RN28, July-Sept 2000 | close window

John Bull

SOUND AS A POUND
It's a wise man, they say, who knows his limitations. Given the incompetence of most politicians when it comes to the economy, we can therefore safely say that the best decision Gordon Brown ever made was to transfer responsibility for setting interest rates to the Bank of England's Monetary Policy Committee.

Broadly speaking, they have done fairly well, keeping inflation within the limits they were set and avoiding either a boom or a slump. It is not too surprising, therefore, that we are told that Gordon Brown is less than keen to consider joining the Euro and transferring responsibility for interest rates to Frankfurt. Whether this is true or not, joining the Euro is certainly the intention of the government, even though Tony Blair seems terrified of the issue and at a loss to know how to sell this to the British public.

A recent poll showed that less than a quarter of the public were in favour of joining the single currency. Bob Worcester, chairman of MORI and keenly listened-to by Blair, believes he has the answer. The main trick, he believes, lies in portraying those in favour of joining the Euro as "moderate" and "sensible", and those opposed to it as "men with 'staring eyes'". The negative impact of the likes of Benn and Foot may, as he claims, have been significant in 1975, but unfortunately for Tony Blair the voices of scepticism come from a much wider spectrum of opinion than in 1975. More important, in many ways, than the politicians will be those newspapers which will be on our side, and the large number of businessmen who are also opposing the Euro.

Eddie's insights
Certainly Eddie George, Governor of the Bank of England, is not a man with 'staring eyes', so his recent comments on the Euro are worth noting. The Times reported that "he was relieved that Britain had not joined the Euro from the start. If it had done so, he judged that 'It is very difficult to envisage how we would have avoided an inflationary boom in this country'". It must be obvious to anyone with even an inkling of economics that 'Euroland' is utterly unsuited to a single interest rate - which is the inevitable consequence of a single currency. Growth in Euroland countries varies between 2.1% and 7.4%; inflation varies from 1.6% to 4.6%; and unemployment ranges from 2.7% to 15.2%. Is it any wonder that the currency markets have dumped the Euro in favour of pounds and dollars?

But back to Eddie George. He has also shot Labour's fox when it comes to fudging the entry decision. "Monetary union is fundamentally a political rather than an economic issue", he said, effectively dismissing the nonsensical argument that abandoning the pound is a purely hard-nosed economic decision to be taken based on vague 'convergence' criteria. "It necessarily involves the deliberate pooling of national sovereignty over important aspects of public policy in the interests not just of collective economic advantage [JB: What advantage?] but of a perceived wider political harmony in Europe".

Changing tactics
We were originally told that we had to join the Euro because it was going to be one of the world's strongest currencies, more powerful than the dollar or the yen. Ever since it has gone into freefall, the spin doctors have reversed the argument, claiming that the strength of the pound is harming our industries and we have to join the Euro because it is so weak! But the argument that the British economy cannot survive a weak Euro just doesn't hold water.

Apart from the fact that the vast majority of our economy is purely domestic and thus unaffected by foreign currency values, for those exporters who are harmed by the weak Euro the answer is very simple: turn your attention to the US market where it is the pound which is very weak. Now that the Euroland countries all have the same currency they are - to all intents and purposes - a single market, and it is well known that no exporting company should become too dependent on a single market. In other words, despite Labour's protestations to the contrary, British businesses should be moving out of Europe and into the United States. Having said that, it should be noted that relative currency values are only one factor determining the strength of our exporting industries. An analysis in The Times stated that "demand is as significant, if not more significant, a factor in determining export growth as the level of the currency". This is another reason to target the booming US market rather than the stagnant European one.

Down with dumping
The Times analysis concluded, however, that regardless of currency shifts and relative growth, "something more fundamental is going on". That something is overseas man-ufacturers undercutting domestic producers. "Technical developments, and their diffusion across the globe, mean that it is becoming easier for international competitors to muscle in on home markets...Put simply, the evidence suggests large parts of traditional manufacturing are in structural decline". Economists and free market politicians normally tell us that there is nothing really wrong with traditional industries closing down and moving to developing countries where labour and other production costs (such as anti-pollution measures) are lower. I do not subscribe to this argument, as this would mean that we are constantly having to run in order to stand still, developing new industries which generally are less labour-intensive and require a much more highly skilled workforce. There is nothing wrong with such industries of course, quite the opposite, but they should not replace the traditional manufacturers, merely complement them.

