THE FUNDAMENTALS OF THATCHERISM AS A PHOLOSOPHY OF SUSTAINABLE ECONOMIC GROWTH
Abstract
This article is devoted to the study of Margaret Thatcher economic reforms and the legacy of Thatcherism. The historical background of coming of the Conservative party led by Mrs. M. Thatcher to power in 1979 is recalled. The Government’s strategic views of economic policy, drew up during its time in Opposition, are contemplated. The crucial reforms of Margaret Thatcher’s Cabinet, which contributed to sustainable economic growth in Britain in the 80s, in particular, substantial cutting down of public spending, counter-inflation strategy, income and corporate tax rates reduction, are thoroughly analyzed. The dynamics of macroeconomic indicators of the United Kingdom in 1979 – 1990, such as unemployment rate, real GDP growth rate, inflation rate, top marginal income tax rates, corporate tax rates etc., are examined. The archival documents, clarifying Prime Minister’s correspondence with Chancellor of the Exchequer, Chief Secretary to the Treasury and meetings with the Cabinet are studied. The MTFS (Medium-term financial strategy), published by the Government in March 1980, is considered, within the context of PSBR (public sector borrowing requirement) projections and target growth rates of monetary aggregates, viz., M3. The 1981 Budget austerity’s origins, such as public expenditure reduction difficulties and M3 aggregate management and control complexities, are regarded. The debate between 364 economists, advocating Keynesian principles of tackling the recession, and Mrs. M. Thatcher’s Cabinet & other economists, appealing to alternative ways out of the economic crisis (such as Friedrich Hayek, Milton Friedman, Patrick Minford and others) over the 1981 Budget is envisaged. The rationale of the widespread privatization in the 80s in Britain and its economic consequences are analyzed. The household incomes inequality issue is addressed and examined. Finally, after thorough analysis it is found out that Margaret Thatcher’s Government succeeded in getting the country out of depression, restoring social and political stability and eventually creating conditions for socio-economic growth in the United Kingdom.
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A millennium on Macroeconomic data. (2017). Bank of England. Available at : https://www.bankofengland.co.uk/statistics/research-datasets
Booth, P., Congdon, T., Laws, D., Minford, P., Nickell, S., Maurice, P., Scott, D., Wood, G. (2006). Were 364 Economists All Wrong? Cass Business School Research Paper. Available at: https://ssrn.com/abstract=892579
Buiter, W. H., Miller, M. H., Sachs, J. D., Branson, W. H. (1983). Changing the Rules: Economic Consequences of the Thatcher Regime. Brookings Papers on Economic Activity. DOI: https://doi.org/10.2307/2534293
Chancellor of the Exchequer Budget Speech. Margaret Thatcher foundation. Available at: https://www.margaretthatcher.org/document/109497
Chancellor of the Exchequer Budget Speech. Margaret Thatcher foundation. Available at: https://www.margaretthatcher.org/document/109499
Chancellor of the Exchequer minute to MT. (1981). Margaret Thatcher Foundation. Available at: https://www.margaretthatcher.org/document/113990
Consumer price inflation, historical estimates and recent trends. Office for National Statistics. Available at: https://www.ons.gov.uk/economy/inflationandpriceindices/articles/consumerpriceinflationhistoricalestimatesandrecenttrendsuk/1950to2022
Downing Street No. 10 Meeting Transcript. (1981). Margaret Thatcher Foundation. Available at: https://www.margaretthatcher.org/document/113996
Downing Street No. 10 Meeting Transcript. (1981). Margaret Thatcher Foundation. Available at: https://www.margaretthatcher.org/document/114002
Financial Statement & Budget Report (the Red Book) (1980). Margaret Thatcher Foundation. Available at: https://www.margaretthatcher.org/document/113209
Gregory, M. (1998). Reforming the Labour Market: An Assessment of the UK Policies of the Thatcher Era. Australian Economic Review. DOI: https://doi.org/10.1111/1467-8462.00077
