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What were Margaret Thatcher's economic views?
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Britain – Thatcherism, 1979-90
In this course, Professor Pete Dorey (Cardiff University) explores the impacts of Thatcherism from 1979-90. In the first lecture, we think about Margaret Thatcher’s economic views and their origins. In the second lecture, we think about some of Thatcher’s key policies. In the third lecture, we think about how Thatcher’s governments approached government intervention in economic affairs. Next, we think about how Thatcher managed her cabinet and ministers. In the fifth lecture, we think about how Thatcher managed ministers who did not agree with her policies. In the sixth and final lecture, we think about how Thatcher managed Conservative loyalists.
What were Margaret Thatcher's economic views?
In this lecture, we think about Margaret Thatcher’s economics views, focusing in particular on: (i) Thatcher’s belief that only capitalism could provide economic growth, prosperity and political freedom; (ii) Thatcher’s belief that communism was inefficient and didn’t provide political freedom; (iii) Thatcher’s admiration of those who start their own business, as they generate the wealth for the country; (iv) Thatcher’s view that people are naturally motivated by self-interest and the desire to acquire wealth; (v) Thatcher’s views on individualism and their inspiration from the economist Adam Smith and his book An Inquiry into the Nature and Causes of the Wealth of Nations; (vi) Adam Smith’s baker analogy, which posits that the individual and society can both benefit by an individual making money through the production of goods; (vii) Thatcher’s view that competition empowers the consumer; (viii) Thatcher’s view that competition gives a failing business three options, to lower prices, improve quality or diversify production, all of which empower the consumer; (ix) Thatcher’s belief that equality was neither achievable nor desirable and that equality through socialism was inefficient, as well as impoverishing people and taking away their freedom; (x) Thatcher’s view that people who were poor were often lazy and lacked a good work ethic; (xi) Thatcher’s view that the post-war British welfare state was too generous and rewarded people for being lazy; (xii) Thatcher’s admiration for self-made successes like Richard Branson and Alan Sugar; (xiii) Thatcher’s view that wealth creation and the trickle-down effect of wealth went hand in hand, therefore causing her to tune her economic policies to help the rich stay rich; (xiv) Thatcher’s view that those who advocated for equality, such as socialists, were promoting the politics of envy; (xv) Thatcher’s alignment with Churchill’s quote that the poor don’t get richer by making the rich poorer; (xvi) Thatcher’s humble beginnings as the daughter of a shopkeeper; (xvii) Thatcher’s key economic principles, inspired by her experience working in her father’s shop; (xviii) Thatcher’s economic inspiration from Milton Friedman and Friedrich Hayek.
Hello. I'm Pete Dorey.
00:00:06I'm professor of British politics at Cardiff University,
00:00:08and I'm based in the school of law and politics.
00:00:11And today, I'm going to talk about Margaret Thatcher's economic
00:00:13policies and the beliefs which shape those policies.
00:00:16To understand their policies, we need to understand,
00:00:20first of all, the philosophy which underpinned her beliefs,
00:00:22what she believed in, and why she believed in them.
00:00:26So the first thing to note is for Margaret Thatcher,
00:00:29capitalism was the only system which guaranteed economic
00:00:32growth, prosperity, and political freedom.
00:00:35She was opposed, therefore,
00:00:38to all economies based on state control and certainly opposed
00:00:40to communism, which she believed was inefficient,
00:00:44totalitarian, and did not guarantee liberty or freedom.
00:00:46So for her, therefore,
00:00:51any economic system which was gonna give you prosperity and
00:00:52freedom had to be based on private enterprise and property ownership.
00:00:55And for Margaret Thatcher, her heroes,
00:01:00the people who drove society forward, were business people, entrepreneurs,
00:01:02and people who started their own businesses or were self employed.
00:01:07For her, these were the people who were the engineers of society.
00:01:10They drove society forward.
00:01:14They were dynamic, risk taking, entrepreneurial, and creative,
00:01:16and they should be supported more than anybody else in society.
00:01:20They also created jobs and the wealth that the rest of us rely upon.
00:01:25So again, she argued,
00:01:30these other people should be encouraged and rewarded because
00:01:32the rest of us benefit from these people.
