Did Thatcher really save the economy?

[Kipling]

It seems to be accepted as fact, even among lefties, that, daemonic as Thatcher was, she saved the economy and we would otherwise have spiralled into the sort of state Italy now finds itself in. Personally I have always viewed this as bollocks of the first order, since the world economy as a whole recovered during this period, even in social democratic countries like France. But does anyone agree with me?

[Maple]

1. It was called

the British disease, and things were genuinely bad.

Thatcher, Reagan and Mulroney all came to power around the same time, and all had pretty much the same agenda.

Italy could definitely use similar help.

I guess we just have to stop going to extremes in either direction.

On edit: sorry to butt in on a UK thread, but your topic intrigued me. :D

[Anarcho-Socialist]

2. My answer to your question is no she did not.

The economy was mishandled by successive governments in the 1970s and all that Thatcher did was just mishandle it in a different way.

The approach to economics that Thatcher has was that:
1. British public sector is too big
2. Union strikes were unhealthy for the U.K. economy
3. Britons weren't working hard enough

Her solution was to:
1. Cut taxes for the wealthy to stimulate growth (upper rate was cut from 83% to 60% and then to 40%)
2. Hike sales taxes from 5% to 17.5% to make up any revenue shortfall
3. Freeze or cut-spending on NHS and education (due to perceived left-wing biases)
4. Raise spending on defence and policing (areas that are seen as natural Tory allies)

This plan was meant to drastically-increase British growth and cut unemployment but it did neither.

The first major economic event of the Thatcher government was the 1981-83 recession. There was a global economic downturn at the time which bears part of the blame but not all of it. The Tories' cutting-back on public spending withheld a necessary stimulus to the U.K. economy at a time of a global slowdown. The big increase in VAT meant that everything became more expensive for the poorest and as such they didn't buy as much impacting business returns. The rich who benefited the most from the income tax cuts withheld most of their extra spending money from the economy and saved it in the hope of riding out the recession. People were spending less, business was bringing in less money and subsequently unemployment soared beyond to levels not seen since the 1930s.

The only good thing that came out of the first part of the eighties was that inflation had finally been subdued (from over 15% to under 5%).

Next came the "Lawson boom". The economy began to improve as did global economic prospects. From 1984 the economy began to expand again at a moderate level. The Thatcher government began its next stage of economic tinkering in denationalisation: BA, gas, electricity, steel, BT. It even let go of the valuable nationalised oil company that provided huge revenue to the exchequer. All of these companies were disposed of at below market value. Instead of investing the money from the assets sold the Thatcher government spent them on the election tax-cuts in 1987.

By 1987 the Lawson boom began to slow-down but the government cut interest rates at an unsustainably low level since it was an election year - to keep the economy booming. This caused an inflationary bubble in 1988 and this followed by lower than expected growth figures that impacted the treasury’s revenues. Inflation got into double-digit figures again and the economy went into recession.

By 1989 the economy recovered slightly, but inflation lingered around 7-9% and the economy remained very lethargic from this.

Did Britain benefit at all from the eighties? Yes, but not directly from Thatcher. The British government learned to take inflation more seriously than they had before. Also the idolisation of business and “enterprise” by the 80s elite meant that many bright people were attracted into business at the expensive of traditional public services.

In my opinion she didn’t save the British economy. Her VAT hikes were obscene, and her manipulation of interest rates for election purposes were disgusting, (but an old tried-and-tested election practice dating back to MacMillan).

[non sociopath skin]

4. Excellent summary, AS...

... thanks for that.

David W.

[Anarcho-Socialist]

5. Thank you

:hi:

[fedsron2us]

9. Thatcher did not follow a consistent economic policy

The monetarist regime that she followed in the early years of her government decimated the UK's manufacturing sector and indirectly led to widespread rioting in many British cities. When her Chancellor, Geoffrey Howe, actually raised taxes during the middle of the recession it looked as though the economy would simply grind to a halt. Complete disaster was only averted when the Reagan administration quietly junked the policies of Milton Friedman and injected a massive amount of liquidity into the world economy. Although the decision by Washington to run a massive budgest deficit whilst cutting taxes was derided as 'voodoo' economics the same policy was adopted to a lesser degree by Nigel Lawson. It led directly to the boom of the mid to late 1980s. This U turn proved that, when it came to saving her political career, the Iron Lady could be remarkably pliable. By the end of Thatcher's period of office her government was trying to manage the British economy using fiscal controls such as interest rates and public spending that were not that different from the much maligned British governments of the 1970s. In fact she had ditched the financial conservatism of her earlier years with such a vengeance that she actually fell out with her later Chancellors, such as John Major, who wanted to reintroduce some form of monetary discipline to the UK economy by joining the ERM.

