The Resurgence of Big Government: A Second Farewell to Reagan and Thatcher

Ronald Reagan and Maggie Thatcher are dying a second time these days. After his official funeral on June 11, 2004 in Washington in front of 2100 invited mourners and her ceremonial funeral on April 17, 2013 in London, the spirit of that era is now being buried.

It was a time when states had withdrawn from the lives of their citizens. Economy took place in the economy, not in the planning staff of a ministry. “Don’t slaughter the goose that lays the golden egg,” Thatcher told voters. And they followed her.

“It’s not a politician’s job to please everyone”

Thatcher was hated by the left, opposed by the unions, but richly rewarded by middle-class voters for her tax cuts and privatization policies. When she was re-elected on June 9, 1983, she won 42.4 percent, an unbeaten record in Great Britain to this day. Her credo: “It is not the job of a politician to please everyone.”

Ronald Reagan was made of similarly tough stuff. At the inauguration on January 20, 1981, he said: “The government is not the solution to our problem. She’s the problem.” The economy was deregulated, taxes lowered, and the welfare state trimmed. Ronald Reagan still ranks ahead of Bill Clinton, Donald Trump and Joe Biden in the Gallup Institute’s popularity rankings.

We have once again entered an age of Big Government

But the spirit of that time is back in the bottle. We have re-entered an age of “big government” that the world last experienced during the Great Depression and World War I and later, almost simultaneously with Reagan and Thatcher, in France under François Mitterand. His “planification”, which ended with the nationalization of France’s key industries, is still considered the most costly blunder in post-war French history.

Today’s phase of Planification is global, but it’s smoother. The governments, neither that of Joe Biden nor that of Olaf Scholz, are not ideologically committed. But they are the children of their time. Globally, there is a tremendous shift in power and resources; the leeway of the private sector and citizens is narrowed in order to expand that of the state – financially and regulatory.

The most aggressive drivers of this development can be seen in the following areas:

1. China’s rearmament and Russia’s war have given a new meaning to the military and the military-industrial complex throughout the West. In the USA, the armaments budget of around 842 billion in 2024 will be of an unprecedented magnitude. That equates to the operating profit of the world’s eight most profitable companies in 2022 – which include Saudi Aramco, Apple, Microsoft, Alphabet, ExxonMobil and Shell, among others.

In Germany, Olaf Scholz has launched a 100 billion armament program that has not been seen on such a massive scale since the rearmament of the Bundeswehr. And in Japan, where China feels particularly threatened, the defense budget will increase by 57 percent in the coming year.

2. The political will to slow down man-made climate change has called the savior states into action in all western countries. Politicians are responding to this challenge with gigantic sums of money – McKinsey estimates that a total of 9.2 trillion US dollars per year must be spent on the green transformation – and a high level of regulation for the transport sector, house construction and industrial production. Also in the original capitalist USA. The Financial Times coolly sums up:

“The current US administration is interfering with the economy at a level not seen since the 1930s.”

Whether it will actually succeed in lowering the world temperature like an air conditioner is an open question. But one thing is certain: in its ecological zeal, the state intervenes deeply in business decisions and also in the private lives of its citizens. However, it must not be concealed that he has the mandate of his electorate in western democracies.

3. The declining birth rate in many Western countries gives the welfare state a greater role. There is a constant expansion of the welfare state, which in 1970 made up only 20 percent of the federal budget, in 2022 it was already 36 percent. The statutory pension insurance alone must be subsidized with over 100 billion euros so that the promises made to the citizens can be fulfilled.

Germany is not the exception, but the rule. Expenditure on healthcare and pensions will continue to rise sharply. The demographic stress ratio – calculated as the proportion of people aged over 65 compared to the number of people aged 20 to 64 – will increase across the OECD from 33 percent in 2023 to 36 percent in 2027, before peaking by 2050 increasing by about one percentage point per year to 52 percent.

Students, employees and entrepreneurs pay for it with their money

Conclusion: The downsides of this extended state activity would have to be discussed with the citizens. Because the active ones, i.e. the students, the employed and the entrepreneurs, pay for it with their money and the restriction of their individual freedom. But this conversation – which should also be a conversation about alternatives – is currently being refused.

The new interventionists are soft-spoken. They silently execute the zeitgeist. The courage to tell the truth is not very pronounced among them. Maggie Thatcher would disagree with this:

“If there’s one thing I despise in politics, it’s the type of eel who wants to bite his own behind for being so supple.”