Adam Curtis, 1992
3. The League of Gentlemen
A fable from the age of science
For the last thirty years, politicians in Britain have tried to build a new prosperity. They wanted to make an old
nation that had fallen behind in the world recapture the glories of its past.
They turned for help to what they believed was a science of money. One after another, Labour and Conservative governments became convinced that if they followed what they thought [was] a set of scientific laws, the
economy would grow faster. The perceived tide of decline could [be] reversed.
But instead of restoring the country's fortunes, the economic experiments failed to halt Britain's relative decline. This is the odd story of how politicians came to believe there was a technical way to make Britain great again.
THE LEAGUE OF GENTLEMEN
[Alan Whicker narrates a] 1960 [film]
[Caption in film:] WE THE BRITISH
[Caption in film:] ARE WE IN DECLINE?
"Ten years ago, one car in every three bought in Sweden was British. Today, we've less than ten
"Now that's a sad story. But let's take a quick sample here on this bridge in central Stockholm and
see just what the Swedes are driving... Well, there's a Swedish Volvo... a Swedish Saab... that is
another Swedish Volvo over there... a Swedish Volvo..."
Michael Posner, economist
One after another, other European countries – who we were used to thinking of [as] nice guys but
poorer – began to get within shouting distance of us and passing us; it was like being in a sailing
race and seeing people you didn't think were good enough or hadn't scraped the bottom of their
boat well enough nevertheless overhauling you –
[Back to the Whicker film]
"... a German Ford truck... an English Zephyr – congratulations, Ford... a Mercedes-Benz..."
People began insistently to ask: "If they can once get on the growth path of that steepness, won't
they soon overtake us properly?"
"... and a Volkswagen. Well, in that lot, one British car – one Ford."
What was holding Britain back, it was decided, was the old-fashioned idea that the civil servant's job was simply to keep the economy stable. In 1961, the Conservative government set up "Neddy" – the National Economic Development Council – in what had been a gentlemen's club in Westminster. It was advised by young economists convinced they could make the economy grow much faster.
Sir Donald MacDougall, Economic Director, NEDC 1962–1964
[Walks into shot through door into empty room] Ah, yes, this is my old room – a splendid room, isn't it?
Yes... I'm sorry it's all boarded up – the windows there – because, you know, there's a balcony out
there... As you know, the growth target of Neddy was four percent a year between 1961 and 1966
and I had visions of myself getting out onto that balcony at the end of 1966 and proclaiming to the
cheering crowds below "Four percent – we've done it!".
Many of this generation of economists had been taught with the aid of a large machine worked by water. Built by Bill Phillips, an engineer-turned-economist, it has lain disued for years.
Colin Carter, London School of Economics
Reza Moghadam, London School of Economics
[Carter, pointing out various parts of the water machine as it operates:] ... that powers these two... parts
over here, which is where money can actually come into the economy. The actual water flowing
round is the money going through the economy...
[Moghadam, also pointing out various parts of the machine as he speaks:] That's... enabled you to
illustrate, for instance, what would happen if you tried to grow the economy, pump more money
into the economy. For instance, you could increase government expenditure and see what the
effect of that is through the workings of the economy – the interaction of all the variables – on
growth. Of course, if the economy is very prone to imports, people might simply spend their
money to... import foreign goods. Or, if the economy is operating at a high level of activity, then
that would lead to inflation.
Neddy's economists did not have a new theory, but they believed they could use existing techniques in a new way. They saw themselves as followers of the economist [John] Maynard Keynes. He had shown how to manage an economy by increasing or decreasing demand. The problem was that every time you increased demand too much, imports flooded in and wages rose. But Neddy's economists were convinced they could control a boom. They would plan investment in industry and the government would hold inflation down. The bad old days of stop/go would be over.
[From TV recording of] Reginald Maudling, Chancellor of the Exchequer 1963 [giving a speech (at that year's
Conservative Party conference?)]
