Recent essays have focused on the boost to economic growth that occurs quite naturally whenever obstacles are removed. I highlighted the positive effect of Margaret Thatcher’s decision to allow markets, including the labour market, to operate freely by curbing the vice-like grip of the unions, lowering taxes, and encouraging home ownership through the sale of Council-held properties.

I have continually stressed the importance of free trade when so many nations are embarking on trade wars against those regarded as competitors rather than trading partners, despite the impoverishing effect of tariffs on the people of their own country. This malign notion is based on the belief that an increase in exports produces a current account surplus (a “good” thing) whereas higher imports may produce a current account deficit (a “bad” thing) ignoring the fact that it’s impossible for every country to have a current account surplus at the same point in time!

Currency manipulation

Competing for excellence is the platform for commercial success, as every business-owner knows – and government intervention in markets, such as using taxpayers’ money to subsidise failing sectors, is a distortion that flies in the face of this principle. Yet, while most of us acknowledge the importance of competition between producers as being healthy for the economy, competition between nations becomes a source of great bitterness whenever the playing field is perceived to be uneven due to the manipulation of currency exchange rates.

The myth therefore persists that any particular country’s economic woes, including comparatively inferior living standards of its citizens, may be alleviated by a devaluation of its currency on the basis that this would boost its exports by making them cheaper to overseas customers.

Let’s pause for a moment and exercise our reason: if all these “competing” nations just happened to be using the same currency, say gold (as once was the case), it would be impossible for any one country to improve its situation by devaluing its currency – indeed, the very concept would be meaningless. A disparity in living standards between different nations, as is certainly the case with EU nations, would still exist, of course, but the government of a country with a weak economy couldn’t blame the currency for this – after all, every eurozone country is using it!  So the reason for relative prosperity or poverty in respective nations must lie elsewhere. How to resolve it?

Competition is critical

For a country’s economy to be “competitive” it must simply be able to produce goods and services of a quality acceptable to overseas customers at prices they are willing to pay - and that payment can be made in any currency nominated by the seller as trustworthy. Which begs the question of why some currencies are trusted more than others.

Forgive me for stating the obvious: whoever receives payment for goods or services they have sold must be able to use that money to pay for their own purchases; and that means the money must maintain its purchasing power, often over an extended period. That will not happen if its function as a medium of exchange is compromised by, say, unbridled money printing by the central bank, or by uncontrolled fractional reserve lending by deposit-taking commercial banks. Such inflationary practices have a directly adverse impact on production costs down supply chains, forcing a descent into uncompetitive pricing.

Once this process takes hold it is difficult to control its inexorable slide into stagnation of productive processes, a rise in unsold stock levels, wage demands that cannot be afforded and, inevitably, an industrial and commercial slump. What follows is widening state dependency by uncomprehending citizens, institutionalized indolence and, ultimately, societal breakdown.

All avoidable, of course

Let’s return to the question of how a nation may become internationally competitive when currency manipulation is not an option. Maintaining a low-cost, smooth-running industrial framework is a huge plus in in enhancing productivity. But, once again, today’s big-state structure is a millstone round industry’s neck.

We have just witnessed at first hand the EU’s determination to destroy UK competitiveness by imposing bureaucratic form-filling obligations on its ferry and lorry transport chains. When it comes to regulatory insanity, the EU has no rivals. Right now Brussels is planning a “carbon border tax” that will inflict penal tariff rates on imports from countries perceived to have lower environmental standards.

But even here in the UK the Supreme Court has effectively extended great swathes of employment protection provisions on the engagement of gig-workers previously classed as self-employed freelancers. In Spain too: from this week, “platform workers”, aka Deliveroo cyclists, will be classed as employees, like it or not.

The nannying takeover

What’s behind this? The deluded suckers who believe the propaganda surrounding all this folderol will say that it’s being done in the workers’ interests to counteract exploitation and hence improve their working conditions. This, of course, is utter rubbish (or stronger)! It’s done so that they, the state-functionary police, will be able to access still more intrusive personal data and enforce tax collection without hindrance. The one thing they never do is consider the big picture. The effect of all this interference is to create vast numbers of redundancies in sectors whose workers had never expressed any demand for the pension contributions, holiday pay and benefits now thrust upon them.

So insidious is the slippage into the big-brother domain that many large conglomerates are now complicit in abetting the state’s strictures. Some now insist that a “living wage” is paid throughout its supply chain, notwithstanding the impossibility of monitoring its operation in a host of domains, or the inconsistency of its rates and measures. Being cocooned from the sharp end faced by the thousand of smaller businesses they remain untroubled by the unemployment generated whenever businesses that might have presented some unwelcome competition, are forced to close because they can’t afford to pay an arbitrarily determined minimum wage. There’s always work for conniving statisticians, heedless of the impact of the folly they inflict.

The only certainty in all of this is its impact on costs - and hence competitiveness. Many businesses are compelled to succumb to the increasingly fashionable touchy-feely culture and provide such goodies as diversity training and “unconscious bias” courses – all commercially unproductive yet occupy inordinate amounts of time, and enforced by a government whose budget deficits stand at wartime levels.

It’s all very well, of course, if businesses can either absorb these extra costs or pass them on in their pricing structures – but because their nature is essentially uncommercial and obstructive they add no value. But never forget that they are not borne out of real savings – they are simply yet another manifestation of the good old reliable printing press. The result? You’ve guessed it: an inflationary spiral in which prices will soar, pushing up the cost of living of everyone in the wider economy.

“Why is Keir Starmer making life so easy for the PM?” is the question posed in this week’s “Spectator”.

Answer: Starmer couldn’t possibly do a better job of propagating and enacting the ideals of big-state socialism than the present Conservative government. Thatcher must be turning in her grave.