Europe and Currency in 1992

British capitalism, sound money and European Union

by Brendan Clifford

A “free trade area’ consisting of a dozen national currencies, each maintained by its national state as the essence of sovereignty, necessarily stimulates currency speculation. Each country in the area will trade chiefly with the other countries in it. In one respect it will be as if the trade of the whole area was conducted within a single national economy. But within this economy business men will not be able to take the medium of currency for granted. They will have to trade across a range of currencies within the single market. They will therefore have to play the money market of the free trade area in order to maintain their money at maximum value with relation to the other money systems within the area. Any major businessman who neglects to do that runs the risk of having his business damaged by a factor which has nothing to do with business efficiency.

This kind of necessary money speculation was a very small element in the orgy of speculation which made it impossible for sterling to remain within the ERM. But in a free market it is virtually impossible to make a functional distinction between speculation by traders for the purpose of maintaining the value of their money and speculation by people whose only business is speculation. The only way to end the speculation is to establish a single currency for the single market.

Whether there was concerted action by a group of major speculators to attack the ERM before the momentum towards a single currency became unstoppable remains to be established. What is certain is that it is the currency speculators who have the strongest interest in preventing the establishment of a single currency, that currency speculation is the best way to make money in Thatcherite Britain, and that Thatcher Toryism never understood the difference – the vast difference – between currency speculation and capitalism.

If we cannot be socialists any longer, let us at least orientate ourselves on capitalism as a system of production and distribution, rather than on the parasitic elements which flourish in its cracks.

Labour ceased to be a functional Opposition around 1980.  Foot and Kinnock – disoriented Bevanites trying to present an ‘image’ of the right-wing ‘collaborationist’ social democracy which they had earlier despised – could make no coherent criticism of the erratic Thatcherite conduct of the economy during the eighties because their minds were not attuned to the real practical life of Western Europe. Tory economic policy since 1979 has been a series of irrational zig-zags. The declared purpose of Thatcherism was to establish sound money and foster entrepreneurial initiative. Thirteen years later sterling has been devalued in circumstances infinitely more chaotic than the Labour devaluation of the Sixties and entrepreneurial initiative is stunned.

Thatcherism did not produce sound money. It could not have done so because it never understood the conditions of existence of money in a modern capitalist economy. The early Thatcherites spoke as if they believed that money would become sound if left to its own devices – as in the days when money was gold. Then they discovered that paper money is created and maintained by the state. And they began to veer irrationally between universalism and the narrowest kind of nationalism. By the mid-eighties Thatcherism was a jumble of half-baked notions taken on the one hand from the Victorian era – when British industry dominated the world market – and on the other hand from the rationale of the nationalist economic measures raised by many countries against Victorian free trade. Operating with this jumble of notions, Thatcherism grew increasingly out of joint with the prime requirements of actual British capitalism. It could not create sound money within a British national framework, and it would not support the establishment of a European money system. And now the Tories are blaming the Germans – who have created sound money for themselves – because the Germans did not take sterling under their wing and do for it what the Tory Government itself was unable to do.

Socialist opposition to the Common Market in the Seventies was largely based on the delusion that the socialist development of Britain would be retarded by the loss of power by the British state to create its own money and manipulate the national economy be use of it. In the event, British socialism collapsed as a national force long before there was any prospect of sterling being superseded by European money. In the late eighties this argumentation of left socialism revived within Thatcherism – but now it was capitalism that was alleged to be endangered by the establishment of European money.

The Tory Government could make a mess of things with impunity because the Kinnock leadership did not inhabit the real world. John Smith does inhabit the real world. But the legacy of ten years of ineffectual opposition is not easy to overcome, especially since his outlook is not shared by many in the Party, and since the BBC feels free to give Bryan Gould priority over him.

Smith has been consistent in his general world outlook throughout the Labour flux of the past twenty years. But he was not elected leader because of his integrity of outlook. He was elected leader because it was felt that if he had been leader in May his reassuring ‘image’ would have won the election for Labour. His qualities as a consistent right-wing social democrat are not widely appreciated in the Party. His comments therefore arc not developed and amplified by other Party spokesmen, as they would be if he had been elected for his substance rather than his appearance. And since he does not have a dominating personality his voice tends to get lost in the babble. □


This article appeared in September 1992, in Issue 31 of Labour and Trade Union Review, now Labour Affairs.  You can find more from the era at and