The exchange rate would not even necessarily go up, as the hon. Member for Nottingham, West (Mr. English) interjects. It could go down. It would do one thing or the other according to that country's economic experience and according to what was happening in the rest of the world. For example, the fact that we discover an indigenous source for something which we were previously importing from the outside world is bound to affect our exchange rate and the exchange rates of all the other currencies.
So the attempt to control—and I hope I will be pardoned if I sometimes slip into saying"to fix "—exchange rates is foredoomed immediately to come into conflict with economic reality as expressed by the crucial price which we know as an exchange rate. That has been the history; but there have been various methods of overcoming that conflict. In the time of the gold standard it was done by an automatic process, whereby the movement of gold from one country to another either inflated or deflated the currency in the respective countries.
Inflation or deflation, necessitated by the attempt to maintain fixed parities of exchange rate, runs right the way through the story, however, complicated or simple the mechanisms have been. When we had a fixed exchange rate on a gold exchange standard from 1925—I do not need to remind the House and certainly not the Labour Party—this meant that grinding deflation had to be imposed upon this economy. There was no alternative. Under the perhaps more enlightened arrangement which has prevailed in the past 30 years, which is not even a gold exchange standard, gold having ceased to play a part in the system, what has still been happening, is that there has been enforced, by however complicated a process, inflation or deflation in order to attempt to maintain controlled or fixed parities.
So if we enter into such a system as proposed, we shall know in advance that we are committing ourselves to our economy being manipulated by an outside force either deflationary or inflationary.