Against Inflation: Speeches in the Second Chamber 1965–1977

127 Pages·1979·11.909 MB·English

by  Lord Robbins (auth.)

AGAINST INFLATION
Also by Lord Robbins
AN ESSAY ON THE NATURE AND SIGNIFICANCE OF
ECONOMIC SCIENCE
AUTOBIOGRAPHY OF AN ECONOMIST
ECONOMIC CAUSES OF WAR
THE EVOLUTION OF MODERN ECONOMIC THEORY
MONEY, TRADE AND INTERNATIONAL RELATIONS
POLITICAL ECONOMY: PAST AND PRESENT
POLITICS AND ECONOMICS
THE THEORY OF ECONOMIC DEVELOPMENT IN THE
HISTORY OF ECONOMIC THOUGHT
THE THEORY OF ECONOMIC POLICY IN ENGLISH
CLASSICAL POLITICAL ECONOMY
AGAINST INFLATION
Speeches in the Second Chamber
•g6s-•977
Lord Robbins
M
© Lord Robbins 1979
Softcover reprint of the hardcover 1st edition 1979
All rights reserved. No part of this publication may be
reproduced or transmitted, in any form or by any means,
without permission
First published 1979 by
THE MACMILLAN PRESS LTD
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British Library Cataloguing in Publication Data
Robbins, Lionel, Baron Robbins
Against inflation
1. Inflation (Finance) -Great Britain
Addresses, essays, lectures
I. Title
332.4'1 HG939·5
ISBN 978-1-349-04480-1 ISBN 978-1-349-04478-8 (eBook)
DOI 10.1007/978-1-349-04478-8
This book is sold subject
to the standard conditions
of the Net Book Agreement
To my friends in different parts of the House
Contents
Preface IX
INTERNAL INFLATION AND THE FUTURE RATE OF EXCHANGE
Finance (No. 2) Bill Second Reading and Remaining
Stages; 4 August 1965 1
2 A BREATHING SPACE AND PREMATURE OPTIMISM
Motion: The Economic Situation; 9 February 1966 7
3 FEAR OF DEPRESSION IN A PERIOD OF OVERHEATING
Motion: The Economic Situation; 28 July 1966 12
4 DEVALUATION AND THE DANGERS AHEAD
Motion: Devaluation of the Pound Sterling;
21 November 1967 17
5 THE U.S. DEFICIT AND THE INTERNATIONAL PROBLEM
Motion: The Economic Situation; 10 April 1968 20
6 DISASTER AVERTED BUT APPREHENSIONS CONTINUE
Finance Bill Second Reading and Remaining Stages; 17
July 1968 26
7 LESSONS FROM EXPERIENCE AND WARNINGS FOR THE FUTURE
Debate on the Address (Second Day); 7 July I970 30
8 A FOOL'S PARADISE-THE VULNERABILITY OF THE
GOVERNMENT
Motion: Public Spending and Economic Policy; I8
November 1970 35
9 COLLAPSE OF BALANCE-OF-PAYMENTS SURPLUS PREDICTED
Motion: Wilberforce Report and the Ecol'omic
Situation; 3 March I97' 4I
IO INFLATION AND UNEMPLOYMENT
Debate on the Address (concluded); 9 November 1971 46
I I THE FLOATING POUND AND THE CORRUPTING INFLUENCE OF
INFLATION
Motion: The Economic Situation, Inflation and U nem-
ployment; 5 July I972 53
I2 REDUCTION OF THE RATE OF INFLATION-AN ESSENTIAL
DESIDERATUM
Counter-Inflation (Temporary Provisions) Bill Motion
for Approval; 23 November 1972 6o
vii
Vlll Contents
13 THE CONDUCT OF THE CREDIT BASE CONDEMNED
Counter-Inflation Bill Second Reading; 5 March 1973 65
14 THE CRISIS IN THE MINES AND INCOMES POLICY
Motion: Industrial and Economic Situation;
6 February 1974 70
15 THE SIGNIFICANCE OF THE SO-CALLED SOCIAL CONTRACT
Q.UERIED
Counter-Inflation (Abolition of Pay Board) Order 1974;
18 July 1974 75
16 ADVOCACY OF REFLATION ABSURD WITH PRICES RISING AT 20
PER CENT PER ANNUM
Financial Bill Second Reading; 30 July I974 78
I7 PAY RESTRAINT AND 'MONETARISM'
Motion: The Attack on Inflation; 30 July I975 84
I8 PERSISTENCE OF APPREHENSIONS AND DEFICIT FINANCING
Debate on Address (Second Day); 20 November 1975 88
I9 A LACK OF FOREIGN CONFIDENCE
Motion: The Economic Situation; 9 June I976 93
20 THE FURTHER THREAT TO THE POUND
Debate on the Address (Second Day); 25 November 1976 97
2I ASSISTANCE FROM ABROAD AND PROBLEMS AHEAD
Motion: The Economic Situation; 26 January I977 101
22 THE THREATENED BREAKDOWN OF PAY RESTRAINT
Motion: The Economic Situation; 20 July I977 105
23 THE REVIVAL OF STERLING AND ITS PROBLEMS
Debate on the Address (Second Day); 8 November 1977 108
Index 112
Preface
As its title implies, the centre of gravity of the following collection is the
decline in the value of money, which, in greater degree than in most other
Western financial centres, has affected the economy of this country for
more than a quarter of a century. During this period diagnosis of this
movement and its effects, internal and external, have been a more or less
continuous preoccupation of economists concerned with the practical uses
of their subject. I myselfhave written on these subjects on many occasions.
But in my position as a cross-bencher in the Second Chamber at
Westminster I have had special opportunities for observing the evolution
of events and policies as they emerged; and it has occurred to me that the
reactions involved, as reflected in successive interventions in debate on my
part, may have some interest supplementary to more systematic treatment
