UK 14: Thatcher's economic policies and their impact Flashcards
Define privatisation/denationalisation during Thatcher’s premiership.
Moving a business/organisation that was in the public sector, to the private sector. This gives the organisation independence and incentivises them to maximise profit, improve their businesses and essentially increase dynamic efficiency.
Examples of privatisation and denationalisation during Thatcher’s premiership.
○ Driven by anti-socialist ideology, Thatcher privatised: BP 1979; British Aerospace 1980; British Telecom 1984; sold British Gas 1986 (biggest share offer in history accompanied by high profile advertising campaign) - thought private sector was more dynamically, allocatively and productively efficient
○ Businesses would compete more intensely whilst government financial pressures led to ‘rolling back the frontiers of the state’
○ The Housing Act of 1980 gave the ‘Right to Buy’ to council house tenants.
What was the impact of privatisation in the 1980s?
○ Brought in more revenue for the government, critics said enterprises were sold off cheaply in order to ensure all shares were taken up -> insecure life for employees and some lost jobs, couldn’t rely on job-security or pension provision
Radical Thatcherites wanted to privatise parts of the NHS, coal industry and railways but didn’t happen until 1990s
What is the point of deregulation in supply-side economics?
○ Little government intervention and removal of ‘red tape’, making it easier for businesses to trade by lowering costs of production
Encouraging entrepreneurship
Some examples of deregulation in the 1980s
○ Loan Guarantee Scheme tried to make it easier for small businesses to borrow money
Enterprise Allowance Scheme tried to encourage unemployed to start their own business by giving them £40 a week
What was the impact of financial deregulation?
led to the City London and financial markets being free from control of BoE -> ‘Big Bang’ 27/20/86 deregulated London stock exchange and replaced ‘old boys network’
○ Let foreign banks operate as stockbrokers, blew away old tradition and is credited with restoring London’s position as a world financial centre
○ ‘Yuppie’ became iconic image of the city, bigger risks were taken -> could compete with Wall Street
Economy grew under Thatcher’s premiership but not much in terms of productivity, 2.2% growth 1980s not better than 1970s (growth in 2nd half was accompanied by underperformance in the first half)
• What was the issue of unemployment during her time and how was it addressed?
○ Full employment was not her aim, wanted to make British industry more competitive
○ Worst hit areas were Midlands, North, central Scotland, South Wales -> described as ‘deindustrialisation of Britain’, manufacturing fell by 15% in 2 years
○ West Midlands production fell by 1/4, steel cut by 30%
○ 1983, unemployment at 3 million, 13.5% of workforce
○ Youth Employment Schemes created which subsidised employees to take on young people, National Insurance rates reduced for lower paid jobs
○ Places like Liverpool increased to 25% unemployed
○ Traditional skills fell in demand, rendered out of date by mechanisation
○ Economic realignment meant men were hit harder than women (main breadwinners)
• What was the issue of inflation during this time and how was it addressed?
○ Thatcherites blamed Keynesian economics for high levels of inflation, concluded that controlling inflation would better the economy
○ Raised interest rates to 17% in 1979, made it more expensive for businesses to borrow
○ Increased value of the pound, exports more expensive
○ Economic recession led to high unemployment
○ Worse inflation and peaked at 22% in May 1980, reached a low of 2.5% in 1986 -> further inflation created led to entry into European Rate Mechanism (ERM)
• What was ‘economic realignment’ and its impact?
○ Previous to this, old labour intensive industries were faced with foreign competition and technological innovation
○ Moving away from manufacturing and heavy industry to services
○ Foundations of working class crumbled and sharpened North-South divide
○ Seen in urban decay of inner city areas, increased ill health, depression and substance abuse
○ Young people could no longer follow parents into work/had to move away (work was shifting toward London)
○ 1981 Howe advised Thatcher to ‘manage decline’
○ Riots broke out in Brixton, London, Handsworth, Birmingham…
○ Scarman Report examined causes of riots and identified poverty and race, exacerbated by deprivation and ‘sus law’ (led to police discrimination)
○ Investment and regeneration of some areas, Michael Heseltime argued for greater intervention and spearheaded redevelopment projects
