What I wrote in summer 1975
When I was a young further education teacher, I belonged to “Further Left”, a socialist group centred around a quarterly magazine of that title. We weren’t boggle eyed extremists – had a few MPs on our advisory board, plus that dangerous radical Jack Straw, and one of our assistant editors has become a Lord. In 1975 the big political campaign was around the Common Market Referendum, and I was a member of the “No” campaign. Whether I would be for the next referendum is doubtful: there may be slimier things than sharing a stage with Nigel Farage, but I’m struggling to think of them. I remember writing an article expressing the economic case for staying out, and I found it today when burrowing through some old personal records. It included this extract on a single currency:
“ … monetary unions tend to create areas with lower incomes and higher unemployment than the average. The reason is simple. All countries have different rates of productivity change and inflation, and generally they can adjust by devaluation. If this policy is forbidden because of membership of a monetary union, the only alternative is deflation: that is, unemployment and short-time. It is a mistake to believe that economic theory demands large currency areas. In fact it seems to commend smaller ones in order that changes in prices and productivity may be accompanied by gentle devaluation rather than unemployment and stagnation.
“The polite story now going the rounds is that the EEC has shelved its plans for monetary union. We must realise that this is not true. The momentum was lost in the early seventies, but is being picked up again. The Paris Summit of last December affirmed that in this area the Community’s will “has not weakened, and objective has not changed”. Indeed, the Belgian Prime Minister was asked to go away and come back with a report on the matter: he will deliver his wisdom after the UK referendum …”
So, Gordon Brown did us a favour staying out of the Eurozone. Yes, I know people who say “told you so” are pretty unattractive, but … “told you so”.
Footnote from 2025: saying there are two ways to cope with different internatioal efficiencies and prices – deflation or devauation – was true in the sensible world of 2013. Trump reminds us there is a third option, which is tariffs and import restrictions. The argument against that relies on Economics 101 international trade theory and comparitive advantage. Too tedious to go into now, but in the early 19th century, J S Mill and David Ricardo showed how things are best made in places that can produce them efficiently, and nations benefit from specialisation and trade even if they do everything, or nothing, better than their competitors.
Grumpy Wisdom 