Dave Heasman: “I bet he also recalls the letter to the Times in about 1981 by 365 economists decrying Thatcher’s policies, and I recall him rather defending those in the mid-90s.”

Absolutely – I go by the evidence, not fantasies. The economists’ letter related to the excessively stringent fiscal stance of the 1981 Budget but you have evidently not noticed that:

- “Inequality in Britain has continued to increase since Labour came to power, an influential think tank has said. . Fewer people are living in poverty than in 1997, but the proportion of wealth held by Britain’s richest 10% rose from 47% to 54% during the 1990s . . ” – from: http://news.bbc.co.uk/1/hi/uk_politics/3526752.stm

- The Blair government has enthusiastically continued with the privatization of state-owned business and has left most of Thatcher’s legislation to curb trade union power unchanged on the statute books. Market flexibility and trade liberalization within the EU and beyond are the policies being pushed by the Blair government – all very Thatcherite!

- The Thatcher governments poured billions into supporting the British-owned motor industry in Britain and more billions into supporting the coal mining industry. The latter is not widely recognised but shows up clearly in the official figures on the mining industry’s large external financing requirement through the 1980s – citation available. In contrast, the industrial policies of the Blair government have been LESS interventionist but MORE regulatory in respect of minimum wage legislation and applying EU employment rights.

- Britain’s position in the league table for GDP per capita growth among OECD peer-group countries switched from being around the bottom in the period 1971-80, to being somewhere close to the top for the period 1981-90, as readers can confirm with this data from an independent source: http://www.umsl.edu/services/govdocs/hies97/c/tab9.htm

- The outcome of the restructuring of Britain’s economy under Thatcher’s governments was that by end 1995, Britain’s standardised unemployment rate was lower than in France, Germany or Italy and the employment rate among working-age people higher: http://www.eto.org.uk/eustats/employ.htm

- The catastrophic mistake of the Thatcher governments was the decision to join the European Exchange Rate Mechanism in October 1990 and that decision was cheered on by the Labour Party in opposition.

- The fact remains that Britain’s unemployment and inflation rates are currently lower than those of the Eurozone and GDP growth is higher. Gordon Brown and his advisers should be congratulated for their good sense in keeping Britain out of the Euro.

For inflation – not a lot, in goods. A 3.75% base rate maintained 1.5% deflation in goods last year. And there’s lots of capacity, and it’s a global market these days. In services, well it depends. Mostly on your view of the job market. I personally think that there’s enough slack in the labour market to keep the inflation rate for services at about the 2.5% it currently is; obviously Bob disagrees here. House price inflation would rise, obviously, but oh the joy of remortgaging at 3%. And the 6-7% growth. That’s a win-win for me. Obvously Bob, being younger than me and more left-wing than me, worries about the longer-term effects on the very much wider economy, but for me & mine it’s all good.

Bob isn’t that much older or more left-wing than me, though. He notes “The call to delay Emu ‘for a couple of years’ is made in a declaration signed by 155 university professors ” but I bet he also recalls the letter to the Times in about 1981 by 365 economists decrying Thatcher’s policies, and I recall him rather defending those in the mid-90s.

And what would a 2% interest rate do for the inflation rate in Britain and for the boom in house prices, which we already know is unsustainable?

“JACQUES DELORS, the former President of the European Commission, fuelled the controversy over the euro yesterday [16 January 2004] by admitting that Britain was justified in opting out of the single currency because its launch was flawed.

