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ECONOMIC POLICIES AND LEGACY OF MARGARET THATCHER

An Overview Thatcher’s Governance Legacy

Thatcher’s government setting reveals a case study of how economic ideas were entwined with political and economic history of the country.

Her government was wholly linked with “monetarism” economic principles.

Her economical policies were influenced by different economists including Milton Friedman and Driedrich Hayek.

Her government brought about changes in the way business were conducted aimed at altering specific economic issues.

Legacy of 1970s

Events of 1970s have profound influence on Thatcher’s government.

The microeconomic policies were never given a chance solve the existing problems.

Trade Unions were responsible for bring down the health government in 1970s.

The 1970s legacy had other specific problems to influence Thatcher’s government attitude.

Increasing levels of unemployment, inflation and so forth.

Thatcher not an Ordinary Politician

Thatcher was a highly skilled in persuading people in the public with certain stands to adopt what her government’s stood for.

With help of media she sold her government’s ideas of free market, lean-government platitudes to the public.

Her policies on economic and social issues were embraced by a bigger section of the public.

She advocated abandonment of social and economic policies in favor of common sense of the age.

Macroeconomic policy

Monetary policy :Her government abolished exchange control

regulations, responsible for restricted movement of money in and out of Britain.

Her government was also involved in tax and supply side policies: Aimed at reducing burden of direct taxation . Tax cut remained a long term goal that was never

achieved .Switched to indirect taxation. During the 1979 budget ,

increment was reported in the Value Added tax.

The Introduction of Medium-term financial Strategy (MTFS)

Her government introduced MTFS.Her policies favored measure of money supply as well

as the ratio of public sector borrowing requirement over GDP.

Explicitly connected monetary and fiscal policy hence constraining the government budget.

Government encouraged lending to private sector Aimed at reducing money supply without controlling

public sector deficit.

Moving from Monetarism to ERM

Britain was hit by two recessions under Thatcher.By1985 Britain economy was in a crisis, compared to

the period earlier on in the decade. The crisis was as a result of high exchange rates

witnessed from periods 1979 to 1981.The government strategically replaced monetary targets

in favor of the Exchange rate mechanism (ERM).Her government considered ERM attractive since the

sterling stood at 3.75 Deutschmarks, growth was immensely great and inflation low.

The Impact of Thatcher’s Conservative Government policy on Britain Economy

The cost of living: In 1979, inflation increased to higher levels above

20%.Manufacturing decline: by 1970, manufacturing accounted for about 21% of

GDP; however, by 1979 it dropped to 17% of GDP.Public spending: More workforce employed in public sector:

Thatcher’s reign 23% verses currently 20%, 3% higher.

Pay Gap:- Men were paid higher compared to women.- Women working full-time by 1990 were paid are about 76% , men increase from 73%. House prices and Interest rates- In 1980s was marked with increase in house price economy.- Interest rates rose to a record levels higher by17%.

Pay Gap, Housing Price & Interest rates

- Unemployment rose to higher levels - Increased poverty level according to statistics obtained from the Institute for Fiscal Studies.- By 1979 about 13% of total Britain population lived below the 60% mark, the median incomes before housing costs. - In1990 the percentage had increased to over 20%.

Unemployment, Poverty and Inequality

-Increased poverty levels led to inequality. - Gini coefficient commonly used in measuring inequality reveals that zero is the most equal society.- Britain’s society according to gini score indicate an increase from 0.25 to 0.34 at the time Thatcher ended her reign as Britain P.M.

Graphs on Poverty and Inequality during Thatcher’s Reign

References

Todhunter, C. 2013.Britain’s De-industralization and Privatization: The Economic and Social Legacy of Margaret Thatcher, “The Iron Lady” Global Research; Retrieved from: http://www.globalresearch.ca/britains-de-industralization-and-privatization-the-economic-and-social-legacy-of-margaret-thatcher-the-iron-lady/5329683

Smithin, J. N. (1990). Macroeconomics after Thatcher and Reagan: the conservative policy revolution in retrospect. Aldershot, Hants, England, E. Elgar.

References

Backhouse, R. (2002). The Macroeconomics of Margaret Thatcher. Journal of the History of Economic Thought. 24, 313-334.

J. C. R. Dow, & I. D. Saville. (1990). UK Monetary Policy Since 1971.

King, M. (2005). Epistemic Communities and the Diffusion of Ideas: Central Bank Reform in the United Kingdom. West European Politics. 28, 94-123.

Shiping Hua. (2006). The Deng Reforms (1978 1992) and the Gorbachev Reforms (1985 1991) Revisited: A Political Discourse. Problems of Post-Communism. 53, 3-16.

References

Reitan, E. A. (2003). The Thatcher revolution: Margaret Thatcher, John Major, and Tony Blair, 1979-2001. Lanham, Md, Rowman & Littlefield.

Berlinski, C. (2008). "There is no alternative" why Margaret Thatcher matters. New York, Basic Books. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=579006.

Casey, T. (2002). The social context of economic change in Britain: between policy and performance. Manchester [u.a.], Manchester Univ. Press.

References

Heath, A. F., Jowell, R., & Curtice, J. (2001). The rise of New Labour party policies and voter choices. Oxford [UK], Oxford University Press. http://site.ebrary.com/id/10283803.

Roy, S., & Clarke, J. (2005). Margaret Thatcher's revolution: how it happened and what it meant. London, Continuum.