“We are all Thatcherites now”

Fareed Zakaria gives an overview of how the recently-deceased Margaret Thatcher changed the world’s economies:

Consider the world in 1979, when Thatcher came to power. The average Briton’s life was a series of interactions with government: Telephone, gas, electricity and water service, ports, trains and airlines were all owned and run by the state, as were steel companies and even Jaguar and Rolls-Royce. In almost all cases, this led to inefficiency and sclerosis. It took months to get a home telephone line installed. Marginal tax rates were ferociously high, reaching up to 83 percent.

Britain was not unusual. In most European countries, the state had as large a role atop the “commanding heights” of the economy. And while the United States was always far more free-market-oriented, even U.S. tax rates in the 1970s were in the range of 70 percent, and government tightly regulated telecommunications, transportation and finance. Throughout the Western world, the consensus was that large-scale state intervention was needed to achieve growth and prosperity. That’s why a conservative Republican president, Richard Nixon, said in 1971, “I am now a Keynesian in economics.” (The phrase often misattributed to him, “We are all Keynesians now,” was actually written by the libertarian economist Milton Friedman, in Time magazine in 1965.)

Today’s world is completely different. Thirty years of privatization and deregulation have swept through industries as varied as telecommunications, airlines and finance. In most sectors, it is hard to find a major state-owned company in the Western world. Thatcher privatized 50 companies, and governments in Europe, Asia, Latin America and Africa followed the same course. Taxes have been slashed everywhere. The top marginal tax rate in India in 1974 was 97.5 percent. (Really.) Today, the top rate is 40 percent. In the United States in 1977, taxes on capital gains and dividends were 39.9 percent; in 2012, the rate was 15 percent. In 1977, corporate U.S. tax rates were close to 50 percent; now they are 35 percent, and most companies pay a much lower rate. These changes have taken place under conservative, liberal and even socialist governments. As Peter Mandelson, architect of the Labor Party’s rise in the 1990s, declared, “We are all Thatcherites now.”

Note that Thatcher rolled back the regulatory state but not the welfare state. During her 11-year reign of radical free markets, the state’s role in the overall economy grew. She never spoke out against Britain’s nationalized health care. While cutting some taxes she substantially raised others (on consumption), ensuring that deficits didn’t grow too large.

Thatcher’s ideas resonated because they were an effective antidote to the problems of the times. In the 1970s, the Western world staggered under the weight of oil shocks, rising wages, rocketing inflation, slowing productivity and growth, labor unrest, high taxes and sclerotic state-owned companies. These are not the problems we face now.

via Fareed Zakaria: Could Margaret Thatcher’s reforms work in 2013? – The Washington Post.

Zakaria goes on to argue that today’s economic problems are very different and that the policies of Margaret Thatcher–and, I might add, Ronald Reagan–do not really address them.  Still. . . .

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • Grace

     ‏

    Fareed Zakaria was born in 1964, as such, his views are not the same as those who lived ‘of age in the ‘period of time when Barnoness Thatcher was in office. Yes, I am aware history is history, however choosing Zakaria as an individual, who might shine light on that era, when there are so many, who KNEW Thatcher is rather ridiculous.

    “Zakaria goes on to argue that today’s economic problems are very different and that the policies of Margaret Thatcher–and, I might add, Ronald Reagan–do not really address them. “

    The economic problems we suffer now, in the United States, the full bloom of socialism has once again born its pollen, but instead of England, it’s right here in the U.S.A., as the country looks on, and those who live off other individuals hard work, wait for FREE deliverance from their plight. Ronald Reagan and Margaret Thatcher would be appalled.

     ‏

  • DonS

    The 80′s were certainly a golden time with both the visionary leadership of Thatcher in England and Reagan here in the U.S. — the populations of each country never had a better sense that government is rightly a tool of the people, not the master of the people, and functions best when limited to its proper role, restricting the liberty of the people as little as possible. However, Zakaria, who is no conservative, very much overstates the case, both as to how things were before, and as to the current state of affairs. In particular:

    1)

    That’s why a conservative Republican president, Richard Nixon, said in 1971, “I am now a Keynesian in economics.”

