Margaret Thatcher's New Government

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After the 1970s crises of uncontrolled inflation and the IMF bailout in 1979 a new government under Margaret Thatcher came to power. With this new government came controversial policy changes. While some policies followed by Thatcher’s government could be argued to have succeeded in the areas of bringing inflation under control and improving productivity, on closer inspection the statement that Thatcher left behind a ‘successful economy’ in 1990 seems doubtful. Her achievements when analysed in more detail, appear to have come at the unacceptable cost of higher inequality and unemployment. In addition to this, policies followed were often were short-sighted and may have led only to temporary success that did not continue into the 1990s.

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Through supply side policies of deregulation and privatisation throughout the 1980s Thatcher aimed to reduce regulatory burdens and increase competition. By privatizing around half of Britain’s public corporations, including energy, the steel industry and railways, Thatcher aimed to encourage cost reduction and promote business efficiency. This was all part of her government’s less interventionist approach, a big change from the previous post-war heavily state influenced economy. This supply side reform lead to an increase in productivity growth from 1.1% between 1973-79 to 2.2% from 1979 to 1987. While her impact on productivity is largely accepted, the debate continues over the cost of this reform and which exact policies had the greatest impact. While privatised companies did begin to see improvements in performance, there is some question as to whether this was a direct result of privatisation as similar progress also took place in public corporations. Perhaps more significant was the privatisation of the financial sector through the ‘Big Bang’ of 1986. Minford puts it simply: ‘The City Big Bang was an important component of the UK economy’s resurgence and she got it right’. While financial reform cemented London’s place as a financial centre on a global level, Britain was also now more susceptible to the effects of greater capital mobility. This left Britain with a less stable economy, the risk of which continued to increase as the financial sector grew. This was another instance where the government prioritised capital over labour, as this increased vulnerability made the government reluctant to implement the necessary labour and welfare policies for ‘fear of capital

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