Was Thatcher a Thatcherite?

The hidden history of "neoliberalism" in Britain

In the standard telling of postwar British politics 1979 is the pivot. Before then, so the story goes, there is a broad consensus between Labour and Conservative governments around Keynesian economic policy, active industrial strategy and keeping unemployment as low as possible. This approach falters in the 1970s as inflation becomes unmanageable and relations between trade unions and government deteriorate. Thatcher arrives, bolstered by an ideological cabal, determined to drive inflation down and smash the unions, regardless of the consequences. For the right this was necessary to save the country, for the left it was a disaster, responsible for many of today’s woes. When Andy Burnham speaks of “40 years of neoliberalism” he means 47 years.

Those with a more detailed knowledge of political history know that it is not quite that simple. The Labour government preceding Thatcher were forced into cutting spending, after borrowing money from the IMF, while trying to manage inflation. James Callaghan’s famous “in all candour” speech to the 1976 Labour party conference warned delegates the country could no longer spend its way out of a recession.

During the 1980s European countries with left-wing governments were also forced into similar policies, albeit without the level of privatisation or industrial strife that Thatcher was willing to support. In 1983 François Mitterrand had to abandon his pseudo-Keynesian economic policy to keep France in the European Monetary System. Some form of shift away from the postwar approach happened everywhere - leading to the rise of “third way” social democratic parties in the 1990s.

But the true story in the UK goes much further back than this, to the unplanned postwar revival of the City and its global consequences. It shows that much of what is termed “Thatcherism” came about as the Conservative government adapted to circumstances outside its control, which were often poorly understood by the Prime Minister herself. The end product was not at all what she had hoped to create. New Labour’s attempts to modify the Thatcherite approach were also distorted by structural economic changes that were not fully appreciated at the time.

This is not just a matter of historical interest. A simplistic understanding of Thatcherism on both right and left means today’s economic debates often miss the point, and risk repeating the same mistakes.