Thatchers Economic Policies Flashcards
(9 cards)
What is the background to Thatchers policies ?
- since 1945, parties had adopted a consensus attitude of Keynesian economics keeping Gov spending low
- also included controlling price and wages and negotiations with the unions
- view became challenged by right wing economists such as Kieth Joseph
What challenges did Thatcher face when coming into office ?
- Retail prices had doubled between 73-79 so Thatcher convinced she needed to conquer inflation (aim and challenge) eroded middle class savings and led to strikes for increased wage
- lack of investment, modernisation and economic stagnation
- costly and unprofitable publicly owned industries and services
- a lack of incentive to modernise and increase productivity
Thatcher believed the state sector had grown to much at the expense of private business and enterprise, Thatcher believed the market must decide prices and reduced inflation was more pushing than increased unemployment
Who was Sir Kieth Joseph ?
- Con economist and theorist
- rejected paid war tendency to increase government intervention and wanted the market to determine its prices and wages
- this mean deflation and unemployment in the short term
‘Short term pain long term gain’
What were the conservative governments taxation policies during this period ?
June 1979 COE Sir Geoffrey Howe shifted tax burden from direct to indirect
- The VAT increase did however increase retail prices and goods prices
Howe then turned to deflation
- cutting government spending, reducing government borrowing and increasing tax
- described the budget as the most ‘unpopular in history’
What were Howes policies and economic problems ?
Positive impact on inflation but did cause downturn
- rate at prices rose reduced from 18% in 1980 to 4.5% by 1983
- manufacturing output fell by 14% some businesses went bust
- unemployment double to over 3 million by 1983
- Government no longer supported ‘lame duck’ industry
What happens to the value of the pound ?
The Thatcherite approach increased confidence abroad and the price of the pound rose
- boosted the financial sector
What was the impact ?
Social cost
- April 1981 Brixton riots in south london places of high unemployment, poverty and racial tension
- also occurred in six other major cities
Britians growth rate began to show upturn by 1982
- weaker businesses failed but stronger ones thrived
- wage demands and inflation fell and Britian became more competitive
Government spending
- rose by 13% from 1979 to 1990 but real spending as a percentage decreased
How did Thatcher implement privatisation ?
Began in October 1979 with the sales of British Petroleum
- Gov then accelerated the sales of state owned enterprise into private hands after 1983
- ‘fundamental to improving British economic performance’ Thatcher
- maintained industries that were inefficient and over manned
- argued that the sell off would raise revenue with which to cut tax and boost investment and enterprise
