It really is a pleasure to see so many of you here today because the timing of today's meeting is extraordinarily successful in some ways - it is the hundredth day of the euro and, on the other hand, I am reliably informed that there has never been a bigger sporting weekend in the history, almost, of the world, and the fact that you are here rather than fluttering on the Grand National or glued to the Brazilian Grand Prix I think is a great credit to you and indeed to the importance of the topic that we are discussing.
I would like to begin with a reflection about what sort of world we now live in. I think the world in which we live has been completely changed by electronic media. It's now possible for people to communicate with other people anywhere on the globe at any time of their choosing and virtually without any possibility of hindrance by any government. Through the internet, through e-mail, people can converse with each other, they can exchange ideas, they can exchange goods, they can exchange money and people can't do anything about it. I regard it, by the way, as an enormous increase in the liberty of citizens and individuals across the country; an enormous decrease in the power that governments have over us. But it also means, effectively, that we have abolished the importance of national frontiers, that we have abolished time zones, we have almost abolished geography. In a truly global economy, we can now link personally or culturally or nationally with anybody that we choose.
One of the things that strikes me about the European federal project is that, in this sense, it is so anachronistic. The idea, in the 21st century, of building a massive economic bloc, or wanting to build a new massive political union, or the idea of saying that countries should get together, not because of what they share in common, not perhaps because they share values in common, but rather because they happen to be next door to each other - all of these concepts are really very old fashioned. And they will appear to be increasingly old fashioned. So I want to start by saying to you that I don't think I speak to you as a little Englander or a little nationalist; I speak to you, I think, as someone who is quite typical of Britain, because I think Britain is a country that, perhaps more than any other, can claim to have a global outlook. For centuries Britons have communicated with every part of the known world. We are an island, of course, but that never made us insular; rather it made us into a maritime nation. We had to travel overseas in order to make our living in the world. Over time it made us into an colonial nation, an imperial nation, also a nation of missionaries, a nation of people spreading trade, spreading the word of God around the world, and even today we find, I think, six million Britons who live outside the United Kingdom. We are truly a global nation.
And we approach this question of the European Union as globally minded people and aware of the sort of world in which we are all now living - the world that is going to become increasingly globalised in the coming century.
I hear more and more those who put forward the idea of European political union saying that what we need to do is to pool our sovereignty in order to be part of some large bloc which will have greater influence in the world. The first thing is that I think pooling sovereignty is rather like losing a bit of your virginity. And the second thing is that this idea that we are going to be blocs competing with each other not only sounds to me very sinister, but also very out of date. Speaking as a Conservative, I would refer you to Adam Smith. Two hundred years ago he led us to understand that in this world it isn't countries that compete with one another - it is rather individuals or it may be companies, but it is not countries. And I would hope that those who are building the European Union, who are looking to create a European state, are not doing so because they want to create some great big alternative political entity that can be at loggerheads with the United States. I hope that isn't what's in their minds, although I fear it is in the minds of some.
Let me go back a stage. Some of you may be saying, "What on earth is he talking about a federal Europe for? Why on earth is he talking about a European nation state when what is on the order paper today is about the euro, which is a currency, which is an economic matter?" To illustrate why the two are so closely linked, I would just ask you for a moment to remember the Bible. Remember that at one point Christ held up a coin (it wasn't a 20p but He held up a coin) and He said, "Whose head and image is on this coin?". The answer was, of course, that it was Caesar's. My point is that all the way back to thedays of the Bible, people have perfectly understood that there is the most intimate link between he who controls the currency and he that has political power. That is why since time immemorial, since way before the Bible, the head of the sovereign, the head of the person who had power and authority has appeared on the coins.
Everywhere else in Europe, everywhere on the continent of Europe, the euro is discussed, quite rightly, as being a political question rather than an economic one. Again, I want to make it perfectly clear that I understand the political project: I understand the idealism in some people that motivates this political project.
