IT’S tempting to say Margaret Thatcher will have no truly long-term legacy in the UK – all the unemployed will one day be gone; governments spend more now as a percentage of GDP than before her; governments have switched from privatising industries to nationalising them on a vast scale; keeping inflation low has little more than lip-service and no-one believes today’s policymakers would accept unemployment rising to get inflation down; confidence in the general merits of capitalism is at its lowest ebb since the 1930s. Perhaps her most lasting economic legacy is not in the UK but abroad – in those nations that copied her privatising programme or even (ironically) in that most economically Thatcherite of institutions, the European Commission?
Tempting, but incomplete. To see why, we should first understand that a country’s model of economic organisation is fundamentally a political, not commercial, arrangement. Money is a form of power – a way to get things done. An economic model is therefore a way that power is allocated and channelled.
There have always been three main models of how money and property, and hence power, was to be allocated: brute force (“might is right” – money and property needs to be allocated such that order is maintained); justice (property should sit with its rightful owners, not its mere current possessors); collective prosperity (the allocation needs to promote the interests of the country as a whole, not simply of individuals).
Though all three were always present to some extent, much of history was mainly a struggle between the brute force and justice concepts – the role of the state was generally to protect the rightful owners of property, while being pragmatic in bowing to power where necessary. Collective prosperity only tended to become the central consideration in periods such as wars or famines.
But in the era of widespread democracy, that changed. The property rights of rightful owners came to be seen as of little significance compared to the maintenance of order (against revolution or war) and collective prosperity (the need to secure votes or to keep the country growing fast enough to compete militarily with enemies – Nazi or Communist). Property could be taxed as much as necessary; industries could be nationalised; firms could be forced to grant pay rises – and if this were not done, order would collapse in strikes and riots, or even insurrection. Indeed, often those who threatened order denied that individuals were the rightful possessors of property, anyway – all property was said to be collective. In Britain, strikes repeatedly brought down governments, but elsewhere in the world strikes led to revolutions – a point not lost on the British political establishment when deciding how order could be maintained. Workers had to be granted hope and their aspirations met, or else communist or fascist revolution or coup would be the result.
Thatcher changed the equation: collective prosperity was now the fruit of individual work
Thatcher changed this equation totally. She made us believe that collective prosperity would be best delivered when individual justice was delivered – in other words, that we collectively would be wealthiest when you and I and he and she are free to use our property for ourselves. History ceased to be the story of the gradual and ineluctable erosion of individual property rights in the name of promoting collective prosperity. Collective prosperity was the fruit of individual work and thrift and creativity. Thatcher was willing to face down brute force to deliver this, believing that the power on her side was greater than the power against her. The task of politics ceased to be the orderly management of the march to collectivism, but instead the freeing of the aspiration and opportunity of the individual and the underdog.
In the developed world, Thatcher was the first significant instance of this reversal of the tide being achieved in a democracy with universal suffrage, except in countries that had just been defeated in war. Of course, there had always been those in Britain who believed in an economic order based on more markets and personal property. But from the 1930s to the 1970s, they had only their faith to appeal to. For us, things are different. Her greatest economic legacy is that, in our dark days – when we look at nationalised banks and governments spending half of GDP, with growth poor, unemployment threatening, and discontent high – if we doubt that individual property justice can deliver collective prosperity, we need only remember that that was proved true by Thatcher.
Andrew Lilico is a fellow of the Institute of Economic Affairs and a columnist for ConservativeHome.