00:01:35Fundamental also to Margaret Thatcher's beliefs was that
00:01:38people are naturally motivated by self interest and the desire
00:01:41to acquire wealth and more material possessions.
00:01:46Effectively, selfishness is a virtue.
00:01:49She argued once in nineteen eighty seven,
00:01:52there is no such thing as society,
00:01:54only individuals and families.
00:01:56So from that point of view, therefore,
00:01:59our philosophy was based very strongly on individualism.
00:02:01You start with the individual and then society logically
00:02:05follows from that.
00:02:08Having said that,
00:02:10the idea of pursuing self interest was not deemed to be
00:02:11incompatible with the wider society.
00:02:16She argued that pursuing self interest actually benefits society.
00:02:18And here, we can see the influence of the philosopher and political
00:02:22economist, Adam Smith.
00:02:26Adam Smith, in his famous book, The Wealth of Nations,
00:02:28back in seventeen seventy six argued,
00:02:31and he gave the example of the baker.
00:02:35And Adam Smith argued the baker doesn't bake bread because he
00:02:37or she is concerned about people going hungry.
00:02:41Adam Smith bakes bread because that's how he or she makes a living.
00:02:44But in making a living and making a profit by selling
00:02:47bread, people who buy the bread don't go hungry.
00:02:50They have food in their stomachs.
00:02:54He or she makes a living.
00:02:55It's a mutually beneficial transaction.
00:02:57And Margaret Thatcher believed very strongly that's how a
00:03:00capitalist society works.
00:03:03Entrepreneurs find a market for their goods or products.
00:03:04People want to buy those goods or products.
00:03:08Everybody is happy.
00:03:10There's no need for the state to get involved in term
00:03:11determining what's produced or at what price.
00:03:14The market will decide itself voluntarily and naturally.
00:03:17She also believed very strongly in the importance of competition.
00:03:22There needs to be competition between producers or companies
00:03:25or entrepreneurs for selling their goods.
00:03:30If you have competition, she argued, then the consumer,
00:03:33you and I, are empowered.
00:03:36We have the freedom to choose where we buy our products from,
00:03:39at what price we're prepared to pay,
00:03:43and which ones we think give the best value.
00:03:45If you have competition, she believes,
00:03:48then a company whose profits are declining,
00:03:50whose sales are declining, has one of three choices.
00:03:53They must either lower their price, make their goods cheaper,
00:03:57or they must improve the quality of their product so
00:04:02people are prepared to pay the price they're asking for, or thirdly,
00:04:05they must diversify and offer something else which is
00:04:09attractive to people.
00:04:12But the important point there is in each of those three
00:04:14cases, the power resides with the consumer, you and I,
00:04:16to make a choice about who we buy from.
00:04:20If we don't like company a or producer a, we can go to
00:04:23company b or company c or company d.
00:04:26We have the power as consumers in the marketplace and that
00:04:29Margaret Thatcher believed is part of the genius of competition.
00:04:33If the state controls everything,
00:04:37if only the state provides you with what you need,
00:04:39you have no choice.
00:04:41You take what you're given,
00:04:42however bad or expensive it might be.
00:04:44So you need competition, therefore.
00:04:46Margaret Thatcher also believed that equality was both
00:04:48unachievable and undesirable.
00:04:53She argued that every society and every ideology, most
00:04:56notably socialism,
00:05:00which pursues equality ends up being inefficient,
00:05:01impoverishing people, and taking away their freedom.
00:05:06For her, the right to be free entails
00:05:09the right to be unequal.
00:05:13So she totally rejected the idea, therefore,
00:05:15of equality and actually encouraged inequality
00:05:17and the widening of the gap between rich and poor.
00:05:20She believed that the people who are rich and hardworking
00:05:23deserve their wealth,
00:05:26and that other people who want to become rich should work
00:05:28harder and emulate them.
00:05:30She also assumed, therefore, logically falling on from that,
00:05:33that people who are poor were often lazy.
00:05:36They lacked a work ethic.
