Thatcherite economics

Discussion in 'Economics' started by BiscuitsAB, Apr 8, 2013.

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  1. BiscuitsAB

    BiscuitsAB LE Moderator

    Quote Wiki "Thatcherism is associated with the economic theory of monetarism. In contrast to previous government policy, monetarism placed a priority on controlling inflation over controlling unemployment. According to monetarist theory, inflation is the result of there being too much money in the economy. It was claimed that the government should seek to control the money supply in order to control inflation. However, by 1979 it was not only the Thatcherites who were arguing for stricter control of inflation. The Labour Chancellor Denis Healey had already adopted some monetarist policies, such as reducing public spending and selling off the government's shares in BP.

    Moreover, it has been argued that the Thatcherites were not strictly monetarist in practice. A common theme centres on the Medium Term Financial Strategy. The Strategy, issued in the 1980 Budget, consisted of targets for reducing the growth of the money supply in the following years. After overshooting many of these targets, the Thatcher government revised the targets upwards in 1982. Analysts have interpreted this as an admission of defeat in the battle to control the money supply. The economist C. F. Pratten claimed:

    Since 1984, behind a veil of rhetoric, the government has lost any faith it had in technical monetarism. The money supply, as measured by £M3, has been allowed to grow erratically, while calculation of the PSBR is held down by the ruse of subtracting the proceeds of privatisation as well as taxes from government expenditure. The principles of monetarism have been abandoned.

    Thatcherism is also associated with supply-side economics. Whereas Keynesian economics holds that the government should stimulate economic growth by increasing demand through increased credit and public spending, supply-side economists argue that the government should instead intervene only to create a free market by lowering taxes, privatizing state industries and increasing restraints on trade unionism."

    So why not on this day ask the question. Is it better to try and control inflation or unemployment?

    We've seen where Keynesian economics has led us this last decade how about we give Thatcherite monetarism another shot?
     
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  2. I think putting the old bint on a burning longship might be a more fitting tribute.

    There are some fairly crazy economic ideas being applied unsuccessfully in europe at the moment but classical monetarism had an even ropier theoretical basis that simply did it stand up well to empirical experience over time, it essentially died with the Black Monday in 87 and Japan tanking into its long stagflation. It was an understandable response to a period of high inflation following the 70s oil shocks that we have not seen since.

    Most conservatives are more Austrian school these days, that plainly does not work either but it fits with the ideological mission of starving the statist beast while discretely stuffing the pockets of the top percentiles.

    Mainstream economics is essentially Keynesian and since 08 has often been on its high horse about it. That's the theory behind the Fed's policies. Americans may sometimes appear stupid but even Congress is not dumb enough to take a longshot on expansionary austerity at Federal level in the face of a looming depression. Far from perfect but the US has fairly obviously weathered this crisis in post-Thatcherite capitalism far better than europe.
     
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  3. She curbed the unions, privatised most utility companies and took the country to war.
    That said cant see cameron or miliband being given the same amount on the news when they snuff it!
     
  4. Right, Wrong, Right. Not even concievable!
     
  5. Grumblegrunt

    Grumblegrunt LE Book Reviewer

    she dislocated state from industry which was destroying the economy, if it wasn't govt owned it was govt controlled - I was too young but apparently you weren't allowed to take more than 50 quid out of the country.

    that's is what I see as thatcherite economics and I still had milk at school.
     
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  6. I'm no expert but I do believe that during burning longship funerals, the deceased warrior was accompanied to the afterlife by his nearest and dearest.

    As Maggie is sent on her way to Valhalla, who should be tied to the tiller to guide her on her way? I'll start the ball rolling with Arthur Scargill.
     
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  7. How about increasing production through subsidies/start up grants combined with deporting all non-Brits who aren't in a pinch point job (i.e. Doctors) and a total removal of unemployment benefits:

    1. More British goods on the market.

    2. More people in work.

    3. More money to spend.

    4. More tax income through VAT.

    5. More money coming in via exports.

    6. National deficit decreases.

    7. Less unemployment by removing the safety net.

    8. Less uncontrolled breeding by the untermensch.

    It's simple.
     
