Economy in 1980s

Readers Question. In 1980, what was the economy’s biggest risk–inflation or unemployment?

In the UK, the 1980s was a period of economic volatility.

At the start of 1980, the biggest problem facing the UK (and other countries) was cost push inflation. In the UK inflation reached over 20%. This was caused by:

• Rising oil prices
• Wage push inflation

The UK government aggressively tackled inflation. But, in doing so caused the severe recession of 1981. Unemployment shot up to 3 million and high unemployment persisted throughout the 1980s.

See: UK economy 1979-1984

Lawson Boom

By the late 1980s, the UK economy was again experiencing high inflation. This time it was caused by high economic growth and demand pull inflation.

This boom was followed by another recession as the government sought to control the inflation it had caused. See Lawson Boom

Interestingly, the Chancellor of the exchequer Norman Lamont, said the ‘unemployment was a price worth paying to tackle inflation’

See: Is unemployment a price worth paying for lower inflation’

Essays on Inflation and Unemployment