Republicans? Thatcher? Hayek? Keynes?

Alin Voicu

Andrew Roberts writes an excellent article (“Republicans and the Thatcher Legacy”) in Thursday’s paper (30 July 2011) on the power of advertising and on the marketplace of ideas. But Mitt Romney’s (or anyone else’s) case is not necessarily strengthened by assimilating with Thatcher in 1979 or with choosing Hayek over Keynes.

For truth in advertising, as it were, the author remarkably mentions that British unemployment took a 20 year circular and socially contentious route that doubled unemployment to arrive back at the original level—was it worth, then? (Verily, only eleven of those years belonged to Margaret Thatcher with the balance going to John Major.) The key driver may have lain within what the author terms the “ludicrously confiscatory taxation” of Keynesian nature whose structure was altered by the Conservative government. Notably, upon taking power two decades later, Tony Blair’s “dialogue with the British people” did not include hiking the the top income tax brackets established during Thatcher’s time. (www.telegraph.co.uk/news/uknews/1329713/Blair-vows-not-to-raise-tax-on-high-earners.html)

The distribution of British wealth was modified and that brings forth the an uncomfortable question for Romney’s approach: was it worth it? The GDP was already on a secular ascending path (very much unlike the context in which Romney would operate)—the highest GDP growth rates were actually achieved while Thatcher was the leader of the opposition (26%) in 1975, (www.ukpublicspending.co.uk/downchart_ukgs.php?year=2000_2010&state=UK&view=1&expand=&units=b&fy=2010&chart=&bar=0&stack=1&size=m&color=c&title=UK%20Gross%20Domestic%20Product) Subsequently, and further weakening Romney’s case, growth rates declined by a factor of three between 1979 and 1998—when a new “social malaise” took over again, presumably.

At the end of that era and during a time of economic recovery (!), Tony Blair took advantage of the dismissive attitude toward society characteristic of Austrian economics and exemplified by Thatcher’s comment in a Douglas Keay interview in 1987: “Who is society? There is no such thing!”–and handily defeated the Conservatives. With similar unemployment levels, it was social issues like those surrounding unpopular privatizations such as that of the rail services that led British voters to elect Labour. Also weakening Romney’s case is the fact that the current UK government, though led by the Conservative David Cameron, aims for a break with Thatcher’s legacy and calls explicitely for a “big society” to empower British people—a society in which economics is treated as a *social* science, bypassing the artificial choice between being Keynesian or Austrian.

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