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A Policy for Economic Growth
Published online by Cambridge University Press: 24 September 2024
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The discussion of the Government’s incomes policy has overshadowed discussion of the setting up of the National Economic Development Council. This is hardly surprising. Every individual is not only very concerned with what goes into his pay packet, he is also fully aware of what is happening to it. Economic growth, inflation and a host of other factors, may have just as great a bearing on his standard of living as the amount of cash he actually takes home, but, for all that, it is a less obvious bearing. Nevertheless, the question of economic growth is a vital one for each individual, and for the community as a whole. Moreover, it is a question that is intimately connected with the subject of incomes policy. In the present article, economic growth will be considered under three headings. The first is the desirability of economic growth; the second, the facts which account for slow or rapid growth; and thirdly, the possibility of framing a policy for more rapid growth in Britain.
Since the war, Britain has been faced with the problem of inflation. During the war, inflation occurred because of the very heavy Government spending on war materials, a restricted supply of civilian goods for consumption, and a reluctance to raise taxation to the level where it would have left civilians with just enough money to buy the greatly restricted supply of civilian goods available. Many economists thought that the high level of personal savings (which did much to keep inflation from getting entirely out of hand) would prove a useful defence against any post-war depression.
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- Copyright © 1962 Provincial Council of the English Province of the Order of Preachers
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1 Gross profits, in this context, include the fixed interest charges which com‐ panies have to pay on borrowed capital. A large proportion of the net profits are reinvested, and it would be impossible, if investment is to be maintained at a high level, to change this situation, though one might argue that in some way the workers should be given a share in these unhtributed profits (especi‐ ally through improved pension schemes). It may also be pointed out that in industries where productivity increases rapidly, there is no justification for a corresponding increase in wages. Other workers, where productivity is not increasing, or is increasing less rapidly, will expect similar increases. The rule should be, subject to some necessary adjustments for changes in the general relationships of supply and demand in the labour market, that all wages rise at the same rate as the average increase in productitivity throughout the economy.
2 It must not be thought that this would be easily achieved. First, we have to get the 4 per cent rate of growth that is the target for N.E.D.C. Secondly, we have to induce the unions to accept an average rate of increase in wages of 4 per cent. Since some relative adjustments have to be made, and some groups may be justified in claiming increases of 20 per cent to 30 per cent or more, it follows that others must be willing to accept less than 4 per cent. It is here that the difficulty lies.
3 Ih countries where the expectation of life is very low, an increase in the expectation of life and a falling death‐rate will have a considerable effect on the size of the working population.
4 It is not the whole explanation, however. Something of the same situation exists in the United States. One explanation that has been advanced there is that there has been rapid technological advance in American agriculture and that this has led to over‐production, which, with a very inelastic demand, has led to disastrous falls in price. See the symposium on ‘The Farm Problem’ in Social Order, May 1962.
5 In Britain, education is perhaps the only social service that would make a significant Werence to productivity. This is especially true of technical education.
6 It would not be inconsistent to argue that a Government could have a con‐ siderable influence in raising the productivity of a predominantly free enterprise economy whereas it would retard the growth of productivity if the Govern‐ ment tried to do too much.
7 The only qualification necessary is that jobs must be avdable. If movement of labour to areas where industry would naturally choose to expand is undesirable or prevented by housing shortages and so on, the deche of the old industry should not proceed faster than new jobs can be provided in the area.
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