(David Henderson further exposes Krugman's dishonesty in posts here and here. Because of the intellectual environment in which he operates, Krugman does not have to worry about telling whoppers, as they fit the narratives that the people who surround him hold. Why bother with the truth when the narrative is more popular?)
Krugman no doubt would argue that because the results of the Hoover presidency saw a lot of business and farmer liquidation, that Hoover somehow must have been a closet Mellonite. After all, had Hoover actually intervened in the economy, then it would not have fallen so far, right?
Actually, this post is not about Hoover. Instead, it is about Krugman's recent blog post on Margaret Thatcher and Great Britain. Krugman asks whether or not Thatcher's policies actually had any positive effect on the British economy and concludes in a backhanded way (of course) that they did not.
Krugman's "proof" is shown on two graphs, the first showing Great Britain's GDP relative to France from 1950 to the present and the second a comparison of unemployment between the two countries from 1978 to now.
Contrary to what Krugman claims, the British economy relative to France did in fact see a GDP jump in the early 1980s following a steep recession. And while Krugman admits that when Thatcher took power in Britain in 1979, the country had "huge economic problems," but does not go on to explain what was the situation: 20 percent inflation, a huge and bloated government sector, and numerous nationalized industries better known for strikes and shoddy products. Andrew Sullivan writes:
To put it bluntly: The Britain I grew up in was insane. The government owned almost all major manufacturing, from coal to steel to automobiles. Owned. It employed almost every doctor and owned almost every hospital. Almost every university and elementary and high school was government-run. And in the 1970s, you could not help but realize as a young Brit, that you were living in a decaying museum – some horrifying mixture of Eastern European grimness surrounded by the sculptured bric-a-brac of statues and buildings and edifices that spoke of an empire on which the sun had once never set. Now, in contrast, we lived on the dark side of the moon and it was made up of damp, slowly degrading concrete.Krugman political logic demands that once a politician takes office, the economy must immediately improve, with the rate of unemployment falling. Oh, I forgot, that didn't happen with Barack Obama's presidency, but Krugman has been willing to give a myriad of excuses for his beloved president. (And don't forget that Goldstein always has lurked in the background trying to destroy the economy and undermining Obama's efforts to subsidize more "green" industries, reflate the housing bubble, and print money out the wazoo.)
Indeed, we do see an upturn in the British economy during the early-to-mid 1980s with British unemployment falling. (The interesting thing about the unemployment graph is that during the 1980s, France was governed by a socialist government, yet unemployment also rose in that country during the early 1980s. I guess Francois Mitterand must not have believed enough in government.)
Krugman also fails to point out something that is painfully obvious in the first graph, and that is the rapid decline of the postwar British economy. Now, that should surprise any Krugman fans, given the British governments (and especially the Labor governments that Krugman so favors) were seizing industries, nationalizing medical care, and printing lots of money. The government still rationed food into the mid-1950s despite the fact that the other economies in Europe already were well on the way to recovery even though many countries had received much more physical damage from warfare. (In 1976, Great Britain received a bailout from the IMF and "60 Minutes" asked in one episode, "Will there always be an England?")
Furthermore, as invariably happens under socialism, capital deteriorated, the society became even more stratified, and many enterprising Brits left the country in hopes of doing better elsewhere. The numbers are clear, and one can see steady progress upward after Thatcher took office (with the exception of the 1990 recession, which also hit the USA).
Yet, Krugman wants us to believe that most likely Britain would have been better off with the old order in place, or at least wants us to think that nothing improved in the country until the Blair government took power in the mid-1990s. (And, don't forget that Blair did not follow his labor predecessors in nationalizing everything and reimposing socialism. His policies were not much different than those of the Tories, something that Krugman would ignore, of course.)
Like all strong politicians, Margaret Thatcher had a mixed record. Yet, she steered Great Britain away from an economic course that was strangling its once-magnificent economy. Great Britain is not the world power it was more than a century ago, but neither is it spinning off into irrelevancy as it was in 1979. That Krugman cannot recognize that fact should not surprise any reader.