Es­say: Was the re­vival that be­gan un­der Thatcher merely a brief pause in Bri­tain’s long, slow de­cline?

An English­man pon­ders the pos­si­ble end of the resur­gence that be­gan with Thatcher

Bloomberg Businessweek (Asia) - - CONTENTS - By John Mick­leth­wait Mick­leth­wait is editor-in-chief of Bloomberg.

The great sweep of eco­nomic his­tory is a se­ries of “rises” and “falls”—from the fall of Rome to the rise of China. The in­trigu­ing episodes that spark the “what ifs” of his­tory come lower down—when a medium-size power sud­denly re­verses an in­evitable-seem­ing tra­jec­tory. That’s what Bri­tain did un­der Mar­garet Thatcher and her suc­ces­sors: a crum­bling coun­try un­ex­pect­edly over­turn­ing years of gen­teel de­cline to be­come Europe’s most cos­mopoli­tan lib­eral en­trepôt. My fear is this re­vival ended on June 23, 2016.

I can re­mem­ber when my ver­sion of lib­eral Bri­tain was born: in a sauna in San Fran­cisco in 1981. I was vis­it­ing from the U.K., trav­el­ing around Amer­ica with Ge­orge, an­other 18-year-old, on our “gap year” be­tween school and univer­sity. We were stay­ing with Ge­orge’s el­derly cousin Antony, who had fled high-tax Bri­tain, hav­ing made a lot of money on chick­ens. He took us to have a sauna with his equally el­derly neigh­bor, a small in­tense man called Mil­ton. They asked Ge­orge and me about Thatcher, and when they dis­cov­ered that we knew lit­tle, Mil­ton took cen­ter stage, ex­plain­ing how the prime min­is­ter, who took of­fice in 1979, would break the unions, open up the econ­omy, and trans­form Bri­tain into a free-mar­ket ex­em­plar.

Ge­orge and I had no eco­nomics, but even we knew this was codswal­lop. Thatcher al­ready looked in trou­ble: There were ri­ots back home. The Bri­tain we had grown up in was a class-rid­den land of in­evitable de­cline—sometimes be­nign (watch­ing Up­stairs, Down­stairs), sometimes hu­mil­i­at­ing (be­ing bailed out by the IMF), and sometimes un­com­fort­able (be­ing taught by can­dle­light dur­ing the min­ers’ strikes). But the tra­jec­tory, pretty much since 1913, had been grad­u­ally down­hill. Cul­tur­ally, Bri­tain could be cool—we had pro­duced Mick Jag­ger and Monty Python. But eco­nom­i­cally we were fin­ished. Later in my gap year, I watched the Grate­ful Dead and found them less hal­lu­cino­genic than the dreams of mad old Mil­ton in that sauna.

When I re­turned to Bri­tain, how­ever, Mil­ton Fried­man was ev­ery­where—the econ­o­mist be­hind Thatcher’s free-mar­ket gam­ble. Sir Antony Fisher (as he later be­came) was less well-known, but he’s now cel­e­brated as one of the great spon­sors of the lib­er­tar­ian right. And what they fore­cast was ba­si­cally cor­rect; the tra­jec­tory of Bri­tain did change.

You can ar­gue that Thatcher was need­lessly ruth­less: Even to­day, many of the ar­eas that voted for Brexit were in the in­dus­trial north that col­lapsed un­der her on­slaught. You can claim she was an ac­ci­dent: No­body in 1979 voted for “Thatcheris­m”; to most vot­ers she seemed like a tough-minded prag­ma­tist rather than an ide­o­logue. You can say she was lucky: Had Ar­gentina not in­vaded the Falk­lands in 1982, she might well have been a one-term prime min­is­ter. But the nar­ra­tive changed—away from de­cline to­ward some­thing more ex­pan­sive, mer­i­to­cratic, and con­fi­dent.