“In a remarkably frank interview with The Times, the one-time bogeyman of Eurosceptics also predicted that Britain would stay out for years, not least because Gordon Brown was so ‘passionate about his contempt for Europe’.” – from: http://www.timesonline.co.uk/article/0,,724-967150,00.html

Since autumn 1996, I have maintained a consistent critical position about Britain joining the Euro after reading a persuasive contribution to Foreign Affairs by the late Rudi Dornbusch: http://www.foreignaffairs.org/19960901faessay3403/rudiger-dornbusch/euro-fantasies-common-currency-as-panacea.html

His misgiving have proved well founded, as Delors concedes. We would all benefit, I believe, if Euro enthusiasts finally came clean now and admitted their claims were seriously flawed and for reasons more than a few German economists recognised in an open letter to the Financial Times in February 1998:

“More than 150 German economics professors have called for an ‘orderly postponement’ of economic and monetary union because economic conditions in Europe are ‘most unsuitable’ for the project to start. The call to delay Emu ‘for a couple of years’ is made in a declaration signed by 155 university professors and sent to the Financial Times and the Frankfurter Allgemeine Zeitung newspaper in Germany. It signals intensified opposition to the government’s euro policy. The declaration was organised by Manfred Neumann, professor of economic policy at Bonn university and chairman of the Bonn economics ministry’s council of expert advisers. It signals concern among professional economists about Bonn’s determination to begin the single currency on January 1 1999.” – reposted at: http://www.internetional.se/9802brdpr.htm

Government ministers in Britain, like Denis MacShane, who have persistently imputed all sorts of malignant motives to critics of the Euro are now exposed for the ignorant fools that they are – and btw Denis MacShane has a PhD in international economics.

“For evidence, take a peek at a 1993 interview given to the Financial Times by Edouard Balladur, prime minister of France and now the favourite to succeed Mitterrand in this spring’s presidential elections. ‘What is the market?’ asked Balladur. ‘It is the law of the jungle. And what is civilisation? It is the struggle against nature.’” – from: http://yoz.com/wired/1.01/features/culture_war.html

The trouble is that even nostalgia isn’t as good as it used to be.

The Eurozone economy has not been performing well, contrary to what we were led to expect by the many enthusiasts for European monetary union. How well I remember all the dire predictions from some UK government ministers, especially Peter Mandelson, the UK’s new Commissioner when he was a minister, about the terrible fate that would befall Britain if by some mischance or oversight we failed to sign up to the Euro.

Here we are in Britain, still out of the Euro, thanks to HM Treasury, and none of that terrible fate has materialised. Instead, the rates of both inflation and unemployment are lower in Britain, the GDP growth is better and there is the looming issue of what to do about the unilateral breaches of the Eurozone’s Stability and Growth Pact by the governments of the leading Eurozone economies.

We must hope that will all soon be sorted out along with the apparently perennial problem of large scale fraud in the EU Commission.

It really will not look communautaire if five years further on the European Court of Auditors is still regularly refusing to endorse the EU Commission annual accounts. That already looks more than just tedious after nine years running: http://news.bbc.co.uk/2/hi/uk_news/politics/3688241.stm

Judging by what surfaced about Eurostat last summer, it seems that Commissioner Kinnock, one of the UK’s retiring commissioners, was unable to complete his portfolio responsibilities for administrative reform sufficiently to prevent a recurrence of fraud on a large scale: http://www.guardian.co.uk/elsewhere/journalist/story/0,7792,996521,00.html

The new commissioners from Ireland and the Netherlands will have especially challenging portfolios for, respectively, the single market and competition policy, the latter including state aids, which on track record leads to sequential and protracted disputes with French governments, whether from the centre-left or centre-right. Whatever happens in elections in France, the national tradition of dirigisme continues with little change. It is perhaps especially significant that these two crucial portfolios have gone to commissioners from small countries.

Mandelson, the new commissioner for trade, will have the truly daunting challenge of maintaining a liberalizing momentum in a new WTO round to reduce EU trade barriers and wind down EU subsidies to farm exports: http://news.bbc.co.uk/1/hi/business/3525602.stm

Whatever the outcome of the US Presidential election in November, on the campaign rhetoric, it seems quite likely that Commissioner Mandelson will also need to be adept at preventing outbreaks of trans-Atlantic trade wars: http://newswww.bbc.net.uk/1/hi/business/3926601.stm

Uhh, and from my centre-right, get-a-healthy-economy-and-then-worry-about-the-other-stuff perspective, great!