Andrew Wilson: Time to lay boom and bust to rest

Margaret Thatcher. Picture: Hamish Campbell

Margaret Thatcher. Picture: Hamish Campbell

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HOW rare it is we get a chance to talk to our younger selves like I did this week. It’s funny how much you recognise and how much seems foreign.

Following the pomp, emotion and clatter of responses to the funeral of Margaret Thatcher I dug out a very boring tome. It was my honours dissertation from university written two decades ago when I was the callowest of youths. The question it sought to answer was: “Economic growth in the 1980s: Was there a ‘Thatcher Miracle’?”.

It was slightly emotional, in its own way, to read my words and recall what I must have been thinking and feeling as I wrote them half a lifetime ago. I don’t recall much of public discourse from the 1970s but I have lucid memories of 1980s debates and politics. Inevitably our recollections compress into shorthand reflections of the memories and themes that imprinted themselves on our national consciousness: recession, strikes, Falklands, unemployment, boom, privatisations, ­Europe, poll tax, Howe’s resignation speech. You will have your own.

Much myth is made in both directions, this is what happens when a “brand” ­becomes so well-known and so ingrained in the national psyche.

Many of the reform policies she brought in were in fact underway already. And few were reversed by successors. The post-war consensus was collapsing before she took office but the pace, and more importantly the political tone, changed fundamentally. The state’s share of the economy dropped significantly but has regrown since.

Looking back with the benefit of statistics it is impossible, I think, to justify suggestions that an economic “miracle” occurred. Under her premiership the economy grew at pretty much the same rate of knots as the average for the post-war period until now. And that average marked a continuation of the slow decline relative to most main competitors which has been Britain’s story pretty much since the end of the 19th century. This is the so-called “British disease” that saw this economy triumph in industry, empire and war only to see the inheritance squandered through successive generations of relative decline.

But underlying the very average perfor­mance of the 1980s were some much more substantial stories.

There were four years of very strong growth between 1985 and 1988 after a sharp recession at the start of the decade. The patient was limping into the 80s but was then pretty much put into a coma before being jump-started back to life. But the net effect on growth was “more of the same” at least at a macro level.

In 1983 Britain became a net importer of manufactured goods for the first time since the Industrial Revolution. But services boomed and the City of London created enormous wealth and became the global city state it is today as Europe’s largest city economy.

North Sea oil was an enormous windfall which boosted public finances as it still does. But unlike many other countries to enjoy this win on the natural lottery, Britain spent it rather than saved it. A far cry from the canny housekeeping image of a grocer’s daughter. One of the biggest policy mistakes of the century.

One of the many theories for Britain’s seminal economic decline was that too many inherited too much too easily and squandered rather than building on the base. Nowhere was this more true than with the bounty of oil.

Most tellingly of all, however, is the Gini co-efficient, which measures inequality on a scale from 0 (total equality) to 1 (total inequality). This surged in the wrong direction from 0.25 in the year of her election to 0.34 in the year of her departure in 1990. Under Labour, however, it rose further, to 0.36 and could end 2015 breaching 0.4. So there is no party monopoly on the pain of inequality.

Moreover, the destruction of the primary industries and the manufacturing base had a regionally specific impact. Villages, towns and cities that dug the coal and forged the steel that fuelled and built an empire and won two world wars were left surviving on the metaphorical methadone of public subsidy. Two decades on, it is hard to contemplate the consequences of the economic and human impact of the withdrawal of that welfare support now it is under threat. Neither its administration nor its withdrawal, however, is a sustainable way to live.

So it was interesting to read Ed Miliband saying last week that he wanted to reset Thatcherism and the errors of New Labour that followed. Just as the post-war era required reform so now do we need a new approach for the epic era of change we now exist within. It is urgent. The gap between the richest and the poorest ­areas of Britain are now the largest of any ­country in the EU25. This cannot stand.

Looking back in anger matters much less than looking forward with determination to heal the wounds of an ill-divided boom and regionally concentrated bust.

Waiting for the politicians to come up with solutions will require the patience of all the angels. And the evidence from decades suggests the wait will prove fruitless.

Better to give people the power and the means to set their own course and reach their own potential than to fight about which party is best placed to dry the tears they shed. «

Twitter: @AndrewWilsonAJW

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