Austin Mitchell on John Mills: Listen to the expert on export
John Mills is just the man to help shed light on the reason for Britain’s decline, says Austin Mitchell
15 June, 2017 — By Austin Mitchell
BEING both a successful businessman and a highly trained economist, John Mills offers a combination of talents that allows him to offer a new insight into a perennial British problem. What is the cause of Britain’s long comparative decline and what are the prospects for an economy crippled with debt that can neither pay its way in the world nor support the superstructures of welfare education and health a modern electorate demands?
Neither politicians nor academic economists have offered effective answers or satisfactory explanations. The politicians dole out nostrums that usually serve their self-interest: tax cuts, planning, rolling back the state, breaking the power of the unions, deregulation and freeing up markets. The academics offer new theories that are often just dolled-up old ones: monetarism, neoliberalism, marketisation, even modern mercantilism for a brief period in the 1970s.
What none of them takes account of is the exchange rate, which is taken almost as an act of God.
Yet as Mills shows in this powerful analysis, an overvalued exchange rate is the common factor to the causes of British decline and a competitive one is the main explanation of the success of our German and Asian competitors.
The argument is well documented and essentially straightforward. Politicians and our powerful financial interests required a high and stable exchange rate which penalised production and exports and subsidised imports.
Competitors started with a very low exchange rate and kept it down, which built powerful exporting sectors with economies of scale attracting the talent and ability that here went into the City, speculation and creative accountancy hyping profits and the short term.
It’s a sad story that leaves us keeping going by borrowing, selling off every available asset and blowing up a huge bubble of asset and house inflation that may or may not burst. Yet nothing can be done to reverse it without a competitive exchange rate to boost light industry, stimulate exports and rebalance the economy.
Mills makes the point powerfully with a wealth of statistical analysis in a book that avoids both complicated econometrics and incomprehensible gobbledygook.
It should be read by politicians and business people alike.
It will upset them by showing what a mess they’ve made. But if they’ve got half a brain it should help them to understand why and realise the painful but necessary processes of getting out of it.
And boy do we all need that.
• Austin Mitchell was Labour MP for Great Grimsby between 1977 and 2015.
• Britain’s Achilles Heel: Our Uncompetitive Pound. By John Mills, Civitas, £15