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April 09, 2013

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Alex

her vision of Britain was of a property-owning democracy of savers with moral restraint. She got indebted spendthrifts

but this is content-free moralising. you can't have "property-owning democracy" yadda yadda without "indebted". realistically, what % of the population could ever be cash buyers of property? we'd have to be either an astronomically cheap property market (i.e. discover a Canada of land from somewhere) or else as rich as Saudi Arabia. property-owning democracy necessarily requires a mortgage-holding society, which implies a big financial sector.

gastro george

"All monetarists would have preferred the unemployment-inflation trade-off to be more favourable."

Sure, and gullible isn't in the dictionary.

John@MoneyPrinciple

Her major failure was to encourage the sale of municipal housing yet forbid councils from building more houses. No-one else was willing to build social housing - developers would rather build more profitable executive pads.

Couple this with liberalised credit controls and we are where we are - massive house prices. Nice for those already with houses, a disaster for the rest and it has led to a debtor society which cannot be reversed without a lot of pain and is never going to happen for electoral reasons.

Even in a static population, housing needs replenishing and with an increasing population, this has become critical.

It was this lack of foresight that in my opinion transcends union bashing or military adventures as her epitaph.

http://www.themoneyprinciple.co.uk/2013/free-money-the-2013-uk-budget-report/

Richard

Alex - there's a difference between taking out an affordable mortgage to buy a house and, say, racking up loads of credit card debt to buy plasma screen TVs etc.

NM

Chris, fair play to you, but that is a brilliant line: "She wanted the British people to be like her father, but they turned out more like her son."

The last few decades summed up in one sentence.

Harry Evans

Your last paragraph just reminded me of something I was reading this morning, about the correlation of decisions made by experts, and that their correctness is statistically little better (and sometimes actually worse) than random guesses. This does rather question whether or not 'legacy' is a meaningful term in politics, and to what extent someone's intentions should be taken into account when assessing someone successes (and, by extension, their failures).

john H

"We now know that they were mostly wrong; employment in mining areas never fully recovered from the closures."

The second paper you cite does not seem to support this conclusion:

In 19 out of the 29 areas, employment was higher in 2002 than in 1983.

chris

@ John H - the point is that the rise in employment overall wasn't strong enough (esp relative to non-mining areas) to claw back the dole payments made to miners.
@ NM - it is a brilliant line, but it's not mine. I forget who said it, as I'd like to credit them.

George Carty

Wasn't there a very simple and cynical motivation behind Thatcher's Right to Buy programme?

"Once they have mortgages, they'll never strike again!

paulc156

@john H "The second paper you cite does not seem to support this conclusion:

In 19 out of the 29 areas, employment was higher in 2002 than in 1983."

That paper does state the following:
'Areas have the capacity to recover even after serious shocks.
However the effects of shocks can persist over long periods and employment growth 1983-2002 was lower in the mining areas than in the UK as a whole'

paulc156

@George Carty "Wasn't there a very simple and cynical motivation behind Thatcher's Right to Buy programme?

"Once they have mortgages, they'll never strike again!"

That was certainly said at the time but by whom I have no idea. If I had to hazard a guess that if there was an evil genius standing behind Thatcher who might have posited that as a worthy motive it would be Nicholas Ridley who was more thatcherite than Thatcher.

Apart from mortgages for social housing tenants there was also the fondness of any energy other than coal specifically because those working in it were more aspiring middle class technocrats than pure working class stock. So in practice that meant out with coal and in with nuclear and oil.

oliver

"She wanted the British people to be like her father, but they turned out more like her son."

As above, brilliant summary.

Churm Rincewind

How come Thatcher's success started as "partly inadvertent" (paragraph one) and ended up as "largely unintentional" (final paragraph)? There's a big difference - which is it to be, wishful thinking apart?

Keith

What Chris is really saying it seems to me is not well expressed. He is saying that in terms of economic policy she failed but was politically effective. You do not explain the success as you have ignored the political effect of the SDP/Labour split. You also need to mention North sea oil as a revenue source and balance of payments boost.

There are different phases as well. Her long term political success is very much wrapped up with the boom in debt and consumption of the middle eighties when Monetarism had been abandoned with all credit controls. Rising real wages greater debt and high public spending totals kept the tory vote at 43 per cent. The failure of Cameron to do as well in vote share is the result of his inability to offer the same free lunch to the voters.

