What's the counter-Thatchual?

The world needs more Margaret Thatcher policy punditry and by God I will provide it!

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,

a more fundamental question is: what would have happened if Margaret Thatcher had not won power?

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.

On the bright side

I guess it is easy to be hysterical about the Maggie Thatcher grave-dancing. Yup, definitely is. Perhaps the numbers provide some perspective. Total sales of Ding-Dong, The Witch Is Dead, according to the official charts, are about 20,000. So, total resources dedicated must be, what, £40,000... probably about what Grantham spends every week on cappucinos. Proof that whatever your politics, nastiness and meanness remain unpopular.

I have downloaded a copy of Duke Dumont's Need U (100%), last week's Number 1. I am convinced that this splendid piece of music will give me numberless hours of unadulterated listening pleasure. I hope you will do the same. (iTunes, Amazon.)

Update: yeah, good for you Ken.

Evaluating Thatcherism II: pseudomarkets

In Vancouver for a wedding. An old friend who teaches in Chicago waxes bitter about the charter school system. He has terrifying anecdotes about the school management: hiring their own relatives at inflated salaries, wasting vast sums on school construction. "There's no oversight, no accountability," he says. I am embarrassed. This is not what the Economist says! (Ah, but -- side note -- the Economist is part-owned by Pearson Plc, which makes a lot of money from standardized testing and "learning services", and wants to make more.) My friend has interests too, he is now a union rep., but his stories are convincing, and he transparently cares about his pupils.

My friend is on weaker ground with school choice. "But why should parents be able to choose their kid's school?" he asks. That line is pretty much an argument-loser.

This all brings me back to the vicissitudes of the Thatcher agenda. As the neolibs moved from things you could privatize to things that, politically, you could not -- from telephones to trains to education -- they cast around for new ways to bring in choice. Their solution was to introduce incentives and competition, but with the government as centralized buyer: what this blog calls pseudomarkets. Schools could be evaluated by standardized tests for pupils; privatized services would have Ofcom and Ofwat to measure their performance -- these are not Norse gods, but official regulators; policemen could get promoted based on the number of crimes they cleared up.

And lo, the performance measurements increased and the government saw the statistics and was well pleased, so pleased that the Blairites took over this part of the agenda and pushed it further still.

And yet the people who actually experienced the public services were not as happy as the performance measurements suggested. And they started to mutter about "teaching to the test" and "valuing what you measure instead of measuring what you value". (And nerds among them pointed to a famous paper by Holmstrom; and the others retorted, "yeah, that's what we said" and took a headache pill for the maths.)

But the agenda was still very popular with politicians: perhaps because politicians do not have many ideas, and keep doing what seemed to work before; perhaps because they were inside the whale, and truly believed the statistics that their civil servants read out; perhaps because "choice and competition" enabled accounting shenanigans which made debts vanish from the government's books, but the debts would still come back in the end.

Which brings us more or less up to the present day. So what do we do now?