Thatcher’s Legacy: Myth and Reality

Adrian Pabst, Lecturer in Politics at the University of Kent, UK, Visiting Professor at the Institut d’Etudes Politiques de Lille (Sciences Po) and at IBS Moscow

Dr Adrian Pabst, Senior Lecturer in Politics, School of Politics and IR, University of Kent; Visiting Professor, Institut d'Etudes Politiques de Lille (Sciences Po), specially for

The death of the former British Prime Minister Margaret Thatcher on 8th April 2013 has once again brought into sharp focus her legacy and its implications for the UK, the rest of the West as well as the wider world. There can be little doubt that her premiership had a profound impact both during her nearly 12 years in office (May 1979 – November 1990) and for decades thereafter. Arguably most politicians across Western countries and beyond since the 1990s have been in some important sense Thatcher’s children.

She was a conviction – not a consensus – politician who believed in the power of ideas and the importance of ideological tradition nationally as well as globally. No wonder that Thatcherism is synonymous with the neo-liberal age which is still upon us.

But rather than signifying conservative market fundamentalism and Christian realism, Thatcherism marked the fusion of the unbridled free market with the centralised authoritarian state. As a liberal moderniser, she proceeded with the secular destruction of a Christian settlement in Britain and arguably at the international level too.

1. Thatcher’s mythology

Unsurprisingly for a controversial figure of her stature, the debate about the meaning of Thatcherism and its influence has always been acrimonious and at times even violent. The political right idolises her as some kind of saviour. With religious zeal, she supposedly rescued Britain and the rest of the West from defeatist decline and also stood up to the forces of collectivism and Communist oppression. By contrast, the political left demonises her as a witch who destroyed the state, ushered in the age of global finance and inaugurated neo-conservative militarism – with no compunction about the human suffering as a result of mass unemployment, poverty and inequality.

This debate is couched in quasi-Manichean terms of good versus evil – a moralism which Thatcher’s particular brand of Christianity wholly embraced (as I will suggest below). As such, Thatcherite conservatives indict progressives on grounds of moral relativism, while the latter accuse the former of moral self-righteousness. Both are right about each other but wrong about the Iron Lady.

She may have had a clear sense of her own moral compass and political purpose but the reality of Thatcherism is nonetheless a series of carefully crafted myths that underpin all the eulogies. The first myth is that she saved Britain’s economy and forged a new economic paradigm to which “there is no alternative” (in her own words). The second myth concerned her promotion of a global ‘free market’ by “rolling back the frontiers of the state” (again in her own words).

The third myth is that she championed a new brand of conservatism that cherishes tradition and continuity as well as upholds a moral vision grounded in Victorian values which resonates with fellow Christians and other religious or ethical traditions. The fourth myth relates to her defence of patriotism and British sovereignty, which were linked to the universal principles of national self-determination and non-interference within the international system of sovereign nation-states.

2. ‘There is no alternative’ to free market fundamentalism

Undoubtedly the 1970s when Thatcher emerged as the dominant political figure in Britain and the rest of the West were a time of economic crisis and political disarray. The end of the post-war boom and the oil shocks of 1973 and 1978/9 had a profound impact on the global economy and the hitherto prevailing Keynesian consensus. This, coupled with the end of the Bretton Woods system of capital controls and fixed exchange rates, plunged the Western world into a protracted period of financial turmoil, galloping inflation and endless strikes. There was no doubt that a new socio-economic model was needed.

However, the idea that Thatcher rescued the British and Western economies is fanciful. The monetarism she adopted may have curbed inflation and created the conditions for more global trade, but this came at an economically and socially unacceptable price: permanent de-industrialisation, mass unemployment and the creation of a new social underclass who are permanently locked into welfare dependency.

Indeed, unemployment is path-dependent and does not return to previous levels even after a recession ends and an economic recovery gather pace. This, coupled with a low-wage economy and a poor productivity performance, has left Britain with kind of precariousness that is economically inefficient and socially destructive. As a result, deficits and debt have been structurally higher ever since, and the loss of human and social capital represents a permanent stain on the nation’s fabric.

Moreover, soaring interests and the policy of the strong Pound Sterling wiped out large swathes of industry and manufacturing on which vibrant economies like Germany and Northern Italy depend. Thatcher’s successive governments did little to channel investment into the newly de-industrialised Midlands and northern parts of England – not to mention Scotland and Wales whose native populations resented her centralism and ‘Little Englander’ mentality.

Instead of embracing an ambitious industrial policy to develop the regions (recommended by her erstwhile rival Michael Heseltine), she banked on the housing market, the service sector and above all the City of London to revive the economy. The right to buy hitherto state-owned council houses did much to transfer wealth from the public to the private sector. But the lack of building a proper stock of new homes led to a housing bubble that has greatly enriched the property-owning middle and upper classes while shutting new buyers out of the market. Linked to this is the unprecedented rise in asset – not just income – inequality, with levels not seen since late 19th-century laissez-faire and the 1929-32 Great Depression.

