Twenty-five years ago this month, in May 1979, Margaret Thatcher became prime minister of Great Britain. This proved to be an event of profound importance for that country. It is not an overstatement to say that she revolutionized Britain's society and economy in ways no other British leader has ever done.
It is hard to explain to an American audience why Thatcher was so important, because much of what she did that was highly controversial in Britain would seem commonsensical to us. Indeed, one of the harshest criticisms leveled at her was that she was making Britain too much like the United States.
Economist Irwin Stelzer did an excellent survey of the Thatcher legacy in the spring 1992 issue of The Public Interest. He goes to pains to explain what pre-Thatcher Britain was like. For only by knowing the historical, political and economic circumstances of the time can we really appreciate the changes Thatcher wrought.
Because it was home to the Industrial Revolution, Britain became fabulously wealthy in the 1800s. Even after the devastation of the First World War, it remained the richest country in Europe. As late as the eve of World War II, per capita income in Britain was 25 percent above the rest of Europe.
But the Second World War had a devastating impact on the British people. They came out of it with a deep longing for stability and security. This led to establishment of a far-reaching welfare state in Britain that included nationalization of much of its industry. Taxes were raised to confiscatory levels, and the British pound was devalued to pay for all the benefits. The British Empire came to an end.
These socialist policies sapped the economy's strength. Although incomes continued to rise, they rose much more slowly in Britain than in the rest of Europe. By 1978, Britain was among the poorer countries there. Its productivity, which had once been the best in the world, was down to 69 percent of that in the United States. Moreover, the trend was downward. In 1960, British productivity had been 75 percent of that here.
As Stelzer explains, during the 1950s and 1960s, the British people had settled in to the idea that the country was in decline and that nothing could be done about it. The principal job of Britain's leaders, both under the Conservative Party and the Labour Party, was to manage the decline so that it was not too disruptive. This often involved caving-in to labor union demands to preserve uneconomic jobs in obsolete industries at pay levels far above those justified by productivity.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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