Since the late eighteenth century, at least, Europe has been dogged by Franco-German rivalry. There have been invasions in each direction. And the calamity has become worse on each occasion. In the first World War 15 million Europeans were killed. In the second World War 41 million Europeans were killed. Our Chairman referred when introducing me to the film that I made about Spain and about my father - my father was a refugee from the Spanish Civil War; his life was shattered by the Spanish Civil War, a war which cost the lives of about 800,000 Spaniards. So, one perfectly understands that, following these terrible conflicts, European idealists began to wonder whether there was any way in which they could create institutions in Europe that would enable future generations of Europeans never to suffer that death toll and that terrible hardship and grievance that so many Europeans had suffered before.
They dwelt in particular on extremist nationalism as being a cause of war in Europe, and indeed that was right; it was one of the important causes of war in Europe. But I am afraid to say that, somewhere along the way, there has been a failure of logic because, by abolishing the nation states of Europe and creating a new nation state of Europe, we are not going to abolish extremist nationalism. There is no example of our recent European history that would encourage us to believe that abolishing people's states is the way to quench their nationalistic thirst.
If we look at what has happened in the former Yugoslavia, in the federal Republic of Yugoslavia and today, in the former Soviet Union, all the indications are that trying to stifle nationalism within ever larger states, within ever more artificial political unions, is no way in which to bring peace and prosperity to our continent.
And this is the second way in which I think the quest for European federalism, for an emerging European state, is anachronistic, is out of date, is moving against the tide of history. What does our own country tell us? What's going on in Britain? Is there not a great thirst, in Scotland in particular, for people to see decisions taken ever closer to themselves? Are the people of Scotland not saying, "Look, London and Westminster are too far away for us to trust the Parliament assembled there to take decisions for us"? If that's the case, and it is, it's happening in Catalonia, in the Basque country and many other places in Europe as well, then what leads us to believe that, at the European level, the sensible thing to do is to move decision making further away from people, to take it to Brussels or to take it to Frankfurt?
And there are those nationalists who welcome the idea of power being removed from London or power being removed from Madrid and power being given to Brussels or power being given to Frankfurt. But I don't believe that that feeling will last very long because, before very long, those people will realise that they are now part of a minority which is even smaller within a larger European state and that the people who are taking decisions are even more remote from their own concerns.
The euro. I want, first of all, to discuss it as though it were an economic issue although it is not. My main objection to the euro in economic terms is that it is a one-size-fits-all policy for Europe and Europe is simply in no condition to take on that sort of garment. Our own experience, during the period when we were members of the Exchange Rate Mechanism, should give us all the warning that we need. When we were in the Exchange Rate Mechanism, we ran interest rates at about twice the level and, on the last day of being members, at three times the level of that which appropriate for our own country.
During that period, many people lost their homes, they lost their businesses and they lost their jobs because the exchange rate and the interest rate were not appropriate for our own country and our own conditions: they had been set according to conditions in another country, which was Germany. On the day that we left the Exchange Rate Mechanism, our interest rates went down from 15 per cent and over the next few weeks they went down to 5 per cent.
In passing, I want to make a point because some people, I think wilfully, confuse us on this. People often say, "In the modern world there is no such thing as sovereignty because all countries are shaped by economic forces which are very large and very global and which all countries have to conform to, and therefore giving up some more sovereignty, or giving up your political sovereignty, shouldn't matter at all". As I have heard Peter Shore explain very clearly to other audiences, there is a world of difference between saying, on the one hand, that we are all sitting there together, all the countries of the world, facing economic gales and blizzards (and those do present us with some difficulties) and, on the other hand, saying that facing those gales and blizzards the right thing to do is to give up all right to choose how you respond to the difficulties that are put in your way. There being some limitation to your power to do things is absolutely no argument for you to give up the power to choose, and sovereignty is about the power to choose.
When we left the Exchange Rate Mechanism, it's true that we couldn't have our interest rates at any old level that we determined for ourselves; we were still constrained by global forces. But since we were then free to choose, we were able to choose a level of 5 per cent rather than a level of 15 per cent, and that made a world of difference to many people trying to make their livings in this country.
