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Wednesday, May 20, 2009

"Anatomy of Thatcherism"

Robert Skidelsky assesses Thatcherism:

Anatomy of Thatcherism, by Robert Skidelsky, Project Syndicate: Thirty years ago this month, Margaret Thatcher came to power. Although precipitated by local conditions, the Thatcher (or more broadly the Thatcher-Reagan) revolution became an instantly recognizable global brand for a set of ideas that inspired policies to free markets from government interference. ... But 30 years of hindsight enable us to judge which elements of the Thatcher revolution should be preserved, and which should be amended in the light of today's global economic downturn.  ...

[B]y the 1970s the pre-Thatcher political economy was in crisis. The most notorious symptom of this was the emergence of "stagflation"... Something had gone wrong with the system of economic management bequeathed by John Maynard Keynes. In addition, government spending was on the rise, labor unions were becoming more militant, policies to control pay kept breaking down, and profit expectations were falling. It seemed to many as though government's reach had come to exceed its grasp...

Thatcherism emerged as the most plausible alternative to state socialism. ... Yet, despite all the "supply side" reforms introduced by Thatcherite governments, unemployment has been much higher since 1980 than in the 1950s and 1960s...

What about inflation targeting? Here, too, the record since 1980 has been patchy... Nor has Thatcherite policy succeeded in one of its chief aims ― to reduce the share of government spending in national income. The most one can say is that it halted the rise for a time. ...

In de-regulating financial markets worldwide, the Thatcher-Reagan revolution brought about the corruption of money, without improving on the previous growth of wealth ― except for the very wealthy. ... Furthermore, in unleashing the power of money, the Thatcherites, for all their moralizing, contributed to the moral decay of the West.

Against these formidable minuses are three pluses. The first is privatization. By returning most state-owned industries to private ownership, the Thatcher revolution killed off state socialism. The British privatization program's greatest influence was in the former communist states, to which it gave the ideas and techniques needed to dismantle grossly inefficient command economies. ...

Thatcherism's second success was to weaken trade unions. Set up to protect the weak against the strong, labor unions had become, by the 1970s, enemies of economic progress, a massive force of social conservatism. It was right to encourage a new economy to grow outside these congealed structures.

Finally, Thatcherism put paid to the policy of fixing prices and wages by central diktat or by tripartite "bargains" between governments, employers, and trade unions. These were the methods of fascism and communism, and they would, in the end, have destroyed not just economic, but political, liberty.

Political pendulums often swing too far. In rebuilding the shattered post-Thatcherite economy, we should be careful not to revive the failed policies of the past. ...

As long as central government takes responsibility for maintaining a high and stable level of employment, Keynes thought, most of the rest of economic life can be left free of official interference. Building a proper division of responsibility between state and market from this insight is today's main task.

    Posted by on Wednesday, May 20, 2009 at 09:17 PM in Economics, Regulation | Permalink  TrackBack (1)  Comments (24)

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