Full Description
An economic theory, associated with Milton Friedman and the Chicago School, holding that control of the money supply is the primary tool of economic management and that government intervention in markets is generally counterproductive. Monetarism challenged the Keynesian consensus that had dominated Western economic policy since the 1940s, arguing that inflation — not unemployment — was the primary economic danger. It became the intellectual foundation of Thatcher and Reagan’s economic policies in the 1980s.
Critical Perspective
Monetarism achieved intellectual dominance partly through the crisis of the 1970s, when Keynesian economics appeared to fail in the face of simultaneous inflation and unemployment (“stagflation”). But monetarism’s practical record was equally mixed — Thatcher’s application of it in 1979–81 produced the deepest recession in Britain since the 1930s and unemployment of over three million. Its attraction lay less in its empirical success than in its ideological usefulness to those who wished to dismantle the post-war welfare state.
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