Thatcher had no more idea how to solve the problems of the British economy than any of her predecessors. Although she was successful in limiting the power of the Trade Unions this did not lead to any obvious economic renaissance. On the contrary, Britain's decline as a manufacturing centre sharply accelerated. Although this process may have been inevitable Thatcher ensured that occurred in such a way as to cause the maximum amount of misery.

[LeftishBrit]

3. I don't know any leftie who thinks so!

In fact, while her policies did reduce inflation, they also created serious unemployment and wrecked Britain's industrial base. While the economy was not doing brilliantly in Callaghan's time, she made it a great deal worse!

One of the few good things(and yes, it's an important thing) that the Blair government has done is to get the economy back on its feet after the disaster of Thatcherism.

Anarcho-Socialist has given a good summary!

[Anarcho-Socialist]

6. Thanks

:)

[Mr Creosote]

7. Question

doesn't the recovery in the British economy pre-date Bliar by several years?

[Anarcho-Socialist]

8. Yes, the economy came out of recession in 1993

and performed reasonably well because Ken Clarke resisted any short-termist political interest rate cuts. Also Major's government did start to increase expenditure on NHS and education again which helped economic growth.

Despite all this the economy started to overheat in 1997 and the Major government resisted hiking interest rates as a last-ditch hope for a "feel-good factor" going into the 1997 General Election.

Although in 1997 the economy was in better shape than it was at any time since the 1970s, the Blair government certainly didn't inherit the "golden economic legacy" that Tories claim. In 1997 most economists were predicting that the U.K. economy would go into recession in Q4 1997 or the first half of 1998 and I feel Labour deserve some credit in avoiding this.

Taking the control of interest rates out of political hands was a major step in this. This enabled the Bank of England to hike rates to deal with the inflationary bubble the Conservatives had left Labour. Inflation rates climbed to just under 4% in 1998 before interest rates help to lower it down to 2.5%. There was a slow-down in growth in 1998 but a recession was avoided and the economy started growing at trend growth by 1999.

[T_i_B]

11. And by the same token...

I don't know any right-winger who thinks that she didn't save the British economy.

I think that what she did was good for some, bad for others, which is a large part of the reason why the North has never forgiven the Tories for destroying their manufacturing industries and many in the affluent Home Counties still thank her for their affluence.

[bennywhale]

10. NO, she was a dogmatic nutter who has left her pungent stain on society

that isn't leaving.

She did more to divide this country across every line going than any in history. Societies values have changed on mass as a result of her, with people still more selfish and out for number one, which she would have loved.

She destroyed peoples lives, communities and cultures which still suffer today and i hate her.

As you can see i view the bitch's legacy rationally. on the economy, we would have been better with simply someone less demonic but still prepared to make changes. Just not in that masochistic way she did.

[Ken Burch]

13. Holy Christ, bennywhale!

You and I actually agree on something!

(what's the odds of THAT ever happening again?)

[Jack Rabbit]

12. It shouldn't be a surprise that this question is asked

Even if it is predicated on a lot of horsepucky.

We have similar discussions on our side of the Pond about what a marvelous period of economic growth the Reagan era was. Of course, his economic policies weren't much different from Margaret Thatcher's and in the long run they didn't work any better. Poor President Bush (Bush the Preppy, the real President Bush, the one who actually won an election) was stuck holding the bag for Reagan's sins. It served Bush the Preppy right to have to eat his words after pledging "No new taxes" when it was pretty obvious that ballooning budget deficits were going to bite him in the aardvark sometime during his term in office, but those deficits were Reagan's doing. Nevertheless, the Republicans loyalists, being the ideologues they are nowadays, would sooner sacrifice Bush's shot at a second term that speak ill of St. Ronald of the Right.

The fact is that the Reagan boom existed for the most only part on paper. The rich did very well and middle class shrank at an accelerated pace. As for the poor -- well, this is the time that "homelessness" entered the American vocabulary.

If Reagan looks like a better leader to me now than he did twenty years ago, it's only because now I have Bush the Frat Boy against whom to compare him.

[eauclaireliberal]

14. Thatcher saved the British economy...

...just as much as Ronald Reagan saved ours.