Pethokoukis

Is Paul Krugman seriously not going to give Thatcherism credit for the UK turnaround?

040913thatcherism

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.

13 thoughts on “Is Paul Krugman seriously not going to give Thatcherism credit for the UK turnaround?

  1. http://ow.ly/jTkN1 Your own chart shows the UK only overtook France after massive statist fiscal stimulus under Blair/Brown. A more balanced argument might ask why it is that France still has a GDP almost the same as UK with all its statist policies. Neither right nor left will engage with this obvious point. Two systems – one result.

    • The graph shows that under Conservative free market policies the wide gap between Britain and France began to steadily narrow as Statist France relatively stagnated and free market Britain relatively prospered.

      And you reduce that more than twenty years of superior economic performance to just the single moment when the lines crossed? That seems to be intellectually dishonest of you.

  2. Krugman concludes: if anyone tells you that Thatcher saved the British economy, you should ask why the results of that salvation took so very long to materialize.

    I wonder if Mr. Krugman has ever made that same observation about FDR?

  3. 1) Am I missing something? Does Krugman not see the almost steady rise starting around 1981 and continuing to about 1988?

    2) How much of the increase in the ratio of England/France is due to improvement in growth in England and how is due to a decline in growth in France? I mean that the Numerator (England) could be flat but the ration would increase if the Denominator (France) were shrinking.

  4. I struggle to take seriously the work of an “analyst” who believes that $38,000 is 10% greater than $36,000 (see here: http://www.aei-ideas.org/2013/04/how-margaret-thatcher-turned-around-great-britain-in-one-chart/). Leaving aside Mr Pethokoukis’s embarrassing struggles with basic numeracy, an account of UK economic performance in the 1980s which wholly ignores the impact of North Sea oil on UK economic growth really can’t be taken seriously.

    • So North Sea oil explains all! Downsizing and moving out of coal – a smart Thatcherite step also on the supply side – doesn’t?

      Everybody’s a cherry-picker when partisan pols are at stake.

  5. Krugman has long ago reached a caricaturish point where he is no longer worthy of being taken seriously. He regularly cedes NO respect or legitimacy to economists – and even fellow Nobel Prize winners are not spared! – who question the Keynesian line. They are all incompetent, corrupted or even mentally ill, by his telling.

    It is time we reciprocate. A brazen hack is a brazen hack, past reputation be damned.

  6. A relevant exercise is to “google” Paul Krugman lies….and Presto ! A litany of articles and a wealth of material is at your fingertips.

    • Dude, just … stop. That line is robust and coincides perfectly with Thatcher’s tenure.

      You’re not going to defend this Krugman’s “Well, did it REALLY have anything to do with Thatcherism?” hatchet job without looking just as foolish.

  7. one wonders how a Noble prize Wiiner Like Krugman can be so ignorant so often..oh wait a minute didn’t Jimmy O’Bama Carter..sorry I mean Barach Obama win a Nobel prize??

  8. Is there any way to obtain separate graphs for the City of London for that time period versus, say, Scotland or Yorkshire?

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