In short, no, it did not. The average real UK per capita GDP growth rate fell from its golden age (1948–1973) average.
One can see the data below and skip the averages at the end to the broad picture:
Year | Real Per Capita GDP* | Growth RateThe average real per capita GDP growth rate during the Keynesian golden age of full employment fell from 2.34% to 2.05% under the Thatcher years. There was no miracle here.
* in 1990 international Geary-Khamis dollars
1919 | 4870 |
1920 | 4548 | -6.61%
1921 | 4439 | -2.39%
1922 | 4637 | 4.46%
1923 | 4760 | 2.65%
1924 | 4921 | 3.38%
1925 | 5144 | 4.53%
1926 | 4936 | -4.04%
1927 | 5315 | 7.67%
1928 | 5357 | 0.79%
1929 | 5503 | 2.72%
1930 | 5441 | -1.12%
1931 | 5138 | -5.56%
1932 | 5148 | 0.19%
1933 | 5277 | 2.50%
1934 | 5608 | 6.27%
1935 | 5799 | 3.40%
1936 | 6035 | 4.06%
1937 | 6218 | 3.03%
1938 | 6266 | 0.77%
1939 | 6262 | -0.06%
1940 | 6856 | 9.48%
1941 | 7482 | 9.13%
1942 | 7639 | 2.09%
1943 | 7744 | 1.37%
1944 | 7405 | -4.37%
1945 | 7056 | -4.71%
1946 | 6745 | -4.40%
1947 | 6604 | -2.09%
1948 | 6746 | 2.15%
1949 | 6956 | 3.11%
1950 | 6939 | -0.24%
1951 | 7123 | 2.65%
1952 | 7091 | -0.44%
1953 | 7346 | 3.59%
1954 | 7619 | 3.71%
1955 | 7868 | 3.26%
1956 | 7929 | 0.77%
1957 | 8017 | 1.10%
1958 | 7966 | -0.63%
1959 | 8240 | 3.43%
1960 | 8645 | 4.91%
1961 | 8857 | 2.45%
1962 | 8865 | 0.09%
1963 | 9149 | 3.20%
1964 | 9568 | 4.57%
1965 | 9752 | 1.92%
1966 | 9885 | 1.36%
1967 | 10049 | 1.65%
1968 | 10410 | 3.59%
1969 | 10552 | 1.36%
1970 | 10767 | 2.03%
1971 | 10941 | 1.61%
1972 | 11294 | 3.22%
1973 | 12025 | 6.47%
1974 | 11859 | -1.38%
1975 | 11847 | -0.10%
1976 | 12115 | 2.26%
1977 | 12384 | 2.22%
1978 | 12828 | 3.58%
1979 | 13167 | 2.64%
1980 | 12931 | -1.79%
1981 | 12747 | -1.42%
1982 | 12955 | 1.63%
1983 | 13404 | 3.46%
1984 | 13720 | 2.35%
1985 | 14165 | 3.24%
1986 | 14742 | 4.07%
1987 | 15393 | 4.41%
1988 | 16110 | 4.65%
1989 | 16414 | 1.88%
1990 | 16430 | 0.09%
1991 | 16136 | -1.78%
1992 | 16088 | -0.29%
1993 | 16416 | 2.03%
1994 | 17082 | 4.05%
1995 | 17495 | 2.41%
1996 | 17891 | 2.26%
1997 | 18459 | 3.17%
1998 | 18925 | 2.52%
1999 | 19291 | 1.93%
2000 | 19817 | 2.72%
2001 | 20127 | 1.56%
(Maddison 2003: 63, 65).
Averages
Average real per capita GDP growth rate, 1948–1973: 2.34%
Average real per capita GDP growth rate, 1948–1978: 2.17%
Average real per capita GDP growth rate, 1979–1990: 2.05%
Average real per capita GDP growth rate, 1979–2001: 1.99%
In fact, Thatcher’s disastrous monetarist shocks induced the worst post-WWII recession seen to that point in Britain.
