HL Deb 16 December 1981 vol 426 cc172-81

2.57 p.m.

Lord Noel-Baker rose to call attention to the relationship between the arms race and inflation, unemployment, trade recession and the world economy; and to move for Papers.

The noble Lord said: My Lords, at 4 p.m. on the first Sunday in June 1981, six months ago, eight F.16 bombing aircraft with six F.16s for fighter cover flew in a tight formation from Israel over Iran to the power plant at Osyrak, nine miles from Baghdad, the capital of Iraq. They told inquiring controls that they were a commercial flight. When they reached Osyrak, the F.16s each dropped the two bombs they were carrying, bombs of 2,000 lbs. of TNT. and 32 tons of high explosive destroyed the nuclear plant. There is strong ground for thinking that that act of unprovoked, aggressive, charter-breaking war signed the death warrant of President Sadat of Egypt. His assassins must have said, " Israel takes no interest in his policy of peace ". After they dropped the bombs they threatened that they would repeat that savage act whenever any Arab state might build a nuclear plant. The assassins must have said, " Sadat is a dreaming fool. We must remove him before he sells our country to a ruthless foe ".

There is strong ground for thinking that that savage act and the murderous threat that followed signed the death warrant of the State of Israel. I am a lifelong Zionist. I was converted to Zionism by the Emir Feisal and Lawrence of Arabia. For many years I was the spokesman of the Zionists in another place, but I am certain that Israel will not survive if she relies on winning wars against the Arabs once every seven years. The savage act and the murderous threat which followed might have been the action that would have started World War 3. Operation Babylon, the destruction of the nuclear plant, gave us in a sudden blinding flash a new understanding of the urgent peril of the arms race. If that race goes on, someone somewhere as insanely irresponsible as Begin will commit the act which will unleash the dogs of war. That is the thought which I hope your Lordships will take away from this debate.

But the burden of my Motion seeks to cast a searchlight on a different aspect of the arms race. The Motion has been drafted with the help of the authorities of the House, to whom I voice my thanks. In language that accords with the conventions that your Lordships observe, it states that the arms race has a relation to inflation, to unemployment, and to trade recession. With as few harsh words as may be, I want to argue that in fact the arms race is a major contributory cause to national and world inflation, to national and world unemployment, and to the trade recession which is not yet at an end.

I start with inflation. Every economist since Adam Smith has said that inflation is too much money chasing too few goods. Every economist since Adam Smith has said that arms production is unproductive. The nations are now spending 600,000 million dollars a year on arms—6 billion dollars. In the last 10 years they have spent 4 million million dollars. That vast accumulation of purchasing power goes on the markets of the world through the wages and the salaries of the men in the armed services, the wages and the salaries of the men and managers in the armament factories, the dividends of the private armament firms. That vast sum of purchasing power is balanced by the production of no goods whatever which people can purchase and use.

Prima facie, it seems obvious that it must mean too much money chasing too few goods. Some economists say that that is not the case, that the extra purchasing power is mopped up by new taxation. With all respect to the economists—I remember a transatlantic saying of long ago, that if you took all the economists in the world and laid them out in a row end to end, they would not reach a single conclusion—I do not think that what they say adequately explains the facts. The men in the forces, the men in the factories, spend their income. They pay rent. They buy food. They buy television sets and motor cars. And they produce no goods that anybody can buy.

I believe that the case is more adequately stated by Mrs. Sivard of the United States. She says that excessive arms spending overheats the civil economy. It generates too much spendable income without producing goods and services that will mop it up; and I am glad to think that the economists of the Secretariat of the United Nations have endorsed Mrs. Sivard's view. They say that armament expenditure is inflationary.

