The Margaret Thatcher Era Isn’t Over Yet
No one is seriously suggesting, now, that these reforms — which made London the financial capital of the world for the next two decades — were a mistake; no one can credibly connect them to the meltdown on Wall Street, and no one is proposing to reverse them. Were you now to propose solving the banking crisis by reinstating currency controls, you would be widely and properly regarded as a loon. No one ever points to a specific Thatcherite regulatory reform that can be connected to the current crisis, and that’s because there wasn’t one. “She made people feel greedy” is not an adequate answer. People have been greedy since the Garden of Eden.
Another key point, painfully overlooked: Thatcher was in fact a proponent of quite stringent bank regulation, as evidenced by the 1986 Financial Services Act, which closed loopholes in laws designed to protect investors, established a comprehensive regulatory apparatus to ensure these regulations were enforced, and widened the purview of laws designed to protect investors so that they applied to a broader range of securities and investments. This is hardly the sort of legislation we would expect to see passed were Thatcher truly a wild-eyed ideologue who believed lawlessness itself would lead to prosperity.
Under Thatcher, credit growth was controlled through the money supply and by allowing banks to lend within carefully adjusted parameters. She would have been appalled by the unregulated explosion of leverage in Western economies that followed her time in power: philosophically, the hyperleveraging of the economy was against everything she stood for and everything that, in fact, she and her successive chancellors did.
This is evident from scores and scores of her speeches, policy documents, and decisions in government. She was willing to withstand enormous criticism precisely because she would not deviate from her belief that an economy must be based on the housewifely principles of thrift, common sense, and living within ones means. In this, she may have been, as her critics often charged, economically naive and simplistic, but she was nonetheless perfectly clear.
The economic policies for which Thatcher is best known — and which wrenched Britain from a trajectory of permanent decline — have not been discredited by this crisis and indeed are completely separate issues. Britain was essentially a socialist state before Thatcher, with top rates of taxation of 98 percent. That number is not a typo. The country was an economic basket case: It was the second-poorest country in Europe. Even the Soviet Union was reluctant to trade with Britain because British goods were unreliable and British workers were always on strike. Thatcher is known for denationalizing the commanding heights of British industry, taking on and weakening Britain’s overweeningly powerful trade unions, curtailing government spending, advocating sound money, and promoting a business-friendly tax environment. Her reforms led to the longest sustained period of British economic expansion of the postwar era, with Britain in the past decade ranking top in both output and inflation stabilization in the OECD.
Nothing in the recent crisis detracts from this or suggests that her reforms were misguided — or that their lessons are no longer relevant. They are very relevant. Both candidates for the presidency would be wise to consider them closely as they consider not only the banking crisis, but other economic policy issues under debate, such as the Employee Free Choice Act. Unfortunately, neither candidate seems to possess even a rudimentary understanding of what she did and what this suggests for us now. And neither do those who say the era of Thatcher is over.
Interesting – I don’t know much about Thatcher. Thanks for the article.
It is interesting that anyone can possibly believe lack of regulation is what led to this stupidity. If anything, it was a simple failure to enforce. In fact that was a great YouTube video showing a 2004 C-SPAN broadcast of a congressional meeting in which almost exclusively Democratic congressmen were absolutely grilling these poor housing regulators who were warning that Fannie and Freddie were WAY undercapitalized & etc. They basically accused these guys of (1) trying to foment a crisis of confidence as a pretext to scrapping GSEs altogether, just like “you’ve always wanted to do,” and (2) being motivated by racism.
“You’re racist fanatical ideologues.” God, come up with something new, just to change it up a little guys.
Well, i guess we know who was right now. But anyway no one looking at even one volume of SEC and other financial industry regulations could *possibly* conclude that the industry is under-regulated. That’s just political babytalk for the usual idiots to suck on.
Dan wrote: Well, i guess we know who was right now…
That’s just the trouble – everybody keeps looking backward to see who was right. It’s all well and good to learn from our mistakes, but fer crying out loud, doesn’t the typical American see the pattern? McCain was for the surge when it was unpopular to be for it. Two years later, we look back and see he was right. As far back as 2005, I think, McCain was warning about Fannie and Freddie and joined the move to reign it in. We look back and sure enough, good ol’ Mac was right again.
We can’t look 2 years back and see Sen. Obama being right about anything because he only votes “present”. His biggest stance has been against babies born alive, apparently so as not to “punish” young women with babies. Doesn’t he realize how many people are on waiting lists hoping for a baby to love and raise? And here I always thought abortion was about terminating a pregnancy and not about ending a life.
*sigh*
Ditto,
Where McCain falls short is that the man didn’t have the good sense to be right on the bailout. It was plain to everyone with eyes that the plan was doomed from the start, and had he taken the principled, Thatcherite/Reaganite position on the issue, he would probably be 10-15 points ahead of Obama right now; he could have ridden that wave of populist outrage at redistribution of wealth to the wealthy all the way to the White House.
