It is quite fashionable to build narratives around economic growth/development of a country with one/two individuals. Nothing sells as much as this narrative. It has an immediate appeal. What starts as a narrative eventually becomes a fairy tale of sorts and that person a very popular character. What better than India to see this where 1991 was the year when Dr Manmohan Singh just changed Indian economy.
The problem with such grand narratives is the story starts much before and is a series of multiple steps and actors which culminates in that big narrative. So in India’s case researchers have often pointed things started with Rajiv Gandhi post 1985 but it does not really capture the mood.
Similarly in this piece, Profs. Nauro Campos and Fabrizio Coricelli question the Thatcher narrative:
These results provide new evidence that the great British reversal was driven by membership of the European Economic Community, not Mrs Thatcher’s structural reforms. These two explanations may, however, be complementary.
These reforms were implemented in the second term of the Thatcher government. Her June 1983 general election victory was the most decisive since Labour’s victory in 1945. The main reforms that defined her second term covered labour, product, financial market liberalisation, privatisation and openness to foreign investment (Card and Freeman 2004, Oulton 2016).
Our main finding was that the 1969 turning point is more powerful than structural breaks at the launch of Mrs Thatcher’s programme of structural reforms in 1983 or 1986. Our earlier Vox column on this topic discusses the determinants of the UK decision to join the EU (Campos and Coricelli 2015), while here we focus on its implications by providing new statistical evidence on the effects of European integration on UK economic performance, compared to Mrs Thatcher’s reforms. Hence our study combines the empirical identification of structural breaks with an analysis of how and why the benefits from EEC – and later, EU – membership changed over time (Campos et al. 2016, Crafts forthcoming). The UK’s per capita GDP relative to the EU founding members declined steadily from 1945 to around 1970, and became relatively stable after that. If the UK joined the EEC to stop its relative economic decline, it worked. It also laid the ground for future improvements in relative economic performance with the introduction of the single market.
The success of Mrs Thatcher’s reforms required EEC membership. These structural reforms were not implemented in a vacuum. They could not have existed without the powerful support of British entrepreneurs (Grossman and Helpman 2001), who benefited from a larger, deeper and more innovative market (contrast the EEC at the time with EFTA and the Commonwealth). These entrepreneurs also realised that to be competitive they would need access to deeper capital and labour markets supported by a set of common standards, rules and regulations (Baldwin 2016, Mulabdic et al. forthcoming). Without support from such powerful constituencies, Mrs Thatcher’s reforms would not have been implemented as they did, and certainly would not have been as successful.
This explanation draws parallels with the French experience in the immediate post-war period (Adams 1989). Between 1945 and 1957, there was a conflict of interest between powerful groups of French entrepreneurs, some of whom were against, and some in favour of, further European economic integration. The interests of those against were associated mostly with the former French colonies, though they lost influence in the run-up to the Treaty of Rome and found themselves locked into the European integration project even after de Gaulle was elected president in 1958 (Moravcsik 2012). At that point, they could redirect but not reverse the process.