Thatcherism is just another word for neoliberalism, says Kevin Rudd. It’s been almost two decades since Margaret Thatcher left office and her record has been obscured by mythology. Sure she took on the unions and sold off some public enterprises, but did she really "roll back the frontiers of the state"?
Despite more than a decade in power, Mrs Thatcher left office with tax revenues running at around 36.1 per cent of gross domestic product. In the same year, Australia’s social democratic government had tax revenues running at around 28.5 percent of GDP. And last year, the Australian treasury was bragging that Australia’s tax to GDP ratio was "substantially below the OECD average of 36.2 per cent".
Of course getting taxes down to the current OECD average was a significant achievement in 1980s Britain. According to Paul Pierson, the Thatcher government succeeded in reducing total public expenditure from 44.0 per cent to around 40.1 of GDP (while allowing expenditure to rise to 47.5 per cent in 1982). It’s true that 40 per cent is lower that 44 per cent, but it was far less than the reduction many of Mrs Thatcher’s supporters were hoping for.
In the 1994 book Thinking the Unthinkable Richard Cockett writes about the disillusionment of neoliberal activists like John Hoskins, Norman Strauss and Alfred Sherman:
Although Mrs Thatcher might have appeared to be radical, at the vital moment she had failed to grasp the nettle of institutional reform that might have foreshadowed a real return to economic liberalism; as it turned out, the levels of public spending (in real terms) in 1990 when Mrs Thatcher left office, had hardly changed from the year when she had entered Downing Street in 1979. Measured by this important yardstick ‘Thatcherism’ had thus made very little impact at all (p314-315).
Of course none of this should have been a surprise. In a 1977 piece for the Spectator, John Grigg warned that Mrs Thatcher was bound to disappoint her supporters if she won office. He argued that the previous Conservative Prime Minister’s embrace of the "neo-Liberal economic programme" had been a disaster. After clashing with the unions, said Grigg, Prime Minister Heath abandoned the "dogma of laissez-faire" and took a more pragmatic course.
According to Grigg, Mrs Thatcher was "more practical politician than ideologue" but was constrained by her own prejudices and by those of her "radical right" enthusiasts:
The ‘radical right’ corpus of doctrine is a resurrection of nineteenth-century Liberalism largely accomplished through the thaumaturgy of two foreign academics — the Austrian Professor F.A. von Hayek and the American Professor Milton Friedman. Both are eminent thinkers, but neither could be said to have much understanding of the realities of politics in Britain.
Mrs Thatcher might have ignored his advice about relations with the trade unions, but she did turn out to be more pragmatic than her current reputation suggests. At the New Statesman Dominic Sandbrook notes that Thatcherism "was more fluid, more improvised, more complicated and more contradictory than the neat, sterile neoliberalism of the political science textbooks."
One example of political pragmatism is the bail out of British Leyland. Before the election, Mrs Thatcher’s industry minister, Keith Joseph, insisted that "For every job preserved in British Leyland, Chrysler and other foci of highly-paid outdoor relief, several jobs are destroyed up and down the country." But faced with the collapse of the nation’s largest car manufacturer, the government quickly abandoned its liberal principles.
"The economic implications of such a collapse were appalling", Mrs Thatcher wrote in her memoir: "One hundred and fifty thousand people were employed by the the company in the UK; there were perhaps and equal number of jobs in the component and other supplying industries dependent on BL."
A review of the books concluded that a government bail out would probably fail — in the end, the company would run-down or go into into liquidation. But as Mrs Thatcher explained, "the final judgment had to based on wider considerations." Presumably these were the same consideration Geoffrey Howe referred to in his 1976 memo to Michael Heseltine. — " a very large number of seats in the West Midlands Area, must depend upon the votes of British Leyland workers …"
Professor Hayek must have found this discouraging. In 1981 he told the Listener "I have often regretted that there haven’t been more bankruptcies in the past; the British economy would be in a better position now if more firms had been eliminated and not kept artificially alive" (p280).
It’s difficult to know how industry would have fared under a different government. But according to Dominic Sandbrook, it’s a myth to think Mrs Thatcher destroyed British manufacturing all on her own:
… it had been ailing throughout the 1970s and 1980s, and many firms were probably doomed to collapse, even without the austerity of her first government. If anyone thinks that, had Thatcher fallen under a bus in 1974, Britain today would have booming coal mines, a roaring steel industry and car factories the envy of the world, then they have been reading the wrong history books.
While the Thatcher government is often seen as the paradigm case of neoliberalism, in the early 1980s the economists who were supposed to have inspired Thatcherism were looking to Chile. When Hayek wrote to Mrs Thatcher about the success of General Pinochet’s reforms, she wrote back explaining that while the "progression from Allende’s socialism to the free enterprise capitalist economy of the 1980s is a striking example of economic reform from which we can learn many lessons … I am sure you will agree that, in Britain with our democratic institutions and the need for a high degree of consent, some of the measures adopted in Chile are quite unacceptable. Our reform must be in line with our traditions and our Constitution" (p296).
Compared with her predecessors, Mrs Thatcher might have been a radical. But compared with the British, Australian, Canadian and New Zealand governments of today, many of her policies seem almost middle of the road. Comparing the Thatcher government to today’s governments is a bit like comparing a Triumph Dolomite Sprint to a late model Ford Focus. For enthusiasts, it’s best not to spoil the memory by taking a test drive.