Blog 2023 Malcolm Blair-Robinson

If we take the politics out of it, the British economy is fighting back hard against a staggering catalogue of problems brought about by flawed government going back decades. It is once again growing, as well as cutting, but like America, the growth is fragile. There is, like America, uncertainty as to whether the government is on the right track; should it do more, or get out of the way? In the US the voters now have an opportunity to give their view on this burning issue, but in the UK it will be 2015 before the people have their chance.

There is another dimension in the UK which rarely comes up these days. It is the historic over-valuation of the pound sterling to the dollar. It is this blog’s view that for many years, maybe even since the end of World War II, the true value of the pound is close to parity with the dollar. Such an idea was unthinkable to Great Britain as it watched its Empire, on which it was said the sun never set, fade into the sunset of history, to remain for a time as a nostalgic glow at the end of a glorious epoch. Nowadays, even the glow has gone and most people care not a jot for the lost Empire; in fact many think it did more harm than good.

Great Britain officially won the war, yet it lost all it was fighting to preserve, except its freedom. One thing it was determined to defend was the value of the mighty pound vis a vis the dollar. This has been an underlying objective of all governments, through a gradual devaluation process which has brought the pound from $5 to the £ to the current level of $1.60. This drift downwards has always been slower than reality called for. The consequence was uncompetitive  British manufacturing, both for export and even for home consumption. The consequence of that was a dysfunctional economy reliant on debt, with the gap between rich and poor growing and growing, and underclass dependent on benefits, continuous unemployment and the second biggest pile of debt in the world.

The countries which valued their currencies according to the realities of post war economics, including Germany, France, Italy, Japan and the US, enjoyed lower interest rates and higher growth and their populations enjoyed a higher standard of living. The UK ended up importing almost every product consumed and exporting only in the luxury or military areas, where price is less of a driver. The problem is that the UK and US economies are much closer entwined than Britain is ever willing to admit, and an imbalance in the currency has a toxic effect on growth, in the smaller and more expensive of the two.

This entry was posted on Monday, November 5th, 2012 at 2:34 pm and is filed under Malcolm Blair Robinson. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.