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A sideways look at economics

In defence of the economic cycle

18 June 2021|

“No more boom and bust”, was Gordon Brown’s mantra. He served as chancellor of the exchequer following Tony Blair’s landslide victory in 1997, taking over the reins himself as prime minister in 2007. During the Global Financial Crisis of 2008/09, which saw the UK economy contract by close to 6%, Mr Brown added an important qualifier. All he had in fact promised was that there would be “no return to Tory boom and bust”. Economic cycles are generally seen as a ‘bad thing’. Indeed, in the introduction to Lectures on Macroeconomics — required reading for anyone, like me, who studied the subject in the mid-1990s — Olivier Blanchard and Stanley Fischer assert that understanding, and implicitly dampening down the economic cycle should be the primary objective of anyone working in the field. But are we doing the phenomenon a disservice? That is the question I pose, and attempt to answer, in this blog.