One of Thatcher’s legacies

When I was a young adult Thatcher and Reagan were my two favorite political leaders (I was a bit more conservative during the cold war period.)  So I was sad to hear that Margaret Thatcher died today.

There are of course many ways to view her legacy, but I like to draw the comparison between Britain and France.  These two countries have almost identical populations, GDPs, GDP per capita (PPP), etc.  Both have large capital cities that completely dominate their respective political, economic and cultural life.  There are obviously many historical connections.

When Thatcher took office Britain was beginning to significantly lag behind France in all sorts of economic indicators.  Thatcher’s reforms allowed Britain to catch up to France.  (Indeed by some measures they have edged ahead.)  Of course the economic outcomes are not identical (Britain tends to have lower unemployment while France has less inequality.)  But they are back to being the two of the most similar countries in Europe.  (What are other good pairs?  Denmark/Finland?  Greece/Portugal?)

PS.  And let’s not forget that the Falkland Islanders are still free of Argentine rule.


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55 Responses to “One of Thatcher’s legacies”

  1. Gravatar of ssumner ssumner
    8. April 2013 at 04:12

    S. Cunsolo. I doubt it, monetary policy doesn’t affect long term growth rates.

    Marcus, Yes, I recall that as well.

  2. Gravatar of Andrew Andrew
    8. April 2013 at 07:29

    I’d be very interested to hear your response to Matt yglesias’ latest:

    http://www.slate.com/blogs/moneybox/2013/04/08/consumption_taxation_a_good_idea_but_hard_in_practice.html

  3. Gravatar of W. Peden W. Peden
    8. April 2013 at 08:13

    One of her biggest innovations was that privatisation would be far more effective if retail investors could get into the share offering easily. That was as important a part of her changing British politics as breaking the miners’ union and their power to take down governments the communist bosses disliked.

    More than that, the idea that privatisation could create widespread equity ownership and thereby create popular support for previously unthinkable policies (like privatising water distribution or the energy industries) had a huge impact not only on Britain, but the world. So this advert is one of the most important in history-

    http://www.youtube.com/watch?v=nedVpG-GjkE

  4. Gravatar of Basil Basil
    8. April 2013 at 08:25

    James Pethokoukis makes the same point about UK vs France, but in chart form, over at AEI:

    http://www.aei-ideas.org/2013/04/how-margaret-thatcher-turned-around-great-britain-in-one-chart

  5. Gravatar of Ashok Rao Ashok Rao
    8. April 2013 at 08:27

    James Pethokoukis on exactly this, “in one chart” –

    http://www.aei-ideas.org/2013/04/how-margaret-thatcher-turned-around-great-britain-in-one-chart/

    I’d say the most incredible thing about Thatcher is that one person, within a democratic institution, can be revolutionary. Hasn’t happened since. It’s what we were hoping for in Obama, of course..

  6. Gravatar of Richard W Richard W
    8. April 2013 at 08:40

    @W. Peden

    Individual members of the public bought the shares and sold them immediately because they were offered at a discount. Other than down there was no change in the percentage of UK stock market value owned by individual retail investors. They owned around 28 per cent of the value at the start of her reign and 20 at the end. Now down to 11.5%, the popular and widening of shareholding from privatisations is a myth.

  7. Gravatar of W. Peden W. Peden
    8. April 2013 at 08:48

    Richard W,

    Only monarchs have reigns.

    Selling equity is one of the things you can do with it- IF you own it…

  8. Gravatar of Richard W Richard W
    8. April 2013 at 08:50

    The Pethokoukis chart appears to take off a year or so after the exit from the ERM and the devaluation of sterling, a number of years after she left office.

  9. Gravatar of W. Peden W. Peden
    8. April 2013 at 08:51

    Also, I’m not sure why you give the figures for share ownership as (a) individual retail investors, when people can own shares either as individuals or through funds, and (b) even more mysteriously, why you give retail share ownership figures as a percentage share of the market rather than as a share of the public, which is what would be relevant to widening share ownership.

  10. Gravatar of Richard W Richard W
    8. April 2013 at 08:55

    Obviously you can only sell something you own but the idea that privatisations were a catalyst to widespread retail shareholding is not true.