00:05:40And she was very concerned therefore that in post war
00:05:42Britain from nineteen forty five until the mid nineteen
00:05:44seventies, too many people have been rewarded
00:05:47for being lazy and unemployed because the welfare state was too generous.
00:05:51She wanted, therefore,
00:05:55to encourage more individual reliance on your own efforts, harder work,
00:05:56and therefore roll back the welfare state and encourage inequality.
00:06:01We should emulate the rich and be more like them.
00:06:05And her heroes in the nineteen eighties were people like
00:06:08Richard Branson and Alan Sugar,
00:06:12self made millionaires who she believed were the role models
00:06:15we should all follow.
00:06:18To her, these were the heroes of society.
00:06:19She also believed, therefore, again,
00:06:23that wealth would trickle down.
00:06:25This, again, is why she argued we should actually encourage wealth
00:06:27creators to keep more of their wealth,
00:06:30that being rich was a good thing, not just in itself,
00:06:32but also because if people become rich,
00:06:36the money they spend or the money they invest will trickle
00:06:38down from the top to the bottom of society and create
00:06:42prosperity and jobs for everybody else.
00:06:45So for her, therefore,
00:06:48wealth creation and the trickle down effect went hand in hand.
00:06:50She also believed that people who advocate equality, I. E.
00:06:54Socialists, were promoting the politics of envy.
00:06:59They're encouraging a jealous resentment of people who are
00:07:02hardworking and successful.
00:07:06So she denounced, therefore,
00:07:08those who want to create equality and egalitarianism
00:07:09as being promoting the politics of envy.
00:07:13There's an also a conservative phrase,
00:07:15which Margaret Thatcher believed in very strongly,
00:07:18was you won't make the poor richer by making the rich poorer.
00:07:20You'll only make the poor richer by making the rich richer.
00:07:25So, again, therefore, for her,
00:07:29the focus was not on directly tackling poverty,
00:07:30but actually encouraging rich people to become even richer
00:07:33and therefore to provide the role models for everybody else to follow.
00:07:37Her economic ideas were largely shaped by two things.
00:07:41Firstly, her own personal experience growing up.
00:07:47She was, as many people know, the daughter of a shopkeeper in
00:07:50Grantham in Lincolnshire.
00:07:54And after school and on Saturdays,
00:07:56she often helped her father in the shop by serving the
00:07:59customers from behind the counter.
00:08:03And she often argued later in life in her autobiography
00:08:05that many of her fundamental economic beliefs came from her
00:08:08experience of working in her father's corner shop.
00:08:12Perhaps principles is don't borrow money you haven't got.
00:08:16Don't be frivolous with your money. Be careful. Work hard.
00:08:20Save on a regular basis.
00:08:24All those things she argued were both common sense,
00:08:26and they were derived from her own experience of working in
00:08:29her father's shop.
00:08:32But at the same time, she also had an intellectual basis for her ideas.
00:08:34She read the works of economists and philosophers
00:08:39like Adam Smith, who I mentioned before,
00:08:43Friedrich Hayek, and Milton Friedman.
00:08:46And indeed, sometimes in the nineteen seventies,
00:08:49she used to have lunch with Friedrich Hayek.
00:08:51So these people, Adam Smith, Milton Friedman, and Friedrich
00:08:54Hayek were all advocates in their own way of the idea of
00:08:58the limited state, private enterprise, competition,
00:09:02and the free market.
00:09:06And Hayek especially was vehemently
00:09:08anti socialist, anti communist,
00:09:11and Margaret Thatcher learned a lot, she admitted,
00:09:13from Friedrich Hayek.
00:09:16
Cite this Lecture
APA style
Dorey, P. (2024, April 05). Britain – Thatcherism, 1979-90 - What were Margaret Thatcher's economic views? [Video]. MASSOLIT. https://massolit.io/courses/britain-thatcherism-1979-90/how-did-thatcher-manage-her-cabinet
MLA style
Dorey, P. "Britain – Thatcherism, 1979-90 – What were Margaret Thatcher's economic views?." MASSOLIT, uploaded by MASSOLIT, 05 Apr 2024, https://massolit.io/courses/britain-thatcherism-1979-90/how-did-thatcher-manage-her-cabinet