I come to bury Thatcher, not to praise her (10 April, 2103)

I come to bury Caesar, not to praise him.

The evil that men do lives after them,

The good if of't interred with their bones;

So let it be with Caesar

Act 3, Scene ii

Picture from the WSJ

Having sworn not to engage in the deluge of ill-informed, reactionary hagiography/vitriol following Thatcher’s death, here I am. Perhaps it is not right to argue that this process distracts from the pursuit of the real criminal (Blair) but I suppose that can wait. As it is, the best thing I have read about Thatcher was written at the time not of her death but her political denouement. I strongly recommend Hugo Young’s article to anyone not yet to have read it.

Taking that article as a starting point (Young raises 5 critical points: The Falklands War, Economic Policy, The Battle with the Unions, Europe and the Poll Tax), we can probably all agree that her stance on Europe and the Poll Tax was simply wrong; this was at the tale end of her administration where by few I think would contest that clarity of purpose had been replaced by a clumsy intransigence that looked a lot like hubris. We could argue the toss here but there is more to be gained by looking elsewhere. Likewise the Falklands War; I cannot add to Young’s assessment (‘a prime example of ignorance lending pellucid clarity to her judgement’) and again much has been written about it elsewhere.

You could say that much has been written about the unions and economic policy but there remain a couple of points to make here. The first is to stress the extent of Britain’s malaise at the turn of the seventies. Britain’s manufacturing and industrial base was in an appalling shape. A lack of investment, innovation and entrepreneurial quality meant that Britain was profoundly uncompetitive on the international and even domestic scene. Compared to Europe and Japan, which thanks in part to the war had rebuilt their industrial base pretty much from scratch, Britain’s wheezy and dated factories looked pretty much obsolete. Many of the commentators lining up to traduce Thatcher and her legacy have never heard of British Leyland, never mind sat in one of their ‘cars’ on a cold morning, hoping that it might start and wondering if the rain was supposed to come in through that gap in the bodywork. Likewise, the idea that we could mine our way to economic efficiency is no less barking. Even if the depletion in reserves was exaggerated for effect (and it was) coal mining in the UK was becoming increasingly economically unsustainable (again, a failure to invest in new facilities can be identified as a contributory factor but blame for this can hardly be put on Thatcher’s plate). In short, we were the Trotters of the international market, selling shoddy goods at prices propped up by subsidies both home and abroad; shorter, we were buggered.

Even as our industrial and manufacturing capacity spiralled down the cludgie the unions grew ever stronger. Whether this is correlation or concurrence is moot – one was getting weaker and the other more powerful, more belligerent and less democratic. I remember trying to explain to a Lower Sixth politics class what it was like to be in a country crippled by strikes and it felt as though I was describing a foreign country – the baffled looks on the faces of the students certainly suggested as much. The miners were striking, forcing power stations to close and causing blackouts up and down the country; refuge collectors were on strike causing rubbish to pile up on the streets; grave diggers were striking causing bodies to pile up in morgues and teachers were striking causing endless joy for kids (this being pre-McCann Britain, some parents went to work anyway, unless they were teachers, grave diggers, refuse collectors or miners.) And every fifteen minutes there was a walkout from Longbridge, Cowley or Linwood causing the world to give a sigh of relief as it meant one fewer Austin, British Leyland or Chrysler to deface the streets. Strikes would be called without a vote and for any reason dictated by the leaders (strikes were called in complaint to the food served in the canteen, an extreme but memorable example) and the well being of the workers and the businesses in which they worked came distant second to the agenda – personal or political – of the union leaders.

This was not new. The convergence of this twain had been in the post since the birth of the post-war consensus. The implementation of social democracy with managed economies had seemed a sensible way to deal with the horrific human, social and economic costs of two global conflicts but by patching together what was already there the fundamental inefficiencies of the model were papered over. Yesterday on Radio Two, Douglas Hurd and Frank Field – two uncommonly eloquent and thoughtful commentators who had the inestimable benefit of having been there – reached an agreement as elegant as it had initially looked unlikely: that politicians and union leaders had for a generation ducked the critical question of how we were going to sort this out. Thatcher did not duck that question and she did not blink as the protests and anger rose. The key point amongst all this is that Thatcher did not destroy the mines, or the car business or anything else in our manufacturing base: she did what was necessary and put it out of everyone’s misery. The death of British industrial capacity was a long, painful and drawn out affair that Thatcher at least did the nicety of bringing to a clear conclusion.

