IMF crisis echoes

The economy in crisis. Capital markets in revolt. Half of all under-25 year olds out of work. A left-wing government in office, with Marxist ministers determined to re-nationalise every major industry. And a deeply unpopular bailout from the International Monetary Fund.

No, I’m not talking about Greece today, but Britain in 1976. While there are some differences between Athens today and London then (primarily the currency arrangements, if not the facial hair), there are some uncanny similarities- which I explore in my Times column this week.

It’s striking reading back into Britain’s experiences during that period – the misery when the “men in grey suits”, as the IMF inspectors came to be known, arrived in town*; the resistance from the Government to their reforms (at one stage the Chancellor, Denis Healey, threatened to “call a general election on the issue of the IMF versus the people”). So many similarities with Greece’s experience today.

Most instructive of all is to note that this was, in a sense, Britain’s lowest ebb. It was the moment productivity started to recover, after a dismal few years. The sense of outrage over Britain’s economic sovereignty being undermined contributed to the groundswell of opinion that brought Thatcher into Downing Street and enabled her to implement some seriously unpopular economic reforms.

As Tyler Cowen has put it, Greece needs a Thatcheropolous – someone to carry out the unpopular supply-side reforms Britain went through in the ’80s and ’90s. But if Britain is anything to go by, Greece may well need to go through the misery of surrendering its sovereignty before such reforms become politically feasible.

However, it’s worth mentioning a two key differences between Greece today and Britain in 1976. The first is that Greece is limited in what it can do by the fact that it is clamped into the single currency. Second (and perhaps because of that) it has faced a far deeper recession than Britain did in the ’70s, or indeed in any comparable period.

PS the real point of my column was to list some of the reforms the Troika might recommend were it in the UK today.

* Ironically one of the six men from the IMF was Greek.