Let me test the theory against some facts of what happens in the world. I believe that I could prove my case by taking two countries only, two countries at opposite extremes: Israel and Japan. Israel, of all the nations in the world, spends the largest percentage of her GNP on arms, 23.2 per cent., and, with the finest financiers in the world—money magic is the heritage of the Jews—Israel has an inflation rate of 130 per cent. Japan spends the lowest percentage of its GNP on arms—3.9 per cent.; and Japan has an inflation rate, if I remember rightly, of about 4 per cent.

I could add a further flood of figures, but I shall try to make a very simple table in which I add three countries to Japan. The United States, with 5.5 per cent. of her GNP spent on arms, has an inflation rate of 11 per cent. Britain, with 5.1 per cent. expenditure on arms, had an inflation rate in October last of 11.7 per cent. Western Germany, with 3.4 per cent. of her GNP spent on arms, has an inflation rate of 6 per cent. Japan, with 0.9 per cent. expenditure, has an inflation rate of 3.4 per cent.

I add some comments. Britain and the United States have taken sustained and drastic action to check inflation: soaring interest rates, slashing of the social services; but their inflation rates remain in double figures. Germany, with rather more than half of our expenditure on arms, has an inflation rate almost half that of ours. Japan, again, is far below any other nation in inflation.

Inflation is a cancer in the body politic. It assaults every section of the community, but it bears most harshly on the elderly and the poor. It robs them of what are their basic needs to keep them alive and well. It also slows investment. It upsets exchange rates. It diminishes international trade. While the nations go on spending 600 billion dollars on armaments they will go on having high inflation.

Let me pass to unemployment. The prophets of military power always say that armaments create jobs, and of course they do. But there are official United States Government figures to show that capital invested in armament production produces considerably fewer jobs than capital invested in civil work. The United States lists as examples construction, the transit system, health and education. By construction they mean buildings—houses, schools and hospitals—roads, bridges and other public works; by transit they mean public transport—trains, ships and aircraft—coaches and taxi-cabs. On construction, transport and health, a thousand million dollars invested in such civil work produces 100,000 jobs; but a billion dollars invested in armament production produces only 78,000 jobs; that is to say, there are 22,000 more jobs from civil work. Investment in education of a billion dollars produces 120,000 jobs, and the schooling prepares the pupils for skilled productive work.

But take 100,000 jobs as the average for civil work. That is 22 per thousand more than from a billion dollars spent on arms. Twenty-two thousand multiplied by 600—the 600 billion of world expenditure on arms—makes 13 million jobs. There are 14 million unemployed in western Europe, 8 million in the United States. If we could divert expenditure on arms to expenditure on civil work of the kind I have described we should make a massive attack on the unemployment which causes such misery today.

Have noble Lords ever tried to imagine, as if it were happening to themselves, what unemployment means to the men without a job? Idle days; sterile empty nights—they have no cash for entertainment—and no purpose in life. As the days and weeks go by, hope dies, morale decays. The young can turn too easily to the kind of senseless violence that we had in Britain not long ago. But unemployment is a scourge which afflicts the families of the men and women without jobs only slightly less than those men and women themselves; and while we have this high armament expenditure, we shall have the high unemployment which results.

Expenditure on arms slows the rate of investment. I resist the temptation to give your Lordships another flood of figures. I offer only a very simple table of the four countries which I have already named: the United States, with 11 per cent. of GNP on arms, has a growth rate of about 2 to 2½ per cent.; Britain, with 11.7 on arms, has a growth rate of 2½ to 3 per cent.; Germany, with 4.3 per cent. on arms, has a growth rate of 6 per cent.; Japan, with an arms expenditure of 0.9 per cent of GNP, has a growth rate of a fabulous 8 per cent. Those figures— 2½, 2½ to 3, 6 and 8—tell the story for themselves.

The manufacture of arms damages the economy in other ways. For the most part the industry is hideously inefficient. Private manufacturers of arms always try to make their contracts on a cost-plus basis, and they fix the cost more or less to please themselves. Governments are not well equipped to challenge what they ask, and neither management nor trade unions have much scruple about how they exploit the public purse. Those high production costs are wasteful of resources in many ways; and, of course, again, they are inflationary.

