ABSTRACT
The chapter argues that post-war economics has suffered from two forms of short termism: the belief, up to the 1970s, that performance of British industry could be regulated primarily through demand management; and, from the late 1970s onwards, the insistence that monetarism would take care of inflation and the real economy would look after itself. The new world market, which today is industrially and financially transformed, demands a new economics. In 1984, Nigel Lawson, then Chancellor of the Exchequer, sought to combine theory and practice in a lecture entitled the ’British Experiment’, in which he set out the guiding principles that had governed economic policy since 1979. Lawson argued that, within both the micro and macro areas, the key instruments of policy should change. The crucial macro instrument was not budgetary policy – the variation of taxation and public spending to prevent recessions – but monetary policy.
