Tony Blair used the labour party as a matter of timing only. If the conservatives had been on the rise when he was pushing for power, he'd have been with them instead. He was a politician as a route to power, not through any specific political conviction. He was more centrist than Thatcher but that doesn't make him actually labour. Brown was a bit more 'traditional labour' but only a bit, he was more traditional Scottish social democrat.

Remember when Baroness Thatcher was asked what her greatest political achievement was she replied 'Tony Blair in government'. She meant that she'd eviscerated the labour movement to the point where they were effectively not labour at all.

At no point in the last 30 years have we had a traditional labour government. John Smith might have created one, if not for his untimely death.

Old style labour has been dead for a long time and only a few dinosaurs and sad SWP types haven't noticed. Labour drew its power from the old working classes which no longer exist. people had aspirations and in the 80's old labour and the unions were too busy fighting the battles of the 70's to notice times had moved on. Some of the people rejoicing over her death seems to be consumed by anger and bewilderment over the fact the country chose her and her policies for three elections.

Wonderful exchange!

Mark

This made me laugh. How many Governments have we had since then that have had the opportunity to reverse what Thatcher did? Doesn't that make them all just as bad?

Yes but New Labour were closet tories anyway. So we have had the same neo-classical economic policies in place for the entire period. Without decent regulation the bubbles kept being inflated. Look at how house prices have shot up since the 80's. What you have left is a very weak economy that may or may not go into a third recession but will not recover for a generation thanks to Thatcher.

Err.. yes? I didn't say any of the others were any better. However I find the some of the hagiography that is going on about her frankly rather nauseating. She made the decisions that put the UK on the road it's on, all her successors have done is be too weak to turn the wheel.

Jon

Not sure about that. Maggie would never have allowed the welfare state to grow to the levels it did under New Labour. She wanted people to pay their own way.

So we had this weak economy and lots of strikes and an IMF bailout.
And then Thatcher came along and made it weak.
And then others spent the next 20 years following her example, and they made it weak.
And it will stay weak for ever.
But somehow she gets exactly all of the blame.

I have to say that sounds a tiny bit unreasonable.

I did not say that she made our economy weak. That was down to every single government that followed in her footsteps. The policy of lowering the taxes on Capital Gains meant that we ended up with a bubble economy because of the ease that profits can be made with excess credit. That was not Maggie but every government since. Look at the rents of pubs since her intervention in the brewers. She opened up the floodgates of excessive credit. Now we are all paying for it.

The fact that when the banking crisis struck it caused a serious hole in tax revenue, which put a huge hole in government finances not excessive overspending. The liberalisation of the banks were her doing under Big Bang, the lack of regulation was down to all post Thatcher Governments and the opposition for failing to point that out. The attitude was that banks know their risks and as such should not be regulated. Right up till the crisis the Tories were committed to the same spending plans of New Labour. The PFI of Brown were modelled on the PPP of Thatcher. These sorts of deals were banned in the private sector but still undertaken by governments. She created the framework of policy that allowed the mess to build and fester. While the unions were out of control in the 70's they have hardly been militant since. The lack of investment in public utilities prior to the privatisation's was government policy. Some of the privatisation's should have happened but not necessarily all and not all at fire-sale prices. Since her rule inequality has risen steadily, but much was under New Labour who followed a solidly Thatcherite policy.

Yes the economy is weak now because of the excessive private debts, which are substantially higher than government debt, even at 90% of GDP. It is those debts that are the biggest single problem in this country. The fact that after 5 years the UK GDP still has not recovered to the level of 2008. Yet the government are not reforming banking and are still providing it with unlimited liquidity to avoid the collapse of Barclays and others.

Also when William the Conqeror undertook the Harrowing of the North the impact on the population in the north was still felt more than a century later. So things which might only be for a short period can still be felt for much longer. You only have to see the fact that so many old coal or steel towns in the North still have low employment as a sign that nothing has changed.

I think I recall the unions getting up to some post 70s silliness, well one in particular. They didn't get up to any post Thatcher silliness largely because when she took over state runs companies accounted for 12% of GDP and when she went I think it was 4% (now more ike 2% if I'm remembering correctly)
I'm no particular fan of PPP so I won't defend that.

The Bank of England famously used to regulate banks by raising or lowering the governor's eyebrows. I really don't see how that system would have lasted through the dotcom era. If UK banks were in a peculiarly bad shape compared to their international peers, I would take your complaint more seriously. But the recent global banking problems are of a sort that no single politician, especially one exiled from the parliament of a small island state more than twenty ears ago can really be blamed for.

I think your analysis of credit bubbles is absurdly one sided, being all about demand and having nothing to do with supply. They are a result of excess money sloshing around looking for returns. It's the weight of cash looking to be lent that causes cheap credit by bidding down the returns, and the low returns on traditional lending then stoke demand (among lenders and investors) for risk, which leads to risk being underpriced. The scale of the crash was made inevitable by the artificiality of the proceeding boom - which was nothing to do with Thatcher or even Britain, it was the US Fed's monetary policy and China's rapid productivity and investment growth that did the heavy lifting there. That combination of low interest rates and low inflation for a longer time than is normally sustainable created the dangerous weight of excessive money, some which had to go up in smoke. The current crash would have been a lot less frightening if it had happened a few years earlier. And the main reason that didn't happen was sheer bad luck.

