There will presumably be a lot of commentary about Margaret Thatcher over the next few days, although probably nothing like the “Reagasm” of 2004. And there will in particular be many assertions that Thatcher turned around a moribund British economy. So, is this right?
OK, I don’t want to do a slash-and-burn here — the question mark in the title of this post is for real. But I think it is interesting to look at what actually happened at a macro level.
Now, there is no question that Britain did turn around. In the 1970s it was a country with huge economic problems; today, despite the failure of austerity policies, it’s in a much stronger position. There are various ways you could show this; I find it useful to compare Britain with its love-hate-relationship neighbor France. So, here’s per capita GDP in Britain relative to France:
A long decline ended and turned into a revival.
And here’s unemployment in the two countries:
Britain had terrible unemployment for a while, but has done pretty well since (France has done better than the numbers suggest, for technical reasons, but still).
So, a real turnaround. Was it the Iron Lady wot did it?
Well, there’s a bit of a problem: Thatcher came to power in 1979, and imposed a radical change in policy almost immediately. But the big improvement in British performance doesn’t really show in the data until the mid-1990s. Does she get credit for a reward so long delayed?
This is, by the way, somewhat like a similar issue in America: right-wingers were eager to give Ronald Reagan credit for the productivity boom of the Clinton years, which also didn’t start until around 1995; if Reagan could get credit for events that were 14 years or more after his 1981 tax cut, shouldn’t Richard Nixon be given credit for anything good that happened in the Reagan years?
Anyway, I guess there is a case that the Thatcher changes in taxes, labor regulation, etc. created a more flexible economy, which made the good years under Blair possible. But it’s an awfully long lag. And there’s another possibility. For what happened in the 90s that arguably redounded very much to Britain’s benefit? Why, the rise of fancy finance — which was a huge boon to the country that contains the City.
I’m sure that British economists will be hashing this stuff over in the days ahead. For now, consider this a caution: if anyone tells you that Thatcher saved the British economy, you should ask why the results of that salvation took so very long to materialize.
OK, I don’t want to do a slash-and-burn here — the question mark in the title of this post is for real. But I think it is interesting to look at what actually happened at a macro level.
Now, there is no question that Britain did turn around. In the 1970s it was a country with huge economic problems; today, despite the failure of austerity policies, it’s in a much stronger position. There are various ways you could show this; I find it useful to compare Britain with its love-hate-relationship neighbor France. So, here’s per capita GDP in Britain relative to France:
A long decline ended and turned into a revival.
And here’s unemployment in the two countries:
Britain had terrible unemployment for a while, but has done pretty well since (France has done better than the numbers suggest, for technical reasons, but still).
So, a real turnaround. Was it the Iron Lady wot did it?
Well, there’s a bit of a problem: Thatcher came to power in 1979, and imposed a radical change in policy almost immediately. But the big improvement in British performance doesn’t really show in the data until the mid-1990s. Does she get credit for a reward so long delayed?
This is, by the way, somewhat like a similar issue in America: right-wingers were eager to give Ronald Reagan credit for the productivity boom of the Clinton years, which also didn’t start until around 1995; if Reagan could get credit for events that were 14 years or more after his 1981 tax cut, shouldn’t Richard Nixon be given credit for anything good that happened in the Reagan years?
Anyway, I guess there is a case that the Thatcher changes in taxes, labor regulation, etc. created a more flexible economy, which made the good years under Blair possible. But it’s an awfully long lag. And there’s another possibility. For what happened in the 90s that arguably redounded very much to Britain’s benefit? Why, the rise of fancy finance — which was a huge boon to the country that contains the City.
I’m sure that British economists will be hashing this stuff over in the days ahead. For now, consider this a caution: if anyone tells you that Thatcher saved the British economy, you should ask why the results of that salvation took so very long to materialize.
