Here’s Fareed Zakaria in last Wednesday’s Washington Post on why Margaret Thatcher style reforms wouldn’t work in 2013:
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.
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’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 taxesand sclerotic state-owned companies. These are not the problems we face now.
Today, American and European workers struggle to keep up their wages as technology and globalization push them down. Western economies face global competition, with other countries building impressive infrastructure and expanding education and worker training. They face a two-track economy where capital does well but labor does not, where college graduates thrive but those without strong skills fall behind and where inequality is rising not just in outcomes but also in opportunities.
Against this backdrop, would a further round of deregulation do much? Would cutting taxes from around 40 percent unleash growth, especially when it would mean even larger deficits?
Margaret Thatcher was, in her own words, a “conviction politician,” but she was successful because her convictions addressed the central problems of her time. The ideas that work now will be those that solve our problems, not those of the 1970s.
While Mr. Zakaria doesn’t elucidate the “ideas” that will “work now”, he presumes that Thatcher-esque policies won’t. Therefore, today’s ideas must, in his view, embrace something other than merely private sector solutions. He legitimately (rhetorically) questions: “would a further round of deregulation do much?” Would cutting taxes unleash growth?” And I’m happy to concede those two points. But he’s missing something very important, he’s making no effort to go beyond talking points—he’s not asking the right question. For if he did, assuming he’s not politically captive, he’d be less likely to discount a Thatcherian approach to today’s problems. The right question being:
If government were smaller (it’s expanded markedly of late), less influential, less promiscuous when courted by industry, and less overbearing when pursuing industry—were government not a the primary consideration in the planning processes of all the industries he mentions—might businesses (having to fend for themselves in a freer, more competitive market) have already unleashed trillions in capital, propelling the economy to a growth rate consistent with, if not exceeding, past expansions?
As for globalization and technology holding back the worker, my how he exposes himself there—clearly he’s been very selective in his research. Rather than pointing him to the empirical evidence (which is overwhelming by the way), I’d simply ask him to imagine life in these United States—imagine the state of today’s worker—without globalization and gains in technology.