Comments: Brown's luck runs out, or so the Tories hope

Here’s a passage from ‘The Commanding Heights’ by Daniel Yergin and Joseph Stanislaw:

Malaise and Inflation

What had been confidence in government knowledge was now turning to cynicism. The Keynesian paradigm was not what it seemed to be. It was not all that easy to manage the economy by wielding the levers of fiscal policy. In fact, it was not clear, with all the lags and uncertainties, that it could be done at all. Indeed, critics argued that the effort to apply Keynesianism was in itself inherently inflationary. Instead of picking up the slack of inadequate private sector investment as Keynes had proposed in the 1930s, public spending, it now seemed, was crowding it out.

Confidence was also ebbing in the ability of government to solve major social problems through big, interventionist programs. However altruistic and idealistic the purposes of these programs, the application of new methods of cost-benefit analysis combined with everyday observation, led people to question whether the public was getting value for the tax dollars it spent an them.

In a low-inflation, growing economy, the public had accepted the tax burden. But with recession and slow growth - and with inflation pushing people into higher brackets - taxes stoked the anger of the public. Conservatives had traditionally argued that high taxes on working people and high transfer payments to non-workers held back the economy. That had, no less traditionally, been dismissed as the "Fanciful ideology" of the right. But now this contention could no longer be dismissed; indeed, a new wave of academic research supported the assertion."

The above section describes the period of the Carter administration in the late ‘70s when the US was struggling with stagflation and a high oil price. Well, we know what happened next.

Replace ‘fiscal policy’ with ‘monetary policy’ and ‘working people’ with ‘hard-working families’ and, voila, there we have a UK Conservative platform for today. What goes around…

Posted by David Sandiford at October 7, 2005 12:29 PM