Commentary: The Economic Landscape of the UK
In a pioneering venture, Christopher Dow at the National Institute of Economic and Social Research helped establish the concept of demand management as the key objective of economic policy. He showed in his 1964 work that although demand management had prevented “the heavy unemployment that accompanied the pre-war trade cycle”, the price paid was that of excessive year-to-year fluctuations resulting from policies that ultimately became known as ‘Stop–Go’. A more damning indictment of policy over this period is that the emphasis on short-run macroeconomic control encouraged the neglect of the more fundamental issue of the long-run rate of productivity growth. Indeed in later work, Dow was himself acutely aware that labour productivity did not regain the path it had adopted in the long expansion after World War II. The tension between short-run demand management and long-run economic prospects is as much a current concern as it was over 50 years ago; accordingly, as we enter an election campaign that may be dominated by the question of Britain’s exit from the EU, this Commentary highlights the key structural issues facing the UK economy.