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Margaret Thatcher's Economy
Originally published on Tue April 9, 2013 9:14 am
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Shortly after being elected to her first term as prime minister in 1979, Margaret Thatcher said this: Pennies don't fall from heaven. They have to be earned here on Earth. That was a good summary of a conservative philosophy that would see Thatcher lead her country through its most dramatic economic and social changes in generations. Thatcher, the only female prime minister Britain's ever had, died yesterday at age 87. Her Thatcherite revolution is credited with laying the groundwork for Britain's economic revival in the 1980s.
But as NPR's Jim Zarroli reports, her economic policies remain controversial to this day.
JIM ZARROLI, BYLINE: When Margaret Thatcher took office in 1979, she saw her task not just as reviving her country's moribund economy. She wanted to change the very nature of British society and show the world what free market principles could accomplish. In an interview with David Frost, she talked about one world leader who paid her a visit early in her term.
(SOUNDBITE OF INTERVIEW)
PRIME MINISTER MARGARET THATCHER: It was the finance minister from another country - I won't say which - coming to see me, and saying we've been watching you very closely. If you can roll back the frontiers of socialism and roll forward the frontiers of freedom, other nations will follow. And I said, I thought, goodness, me. What a responsibility.
ZARROLI: Thatcher took office at a time when Britain, like the United States, suffered from high unemployment, rampant inflation and low growth. But in many ways, Britain's condition was even more dire than the U.S.
Tony Travers is a professor of government at the London School of Economics.
TONY TRAVERS: Britain was often described as the sick man of Europe. Its economy was considered in poor and declining condition. So I think Mrs. Thatcher saw herself as starting again, or having an opportunity to start again, and radically to reform the British economy.
ZARROLI: One of Thatcher's first goals was to take on the country's powerful labor unions. Britain was plagued by strikes that regularly shut down huge swaths of the economy, and made doing business in the country wildly unpredictable. She spoke later in an interview with NPR.
(SOUNDBITE OF ARCHIVED INTERVIEW)
THATCHER: I can remember being overseas and trying to urge people to order things from us. And they said, oh, but we'll order it from you, and then the industry will go on strike. And I said, well, we're trying to deal with that. Then they said, all right. It'll get to the docks, and the docks will go on strike. That was the kind of reputation we had.
ZARROLI: Under Thatcher, the government approved laws making it much tougher to strike. Long work stoppages followed, including an especially bitter strike by coal miners. But Thatcher ultimately prevailed.
Like her friend Ronald Reagan, Thatcher set about unleashing market forces. She privatized large parts of the economy that had been under government control since World War II, including the steel, airline and telecommunications industries.
David Blanchflower, a professor of economics at Dartmouth, says some parts of the British economy have never really recovered from Thatcher's policies.
DAVID BLANCHFLOWER: The story that I always tell my students is that there were a million male manual workers who were union members that worked in manufacturing in the north, who actually lost their jobs under Thatcher and never obtained jobs again.
ZARROLI: But Blanchflower, a former member of the Bank of England's Monetary Policy Committee, says many more people saw their incomes improve.
BLANCHFLOWER: Ten percent of the people were unemployed all the time. And 90 percent of the people weren't unemployed at all, and had really big rises in real earnings. And so Thatcher benefitted from the fact that most of the people were better off under her government.
ZARROLI: Blanchflower says Thatcher was lucky in one sense: North Sea oil revenues began to flow in, making it easier to cut taxes. Like many people in Britain, Blanchflower believes the deregulation begun under Thatcher was necessary for the country. But he says it also helped create some problems, including the recent banking crisis.
Tony Travers of the London School of Economics notes that Britain has responded to the current economic downturn by pushing through painful austerity measures.
TRAVERS: And it's managed to do that with an amazing lack of reaction from trades unions or, indeed, in the streets at all.
ZARROLI: And Travers believes this public acquiescence to the government's policies is one more part of Thatcher's legacy, and how she left her country a fundamentally different place.
Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.