Margaret Thatcher (Part 4)

 

Margaret Thatcher is one of my heroes and I have a three part series on her I am posting. “What We Can Learn from Margaret Thatcher,”By Sir Rhodes Boyson and Antonio Martino, Heritage Foundation, November 24, 1999, is an excellent article and here is a portion of it below:

Thatcher

This was the background of the advent of Mrs. Thatcher. Wrong economic theories, entrenched interest groups, and a widespread aversion for the free market had resulted in economic sclerosis, inflation, unemployment, and general decline. She intended to change all of this, and she did.

Her first battle was in the field of macroeconomic policy, where there was a switch from reliance on fiscal policy as a means of managing aggregate demand to the use of monetary policy. In fiscal policy the aim was that of reducing the deficit (PSBR: Public Sector Borrowing Requirement). In the field of taxation, the goal was that of restoring incentives to work, save, and invest through cuts in all tax rates, especially at the highest levels. The underlying philosophy was that the restoration of incentives was more important than the search for equality.

But where she really excelled was in macroeconomic or supply side reforms:

[A]fter the inflation-fighting campaign of 1979-82, [she engaged in] non-stop reform of the supply side — union laws, privatisation, deregulation, local government finance reform, housing, radical tax reform and much else.30

Thatcher also succeeded in taming the unions. Even her detractors concede that that was one of her great successes, one which she shares with President Reagan:

[Reagan and Thatcher] did make considerable progress in shrinking the role of government, and in expanding the reach of market forces in the microeconomy. Both did so, first, by taming the trade union power…. The President successfully broke a strike by air traffic controllers in 1981…. The Prime Minister equally successfully broke a strike in 1984-85 by coal miners determined to impose their leader’s political agenda on an electorate that had rejected it.31

She also succeeded in shrinking government’s direct role in the economy through privatization. It is generally recognized that “Thatcherism’s success in converting state-owned to privately-owned enterprises…[was] a programme so radical in conception, and so successful in operation, as to have won the highest form of flattery from other nations — imitation.”32 Contrary to what people both on the right and on the left maintain, Mrs. Thatcher’s successes do not include a reduction in total public spending: “Indeed, 18 years of Tory government left the state’s overall share of the economy virtually undiminished: 44% of GDP in 1979 and 43% in 1996.”33

To sum up, Thatcher succeeded in drastically reducing inflation in a country that had become dependent on it; taming the power of what were probably the most powerful labor unions in Europe; privatizing a large portion of a bloated public sector; enacting a tax code more favorable to entrepreneurship and investment; and establishing the conditions for long-term economic growth.

She put an end to the “British disease.” She put Britain back to work. Last, but definitely not least, she shifted the focus of political debate on economic issues. Mr. Blair’s economic program would have been considered Conservative in the 1970s. If Labour has been forced to drastically alter its position, this is largely due to Mrs. Thatcher’s legacy. One can criticize some details, but overall hers has been a fantastic success.34

How Did She Do It?

How did she do it? I believe there are several factors that contributed to Thatcher’s “Conservative Revolution.”

Ideas. There is no doubt that Thatcher’s success is largely due to the power of ideas. She acknowledged the important role played by the Institute of Economic Affairs in providing the intellectual ammunition and the inspiration for her program. On the occasion of the 30th anniversary of the IEA, she said:

[T]he Institute began at a time when despite free speech in a free country, there prevailed what I would call a censorship of fashion. Anyone who dared to challenge the conventional wisdom of the post-war years was frowned-upon, criticized, derided and pilloried as being reactionary or ignorant…. You set out to change public sentiment…. May I say how thankful we are to those academics, some of whom were very lonely, and to those journalists who joined your great endeavour. I do not think they ever numbered 364. They were the few. But they were right, and they saved Britain.35

Without those ideas, Thatcher’s revolution would have been impossible. However, let’s not forget that most of them were already available 10 years earlier at the time of the Heath government. It can be argued that in 1979 the justification for a radical change in economic policy was stronger than ever before, but it is still true that ideas alone do not explain the revolution. They were a necessary, but certainly not a sufficient, cause for the change.

Circumstances. It is true that by the end of the 1970s, the evidence of the failure of the statist policies pursued by both Labour and Tory governments was overwhelming. I believe that circumstances did play a role in Thatcher’s success. However, the evidence of the failure of those anti-market policies was already in existence in 1970, even though it was not as conspicuous as in 1979.

Furthermore, let’s not forget that not everybody drew the same conclusions from that experience. Certainly not the Labour Party that in 1979 was as Socialist as ever. And, as far as academic economists are concerned, the vast majority was convinced that there was no need for a change in policy, as revealed by the 364 of them who signed a manifesto against the new policies of the Thatcher government. The evidence was undoubtedly there, and it helped Thatcher’s cause, but it had been there before with no impact, and many educated people still failed to draw the correct conclusions from it.

Interests. The trade unions had abused their power, and this made the case for reducing their influence stronger than ever. However, even this was not new: The danger omnipotent labor unions pose to a free society had been obvious for years, yet nobody had ever tried to tame them.

Leadership. I believe that, while these factors played a role in Thatcher’s success, the crucial element was her personality, her principled and uncompromising leadership. It can be said of her what Ted Kennedy said of Reagan:

It would be foolish to deny that his success was fundamentally rooted in a command of public ideas. Ronald Reagan may have forgotten names, but never his goals. He was a great communicator, not simply because of his personality or his teleprompter, but mostly because he had something to communicate.36

She dared do what no one else had had the courage to do in Britain for decades: challenge the prevailing consensus, the common wisdom, the entrenched interests, and drive a reluctant party and a befuddled country in a radically new direction.

I can testify to her unusual personality. I have had the chance to meet her several times even before I entered politics. Once, in 1991, there was a conference in Fiesole, near Florence, organized by the National Review Institute. During a coffee break, we were walking along the portico of the hotel. Tuscany’s countryside looked magnificent under the afternoon sun. Mrs. Thatcher remarked: “Yours is a beautiful country, with a rotten government.” To which I replied: “My dear lady, the opposite would be much worse.”

Her straightforward, direct way of putting things, so unusual for a political leader, earned her some enemies among other leaders but made for a refreshing contrast with the hypocrisy and vacuity of the accepted political discourse. At times, she probably overdid it. For example, on that same occasion in Fiesole, during her summing-up of the conference, she came out with the statement: “Civilization is the exclusive prerogative of English-speaking peoples.” I was the only non-English, non-American in the room. I looked at John O’Sullivan, who was sitting next to me. He smiled and said, “You have been consigned to barbarism!”

She can also be very kind and thoughtful. When we won the elections in Italy in 1994, she sent me a fax of congratulations. I called her to thank her for her kindness. She gave me her usual pep talk: “You must do for Italy what I did for Britain.” I attempted to explain that we were at a disadvantage compared to her. I said: “You had a Constitution that was written in the hearts and the minds of your people. We don’t. You had an independent judiciary. We don’t. You had a clean and effective civil service. We don’t. You had a single party majority. We don’t. You had those think tanks, like the IEA, that provided you with the right ideas. We don’t.”

“However,” I added, “we have something which you didn’t have.” “What’s that?” she said. “Your example,” I replied.

As to the relative importance of ideas and/or leadership, she gave her own view on the occasion of the celebration of the 30th anniversary of the IEA. After having listened to a series of speeches by distinguished academics, all praising the great importance of ideas, she thus concluded her remarks: “Speaking as the eleventh speaker and the only woman, I hope you will recall that it may be the cock that crows but it is the hen who lays the eggs.”

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