Margaret Thatcher was probably the most important political figure
Margaret Thatcher was probably the most important politician, or political figure, alongside Ronald Reagan in the struggle and continuous battle for economic and political liberalism (in the European sense of the term). Thatcher, according to records, books and articles was an incredibly intelligent, brave and hard-working woman, always looking to give greater power to the individual, against collectivism and its adjacent ideologies. Nowadays, at least in Europe, the number of political parties which defend liberalism without prejudice or fear to be judge by political rivals is almost inexistent. Support for capitalism or more pro free-market ideologies have been completely displaced out of the political spectrum, leaving this space for an insurgent extreme left, and a populist extreme right all along Europe. That’s why, for some of us, convinced supporters of capitalism, individual rights and freedoms and respect for basic rights as private property; reading and writing about Thatcher’s legacy can even moisten our eyes.
Eight days ago, the 5th of May of 2019, 40 years were made since Margaret Thatcher became Prime Minister of the United Kingdom in of the most difficult moments in the history of the country. She took one step forward, defied all men who tried to put obstacles in her way, and empowered women, equality, and above all those policies that have generated so much socioeconomic development in the West for at least the last 200 years, centre-right liberalism. Margaret Thatcher was probably the best promoter ever of feminism, capitalism, and overall, freedom. Due to the 40th anniversary of her election as PM of the UK, I’ve decided that one of the best tributes we could pay her was remembering some of those policies which guaranteed freedom in the UK for more than 10 years and settled the bases for a wider economic liberalism onwards throughout the whole of the European continent. Let’s start.
First of all
First of all, before commenting exclusively on her economic legacy, we should mention some policies and reforms, that even related to economics, had to do more with personal freedom and philosophical individualism. In 1980 Thatcher, introduced the Right to Buy Scheme, intending to create a country of proprietors instead of renters, as this would guarantee long-term development, stability, saving and economic independence for a million people all around the UK. What this scheme intended to do was to allow people who were renting a social house at the moment to buy it at a discounted price and free of interest. The main intention, was that these people will save during some time to pay for the first month of the mortgage and later on will continue paying for around 10 years, until finally they discovered at their retirement that they had some patrimony and capital saved, and which their children could inherit, improving living standards throughout generations, and consequently completely closing the intergenerational gap which prevailed during the 70s and 80s. This is one out of a hundred of examples that I think about when I say Thatcher was not worried to get re-elected, as she had a long-term vision of prosperity for her nation.
One of the factors which arise most admiration for Margaret Thatcher nowadays from free-market supporters, were her economic reforms, which introduced huge liberalization policies which lead to tremendous socioeconomic development in just 11 years.
When Thatcher arrived at Downing Street in 1979, inflation had peaked at 26% during the 1970s. The expansionary monetary policy of the Bank of England in the years previous to Mrs. Thatcher arrival was inverted when Mr. Lawson was set in charge of monetary policy, increasing interest rates and dropping inflation down to 4.9% in 1983 and 3% in 1986, from 16.4% in 1980; which was a complete achievement! Margaret Thatcher was influenced by Friedman’s monetary policy, and Chicagoan economists in relation to structural reforms, which provided excellent results.
When Thatcher left
Thatcher privatized many British companies in a wide variety of sectors and industries. In 1979 the State employed more than 30% of the total labour force, being this number less than 20% when Mrs. Thatcher left Downing Street in 1990. Thatcher privatized very well-known companies such as British Airways, Jaguar, Rolls Royce, British Telecom, BP… which caused a tremendous increase in productivity levels and rose those companies’ profits, deriving in better goods and services, at a lower price, for the whole of British society, as these firms where now under competitive pressure in a realistic market structure. Throughout her 11 years of mandate industrial production rose by more than 7.5%, with continuous growth during all those years.
On top of it, thanks to the brave liberalization of the labour market which Thatcher carried on, the number of workers affiliated to a trade union decreased from 13 to 8 million during her mandate, which allowed for many more individual negotiations and provided skilled workers with greater bargaining power, which lead to much more flexible employer-employee relationships.
Nowadays, Europe should look for Thatcher’s fiscal policy reforms as a reference for what should be done. Mrs. Thatcher, along with Geoffrey Howe slashed maximum Income Tax rate from 90% to 60%, the mean rate from 33% to 30%, and deductions for low rents were amplified; which meant a huge reduction of marginal rates, generating a very big human capital attraction, mostly of highly skilled labour. In 1988, one of the last years of Thatcher’s mandate, taxes were cut further on, with the mean Income Tax rate being reduced from 30% to 25%.
Finally, Mrs. Thatcher didn’t forget the Corporate Tax rate, which was essential for the enormous capital attraction the UK experienced along those 11 years. The maximum Corporate Tax rate was slashed from 50% to 35%, and the mean rate from 30% to 25%. The Iron Lady was also able, even with a strong opposition fiercely against, to reduce the size of the state (measured as public spending/GDP) from 42.75% in 1979 down to 35.23% in 1990.
In conclusion, Thatcher’s economic results were magnificent. GDP increased at an average 3% from 1979 to 1990, which accounts for a compounded economic growth of more than 35% along those 11 years, also making disappear any sign of fiscal deficit (public debt/GDP levels fell from 50% to 30%) and positioning Great Britain as one of the world’s greatest economic forces. European free-market capitalism owes almost everything from 1980 onwards to Mrs. Thatcher and her defence of those economic values and ideas which have brought so much socioeconomic progress to the Western world in the past decades. The Iron Lady was a real freedom fighter.