In Euroland today, they are again trying to apply one interest rate and one exchange rate to all the countries of Europe, even though they know perfectly well that those countries have very different sorts of economies, they have different cycles, they are at different stages of development. People sometimes talk as though freezing the exchange rate guarantees stability. It does not, of course. The economies continue to move; there continue to be all sorts of forces and pressures inside each European economy, and all you do if you abolish their currencies, all you do if you freeze the exchange rate is to prevent those pressures from being released in the form of the exchange rate or the interest rates moving up or down. To say that abolishing currencies or to say that freezing exchange rates is a way of providing stability will be a bit like driving in your car and saying that if the thermostat were broken the engine would no longer be able to boil. Those ructions and movements will continue to occur but they will no longer be able to express themselves by movements in the exchange rate. And if they can't do that, where will those pressures make themselves felt? I fear they will make themselves felt in the form of unemployment. Already Europe has 18 million unemployed people today.
In the first months of the euro, we heard Germany, particularly in the words of Mr. Lafontaine, saying, "This rate of interest is entirely wrong for us", and the European Central Bank governors saying, "This interest rate is not set for you; this interest rate is set for all of Europe". And there, in a nutshell, you have the first economic argument, that if you try to have one interest rate and one exchange rate for all of Europe, the policy is going to be wrong for most people most of the time. So, begging to differ with my Lord Chairman, the title of today's meeting is indeed "The euro is wrong for us", and he said that meant Britain, it is wrong for Britain, but to me that "us" is bigger still. The euro actually, I think, is wrong for all of us in Europe and one interest rate and one exchange rate will be wrong for most people in Europe most of the time.
If the interest rate in the past week has been cut by half a per cent in Euroland, that means it will be better for Germany and worse for somebody else, maybe worse for Ireland, a country that I predict is likely to encounter strong wage inflation soon. It's in a boom condition and normally when countries are in a boom condition and wages start rising, then those countries adjust their interest rates, they put them up a little bit in order to damp down the economy and make sure that they can remain competitive. But that is now not an option that is open to Ireland.
And so Britain would have to think that, if we were in there over the last hundred days, the exchange rate and the interest rate would not have been set for Britain - it would have been set for Europe. And not only for the last hundred but for as far ahead as anyone can see for, as we know, the Maastricht Treaty describes the euro as being an irrevocable arrangement.
So that is the first economic argument against it. The second economic argument is one which I feel strongly about, although it may not be a view which is shared so strongly by my fellow members of the platform: we shall see in due course. But I believe the economic policies that are currently being pursued by our continental partners are unsuccessful economic policies. They are policies that, to my way of thinking, are too reliant on high rates of taxation, too reliant on high rates of public spending and too reliant on government intervention in the labour market. These have created very inflexible economies in Europe.
An economy where the government is taking about half of what the people produce and spending it on their behalf in taxation is not well equipped to compete in today's world. Japan or the United States, their governments typically take about one third of what the people create. We, the British, are in the middle: we take about 40 per cent, our government takes about 40 per cent of what we all produce. Around the world governments have mostly moved away from policies of high government spending and high taxation and massive intervention in their labour markets. And, indeed, almost anywhere in the world where an economy has got into difficulty and the International Monetary Fund or the World Bank has been called in to give advice and to give help, they have recommended that the economy should be made more flexible, that regulation should be swept away, that tax rates should be reduced, that the government should take a lesser role in the economy of the country.
Britain is extraordinarily placed, I would say extraordinarily well placed, because our economy is somewhere between that of the United States and that of continental Europe. We, I think, are ideally placed to be globally competitive.
People sometimes say, "Are you going to decide that you are part of Europe or not?" To me, the question is absurd. Of course, Britain is part of Europe. The question is whether we will be merely European or whether we shall also be global. The question is whether we are bound to be only European or whether we can go on being also Atlanticist, Commonwealth, an English speaking nation and all the other things, all the other components that give Britain our formidable competitive position in the modern world.
