Spectre of Brexit poses threat to British economy in the years to come

In Nine Crises, William Keegan examines a series of turning points , starting with the devaluation crisis of 1967 and ending   with post Brexit turmoil fifty years later.

This book explains how key participants viewed each crisis as it unfolded and what they hoped to achieve.

 

The British economic policy and its policymakers have responded to a problem – inflation, a deteriorating trade balance, rising unemployment or weak public finances and often their solution to the original problem contributes to the emerging one. The search stability has proved elusive asndf every attempt top build a new framework for policy, be it be Harold Wilson’s Keynesianism plus of the 1960s, Thatcher’s monetarism of the 1980s or Tony Blair and Gordon Brown’s social-democracy-lite of the 1990s and 2000s ended in failure.

 

Economic policy is not made in a vacuum and political considerations dri e policy choices.

 

His description of the 1976 IMF crisis in which a distinctly left of centre labour agreed to cuts in public spending in return for financial support from the IMF, James Callaghan, then prime minister famously told delegates at the Labour party conference: “ We used to think you can spend your way out of recession and increase employment by cutting taxes and increasingly government spending. I tell you in all candour that option no longer exists.”

 

 

The popular narrative of 1970s in the UK’s as a time of weak government unable to take hard decisions contains a lot of truth but any attempt to pin the entire blame for the atrocious industrial relations, high inflation and weak growth on the UK alone misses the bigger picture.

 

Keegan explains the oil shock of 1973 and the end of Bretton Woods era of fixed exchange rates were critical drivers of chaos.

Remember the black Wednesday when Sterling crashed out of the European Exchange Mechanism in 1992 and the financial crisis in 2007 are absent from the book.

He greeted the news that the incoming Blair government of 1997 has giv en the Bank of England independence by writing “ I believe, with only modest reservations , that labour has taken leave of its senses”.

Nine Crises: Fifty Years of Covering the British Economy from Devaluation to Brexit by William Keegan, Biteback £20, 286 pages.