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KOIZUMI VICTORY
Japan's 'Thatcher' moment?
Published 22nd September 2005
By DAVID HOWELL
LONDON -- Prime Minister Junichiro Koziumi's smashing election victory could
give him the same kind of political power as that which fell into the hands of
British Prime Minister Margaret Thatcher in the 1980s. Should he therefore
follow the Thatcher recipes and methods for structural economic reform, which
had such an electric effect on the British economy and from which the British
are still benefiting enormously today 20 years later?
Thatcher used her swelling political majority to best advantage, and showed
great courage and conviction in overcoming resistance to change, some of which
was quite violent.
But it is as well to remember the weaknesses and ultimate failures in the
Thatcher approach as well as the successes, since in the end these caused
unnecessary bitterness and devalued her achievements in many people's eyes.
These problems could have been avoided.
The biggest weakness was the failure to convince the broad public that her
reforms would bring benefits to all, not just a lucky few, and that those who
had their lives disrupted by change would be properly cushioned and cared for,
and not just flung on the scrapheap by the harsh workings of market forces.
In reality, and in the end, years after Thatcher departed from office, these
early reforms have indeed probably benefited the vast majority of British
people. But at the time that prospect was not at all clear, nor did the language
and policies of the Thatcher reform era give much comfort to a lot of very
frightened workers.
The best course would have been to concentrate more heavily on spreading the
benefits and wealth of all the privatizations, the new enterprises and the
deregulation that went on, to the whole population, and to do so not by bigger
welfare handouts -- the socialist way -- but by wider capital ownership, through
assets, pensions and property, to all families. The declared aim should have
been to turn earners into owners, to abolish the slavery of over-dependence on
weekly wages and to give people down to the humblest level the dignity of some
personal security and savings.
It could be argued that to some extent this is what the Thatcher reforms tried
to do. Millions bought their own houses from the state. And the number of direct
holders of stocks and shares in Britain rose from 3 million to 9 million during
the Thatcher years, although most of these shareholdings were small and
vulnerable -- and mostly in the privatized industries, such as electricity, gas
and telephones. Not all these shares did very well and some holders sold in
disillusion, although others, such as the lucky holders of shares in the
privatized National Freight business, built up a very nice sum.
But generally the spread of the new prosperity was limited. Most people
continued to feel that their only chance of a better living standard was through
pressing for higher wages and salaries, while resentment built up that the real
wealth was going into the pockets of a few financial operators and "fat-cat"
directors.
The message from the Thatcher proponents thus became far too ideological and
insensitive. Being told that markets were the best solution to everything and
that the judgment of the market would determine everyone's fate was not at all
appealing. Nor was it convincing.
Too many Thatcherite experts seemed to forget that markets only work in the
proper social and light-regulatory context. They forgot that the greatest
postwar European miracle, the amazing German economic recovery under the
guidance of the financial genius Ludwig Erhard, was labeled the social market
economy, not just unvarnished market economics.
And they forgot that markets do not necessarily end up in equilibrium but can
either become extremely volatile or be replaced by monopolies and cartels, as
Adam Smith, the father of modern liberal economics, forcibly pointed out long
ago.
All this played straight into the hands of critics and opponents, who speedily
labeled the Thatcher philosophy as greedy and self-interested and urged a return
to dependency on the government and the state to solve all problems.
Luckily, by the end of the 1980s the whole world was changing, and although in
Britain there has been some back-sliding to the bad old ways, the bulk of the
Thatcher legacy remains intact. So perhaps the answer to the question for
today's big political winners -- in any country -- is, yes, follow the Thatcher
example in terms of courage and conviction, and challenge the narrow and
self-serving arguments of those who resist. But remember and care for the
immediate losers, and remember to spread the eventual benefits as widely as
possible to all levels of society. Above all, it is worth remembering at such
moments of political triumph a dictum of Winston Churchill -- "in victory,
magnanimity."
If Japan follows these paths it will emerge a happier and more united nation
from the testing processes of reform -- and it will have learned something
worthwhile from Britain's experience.
David Howell, a former British Cabinet minister, is a member of the House of
Lords.
The Japan Times: Sept. 22, 2005
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