  8. Grumblegrunt

    Grumblegrunt LE Book Reviewer

    ^tony blair
     
  9. Grumblegrunt

    Grumblegrunt LE Book Reviewer

    I remember the enterprise allowance scheme but for different reasons, I knew a lot of people who would set themselves up as driving instructors for the 28 quid a week.

    not because they wanted to be instructors or get any work from it but because it gave them the chance to buy a car and therefore a better job.
     
  10. The thing about monetarism is that it has a Blackadder-esque tiny flaw. It was primarily an ideological position and not an economic one, designed to keep the state out of the market. Its main weakness is in choking investment and the small business sector, leaving the private sector economy dominated by large players - a cynic might guess that this is one reason why it was favoured by so many of our political classes. It's particularly inapt for a 'nation of shopkeepers'.

    Keynes-ism works. It always has. The trouble is not with the policy but with politicians not realising that the favourable headlines it buys them might not be its true measure of success and it will run its course before they do.
     
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  11. The issue with Keynesian economics that everybody misrepresents is that it does not call for continuous high government spending.

    Rather it says that government pending should be counter cyclical, i.e. spend lots to help the economy when the cycle is down and cut spending to free up resources when the cycle is up. This also enable to government to balance its books, running a surplus when the economy is doing well and a deficit when it is doing badly.

    Our current problems are because a traitor named Gordon Brown ran a deficit when the economy was doing well so we now have massive debts and high spending, preventing us from raising government spending now that the economy is doing badly.
     
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  12. BiscuitsAB

    BiscuitsAB LE Moderator


    So in essence Joseph of the technicoloured coat was right. Put aside in the good years so you have reserves for the bad.
     
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  13. Wordsmith

    Wordsmith LE Book Reviewer

    In many ways it doesn't matter what economic model is used - both Keynesian economics and monetarism will deliver a boost to the economy.

    What matters above all is whatever system of economics is in use, the economy is run competently. Simply throwing money at the problem will result in waste and debt whatever economic dogma is being followed. As one manager I used to work for always said; "any idiot can spend money; it takes a wiser man to generate it in the first place".

    For a private sector company, inefficiency means you go out of business. There are no such constraints for public sector companies - they just swallow up ever more tax payers money for ever diminishing returns. The NHS is a classic example of this. No matter how dedicated the doctors and nurses working at the coal face are, the overall system is a bloated inefficient mess.

    We don't require Keynesian's or monetarists - we require ministers, senior civil servants and senior executives who can find the inefficiencies in the state sector and deliver far better value for the money being spent.

    Wordsmith
     
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  14. udipur

    udipur LE Book Reviewer

    The trouble with all economic theories are evinced in their name - they are but theories. Applying them, justifying the tweaks and ending up with but a shadow of the concept blights the name thereon.

    I think it's a little naive to call today's attempt at running the economy Keynesian. We are still woefully influenced by the naivete of Greenspan's approach to credit. Let's not forget what actually drove us into recession and since we are in a recession caused by a financial crisis, we could do worse than addressing a key cause.

    Thatcher succeeded because Galtieri's Latin machismo (not forgetting he did it for exactly the same reasons it benefited Mrs T) got her into a jolly scrape and roused national pride. That gave her a sweeping victory the following year. More importantly, it allowed her approach to bed in and take effect. No one has changed the economy overnight - the trouble is, it usually takes longer than a government's term.
     
  15. Thatcher inherited a car crash created by successive governments that had failed to what was necessary to restore (or maybe create) a competitive economy in the UK. It is easy to blame Labour for the mess, but the Heath and MacMillan Conservative governments had not done much either. The country of my youth was strike ridden, repressed, and broke. Somewhere along the way, failure was inevitable; we could not go along continually subsidising state monopolies through a time when the global economy was taking off. Don't forget, Britain had recently been bailed out in a manner very similar to the PIGS. Someone had to take the hard decisions, or they would have been taken for us. The retrenchment of Britain's industry was going to happen anyway. By taking command of the situation, Thatcher accelerate the inevitable, but created the space and opportunity for the growth of other sectors to replace the lost industries.

    In many ways, we are back in the same situation. Different symptoms, but the same problem. A major and unpopular retrenchment has to occur to restore Britain's public finances and competitiveness. Sadly, there are no leaders in any of the political parties that have the balls to do what is necessary. Maybe we need another Labour government to take us to another bail out in order to create the space for another radical leader of Thatcher's standing.
     
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