But, far more serious than anything else that I have said, armament expenditure is the cause of the world poverty which afflicts so many of our fellow men. It was President Eisenhower who said it first. Every warship ", he said, every aeroplane, every gun, rightly viewed, is a theft from those who hunger and are not fed ". The great Pope John said: Armaments kill their millions while they lie unused in their silos, their hangers and their sheds. They absorb the resources which should go to ease the sufferings of the poor ". Let your Lordships consider the vast sum of suffering, hardship and loss which armament expenditure involves. There are 1,000 million men and women, grown-up, who cannot read or write—the darkness of the mind; the gravest form of poverty of all, which shuts the path to economic, cultural or political advance. There are 200 million children (perhaps a great many more) for whom there are no schools, no hope of education, destined from their early years to grow up as part of the vast assembly of the voiceless who have no way to influence the policies which their Governments pursue.

There are 800 million people who live on the margin of starvation. They never know a solid meal from the cradle to the grave. There are 2,000 million people who have no clean water to drink. Every time they slake their thirst they may be contracting some foul disease. I repeat: 2,000 million, my Lords! There are hundreds of millions every year who are victims of preventable disease—malaria, leprosy, yaws and other diseases; diseases which could easily be cured if a little capital is given to the task. There are hundreds of millions who suffer deprivation in other ways. There are 40 millions who are blind. Trachoma destroyed their sight; yet a simple, cheap ointment would have effected a cure. All this vast sum of suffering and loss could be ended if we could divert the armament expenditure to human welfare instead.

Confronted with this ghastly situation, it is not enough, I say with all respect, to speak of multilateral arms control, of balance at a lower level, as did the noble Lord the Foreign Secretary in the last debate on the subject in this House. The trouble about balance of power is that each side always tries to tilt it in its own favour, and 60 years of seeking balance at a lower level has given us hardly any practical result. The arms race is more dangerous today than ever before. What is needed is the application of the policy of the final document of the special session of the United Nations General Assembly devoted to disarmament which met in New York in 1978.

That final document, prepared and endorsed by the 140 who pledged themselves to the policy proposed, said that it was now essential to proceed to the disarmament of all the nations of the world, general and complete, down to the level at which no Government keeps more than it needs to maintain internal order within its state and to make a manpower contribution to the United Nations peace force; disarmament to be carried out in progressive stages and under stringent international control, accompanied by the reallocation of the resources so released—vast resources of one and a quarter million dollars every minute—to ending world poverty and promoting social justice everywhere. And there is a lot of social justice still to be promoted in our Britain.

That policy was accepted by the Governments in 1978 and it was a reaffirmation—and I call this to your Lordships' close attention—of the major war aim of the victorious allies in the Second World War as described by President Franklin Roosevelt in 1940 in his famous " four freedoms " speech. President Roosevelt said that in the postwar world there must be freedom from fear, which, he said, means a reduction of armaments to the level at which no Government has enough armaments to make aggressive war against any neighbour anywhere.

I venture to think that in 1981 we are not entitled to forget the war aim of the Second World War, of the struggle of six agonising years in which more than 50 million people lost their lives. We cannot forget the war aim. We cannot forget the sacrifice of the 50 million. We must proceed to carry out the final document of 1978. And the time to do it would be in New York, six months from now. I beg to move for Papers.

3.25 p.m.

Lord Thomas of Swynnerton

My Lords, I am sure that the House would wish me to express our gratitude to the noble Lord, Lord Noel-Baker, for initiating a debate so far-ranging and so far-reaching that it would be difficult for any of us, even with the worst will in the world, to seem to be irrelevant; although I fear that some noble Lords may think that some of the things I am about to say, or may say, seem irrelevant. The eloquence of the noble Lord, Lord Noel-Baker, who initiated this debate and who over many years has shown me personally great kindness, is, I think, a sure indication that a young heart and a creative brain are sure consequences of a life devoted to noble causes.

