The 1980s

"The edifice [Supply-side Economics] was delicately balanced on a set of simultaneous policy actions and a set of equations describing the effects of the policy actions on the economy."
"Productivity isn't everything, but in the long run it’s almost everything."

Units

Supply-side Economics	Questions of the Day	Outline
Economic Growth	Questions of the Day	Outline

 

Abstract

The confidence of the 1960s collapsed into a malaise in the 1970s as the major industrialized countries suffered through bouts of stagflation - slower growth and higher inflation rates.  Traditional Keynesian policies proved ineffective at best, and by the late 1970s there was a notable shift to the ideological right as conservatives were winning elections worldwide.  In the UK it was Margaret Thatcher and in the US it was Ronald Reagan, with the help of Fed Chairman and Paul Volcker, who brought forward a set of policies designed to reduce the influence of government on the economy, speed up growth, and reduce inflation.  These polices were so closely associated with the two leaders that they became known as Thatcherism and Reaganomics, which you may have heard described as supply-side economics.  

This unit will contain two sections - in the first we will examine the policy package known as Reaganomics, and in the second we discuss long-term economic growth.  In the Reaganomics section we will examine how Reagan attempted to save the US from the "worst economic mess since the Great Depression,"  while in the second we will talk about the key role that productivity plays in increases in a nation's standard of living, how we might explain growth differentials, and the problems caused by the cost disease of the service sector.