Britain's new economic muscle brings respect, some boasting
For decades, Britain was the economic wimp of Western Europe. No longer, says Chancellor of the Exchequer Nigel Lawson. The United Kingdom is now into its seventh year of economic growth of about 3 percent a year in real terms with low inflation - a performance he terms ``remarkable.''
This year the British economy promises to grow at least 3.4 percent, the highest rate for any industrial democracy.
In fact, Britain will catch up economically with France ``reasonably soon,'' Mr. Lawson figures. It will take longer to reach the level of prosperity of West Germany, still the strongest economy in Europe.
Moreover, British representatives abroad are no longer getting sand thrown figuratively in their faces, Lawson noted in a recent interview. He was here for the joint annual meeting of the International Monetary Fund and World Bank.
Britain's economic performance has attracted greater respect. ``This is clear from the way we are regarded throughout the world,'' Lawson claims.
One index of this respect is the ``worldwide desire of the financial community to set up office in London,'' says the chancellor. As a result, London has become not only the most international of the major financial communities, more so than Tokyo or New York. Although recent weeks have seen some layoffs at banks, brokerages, and securities firms, which had overstaffed after last year's ``Big Bang'' of deregulation, Lawson still believes London is ``the leading financial center.''
He referred to a recent speech by US Treasury Secretary James Baker III complaining about the unsatisfactory regulatory system for the financial community in the United States. That regulation, says Lawson, has prompted some financial services business to locate elsewhere in the world, including London.
British investors have also moved the nation from being a net debtor on an international basis in 1979, when the Conservative government of Prime Minister Margaret Thatcher took power, to a net creditor of more than $114 billion at the last count.
``That,'' says Lawson, ``is the strongest [creditor] position of any country in the world apart from Japan.'' Income from those foreign investments offsets a large part of Britain's trade deficits, he adds.
Lawson also boasted a little about the revival of capitalism in his country. The government has encouraged companies to sell shares to their own companies. It has also privatized about one-third of government-owned enterprises, endeavoring to ensure widespread ownership of the shares of these companies and bringing about $8.5 billion a year to the government's Treasury.
As a result, says Lawson, one adult in five now directly owns shares in a private company, and there are 5.5 million new share-holders. Because of the decline of trade unions in Britain, there will soon be more shareholders than union members, he says. ``That is quite a change,'' he added with obvious pleasure. In Britain, the trade unions are part of the opposition Labour Party. One problem for the Thatcher government has been high unemployment, now standing at 10.2 percent of the labor force. Lawson contended that creating the ``conditions for good economic performance'' helped bring Britian's jobless rate down ``very fast.''
In the past 14 months the number of unemployed has declined by about 400,000. On a proportionate basis, he says, the jobless rate has come down fastest in Wales and the North of England in the past few months, two regions of relatively high unemployment.
Unemployment would come down faster if employers were more restrained in the pay increases they offered their workers, says Lawson. ``That would price more people into work.''
Inflation, he concedes, is ``higher than we would like'' - 4 to 4.5 percent. But with high productivity gains, especially in manufacturing, the cost of each unit of labor has been rising ``quite slowly.'' Lawson also expects that both inflation and the growth rate will fall somewhat in the months ahead.