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Originally Posted by donsutherland1  I have to strongly disagree with respect to Britain's monetary policy. Britain, not unlike much of the world, faced a severe bout of inflation from the late 1970s into the early 1980s. |
You forgot to mention the resulting recession they managed to inflame. Monetarism (fortunately a dodo of an ideology now) ensured a collapse so extreme that it was arguably more extreme that our version of the Great Depression
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In my opinion, the tough monetary policy was necessary regardless of whom occupied 10 Downing Street.
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The policies implemented were the result of ideological limitations in Tory economic knowledge. Read something like Backhouse (2002, The Macroeconomics of Margaret, Journal of the History of Economic Thought, Vol. 24, pp.313-334) for an introduction. The negative deindustrialisation was caused by the interaction of several policies, examples include:
1) exchange controls abolished leading to Bank of England money supply techniques becoming ineffective
2) nasty increase in interest rates as the government tried to use monetarist policies to control inflation
3) introduction of tax and supply side policies that induced inflation (e.g. increase in VAT that increased the RPI immediately by 4%)
4) severely restrictive fiscal policy that impacted mainly on households and therefore consumption
Its easy to control inflation by crucifying the economy. As i remarked earlier, we are still feeling the consequences: with an unnatural shift to a low skilled equilibrium