Margaret Thatcher’s Legacy

For better or worse, the legacy, leadership, and influence of the late Margaret Thatcher might have had a more profound influence on the world than might at first be obvious. There are some who feel that she changed the world in a good way, but also some who feel she changed the world more negatively. Even so, many of the economic changes she instilled into British politics and the British economy have not been altered, even by a Labour (British Socialist government), that was in power for over a decade, for years after she was forced to resign. So Margaret Thatcher must have gotten some things right.

Introduction

Margaret Thatcher died recently and has left a legacy of sorts, some of which is negative and some of which is positive. This posting will examine her legacy from the perspective of what she left behind economically, her leadership style, and how she influenced others.

Looking through the online media there are reports from the left that are negative and reports from the right that are equally biased on the positive side. Margaret Thatcher was both loved and hated in Britain and there never really was much sentiment in between. At the time of her death, the first thing that rang out on all American television news channels was that she is remembered for the Falklands war. Much United States television news is annoyingly over-dramatic, but warfare is not a good thing to be remembered for unless one is thinking about Winston Churchill. Consider that Margaret Thatcher did many more things and that much of her leadership was about economics, and the partial extrication of Britain from the noose of a possibly over zealously applied welfare state; at least this is how Margaret Thatcher probably saw it. Does everything she did become irrelevant in relation to the Falklands war? Does George W. Bush want to be remembered for the Second Gulf War and Afghanistan, trillions of dollars on credit, thousands upon thousands of deaths and injuries? Considering that both of these conflicts have outlasted the sourly remembered Vietnam War, and thus it is quite possible that Margaret Thatcher would not want to be remembered for having sent a fleet of highly trained sailors and marines to beat-up an army of conscripts, in a place that most people cannot even envision on a map.

Margaret Thatcher’s leadership style was imposing and always gave an impression of strength and consistency. However, she was also uncompromising, and even bloody-minded at times, to the point where her seeming obstinacy made it much more difficult for her to achieve what she sometimes set out to accomplish.

The influence of Margaret Thatcher was multi-faceted: (1) she helped bring down the iron curtain in her lifetime, and (2) she influenced many nations to adopt thriftier economic policies in modern times. Did she even reach thirty years into the future to influence the general trend of European austerity, even though her practice of financial deregulation could have helped to cause to 2008 recession in the first place? Has she reached out and influenced the far right wing of United States politics into wanting to reduce taxes, reduce social programs, and removal of deregulation to the extreme?

Background Concepts

Some British people may recall a satirical BBC television show that contained a topical political skit. There were protestors outside the prime minister’s residence holding up placards in bold writing, all shouting “Thatcher Out! Thatcher Out!” The next scene shows Margaret Thatcher returning to the prime minister’s residence at 10 Downing Street, stepping onto the concrete front step, pausing to wave at the protesters, and finally smiling and disappearing behind the glossy painted black door with the big number 10 on it. Those same protestors immediately proceed to reverse their placards, now stating “Thatcher In” in big bold letters, all shouting “Thatcher In! Thatcher In!” The British do not take themselves too seriously even though politics and the economics of politicians is a very serious business, with far reaching effects for millions if not billions of people.

As a result an examination of what Thatcher did, how and why, is as relevant now as when she was in power. Many nations are still very heavily influenced by her beliefs and particularly her economic ideas. She did help to change the world in some respects, partially helping to reverse a trend in of increasing social equality in Western Europe. How much social engineering one agrees with or not is irrelevant in this posting because the idea is to examine what she did, how she did it, and how she still influences history more than two and half decades after leaving office.

Out with the Old and in with the New

Margaret Thatcher came to power on a wave of economic problems including high unemployment and a winter of discontent made up of disputes and strikes on a nationwide scale. Two party democracies can vacillate between two parties, where the swing–vote often tires of one party and swings to the other- politicians the world over constantly capitalize on this trend by pandering to a periodical need for change, where the content of that change is somewhat irrelevant. In Britain over the last few decades this switch has occurred approximately once a decade with a general overall trend of swinging to the center-left. So even if Margaret Thatcher was not at the helm of right wing leadership in 1979, the right may have been voted in anyway because the voting population was disenchanted with the left.

