The president of the German Bundesbank, Helmut Schlesinger,
might be insufficiently politically accountable; he certainly deserves to take
a large measure of the blame for the recession now afflicting all of western
Europe. If the Bundesbank, obsessive about the dangers of inflation, had not run
such high interest rates in the past couple of years, life would undoubtedly
have been easier for everyone.
But on one thing, he is undoubtedly right, unlike the
elected politicians who control, or rather claim to control, Britain's monetary
and fiscal policy. As Mr Schlesinger said in an interview published on
Wednesday, sterling should have been devalued against the Deutschmark on
Sunday, when the Italian lira devalued by 7 per cent, as part of a general
realignment of currencies within the exchange rate mechanism of the European
Monetary System. Instead, the British government decided pig-headedly to
maintain the pound's parity with the Deutschmark, no matter what the cost to
the economy.
After intervention in the currency markets to prop up
sterling had failed, the government on Wednesday put up interest rates first by
2 percentage points – and then by another 3 percentage points after that had foiled to end the
run on the pound. The government's hope is that these moves, which are
guaranteed to make worse the already dire recession, will end the speculation
against sterling. But it is apparent that the feeling on the currency markets
is that the pound is overvalued. Devaluation of sterling, if it has not
happened by the time you read this, is on the cards. If the French vote no to
Maastricht on Sunday, it is a virtual certainty.
During what now seems to have been the inexorable drift
towards devaluation, the Labour leadership has gone out of its way not to
appear in favour of devaluing the pound – a position that has drawn heavy fire
from within the party, particularly from the anti-Maastricht soft left, whose
intellectual flag-bearer, Bryan Gould, has long been a proponent of
devaluation.
That the argument has been had is no bad thing: for the
first time in several years, Labour has had a free and frank political
discussion in public, which is most refreshing. John Smith should resist the
calls from Gerald Kaufman and others for the devaluationists to be gagged and
"collective responsibility" to be enforced. Moreover, even if some
arguments for devaluation are unconvincing, it is difficult to disagree with
the case for devaluation if the choice is between devaluation and higher
interest rates, as it has been this week.
But those who have attacked the leadership position of
keeping quiet about devaluation are not tactically right. Having kept their
remarks on the possibilities of devaluation to the bare minimum, Mr Smith and
the Shadow Chancellor, Gordon Brown, are now in an optimal position to attack
the Tories when devaluation actually comes. John Major and Norman Lamont,
unable to say that they are doing only what the opposition recommended, look
set to get a deserved political ducking.
More members good, no
members bad
Labour is broke. It needs more money – and fast. Usually, in
times of trouble, the party turns to the trade unions. But they are broke too.
And there's no way that the party's direct-mail fundraising operation can bring
in any more money than it already does.
In the circumstances, it
is perhaps unsurprising that the
party has decided the only option
is to increase membership
subscriptions for a year for ordinary members from the current £15. An extra £3 a
member would make a lot of difference to the party's finances.
The problem is that it's not quite as simple as that. Even
with generous discounts for people who can't afford the full membership fee, if
the proposed increase in subscription rates goes ahead, thousands of potential
members will be deterred from joining and thousands of existing members will
think twice about renewing.
Indeed, there is a danger that the numbers put off will be
so large that the party will get no net financial benefit from putting up the
subscription rates.
Given that Labour's membership is already at a post-war low,
it seems utterly mad to take such a risk.
Of course, the reason that Labour's membership has declined
is not simply that it has become too expensive to become or remain a member.
But a far more sensible solution to Labour's financial crisis would be a
dramatic cut in subscription rates and a vigorous national recruitment drive.
Where Labour Party membership is concerned, more really is better.