  11. Gravatar of W. Peden W. Peden
    8. April 2013 at 09:01

    Richard W,

    Alec Cairncross, not a noted Thatcherite, writes in “The British Economy Since 1945” –

    “… it was estimated in 1987 that the number of shareholders in Britain had grown from 3 million in 1979 to 9 million eight years later. Nearly half of those shareholders held shares exclusively in privatized companies or in the Trustee Savings Bank.”

    That’s the kind of figure that is significant for widening shareholding, not the figures you gave, since institutional investing has not exactly been unchanged in its nature in the last 30 years.

    Anyway, another factor that is very significant to British politics was the Right to Buy (mandatory right of purchase of government-owned homes for many tenants) whose impact was sullied by the regrettable cuts to social housing building during the period.

  12. Gravatar of Richard W Richard W
    8. April 2013 at 09:17

    Yes most people own shares through pension funds but privatisations have no impact on whether someone contributes to a pension fund or not.

  13. Gravatar of S Cunsolo S Cunsolo
    8. April 2013 at 10:19

    Could the fact that UK got its monetary policy more or less straight after 1980 while France got stuck with the DM peg (Snake, ERM, Euro, they’re really all the same) have a role in that ?

  14. Gravatar of ssumner ssumner
    8. April 2013 at 10:31

    Andrew, Lots of mistakes there—I’ll have plenty to say.

    Basi land W. peden, Thanks for the info.

    Ashok, Given his instincts on economics, thank God he wasn’t a revolutionary!

    Richard, I think you are missing the point about privatizations. If people have a stake, they will favor more pro-capitalist policies. Ideally you’d like the public to hold diversified mutual funds, so they support the general interest, not special interests. And don’t forget privatization of council houses.

    Thatcher inherited 20% inflation, so the 1981 recession was almost inevitable. After that Britain began rapidly gaining ground on France. The graph is quite clear on that point.

  15. Gravatar of marcus nunes marcus nunes
    8. April 2013 at 10:36

    And she did it despite the opposition of 364 ‘luminaries’:
    http://www.res.org.uk/view/article4Oct12Feature.html

  16. Gravatar of Brett Brett
    8. April 2013 at 11:28

    She had some negative foreign policy issues and statements (aside from the Falklands, which was a good decision), but her core economic policies were both good and necessary. Of course, someone was going to have to deal with the inflation, the unions, and the public companies, especially after the Winter of Discontent.

  17. Gravatar of Bill Ellis Bill Ellis
    8. April 2013 at 12:13

    The passing of Thatcher shocked me…I could of swore she was already dead.

  18. Gravatar of Seymour Seymour
    8. April 2013 at 13:30

    Professor Sumner, have you seen this blog post yet? By the looks of it, it doesn’t look like Thatcher deserves all the credit.

    http://socialdemocracy21stcentury.blogspot.com/2013/04/thatchers-passing.html

  19. Gravatar of 123 123
    8. April 2013 at 14:33

    Thatcher and NGDP:
    “In effect, the MTFS has set out a nominal framework designed gradually to reduce the growth of money GDP and improve the division of that growth between real output growth and inflation”

    http://www.margaretthatcher.org/document/109504

  20. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    8. April 2013 at 14:54

    I lived in London for several months in 1974. I remember shopping in stores near Picadilly Circus that were operating by candlelight in midday thanks to coal miners’ strikes that had severely curtailed electricity. The country was on the verge of going completely Marxist. It was not Jeremy Clarkson’s England.

    When I returned late in 1980 it was a normal country again. That happened because Thatcher stood firm in her convictions. I remember a young Brit interviewed in the streets of London, when asked what he thought of Thatcher, saying, ‘Better an iron lady than those cardboard men.’

  21. Gravatar of ssumner ssumner
    8. April 2013 at 15:31

    Seymour. Phillips Curve??

    Patrick, Good observation. I lived there in 1986.