    Please. Nixon was never a conservative.

    2)

    Taxes have been slashed everywhere. The top marginal tax rate in India in 1974 was 97.5 percent. (Really.) Today, the top rate is 40 percent. In the United States in 1977, taxes on capital gains and dividends were 39.9 percent; in 2012, the rate was 15 percent. In 1977, corporate U.S. tax rates were close to 50 percent; now they are 35 percent, and most companies pay a much lower rate. These changes have taken place under conservative, liberal and even socialist governments. As Peter Mandelson, architect of the Labor Party’s rise in the 1990s, declared, “We are all Thatcherites now.”

    Nonsense. Marginal tax rates have been slashed. But, those absurdly high rates (70% in the U.S., 97% in India, etc.) only applied at extraordinarily high levels of taxable income, which almost no one fell under. In the pre-Reagan era, many more expenses were fully deductible, with no thresholds or phase-outs. For example, everyone could fully deduct all of their credit card interest, their medical expenses, their miscellaneous deductions, etc. Many more tax sheltering maneuvers were legally available for the very rich. In many respects, the lower rates applicable today hit harder than the higher rates in prior eras because of the restrictions in available deductions, phase-outs and the like. In overall terms, government tax collections in the developed world are not substantially lower than they were, as a percentage of GDP, in the 1970′s. And government spending, of course, is much higher, creating an insidious and evil tax on our kids.

    3) As for the issue of privatization, unfortunately, we have been actively engaged in re-regulation for the past couple of decades. The structure has changed, in some respects, as the buzzword now is “public-private partnerships”. But that just means that big business is complicit with government in regulating the small business person out of existence. Not necessarily a better scenario than before.

    Unfortunately, then, we must conclude that most of what Thatcher and Reagan did has been subsequently undone by the nanny handwringers in charge of government today.

  • Grace

    DonS @ 2

    “However, Zakaria, who is no conservative, very much overstates the case, both as to how things were before, and as to the current state of affairs.”

    The man obviously doesn’t have his facts correct, and as you stated “is no conservative” – we have a ‘SWARM in this day of individuals just like him, whose only claim to fame are the univiersities they attended. In Zakaria’s case it is Yale and Harvard. And who else attended Harvard, but bows to socialism? Obama who attended Harvard, but has no published papers from the Law Review, of which he was president, OR, they are not released for the public to read.

    “Unfortunately, then, we must conclude that most of what Thatcher and Reagan did has been subsequently undone by the nanny handwringers in charge of government today.”

    Don, I don’t believe they are “handwringers” – they have an agenda, one in which has dismanteled our infrastructure, given a slide down the mountain with socialism driving the bus. It is ALL orchestrated!

  • John C

    For an antidote to Zakaria’s hagiography I recommend Russel Brand.
    http://www.guardian.co.uk/politics/2013/apr/09/russell-brand-margaret-thatcher

  • Grace

     ‏

    Regarding Fareed Zakaria, who wrote about Margaret Thatcher above:

    NewsBusters
    University of Oklahoma Touts Plagiarist Fareed Zakaria As Commencement Speaker
    By Matt Vespa | March 11, 2013 | 11:00

    “The University of Oklahoma, like every higher education institution in the country, is opposed to plagiarism. So why did the home of the Sooners invite admitted plagiarist Fareed Zakaria to deliver the class of 2013′s commencement address after the CNN anchor and Time plagiarism scandal?

    In a statement announcing Zakaria’s selection, University of Oklahoma President David Boren insisted that, “Fareed Zakaria is truly an educator…he uses his forum through the public media to educate a worldwide audience about the important issues we all confront and how we can work together to meet them.” Yes, he sure does, especially when he lifts other people’s work to convey his point of view.

    Last summer, Zakaria lifted material from Jill Lepore of the New Yorker in his column about gun control almost verbatim.</b. Here’s a paragraph from his Time piece:"

    http://newsbusters.org/blogs/matt-vespa/2013/03/11/university-oklahoma-touts-plagiarist-fareed-zakaria-commencement-speaker

    The rest of the article will enlighten many of you!


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