50 Years Ago: Bank Rate Cuts
Bank Rate is generally regarded among the economic “experts” as a means of controlling the economy.
Put up the Rate, runs their argument, and you slow down production; put it down and production will start booming.
None of the experts have ever explained why, if it is really so easy to control capitalism, the economy ever gets into a crisis.
The Chancellor’s decision to reduce Bank Rate by one half percent was greeted as a stimulant to British industry.
“One positive gain,” said the Daily Telegraph, “it (the government) hopes to see … is a greater willingness among businessmen to proceed with their capital investment programmes.”
Since September 1953, when Bank Rate was 3 1/2 percent, there have been twenty seven changes. Both Conservative and Labour governments agree that Bank Rate helps to control the economy, both have upped it to seven percent in times of crisis.
But none of these changes have altered a course of economic events which was already set. They have, in fact, been made in response to those courses; they have been not an influence but a reaction.
Callaghan’s panic seven percent last July was no exception and neither is the latest reduction. William Davis, the Guardian’s Financial Editor, put it:
“I gather that the Bank of England advised the Chancellor a few weeks ago that a half percent cut in Bank Rate couldn’t be delayed much longer.”
The economy of capitalism, as so many Chancellors have found out, cannot be controlled by Bank Rate changes or any other juggling. The Labour Party should know this, perhaps better than anyone.
For they once had a mighty Plan to defeat economic crises. But just like the Tories, they end up doing what the Bank of England tells them.
(From “Review”, Socialist Standard, March 1967)