  22. Gravatar of Bill Ellis Bill Ellis
    8. April 2013 at 16:43

    “A broken society, yes. But broken by Thatcher”
    …acute inequality is a Tory legacy”
    Excerpt…

    ‘…truth is that we are suffering the impact of the massive increases in income inequality under Thatcher, which Blair and Brown have since failed to reverse. In the 1980s the gulf between the top and bottom 20% widened by a full 60% – much the most dramatic widening of income differences on record. Since then there have been only minor fluctuations under Major, Blair and Brown. The result is that the gap between the top and bottom 20% in Britain is twice as big as among our more equal European partners.”

    http://www.guardian.co.uk/commentisfree/2010/jan/29/social-mobility-inequality-conservative-thatcher

  23. Gravatar of dtoh dtoh
    8. April 2013 at 18:38

    I lived in London in the early 80s. It was a dull and dreary place; the economy was in shambles. Barbara Thatcher totally transformed British society. Everyone is so much better off now.

    IMHO the purveyors of inequality data don’t give a crock about anybody’s well being, they’re just self-serving, paternalistic parasites peddling an agenda of envy disguised as economics.

  24. Gravatar of Mike Sax Mike Sax
    8. April 2013 at 20:21

    Krugman too had a couple of charts that showed that Britian overtook France on both employment and GDP per capita, thoggh the correlation of Thatcher and the turnaround in the numbers is not an exact correlation and can be interepreted other ways-as is always the case in drawing correlations.

    On the unemployment numbers though, while Britain has surpassed France, Britian’s unemployment is much higher than it was in 1979-and was so for the next 20 years from the time Thatcher came into office.

    Indeed, looking at both France and Britian unemployment the story could be that both unemployment rates spiked during this time.

  25. Gravatar of Ashok Rao Ashok Rao
    8. April 2013 at 22:36

    “Ashok, Given his instincts on economics, thank God he wasn’t a revolutionary!”

    Scott, you might not agree with his fiscal policy, but don’t you think sound financial sector regulatory overhaul (real stuff) would have been so much better than the crippled version of Obamacare that actually passed?

    Or, if stimulus was to be done at all, don’t you think it should have come in full force at the level the Romer memo suggested? Rather than the politically moderated version that Obama actually passed?

    If you’re doing something, better do it right than halfway…

  26. Gravatar of RebelEconomist RebelEconomist
    9. April 2013 at 00:50

    Richard W. has it right. The widening of share ownership was at first due to heavily marketed virtual give-aways in privatisations and later by the conversions of building societies to banks (not one of which survives independently). Of the few small shareholders that remain, almost none are active owners. Indeed one of the reasons that they remain shareholders is that they can’t be bothered to find out how to sell their shares, to the point that these days UK charities approach such shareholders and ask them to make a gift of their shares.

    It always struck me as ironic that Mrs T, who claimed to a believer in markets, was so pessimistic about her chances of convincing the British public to agree with her that she practically gave them assets in an attempt to get them interested.

  27. Gravatar of W. Peden W. Peden
    9. April 2013 at 02:30

    Mike Sax,

    Much has changed since 1979 and not all of it is due to government policy. For what it’s worth, the natural rate in the UK is lower than it was then, which is why unemployment went below the late 1970s level in the Noughties without a takeoff of inflation.

    One of the problems, perhaps unavoidable, is that the disinflation was protracted and so unemployment stayed high for much longer than it technically had to, partly because workers wisely didn’t trust the government on inflation until well into the 1990s. The result was that, to get relected, the Conservatives let rip the printing presses after about 1985-

    http://timetric.com/index/unemployment-all-16-over-lfs/

    http://timetric.com/index/money-supply-m4-boe/

    – so we had a boom & bust cycle in the late 1980s/early 1990s that wasn’t as severe as the Keynesian boom & bust of 1971 to 1981, but which was nonetheless very painful. And while final goods inflation wasn’t as bad in the late 1980s as in the 1970s, asset price inflation was very bad and house prices in 1988 were disconnected from all reality.

    RebelEconomist,

    Given that the public theoretically owned the nationalised industries already, surely the cheek was in expecting people to pay for the shares in the first place?

  28. Gravatar of Saturos Saturos
    9. April 2013 at 03:12

    And here is the contrary view: http://www.mirror.co.uk/news/uk-news/margaret-thatcher-dead-ripped-heart-1819351

    Also see: http://www.mirror.co.uk/news/uk-news/margaret-thatcher-dead-asian-tv-1819609

  29. Gravatar of RebelEconomist RebelEconomist
    9. April 2013 at 03:34

    @W.Peden, in that case, the government should have given the shares away to the entire population, not just those (like me) who applied for them. Basically, Mrs T created a whole group of ordinary people who were interested in owning shares (and houses) for quick capital gains rather than long-term participatory ownership.

