COMMENTARY

Margaret Thatcher (1925-2013)

A V Rajwade

Thatchers impact on Britain can still be felt. A leader with clear, if divisive, convictions, her rule has transformed Britain. Ironically, for someone who ruled with such imperialist nostalgia, her policies have led to the economic and political eclipse of British power.

n Sanskrit, it is said that maranantani vairani. In Latin, the same thought is expressed somewhat differently: nil nisi bonum, one should not speak ill of the dead. Much of the media commentary after Margaret Thatchers death in April has obviously ignored these dicta. And, no wonder. She was a divisive personality, a politician of conviction, not consensus, and sometimes with extreme views. I recall having read that the British empire was bigger, and far more peaceful, than the French or other empires, because much of the ruling class had Oxbridge backgrounds, and the most taught philosopher in these universities was Aristotle, famous for his doctrine of moderation as the only virtue and extremism as the only vice. One point on which both her followers and her critics would agree is that she cannot be accused of practising the Aristotelian virtue of moderation. Until she came to power in 1979, there was very little difference in policies followed by the two major parties, Labour and Conservative, when in power. One of the cornerstones of these policies was that governance required a dialogue with the British trade unions. The result was that the unions, or at least their leadership, increasingly had become the dominant minority. In the 1970s when I was employed in the United Kingdom (UK), Labour was not working had become a popular catchphrase, the rst word in the quote referring both to the Labour party and the working class. I still recall how difcult it was to get a British Telecom (a public sector company) operator on the line for putting a call through to India. There were umpteen strikes, uncollected garbage, power cuts (for a while Britain was observing a threeday week because there was no power). In the Time of Thatcher

A V Rajwade (avrajwade@gmail.com) has been a long-standing commentator on the external sector and nancial services.
Economic & Political Weekly EPW

Thatcher entered the Cabinet in 1970 as a token woman in the Edward Heath government, as the minister for education.

One of her rst controversial acts was to discontinue the free supply of milk to poor children in schools. As prime minister in 1979, she moved dramatically away from the way Britain had been governed for the previous 35 years. She was not a leader who would make policy by holding a wet nger in the wind. She had clear convictions, one of the strongest being to reduce the role of the government in the economy through deregulation and privatisation. Willing to confront the unions, she came across as a cold, heartless, abrasive personality, nostalgic for an Imperial Britain, for a 19th century laissez-faire economy. One of her rst priorities was to bring ination down through tight monetary policy, which had the expected result: deep recession and huge unemployment in 1980 and 1981, making her extremely unpopular. Tax cuts for the rich did not help. As a result of her monetary and exchange rate policies, while ination did come down, a signicant proportion of Britains manufacturing and mining industries, broadly concentrated in the north of the country, was decimated. (The gap between the per capita incomes then created between north and south England persists to this day.) But, she was also lucky. Argentina had occupied the British-ruled Falkland Islands, and in a highly popular war, she managed to retake the colony in 1982. This helped distract attention from domestic economic problems, and she won the 1983 election by a land slide. Her victory was also helped by a lacklustre opposition. Another lucky break for her was the discovery of oil in the North Sea. She also imposed a regressive poll tax: another manifestation of her nostalgia for the 19th century, when only the propertied classes had votes. In terms of her economic philosophy, if withdrawal of the government from economic activity was one aspect, the other can best be described as Social Darwinism, a creed of selshness, of no social responsibility. (Indeed, at one time she said that there is no such thing as society!) One achievement that cannot be taken away from her is of being the rst elected female prime minister starting from scratch. Indira Gandhi of India and
17

may 25, 2013

vol xlviii no 21

COMMENTARY

Sirimavo Bandaranaike of Sri Lanka became prime ministers before her, but with the advantage of being born to or married into highly inuential political families. Thatcher displayed little feminine softness in her dealings with issues or persons. Before moving forward to discuss two major issues her attitude towards Europe, and the Big Bang in the City in 1986 one should not forget her support for many racist and cruel regimes like the apartheid government in South Africa and Augusto Pinochets dictatorship in Chile. Right up to the end, she considered the African National Congress and Nelson Mandela to be terrorists. Her heartlessness was also manifest in the way 10 prisoners in Ireland were allowed to die in a hunger strike undertaken to demand treatment as political prisoners, and not criminals. Attitude towards Europe After winning an unprecedented three successive elections, what nally forced her out was her attitude towards Europe, indeed, what could be termed as her Europhobia. For her, the English Channel was far wider than the Atlantic Ocean. I can do no better than quote Phillip Stephens (2013) on the point:
Thatchers memories were Churchillian, rooted in the glorious narrative of a great nation standing alone and unswerving against the forces of tyranny across the channel. The guiding emotions of British euroscepticism are superiority and insecurity.

