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HE performance of the British economy over the past flveyears has been the object of worldwide curiosity. Much publicity has been focused on the government of Margaret Thatcher and herapparently radical departure from the policies pursued by her predecessors.1 This alleged policy departure is sometimes considered a ‘monetarist experiment.”2 Chart 1 illustrates some of the major macroeconomic changes in Britain since Mrs. Thatcher’s election to Prime Minister. Inflation first rose through 1980, then fell by 1983 to its lowest level since the mid-1960s. In contrast, unemployment rose after 1979 to its highest level since the 1930s. By the end of 1983, unemployment was more than double that following the previous worst recession 1973—75) in the postwar period.

Dutch Disease or Monetarist Medicine?: The British Economy under Mrs. Thatcher