What were the effects of Thatcher's economic policy.
- Created by: Dom.jacques
- Created on: 14-02-18 11:37
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- What were the effects of Thatcher's economic policy?
- Inflation
- Unemployment by 1982 had risen to over 3 million and manufacturing production fell by 14%
- However inflation was reduced to single figures and never rose above 9% in the rest of the 80s
- Unlike previous governments Thatcher was willing to risk higher unemployment in order to reduce inflation.
- Thatcher attempted to reduce inflation through monetarism-> reducing the amount of money in circulation
- Milton Freidman
- Govt. spending was reduced in the 1980 and 81 budgets with controversial cuts to spending on housing and social security
- Unemployment by 1982 had risen to over 3 million and manufacturing production fell by 14%
- Privatisation
- Thatcher was in favour of privatisation as it would cut government expenditure in loss-making industries.
- Another key idea of privatisation was promoting competition and innovation
- One effect of privatisation was the take up of popular capitalism with the amount of shareholders in the UK increasing from 3million in 1979 to 11million in 1990
- Popular Capitalism- The idea that everyone in society should have the opportunity to own property and shares in companies
- However, this could be seen as misleading as many shares were sold for a quick profit, resulting in only 20% of shares being owned by individuals in 1990 compared to 38% in 1975
- State assets were sold off at an undervalued price
- Harold Wilson- "Selling off the family silver"
- Seen by many as a missed opportunity to use national resources to invest in the future
- Thatcher was in favour of privatisation as it would cut government expenditure in loss-making industries.
- Deregulation
- Removal of exchange controls in 1979- meaning people had no limits on how many pounds they could convert into foreign currencies
- This first led to increased foreign investment (this created profits in the UK)
- This also led to an increase in spending on foreign goods which drained wealth from Britain
- This first led to increased foreign investment (this created profits in the UK)
- Thatcher deregulated the financial sector leading to massive growth because of the relaxed laws.
- However this also led to massive increases in personal debt
- private household debt rose from £16bn in 1980 to £47bn in 1989
- This also led to banks using risker strategies to return profits--> This was done in an unsustainable manner in many cases.
- This arguably laid the groundwork for the 2008 crash.
- However this also led to massive increases in personal debt
- Removal of exchange controls in 1979- meaning people had no limits on how many pounds they could convert into foreign currencies
- Reducing the influence of the Trade Unions.
- 1980 TU act meant workers didn't have to join a union when they joined a particular firm
- This helped to reduce TU membership
- TU membership went from 13.5 million in 1979 to under 10 million in 1990
- It could be argued that TU membership reduction was inevitable with the British economy naturally moving away from a manufacturing economy to a service economy
- TU membership went from 13.5 million in 1979 to under 10 million in 1990
- The 1980 Act also meant that strike action could only be taken against their direct employers and not in sympathy with other workers
- along with other acts such as the 1982 Act meaning that TU's could be sued for illegal strikes helped to reduce the number of days lost to strike action in by the end of Thatcher's time in office.
- Num. of working days lost to strike action went from 10.5million in 1980-8 4to 0.8million in 1990-94
- along with other acts such as the 1982 Act meaning that TU's could be sued for illegal strikes helped to reduce the number of days lost to strike action in by the end of Thatcher's time in office.
- This helped to reduce TU membership
- It could be argued that TU membership reduction was inevitable with the British economy naturally moving away from a manufacturing economy to a service economy
- 1980 TU act meant workers didn't have to join a union when they joined a particular firm
- Inflation
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