ECONOMIC POLICIES AND LEGACY OF MARGARET THATCHER

1. ECONOMIC POLICIES AND LEGACY OF MARGARET THATCHER Name: Institution: Instructor: Course: Date of Submission:

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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%.

10. 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%.

11. 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.

12. 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-de-industralization-and-privatization-the-economic-and-social-legacy-of-margaret-thatcher-the-iron-lady/5329683 Smithin, J. N. (1990). Macroeconomics after Thatcher and Reagan: the conservative policy revolution in retrospect. Aldershot, Hants, England, E. Elgar.

13. 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.

14. 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.

15. 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.