THE ECONOMY
Star billing for the Greens and Miss Rosy Scenario
JOCK BRUCE-GARDYNE
It is, when you come to think of it, one of the many bad habits bequeathed to world statesmen of the end of the 20th century by the old actor-manager. It all began with that cringe-making television chat, when Harold Macmillan exploited his wartime connection with President Eisenhower to get him to share a fireside in the run-up to the 1959 election. Like too many of Mac- millan, theatricals, it worked. And so, ever since, the great men of the world have recognised an obligation to act as stage- props for each other's domestic political performances. This week President Mitter- rand was the chosen beneficiary, with the misnamed 'economic summit' dragged back and forth through a Paris under siege in a somewhat forlorn attempt to put life into the flagging celebrations of the bi- centenary of the storming of the Bastille. One of these days the statesmen will wake up to the fact that plunging their respective capitals into the chaos generated by gather- ings of heads of state is not in fact the best way to please their voters. Then, perhaps, they will stay at home and mind the shop. Meanwhile, however, they cruise the world in search of photocalls for the gratification of their hosts.
Star billing for this week's entertainment was to be shared by the Greens and Miss Rosy Scenario. The Greens because Presi- dent Mitterrand and some of his guests, notably Chancellor Kohl of West Ger- many, were shaken by their performance in the June Euro-Elections; Miss Scenario because President Bush and his Treasury Secretary, Mr Brady, are in hot pursuit of this delectable young lady. She is supposed to deliver a return to stable prices in the United States without recession, and a reduction in the US fiscal deficit resulting from a recovery in the US personal savings ratio, which also produces a continuing shrinkage in the US trade deficit. So while Rosy takes the bouquets on the world economic stage, M. Mitterrand and his guests can frame a communiqué in which they pledge each other to saving the rain forest and abstaining from the use of aerosols to fix their hair-pieces in position.
That should enable M. Mitterrand's guests to go home happy (although Mrs Thatcher may well feel that she would have been better employed at home, waving her handbag at Mr Jimmy Knapp and putting some backbone into her Transport Secret- ary — as, indeed, she might). But will someone rock the boat? The Japanese, for example? The Japanese have begun, in the past few months, to throw at least a tiny proportion of their weight around. For years they have meekly accepted the role of the school swot, winning all the prizes, and cordially disliked for their perform- ance. Less successful scholars have accused them, more or less openly, of cheating. They have been subjected to endless lec- tures about their duty to open up their markets, and to let their currency appreci- ate. They have meekly done all that has been asked of them, and their performance on prize-day has been entirely unaffected. Now they have begun to argue, with increasing stridency, that it is time for other scholars to begin to mend their ways: in particular, for the Americans to reduce their Government's dependence on other countries' savings.
The Germans, who have meantime been collecting all the trophies which have not gone to Tokyo, have got off surprisingly lightly. Their alibi has been the European exchange rate mechanism. This has be- come so fashionable that the price the Germans' partners pay for it has gone essentially unnoticed. It was devised ten years ago by Helmut Schmidt and the Bundesbank as a dragging anchor on the deutschmark, which was then constantly threatening to damage German export markets by appreciation, and that is pre- cisely how it has in practice operated. French and Italian Governments, which had proved incapable of controlling their own domestic inflation, agreed to use the deutschmark for the purpose, and it has worked. But at a heavy cost. German industry, backed by a currency whose value has been artificially deflated by the ERM have colonised their neighbours'
`Is that about right, or shall I rip a bit off for you?'
markets. Yet because West Germany's swelling export surplus has been won in western Europe, and not, like Japan's, in the United States, the Germans have come in for surprisingly little criticism. Now they have begun to complain — with consider- able chutzpah — that their neighbours' eagerness to buy their goods is overheating their economy.
It is, however, the Japanese who might spoil the atmosphere in Paris, by calling upon Messrs Bush and Brady to take that budget deficit seriously at last. Yet the real hazard to the world economy surely lies elsewhere. It is that the US central bank has been going in for overkill. All the evidence suggests that US monetary poli- cy, like UK monetary policy in 1979-80, has been too tight. Fortunately it looks at the time of writing as though Mr Greens- pan, chairman of the Federal Reserve, has now got the message. US interest rates look to be heading downwards, to the vast relief of Mr Lawson and others. The Americans can afford to ignore the lectures from Tokyo, since the Japanese are locked into their Treasury bond market, and cannot escape. But if they want to go home from Paris with Miss Rosy Scenario intact and aboard for the homeward journey, then Mr Brady had better make sure that Mr Greenspan lays off US interest rates for a spell.
But it looks as though we are unlikely to escape without a costly tribute to the Greens. This is the last thing which the British economy needs just now. The Prime Minister frequently asserts that if we want cleaner air or purer water, we shall have to pay for it. No doubt. But could somebody please tell us what is wrong with the water we drink, and the air that we breathe, which could not at least wait until ten per cent per annum has ceased to be added to our labour costs to maintain us in the state to which we are accustomed?
Mrs Thatcher and Mr Lawson should ponder the message of the Railway Staff pay tribunal, which complained last week that there had been 'no contribution to cost inflation from the wage bill in the last financial year'. It was high time, therefore, to make one, the Tribunal reckoned, by its own adjudication. And did so. Mrs Thatch- er would surely be unwise to add yet another contribution, from 'green' charges, for the simple pleasure of signing an agreed communiqué in Paris.
Previous page
