MAY 11, 1975
Invisible Success Story
AN ADDRESS BY Lord Limerick,
PRESIDENT OF THE ASSOCIATION OF
BRITISH CHAMBERS OF COMMERCE
CHAIRMAN The President,
H. Allan Leal, Q.C.
My Lord, ladies and gentlemen: It is a happy circumstance that the visit of our distinguished guest today coincides with the presentation of a symposium of British Technology called Tech-Ex. We are grateful to the British Canadian Trade Association and the British Consulate-General, Toronto for their cooperation in making it possible for Lord Limerick to be with us on this occasion.
Our guest was born Patrick Edmund Pery and he succeeded his late father as the sixth Earl of Limerick in 1967, an Irish earldom created in 1803 about the time of Trafalgar in the period of the Napoleonic Wars. He was educated at Eton and at New College, Oxford. New it was in terms of the date of its founding as compared to the original Oxford Colleges, and "New" in name it remains, although founded in the late 14th century. Lord Limerick is a chartered accountant by profession, an international commercial banker by avocation, and a devoted public servant and a Conservative by conviction.
His association with Kleinwort, Benson Ltd. as Executive Director and Comptroller has involved him in financial and business affairs in the Middle East, Africa and Australasia. He is the President of the Association of British Chambers of Commerce, a Council member of the London Chambers of Commerce, Deputy Chairman of the Committee for Middle East Trade and a member of the British Overseas Trade Board. At present he sits as a Conservative Member of the House of Lords, and he was Parliamentary Under-Secretary of State for Trade at the Department of Trade and Industry in the Heath Administration.
As a young undergraduate in the mid-thirties, I read a book spelling the doom of British industry due to its refusal or inability to rationalize its production, financial and administrative processes. Neither the author of that book nor its reader on that occasion could know how soon the thesis was to be tested nor how wide of the mark it would be proven to be.
I know you will want to join with me in extending a warm welcome to Lord Limerick who will address us on his chosen subject, "Invisible Success Story".
Mr. Chairman, ladies and gentlemen: there are at least two forms of introduction--the gracious and the grudging. An example of the grudging introduction would be that given by a British diplomat who left his post in Pakistan. He was asked by his cook for a reference, and he commended him to his successor with the words, "Ali Noor has been doing for me for the last three years. If you engage him, I'm sure he will do for you too." Yours, Mr. Chairman, was a very gracious introduction. I'm glad that you made it clear that I was not a Founder Member of New College in 1376.
I am very conscious at this moment that there is no such thing as a free lunch. You gave me many openings. I could speak to you as one who was, for a while, a politician. I shall not do that, partly because I remember too well the definition that was given to me in the 1970 election by Reg Maudling who said, "I've just been told that a politician is a man who approaches every subject with an open mug." The second reason is that I was perhaps the most unlikely politician of all time.
The only political initiative I ever took was to reach out my arm and answer the telephone. The voice at the other end said, "This is very impertinent, because I know you sit on the crossbenches, you show no interest in active politics. But hypothetically, if you were asked to join the government, would you be prepared to join the Tory party first?" Remembering some advice that I had once been given, "Never volunteer for anything, but never refuse anything worthwhile that is offered to you," instead of saying on the spur of the moment "Go away, you must be thinking of the wrong man," I said, "What are you asking me to do?" That was worth two years penal servitude. So it is not as a politician that I want to speak to you.
I remember also Mark Twain's dictum that "there is no substitute for brains, but a man may retain a reputation for quite a long time so long as he keeps his mouth shut." So I shall try to talk to you about the matters where I have at least a passing knowledge.
You referred to me also as a banker. I'll just tell you one story about my native Ireland. It concerns a man who rang up his banker with some query about some government securities that he held in the days when wise men held government securities. The voice at the other end said, "Is it conversion or redemption you're after, Sir?" He paused and thought about that. "You mean, I have a choice?" "Yes, Sir," the voice replied. He paused even longer to work that one out. Then he said, "This is the Bank of Ireland, I'm talking to, not the Church of Ireland?"