3. Turning London into the capital city of global finance

Crucially, her economic reforms laid the foundations for the rise to power of global finance. Deregulation and liberalisation involved the so-called 1986 ‘Big Bang’ when numerous banks ceased to be partnerships or mutuals and were turned into private limited companies (plcs) listed on the stock exchange – thereby raising global capital and trading worldwide.

Legislative and regulatory change favoured this new corporate model at the expense of reciprocal arrangements across a whole host of sectors. That included credit unions, community banks, housing associations, consumer cooperatives as well as mutuals in the insurance and social security sectors.

These changes did not simply reduce the organisational variety within banking and finance but also unleashed a wave of mergers and acquisitions that loaded unprecedented debt onto plcs. At the same time, the conversion of mutuals and partnerships into plcs brought similarly unprecedented wealth to senior executives through the creative use of share options. The conversion and floatation on stock-markets enabled the goodwill of these former mutuals and partnerships to be monetised mostly for the benefit of the top management and institutional shareholders as well as investment bankers and lawyers who charge astronomical fees.

Key to the mutual models was risk- and profit-sharing that restrained careless lending and reckless risk-taking. By contrast, plcs encouraged huge leveraging and divorced risk-taking and profit-making from the individual responsibility of the board of directs and senior managers. Thus, Thatcher’s reforms undermined the very responsibility she purported to defend.

The structure of mutuals that had dominated banking and finance allowed institutions to nurture and grow relationships of trust with their customers. By contrast, the newly demutualised banks assumed more risk which they either did not fully understand or could not effectively control. Short-term goals such as quarterly earning reports and annual profits replaced long-term strategy and investment. Speculative transactions took priority over relationships of trust.

The system that Thatcher helped create privileged short-term financial transactions at the expense of long-term saving and investment, with many mutuals and cooperatives (such as workers’ credit unions and building societies) taken over by retail and investment banks. Over time this led to a cartels of banking behemoths ‘too big to fail’ and run by some semi-criminal bankers seemingly too powerful to jail.

Neither Mrs Thatcher nor her fellow cabinet members or advisers foresaw the dangers in fuelling an inherently volatile and fragile financial sector as a engine of growth. Nor were they worried about the increasingly amoral and immoral practices in banking and finance that started well before the 1990s and 2000s. Rather, they tacitly encouraged the 1980s ‘yuppy’ culture that divorced profit-making from doing good or virtuous behaviour.

Thatcher may have hoped for Victorian values of philanthropy but the economic thinking of Hayek and Friedman which she drew inspiration from fused market individualism with a centralised state that aggressively promotes finance with the use of tax and regulatory incentives. All this contributed to the neo-liberal paradigm whose failure is now clear for everyone to see.

4. The authoritarian market-state

And there was nothing inevitable or desirable about this political-economic model. The annual growth in the 1980s was not permanently higher than in countries such as West Germany or (Northern) Italy, and the lack of strategic investment in high-tech manufacturing and industry created a long-term dependency on services (especially) finance that has entrenched a lop-sided economy in dire need of diversification – based on true skills, R&D and innovation that all require proper cooperation between state and market.

Instead of solidarist solutions and a cooperative framework, Thatcher centralised power and fused bureaucracy with managerialism to produce an authoritarian market-state that rules more by subjecting more economic sectors and spheres of life to central control – except finance. Little wonder that the actual weight of the state in the economy barely fell during her reign.

Public monopolies became private cartels, and an inefficient system with the vested interests of union bosses was replaced by an unproductive rentier economy that benefits the new financial oligarchy.

Fundamentally, Thatcher’s mindless modernisation undermined and destroyed a civic tradition that rests on notions of individual virtue and the honour of public service – including  local government, independent universities, the higher civil service, the Bar, the honour code of the House of Lords or the judiciary and even the autonomy of the monarchy. She despised the public service ethos on which these and other institutions such as the BBC or the Army are based. In its place, she advanced notions of narrow self-interest at once promoted and policed by central government.

The trade unions needed reform, as their bosses behaved like a parallel government that ignored the needs of union members and those of the nation. But Thatcher’s war on the striking miners was in the end an attack on the self-organisation of workers and thus the principle of human association. In this and so many other areas, she acted much more like a secular liberal than a conservative Christian.

5. Thatcher’s secular liberalism

Though she was a devout believer, Thatcher’s particular brand of Christianity was almost entirely compatible with the secular liberalism that underpinned her economic and political ideas. Indeed, commentators such as David Brooks in the New York Times are quite wrong to ascribe ‘vigorous virtues’ to her ideology. Hers was a set of abstract, general values centred on the individual, without the relational dimension of community or society and the reciprocal respect for the dignity of each person – including political foes.

