Sir Alan Walters, one of Mrs Thatcher’s key economic advisers, has died at the age of 82. Though he always tried to shun media attention, Sir Alan attracted a considerable amount of it when he clashed publicly with the then Chancellor, Nigel Lawson, over the Exchange Rate Mechanism (ERM). When faced with the choice from Nigel Lawson that either Alan Walters went or he did, Mrs Thatcher famously chose her adviser over her Chancellor. This lent Sir Alan a degree of infamy in economic circles and he is perhaps known best as one of the most influential monetarists of the period. Sir Alan was an early advocate of money supply targeting and always argued that the money supply should not be manipulated for political reasons. His advice was also key in the budget of 1981 which raised taxes in the middle of a recession, something that in this current recession would appear to be unthinkable.
Thatcher’s economic guru dies Independent (6/1/09)
Nigel Lawson and Thatcher’s guru in a political bloodbath Telegraph (5/1/09)
Mrs Thatcher always agreed with Alan Times Online (5/1/09)
Thatcher pays tribute to Walters BBC News Online (5/1/09)
Thatcher economic adviser Walters dies The Herald (6/1/09)
Sir Alan Walters, Thatcher’s economic guru, dies aged 82 Times Online (5/1/09)
Sir Alan Walters Telegraph (6/1/09)
Mrs Thatcher’s monetarist guru The Economist (6/1/09)
Questions
- Write a short paragraph setting out the key influences of Sir Alan Walters on economic policy in the 1980s and 1990s.
- Explain what is meant by money supply targeting.
- Discuss the effectiveness of money supply targeting in combatting inflation in the 1980s.
- Examine whether money supply targeting might once again be an effective tool in the monetary policy ‘armoury’.
It is something of a media sport in these recessionary times to find ‘economic scapegoats’. One minute the recession is the fault of the banks and their poor lending practices; the next minute it is the fault of the media themselves, who are constantly reporting doom and gloom; the next minute it is the fault of the politicians, who have failed to react quickly enough to the economic uncertainties; the list goes on! However, the one group that is rarely blamed is ‘us’ – the consumers. Given that the state of the economy is the outcome of our collective decisions, it could be said that we have no real right to complain, as our collective lack of confidence could be what has caused much of the current situation. As James Meek puts it in the article below:
What makes the situation peculiar is that the crisis that threatens us also seems to be us; we are simultaneously menaced by the wave, and exist as elements of the wave. After all, that is what an economic crisis is: the sum of all the actions of billions of people around the world, deciding whether to lend or hoard, borrow or save, sell or buy, move or stay, hire or fire, study or look for work, be pessimistic or optimistic.
To live in remarkable times Guardian (5/1/09)
Questions
- Explain how changes in consumer confidence can affect the level of aggregate demand.
- Examine the importance of consumer confidence in determining the length and depth of a recession.
- Discuss policies that the government can implement to try to boost consumer confidence.
- Analyse the impact on an economy of a prolonged period of poor consumer confidence.
The Koruna (or crown) was the national currency of Slovakia. This may not be something you knew until you read it just now and you might as well forget the fact straight away. This is because the Koruna ceased to exist at midnight on December 31st 2008 when Slovakia became the 16th member of the eurozone. The official conversion rate between the Koruna and the euro has been advertised extensively in Slovakia and is 30.126. Slovakians now have to get used to a complete change in their notes and coins as euro notes and coins became legal tender on January 1st 2009. So what will be the impact for Slovakia of joining the eurozone?
Slovakia becomes eurozone member BBC News Online (1/1/09)
Slovakia embraces the euro BBC News Online (31/12/08)
Slovakia joins eurozone in new year Times Online (30/12/08)
Slovakia adopts the euro on January 1 Times Online (29/12/08)
Questions
- Examine the likely impact on the Slovakian economy of joining the euro at a time of global downturn.
- Explain three factors that the Slovakian authorities would have needed to consider when setting the conversion rate for the Koruna to the euro.
- Discuss the advantages and disadvantages to Slovakia of joining the eurozone.
The current financial crisis had led to Keynesian theory coming back into fashion. Governments all around the world have put in place a significant fiscal and monetary stimulus to try to mitigate the impact of the downturn. But is this really Keynesian policy at work? Keynes argued for permanent and tough controls on the financial sector to allow the government to pursue a policy of full employment. It would be difficult that current policies are therefore pure Keynesian policies, so is there an economic theory vacuum with market economics discredited, but Keynesian economics not really taking its place? The article below looks at how economic theory has changed in recent months and considers whether we need a ‘new’ Keynes.
Wanted: the Keynes for our times Guardian (22/12/08)
Questions
- Explain the difference between classical and Keynesian beliefs with respect to government intervention in the ecoomy.
- Analyse the extent to which the recent policy stimulus has been Keynesian in nature.
- Discuss the changes that have taken place in economic policy during 2008/9 in the context of economic theory.
EU leaders at a Brussels summit have agreed a plan to cut emissions. This will involve the 27 EU countries cutting greenhouse gas emissions by 20% by 2020 compared with 1990 levels. The aim is also to try to raise renewable energy sources to 20% of total energy use. The package has become known as the 20/20/20 package, but scientists have already argued that these measures may not be sufficient to prevent serious climate change.
Fiddling with words as the world melts The Economist (18/12/08)
Climate deal is far too little too late Guardian (15/12/08)
EU leaders claim historic agreement on cutting pollution Guardian (13/12/08)
Climate change: EU leaders reach compromise deal on emissions Guardian (12/12/08)
World needs ‘climate revolution’ BBC News Online (11/12/08)
EU climate package explained BBC News Online (5/12/08)
EU leaders reach new climate deal BBC News Online (12/12/08)
Questions
- Identify two external costs that result from climate change.
- Using diagrams as appropriate, illustrate the impact of the EU climate change deal on the market for electricity.
- Discuss the extent to which the EU climate change deal will lead to an increase in the supply of renewable energy sources. How quickly are these changes in supply likely to take effect?
- Examine two other policies that national governments could implement to reduce carbon emissions.