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Were Thatcher and Reagan Right After All? Not Likely.

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by Ben Cohen

This from the Times in London:

The fourth, and biggest, implication of a recession that ends now is that the
obituaries written last year for liberalism, for the 30 years of policy
domination by the ideas of Reagan and Thatcher, will prove premature. The
state has been back only as an emergency rescue service, albeit a vital one,
and governments in Europe and America will sell nationalised banks and other
assets at the first opportunity, and cut public spending wherever they can.
Financial regulation will be tighter at the end of this crisis than at the
start, but even Friedrich Hayek, Lady Thatcher’s guru, would not quibble
with that.

Indeed, I would venture a prediction: five or ten years hence, we will
conclude that the countries that recovered most strongly and durably from
the 2007-09 recession were those whose economies were the most flexible, the
most able to seek out new opportunities and to shift resources from dud old
sectors to new ones — which means more liberal countries, such as Britain
and America.

The writer, Bill Emmot was the former editor of the Economist (from 1993-2006). How on earth he managed to come up with this drivel is absolutely astonishing. Given the fact that his former magazine managed to spectacularly fail to predict the recent economic meltdown (and even issued an apology for getting it so wrong), Emmot should probably show a little humility when it comes to prediction.

To boot, the British and American models are not more 'liberal' economically speaking. They are just redistribute resources upwards rather than downwards. Emmot and his fellow neo liberals cannot seem to get their head around the fact that when the government bails out rich people, it is still socialism. His talk of the flexibility to 'shift resources from dud old sectors to new ones' comes directly from government intervention in the market. Banks won't be able to invest in anything unless the public continues to socialize their debt, and just because the decision making is in private hands, doesn't mean it has anything to do with free market capitalism. In a true 'free market' the banking system as we know it would be dead, and the banks non existent. But conveniently in the Anglo Saxon economies, the governments ensure that the risk taken by the private sector is socialized, while the profits remain in their hands. It's a win-win situation for the rich, and a lose-lose situation for everyone else.

The notion that the U.S and U.K economies will recover faster is also provably false. The more socialistic economies in Europe are riding out the recession far better than the 'liberal' economies precisely because the government didn't allow the excessive risk taking of the private sector, and has a structure in place to deal with unemployment and collapsing industry. The U.S and U.K economies have grown due to a heavy emphasis on financial services, and most of that growth was based on meaningless projections and speculation. We've cleaned up the mess and incurred an extraordinary debt to do so. If Emmot thinks this is to be applauded, then his notion of conservatism needs serious examination.