LETTER : `Feelgood' factor is not good for the economy

Sir: The "feelgood factor" results from not having to worry about money ("Where's the feelgood factor?", 9 March). Not having to worry about money results from excessive wage increases, and leads to a lack of concern about prices. This in turn allows prices to rise beyond what is absolutely necessary as a result of increasing costs. This leads to excessive inflation, which quickly eliminates the short-lived feelgood factor.

The Germans have never known or understood the so-called "feelgood factor", in spite of having built one of the most successful post-war economies. Even when their economy was growing rapidly, inflation never took off because the German people will never allow suppliers to increase prices unnecessarily. Our country has suffered in the past because there have been periods when we have been unconcerned about prices.

The last three years or so have seen unprecedented price stability in this country, accompanied by low wage increases. Nobody feels good about this because we still have to worry about how much we are spending. But if we ever stop worrying about this, and the feelgood factor returns, we should be clear that inflation, high interest rates and recession are only just around the comer.

We are having to make an important psychological step forward, which is to accept that a successful economy is built on hard work and increased productivity, rather than the artificial money-stimulated booms of the past. Politicians will never admit it, but, while getting people to "feelgood" may be a political aim, it is the last possible goal of a serious wealth- creating economic policy.

David Mercer

Bedford