I hope that he will forgive me if I do not follow him in all the things that he said since he ranged over so wide a field. I think, however, that the House might have been more convinced perhaps by the general thrust of his argument if, among the statistics that he quoted at the beginning, he had mentioned the fact that one country, namely, the Soviet Union, spends no less than 13 per cent. to 15 per cent. of its GNP on armaments; and if he had also noticed that the world economy might be much better off if the Soviet Union were able to manage its agriculture more efficiently so that, instead of having to import food, it were able to export it, as was the case with Russia before 1914.

The noble Lord also mentioned Adam Smith. I think that the quotation that he made prompted some of us to recall that that great economist also said in the same book, The Wealth of Nations, that, defence is more important than opulence ". In relation to the Soviet Union, I think that he might have recalled, when talking about the need in a perfect world for no Government to keep armaments or armed forces greater than those needed for the maintenance of internal order, that the Soviet Union maintains vast numbers of forces for the maintenance of that internal order and security which, even if they were kept only for that purpose, would continue to seem a threat to the rest of the world.

I do not think it possible to cover all the subjects raised in this debate. Certainly, the subjects men- tioned on the Order Paper are interlocked and have a connection with each other, although it is difficult to say that there is a general explanation of how these things are interlocked and linked. Some of us would feel, I think, that there have been occasions, such as in the 1930s, when employment has been beneficially affected, lamentable though that may seem, by the armaments industries. Some would want to recall that there have been occasions when technological innovation has been the consequence of effective armaments industries. I must say, too, that the lesson of history is that it is not only since 1945 and not only in international affairs but also in domestic affairs, that armaments have contributed to the maintenance of stability.

Those generalisations stated, I do not want to dwell too much on such matters. With the permission of the House, I should like to divert from the general to the particular. There can be no doubt that today in our minds that there is one country which is preoccupying us: that is, Poland. It preoccupied us last week during the moving debate initiated by the noble Lord, Lord Harris of Greenwich—a debate to which there was a magnificent speech contributed by the noble Baroness, Lady Ryder of Warsaw. Her moving speech must remain for a long time in the memories of all those who heard her—they certainly will in mine.

Certainly, Poland will preoccupy us in this House on many occasions in the future. The reactions of Her Majesty's Government and their allies in relation to this military coup—as it is, and a very remarkable thing for the Soviet world—have led their spokesmen to make suggestions primarily of an economic nature. Our Governments in Europe have suggested that we should, so far as possible, and so far as I can understand, continue to send food to Poland until and unless repression occurs; whereas the United States Government have at the moment taken a slightly different line and suggested that food should not be sent to Poland while there is a chance of repression.

Many of us will have felt initially that this discrepancy between the European and the United States Governments is unfortunate; but I am not so sure that that is the case in a very difficult situation. The need for flexible policies is perfectly obvious, and perhaps we should consider two policies in this particular case. One has to remember that, bad though the situation in Poland is at the moment, it could he very much worse if there were a Soviet invasion. That said, however, I welcome very much the fact that there has been a recognition by our Governments that the co-ordination of economic policies by the West could very well play a part in securing the triumph of Western ideals in Eastern Europe and elsewhere. I hope it may be possible for this crisis to be the occasion for further co-ordination of Western economic policies in relation to the Soviet bloc.

In this connection, I wish to draw your Lordships' attention to two matters in a preliminary way. First of all, there is no doubt whatever that the West has never used its great economic preponderance over the Soviet Union and her allies in an effective way. No doubt at the back of the minds of our leaders has been the fact that policies of economic sanctions have never in the past been successful. Nevertheless, we have never used this economic power.

