Inspired by many other thinkers, they deduced that much of the blame lay with both the rigidities imposed by a militant trade union movement and the over-supply of money. Yet they recognised that monetarism (attempting to control the money supply) alone was not enough to revive Britain’s economy, and that – in the short term at least – there was likely to be significant pain owing to the very lack of flexibility in the UK economy itself.
Monetarism needed to be augmented by constraining the growth of the state, and liberating the private sector of the economy by removing the dead hand of government from a vast range of industries, deregulating others, rolling back union powers and providing the incentives for work and investment through cutting marginal tax rates.
The story which followed is well-known. The early years of the 1980s were difficult, as the government sought to get inflation under control. But the pay off to this, and the supply-side reforms she implemented, was a sustained period of economic growth and prosperity until monetary folly in the late 1980s and early 1990s. Swathes of former nationalised industries were successfully put into private hands, often with significant public offerings. Exchange controls were abolished. Union power was constrained. Income tax rates were cut across the board. People were given the opportunity to buy their own houses for the first time.
It would be easy to define Thatcherism as a particular set of economic policies, designed to deal with the specific problems of that age. But this would be a mistake. As Shirley Letwin’s The Anatomy of Thatcherism and the writings of former CPS director Sir Alfred Sherman have shown, Lady Thatcher and her supporters often saw the economics as reflecting their deeply-held principles about how society should operate. They believed that the market was the best enabler of the British people expressing their creativity and brilliance, and that the concepts of freedom and self-determination tapped into the psyche of the public.
Thatcherism is not just an economic policy, but a way of thinking – an outlook that policies should be examined through the prism of the principles of liberty, free markets, individual responsibility, families, democracy and self-determination, because these are the principles which release the virtues of the British people and enhance our standing in the world. This also explains the style of governing. Because Thatcherites see individuals and their families as paramount, they sought not to govern by appeasing certain interest groups, but by “doing the right thing” according to their principles.
Thatcherism is an ongoing force. The principles and the ideas are timeless. It will not end with yesterday’s sad passing of Lady Thatcher, but can help us in thinking about some of the huge challenges our country faces. With economic stagnation, huge budget deficits, the question of “who governs Britain?” being asked again (this time in terms of our relationship with the EU), and the challenge of an ageing population coming our way, clear thinking about our direction is required again. The principles that underpin Thatcherism could provide a coherence to tackling them.
Lady Thatcher once told a CPS audience: “We have accomplished the revival of the philosophy and principles of a free society... We set up the Centre for Policy Studies and it has propagated these ideas and they have been accepted.” Those principles cannot today be taken for granted in an ever-changing world. It is up to us to continue to make the case. Echoing her tribute to Ronald Reagan, however, we at least have the benefit of her example.
Ryan Bourne is head of economic research at the Centre for Policy Studies.