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ECONOMIC POLICIES AND LEGACY
OF MARGARET THATCHER
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An Overview Thatcher’s Governance Legacy
 Thatcher’s government setting reveals a case study of
how economic ideas were entwined with political and
economic history of the country.
 Her government was wholly linked with
“monetarism” economic principles.
 Her economical policies were influenced by different
economists including Milton Friedman and Driedrich
Hayek.
 Her government brought about changes in the way
business were conducted aimed at altering specific
economic issues.
Legacy of 1970s
 Events of 1970s have profound influence on
Thatcher’s government.
 The microeconomic policies were never given a
chance solve the existing problems.
 Trade Unions were responsible for bring down the
health government in 1970s.
 The 1970s legacy had other specific problems to
influence Thatcher’s government attitude.
 Increasing levels of unemployment, inflation and so
forth.
Thatcher not an Ordinary Politician
 Thatcher was a highly skilled in persuading people in
the public with certain stands to adopt what her
government’s stood for.
 With help of media she sold her government’s ideas of
free market, lean-government platitudes to the public.
 Her policies on economic and social issues were
embraced by a bigger section of the public.
 She advocated abandonment of social and economic
policies in favor of common sense of the age.
Macroeconomic policy
 Monetary policy :
 Her government abolished exchange control
regulations, responsible for restricted movement of
money in and out of Britain.
 Her government was also involved in tax and supply
side policies:
 Aimed at reducing burden of direct taxation .
 Tax cut remained a long term goal that was never
achieved .
 Switched to indirect taxation. During the 1979 budget ,
increment was reported in the Value Added tax.
The Introduction of Medium-term financial Strategy
(MTFS)
 Her government introduced MTFS.
 Her policies favored measure of money supply as well
as the ratio of public sector borrowing requirement over
GDP.
 Explicitly connected monetary and fiscal policy hence
constraining the government budget.
 Government encouraged lending to private sector
 Aimed at reducing money supply without controlling
public sector deficit.
Moving from Monetarism to ERM
 Britain was hit by two recessions under Thatcher.
 By1985 Britain economy was in a crisis, compared to
the period earlier on in the decade.
 The crisis was as a result of high exchange rates
witnessed from periods 1979 to 1981.
 The government strategically replaced monetary targets
in favor of the Exchange rate mechanism (ERM).
 Her government considered ERM attractive since the
sterling stood at 3.75 Deutschmarks, growth was
immensely great and inflation low.
The Impact of Thatcher’s Conservative
Government policy on Britain Economy
 The cost of living:
 In 1979, inflation increased to higher levels above
20%.
 Manufacturing decline:
 by 1970, manufacturing accounted for about 21% of
GDP; however, by 1979 it dropped to 17% of GDP.
 Public spending:
 More workforce employed in public sector:

Thatcher’s reign 23% verses currently 20%, 3% higher.
Pay Gap, Housing Price & Interest rates
Pay Gap:
- Men were paid higher compared to
women.
- Women working full-time by 1990 were
paid are about 76% , men increase from
73%.
House prices and Interest rates
- In 1980s was marked with increase in
house price economy.
- Interest rates rose to a record levels
higher by17%.
Unemployment, Poverty and Inequality
- Unemployment rose to higher levels Increased poverty level according to
statistics obtained from the Institute for
Fiscal Studies.
- By 1979 about 13% of total Britain
population lived below the 60% mark, the
median incomes before housing costs.
- In1990 the percentage had increased to
over 20%.
Graphs on Poverty and Inequality during
Thatcher’s Reign
-Increased poverty levels led to
inequality.
- Gini coefficient commonly used
in measuring inequality reveals that
zero is the most equal society.
- Britain’s society according to gini
score indicate an increase from 0.25
to 0.34 at the time Thatcher ended
her reign as Britain P.M.
References
Todhunter, C. 2013.Britain’s De-industralization and
Privatization: The Economic and Social Legacy of
Margaret Thatcher, “The Iron Lady” Global
Research; Retrieved from:
http://www.globalresearch.ca/britains-deindustralization-and-privatization-the-economic-andsocial-legacy-of-margaret-thatcher-the-ironlady/5329683
Smithin, J. N. (1990). Macroeconomics after Thatcher
and Reagan: the conservative policy revolution in
retrospect. Aldershot, Hants, England, E. Elgar.
References
Backhouse, R. (2002). The Macroeconomics of Margaret Thatcher.
Journal of the History of Economic Thought. 24, 313-334.
J. C. R. Dow, & I. D. Saville. (1990). UK Monetary Policy Since
1971.
King, M. (2005). Epistemic Communities and the Diffusion of
Ideas: Central Bank Reform in the United Kingdom. West
European Politics. 28, 94-123.
Shiping Hua. (2006). The Deng Reforms (1978 1992) and the
Gorbachev Reforms (1985 1991) Revisited: A Political
Discourse. Problems of Post-Communism. 53, 3-16.
References
Reitan, E. A. (2003). The Thatcher revolution: Margaret
Thatcher, John Major, and Tony Blair, 1979-2001.
Lanham, Md, Rowman & Littlefield.
Berlinski, C. (2008). "There is no alternative" why
Margaret Thatcher matters. New York, Basic Books.
http://public.eblib.com/EBLPublic/PublicView.do?ptiID
=579006.
Casey, T. (2002). The social context of economic change
in Britain: between policy and performance.
Manchester [u.a.], Manchester Univ. Press.
References
Heath, A. F., Jowell, R., & Curtice, J. (2001). The rise of New
Labour party policies and voter choices. Oxford [UK], Oxford
University Press. http://site.ebrary.com/id/10283803.
Roy, S., & Clarke, J. (2005). Margaret Thatcher's revolution: how it
happened and what it meant. London, Continuum.