Margaret Thatcher and Governor Sarah Palin are
similar in character .
http://www.youtube.com/watch?v=96YQdiMV-Jc
Our economic troubles in the United States have virtually nothing to do with the free market. On the contrary, Democratic Party politicians literally forced lending institutions to provide mortgages to minorities possessing mediocre credit histories. Moreover, large corporate interests have often fully cooperated with leftist politicians. They do so to rid themselves of competitors and also guarantee their profits. State interference in the market place normally causes more harm than good. Margaret Thatcher understood this clearly. Left-wing politicians don’t have a clue.
yeah but regarding the bailout – it doesn’t really seem like anyone really knows what to do, don’t you think? i don’t see how you can really hold it against mccain that he thought a confidence-building measure proportionate to the problem was a good idea. considering that financial armageddon seemed (seems?) to be looming. i dunno. the only one i blame is Obama and the cynical argument that if the economy imploded and bush was in the white house, that means I, Obama, am right about how to fix the economy.
What?
And he’s supposed to be the economic white knight. I don’t get it, if this is how politics is going to work for the forseeable future, we are in deep, and deepening, trouble.
What memories this article conjures up…
At a low point in the popularity her first administration (ultimately she was an undefeated three time election winner) she was under enormous pressure to reverse her economic policy from within her own party. Her policies must be reversed was the cry – the famous “U turn” was eveywhere advocated.
At the party conference she stood up, the joy of battle in her eyes, and issued this ringing defiance:
“You turn if you want to – the Lady’s not for turning”
Shabash Memsahib!
It is unquestionable that the British economy as it stands is largely the product of the Thatcher years and that New Labor is a tacit admission of their basic soundness.
You have, however, understated [or, rather, not stated at all] three important structural advantages to the British economy during these years. First, and most important, Britain became a net exporter of oil an natural gas during a period when the flow of profit to exporters from importers has increased immensely.
Second, the steady integration of Britain into the EEC has given it access to a broader economic base on very friendly terms.
Third, the political climate of Britain became much more accepting of the “collateral damage” of Thatcherism in the form of the return of a stratum of genuine poverty and homelessness in UK society.
We here also have the third advantage. For the basic American assumption is that all poverty is a moral failure on the part of the impoverished and not a structural consequence of a relatively deregulated market.
But we have not had the advantage of being an energy exporter during this same period. Nor have our “diminished trade barriers” been negotiated on terms very favorable to us.
Consequently, there are definite limits to what the Thatcher example can be for us.
http://www.youtube.com/watch?v=bBX2ec7c81E
Watch this
I think it’s too soon to tell. MT helped build a Britain where the services industry was to bring us wealth instead of manufacturing – opinions differ on whether she destroyed manufacturing or just buried the corpse. We need to see how the country deals with the current crisis before judging whether this is a sustainable strategy (the success of the City of London has carried us, along with the oil revenues noted above).
At the time I seem to remember that Reagan and Thatcher’s domestic economic policies in practice were quite different from each other, so maybe the lessons are limited.
On the other hand their social outlook seemed much more similar, not to say fairly repellent to a lot of people in the UK and dare I say the US.
They have declared the era of Lady T dead many times. Her ethos and attitude will live on for many a time. I still mention her name and watch the lefties twitch.
Joseph Marshall,
You are right to point to the “windfall” bonus of oil & gas exports without which the Thatcher revolution arguably would not have succeeded. However in fairness it was Geoffrey Howe who established the tax and royalty structure that was world beating at the time – so some credit reflects on the Thatcher government here too.
The benefits of the EEC/EU that you cite are far more dubious. Britain has a net trade deficit with the continental EU and those areas in which the UK outperforms, especially services, are still not a single market in the EU. Therefore, Whilst the British market is open on favourable terms to EU manufactures and EU agriculture the reciprocal benfits of open EU markets for British services have just not materialised. The outperformance of the British financial sector makes Britains share of the global financil services cake disproportionate to the size of the domestic UK economy but this Thatcher achievement owes nothing whatsoever to the EU.
Real poverty levels in the UK are far lower in post Thatcher Britain than they were prior. However relative poverty levels have certainly increased due to the gearing towards incentives embodied in Thatcherite economic philosophy.
Naomi Klein has an excellent chapter on Thatcher in her book “The Shock Doctrine” While Margret Thatcher may have very well “been appalled by the unregulated explosion of leverage in Western economies” everything she did while she was in office cleared the way for the debt explosion and her policies helped to concentrate the wealth of Great Britain in the hands of a few allowing them the power to corrupt the political system and game the financial system to their benefit and the detriment of all others. The article also fails to mention any of the social costs or causalities of Thatchers policies. It may be a bit early to write the obituary of Thatcherism (Reganomics, Neo-liberalism, Milton Friedman etc.) but it is a philosophy that has been exposed as a fraud. A little peppering of Thatcherism may perhaps be tonic for a overegulated socialist economy but Neo-liberal ideas are a dangerous and fatal cancer if applied in full to an entire economy. Chile, Argentina, Iraq, United States etc.
An excellent article. Thatcher, peace be upon her, was the best PM since Churchill.
I don’t know much about Margaret Thatcher but hey, McCain could learn some lessons from her.
OT: Does anyone know a good biographical book about her?
Dear Commenter 17–
I just wrote the book you’re looking for. “There is No Alternative: Why Margaret Thatcher Matters,” available on Amazon. I hope you’ll enjoy it.
Best regards,
Claire
thanks Ms. Claire!
Yes, and that says it all.
An unmitigated disaster. A misguided women that crowed, ‘there is no such thing as society’.
My only disappointment is in the fact that she is now so senile that she has no comprehension of her disastrous policies.