certainly exists for industrial revival.
The Bank of England's minimum lending rate (MLR) has been brought down two points to 14 percent. Other banks have followed. Mortgage rates should begin to come down before long. I expect MLR to be down to 12 percent in the spring.
Private citizens have been paying nearly 25 percent for loans, including outstanding debts on credit cards. When these rates return to more normal levels and home loans too come down, the economy will begin to revolve more quickly once again.
And not every story one hears is of doom and gloom. Taken to lunch recently at a smart London restaurant, where I could not possibly afford to go if I were paying for myself, I was told by my well-heeled host of a friend of his who had been in a lowly dead-end job earning little more than an average manual worker's wage, now about $240 a week, but had given it up to become a salesman of suction cleaners imported from the USA.
"My once-poor friend now earns more in a week than I earn in a month!" my host declared. Business is great, he added, if you have got a good product at a good price.
With inflation down below 10 percent, as it certainly is, with pay increases more nearly reflecting productivity, with basic raw material prices down, with interest rates down and government spending down in real terms, there may be more justification than many will admit to assert that Britian has indeed already turned the corner.