Reducing the gap between income taxes and cap gains is a very credible idea in its own right, but raising cap gains specifically curb demand for credit would just be another artificial and counter productive move.

Ken Loach has a suggestion

http://www.thewrap.com/movies/node/84766

It was her opening up the bank liberalisation that lead to the US repealing Glass-Steagall. That was how it impacted the US and the rest of the world. She was the prime instigator but many others both here and in the US made it much worse. Her role was tiny but in the bigger picture her role was crucial. The deregulation of the banks was spread by regulatory arbitrage. Unless you deregulate we are off to some other nation. It was repeated at the height of the crisis when there was any hint of re-regulation, that HSBC would go back to Hong Kong, and others hinted at Singapore or Dubai. It was that deregulation that was the first domino. Not all the banking reforms were bad but they were done in blind faith that the market knows best. We have since discovered that the market still needs a bailout when most people get it completely wrong.


Banks create credit and then find the reserves afterwards. Also they levered up considerably. So that little bit of capital could lend so much more with a loose regulatory regime. They get that money in the short term on the interbank markets and longer term in the capital markets through issuance of bonds. The interbank funds was also fed by cheap Chinese money flooding the wholesale money markets. The credit crunch started in the interbank markets. It was the risk to counter-parties who would lose heavily that caused the crisis at Northern Rock. They relied on cheap short term interbank funds to lend out on 125% mortgages. When Northern Rock were locked out of the interbank markets it was that that precipitated the run on the bank. Their business model was the most extreme but they were not alone in that folly. Yes the preceding boom was completely artificial but we still are supporting that bubble, which is why our private debts are still too high. Barclays proudly claim that they were not bailed out, but they were via the bailout of AIG who collapsed and the US government spent $185 billion to pay out its counter parties including $10 billion to Barclays.

Also one of the key features of all the bailouts is that the bondholders money does not go up in smoke when the banks collapsed. Ireland, Greece Portugal and Spain were forced to make bondholder whole by screwing the taxpayers. So when Irish banks collapsed the RBS had a massive £46 billion bailout courtesy of the Irish tax payer. Still not enough to save the bank considering the mess its finances were in. In the second Greek bailout they imposed massive losses on bond holders, which is where most of the Cyprus losses occurred. If we had left bondholders and bank counter parties to suffer losses it would have lead to a far smaller but cleaner banking system like Iceland has got. It would mean that we would be growing now. Though Brown and others decided to save the banks at the tax payers expense.

The long period of stability led politicians and bankers to think that there was no more boom and bust and housing could only go up. In 2008 the Economist estimated that UK property was overvalued by more than 60% yet it has fallen only 10 to 15% outside London. I am ignoring London as it is now dominated by inflows from the Eurozone buying property here. So UK property is still over valued by more than 45%, and is only held up by ultra low and damaging interest rates. The impact on pensions will not be felt by most until they retire. The problem was that recessions are normal way of clearing out bad investments, and creating new opportunities. Until those bad investments are cleared and repriced it reduces the scope for new investment. That was a mistake of neoclassical economics which is what Thatcher brought in and both Brown was promoting and Cameron continues today. Thatcher was not the biggest cause of the weakness of our economy now but she started the cascade.


A cap on credit should be done by the Bank of England not via tax policy. The first steps would be limited leverage and slowly lowering the level of leverage over time. It could be fast or slow depending on what the Bank of England decides.

Capital Gains tax would not cap credit. It sole aim should be to reduce demand for speculative property investment and free up funds for small businesses. Most people might borrow to buy a car or a kitchen neither of which rise in value over time. These loans would continue as before as capital gains would not factor into the decision.

If house prices did not rise annually there would be lower demand for wages increases to get on the property ladder, it would also make us more competitive internationally. It was the prospect of rapidly rising property prices that created demand for other ways of funding those mortgages. Banks preferred lending linked to property as it was "safe as houses" for them at least. There were pension mortgages which used the tax free lump sum to pay the balance, endowment mortgages which have also burned many home buyers. If house prices had been stable then at least everyone would have stuck with repayment mortgages. So if house prices and wages were stable would you be worse off? No because over the life of the mortgage you would acquire a home of the value that you paid for it but the debt would have fallen to zero so you would be better off. In an environment with rapidly rising house prices you might be nominally better off but if you moved you would have to pay far more for a new property then the mortgage you would need would be bigger and to get that mortgage a higher wage would be needed. With globalisation your wages will eventually stagnate and the ability to buy a home will diminish as you are slowly priced out of the area. That has started with mortgages with much higher income multiples available in the past.

While rising property might seem good it is also a fixed cost for business. Keep those costs down and you encourage small business formation which is where the real job creation comes from. If shops and offices are bid up to stupid levels then it keeps the cost of business formation and expansion high, and so the rate of new start ups down. Longer term the best form of wealth creation comes from businesses paying dividends. If capital gains are treated more favourably then it leads to share buybacks and no dividends as these are treated unfavourably. It is the reinvestment of dividends that increases pension pots and will increase wealth for shareholders. They can use that dividend income to invest elsewhere if necessary.

Probably a less politically biased view:

http://uk.finance.yahoo.com/news/blame- ... 19607.html

Er.. sourced from the Daily Telegraph? I'm not entirely sure your adjectives are appropriate.

BBC News are reporting stuff that isn't related to Margaret Thatcher. I feel quite confused...