"Our plans for the future of Britain in the coming year are clear and comprehensive. We've
accepted with enthusiasm the Neddy target of a four-percent growth rate and all our actions
have been designed to achieve it. This nation must not jog along – this nation must be inspired
with the determination to achieve great things."
By 1963, the economists' promises seemed to be coming true. The Conservatives had poured money into the economy; and, sure enough, it had begun to grow.
They had placed their bets on growth. They talked about it a lot; there was an announcement
about it, white papers, speeches and all the rest. In our system of politics, when something
important like that is put on the table by the government of the day, the Opposition has to
respond to it.
[From footage of a] PARTY POLITICAL BROADCAST ON BEHALF OF THE LABOUR PARTY [given by George Brown], 1964
"My purpose tonight is to have a word with you about the future of Britain.
"The outstanding thing we ought to do, obviously, is to get up our economic strength...
operating a national plan; a plan for steady, continuous, controlled production and expansion."
Labour promised a national plan, run by a separate department of economic affairs under George Brown. It
would make Britain grow by a quarter in just six years.
It was a seductive dream for a socialist party, for if the economists could produce this growth, then Labour's leaders would avoid what they had always thought inevitable: the battle to redistribute the country's wealth. Instead, there would be more for everyone. But it all depended on the economists' promises that they had the technical solutions to the politicians' problems.
Professor Charles Goodhart, Economic Adviser to the Department of Economic Affairs 1965–1967
We saw ourselves as providing the politicians with a potential menu of outcomes, which, if the
politicians would give us some indication, then we could set the instruments in such a way as
we could deliver – reasonably enough, give or take the various shocks that would occur in the
economy – the kind of outcomes that the politicians wanted.
But Labour had come to power just as the boom the Conservatives had begun was overheating. Imports were flooding in and wages rising. This was the point when, in the past, a halt would have been called. But Labour were
determined to press on.
Labour had missed out a vital component from the plan, the economists told them. They should devalue the pound and so make Britain's exports cheaper. But, in the politicians' eyes, devaluation would undermine precisely what they were trying to achieve: [making] Britain great again.
Rt. Hon. Tony Benn MP, member of Labour Cabinet 1964–1970
[Harold] Wilson was a great one who believed in [for believing in?] sterling. Sterling was at the
centre of everything... and he always said that he would defend the pound; and we'd have a
place east of Suez; and... It was a sort of nationalism of a kind.
Sir Donald MacDougall, Director-General, Department of Economic Affairs 1964–1968
After that, all talk of devaluation by economists and everyone else was forbidden. I personally
used to do little sums on scraps of paper in my room in the DEA; and, when anyone opened the
door, I would hastily put them into my drawer.
By 1965, the boom was clearly out of control. Faced with inflation, the government tried to hold down wages and prices, but to no avail. It also faced repeated runs on the pound, as foreign investors lost confidence in Labour's
management of the
now became a game between the politicians – whose fortunes depended on it – and their economists, who had begun to realise that the economy was now far beyond their control. They were being used.
Brian Reading, Department of Economic Affairs 1964–1966
I think the moment I really realised it was a gimmick was when... after we'd finished work on it
and it was the summer – I think it was the summer of 1965 – I hadn't very much to do and so I
decided I'd look at the details of the plan and see all the different measures – the things like the
decision that you'd double expenditure on road-building, for instance – and try and work out
what effects these might have on the growth rate of the country. And I laboriously worked
through [them], making my best guesses and calculations – not having been particularly told to
do this by anybody – and came up with the results; and they were well, well short of anything
that might've produced the twenty-five percent growth. And I wandered along to my seniors
and said "Hey, look, I've done this useful little exercise..." and they weren't in the least interested.
[They wanted] nothing to do with it at all.
