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Challenging Assumptions - Liberal UK economic policies since 1979 have not spurred growth

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Ken Coutts and Graham Gudgin would like to share their research and co-authored report with IfM people. They both are Honorary Research Associates at the Centre for Business Research at Cambridge Judge Business School. Ken Coutts is also Emeritus Fellow of Economics at Selwyn College, Cambridge, and Graham Gudgin is also visiting Professor at the University of Ulster. They recently finished a report entitled The Macroeconomic Impact of Liberal Economic Policies in the UK.

Contrary to widespread assumption, the “sea-change” of liberal market economic policies introduced since 1979 has not boosted British growth. While “conventional wisdom” holds that liberal market policies followed since Margaret Thatcher’s 1979 election remain the best model for the UK economy, albeit with additional banking safeguards, Ken Coutts and Graham Gudgin ask whether this benign view of the post-1979 world is a true reflection of the economic facts in a new report published on 10th June 2015.

Average annual growth of per capita GDP fell from 2.6% per annum in the three decades prior to 1980 to 2.2% per annum in the following decades to 2007, and a decline of 0.2% per annum since 2007. The deterioration in the growth of labour productivity after 1979 has been even more marked: 2.9% per annum in the three decades prior to 1980, compared to 1.7% per annum from 1980 to 2007, and a decline of 0.2% per annum since 2007. Other than this unsustainable boost to demand from financial liberalisation there is little evidence that other liberal market policies taken together improved the trend rate of economic growth in the UK even temporarily. Given that the economic crisis in the UK which began in 2008 has been the deepest and most prolonged for more than a century, this is an appropriate time to question whether the UK is following the most appropriate form of capitalism.

In this talk the authors will review some of the evidence on UK economic growth before and after 1979 and discuss what kind of alternative economic policies can aid an improvement in economic performance in the future.

This talk is part of the Manufacturing Research Forum series.

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