Recently Lord Skidelsky stated, in the Financial Times, that figures show current UK inflation is driven by increases in prices paid for imported food and materials. He continued:

“Indexation needs to distinguish between domestically generated inflation and imported inflation.

“This can be done by removing from the price index something like one-fifth of the rise in sterling import prices – a task which is well within the capability of government economists and statisticians.

“When the terms of trade turn against us the proper response is to buy less from abroad, switch to home-produced substitutes and develop home-based competitors.”

oOOo  

LWM recognises the need to propose positive models for economic activity and one of its aims is to promote the environmental, social and economic benefits of local trading, using local businesses, materials and supply chains. The proposal to “buy less from abroad, switch to home-produced substitutes and develop home-based competitors” is consistent with this aim.

Less appealing is the implication that these are temporary measures to be adopted only “when the terms of trade turn against us”? Would home producers then be dispensed with ?

It would be interesting to know more about Skidelsky’s thinking, encouraged by other statements. As he wrote earlier: “The wealth of the nation lies in what its citizens can produce” and “we do owe our population a reasonably high level of employment”.

Skidelsky reminds us that governments should be accountable to their own people, not to their markets, adding: “the new battle lines are going to be government versus financial power. I think finance is too powerful, not only within countries but globally.”

His most pertinent question, “why accept as binding the views of the same financial markets whose mistakes precipitated the crisis in the first place?”

 

Lord Skidelsky is currently Emeritus Professor of Political Economy at the University of Warwick