Thatcher's Economic Policy: Stage 1 (1979-1982)

Question 1

What Fredrich Hayek quote influenced the first stage (1979-1982) of Thatcher’s economic policy?

Answer 1

“The more the government plans, the less can an individual plan, and when the government plans everything the individual can plan nothing”

Question 2

How did Thatcher view the post-war consensus?

Answer 2

She was opposed to it, and viewed it as creeping socialism

Question 3

What were the 4 things Thatcher attributed to post-war consensus policies?

Answer 3

1) Inefficiency and Low Growth
2) Undermining of personal responsibility, and the creation of “dependency culture”
3) Hard working members of society subsidising the “work-shy”
4) Stifled initiative

Question 4

What were Thatcher’s 4 main goals of her Stage 1 Economic Policies

Answer 4

1) Cut public spending
2) Reduce government interference
3) Reduce government bureaucracy
4) Reduce the power of the Unions

Question 5

What was Thatcher’s blanket economic policy?

Answer 5

Free market economics (Letting natural economic forces of supply and demand operate with no government control)

Question 6

I) What was this policy built on?

II) Who put this ideology forward?

Answer 6

I) Monetarism

II) Milton Freidman

Question 7

What was the main belief of monetarism?

Answer 7

The root cause of inflation is government spending, thus the government should aim to restrict their public spending

Question 8

What is Demand Side economics?

Answer 8

The Keynesian belief that demand for goods and services drive economic activity

Question 9

What is supply side economics

Answer 9

An economic theory based on the idea that tax cuts and de-regulation lead to economic growth

Question 10

Give 3 major instances of privatisation

Answer 10

1) BP (1979)
2) British aerospace (1980)
3) British Telecom (1984)

Question 11

What was the biggest example of privatisation?

Answer 11

British Gas (1986)

Question 12

What was the growth rate of civilians owning shares between 1979 and 1990?

Answer 12

3x, from 3m to 9m

Question 13

What were the driving forces behind privatisation? (3)

Answer 13

1) Anti-socialism
2) A belief that Private companies were better at delivering services than the public sector
3) Competition would encourage improvements and innovation

Question 14

I) What was “Outsourcing”

II) What was an example of this?

Answer 14

I) Private companies taking on contracts for services that would have otherwise been done by the public sector
II) Refuse collection was outsourced

Question 15

What were some major criticism of Privatisation?

Answer 15

1) There were theories that shares were sold off cheaply to ensure all the shares sold
2) Employees felt less secure in their jobs

Question 16

What was the major message sent by privatisation?

Answer 16

The end of (at the very least the economic portion of) the Post-War consensus

Question 17

What was deregulation?

Answer 17

The policy of the government interfering as little as possible in company affairs

Question 18

What did the “Loan Guarantee Scheme” do?

Answer 18

It made it easier for more small businesses to borrow money?

Question 19

What did the “Enterprise Allowance Scheme” do?

Answer 19

Encouraged the unemployed to start up their own businesses by giving them £40 per week for up to a year to get their businesses off the ground

Question 20

What impact did deregulation have on the financial markets?

Answer 20

They were no longer under the control of “the Bank of England”

Question 21

I) What was the “Big Bang” of 1986?

II) What was its effect

Answer 21

I) The deregulation of the stock market

II) It allowed for “computer screen traders” to play the stock market, and replaced the “old boys network”

Question 22

What was the effect the Deregulation of the Stock Market

Answer 22

London became on of the financial capitals of the world

Question 23

I) What happened to the economy under Thatcher

II) What happened to productivity under Thatcher

Answer 23

I) It increased

II) It did not increase much at all

Question 24

What had inflation increased to by 1980?

Answer 24

15%

Question 25

What had Unemployment risen to by 1980?

Answer 25

2 million

Question 26

What do the figures of 1980 point to?

Answer 26

Stagflation

Question 27

What was the reason Britian did not enter another balance of payments crisis?

Answer 27

North Sea Oil

Question 28

What was the social cost of monetarism’s failure?

Answer 28

There was pressure to reverse monetarism

Question 29

What was VAT increased to from 8% in 1979?

Answer 29

15%

Question 30

What was the biggest reason there was backlash for raising indirect taxes?

Answer 30

It was seen to hit the poor the hardest