The second point to which I wish to draw attention is the fact that the Soviet economic system in the last generation seems only to have survived at all because of their successful exploitation of Western technology and Western economic assistance. This is a very important factor in the present circumstances. It is particularly true in respect of Soviet military developments—really the only zone of Soviet economic life where there has been an effective advance.

A list of items where Western economic assistance has been of great military value to the Soviet Union would be quite endless. It stretches from petrochemicals to lasers; from steel welding to precision grinding. This last item is particularly important, since I understand that it would be almost impossible for the Soviet Union to have modernised their intercontinental ballistic missiles in the early 1970s without the assistance of the precision grinding equipment made available to them under détente by United States companies.

Now, hearing in mind these two things, I wonder whether this would not he a good opportunity for Western Governments to make plans for a much more effective economic policy in relation to the Soviet bloc than we have had hitherto. This is a proposal which is well covered by the terms of reference of this Motion. I should like to suggest something like a three-pronged policy.

The first prong might consist of a revised and modernised agreement under the present arrangements known as COCOM to cover some of the items which I mentioned a minute ago, and also bringing into the COCOM agreement some of the countries which at present do not adhere to it. All of the advanced industrialised countries should be invited and indeed pressed to join this agreement. That is something which could be done now, Poland or no Poland.

The second prong of my proposal is that plans should be made so that if there were a new Soviet outrage, whether it were the invasion of Poland or something else, the West would be perfectly well prepared for the next stage of economic policies towards the aggressor. This might include all equipment and technology which might conceivably be of assistance to the Soviet military power, including fuel, oil ex-ploitation and credits. I do not at this stage think that food should be involved. That is another question which might be discussed.

This policy should be prepared and should be ready for introduction if such an outrage were to occur. The fact that that policy had been prepared should be amply publicised in the hope that the outrage would not occur. If it did occur, and if it were to continue and if these other measures which I have mentioned were effective, then the Western countries could go on to activate a third prong in the policy. This would affect without question the provision of food to the Soviet Union and other items which make an effective contribution to the Soviet standard of living.

It may be that a way of preventing the circumvention which occurred when President Carter suggested a rather similar programme, or tried to introduce one, after the invasion of Afghanistan, could be achieved by COCOM or perhaps some other organisation buying up the grain and other foodstuffs which might otherwise reach the Soviet Union. Perhaps the EEC's target price policy offers some precedent for this proposal.

It may seem that these suggestions are rather strong meat. However, bearing in mind the psychological warfare which the Soviet Union is perfectly plainly waging against us—as was indicated with some eloquence last week by the noble Lord, Lord Chalfont—and the support which the Soviet Union seems to be giving to terrorist activities throughout the West with the intention of destabilising our societies, and bearing in mind that the Soviet Union is perfectly plainly also concerned in the battle to prevent us securing essential supplies of raw materials, this would seem to be a minimum response which we should make.

In the long run, a properly co-ordinate and intelligently managed economic policy towards the Soviet Union might place that country in a dilemma between two policies: on the one hand, to cease their excessive and wholly unjustified military spending and collaborate in the sort of real reduction of armaments which the noble Lord, Lord Noel-Baker, rightly considers to be desirable, or, on the other hand, to continue to spend such vast sums on armaments, depriving consumer demand in the Soviet Union of what it plainly desires and leading to unrest which could spark off connections with nationalist discontent in some of the non-Russian Soviet Republics and so, in a sense, forcing the Soviet Union in the end to abandon its policies or at any rate to change them radically.

These proposals seem to me to be the best hope of securing world peace and the other desirable measures which are implicit in the Motion on the Order Paper. I think it was Mirabeau who said: the national debt is the germ of our liberties ". It may well be that, if we link all these matters with debts and credits as well as economic assistance, international debt may come to seem the germ of liberties on the other side of the Iron Curtain.

3.42 p.m.