The 43 per cent felt they did well out of Thatcher; but the rest felt they did very badly. The miners got the stick and the unemployed with the gains from growth being unequally split. The spending totals and her promise that the NHS was "safe in her hands" was a pragmatic device to assuage segments of the working class vote who might have defected to Labour.

If only our politicians today were willing to offer us goodies like Thatcher we might feel better disposed towards them? Rather than cuts and more cuts...

"Alex - there's a difference between taking out an affordable mortgage to buy a house and, say, racking up loads of credit card debt to buy plasma screen TVs etc." Yes the difference being you can buy lots of TVs and not increase the price but supply of housing is far more limited so prices will go up much more. Eventually pricing wage earners out of the market. Creating property booms as a way of boosting demand is inflationary and destabilise the economy.

Blissex

«If the greatest political figure of the last 60 years was a success largely unintentionally»

It is laughable that there is no mention of the very important fact that right as her government took power the North Sea Oil transformed the UK into a low tax oil exporter, and the sterling into a strong petro-currency.

The impact of that was colossal: it allowed closing down the coal mines and destroying the pretensions of the NMU to rule the country instead of the City.

This graphs tells a very compelling story about the Thatcher and Blair premierships:

http://mazamascience.com/OilExport/output_en/Exports_BP_2012_oil_mtoe_GB_MZM_NONE_auto__.png

Blissex

«Her major failure was to encourage the sale of municipal housing yet forbid councils from building more houses. No-one else was willing to build social housing - developers would rather build more profitable executive pads.

Couple this with liberalised credit controls and we are where we are - massive house prices. Nice for those already with houses,»

This was entirely deliberate, to create massive continuous tax-free capital gains for the 60-70% of *voters* who are housing speculators, and who are very grateful voters.

Also, I remember two factoids from The Economist: that 60% of Conservative and Unionist Club chairmen are the local mortgage and insurance brokers, and 40% of local councillors are estate agents (no political affiliation IIRC was mentioned, but I doubt it was mostly Labour).

Keith

Blissex is correct. After all for 43 per cent of the voters closing down the mines and reducing industry was fine as they got oil financed credit booms; property price rises and higher personal consumption with the NHS and social services thrown in too; some income tax cuts and free money from selling shares in BT and British Gas etc. To coin a phrase "Most of our people have never had it so good..." True for Thatcher in 1985 as for super mac in 1955. Even the Disabled got DLA out of them. Winning elections is easy when most voters are having a party.

Blissex

«Eventually pricing wage earners out of the market. Creating property booms as a way of boosting demand is inflationary and destabilise the economy.»

«"Wasn't there a very simple and cynical motivation behind Thatcher's Right to Buy programme?
"Once they have mortgages, they'll never strike again!"
That was certainly said at the time but by whom I have no idea. If I had to hazard a guess that if there was an evil genius standing behind Thatcher»

It was a far more important strategy: around 1980 The Economist reported that surveys and studies by some conservative think tank showed that people who owned real estate, company shares, and a car voted far to the right of people who rented, had no shares, and used public transport, even controlling for income etc (for psychological reasons, but also because of voting their investment book).

Accordingly the Thatcher government engaged in massive social engineering to shift voting patterns to the right via massive programmes of destruction of the rented sectors, distributing shares, and undermining public transport.

Blissex

«Rising real wages greater debt and high public spending totals kept the tory vote at 43 per cent. [ ... ] The 43 per cent felt they did well out of Thatcher;»

The "tory vote" was and is much higher than 43%, New Labour was fundamentally a new strategy by Labour to get a large chunk of the "tory vote", as the vast majority of "aspirational" voters who have done fabulously well (so far) out of credit fueled speculation are as a rule far to the right in voting patterns than most Tory voters of the pre-1980 era.

The legacy of Thatcher was that the "tory vote" in 1997 elected yet another Tory government.

«Winning elections is easy when most voters are having a party.»

Most "aspirational", "striving" voters who work hard at investing in assets are having a party. While "shirking" voters who improductively work for a living, .... well they don't matter.

The dream is the plantation economy with the landlords and landladies of the manors enjoying their long affluent retirement thanks to their independent property wealth.

Blissex

«Her major failure was to encourage the sale of municipal housing yet forbid councils from building more houses.»

It could be said that her major failure was to establish the dominance of the "F*ck YOU! I got mine" politics in UK culture, but for many UK voters, probably the majority, that was an achievement, not a failure.

