What Inflation has Revealed about the Formulation of Economic Policy

Abstract

The role of the state in economic life has fluctuated over the centuries, but our present attitude to government intervention in the economy is largely a result of Keynes’s analysis of the 1930s depression. Observing the failure of the economic system to eliminate unemployment sufficiently rapidly, Keynes provided a rationale for government intervention designed to stabilise the economy more quickly. Although Keynes was principally concerned with the maintenance of full employment, governments are now also charged with the responsibility for controlling inflation, achieving a steady growth of the standard of living and preserving the value of the currency.

As the new year looms one should spare a thought for the Chancellor of the Exchequer, Sir Geoffrey Howe, who has an unenviable task. He has to think up a new economic policy. And fast.

(The Guardian, 29 December 1981)