With the passing of Margaret Thatcher, and the commemoration of Winston Churchill day, world attention this week was rightly focused on the greatest Prime Ministers of the 20th century.
Given that Thatcher, more than Churchill, will be remembered for the near miraculous economic recovery her governance produced in Britain, and given America’s unremittingly woeful economic state, it is useful to recall her economic accomplishments, the means by which she achieved them, and their application to our economic moment.
The British stage onto which Thatcher stepped in 1979 was not unlike the America Reagan inherited, or the America we see in the near future. Pre-Thatcherism, Britain, like America, was mired in malaise: the trade unions were rich and rioting; the healthcare system was in crisis; gas shortages loomed; state owned industries were failing; and the top income tax rate was 98%. Not surprisingly, in October of 1980, more Britons were out of work than at any time since the Great Depression.
The resulting effect of this economic and political crisis was a harsh blow to the very soul of Britain. The false promises of post-war Socialism and cradle-to-grave security yielded staggering debts, dysfunctional government, and a sense that Britain’s best days were behind it.
Thatcher rejected such defeatism, asserting, like Reagan, that better days were ahead for her people. Equally important, she rejected her party’s inclination to find consensus with the statist, status quo Labor Party on the most divisive issues – taxes, deficits, unions, privatization – instead proclaiming, “I am a conviction politician,” a leader “not for turning.” Her convictions and resolve never wavered, even when union rioting in opposition to her policies turned deadly.
As a result of Thatcher’s economic revolution, which focused on cutting tax rates, privatizing industries and property, eliminating deficit spending, and weakening the choke hold of trade unions, the British economy grew to become the world’s fourth largest. The top tax rate was reduced to 40% and 900,000 government jobs were shifted to the private sector as a result of massive privatization.
At this American moment, we are in dire need of Thatcherism. The March jobs report told a harrowing tale: only 88,000 jobs were created, jobless claims rose to 385,000, disability claims outpaced new jobs, and the labor force participation rate was 63.3 percent, the lowest level since 1979, when Thatcher took office.