MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY ＮＧＵＹＥＮ ＤＵＹ Economics, Economics Teikyo University MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY Brief Introduction of Ms Margaret Thatcher Margaret Thatcher (1925-2013) called Iron Lady of British government is the first prime minister woman of Britain who won elections for periods of year in power lasting from May 1979 to November 1990 (Gregory, 2013) The starting point for her career in the government should be mentioned about her very first position of the president of Conservative Association in Somerville College in 1946 After two times failed to have a seat of Dartford due to being a Tory, she has passed the Bar exam and became a member of parliament by getting a seat of Finchley in 1959 (Cameron & Rogaly, 2013) After all, in 1979, she represented for Conservative party had won the election to become the British prime minister To that extent, this essay tends to have a disclosure to her contributions towards the British economy during her three elections to help UK to overcome their difficulties of the recessions and financial crisis The British economy before the election of Ms Margaret Thatcher The very initial cause of British bad years was raised as the start of the policy problem after the World War II in the years of 1950s-1960s It occurred to affect both internal and external business environment (Oliver & Pemberton, 2006) Following that, the application of Keynesian demand management approach not only played an inefficient role in monitoring the Britain economy but also facilitated the decline of it The demand management policy is a method to take control economic factors by impacting on interest rate, tax and public expense to expect the changes in key economic indicators such as consumption, investment, trade balance, etc Nevertheless, in that point of time, it worsened the business cycle by being costly in data collection timely and inappropriate forecasts Its consequences were high inflation and the greater gap between wages and productivity (Oliver & Pemberton, 2006) Regarding to the external market, the surplus of short-term liabilities compared to short-term assets created illiquidity Moreover, under the impact of demand management, foreign exchange rate which is not allowed to float had no contribution on automatically modified the significant gaps of balance of payments and short-term capital flows at that time, hence, impacting on import and export Simultaneously, going along with the investment of long-term rather than short-term assets, the low level of reserves incurred financial problem of trade balance between import and export (Oliver & Pemberton, 2006) Since the 1970s, the Britain has named as “the sick man of Europe” due to its worst recession of the economy (The Guardian, 2013) In the period of 1973-1976 called the stagflation MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY of the Britain, it experienced the increase in unemployment rate, inflation, tax rate and high annual living expenses in addition with the pump of oil price (Elliot, 2012 and Hlína, 1998) The tax rates were 83% and 98% of employment incomes and unemployment ones respectively before the year of 1979 (Hlína, 1998) At the same time, the last indicator of annual living expenditures had reached the peak of 26% in 1975 (Elliot, 2012) To worsen the situation, a lot of strikes from the council mineworkers known as the winter of discontent in 1970 had raised accompanying with the worthless efforts of the Edward Heath’s government to renovate the bad scene (Sandbrook, 2010) The policies enacted during the election and their impacts on the British economy One of the most popular policies that Ms Margaret Thatcher had brought during her power is the Thatcherism which is known as promoting free-trade and reducing the controlling power of state on economy There are five dimensions that Thatcherism had targeted to including of weakening the impacts of labor unions, financial deregulation, privatization, and selfdetermination as the human rights (The Guardian, 2013 and White, 2013) Her policies are still re-applied in other countries around the world Initially, by observing the problem of union’s strikes in October 1970, Ms Thatcher had done a lot of efforts to diminishing the influence of mineworkers union It was indicated by changing in regulations to restrict some of the industrial actions especially manufacturing businesses and controlled high unemployment rate which in turn, reducing the bargaining power of the union (Coman, 2013) Those altered regulations can be named as The Employment Act 1980, The Employment Act 1982, The Trade Unit Act 1984, The Employment Act 1988 and The Employment Act 1990 (Hlína, 1998) Besides, to prevent the congestion of other businesses due to lacking of employees to move the coals from the mines to the power station, she had utilized the army to replace those positions to ensure the energy enough for production and household living (Travis, 2013) In 1980, half of the employees had left the union since the year of 1979 (Coman, 2013) After counter-attack the labor union, the application of monetarism which focuses on the flow of money to affect inflation rate helped the government of Ms Thatcher to improve inflation ratio from 10.7% in 1979 to 4.6% in 1983 (Crump, 2013) Following, the second role of Thatcherism contributing to the British economy is about financial deregulation, especially in the banking sector in 1980s It is believed that such a policy is enacted due to the financial