Monday, April 8, 2013

Thatcher’s Passing

Margaret Thatcher has passed away, and no doubt that is a tragedy for her family and friends.




But one can maintain a quiet respect without succumbing to the torrent of hyperbole and gushing propaganda about her economic policies that is already being unleashed by her supporters now she is no more.

While I am minded to write a longer post on Thatcherite economics, just one important metric will do for now: unemployment.

An honest economic verdict on Thatcher’s years is revealed starkly by these graphs of unemployment in the UK. The first is a long-run graph from 1870 to 1999, and the second a post-WWII graph from 1946 to 1999. The data come from Boyer and Hatton (2002). The first simply omits unemployment statistics from the two World Wars. Compare the graphs with the data in the Appendix below.

Remember that Thatcher was Prime Minister of the United Kingdom from 1979 to 1990.







They both paint a damning picture: unemployment under Thatcher was the second worst in modern British history, second only to the Great Depression. I hope we will hear all about this as the obituaries appear.

Appendix: UK Unemployment, 1971–1999
Year | Unemployment Rate
1971 | 3.4%
1972 | 3.7%
1973 | 2.6%
1974 | 2.6%
1975 | 4.1%
1976 | 5.6%
1977 | 5.7%
1978 | 5.6%
1979 | 5.2%
1980 | 6.7%
1981 | 10.2%
1982 | 11.9%
1983 | 13.0%
1984 | 14.1%
1985 | 14.5%
1986 | 14.8%
1987 | 13.3%
1988 | 10.7%
1989 | 8.3%
1990 | 7.7%

1991 | 10.6%
1992 | 12.7%
1993 | 13.4%
1994 | 12.2%
1995 | 10.8%
1996 | 9.8%
1997 | 7.4%
1998 | 6.3%
1999 | 5.8%
(Boyer and Hatton 2002: 667).
BIBLIOGRAPHY
Boyer, George R. and Timothy J. Hatton. 2002. “New Estimates of British Unemployment, 1870–1913,” The Journal of Economic History 62.3: 643–667.

19 comments:

  1. Yeah they will continue to ignore the basic facts.

    A good analysis is by Wynne Godley and Ken Coutts:

    The British Economy Under Mrs Thatcher, 1989 and The British Economy Under Mrs Thatcher - A Rejoinder, 1990.

    Not surprisingly Wynne Godley was predicted the huge rise in unemployment with very high accuracy much in advance. And he went on to predict the problems brought about by Thatcherism and the crisis we are in.

    Wynne Godley called her policies a "gigantic con trick"

    ReplyDelete
    Replies
    1. Jan: Thank you Ramanan!Another great piece of work from 'the Cassandra of the Fens'.!

      Delete
  2. I am not a huge fan of Margaret Thatcher either but I think you are giving a one sided view of the UK economy since Thatcher.

    In terms of GDP growth per capita the UK has outperformed most other economises since 1980 (see:http://www.themoneyillusion.com/?p=5164)

    and in terms of unemployment: the UK rate was only slightly above European average even in the 1980's and lower in the 1990s.

    Unemployment performance compared 1961-2004
    Annual averages UK Eurozone US
    1971-1980 3.80% 4.20% 6.20%
    1981-1990 9.60% 8.90% 6.80%
    1991-1995 9.30% 9.40% 6.60%
    1996-2000 6.50% 9.90% 4.60%
    (Sources: EU Commission 2002 (European Economy No 4 (annex table 3) and No. 5, annex table 28)

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    1. It is not much credit to her to say that UK unemployment was somewhat worse than the almost equally disgracefully bad European average in the neoliberal age.

      As for real GDP growth it slumped virtually everywhere after 1980, as compared with 1946-1980, once full employment was abandoned.

      Also, the so-called Thatcher boom (Lawson Boom) was mostly an asset boom arising from financial deregulation.

      Delete
    2. "It is not much credit to her to say that UK unemployment was somewhat worse than the almost equally disgracefully bad European average in the neoliberal age."

      Similarly, it's not a knock against her to say that unemployment grew under her administration. If the trend throughout Europe was increasing unemployment...

      And what neoliberal age are you talking about? Half of Europe was still communist pre-1990.

      "Also, the so-called Thatcher boom (Lawson Boom) was mostly an asset boom arising from financial deregulation."

      Booms don't arise from deregulation. They arise from inflation.

      Delete
    3. "And what neoliberal age are you talking about? Half of Europe was still communist pre-1990."

      I am talking of Western Europe.

      "Booms don't arise from deregulation. They arise from inflation."

