Why was Reaganomics so successful

Suddenly he was there, and then it started. "I don't like Russians, I don't like taxes, I don't like inflation," declared US President Ronald Reagan when he started the conservative revolution in 1980.

Less state and fewer taxes should make the ailing power super again. The consequences of this change of course in other industrialized countries shape the world to this day. Thirty years later, what is left of the "Reaganomics", whose creators would have turned 100 this Sunday?

Ronald Reagan and conservative comrades-in-arms like Margaret Thatcher in Great Britain gave the West the necessary revitalization. But their anti-state dogma overshot and created new problems that ultimately culminated in the current financial crisis.

By 1980, left-wing liberals were thrown out of governments everywhere, in the United States as well as in Germany. The western welfare states were frozen after the economic miracle, and entrepreneurial activities were hampered by high taxes and tough rules.

The large industrialized countries groaned under the double-headed terror of high inflation and high unemployment, so that the Keynesian spending policy ("better five percent inflation than five percent unemployed") seemed to be the end.

Reagan's whisperer Arthur Laffer promised a simple counter-recipe: If taxes were only lowered enough, the economy would grow so strongly that the state would receive enough income of its own accord. The idea was so simple that Laffer could paint it on a napkin - good for the detail-shy Reagan, who cut the top tax rate in half from 70 to 33 percent. Europe followed this direction.

The legacy of this radical advance is mixed. The taxes were clearly too high before, they restricted growth. Reagan's liberation blow boosted the American economy and created 16 million jobs. In truth, however, this was not a course distanced from the state, but an expansive fiscal policy like Keynes', only in a different guise. Reagan ran massive deficit spending, Tax cuts and armaments purchases tore budget gaps as big as the Grand Canyon.

Party friend George Bush the Elder, who had condemned Reagan's ideas before his election victory as "voodoo economics", had to clean up as president just as much as Democrat Bill Clinton did later. America struggled with mountains of debt for ten years.

The "Reaganomics" were successful, but only for a short time because of their exaggeration - the price came later. The ideology of the self-financing tax cuts nevertheless got stuck. George Bush the Younger resurrected politics from 2000, with similarly disastrous consequences for the budget.

Today it can be said that a government should not torture its citizens with tax rates above 50 percent, but low taxes for the rich are not a sustainable program. But in America the ideology has established itself that tax cuts on credit will solve everything - combined with a risky monetary policy of the US Federal Reserve. This combination destabilizes the largest economy and the rest of the world.

The same applies to excessive deregulation. Electricity, telephone calls and flights are now liberalized in most industrialized countries. Reagan and his heirs cracked the monopolies and brought customers lower prices without the supply in these areas - as critics claimed - collapsed.

In the financial sector, however, deregulation went too far. The anti-state dogma gave rise to giants who speculated without control and at too high a risk until everything collapsed. "The state is not the solution, it is the problem," said Reagan. It is now clear that the total withdrawal of the state is the bigger problem.

© SZ from 05./06.02.2011/pak