“Inflation is Caused by Governments” - Keith Joseph's Preston Speech

On 5 September 1974 CPS founder Keith Joseph delivered his Preston speech, a rapid departure from what he later came to term the Conservative Party’s “well-intentioned statism”.

Recently Prime Minister David Cameron evoked Joseph in his Sunday Telegraph article, stating “That is lowest common denominator politics – and it gets you nowhere. The right thing to do is to address the things people care about; to fix yourself firmly in what Keith Joseph called the “common ground” of politics.”

As the PM recognises, Keith Joseph’s work has much to teach us today and, with tomorrow’s meeting of the Bank of England’s Monetary Policy Committee, on no subject is his advice more pertinent than the relationship between government action and inflation:

It has always been known that to create too much money – “excess aggregate demand” is what the economists call it – is to court the danger of inflation. But government after government chose to take the risk, for several – in themselves not ignoble – reasons. The assumptions were probably always the same; that the inflation would only be mild; that it could be stopped; and above all, that mild inflation seemed a painless way of maintaining full employment, encouraging growth and expanding the social services – all highly desired objectives. We see now that inflation has turned out to be a mortal threat to all three. In this speech I am concentrating on employment. I shall discuss growth on another occasion.”

Read the full speech at the Thatcher Foundation website.

Date Added: Wednesday 6th March 2013