Thatcher’s sense of ‘doing the right thing’ represented a form of moral self-righteousness that is at once more secular and more fundamentalist than the ‘mediated middle’ of creedal Christianity with its emphasis on forgiveness, redemption and the exercise of virtue – not a set of abstract, moralising rules and vacuous values. By speaking the language of good versus evil, Thatcherism effectively subordinated the Christian faith to the pursuit of power and wealth – a secular perversion that inverts the primacy of the supernatural Good in God over human sinfulness.

The Iron Lady may have preached thrift, hard work and individual responsibility. But she fused market individualism with central state power – clothed in the garb of a narrow moralism which is a parody of the Judeo-Christian tradition. The theologian John Milbank puts this well:

she famously championed a claustrophobic suburban austerity derived directly from the narrow moralism and thin Christology of her father, Alderman Alfred Roberts. His desiccated Methodism had little to do with the more authentic Methodism which, from John Wesley’s High Toryism through to the primitive Methodist trade unionists, always wedded pietism to social justice in the name of the Kingdom of Christ. Apart from that tenuous religious thread, Thatcher was a coiffured nihilist with no culture or imagination and a very restricted intellect.

Internationally, she weakened a number of institutions with clear Christian foundations and even a Christian outlook – including the UN, the then European Economic Community (later the EC and the EU) and the Conference on Security and Cooperation in Europe (later the OSCE). Though increasingly secularised since the 1960s, these and other institutions preserved the Christian emphasis on an international society of peoples and nations bound together by ties of mutual obligation as well as  cultural connections – not simply a system of states and markets that combine natural anarchy with an artificial human order based on secular power.

6. Patriotism, sovereignty and intervention

Thatcher’s preference for narrow moralism over Christian realism does much to invalidate wild claims about her putative foreign policy achievements. She is probably best remembered for her audacious bid to reclaim the Falkland Islands, the ‘special relationship’ with President Ronald Reagan in opposition to Communism and her increasingly vocal euro-scepticism.

Only the Falklands represents a true achievement in the sense of rebuffing Argentina’s dreadful dictatorship and indirectly promoting a peaceful transition to democracy in one of Latin America’s most important countries. It also symbolised her patriotic refusal to countenance British decline worldwide.

However, her defence of national sovereignty and British interests vis-?-vis the EU stands in stark contrast to her subservience vis-?-vis the United States. More than any other UK Prime Ministers before her, she refused to acknowledge just how often since 1945 the United States had sought to undermine Britain as an independent global power, especially over Suez crisis. The ‘special relationship’ was less a force multiplier for UK influence and more an instrument for US unilateral power. Little wonder that the Reagan administration was initially ambivalent about the Falklands.

In the end, Thatcher only had marginally more influence on Ronald Reagan and George Bush Sr than Blair would later have on Bill Clinton and George W. Bush. Far from being an independent power in her own right, Britain became increasingly seen as an extension of US hegemony, which Thatcher mistook as compatible with British principles.

Her blindness was partly the result of ignoring the history of Anglo-American relations since Suez. It was also partly a consequence of her misguided view that the mark of Anglo-Saxon culture is an extreme individualism which elevates negative liberty over above any sense of reciprocal rights and mutual obligation – a conception that betrays the British sense of goodness, justice and fair play (and cognate notions in continental European traditions).

Connected with this is her neglect of Britain’s socio-cultural and economic-political ties with the countries of the Commonwealth and continental Europe. Instead of forging a strong sense of shared history and destiny, she increasingly viewed them as mere trading partners – ‘commerce without benevolence or sympathy’, to adapt a sentence from Adam Smith who shaped Thatcher’s thinking as much as Hayek or Friedman.

As such, she perpetuated Churchill’s mistake of failing to link Britain and its commonwealth partners to all the European powers and their former colonies – a global European commonwealth that would over time include the sovereign countries of Central and Eastern Europe and a newly independent Russia.

She did fight for the liberation from Communism and for the triumph of freedom over oppression. But leaving aside dubious choices (such as supporting General Pinochet and apartheid South Africa), she was also unprincipled. For she purported to defend the principles of self-determination and non-interference (in relation to the Soviet joke) while in reality she advocated selective international intervention.

For example, after her resignation, she called on her successor John Major and the then US President George Bush Sr to use military force against Belgrade and the Bosnian Serbs – in the name of the perpetual struggle of good versus evil that Blair, Clinton and Bush would escalate a decade later in Kosovo and Iraq. Like neo-liberal globalisation, the roots of neo-conservatism militarism go back to Thatcher.

As such, Thatcher’s perverted Christian moralism underpins both her fusion of market individualism with authoritarian state power and her secular liberalism that undermined the Christian outlook of Britain’s post-war settlement and the international system.