Tuesday 18 November 2008

If cutting spending was so popular why didn't Thatcher or Reagan achieve it?

That's a question that I address in a commentary in this week's Newsweek, which the magazine titles 'How Big Government Never Left', and which happens to coincide with the return of the politics as spending and taxation to the centre of British political debate.

The too easy answer to the post-defeat inquest on the US right is that Dubya has not stuck to small government principles.

That's clearly true - but too shallow. After all, the difference with past conservative administrations is one of degree, rather than direction. The frequently offered contrast with the golden age of the Reagan ascendancy is largely a myth if the quest is for greater intellectual consistency in politics.

"Government is not a solution to our problem, government is the problem", said Reagan. But government spending grew all the same - and there was an increase in the number of civilian Federal employees. (In contrast, there was a reduction under Bill Clinton!).

In truth, as George Packer noted in an excellent New Yorker essay:

[Reagan] had failed to limit the size of government, which, besides anti-Communism, was the abiding passion of Reagan’s political career and of the conservative movement. He didn’t come close to achieving it and didn’t try very hard, recognizing early that the public would be happy to have its taxes cut as long as its programs weren’t touched. And Reagan was a poor steward of the unglamorous but necessary operations of the state.

In Thatcher's Britain, the Prime Minister probably did wake up every day asking how she could shrink the state.

And yet, the Institute of Fiscal Studies will confirm that, to quote

During Margaret Thatcher’s premiership public spending grew in real terms by an average of 1.1% a year, while during John Major’s premiership it grew by an average of 2.4%. (Source: IFS PDF file, page 3)

In Britain, public spending as a proportion of GDP was 43 percent in 1980 and 41.9 percent in 1996.

Cutting government sounds popular in the abstract. But it is much less so when it comes down to anything concrete and the real political choices, once we get past the obligatory soundbites where all parties offer a 'war on waste'.

Whether it is child protection, saving post offices, investing in health, education and childcare, getting the mortgage market moving again, or protecting us from the worst risks of a recession, all of the concrete calls are for government to do more, not less.

Smaller government is much less popular than the right imagines. And even their most ideologically motivated political champions knew it.

1 comment:

Robert Alcock said...

Very interesting analysis.

Some, e.g. Michael Portillo, have claimed that, of the great ideological battles of post-war British politics, the Right proved victorious on economics while the Left triumphed on social values. Hence New Labour attempted no substantive challege to the outcome of Thatcher's privatisation agenda; yet at the same time the key features of the 1960s 'permissive society' - e.g. legislation on divorce, abortion and homosexuality - remained largely in place during the long Tory years, despite vile aberations such as Section 28 and the laughable 'Back to Basics' campaign.

But if a sign of victory is forcing your opponents to assimilate some of your agenda - at the least for pragmatic ends - we should reformulate this rather blunt assessment, particularly on the basis of the evidence set out in Sunder's post.

Bevan, the father of the NHS, will always be a Labour hero. But the strand of democratic socialist thought that has proved resilient is that of Tony Crosland's 'The Future of Socialism' rather than Bevan's 'In Place of Fear'. It is Crosland's emphasis on the mixed economy and mechanisms such as tax policy to promote equality that has proved lasting. The claims of pessimism levelled at the Marxism Today crowd in the 1980s were probably right - there was no all-embracing Thatcherite 'hegemony'.

Moving from the long to the short term position of the Right on state spending, this comment piece by Anatole Kaletsky - hardly a Labour partisan - in the Times is a good read. Kaletsky's usually pretty measured, but today wonders whether the Tory course plotted by Cameron & Co amounts to 'a second-longest suicide note in history'.
He also presents the opposing view to Will Hutton on the euro - that the monetary freedom afforded by the continued independence of our central bank is allowing us to beat a path towards minimising the fallout from the recession. Slashing interest rates (with plenty of scope to cut further) is devaluing sterling - but Kaletsky points to this being a "solution" rather than a problem, just as when the cheap pound was a motor for UK recovery after we crashed out of the ERM in 1992.

All this - and the unprecedented (in my memory) sight of Labour arguing against the Tories on economic policy while being backed – to all intents and purposes -
by the CBI, Institute of Directors AND the TUC.