Anti-Thatcher karaoke won’t drag Britain out of its self-imposed economic stagnation

The British economy has barely grown in twenty years

Dr. Kristian Niemitz is the Editorial Director and Head of Political Economy at the Institue of Economic Affairs

I was at King’s College London, where I had a part-time job teaching economics, when the news of Margaret Thatcher’s death broke in April 2013. I remember how one of my colleagues, a sociology lecturer with standard trendy Guardianista opinions on everything, was in a jubilant mood, and kept crowing about it for days, playing the ‘Ding dong the witch is dead’ song on repeat. I don’t think it was her death per se that he was celebrating, he was celebrating the opportunity to signal his fashionable anti-Thatcherite credentials.

After listening to one of his sermons about how Thatcherism had destroyed the country, I asked him which specific Thatcher-era reforms he would reverse. Would he renationalise British Airways, British Telecom and Heathrow Airport? He thought about it. No, he said, the state is probably not great at running companies like that, and consumer choice and competition are actually desirable. Would he reopen the coalmines, then? God, no, he said. That would be ridiculous. We can’t run the country like an industrial history museum. Would he bring back exchange controls, with limits on foreign currency holdings? No, that would be silly. Why is it the government’s business if I want some dollars or euros? Would he bring back special immunities for trade unions when they engage in activities unrelated to their industry? No, he wouldn’t. Trade unions are a force for good, but they shouldn’t be above the law. Would he raise the top rate of income tax back up to 83%? No, that would be dumb. The tax system should be progressive and redistributive, but within reason. It should not erode work incentives.

And so on. Apart from some relatively minor trade union law (it was either secret ballots or the quorum for strike action), he could not identify any specific Thatcher-era reforms that he objected to. But he still hated the package.

Needless to say, after our conversation, he went back to playing ‘Ding dong, the witch is dead’, and slagging off ‘Thatcherism’ in the abstract. Leave me alone with your neoliberal nitpicking, Niemietz. Thatcherism means neoliberalism, which means capitalism, which means bad. All the cool and fashionable people know that.

I don’t want to pick on that one former colleague, who is hardly alone in this: this is the attitude of every other social media user in Britain today. I’m merely singling him out to make the following point:

This was in 2013. Given that the median age in Britain at the time was 39, most of the population would have had at least some memories of Thatcher as an actual Prime Minister rather than a vibe. Today, that share is down to around 40%, and it can only go one way. This will increase the vibe-ification of Thatcherism. Soon, only a few historians will be able to name an actual Thatcher-era reform; everyone else will only know that they’re socially expected to hate it.

Photo by Nick Page on Unsplash

As previously discussed (see here and here), Andy Burnham also likes to lean into the anti-Thatcherism vibe. Yesterday in his PM statement to the House of Commons, he said:

‘From the 1980s, this country took a series of wrong turns. […] [E]conomic power [was] privatised, the country deindustrialised, austerity followed […]

People […] see no hope if we continue on the same path, with a failed economic model which does not trickle down much […] and instead allows wealth to be extracted and siphoned out.’

This is pure vibes-based economics, though. The actual Thatcherism saw huge economic improvements, and there is a reason why sections of Andy Burnham’s party later made their peace with it. In 1990, real median household incomes were a third higher than they had been in 1979. In 1997, they were almost one and a half times the 1979 level.

The ‘explosion’ in poverty that we always hear about was an explosion in relative poverty, caused by unequal growth. Real incomes at the lower end of the distribution continued to grow at roughly the same rate as in the previous decades, but median income growth accelerated. In such a situation, people can ‘grow into poverty’: their income grows, but it is overtaken by the poverty line, which grows at a faster rate. If we use an absolute poverty line, we get a very different result. In 1979, a third of the population lived on less than $20 a day (in today’s prices). By 1990, that share had dropped to one fifth, and by 1997, one seventh.

Internationally, the Thatcher years saw an end of Britain’s relative decline, and a partial reversal of it. In the 1950s, 1960s and early 1970s, Britain experienced the slowest growth rate of any major economy, growing at only half the West German or the Austrian pace. The Thatcher reforms then turned Britain into one of the better performers, which it remained until the Great Financial Crisis.

Most Thatcher/Major-era privatisations were associated with considerable productivity gains, although in fairness, it is often difficult to establish whether privatisation was really the main cause of that, or whether some of it would have happened anyway. There are unsuccessful examples, but these are the ones where privatisation did not lead to the establishment of a competitive market, so this is very much in line with what ‘neoliberal’ economic theory would predict.

I have often criticised ‘Karaoke Thatcherism’, the tendency of free-marketeers of a certain generation to refight the economic battles of the 1980s. Karaoke anti-Thatcherism, though, is a lot worse still. Not only is it wrong as an account of economic history, it also undermines political accountability in the here and now. The British economy has barely grown in twenty years, and this is, at this stage, a failure of all the established major parties of today.

As we explain in our book The Great Stagnation: Why Britain Stopped Growing, the economic problems that Britain faces today are not a matter of ‘too much’ – or, for that matter, ‘too little’ – Thatcherism. They are largely orthogonal to the problems of the 1970s and 1980s, which makes a refighting of the economic culture wars of yesteryear worse than useless.