Report by Ken Coutts & Graham Gudgin

Discussants:  Professor Nick Crafts, University of Warwick &

Professor Robert Rowthorn, University of Cambridge 

This new report compares UK macro-economic performance in the three ‘corporatist’ decades prior to 1980 with performance in the Thatcher and post-Thatcher decades since 1980. The conclusion is that growth in GDP and productivity, unemployment and income inequality were better in the corporatist era, while inflation and industrial disruption improved under the free-market regime since 1980. The well-known improvement in UK growth relative to France, Germany and other European economies is shown to be wholly due to the slowing of the European economies with no improvement in the UK. The long-established decline of the UK share in world trade has continued at the same rate since 1980 as in the pre-1980 decades. The conclusion is that free-market policies did not result in a better overall economic performance, and that a wider range of varieties of capitalism can be adopted than is generally assumed.

The authors argue that the decline in productivity growth under free-market policies has been mainly due to the extreme loss of manufacturing. This decline was concealed up to 2007 by an inevitably unsustainable expansion in household debt and associated consumer spending. Since the debt-related banking crisis slow growth in productivity has been fully revealed as ‘secular stagnation’, and this is likely to be permanent unless the economy can be restructured with a larger modern manufacturing sector.

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