A Macroeconomic Regime for the 21st Century

The book aims to give non-economists a detailed understanding of how macroeconomic policy works in modern economies, and the issues it faces. The world has recently been through a huge economic crisis and thinking people everywhere have reason to wonder whether something is not seriously wrong with the policy regimes underlying these dramatic events in the major economies, and whether changes should be made. The author reviews the history of the successive regimes tried and found wanting in the second half of the last century and proposes a set of reforms designed to convert the flawed neo-liberal consensus of the 1990s into a durable regime for the present century.

Drawing on his personal experience as a senior economist at the Bank of England for much of the time, the author traces the decline and fall of Keynesian management in the 1970s and the failure of the monetarist experiment that largely succeeded it in the 1980s. The story culminates in the `1990s synthesis' — the consensus on macro-policy reached in the early 1990s, which combined the best elements from previous approaches — which although promising a workable solution also proved to contain serious flaws, as the crash of 2007-8 showed. The second half of the book proposes important changes to address these flaws, including a new role and institutions for fiscal policy, a broadening of monetary policy, and a revival of systematic exchange-rate stabilisation in the cooperative spirit of Bretton Woods. More speculatively he floats the possibility of crowning these reforms by merging the dollar and the euro in a North Atlantic Monetary Union around the middle of the century.

This makes for a stimulating volume which should equip readers to enjoy a greater understanding of the topic area.