Yet a dispassionate assessment of her policies and their impact on Britain’s overall condition indicate that perhaps she deserves more credit than first appears.
Revisiting the Thatcher years inevitably conjures up memories of massive social unrest. Strikes, riots, record unemployment and economic hardship characterized much of her time in leadership, while her fall from grace and removal from office in 1990 leaves many with the impression that her era was an overwhelming failure.
Yet the legacy of “Thatcherism,” if not only from a macroeconomic perspective, paints a very different picture. In order to understand why Thatcher’s “Bitter Pill” was necessary, and ultimately beneficial for Britain, it is critical to examine the situation that Thatcher inherited upon entering office.
Much like many current European states, Britain was suffering from a severe ailment in the post-World War II years. The costs of reconstruction alone were close to crippling. In addition to this, the UK was facing increasing competition for trade from growing economies, particularly the U.S., and the recent dissolution of the British Empire had liquidated a once dependable export market.
To meet the growing needs of postwar Britain, a massive welfare system was rolled out, providing expanded services for citizens and nationalizing key industries such as coal, steel, energy and rail. The public sector became so bloated that by 1975 government expenditures were as high as 50 percent of GDP.
The labor force of the largely nationalized British industry soon became heavily controlled by inflexible unions (a primary target of Thatcher’s in later years). Excessive concessions to the unions left British industry in a state of uncompetitiveness with inferior technological innovation and high-priced exports.
As industry inevitably declined, unrest increased and the 1970s were beset with strikes, culminating in the 1978 “Winter of Discontent.” Unemployment was growing while industry was shrinking. Inflation was accelerating and the increased cost of imports (particularly oil), combined with decreasing exports, left the British Pound very vulnerable; so much so that in 1976 it was forced to borrow $3.9 billion from the IMF, an unprecedented amount for what had been such an economic giant for centuries.
There was little surprise then that Thatcher and the Conservative Party would oust the Labour government and Prime Minister James Callahan in the 1979 election. Nor was it unexpected that Thatcher would attempt to revive the state of the British economy, although it was the forceful and drastic manner in which she did it that became so controversial. Yet it was never her intention to be popular, stating, “If you set out to be liked, you will accomplish nothing.”
Upon entering office, Thatcher at once attacked the bloated state. She introduced sweeping reforms of economic liberalization, denouncing dependency on one’s government and challenging the longstanding adherence to Keynesian economic philosophy. As the daughter of a grocer, Thatcher believed strongly in self-reliance and personal responsibility. She affirmed that every citizen should have a stake in society rather than a dependence upon it, and this ideology shaped her key policies.
Perhaps most famously, Thatcher introduced the massive de-nationalization of industries, a process that became known as privatization. Many such industries were sold to the public at low share prices while a number of others were opened up to more competition such as schools, waste collection and telecommunications. Alongside this, Thatcher would singlehandedly take on the unions — and eventually win — although not without further strikes and riots in Britain’s streets.
The drastic liberalization and deregulation of the British economy at once had negative effects. Unemployment skyrocketed to rates unseen since the 1930s. The victims were largely those in industrial sectors hit by closure or downsizing as part of Thatcher’s policies. Many regions, particularly in the north of England and Scotland, relied almost entirely on such industry for income, and were resultantly hit hardest by the change. This led to an economic divergence between the north and south, elements of which can still be seen today.
Were it not for victory in the Falklands War in 1982, Thatcher almost certainly wouldn’t have seen a second term. However, in a wave of patriotic fervor, she saw a sweeping victory in 1983 that led to a further wave of strong and controversial policy decisions.
Yet, soon the impact of Thatcher’s reforms would be seen as the economy would begin to gather pace and both inflation and unemployment would fall. Profits from privatization enabled the government to pay off large amounts of national debt. Furthermore, 1.3 million former government-owned houses were purchased by their tenants as part of Thatcher’s “Right to Buy” policy, giving citizens a foot on the property ladder.
Thatcher would eventually win a third election, making her the longest serving British prime minister since the early 1800s. Yet, division within the Conservative Party over European Union membership, as well as the introduction of the controversial Poll Tax, would eventually lead to Thatcher’s demise. She was replaced as leader of the party in 1990. In her time as leader, she never lost a national election.
Today, few question that Thatcher’s overhaul of the British economy was, to at least some extent, necessary. She remains largely unpopular among the British working class, while her disfavor in Scotland and Northern Ireland has almost certainly fueled nationalist movements for independence. Yet, today’s mainstream political parties acknowledge the wisdom in much of her overall philosophy, and much of today’s economic success can be credited to Thatcher, not to mention sidestepping the possibly fatal inclusion in the eurozone.
Certainly it is easy to criticize Thatcher (albeit in bad taste in the immediate wake of her death), yet examining the necessity of Thatcher’s intervention in Britain’s spiraling economy, and considering the state Britain might be in had it not been for Thatcher, should produce a more sober assessment.
She did not set out to be popular, but rather to fix the state of the nation that she loved, doing what was necessary to fix the broken state of the economy. Her actions took courage and vision, and for that she should be celebrated.