Hywel Williams dispels some myths about monetarism in the UK in the Guardian online. The monetarist experiment was started by Labour, not the Tories. And it was Margaret Thatcher who ended it: The lady was for turning
First: Thatcher and her circle did not turn to monetarism as a new instrument of economic policy in 1979-81. It was the Callaghan government of 1976-9 that was the first to decide that the money supply's elasticity was a major determinant of economic growth and a factor in inflation. Tracking the money supply was an element in that government's economic policy and it paid dividends - along with major cutbacks in government expenditure. The Labour record in economic management was actually pretty successful in 1976-8 until the clouds rolled in during its last year in office. What the Thatcher government did afterwards in 1979-81 was to take the money supply's control - previously just one among other tools of economic management - and turn it into the central aim of government policy. It was that inflexibility which created the economic mess of early Thatcher-Howe: high inflation, high interest rates, slow growth, mass unemployment and the destruction of Britain's manufacturing base.
Second: getting over this involved a massive U-turn in the autumn of 1981. I doubt whether the riots of that year influenced the decision-but even the government and Margaret Thatcher could see that the recipe was not working.
...What happened was this: in the autumn of 1981 Alan Walters returned to government and told her that the monetarist policy as interpreted so inexpertly by her was wrecking the British economy and her government. He had been working at the World Bank in the previous four years and therefore away from the scene. But he was the only technical economist Margaret Thatcher ever paid any attention to and he had taught her the details of money supply economics when she was opposition leader. The fact that her economic guru, himself a "monetarist", told her that her kind of blanket "monetarism" was crazily self-destructive meant that she had to listen. Control of the money supply went back to being just one among many policy instruments from 1981 onwards.
"Monetarism" as an overarching doctrine was dead by the end of the year. Walters told her to cut interest rates immediately, which she duly did that autumn and the effect was almost equally immediate. Walters stayed on as her economic adviser for the next three years, a time when the economy started to grow and recover from the trauma of 1979-81.
This was one of the biggest economic policy U-turns post-1945. It doesn't get the attention it deserves because it suits both Thatcher-worshippers and Thatcher-loathers to present her as steadfast or inflexible (according to taste). It also suits Lady Thatcher herself to ignore the evidence of her own pragmatism in the face of the facts. But the lady really was for turning - when Alan Walters told her she had to.