It was later on in her first four year reign (some people refer to it as a reign), that she picked a fight with the all powerful Arthur Scargill and the Miner’s Union. She was shrewd in picking her battles, as well as at picking sensible times to fight them. Her first actions were economic in nature including cutting public spending, the power of the state, cutting inflation, cutting taxes, financial deregulation; in general she was thrifty. In the short term there was record unemployment and mass discontent, but towards the end of the 1980’s Britain turned around from a mess into a huge economic success (Margaret Thatcher: How the economy changed).

Keynesian Economics

Keynesian economics is “an economic theory stating that active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability (Keynesian economics). In truth, it appears that Keynesian economics was used by Margaret Thatcher and has become a trend in modern times, and even is applied at least in part by politicians on both the right and the left side of the political spectrum, in both Europe and North America.

Keynesian Economics in the Modern United States

It could be interpreted by Americans that Keynesian politics is socialism as practiced by the current Democratic Party, which interferes with interest rates and uses quantitative easing as a nomenclature for buying up bad debt. Both Democrats and Republicans have done similar things so technically both sides of the aisle are Keynesian. For example, the Republicans started TARP and the Democrats continued it. Are economic cycles dependent upon ideologies and politicians? Perhaps not so much as politicians would like us to believe, indicating a mix of both left and right wing United States political doctrine, in that government spending and tax breaks occur simultaneously in hard times, and that spending cuts in unison with tax increases occur during good economic times; so is it a fact that everybody is Keynesian and is this trend is global and at the expense of social needs? Both appear to be the case in general.

Does Wealth Create Itself?

The answer to this question could well depend on who is asked. Margaret Thatcher would have said that wealth is created by lowering taxes, and allowing businesses more cash to re-invest in creating new business – assuming they do re-invest. She might also have said that reducing public spending forces those less interested in working to be placed in a position of having to find a paying profession. However, GDP increased under Margaret Thatcher at the same time that public spending did, partially caused by increases in defense spending. Current right wing United States politicians argue continuously for tax decreases but rarely present substantive evidence of the benefits – and they never cut defense spending. So far under the Obama administration, the economy appears to have improved, possibly as a result of increases in public spending, but perhaps also because the economy is simply on an upswing.

Does Wealth Creation Need a Little Help?

Would private companies now be shooting satellites into space on privately designed and built chemical rockets if the US government had not funded NASA for years? Probably not because sometimes government spending is required to finance development that is simply too risky and too long term for private enterprise to undertake; sometimes public funding really is necessary because the return on investment has too much of a long term time frame. TARP saved the United States and perhaps the entire global economy from another depression. Margaret Thatcher’s seemingly harsh and extreme economic policies initially created three million unemployed according to Ken Livingstone (Throw out the myths about Margaret Thatcher). Ken Livingstone has always been very left of center and does seem to focus on the negatives. Even though unemployment was still higher at the end of the 1980’s than it was in 1979, the British economy was very firmly and boisterously back on its feet. The content of the economy had changed but the obvious success is difficult to argue with.

So yes wealth creation can be helped by certain types of government intervention in the same way that social programs are helped by government intervention. Again, both sides of the political spectrum can benefit from government intervention, except the content of the intervention can be very different. Margaret Thatcher intervened economically as a fiscal conservative but she also did not attack all social programs, mostly she focused on public housing by way of drastic increases in private ownership (part of her privatization program).

Are We All Self Interested?

It can be shown that people are generally self serving (but also independent) in a situation such as a traffic jam where individuals drive according to self interest as opposed to one of collaborative effort (at least not voluntarily). However, the addition of some rules and a need to accomplish a goal, people can become indirectly cooperative. Margaret Thatcher was very suspicious of British bureaucrats. (The Australian. Margaret Thatcher led the way with sane economic policy). Extreme application of British social programs had attempted to re-distribute British economic wealth to the point of its own destruction by the time she came to power in 1979. So yes people are generally self-serving and can become indirectly cooperative where there is a need.

