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Pattern matching with Maggie
April 15, 2013
Margaret Thatcher was without question the most powerful politician of my lifetime – powerful in the sense of creating strong emotional association or pattern matching in so many of our minds.
My pattern match has been reactivated over this past week and the emotion I have is of excitement and vindication.
So this is my Maggie pattern match story. You need to know that in the 1970s I was in my twenties, I had completed a Masters in Economics at the LSE and was then working in the Treasury as a young economist. Oh yes, I was a high flier then.
At the LSE I was exposed to a revolutionary idea - that government could not do everything but one thing that they could do was control the money supply. And that is what they should do and then in time inflation would adjust and indeed all kinds of behaviours would adjust - because they would just have to.
And then later in the Treasury I saw money supply running riot, I saw the leading trade union bosses of the time (High Scanlon, Jack Jones, Joe Gormley) trooping in and out of number 10, all the world like Mafia bosses offering protection against something unpleasant that might otherwise just happen.
At the Treasury I remember briefing Denis Healey once. I was doing the world economy forecast then and he was visiting Helmet Schmidt in Germany and he wanted me to brief him on reasons why Germany should reflate and print money just like the UK was doing. I remember thinking that Healey was a fool and that instead we should be asking Schmidt what we should be doing.
My next job in the Treasury was advising on industrial policy. That was basically about dealing with massive requests for subsidies for failing industries. I remember in particular dealing with a big request for the shipbuilding industry on Tyneside and Clydeside and being asked to evaluate the British Leyland Metro project. That was a new car that was going to save the car industry. I could see quite clearly that it was just money down the drain and I politely briefed accordingly. Of course I was ignored. It was obvious to anyone who looked, that these industries were finished and there was nothing that any government could or should do about them and to pretend otherwise was delusional.
I remember listening in on interminable discussions of economic policy in the Treasury and all of it revolved around what was the right value of sterling given that we had an Incomes policy that kind Mr. Scanlon et al would be delivering for the nation. Now it does not need a economics genius to know that a forex value is simply the price of one currency in terms of another and that it would be impossible to set the value for sterling if you are letting the amount of sterling (ie the money supply) go through the roof. Yet that is what all the wise birds in the Treasury were apparently saying.
You're getting the picture? I could see quite clearly that economic policy was mad and everybody was talking rubbish.
And then Maggie came in. Early on she abolished exchange controls. So people could be trusted with their own money. And then she began a really tight fiscal policy with money control and the recession bit hard and 364 economists wrote to her telling her that she had to change tack. I remember thinking at the time I would not have signed that letter. Not that they asked me.
So what Maggie did was exactly what I thought she should do against all the odds and against all that the conventional wisdom thought. And she was right and I was right and everybody else was wrong. No wonder I fell in love with her just a little bit.
She was a revolutionary and anti-elitist and those who hate her cannot see that. And the idea that the conventional thinking in most things is probably wrong and just repositories of vested interests – take mental health or climate change or bailing out the banks right now for example. Well who could argue with that?
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