I do intend, naturally, to say something about Anglo-Canadian trade relations, but first I'd like your indulgence to say a few words about the larger world so as to get this in the right perspective.
I start with three quite general propositions. The first is, that as we look around, economies are rising and falling at a quite unprecedented rate as the balance of resource demand and availability changes. The second proposition is that countries with ample natural resources are going to have a much easier time, by comparison with those which rely on importing and converting. And the third, and perhaps the most relevant, is that there are many constraints, notably of energy supply, which limit the rates of overall world growth, so that as some economies expand rapidly, others and notably the oldest, will inevitably suffer some relative decline.
For us in Britain, this rapid rate of change poses particular questions. Of course, it is tremendously rapid. You see it in the language. We tend to talk no longer just about change, but about the growing change in the rate of change. These sorts of catch phrases illustrate people's concern.
Could I just recall that whereas it was 90 years ago that the last spike was driven in the trans-Canada railway, it's still only 150 years, when with the opening of the Stockton- Darlington Railway in 1825 that man was for the first time able to travel faster than the speed of the horse, and to extend his working and his social radius outside some ten miles a day.
This was followed with quite extraordinary rapidity by the Industrial Revolution, which was based in Britain on the proximity of coal to iron ore, the possession and building up of a merchant marine, and the forging of imperial links round the world.
That pattern has changed quite dramatically, and within only 150 years this great trading empire has grown, has flourished, and has been handed back. Towards the end of that period, Britain herself was economically weakened by the burden of two world wars, and the growing resources of other countries have outstripped ours--they have cheaper or more abundant natural resources. Inevitably, in an old economy, there are withdrawal symptoms, both political and economic. And just as there is a limit to the rate at which technical generations can be compressed into human generations without social disruption, as I think we are all coming to appreciate, so does political adaptation take some time.
That theme of political adaptation leads me to say a word about Europe. I believe that the foundation, the success and the recent expansion of the European Economic Community, the Common Market, is arguably the most hopeful world event since 1945. Men of vision wanted a British association from the start of the Community in 1957, and you will remember that Winston Churchill was advocating this in the 1940's. But the whole issue of political links with Europe, while we still thought primarily in terms of Commonwealth, does afford a good example of these post-Imperial problems to which I referred, and it was only three years ago that Britain and Europe finally established, as De Gaulle might have said, that they were ready for one another. This European issue still rumbles on with the referendum which we face next month. I personally deplore the fact that there should be a referendum, that this should be an issue two and a half years after we signed a treaty. I deprecate the fact that we are holding a referendum, which is a most unwelcome constitutional innovation. But that is not the point at all. The point is that we have to show now decisively that this issue really can be laid to rest, and we are firmly committed members of the European Community.
But meanwhile, the publicity that is given to different views does rather highlight, temporarily, the divisions that exist, and they cut right across party lines. You probably know that the leader of the "Keep Britain In" campaign is Roy Jenkins, who is a Labour cabinet minister, whereas of course the Labour Party Executive has come out against Europe, while the campaign to get Britain out is headed by a Conservative M.P. Three days ago, Roy Jenkins, Ted Heath and the Liberal leader Jeremy Thorpe were to be seen on the same platform, jointly proclaiming loud and clear their belief in the European ideal.
It is significant, I think, that Harold Wilson, who is the only surviving Labour Prime Minister, and all of the four surviving Conservative Prime Ministers (Anthony Eden, Harold Macmillan, Alex Home and Ted Heath) are firmly in favour. I don't know why it is. There are always more Duchesses than Dukes, and there always seem to be more Tory Prime Ministers than Labour Prime Ministers!
Now on the other side, curiously, there is no leadership heavyweight, but nevertheless the result on the 5th of June is not a foregone conclusion, because there are many people who are confused and unhappy, especially over rising prices. Prices have of course gone up substantially over the last two and a half years, and it is awfully easy to assume that these two things have something to do with each other even when they are quite unconnected.
Also involved is the rather artificial question of sovereignty.