Far from this approach being that of a Luddite, opposing 'dumping' is recognised as legitimate, and anti-dumping investigations are, in fact, on the increase worldwide. A recent study revealed that the most investigated countries last year were China, Korea, Japan and Taiwan, and that the main industries affected were chemicals, plastics, rubber and steel, with textiles and mechanical engineering also high on the list. Why should we accept that these industries should be destroyed? Fair competition is a good thing, ensuring that companies do not exploit their customers or become complacent and produce inferior products, but unfair competition is purely destructive. We are also told that there is nothing wrong about foreign companies taking over British ones and to object is to be petty and 'out of date'. But as we have seen with the Rover fiasco, foreign companies are often unable to devote sufficient attention to what is often a relatively small part of their empire, and are quick to leave when things start going wrong. The government, of course, does nothing.

A partnership of equals?
The latest lunacy is the proposal to merge London's Stock Exchange with that in Frankfurt. Apart from the fears that this may force British companies to adopt the Euro against their wishes, and also result in them being governed by German regulations not suited to our businesses, I have a very simple question which I have never seen answered: why has a 50:50 merger been agreed when the London Stock Exchange is more than seven times larger than that of Frankfurt? This is the equivalent of your local corner shop merging with Tesco. What can we possibly gain by it?

SERBS THEM RIGHT?
Last year I pointed out that the NATO bombing of Serbia was illegal in international law as it breached a number of international conventions.

Although the government denied this at the time, the House of Commons cross-party Foreign Affairs Committee has now concluded that NATO's actions broke the United Nations Charter, "the basic law of the international community". So was the government criticised for their criminal behaviour? Of course not. The Committee decided that the bombing was justified on "moral grounds", and that the government couldn't obtain UN approval for its actions because of the objections of Russia and China. So there you have it: if you can't change the law then you are justified in breaking it as long as it is in line with your moral values, and the fault lies with those who object. This is also known as the law of the jungle, or anarchy for short. The government was quick to condemn the anti-capitalist rioters but they were obviously just acting on 'moral grounds' and following the government's example of how the law should be respected. Perhaps Serbia will now sue the government for damages, or seek the arrest of Tony Blair as an international criminal; after all, General Pinochet provides another fine British precedent.

BACK TO NORMAL?
British politics, it seems, is finally returning to normal. After three years of gravity-defying opinion poll scores, Tony Blair no longer walks on water. Labour has 'lost' the Euro, local and London elections, and the Tories are beginning to win favourable comment in the press. This is partly due to the public's inevitable disappointment as they realise that Labour are not only utterly useless, but increasingly hostile to the values of 'middle Britain'. The Tories, meanwhile, have discovered the joys of patriotism - or at least a bogus watered-down version of it. Giving the public just a hint of the real thing has been the Tories' favourite trick down the years, so there is no surprise that they have turned to it again in their hour of need. They say that they the Tories will halt the erosion of our national sovereignty, the tide of asylum seekers and the perversion of the judicial system against the ordinary citizen. They will do none of these things of course, but even the suggestion that they might has enraged the Left. The Left of the Tory party, that is. "Tory mutiny over asylum rocks Hague" screamed the newspaper headlines, and Hague was warned that he was in danger of unleashing "dangerous forces in society".

So is everything, indeed, back to normal? Well, not quite. Although support for Labour is slipping and the Tories have firmed up their core vote, a growing number of voters are becoming increasingly disillusioned with both parties. This is mostly reflected in the fact that in all three of the above-mentioned elections the overwhelming majority of the electorate simply didn't vote. Low turnouts are nothing new, of course, but in the last few years the situation has markedly worsened. Furthermore, a growing number of voters are now prepared to flirt with new, alternative parties and candidates - a trend which has been encouraged by the introduction of PR in the European and London elections. The UK Independence Party, for instance, won three seats in the Euro elections and Ken Livingstone, standing as an independent, was elected as Mayor of London. If PR is introduced more widely in local elections, as has been mooted, this will give an opportunity to a host of smaller parties. In the London elections, for instance, the Green Party won three seats on the Greater London Assembly (GLA), and, including second preference votes, almost 5% of those Londoners who bothered to vote (and even in this highly hyped election the turnout was barely a third) in the Mayoral contest voted for the British National Party. Perhaps the most amusing feature of the Mayoral election was the embarrassment suffered by Steven Norris who, despite being the official Conservative candidate, won a lower share of the vote than the Conservative GLA candidates obtained. Could it have had anything to do with his ludicrously 'politically correct' campaign, one wonders? But even more amusing, and indeed amazing, is the suggestion that Hague may offer Norris an official post in the party. What for, for goodness sake? To reduce their vote even more?

johnbull.rightnow@england.com

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