[Start of TV programme 24 Hours, presented by Cliff Michelmore, on] July 20th 1966
[Michelmore:] "The fight for the pound is on. After last week's depressing trade figures and the
rise in the bank rate, after a weekend of growing speculation and three days of shoring up the
pound in the foreign exchange market, Mr Harold Wilson himself cried "Stop!" –
Andrew Shonfield, economist
"What went wrong was that foreigners who hold the pound decided, in unison,
that Britain was no longer to be trusted – there was a wave, there was a mood;
"... and what the government has done is to respond to the mood by producing
something which demonstrates a will to deflate this economy – which is bound
to crush it, in my view.
"... In other words, we're condemned to no growth..."
The attempt to plan growth had failed. Britain was left with little expansion and political disaster. Most economists blamed it on the government's failure to devalue. Few asked whether the weakness of Britain's currency was really a symptom of something much deeper, far beyond the power of their techniques to deal
A year later, the government bowed to the inevitable and devalued. But it was far too late: the economy had long ago come juddering to a stop.
Michael Posner, Economic Adviser to the Treasury 1967–1969
As a result of that experience, we had to abandon the notion – tacitly and slowly, but abandon
it all the same – that the planning apparatus itself was the unique and certain method of
achieving the aim of faster growth. We still believed in faster growth; and we still, many of us,
thought that it was obtainable – but this particular path to its achievement was no longer key,
was no longer essential; would no longer be relied upon.
In the early seventies, many economists began to find they no longer understood how money behaved. The new Conservative government under Edward Heath had tried what was called a "dash for growth"; they poured in money by liberalising credit and increasing public spending. For a moment, the economy boomed. But then the strangest thing happened: prices and unemployment began to rise together. People called it "stagflation".
Professor Alan Budd, Economic Adviser to the Treasury 1970–1974, interviewed June 1991 when economic adviser to Barclays Bank
Now, I happened to arrive in the Treasury in 1970. When I got there, people really felt that they
didn't quite understand how the economy worked any more; and one particular example of this
was that we saw unemployment and inflation rising at the same time – and that was something
that should've been quite impossible.
And while this was going on, there, sitting in Chicago, in the States, were the monetarists, who
said "No, we know perfectly well what's going on; we can explain it – you've been led astray by
your Keynesian beliefs – and we can explain precisely what's going on; and it's all to do with the
growth of the money supply.
Professor Milton Friedman, monetarist economist
I and people who believed the way we did were saying that a continuation of the policies was
going to lead to higher inflation and more unemployment.
It represented a recognition that fine efforts to produce paradise on Earth were producing
something very different [from] what was intended.
Friedman argued that any attempt to money into the economy to make it grow was doomed to failure. But he was not challenging the idea of the economy as a predictable system; only how it worked. He considered his laws were as powerful and objective as those of the physical sciences.
It was scientific. Inflation isn't a communist phenomenon; it's not a capitalist phenomenon – it's
a printing-press phenomenon. That's a scientific statement.
And you will only have inflation if the quantity of money increases more rapidly than output; you
can only stop inflation by slowing down the rate of monetary growth.
Monetarism offered an attractive technical explanation for the problem of inflation. But from it would come, in less than ten years, another scheme for Britain's salvation: a set of "scientific" rules, which, if the politicians
followed them correctly, would create the right conditions for economic growth.
It began with a disillusioned group of economists. They included two influential journalists: Peter Jay of The Times and Sam Brittan of The Financial Times.
Sam Brittan, The Financial Times
[Smiling knowingly] We were found to be "stimulating" and "interesting" – which are the English
words for damning people – and we were always regarded as good for a puzzling interlude in a
programme such as this –
[Brittan is referring to] THE MONEY PROGRAMME [of which a brief clip from an episode broadcast in] 1972 [is shown]
If there was one place where we tended to bump into each other, it was the Institute of Economic
Lord Harris of Highcross, President of the Institute of Economic Affairs
Milton Friedman would... we'd set up a table here, to maximise the array of people that we could
fit in – we could probably fit in twenty or twenty-five people in this small room – and he would
develop his arguments briefly, very emphatically, in strong form. And he would say "If you want
details of this, particular episodes in American history, I could go back to that..."; and then the
discussion would take place.