The crucial question really is, who wants us to come out of Europe, and where would we turn if we sought to do so?
It is most commonly alleged by the opponents of our membership that we have let down the Commonwealth in some way, and that we are destroying our agricultural system.
I don't want to argue the ins and outs of this. I don't believe it is necessary, because I would point just to two things. One is that the Council of the National Farmers' Union (and Henry Plumb incidentally, the President, is a Vice-President of the Britain-in-Europe movement) took a vote on this a few days ago. There were 5 abstentions, 2 against, and 118 in favour. That's pretty conclusive evidence on the agricultural side.
Likewise, and even more significantly, all our Commonwealth friends, the Jamaica Communique and most notably Mr. Trudeau for whose lead on this we are deeply grateful, have made it abundantly clear that they prefer a Britain which is strong in its membership in a thriving community, and they see this to be in their own interests as well as in ours, and also in the world interest that the European Community should be more outward looking than it initially was, and to that I confidently say that Britain has already contributed substantially.
I pray that we are mature enough to recognize our long-term destiny. I think that we are.
If I now return to the state of Canada-U.K. trade relations, it is to acknowledge immediately that they are as cordial as ever they were. But I believe that they cannot be said to be in really good shape, because they are losing weight too fast.
It has been pointed out to me that I am echoing the theme taken by Alastair Gillespie in a speech to the annual meeting of the Canada-U.K. Joint Committee about a fortnight ago when I mention that in the past decade our share of each other's markets has been reduced in each case by one half. We remain the third takers of Canadian exports, and the fourth suppliers of your import needs. But this decline demonstrates that the basis of the trading relationship can no longer be taken for granted.
I don't think that should come as a surprise, because nothing in life which is worthwhile is achieved without effort, and nothing which is worth preserving can survive without constant attention. But it does follow that as there is a decline in the goods traditionally traded in relation to our total trade (actually, our trade is increasing all the time: the numbers are going up but the percentage is going down), new fields must be identified and must be cultivated.
To my mind, there is no doubt what these should be. Already we are important partners in investment. Again, in corresponding figures, we each hold about 10% of our overseas direct investments in each other's countries. The emphasis now should be on increased industrial cooperation, in higher forms of applied science and technology. One form of this, by no means the only one, is the joint venture whereby we benefit from each other's experience, and it turns out that the industrial whole is stronger than the sum of the parts. I have learned that Mr. Gillespie cited telecommunications, aerospace, nuclear technology, high voltage transmission, and oil and gas production as likely examples. In each of those cases, I most fully concur.
Now that talk of technology and co-operation leads me directly into mention of the British displays, both on the national stands and on the stands of many Canadian representatives at the National Industrial Production and Machine Tool Show which is going on now. I was able to visit this show briefly this morning, and shall do so at greater length this afternoon, and I judge its quality to be very high. I hope that a number of you who are professionally engaged will visit it and will also look at the Tech-Ex Display of British technology which is equally impressive and is the only thing of its kind in the show. The British stand is by far the biggest of the national stands and is larger than it has ever been before with the solitary exception of the Exhibition Year.
I think that, taken with the purely technical presentation going on by highly qualified specialists in various fields at the British Technology Symposium throughout this week, gives us something that we can be very rightly proud of.
While I'm blowing the British trumpet, let me go straight on to say that the quality of Canadian imports from Britain is sometimes insufficiently appreciated. I wonder how many Canadians, for example, know that 'the electricity generated by Ontario Hydro from Dickering A comes from British turbines and that the steam turbine generator sets for the Bruce Peninsula will also be British? How many know that British rotating electrical equipment will be installed by Calgary Power on the Big Horn hydro development in the Rocky Mountains, or that the complete generator and all the turbine shafts and blades for New Brunswick's first nuclear power station will be British-made?
