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April 17, 2013


Pageantmaster on the Impact of Margaret Thatcher

Some interesting comments from an Anglican in England, Pageantmaster, over on T19:

In 1979 I was spending six months abroad between school and university.  A radio was placed on the dining table of the friends I was staying with and tuned in for news of the UK election - then the news came that Margaret Thatcher and a Conservative Government had been elected - a cheer went up.

It had been such a downward road we had been on - paralysed with strikes, the ‘poor man of Europe’ with a lost empire and declining commercial trade, high inflation, taxes and government debt, a devalued currency, restrictive practices - a grey sad country which had lost its way and its self-belief.

You will hear various opinions about Margaret Thatcher, but she turned things round, restored our trade, opened our markets and removed restrictions on trade and currency movements.  Contrary to the naysayers’ predictions, capital flowed in and people started investing in the UK.  Taxes came down and we became the fourth largest economy in the world, something which lasted until Tony Blair got his hands on things and started borrowing and spending like there was no tomorrow.

I am grateful for her leadership and the gift she was to us.  Her ideas were used by others across the world to turn their economies round, or rather the ideas of her main advisor, Airey Neave who was sadly blown up in an IRA car bomb.  It was his plan she put through and we are so grateful, even as things are now, we are better placed than we were.

We came very close to joining the Euro - her colleagues including the chancellors and John Major argued very strongly for it, and for a time we shadowed the early ERM basket of currencies.  A weak economy combined with no flexibility on exchange rates led to the sort of speculation and crisis as Greece and Spain have had more recently, although unlike them we could and did get out.  By that time however, we had expended huge reserves defending the currency.  We learnt the hard way what could happen.

Currency linkage and pegging is only possible if you have a weak client economy of a large one, such as Panama had with the US, or if you go the whole hog of uniting into one country as the US states did.  The half-way house of independent states with one currency just does not work if they have such varied economies.  Thatcher foresaw all this as an article I read today pointed out.

There is no doubt her government did make mistakes.  In particular with our manufacturing industry in the Midlands, North and the Gaelic and Celtic fringe.  There were three things I could see happening:
1. British manufacturing companies had not invested in modernisation - their demise would have happened anyway without government assistance and advice such as China, France, Germany and others engage in.
2. Others who had invested, were caught out in the ERM mess when having borrowed to modernise, the exchange rates made them uncompetitive followed by a period when interest rates doubled - something no company could plan for and which sent many good companies to the wall unable to service the debt for modernisation the government had encouraged them to undertake.
3. Necessarily the government stopped spending taxpayers’ money propping up heavy industry and mining, but the speed with which it happened gave no time for companies to reorder themselves.  As a consequence we lost a third of our manufacturing capacity in about 4 years.

Then of course there was the Poll Tax - an exercise in hubris.

But on balance, she brought us into the modern world and set us up mentally and economically as a country to move on and rebuild - something which we still carry as an inheritance from her period of office.


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