Monetarism or Prosperity

British economic management over the past century or more has been dominated by the preoccupation with ‘sound money’. The pre-eminence of financial interests in our economy, the importance of the City as a financial centre and the universality of sterling as a medium of exchange have meant that the interests of the real economy — of manufacturing industry — have been subordinated to the money economy and to the international role of sterling. The whole thrust of economic policy has been directed towards financial orthodoxy so as to preserve the value of sterling, irrespective of the consequences for internal growth. This has meant a constant recourse to deflation in the attempt to hold down costs and thereby maintain competitiveness; but because an overvalued pound and the deflationary policies needed to support it have been entirely destructive of our international competitiveness, we have found ourselves in a vicious downward spiral which has not only denied to manufacturing industry the conditions essential to its expansion and prosperity but which has also, in the long term, negated the objective of ‘sound money’ itself.