By Matthew Lynn
LONDON (MarketWatch) — The eyes of the world will be on St. Paul’s Cathedral in London today. Not since Prince Charles married Diana Spencer in the same magnificent setting way back in 1981 will so many people around the world tune into an event at the cathedral. The funeral of Margaret Thatcher, British prime minister from 1979 to 1991, will be a global media event on the same scale. Although, of course, a less happy one.
Her death has sparked a worldwide debate about her legacy — a debate that has confirmed her place as one of the towering political leaders of the last half-century.
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Thatcherism is both a word and an idea that still has resonance even 22 years after she lost power. That won’t be true of Blair-ism, or Clinton-ism, or Merkel-ism, whatever they might be. People are still fascinated by Lady T because she stood for something, and had the will and courage to fight for it, which is hardly a characteristic in abundant supply among today’s political leaders.
As she is laid to rest, it is worth asking how would she have guided us out of the financial crisis that has engulfed the world in the years since 2008. The answer? By ignoring the conventional wisdom, deciding what needed to be done, and then working out how to get there, regardless of whatever obstacles might be put in her way.
St. Paul's Cathedral: A British institution
St. Paul's Cathedral is the venue for the funeral service of former British Prime Minister Margaret Thatcher. The church has hosted momentous church, state and royal events since 1708. Delving into the cathedral's history.
What made Thatcher unique among politicians of the last three decades was her ideological certainty. You can approve or disapprove of her policies according to political taste. Certainly in the U.K. as many people hated as adored her, and her death is celebrated by some as it is mourned by others. Much the same will be true in other countries as well. But she knew what she believed, and she refused to accept that it was impossible to achieve.
That was the common theme that ran through all the great battles of her career. In the late 1970s, many people assumed the U.K. was condemned to permanent post-imperial decline. She turned that around. Britain had its ups and downs like most developed economies, but there can be no serious debate she left it in far better shape than she found it.
When people argued the trade unions couldn’t be controlled, she over-ruled them. By standing firm, organizations that had become over-mighty were bought to heel.
When the Argentines invaded the Falklands Islands, she refused to accept that it was impossible to mount a counter-invasion by sea thousands of miles away. The invasion was wrong, and the islanders wanted to remain British, so she ignored the risks and fought back.
And when foreign-policy experts argued the West had little choice but to appease the Soviet Union, she refused to accept that as well, standing up instead for the freedom of the Eastern Europeans and the Russians. To her, the Cold War balance of power was not acceptable — Communism was bad and it could be defeated. She had no time for Europe’s single currency either — and, looking at it from 2013, it would have saved the continent and the rest of the world a whole lot of trouble if she’d won that battle as well.
So how would Lady T have tackled the financial crisis? There are four places she would have started.
First, she would have overturned the conventional wisdom on the euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.4418% .
It is surely clear to everyone that the single currency has been a catastrophe for every nation that joined it. By constantly destabilizing the financial markets, it has damaged growth and investment everywhere. Most world leaders have been desperately trying to prop it up, fearful of the consequences of the currency falling apart. The IMF keeps throwing more and more money at rescuing the currency. But as Lady T saw of the Soviet Union, there is no point in trying to prop up a system that isn’t working.
Even if you can’t be sure how it will play out, it would be better to start taking it apart and replacing it with something that works better. She would argue for the euro to be amicably split up, and would have offered assistance to countries such as Greece or Portugal that need help to get themselves out of the mess. That would surely help people in nations gripped by terrible recessions, just as her support helped the Poles and others in the mid-1980s.
Next, she would have attacked debt, and latched on to innovative economic thinking.
The conventional wisdom says that we must fix the debt crisis by frantically creating more debt. It’s wrong — rather as the conventional wisdom of the 1970s that you could control inflation with wage and price controls was wrong. A few economists are starting to identify debt itself as the real issue. Thatcher would have championed their work, and put it in practice. Sure it would have created some pain on the way, but she would have argued that was worth it if the end result was a healthier economy.
Split the banks
Too-big-too-fail financial institutions are the equivalent of the nationalized monopolies of the 1970s: a drain on the economy and an affront to common decency. They need to be broken up before they can do any more damage.
Curb power of central banks
Lastly, she would have curbed the power of unelected central bankers.
Thatcher was always suspicious of bureaucrats who thought they knew best, and that is what central bankers have become. The central banks are engaged in a massive experiment in printing money, but they have no real legitimacy for it. Thatcher would have recognized that and started bringing the central banks under political control again.
True, we’ll never know exactly how she would have responded to the challenges of the 2010s as opposed to the 1980s. But Thatcher’s great ability was to change the political landscape. And that is not a quality that is much in evidence anymore, even though it is needed more than ever.