    But don’t get me wrong. Mrs T did Britain a lot of good by biting the bullet of closing loss-making protected industry. While that was only half the job – the rest was to foster the growth of German-type competitive industry – that was half a job more than her successors did. I supported her the first couple of times she was elected, but she lost the plot.

  30. Gravatar of James in London James in London
    9. April 2013 at 04:19

    Another way of looking at Margaret Thatcher’s success, and the challenge she was faced with is this chart:
    http://www.unionancestors.co.uk/Images/Strikes%201901-2000.pdf

    Days lost through strikes. In 1972-3 Britain was virtually ungovernable under the Conservatives. Labour won the 1974 election by caving in to the unions who dominated large swathes of British, mostly state-owned, “industry”. But Labour could no more govern the country than the Conservatives. Hence the 1978-9 peak in days lost. The 1984-5 peak was the final face off, and this time the unions lost. Margaret Thatcher had won, facing down the unions and much of her own party elite, and obviously the consensus of working academic economists.

    We may have other problems today in the UK but RGDP destruction from huge loss-making state industries, constantly disrupted by strikes, and disrupting the rest of the economy, is not one of them. Thank you, Margaret Thatcher.

  31. Gravatar of Saturos Saturos
    9. April 2013 at 04:40

    And here is the Guardian: http://www.guardian.co.uk/politics/datablog/2013/apr/08/britain-changed-margaret-thatcher-charts

    The best one though is by Bruce Bartlett, of course: http://economix.blogs.nytimes.com/2011/07/05/the-legend-of-margaret-thatcher/

  32. Gravatar of Richard W Richard W
    9. April 2013 at 05:08

    ssumner
    8. April 2013 at 10:31

    ” Thatcher inherited 20% inflation, so the 1981 recession was almost inevitable. After that Britain began rapidly gaining ground on France. The graph is quite clear on that point.”

    That is part of the revisionism that I am on about. Inflation was just over 10 per cent and falling when she took office. It doubled during her first couple of years. When she was forced out of office by her own party inflation was 10.6% and rising. Sterling becoming a petro currency through North Sea oil did more to dampen inflation than anything else. When the oil price collapsed in 1986, and sterling with it vis-a-vis the USD, no surprise that inflation returned in her last years in office. Floating the pound after the ERM exit and the Ken Clarke chancellorship did more for the UK economy than anything from the 1980s. Yet the revisionists all want to claim every later success as some sort of delayed reaction from the 1980s. I don’t deny some policies take years to bear fruit but crediting the Thatcher government for all the success is dubious.

  33. Gravatar of W. Peden W. Peden
    9. April 2013 at 05:33

    RebelEconomist,

    But then the Treasury would have made a net loss on most privatisations and deficits/interest rates would have had to be even higher in the 1980s… Policy-making is a lot easier from the benches.

    I agree that she lost her touch towards the end. In an odd way, I think she had the same problem as Ted Heath: she was tied to a particular era of politics. Heath’s entire life was fighting World War II again and again, so it was all about co-ordinating a consensus and working out the administrative side of things. Thatcher’s premiership was fighting the battles of the 1970s over and over again- if it’s not unpopular and divisive, then it’s weak and imprudent. As a result, she thought that the poll tax and tearing the Conservative party apart over Europe were good ideas.

    Richard W.,

    Inflation wasn’t falling in May 1979 and it was falling in late 1990. The NGD rate in 1990 was around half of what it was in 1979: still too high, but a big step in the right direction. She did make the mistake of succumbing, in the end, to the advice of (the mostly Keynesian) British economics profession in the 1980s and focused on exchange rate targeting, in various forms.

  34. Gravatar of W. Peden W. Peden
    9. April 2013 at 05:35

    * NGDP growth rate.

