Chapter 8: The Politics of Recession: Power and Politics
8. The politics of recession: power and politics Making the statement ‘recessions are political’ suggests that recessions are not exogenous events. Recessions are human made and therefore reflect deliberate policy choices. The metaphor of the ship of the state being guided by the ship’s captains to weather the storms of the global economy implies that governments have no choice but to respond to events that are always beyond their control. Recessions being defined as being inevitable suggest that these economic events are like earthquakes or floods, events that cannot be predicted or controlled, and that the role of government is about cleaning up the mess. The earth has shifting plates, volcanoes that generate tsunamis, floods and human tragedies. Recessions are described as equally tragic events, but are also seen as an inherent part of a market economy. However, the argument of ‘a politics of recession’ points to the view that recessions are human made and reflect the outcome of a series of policy decisions. The Thatcher government’s monetary policies adopted in the 1980 budget contributed to the recession of 1981 and 1983. High interest rates, high sterling and reductions in public expenditure were aimed at changing the UK economic landscape. Growth and employment were no longer the policy objectives. The Thatcher government made inflation the number one macro-economic objective. Paul Volcker, the Chairman of the Federal Reserve, also made the conquering of inflation the policy priority of the Carter Presidency. Unemployment in both the UK and the USA climbed to...
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