The Australian Financial Review
was the first political leader to acknowledge that post-war Britain was not working, to reject a national narrative of inevitable decline and act to change it. She was the first to instinctively sense that Britain’s welfare state and system of state planning constructed after its loss of empire was suffocating the individual enterprise required for national prosperity.
, Mrs Thatcher grabbed the initiative after economist Milton Friedman diagnosed the 1970s stagflationary collapse of the Keynesian consensus in what were then called the industrialised economies.
in Australia, the daughter of thrift rather than privilege had the conviction to stare down the power of the British trade unions while embracing the power of free markets. This provided a template for the Hawke-Keating government reforms of the 1980s that Julia Gillard now treats with indifference. Mrs Thatcher not only changed Britain, she and Mr Reagan stood up to the Cold War Soviet state. She led the international intellectual realignment toward economic liberalisation that even extended to China’s early opening in the same year she was elected to office. And, in so doing, she changed the Labour Party, both in Britain and in Australia.
“Margaret Thatcher didn’t just lead our country – she saved our country," says British Prime Minister
of a predecessor who had been bequeathed a legacy of power blackouts, 22 per cent inflation and the ignominy in 1976 of being bailed out by the International Monetary Fund. The state Mrs Thatcher took over made steel, cars, ships, aircraft and computers; it dug coal, drilled for oil, piped gas, lifted cargo, drove trains, flew planes, generated power, and rang the telephones. It often did so under monopolies, mostly at massive annual losses soaked up by tax payers, and under the inexpert guidance of civil servants and union bosses. Under Mrs Thatcher, these assets were sold and helped to democratise capitalism in Britain. Expanded ownership of shares and homes gave real property – capital – to those who had never owned them. Cutting the standard rate of tax to 25 per cent let citizens decide how to spend more of their own money. Dismissing failed Keynesian fiscal policy, she directed monetary policy to tame inflation and cleared away supply side blockages like as rigid labour rules and restrictions on capital flows. The benefits remain now.
Mrs Thatcher made business respectable again. In the 1970s, clever graduates headed for the civil service. By the mid-1980s, they were flocking to the private sector. She changed the outlook of a nation used to losing, backing navy admirals over Defence boffins who said the Falkland Islands could not be recaptured from Argentina. When British Chancellor of the Exchequer
today sticks to austerity, he echoes Mrs Thatcher’s dismissal of the landmark protest letter sent by 365 economists to The Times ahead of her key budget of 1981.
Mrs Thatcher said “there is no such thing as society. There are individual men and women, and there are families". Critics damned it as the ultimate expression of a selfish Tory view of the world. But she meant that society was not an abstraction that could shield people from taking responsibility for themselves, or to take the blame for bad behaviour.
The paradox was that for all her economic individualism, Mrs Thatcher thought people would act as social conservatives, with the same virtues of thrift and prudence as her own . She did not foresee how economic freedom would turn into Britain’s pre-2007 consumer borrowing binge and the excesses of the City. Mrs Thatcher’s reputation as an axer was worse than the reality. Health and education spending rose faster than inflation and universal welfare benefits were not scrapped. When she did turn on these citadels, the public had become wary and it was the beginning of the end.