CITY AND SUBURBAN
When your cold doesn't get better, that means there's something wrong with the doctor
CHRISTOPHER FILDES
Recessions are like colds. Give them a chance and they cure themselves. You catch one willy-nilly, carry on for a few days, spreading it about and making it worse, and then go to bed in a bad temper. Then comes the cheering moment when the antibodies get through and you wake up feeling bouncy. It takes about a week. If after three weeks it still hasn't happened, the antibodies are as exhausted as you are, the bounce is missing, and whatever may be wrong with you, there is something wrong with your doctor. That has been our trou- ble. We caught a nasty recession but the treatment made it worse. We suffered two debilitating years of dear-money therapy, with Dr Lamont always telling us that we would feel better in the morning, and always surprised when we didn't. He suf- fered — or, rather, we suffered — a whole series of falsely diagnosed rallies and painful relapses. Finally he was forced into taking a second opinion and changing his methods. We show signs of responding, but we are not going to snap out of this reces- sion and bounce straight back in fighting form. It has taken too much out of us. I am not sure that Dr Lamont has taken this on board. He is a great believer in confidence, but cannot be said to inspire it. He is fairly lucky not to find himself explaining to the General Medical Council why his treat- ment was successful but the patient had died. Now he will take any sign of recovery as a good sign. If only it were so easy.
An import-led bounce . . .
WHAT WE now have, so the Chancellor tells us, is a strategy for growth. Oh, good, what a splendid idea, why didn't we have one before? Well, because we were in a tangle. We had a tough monetary policy, high interest rates, a high exchange rate. That gave us a recession which took the Treasury by surprise, so that it failed to forecast the collapse of the public finances and the explosion of the Budget deficit. Then we had a tight monetary policy and a lax fiscal policy. Now the exchange rate has been knocked off its perch, and interest rates have come down by almost one third in three months. Monetary policy has been relaxed, and as for fiscal policy, it is getting laxer. The two between them should be stimulus enough to get some kind of growth under way. The question is: what kind? One where the consumer and the Government are both of them borrowing and spending more? That sounds to me like an import-led recovery. If so, it will not get us far. James Capel's economists fear a budget deficit of £47 billion next year, and a payments deficit on current account bal- looning to £20 billion: 'Financing the twin deficits at the current level of interest and exchange rates', they say, 'looks an almost impossible task.' Next year's crisis, here we come. I wish we had heard of a strategy for making our devaluation work. That means an export-led recovery, but it means hard tack at home, saving, not spending, and, for the Government, real economies and unpleasant choices. They were ducked, this time round, in favour of an implausible commitment to hold public pay down. Today's ministers have never liked to be reminded that, as de Gaulle said, to govern is to choose.
. . . a conditioned yip
IT WAS unkind of Denis Healey to call Mr Lamont an infuriated chihuahua, but he never sounds more yippy than when he barks at the banks. Freud would have called it a displacement activity, Pavlov a condi- tioned reflex. He is biting the hand which he hopes will feed his recovery. Strong growth cannot be built on weak finances, and our financial businesses — most all the big banks and insurers — have taken a fear- ful hammering in this recession. He ought to want to see them healthy and profitable, for their own sakes, and for their central part in the economy. He does not sound like that, he does not act like that. A glance across the Atlantic would show him that this requirement for recovery is in place, after two years in which the Federal Reserve has nursed a feverish and weak- ened banking system back towards health. The treatment has included a steady diet of Government debt. At times when banks are on short commons, it can help to build them up. It can be an effective treatment for monetary malnutrition. Mr Lamont does not approve of it, and will not consid- er it, even though, without it, his budget deficits will take an awful lot of swallowing. The Treasury has conditioned his reflexes.
Swiss on a roll
WHAT an extraordinary thing to say about the Swiss. They find themselves accused of letting their hearts rule their heads and their wallets. It would be the first time. Even in William Tell's day, the apple had a numbered acount and knew what was good for it. Now they have turned down the Euro-deal on offer to them — and those who mistook this decision for sentiment went on to forecast how badly the markets would take it. The Swiss franc and Swiss shares have been going up ever since. The role of a safe currency, outside the turmoil of Europe's Exchange Rate Mechanism, is one that the Swiss franc can play with its eyes shut. The Swiss have come so far, not by doing what their neighbours do, but, like good businessmen, by making their product distinctive. A Euro-bank is just another bank but a Swiss bank is something else. When, as now, their neighbours make a hash of things, their advantage counts dou- ble, so why vote to discard it? If Providence had meant Switzerland to be a level play- ing-field, he would not have given it Alps.
Off the rails
BRUNEL'S main line along the Vale of the White Horse is (as I noticed the other day) getting extra tracks to accommodate a per- turbing new traffic in imported coal. It is getting a new bridge, too, across the widened line. The girders arrived the other day, coming all the way from Scotland, by road. The railway as carrier could not com- pete either on price or on time.
Off to work we go
SOME of the Chancellor's seven new eco- nomic advisers are men of real stature. I am sorry, therefore, that the City has labelled the new set-up 'Off-white and the seven dwarves.'
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