Thatcher's Economic Policy: Stage 1 (1979-1982) Flashcards
What Fredrich Hayek quote influenced the first stage (1979-1982) of Thatcher’s economic policy?
“The more the government plans, the less can an individual plan, and when the government plans everything the individual can plan nothing”
How did Thatcher view the post-war consensus?
She was opposed to it, and viewed it as creeping socialism
What were the 4 things Thatcher attributed to post-war consensus policies?
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
What were Thatcher’s 4 main goals of her Stage 1 Economic Policies
1) Cut public spending
2) Reduce government interference
3) Reduce government bureaucracy
4) Reduce the power of the Unions
What was Thatcher’s blanket economic policy?
Free market economics (Letting natural economic forces of supply and demand operate with no government control)
I) What was this policy built on?
II) Who put this ideology forward?
I) Monetarism
II) Milton Freidman
What was the main belief of monetarism?
The root cause of inflation is government spending, thus the government should aim to restrict their public spending
What is Demand Side economics?
The Keynesian belief that demand for goods and services drive economic activity
What is supply side economics
An economic theory based on the idea that tax cuts and de-regulation lead to economic growth
Give 3 major instances of privatisation
1) BP (1979)
2) British aerospace (1980)
3) British Telecom (1984)
What was the biggest example of privatisation?
British Gas (1986)
What was the growth rate of civilians owning shares between 1979 and 1990?
3x, from 3m to 9m
What were the driving forces behind privatisation? (3)
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
I) What was “Outsourcing”
II) What was an example of this?
I) Private companies taking on contracts for services that would have otherwise been done by the public sector
II) Refuse collection was outsourced
What were some major criticism of Privatisation?
1) There were theories that shares were sold off cheaply to ensure all the shares sold
2) Employees felt less secure in their jobs
What was the major message sent by privatisation?
The end of (at the very least the economic portion of) the Post-War consensus
What was deregulation?
The policy of the government interfering as little as possible in company affairs
What did the “Loan Guarantee Scheme” do?
It made it easier for more small businesses to borrow money?
What did the “Enterprise Allowance Scheme” do?
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
What impact did deregulation have on the financial markets?
They were no longer under the control of “the Bank of England”
I) What was the “Big Bang” of 1986?
II) What was its effect
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”
What was the effect the Deregulation of the Stock Market
London became on of the financial capitals of the world
I) What happened to the economy under Thatcher
II) What happened to productivity under Thatcher
I) It increased
II) It did not increase much at all
What had inflation increased to by 1980?
15%
What had Unemployment risen to by 1980?
2 million
What do the figures of 1980 point to?
Stagflation
What was the reason Britian did not enter another balance of payments crisis?
North Sea Oil
What was the social cost of monetarism’s failure?
There was pressure to reverse monetarism
What was VAT increased to from 8% in 1979?
15%
What was the biggest reason there was backlash for raising indirect taxes?
It was seen to hit the poor the hardest