To start with, I must admit I didn't believe the monetarists for a moment. It just seemed totally
implausible; this was the sort of economics that I'd been told to discard all the time I'd been
learning economics – it was a joke, really; it wasn't to be taken seriously. Whatever else one used
to explain inflation, it wasn't the money supply.
In February of 1974, Edward Heath's government fell amid power cuts, a three-day week and never-ending
inflation. They were direct consequences of his crude "dash for growth".
The time was ripe for the monetarists; in particular Alan Walters, a professor from the London School of Economics. He began to attract both press and politicians with apocalyptic warnings of what was to come.
[From a TV programme shown in] July 1974
[Walters:] "... a reduction in output; an increase in unemployment; and, at the same time,
rampant inflation – inflation of the order of perhaps thirty percent; perhaps even increasing as
we go on. There is a real danger of hyperinflation."
Lord Joseph, member of Conservative cabinet 1970–1974
Alan Walters had snubbed me when I went back to meet old friends, once [...] the government
fell and [...] I was back as a Member of Parliament without a government post. Alan Walters
refused to shake my hand; he said "You've been debauching the currency – why should I welcome
you back?" And I started to rethink what we'd been up to and a fellow called Alfred Sherman was
very influential in convincing me – he used to say "Don't you know? Keynes is dead! Keynes is
dead!" I didn't understand what he meant.
Sir Alfred Sherman
He turned to me for help; and I managed to persuade him [to] go further and look at the whole
Keynesian mumbo-jumbo – the panacea –
Keith Joseph toured the country, translating monetarism into a political programme. The primary job of economics was no longer to create employment, he said; it was to reduce inflation.
After having failed to persuade the Shadow Cabinet to reconsider our economic policies, I
warned them that I'd have to make a speech. Well, the speech was made – I remember... I
remember that I said to Sam Brittan, who looked at one of the drafts: "This speech has been
through nine drafts – we're trying to get it right!" and Alfred Sherman from the background
said "Yes, I wrote thirteen of them..!" Well, we slogged at that speech.
[Footage of Lord Joseph speaking on] 4th September 1974 [in] Preston
"...is threatening to destroy our society. The distress and unemployment that will follow unless
the trend is stopped will be catastrophic.
"Inflation is caused by spending more than we produce – too much money chasing too few
goods; deficit financing; printing money. Mild inflation seemed a painless way of maintaining
full employment, encouraging growth and expanding the social services. We now have seen
that inflation has turned out to be a mortal threat to all three."
But Labour was in power. As before, they had inherited the chaos of a Conservative boom. Yet this time, none of the traditional Keynesian methods offered them any help, because inflation and unemployment were rising together. It was something the Keynesians believed impossible. By the end of 1975, the economists advising the government were lost.
Gordon Pepper, City stockbroker 1962–1990
My memory is – I think it was a dinner party I'd deliberately organised, where the main economic
models were there: the Treasury was represented, the Bank [of England] was represented, the
National Institute of Economic and Social Research, London Business School...
...and I was a fly on the wall. And they were talking about the medium-term projection in their
models – and they were unanimous: that they could not project what was going to happen [to]
inflation, or to unemployment or the balance of payments. There's almost total agreement around
the room that the UK was in serious danger of going into absolute decline – that was negative
growth, not just growing at a slower rate than other industrialised countries. That is when the civil
servants in the Treasury and the Bank of England realised that the UK economy had arrived at the
brink of the abyss – and they had sight of the awfulness of what that abyss might look like; and
they were shell-shocked as a result of it.
Then, in March 1976, Britain fell into the abyss. Foreign investors, led by American bankers, panicked. The pound
began to slide against the dollar – and nothing would stop it.
Britain faced bankruptcy. In desperation, Labour turned to the International Monetary Fund for a loan. An IMF team came to London. They were determined that the only way to restore confidence was for the British government to adopt monetarist policies. In a speech that could've been written by Keith Joseph, Prime Minister James Callaghan told the Labour Party why it had to do what the financial markets wanted.
