Reaganomics is known as the series of neoliberal economic policies promoted by US President Ronald Reagan during his time in office in the 1980s. When Reaganomics was first implemented into the US, it was during a time of economic recession and was meant to counter the recession and improve the economy; which it did temporarily. Inflation and unemployment both dropped significantly, millions of new jobs were created, and the GNP saw a strong increase.
Britain is currently seeing about a 9.9% inflation and the Bank of England just raised interest rates by .5% on September 22nd. Prime Minister Truss is laying out a huge fiscal stimulus that is expected to have large tax cuts and provide subsidies for energy bills. The Bank of England is expected, however, to raise inflation rates again in response to this fiscal stimulus faster than it otherwise would. Britain's currency, the pound, is also falling quite a bit which means the Bank of England will not be able to offset the fiscal stimulus using currency markets. When Reaganomics was implemented in the United States, it was accompanied by a strengthening dollar which greatly helped its success.
While Reaganomics were relatively successful in the United States, it does not guarantee a similar result for Britain. Britain's economy is structured differently and it relies more heavily on imports than the United States does. With the pound already weakening, this dependency on imports means trouble for Britain. It will be interesting to see the results of the fiscal stimulus in Britain's economy when so many are expecting it to fail.
I think it will be interesting to watch and see how it turns out for Britain. As Reaganomics did help but it isn't the most liked policy, specifically cause of the trickle-down theory. One pretty big con is that it widened the income gap between the rich and poor. If Reaganomics is pretty controversial now even if it did work, I wonder how it will be received in Britain with the expectation of it failing. I am honestly more interested in how the public sees the policy when the economy recovers.
ReplyDeleteBritain has been an interesting country to observe economically for some time now, especially since Brexit and the politics that came with it. Especially recently, the country has been going through change, recently changing the prime minister and the passing of the Queen. Seeing how closely tied Reagan's political campaign and economic policies were, it is interesting to see something similar occurring in Britain. From when I lived in England I remember the pound being closer to double the value of the dollar, whereas now it is approaching a 1 to 1 conversion. I am unsure how it will work out long-term in Britain, but it makes sense that they are trying fairly drastic economic change.
ReplyDelete