Even if one includes the pre-Thatcher stagflationary years of the 1970s and take the average for 1948–1978, this was 2.17%, and still higher than the average under Thatcher.
Indeed, the fall in real per capita GDP (and real GDP) in Thatcher’s years was just part of the general trend seen in the neoliberal era in country after country as average rates of growth fell compared with the post-WWII era. When full employment demand management was abandoned, growth rates slumped, precisely as you would expect, given that real output is driven by aggregate demand.
Finally, one can see the data above in graph form below. But you cannot see the important trends I have described above, and this is one of the reasons why graphs are not always a good way to present real GDP data.
BIBLIOGRAPHY
Maddison, Angus. 2003. The World Economy: Historical Statistics. OECD Publishing, Paris.
This doesn't have much to do with the post, but I was wondering if you have done one on why you subscribe to Post-Keynesian economics as opposed to Marxian economics. And also what your opinions are on New Keynesian and Georgian economics.
ReplyDeleteRegards,
Andrew Gorman.
On Henry George, he had some interesting ideas, but his economics focuses too much on land. E.g., secondary financial asset markets and bank credit are more important for a capitalist system, its growth and business cycles, I would say.
DeleteAs to Marxism, the strict form of classical Marxism is just wrong. Even though price is explained by the wage bill along with other costs of production, the Marxist labour theory of value is not right.
And the notion that the rate of profit has a tendency to fall in capitalism is empirically untrue.
As far as I have understood the ideas of Henry George are compatible with post-keynesianism. I think if George would have lived today, he would be a post-keynesian.
DeleteI would also be interested in your views on the performance of the UK in (and since) the 1980's compared to countries that did not adopt Thatcher-style policies (such as France).
ReplyDeleteEven Krugman has commented on the comparative success of the UK in that time:
http://krugman.blogs.nytimes.com/2013/04/08/did-thatcher-turn-britain-around/
How did the UK compare to, say, Australia, Sweden, or Norway, whose neoliberalism was less extreme? The latter nations did much better in social and welfare indices. I have not looked at their real GDP.
DeleteAs for France, it had its own form of neoliberalism by the end of the 1980s. Just because the ruling party was "socialist", it does not mean that country was not affected by the wave of market liberalisation post-1980.
I think the French socialists did a poorly timed stimulus about 1981-1983 when the rest of the world was depressed or pursuing austerity, and when France was trying to keep within the EMS, which led to a balance of payments constraint and speculative attack.
You are wrong there, Rob.
DeleteMitterand changed his strategy pretty severely in 1983
" Although there were two periods of mild economic reflation (first from 1984–86 and again from 1988–90), monetary and fiscal restraint was the essential policy orientation of Mitterrand's presidency from 1983 onwards."
And France didn't even have a recession(in Real GDP terms), and unemployment was lower in France in the 80's, when France had an expansionary policy, than in the 90's, where it was less expansionary.
LK, I was wondering if you have read the recent work of Yanis Varoufakis.
ReplyDeleteHe attempts to put the phenomena you have described so many times as the 'Golden age of Capitalism' and the subsequent era until 2008 in the context of two 'global surplus recycling mechanisms.'
In the golden age, or 'global plan' era, as he calls it, the United states ran trade surpluses, and used excess profits to fund productive investments in Europe (especially germany) and in Japan. Gradually the system unravelled as the US found itself running trade deficits. This corresponds to the Bretton woods era.
In the following 'global minotaur' era, the process was reversed and the US economy became the recipient of both a flood of imports and also massive capital flows.
These are sort of obvious points, but Varoufakis attempts to clarify by emphasizing the political decisions that made these surplus recycling mechanisms work.
Blog
The Global Minotaur for a popular audience. I have recently read this.
Modern Political Economics: Making sense of the post-2008 world more scholarly. I will probably read this as well.
also,
thought you might like to see the headline here!
http://www.forbes.com/sites/timothylee/2013/04/10/nobody-knows-if-bitcoin-is-a-bubble/
of all the days to write that!
