Paul Krugman on Thatcher and "Reagasm"

Paul Krugman writes:

There will presumably be a lot of commentary about Margaret Thatcher over the next few days, although probably nothing like the “Reagasm” of 2004. And there will in particular be many assertions that Thatcher turned around a moribund British economy. So, is this right?[...] 

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?

Krugman is making good points here. Krugman is unlikely, though, to extend the points to argue that government leaders are given far more credit than they deserve for economic turnarounds. He is a statist afterall.  But during an era when central banks play such a large role in manipulating the economy, the heads of the central banks are the main drivers.

Leaders can make a mess out of things by adding taxes and regulations, or worse in the case of Thatcher and Reagan, where they pretend to be free marketeers and  expand the state, but it's Bernanke, Greenspan and Volcker that have been the main manipulators on this side of the pond and in the UK, it's been Pembelton, George and King.

I hasten to add, this doesn't mean government leaders don't impose their will on some CBers, just that the real manipulations are done by the CBers.