Governments, like old generals, are often guilty of preparing for the last war. A weak, limping recovery from the financial crisis led many experts to proclaim that premature “austerity” had stifled growth in Europe and the US.

Next time, better for governments to do too much rather than too little, centre-left economists advised. Governments should “run the economy hot”, they suggested, favouring aggressive monetary and fiscal stimulus to prevent another relatively stagnant decade.

Covid-19 hit and western governments and central banks obliged. The UK’s money supply soared and the budget deficit shot up to above 15 per cent of GDP. Economy-wide spending (nominal GDP) surged, as promised, now 2 per cent above its previous trend line. But the limits of a sugar-rush stimulus soon appeared: real output is still gasping, lower than late 2019 levels. This lavish spending, magnified by gas price jolts from the Ukraine war, also greatly stimulated the price level.

Nobody today, in good conscience, can thus claim that the UK’s growth problem is caused by too little demand. It’s obvious that supply problems are the constraint on growth. Improving productivity, and ultimately living standards, requires either a smarter deployment of resources — people, capital, ideas and technologies — or else more cutting-edge innovation. To twist a famous line from President Nixon on Keynesianism: when it comes to economic policy “we’re all supply-siders now”. Or at least we should be.

Yet in truth, a focus on supply is way overdue anyway. The economy did see slower spending growth in the 2010s compared with the 2000s. That’s why some thought more government stimulus was needed to get us back on the old track. But given inflation still averaged over 2 per cent per year from 2010 and 2019, there wasn’t much evidence of this massive spending shortfall undermining real growth; it was primarily a weak supply-side even then.

The mechanisms by which deficit reduction supposedly slowed long-term growth were always speculative. Lord Skidelsky, Keynes’s renowned biographer, thought austerity would make short-term unemployment permanent through weakening demand. The persistent joblessness, he said, would see workers’ skills erode, undermining future productivity growth. What happened? Unemployment fell steadily as the deficit was cut, dropping below its pre-crisis trough by 2016.

Perhaps more borrowing for transport infrastructure investment might have improved growth prospects by lubricating the supply of goods? Even here, the effects would have been small. Investment spending averaged the exact same 1.9 per cent of GDP from 2011 to 2019 as New Labour was spending before the crash, when growth was higher. Major increases in government investment starting in 2020 haven’t seen much growth pay-off yet either.

Certainly, one can dream up more complex theories for how the 2010s spending restraint may have caused persistent weakness. Given the rise of the long-term sick, would more capacity-building for the NHS back then have helped get people back into work quicker today? Maybe. But overall, it’s hard to see how borrowing more for, say, working-age welfare and the department for communities and local government would have helped long-term growth prospects.

This debate about stimulus versus austerity instead sucked oxygen from the more fundamental challenge: stagnant productivity growth. Recognised by the Royal Statistical Society as the “stat of the decade”, output per worker has seen meagre growth of 0.3 per cent per year since 2008. If the trajectory established before the financial crash had been maintained, we’d be 21 per cent richer today. Such a shortfall should have been central to political debate long before inflation soared.

It’s essential to address this weakness now rather than dwell on past oversights. Regardless of the degrowthers (those against growth) and the no-hopers (who think government policies can’t affect it), the current state of the macro economy seems an opportune time to finally debate “structural reforms”.

In terms of such supply-led growth, two major perspectives have emerged. The first is a liberalising approach. As a 1994 internal HM Treasury review put it, this view says governments should be “promoting policies and public expenditure priorities which improve the use of resources and the efficiency of markets”. In the 1980s, this meant bringing down marginal tax rates, privatising industries and targeted regulatory reforms. Today, the challenges are different.

The UK’s energy sector is a mess, housing is unaffordable, childcare is expensive and the tax code deters private investment. Before worrying about high-tech industries or cutting-edge science, modern free-market supply-siders such as the economist Sam Bowman thus argue that delivering cheaper energy, more housing, more childcare and pro-investment tax changes through careful, pro-market reforms could elevate GDP substantially.

Despite the evident failure in delivering these basics, a more fashionable school thinks governments can raise their country’s growth potential through active industrial policies, skills provision and R&D spending. Taking cues from Joe Biden’s green energy incentives, this “modern supply-side economics”, as Janet Yellen, Biden’s Treasury secretary, calls it, says governments should embrace some sectors and jobs over others, not just to play venture capitalist but to meet broader social objectives.

Neither of the UK’s main parties sits fully in one camp yet. When the Tories talk growth, they focus on investment incentives, yes, but also strengthening finance and pharma, or building up cutting-edge sectors like AI and biotech. Labour is more Biden-like in pushing its Green Prosperity Plan, but also indicates some deregulatory impulses through green belt reform.

What’s unclear is if anyone has the patience for the intricate details supply-side reform requires. Crafting incentives, establishing institutions and soothing vested interests is infinitely more challenging than splashing cash or slashing tax. But just as our inflation has made clear the centrality of the supply-side problem, so it’s become obvious that those who seek growth cannot sidestep reform any longer.