crisis was lasting since the end of the year 1979 until that point of MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY time (Booth, 2015) The year of 1986 is known as the milestone year of the Big Bang event in the financial sector of Britain by which the City of London as the London’s main exchange to be deregulated The main altered elements of the Big Bang event are including of eliminating fixed commission on trades, easing the rule that brokers and jobbers must be different persons, and permit foreigners to have local brokers for themselves (Robertson, 2016) To explain, in the past, UK regulation implied on the stock exchange market restrict that the brokers as the people giving advising services to customers and the jobbers as the people to actually the trade at the trade floor must be distinguished (Robertson, 2016) The contribution of that event was to attract the foreign investments to flow into the country, consolidating the role of banks in financing business by which helping to revive British economy (Minford, 2013) This had made UK to become the biggest financial center in the world in addition to the privatization encouraging competition helped to attract more investments for Britain at that point of time (Minford, 2013) Within the purpose to reduce the burden for public debt in the recession period of 19801981, privatization was the approach that Ms Thatcher decided to use (Groom & Sylvia, 2011) The highlighted actions are privatization of Rolls Royce and British Gas from state-owned companies (Crump, 2013) The effect was, in the percentage of gross domestic product (GDP), the public debt had declined from 43.6% in 1976 to 26.7% in 1990 (McSmith, 2013) It is stated that such a policy raised the revenues earned for the businesses by which reducing the public debts to support for their operations (Seymour, 2012) Furthermore, promoting competition by limit the control of State on doing businesses also benefited for the consumption as well as the economic market (Groom & Sylvia, 2011) Besides, increase in pay wages as a result of privatization is expected to monitor inflation rate (Seymour, 2012) and increase customers’ wealth Last but not least, allowing privatization also gave supports for the flow in the stock exchange market because corporations had the rights to issue shares and stocks to trade (Groom & Sylvia, 2011) The other highlighted point in the year in power of Ms Thatcher is the promotion of civil rights In details, the Fifth and Six Amendment enacted to protect the human rights of people in the crime scenes The first Amendment does not allow the court to have subjectively negative point of view against the defendants who choose to keep silence or protect themselves whereas the second Amendment require ''a speedy and public trial, by an impartial jury'' (Whitney, 1988) MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY At the same time, the First Amendment respects the freedom of speech and press against the controlling power of the Parliament (Whitney, 1988) Besides those legacies, The Housing Act 1980 and 1988 are recognized as her major acts by the record of UK government (UK Government, n.d) The 1980 Acts allowed people to buy and have ownership rights of the public housing Eight years later, the amended version as The Housing Act 1988 gave a plentiful discount for tenants purchasing council homes (Gulliver, 2013) They were stated to expand the housing sector and market, reduce the burden of social welfare as well as to support for the policy of decentralized the power of Central (Gulliver, 2013) Nevertheless, there is some argument that those regulations leading to another consequence of homelessness due to lack of council to supply for buyers after the prior accommodations had been sold (Mc Smith, 2013) Furthermore, new legislation to ease mortgage lending was also a contributing factor to the increase in housing price in UK due to the fact that housing loan was easily to get than before (Mc Smith, 2013) Lastly, tax reform was another movement of Thatcher’s government in order to heal the wound of poverty and to raise employees’ incentives to work (Hlína, 1998) Following this, at the mid of 1979, employment income tax reduced from 83% to 60% Simultaneously, the valueadded tax (VAT) of necessities for living such as food kept at 0% Moreover, to be carefully prepare for the escalation in money supply as well as to recoup the public budget due to tax reduction, an increasing adjustment in VAT for other kinds of goods and services to be 15% comparing to the range of 8%-12.5% like before In corporation aspect, corporate income tax (CIT) had fallen from 52% in 1979 to 35% in 1990 which was remarked as the lowest CIT at that point of time among other countries such as France, Germany, Italy, Japan and USA (Cook et al, 1995 as cited in Hlína, 1998) By doing this, unemployment rate also affected in a positive way It also led to inequality in income earned which is considered as a supporting factor to working motivation In conclusion, for the years before Ms Margaret Thatcher’s election, the UK economy had experienced both recession and financial crisis as results from The Great Depression of 1930s Their evidences were proved as high inflation and unemployment rate, greater pay wages comparing to the supply, deficit of current account due to the overcome of short-term liabilities against short-term assets, the negative impacts on trade balance between import and export as the consequence of controlled foreign exchange rate under the demand