Nearer home, and right overhead as you might say, Britain will be supplying the complete antenna complex for the FM and television broadcasting services to be installed in the CN Tower, and also the television broadcasting equipment to enlarge the provincial educational broadcasting network. You may not know that the floodlights to enable ice hockey matches to be televised in Toronto's Varsity Arena will be British. British engineers are engaged for the design, the engineering and the contract planning of the Sidney Steel Corporation's expansion. There are British hydraulic-powered supports keeping open many Canadian coal mines. There will be British furnaces producing hydrogen for oil desulpherization at the Athabasca sands projects on Lake Mildred. Finally, British machinery will be installed in British Columbia at Burnaby, as part of a major expansion, in one of the largest paper recycling plants in North America.
I give that list without apology. It's a bit long and a bit technical, but I think from our point of view it is important that this should be appreciated. We intend to make that list even longer in coming months.
The next point I'd like to make is that so many of the articles and processes now commonplace throughout the world were invented in Britain. We have not stopped inventing. I'll give you just two quick examples of what I mean.
There's the EMI brain scanner, working very successfully and with some rather dramatic results at the Toronto General Hospital. And one final example. Almost exactly two years ago I had a memorable flight, in company with the Lord Mayor of London and a television comedian in an aircraft designated 002. I'm referring of course to the British prototype Concorde. Any high technology presents great problems and great risks. But when they are successfully overcome, the whole world will benefit. If the flight time from Toronto to London is halved, maybe we shall all see each other twice as often!
Before I leave the British scene, there's the rather important question of our domestic oil and gas supplies. The latest official estimate from last month is that oil production will reach fifty million tons by 1978, will accelerate after that, and by 1980 we shall have passed the self-sufficiency point. Production then will be between 100 and 130 million tons. There are sufficient reserves already proven to sustain that level throughout the 1980's, and should extend far beyond because the estimates of total recoverable reserves are now in excess of 3,000 million tons.
As regards gas, it has happened quicker. The total quantity available will be rising significantly within a few years and stay at a high level certainly all through the 1980's. This gas has been flowing for several years, and last year domestic natural gas provided 95% of our total gas consumption. The impact of these developments on the balance of payments is clearly very substantial.
To round off my energy picture, I would highlight one little-publicized fact which is that by the end of 1974 Britain had produced almost one third of the world's total supply of electricity generated by nuclear means.
I want to go on to say something about a field in which Britain has had substantial and continuing success, the so-called "invisible exporting", which sounds very mysterious but it is simply all of our earnings in the form of interest or profits from investments in foreign enterprises and from provision of services to people living abroad. The direct contrast is with visible earnings derived from the sale of goods abroad.
The services provided under this head are many and varied. Let me give some everyday examples.
When Russian goods are shipped in a British ship, when Canadians fly on British airways and stay in a London hotel, when Americans book for a British show on Broadway, when the Australians insure a factory on the London market, when a British accountant gives advice to a foreign client, or a Japanese trading company raises capital on London's Eurodollar market, these are all examples of invisible earnings, as are merchanting profits on the London metal or commodity exchanges and ship chartering brokerages on London's Baltic exchange. London traditionally has been pre-eminent in providing many of these services and that success story continues undiminished. Britain's private invisible earnings last year grossed over 9.2 billion pounds, and produced a surplus of 2.6 billion. But I don't think figures mean too much. It's much more comprehensible if we put it that these invisible earnings account for more than one-third of our total foreign income, an equivalent to nearly half our import bill. They are, incidentally, second only to those of the United States, and represent almost 12% of world invisibles, which is well ahead of Germany, France and Italy which come next.
A sensible question now would be on the lines of "if you are so good at invisible exporting and are having problems with other forms of exporting, why don't you concentrate and do more of it?" The answer is that we have done just that. It has been no mean achievement during a period which, to take an obvious example, national airlines and banks, national shipping and insurance companies have proliferated round the world, and the governments concerned have increasingly insisted on their use so far as lies within their power. The British success story in increasing invisible earnings and maintaining our share of a growing world invisibles market is a substantial one.