  35. Gravatar of W. Peden W. Peden
    9. April 2013 at 05:45

    An old chart from Britmouse summarises the shift nicely-

    http://uneconomical.wordpress.com/2013/01/28/we-need-better-policy-not-better-central-bankers/

  36. Gravatar of ssumner ssumner
    9. April 2013 at 07:13

    Bill, I agree that Brown’s huge expenditures on social insurance, which caused British government spending to balloon to 50% of GDP, did not cause the inequality to improve. And there’s an important lesson there for liberals.

    And of course I have many posts explaining why income inequality data is almost meaningless. It does not measure economic inequality.

    Ashok, Because the stimulus spending was wasteful, even larger stimulus would have been even more wasteful. It would have caused the Fed to do less QE. Obama is opposed to serious financial reform (reducing moral hazard) because he has a visceral opposition to risk-taking. He wants everyone to be “protected” which is precisely how we got into this mess. His administration is actually encouraging a new subprime housing bubble.

    I agree that Obamacare is highly flawed, but given him more power would not have helped, as his economic instincts are the worst of any President since Nixon.

    Saturos, That first article is idiotic. An extreme right-winger??? She’s far to the left of Bill Clinton. She favored nationalized health care; not like in Europe where they have private health care and socialized insurance, but the government actually running the health care system, employing the doctors. She favored far higher spending on social programs than Bill Clinton. A higher top marginal income tax rate. If she’s an extreme right-winger then Clinton with his “welfare reform” was an outright fascist.

    Richard, Anyone who visited Britain in 1979 and then in 1997, after 18 years of Thatcher-Major rule, could see the enormous improvements. You’d have to be blind to miss it. Many of her reforms faced deep opposition, even within her own party, and hence took years to enact. Privatization, is one example, taking on the unions is another. Those polices were not enacted in 1979. And 1981 was the key year where Thatcher moved away from the then fashionable Keynesianism (and a letter of 100s of top British economist predicted disaster.) Some disaster!!

    BTW, You are completely wrong about inflation, which was 13.4% and rising rapidly when she took office in 1979, and peaked at 18% in the oil shock year of 1980, before falling. I do agree that UK monetary policy in the late 1980s was very bad.

  37. Gravatar of ssumner ssumner
    9. April 2013 at 07:23

    Saturos, The Bartlett article is pretty good, but also misleading in some respects. She inherited a very high inflation rate and a budget deficit of nearly 10% of GDP. That combination is utterly disastrous, because to reduce inflation with tight money means a much higher level of unemployment, and also higher government spending during the period of high unemployment. That makes the deficit much worse! Restructuring industry also created unemployment in the short run. So government spending was bound to increase in the short run. She was dealt an exceedingly bad hand–indeed the Labour party would have had to run to Blairism if they’be been in office in the 1980s, as occurred in Australia and NZ. And then of course Canada and Sweden in the 1990s.

    I’d say she had to raise taxes due to the high deficit, and that she did some excellent tax reform that Laffer would obviously approve of (BTW, the top rate fell to 40%, not 60%.) And she did cut government spending, which showed up after the period of high unemployment ended. But yes, it was not a radical change in the size of government, a point I often make about the “neoliberal revolution.”

  38. Gravatar of dtoh dtoh
    9. April 2013 at 07:24

    “Anyone who visited Britain in 1979 and then in 1997, after 18 years of Thatcher-Major rule, could see the enormous improvements. You’d have to be blind to miss it. Many of her reforms faced deep opposition, even within her own party, and hence took years to enact. Privatization, is one example, taking on the unions is another. Those polices were not enacted in 1979. And 1981 was the key year where Thatcher moved away from the then fashionable Keynesianism (and a letter of 100s of top British economist predicted disaster.) Some disaster!!”,

    +1. Totally transformed Britain and in the face of vile opposition. Along with Churchill and Disraeli, one of Britain’s great leaders.

  39. Gravatar of James in London James in London
    9. April 2013 at 07:46

    dtoh

    Disraeli? I don’t think so. A Tory paternalist, no better than Labour in the 1970s. Go Gladstone! A real free-trader and self-helper. Churchill was a great war-time leader but a bit hopeless on the economy. He did ditch rationing in 1951 after six disastrous years that Labour kept it going after WWE2. But Churchill did very little to roll back the state control of major British industries nationalised during war time. It was only Margaret Thatcher, over 30 years later who kicked that off.

