Returning to Growth: Policy Lessons from History*


  • *Submitted December 2012.
  • This paper is based on the 2012 Royal Economic Society Policy Lecture. The author is grateful to Stuart Adam, Jagjit Chadha, Tim Leunig, Roger Middleton and John Muellbauer for advice and help with data. The usual disclaimer applies.


This paper considers ‘unconventional’ monetary stimulus and supply-side reform as ways to speed up UK recovery in the context of fiscal consolidation, drawing on the experience of the 1930s and 1980s. To imitate the 1930s, the inflation-targeting regime may need to be reformed to cut real interest rates, with land-use planning liberalised to ‘crowd in’ residential investment. To emulate the 1980s, supply-side reforms to improve productivity and to raise permanent income are required and possibilities in the areas of infrastructure, education and taxation are outlined. A problem common to all these options is that they are ‘politically challenging’.