Outlook: What's good for GM may not be best for Britain
Outlook on attitudes to monetary union, the WH SMith proposals and the new bid for mci
Thursday 16 October 1997
In itself there is nothing particularly startling or new in this. It is the sort of thing that the CBI, some of its larger corporate members, and Britain's burgeoning band of inward investors, have been saying for some years now. The latest round of pro-EMU noise from big business is none the less being given an added piquancy because of the general view that the new Labour Government is warming to the single currency and might want to take us in at the earliest opportunity.
Given that the electorate, according to the opinion polls, is still strongly sceptical about monetary union, it plainly helps in the softening-up process if business starts to warn of dire consequences if we don't join. It is probably too conspiratorial to believe that Gordon Brown and others are deliberately pushing business into making such comments. Dr Mohatarem doesn't even live in Britain and it seems doubtful that he has met either Tony Blair or Mr Brown. But certainly it is sometimes hard to tell just who is manipulating whom. Is it big business trying to push the Government towards monetary union or is the Government enjoining business in the cause in the hope that if enough authoritative voices back the single currency then eventually it might win a referendum on the issue?
The probable answer is that what we are seeing here is a meeting of minds. The single currency suits the big multinationals, who see in it an opportunity to cement Britain's part in the single European market and enhance their power, profits and influence. And it suits inward investors, who fear that if Britain is not wholly a part of Europe, then they might be disadvantaged in lucrative export markets. Mr Brown, at least, seems to have bought these arguments, even if Mr Blair is for the time being keeping his counsel.
It is worth recalling here that the CBI and some of our major companies took a very similar view of the European Exchange Rate Mechanism. We have to be a part of it, we must be a part of it, they told the Government and eventually even Mrs Thatcher caved in.
Within a year or two, struggling under the weight of unacceptably high interest and exchange rates on top of an already deep recession, they were just begging to be let out. It took that nice Mr Soros finally to force what the politicians seemed incapable of accepting - a big devaluation.
If we scrapped the pound completely, there would be no such second chances. We would be locked into whatever the European Central Bank wanted to visit on us.
So in listening to what big business has to say on monetary union, the Government needs to be very aware of the possibility that this may be no more than clever special pleading. It would obviously be beneficial for big multinationals like Unilever and BP to be part of it, whatever the economic consequences of the single currency for Britain. These are as much Continental as British companies. For them, the more integrated Europe becomes as a market place, the better. It is not entirely clear that the same is true for the corner shop owner, or any other small businessman servicing a more localised economic environment.
Big business has set the economic agenda wrongly once before. The Government should be very careful that it doesn't happen again. It may be that Dr Mohatarem is right about the single currency, but the Government should not be standing in awe of what these people are saying. The issue is a rather wider one than the level of GM's profits and the ease with which it is able to do business.
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