“We want a free economy, not only because it guarantees our liberties, but also because it is the best way of creating wealth and prosperity for the whole country”
Margaret Thatcher [1]
The liberal economy, so gloriously introduced to us by Ronald Reagan and Margaret Thatcher, may have reached its final destination. The deregulation of the market started well 20 years before I was born, and has seemingly been the guideline for future prosperity until recently. Now, it seems like the pendulum has turned. During the last three years of crisis, very few countries have seemed to govern in favor of tax cuts and globalization.
This period is likely to be more than a regular bear market and may very well be the end of the Reagan-Thatcher era.
Photo by Library of Congress on Unsplash
The Cause of Death
A free market will inevitably swing. As you may have noticed, we now find ourselves in quite a downturn. Global inflation is at its highest for well above 40 years, and the central bank has the ungrateful job of reducing our buying power drastically. Almost as a natural instinct, the system itself seems to get the blame.
Let’s wind back to the age of John Stuart Mill, one of my personal favorites within philosophy. Mill lived at the end of the 19th century. Americans were strongly affected by a gruesome civil war, and the world suffered under the Long Depression. Like many other grand thinkers, he was perceived as an outsider at his time. This was not necessarily because of his idea of what an ideal society looks like, but more due to his belief in an ideal society in the first place.
It was at this time we saw the beginning of a development towards a global market economy. At the start of the 20th century, people even began to become a bit optimistic. Of course, this optimism stopped after just a few years. World War I started, closely followed by World War II. Following these tragic years, the optimism and the idea of an ideal society was rediscovered.
The pace of the economic growth was immense, but the arguments about how to share this wealth most efficiently escalated. It turns out, our visions of an ideal society are not necessarily equal!
The world then turned neoliberal around 1970, and the Reagan-Thatcher era began. If we are to name a specific end for this era, it may well be the recent Conservative Party conference.
Liz Truss was met with huge criticism from her own party after having proposed a budget inspired by Reagan-Thatcher, involving tax cuts, deregulation, and cuts in public spending.
The recent development makes it appear like she will have to discard most of these ideas for approval by her own party. We can only imagine the changes needed to get it accepted by the parliament in the end.
So what are we left with, after 40 years of this era? An era defined by lower taxes, privatization, and globalization. Never have so many people lived a better life. At the same time, 1 billion people have escaped extreme poverty, and even more people have avoided the faith of being born in extreme poverty. On the downside, however, we have experienced more climate change issues and increasing differences between the rich and poor.
Photo by Nick Fewings on Unsplash
Aftermath
What will the next era bring? It is difficult to call, and most of us will by instinct assume that life will continue to be like it has been. The people in the 19th century were wrong in their pessimism about the future, and there is no definite answer to what is next for us either. But we do have some leads.
Rana Foroohar writes in Financial Times about her chat with an official of the Biden administration: “(The official) told me that many chief executives are now coming to Washington and asking for “a signal from government – where should we invest? Should we be in Vietnam or Mexico? Which sectors do you want us in?”[2]
Businesses seem to position themselves for a market with greater state control and economic constraints. It’s doubtful that history will repeat itself with a planned economy or a fundamental national conservatism, but we will definitely see something different from what we are having now.
It may seem like the Covid, followed by a war and a financial crisis, all together ended an era. The new wave seems to request massive governmental involvement to solve pressing issues like pollution and an increasing number of pensioners. As I discussed in an earlier article, it may not have helped the idea of a free market to make Russia and China vital trade partners either.
Welcome to the death of the Reagan-Thatcher era.
It is our mission to decide what comes next.
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