Thatcher's Legacy

As 'The Iron Lady' is laid to rest today, we thought a look back at 'economic' legacy was worthwhile. As Bloomberg's Niraj Shah notes, average U.K. public spending was lower under Margaret Thatcher than under David Cameron while the average quarterly economic growth rate was 0.6 percent compared with 0.1 percent today. However, unemployment averaged 9.5 percent under Thatcher, the highest rate seen during the stewardship of any post-war U.K. leader, despite her stalling of the 1970s downward economic spiral. From the Poll Tax riots to mining-union busting to surviving bombings, commitment to brokering peace with the IRA, and winning the Falklands' War, there were many sides to this lady, and perhaps in death she has some lessons for investors today, "To me, consensus seems to be the process of abandoning all beliefs, principles, values and policies. So it is something in which no one believes and to which no one objects." The longest serving prime minister in 150 years is receiving a ceremonial funeral with full military honors today as her legacy continues to divide the country.

Via Bloomberg Briefs (Niraj Shah @economistniraj),

How she stacked up...

 

Today’s U.K. unemployment data may highlight part of Margaret Thatcher’s legacy. Her labor-market reforms and curbs on trade union rights of two decades ago, which enabled companies to hire and fire more easily in response to economic developments, helped limit the increase in unemployment after the severest recession since the 1920s to 8.4 percent in 2011, compared with 11.9 percent in 1984.

 

Strikes

The number of working days lost through industrial action dropped to 249,000 in 2012 from 29.5 million in 1979 and 1.9 million in 1990. Union membership has almost halved since 1979 to 6.7 million in 2011, according to the Department for Business Innovation & Skills. The drop in strikes may have contributed to an increase in inward foreign investment. FDI inflows tripled to $30.5 billion in 1990 from $10.1 billion in 1980, according to UNCTAD.

Deindustrialization

About 173,000 coal miners lost their jobs under Thatcher, compared with a total workforce reduction of about 300,000 in the 1960s and 1970s. The Department of Energy & Climate Change estimates fewer than 6,000 coal miners remain. The World Bank calculates the contribution from industry, including manufacturing, to U.K. GDP fell to 34 percent in 1990 from 40 percent in 1979. That figure has since dropped to 22 percent. The U.K. remains the sixth-largest manufacturer by output.


Housing

Home-ownership levels are lower than when Thatcher left office in 1990. In the 1980s, the level of home ownership rose to 66 percent from 56.6 percent, peaking at 70.9 percent in 2003. That dropped to 65.3 percent in 2012 as the rising cost of property and a reduction in the availability of credit priced out buyers. House prices tripled between 1979 and 1990 and quadrupled in the next 20 years to an average 251,634 pounds, according to the Department for Communities and Local Government.


Inequality

Institute for Fiscal Studies research shows all income groups grew richer under Thatcher, even as inequality increased. A family in the bottom 10 percent of earners had a 4.6 percent increase in weekly income between 1979 and 1990 after adjusting for inflation. That compares with a 47 percent increase for the top 10 percent. Inequality as measured by the Gini coefficient, which ranges from 0 to 1, increased to 0.34 in 1990, the same as in 2011, from 0.24 in 1979.