Margaret Thatcher’s Gift to the Left

The most durable parts of Thatcher's years as prime minister are also the most important and laudable ones.

Some of Margaret Thatcher's record is rightly controversial or, in retrospect, embarrassing. But the most durable parts of her years as prime minister -- the instances in which she not only got her way but ultimately brought the Labour Party along with her -- are also the most important and laudable ones.

I am mainly talking about three aspects of the Thatcher legacy: the breaking of the National Union of Mineworkers strike; the privatization of industrial firms owned by the British government; and substantial reductions in the top rate of income tax, which stood at 83 percent when Thatcher took office.

First, the miners' strike: In 1984, when Thatcher tried to close 20 money-losing government-owned coal mines, the NUM went on strike to protest the closures. Unlike two previous governments that had been cowed by the union, Thatcher's government had stockpiled coal and waited the workers out though a fractious strike that lasted nearly a year. Then Thatcher won: The money-losing mines closed, and the workers in the other mines returned.

This keeps showing up at the top of the list of lefty criticisms of Thatcher. In describing the miners' strike, Ned Resnikoff of MSNBC complains that "Thatcherism's economic program was one of austerity, privatization, and aggressive union-busting." But what was the correct public policy with regard to the miners? To continue operating money-losing industrial enterprises at taxpayer expense because that is what a union wants?

The miners' strike shows why Thatcher was correct to want the government out of industry. When the government runs industrial enterprises, the political temptation is to operate them in the interests of unions instead of taxpayers or the public at large. That's why it was necessary not only to defeat the NUM but also to sell British Coal so it would not have such influence in the future.

British Coal was just one of many industrial enterprises the Tories sold off under Thatcher and her successor, John Major: There were also Jaguar, Rolls Royce, British Petroleum, British Gas, British Aerospace and more. And few in Britain are looking back: In 1995, Labour amended its party manifesto to eliminate "Clause Four," the plank advocating state-ownership of industry.

Privatizations of traditional functions of government, like transportation, have been a mixed bag and are appropriately an ongoing subject of debate. Privatizations of British Rail and the London Underground have been fiascoes, while bus service privatization seems to be working pretty well. But is anyone prepared to make the argument that Thatcher was wrong about heavy manufacturing and that the U.K. government ought to get back in the businesses of mining coal and making steel and cars?

Finally, on the tax issue, Thatcher got the top income tax rate down from 83 percent to 40 percent. A Labour government raised the top rate to 50 percent during the current economic crisis and the Conservative-Liberal coalition now in power just reduced it to 45 percent.

Maybe 50 is better than 40, but I don't see a lot of people prepared to argue that a top rate around 83 percent is desirable or even that it is below the revenue-maximizing rate. Invocations of the Laffer Curve are silly now because tax rates are so low; they are not silly when talking about top rates above 80. Thatcher moved the goalposts on the top rate issue closer to where they belong, even if there is now room to move a bit higher.

There are two keys to Thatcher's ideas on economic policy: That the government should do less to plan the economy, leaving core economic activity to the private sector; and that it should tax less progressively and do less to redistribute income. The latter remains highly controversial. Thatcher's wildly unpopular attempt to make local taxes less progressive, replacing Britain's version of property tax with a flat "Community Charge," was a key driver of her ouster in 1990.

But the rejection of state control of the economy has become a consensus view, to the benefit of both the British Left and the U.K. population as a whole. The key success of New Labour under Tony Blair and Gordon Brown was marrying Thatcher's laissez-faire views on economic regulation and private ownership with more progressive fiscal policies that raised the real incomes of the poor. By beating union-driven socialism so soundly, Thatcher made the rise of the neoliberal left possible -- and unless you miss government-made steel, you should be grateful for that.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.