British Economist Predicts Crisis

"Britain's spiralling inflation could bring on a financial crunch of such serious dimensions that the pound may have to be devalued again," the Honorable Lord Wilfred Brown, Minister of State to the Board of Trade in Harold Wilson's Labor government, told reporters Wednesday after addressing a Business School audience.

Britain's inflation rate is projected at 14 per cent for 1971 and wage increases have ranged from ten to 20 per cent over the last several years, Brown said.

Brown blamed the inflation on union demands for higher wages and said that labor unions have become so powerful that "bargaining for higher wages is a matter of capitulation on the employers' part."

The "wage fight" is over proportional wage increases in different occupations, rather than over across-the-board wage increases, Brown said.

Speaking to members of the Business School's Advanced Management Program, Brown outlined a plan for a "council of unions" to resolve the spiralling wage problem. What Brown proposes is a system of differential wages where the bargaining is between trade unions instead of between the unions and employers.

"Macro-economic policy is based on the idea that labor behaves like a commodity, but this is demonstrably not true. That's why the government's tools are only temporarily effective," Brown said.

Such a scheme is not "politically possible" now, Brown said. But he noted that, "If withdrawal of vital community services in support of wage claims becomes an increasing pattern of conduct, then public desperation would make acceptable a degree of change not feasible now."