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Thatcherism after Blair

June 27th, 2007

While there will doubtless be plenty of discussion of Blair’s contribution on his departure, it might be more useful to take a step further back and re-evaluate Thatcher. When Blair took office, he was generally seen as offering Thatcherism with a human face. Thatcher herself was generally seen,as a successful (counter-) revolutionary and aspirants to the Tory leadership were still competing for her mantle.

Ten years later, the picture is quite different, superficially at least. Brown seems much more Old Labour than Blair, and Cameron is eager to be seen as anything but Thatcherite.

That’s not to say Thatcherism is politically defunct. Most of the changes implemented by Thatcher (at least up to the time of the poll tax fiasco) remain in place. The big public utilities remain privatised, unions have never really recovered, the rich are a lot richer and so on. Still her term in office now seems to be thought of by both sides of politics, not as a a turning point, but as a period of unpleasant, though probably necessary, shock therapy, best passed over in silence.

Privatisation is a prime example. As it’s turned out, the difference between a commercially sensible public monopoly and a well-regulated private monopoly is so modest as to suggest that this should never have been the central ideological battleground it seemed to be for most of the 20th century. While I think there’s a good case for renationalisation in a number of industries, it will clearly take a Railtrack-scale fiasco for this to happen. On the other hand, interest in further privatisation has waned drastically, and the problems of PFI/PPP schemes seem to be ever more widely appreciated.

In other respects, though, the battle over the size and role of the state seems to have gone fairly conclusively to the social democrats. The central institutions of the social-democratic settlement, such as the NHS, public education, and redistributive transfer payments are not only still in place but are growing in importance. It seems far more likely that the US will implement socialized medicine (at least in the form of universal public insurance) than that the UK will abandon it.

All of this is a view from a long way off. My view is based on the refracted versions of Thatcherism that reached Oceania, and were implemented by Labo(u)r governments in the 1980s and 1990s. In some respects, this was a necessary response to the times. Demands on the postwar welfare state had outrun state capacity, and a combination of retrenchment and refurbishment was inevitable. Since the political right was correctly pointing this out at a time when the left was still recovering from the impossibilist fantasies of the 1960s, it was probably inevitable that the adjustment would come with some of the ideological baggage of Thatcherism.

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  1. mugwump
    June 28th, 2007 at 01:16 | #1

    Privatisation is a prime example. As it’s turned out, the difference between a commercially sensible public monopoly and a well-regulated private monopoly is so modest as to suggest that this should never have been the central ideological battleground it seemed to be for most of the 20th century.

    That’s rewriting history if ever I saw it.

    The “central ideological battleground” was between inefficient, union-controlled, commercially hopeless public monopolies and competitive private markets. British Steel, British Coal, etc.

    The Left’s policies were a resounding failure. Competitive private markets have proved far more efficient at raising the welfare of all.

    Sure, there are some natural monopolies where the difference between public and private is negligible, but they certainly weren’t the defining cases of the ideological battle.

  2. jquiggin
    June 28th, 2007 at 06:24 | #2

    Umm, no. British Coal wasn’t privatised until 1994, well after Thatcher had gone, and it was pretty much shut down by then (even more so now). British Steel was privatised in 1988, and is now an unimportant subsidiary of an Indian firm. The issues raised here were those of how to deal with declining industries, not public ownership vs markets.

    The big deal in the latter case was the privatisation, at knock-down prices, of the highly profitable British Telecom in 1984. As I noted, it’s still a regulated near-monopoly in fixed-line telecomms 20+ years later. British taxpayers got the worst of all raw deals on this one.

  3. gandhi
    June 28th, 2007 at 07:35 | #3

    I think the ideological inheritance from Thatcherism has dwarfed Blair’s fiscal mimicry. I doubt we would have had the Iraq War if not for Thatcher.

    Remember how Thatcher was polling in the gutter until the Falklands War came along. Being a “war president” (or PM, in this case) was what gave her tenure legs. As The Iron Lady famously declared “The lady’s not for turning” – and from that moment on, no major Western politician has even been prepared to acknowledge a mistake. The spin doctors who tutor Blair, Bush and Howard have never deviated from this model.

  4. June 28th, 2007 at 07:51 | #4

    since social democracy has no visible connection to democracy, could we just call it social paternalism and enjoy whatever benefits spring from linking words and reality?

  5. June 28th, 2007 at 09:34 | #5

    Privatisation allowed a rational and honest adjustment process for industries undergoing (or in need of) structural change. The problem with nationalised industries is that they simply don’t make the hard adjustment decisions until late into the game. Thatcher in fact represents the painful process of late game adjustment. Of course publicly owned businesses are better at the adjustment game if they are surrounded by private sector role models. So in this sence the imperative for further privatisation declines as the targets become smaller in number and are less in need of structural reform.

