Economic boom fuels Thatcher election bid. Britons seem to accept that high joblessness is the price of prosperity
Our world is a huge laboratory for testing various political, social, and economic systems. This week there was no doubt about whose experiment was attracting the most interested attention. All eyes were on Britain. Margaret Thatcher's decision to call a June 11 election focused general attention upon the novel fact that Britain, long the economic invalid of the Western world, has been converted into a leader. It is leading in improvement in productivity. It is in the eighth month of rising employment. Business is booming. Interest rates are down. The pound sterling is up.Skip to next paragraph
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The English pound was once worth nearly five United States dollars. It sank in recent years almost down to a single dollar. This past week it was above $1.66 and still climbing.
Besides, Britain's overseas trade and the national budget are both in balance. The United Kingdom of Great Britain and Northern Ireland is again solvent, in the broadest sense, for the first time since World War II, and some might say since World War I.
France was once the economic marvel of the post-World War II world. West Germany recovered from the wreckage of war and defeat with the speed and success one expects of hard-working Germans. Since Mrs. Thatcher took over in Britain and turned the rudder away from welfare statism and away from a system in which the first priority of government was full employment, she has paid a price many others would find unacceptable. When she took office, British unemployment was at 4.3 percent and 1.1 million workers were listed as being out of work. The latest figures show 3 million, or 11 percent, out of work.
The experiment may not prove, but it certainly suggests, that full employment and economic vitality are incompatible. Mrs. Thatcher abandoned full employment as the first task of government. Her reward is a vibrant, lively economy - and the prospect of winning her third election. The opinion polls all seem to show that the British public, having long been acquainted with high employment coupled with economic decline, have concluded that economic prosperity even at the price of high unemployment is the better choice, or the lesser evil.
Some of this British economic marvel is based on non-repeatable measures. Mrs. Thatcher has sold off some $30 billion worth of state properties and enterprises to the private sector of the economy. Once she has sold off all the railways and coal mines (which she intends to do if reelected) she will soon run out of properties to sell. That will make it harder to balance her budget. It will have to be done out of taxes. But balancing her budget is a high priority for her. That is one reason the British economy is more interesting, and more admired by others than the far bigger but less stable US economy. One observer has commented that Mrs. Thatcher is showing how to make Reaganomics work.
The contrast between the US and Britain is important. President Reagan has a dangerously unbalanced budget at home and a horrific imbalance in foreign trade. Many see a revival of higher inflation and a continued weakening of the US dollar. Anyone who transferred his assets from dollars to pounds a year ago would be better off today by some 40 percent.
All of which explains in part why Soviet leader Mikhail Gorbachev spent so much time with Mrs. Thatcher during her recent visit in Moscow. He is trying to revitalize the Soviet economy. He has more to learn from her now than from anyone in Washington, or anyplace else for that matter.
For the US, the lesson is that putting the brakes on welfarism and cutting taxes is good for an economy, provided that you don't saddle it with a massive arms buildup and refuse to raise such taxes as would be necessary to balance the budget.
But this week Mr. Reagan had other things on his mind. The testimony of prominent actors in the Iran-contra affair was poured forth upon the record of a joint congressional committee investigating the matter. The opening disclosures made it clear that the person closest to the President in foreign policy, his own assistant for national security affairs, was deep into both operations.
It is a basic assumption in Washington that somehow everyone involved will manage to keep the affair from actually crossing the threshold into the Oval Office and thus interfering with a normal completion of the President's term of office. But one begins to wonder, after so much testimony that those involved in selling guns to Iran and putting the profits into the jungles of Nicaragua assumed they were carrying out presidential wishes.
Can it be that Mr. Reagan can be proved to have encouraged illegal acts by members of his official household? This week it is only a question. Perhaps we will know the answer in another week or so. Keep watching. This could become a constitutional crisis. Meanwhile, Mr. Reagan has little time left from his troubles at home to notice or draw conclusions from the fact that his good friend Mrs. Thatcher is having her hour of prominence, and is probably headed for a brilliant election victory.
Not since the first industrial revolution ran out of steam have the British Isles made such interesting economic news.