Britain's economic establishment today condemned Prime Minister Margaret Thatcher's harsh anti-inflationary economic policies and urged her to change course to save British industry and the country's social and political stability.
An unusual public statement signed by 364 economists at British universities -- including most officers of the Royal Economic Society and five of the seven chief economic advisers to previous postwar governments -- declared that "the time has come to reject monetarist policies and consider urgently which alternative offers the best hope of sustained economic recovery" from Britain's worst recession since the 1930s.
If Thatcher's policies remain unchanged, the economists warned, they "erode the industrial base of our economy and threaten its social and political stability."
The economists argued that there is no "supporting evidence for the government's belief that by deflating demand it will bring inflation permanently under control and thereby induce an automatic recovery in output and employment."
The statement, circulated by Thatcher's most active antimonetarist economic critics at Cambridge University, was signed by economists at 36 universities, including many of those who have advised or worked in both Conservative and Labor governments. But it was not signed by any of the minority of staunch monetarist economists concentrated largely at the London Business School, City University in London, and Liverpool University.
Thatcher has tried to tighten the money supply, reduce government and business borrowing, and force down wage and price inflation through high interest rates, repeated attempts to curb government spending and, most recently, unexpectedly sharp increases in taxes. Inflation has come down so far from 22 to 12.5 percent, but at the cost of post-Depression record levels of unemployment and business failures.
Chancellor of the Exchequer Geoffrey Howe said last week the Treasury believed the recession would bottom out and a recovery begin within the next few months.
But the Confederation of British Industry's latest economic survey, also made public today, forecast that manufacturing output will continue to fall well into next year to nearly 20 percent below its level when Thatcher took office in 1979. Business will be hurt by tax increases in the new government budget announced earlier this month, the survey showed.
The industries confederation, the Trade Unions Congress, the opposition Labor Party, the new Social Democratic Party and dissenters in Thatcher's own Conservative Party and cabinet have all called publicly for the Thatcher government to help industry with a mult-billion-dollar program of investment in public works such as roads, railroads and telecommunications.
Thatcher appeared to dismiss such suggestions in yet another strongly worded defense of her policies at a meeting of Conservative Party workers over the weekend when she said previous governments had only made inflation and unemployment worse "by more or less throwing newly created money" in the direction of "unemployed hands and under-used plants."
She again insisted there is "only one way -- it is to set limits on the increase of money, which has always, everywhere, been the fuel that keeps inflation going faster."
But Thatcher added that there is room for "flexibility" in special circumstances, such as her approval of the investment of more taxpayers' money in the government-owned auto and steel industries. "In tactics flexibility, in strategy resolution," she said, providing a glimmer of encouragement for critical Conservative members of parliament who want her eventually to spend much more on helping revive the economy while holding down other government costs.
The 364 complaining economists did not offer a specific alternative to Thatcher's policies because they represent a spectrum of economic thought. The statement was designed to win the widest possible support.
"We believe that a large number of economists in British universities, whatever their politics, think the government's present economic policies to be wrong and that, for the sake of the country -- and the profession -- it is time we all spoke up," Cambridge economic professors Frank Hahn and Robert Neild said in a letter requesting other economists' support.
Among those signing the statement were former government chief economic advisers James Meade, Lord Roberthall, Alec Cairncross, Bryan Hopkin and Fred Atkinson. Another former chief economic advisor, Donald Macdoughall has been advising the Confederation of British Industry in its efforts to persuade Thatcher to ease her policies.