      Booms do not arise from increased credit flows inducing more investment and consumption?

      And finally you sound like Major_Freedom, and I am guessing you probably are too.

      Delete
  3. Thatcher may not have had the best record on unemployment, but someone like her was definitely needed at the time. Britain's radical unions were running wild. The way I hear it, garbage was piling up in the streets. Im not someone who's opposed to moderate unions, but the UK's unions were JUST CRAZY.
    RIP Margaret Thatcher,
    P.S. And... she won the Falklands war against a filthy right wing junta/dictatorship.. :-) go... go britain!

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  4. Besides, Thatcher inherited 20% inflation. A recession was inevitable. Her policies, while far from perfect, got the UK to move ahead of France by some measures:

    http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

    ReplyDelete
    Replies
    1. Recession was not inevitable. The recession was induced by her incompetent monetarism.

      Delete
    2. Freshly Squeezed CynicApril 9, 2013 at 7:37 AM

      Inflation was 8% when Thatcher took office, having declined from a high of 25%. It increased to 18% during the 1981-3 recession, and spiked to 10% during the 1990 recession.

      But strangely, we never hear of the "Thatcher stagflation"...

      Delete
  5. Well maybe, but that's still a different story to what your charts alone implied.

    Plus: Economic growth in the UK was higher in the 1980's than in 1973-1980 period.

    (http://books.google.com/books?id=Z3WS_6x5PZcC&pg=PA23&lpg=PA23&dq=united+kingdom++gdp+growth+in+the+1970s+v+1980s&source=bl&ots=UimiuAuS83&sig=dqCCh_c07UREZjtgBLFxnj0u6O0&hl=en&sa=X&ei=CkdjUayxF4fNigKx24CQCQ&ved=0CGoQ6AEwBg#v=onepage&q=united%20kingdom%20%20gdp%20growth%20in%20the%201970s%20v%201980s&f=false)

    So an honest assessment of the UK economy in the 1980s should acknowledge that growth relative to the UKs recent past and growth compared to the UKs neighboring economies both improved.



    ReplyDelete
  6. Duh, there was an increase in unemployment! She sold off the state owned industries to those that knew the value of workers. And who paid them accordingly. Zero to those whose output did not bring value to company. Why else would unions be so mad at her?

    ReplyDelete
    Replies
    1. The major cause of unemployment was the severe monetarist induced recession from about 1980-1981.

      Delete
  7. Maybe this post would explain why there's so many mixed feelings about Thatcher's policies from UK natives that I have come across who claim that Thatcher made the lower middle class and the poor worse off with her neoliberal policies. These claims especially come from supporters of the Labour Party. I have also seen a lot of praise for her actions regarding the Falkland Islands, but plenty of negatives, especially with regards to South Africa, the poll tax, and the miner's strike/riots in the mid-1980s. Maybe you can fill me in on why Thatcher has such a mixed reputation later on.

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    1. If not for the Falklands war, she would have been thrown out of office.

      Patriotism the last refuge of the scoundrel and savour of unpopular governments.

      Delete
  8. Hey! Margaret Thatcher improved the UK's competitiveness!

    http://www.tradingeconomics.com/charts/united-kingdom-current-account-to-gdp.png?s=gbrca2gdp&d1=19800101&d2=20130430

    Just because it doesn't show up in the data doesn't mean we can't pretend that its true. After all, that's what monetarism is all about!

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  9. At least Thatcher was negative on the euro. Europeans would have been saved a lot of agony if they shared her view.

    “The European single currency is bound to fail, economically, politically and indeed socially, though the timing, occasion and full consequences are all necessarily still unclear.”

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    1. John S,

      I am pleased to say that I agree with you wholeheartedly in this comment. Indeed, Thatcher's Euroskepticism was a redeeming feature of her economic views. Even an old Labour social democrat like Tony Benn agreed with Thatcher on this point.

      To the extent that Thatcher fell partly because of Europhiles in the Tory party, she was treated unfairly.

      Her statement (made in 2002) looks prophetic.

      Delete
    2. Yes, this was a bipartisan issue.

      http://www.concertedaction.com/2012/11/06/nicholas-kaldor-on-european-political-union/

      I think that Benn was getting his Euroscepticism through his adviser, the Post-Keynesian economist Francis Cripps. Cripps, of course, published with the other famous early Post-Keynesian critic of the Eurozone, Wynne Godley:

      http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that

      P.S. Here's Godley on Thatcher:

      http://www.concertedaction.com/2013/04/08/margaret-thatchers-gigantic-con-trick/

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