Guns and Butter and Government Popularity in Britain

Abstract

Britain under the government of Prime Minister Thatcher provides a unique opportunity to probe the effects of both war and macroeconomic performance on government popularity. Monthly ratings for Thatcher and Conservative-party support (June 1979 to July 1985) are examined by way of Box-Tiao intervention models. The model that best captures the impact of the Falklands War of 1982 is of the gradual-temporary variety: popularity gains accrued through the three-month war shrink in a geometric fashion. Nevertheless, they prove to be worth over five percentage points for the Conservative party a year later, in the 1983 election. Macroeconomic performance, meanwhile, is found to have an asymmetric effect on government popularity, with unemployment strongly significant but inflation not significant at all. Apparently, the British public is punishing failure (on employment) while letting success (on inflation) go unrewarded. Qualifications of the positive effect of war and the negative effect of macroeconomic performance are suggested.