Hayek letter on the 364 economists ("Beating inflation key to recovery"). (1981). Margaret Thatcher foundation. Available at: https://www.margaretthatcher.org/document/114508
House of Commons Hansard Debates. (1990). Available at: https://publications.parliament.uk/pa/cm199091/cmhansrd/1990-11-22/Debate-3.html
Household disposable income and inequality. Office for National Statistics. Available at: https://cutt.ly/oNWTark
Household income inequality. Office for National Statistics. Available at: https://cutt.ly/zNWTfap
Keynes, J.M. (1936). The General Theory of Employment, Interest, and Money. International Relation and Security Network New York: Harcourt, Brace and Co. Available at: https://www.files.ethz.ch/isn/125515/1366_KeynesTheoryofEmployment.pdf
Layard, R., Nickell, S. (1989). The Thatcher Miracle? The American Economic Review. Available at: http://www.jstor.org/stable/1827759
Letter of the 364 economists critical of monetarism. (1981). Margaret Thatcher foundation. Available at: https://www.margaretthatcher.org/document/121217
Machin S. (1996). Wage inequality in the UK. Oxford Review of Economic Policy. DOI: https://doi.org/10.1093/oxrep/12.1.47
Main corporation tax rates over time (UK). Institute for Fiscal Studies (IFS). Available at: https://ifs.org.uk/taxlab/taxlab-data-item/main-corporation-tax-rates-over-time
Margaret Thatcher’s meeting with Ministers. (1979). Margaret Thatcher foundation. Available at: https://www.margaretthatcher.org/document/115026
Matthews, K., Minford, P., Nickell, S., & Helpman, E. (1987). Mrs Thatcher’s Economic Policies 1979-1987. Economic Policy. DOI: https://doi.org/10.2307/1344621
Michael R. Darby, James R. Lothian. (1983). British economic policy under Margaret Thatcher: A midterm examination. Carnegie-Rochester Conference Series on Public Policy. DOI: https://doi.org/10.1016/0167-2231(83)90029-5
Neild, Robert. (2014). In: Needham, Duncan and Hotson, Anthony eds. Expansionary Fiscal Contraction: The Thatcher Government’s 1981 Budget in Perspective. Cambridge University Press. DOI: https://doi.org/10.1017/CBO9781107337626.004
Nelson, E. (2017). Reaffirming the Influence of Milton Friedman on U.K. Washington: Board of Governors of the Federal Reserve System. DOI: https://doi.org/10.17016/FEDS.2017.096.
Oliver, Michael J. (2014). The long road to 1981: British money supply targets from DCE to the MTFS. Cambridge University Press. DOI: https://doi.org/10.1017/CBO9781107337626.015
Public Expenditure Reductions 1979 – 1980: Memorandum by the Chief secretary of Treasury. (1979). Margaret Thatcher foundation. Available at: https://www.margaretthatcher.org/document/112624
Real Gross Domestic Product at Market Prices in the United Kingdom. FRED Economic Data. Available at: https://fred.stlouisfed.org/series/RGDPMRPUKQ#0
Review of expenditure programmes: Memorandum by the Chief secretary of Treasury. (1979). Margaret Thatcher foundation. Available at: https://www.margaretthatcher.org/document/112621
Schmitthoff, C.M. (1952), The Nationalization of Basic Industries in Great Britain. Annals of Public and Cooperative Economics, 23: 169-189. DOI: https://doi.org/10.1111/j.1467-8292.1952.tb00676.x
Speech to Conservative Party Conference (“The lady's not for turning”). (1980). Margaret Thatcher Foundation. Available at: https://www.margaretthatcher.org/document/104431
Speech to Conservative Party Conference. (1967). Margaret Thatcher Foundation. Available at: https://www.margaretthatcher.org/document/101586
The Government`s Expenditure Plans 1980-81. (1980). Margaret Thatcher foundation. URL: https://www.margaretthatcher.org/document/113724
The Right Approach to the Economy (Conservative policy statement). (1977). Margaret Thatcher foundation. Available at: https://www.margaretthatcher.org/document/112551
Top marginal income tax rates (1900 – 2017). Our World in Data. Available at: https://ourworldindata.org/grapher/top-income-tax-rates-piketty
Unemployment rate (aged 16 and over). Office for National Statistics. Available at: https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment/timeseries/mgsx/lms
