Saturday, September 7, 2013

Glass Ceiling, Iron Lady.

This is the third in a series of posts, about where the State of California is headed.  The first is here, and the second is here.

In the first post, I took a look at the Nordic countries of Europe, and how their high quality governments arose out of a history of difficult geography and benign history. I noted that California has a similarly difficult geography and benign history, and that California has dealt with those challenges through a series of "big projects," the ultimate example of which is California's Master Plan for Education. Yet while both the Nordics and California have enjoyed subsequent economic success, they have developed very different levels of trust in government. To try to understand why California's culture has developed differently, I looked for a foil to California, a place with technical sophistication and high levels of education that is nonetheless suffering from economic stagnation -- a description that fits Japan.

In the second post, I took a look at Japan, and how its stagnant economy has been hobbled culturally. I drew attention to the Japanese disdain for entrepreneurs. Even more importantly, I pointed out its yawning gender gap. I found this surprising given Japan's long term cultural flexibility. However, I argued that the Japanese repression of women seems to reflect a longing for an arcadian rural society. I pointed out how England shared the Japanese preoccupation with so-called romantic country life. I argued that the English, unlike the Japanese, have self-critically examined the consequences of this ideal, and that the English had tempered their views by the late 1970's, when Margaret Thatcher, chemist by training, Education and Science minister in government, became Prime Minister.

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Surrey docks, September 7, 1940
Image available at http://tinyurl.com/l9mtdsu
In some respects, it is hard to pick "winners" from World War 2.  But it is clear who the losers were, and the British Empire was one of them.  Much as the collapse of the Western Roman Empire was foretold by the sack of Rome by Alaric in 410 AD, the Blitz of London in 1940 shocked the British and signaled the acceleration of Imperial decline. Despite eventual American entry into the War, the UK found itself on the brink of bankruptcy in 1945, and a harsh postwar austerity followed.

However, the UK did not stop bearing the costs of maintaining international order. Unlike the Nordics (and, effectively, since 1945, Japan), the UK continued to expend substantial sums on defense, while the Japanese and Swedes spend far below the average to this day. The UK, like the US, remained committed (most of the time) to collective defense through NATO, and to collective security through other international organizations.

 Image available at http://tinyurl.com/kn87o24
By the 1970s, though, the UK economic situation had become dire. Wages were amongst the lowest in Western Europe -- half those of the West Germans, and only two-thirds of the Italians -- and educational achievement lagged behind a series of other industrialized nations. Massive strikes became common. The UK's "Winter of Discontent" in 1978-1979 is hard to imagine today, but it was a place where Chris Mullin's A Very British Coup was a plausible, if frightening potential future for the "Sick Man of Europe." 

Into the maelstrom stepped Margaret Thatcher as Prime Minister. Thatcher herself said, as late as 1970, that "[t]here will not be a woman prime minister in my lifetime - the male population is too prejudiced." This was a keen observation from a skilled observer; it was also wrong. The culture of the UK changed, rapidly, under pressure. 

It is difficult to understate how significant a change it was; in 1832, the UK had taken the vote away from women. While the US record on women's rights is not exactly stellar, Jeannette Rankin of Montana was serving in Congress before women in the UK even had the right to vote.  Julian Fellowes' Downton Abbey (a short clip is below) illustrates the UK upper class ... backwardness, for lack of a better phrase, right up to the start of World War 2.



Thatcher's policies in office were conservative -- essentially, to promote low inflation, the small state, and free markets through tight control of the money supply, with privatization of state-controlled businesses and constraints on labor unions.  The success of her efforts is attested to by the fact that most of the major UK political parties today accept the approach that Thatcher's government installed.  A cultural consensus formed regarding Thatcherism, which spread across the political spectrum. Tony Blair, in his autobiography A Journey, argued that the UK "needed the industrial and economic reforms of the Thatcher period ... much of what she wanted to do in the 1980s was inevitable, a consequence not of ideology but of social and economic change."

However, while Thatcher's policies were anything but socialist, her government did not challenge the existence of the National Health Service -- the UK has had what Californians would characterize as "Medicare for All" since 1948.  Just as a consensus in the UK formed around the economic policies of Thatcherism, so too had a consensus formed concerning health care. It is easy to underestimate how important portable health care is for women (or, indeed, any entrepreneur) in the workforce; the US system tying it to employment has been argued (I believe correctly) to have created a degree of "entrepreneurship lock." When Thatcher implemented her policies, no laid-off worker needed to fear losing their health care, a critical point often missed by US observers. Thatcherism, while a radical series of reforms, was therefore a great deal less harsh than similar policies are when implemented in the US.

And in that forming of a cultural consensus -- of trust in government, alternately coalescing around policies championed by the left and the right, is the thread that ties the stories of the Nordics, Japan, and the UK in the last century to the future of California in this one.  And arriving at that point is the signal that it's time to turn the focus to California itself.

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Janet Yellen
Image available at http://tinyurl.com/khgsorw
I take the trip back across the Atlantic in 1980 with a pair of somewhat nerdy economists, heading to new teaching jobs on the West Coast of the United States. They had been teaching for a few years at the London School of Economics, where the wife had encountered the same resistance Margaret Thatcher described in 1970 in the UK's culture. The husband and wife team was done with the LSE, because, as the faculty there would later admit, "we only thought of her as someone’s wife ... ”

The couple's names were George Akerlof and Janet Yellen. And that's where this story will pick up again, another day, over here.

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