The Bright Side of Margaret Thatcher

Thatcherism has in part survived successive left wing (Labour) governments, the Iron Curtain came down and the Cold War ended (what’s replaced it might be worse), privatization was championed (for better or for worse), and women became acceptable as political leaders.

It is obvious that many of Margaret Thatcher’s early economic reforms were economically expedient and productive, given that even a decade of left wing British Labour government under Tony Blair did not repeal any of her reforms. So much of Thatcher’s reforms must have had a positive effect if Thatcherism has survived years of Labour government. Tony Blair has even stated that “economic activity is best left to the private sector” (A long shadow). And again, the general philosophy in the Labour party is Thatcherism is required for continued British prosperity.

Margaret Thatcher is also credited with having a small measure of persuasion the collapse of dictatorship in the Soviet Union. Even if her influence was only minimal she instituted a very large privatization program of nationalized British industries, which not only gave the British people a sense of ownership and responsibility, but she also inspired intensive privatization programs in eastern European countries after the disintegration of the Soviet Block .

Last but not least, Margaret Thatcher was the first British woman prime minister and probably a very significant political leader amongst many other women leaders in history. England seems to do quite well under female stewardship, such as Queen Elizabeth I and Queen Victoria. Perhaps without Margaret Thatcher’s prominent leadership, minority group talent such as Barack Obama might never have even been noticed as potential leadership.

The Dark Side Margaret Thatcher

Thatcherism’s economic success is still open to debate because it has been so far reaching, and still appears to be having a profound effect on Western economies. She was inflexible and that might have made it more difficult for her to get things done that required negotiation between conflicting opinions and requirements. The decline of outdated and unprofitable British manufacturing was inevitable but now there isn’t much left at all. Surprisingly, Margaret Thatcher appeared to favor economics but she did not ignore social issues but rather tackled issues and industries that might have been holding Britain back economically.

There are also negative aspects of Margaret Thatcher’s legacy. Did she really succeed or was she just lucky? According to Ken Livingstone, Margaret Thatcher increased GDP and turn around of Britain around through economic reforms were funded by a 90% tax on North Sea oil in addition to extensive funding from privatization. . The not so generous Mr. Livingstone also held her responsible for the financial crisis of 2008 (as if it started in England), by way of financial deregulation almost thirty years earlier that created the hugely profitable financial industry in the 1990’s. The financial meltdown of 2008 was global in nature and perhaps the combination of the entire European and United States economies were responsible for the near financial collapse of 2008. Deregulation did have an effect in that it helped to encourage property loans for people who could not afford the payments, and unscrupulous rating agencies to apply AAA ratings to wrapped up bundles of poorly underwritten loans in the form of mortgage backed securities. Perhaps deregulation allowed over exposure and lying but it was not the only cause, given that people involved in a deregulated financial industry made bad loans and misrepresented them, as well as people acquiring those loans to buy houses they could ill afford. All Margaret Thatcher was trying to do was to loosen up the money supply and encourage economic activity. There is no way she could have predicted the crooked wizardry of traders and the foolhardiness of unwary investors, twenty years after she left office. After all, economics is in some respects not really a precise science and cannot really be expected to counteract well concealed dishonesty.

Yes Margaret Thatcher’s economic policies did produce the largest unemployment numbers in British history but by 1987 those unemployment figures were down almost to 1979 levels, and with the addition of a newly thriving economy. Yes she decimated the manufacturing industry but most of that manufacturing was obsolete and unprofitable, and parts of Europe were a toxic waste land forty to fifty years ago. Is it possible that a large portion of those 1.6 million unemployed in Britain in 1987 were left over from the demise of manufacturing? Yes it is unfair to reduce communities to unemployable populations by way of mine closures and the movement offshore of entire industrial sectors, but when those industries are hemorrhaging money that other tax payers are funding through their own hard earned wages, the subject of what is and is not fair comes up for lively debate. Surely those working tax payers would rather fund training to reeducate those left out in the open without a paddle.

