It is tempting to pronounce British Keynesian social democracy ideologically bankrupt by the late 1970s and, certainly, by the International Monetary Fund (imf) and us Federal Reserve, it was deemed to be literally so soon after the Labour Party came to power in 1974. In such a reading the sterling crisis of 1976, and its “cap-in-hand” denouement, assumes a pivotal significance in terms of the attitude of many on the Left who had previously given Keynesianism overt or tacit support. In this context James Callaghan merely voiced with “candour” what others had already come to believe was the futility of a demand-managed pursuit of full employment. Thus, one year before Callaghan's mea culpa, Harold Wilson had made clear his own view that a tradeoff between inflation and unemployment was no longer an option, as the former now manifestly caused the latter. It was, though, left to the Callaghan government to give practical expression to this abandonment of received social democratic wisdom. With unemployment rising in the mid-1970s, the rules of Keynesian demand management dictated a reflation of the economy. But, under the tutelage of external agencies, a Labour government pursued a restrictive monetary and fiscal policy to tackle its precarious balance of payments position and to curb inflation. Under Keynesianism, “the proper object of dear money [was] to check an incipient boom. Woe to those whose faith [led] them to use it to aggravate a depression!” Yet the Labour government did just that and the foundations of Keynesian social democracy were fundamentally shaken.