When Margaret Thatcher became the Prime Minister of the United Kingdom in May 1979, the country was going through a lot of economic hardships. In her initial years as the prime minister, she had to deal with increased numbers of inflation, with unemployment at its peak and a sizeable budget deficit. But she was the ‘Iron Lady’ she figured out the way to stabilize the UK’s economy.
Margaret Thatcher came up with three component policy which is popularly known as Thatcherism’s economic components. Out of the three elements, one is the practices of macro- economic policy through monetarism. In simple words, monetarism is necessarily about adopting a durable budget and tough monetary policy to regain financial discipline even the period of recession.
It gave high priority to bring inflation under control through organizing money supply while parallelly ensuring budget regulation. The fiscal policy aims were convoluted by cutting taxes on incomes counterbalancing the tax cut by a substantial rise in value-added tax.
Another component of the economic policy is deregulation of markets, removing state control over private businesses and household choices. Her government encouraged free inward and outward flow of capital by removing all exchange controls. Along with this, liberating mortgage lending was a pivotal step in financial deregulation.
Initially, this resulted in the massive expansion of mortgage lending and helped in enabling ownership. Later, controlling over-lending became a problem and it poorly ended up to a certain extent it had affected her reputation as well back then at that point in time.
The third and the most important element of Thatcherism is Privatization. She considered privatization as a political tool. It helped her to incapacitate the state’s control, subvert socialism and eventually outwit the Labour Party by the enticing working class with affordable shares and to sell council homes with hefty discounts.
This policy was beneficial for the treasury as the selling of assets mitigated public hiring and moved to the future borrowing by private organizations. The expectation behind this policy was to improve the performance of the government-owned companies by private ownership in two ways either by competing or diminishing political hindrance. Thatcher’s policy of handing over a certain part of the UK government-led activities to the privatized companies in the 80s overturned the course in the growth of government in the UK was later followed by many across the globe.
However, it turned out to be a combined experience. Entities like British Airways, Rolls Royce, BAE immensely improved on the basis of long-term investment. On the other hand, several private companies became controlled monopolies which resulted in the involvement of the government.
Many experts argue that Margaret Thatcher made economic policies keeping political games in mind. According to Professor Kevin Lee, Margaret Thatcher’s economy was highly influenced by the ideas of the economists like Milton Friedman and Friedrich Hayek. Her economic policies are studied and followed even today by scholars and were appreciated even by her critics at that point in time. Margaret Thatcher was a kind of politician whose economic experiments changed the course of both politics and economics.