Health warnings
THREE health warnings should appear on these bottles of snake-oil. The first would warn against the chronic defect of our European diplomacy, which goes back to George Brown's day and beyond — nego- tiation by gesture, playing the good Euro- pean by giving something for nothing. At the Madrid summit we made terms for joining the EMS — free movement of money and capital in Europe, an open market for services as well as goods. A country whose trade in services is worth more than its trade in goods must have those terms met, and what chance would we have if we throw away our bargaining card at the beginning? The second warning is that an exchange rate is a barometer which shows the state of pressure on the economy. There may not be much point in trying to bring our barometer into line with everybody else's, and none at all if the pressures are out of line, as, now, they so obviously are. We would need to get our inflation down before going into the EMS, not after. The Bank of England, whose job it is and would be to manage sterling, is quite clear about that. The third warning derives from the second. It says (and it should by now be familiar) that the EMS would do nothing for us that we could not, if we wanted to, do for ourselves. If sterling ran into trouble, our partners, from Germans to Greeks, would not rush to its rescue. That would be up to us, as it is now. We would have to use the means we use now. They would include interest rates, as they do now. To argue for the EMS as an alternative to discipline — to say, as its promoters say, that it would have spared us 15 per cent base rates — is delusive. To argue for it as a discipline is a scathing judgment on our own self- discipline. It is to say that we shall sub- contract our policy-making to the Germans because we cannot do it ourselves. The most gullible customer can sniff the snake in that oil.
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