segunda-feira, 8 de abril de 2013
Thatcher’s quest left ‘lasting scar’ on economy
Não morro de amores pela política econômica da Dama de Ferro e a considero tão incompatível com a doutrina social católica quanto o seu extremo oposto, o Imperio Sovietico. O artigo abaixo, apresenta uma analise bem equilibrada da herança da deixada por este triste período da política britanica.
Starting and ending in recession with a boom sandwiched in the middle, Margaret Thatcher’s economic record between 1979 and 1990 appears quite in keeping with the rest of Britain’s postwar history. But to look purely at the broad economic aggregates would miss the importance of the period’s enduring legacy.
Patrick Minford, an ideological fellow-traveller of Thatcher and professor of economics at Cardiff Business School, says: “It is hard for people who weren’t around in the 1970s to understand the legacy, which is not just defeating inflation. She just transformed the supply side of the British economy”.
When she was elected in spring 1979 after the Winter of Discontent, she was bequeathed a style of economic management that had represented an elaborate firefighting dance amid long-term decline. She inherited incomes and prices policies to keep the lid on inflation, exchange controls to stop currency flight and the use of fiscal policy to manage demand – and discarded the lot.
The high interest rates and tight fiscal policy of the “medium-term financial strategy”, the first incarnation of Thatcherite monetarism, pushed the economy into a deep recession, generated more than 3m unemployed, decimated the manufacturing industry of the north of England and squeezed inflation out of the system.
The upswing that followed in the second half of the 1980s was geographically concentrated in London and the southeast of England, dominated by spectacular household consumption growth on the back of booming house prices and the bounty of North Sea oil.
Between the second quarter of 1979 and the fourth quarter of 1990, the average annual growth rate of the economy was 2.3 per cent, no better than Britain’s postwar norm. Although the growth performance was far from stellar compared with Britain’s past, economists of left and right tend to agree that the legacy is much more impressive in comparison with the contemporary performance of other countries.
John van Reenen, head of the Centre for Economic Performance at the London School of Economics, said: “The changes [under Thatcher] helped shift Britain from a century of relative decline to three decades where we caught up with the US, Germany and France”.
While UK per capita incomes slid relative to those in the US between 1950 and 1979, other leading European economies – France, Germany and Italy – caught up, but from the 1980s onward, Britain’s living standards rose faster than other large EU economies and only stopped improving relative to the US at the start of the financial crisis in 2007.
Underpinning this improvement was a relentless, albeit incremental, focus on improving the way the economy worked with reference to market forces. Sir Alan Budd, chief economic adviser to the Treasury for much of the 1990s, says this “supply-side revolution was the most important single change to the economy she wrought”.
“You can’t buck the markets,” was Thatcher’s riposte to Nigel Lawson’s desire to peg sterling to the Deutsche mark, but this sense was also ingrained by her government into all aspects of policy making and this has lasted 30 years, says Jonathan Portes, director of the National Institute of Economic and Social Research. “She entrenched in the British policy making class a fundamental view that markets were the best way of allocating resources,” he added “and that was mostly good rather than bad”.
Generally the reforms came amid protest from vested interests, who preferred the status quo.
For companies, changes to labour and product markets “gave managers a greater right to manage”, says John Philpott, an independent labour market economist, often against, but offered little protection if their companies failed.
The moves towards privatisation and regulation of telecoms, gas, water and ultimately most of the rest of the utilities “moved a lot of sectors in the public sector space into the private sector” says prof van Reenen, and paved the way for beneficial competition to enter these sectors.
Aiding competition further was an openness to trade and foreign direct investment that saw Japanese industry decide largely to locate in Britain for its European production bases in the 1980s.
In the labour market, the power of labour, first undermined by the huge rise in unemployment of the 1980s and the industrial change, was further limited by laws, allowing workers not to be represented by unions, insisting on secret ballots before strikes were called and restricting picketing rights. Industrial strife quelled and union membership has halved from 13m in 1979 to 6.5m today, mostly in the public sector.
The unexpected rise and persistence of unemployment, spurred the Thatcher government to put more pressure on the unemployed to “get on your bike” and find work, for fear of losing benefits. These restrictions were new, have been augmented by all governments since and have helped foster the relatively low unemployment rates of the current downturn.
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In the housing market, tenants renting from local government were given the right to buy to help labour mobility and the private rented market was deregulated in 1988.
The burden of taxation was shifted from incomes towards consumption and in later years, was simplified.
But the triumph of greater market forces in improving the relative performance of the UK economy came with collateral damage and unexpected side-effects.
Most obvious was a huge increase in inequality, driven more by rising wage inequality as employers faced fewer restrictions in paying top people more and deregulation in the financial services sector pushed this process even further.
Paul Johnson, director of the Institute for Fiscal Studies, says: “The tax system became much less progressive with all income tax rates over 40 per cent abolished, but this was really a reaction to a changing income distribution, so the tax system was doing as much redistribution at the end of the period as at the beginning”.
Large parts of the country have never recovered from the industrial blight of the early 1980s, leaving a “lasting scar” says Mr Portes. And the legacy of owner-occupation, high house prices and planning restrictions now trap as many people in their homes as council housing ever did.
According to Prof Minford, these new problems, some relating directly to the Thatcher period, show “supply-side issues are never dead”. But for 22 years after Thatcher departed, Britain has been more able and willing than many economies to go ahead with change, knowing that longer-term gain generally outweighs the short-term pain.