Letter: Remember the 364 economists

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The Independent Online
Sir: The Independent should be congratulated on its Forum for National Recovery, but are we about to see history repeat itself? Just as the 364 economists who wrote to the Times in 1981 calling for a radical change in economic policy managed to do so as output started to recover, recent shoots of recovery appear to be taking on a green tinge.

Retail sales have risen in seven of the last nine months, to be nearly 2 per cent higher than a year earlier. Car production is more than 20 per cent higher than a year earlier, while car registrations are 7 per cent higher on the same basis. All this has occurred against a background of falling house prices, rising unemployment, collapsing consumer confidence and a relentlessly gloomy media.

The risk now must be that the Government has stimulated the economy too much, and inflationary pressures will begin to build again, with Ford's planned price increases acting as a timely reminder. All this may appear far-

fetched, but as was (re)discovered as recently as 1988/89, when interest rates were raised, the lags between monetary policy and economic activity are long and variable. As a consequence, there is little chance that the easing in economic policy that has taken place since sterling's departure from the ERM has had any impact on activity. (Not that consumer demand needs a further stimulus, the problem appears to be lack of supply, as both the monthly trade statistics and Sir John Harvey-

Jones continue to highlight.)

As Nigel Lawson wrote in 1962, '. . . the Treasury has never done anything too soon. Its actions fall into two categories, too little too late and too much too late.' It would then be somewhat ironic if the same fate befalls the Independent as the 364 economists.

Yours faithfully,

ROB ELLIS

Petts Wood, Kent

10 December

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