Margaret Thatcher did increase defense spending and some will argue that this is not a bad thing. However, if one listens to Eisenhower and his parting presidential comments about the dangers to the United States from the military industrial complex, it gives one pause for thought. Yes Ronald Reagan’s SDI did help to scare the Soviets into technological submission but we have other enemies now. Has anything changed? And was it perhaps a huge waste of money that the previous United States government threw trillions of dollars at Iraq and Afghanistan for an unproven purpose, which has now cost more than the Marshall Plan that helped rebuild Western Europe post WWII? If one was to add up the cost of an extra fifteen years of an Iraqi no fly zone pre-Gulf War II, and that of actually finding Osama Bin Laden, there is a really good chance the cost would be much lower than what was spent; the United States cannot afford that level of cost and even defense spending is debatable as to its usefulness because it does not really put anything back into the economy, at least not immediately and much of it cannot be re-sold for profit to other countries.

In reality, full employment is a pipe dream and at any given time, regardless of economic health, a portion of the population will be unemployed. Outsourcing and off shoring has been happening since the mid to late 1990’s, and regardless of economic health there is still the possibility of unemployment. Many of those people are young enough to retrain and specialize further. Will the medical industry in the United States and its ridiculous costs be the next industry to be outsourced? Is it important to note that Margaret Thatcher did not privatize medicine in Britain?

Yes Margaret Thatcher narrowed access to wealth but is it not the case that they put more wealth into the hands of those that might be more likely to put that wealth to work, creating more revenue, creating more jobs? The answer to that question is a very big maybe because austerity has not worked in Europe post 2008 financial crisis, but rate suppression and buying up bad debt has worked in the United States. Of course, there might yet be another far bigger financial crisis around the corner for the United States but blowing trillions on foreign wars and massive outsourcing to China and India might be more likely causes. Also repeated Republican governments in the United States have performed the same austerity type of economics over 30 years, and it never seems to work to the point that insanity is indicated where doing the same thing over and over and it not working means one should probably stop doing it. Margaret Thatcher shut down non-profitable, socially propped up, and dated industries where funding entire industries that cost the tax payer money is not a profitable venture, but a venture in social engineering that never improves the economics of the people who are dependent upon it. The industrial and commercial cogs of an economy must keep recycling into to new things that serve to continually increase the quality of life of each generation. And does this tell us something about the Conservative politically bent in The West to resist change? Must we not be constantly changing in order to keep growing?

Margaret Thatcher did to a certain extent ignore social issues but previous Labour governments had the economy on its knees as a result of over catering to those social issues. In some respects, perhaps a fair mix of socialism and capitalism is the best solution for both economic well being, the happiness and thus productivity of a population.

One of Margaret Thatcher’s biggest problems was her own inflexibility, which often caused her opponents and sometimes even her friends to react belligerently to the point where she could have accomplished her goals more easily by exercising a little more flexibility and perhaps even tact, as opposed to the occasional obstinate bullying. Margaret Thatcher was indeed the Iron Lady and the reputation was much deserved, but sometimes a little diplomacy and simple schmoozing can help to get things done a little more easily.

Conclusion

Much of what Margaret Thatcher changed economically has survived intact as economic policy to this day, particularly in Britain. Either she did something right or she simply lead her country in the economic direction it probably would have gone in anyway, regardless of who was leading it at the time. In some respects Margaret Thatcher is remembered for the successful prosecution of the Falklands War, but she should also be remembered perhaps for economic success and for helping to bring down the Iron Curtain. For a political leader who was both loved and hated by many Britons, she will go down in history as a significant leader who for better or worse, played an important part in changing the world in more ways than one.