    Disaster and failure in the private sector does not warrant nationalisation. It warrants adjustment. And the pain of failure provides the necessary all round motivation for change.

    Thatcher was heroic because she took necessary measures in the face of furious opposition. She was no fair weather sailor. However her ilk would not even have been necessary if businesses had remained private, markets had remained relatively free, and tax rates had not reached the ridiculous and counter productive 90% levels.

    Having said all that I do agree that the state has grown in line with the desires of social democrats. In real per capita terms the Howard government now spends at least 35% more than the Keating government. And the situation in the UK is even worse. Rather than retreating in the face of private sector success the state has used it as a crutch to advance itself.

  6. June 28th, 2007 at 11:02 | #6

    I’ve got something of a different take, John:

    http://larvatusprodeo.net/2007/06/28/thatcherism-after-blair/

  7. Ernestine Gross
    June 28th, 2007 at 14:52 | #7

    On privatisation, I tend to agree with JQ. There is no simple ‘for or against’ stance unless one wishes to be dogmatic.

    There is the sentence ‘greed is good’, which I believe belongs to ‘Thatcherism’.

    There is indeed a sense in which ‘greed is good’ in ‘free market economics’. The assumption of ‘non-satiation’ (‘greed is good’) makes it much easier for a theoretician to prove market clearing in a theoretical model of a ‘competitive private ownership economy’where commodities are the only objects of choice. However, in these models it is assumed that individuals take their endowments as given – rent seeking is excluded and so are strategic games of corporate managers.

    I should think that a straightforward insight from these theoretical models where ‘greed is good’, in the above mentioned sense, is that everybody is frustrated throughout their lives because they can’t ever have enough – a state which I would find difficult to reconcile with any notion of ‘happiness’.

    Another insight which follows is that the dictum ‘greed is good’ is not consistent with what is now called ‘sustainable development’ (the assumption of ‘free disposal’ is given up and the assumption of incomplete markets is empirically appropriate).

    Further, ‘greed is good’ fails to do the trick even for proving market clearing in theoretical models of economies with a sequence of commodity and share markets.

    I’d love to know whether Frank Hahn (Cambridge) had as much influence on the public as v. Hayek and Friedman.

    Empirically, George Soros very swiftly and smartly presented the Thatcherites with the bill for advocating ‘greed is good’.

  8. June 28th, 2007 at 17:48 | #8

    George Soros made the UK government choose between it’s interest rate target and it’s exchange rate target. Nothing more nothing less. I think they should have chosen their exchange rate target but that is another matter.

    The “greed is good” phrase was made famous by the movie “Wall Street” when the central character Gordon Geko said:-

    The point is, ladies and gentleman, that greed — for lack of a better word — is good.

    Greed is right.

    Greed works.

    Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.

    Greed, in all of its forms — greed for life, for money, for love, knowledge — has marked the upward surge of mankind.

    And greed — you mark my words — will not only save Teldar Paper, but that other malfunctioning corporation called the USA.

  9. rog
    June 28th, 2007 at 20:32 | #9

    Thatcher’s phrase, “this lady is not for turning”, was clearly stating that she would call any bluff and not compromise on principle. Whether you agree or disagree with her principle is another matter; without her defiant stance economically the UK would have gone down the gurgler.

    Tony Blair followed this advice, when asking about Kosovo she advised “ignore the carping, stay resolute and get the job done.”

    Blair has been credited with finishing Thatchers work http://clublet.com/why?HistoriansDisagree

  10. mugwump
    June 30th, 2007 at 10:42 | #10

    Umm, no. British Coal wasn’t privatised until 1994, well after Thatcher had gone, and it was pretty much shut down by then (even more so now). British Steel was privatised in 1988, and is now an unimportant subsidiary of an Indian firm. The issues raised here were those of how to deal with declining industries, not public ownership vs markets.

    Had the coal industry never been nationalized it would have died its own, much more rapid death at far less cost to the British taxpayer. That may also have been true of the Steel industry, although it may have managed to adapt into different markets had it not been under public (read union and bureaucrat) control.

    The history of Nationalization of industries is more-or-less one of complete disaster for the average taxpayer (although not for unions and bureaucrats). The private vs public argument was comprehensively lost by the Left. The evidence is obvious: there are so few remaining nationalized industries.

    That said, I completely agree that the state has managed to grow disproportionately without nationalization. Hayek was right.

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