I encourage you all to read this commentary from the London Daily Telegraph which looks back at the wisdom of Thatcherism-
key takeaway- In the 1980s the policies of Britain’s first female Prime Minister, which brought pain and unrest to
the UK, were called ‘Thatcherism’. Today, we would call such policies by a different name – ‘Austerity’.
Thatcher stayed the course, despite the obvious – but in her eyes, necessary – pain and turned the UK
around, setting the stage for the boom times of the 1990s.
Of course we all know how THEY ended.
We are about to find out whether the modern crop of politicians; from Athens to Madrid to Dublin and
Lisbon, all the way to Washington DC, have the stomach for the kind of fight that Thatcher faced in
on the Euro-Her autobiography records how she warned John Major, her euro-friendly chancellor
of the exchequer, that the single currency could not accommodate both industrial powerhouses
such as Germany and smaller countries such as Greece. Germany, forecast Thatcher, would be phobic
about inflation, while the euro would prove fatal to the poorer countries because it would “devastate
their inefficient economies”.
But Jim, what does this mean for us? We control our currency, we borrow in our currency, and we’re not tiny.
And “austerity” is useful when you have a problem that it cures (like the high inflation of the 1970s), but not when it isn’t (e.g., Japan’s lost decade, 1937 during the Depression, or the beginning of the Depression). And consider the starting point as well — England with “austerity”, still has National Health, and (I think) higher taxes and spending than we’ve ever had, excluding war spending.
And, further, we know that we’ve paid higher taxes in the past without harm to our economy; it grew just fine, over time. Why shouldn’t we work harder for more employment (and inflation) now, knowing that we have room to raise taxes and interest rates in the future if we overshoot? Right now, 5% inflation would be a good thing; by devaluing the dollar slightly, it will bring true housing prices more in line with their list prices, and help all homeowners with mortgages, whether they are underwater (they will either stop being underwater, or will be less underwater) and those who borrowed responsibly (they will owe a smaller fraction of their home’s value).
“Lady Thatcher-Here! Here!” Where have all the leaders gone??? Heads in the sand or as NJ Governor Chris Christie says “looking for an escape hatch”…want less of something? increase taxes – just ask Sen. Kerry where he bought his boat…
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