Thatcherism's death

Thatcherism is dead. Boris Johnson’s love of big infrastructure projects conflicts with her preference for markets and caution about spending public money. His pulling out of the single market contrasts with her hailing it as “a fantastic prospect for our industry and commerce.” His increase in bus subsidies conflicts with her antipathy to public transport. (She never actually said that any man on a bus after the age of 30 should consider himself a failure, but the fact that it is so widely believed that she did so reveals something about her). And, of course, whereas Thatcher chose free market ideology over the wishes of northern (now post-) industrial towns, Johnson is making the opposite choice.

John Harris has quoted a senior minister as saying that “some very prominent strands of Conservative thinking were now in retreat” and that “some of the things we’ve celebrated have led us astray”. Those things are Thatcherite ones.

It’s not just the political climate that is anti-Thatcherite, however. So too is much of the intellectual climate. Thatcher regularly invoked Hayek and Friedman as intellectual influences. Not only does Johnson have no such equivalents, but perhaps the two most prominent economics Nobelists today – Paul Krugman and Joe Stiglitz – are hostile to Thatcherism. And Banerjee and Duflo’s latest book, Good Economics for Hard Times, is a flat rejection of her naïve faith in free markets, with its message that economies are sticky and slow to respond to shocks.

All this reflects the fact that the facts are now anti-Thatcherite. She hoped that deregulation, privatization, lower top taxes and the smashing of trades unions would lead to not just to an economic renaissance but also to a revival of what Dierdre McCloskey calls bourgeois virtues. But they haven’t. In fact, productivity growth was much slower in the Thatcherite era than it was during the post-war years. As I’ve said, there are many ways in which neoliberalism caused the productivity slowdown.

Nor have we seen a flourishing of bourgeois virtues. Thatcher hoped to create a society of men like her father, but left us one with men like her son. The assertion of “management’s right to manage” has led not to a healthier economy but merely to more expropriation. An under-appreciated sign of her legacy can be found on daytime TV. Programmes such as Homes Under the Hammer, Bargain Hunt and Antiques Road Trip show that the British public prefer to make money from rising house prices and selling tat rather than from graft, innovation and entrepreneurship*.

You might object here that one legacy of Thatcherism lives on - inequality. True. But of course, inequality and its defenders long pre-dated Thatcher. In many ways, what most distinguished Thatcherism is now gone. 

Herein, though, lies a wonderful paradox. It is not the Conservative party that has suffered most from the death of Thatcherism. It has successfully reinvented itself, helped in part by not suffering the handicap of having principles or feeling the need to think deeply.

Instead, perhaps the biggest casualty have been centrists. The collapse of Change UK, or whatever they called themselves, means that their parliamentary presence now matches their intellectual heft. My biggest beef with them – and indeed with the Labour right – has been their total lack of any worthwhile economic ideas.

There is, I suspect, a reason for this. Centrists were keen to accept “economic realities” when these were Thatcherite ones of fiscal “credibility”, tolerance of the wealth and power of the 1%, and faith that the capitalist economy could grow nicely with only little state help. Now that the realities are anti-Thatcherite – that inequality does real damage and that capitalism is stagnant – they are as helpless as a whale left on a beach after the tide has gone out.

The old jibe against the Labour right had some truth – that they were capitalism’s second XI. And why would anybody want a second XI when the first XI have made themselves fit for selection?

* This worked for me: most of my wealth has come from tax-free capital gains on housing.

Comments

[Scratch]

"Thatcher hoped to create a society of men like her father, but left us one with men like her son."

Heh. That's marvellous.

[Ralph Musgrave]

Those wishing to cite HS2 as a reason to celebrate the death of Thatcherism should remember that there are big doubts among economists and other relevant professionals as to the viability of HS2. If HS2 fails to produce a commercial return on capital, far from that being a reason to celebrate the demise of Thatcherism, it could be a reason to deplore that demise.

[Dipper]

It is worth reading Steve Richards book The Prime Minsters. The job of the PM through the 60's and 70's was to navigate the world of wages and prices, determining how much each could go up. Thatcher swept all that away leaving the market to set wages and prices and interest rates to control inflation. That hasn't changed.

[Robert Mitchell]

Markets use inflation swaps and Treasury Inflation Protected Securities to take inflation out of the picture in contracts, so interest rates can go down while money supply increases. Lesson: inflation is no constraint. We can adjust to inflation by maintaining real purchasing power, and using unlimited central bank currency swap lines to eliminate exchange rate risk.

[Davis X. Machina]

"...graft, innovation and entrepreneurship*."

Confused Yank here -- am I correct in thinking 'graft' means 'hard work' over there? Here it's synonomous with political corruption, especially self-dealing by people in govern,et

[aragon]

Thatcher got almost everything wrong!

https://thecorrespondent.com/283/why-poor-people-make-poor-decisions/37442933638-a4773584

"Margaret Thatcher, the former British prime minister, once called poverty a "personality defect.""

[...]

"Granted, it would take a big programme to eradicate poverty in the US. According to economist Matt Bruenig’s calculations, it would cost $175bn. But poverty is even more expensive. One study
estimated the cost of child poverty at as much as $500bn a year. Kids who grow up poor end up with two years’ less education, work 450 fewer hours per year, and run three times the risk of bad health than those raised in families that are well off."

Who would have guessed?

A Basic income has a net positive (x2) return.

""Poverty is a great enemy to human happiness; it certainly destroys liberty, and it makes some virtues impracticable, and others extremely difficult," said the British essayist Samuel Johnson in 1782. Unlike many of his contemporaries, he understood that poverty is not a lack of character.

It’s a lack of cash."

Ralph HS2 is a modest £100Bn fiscal stimulus and therefore already a success, we might even get a train line out of it too!

[Dave Timoney]

As others have noted, the economics of HS2 are dubious. Arguably, it is an example of Thatcherism's decadence, rather than its rejection, with public money being directed to prop up private construction firms and at a price level dictated by the state's refusal to take the burden of future risk.

Likewise, the rejection of the single market is motivated more by Thatcherite delusion - the prospect of global free trade deals - than disappointment.

The modest injection of funding for buses is of an ilk: there will be no attempt to bring services back under local authority control despite the "best practice" of London.

[georgesdelatour]

What was Thatcherism? It was the attempt to reverse Wagner’s Law; to permanently lower government spending as a proportion of GDP. True believers wanted to lower it at least to pre-WW2 levels (around 30%) and maybe even to pre-WW1 levels (around 15%). Success was, at best, partial and temporary.

When Thatcher became PM it was around 45%. When she resigned it was around 35%. But the ERM crisis quickly pushed it back up to 40%. It fell back to 35% during the first Blair government, but wound up back at 45% by 2011, in the aftermath of the 2008 financial crisis.

I suspect people will only vote for small government under very specific circumstances: if the economy appears to be doing well, if private sector wages are high, and if the economic rewards are actually reaching the median voter. Some East Asian countries seem to manage this. South Korea has the world’s lowest Gini score BEFORE taxes and transfers, for instance; and this may explain why government spending there is just 23% of GDP. But the UK is not South Korea.

[Maurits Pino]

Deirdre, not Dierdre (Blitzkrieg, not Blitzkreig etc)
Graft - funny to discover the English as opposed to US meaning of that one!

[redpesto]

"Thatcher hoped to create a society of men like her father, but left us one with men like her son."

Touche. I can never decide whether Cameron, Osborne et al. were Thatcher's idiot children or her bastard offspring. On the other hand, if Thatcherism really is dead, it's been replaced on one level by nationalism and English/British exceptionalism, as typified by Brexit.