Source : ONS b , a. Although the proportion of shares held in an individual capacity by UK citizens was declining before the Thatcher years, approximately halving from to , clearly the Thatcher reforms did little to address this decline.
Conversely, the proportion of UK quoted shares in foreign hands approximately quadrupled during the Thatcher years, and has quadrupled again since ONS, b , a. Alongside of outright privatisation, recent UK governments have also pursued a policy of marketisation. This initiative, based on the ideological assumption of the relative efficiency of the private to the public sector, involved introducing quasi-market mechanisms into public services through a separation of the purchaser and provider functions of state agencies.
This facilitated a plethora of private organisations entering the market to sub-contract to government particularly in health, social care and housing Buchanan et al. The introduction of quasi-markets in the NHS for example has led to a confusing array of independent and private sector organisations available to commissioning groups to deliver health care services often with no clear lines of accountability Klein, Similarly, welfare clients have found it difficult to operate as active and effective consumers in the new care markets, as these favour the more articulate and affluent service users Clarke, Some would argue the privatisation strategy itself was undemocratic, given the hostility of the British people towards the policy.
The majority of the British people remain of the opinion key public services—including utility companies, public transport, schools, the Royal Mail and the NHS—should be in the public sector, not the private sector YouGov, It has often been said e. Spending the proceeds arising from the sale of public assets may have been politically more acceptable, and more popular, than increasing taxes, further borrowing or cutting public expenditure Brittan, Neither is there any evidence privatisation led to efficiency gains which benefited the British people.
Thatcher , , , , argued that making the UK great again required, not economic policy, but the re-establishing of the moral spirit of the British people. She further argued that promoting liberal free-market economic values would motivate the adoption of conservative moral values c.
Cameron, , in a similar vein. If her policies failed in the major economic dimensions, we might regard her policies as a success by her standards if she had improved the moral economy of the nation. There is no agreed metric against which this might be judged. Thatcher was convinced that the public share of the economy must be reined in. Yet, insofar as she set herself the goal of reducing these, she failed; neither taxation, borrowing nor spending declined over the course of her government.
The total value of central government receipts was In real terms, the total managed expenditure rose by 7. The story is, however, rather better with regard to debt, in the short run at least. The billions of pounds arising from privatisation and North Sea oil and gas revenues temporarily reduced the public sector borrowing requirement. As a percentage of GDP, though not in nominal terms, public sector debt fell from to Figure 7. Source : Cecchetti et al. Privatisation can deliver, however, only a one-off windfall and once the most profitable assets had been sold, government debt began to increase again.
By , when the Conservatives left office, public debt was a greater proportion of GDP than it had been in Rather more worrying, what decline there had been in public sector debt, was more than offset by increasing household debt as many British households resorted to credit to make up the shortfall in their incomes c.
Crouch, , Furthermore, Britons had become more dependent on social security during the s. At the core of society, so Thatcher was convinced, were the individual and the traditional family unit Thatcher, motivated by self-interest. However, according to ONS b , the family unit was not obviously strengthened by her policies. The marriage rate for men per 1, unmarried men was 58 in , the equivalent rate for women was By , these rates had fallen to 42 and 36, respectively; in , they stood at 32 and 28 ONS, Furthermore, as inequality increases, there is evidence that the economically vulnerable find it increasingly difficult to form long-term romantic attachments Gould and Paserman, ; Carbone and Cahn, ; Schneider and Reich, The impact of declining family prospects has fallen on British children.
Whether because of the continued weakening of family bonds, social disconnection and stress or for some other reasons, crime rates increased under Thatcher.
There was a sea-change in homicide in the s, but it was not for the better. According to Dorling , men leaving school in the summer of and later generations had a greater chance of being murdered than did their elder siblings.
Although the cause of the so-called crime drop—which is, broadly speaking, an international phenomenon—is still much debated amongst criminologists Farrell et al. More recently, there is some evidence that the police-recorded crime rate has begun to increase again, particularly the rate of violent crime—for example, the rate of knife crime in London and other major UK cities ONS Online f.
Complementing the increase in unemployment and poverty experienced by many in the UK of the s was a decline in economic security. Notwithstanding the opportunities for the British to call on their sense of morality and help out their fellows so long as they did not support their fellows through unionisation, c.
Community bonds in general have deteriorated since the s, as Britons' social networks decline and fragment, particularly in the inner urban areas Stepney, b. There has also been a long-term decline in the proportion of British households giving to charities, which dates from the s Charities Aid Foundation, Ironically, the British were prepared to make sacrifices to promote social justice—through the state.