and higher per capita incomes. Practising stakeholder, not shareholder, capitalism, it is the indisputable leader of the European Union (EU). The long and historical special relationship with the US, may increasingly depend on Britains inuence in the EU. Should the referendum promised by the current prime minister go against the EU, Washington may well prefer Berlin to London. The Big Bang The Big Bang deregulation of the City in 1986 was aimed at restoring London to its 19th century status as the worlds number one nancial market. It abolished the distinction between commercial and merchant banking, between jobbers and brokers, and dismantled most nancial regulation. And, it is true that London is back to the global number one position in many nancial markets. But this has been achieved at a huge cost; it was The Death of Gentlemanly Capitalism and birth of The Greed Merchants as the titles of two books by Philip Augar (2001, 2006), a nancial professional both before and after the Bang, describe the change. It sounded the death-knell for the traditional British merchant banks. The City is today dominated by big American, Swiss, German, and Japanese institutions, with Barclays perhaps being the only British name left in global investment banking. Relationship banking gave way to transaction banking, damaging the old ethical concept of putting the clients interest rst. It gave birth to a culture of greed and selshness, of obscene bonuses (to quote the chairman of Barclays Remuneration Committee), and of knowing the price of everything and the value of nothing. In a recent article in the Financial Times, Augar (2013) argued:
A consensus emerged among shareholders, regulators and governments that business worked best if it was left to its own devices. This view had been prevalent in the US and became entrenched in the UK in the years either side of the millennium. Shareholder value was elevated above other interests The Financial Services Authority was probably the rst regulator in history to have been regarded as its economys accelerator rather than the brake.
may 25, 2013

The recent Salz Report (2013) on Barclays business practices concludes:

Culturally, nancial service organisations were led by those whose basic assumptions were founded on money as the goal; numbers as the answers, and technology as the intermediary. The implications of replacing people with technology, judgment with money, and leadership with those skilled only in money making went unrecognised.

This was reected in her opposition to the single currency, and to German unication, as that would create a dominant power. (Helmut Kohl, the former Chancellor of Germany, has quoted her in his memoirs saying that we beat the Germans twice and they are back.) Her belief in the superiority of Britain was perhaps unwarranted, yet a crucial part of her political persona. The reality is that the country that gave birth to the industrial revolution is now a third-rate manufacturing power, while Germany remains in the front ranks. In many ways, Germany is the very antithesis of Britain with powerful unions, a heavily regulated economy, a strong middle class, lower income disparities,
18

While frowning on the entitlement culture of the poor, Thatchers economic policies led to an entitlement culture amongst bankers, entitlement to compensation levels far exceeding those in the rest of society. Bankers in the City have become todays dominant minority! In retrospect, it is an accident of history that three leaders, who made a major impact in their respective countries, came to power in three successive years: Deng Xiaoping in China in 1978, Margaret Thatcher in the UK in 1979, and Ronald Reagan in the US in 1980. One common result of their policies was a sharp rise in income inequalities. The difference was that Deng focused on the growth of the real economy, ushering in three decades of double-digit growth in China, something unprecedented in economic history, propelling hundreds of millions above the poverty line. The two Anglo-Saxon leaders, on the other hand, focused on the nancial economy, often at the cost of the real economy. The result has been that the latter two countries share of global economic output, measured in purchasing power parity terms, has continued to fall even as that of China has gone up sharply. It seems to me that, in terms of impact on the 21st century, Deng will beat the others, and that too by a wide margin.
References
Augar, Philip (2001): The Death of Gentlemanly Capitalism: The Rise and Fall of Londons Investment Banks (London: Penguin). (2006): The Greed Merchants: How the Investment Banks Played the Free Market Game (London: Penguin). (2013): Barclays Has Vaccine against Future Ills, Financial Times, 8 April, London. Salz, Anthony (2013): Salz Report: An Independent Review of Barclays Business Practices, (London), https://www.salzreview.co.uk/c/document_ library/get_le?uuid=557994c9-9c7f-4037-887b8b5623bed 25e& groupId = 4705611, accessed on 10 May 2013. Stephens, Phillip (2013) Europe, Sterling and Thatchers Handbag, Financial Times, 12 April, London.
vol xlviii no 21
EPW Economic & Political Weekly