The legacy of the Iron Lady
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Associate Editor
David Stevenson May 08, 2009
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Margaret Thatcher once claimed to have turned the British disease into the British cure. Could we do with another dose today? asks David Stevenson.
How did Margaret Thatcher get elected?
"To understand the magnitude of what Margaret Thatcher did, it was perhaps necessary to have lived through Britain in the Seventies," says the Daily Mail's Peter Oborne: "it was a time of constant national humiliation", with mass unemployment and runaway inflation. "Britain in 1979 wasn't just exhausted," says MEP Daniel Hannan, "it was bankrupt, fractious, indebted, gloomy, backward-looking and – worst of all – reconciled to permanent decline."
The 1978/1979 'Winter of Discontent', with widespread wage-demand-driven strikes, which left rubbish uncollected and hospitals blockaded, was about the last straw. There was even talk of the army mounting a coup to avert revolution.
"The conventional wisdom in all political parties was that nothing could be done," says Oborne. "It was accepted it was impossible to take on the power of the unions, which held the country to ransom whenever constructive industrial reform was attempted." But Maggie had other ideas.
How did she turn things around?
Forcefully. As Nigel Lawson recalls in Standpoint, Thatcher achieved several political and economic goals "thought by most of the opinion-forming classes to be politically impossible". For example, she initially pledged to control inflation, which had hit a giddy 27% just four years before. Among other measures, interest rates were pushed as high as 17%. The "fierce monetary squeeze" imposed by the new government drove unemployment above three million and resulted in a severe recession, but achieved its goal - within three years of being elected, inflation had fallen to 8.6% from 18%.
But she is remembered most for breaking the power of the unions. Her 1980 Employment Act, for example, required union agreements to be approved by secret – rather than public – ballot to protect rank-and-file workers. Many started to defy trade-union leaders for the first time. The National Union of Mineworkers' defeat by the Conservative government in the 1984/1985 coal strike proved the tipping point.
What about her free market reforms?
Boosted by a British victory in the Falklands and the failed IRA assassination attempt at Brighton in 1984, the 'Iron Lady' also pressed ahead with a full-scale, free-market agenda. This featured tax-cutting – the top marginal tax rate was cut from 83% to 40% – privatisation, and reduced state control. The 1986 'Big Bang' freed the City of a host of restrictive rules. Thatcher was also a strong advocate of private share and home ownership; more than 1.5m tenants bought their council homes after the 1980 right-to-buy law.
So, was she universally popular?
No. After years of heavy trade-union interference and protection, raw exposure to market forces decimated British manufacturers. Thatcher also stood out as a promoter of inequality. Her focus on wealth creation, rather than redistribution, led to the idea that 'greed is good' – a mantra eventually epitomised by Gordon Gekko in the 1987 film Wall Street
. "Thatcherism is caricatured as the rich getting richer and the devil taking the hindmost," says Simon Heffer in The Daily Telegraph.
But "the unrich also often became rich, thanks to deregulation. People whose families had for generations done blue-collar jobs now did white-collar ones." Further, the extra tax produced by this new prosperity meant more cash for the welfare state. "Anyone who looked at Britain in 1990 when Thatcher left office and compared it with when she came to power would have found a largely unrecognisable country."
What's her legacy been?
Where Thatcher led, others followed. Similar free-market reforms have been pursued in China, eastern Europe, India and the Soviet Union. As she once said: "People are no longer worried about catching the British disease, they're queuing up to obtain the new British cure." Her euroscepticism lives on too. Yet despite some impressive economic gains, Thatcherism has been blamed for encouraging the excessive risk-taking culture, post-Big Bang, which recently led many banks to implode.
As such, today's 'remedies' – nationalisation, higher taxes, printing money, extra regulation – are a snub to everything she stood for. The trouble is, these are "emergency measures, not a carefully thought-out ideology", says the FT's Gideon Rachman. Thatcher and her advisers thought for years about the policies they intended to pursue.
Yet today "no major Western political figure has yet articulated a coherent alternative to the free-market principles inherited from Thatcherism. Until that happens, the Thatcher era will not be definitively over."
Could Thatcherism make a comeback?
Now 84, and suffering from dementia, Lady Thatcher is no longer a political force. But her core beliefs may be about to get a second wind in the wake of the biggest financial bubble in history. "Friends have pointed to her personal thriftiness", says Brian Groom in the FT: "she never owned a credit card, disapproved of speculation and believed high earnings should be the result of hard work".
Those are attributes that may chime with many disillusioned by the recent behaviour of a wealthy elite. Further, Thatcherism abhors "the vision opening up in which the state controls your mortgage, your bank account and your life assurance", says Lord Saachi of the Centre for Policy Studies.
Finally, Maggie would "block with every ounce of her body" today's bloated public sector and the unmistakable trend towards higher taxes and increased regulation.
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