Under neo-liberalism, the typical Briton became more, not less, dependent on debt and benefits. If it is indeed the case Thatcher failed to deliver on many of her stated policy goals, we might well wonder why she appeared, and seemed to remain, so apparently popular with the British people, winning re-election in and It may be, however, her successes were rather more due to the disorganisation of the opposition, along with luck and politics Stepney, , than sound economics as we discuss below.
They were ahead in the polls from then until the election Clarke et al. Freedman, ; Barker cited in Briley, ; McClure, had subsided by the time Thatcher went to the country. Ironically, in , it might have been neither her own policies nor war—bumbled into but successfully concluded—which saved Thatcher from electoral defeat, but implicit Keynesianism.
According to Sanders et al. Notwithstanding their stated aims of rolling back Keynesian economic policies, the Conservatives were apparently not opposed to using the revenues gained from North Sea oil and gas, and the proceeds of their early privatisation experiments, to boost the economy.
To some extent at least, relative price stability resulted from the easing of the effects of the second oil shock which began in the late s.
By , the price had begun to decline, reducing inflationary pressures. For the remainder of the s and s, oil prices were broadly comparable to their levels in the late s Figure 8 ; Statistica Online. There was, however, a downside: As the UK began to export fossil fuels, Britain being barely even able to afford to buy its own oil Cripps, , the exchange rate appreciated, making it yet more difficult for UK industry to compete globally.
Sadly, his advice was not followed. In contrast, Norway, which similarly exploited its oil and gas reserves, used much of the proceeds to build a sovereign wealth fund for investment purposes. This offset the impact of fossil fuel exports on the exchange rate and paid for the accumulation of productive public-owned assets for the benefit of current and future generations. The Conservative share of the vote declined with every election she fought. The Conservatives won The increase in the number of seats won by the Conservative Party—, and in , , and , respectively Audickas et al.
It seems reasonable to suppose the apparent support for Thatcher which might be concluded from a consideration of the numbers of MPs, arose, at least in part, from the disorganisation of the opposition s. This is not to say, of course, that many, albeit a declining minority, felt her policies were at least as good if not better than those on offer from other parties.
Despite her failure to deliver economically or socially for the British people in the long term, it is clear Thatcher played a bad hand well politically. One-time windfalls from North Sea oil and gas, boosted by the proceeds of privatisation and Right to Buy, were used to cut tax for the affluent and increase government spending. On top of this, billions of pounds of former public assets were undersold to those British people who were fortunate enough to be in a position to take advantage of the opportunity to make windfall capital gains.
Furthermore, Thatcher was able to rely on support from the popular media, especially the Murdoch Empire Stepney, Ferguson, , ch. Many of her policies were by their natures one-off, yet few considered how Britain would pay its way in the world once North Sea oil and gas began to run out, the most valuable public assets were sold, and the proceeds of these windfalls spent.
Thatcher claimed that she had improved the economic prospects of the UK and all its citizens through the application of neo-liberal policies; that is according to her definition of neo-liberalism , free-market policies Thatcher, The evidence, however, does not support this claim. Economic growth was weaker under Thatcher than under preceding governments and, if subsequent governments performed no better, this is not because they radically departed from her policy prescriptions Dorling, The costs of this lack of growth were disproportionally borne by the poor.
The impact of this stagnation was more generally felt, however: Those British born in the s appear, on average, to be less affluent than their older siblings let alone their parents. In fact, they are increasingly likely to be living with their parents. As a patriot, it is unlikely Thatcher would regard this as a positive outcome of her policies.
Neither did her policies foster the moral economy for which she hoped; if anything, rather the opposite. Thatcher was able to generate and capitalise on a narrative of improving prospects. However, to the extent that such improvement as there was rested on North Sea oil and gas, and never to be repeatable sales of accumulated public assets, her policies could never provide the foundations of UK prosperity in the long run.
Given that many governments around the world continue to apply broadly Thatcherite policies, this analysis implies a substantial reassessment of modern global political economy is overdue.
As Thatcher herself argued:. Those who think they know, but are mistaken, and act upon their mistakes, are the most dangerous people to have in charge. Thatcher, , p. Income is equivalised, that is to say, adjusted, to take account of differing household composition. This rather makes us wonder how much of the increase in household income at the bottom end of the distribution may have resulted from having an increased number of wage earners in each household as some young people cannot afford to move out.
The same thing happens, of course, when UK property or shares are sold overseas, other things being equal. Atkinson , A. Google Scholar. Google Preview. Atkinson , R. Minimum city? Audickas , L.
BBC News. Beatty , C. Belfield , C. Briley , H. Health Care. Monetary Policy. Poverty and Social Welfare. Public Opinion. Tax and Budget Policy. Technology and Privacy. Trade Policy. April 9, PM. By Steve H. An acceptance that monetary discipline should be central to policymaking shaped the inflation targeting of subsequent decades.
