One economic fact which stares us all in the face is that we in Britain have an enormous trade deficit, a trade gap. We import much more than we export, and especially in trade with the rest of the European Union (EU).
The brilliant British economist John Maynard Keynes – the brightest of them all – understood that a trade deficit like Britain’s could only be put right by reducing the prices of our exports and increasing the prices of our imports, by devaluation or depreciation of the currency. That is why he designed the world economy after the Second World War to include the possibility of devaluations when necessary. Bad economists have now foolishly dismantled much of what Keynes created.
Britain’s trade deficit with the rest of the EU, and especially Germany, is now more than one billion pounds every week. That is the equivalent of over a million jobs exported from Britain to the continent. To prove to yourself that we have a trade problem try counting all the BMWs, Mercedes, Audis and Volkswagens on our roads. Even my Vauxhall was actually made in Germany. It is not surprising that Germany’s manufacturing industry is now more than twice as big as Britain’s as a proportion of the economy.
So we need to adjust the value of the Pound relative to the Euro to give Britain’s manufacturing a real chance of recovery.
Had Britain joined the Euro we would by now be in a terrible crisis, like Spain for example. As it is we have two and a half million unemployed, but Spain’s equivalent unemployment rate in Britain would be eight million with more than half of our young people under 25 without jobs.
Britain’s economic recoveries in the 1930s, the 1950s, the 1960s, the 1980s and 1990s were all built on significant devaluations or depreciations and we need another such adjustment now.
We need more manufacturing still, and getting the right value for our currency is a vital condition for success.