Small businesses have a hard time tormented by impatient creditors and evasive debtors

Small businesses have a hard time, tormented by impatient creditors and evasive debtors. It was also the climate of the “Golden Years”, the period between about 1950 and 1974 which brought Britain and western Europe the biggest increase of prosperity in history, when inflation ran at an average of 5 per cent. But there is nothing like a dose of inflation to revive a drooping building trade.That economic macro-climate – slowly rising prices, a borrower’s market – fostered much of Britain’s old industrial growth and expansion. It also keeps the financial world in a state of suitable humility, with bankers sucking up to their powerful customers while attempting to bully small overdraft operators like you and me. These are times which favour the borrower, and above all him or her who can contrive to borrow long. Inflation, as the south-east English know all too well, can also enrich the home-owners, lulling them into the illusion that life with property is one long escalator. Times of moderate inflation can seem turbulent, but are generally optimistic.A steady but controlled rise in prices favours certain big organisations – trade unions, but also large manufacturers.

To put it crudely, moderate inflation encourages Colossus Forges Ltd to delay paying its bills for many months (the equivalent of a gigantic tax holiday) and enables it to reduce its suppliers to a condition of abject dependence. Its global effect is to create a society in which large, determined but usually peaceful social struggles take place, as whole sections of the population improve their lot and revise their relative standing. There is a sense of collective – as opposed to individual – opportunity. This is a context in which standards of living improve at very different rates for different groups, so that “our lot” will always be able to use the improvements won by “their lot” as the reason for demanding better pay or conditions. But all orthodoxies with moral pretensions are absurd, and the assumption that minimal inflation equals maximum rectitude is absurd too.Moderate inflation – within single figures – has a complicated but stimulating impact.

There are young “analysts” strutting about the City who believe that zero inflation is a plausible target – which is like saying that the best way to regularise a heart’s rhythm is to stop it. (When that bubble burst, in 1989-90, inflation bobbed up to over 9 per cent).Since then, and especially after the “Lawson Boom”, a terrible, thin- lipped orthodoxy has prevailed. They had been thoughtless in asking for more; they had wallowed in easy money which lost its value. Guilt-ridden, the British masses bowed their heads – and while the masses were not looking, the City and the yuppies made the easiest, fastest money since the South Sea Bubble. When the Tories took power that year, the British lurch into seriously destructive rates of inflation had already been brought under control. But this did not prevent Mrs Thatcher from applying a panoply of economic brakes, from monetarism through anti-union legislation to budget-cutting, which convinced a large part of the electorate that their sufferings were their own fault. Anti-inflationary rhetoric is apt to use sexual references like that.

It sounds a familiar note of Puritan hysteria which proclaims that the sin of uncleanness must be rooted out utterly, that the sinner should loudly give thanks for his own chastisement as the demon is thrashed out of him (ie, that the voters will support the party that cuts their earnings and destroys their bargaining power).Like most of our problems, this one dates back to 1979. People talk of a “sound money” policy, rather than a tight money policy, until “easy money” is thought equivalent to easy virtue. In contrast, they regarded unemployment as an old evil, like TB, which no modern society should tolerate Over the years, however, these attitudes changed places. The Germans have grown much more concerned about the social and political poisons spread by joblessness, while the British have been brainwashed into accepting the permanence of mass unemployment and the wickedness of almost imperceptible rises in the Retail Price Index.Today, slogans like “Squeezing inflation out of the economy” are used, as if the faintest trace of this toxin could be fatal.

The Britain which I had left – the land of the welfare state – had no folk-memory of inflation, which seemed an obscure bit of banker’s lore. What I am arguing for is recognition that moderate inflation is healthy – a sign, indeed, that the economic organism is alive and growing. What we should all ask is why a miserable, blue-nosed, canting, hypocritical, sadistic tribe of anti-inflationary preachers has captured every economic pulpit in the land.When I first went to Germany, in the early 1960s, I was amazed to discover a nation which feared inflation more than unemployment. More to the point, I remember when a small espresso in the Warsaw Holiday Inn cost more than a first-class return sleeper to Vilnius. I remember the 1970s, when each bottle of shampoo cost half-as-much again as the last one. My flag will say: “Long Live Inflation, Friend of Mankind!”

How strange it is that the British should have let themselves be conquered by Whiggish zealots who believe that inflation is the deadliest sin! The British – that conspiracy of cheerful, slovenly peoples whose main tribe, the English, live under the slogan of “Go on: spoil yourself!” But it has happened, and last week Parliament trembled at the idea that the Chancellor might not be able to keep annual inflation below a mere 3 per cent.
I am not arguing for “runaway” inflation Nobody sane can do that.