Friday, April 12, 2013

The Iron Lady: A woman of her time

Former prime Minister Margaret Thatcher legacy (1979-1990),will be hard to forget as times goes by. Although she did not focus too much her attention about Latin America, but after she decided an unnecessary war with Argentina(1982), with it, she sealed her vision about the British role for years to come. Quite remarkable is that she probably did not expected to get that outcome in that way. How come? a.- The seventies were rough time for Great Britain. The old fashion socialism of Former Prime Minister Harold Wilson(1964-1970,1974-1976) ,led the country to a self diminish path which required strong leadership to turn things around. Those were years of ideology, and as Guy Sorman has said “ideology get to more ideology ”, which what Ms Thatcher message was about. To confront the threat on freedom arising from an increasingly invasive State , the answer was stronger markets. The weaker the ability the markets to solve the allocation of resources and the improvement of the welfare community, the stronger becomes the state which take its place. For this purpose she had Strong allies, like Ronald Reagan President of the USA(1981-1989)and clear mind inspirer like M Novak. Deregulation, more flexible labor markets , privatization and competition were the key to what became a counter Keynesian revolution. b.- Free markets policies in Europe in the mid seventies , looked like very unorthodox approach for improving welfare levels. Europe created the welfare state, based on high taxes , fiscal expenditures ,subsidies, regulations and generous programs for public health. Those were the years of Olaf Palme, Willy Brandt , Aldo Moro ,Francois Mitterand. In such scenario, to try the alternative path it was like moving backward the history clock . However the unexpected happened, and It was even claimed early in the nineties that the end of history had been reached .Free markets policies seemed to settle down as “the “ alternative .- Did it all worked out the way it supposed to ?. The outcome is not that much negative. Since 1990 UK economic growth was higher that its European partner, and unemployment is currently lower than the average rate for the EU(12%) .Besides, in the years 2000, Germany made reforms to reduce the distortion of the welfare state, to improve the incentives to look for jobs . The winds of prosperity has arrived to new places throughout globalization , which is the direct result of private sector expansionary strategies. Latino America did not stay either away from the wave of reforms. Following its external debt lost decade (1980-1990), deep reforms were made according to the new policy framework: The private sector instead of the State as the engine for growth. The outcome so far, does seem to fit the minimum higher growth, less unemployment and poverty, unthinkable achievements in the beginning of the nineties. Latin America economies look forward to what come next, instead of feeling sorry for what it did in the past. Does all this means that free market policy and Reagan- Thatcher legacy, has definitely become the new paradigm, like they dreamed ?.Not necessarily so. The Financial crisis of 2008 indicates that deregulation is that much dangerous as it is regulation, specially in the extreme sides. There is a middle ground between them, which is the challenge of policy makers to find out. Furthermore, markets energy need an institutional framework to get its way through for welfare improvement , otherwise it can be very close to become self destructive.