Thatcher may have called her­self a Con­ser­va­tive, but her in­spi­ra­tion was the clas­si­cal lib­er­al­ism of John Stuart Mill and Adam Smith, cen­tered on free com­merce and in­di­vid­ual free­dom and what we now call glob­al­iza­tion. It sat at the heart of the first great Vic­to­rian age of glob­al­iza­tion, which came to an end in 1914. For Thatcher these ideas were chan­neled through thinkers like Fried­man. She wasn’t al­ways as ide­al­is­tic as she claimed, but the di­rec­tion she set—and John Ma­jor and Tony Blair fol­lowed—was clearly to­ward open mar­kets.

As a re­sult, Bri­tain has ar­guably been the big Western econ­omy most com­fort­able with the cur­rent age of glob­al­iza­tion. Not as suc­cess­ful as the U.S., to be sure. But we have usu­ally been stauncher sup­port­ers of free trade and more at ease with for­eign­ers buy­ing our com­pa­nies or run­ning them, with pri­va­tiz­ing govern­ment ser­vices, with the move from man­u­fac­tur­ing to ser­vices, es­pe­cially fi­nance, and with for­eign­ers play­ing for our foot­ball clubs or tak­ing over our cui­sine. And along­side that has grown a lais­sez-faire at­ti­tude to­ward in­di­vid­ual free­dom, from gay mar­riage to stem cell re­search. This lib­eral Bri­tain didn’t al­ways work out well. Over­re­liance on fi­nance meant we were es­pe­cially ex­posed to the crunch in 2008. Even if in prac­tice we were good at deal­ing with im­mi­grants, there was still grum­bling about for­eign­ers, whether poor ones tak­ing coun­cil houses or rich ones buy­ing up Chelsea. We’ve been schiz­o­phrenic to­ward the Euro­pean Union: We liked the sin­gle mar­ket but hated its tan­gle of reg­u­la­tion.

Yet this love-hate re­la­tion­ship has served Bri­tain very well. The fact that we were at the free-mar­ket end of a scle­rotic union in­creased our rel­a­tive at­trac­tive­ness. Lon­don has be­come the com­mer­cial cap­i­tal of Europe and its tal­ent mag­net. Bri­tain’s soft power has not been greater for decades.

What went wrong? The ob­vi­ous re­join­der is lib­eral Bri­tain worked a lot bet­ter for some Bri­tons than for oth­ers. That is true. Many Brex­iters also felt that they had been lied to re­peat­edly about im­mi­gra­tion. Oth­ers see the EU as a doomed project—and think we are best out of it. Add in shame­less po­lit­i­cal op­por­tunism, a Eu­roskep­tic press that told vot­ers there was no cost to vot­ing Leave, and polls that showed Re­main was in the lead (so a protest vote was just that), and you get to 52 per­cent of the elec­torate.

The chaos could pan out in a lib­eral di­rec­tion. A few Brex­iters be­lieve they are Thatcher’s heirs, re­ject­ing the EU leviathan. But most of the Leave vot­ers want less glob­al­iza­tion, not more. And Europe is hardly in a mood to give spe­cial fa­vors to per­fid­i­ous Albion. The re­volt against the age of glob­al­iza­tion could well spread. In terms of soft power, Bri­tain’s rep­u­ta­tion as a tol­er­ant, sta­ble haven is be­ing shred­ded, day by day.

Hence the fear that the years 1979 to 2016 will be seen as the great ex­cep­tion—a brief re­vival in the cen­tu­ry­long de­cline of a for­mer Great Power. By 2050 his­to­ri­ans may well deem it in­evitable that the fi­nan­cial cap­i­tal of Europe would move to Ger­many. One irony is there was as much ac­ci­dent in the end of lib­eral Bri­tain as there was in its found­ing. If few Bri­tons knew what they were get­ting in Thatcher, per­haps fewer thought through the con­se­quences of Brexit. They just wanted to give their politi­cians a kick­ing, be­liev­ing it was risk­free. A lot de­pends on how quickly they ad­mit they were wrong.

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