If only pollies had Maggie's backbone

THE challenge of our times, to live within our means, requires Thatcherite courage.

IF you could travel back in time, what would you do to improve the world? It was a no-brainer when John McDonnell, a leadership contender for the British Labour Party, was asked this question a few weeks ago. The former unionist said he would "go back to the 1980s and assassinate Thatcher".

Excellent idea. Time travel, that is. Given the fiscal problems facing European economies, reliving the 80s era of Duran Duran, MTV, frizzy hair, high-waisted jeans and Margaret Thatcher makes eminent sense right now. Instead of slaying the former British prime minister, today's politicians should reacquaint themselves with her backbone. Actually, let's be blunt. It's not at all clear that political leaders today, most of them men, have Thatcher's balls when it comes to transforming their sclerotic economies.

While O'Donnell's comments were greeted with rapturous applause from his union audience, returning to Labour's 1980 manifesto is not the answer if you want to improve the world or even just boost an economy. Back then, Labour's policies, based on nationalisation, higher taxes and big-spending government, were correctly described as the "longest suicide note in history".

Thirty years later, Britain's new Tory Chancellor has kicked off a unique conversation with the British public about the role of government. Forget about Kevin07's choice of climate change as the greatest moral and economic issue of our time. (Luckily, Rudd10 seems to have forgotten about it, too.) Instead, with a budget deficit of pound stg. 155 billion ($260bn), the largest among European Union countries, George Osborne says the "greatest challenge of our generation" is learning to live within our means.

You have to admire this kind of back-to-basics policy. As Prime Minister David Cameron wrote in the Financial Times last week, dealing with the deficit will affect "our whole way of life . . . we have to accept there are things we can no longer afford".

The question is whether leaders such as Cameron have the political courage to confront the inevitable backlash. Across Europe, powerful unions are mobilising against change. Millions of public servants have taken to the streets in Greece, France, Spain, Denmark and elsewhere trying to protect conditions that their countries simply cannot afford.

EU bailouts for bankrupt countries won't help the resulting malaise. Only reform will do that. As one commentator noted: "It's hard to convince people in Germany to work until they are 67 to allow people in Greece to retire at 61."

Remember "the sick man of Europe"? At different times, different countries attracted this epithet. Now it's a continent-wide cancer with countries facing the bill for years of spending beyond their means. Their bloated budget deficits rendered the mandated EU target of 3 per cent of gross domestic product a joke. Alas, no one's laughing now and the illness won't be cured until four things happen: governments introduce reforms to cut spending and boost employment; the same governments find the courage to confront powerful unions fighting to protect their cosy arrangements; deluded public servants understand their own role in colossal public debts; and voters accept a more limited role for government.

The first steps are being taken in Europe, where the new catch-word is austerity. The socialists in Spain talk about cutting public sector salaries by 5 per cent and liberalising labour laws to deal with a budget deficit of 11 per cent and 20 per cent unemployment. French President Nicolas Sarkozy flags a three-year freeze on central government spending, an overhaul of the pension system and plans to raise the retirement age, one of the lowest in Europe, to 62 to rein in a budget deficit of 8 per cent of GDP. The Danish government wants to cut unemployment benefits. Britain's Deputy PM Nick Clegg wants cutbacks to the "unreformed gold-plated" public sector pension schemes. And so on. But the final steps are a long way off.

The delusion of public servants continues and the broader public has yet to accept a more fiscally sustainable role for government.

Instead, talk of austerity is met with knee-jerk opposition. Each time the catchcry from public servants is the same. They scream about attacks against their rights, against their salaries, welfare and public services. They scream about their innocence, pronounce that "public servants didn't create the crisis" and point the finger at greedy banks. It's true that banks made plenty of mistakes. But instead of looking only at Wall Street excess and drafting up Robin Hood taxes, it's time to talk about government excess, too.

For years, European governments lauded their socially progressive model. Translated into English that model means workers retiring too early, public servants being paid too much, overly generous pensions and inflexible labour laws.

For years, economic rationalists warned that the bill would eventually cripple Europe. That bill has arrived and the grand total is a sovereign debt crisis highlighting a harsh reality: there is no human right to high salaries and cosy conditions that leave countries on the brink of bankruptcy.

Australia has its own problems with government excess. Whether it's sovereign debt or sovereign risk, the problem is the same poor government policy. The Rudd government's path to deficit reduction is as poor as it gets: nationalise 40 per cent of mining losses and slap a prohibitive tax on an industry that drives Australia's economic prosperity. It fits a pattern of Rudd-style excess, an old-fashioned, big spending, redistributive, interventionist government. On Monday, an Associated Press headline said it all: "Canada's economy is suddenly the envy of the world". Australia used to attract headlines like that.

Yes, by all means travel back in time. Thatcher circa 1980s. Kenneth Baker, a former Thatcher minister, summed up his boss as driven more by good instincts than ideology. She understood that the state should do less and the individual should do more. The state should spend less so that the individual could spend more. And the state should own less so that the individual could own more. When the unions flexed their muscle, she didn't flinch.

Recall what Thatcher told the Conservative Party conference on October 10, 1980, as pressure mounted for her to soften her resolve for reform. "For those waiting with bated breath for that favourite media catchphrase the U-turn, I have only one thing to say. You turn if you want to. The lady's not for turning." Thirty years later, with unions primed for battle, name just one political leader with that kind of political courage. Depressing, isn't it.

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