The empress has no clothes or, at least, not the clothes in which so many want to robe her. Despite all the praise, Margaret Thatcher did not arrest British economic decline, launch an economic transformation or save Britain. She did re-establish the British state's capacity to govern. But then, although she wanted to trigger a second industrial revolution and a surge of new British producers, she used the newly won state authority to worsen the very weaknesses that had plagued us for decades. The national conversation following her death has been based on a fraud. If the Thatcher revolution had been so transformatory, our situation today would not be so acute.
In the 20 years up to 1979, Britain's growth rate averaged 2.75 percent, although it had been weakening during the ills of the mid-1970s. In the years before the banking crisis, there was a vexed debate about whether the Thatcher reforms, essentially unchallenged by Prime Ministers Tony Blair and Gordon Brown, had succeeded in restoring the long-run growth rate to earlier levels. Certainly, the gap in per capita incomes between Britain, France and Germany had narrowed, as, apparently, had the productivity gap.
The question is whether any of it was sustainable. Now, there is a growing and dismaying recognition that too much growth in the past 30 years has been built on an unsustainable credit, banking and property bubble and that Britain's true long-run growth rate has fallen to around 2 percent. The productivity gap is widening. All that heightened inequality, the unbelievable executive remuneration, wholesale privatization, taking "the shackles off business" and labor market flexibility has achieved nothing durable.