But perhaps the really big failure was to teach for decades that only fools and losers waste their money investing in productive business capital, because investing in asset price increases is far easier, and has much higher returns which are effectively guaranteed by the government.

guthrie

Flexible labour force able to move freely from job to job? My arse, as they say.

Maybe in the 60's or something, but typing as someone trapped in unemployment by some years of narrowly specialist skills and no prospects of a job, I'd like to be able to move freely from job to job, but oddly enough there are lots of barriers to doing so. Such as previously experienced people getting first go at a job, high cost of re-training, uncertainties associated with retraining, etc etc.

Re. the Congdon quote, maybe 'monetarists' hadn't expected or wanted unemployment to reach 3 million, but I am damned sure that lots of conservatives and right wingers wanted it to go as high as necessary to break the power of the unions and workers. Whether that was 1, 2, or 3 million was irrelevant, what counted was disciplining the workforce.

Blissex '11:23pm - oddly enough the rented sector has been reconstituted what with buy to let and small property empires and now people's children can't afford to buy their own place...

Keith

"the really big failure was to teach for decades that only fools and losers waste their money investing in productive business capital"

But if I can buy all the goodies I want from china ( Flat screen tv cars etc ) with my Capital gain exempt property profits why worry about productive investment?

oldcobbler

It's strange she is so popular with Tories given her lamentable record on several traditional Tory concerns, such as inflation, savings, crime and "family".

Inflation - 10.3% on taking office, 9.7% when leaving, monetarist policies having been quietly abandoned along the way.

Crime - according to the British Crime Survey, up by over 50% during her tenure of office

Family - divorce rates continued to rise

Savings - household savings ratio declined from around 12-14% pre-Thatcher to around 4% at the end of the Lawson boom. Although there have been many changes since, 1980 seems to have marked the beginning of a secular decline in household saving.

It's a funny old world

Adrian

Glad I stumbled across this site, some very thought provoking posts.

I come from a right-libertarian/liberal-conservative position which I am becoming increasingly disillusioned with and have been interested on and off in Left-Libertarianism for some time but been put off by the views of some Left-Libertarians. I have come across.

I know some of my views will sit quite comfortably with Left-Libertarianism, but other will probably not. Can anybody suggest a forum or some other medium where I can have a discussion with Left-Libertarians (not Forums of the Libertarian Left please, it's full of communists)?

Sorry for off-topic post.

Guano

Many of Thatcher's Children have come to believe that they are engaged in productive economic activity when they move money around or bring in income from rents on a string of former council houses bought below market value. They don't see what is bizarre about the Daily Mail obsession with house prices. They don't see what is absurd about closing down coal mines, pissing away North Sea Oil but then opposing wind farms.

Thatcher bribed people with their own money by selling state assets below their real value. The discussion in the 70s about how to invest the income from North Sea Oil was forgotten and it subsidised high unemployment and asset bubbles. The chickens are now coming home to roost. George Osborne admitted a couple of weeks ago that the growth of the number of people on disability allowances, a legacy of Thatcher, was wrong. I doubt if he will be boycotting her funeral though. Thatcher's legacy is not only that the UK has become a country that tries to live by moving money around, but that substantial numbers of people don't see what the problem is.

Blissex

«Thatcher bribed people with their own money by selling state assets below their real value.»

Oh even better: she started a giant Westminster-style scheme, in which she bribed the "tory vote" with everybody else's money.

Because asset bubbles are purely redistributive: from "shirkers" who work to earn a living (or can't find a job) to "strivers" who have aspiration for massive risk, tax and effort free capital gains.

Blissex

«the UK has become a country that tries to live by moving money around»

OH NO! Not the UK, as the North and Scotland and other periphery has never been meant to share in the rent extraction.

It was meant to be the great speculative bubble for "tory vote" "strivers" of all parties in the London and surrounding area. The rest of the UK can go down the drain.

The Thatcher strategy has been summarized recently as:

http://www.vanityfair.com/society/2013/04/mysterious-residents-one-hyde-park-london
«When the British Empire crumbled in the mid-1950s, London replaced the cozy embrace of gunboats and imperial trading preferences with a new model: tempting the world’s hot money through lax regulation and lax enforcement.
There was always a subtle balance, involving dependable British legal bedrock fiercely upholding U.K. domestic rules and laws while turning a blind eye to foreign law-breaking.
It was a classic offshore tax-haven offering that tells foreign financiers, “We won’t steal your money, but we won’t make a fuss if you steal other people’s.”»