What about the future for these invisible earnings? It P looks reasonably bright. Even what appear to be unfavourable developments can be turned to advantage. When new national insurance companies spring up, they will need to reinsure, and London offers the largest reinsurance market. At the beginning of last year, restrictions were removed on American capital markets, and New York consequently has provided a welcome additional source of borrowing for clients of London banks. These London banks have adapted themselves to dealing with the really formidable problems of the so-called unlendable surplus of petrodollars.
One last point is that the City of London has started now actively selling its services overseas. I was rather closely associated with the first of these overseas invisible promotions which took place in Kuwait in December, 1972. Since then there have been repetitions with suitable variations for local requirements in Djakarta, Rio de Janeiro and in Cairo. Later this month there will be a party going to Tokyo and on to Seoul, and in the autumn to Tehran. Each development of local financial institutions can generate counterpart business for London and we hope that these links will be even stronger than they are now with financial institutions of all types in Canada. The City of London, I am happy to report, is alive and well and thriving on competition.
When I was asked to come and talk to you, I consulted one or two of my friends in Canada, and they said, "We want to know what's going on in Britain." Perhaps this part of my talk should be entitled "As others see us". We are of course conscious that, at this difficult transition time, there are reports appearing and analyses being ,made that are not, to put it mildly, entirely favourable.
Just to focus this, for those who have seen it, I'm thinking of such things as The Wall Street Journal article on the 29th of April which was entitled "Goodbye Great Britain", and the remarks on the CBS Evening News program by Eric Sevareid which followed fairly shortly afterwards. Whether we like them or not, these are comments made by people who are our friends and they deserve to be seriously attended to.
I'd like to make three general observations on this before saying anything more. The first is the very obvious point that impressions and judgments are based on what is known to those who entertain the impressions and make the judgments, and that in turn depends on what is reported, what is news. We don't read too much about each other's countries. Sometimes when we do we wish we hadn't. Good news does not travel as well as bad news. Just to give an example of what I mean, it's obviously news in Great Britain when your Prime Minister acquires a bride or becomes a father. Royal visits to Canada are always news, especially if someone happens to lose some skin off his nose. Otherwise it has to be pretty spectacular--such as the Olympic Games under threat. This very rightly arouses the indignant reaction: "What about all the good news?"
I can only say I entirely agree. I come here and read your newspapers. I talk to my friends. What you read about Britain is almost entirely the bad news. That's natural and inevitable.
The second general point is that you should not assume that all of the criticism is well directed. I will take one specific example because it has such a beautiful rebuttal. Mr. Sevareid made the statement that the City of London is financially broke. I'm relying on a certain part of the City of London to provide me with a pension starting in twenty years time and continuing for the rest of my natural life, and I have no qualms at all about my pension. If Mr. Sevareid was speaking of the City of London in the sense of the Municipal Treasury, he might have made some comments about New York City first! But if he meant "the square mile", the financial centre which is known as "the City", then I think that's a ludicrous comment and it detracts from the rest of his observations. But I wanted to quote you the response which came from my good friend William Clarke who is the Director of the Committee on Invisible Exports. This was reprinted in a letter which he sent to The Times a week ago. It reads like this: "You are quoted here as saying that the City of London is financially broke. If correctly quoted, this is rubbish. As you should remember from your pleasant stay here, the City of London is the name for the financial centre of Britain, like Wall Street. Its foreign earnings have doubled in the last five years, and are bigger than New York. It is the centre of the world's Eurodollar market, has the largest international insurance market, the largest international commodity markets, the world's leading bullion centre, the biggest shipping and airfreight market, and boasts more international security quotations than any other centre. It also has more American banks than New York. Why not ask them why they are here."
My third and even more general observation is that any socially and democratically mature society has a high degree of adaptability which regularly falsifies charts and long-range forecasts. If we go back to the earlier part of the 19th century, you will remember the Malthusian projections. They showed that the world would no longer be able to feed itself by 1900. Necessity, proverbially, is the mother of invention, and human responsiveness to necessity has regularly mothered the necessary inventions or brought about the necessary changes of direction. And the direst predictions about the British economy, indeed any other economy, will never be realized because as a mature people we simply won't let them happen.
