Why Keynesian Policy was More Successful in the Fifties and Sixties Than in the Last Twenty Years (Report‪)‬

1. Introduction The focus of this paper is firmly on unemployment. Underemployment, which is people working fewer hours a week than they would wish, is also a problem but generally is well correlated with unemployment. As is documented below, in the nineteen fifties and sixties even in periods when there was a major downturn in economic activity policy, unemployment was much lower than was the case in the last twenty years. In the 1950s and 1960s unemployment averaged about 2 per cent. The lowest level of unemployment in the last twenty years was more than double that figure. Moreover, long term unemployment was virtually unknown in the 1950s and 1960s but has been a severe problem in the last 20 years. In each period there were two major slumps. This paper examines the macroeconomic policy responses to each of the four slumps in order to search for reasons for the contrast.