The United Kingdom and the Means to Prosperity

Laura  Alfaro; Lakshmi  Iyer; Hilary  White

Teaching Note | HBS Case Collection | May 2015

The United Kingdom and the Means to Prosperity

by Laura Alfaro, Lakshmi Iyer and Hilary White

Abstract

After struggling through the country's longest recession since 2008, the U.K. was expected to grow faster than any other G7 nation in 2014. Analysts wondered whether the return to growth was because, or in spite of, Prime Minister David Cameron's controversial £113 billion austerity plan introduced in 2010. Despite the positive upturn in the economy, U.K. policymakers still faced challenges with rapidly rising income inequality, an economy dominated by the financial sector, a possible housing bubble, and an approaching referendum on Scotland's independence. Moreover, many claimed the U.K. was at risk of secular stagnation, a slowdown in economic growth caused by a structural deficiency in demand. What could the government do to put the country on a sustained and balanced growth trajectory?

Keywords: United Kingdom; austerity; fiscal deficits; fiscal policy; Keynesian multiplier; macroeconomics; economics; government; government policy; recessions; depression; inequality; government intervention in the markets; Economic Slowdown and Stagnation; stagnation; public finance; Economics; Macroeconomics; Government Administration; Business and Government Relations; Economic Growth; Economic Slowdown and Stagnation; Public Sector; Economy; Financial Crisis; Taxation; Government and Politics; United Kingdom;

Language: English

22 pages

Purchase

Citation:

Alfaro, Laura, Lakshmi Iyer, and Hilary White. "The United Kingdom and the Means to Prosperity." Harvard Business School Teaching Note 715-055, May 2015.

In the decades following 2005, China faced significant financial challenges. Inflation spiraled upwards and China’s economy stagnated in the wake of the Global Financial Crisis. The country’s leaders took an interventionist approach to weather the storm, controlling capital and exchange rates. These actions raised criticism from other nations, and in 2017 the U.S. initiated the U.S.-China Trade Wars, which enforced tariffs and requirements for increased transparency. As implications of the trade wars remained uncertain, many wondered whether the central bank would introduce further discreet steps to change the yuan. Would China’s currency appreciate as substantially against the U.S. dollar as predicted by economists? And when would further change occur? The stakes were high; a freer yuan float would impact groups within and outside of China very differently. Would China’s currency then be allowed to depreciate or appreciate if fundamentals required it?

For decades, Chile was heralded as South America’s pillar of stable economic growth. Chile was the world’s largest producer of copper and enjoyed a long period of over 30 years of world demand for its resources. In 2013, the commodity boom ended and was replaced by a slow period of economic activity. By 2019, a culmination of factors had contributed to widespread protests. Major streets in Santiago were shut down due to demonstrations by workers across 20 ports. Mining unions urged the government to lift the state of emergency and end curfews. It was unclear how these stoppages would affect copper production and prices in a country that produced a third of the world’s supply.

Faculty & Research

The United Kingdom and the Means to Prosperity

Abstract

Citation:

About the Author

More from the Author