Don't talk to me about ideology: Now we can return to economic policies that suit our temperament, writes James Buchan

ENGELS says somewhere, misquoting Hegel, that history unrolls twice over, once as great tragedy and once as wretched farce. I do not know if he is right, but for those of us who were children during the 1967 sterling devaluation - in the shocked silence of living rooms, the black-and-white flicker of televisions, the drawn faces of adults, the hiss of pas devant - the sight of old Norman Lamont cavorting, in colour, in the courtyard of Admiralty House on Wednesday evening was an unbearable relief. Why do we make such a thing about devaluation and then devalue?

The truth is, of course, that we British have a weakness for foreign luxuries but do not have many of our own to exchange for them except at cut rates (which is what a devaluation does); that we like to borrow and spend, especially spend; and, except in the horrific and aberrant period of hoarding forced on us by John Major and Norman Lamont in the past two years, we hate to save.

The untruth, which was put about in various forms during the era of Thatcherism - which was itself, one hopes, also consigned to history last Wednesday - was that somehow we had broken these old British habits and were in the thrilling process of converting into a nation of savers and doers, a sort of British Swabia. That the entire country, at this time, from Margaret Thatcher downwards, was not doing or saving but speculating feverishly in houses, art and securities was not held to compromise this interesting theory.

Under Major and Lamont, the Thatcherite untruth was restated in simple and small-bourgeois terms. It was now claimed that Britain would do anything, but anything, to defend an arbitrary but inflation-suppressing rate for sterling within the exchange rate mechanism of the European Monetary System. This always seemed wildly implausible to me, for these reasons.

First, in their excitement at having ousted Mrs Thatcher and seized supreme power, Major and Lamont forgot (or did not recognise) that they were attaching sterling to the German mark at the most inauspicious time since 1945. The Bundesbank was desperately trying to recover control of German finances which had been plunged into chaos by Helmut Kohl's wild promises at unification. The central bank was keeping German interest rates exceptionally high. This policy was not only going to make a Swabia of Britain, it threatened (and still threatens) to make a Russia out of Swabia.

Second, being softies, we British were not going to sit about while 3.5 million people were driven out of work, there was no more equity in the housing stock, the construction industry went bust and the clearing banks were in a lifeboat - all short-term rather than medium-term prospects under the Major-Lamont deflation.

Third, if Lamont had gone into the British streets instead of sitting on whatever he sits on, he would have seen that inflation no longer exists: asset prices have collapsed, price wars are raging out of control in the shops and in industry, and money wages are crumbling. Norman Lamont would be wittering about inflation while the camps were going up in Hyde Park and the windows of the Treasury starred and tinkled about him.

It is the great virtue of capitalism - actually, it is the only virtue of capitalism - that it will not tolerate untruths indefinitely. The currency markets took the Major-Lamont lie, tossed it in the air, worried it, gnawed at it till it broke like a badly made toy. The young foreign exchange traders, with their malapropisms and dented Porsches, are the heroes of this story and restore some of our pride in being British. (They also confirm the truth: never trust anybody over 30, least of all if he says he is Chancellor of the Exchequer.)

Balfour once said: 'Nothing matters very much, and very few things matter at all.' Even so, Major and Lamont have done us two disservices. First, they have made ridiculous the most reputable bureaucratic institution in this country, which is (as in Italy, Saudi Arabia, etc) the central bank. Having lost control over credit in the late 1980s, the Bank of England could barely afford to lose more prestige, but it has. After quarrelling so comprehensively with the Bundesbank, the British Government probably has little stomach for central banking independence nearer home; but something must be done urgently to rescue the Bank of England from the meddling of Westminster fatheads.

Second, Major and Lamont have injured the cause of co-operation between European states. When Mikhail Gorbachev, bless him, dumped East Germany and the Balkans in the lap of Western Europe and withdrew from the scene, it was clear that we would only master this poisoned legacy through the most scrupulous analysis, political caution and diplomatic courtesy. Instead, Britain has tried to push through the Maastricht treaty over the heads of electorates, pursued an inflexible economic policy and, when that failed, sniped and whined at the Germans. My overriding impression of John Major's Government (excluding David Mellor) is of its utter frivolity.

After the bloody class wars of Thatcherism and John Major's monetary insanity, this country (or at least this writer) is utterly fed up with ideology. Mercifully, thanks to the currency traders, we are now free to pursue those pragmatic, humane and slightly rackety economic policies that suit our temperament and means.

(Photograph omitted)