management approach of the MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY government and the low level of reserves and inappropriate focusing on investing long-term assets Furthermore, the raise of labor union led to a lot of strikes with the peak was the winter of discontent in 1970 Inherited those issues from her predecessors, Ms Margaret Thatcher called the Iron Lady of the UK government had issued and enacted a lot of policies and regulations to help altering the worst situation and reviving the British economy during her three elections Those legacies comprising of breaking down labor union’s power, financial deregulation, privatization and the emphasis of human rights known as parts of the Thatcherism Finally, in the historical record of the UK government has pinned that her issues of Housing Act 1980 and 1988 can also be considered as her major impacts on the UK economy though those acts are blamed to increase the homelessness in UK In turn of the amendment of mortgage loan to be eased it, the increase in UK housing market is believed as a result of such a legacy issued by Ms Thatcher during her years in power Along with those changes, tax reform was a necessary and important policy at that point of time to recover UK economy by reducing poverty and unemployment rate thanks to its effects on creating income inequality and boosting employment incentives for both individuals and corporations MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY References Booth, P (2015) Thatcher: the Myth of Deregulation Institute of Economic Affairs Retrieved from https://iea.org.uk/publications/research/thatcher-the-myth-of-deregulation Cameron, S & Rogaly, J (2013) Margaret Thatcher: ‘Iron Lady’ who remade Britain Financial Times Retrieved from https://www.ft.com/content/f76c049e-a042-11e2-a6e100144feabdc0 Coman, J (2013) Margaret Thatcher: 20 ways that she changed Britain The Guardian Retrieved from https://www.theguardian.com/politics/2013/apr/14/margaret-thatcher-20changes-britain Crump, R (2013) Britain’s economy transformed under Thatcher Financial Director Retrieved from https://www.financialdirector.co.uk/2013/04/11/britains-economy-transformedunder-thatcher/ Elliott, L (2012) British recessions: a short history The Guardian Retrieved from https://www.theguardian.com/business/2012/dec/07/britain-recessions-history Gregory, J (2013) Margaret Thatcher, ‘Iron Lady’ Who Set Britain on New Course, Dies at 87 The New York Times Retrieved from https://www.nytimes.com/2013/04/09/world/europe/former-prime-minister-margaretthatcher-of-britain-has-died.html Gulliver, K (2013) Thatcher's legacy: her role in today's housing crisis The Guardian Retrieved from https://www.theguardian.com/housing-network/2013/apr/17/margaretthatcher-legacy-housing-crisis Hlína, P (1998) Thatcherism and its long-term consequences Faculty of Social Sciences, Charles University Prague, France McSmith, A (2013) Did Margaret Thatcher really 'save' Britain? Independent Retrieved from https://www.independent.co.uk/news/uk/politics/did-margaret-thatcher-really-save-britain8566596.html Minford, P (2013) City’s 'Big Bang’ helped boost UK’s economy The Telegraph Retrieved from https://www.telegraph.co.uk/finance/economics/9992027/Margaret-Thatcher-CitysBig-Bang-helped-boost-UKs-economy.html MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY Oliver, M & Pemberton, H (2006) UK economic policy in the 1960s and 1970s and the challenge to learning Retrieved from http://www.helsinki.fi/iehc2006/papers1/Oliver19.pdf Sandbrook, D (2010) Britain in the 1970s: Worst of times, best of times The Economist Retrieved from https://www.economist.com/node/17090761 Seymour, R (2012) A short history of privatisation in the UK: 1979-2012 The Guardian Retrieved from https://www.theguardian.com/commentisfree/2012/mar/29/short-historyof-privatisation The Guardian (2013) Margaret Thatcher: her impact and legacy in global development Retrieved from https://www.theguardian.com/global-development/povertymatters/2013/apr/16/margaret-thatcher-impact-legacy-development The Guardian (2013) What did Margaret Thatcher for Britain? Panel verdict Retrieved from https://www.theguardian.com/commentisfree/2013/apr/08/what-did-margaret-thatcher-dobritain Travis, A (2013) National archives: Margaret Thatcher wanted to crush power of trade unions The Guardian Retrieved from https://www.theguardian.com/uknews/2013/aug/01/margaret-thatcher-trade-union-reform-national-archives UK Government (n.d) Past Prime Ministers: Baroness Margaret Thatcher Retrieved from https://www.gov.uk/government/history/past-prime-ministers/margaret-thatcher White, M (2013) What is Thatcherism? The Guardian Retrieved from https://www.theguardian.com/politics/2013/apr/08/what-is-thatcherism-margaret-thatcher Whitney, C (1988) THE WORLD; The Appeal of a British Bill of Rights The New York Times Retrieved from https://www.nytimes.com/1988/12/11/weekinreview/the-world-the-appealof-a-british-bill-of-rights.html .. .MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY Brief Introduction of Ms Margaret Thatcher Margaret Thatcher (1925-2013) called Iron Lady of British government is the first... foreign exchange rate under the demand management approach of the MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY government and the low level of reserves and inappropriate focusing... enacted due to the financial crisis was lasting since the end of the year 1979 until that point of MARGARET THATCHER AND HER CONTRIBUTIONS TO THE BRITISH ECONOMY time (Booth, 2015) The year of