By Noshua Watson
Margaret Thatcher’s legacy will always be judged by the consequences of economic liberalisation. In the FT, Erik Berglof, Chief Economist of the EBRD, discusses the consequences of liberalisation and privatisation in eastern Europe after 1991 which were influenced by Thatcher’s policies. He writes that Thatcher’s idea of using EU accession as encouragement for economic reform led to more balanced transition, higher growth and lower economic inequality in countries like Czech Republic and Slovakia. In countries like Ukraine and Russia, where EU accession was not an option, highly-inequal, elite-dominated economies emerged.
Berglof argues that Thatcher understood the link between political context and liberalisation policies, although that was not fully appreciated by those who followed her. He encourages India and China to continue moving away from directing the resource allocation and investments of private enterprises, while promoting good governance, competition and equality.
Thatcher’s lesson for the BRICS is that domestic policy and foreign policy go hand in hand. It is a tricky game for the BRICS to play both donor and recipient. As the BRICS consolidate as a bloc and expand their own regional influences, they need to focus on domestic growth and stability as well as growing their foreign aid budgets. Whilst maintaining macroeconomic growth, the BRICS still need to continue to reduce poverty by attracting skilled jobs, investment in infrastructure, better regulation and attracting FDI. The aim of separating the State from the private sector was to get the State out of the business of choosing ‘winners’ and ‘losers’. As Mrs Thatcher learned, the same principle holds when it comes to people.