The 1970s saw the end of much throughout the Western world: the Vietnam War came to an official close, numerous other proxy wars were launched throughout the globe, and mainstream society began to adjust to the countless cultural revolutions of the previous decade. But for all their similarities, the world’s two brightest Liberal superpowers each underwent a series of minor economic crises of identity, with the decade serving as the worst performing for industrialized countries since the Great Depression. Low growth rates and oil shocks in 1973 and 1979 rang through the global order, reverberating to signal change in both the United States and the United Kingdom.
The United States experienced it’s last trade surplus in 1975, and the latter half of the decade witnessing the economy undergo a period of stagflation, in which both inflation and unemployment steadily rose correspondingly. Trust in government was at a low point following the Vietnam War and the Watergate Scandal under President Nixon, and the solutions attempted (broadening the money supply as a fiscal stimulus measure and the phasing out of Nixon-imposed price controls) had mixed impacts in the short-term. Great Britain experienced a parallel slowdown, as Butskellism (an economic strategy favouring public ownership and public/private sector collaboration towards a grand “Industrial Strategy”) saw a welfare state expand to become burdensome, reducing the competitive advantage Britain once held over West Germany and Japan.
The problems of the 70’s were well-analyzed and researched by regional think-tanks and experts, the majority of whom favoured different policies with a few consistent themes: greater liberalization of markets, reductions in taxes and regulation, and increased competition to foster innovation and growth. Each nation saw a champion of this cause rise in the form of Ronald Reagan and Margaret Thatcher, with their own plans and complex legacies that helped give shape to the world of today.
Ronald Reagan was elected on the promise of reducing taxes, promising a return to growth levels that existed in the Industrial Era before FDR’s New Deal. His combination of removing price controls from petroleum, slashing corporate and individual taxes, simplifying the tax code, investment into military spending, increases in government borrowing and lending, and federalization through delegating greater autonomy to the States served to raise spending levels, both individual and institutional, reinvigorate growth and boost employment. His economic policies, named under the sphere of Reaganomics, have been credited with leading to the second longest period of peacetime expansion in the history of the United States.
Margaret Thatcher was carved from a similar mold of conservatism, formed by a belief in free markets and small governments. More than Reaganomics, Thatcherism encapsulated the age in which she dragged the UK. By transitioning the national economic focus from managing unemployment to managing inflation, Thatcher prioritized monetary objectives, warring with unions and industrial strategists to achieve her objectives of reducing the tax burden, reducing state subsidization programs, and exerting control over monetary policy. Thatcher also embodied the toughness with which she governed, often centralizing federal decision-making around herself to deal with crises and bringing together a Britain once thought as ungovernable. Under Thatcher, the inflation rate fell from almost 15% to below 5% and growth rates exploded.
But each leader’s policies of small state governance had disenfranchising impacts as well. Reagan’s policies saw poverty rates rise, with trickle-down economics proving largely ineffective at spurring growth. Thatcher’s policies rose unemployment levels in the UK by over 1.5 million people in her first five years. The international aid programmes of each began to focus upon structural reform, with the IMF and World Bank becoming stronger in their urging for austerity programs in struggling states, which are nothing if not unpopular amongst citizens. Each leader’s brand of social conservatism, military hawkishness and economic libertarianism further polarized voters, and their support of traditional marriage, penalization of criminality and disdain for the needy served to create figures for the mold of Conservatism currently being shaken off today. But even in today’s environment, each leader would find a place: both were tough straight-talkers who utilized populist speech to mobilize supports and justify a values-driven agenda. Reagan’s pursuit of the Soviet Union and Thatcher’s disembowelment of trade unions were fuelled by rhetoric of “welfare chisellers” and scapegoating of an opposition often not capable of speaking for themselves.
The legacies of economic policy are not best measured in quarters, but in decades. Many credit Reaganomics for aiding in facilitating capital allocation to allow for the tech boom of the 1990’s, and Thatcherism saw a return of London as the world’s financial hub, prompting greater economic evolution past the age of manufacturing in Great Britain. Each nation saw their roles change to being greater consumers of goods instead of producers, enriching some and unemploying many. The policy themes in each platform are credited with influencing similar actions taken in both Australia and New Zealand, ensuring that the world’s Anglo-Saxon colonial powers all remained allies on similar footing moving forward.
The economic objectives of each (lowering tax rates and reducing regulation, restraining government spending and noninflationary monetary measures) spurred growth rates and reshaped the economic identity of each nation for years to come. However, their legacies lie not in their success at growth, but in the side-effects enacted by these policies. Milton Freidman, an economic advisor to both cut from the mold of the Chicago School of neoliberalism, admitted that trade deals and deregulation devastated the working poor across the globe. Increased inequality, exacerbated by falling wages and increasing unemployment, are now what defines the economic legacy of these two leaders who each managed to resurrect their countries from struggle. Each was followed by conservatives who doubled down on their models and fuelled further inequality and the push of boom and bust bubbles. And each dismantled systems to lay the groundwork that gave rise to today’s modern populism currently sweeping the US and the UK. Trickle-down indeed.