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What a strange column on Thatcherism by Paul Krugman.
1) Krugman acknowledges that 1970s Britain was a country with “huge economic problems.”
2) Krugman also acknowledges that there was a “huge turnaround.”
3) But Krugman is hesitant to credit Margaret Thatcher’s economic policies because “the big improvement in British performance doesn’t really show in the data until the mid-1990s. Does she get credit for a reward so long delayed?”
Again, let’s compare UK economic performance to that of France. In 1961, UK real per capita GDP was 104% of France’s. By 1978, UK real per capita GDP had fallen to just 81% of France’s.
Quite a two-decade decline.
Then Thatcher arrives in May 1979 as the UK decides to embrace free-market economics. France stays the statist course.
As the above chart shows, the UK almost immediately begins gaining ground on France. By 1990, UK real per capita GDP is 87% of France’s. Then we have another seven years of Conservative government, and by 1997 UK real per capita GDP is 94% of France’s. But here is Krugman’s conclusion:
Anyway, I guess there is a case that the Thatcher changes in taxes, labor regulation, etc. created a more flexible economy, which made the good years under Blair possible. But it’s an awfully long lag.
Tony Blair didn’t become prime minister until May 1997! By that time, the UK had already reversed most of its two-decade decline vs. more statist France.
I think as that last quote reveals, Krugman is fully aware that 1970s Britain was overtaxed and overregulated and overunionized — and that Thatcherism was a necessary if imperfect remedy. But in today’s hyperpartisan world, an explicit admission would hurt his brand. (It might also mean conceding Reaganomics was successful.) Too bad for Krugman and the liberal readers of The New York Times.
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