Deindustrialisation on a huge scaleby John Mills / December 21, 2016 / Leave a comment
No-one can deny that liberal democracy is under serious threat from populist nationalism. The moderate left, in particular, is in the firing line. What is the single most important reason this is happening? It is that western politicians, commentators, the academic establishment and public opinion have—as a result of a combination of thoughtlessness and carelessness—pursued policies which have allowed the east comprehensively to out-compete the west where it really matters, which is in building up industrial strength.
It started in the 1970s when the Keynesian consensus broke down. The discipline provided by Bretton Woods then disappeared and there was a huge credit-driven boom—exacerbated by the Arab-Israeli Yom Kippur War and the OPEC oil price hike—all of which drove western opinion into the arms of monetarism. As the battle against inflation took centre-stage, interest rates peaked at 15 per cent in the UK—and 20 per cent in the USA—and western currencies massively revalued. The UK’s trade weighted real effective exchange rate rose by about 60 per cent between 1977 and 1981.