An Exchange Rate Target: Why We Need One
By: John Mills (author)Paperback
2 - 4 weeks availability
It is increasingly recognised that the over-valued pound is holding back the competitiveness of British exporters. Financial Times columnist Martin Wolf has said that a weaker pound is 'welcome' while Roger Bootle has written in the Daily Telegraph that 'our best hope lies with a competitive pound.' However, the devaluation of sterling by 20 per cent since 2008 has barely impacted exports, which have increased by only two per cent. The problem is partly one of uncertainty. As Martin Weale of the Bank of England points out, businesses 'are reluctant to devote substantial resources' to increasing exports because 'they are concerned that the competitive advantage gained by the United Kingdom after 2008 might not last'. In An Exchange Rate Target: Why we need one, economist and successful entrepreneur John Mills argues that the UK government should set a competitive exchange rate target and take active measures to achieve it. He proposes a target exchange rate for sterling which is one third lower than the recent $1.60 average - about $1.05. Crucially, businesses should feel confident that the government is committed to this exchange rate target for the long term.
Only then will they have the policy certainty they need to invest and allow the UK to reap the benefits of a weaker pound. Mills also cogently argues that many of the pressing social and economic problems the country faces cannot be solved without a devaluation. Currently the UK has a gargantuan GBP100bn annual trade deficit in goods with the rest of the world. Purchasing power is lost in the UK economy as what we sell to the world is less than what we buy. As a result, there is sub-optimal demand, which creates structural unemployment, and our inability to pay our way in the world leads to a ballooning of government and private debt. High unemployment encourages dependence on the welfare state and indebtedness imperils our economic future. Furthermore, the strong pound has led to manufacturing job losses in the former industrial heartlands of the UK, perpetuating inequality. Without a competitive exchange rate, John Mills emphatically states, Britain has no chance of reversing long-running economic decline and prospering in the hyper-competitive world of the twenty-first century.
John Mills is an entrepreneur and economist. He graduated in Politics, Philosophy and Economics from Merton College, Oxford, in 1961. He is currently chairman of John Mills Limited, a highly successful import-export and distribution company. He has been Secretary of the Labour Euro- Safeguards Campaign since 1975 and the Labour Economic Policy Group since 1985. He has also been a committee member of the Economic Research Council since 1997 and is now Vice-Chairman. He is also Chairman of The People's Pledge campaign for a referendum on Britain's EU membership. He is the author of Growth and Welfare: A New Policy for Britain (Martin Robertson and Barnes and Noble 1972); Monetarism or Prosperity? (with Bryan Gould and Shaun Stewart Macmillan 1982); Tackling Britain's False Economy (Macmillan 1997); Europe's Economic Dilemma (Macmillan 1998); America's Soluble Problems (Macmillan 1999); Managing the World Economy (Palgrave Macmillan 2000); A Critical History of Economics (Palgrave Macmillan 2002 and Beijing Commercial Press 2006); and Exchange Rate Alignments (Palgrave Macmillan 2012). He is also the author of a previous Civitas pamphlet, A Price That Matters (Civitas 2012).
Author, Foreword, Introduction, 1.Standard of living, 2.Unemployment, 3.Dependency, 4.Debt, 5.The Welfare State, 6.Inequality, 7.Britain's place in the world, 8.Remedies, Notes
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- ID: 9781906837525
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