My colleague Tom Scotto asked a simple question, that I think has not got enough attention in many of the very thoughtful comments from economists and others: "What's the counterfactual?"
In other words: although it is interesting to consider whether
- it was a mistake not to start a Norwegian-style sovereign wealth fund for North Sea oil,
- the monetarist policy of the early 1980s made the recession unnecessarily hard,
- supply-side changes weakened the unions and modernized our economy, or
- her European policy was foresighted, or counter-productive,
There are two natural ways to cut this. If Thatcher had not won power in 1979, then Callaghan would have stayed on. Or, you could look at 1983, where a random shock (named Galtieri) kept her in power. I'm too young to remember this stuff, but I'll make some guesses.
Surely the result in 1979 is easy to call. Callaghan was a failure; he would have continued to be a failure. Evidence from the 1979 Labour manifesto shows that these guys planned to continue down the failed path of the 'seventies.
Now we set ourselves the task of bringing inflation down to 5 per cent in three years. It is an ambitious target. We need the assistance of everyone.
three-way talks between ministers, management and unions to consider the best way forward for our country's economy...
Industrial democracy - giving working men and women a voice in the decisions which affect their jobs - is an idea whose time has come...
Labour will strengthen the Price Commission, giving it greater powers to initiate investigations and reduce prices ....
We reaffirm the policy that we have pursued that wherever we give direct aid to a company out of public funds, we shall reserve the right to take a proportionate share of the ownership of the company....1983 on the face of it seems just as easy. Labour ran under a manifesto which has been called "the longest suicide note in history", including withdrawal from the EEC, unilateral nuclear disarmament, renationalisation....
But then Labour was not the only game in town. What if the SDP/Liberal alliance had won? Might we then have had a moderate, responsible centre-Left government, making some necessary reforms but without engendering the division and bitterness that Thatcher left?
I doubt it. My feeling is that politics like those of Schroeder, Blair, even Lula were only possible after Thatcher. The centre-Left had to swallow the bitter pill of accepting (some) New Right ideas. Even the 1983 SDP counterfactual would have been something like France at the same period (or now): half-hearted acceptance that you cannot actually get more Left-wing; but no real reforms.
In any case, the main point is: Thatcherism is best evaluated against real alternatives that might have come about, rather than against the analyst's ideal policy.
You ask "what would have happened if Margaret Thatcher had not won power?" I do not know, but I am often intrigued to recall the prediction of Milton Friedman in "The fragility of freedom" at http://0055d26.netsolhost.com/friedman/pdfs/other_commentary/Immediate.11.18.1976.pdf and "Professor Milton Friedman Prescribes a Medicine for Britain" at http://0055d26.netsolhost.com/friedman/pdfs/other_commentary/Immediate.11.18.1976.pdf.
ReplyDeleteFriedman considered that Britain was on the same road as Chile had been under Allende, and the outcome would most likely be a similar disaster. He wrote:
"I do not know where Britain is going to end up. She is now in a severe economic crisis and it may
be that the outcome will be similar to that suffered by Chile: the destruction of freedom, of a
democratic government, the resort to some type of a dictatorship. Of course it will be a peculiarly
British type of dictatorship: they will be polite but in any dictatorship or any control by armed might, the iron fist will be inside the velvet glove. I hope I am wrong."
Thank you for the pointer. There are some very interesting other quotes in that Friedman interview.
ReplyDeleteOn Thatcherism's policy lags, discussed by Krugman and others:
Wouldn’t your solutions—for a further monetary squeeze—increase that unemployment considerably?
Is there a solution that won’t? You have got a patient who is very sick. What makes anybody believe that there is an instant cure that will enable him to rise from his sickbed, tomorrow, a healthy man?
On bailouts:
Are you saying that we shouldn’t be baled out, then?
Of course you should not be baled out. On what ground is there any justification in baling you out? Britain is potentially an enormously wealthy country. You have been dissipating your resources. You have been baled out over the years. I personally can see no justification.
If we accepted harsh conditions—in other words, did the things you say we should . . .
It is no business of the rest of the world to impose harsh conditions on Britain. You must live your own life. Would you rather lose your freedom to an international group than to your local group? What you are saying is that Britain should give up her democratic freedoms and allow herself to be governed by a committee of the IMF. If I were an Englishman or a Briton, I would think that was both politically and economically unacceptable.