Opinion

The Great Debate

Thatcher: Master of the ‘unexpecteds’

By Daniel Yergin
April 16, 2013

The passing of Margaret Thatcher comes at a time when the great theme that shaped her years as Britain’s prime minister – the frontier between government and the private sector – is again the focus of serious public debate. Her historic achievement was to widen the frontiers of the “market” and, as she said, to have “rolled back the frontiers of the state.”

There is, however, a pendulum in this relationship between government and private sector. The role of government in the economy has expanded greatly since the 2008 financial collapse, along with government debt. So we will likely again see a struggle to rebalance the respective realms of state and market. And it will again be a battle.

The former prime minister’s memorial service Wednesday provides timely reason to ask: What was the Thatcher Revolution about? I tackled that question 15 years ago – for my book The Commanding Heights: The Battle for the World Economy – and I decided the best way to answer was by asking Thatcher herself. So I turned up at the Thatcher Foundation, a town house in London’s Belgravia, which was the operating base for then-Baroness Thatcher.

“For me, it was so simple,” Thatcher told me that day. “The state ought not to tell people what to do. My experience reinforced my beliefs. It was becoming obvious to people that the socialist way meant accepting decline.” At that point she shook her head. “Can you imagine – people accepting decline.”

She had become prime minister in 1979, when Britain’s economic decline was accelerating – many were predicting it would slide to the level of East Germany. Britain was broke, and its economy was broken. Inflation was at 20 percent. Public debt was so out of control that Britain had been forced to borrow money from the International Monetary Fund.

The nation was “all strikes all the time.” Trains would stop running. The garbage was not being picked up because the “dustmen” – the garbage collectors – were on strike. Hospital workers walked off the job. So did grave diggers.

The state-owned industries were the most vulnerable to this labor unrest. Unions had enormous leverage over these companies, and the success of their “industrial actions” ensured that businesses would be highly inefficient and lose great amounts of money. Which meant the national government that owned them was losing a great deal of money.

Once in power, Thatcher took direct aim at the “mixed economy,” which was championed both by the Labor Party and some Conservatives. The then-dominant consensus held that the government should control the “commanding heights of the economy” and own “the means of production.”

Her great test on labor relations came in 1984, when the Marxist-led coal miners went out on strike against the government-owned coal industry. They were sure they would win because the bulk of Britain’s electricity was coal-generated. And they could determine whether the coal got to the power stations, which meant that they would determine whether the country’s electricity stayed on. Or so they thought.

Thatcher held firm. After a year, the strike collapsed – and all British labor relations were dramatically reformed.

She instituted what became known – after some debate about the proper terminology – as “privatization.” This meant decamping from the commanding heights by selling off government-owned businesses that dominated the economy. That became the model for reform for many other countries. It also ushered in a new era of globalization of capital markets, as the shares in these privatized companies were offered to pension funds and other investors around the world.

All this was what we were to talk about that morning in Belgravia. What strikes me now is how her words then, looking back at her time in office, are still relevant.

“Years ago,” Thatcher explained, “ordinary people became Labor to get a better life. Now they understand that freedom and enterprise under law is better than massive government control over industry and people. You have to create wealth before redistribution. Socialism started with redistribution before wealth.

“Socialism was the flavor of the time for a long time,” she continued. “We in this country had an experiment in socialism. The Conservatives, when in power, did nothing to reverse it. I, myself, never had any sympathy for socialism.”

Her views on the proper tasks of government were clear. And ordered. “First, keep finances sound,” she began. “Second, ensure a proper foundation of law so that industry, commerce, services and government can all flourish. Third, defense. Education, the fourth, is the road to opportunity.”

Then she added, “The fifth is the safety net. Society is more complex and needs to be more sophisticated in how it responds to fundamental questions. How is it to provide an effective safety net without creating or strengthening the dependency culture? How are we to uphold the virtues of civil society?

“And a certain amount,” she added, “is to be spent on infrastructure and a certain amount on pure research.”

To this list she added, “Don’t forget Thatcher’s Law.” She explained that basic rule: “The unexpected happens. You had better prepare for it.”

I asked her about the global impact of the policies she launched in Britain. That, it turned out, had been one of the “unexpecteds.”

“In 1981,” she said, “a finance minister came to see me. ‘We’re all very interested in what you’re doing’, he said, ‘because if you succeed, others will follow.’ That had never occurred to me.”

As it turned out, many did follow.

That morning’s discussion had brought a further reflection. The Thatcherite Revolution was itself another “unexpected.”

In the mid-1970s, it would have been hard to imagine such a reversal in Britain.  The “mixed economy” seemed too entrenched. Yet her political program had not come out of nowhere. It was, rather, built on a foundation of many years of thinking, discussion and analysis.

“Yes,” Thatcher said, “it started with ideas, with beliefs.” She paused for a moment. “That’s it. You must start with beliefs. Yes, always with beliefs.”

In addition to tributes from around the world, Thatcher’s death has unleashed much criticism. That itself is a sign of her impact. She was certainly a polarizing figure. After all, it was her fellow Tories who brought her down in 1990, rebelling against what they saw as her increasing imperiousness – her complete confidence, as one of her closest colleagues put it, in “the undivided sovereignty of her own opinion.”

Yet so much of the diatribe against Thatcher that has emerged in Britain since her death comes from people who don’t realize how much more poorly they would live today had it not been for her forthrightness. This reflects a failure to recognize what the costs would have been of, in her words, “accepting decline.”

Perhaps the strongest affirmation of what Thatcher had created was embodied in what came after – how Tony Blair’s Labor government did not seek to roll back the frontier that Thatcher had defined.

“Very few leaders,” Blair said last week, “get to change not only the political landscape of their country but of the world. Margaret Thatcher was such a leader.”

Even clearer was what Blair had said many years earlier, when he was leading his party, which rebranded itself as “New Labor.” It should not be a party, he explained, that “bungs up your taxes, runs a high-inflation economy and is hopelessly inefficient” and “lets the trade unions run the show.”

That pretty much summarized the ills that Thatcher had targeted as prime minister and set out to fix. To have done otherwise would have been to preside over a country in continuing decline – which she was determined not to do. Not only were her achievements considerable in themselves. What was also remarkable was how her policies resounded around the world.

And would continue to do so.

 

PHOTO (Top): Former Prime Minister Margaret Thatcher listens on the third day of the Conservative Party Conference October 9, 1997. REUTERS/Archive

PHOTO (Insert A): British Prime Minister Margaret Thatcher points skyward as
she receives standing ovation at Conservative Party Conference on
October 13, 1989. REUTERS/Stringer/UK

PHOTO (Insert B): British Prime Minister Margaret Thatcher points a finger as she answers questions at a news conference in London, June 8, 1987. REUTERS/Roy Letkey

PHOTO (Insert C): Prime Minister John Major talks to former Prime Minister Margaret Thatcher on board the new Eurostar high-speed train at Waterloo International station before setting off for Channel Tunnel inauguration ceremonies in Calais May 6, 1994. REUTERS/Archive


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