Automatic Poverty by Bill Jordan

Author:Bill Jordan [Jordan, Bill]
Language: eng
Format: epub
Tags: Social Science, Sociology, General
ISBN: 9780429894794
Google: 5A9mDwAAQBAJ
Publisher: Routledge
Published: 2018-07-20T04:45:03+00:00

(iv) Economic prospects under the Conservatives

In June 1980, the Independent Treasury Economic Model (ITEM) Club published its forecasts for the economy. The club is a group of economists who pool their knowledge to prepare quarterly forecasts using the Treasury’s computer forecasting model. Club members represent a cross-section of publicly and privately owned industry, banking, finance and public administration. These forecasts are not designed to support any particular theory or to try to persuade the government to make any particular change of policy.

The summary of their conclusions was that the Conservative government’s monetary policies would not bring inflation back into single figures (where it was just before they took office) before 1983; that, by then, 3 million people would be unemployed, and output would have fallen 8 per cent from its 1979 peak; that the balance of payments current account deficit would remain persistently over £3 billion a year; that the Public Sector Borrowing Requirement would rise again from the target £8.25 billion in 1980 to £11.5 billion in 1981, because of increased unemployment and social security expenditure; and that one-sixth of manufacturing industry would be destroyed as a result of government policies. Only the financial sector of the economy would benefit from these changes, as interest rates would fall only slowly, and sterling would keep much of its strength.

The ITEM Club’s report simply quantified the sort of forecasts that had been made by industrialists and economists throughout the first half of 1980. The report addressed itself not to the slump, which was well under way when it was published, but to the ‘recovery’ anticipated by the Conservative government:13

It now seems that it will be very late and very small with the famous ‘supply side’ of the economy devastated over the next couple of years by de-industrialisation, mass unemployment and low investment. This should come as no surprise. Britain has a mixed economy. To this the government has applied its pure competition theories. Monetary policy works through the market. In so far as the policy succeeds, it does so by squeezing output, increasing unemployment and so eventually choking off inflation, primarily in the open competition fractions of the economy. That success further reduces the limited area in which the policy operates, raising its cost and reducing its impact.

ITEM forecasted that inflation would still be running at about 11.5 per cent in the second half of 1982, having been around 15 per cent in 1981:14

The price of this limited success in the fight against inflation is a terrible slump. National output is expected to fall 3½ per cent in 1980, 5 per cent in 1981, and then to remain virtually unchanged in 1982: a cumulative decline of 8½ per cent from the modest 1979 peak over the three years to 1982. Since North Sea Oil output is expected to rise steadily over this period, the on-shore slump in output is even greater. 1982 is expected to be 10 per cent down on 1979 and 4½ per cent down on the dreadful year of 1975.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.