second stage Thatcherism economics Flashcards
what economic policy had Thatcher used up until 1983?
monetarism
what new economic policy did she adopt, 1983-87?
supply side economics
what did this new policy aim to do?
-correct the artificial demand created by Keynesian economics
-incentivise people to work harder mainly through wages
-encourage people to be more entrepenuerial and enterprising
how would the government achieve this?
-reduce taxation
-encourage competition to lower prices
-limit trade union power
-cut welfare payments to reduce dependency
Thatcher quote that reflected these aims:
‘property owning, share owning democracy’
example of supply side economics in action: privatisation of British Telecom
-1984
-50% of the company was sold via the London stock exchange
-2 million people bought shares - enormous figure
-share prices rose by 43p on day one, so people just sold their shares quickly
-anyone who bought £1250 of shares on day 1 had made £1000 profit within 2 years
-before privatisation it could take 3 months for a BT engineer to come to your house and install a phone
-after the privatisation, prices fell, phones were available on demand and the number of public telephone boxes increased
what was the big bang of 1986?
-the deregulation of the stock exchange
-this was the start of the financial sector forming a major part of the British economy
-the london stock exchange became a viable alternative to Wall Street
-london switched from traditional face-to-face dealing to electronic trading which was much more efficient
-london became a draw for american investment banks who invested into the infrastructure
-believed to have created 1,500 millionaires
when was the right to buy introduced?
1980
what did the housing act of 1980 do?
gave council tennants of more than three years’ standing the right to buy their home at a discount on the market price
what was the average discount on the market price by 1988?
44%
how much did the proportion of homes that were owner-occupied increase by 1979-89?
from 55% to 67%
how much was the first house sold for in 1980?
£8,000
how many houses had been sold off by 1997?
1.7 million
what was one issue with this policy though?
the government didn’t build new homes at the same time as selling them, which led to a shortage of houses especially in London and the consumer belt
how did inflation change under Thatcher?
it peaked at 22% in 1980 due to her policy of monetarism, but by 1983 it had fallen to a 15 year low of 4%
