Government of National Unity
Sir: Can our plight be put right by a GNU? Would its head be dull red or pale blue?
Could it rule with one mind? Let's be cruel to be kind And accept it's best kept in the zoo!
F. S. Flood 19 Kelburne Road, Oxford • From Lieut. Commander N. Paulley, RN (Rtd.) Sir; A coalition government of national unity would succeed only if it pursued the policies which are known to overcome inflation, but from which all three political parties have hitherto flinched. The record is not encouraging.
In complaining that threshold agreements are fuelling inflation, Mr Wilson echoes the Heath-Thorpe consensus view that inflation is the result of increases in wages and prices and that both these must therefore be subjected to control. Wage and price control has failed, and has failed disastrously, on three occasions since the war; and it has never succeeded in any country, or in any century. I am appalled at the prospect of a government of national unity, which inevitably would have little or no parliamentary opposition, pursuing a policy with a record of failure which must be unequalled, and which is inherently unsound. It is debatable which would occur first: national bankruptcy or civil strife.
Inflation is a reduction in the value of money. This can occur only when the quantity of money increases more than the quantity of goods and services for which money is exchanged. The Nadon's money stock can increase for various reasons e.g. an external balance of payments surplus. The present inflation is the result of an unprecedented creation of new money by the last Tory government to finance its massive budgetory deficits. The tax increases in Mr Healy's March Budget have substantially reduced the Budget deficit, and hence the increase in the money stock. Provided this policy is maintained, the present inflation will end as surely as day succeeds night. But, such is the peculiarity of money, this will take time — possibly as long as two years. Threshold agreements, indeed wage increases generally, will not affect this process, since they do not of themselves
create new money. .
The policy which is known to overcome inflation, the slowing down of the growth of money, will dislocate economic activity, because this is the inevitable consequence when people realise that inflation is really coming to an end. The interruption to production and the loss of jobs will only be temporary, but the hardships will be real and it will be felt. If, therefore, inflation is to be overcome, there will be a need for political leadership which commands the trust of the people.
Noel Paulley Corfu, Cardiff Road, Creigiau, Cardiff.
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