Without Thatcher, There's No 'Cool Britannia' For Blair

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"I suppose nowadays nobody of any significance calls himself or herself a socialist, except between consenting adults in private, without at least a twinge of embarrassment." - Nigel Lawson, The View From No. 11: Memoirs of a Tory Radical

In her life Margaret Thatcher could claim numerous successes, and with her passing they're rightly being remembered. It seems to me one of her most important achievements was that she forever changed the policy debate - very much for the better.

Nigel Lawson, whose quote begins this piece, served Thatcher as Chancellor of the Exchequer from 1983-89, and he published The View From No. 11 in 1992. Notable about the time in which he wrote his account of working for Thatcher was how easy it was for him to proudly advertize his free-market, anti-socialist views. Capitalism and economic growth had been made very acceptable by the Thatcher years such that supporters of same freely came out of the closet, while socialists closeted themselves.

The above can't be minimized. From the ‘40s through the ‘70s to be a socialist or communist was perfectly normal, and seen even by mainstream economists as just another economic philosophy. Going back to World War II's aftermath, the Attlee Labor Party government took over in England in 1945, and it "was proud to call itself socialist," according to Lawson.

Thanks to Thatcher in England, and Ronald Reagan in the U.S., no serious person any longer self-identifies as a socialist, and in the U.S., so discredited is "liberal" that American-style "liberals" increasingly self-identify as "progressives." Thatcher altered the policy discussion in important ways, and particularly amid trying times like these in which England and the U.S. limp along, the fact that Thatcher greatly advanced the terms of the policy discussion should give us reason for optimism. To put it plainly, though policy has taken a wrong turn, we're decidedly not going back to the failed ideas of the past.

To understand why this is true, consider Tony Blair. As his former press secretary Alastair Campbell wrote in The Blair Years, "TB said it was important I understood why parts of Thatcherism were right." And then when pressed by his advisers, including Campbell, to "be more progressive and radical," Blair responded that "What gives me real edge is that I'm not as Labour as you lot." Implicit from Blair was that Thatcher's success had moved the discussion to the right, so for Labor to succeed it would have to be far more Tory, more Thatcher, less Attlee.

During the Blair years we heard lots about ‘Cool Britannia,' but the reality was that Great Britain wasn't very cool before Thatcher's policies of privatization, tax cuts, and tax simplification made it far more of an attractive place for the ambitious to produce. In short, Britain wasn't cool before her precisely because the ‘cool' had departed.

The cool left England in the 1970s because the tax rate on top earners then was 83%, and taxes on capital gains were 98%. As Rolling Stones' guitarist Keith Richards put it in Life, his 2010 autobiography, the nosebleed tax rates on the successful in England were the equivalent of "being told to leave the country." And leave the Rolling Stones did, along with a good number of England's best and brightest.

Two decades later Tony Blair could surround himself with movie and music stars upon ascending to Prime Minister in 1997 precisely because Thatcher's tax cuts had lured England's talented back to England. It's important to note here that Blair learned the lesson of the taxation aspect of Thatcherism very well, and the British benefit from it to this day.

As Campbell also recounts in The Blair Years, "TB was pretty clear" about taxes. "He said the minute we signaled we were raising the top rate, as far as the public is concerned, that was us [Labor] back to the old ways they rejected." Not only did Thatcherism win in England, it won big. The political party (Labor) known for wealth redistribution wouldn't touch higher tax rates on the rich simply because the Thatcher era totally laid waste to the notion.

About her political soulmate in Reagan, Lawson observed that "Margaret was somewhat in awe" of him, but it can be argued in at least one sense that Reagan's shadow wasn't as long as Thatcher's. Though tax increases in England were taken off of the table by Blair and a much-chastened Labor Party once it came back to power in the late ‘90s, Bill Clinton and the Democrats were more brazen on the tax front. They lost Congress at least partially as a result in 1994, but Clinton kept his job. Notable there is that Clinton himself admitted in the '96 campaign that the tax hikes were a mistake, and then in 1997 he signed into law a cut in the capital gains rate. Lesson learned. Despite occasional lurches in the wrong direction, we're all tax cutters now, and we are thanks to Thatcher and Reagan's initial legislative successes.

After that, it's notable that be it the U.S. or the U.K., major, 1970s style tax rate increases are well outside the realm of reasonable discussion. They're totally discredited as a blast to a malaise-filled 1970s past. They're discredited because of Thatcher and Reagan who, despite much ridicule from economists and politicians on both sides, instinctually knew when it wasn't clear to others that taxes are a price. Overtax work and investment, and you get less of both.

So while the health of the economies in the U.K. and U.S. presently leaves much to be desired, Margaret Thatcher's sad passing is a good reminder of just how much worse things were before she and Reagan transformed the policy landscape. Our troubles are surely less daunting today thanks to Thatcher and Reagan having so powerfully changed the debate, and even better, the success of their policies at a time when a previous generation had similarly begun to question capitalism provides us with a clear roadmap out of our present difficulties. Though Thatcher has left us, she didn't take her growth-boosting policy ideas with her. In her absence, one way to honor her would be to ask what she did amid troubled times, and mimic it.


John Tamny is editor of RealClearMarkets, Political Economy editor at Forbes, a Senior Fellow in Economics at Reason Foundation, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He's the author of Who Needs the Fed?: What Taylor Swift, Uber and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank (Encounter Books, 2016), along with Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You About Economics (Regnery, 2015). 

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