Thatcher Legacy Sees Employment Rising Amid U.K. Slump
Margaret Thatcher is keeping a record number of Britons in work, nearly 30 years after her policies drove unemployment to the highest in living memory.
Slammed in swathes of northern Britain for shutting down industries from shipbuilding to mining, Thatcher’s vision of the job market has now led to 29.8 million people in work at the end of December, more than at any time in history. That’s after a double-dip recession and the country’s worst financial crisis since World War II.
“I would have expected unemployment to rise quite a lot further, perhaps another million wouldn’t have been surprising,” said Nicholas Crafts, professor of economic history at Warwick University. “If we ask why it hasn’t risen further, the answer is real wage flexibility. The reforms Thatcher put in place brought down unemployment largely after she left office.”
Thatcher, who died yesterday at the age of 87 from a stroke, fought battles with labor unions to reduce their power, sold state industries and opened the economy to competition, as well as unleashing a revolution in the City of London.
The result was unemployment that reached a postwar high of 3.3 million people, a rate of 11.9 percent, in 1984, a social legacy that divides the country to this day. While the likes of Prime Minister David Cameron and her successor, John Major, praised Thatcher yesterday, people reacted in Glasgow, Scotland’s main city, by dancing in the street.
“Unemployment went through the roof, we had riots,” former Labour lawmaker Clare Short told the BBC. “She did enormous damage.”
“We can’t deny that Lady Thatcher divided opinion,” Cameron said outside his Downing Street office last night. “For many of us, she was and is an inspiration. For others, she was a force to be defined against. But if there is one thing that cuts through all of this -- one thing that runs through everything she did -- it was her lion-hearted love for this country. She was the patriot prime minister.”
Cameron’s list of Thatcher’s fights focused on the economic. “Taking on the union barons, privatizing industry, unleashing enterprise, rescuing the economy,” he said. “When today we admire Britain’s strongest companies, very often they are ones she helped transform from failing state monoliths to thriving private sector businesses.”
British Airways Plc, Centrica Plc (CNA), British Telecommunications Plc (BT/A), BP Plc (BP/) and BAE Systems Plc (BA/) all traced their origins as public companies to the Thatcher government. Ordinary people were encouraged to buy the shares.
Banking was opened up with the introduction of electronic trading, and access given to foreign banks, helping London to maintain its status as a global financial hub.
Thatcher came to power in 1979 after a wave of strikes dubbed “the winter of discontent.” Water and rail workers, truckers and oil-tanker drivers, ambulance personnel and gravediggers, teachers, dock workers and garbage collectors all stopped work. She was determined to reduce union power, and introduced rules to restrict when they could strike and whether they could force people to join.
Her success made it easier for companies to cut pay and hours in the latest recession.
“The 1970s were a bad decade for the U.K.; it seemed as if everything was going wrong -- we had stagflation, little growth and high inflation, the place was depressing to live in,” Howard Davies, a professor at the French School of Political Science who worked under Thatcher as a Treasury official, said in an interview with Tom Keene on Bloomberg Radio’s Bloomberg Surveillance. “When she came in, there was a sense of what was possible, a sense that the U.K. did not need to condemn itself to genteel decline and that it was possible to turn things round.”
One difference can be seen in unemployment. After the most recent recession, it peaked at 2.7 million, or 8.4 percent in 2011. It took four years for employment to pass its June 2008 peak. After previous recessions, job levels took twice that to recover. Employment didn’t reach its 1990 peak until 1998, or its 1979 peak until 1987.
The shift reflects workers accepting real-term pay cuts and shorter working hours: since May 2008, the number of people working full-time has fallen by 400,000 while the number working part-time has risen by 561,000.
“I always fought Mrs. Thatcher, but unemployment would be millions worse in this recession if she hadn’t made our labor market more flexible,” Matthew Oakeshott, a Liberal Democrat lawmaker, wrote on his Twitter Inc. feed.
According to Crafts at Warwick University, losers under Thatcher were low-paid male manual workers, as their jobs went overseas. Income inequality also rose.
“The poor got poorer, for the first time in a century,” Neil Kinnock, who led the opposition Labour Party against her from 1983 to 1992, told the BBC.
Still, Crafts points out that when Labour under Tony Blair won power back from her Conservatives in 1997, it had accepted her changes and reversed few of them.
“She moved the center ground of British politics,” Labour’s current leader Ed Miliband said. “She also defined the politics of the 1980s. David Cameron, Nick Clegg and I all grew up in a politics shaped by Lady Thatcher.”
“The economy was in a frightful mess in the 1970s,” Major told the BBC. “Nobody believed we could move from a neo- socialist economy to a free-market economy, and that’s what she achieved.”
Thatcher said her economic thinking was influenced by the Austrian philosopher Friedrich Hayek and the University of Chicago economist Milton Friedman. Crafts was skeptical of this.
“I really don’t think Thatcher had any sense of economics whatever,” he said. “After the fact one can reconstruct the legacy of what her governments achieved, but she certainly didn’t understand the concepts as far as I can tell.”
One of Thatcher’s great enemies, former Labour London Mayor Ken Livingstone, disputed that she had improved the country. “Almost everything that’s wrong with Britain today is her legacy,” he told Sky News television. “It was her that decided to deregulate the banks. She decided to let our manufacturing wither. She was fundamentally wrong.”
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