Lawson Boom
The Lawson Boom is a term used to describe the macroeconomic conditions prevailing in the United Kingdom at the end of the 1980s, which became associated with the policies of Chancellor of the Exchequer Nigel Lawson.
The term was used by analogy with the phrase "The Barber Boom", an earlier period of rapid expansion under the tenure as chancellor of Anthony Barber in the Conservative government of Sir Edward Heath. Critics of Lawson assert that a combination of the abandonment of monetarism, the adoption of a de facto exchange-rate target of 3 deutschmarks to the pound, and excessive fiscal laxity (in particular the 1988 budget) unleashed an inflationary spiral.
The economic boom saw strong economic growth during the second half of the 1980s, sparking a sharp fall in unemployment, which was still in excess of 3 million at the end of 1986, but had fallen to 1.6 million (the lowest for some 10 years) by the end of 1989.
In 1990, Shadow Chancellor of the Exchequer John Smith referred to the period as the "Lawson boom" in a House of Commons debate, quoting a report which said:
- There have been three phases of this sort, all of which had serious consequences.
- (a) Maudling's dash for growth 1963-64 ;
- (b) Barber's boom, 1972-73 ;
- (c) The Lawson boom, 1986-88.[1]
The "dash for growth" had failed to save the Conservative government from electoral defeat at the hands of Labour in the 1964 general election, and was followed by a difficult period for the economy (during which unemployment nearly doubled) in the second half of the 1960s. The "Barber Boom" a decade later had contributed to a recession and was a factor in the Conservatives losing to Labour again after the February 1974 general election.
The inflationary pressures of the Lawson Boom were one of the reasons given for the UK's entry into the European Exchange Rate Mechanism in October 1990, a move that was supposed to help restrain inflation (which had been approaching 10%) in the UK by "importing" the anti-inflationary credibility of the Bundesbank. However, the economy fell into its third recession in less than 20 years, with unemployment coming close to 3 million by the end of 1992, even though this time the Conservatives managed to gain re-election.
See also
References
Further reading
- Cobham, David. "The Lawson boom: excessive depreciation versus financial liberalisation." Financial History Review 4#1 (1997): 69-90. online
- Matthijs, Matthias M. Ideas and economic crises in Britain from Attlee to Blair (1945-2005) (Routledge, 2012).
- Oliver, Michael J. "The macroeconomic policies of Mr Lawson," Contemporary British History, 13:1, 166-182, DOI: 10.1080/13619469908581520 emphasizes his mistakes and failures