  40. Gravatar of Ashok Rao Ashok Rao
    9. April 2013 at 07:47

    You know, for a market monetarist, I’m surprised you use the term “neoliberal”… Which has a more… sinister (?) conversation.

  41. Gravatar of Ashok Rao Ashok Rao
    9. April 2013 at 08:08

    Scott you say:”Obama is opposed to serious financial reform (reducing moral hazard) because he has a visceral opposition to risk-taking. He wants everyone to be “protected” which is precisely how we got into this mess. ”

    That was my point, his supporters hoped he would have the courage to run his administration the way he did his first campaign.

  42. Gravatar of RebelEconomist RebelEconomist
    9. April 2013 at 08:21

    “BTW, You are completely wrong about inflation, which was 13.4% and rising rapidly when she took office in 1979, and peaked at 18% in the oil shock year of 1980, before falling.”

    Check the facts, Scott; Richard W is right (more or less). At the time that Mrs T took office, on the latest information, RPI inflation (then the standard UK measure) stood at 9.8% oya, and at 10.9% oya when she was ousted. It peaked at 21.9% oya in May 1980. Despite the image she liked to portray as a conviction politician, Mrs T was often quite cynical. In the election that brought her to power, she pledged to implement a highly inflationary public sector pay review, which partly explains the rise in inflation after she took office.

    In many ways, the key break in British economic policy occurred with Jim Callaghan’s speech to the Labour party conference in 1976 when he said (to audience disquiet) “We used to think that you could spend your way out of a recession, and increase employ­ment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists, and that in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of infla­tion into the economy, followed by a higher level of unemployment as the next step.”

  43. Gravatar of Richard W Richard W
    9. April 2013 at 09:31

    W. Peden

    http://www.global-rates.com/economic-indicators/inflation/consumer-prices/cpi/great-britain.aspx

    RPI was running around 2.5% in 1986, and was not far short of 11% late 1990. The point I was making is the great slayer of inflation does not stand up to scrutiny when it came back in the late 1980s. The governments and policymakers in the 1990s had a much better record, yet their success is attributed to the governments of the 1980s.

  44. Gravatar of ssumner ssumner
    9. April 2013 at 09:34

    Ashok, Only leftists think neoliberalism is sinister, it’s the philosophy that rescued Australia, Britain, NZ, Canada, Sweden, etc. I’m proud to be a neoliberal.

    I don’t follow your comment about Obama, I’m saying if he did what he truly believed he’d be much worse.

    Rebeleconomist, Here’s the data.

    http://safalra.com/other/historical-uk-inflation-price-conversion/

    Now please don’t insult my intelligence by telling me that the inflation for 1979 was Thatcher’s fault. That doesn’t even pass the laugh test.

    As far as Callahan, just look at what he did over the three years after 1976, an unmitigated disaster. By 1979 the budget deficit was running nearly 10% of GDP and inflation was rising rapidly–that’s insane.

  45. Gravatar of Ashok Rao Ashok Rao
    9. April 2013 at 09:40

    “Ashok, Only leftists think neoliberalism is sinister, it’s the philosophy that rescued Australia, Britain, NZ, Canada, Sweden, etc. I’m proud to be a neoliberal.”

    Wouldn’t that just be “liberal” ? I thought “neoliberal” was a term coined by leftists for a sinister effect. This is definitely the sense the very, very, anti-leftist/free-market Panagariya/Bhagwati give in their work. Wikipedia says , “The term neoliberal is […] is used mainly by those who are critical of legislative market reform.”

    All I’m saying about Obama is that my initial comment had more to do with popular expectations rather than what he may or may not believe. And people expected him to have the courage for real financial sector reform (I think he chickened out with his econ policy team, and it was downhill from there).

  46. Gravatar of Bill Ellis Bill Ellis
    9. April 2013 at 09:54

    History has a cyclical nature.

    No matter who holds sway, the left or the right, their best efforts will someday be overcome by the unintended consequences of those same actions.

    The left and the right have evolved to counteract the unintended consequences of the other.