Aye, there’s the rub. There was an ending, to be sure, but as the noted wordsmiths Semisonic wrote, ‘Every new beginning comes from some other beginning’s end.’ The problem was that there was no new beginning.

Someone else on that radio programm yesterday was banging on about the selling of council houses and how it had destroyed communities and now there were no more council houses to give anyone. Utter bollocks. The selling of council houses gave people a dignity that living in state sponsored hovels denied them; it gave them cause to begin, in their effort to make these places habitable, an investment spree that the government simply couldn’t afford, generating an economic stimulus to go with the (modest) windfall generated by their sale. Selling council houses was a wonderful idea that regenerated run-down areas across the country and was neither a problem nor an error; what was a problem was failing to build more and this is why we have no council houses to offer anyone.

The problem with Thatcherism is that it correctly diagnosed the problem and the immediate surgery; what it got wrong was the rehabilitation. British industry and the unions needed to be sorted out but trusting the market to rebuild everything in the nation’s interest was wrong.

Democracy and capitalism both share the fatal flaw that they operate exclusively in the short term; for democracy the short term is the electoral cycle, for capitalists it is until their performance is next assessed. Most fund-managers are assessed on their ability to out-perform the market; some are assessed annually, some every six months, some every economic quarter. In other words, if a stock is underperforming on a three monthly count they will dump it. Critically, few, if any, fund-managers are assessed on returns measured over years but this is how long it takes to build a business. Then there is the argument about whether certain industries should be making a profit at all – is it right to profit from the distribution of a basic need like water? But I digress. Capitalism is all about shareholder interest and this necessarily means that industries look to the shareholders to judge how they are doing. I now hand over to Ha-Joon Chang ….

Shareholders may be the owners of corporations but, as the most mobile of the ‘stakeholders’, they often care the least about the long-term future of the company (unless they are so big that they cannot really sell their shares without seriously disrupting the business). Consequently, shareholders, especially but not exclusively the smaller ones, prefer strategies that maximise short-term profits, usually at the cost of long-term investments, and maximise the dividends from those profits, which further weakens the long term prospects of the company by reducing the amount of retained profit that can be used for re-investment. Running the company for the shareholders often reduces its long-term growth potential. (23 Things They Don’t Tell You About Capitalism – an excellent read.)

What is regrettable in an individual business is calamitous when repeated across an economy; it was inappropriate then and it remains inappropriate now. Like anyone in the first blushes of a crush, the obvious flaws of capitalism were overlooked in favour of the dynamism and energy they brought to the economic short term – and after the hell of the seventies you can see why that might have happened. The problem was not the surgery but the remedial care; more investment should have been undertaken by the state because only the state can invest for the economic medium or long term; of course, they are at prey to the democratic cycle and so the returns had better be evident within the next four years or they can look forward to a slaughtering at the polls … oh, hang on. This never happened because no one wants to lose an election and the story is for Thatcher as it was for Blair and it is for the clowns now currently at the controls. Rather than invest in long term sound economic policy, based upon the state’s role as the most cost effective borrower and the only entity capable of looking beyond the next six months, the market was/is entrusted to deliver products in which it has no interest, with the inevitable results.

So in short, if you’re going to have a bash at Thatcherism (a big enough target – leave the person out of it) make sure you get it right. Thatcherism was an entirely necessary economic policy in its treatment of the economy and the unions; its failure was failing to prepare properly for what came after. No small fault, of course, but at the same time this is something of which almost every politician of every stripe is guilty.

There is so much more to say – her suspect support of some very unpleasant foreign dictators and the growth of a large and unaccountable state disciplinary mechanism for a start – but this blog is long enough already. Let us leave Thatcher where she lies, a politician of courage and conviction but as flawed as any of us, and start finding a way to drag the British economy out of the short-termist purgatory she created and Blair exacerbated. And if anyone fancies asking which of Blair or Thatcher was worse, bring it on.