165i The lead article in the Economict of 6/7/63, entitled "Tipt:—ine Whither?", expresses considerable apprehension about economic prospects for the capitalist in the second-half of 19643, We reproduce extracts:
"Jeeill the major free countries now lock as if they may be set utzon a course of restraining their economic growth by just slightly sterner policies than one would have thought logical for them, and sometimes they seem to be doing this for pretty cdd reasons, In the United States the difficulty of per suading Congress to legislate on civil rights makes it unlikely that the President will have time or manoeuvring room to persuade it to pass his tax reductions bill as well... This is happening at a time when most current indices in the United States are still moving upwards. Rut it is also heppsning when the latest surveys of expected future consumer spending in the U.5, sre not azactly bouyant; when the recent reasonably healthy rate of growth there has depended disproportionatoly heavily on advances in two very seasonal industries (artomobiles and construction) s and when it looks as if America, while doing witiout reflationary tax reliofe, is moving over to a higher (and therefore Blightly deflationary) lavel of internal interest rates in order to mest ite balance of paymants problam.
"The nature of the United States' balance of payments problem - a America's oarnings from exports still far exceod its spending on imports, but not by enough to finance its level of lending and foreign aid - makes higher interest rates an entirely logical internal method of correction, Another method, of which more might also soon be heard, would be to cut aid by saying that “other countries should now bear a fairer sharo of it." Eut either step would mean that America was imparting a nlight new deflationary push to the world economy.
"At the same time, the nations of continental Gurops, which have provided the main impotus to western expansion in the recent pass, lock as if they may have run into mich the sama economic predicament as Eritain had reached by 1956. Ths pace of their growth has slowed down, partly because the imediate surge of their ¢~reat investment boom of the 1950s may be ovar,. partly because the advantages they previously held through the former under-valuation of their currencies have begun to run out, But while their rice in output has slowed because of this check to the rise in their investment and exports, Buro— pean workers have got used to lush anmal rises in their wages during the boom years, They are contimiing with this wage push. The slowlown in pressure on demand for these countries' real resources has therefore coincided both with an increase in their cost inflation per unit of output and with some impairment —. ef their previous very healthy balances of payments. Whon this happens, it is the most natural reaction in the world to respond. to the cost inflation and to tho - daterioration in the balance of payments by cutting back internal demand still furthers... In continental Hurepe, where Keynesian economi¢ thinking is not so firmly entrenched, the tendency might even go further and last longer than it did here. So, here again, the signs are that continental -—mrope might five a slighily more restrictive push to total demand within the world economy than economic logic would suggest is dosirable,
"In Britain the official. Treasury view for the 2nd half of 1963 is that expansion is now about to gat going again. ixports have been helped by the cost inflation among our Murepean competitors, The latest ratail sales figures (for May) look more cheerful than the very disappointing figures for April., eeees lt thare are two new damping factors, First, the Profumo affair =— and the consequent demoralisation of the Conservatives - has dispirited Misinozomen, who now await the assumed certainty of a Wilson govarnment,.+<«American overseas investment"...is..."more likely to go to the continent than to potentially Socialist Britain, Secondly, ..lire Maudling has not reacted to this by speeding roflation up...Indecd,.he ..prefers 'steady expansion to spoctacular expansion'"