elsewhere.*
Accordingly I have here collected such of my speeches as have relevance
in this connection. Save for the correction of obvious mistakes in
reproduction, the omission of unnecessary references to other speeches or
interruptions and certain unessential digressions or perorations, they are
reproduced as delivered and in chronological order. Needless to say, as I
have re-read them, I can see points which should have been better
emphasised and objections which I could wish to have anticipated. But I
have made no attempt at revision other than the instances mentioned
above, preferring that they should be read as they were conceived, either in
preparation or delivery, as contributions to debates rather than as
systematic disquisitions standing on their own.
It is inevitable that this form of presentation involves some repetition
and considerable variation of emphasis. The repetition I do not regret, in
view of comments sometimes ventilated by friends abroad not in close
touch with the minutiae of our local controversies. I am glad rather than
otherwise that the main points of view which have inspired my outlook
over these years, should be demonstrated to have been reiterated so often.
But the variation of emphasis, deriving at least partly from variation of
* A more or less systematic outline of my fundamental beliefs in this respect is
contained in the papers reprinted in my Money, Trade and International Relations
( 1971). See also my Memorandum ofE vidence to the Radcliffe Committee on the Working
of the Monetary System (Memoranda of Evidence, Vol. 3, pp. 211-19) and my
critique of the Report of that Committee in the collection mentioned above-a
paper to which I attach especial importance.
ix
X Preface
aspects under discussion, perhaps deserves some further elucidation. I
would like therefore in this Preface to state briefly and baldly the chief
principles which have guided my approach.
1 . Inflation in the sense of a fall in the purchasing power of money is
an evil-at least ifi t exceeds a very small percentage rate. It is an economic
evil as regards the smooth running of the economic system in that it falsifies
expectations, distorts the allocation of productive services intended by
consumers and investors, encourages undesirable speculation and, unless
other areas are inflating at the same rate in relation to productivity, creates
imbalance in external financial relations. It is an ethical evil in that it
imposes unfair burdens on those members of the country who are unable to
secure adjustments of their money incomes in compensation; and it
involves governments in fraudulent representations ofthe real implications
of the money returns on public borrowing. It is a social evil in that the
prospects of quick gains foster corruption and social divisiveness.
2. The initiatory causes of inflation are various: demand inflation
arising from excessive public expenditure; cost inflation arising from
demands for rates of pay disproportionate to productivity at constant
prices or adverse changes in the terms of international trade. But in neither
case is inflation likely to go far, if there is adequate control of aggregate
national expenditure in relation to the value of the national product
estimated at constant prices. This is the invincible platitude from which all
considerations of policy must begin.
3· Such policy necessarily involves direct control of the supply of
money and credit. But it does not exclude indirect control by fiscal
measures. On general grounds I believe that the main policies of public
taxation and expenditure should be based on considerations other than
those relating to macro-economic equilibrium. I am also opposed to 'fine
tuning' in this latter connection, for obvious reasons relating to the
statistical margins of error involved in such operations. But, especially in
times of acute instability in the value of money, I think it is unwise to pass a
self-denying ordinance in respect of any fiscal measures devoted to curing
such troubles. Here I part company with extreme monetarists.
4· The curbing of inflation should not be described as deflation. It is
easy to fall into this habit in informal talk; and candour compels me to
admit that I myself did so in the first few speeches printed in this collection.
But it is wrong and misleading: it fails to distinguish a rate of increase and
movements in that rate. Deflation is a positive deficiency of aggregate
expenditure in relation to output at constant prices; and, as we saw in the
thirties, can be also a very great evil. But reducing the rate of inflation is not
deflation. Inflation may still proceed at a dangerous level when the rate has