Economic Policy under the Conservatives

Abstract

Economics, if it is a science at all, is a science of fashions, in which differing theories hold sway over policy-makers for some time until they no longer seem so attractive. Sometimes the new fashions emerge slowly: at other times, the inadequacies of the old are ruthlessly exposed in public collapse. Unusually, during 1992–3 there were two such collapses: in the events of ‘Black Wednesday’ (16 September 1992) the UK government was forced ignominiously to withdraw the £ sterling from the European Exchange Rate Mechanism (ERM). Then in August 1993, the ERM itself effectively collapsed, throwing European economic policy into disarray. These momentous events signalled the end of a line of British economic policy that can be traced back to 1987, and set a challenging new context for economic policy in the 1990s. By mid-1993 it was far from clear that the government was rising to this challenge.