The impact of Thatcher’s economic policies Flashcards
What did Thatcher believe damaged the British economy?
Keynesian economics
what were the 3 aims of thatchers economic polices?
Restore the health of the economy by controlling inflation.
Restore incentives to work hard.
To create genuine new jobs.
Thatcher believd in neo-
Neo-Liberalism
what were the 4 things of Neo-Liberalism?
- Limited government intervention.
- privatisation
- Reduced government spending (austerity)
- Enhance the role of the private sector.
3 steps of thatcher’s economic policies
Step 1: Monetarism (1979-1982)
Step 2: Supply-side economics (1982-1987)
Step 3: Continuing the boom (1987-1990)
who implemted monetrism and what was the aim
Geoffrey Howe
reduce inflation
policies and outcome of monetarism
Increased direct taxation= inflation reduced- poor suffered.
Decreased direct taxes = rich benefited
Spending cuts = recession (a period of temporary economic decline during which trade and industrial activity are reduced,)
End of government subsidies = unemployment.
Who implemented supply side economics and what was the aim
Nigel Lawson
Stimulate production in the private sector and help businesses to grow.
policies and outcome of supply side economics
Tax cuts = Lawson cut standard rate of income tax from 30% to 27% =increased consumer spending
Popular capitalism = increase in public shareholders
Privatisation( to reduce spending + improve effieciny ) = huge government revenues.
Continued to withhold gov. subsidies = improved efficiency and profitability of business – unemployment.
Who implemented th
e Continuing the boom (1987-1990) and what was the aim?
Nigel Lawson
Create a consumer boom and help industry to flourish.
Policies and outcome: of continuing the boom
Finacial Deregulation + interest and tax cuts = encouraged a borrowing boom
Much of borrowed money spent abroad
=balacne of payment deficit £47 Bn 1990 from £16bn 1979)
easy availability of credit= personal debt increase e.g. Overall personal debt = 1.3 trillion 2003= highest in Europe
rising inflation
increased foreign investment (especially in the financial service industry) – Big Bang
interest and tax cuts = increased consumer spending- increased debt – increasing inflation
Ultimately = stock market crash.
Thatchers psotive impact on unemployment
New jobs created in the financial sector
Thatchers negative impact on unemployment
Unemployment spiralled under thatcher
Mid 1980s:
-1/5
-Rose every year.
1980-1989
- Stayed above 2 million
- Peaked 1986 at 3.4 million
1979 =3.4% of population
1990 = 9.1%
N.b.
Necessary price for economic improvement
Not the role of the state to create jobs.
Between 1980 and 1989 unemploymetn stayed above what and peaked when
2 million
1986- 3.4 million
in 1979 what % of population were unemployed and what did this change to in 1990
- 4%
9. 1%
Thatchers economic policy positive impact on inflation
Succeeded in reducing it via monetarism.
Came to office = 13.4%
1980 = 18%
1901-1988 = kept below 9%
Thatchers economic policy negaitve impact on inflation
Inflation began to rise again by 1980
Lawson’s giveaway budget 1988 (following the SMC 1987)
-By 1990 9.5%
Thatchers economic policy positive impact on Restructuring nationalised industry
improving the efficiency and profitability
and therefore competitiveness of nationalised industries.
-1984 £1.1bn in subsides
-1988 £1.3bn profit.
Thatchers economic policy negative impact on Restructuring nationalised industry
heavy human cost – structural
unemployment regionally concentrated in the
North/Wales/Scotland
decline of
Britain’s industrial capability.
-British steel = -95,000 workers
-National Coal Board = closed 75 pits = 64,000
redundancies.
Thatcher’s economic policy positive impact on privatisation
S.T. raised huge revenues for the government enabling tax
cuts.
-50 large industries sold
(B. Airways, Steel, telecoms. Cable and Wireless)
-Total = £20bn.
Popular capitalism (part of privatisation)
- Shares in newly privatised industry.
- Shareholders tripled – 11m by 1990
Sale of council houses contributed to the creation of a
property-owning democracy.
Thatcher’s economic policy negative impact on privatisation
L.T. despite the state of valued national resources and
industry.
distribution of shares was not equal and arguably had
a limited impact.
- 9% of W/C.
- 50% professional males
Created L.T. shortages of council houses.
Thatcher’s economic policy positive impact on industry and finance
The financial services industry boomed.
-Investment increased by 300%
There was a huge growth in small businesses
- 1.9m to 3m
- 3.5 self employed workers by 1990/
Thatcher’s economic policy negative impact on industry and finance
rapid decline of Britain’s industrial
production.
-Manufacturing only grew by 8%
- 1960 industrial output = 60% of GDP
- 1997 = 21%
growing balance of payments
problem – increasing reliance on imports.
- 1979 = import/export deficit = £5bn
- 1990 = £20bn.
Thatcher’s economic policy positive impact on Economic growth
economy continued to grow.
-Industrial production increased by 4.2% each year in the
1980s.
-Supply-side miracle.