[From James Callaghan's address to the] Labour Party Conference [in] September 1976
"We used to think that you could  spend your way out of a recession and increase employment
by cutting taxes and boosting government spending. I tell you, in all candour, that that option
no longer exists; and that insofar as it ever did exist, it only worked, on each occasion since the
[Second World W]ar, by injecting a bigger dose of inflation into the economy on every occasion,
followed by a higher level of unemployment as the next step."
Rt. Hon. Tony Benn MP, member of Labour Cabinet 1976
It was presented scientifically – but then, they're always presented scientifically – as being the
only way of doing it: "There is no alternative." And this gripped people – but, at the same time,
you must never forget that politics is in the pursuit of an interest and an ideology. And if the
scientist helps you with the ideology, you use him; if he doesn't, you disregard him. So the
conflict between, as it were, Milton Friedman and Keynes was a political conflict; it wasn't really
that it was people solemnly assessing the different values of two sets of ideas. One benefited
one group; another benefited another.
In December 1976, the IMF granted a loan to Britain. That same month, Milton Friedman was awarded the Nobel [Memorial] Prize. In just five years, his economic theory had moved from the margins to centre-stage. It was seen by many politicians as the only solution to Britain's disastrous economic position. And, waiting in the wings, was Friedman's most devoted follower, a politician who believed it was possible to use monetarism as the basis of a
plan to regenerate the country.
Keith Joseph was now the closest adviser to the new leader of the Tory party, Margaret Thatcher. He and the
economists around him had drawn up what was called the "medium-term financial strategy".
The plan was to combine monetarism with another theory from economics called "rational expectations". It said that whenever a government changes policy, it will only work if the politicians can persuade people they're going to stick with it whatever happens.
Lord Joseph, member of Shadow Cabinet 1978
We believed that in announcing and publishing a mid-term financial strategy of what we were
going to do with the crucial element of the money supply, we would persuade the negotiators,
the managements and the trade unions – and the opinion-formers – that there must be some
limit to pay claims if jobs were not to be priced out of the market: rational expectation.
It was to get away from short-termism; and, in that respect, it had something in common with a
national plan – [a] comparison of which I'm not ashamed...
And, as with the national plan, it was all very simple. The supply of money was to be reduced by raising interest rates and cutting public spending. Inflation would fall and enterprise flourish. Instead of putting money in, as Labout had done fifteen years before, this time the theory said it should be tightly controlled.
Monetarism worked throughout the nineteenth century, when we were the envy of the world,
with our people growing in numbers and generally prospering – generally, despite all the horrors
of the time, generally prospering – with the world looking to us for how to do it. It could work
There arose a slightly messianic sense of mission.
[From a TV recording of Margaret Thatcher]
"I can't bear Britain in decline – I just can't. We, who either defeated or rescued half [of] Europe,
who kept half [of] Europe free when otherwise it would be in chains... and look at us now."
Milton Friedman, interviewed 1979
"The Thatcher government is a kind of an experiment in whether it will be possible, in a
democratic society that has gone as far as Britain has gone, to change course in an orderly,
effective way; to set Britain on a new road. If the Thatcher government succeeds, it will be an
example that will not be lost on the United States or the rest of the world."
13 months later...
[From a TV news report with voiceover]
"The latest unemployed, from the Royal Stafford, helped form an unwelcoming committee for
Mrs Thatcher as she arrived..."
But the economy did not behave in the way the monetarists predicted. The squeeze on money led to a wave of factory closures, while inflation continued to rise.
Roy Adkin, insolvency practitioner, West Midlands
I've been in insolvency for all my professional life; and, I think, up until 1980, I used to go in with
a great deal of confidence that with new management and perhaps some sort of reorganisation,
something could be done. It was very sad to have to go onto the shop floor in the early eighties,
into a company, knowing, in fact, that there wasn't much chance of selling that business; and
that, in fact, the business would come to an end.
