Margaret Thatcher’s greatness is continually affirmed by those competing to be hailed as her political successors. Alan Shipman believes she leaves some enduring lessons which today’s parties ignore at their peril. He examines them here.
Pragmatic privatisation
Although the sale of state-owned assets is now viewed as a cornerstone of ‘Thatcherism’, it did not feature prominently in the 1979 Conservative manifesto or the Iron Lady’s immediate action plan. Privatisation gained in importance when the government was let down by the ‘Laffer Curve'– the economic theory that income tax cuts would pay for themselves through burgeoning private enterprise creating more tax revenue – and needed more funds to avoid a rise in public borrowing. Sales under Thatcher focused on state-owned manufacturers and utilities that were saleable because they could clearly work in the private sector. It was only her successors who pushed the privatisation agenda into areas where there was no viable economic model for it, beginning with the still-problematic rail sale of 1993, and extending into social services that she left well alone.
Education
Growing up before the extension of free secondary education to all (under the 1944 Education Act) and creation of the National Health Service in 1947, Lady Thatcher did not seek fundamental changes in either. When social mobility was found to be limited despite the abolition of fees for selective ‘grammar schools’ like the one she attended, Mrs T was happy to scrap them in favour of comprehensives – more vigorously than any education secretary before or since. The renewed differentiation of secondary education under subsequent Conservative, Labour and Coalition governments uncritically reverses her stance.
Healthcare
While critics accuse her of sowing the seeds for NHS privatisation, Thatcher sought a ‘quasi-market’ within the state-run service because she recognised the inadvisability of letting real markets loose on it. Paradoxically, the huge interest that private profitmaking companies now express in taking over hospitals and running schools was the reason why Thatcher saw no need to privatise them, and declared the NHS ‘safe with us'. In opposition, she was heavily influenced by the argument that Britain had ‘too few producers’, partly because a public sector offering ‘non-marketed services’ had grown at the expense of a private sector that could sell them for profit. But whereas today’s government views the scope for private profit as a reason for bringing the private sector into healthcare, Thatcher recognised that it made this unnecessary. It demonstrates that the NHS is not, after all, ‘unproductive’, and that an efficient state-run service promotes social objectives without doing economic harm.
Economic policy
When Thatcher took office, a decade of high inflation and falling output and employment (so-called 'stagflation') had made Milton Friedman the world’s most prominent and influential economist, with his own prime-time television series, and a string of academic honours capped by a Nobel prize. By the time she left it, Friedman was a much-diminished and figure, sidelined even by his own Chicago School colleagues. The reason: Thatcher applied Friedman’s main idea, which was that controlling the growth of the money supply would eliminate inflation without causing any loss of output, if combined with labour-market reform to reduce trade-union power. Monetary restraint led instead to a deep recession and surge of inflation in 1979-81, which was only escaped when Thatcher’s second administration switched to interest rates for inflation control. Friedman’s idea that money-supply growth was cause and not effect of credit growth, and affected only prices (not real output), was disputed at the time; and the general switch to inflation-targeting through interest rates set by independent central banks shows a general rejection of Friedman’s monetarist reasoning. While Friedman spoke warmly of Thatcher during and after her prime ministership, she would not necessarily have returned the compliment – her real Chicago School hero being Friedrich Hayek, whose social philosophy and monetary theories were fundamentally opposed to Friedman’s.
The Holy Family
The late, great Canadian prime minister Pierre Trudeau was probably thinking of his own eventful private life, as well as his Liberal principles, when he pronounced that “the state has no place in the nation’s bedrooms". Lady Thatcher, while
Freedom of Speech
The right to say and do what one likes, however unpopular or apparently offensive, was at the heart of Lady Thatcher’s social policy, from the moment she became Conservative leader in the mid-1970s. She would have been horrified by the censoring of an innocent song from a 1930s musical on grounds of taste and decency, just because her opponents were rushing out to buy it.
Because she was prematurely ousted in 1990, and resisted the temptation to lecture her successors, we can only speculate on how Lady Thatcher would have tackled today’s problems. Her record suggests there has been a lot of false extrapolation by those who claim to have continued her work.
Alan Shipman 16 April 2013
Alan Shipman is a lecturer in Economics at the Open University. He is responsible for the modules You and your money:personal finance in context and Personal investment in an uncertain world, part of the foundation degree in Financial Services.
The views expressed in this post, as in all posts on Society Matters, are the views of the author, not The Open University.
Cartoon by Catherine Pain