That is the fencing economic model, which has worked for parts of Switzerland, Cyprus, Singapore and Monaco. The problem, or perhaps the benefit, with it is that it does not scale to a major country like the whole of the UK.

Therefore the policy of turning London and surrounding area into an offshore fencing operation, and let the rest of the country go gently down the drain, as a useful source of servants and other retainers, following a Dickensian, or Brazilian, model.

Blissex

«Many of Thatcher's Children have come to believe that they are engaged in
productive economic activity when they move money around or bring in income
from rents on a string of former council houses bought below market value.»

But the "tory vote" (for any party) in Little England, the London region don't see what the problem is because it is not a problem for them: they are extracting a lot of economic rent both from the foreigners for whom they fence, and from the rest of the UK when they periodically blow up the capital of their capital destroying fencing operations and the rest of the UK have to contribute to recapitalize them with enormous interest spreads (monetary activism) and a lot of belt tightening (fiscal austerity).

On the simple familiar level of two-up-two-down speculation, my usual numbers that show the enormity of the economic rent extraction that has benefited even the median "tory vote" resident of Little England:

http://www.bbc.co.uk/news/business-19288208
«In 2001, the average price of a house was £121,769 and the average salary was £16,557, according to the National Housing Federation. A decade on, the typical price of a property is 94% higher at £236,518, while average wages are up 29% to £21,330»

This means that in those 10 years landladies of average UK 2 up 2 down terrace houses have enjoyed (usually tax-free) capital gains of around £12,000 per year, nearly doubling their £14,000 after-tax average earnings. I do hope that everybody realizes how enormous that is, both as to amounts and the number of people benefiting. Never mind the smaller but still significant numbers of "aspirational strivers" owning properties that have gone from 200,000 to 400,000.

A substantial number of people in Little England can only vote relentlessly for more of the same. Because they think that it will last forever, or that they should grab as much as they can while it last, and in both cases f*ck everybody else.

Blissex

«[ ... ] a country that tries to live by moving money around, but that substantial numbers of people don't see what the problem is.»

To confirm that it is substantial numbers only in the "tory vote" heartland, consider the expectations of the man on the Clapham omnibus, which today is an affluent professional or a senior civil servant.

Well in a truly classic and revealing statement The Economist argued as to the giant capital destroying City fencing operations:

www.economist.com/node/21542417genera
«Britain will one day wake up to discover that it has lost one of the world's most successful business clusters, and the best hope the next generation has of earning a decent living.»

But *whose generation* has a hope of extracting ("earning" is a big word...) a «decent living» from working in a state-guaranteed London fencing operation? Would that be the children of the man on the omnibus going into Newcastle or Liverpool for their JobCentre attendance?

Not with any significant chance. It will be the children of the "tory vote", of the man on the Clapham omnibus to which the article in The Economist is addressed; it will be the children of the landladies and landlords in the Switzerland-on-the-Thames fencing enclave which is the core concern of Thatcherite policy. It is largely the children of the "250,000 a year is chickenfeed" class, and their hangers-on.

Fortunately a number of the children from the third world area outside that enclave will have the opportunity to earn a hard living competing fiercely for menial jobs with the other desperate immigrants from the third world areas around the periphery of the EU (or the Commonwealth). As a New Labour minister stated several years ago:

http://news.independent.co.uk/uk/politics/article2084235.ece
«He said that benefit claimants needed to compete for jobs with migrant workers, many from Eastern Europe. He went on: “We cannot reasonably ask hard-working families to pay for the unwillingness of some to take responsibility to engage in the labour market.”»

Because Eastern European immigrants are eager to sleep four to a small room like earlier immigrants did in the 19th century in East London, as they are not imbued with the sordid greed of the "shirkers" of today who feel entitled to a lifestyle of luxury thanks £53/week benefits.

The Thatcher Children's dream is to go back to the endless waves of "residuum" from the North, the Celtic fringe, Ireland, Scotland, and now from Romania and Bulgaria, all "shirkers" to be used hard for undeserved low pay to support the lifestyles of the "striving" property owning ladies and lords of the manor (or the slums) in the fencing enclave.

It won't end well, because it is a giant bubble too. As a nice cartoon stated the market for inflated expectations is going to be worth trillions; until it isn't.

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