Are we really back in the 1970s?
There is an all pervasive sense that Britain isn’t working at the moment. The economy is stuttering, the public services appear fractured, inflation is stubborn and persistent, the public finances are in a dire state, and society appears riven with strife. This has led a number of commentators to interpret the current position and immediate future through the lens of the 1970s. Is that a fair assessment? And if it is, what does that suggest as a way out of where we find ourselves?
Perhaps it is helpful to start with a recap of the 1970s and to consider the similarities and differences between then and now. Events in the 1970s can be traced back to the Barber Budget of 1972. In this, the Chancellor attempted a dash for growth through a large fiscal and monetary expansion as a response to rising levels of unemployment. There were increases in pensions and benefits payments along with tax cuts for those working. That was accompanied by an expansion in the PSBR (i.e. government debt), a core element of the money supply at that point. Some of this worked through on the supply side by an increase in activity, but most of it manifested itself in the form of rising inflation.
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