Margaret Thatcher

How Margaret Thatcher Brought Economic Freedom to Britain

Remembering the late prime minister who transformed Britain's economy.

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Of all the possible ways to remember Prime Minister Margaret Thatcher — victorious cold warrior, pioneering woman politician, resolute American ally — the one that's probably most relevant today is the way she transformed Britain's domestic policy and economy.

The numbers tell the story. As the Telegraph reports, when she took office in 1979, the top British tax rate on earned income was 83 percent, on "unearned" income, 98 percent. By the time she left office in 1990, the rate had come down to 40 percent.

It was a classic supply-side success story. The growth encouraged by the lower rates (along with an increase in the value-added tax that shifted the tax burden to consumption rather than income) caused government revenues to more than triple, to 187 billion pounds in 1990 from 57 billion in 1979. Yet because the private sector grew faster than government spending, even during a Cold War military buildup and a war in the Falkland Islands, government spending as a percentage of GDP  in Britain shrank during Thatcher's administration, to 39 percent from 47 percent. Britain had annual real GDP growth  of 4 percent in 1986, 4.6 percent in 1987, and 5 percent in 1988.

As if that weren't enough, the Telegraph summary continues, she privatized government-owned gas, electric, coal, telephone, and airline companies, and she sold the "council flats" housing projects to the tenants who lived in them.

How did she do it? There are all sorts of possible explanations, including the fact that Britain in the late 1970s, like America, had sunk to such a sorry state that there was a market for solutions that were alternatives to the big-government conventional wisdom. But the point that seems most salient from this distance is Thatcher's steadfast confidence in the basic principles behind her policies. It was, as she put it in her "Iron Lady" speech, "my defense of values and freedoms fundamental to our way of life."

She explained those values in her 1988 Bruges Speech, speaking of how "From classical and mediaeval thought we have borrowed that concept of the rule of law which marks out a civilized society from barbarism. And on that idea of Christendom, to which the Rector referred—Christendom for long synonymous with Europe—with its recognition of the unique and spiritual nature of the individual, on that idea, we still base our belief in personal liberty and other human rights."

She went on, "The lesson of the economic history of Europe in the 70's and 80's is that central planning and detailed control do not work and that personal endeavour and initiative do. That a State-controlled economy is a recipe for low growth and that free enterprise within a framework of law brings better results…. And that means action to free markets, action to widen choice, action to reduce government intervention. Our aim should not be more and more detailed regulation from the centre: it should be to deregulate and to remove the constraints on trade."

Even The New York Times obituary, beneath a home-page headline characterizing the heroine of the Cold War as "divisive," seemed to grasp what it describes as "the principles known as Thatcherism — the belief that economic freedom and individual liberty are interdependent, that personal responsibility and hard work are the only ways to national prosperity, and that the free-market democracies must stand firm against aggression."

What to make of Thatcher in America today, when talk of a 4 percent growth rate is dismissed as a "fantasy" by distinguished commentators ? Today, the tax debate between the political parties seems to be about how much to raise taxes, not how much to cut them. In today's America, mere minor reductions in planned growth in government spending trigger paroxysms of political opposition, and the prospect of reducing government's share of the economy, as Thatcher did, by eight percentage points seems remote.

But it probably seemed remote in the late 1970s, too, that Britain's first woman prime minister, who had grown up in an apartment above her father's grocery store, would reshape a failing post-colonial power into an exemplar of liberty. And who would have thought then that, 30 years later and an ocean away, she would be inspiring those of us who believe that even after Thatcher's (and Reagan's) Cold War victories and tax cuts, there yet remains room for another political leader with the conviction and skill to redefine the possibilities for growth and economic freedom?

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  1. With all the stories about Margaret Thatcher today you’d think she died or something.

    1. Yeah, what gives? It’s not like she wrote movie reviews or something.

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    2. Heh. Let’s see if she gets as much attention as Roger Ebert.

  2. …she would be inspiring those of us who believe that even after Thatcher’s (and Reagan’s) Cold War victories and tax cuts, there yet remains room for another political leader with the conviction and skill to redefine the possibilities for growth and economic freedom?

    AND THIS IS WHY REASON VOTED ONE HUNDRED PERCENT FOR BARACK OBAMA. Boom, truth bomb = dropped.

  3. One should never forget how awful labor Britain was. Imagine if Obama, Reid and Pelosi had totally unchecked power for twenty years. That is how bad it was.

  4. how does the NYT write this: the belief that economic freedom and individual liberty are interdependent, have the ability to look at Britain under Thatcher and judge that record vs those using opposite economic tactics, and still conclude that she was wrong and all the failed attempts of statism were right?

