Thatcherism

It has been remarked that seldom has a prime minister’s name been used to denote an ideology – but such was the impact of Mrs Thatcher’s ideas that ‘Thatcherism’ warrants an examination here. These notes – drawn up shortly after the Thatcher experience – are rather brief. They focus on the following questions:

- was Thatcherism conservative?

- what were the economic theories that influenced the doctrine?

- how successful or otherwise was it in fulfilling its goals?

2. What was ‘Thatcherism’?

A key question is to what extent she was a conservative at all. Barbara Goodwin (Goodwin 1987) argues that she linked some "libertarian" arguments (like Hayek's) – for individual freedom from the state, with Conservative ones for elite rule or even state power. Gamble (loc cit) clearly also emphasises her use of a ‘strong state’.

We do find some conservatives defending powerful institutions – even the state – but it is important to note that the conservative approach is to defend existing institutions or associations rather than powerful institutions as such. In this, there is a difference between conservatism and managerialism. (From Barker, 1978).

Rupert Murdoch, in an inaugural Margaret Thatcher Lecture to the Centre for Policy Studies, 21^st Oct 2010, said he was grateful for the opportunities Margaret Thatcher gave him and “every other individual” ... “Hers is a generous spirit, based on an appreciation of personal potential and not of an impersonal ideology. As she said: ‘With all due respect to the drafters of the American Declaration of Independence, all men and women are not created equal, at least not in regard to their characters, abilities and aptitudes.’... She knew that for the talented to triumph, constraints on the ambitions of the working class had to be removed. It wasn’t a matter of furnishing the underprivileged with privilege, but of providing them with opportunity.”

See the speech at: http://www.guardian.co.uk/media/2010/oct/21/rupert-murdoch-inaugural-margaret-thatcher-lecture?INTCMP=SRCH

Of course ‘Thatcherism’ cannot be separated from Margaret Thatcher’s personality, and her rhetoric – which was admired by Rupert Murdoch in the above speech (from which these quotes are taken) – will be remembered even perhaps at the expense of her achievements:

“I’m extraordinarily patient, provided I get my own way in the end.”

“No one would remember the Good Samaritan if he’d only had good intentions – he had money as well.”

3. The ‘free economy’:

The ‘free economy’ side of the summary above comes form her belief in the market, and in low taxes to encourage individual enterprise.

The ‘strong state’ came from her belief in the need for a ‘remoralisation’ of the individual, which could only come about – in practice – through increased social (and state) control. It could be argued also that the state had to be strong if she was to carry through her intentions to reduce the power of trade unions and the civil service and other ‘interest groups’.

The stress on the "free economy" came at first from monetarism (e.g. Milton Friedman); later from supply-side economic theory. Though – as far as I can see! – these are two incompatible theories if we take the whole of what each is saying, they have some points in common which ‘Thatcherism’ drew on:

Monetarism is based on the argument that the key to keeping inflation down is the money supply: money is a commodity like any other, and when there is a lot of it then its value must decline. In fact this is one definition of inflation. Since the ‘public sector’ plays such a large part – accounts for so much money – in the modern state, then monetarists inevitably aim to cut public expenditure. [Monetarist economics was in effect 'demand-side' economics according to G. Thompson in McLennan, Held, Hall, 1984].

Supply side economics stresses the inputs to the economy, e.g. technology, the production process (i.e. the mix of capital and labour), the supply of labour, the role of managerial etc expertise, the industrial structure etc... This is clearly a much broader approach than that taken by Mrs Thatcher and her supporters. What happened was that ‘Thatcherism’ when it borrowed from supply-side theory focussed narrowly on the labour supply and on the conditions of the labour market: the costs of labour were see as a crucial factor in causing inflation – so the aim was to keep labour costs down, while reducing taxes to increase incentives for employers and investors… Had they taken on board supply-side ideas on wider issues of industrial policy, this would have raised the question of the role of the state – while ‘Thatcherites’ were anxious to be seen to be ‘rolling back’ the state…

Both monetarists and supply-siders agreed that: state spending should be cut, thus attacking the Keynesian ideas that had been dominant since the Second World War. Keynes had argued that, in the event of a slump, the economy could be managed by injecting public expenditure to stimulate demand.