It is a trite saying, but there are others before who have made the mistake of writing Britain off. 1940 was an obvious time, and faced with necessity Britain has always responded.
Those observations may help to put the problems into perspective. One cannot pretend that they are other than serious, and they should be squarely faced.
There is a shift in policy which is certainly called for, a shift towards sounder housekeeping involving some real cuts in public expenditure. We are now spending 60% of the national product in the public sector and that imposes a very great burden in our mixed economy on the private sector, who create that wealth. It's been difficult for them to plough back the necessary investment--the result of a combination of declining profitability and high taxation--and this obviously has an impact on future productivity.
There is a growing awareness of these problems. I am quite confident that this shift will come about although I can't precisely predict what political convolutions we may go through to make it possible. But it was with this question in mind that I asked a friend what I should say to a crowd of very knowledgeable Canadians who wanted the truth about Britain. His reply is significant, because he was a prominent member of the last Labour Cabinet. "Tell them," he advised me, "that we are suffering from a temporary surfeit of parliamentary democracy." So I am now telling you just that, and it is on his and my bipartisan authority.
In a way I think it does sum up the problems of the moment. We have too much irrelevant or interfering legislation, too much nannying of a basically vigorous people, too much so-called democracy exercised by activist minorities outside Parliament itself, and too little respect for Parliament's ability to enforce the rules which are really needed.
These are all symptoms of the rapid change which I talked about at the beginning and they are in no way peculiar to Britain.
I think we are in danger, certainly in the older societies and possibly some of you might think even here, of making two bad mistakes. One is confusing equality of opportunity, which is an ideal we all should support, with equality itself. Egalitarianism is inevitably regressive, and breeds destructive jealousies. That distinction was well understood by the anonymous advertiser in Pravda. His advertisement read, "Comrade possessing own knife and fork wishes to meet other comrade possessing own steak and kidney pie."
All of these factors are common in varying degrees to many or most of the industrialized countries. The question then becomes, is the British political and hence economic malaise fundamentally different from that of comparable economies, or have we merely caught an earlier dose of what is coming to everyone.
I believe that the reality is somewhere in between the two. You may remember the three concluding sentences from the Wall Street Journal article. They read, "Goodbye Great Britain. It was nice knowing you. Since we're following down the same road, perhaps we'll meet again."
We shall indeed meet again. I believe it will be up the road, when we have turned around.
I said we were in danger of making two bad mistakes. The second is our sense of values, what we think really matters most and the way in which we pursue it. Your Chairman in his introduction did not tell you one thing about me, which is that I am a mountaineer. I suppose that every mountaineer is partly an idealist, otherwise why should he get up at three o'clock in the morning and be cold and wet and tired and hungry and frightened by turns, and then come back and say he had a marvellous day. I believe that we all have to look beyond our immediate preoccupations. We have to lose this hypnotism exercised by materialism, the weight of the pay package. We've got to think a little bit as the mountaineer thinks.
There are two quite distinct phases. One is the technical planning and the execution of an expedition. But the first is the lifting up of the eyes and the perceiving of the peak and deciding that there is something that is worth doing, deciding that it is your objective to achieve it. You won't achieve it unless the technicalities are right, but unless you have lifted your eyes first, you won't start.
I would just like to leave this thought with' you. I've been lucky enough to know some great mountaineers. I've climbed with John Hunt and four others of his team from Everest. They have one thing in common. They are all extraordinarily unselfish people. The reason they succeeded, and the reason that the international expedition in 1971 did not succeed, was quite simple. In the first case, there was a body of people who accepted as a single objective that there was something worth doing and they were all in it together. In the other case, there were a lot of individualists who were concerned with being the first German, the first Italian, the first Swiss lady if you please, to get to the top of Everest. They didn't get much beyond base camp.
I hope that all of us in our different ways can make some contribution to this lifting up of the eyes.
Our distinguished visitor and speaker was thanked by Mr. Charles C. Hoffman, a Director of The Empire Club of Canada.