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Love her or hate her, it cannot be denied that Margaret Thatcher, who was laid to rest on Thursday, completely transformed the economic fortunes of the United Kingdom.
The reforms of her 11-year tenure as prime minister traded short-term pain for long-term benefits. Many argue that, this legacy is one that Europe’s periphery needs to embrace in order to turn around its own fortunes.
Along with the late American President Ronald Reagan and Pope John Paul II, Margaret Thatcher was indeed a giant of this globalized era and of history. These three leaders were highly instrumental to the fall of Soviet communism and the resurgence of political and economic liberty around the world. Like Reagan, Thatcher was one of those rare individuals who were both a movement leader and an effective political leader.
It is one thing to have firm ideas, but quite another to have the skills to bring them into being and for them to endure after you leave office. Many pundits lament that the current economic crisis has put Margaret Thatcher’s ideas and ideals under siege even though this disaster resulted from ignoring her and Reagan’s fundamental free market principles.
Looking at her biography, Thatcher’s rise was astonishing. Margaret Hilda Roberts was born on 13 October 1925, the younger daughter of Alfred Roberts and Beatrice Stephenson, into a family of lower middle-class grocers. She was raised as a Methodist. Her father was an ex-Liberal who became an Independent councilor and Mayor of Grantham, in Lincolnshire, and greatly influenced Margaret with his emphasis upon thriftiness and a belief in the free-market economy.
The notion that a grocer’s daughter could become the leader of the Conservative Party and Prime Minister in class-ridden Britain would have been preposterous. As world history has abundantly shown us, in business it’s usually outsiders who fundamentally shakeup an existing industry or create entirely new ones. In politics it takes a severe crisis for an outlier to emerge. Though he had a pedigreed background, Winston Churchill was very much the outsider, intensely distrusted and disliked by his own party and much of the public. Only when Britain’s very existence was at stake could he reach the summit. In Thatcher’s case, it was an acute economic and social crisis that enabled her to emerge.
It’s hard to appreciate today how desperate Britain’s condition was before Thatcher took office. Its economy was a laughing stock, the perennial sick man of Europe, like today’s Greece. Strikes were endemic and labor union bosses effectively governed the country. Her Conservative Party had long ago made its peace with the welfare state and the ethos of high spending and high taxes. While the previous Tory (Conservative Party) Prime Minister Edward Heath wanted to revive Britain, he hadn’t a clue how to do it. In a make-or-break showdown with the coal miners’ labor union, Prime Minister Edward Heath called a special election under the banner “Who Governs Britain?” Prime Minister Heath lost and the unions’ dominance in Britain seemed secure.
Great leaders have an astute sense of taking advantage of circumstances. Even though Heath had lost two elections, none of the senior party officials would challenge him. At the time, Thatcher was not regarded as one of the party’s major figures. But she was the only Tory who firmly believed in free markets and in Britain’s ability to become again a proud nation based on the principles of liberty. She was a devotee of Friedrich von Hayek and Milton Friedman and of the idea of paring back big government and giving free enterprise room to flourish. Astonishingly, she beat Edward Heath in a leadership fight in 1975 and led the Conservative Party to victory in 1979.
Immediately, she began slashing income tax rates and reining in galloping spending and fighting inflation. She also exhibited that critical sense of timing. When she took office, she was faced with a potential strike of nurses whose labor union was demanding huge pay increases. Prime Minister Thatcher compromised in a way that some thought she wasn’t able to do and some also thought she didn’t have the backbone to turn Britain around. Instead, she exhibited a great politician’s sense of knowing when to pick a fight.
Thatcher eventually pushed through major labor union reforms and made it clear she would not tolerate any union riots or violence. Shortly after Thatcher won re-election, the coal miners union, which had destroyed Prime Minister Edward Heath, decided to take her on. But unlike Heath, Thatcher was fully prepared. The big showdown ensued and Thatcher beat the coal miners’ labor union resoundingly. It has never recovered from that defeat.
Thatcher knew the deadweight on the economy of excessive taxation. She cut the top income tax rate from 98% to 40%. She cut the corporate income tax rate from 52% to 35%. One of Thatcher’s greatest innovations was the systematic selling off of the government’s business assets, dubbed privatization. After World War II, Britain nationalized enormous swaths of the economy, which subsequent Conservative governments left largely untouched. Thatcher sold government companies off and her example has been followed by countless nations around the world.
In the area of privatization, she did two remarkable things. She sold off much of Britain’s public housing. An enormous number of Britons, far more than in the U.S., lived in these government-owned buildings. Thatcher pushed the sale of these apartments to occupants at low prices and on very advantageous terms. The purpose was to begin to shift the mentality of people and their dependence on government.