Chancellor Denis Healey was forced to go to the International Monetary Fund (IMF) cap in hand in the late Seventies for a bailout as unemployment and inflation in the UK spiralled.
The UK received a bailout of £2.3bn but in return had to accept supervision and instruction from the IMF, headed by H Johannes Witteveen.
That included public spending cuts and a focus on monetarist policies – the control of the money supply – to get inflation down.
It was widely viewed as a traumatic and humiliating experience that a major, advanced and previously powerful western nation had lost control so badly.
Over the next decade Prime Minister Margaret Thatcher followed many similar policies, driving down inflation even at the cost of higher unemployment to improve the state of the economy.
By the 1990s the IMF was advising the implementation of free market policies in return for support in regions like the collapsed USSR, in the wake of Thatcher’s economic revolution.
Through the decade the IMF was called in to help with crisis around the world, like that in east Asia in 1997, while the UK appeared to prosper by following the same ideas.
2000s - today
On the global stage Gordon Brown appeared to lead the response to the financial crisis, leading some supporters to put his name forward as a potential managing director of the IMF – but David Cameron was less keen.
Christine Lagarde became the first female head of the IMF in 2011 against the backdrop of a worsening sovereign debt crisis in the Eurozone.
In the wake of the crisis the UK has been keen to gain IMF approval for its deficit reduction strategy, but earlier this year its chief economist, Olivier Blanchard, shocked George Osborne by saying the chancellor should consider slowing down austerity measures in his March Budget.
After two weeks of intense scrutiny of the UK’s finances and commentary likening the IMF’s visit to a Ofsted school inspection, yesterday’s press conference struck a conciliatory note – but it remains to be seen how closely the chancellor will follow the organisation’s advice.
Allister Heath is away. His column will return next Thursday.