Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why Paul Krugman is Wrong About Margaret Thatcher

Politics / Economic Theory Apr 12, 2013 - 12:35 PM GMT

By: Money_Morning

Politics

As the top Keynesian gadfly, Paul Krugman's recent attack on Margaret Thatcher wasn't very surprising.

In a blog post on the very day she passed, he questioned whether or not Margaret Thatcher had actually made any difference to the performance of the British economy.


Since she had spent much of her career fighting the theories of like-minded economists you can easily understand why Krugman was so quick to take a swing.

But as someone who was actually there, I can tell you the evidence of Thatcher's success is incontrovertible-no matter what Paul Krugman wants you to believe.

What's more, the larger truth is that Thatcher's principles still hold lessons for us today.

The Real Thatcher Record
To illustrate the difficulty of Thatcher's battle: In the summer of 1981, no fewer than 364 top economists wrote a letter to the London Times denouncing her policies and saying they would inevitably lead to economic decline.

That letter marked just about the absolute low point of the 1979-81 recession.

After its publication the economy reverted into strong growth, and in the following year Thatcher's Falklands victory assured her re-election.

From 1981, Britain's economy continued to strengthen with only minor recessions until 2007. The trends marked a complete break from what had gone before, leading British living standards from 10% below those of France in 1980 to 10% above them in 2007.

You'd think the 364 economists who had written the foolish letter would have had difficulty keeping employment once the trend took hold. But far from it.

For the last 10 years, one of them, Mervyn King, has been Governor of the Bank of England -- which explains a lot about the failings of British monetary and regulatory policy, both before and since the 2008 financial crash.

Where Krugman's Argument Falls Apart
Of course, economic realities are hard to prove. Even 30 years after the event, a clever casuist like Krugman can manipulate figures to throw doubt on Thatcher's extraordinary turnaround in the British economy.

Krugman's argument looks at British living standards compared with the French, and produces a second very confusing graph of British unemployment (which was very high during Thatcher's early years because of all the dead capacity that had to be weeded out - the effect was much like the opening up of the Soviet Union after 1991) and then claims that the trend does not become clear until the mid-1990s, so Thatcher had nothing to do with it.

That ignores the political realities. There was no significant policy change in Britain after Thatcher's 1990 departure, other than the 1992 reversal of the foolish 1990 decision to link the pound to the deutschemark. John Major, Thatcher's successor, was a feeble individual with none of her convictions or courage, but he did not reverse her policies since his voting base would not have stood for it.

The 1990s strength after the 1990-92 hiccup (which only confirmed a trend already visible in 1981-89) was as much due to Thatcher as if she had still been wielding her handbag in Downing Street.

It was only after the massive Conservative party defeat in the 1997 election that policy changed, and then only gradually.

Tony Blair, the Labor leader, was quite willing to build on Thatcher's achievements, although over time the sloppy expansion of public spending by his Chancellor of the Exchequer and eventual (2007) successor Gordon Brown did change the policy trajectory.

Again, unlike Paul Krugman, I was there.

I returned to England from New York in late 1982, after Thatcher's Falklands victory had made her re-election inevitable, and lived there until 1995 (by which time a Labor government was itself inevitable).

The effects of Thatcher's policies were already apparent by the time of her 1983 re-election, and they were crystal-clear to everyone by the time of her second re-election in 1987. (Then the snarling opposition could only growl about "bourgeois triumphalism" - an insult I was happy to acknowledge!)

Yet even now in 2013 Krugman tries to explain them away. It is one of the annoyances of economics compared to the hard sciences, that there is always someone willing to doubt experimental results, however emphatic!

Of course, the current overspending, money madness and debt accumulation will eventually lead the United States to a position not unlike that of Britain in the late 1970s, with high inflation, high unemployment, and a mass of useless malinvestment that has to be liquidated for growth to resume.

However, I'm confident that we will then find leaders who know how to restore our economy and are capable of doing it.

But like Margaret Thatcher, they will have to engage in a titanic struggle against huge entrenched opposition, not least of which will come from economists like Krugman who have justified the current erroneous policies.

Source :http://moneymorning.com/2013/04/12/why-paul-krugman-is-wrong-about-margaret-thatcher/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in