Cutting back the power of a dominant state sector was a mantra of Thatcherism. The public sector was to retreat from large areas of the industrial landscape. Privatisations, including Rolls-Royce, BT, British Airways and British Gas, would have seemed unthinkable a few years before, but were pushed through with zeal.
Renationalisation never found its way back onto New Labour's agenda. So-called supply side reform, covering the labour market and tax cuts to boost enterprise was another key feature of Thatcherite economic policy. Reducing the influence of trade unions may have been unpopular with members and the Labour left but the tide has not been reversed by subsequent governments.
A belief in wealth creation and the freedom of entrepreneurs to grow their companies and create jobs were central to Mrs Thatcher's economic policy.
They have not been rejected by her successors. We're going to set the prices that you can charge for tickets. We're going to tell you what routes you can fly.
By showing governments that it was possible to manage their economies, Keynes made himself the most influential economist of the age. In good times they should reduce their spending and build surpluses; in bad times, like the Great Depression, they should step up spending, run deficits, and put purchasing power into the hands of working people.
John Kenneth Galbraith was one of Keynes's leading apostles. I came back to find a whole group of people here who had also read The General Theory, and this was a breath of hope and optimism. That was the basic essential -- and that you didn't worry about accumulating debt, or, more precisely, you worried about it, but did it anyway. As the U.
Good may come out of evil. We may learn a trick or two which will come in useful when the day of peace comes. He attacked the growing consensus by writing The Road to Serfdom. Sarcastically dedicated to "socialists of all parties," it was a popular success. There was even a cartoon version of it. Its message was simple and direct: Too much government planning means too much government power, and too much government power over the economy destroys freedom and makes men slaves.
For Hayek, central planning was the first step to a totalitarian state. He rejected any government intervention during the Great Depression itself, whereas Keynes was an activist. He said in the long run we're all dead, and in the long run if we allow things to go on without remedy, we get lots of Hitlers, lots of wars, and lots of Stalins.
And who was right? We almost certainly want more. Here, delegates gathered from all over the world to organize the postwar economy. They were designed to bring stability to the world economy and prevent the unemployment and the depression of s. Keynes's idealism and humanity were an inspiration. And I doubt if the world understands how big a thing we are bringing to birth. Ill and overworked, his health gave way, but his reputation and influence outlived him.
Then two things happened. Keynes died and was raised to sainthood, and I discredited myself by publishing The Road to Serfdom. And that changed the situation completely. And for the following 30 years, it was only Keynes who counted, and I was gradually almost forgotten. The final summit conference of the three wartime allies took place in a palace in the Berlin suburb of Potsdam. Truman, Churchill, and Stalin came to plan the peace and to redraw the map of Europe.
Their different economic systems offered alternative paths to prosperity. But the Great Depression continued to cast its long shadow.
You had a feeling in large parts of the world, "We don't want to go that way. We want to go a better way. Chapter 7: Planning the Peace []. All these soldiers said, "Never again. We're never going back to unemployment, the Great Depression, to fascism, to rearmament. We want to build a new society.
Winston Churchill, the great wartime leader and head of the Conservative Party, expected an easy victory. Everywhere he went, huge crowds turned out to cheer the nation's hero. Attlee argued that Britain had planned the war, and now planning would win the peace. We set out to ensure that this system of fair shares and the planning and controls continued after the war. And this, of course, was carrying things to absurdity -- Gestapo in Britain!
The result was sensational. The people had voted for a new socialist Britain. BARBARA CASTLE: The Labor Party swept to power simply because the vast majority of people, particularly those men and women in the fighting forces who'd lived through the dreadful Depression years of the '30s, just said, "Churchill's done a fine job of war leader, but we don't trust him to win the peace.
Why not pool your resources? And so we broke into the concept of the sacredness of private property. Labor created a "mixed economy" in which newly nationalized industries coexisted with private enterprise. Now government-owned industries like coal, rail, and steel no longer enriched owners and shareholders, but worked for the common good. That was the hope, and it was the hope that gave us the welfare state, gave us the National Health Service, gave us full employment, gave us trade union rights, really rebuilt the country from the bottom up.
Scientific socialism seemed to be in the ascendancy. The Cold War had begun. He said they breathed freedom. But he saw socialist ideals and the planned economy as threats to freedom, and so he organized a conference at a formerly fashionable hotel on the top of Mont Pelerin -- Pilgrim Mountain. RALPH HARRIS: Well, what happened in was that Hayek at last brought off a great dream, which was to assemble 36, mostly economists, some historians, and a few journalists, a handful of what he regarded as survivors, good eggs, good intellectuals, who understood the market economy and the whole of the case.