Lord Aylestone

My Lords, the House is indeed indebted to the noble Lord, Lord Noel-Baker, for initiating this debate and, if I may say so, also to the noble Lord, Lord Thomas of Swynnerton, for suggesting one or two psychological warfare effects that might he of value in bringing world peace. The noble Lord, Lord Noel-Baker, has spent a great deal of his life on behalf of world disarmament and has contributed so much over so many years, and I am sure he will continue in that field for a very long time. In this particular debate he refers to the arms race—for that is what is it. No mean athlete himself in the days when we were all so much younger, he would know that in this particular race there is no winner: no one can win it. And no one disputes the terrible cost of the race in money and, perhaps even more important, in the drain from industry of our best technological knowledge in this country and in others towards the arms race. All the major countries of the world on both sides of the Iron Curtain are fearful of possible attack and yet prepare for defence. The brain drain of which I speak is of the most advanced kind in electronics and engineering and it takes from industry into research and construction of armaments something that no country can really afford. In this field the present-day, very sophisticated weapons are often themselves obsolescent before they leave the drawing-board and construction begins.

What a waste the whole thing is! Mr. Brezhnev himself not so very long ago said that Russia needs tractors more than she needs tanks, and I am sure it would he equally true to say that Russia needs more technically able people for its development in Siberia rather than to produce more and still more sophisticated arms. The same shortage of technical manpower is probably equally felt in the countries of the West. We might ask whether America, if she engaged in considerable sales of AWACS aircraft, has sufficient skilled personnel to train the purchasers of those aircraft in maintenance and in flying the aircraft. Coming nearer home we might ask: if we were to sell our own Nimrods would we not be in the same position? Can we afford the technical knowledge, or have we got it, to train a would-be purchaser in maintenance of Nimrod aircraft and to teach the purchasing country how to fly them?

The shortage of skilled manpower on both sides of the Iron Curtain is equally as expensive as the purely monetary cost. This ever-ascending scale of cost of skilled manpower is preventing the major powers from doing so much that we should be doing, as the noble Lord, Lord Noel-Baker, has said. There is so much we should be doing in our own country and so much that is so badly needed in the third world. The economic collapse of a country because of its armament costs, or even the possibility of it, is a terrible price to have to pay for security and defence, but—and perhaps some of us will part company here—in my view it is a price we have to pay and it is the duty of this or any other Government to provide it. Maybe economic collapse is an exaggeration, but certainly economic decline is very evident in all the countries so active in preparation for " defence ".

On this Bench we believe that in the present state of the world the possession of a nuclear deterrent is essential. The scale of the deterrent capability in the nuclear field may itself be debatable, but let us say at least that it should be sufficient to give us security. Nevertheless, the competition between the groups of powers on both sides of the Iron Curtain is reaching almost a degree of madness. It might be a good song title to say, " Anything you can do we can do better "; but applied to competition between world powers it can and does lead to economic disaster and much worse.

We on this Bench cannot, I am afraid, accept the argument which some noble Lords seem to accept, that unilateral nuclear disarmament can be of help. We are of the opinion that it can only be of help to a country or countries with the greatest strength in so-called conventional armaments—and that certainly is not the West. I personally should like to think that, at best, the unilateralists have not thought through the real dangers. There is very little point in baring one's chest and inviting the assassin to put the knife in. When we share in massive demonstrations behind the Iron Curtain, especially in the USSR, in favour of unilateral nuclear disarmament in that country, then the whole argument will be more credible; but that is not the position at the moment.

I cannot help but feel that if little Afghanistan had had the smallest nuclear deterrent, that country would never have suffered invasion. I am sure that the real hope for peace, the only hope of reducing the effects of the arms race on our economy, is to press on with disarmament—if I may paraphrase, to talk, to talk, and to talk again, resolutely, and for as long as it takes, to try to reach agreement on a rundown of all armaments between the major powers, with all the safeguards and all the verifications that are felt to be necessary. Let us hope that 1982 will bring progress in world disarmament, that the talks will continue, and that during next year at least some progress will be made.