Monetarists and supply-siders differed in their critique of Keynes: monetarists argued that the proposed increased government expenditure would distort the market (and increase inflation); supply-siders argued that Keynes ignored the supply-side (viz: labour input), assuming that it would automatically adapt without causing inflation. Hence for supply-siders, inflation is caused by taxes not the money-supply. In fact, for supply-siders, monetarism is deflationary...

Both also recommended lower taxes and/or lower wage rates to "liberate enterprise" (increase labour incentives and supply of labour), also both were in favour of decentralisation and privatisation, to deal with the state as a monopolist in supply and monopsonist (the only buyer) in its extensive purchases…

There were, as Gamble (1988) points out, many other economic debates at the time: ‘Austrian’ economics was opposed to both monetarism and supply-side economics, while still being right-wing; and there was a debate between those who supported the gold standard and those who believed in floating exchange rates...

4. Why the need for a "strong state"?

Gamble (1988) says the Thatcher project aimed at gaining "hegemony", i.e. dominance on all levels – political, economic and ideological.

A strong state was needed:

- to unravel the welfare state, social democracy etc – which included setting up a confrontation with trades unions, e.g. miners...

- to ‘police’ (but not regulate) the market. However, Gamble points out that this policing was selective – there was no intervention to, for example, remove race discrimination to ensure free and equal exchange. The reluctance of Mrs Thatcher to resort to the Monopolies/Mergers Commission, or to introduce controls on the City, also shows that the main aim was to increase the scope of private enterprise rather than to control the market.

- to make the economy more productive - modernisation was regarded as essential, to ensure the best way of allocating resources, provide incentives, and stimulate growth. In fact the mantra of ‘efficiency’ overrode other questions e.g. about the size of enterprises, and the rights of particular groups. It can be argued that in practice this was highly interventionist and centralist (people were being forced to be free!)

- to uphold social and political authority - i.e. here we see the ‘traditional’ conservative aspect of ‘Thatcherism’: because of its social goals – to re-moralise society – Thatcherism in practice ‘tilted the balance’ and made the ‘free economy’ a means to strengthen the state (Gamble suggests)... It was clear that the authority of the state must be upheld throughout society, but this raised questions over for example the position of the family…

5. Other aspects of Conservatism that could be seen in Thatcherism:

- the need for authority, hierarchy

- the opposition to collectivism as a threat to property

- the belief that the market leads to the "good" society, not just to freedom

- the opposition to the perceived rise of a 'new class' of public sector professionals, who, it was argued, had a vested interest in the growth of the public sector

- the perceived threat of international communism

- the perceived weakness and decline of the west

- that social democracy was seen as a Trojan horse for communism (cf. Hayek)

- the criticism of the ‘decadence’ of democracy, shown by permissiveness in morals etc

- the belief in the importance of education, family values etc (patriarchy)… (though some believed the market would fulfil this function)

- seeing a threat to order from strikers, demonstrators, criminals and vandals

- a critique of rationalism and the enlightenment

- pessimism (two cheers for capitalism, I. Kristol).

6. Critical assessments of Thatcherism's achievement (* see note below):

6.1 Gamble (1988) argues that the "revolution" aimed at was not completed: the Thatcher regime would have needed to change (gave the impression it was going to change) government, the civil service, the Establishment and "civil society" – and not just the economy. For gamble, the market alone could not bring about the needed modernising changes.

6.2 For McLellan, (et al, 1984): what has changed is not the amount but the kind of state interference...

6.3 For Marsh (1992): not as much has changed as claimed, largely owing to "problems of policy implementation" - i.e. the necessary machinery, information etc were not present.

In fact, says Marsh:

- cuts in the money supply were not achieved and didn’t bring about the changes aimed at

- government expenditure as a % of GNP was still high, at 45% (this was because of the cost of unemployment, and the decline in GNP)

- Thatcherism’s aim was to remove government influence on such areas as incomes, but it was opposed to an incomes policy; but inevitably incomes were affected by, for example, the government’s definition of reasonable increases, the Trade Union laws, the recession, the level of unemployment etc

- privatisation also did not achieve a rolling back of the state, because a new level of regulation was needed.

