09-06-2016, 03:22 PM
Basically received wisdom that Thatcher changed the fortunes of the UK economy, but there is actually surprisingly little hard data to back that up.
Here is Simon Wren-Lewis
That is indeed the received wisdom in much of the media, but of course they have axes to grind. If you look at the most basic measure of national prosperity, GDP per head, the underlying trend is remarkably constant from the 1960s until the financial crisis (see here). Now that itself does not prove anything, but it means there is no obvious sign of a transformation.
I have a post looking at some of the failures and successes of the Thatcher era here. One failure I highlight was the 1980 recession. The scale and rapidity of that recession undoubtedly did some permanent damage to a large section of the UK population. However on this occasion the government was warned by economists in the Treasury that their policies would have this result, and these civil servants were ignored. One of the Treasury ministers at the time who arrogantly dismissed these warnings of a recession was Nigel Lawson.
Here is Simon Wren-Lewis
That is indeed the received wisdom in much of the media, but of course they have axes to grind. If you look at the most basic measure of national prosperity, GDP per head, the underlying trend is remarkably constant from the 1960s until the financial crisis (see here). Now that itself does not prove anything, but it means there is no obvious sign of a transformation.
However we have to add, in this context in particular, that the UK had two things going for it during the Thatcher period which should have led to a more rapid growth in prosperity. The first is North Sea oil coming on stream. The second is being a member of the EU. Let me quote some recent analysis by Nick Crafts, perhaps the best economic historian in the UK today. (You will remember it from the extensive coverage it had in the media during the Brexit campaign. What, you missed it?)
Quote:“Joining the EU membership raised the level of real GDP per person in the UK compared with the alternative of staying in EFTA. The deeper economic integration that EU membership entailed increased trade substantially and this had positive effects on income. Using a variant of the standard methodology pioneered by Frankel and Romer (1999) suggests that the impact was an annual gain equivalent to about 10 per cent of GDP. This far exceeded the ‘membership fee’ required in terms of the net budgetary contribution and net costs of regulation which have totalled about 1.5 per cent of GDP.”
Given the lags involved, a substantial part of that benefit would have accrued in the 1980s.
I have a post looking at some of the failures and successes of the Thatcher era here. One failure I highlight was the 1980 recession. The scale and rapidity of that recession undoubtedly did some permanent damage to a large section of the UK population. However on this occasion the government was warned by economists in the Treasury that their policies would have this result, and these civil servants were ignored. One of the Treasury ministers at the time who arrogantly dismissed these warnings of a recession was Nigel Lawson.