    What works to overcome the prevailing unintended consequences, will eventually be burdened by unintended consequences… Repeat… Repeat… Repeat…

    So it is funny to hear people arguing that Thatcher had the right approach in 1979, (the high point of left wing unintended consequences) and act as if the same approach is right for today…(Still stuck at the high point of right wing unintended consequences since 2007. )

    If you don’t get this… You are an nothing but an ideologue.

  47. Gravatar of RebelEconomist RebelEconomist
    9. April 2013 at 10:52

    Here’s the OFFICIAL data, Scott: http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/may-2012/cpi-and-rpi-detailed-reference-tables.xls

    Callaghan, or Denis Healey to be more precise, were beginning to accept some of the monetarist analysis, and tried to hold the line against the unions in 1978-9 (the “winter of discontent”). The resulting strike-driven chaos convinced the British public (including me) that it was time to elect someone more confrontational.

    The idea that Mrs T’s election pledge to accept the recommendations of the Clegg commission on public sector pay contributed to the inflation in her first year in power may not pass your laugh test, Scott, but it is acknowledged in her obituary in the Daily Torygraph: http://www.telegraph.co.uk/news/politics/margaret-thatcher/8094038/Margaret-Thatcher-obituary-From-Opposition-to-Government-and-battles-over-the-economy.html “A combination of the previous government’s monetary relaxation, the Clegg Commission’s boost to public sector wage levels and Budget measures sharply increased the rates of Value Added Tax (VAT) and sent the Retail Price Index (RPI) soaring”.

  48. Gravatar of W. Peden W. Peden
    9. April 2013 at 14:46

    RebelEconomist,

    NGDP is a better guide to what’s going on with inflation than either RPI or CPI. RPI, for example, would tell you that 1978 was a less inflationary time than 1990!

  49. Gravatar of W. Peden W. Peden
    9. April 2013 at 14:53

    And the idea that Healey was “accepting some of the monetarist analysis” goes against what he says in his autobiography. The £M3 targets were partly a sop for the markets, partly some sugar for the IMF, and mainly an excuse to get leverage for the Treasury against people like Tony Benn and Peter Shore.

    That the Winter of Discontent was a breakdown of an incomes policy suggests that Callaghan and Healey really didn’t have much time for monetarism.

    Most importantly, the Clegg Commission simply got the labour cost pressures out of the way quickly. There was no way that the labour market could be suppressed forever: the Winter of Discontent proved that even the Labour party couldn’t shaft the workers indefinitely.

  50. Gravatar of Benny Lava Benny Lava
    9. April 2013 at 15:45

    Ah yes, the 80s! I can sum up Thatcher in 3 words: North Sea oil.

    And those same 3 words can sum up so much of Britain’s malaise now. Oh if only they had Thatcher again to make the oil flow!

  51. Gravatar of Richard W Richard W
    9. April 2013 at 19:17

    This working paper from the St. Louis Fed is excellent on the history and evolution of UK fiscal and monetary policy.

    http://research.stlouisfed.org/wp/2005/2005-020.pdf

  52. Gravatar of ssumner ssumner
    10. April 2013 at 06:50

    Rebeleconomist, You said;

    “A combination of the previous government’s monetary relaxation,”

    That’s all you need to know.

    Ashok, Anything the leftists think is “sinister” (in terms of economics) is likely to appeal to me.

  53. Gravatar of Ashok Rao Ashok Rao
    10. April 2013 at 09:45

    Yes, I know you accept the principles behind neoliberalism. I just always thought the term was pejorative in nature.

  54. Gravatar of Saturos Saturos
    11. April 2013 at 02:56

    Ashok, only if you think there’s something sinster about 19th century liberalism, or the whole “liberty” thing (which I increasingly disregard, at least in my private evaluations, it may be good for persuading others)

    Scott, this one also disagrees with Bruce: http://www.cityam.com/article/five-myths-about-margaret-thatcher-must-be-refuted

  55. Gravatar of Saturos Saturos
    11. April 2013 at 02:57

    Fareed Zakaria asks whether Thatcherism would be good today: http://www.washingtonpost.com/opinions/fareed-zakaria-could-margaret-thatchers-reforms-work-in-2013/2013/04/10/68e58eb4-a20b-11e2-82bc-511538ae90a4_story.html

    And Morrissey has an opinion about this too: http://www.nme.com/news/morrissey/69650

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