As Marsh points out, to succeed, government needs:

- clear and consistent objectives (succeeded in housing, but not in the goal of increasing efficiency by privatisation)

- an adequate causal theory or sufficient information about problems & the appropriate policy tools and sufficient resources (Thatcherism had the wrong theory at the start (monetarism); the government thought it could bring in the community charge (poll tax) without realising that it would be held accountable; and it couldn't control local budgets (without centralist more intervention); and in industrial relations: while Thatcherism changed the overall industrial relations scene, it didn't affect shop-floor relations.

- control over the officials who had the task of implementing the policies (but local government expenditure rose after the 1984 Rates Act; the medical profession refused to compromise its autonomy to become tools of Thatcherite policy)

- the support of or compliance from groups/agencies affected by any policy (the continued existence and power of policy networks has been main the obstacle to implementation – viz corporations avoided paying for pollution; there were strong agricultural interests; EC policy was not in agreement with Thatcherism)

- stable socio-economic contexts which do not undermine political support (deindustrialisation and rising unemployment (a) helped implement industrial relations policy and (b) hindered the attempt to reduce spending on social security)...

- in other words (Seldon in D. Marquand 1996) an appropriate context was needed, not just ideas or interests...

"The Thatcherite revolution is more a product of rhetoric than of the reality of policy impact."

7. (* See note above): criticisms from the left

I have included these points because they attempt to analyse in a detached way how and why Thatcherism failed to do what it set out to.

Personally I would still claim that the whole political culture changed as a result of Thatcherism – and that Tony Blair has simply continued with the broad values of individualism, lack of regulation of the market, etc.

The points above about the failures of Thatcherism are also, of course, separate from the well-known litany of ‘left’ criticisms (with which I would whole-heartedly concur!). What Mrs Thatcher did bring about was:

- a rise in unemployment, due especially to the destruction of mining and manufacturing, without anything to replace them;

- the decline in trade unions, and the consequent vulnerability of the workforce in a competitive global market economy;

- the damage done to publicly-owned industries by privatisation (e.g. the railways);

- the self-interest promoted by the emphasis on freedom and the market,

- the bogus notion of more ‘choice’ when the individual is powerless besides the giant corporation;

- the promotion of ‘City’ interests (‘loads o’ money!!”);

- the unfairness of the poll tax;

- a tendency to blame the victim: unmarried mothers being stigmatised as a result of the emphasis on the family as the basis of social morality;

- a hostility to immigrants (‘the culture is in danger of being swamped…’) etc.

8. More recent articles:

http://www.theguardian.com/commentisfree/2014/jan/03/denying-margaret-thatcher-failing-1984-national-archives by Hugh Muir

http://www.theguardian.com/politics/2014/jan/03/margaret-thatcher-secret-plan-army-miners-strike on revelations from newly-released Cabinet papers – further articles on other pages of this issue.

9. References:

Gamble, A.: The Free Economy and the Strong State, The Politics of Thatcherism, Macmillan 1988

Goodwin, B.: Using Political Ideas, Wiley 1987

Dunleavy, P. and O'Leary, B: Theories of the State, Macmillan 1987, ch. 3 (The New Right)

Marsh, D and Stoker, G: Theory and Methods in Political Science, Macmillan 1995, ch 4 (Rational Choice Theory)

Further Reading:

Thompson, G, in McLennan, G et al: State and Society in Contemporary Britain, Polity 1984 ("demand-side" and "supply-side" economics)

Barker, R.: Political Ideas in Modern Britain, Methuen 1978

Marquand, D and Seldon, A: The Ideas that Shaped Post-War Britain, New Statesman/Fontana 1996

Gamble, A.: An Introduction to Modern Social and Political Thought, Macmillan

Vincent, A.: Modern Political Ideologies, Blackwell 1992 (especially on liberalism)

Marsh, D. and Rhodes R.A.W.: Implementing Thatcherite Policies, OUP 1992

Keegan, W. Mrs Thatcher's Economic Experiment, Pelican 1984