Thatcher did not see these failings and in the early years of her reign adopted monetarism with gusto. Friedman was overjoyed for this was the first time his academic theories had been fully tested in a real live laboratory (here the laboratory was the British economy). There was an enormous squeeze put on the amount of money in circulation in an effort to keep inflation down which at the time had overtaken the high rate she had inherited. Three things resulted. Firstly the pound took off on the exchange markets (although this was also partly due to the knowledge that the pound was about to become a petro-currency) and secondly, as a result, exporters could not compete as imports flooded in. Thirdly the squeeze on money and government expenditure cut off markets that businesses had formerly depended on. Unemployment took off and the economy tanked.
At this
point this conviction politician who was "not for turning" dropped monetarism
like a hot brick and continued with the uncontaminated Neo-Liberalism. This
left Friedman in the same position as the libertarians complaining that
monetarism had not been applied long enough and fully enough. British industry
has never recovered from Thatcher's monetarist experiment.
3. Exploitation of the Prime Ministerial Power
Lord Hailsham famously said in 1978 that the office of British Prime Minister was an "elective dictatorship". He was speaking as a constitutionalist not as an historian, saying what could happen not what actually happened. He was pointing out that if someone once elected as Prime Minister wanted to fully exploit the powers of the office there was virtually nothing in the constitution to constrain them. This weakness had not mattered so much until then for prime ministers generally saw their role as obeying some kind of recognized consensus. They certainly expected to take their cabinet with them and they had a regard for British traditions and ways of doing things. Obviously, changes happened all the time, but the British way was to evolution more than revolution, taking as many people as possible with you.
In this world ideologies were not welcome. Whatever you may think of Keynes, the predominant economic influence before Thatcher, he was no ideologist. He was interested in making the present system work largely by pragmatic measures and he had a proven track record in predicting problems ahead. Prime Minister Jim Callaghan had in 1978 announced that we would have to move away from Keynes but did not see that the answer lay in ideologies of the Austrian or Chicago varieties. He had a very strong and experienced team around him who were confronting the countries undoubted problems and they were working through them and would have continued to do so if they had stayed in power. They were still living in the pragmatic consensus-driven political world which meant that Hailsham's astute observation remained largely academic.
We will never know whether Margaret Thatcher had heard Hailsham's verdict on the Prime Ministerial power but she certainly understood the truth of exactly what he had said -- however she came by it. For directly on her arrival at No 10, she began to exploit the office as an "elective" dictator. "Dictator" is a strong word and we can argue about whether Hailsham chose well, but whatever word you use the fact is Thatcher as prime minister dictated to others more powerfully than any before her. In this lies her reputation as a conviction politician. She did not need to listen to those around her. She could ignore the advice of long-standing civil servants, jettison colleagues who were off-message, and rely on unproven doctrines by academic theoreticians for wholesale policy initiatives.
Following on from Thatcher, once the cat was out of the bag on the constitutional power of the prime ministerial office, there was no going back. All the Prime Ministers that followed her have treated the office as she did. In this way, Thatcher completely changed the political culture of Britain. Following her style, Prime Minister Major forced through an unpopular rail privatization, a disastrous decision to join the European Money Union, and a squandering of taxpayers' money in the attempt to defend that decision -- while George Soros notoriously was handed billions of pounds of tax payers' money. Major never apologized the British people for this. It is hardly necessary to remind anyone of the dictatorial arrogant styles adopted by the subsequent PMs, Blair, Brown and Cameron.
Thatcher was the prime minister who found out the constitution and exploited it to impose her extreme policies on us and, as I have argued before, this constitutional weakness can only be corrected with a republican constitution embodying a separation of powers.
4. Privatization
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