Thatcherism: what does it mean?

The best-known legacy of former British Prime Minister Margaret Thatcher is probably what is known today as Thatcherism, or Thatcherite economics.

Much of the ideas she pursued as the British PM are internationally recognized concepts of free market, a small government, and independence.

But the way she implemented those concepts were hugely controversial and eventually led her Conservative party to remove her as leader and hence the premier.

One could argue Thatcherism is a mixture of the mentioned notions tainted with monetarism, anti-communism and anti-socialism, individuality, inflexibility, reckless privatization and fierce deregulation of the financial sector in favor of the rich and at the expense of the poor.

The late British PM believed the government’s job is to get out of the way as individuals, industries and businesses compete in a free market, with the state left to take care of the realm and currency value.

The result was the privatization of vast swathes of industry, which had thrived under state ownership and regulation.

Thatcher apparently did not care about the consequent unemployment as she rather focused on an inflation heading toward 20 percent in the late 1970’s.

She advocated monetarism that is controlling the money supply with high interest rates to rein in the inflation, yet that led to what Roger Bootle identified in his April 8 article for the Daily Telegraph as a “cripplingly high pound, which devastated much of British industry, causing unemployment to soar” by damaging exports.

Her battle against inflation sent poverty and inequality skyrocketing, with the latter persisting in the British society 23 years after she was toppled as PM in 1990, while her mass privatization never led to a major GDP rise.

The rich-poor gap was partly triggered by her taxation policy that cut the income tax to 25 percent while the levy on the highest earners was slashed from 83 percent to 40 percent.

For the poor, she compensated the reduced direct taxes by raising the VAT from eight percent to 15 percent.

As for the industries, the decline also changed the British economy from relying on manufacturing to reliant on finance, turning London into the financial hub of Europe.

While the industrial sector never recovered from the wreckage Thatcher left, the financial sector also did not work as it should, with American and European banks slowly coming to lead their British counterparts, including Barings, Kleinwort, Morgan Grenfell, Warburgs, and NatWest, in the British and European financial capital.

Thatcher is also notorious for privatization of public housing by selling them to tenants with her government abandoning its commitment to full employment, leaving the unemployed at the mercy of the private sector.

She was responsible for jobless figures of three million, which was unseen since the 1930’s and refused to decline until 1986.

During her tenure, there was also a drastic fall in manufacturing output.

Thatcher had come to office pledging public pain and austerity to control inflation but she left Britain with an inflation of around 10 percent and an economy weakened by high interest rates of 15 percent and falling house prices that were critical in causing the recession of 1991.

In effect, Thatcherism stands for unnecessary economic pain on the public to achieve an impossible economic target, which the public loathe and economists blame for the current financial crisis Britain is facing.