Now, let me turn to politics again. I do believe in the sincerity with which many of our European partners are pursuing the goal of European union as a way of avoiding future conflict. Chancellor Kohl said that the single currency was a matter of war and peace. It's an extraordinary statement for us to hear and for us to understand but I assume it was his genuine belief that, unless the countries of Europe got together in building a single state, conflict would ensue. The reason I so disagree with this is that I think we have too much focused on the causes of the last war, we have too much focused on this question of extremist nationalism in isolation and, therefore, again we are in danger of designing a solution which is anachronistic and out of date.
For the third time, I find an example of the European Union being anachronistic and out of date. Because were not also the conditions that produced conflict in Europe the following?
First, a lack of democracy - the wars in Europe have always been created by dictatorships. Democracies do not vote to invade one another. The more democracy we have in Europe, the more security and the more peace we have in Europe. And, wonderfully today, we have more democracies in Europe than we have ever had at any time in our history and, in that respect, the outlook is very bright. Were not wars also caused by another condition, a sense of grievance? Didn't Germany before the last war point to nationalities, to peoples, to territory that needed to be reunited with the Fatherland?
Was not this sense of grievance the thing that got people galvanised and thinking that a war could be justified? Did not Hitler prey on people's insecurity, on deprivation, on massive rates of inflation, on very high rates of unemployment?
Was not economic insecurity also one of the things that was a cause of war?
It is too simplistic, therefore, to say extremist nationalism caused previous wars and, if we abolish the nations of Europe, we shall have done away with the cause of war.
What worries me very much is that we are following a course in the European Union that I fear may be the cause of future tensions amongst the peoples of Europe. I think the euro will lead to very high rates of unemployment. The decisions in the European Central Bank are amongst the most politically sensitive and politically important decisions that are ever made in any society. To decide the level of interest rates is to decide the rate of growth of the economy, the level of unemployment and the amount that the people will pay for their credit and, in particular, the amount that the people will pay in order to have housing. These critical, sensitive, political decisions are being taken by the European Central Bank. And who votes for the European Central Bank?
Nobody votes for the European Central Bank, not in this country and not in any other country either. Then people say, "Well, your own bank, the Bank of England is independent". Yes, the Bank of England is independent but the Governor was appointed by the Chancellor of the Exchequer, the Governor appears before Select Committees of the House of Commons, the Bank of England's independence can be rescinded by Parliament at a moment's notice. In no way has the Bank of England passed outside Parliamentary control. But the European Central Bank, it isn't answerable to anybody. And it has chosen to proceed, by the way, in the most obscurantist of fashions. It is not telling us what its forecasts are, it isn't publishing its minutes for many years after its meetings have been held. Take the one decision that it has taken so far to reduce interest rates by half a per cent. We don't know who voted for that half per cent and we don't know who voted against; we don't know what were the reasons; we don't know what is the policy that is being followed; we don't know what forecasts are being pursued. These are critically important decisions.
If unemployment does continue to rise, then come election day in any country in Europe where there may be unemployment, people will go along to the polling stations and they will want to vote, with feeling, against the policies that put them out of work. But when they get to the polling station, they will find that the decision was not a decision that was taken by their own government - it was a decision taken by the European Central Bank. And they have no way of voting for or against the members of the European Central Bank.
This is my real fear - that when people have a grievance and they find that they have no way of settling that grievance democratically, then they begin to despair of democracy and that indeed is when they become prey, probably for the first time, to extremist influences. And we are reducing the amount of democracy in Europe and we are increasing the sense of grievance and we are increasing disillusionment with democratic institutions and all of those are very dangerous trends.
At this point, some of the people who are keen on creating a nation of Europe come along and say, "We accept that there is a democratic deficit and we must do away with it and we must do it by having a European Parliament that has real powers". They said this, after all, the other day when the European Commission had displayed itself to be engaged in cronyism, nepotism and maladministration.
