The Macroeconomics of Margaret Thatcher

Abstract

The government of Margaret Thatcher forms a revealing case study of how economic ideas become entwined with the political and economic history of any country where attempts are made to apply them. As each of the papers in this symposium points out, Thatcher and her government became inextricably associated with “monetarism.” They were influenced by a range of economists, including Milton Friedman and Friedrich Hayek, but the policies that went under the label of monetarism ended up being very different from what one would expect from reading the academic literature on monetarism. Though it shared important features, Monetarism came to mean something very diferent from, for example, Friedman's quantity theory. More significantly, the meaning of monetarism and the way it was applied changed signi cantly during the government's period in office. Many of these changes were in response to specific economic problems that the government was forced to confront. To understand the way economic ideas developed, and why monetarism was interpreted in the way it was, therefore, it is important to understand the macroeconomic history of the period. That is the purpose of this paper.