Margaret Thatcher Won Many Battles, But Thatcherism Lost – The Western Societies She Wanted To Turn Around Believe In State Programs and Most of All Continue To Spend On Unaffordable Entitlement Programs

By Paolo von Schirach

April 14, 2013

WASHINGTON – Margaret Thatcher is on the cover of The Economist with an appropriate title: “Freedom Fighter“. The British moderately conservative news magazine enthusiastically endorsed her politics, her policies and –most of all–  her sincerely held (and fiercely fought over) beliefs in individual freedoms as the cornerstone of any modern, enterprising and ultimately  prosperous society.

There is No Alternative

Yes, leaving aside individual policies and her (often) strident style, Margaret Thatcher was a crusader pushing forward a freedom agenda. And she was mostly right. She was right in pushing as hard as she could, without any compromises, against socialism, against statism, against the trade unions, against the concept that nationalized industries can actually perform. She pushed and pushed and pushed. And to her many critics she said again and again that: “There is No Alternative”, (the TINA principle). Of course there were alternatives; there are always alternatives: via compromise, wishy washy measures, pull back. But she did not relent.

Thatcherism lost

And she won major battles. But these were not personal victories or party victories. Britain as a country gained enormously because of the dramatic policy changes she pushed. Lower inflation, lower taxes, higher productivity and a lot more. Still, while I join The Economist in praising Mrs. Thatcher, I would like to state clearly what the distinguished  magazine vaguely mentions, without stating it properly: Mrs. Thatcher won many battles; but ultimately Thatcherism, while significant and influential in her days, lost. She won many battles; but she lost the war. The Economist tells us that we need more Thatcherism today. But this is mostly because we have hardly any left.

Whatever may bee happening in her own Britain under a mildly conservative coalition, statism and and various form of socialism are triumphant across Europe and most of the West, including once upon a time rugged, capitalistic America. True, we no longer talk about nationalizing this or that as the golden recipe for shared prosperity; but we do talk, loudly, about the need to preserve –at any cost– absurdly unsustainable entitlement programs that have caused the current, unending, fiscal crisis.

Western societies are now entitlement societies

Western societies are now now entitlement societies. The old idea that income support programs were supposed to provide only some additional means for the poor has now been transformed into the almost universally shared  idea that the state has to provide and guarantee income security and a lot more to all its citizens, especially retirees.

Thatcherism was about freedom, But the price of freedom was self-reliance: “We promise no interference. You are free to engage in enterprise without silly limitations. But you take care of yourself. And that would include that you save for your own retirement“. But that’s not where we are today. All Western societies are wedded to the idea that entitlements are essentially birth rights. Entitlement societies are about costly guarantees provided by the state, only partially funded by massive taxation (the rest comes from debt) that diverts scarce resources from productive investments to transfer payments.

Little thought is given to the fiscal and economic impact of these massive transfer payments, funded through high taxes and borrowing. In truth, they are the primary cause of the huge deficits and massive debt accumulated by most Western societies. 

The simple truth is that aging populations (and consequently larger and larger numbers of senior citizens) caused the relentless growth of income support programs that now cost too much. They are essentially unaffordable. In the best case scenarios they severely weaken the economy, (think of the US and Japan). In the worst case scenarios, (think of Italy, Greece and Spain), they bring about financial ruin.