  5. “The lesson of the economic history of Europe in the 70’s and 80’s is that central planning and detailed control do not work and that personal endeavour and initiative do. That a State-controlled economy is a recipe for low growth and that free enterprise within a framework of law brings better results…. And that means action to free markets, action to widen choice, action to reduce government intervention. Our aim should not be more and more detailed regulation from the centre: it should be to deregulate and to remove the constraints on trade.”

    Sadly, most people today seem to have been convinced that this way of thinking caused the housing bubble.

  6. She wasn’t perfect but she sure strikes a raw nerve with retarded Britons that have surprisingly come to loathe her and Churchill in recent years because they weren’t socialists.

    1. Re: A serious man,

      She wasn’t perfect but she sure strikes a raw nerve with retarded Britons that have surprisingly come to loathe her and Churchill in recent years because they weren’t socialists.

      Churchill WAS a socialist. He just wasn’t Clement Atlee-socialist.

      Which means that retarded Britons are even MORE retarded than what you were led to believe.

      1. Beat me to it Old Mexican. Churchill was the man behind the British Social welfare state. But he fought the fascists and is therefore the enemy. They really do hate us for our freedoms.

        1. I don’t think they hate him for his anti-fascism, John.

          At the end of the war, he is reputed to have looked at the map and suddenly shouted out “Oh my God! We’ve slain the wrong dragon!”

          He then started warning people about Stalin.

          *That’s* what the juice-box brigade can’t stand.

          1. “He then started warning people about Stalin.”

            He was strongly anti-communist prior to the war (when the Allies started helping the USSR he claimed he’d ‘say kind words about the devil if he helped stop Hitler’).
            The problem is the US concepts of left and right really didn’t apply to him; he was an imperialist.

            1. If Hitler invaded Hell, I would make at least a favourable reference to the devil in the House of Commons.
              ______

              Churchill was far from perfect, especially from a libertarian perspective, but my god did he have great lines.

              Plus the whole opposing Stalin at a time when half the world thought that Communism was the natural result of progress.

    2. Which is really weird. Churchill wasn’t a socialist since he utterly lacked principles and was appears to me to have been driven primarily by a megalomaniacal desire to make an impact on the world stage without a great deal of thought as to what the impact would be. In order to enhance his power, Churchill put incredible energy into making England into a Bismarckian socialist country.

  7. “They are casting their problems at society. And, you know, there’s no such thing as society. There are individual men and women and there are families. And no government can do anything except through people, and people must look after themselves first. It is our duty to look after ourselves and then, also, to look after our neighbours.”

    1. Some moron at Slate was using that as an example of her sociopathy.

      How dare she not worship government as the be all end all of society?!

      1. But Hugo Chavez was a great man who maybe let his good intentions get a little out of hand. These people are scary.

        1. And Stalin really meant well. All that stuff was the fault of the guys around him! (/sarc)

          1. The problem is that we’ve just never seen it done right.

  8. Yet because the private sector grew faster than government spending, […] government spending as a percentage of GDP in Britain shrank during Thatcher’s administration, to 39 percent from 47 percent.

    Another policy that helped freed the economy was the slow but steady abandonment of the old mercantilist/protectionist regulations and other impediments to free trade. The contrast between how the British lived in the 70s compared to the 80s can be clearly seen in a BBC television show that was later retransmitted on PBS, where a family was selected to relive the 70’s, the 80’s and the 90’s. When placed in the 70s, the family had to makie due with a sparsity of choices in cars, television sets or appliances, all made in England in factories mostly ownerd by the government and rife with militant unionism. You can say that families back then lived in what we would consider today abject proverty! Once in the 80 and especially in the 90s, the family was able to enjoy many more choices that made their lives far richer, thanks to cheaper imports from Japan, Latin America, Europe and the United States.

  9. …”the belief that economic freedom and individual liberty are interdependent,”…
    Jon Stewart needs to read this.

  10. Thatcher had the economics part of the equation worked out; it’s too bad she had an immense Warboner, sang the praises of dictators like Pinochet, called Nelson Mandela a terrorist, and was an elitist who gladly accepted patronage when she left office. Much like Churchill, her version of economic and individual freedom was rooted in the British Class system, and she had no time for frivolitues such as the NAP.

  11. “government spending as a percentage of GDP in Britain shrank during Thatcher’s administration, to 39 percent from 47 percent.”

    Government got *smaller*, and significantly so. Wow.

    1. Actually, real non-military spending actually increased over Thatcher’s reign. The economy grew faster than spending did, however.

      1. Actually, I actually just said “actually” twice, did I actually?

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