Introduction

In October 1980 Margaret Thatcher rounded on the critics of her government’s economic strategy, proclaiming to the Conservative Party conference that ‘the lady’s not for turning’.3 Six months earlier, in line with monetarist prescriptions, her Chancellor, Sir Geoffrey Howe, had placed a series of declining money supply targets at the heart of economic policy, confidently asserting that ‘control of the money supply will over a period of years reduce the rate of inflation’, then running at nearly 20 per cent.4 By October, the money supply was overshooting its target range, inflation was still higher than when the Conservatives took office, and the British economy was in its deepest recession since the 1920s.5 With nominal interest rates at 16 per cent, the strong pound was pricing exports out of global markets.6 Britain would soon become a net importer of manufactured goods for the first time since before the Industrial Revolution. Unemployment was at levels not seen since the 1930s, and the Director-General of the Confederation of British Industry was threatening a ‘bare-knuckle fight’ with the government over economic policy.7 In 1980, monetarism was not working.