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Source: Wall Street Journal 96-02-15
The worst economic decisions are those taken for political reasons. Some of these have been merely counterproductive, most positively disastrous. The most significant such decision was the creation of an economic and monetary union for Western Europe.
The EMU is bird that cannot fly but in its attempts to do so it has already caused a fair bit of chaos, not least in the United Kingdom during the country's necessary membership of the fixed exchange rate mechanism, the ERM.
The recession of 1990-92 was made considerably worse by the fact that the British government no longer controlled the interest rate, which was pegged to a completely different economy - the German one.
There was no reason why the Bundesbank should not have kept the mark at that stage as strong as possible. It was simply the wrong poilcy for Britain and resulted in another million unemployed, the closure of thousands of businesses and the loss of homes by thousands of people who could not keep up their mortgage payments. It was a terrible mess, in other words, and a seemingly very good argument for not integrating or uniting disparate economies. This argument appears not to have been undertood in the various chancelleries of Western Europe, despite recent probleins in France and other countries.
As far as the Conservative government was concerned, the episode was disastrous. Much of its present unpopularity can be traced back to that period and the broken 1992 election promises.
The ERM fiasco will forever, though some would say unfairly, be associated with the name of then-Chancellor of the Exchequer, Norman Lamont. The unfairness consists of many things In the first place, he was never a supporter of the ERM. The policy was decided while he was a junior minister in the Treasury and he knew nothing about it. Reluctantly, he accepted that as chancellor he had to go along with his predecessor's decision.
Furthermore, entry into the ERM was greeled enthusiastically by most economists, the Labour Party and the City. It was considered an essential part of a much-needed budgetary discipilne. The problem was that as its disastrous effects became obvious and more and more people started advocating withdrawal, the government hung on grimly, reluctant to acknowledge a huge blunder.
To leave the ERM would have cast doubt on the whole enterprise of monetary union.
In September 1992 the matter was decided for government by the markets. The pound was bounced out of the ERM, but not till after a desparate last ditch battle, which cost the country still untold millions of pounds and the business community an undocumented number of heart attacks and near-suicides.
The day after the chancellor was singing in his bath, a few weeks on the British economy began to improve and in 1993 Norman Lamont left the government, clearly the intended scapegoat. For a while he glowered in the background like a stage villain, trying to explain away the unexplainable: Why had he not resigned earlier if that is how he felt?
Then in October 1994, at the Conservative Party conference, he struck back. Instead of attacking the prime minister, he made a measured speech that summed up all the pros and cons of continuing European integration and came down heavily against it. In that and subsequent speeches and articles, collected here in "Sovereign Britain," (Duckworth, £8.95, 128 pages) Mr. Lamont explained that he had perceived no benefit to Britain from monetary union, that political union will deprive the country of its independence, and that the European Parliament is an expensive and pernicious talking shop whose ultitnate aim is the destruction of national parliamentary democracy.
These well-argued and well-founded views were greeted with fury. Mr. Lamont was said to be embittered, angry, finished.
We have seen a similar campaign more recently following Bernard Connolly's book, "The Rotten Heart of Europe," which convincingly explains the likelihood of disaster if EMU goes ahead. Mr. Connolly was described variously as being mad or so junior as to be completely unimportant and ignorant. If the argnments for European integration are so good, one asks oneself, why do its proponents always descend to personal abuse?
Norman Lamont was the first senior politician to speak the unspeakable: If Britain is getting nothing out of its membership in the EU, if the future is dire economically, if it imperils the very essence of democracy, then we must think seriously about the possibility of leaving. In the articles and speeches collected in this volume this is argued clearly and cogently.
None of his points have been answered by Mr. Lamont's opponents. Nor has there been an adequate response to his clear definition of national sovereignty, made in a speech to the Sciences-Po Institute in May 1995. He disposes of the wooly arguinent that national characteristics will be retained regardless of political changes with a crisp retort: "We will not retain our national institutions merely as the expression of our nation-state. It is not our character, which is unchangeable, but our ability to make our own laws for our own peopIe that we need to preserve."
If we add to that the need to make laws in a democratic fashion by legislators who are responsible to the people, we have the whole of the Euroskeptic case in a nutshell.
Whether Mr. Lamont will once again rise to polltical heights is uncertain. He has been selected as Conservative candidate for a safe seat, so despite his detractors and the whispering campaign against him, he will remain in political life. Let us hope he will continue to speak out clearly and honestly, disregarding those who are afraid to face the truth.
Conservatives Against Federal Europe
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