Welcome to my one-hundredth blog post.
It became something of a standing joke in our household. Whenever something went wrong, I would say “I blame Margaret Thatcher”. The joke has long since worn thin: I get a withering look if I still use it. And yet, in some important ways, I do still blame Thatcher. Let me explain.
All human beings (or at least the psychologically healthy ones) have a mix of selfishness and compassion for others. (One of my earliest posts, Being Human II: The Four Cs, goes into more detail.) But there’s clear evidence that the balance varies from person to person. But the problem is that the economic theory which has dictated government policy globally since the early 1980s does not recognise this.
Triumph of Greed
The rise of the new economic orthodoxy began in earnest under Thatcher in the UK and Reagan in the USA. Even though the main development in the thinking was in America, (and specifically the University of Chicago) I would argue that Thatcher was the true champion of the new thinking. Reagan, the “Great Communicator”, never appeared to have the intellectual capacity to understand the significance of these ideas and went along with Thatcher. He would presumably have been comfortable with the Orwellian “private sector good, public sector bad” bit of the new creed.
My post Two Castles (part 2), published 12 months ago, explains the two falsehoods upon which our entire economic order since the 1980s has been based. Briefly:
- Falsehood 1: material self-interest is the only motive driving human behaviour when making economically-significant decisions.
- Falsehood 2: people behave rationally when making such decisions.
Cambridge economist Ha-Joon Chang provides excellent rebuttals in his excellent 2010 book 23 Things They Don’t Tell You About Capitalism. In his “Thing 5”, he lists several alternative motives to that in Falsehood 1: honesty, self-respect, altruism, love, sympathy, faith, sense of duty, solidarity, loyalty, public-spiritedness, patriotism. (Doesn’t that sound more like real human beings?) His “Thing 16” goes into great detail about all the reasons people cannot have access to all the information in most of the decisions they make, in order for them to be rational.
Thatcher didn’t question the tenets of free market fundamentalism. Its prescriptions: free markets, small government, low taxes, fitted with her prior world view. But those tenets got boiled down into “Greed is Good” and a whole load of evils have flowed ever since.
The Rise of Finance
Deregulation of the City of London in 1986 led to the enormous growth in scale, reach and innovation of financial services. The new financial “products” (a daft term, if ever there was one) were practically all socially useless or downright harmful. Instead of providing steady, patient funding to allow promising new companies and industries to grow, City money was pumped into financial speculation (“gambling with other people’s money”) and property bubbles. This has had the effect of putting London houses out of reach of people with “ordinary” jobs and facilitated a massive money-laundering racket of the world’s worst fraudsters and racketeers. The UK’s appalling productivity record is one consequence of this.
The City was the first sector of the UK economy to really pick up on “Greed is Good” and led the way in pursuing policies which led to the short-term profit of the companies and individuals involved, regardless of the wider economic consequences. Insurance companies were first to pick up on the idea of a “loyalty penalty”, using their existing customer base as a cash cow for exploitation, punishing those too “lazy” to switch suppliers on every annual renewal. The privatised utilities, operating in a false market that was not really competitive, made money by exploiting the same tactic and making tariffs too complicated for customers to make comparisons with competitors. Policy capture is now so complete that government policy is now to “force” customers to shop around rather than tackle the predatory behaviour of the suppliers – even to the point of encouraging more junk calls from competitors.
Destruction of Manufacturing
The UK now has the lowest proportion of its economy in manufacturing of the major developed countries: 11% against 15% for the EU as whole and 12% for the USA. From Thatcher onward, government economic policy was biased towards the interests of the City. Broadly speaking, what’s good for finance is bad for everyone else: financial services, unlike the “real” economy, lead to a zero sum game. So the rise in finance damaged manufacturing. But Thatcher also hated any competing source of political power: specifically, in this case, the trade unions. In her desire to smash the unions, swathes of manufacturing capacity were also lost. Once the jobs are gone, so too do the expertise and the machine tools. Then there follows the decay and demolition of the factories themselves. So easy to destroy, so hard to rebuild.
Job Insecurity and the Gig Economy
With the significant reduction in Trade Union membership and a succession of anti-union legislation, some inevitable changes happened. Standards of protection of workers’ rights have fallen. This in turn has led to the rise in poorly paid, insecure jobs and zero-hours contracts: the “gig” economy. The “Greed is Good” mantra has been taken on board in a big way by CEOs and top managers. Pay rises for those at the top have well outstripped inflation; lower paid workers have seen stagnant real pay. Income and wealth inequality are back to levels last seen in 1914.
Nationalist Populism and the Rise of the Extreme Right
Politicians in the UK and elsewhere – particularly in France, the Netherlands and the USA – have taken up the “Greed is Good” theme. Blame for the bad economic deal for the many has been successfully deflected away from those responsible to others: the poor, disabled and immigrants. The EU referendum and US presidential election results are the culmination – so far – of this trend. I fear worse to come in France next spring.
These “victories” seem to have stirred up some of the nastiest individuals – racists, bigots, homophobes, Islamophobes – and to have spurred on their cheerleaders in the press, TV and online. The screaming, emotional, irrational hysteria of the Mail, Express, Sun, Breitbart, Fox News and their ilk drown out calmer, more rational voices.
And I think there is a direct line of causation between all this, via Bush Jr’s military adventurism (with Blair as poodle), Osborne and Duncan Smith’s misrepresentations about benefit fraud, Johnson’s lies about the EU, Farage’s …well, everything… and the tone and direction set by Thatcher in the early 1980s. As Chang says in his book: “Assume the worst about people and you get the worst”.
The good news is that the people as a whole still have much more generous a spirit than is reflected by their governments’ policies. A recent survey by CAF shows the USA as having the second most generous people in the world (after Myanmar) with the UK coming eighth: the highest in Europe. The decent people just have to get a voice and get organised. It’s high time we started to push humanity back from the brink. Damn the legacy of Thatcher and keep the faith in human nature!