Changing Philosophies of Economic Policy

Abstract

The 1980s began with an external shock to most economies as the world price of oil rose by about 150 per cent. The years around 1980 also witnessed numerous changes in political leadership, as was noted in the previous chapter. Many, though not all, of the political shifts brought fundamental policy modifications. In some cases — Thatcher and Reagan especially — the new leaders were hedgehogs rather than foxes and acted to impose a new ideology that was closer to orthodoxy than what it replaced. In other cases the alteration in policies — also toward greater orthodoxy — came about through the force of circumstances and under the leadership of foxes like Mitterrand in France and Gonzalez in Spain. These are four selected examples from among the industrial countries. As our story unfolds we shall encounter other instances of striking shifts away from interventionist policies based on changes in economic philosophy — sometimes carried out by ideological hedgehogs and sometimes by pragmatic foxes.