18 April 2013

Lady Thatcher

I was on the street yesterday to see Baroness Thatcher’s funeral procession go by. She was only a politician, but respect is important, ritual is important, and getting in the way of the left imposing their own narrative is satisfying.

 As for her real legacy, it can be confusing. On one hand, many have pointed out that Thatcher’s achievement is that the controversial positions she introduced are now completely mainstream across the political spectrum. In terms of the broad political positions on the role of the state in the economy, Ed Miliband is to the right of Thatcher.

I read that, and nod sagely.

At the same time, a few others are pointing out that she never really made a difference. The state is bigger now than it was in 1979, and controls more of the economy. The leftist singularity grows closer. The social conservatism she occasionally made small efforts towards has been steamrollered over.

I read that, and nod sagely.

What were the achievements of Thatcher as Prime Minister? She broke the power of the Unions, replaced a largely state-run economy with free enterprise and competition, opened up international trade and reduced taxation.

It looks now as if all those things would have happened anyway. They happened across the world, enacted by right-wing parties and left-wing parties. The main cause was the decline of the economic importance of mass manufacturing. When the economy depended on factories, mines and the like, with armies of semi-skilled workers, the unions had substantial real power, and running the economy effectively consisted in large part in managing those armies of workers. The wartime economies morphed easily into command economies, all across Europe.

In the 1970s, automation gradually ate away at the “armies of workers” model. Economic success came less from better handling of a mass workforce and more from the innovations of the highly-skilled and from better management of capital. However, the political institutions did not reflect reality — the unions had real power, high top tax rates were an impediment to getting the best out of the most skilled, and tariffs were an obstacle to employing capital effectively. This state of affairs existed through the 1970s, causing the economic devastation that Thatcher is now credited with “saving” us from.

Across Europe, the cost overhang of the industry which was no longer productive but survived because of its political power became prohibitive, and resulted in a political conflict. Thatcher did not start the conflict; it had been going on for a decade under both Labour and Conservative governments. She won it, as Wilson, Heath and Callaghan had tried to do unsuccessfully. To the extent that she deserves credit for it, it is not for taking on the miners, steelworkers, etc., but for winning. But it is not clear that any of the alternative politicians that might have held the office of Prime Minister for the early eighties would necessarily have failed.

(In the USA, the greater efficiency of industry meant the erosion of manufacturing happened a bit later, and the much weaker political power of the manufacturing unions meant that happened much more gradually, rather than being a catastrophic event as it was in Britain.)

The need to develop new industries to replace the mass manufacturing required the deregulation and tax reform that happened in the 1980s. In the old economy, the expertise and capital to build industry could most easily be assembled by governments. For the new economy, they just couldn’t and governments had to compete to bring high-skilled people and capital to their territory.

So what look like the massive, enduring achievements of Thatcherism were really just the spirit of the times. There were other achievements though. Argentina might have been allowed to take over the Falklands with only a little fuss. While I think the defence of sovereignty was justified and right, I can’t honestly say it makes a big difference to me, now. The sale of council houses was a policy that need not have happened. I’m not sure whether that was a good thing or not — if the state is going to house the poor, it could be argued that owning and managing the housing is a more sensible approach than the current Housing Benefit mess, though there are arguments on both sides.

The centralisation of power away from the already quite weak local government bodies also seems to have been a global phenomenon. It was possibly an inevitable effect of the breakdown of the postwar consensus, under which it didn’t matter which party controlled a council because they all did the same thing anyway.

Finally, we have the end of the Cold War. The strong support for Reagan may have enabled him to push the USSR over the edge faster than otherwise, but I think it was doomed anyway.

 So the real enduring achievements of Thatcher are much smaller than generally supposed by supporters and enemies. Her undoubted strength of conviction may have caused the inevitable to have happened a couple of years sooner than would otherwise have been the case. This might have given Britain a better economic position relative to other countries, due to a head start. On the other hand, the conflicts that happened might have been less violent and destructive if they had been left a bit longer.

What is striking, particularly in comparison with the last ten years, is how competent the Thatcher government was. After all, if the things that governments do are more or less out of the control of particular politicians, all they actually control is whether the things are done well or badly, and, when set against Brown or Cameron, Thatcher and her government did a lot of new, difficult things with surprisingly few missteps.

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