This part, originally broadcast on 22 June 1992, focuses on how both the Conservative and Labour governments of the 1960s attempted to use economists to engineer economic growth to specific targets, as well as programme post-war economic management in the United Kingdom, and attempts to prevent relative economic decline and the perception of the 1960s Wilson governments that devaluation would jeopardise against national self-esteem. By the mid-1970s, stagflation emerged to confound the Keynesian theories used by policy makers. Meanwhile, a group of economists had managed to convince Margaret Thatcher, Keith Joseph and other British politicians that they had foolproof technical means to make Britain 'great' again. The stagflation of the 1970s catapulted the then obscure economic theory of Monetarism to the forefront of political thought. By the late 1970s Milton Friedman had been awarded the Nobel Prize in Economics and even some Labour politicians were claiming that government attempts to grow the economy by injecting capital was doing more harm than good by driving up inflation. In 1979, Margaret Thatcher came to power and began to implement these new economic theories to drive down inflation by cutting government spending and raising interest rates, thus tightening the money supply. However, this failed to end inflation straight away, and caused widespread job loss and industrial decline. By the early 1980s, unemployment had risen to 2.5 million, British industrial output had declined by 1/6, and large-scale riots had begun to break out in Britain. The Conservative Government decided to abandon the Monetarist project and lowered interest rates in an attempt to create jobs. In fact, by the mid-1980s Mrs Thatcher claimed in a television interview that she had "never subscribed" to the theories of Milton Friedman. The episode ends with many of the economists involved in the ill-fated attempts to manage the economy arriving at the same conclusion their predecessors had 30 years before: they could only prevent an economic disaster, not engineer growth. Other economists point out that other countries' successes had more to do with focusing on improving their education systems and industrial bases rather than large-scale attempts to engineer the entire nation's economy. Another economist and adviser to Margaret Thatcher, Alan Budd, worries that the whole Monetarist project might simply have been an attempt to reduce the economic and political power of the working class by raising unemployment and lowering wages, or as he puts it, "creating a reserve army of labour." (Wikipedia)
Pandora's Box - Part 3: "The League of Gentlemen" - YouTube |
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