British Goods in U.S.A.

Press, Volume LXXXIV, Issue 25537, 3 July 1948, Page 6

British Goods in U.S.A.

The recent survey of the demand for British goods in American department stores, summarised in our commercial columns recently, has naturally caused a good deal of heart-searching in Great Britain. It has not been difficult to establish the causes of the high prices which appear to be the only bar to the expansion of the market for British goods in the United States: but it will take a revolution in industrial, Government, and labour thinking on the questions involved before the causes can be removed. A correspondent of the “ Financial Times ” introduced a thoughtful article on this subject by remarking that it will surprise many British people to learn that the ruling prices of consumer goods in North America are low and have always been low. Two main reasons are given for the prices of British goods, much admired in the United States for their quality and craftsmanship, being uncompetitive. The first is that British manufacturers expect smuch higher margin of gross profit than is usual in North America; the second is that\ British administrative costs, by American standards, are grossly extravagant. Production a man-hour, trade by trade, is higher in America than in Britain, but is offset by higher wages. Mass production and large turnovers do not fully explain the lower American production costs, because British | mass-produced goods cost more than ■ American.

The correspondent points out that profits ranging from 9.3 to 14.5 per cent., as announced recently by British public companies, are from three to five times greater than those earned by their opposite numbers in the United States, where 1 to 2 per cent, is not uncommon and 5 per cent, is rarely achieved.

There are British manufacturers who are aware of tnis discrepancy [wrote the correspondent], but they are in a painful dilemma; for the Government’s cheap money policy has forced the market price of their shares to an unreasonable level and on this inflated value they are expected to produce a dividend at least 1 per cent, better than on gilt-edged. If some of them reduce their profit margin to 3 per cent, they will not pay a dividend at all: if they do not reduce their margin they will lose their export markets. All this supports the suggestion that the Government

should reward those manufacturers who hold their overseas markets by absolving them from profits tax. Comparisons of administrative costs are just as unfavourable to Britain. Recent Board of Trade fig--ures for three manufacturing trades —-hats, printing, and printing machinery—give percentages of deskworkers to total personnel as 12, 16, and 22 respectively, with the salaries of these clerical workers representing 23. 24, and 28 per cent, respectively of the total pay-rolls. These figures would be ludicrous in American eyes; yet they are industry averages, and can only hint at the high percentages which some individual concerns must show. The commonest cause of swollen staffs (apart from Government forms and • regulations) is considered to be “ extravagant systems which con“sume unnecessary, quantities of “ time and paper ”, mainly out-of-date accounts and office systems. The correspondent asserts that American bookkeeping methods are 4 anything from 50 to 100 years ahead of Britain’s. The “ iniquitous ” practice of cost-plus [the basis of so ihuch Government regulation and control] is listed as one of the contributors to high administrative overhead, “ for only an archangel “ would reduce costs which lowered “ his profit ”. Finally, the correI spondent says that the American j deserves his commercial success because he has given so much thought to management problems. The American publishes his operating ratios to a central body in order to get in return the corresponding figures of his competitors, whereas the British, to a large extent, obstruct the efforts of the Board of Trade to obtain similar information for the same purpose. The writer in the “ Financial “ Times ” acknowledges that he has touched on only some of the weaknesses of Britain’s industrial economics. One of them undoubtedly is labour; and to this review the “ Economist ” can contribute an enlightening tail-piece:

| It is this fantastic belief that the ; worker can punish the boss by work- ' ing less, without hurting himself in j the process, that marks the essential ■ difference between the teaching of the American and British labour movements. Mr John L. Lewis will fight the employers for a larger share of the proceeds of production with at least as much ferocity as any British trade unionist. But he is under no illusion about the necessity for output; on the contrary, he is wont to make scornful comparisons between his union’s and the British unions’ attitudes to production and efficiency. Every American worker knows that his standard of living is directly dependent on his standard of production. The British worker has been taught that there is such a thick cushion of “exploitation’’ in the economic system that there is virtually no connexion between the effort he puts out and the reward that he can demand.