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Sunday 14 August 2016

Liam Fox Channels Churchill

Over at the Department for International Trade, the Civil Servants working for disgraced former Defence Secretary Liam Fox have made a startling discovery: their boss has begun to channel Winston Churchill. The bad news about this development is that the part of Churchill that Fox is channelling is the singularly most disastrous decision he made during a long and variably successful political career.
And it was because of this realisation that the press release, which told “UK export opportunities remain strong after EU referendum … Department for International Trade continues to provide a range of support for new and existing exporters”, was withdrawn. Why? After telling “While the outcome of future negotiations can’t be predicted, nothing changes until the UK has exited from the European Single Market”, the plot is lost.

This is the paragraph that gives the game away: “If the UK does exit the European Single Market, it will be governed by World Trade Organization (WTO) rules until any new trade deals are negotiated. We’ll remain a competitive player on the global stage because all major economies and most minor ones are members of the WTO. The WTO requires each member to charge the others the same tariffs and grant them ‘most favoured nation’ market access”. Ri-i-ight. Let me add a shot of harsh reality to that cocktail of optimism.

WTO rules would mean other EU member states slapping a 10% tariff on (for instance) cars. And that is where Fox has channelled Churchill’s gravest mistake. Winshton, made Chancellor of the Exchequer by Stanley Baldwin in 1924, was persuaded the following year to put Sterling back on the Gold Standard at pre-World War 1 exchange rates.

But Sterling had effectively depreciated by around 10% against the US Dollar, and many other currencies, in the meantime. The effect was to raise the prices of exported goods - coal, engineering machinery, railway locomotives and rolling stock, shipbuilding, and yes, cars and other road vehicles - by 10% across the board, at a time when similar industries in mainland Europe were getting back to full production after the Great War.

Hundreds of thousands of jobs were effectively exported. Unemployment rose. While The New York Times reported that Churchill had carried “Parliament and Nation to Height of Enthusiasm”, John Maynard Keynes simply asked why Churchill did “such a silly thing”. Looking back many years later, J K Galbraith said of Churchill’s mistake “It proved that the war had changed nothing. It was a thought to which Winston Churchill, historian and professional custodian of the British past, was highly susceptible”.

Liam Fox, like Churchill, is equally susceptible to the view of Britain outside the EU that lets all those sniggering foreigners know that Brexit has changed nothing. But the consequences of his foolhardy belief in the economy’s ability to transcend reality will have the same consequences as Churchill’s mistake all those years ago. The difference lies only in the nature of the jobs that will be lost - apart from car manufacturing.

Small wonder, then, that the press release was pulled very soon after it was first released. Perish the thought that the public might find out just how inept Liam Fox really is.

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