Planning Experiments in Britain
AUGUST 01, 1965 by GEORGE WINDER
Mr. Winder, formerly a Solicitor of the Supreme Court in New Zealand, is now farming in
When, in the autumn of 1964, the Labor Party came to power in
To obtain facts upon which to base their plans, the Department of Economic Affairs sent to all industries a questionnaire asking for estimates of their production during the next six years. In answering these questions, businessmen were advised by the government to assume that the Gross National Product would increase during the period by 25 per cent. When the answers to this questionnaire are recorded, a "mutual adjustment" will take place to fit all production into a National Plan which the Labor government will introduce to the nation.
The full enormity of this plan probably has not yet been realized by many industrialists, and we may take it that they have been busy guessing what their production is going to be six years hence.
However, it has occurred to Mr. John Brunner who was once employed by the Treasury to investigate this questionnaire. His findings appear in a booklet, The National Plan, published by the
Mr. Brunner believes that, even if the industrialists fill in this questionnaire to the best of their ability, it can never form the basis of economic planning, simply because the future is so uncertain in all societies that have a modicum of freedom left. It is just this uncertainty that makes the entrepreneur such a valuable member of the community.
Mr. Brunner thinks that the simplest way to see whether the businessman is capable of forecasting six years ahead is to take his position over two periods of six years, 1951-57 and 1957-63, and see what a hopeless task any forecast for these periods would have been. Who, in 1951, for example, would have foreseen that the motor car industry would have increased its production during the first of these periods by 260 per cent and in the second by 144per cent? Or that the sale of magazines, after remaining stationary over the first of these periods, would have dropped in the second by 22 per cent? Or that book sales, also unchanged in the first period, would have increased by 18 per cent during the second? Or that the sale of cinema seats would, in the first of these periods, have dropped by 37 per cent and in the second by 52 per cent? And what wine merchant would have ventured to forecast that his sale of wine and spirits would have grown by 25 per cent and by 37 per cent respectively in the two periods?
Mr. Brunner’s figures strongly suggest that any forecast made for a period of six years ahead must be sheer speculation. And yet, speculations such as this are to be made the basis for a planned economy!
The questionnaire also asks for an estimate of the manpower the industries will employ over the next six years. This seems even more impossible to answer. In 1959, various industries were asked to estimate the increased number of scientists and technologists they would require by 1962. This was only three years ahead. The mineral oil refining industry estimated their increased requirements at 18.1 per cent, the scientificate instrument manufacturing industry at 24.4 per cent, and the motor vehicles industry at 34.3 per cent. As it developed, mineral oil refining showed an actual drop of 2.1 per cent, while the others showed small increases of 2.6 per cent and 2.2 per cent respectively. The paper, printing, and publishing industry, on the other hand, forecast a 32.2 per cent increase, whereas its employment of scientists and technologists showed an actual increase of 114.1 per cent over the 3-year period.
Even the government’s own nationalized industries, supposedly stable because they have no competition, are apt to fail the planners. Who, for example, would have foreseen that
The government’s assumption of a 25 per cent gain in national product over the next six years does not make the business forecasting any easier. The only time such a rapid growth rate has been approached in
When the results of this questionnaire are returned and neatly arranged by the planners, the task begins of telling industries they must cut down on production of some goods and increase that of others. Or, as it is expressed in the questionnaire, to give the government "some guide to the amount of revision of firms’ existing plans which will be required to bring them into line with the National Plan."
The Labor government actually intends to use this hodgepodge of forecasts, guesses, and speculations upon which to build their plans for industrial production during the next six years—if they are not defeated at the polls. If plans founded on these assumptions lead to anything, it is much more likely to be legalized market sharing and monopoly than improvement in the conditions of the British people.
Nor is the National Plan the only attempt of the British Labor government to plan the economy. Its "incomes" policy is still being pushed. This would control all wages and prices. This was conceived by the Conservative government and is the logical result of their weakness in allowing the inflation of the currency to take place over the whole of their period in office.
British trade unions have long insisted that they shall have increased wages every year; and politicians have responded by inflating the currency to accommodate such demands. The result, of course, was a rise in prices of all goods and services. The Conservative government, before its fall from power, had set up the National Economic Development Council aimed at some reasonable settlement of wages with the trade unions. Such a settlement is essential if the pound, under our present managed currency, is not to be continually depreciated.
When the Labor Party came to power, they recognized this fact. Mr. George Brown, through his new Department of Economic Affairs, persuaded the trade union leaders and the leaders of industry to sign what he hopefully called a "Declaration of Intent." This provided for annual wage increases limited to productivity and made provision for the control of prices. Then he appointed a "Prices and Incomes Board" to carry out this policy.
But it is one thing to make a declaration of intent and quite another to limit the demands of the trade unions. Most unions, when the time comes for their annual round of wage increases, demand more than their increased productivity justifies and state that theirs is a special case. It seems that Mr. George Brown’s attempt to plan wages and prices is no more successful than was the attempt by the Conservative Party. The Conservatives had allowed inflation to the point that the planning of wages and prices seemed a logical answer to the dilemma.
A high rate of investment is alleged to be one of the advantages of government planning; but that requires a high rate of personal saving if it is not to become inflationary. There is little doubt that the government-spending type of investment has caused much of the monetary disturbance which has affected the British economy. That, and an ever-increasing inflationary wage rate. But the wage rate would not have been inflationary if it had not been for the government’s excessive spending which inevitably resulted in an unbalanced budget.
As Adam Smith wrote nearly two hundred years ago, "A statesman who should attempt to direct private people in what manner they ought to employ their capital would not only load himself with a very unnecessary attention, but would assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatsoever, and which would nowhere be so dangerous as in the hands of a man who had folly enough to fancy himself fit to exercise it."