My point is this - that the absence of democracy in the European Union is not a temporary phenomenon. And it isn't something that can be swept away overnight.
Here I take advantage of being the first speaker because I borrow an idea that was put in my mind by Peter Shore. It is this. There are two elements in democracy: "demos", a people, and "cracy", meaning "rule" or "power"; two Greek words. It's perfectly clear that you can have a European "cracy"; you can have a European rule, you can have a European power. But can you have a European "demos", a European people? Do the peoples of Europe today have sufficient in common in order that they will all feel adequately and properly represented by the democratic institutions that they come to elect?
Will they feel that the parliament that they elect is a parliament that is properly making laws in their name? I just do not think it is possible. I do not think there is enough that links Greeks and Danes and Irish and Italians and Spanish and British people for that to be even plausible. As I have already mentioned, the Scottish people are saying that the Parliament at Westminster does not represent for them a body in which they feel properly democratically and accountably represented.
And so this is no passing phenomenon. In hundreds of years anything is possible. The United States of America, you might say to me, is tremendously ethnically diverse and geographically diverse, but there is a set of people who share values, who have a constitution that brings them together, whose children every morning stand in front of the flag and pledge allegiance to the republic for which it stands, they express each morning the commonality of the values of their society. And that is not a situation that exists today in Europe and it is not a situation that can exist in Europe in the near future.
Now, wonderfully, we in this country have the opportunity to choose whether to be members of the euro or not. I think the choice should be clear for us.
I think we should say that we have already experienced the one-size-fits-all policy and it was bad for us and it looks as if it has been bad for Europe today. I think we should say, perhaps I say this more contentiously, that in the last twenty years we have swept away the policies of massive state intervention, high taxation, high public expenditure. We weren't competitive when we had those policies; we shouldn't be going back to that.
And we have the opportunity to say, after all, that we are a very successful democracy. Oh yes, of course, a democracy that can go on being improved, that should be reformed, a democracy that constantly evolves, all of those things, but nonetheless we have a democracy and we would be very unwise to give it up.
We don't know exactly what we would get in its place. We do have the opportunity to choose.
How sad it makes me to hear politicians say, "This is inevitable". I did a radio interview this morning and I was accused, in raising some of these arguments, of using the arguments of yesterday. The interviewer was implying that this is a done and dusted business. What a very sad reflection on a democracy, a country in which the people have been given the choice.
There is nothing inevitable. There is, however, a question how can it be that a country of 55 million people, a country which is the fifth largest economy in the world, apparently ask itself on a daily basis whether it can continue to exist any more as an independent, self-governing democracy? These are not doubts which affect the Canadians, who are much smaller than we are and live next to a very large economy - the United States. These are not doubts which affect the Koreans, living next door to Japan. They are not doubts which affect the Chileans, living next door to Brazil. And I cannot understand why these are doubts which should affect the British, living next door to Europe.
I repeat again: we are inevitably a part of Europe. We are also inevitably a part of a transatlantic relationship, a Commonwealth relationship, an English speaking relationship and a global set of values and outlooks. We could not be better positioned or prepared for the global economy of the 21st century and, what is more, we have a democracy which has evolved over the last seven centuries and that is not something to be given up.
Let me deal with one last point which follows from that. There are those who will say that this room is full of extremists. This room is full of people who are not prepared to abolish their currency. This room is full of people who are not prepared to abolish their nation state. This room is full of people who are not prepared to take an ideological leap in the dark.
Because, really, the idea that we should all abolish our currencies and that we should, by degrees, move toward a single European state is a revolutionary idea. It is a visionary idea in the sense of being one that isn't rooted in any experience or any fact. It is, I think, potentially an extremely dangerous idea. For that reason, the people who are in this room this afternoon are representative of that solid majority of the British people who base themselves in practical reality and experience and who are not prepared to take such an ideological leap in the dark. By your presence here today, you give us all heart that, when the referendum comes, so far from being inevitable, the single currency will be rejected by the British people and they will choose, not merely to be European, but to be European and global at the same time.