Sound Currency and Full Employment

Abstract

The British Experiment is the unfortunate title the Chancellor of the Exchequer, Mr. Lawson chose for his Mais Lecture in June 1984. The title reflects the detachment with which policy makers in Great Britain have fought to transform British society and to stop inflation. There is no question that the Thatcher government has changed the country. The most striking achievements are the reduction of inflation to surprisingly low levels (by the standards of the 1970s) and, to a lesser extent, the consolidation of public finance. These two strategic victories return the country to the position of the early 1970s, undoing the extreme instability of the past decade. But they have not been achieved without costs: unemployment conditions today, in 1985, resemble those of the 1930s. Unemployment, far from being transitory, is becoming a way of life for an increasing number of people.

An extended version of an Employment Institute lecture delivered on 29 May 1985 in King’s College, London. Rudiger Dornbusch is Ford International Professor of Economics at Massachusetts Institute of Technology.