Hayek’s Thatcher and the vultures of India First

Mehru Jaffer

Some of the good, bad and ugly things that Margaret Hilda Thatcher indulged in as Britain’s longest-serving and only woman PM were inspired by Vienna-born Friedrich August Hayek. The economist, philosopher and Nobel prize-winner lived at the turn of the last century when monarchies were being torn down and crowns dribbled like a football in the interest of the maximum good for all in society.

Since monarchies succeeded in fattening only a handful of elite over the centuries, the search was for a more benign community leader to replace disgraced monarchs. This remained a huge question in Europe throughout the 20th century when communism and fascism competed with each other to warm offices left vacant by monarchy. That struggle is similar to solutions sought now to better safeguard the interests of large majorities who continue to suffer because of ‘people-unfriendly’ ways practicsed around the world in the name of democracy, socialism and capitalism.

Hayek’s concern was that socialism ends in totalitarianism. The experience in Russia saw communism lead to dictatorship. In Germany, Adolf Hitler’s ‘national socialism’ culminated in fascism. In 1938, Hayek got British citizenship after he fled Austria, annexed by Germany. He wanted to be far away from the murderous government of Hitler. While in London, he found that English socialists wanted the government to take over every aspect of the lives of citizens like Hitler’s national socialism had done in Germany.

To warn readers in England against allowing their lives to be so totally controlled by the State, he wrote The Road to Serfdom in 1943 in which he argues that to have no say in the economy is to surrender all of one’s life to the State; this is another form of totalitarianism. The Nobel prize was given to Hayek in 1974, citing his penetrating analysis of the interdependence of economic, social and institutional phenomena.

Thatcher discovered the ‘free market thinker’ in 1944. The Constitution of Liberty is what she had believed in and in 1984 Hayek sent Thatcher a leather-bound edition of the same book.

By the time she got the top job in Britain in the late 1970s, the country was falling apart due to endless labour strikes. Students did not attend school because bus drivers were on strike. Work came to a standstill due to constant power shortage. The country stank due to garbage piled up in public places and striking workers refused to pick up dead bodies from morgues.

That is when Thatcher was brought in with the promise to work hard and to balance the books.

 Mesmerized by the neaon lights of London, many parts of the world followed Thatcher's brash way 

Thatcher’s solution was to do exactly the opposite of what the Labour Party had done. So far so good. That precisely was the need of the hour. Her answer to inflation was a sharp cut in spending. The solution was to break the back of those who were on strike, but without addressing the genuine problems of workers. The triumph came once the national union of mine workers was heartlessly destroyed.

Hayek advised her that the power of the trade unions was the main reason behind all economic difficulties, that privileges enjoyed by trade unions were the chief source of Britain’s economic decline.

With loud demands of the majority asking for a share in the boom now busted, the privileged few were quick to grab a totally disproportionate amount of power and wealth under Thatcher’s privatization policies. She converted the country into a capitalist haven for financiers. Manufacturers were told to take a walk.

With unions gone, public utilities privatized, all welfare benefits brushed aside, she got financial vultures to take over and put everything up for sale. Mesmerized by the neon lights of London, many parts of the world followed Thatcher’s brash ways.

Even as she agreed with Hayek on undue powers invested in the hands of trade unions, the loud and divisive Thatcher refused to encourage Hayek’s theory to have free markets play by the rule of law. Hayek died in 1992 and would have been genuinely saddened to see central banks allowed excessive money and credit, and the false prices of real estate that left many more homeless, and a few with multiple homes. The worse aspect of this free market and free spending is when governments volunteer to bail out busted banks, tumbling stock markets and false businesses with people’s money!

That is an economic legacy worth remembering on the eve of a general election in India when some self-styled demigods promise the moon to voters with slogans like India First.

The question is, why not Indians First?  

This story is from the print issue of Hardnews: MAY 2013