City and Business: Only chaos will make us join the euro
Sunday 06 June 1999
Within the dismal science, international monetary affairs probably counts as the most invisible if not arcane specialty. Robert Solomon begins his monumental history of the subject from 1945 to 1981 with these words: "Like the traffic lights in a city, the international monetary system is taken for granted until it begins to malfunction and to disrupt people's daily lives."
Such disruptions do, of course, occur - most notoriously in the case of the hyper-inflations of Germany's Weimar Republic and in emerging market economies today. They occur closer to home, too.
Solomon reminds us that in July 1975 - four years after president Richard Nixon took the dollar off the gold standard, mercilessly exposing the competitive weakness of the British economy - the Archbishop of Canterbury urged his flock to "pray earnestly" for the pound as well as for the country.
The boardrooms of many British manufacturers are sending up prayers again - this time for the pound to go down, not up. Still, on balance, the pound is doing fine these days, though manufacturers find its strength a drag on their ability to compete overseas.
As long as the pound remains in basically sound health, the euro will remain a no-sale to the public. There is no way to make palatable the basic message of the pro-euro lobby: "Take your medicine, children. We know what's best."
This is the card William Hague plays when he urges the Government to halt its preparations for euro entry. This is why nine out of 10 sane newspaper readers yawn when they come to the euro news and then - perhaps with a twinge of social conscience - turn the page. What's wrong with the pound? Nothing much, so why should we dump it?
Even the pro-euro cognoscenti are having second thoughts. The Italians are backsliding on their commitment to keep down their government deficit. So foreign exchange dealers are marking down the euro against the dollar on the perception that it is weak - ie inflation-prone or potentially volatile.
Against all this is there any wonder Mr Blair is going slow? And yet there is a way to couch the debate over Britain's entry into the euro in terms that would energise the public . Call a referendum. Ask: "Do you think the dollar should become the world's sole currency?"
Fear of this scenario is what drove Brussels to push through the euro against the inclinations of a huge minority, if not majority, of the Continent's 300 million citizens. Brussels has created the euro as a countervailing power to the dollar. It is designed to be an alternate reserve currency.
The benefits of operating in a zone in which your money is a currency in which the rest of the world likes to save far outweigh the benefits commonly trotted out by the euro lobby - no more foreign exchange risk, more transparent pan-European markets, etc, etc.
Wall Street and corporate America benefit enormously from everyone else in the world using dollars as their store of value. Even as the dollar fluctuates against other currencies, Wall Street and corporate America enjoy easier, cheaper, more-secure access to capital than their overseas rivals.
The issue for the UK as it considers the euro is not whether it is worth $1.04 or $1.17 tomorrow, but whether it will challenge the dollar as a reserve currency in three to five years. This can be broken down into two questions: 1) Do we think the euro will become an alternate reserve currency? 2) Do we think our economy can perform without access to easy, cheap and secure capital?
Even these questions, however, remain technical. The future of the euro is inextricably bound to the future of Europe in global markets, not to mention Balkan war zones.
The wise man will simply ignore the increasingly desperate posturing of Hague on the euro. He can even afford to ignore the arguments of the mainstream pro- and anti-euro lobbies in favour of his roses.
Britain will stay out of the euro as long as the traffic lights continue to work. It will join when they malfunction and the pound comes down with something serious.
Question time for Auntie
Every once in a while the gossipy incestuousness of the media gets me down. The BBC is one of the most important economic, as well as cultural, institutions in the country, and yet reporting on the selection of its next boss has focused almost exclusively on personalities.
As announcement day approaches, I wonder what effect this will have on the public's support - or lack thereof - for the BBC. I cannot get a refrain out of my head: "Pass the sick bag, Alice."
Here's an idea: put the selection process in the public domain. Candidates for director-general could each have 10 minutes to discuss their strategies for the BBC on air in the mode of a party political broadcast.
Outgoing director-general John Birt first. He would say how the BBC's money has been spent under his management; how much for programming, how much for management consultants, how much invested in such new initiatives as digital television and the co-venture with Discovery.
Then Greg Dyke, Richard Eyre, Tony Hall and Alan Yentob. Each would explain two things: where he sees the BBC fitting into the nation's cultural life over the next 10 years; and where he sees the BBC fitting into the global media over the same period.
The idea is, of course, a joke. It may conceivably happen in the late 21st century, but not before.
Still, the BBC faces eclipse as an economic force. The next boss must deal with competition not just from ITV, Channel 4 and Murdoch, but also British Telecom and Bill Gates.
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