"This is what would normally be a working day – it's the middle of the week – and we're now
down in this plant, which produces well over half the cast-iron baths of the United Kingdom,
onto one week on, one week off... and that's an immediate and practical effect of the strict
monetarism policy that the government is carrying on."
"The managing director said "I'm very sorry to tell you, but, as from this minute, the firm has gone
into voluntary [liquidation]." That was it."
[Another unidentified woman]
"Somebody shouted "Will we get any wages?" and he said "You'll get nothing.""
[Sketch from an episode of the TV comedy series Not the Nine O'Clock News shown in] 1980
[Voiceover (Griff Rhys Jones):] "There now follows a government statement on the current
[Man (Rowan Atkinson) at desk looking forlornly at some papers and sighing:] " [long pause] Oh dear...
[audience laughs] ...... Oh dear, oh dear, oh dear, oh dear......"
[Unidentified man addressing meeting around table]
"The government seems to've totally lost its way in terms of the interaction of four economic
indicators on British industry..."
[Back to sketch]
[Man at desk:] "... Oh, God..."
[Back to man addressing meeting]
"As every member of any firm knows,  with high interest rates as a weapon for controlling
money supply, what is the first thing that has to be cut? Investment – because you still have
to pay wages and you still have to pay your [current?] costs."
[Back to first unidentified man (at cast-iron plant), now responding to interviewer off-camera]
[Interviewer:] "The government would say just hang on and stop making such a fuss now..?"
[Man:] "[Yes], well, all I can say to that is that the government isn't standing where I'm bloody
well standing ..."
Even more mystifying was the behaviour of the money supply. Despite the squeeze, it was still growing – something the monetarists thought impossible.
Professor Charles Goodhart, Chief Economic Adviser on Monetary Policy, Bank of England 1980–1985
Well, it was all a bit embarrassing. People like me were at the Bank of England because we'd
been forced... the government had signed-up for this path of gently-declining monetary
aggregates; and instead of the monetary aggregates gently declining, some five or six months
after this new policy was put into operation, they took an enormous jump – and it was very
difficult to know why or to know what ought to be done about it.
By the end of 1980, unemployment had nearly doubled. Manufacturing output had fallen by a sixth. Britain was declining faster than even in the darkest days of the 1930s. Despite this, the politicians were convinced they were right: the laws of their science told them so.
[Margaret Thatcher addressing a meeting from a lectern labelled "The Press Association"]
"Let me just have a word about monetarism and monetary control first. I mean, you all know
full well that if you produce too much of something, its value will fall. That's elementary. It
isn't a new-fangled theory; it is as essential as the law of gravity – and you can't avoid it."
Lord Joseph, Secretary of State for Industry 1979–1981
People used to say "You're destroying my job!" and I was absolutely secure in my conscience
that their negotiators and their employers were destroying their jobs – by not following rational
expectations and seeing that if they didn't accommodate unit labour costs by a combination of
pay increases allowed and rising productivity to what would keep their prices internationally
competetive, jobs would go. So there was I, absolutely clear in my conscience; and there were
they, convinced in their – what I would call – "invincible ignorance" that I was an enemy... Yes,
it was awkward timing.
Sir John Hoskyns, Chief Policy Adviser to Mrs Thatcher 1979–1982
There was no question that what was happening did, in my view, a great deal of damage to
the economy. The gover... the politicians of the day will never admit to that, because they never
admit to making mistakes at all; but it's quite clear that's what was happening. They were trying
to do it right, but they got it wrong.
In January 1981, Alan Walters became Mrs Thatcher's economic adviser. Although a convinced monetarist, he agreed with Sir John Hoskyns that interest rates would have to come down. This, in turn, would reduce the exchange rate and make exports more competitive. But the problem was how to do it without admitting that all the destruction of the past two years had been for nothing. The only solution, they said, was to cut even more from public spending. That way, the government would be seen to be keeping up its squeeze on the money supply.
