It was not surprising.
Now, there is no question that Britain did turn around. In the 1970s it was a country with huge economic problems; today, despite the failure of austerity policies, it’s in a much stronger position. There are various ways you could show this; I find it useful to compare Britain with its love-hate-relationship neighbor France.
And he presents real GDP per capita in the UK relative to France since 1950, followed by a comparison of unemployment rates and then does his ‘thing’:
So, a real turnaround. Was it the Iron Lady wot did it?
Well, there’s a bit of a problem: Thatcher came to power in 1979, and imposed a radical change in policy almost immediately. But the big improvement in British performance doesn’t really show in the data until the mid-1990s. Does she get credit for a reward so long delayed?
This is, by the way, somewhat like a similar issue in America: right-wingers were eager to give Ronald Reagan credit for the productivity boom of the Clinton years, which also didn’t start until around 1995; if Reagan could get credit for events that were 14 years or more after his 1981 tax cut, shouldn’t Richard Nixon be given credit for anything good that happened in the Reagan years?
David Glasner has a much, much better take:
Margaret Thatcher was a great lady, and a great political leader, reversing, by the strength of her character, a ruinous cycle of increasing state control of the British economy imposed in semi-collaboration with the British trade unions. That achievement required not just a change of policy, but a change in the way that the British people thought about the role of the state in organizing and directing economic activity. Mrs. Thatcher’s greatest achievement was not to change this or that policy, but to change the thinking of her countrymen. Leaders who can get others to change their thinking in fundamental ways rarely do so by being subtle; Mrs. Thatcher was not subtle.
Let me take the UK-France comparison a bit further. Krugman starts of in 1950 showing France´s relative gain. But even in his chart we see that after Maggie came to power the trend reversal was immediate. What Krugman forgets to mention is an implication of the standard Solow growth model, to wit, that if a country for some reason (in France´s case WWII) sees its capital stock pretty well destroyed, it´s going to have a high growth period to return to its ‘steady-state’. The chart below shows this clearly, noting that the UK kept its capital stock, which was old in comparison to France´s ‘new machines’.
The next chart shows that when Thatcher came to power the UK growth trend picks up and the UK goes on to surpass France. So yes, Thatcher´s changes brought on a quick turnaround.
Krugman zeroes in on the unemployment rate, but given that the ‘battle’ was with trade unions, it is to be expected that the labor market would go through a period of turmoil. But note in the chart below that following the initial recession the labor force participation rate rapidly rises and stays high all through her premiership.