Thatcherism

After the Second World War Britain's main parties largely agreed on Keynesianism, the welfare state, nationalised industry and close regulation of the economy. Thatcherism was a systematic, decisive rejection and reversal of this post-war consensus, with one major exception: the National Health Service, which was widely popular. The Conservatives' The Right Approach (1976), calling for reduced spending and taxes, a stronger rule of law, "self help" and better educational standards, provided its intellectual basis. Hayek's The Road to Serfdom had already been distributed by the party as election propaganda in 1945, and Thatcher banged Hayek's The Constitution of Liberty on a table saying "this is what we believe".

Monetarism stood at the centre of its economics. Unlike previous governments it put controlling inflation ahead of controlling unemployment, holding that inflation results from too much money in the economy and that the government should therefore control the money supply. The Medium Term Financial Strategy in the 1980 budget set targets for reducing money growth over the following years. After overshooting many of them, the government revised the targets upwards in 1982, which some analysts read as an admission of defeat in the battle to control the money supply. Thatcherism is also associated with supply-side economics: instead of stimulating demand, the government should lower taxes, privatise state industries and restrain trade unionism so that the market can work. In fact Labour Chancellor Denis Healey had already adopted some monetarist policies before 1979, such as reducing public spending and selling the government's shares in BP.

Unlike the Heath government, it reduced the power of the trade unions gradually. The most significant confrontation was the strike of the National Union of Mineworkers in 1984–85, which ended in the defeat of the miners' union. Both the Conservative Party and the NUM had anticipated the confrontation, and its outcome contributed to the resurgence of the power of capital over labour. Style of government was part of Thatcherism too. In a Britain often called "ungovernable" in the 1970s, Thatcher centralised power in the prime minister, often bypassing cabinet committees and other traditional structures. Her foreign affairs private secretary later said there was "something Leninist" about her style of government.

What Thatcherism was is disputed. Friedman called Thatcher "a nineteenth-century Liberal", but she told Hayek that she was a Tory, not a Whig. The political scientist Andrew Gamble summed Thatcherism up as "the free economy and the strong state". The word is often said to have been coined by the cultural theorist Stuart Hall in a 1979 Marxism Today article, but it was first used by Tony Heath in Tribune in 1973. The High Tory journalist T. E. Utley held that "there is no such thing as Thatcherism", arguing that free markets and even privatisation were long-standing Conservative themes. Leftist critics such as Anthony Giddens argued that the reversal was driven not by any specific logic of capitalism but by interests and power, through reduced social spending, higher taxes on low incomes and lower taxes on high incomes.

Critics point to the social cost. Unemployment rose from 1.5 million in 1979 to nearly 3.3 million in 1984 before returning to 1.6 million by the end of 1990. The relative poverty rate doubled, and the Gini coefficient rose from 0.25 in 1979 to 0.34 in 1990, staying at about that level for the next twenty years. Even so, Tony Blair's "New Labour" governments of the 1990s and 2000s basically accepted the central reforms of Thatcherism: deregulation, the privatisation of key industries, a flexible labour market, the marginalisation of the trade unions and the centralisation of power from local authorities to central government.