Thanks for the link.
DeleteI do not think the US was investing "excess profits ... in Japan" (I could be wrong), but the rest of the ideas seem reasonable.
well, my rendition likely leaves something to be desired. I'm just beginning to study this.
DeleteOK she could have relied less on monetarism to control inflation, but that would have meant relying more on making compromises with trade unions so as to get wage restraint. And trade unions would have demanded more subsidies for clapped-out industries as a price. So would GDP have been any better?
ReplyDelete"And trade unions would have demanded more subsidies for clapped-out industries as a price."
DeleteWhat makes you think UK industry was clapped out?
In fact, one of the worst blows to British manufacturing was Thatcher's incompetent mismanagement of the pound, causing it to soar, which devastated British manufacturing, along with her monetarist-induced recession.
UK manufacturing industry in the late 1970s was exemplified by British Leyland, the car manufacturer with terrible industrial relations producing substandard vehicles. Manufacturing productivity growth during the 1970s was abysmal and picked up during the Thatcher years when inefficient companies were allowed to fail, rather than being subsidised by state grants or negative real interest rates. The data are analysed in this paper:
Deletehttp://www.nuffield.ox.ac.uk/economics/papers/1999/w24/CH3.pdf
Does Keynesian or post-Keynesian theory have anything to say about the quality of output as well as its quantity? The GDP growth figures in the former Soviet Union were very impressive, hiding the fact that a lot of what was being produced was of poor quality and unsaleable in the West.
"The GDP growth figures in the former Soviet Union were very impressive, hiding the fact that a lot of what was being produced was of poor quality and unsaleable in the West."
DeleteAnd, what, are you suggesting that UK manufacturing output in the 1970s was "poor quality and unsaleable in the West"? lol.
As for labour productivity growth under Thatcher, it was lower than 1949-1973, and one should also note:
"The improvement in productivity in the UK has apparently been confined to manufacturing, productivity in the economy as a whole having grown relatively slowly. However even in manufacturing the improvement in productivity has not been associated with any clear improvement in performance whether measured by output growth or by ability to compete in world markets, including our own domestic market."
Coutts, K. and Godley, W., 'The British Economy Under Mrs Thatcher', The Political Quarterly, 60:2 (1989), 137–52.
Moreover, if you think extreme free markets produce industrialisation in our day and age, you are deluded. E.g., the most successful recent industrialised economies in East Asia were created with massive state intervention, protectionism and industrial policy, if not a high degree of economic planning (e.g., MITI in Japan).
And, what, are you suggesting that UK manufacturing output in the 1970s was "poor quality and unsaleable in the West"?
DeleteOf course not. I was pointing out that the quality of UK manufacturing output, as anyone who lived through that era will attest, improved greatly in the 1980s. Your failure to answer my question about what Keynesian or post-Keynesian theory has to say about the quality of output as well as its quantity confirms what I thought the answer was: nothing at all.
Whoops. That's the administration link I posted. You can still download through it. But here just in case:
ReplyDeletehttp://www.2shared.com/document/hMHNXF67/Economy_Under_Thatcher.html
Don't be spoil sports and delete the file please.
Do you want me to delete this post and the one before?
DeleteJust leave that one up maybe...
DeleteThis is a very good paper on the real stats of the Thatcher era for those interested. And a lot of these stats have disappeared from the BoE so that makes it all the more important.
The stats clearly show Thatcher reversed Labour's economic decline - a remarkable achievement given the inflationary climate.
ReplyDeleteAnd aggregate demand emphatically DOES NOT drive real output - I thought we all realised this by now.
(1) The stats show no such thing. They show unemployment under Thatcher nearly at the level of the Great Depression and real output lower than 1947-1979 period.
Delete(2) If you believe "aggregate demand emphatically does not drive real output," you have clearly never heard of the extensive existence of fixprice markets, price administration and how businesses change employment and output in response to demand changes, rather than prices.