The dilemma is this: they know, and we know, that if the rate of inflation is to be reduced, at whatever rate my right hon. and learned Friend later this afternoon announces is the Government's intention, then the result of that, for the time being, must be a slowing down of the rate of economic growth and a slowing down, to put it mildly, in the fall in unemployment. That is the known and certain consequence of reducing the rate of inflation—not of the way in which it is done but of the fact that it happens.
British politician (1912–1998)
John Enoch Powell (16 June 1912 – 8 February 1998) was a British politician, classical scholar, author, linguist, soldier, philologist, and poet. He served as a Conservative Member of Parliament (1950–1974), then Ulster Unionist Party (UUP) MP (1974–1987), and was Minister of Health (1960–1963).
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The whole basis and justification of the resort to statutory control of wages and prices was that the exorbitant demands and monopoly powers of the trade unions were the cause of the rate of inflation with which we were afflicted. Never, not even in pantomime, has the demon king been so speedily whipped back into the wings. His place is now occupied by what is called world prices. World prices, we are assured, are the principal if not the sole cause of the continuing inflation and the justification therefore for the continuance of a statutory policy to control in detail prices, wages, dividends, and the rest... But what has that to do with inflation? Prices change relatively to one another whether there is inflation or not. Changes in the economic world reflect themselves in real, that is relative, changes in prices. But a relative change in prices, even of a group of requirements so important as those which this country habitually imports, is not the same as inflation, and it does not cause inflation.
Parties come and go, governments come and go. But if we lose the power to make and unmake governments, to make and unmake parliaments, then everything else is changed. Even if I were convinced that the result of doing what Michael Foot has described—regaining what we ought never to have given away—even if I were convinced that the result of that would be that we would have Labour administrations for the rest of my lifetime, I would say: well, so be it. But at least we have retained the power to decide under what general principles this nation is going to be governed.
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We must judge ourselves, but we may not judge others, even though I find it difficult to understand how those who argued, as we did in the last Parliament, against something essentially indistinguishable from this Bill, who denounced it in principle and who forswore anything of the sort when they presented themselves to the electorate, can support it now. Still, we must all answer ourselves. Therefore, I answer the question now, as I shall in the Lobby tonight, by saying that for myself I can not.
During any period of inflation expectations, calculations, plans are bound to be based upon an extrapolation of that degree of inflation. After all, we all extrapolate—we have to form notions of what is to come from what has just gone. Then, if inflation in fact tails off or is eliminated, a certain proportion of those expectations are defeated, in some cases disastrously; and until resources have rearranged themselves and expectations have re-formed themselves upon the basis either of reduced inflation or of stable money values, there will be transitional unemployment of resources, including labour. Anyone who purports to reduce or end inflation without causing transitional unemployment is either deceiving himself or deceiving others; and those who object to a method which undeniably holds the key to inflation that it would cause unemployment...are really saying, though they do not dare to do so openly, that they would rather inflation continued than that additional, transitional unemployment should be incurred; for if inflation is slowed down or eliminated by whatever means—by prayer, by magic, by prices and incomes policy, or by control of the money supply—that is the result which will follow.
The connection between the control of inflation and unemployment is that if a substantial level of inflation is in operation and that level is reduced, then to that extent it is inevitable that transitionally unemployment should result. I say again: it is inevitable that controlling inflation, in the sense of reducing or eliminating it, causes transitional unemployment... It arises from the disappointment of the expectations which are maintained during a period of inflation.
In order for all prices to rise—in other words, in order for the value of money to fall—it is necessary, it is elementary, that the supply of money, whatever precisely is meant by that, or whatever precise measurement is applied to it, should be increasing relative to the supply of goods and services; and since the supply of goods and services, however unsatisfactory we might find its growth, is certainly not diminishing, we are clearly confronted with the effective consequences of a growth in the money supply. Indeed, in a modern economy, long-term inflation—that which we have experienced in the past and of which we are experiencing an acute phase at the moment—can be explained or accounted for only in terms of the rate of increase of the money supply.
Does my right hon. Friend not know that it is fatal for any Government or party or person to seek to govern in direct opposition to the principles on which they were entrusted with the right to govern? In introducing a compulsory control of wages and prices, in contravention of the deepest commitments of this party, has my right hon. Friend taken leave of his senses?
[T]he power to control the supply of money, which is one of the fundamental aspects of sovereignty, has passed from government into other hands; and therefore new institutions must be set up which will in effect exercise some of the major functions of government. They would set the level of public expenditure, and settle fiscal policy, the exercise of taxing and borrowing powers of the state, since these are indisputedly the mechanism by which the money supply is determined. But they would do more than this. They would be supreme over the economic ends and the social structure of society: for by fixing prices and incomes they would have to replace the entire automatic system of the market and supply and demand—be that good or evil—and put in its place a series of value judgments, economic or social, which they themselves would have to make...There is a specific term for this sort of polity. It is, of course, totalitarian, because it must deliberately and consciously determine the totality of the actions and activities of the members of the community; but it is a particular kind of totalitarian regime, one, namely, in which authority is exercised and the decisions are taken by a hierarchy of unions or corporations—to which, indeed, on this theory the effective power has already passed. For this particular kind of totalitarianism the Twentieth Century has a name. That name is "fascist".
The plantation of Ulster, right or wrong, wise or unwise, beneficent or not, did take place; neither it nor its consequences can be pretended out of existence. The people of this province are part of the British nation, and the soil of this province is British soil, because the great majority of its inhabitants are so minded.
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All belief in democracy, above all in parliamentary democracy, is an act of faith, as the maintenance of all free institutions is an act of faith. It depends on the faith that the political will of the people is capable of self-expression and of impressing itself upon those free institutions and ultimately moulding them to its will. If that be not so, then democracy and Parliament and all their theory are empty husks. So it is a question of faith whether the people will defend, are determined to defend, have the desire and purpose to defend, or, if it is lost, to restore and regain, the supremacy of Parliament and the political independence of this country.