Scourge of Monetarism (Radcliffe Lectures) by Nicholas Kaldor

by Nicholas Kaldor

Now thoroughly revised and updated, this edition also includes a new introduction which places Britain's experience of monetarism into a world context.

Genres: Economics

Paperback

First published April 24, 1986

Reviews

[T · Rating 4 out of 5]

"[...]however much present policies are out into reverse, the real income of Britain at any particular future date will always be lower than if the Thatcher experiment had never taken place" (xiv)

"The assertion which forms the central thesis of Government's economic philosophy is that public sector borrowing is 'the major cause of growth of the money supply' is without any empirical foundation whatsoever and could only be made by somebody in total ignorance of the facts..." (87)


When we look back at the late 1970s, it's easy to see the Stagnation crisis as an unavoidable consequence of our mixed economy, and the British flirtation with social democracy. "There is no alternative" was a phrase used and popularised by the Prime Minister during this period, wherein privatisation of public sector institutions, closures of factories, and the neoliberalisation of the economy took place. That phrase legitimated the monetarist mayhem which characterised the early policies of the Thatcher period. The consequences were enormous. Rather than curb the sky high inflation, the monetarist policies advocated and eventually disowned by both Milton Friedman and Margaret Thatcher, doubled inflation to 22% in one year!

However, even in discussions today, many of those on the left and right view those policies as the only option Britain had. Ask anybody who lived through the 1970s and they will tell you about the Winter of Discontent, with overunionised work and a sluggish economy. In the popular imagination the Labour Party simply had no response to the crisis, and many people still defend the notion that unions were too powerful. It is easy to forget that there were critics of the British economic regime. Nicholas Kaldor stood up and defended the Keynesian postwar economy, and he argued that there in fact were alternatives to mass privatisation and monetary policy. It is for this reason we must read Kaldor, and rethink what went wrong in the 1970s.

Kaldor is one of the forgotten figures in history. He was a critical intellectual, arguing that the government policies were failing not just because of their implementation, but because the theory underlying it was bunk. Monetarism wasn't going to fix our problems, it was simply part of a government plan to weaken unions, lower the exchange rate, and bring British labour to heel. It was, as Kaldor puts it, "a policy of cutting off your nose to spite your face - of progressively ruining private enterprise for the sake of weakening the bargaining power of labour" ...