[Sir John Hoskyns]
What we said was [that] we'll take a deep breath and take an enormous amount of money out
of the economy, at the nadir of a major recession – I mean, it's against every textbook that's ever
been written or all the Keynesian conventional wisdom which prevailed at the time – and thus,
hopefully, by that insurance make it very unlikely that we would have to put interest rates back
up again just at the wrong moment.
At a meeting with Mrs Thatcher and Geoffrey Howe, they were both absolutely taken aback –
I think they could hardly believe their ears – and Mrs Thatcher [said], very indignantly, "It's all
very well for you, but you don't have to stand up and defend it in the House[s of Parliament]."
In the Budget of 1981, public borrowing was cut by a fifth. Three hundred and sixty-four leading economists
wrote to The Times and the Prime Minister accusing her of virtually destroying the economy.
That summer, there were riots in English cities that even some Cabinet members blamed on the economic policy. Unemployment headed towards two and a half million. Inflation did begin to fall, but the money supply continued its mysterious rise. It became clear that the fundamental law of monetarism – the relationship between the money supply and inflation – didn't work. Ever so quietly, this solution to Britain's problems was discarded. Finally, the man who had first brought the monetarists' message to Britain was publicly told it was over.
[Excerpt from an edition of the TV programme] A Week in Politics [shown on] Channel 4 [in] February 1985
[Interviewer (Peter Jay?):] "The monetarist economists believe in something called "the natural
rate of unemployment", which is supposed to be the rate at which unemploy... inflation stops
or ceases to accelerate. Now, do you think that we, Prime Minister, with all-time record
unemployment figures this week, have yet reached that "natural rate", even though inflation
is still proceeding sufficiently to halve the value of money every fifteen years?"
[Margaret Thatcher:] "It's not a doctrine to which I've ever subscribed. It's one which I think actually
came in with Milton Friedman; I used to read about it, I used to look about it [sic?] – it's not a
doctrine... it's a theory to which I've never subscribed."
Some of those who had lived through the experiment now became deeply pessimistic. One economist saw it as proof that it was fundamentally impossible to change, in a predictable way, how an economy behaved. As in other sciences, his observation had a formal name: Goodhart's Law.
Professor Charles Goodhart
Goodhart's Law said that if ever the government decides to rely on any particular statistical
relationship as a basis for policy, [then,] as soon as it did that, that relationship would fall apart.
And that's just what happened.
The implication is [that] what you should try and do is not to disturb things too much; and let
individual agents go on and try and make the best of the situation as each of them sees it
It was a conclusion that fitted well with Conservative philosophy. If there was nothing that governments could do, then the economic agents in a newly-liberated City of London should be left alone. Unlike the economists, they seemed to know how money worked.
[Margaret Thatcher giving a speech in the City of London in] 1986
"The City's growing confidence and drive owes a good deal to young people. Its vast new
dealing rooms are run by the young; people who made it not because of who they know, or
what school tie they wear, but on sheer merit – and that is the kind of society I want to see."
Brian Winterflood, Executive Director, County NatWest Securities 1986–1988
Capital was available; ideas were available; and there was a keenness to do things. And I think
that probably the government felt that our merchant bankers in the City of London – which,
after all, had put us on the map – there they were again; they were to go out and they were
going to... make us great again, if you like.
Money now became a commodity, traded for itself. It was managed by young technicians in the dealing rooms. Economists, who once thought they could control money, became its servants. They were now employed in their hundreds by the banks to predict on television what might or might not happen as a result of the colossal flows of capital.
[TV collage of (presumably) economists giving views]
"... It is, of course, extremely uncertain, but my view is that –"
"– I guess there is still a lot more to come. We're currently saying –"
"– People fear there will be a rerun of what happened a fortnight ago –"
"– I suspect it'll certainly not stop –"
"– There is, however, a risk that interest rates will have to go higher –"
"– They may even get worse –"
Sir Alfred Sherman
When you get a loss of faith, say, if bishops cease to believe in God, they go in for socialism or
sodomy; but an economist who's agnostic about economics is unemployable – and therefore
they said "We know if you do this and if you do that...". And the economists will argue with each
other but none of them will ever question whether economics is as scientific as it claims.
