Were 364 Economists All Wrong?

A discussion of the impact and legacy of the seminal 1981 Budget.

In March 1981, 364 economists agreed to write to The Times arguing strongly against the then government's monetary and fiscal policy. However, the Thatcher government decided to ignore these voices and continue the pursuit of policies to defeat inflation and restore fiscal responsibility. To the opponents of the 364, this decision marked a turning point in British post-war economic history: every other post-war government had capitulated and returned to policies of reflation and direct control of prices and incomes in the face of intense political pressures when the going was tough. The 1981 Budget, which precipitated the letter, was also a turning point in other respects: from 1981 there was continual growth, falling inflation and eventually, employment growth. Arguably, the 1981 Budget set the scene for today's benign macro-economic outlook and political consensus in favour of stable prices and fiscal prudence.

Amongst the 364 were many economists who play a very prominent part in public life today. Some dissent from their former views and others continue to justify them. In this publication some of the signatories of the letter to The Times , together with their opponents discuss the key issues raised and its relevance to economic policy today. Included is a list of the original signatories and other relevant historical material.

For examples of other recent IEA publications on monetary policy, see Money and Asset Prices in Boom and Bust by Tim Congdon and Issues in Monetary Policy: the relationship between money and financial markets edited by Kent Matthews and Philip Booth, with chapters by Mervyn King, Milton Friedman and number of members of the SMPC.

2006, Readings 60, ISBN 0 255 36588 6, 135pp, PB

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