Hayek and others felt that the world was turning toward planning and that somehow we had to develop an intellectual current that would offset that movement. The room and its furniture are not much changed. The argument always was that democracy is impossible without a free economy. You need a free economy; free economy is a necessary though not a sufficient condition for democracy. At one point, Hayek's former mentor, Ludwig von Mises, stormed out of a meeting.
RALPH HARRIS: Hayek paid enormous tribute to the socialist intellectuals and said that the great strength of the socialists is that they had the courage, he said, to be idealistic; to have a theory, to have a project, to have a vision, and to go on working towards that, through thick and thin.
In the meantime, Hayek could see only one gleam of light. Chapter 9: Germany's Bold Move []. Its economy had disintegrated. Markets had broken down. Shops were empty. Already the Russians occupied East Germany and were waiting for the rest to fall into their lap.
In the American and British occupation zones, raging hyperinflation had made the German currency worthless. In the winter of , the Allies appointed as director of economic affairs a rotund, cigar-chomping economist named Ludwig Erhard. A staunch anti-Nazi, Erhard was a free-market economist who shared many of Hayek's beliefs and ideas.
He also believed the Allies' economic rules were making a bad situation worse. And you had essentially an economy that was brought to a halt. They were for small transactions. Cognac was a medium of circulation for large transactions. But for Erhard, that was not enough. So without informing the Allies, Erhard went on the radio and made a startling announcement. Lucius Clay, the man in charge of occupied Germany, demanded to know what Erhard thought he was doing.
You have changed the Allied price controls. People stopped hoarding, and goods not seen for 10 years went on sale. Instead of nothing being in the windows of the shops, everything started to come up. And that began the German economic miracle. Within a few years, Germany's social market economy overtook Britain's more planned economy. But back then, nobody wanted to model themselves on Germany.
Most countries preferred to plan their economies. Mahatma Gandhi was the father of independence. His economic ideal was a simple India of self-sufficient villages. Pandhit Nehru, the first prime minister, wanted to industrialize and combine British parliamentary democracy with Soviet-style central planning. You talk of any economist in the world, and they were advising the Indian government. And the advice was, you must have a state-led model of industrial growth; the public sector must occupy what came to be called the commanding heights of the economy.
And that's why steel, coal, machine tools, capital goods, all the areas of heavy industry were in the public sector and not in the private sector. And there was this genius statistician, Mahalanobis, who was head of the Indian Statistical Institute. The brilliant Mahalanobis succeeded in expressing the entire Indian economy in a single mathematical formula. And that made Mahalanobis very influential.
Across the developing world, socialism, planning, government control, regulation, and ownership -- these became the gospel. All over Africa, people looked to socialism to lead them out of poverty. Across South America, governments chose state control as the way to modernize.
The apparent success of communist countries like the Soviet Union and China seemed to show the way. Chapter Chicago Against The Tide []. Chicago is geographically isolated. This affects Chicago's intellectual influence in many more areas than economics. Eight professors and another 11 economists from Chicago went on to win Nobel Prizes. Gary Becker is one of them.
I had been a very good student at Princeton. My first day in Friedman's class he raised a question. I answered. He said, "That's no answer; that's just rephrasing the question. People were interested in ideas and argument and not in making sure you didn't ruffle anybody's feathers.
ARNOLD HARBERGER, Professor Emeritus, University of Chicago: If you're sitting in a seminar room and somebody up there is saying something which if imbibed by your students who are sitting in that same room is going to lead them astray, it's up to you to call that guy right now and not later, and that, I think, is sort of the spirit that prevailed in the Chicago workshop system. There wasn't that much fighting in the lunches.
They were pretty cordial. And one man came to dominate those debates. If you want to try to ignore them, you ignore them at your peril. If you find a way of ordering your life which harnesses these forces to the benefit of society, that's the way to go. Nineteen years after he died, his face was on the cover of Time magazine.
The economic advice that economists gave to policymakers said the only reason you have bad economic outcomes is because the government's not doing enough. It sounds almost like central planning, doesn't it? The Keynesian consensus was summed up when that most Ivy League of presidents, John Kennedy, received an honorary degree from Yale. President, It might be said now that I have the best of both worlds -- a Harvard education and a Yale degree.
The battle of ideas was over. That speech suggested that we had won over Kennedy. We had won the heart and mind of the president. Europe, Japan, and America all saw high economic growth and rising standards of living. People enjoyed a prosperity undreamed of at the end of the war. Chapter The Specter of Stagflation [].
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