Here We Go Again

Was the received wisdom wrong about the European exchange rate mechanism?

The received wisdom descends from above, so you feel left out if you haven’t received it. In parliament, all the political parties — government and opposition — sometimes enjoy it, and the Financial Times, the Economist and the BBC take it for granted, and the Confederation of British Industry marshals a phalanx of chairmen behind it. Can they all be wrong? Well, they could be.

They all told us, as you may remember, that we would find salvation in Europe’s exchange rate mechanism, which was the dress rehearsal for the single currency. So we joined, and we suffered, and were told that it was good for us, and were warned (on behalf of Britain in Europe) that to leave would wreck our political and currency stability for a generation. Then we left — or, more precisely, were forced out — and the economy recovered briskly. What price salvation now?

After the rehearsal, the curtain twitched, the euro took centre stage, and the received wisdom was that we had to get in on the act. The Prime Minister — by now, Tony Blair — put himself at the head of Britain in Europe’s campaign. All the familiar cheerleaders fell in behind him. We were warned that, if we missed our chance, grass would grow in the streets of the City of London. At the Bank of England, Eddie George had his doubts: “If this thing is supposed to be for ever, I can’t see what the hurry is.”

Blair never put it to the test. He had promised a referendum and could not be sure of winning. Memories of the dress rehearsal lingered, the City of London survived and even prospered — and, as time went on, the euro developed troubles of its own. Perhaps, after all, this thing would not be for ever? Mervyn King, George’s successor, positively hopes so: “The tragedy of monetary union in Europe is not that it might collapse but that it might continue.”

Now another prime minister has committed himself to a referendum: this time, not on the single currency — we are excused that — but on the European Union itself. Is this the club we thought we had joined, and do we still want to be members? Once again, wisdom has fallen on the familiar receivers, who pass it on and urge us to stay. Once again, fear is the spur, as they warn us of the terrible risks of defiance. Why, outside in the cold, we might be no better off than Greenland, or Switzerland.

So, at least, all the beneficiaries of the received wisdom keep telling us. Can they all be wrong? Well, they have been.

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