[Ken Dodd introduces Margaret Thatcher to a Conservative rally in Chester in] April 1987
[Dodd:] "Great, Great Britain – the finest country in the world, right?"
[Audience cheers:] "Yes!"
[Dodd:] "And let us not forget who made it Great Britain this last eight years!"
[Audience cheers as Margaret Thatcher walks onto stage]
[Thatcher:] "... and when I go to the western summit in Venice on Monday [the thirteenth G7 summit,
June 1987], I will go with my head held high, as leader of a strong country."
Chief Inspector Ernie Plumb, City of London Police Force (retired)
There were people earning a lot of money without doing anything at all in this world of money.
Then, it suddenly came to a dramatic halt in the eighties – the reasons I can't give you; you'll
need to talk to  qualified economist[s] and, no doubt, they'll have differing views on why it
happened – but the system, overnight, became much more cut-throat. We had examples of
firms right out of the blue calling fire drills, locking their employees out and throwing their
belongings from the window to them,  saying "Sorry, chaps, you're fired." That's how bad
The bubble burst again. But that's what happens; in history, you have these... these slumps and
these booms – and you won't change it, because that's what capitalism is, really, isn't it?
Richard Turton, Partner, Insolvency Department, Touche Ross
I don't think we can change the world; it's not something we can do. Certainly, we insolvency
specialists can't; our job is sweeping up, or trying to prevent. Now, as far as I can see, the best
way is to try and see whether we can do something about stopping people being greedy and
stopping people being overambitious – and I don't think you ever will do that.
...and the economists seem to think that the whole of the problems can be solved by... by
money – by the use of money rather than the creation of wealth. But they've never really got
anywhere near it. So, I would ask the question[s]: "Whose money? What money? Where's it
Economics has really obscured the fundamental problems with the British economy [in that]
by seeming to be able to give a particular solution – by pulling a particular lever or pulling a set
of levers – it's obscured the longer-term decline [in] our industries, the longer-term decline in
the quality of our labour force, which politicians should really have been addressing thirty or
forty years ago; and which some of our European competitors – who've turned out far fewer
economists than Britain, by the way – have succeeded in doing much better than we have in
For some economists who were involved in this story, there is a further question: were their theories used to disguise political policies that would otherwise have been very difficult to implement in Britain?
The nightmare I sometimes have about this whole experience runs as follows. I was involved in
making a number of proposals which were partly, at least, adopted by the government and put
in play by the government. Now, my worry is as follows: that there may have been people
making the actual policy decisions or people behind them or people behind them who never
believed for a moment that this was the correct way to bring down inflation. They did, however,
see that it would be a very, very good way to raise unemployment; and raising unemployment
was an extremely desirable way of reducing the strength of the working classes, if you like –
that what was engineered there, in Marxist terms, was a crisis of capitalism which recreated
[a] reserve army of labour and has allowed the capitalist to make high profits ever since. Now,
again, I'm not say[ing] I believe that story, but when I really worry about all this, I worry whether,
indeed, that was really what was going on.
What we now doubt, which we used to think, was that our models will enable us to look into
the future; and, indeed, to change the future, to the benefit of mankind. We... the experience
of recent years has been such that as soon as we develop a model that seems to be reasonably
good at explaining the present – and there are few enough of those, God knows, now – the
[Interviewer (Adam Curtis?), off-camera:] We live in an imperfect world; and, if that's true, how are
you ever going to make it a better world?
[Goodhart:] We can perhaps hope that we can prevent it from becoming a worse world. I don't
think that we can easily make it a better world.
[As credits roll, Richard Turton sings, Negro-spiritual style]
Nobody knows de trouble I've seen; No[body knows like Jesus;] Nobody knows de trouble I've
seen; Glory alleluia. Sometimes I'm up, sometimes I'm down; Oh, yes, Lord – [interrupted by