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No Turning Back


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In the West, the idea of having the state act as a central economic planner gained enormous prestige after winning World War II. It didn’t seem to matter the defeated powers had used this same method of socialist warfare with terrible results.  With the United Kingdom leading the way, developed nations launched themselves down the social-democratic path.

Each time the socialists conquered some new «social» right, the conservatives accepted it as an unassailable minimum, part of an «inevitable tendency.» And so, each new social change always went in the same direction. Things might change, but only in the direction of more socialism and less liberty, there was no turning back. Sir Keith Joseph called it the «ratchet effect,» because there was only room for movement in one direction.

In the United States, President Nixon, a supposed conservative, went as far as to claim: «Now we are all Keynesians.»

Abandoning economic freedom, however, did not redistribute progress and wealth, but only inefficiency and misery. And while the British suffered the consequences of an economy increasingly similar to the Marxist nightmare, West Germany was living out the opposite experience.

It is said Germany enjoyed an «economic miracle» because, as everyone knows, the Teutons are disciplined, efficient and hard-working.  But on the other side of the Wall, East Germans were stuck in complete economic stagnation.

In fact, the miracle had an explanation. Ludwig Erhard, named Director of Economic Affairs by the Allies, ignored what they told him and made the surprise announcement that he was eliminating all price controls. By de-regulating the economy, Erhard allowed the free market to rebuild Germany. All it took was a simple signature to eliminate the breaks oppressing the German economy. And everything started working in the right direction again.

On the other hand, the United Kingdom discarded economic common sense to such an extreme that in 1967 Herman Kahn predicted the U.K. would share last place in European standard of living with Albania come the year 2000. And, unlike Paul Ehrlich, one cannot say Kahn is known for his fatalism.

But they didn’t have to wait that long. Just eleven years later, the British Isles descended into what was called the «Winter of Discontent.» Ambulances were on strike. Cleaning services were on strike. Even grave diggers were on strike. Conservatives did nothing more than retreat further into their inferiority complex, but the unions were never satisfied. Meanwhile, the economy drowned in misery.

Faced with such an embarrassing situation, the British elected an admirer of Hayek to be Prime Minister. Thatcher didn’t simple slow the socialist advance but, with heavy blows, she stopped it cold.  And she designed machines that worked in the opposite direction than what was then the norm. For example, she privatized more than a quarter of a million government subsidized housing units. She privatized the gas, coal, oil and telephone industries. And she did it by putting them in the hands of millions of small shareholders. That way, if one day the socialists want to renationalize them, they wouldn’t be able to meet with four multi-millionaires and present the proposal as a win for the poor against the economic elite. They will have to go house to house, eliminating the stock and real estate savings of millions of individual owners.

It is a shame that today we are back where we started, surrendering to a group of people whose ideas were already refuted a century ago. Defeating them, as Thatcher and Erhard, among others, demonstrated, is easier than it seems.

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