In the first quarter of the 20th century, the United Kingdom was the empire on which the sun never sets.
However, in the post-World War II order, the United Kingdom saw it gradually lose its prized colonial possessions throughout Africa and Asia. In this same period, its welfare state was consolidated and began to hamstring Britain’s historically robust economy.
Labor Prime Minister Clement Attlee (1945–1951) was particularly enthusiastic about using the state to manage economic affairs in the name of promoting “social welfare.” The British state began to nationalize key sectors of the economy, establish price controls, and impose heavy levels of taxation in order to finance a sizable welfare state. Attlee’s successors, whether they were Labor or Conservative, largely maintained his activist government program.
This consensus was so strong that it was informally labeled as “Butskellism”, because of how the policies of Rab Butler, the Conservative chancellor of the Exchequer from 1951 to 1955, and his predecessor in Labor, Hugh Gaitskell, did not differ much in substance. For the next two decades, a big government consensus formed in the UK. By 1979, nearly a third of the British labor force worked for the state in an indirect or direct manner. High levels of unemployment lingered and inflation was clocking well over 20%.
Soon, there was talk about the UK being well past its prime and likely on the path to a pronounced decline — a remarkable drop in status compared to its prestigious spot at the start of the 20th century. Strong leadership would be needed for the UK to avoid such a fate. Then-Member of Parliament Margaret Thatcher was ready to embrace that challenge.
Once Thatcher assumed the position of prime minister in 1979, she immediately used her political office to champion limited government and private enterprise. She categorically rejected state interference in economic affairs and began a broad-based program of privatization to get the UK’s economy back on its feet. Thatcher was a visionary as well. She wanted Europe to turn into a free-trade zone. Though, she would grow more skeptical of the European Union as it became more clear that it was turning into a more centralized, supranational entity that infringed on individual and economic freedoms.
Thatcher’s reforms were solid first steps towards reversing the excesses of government intervention established by previous governments. For example, taxes on the highest income earners in the UK were roughly 83%. Similarly, investment income was taxed at a 96% rate. These rates were slashed down to 40% under Thatcher’s leadership. In addition, Thatcher ended capital controls, which allowed for people to have the freedom to take money out of the country.
Most importantly, Thatcher presided over vast privatization measures that witnessed state-controlled sectors (coal, gas, steel, telecommunications, transportation, among others) go back into private hands, This allowed for the UK’s most talented individuals to take control of these industries and have them operate in line with market incentives.
During her time in office, Thatcher was a staunch proponent of free markets while fervidly opposing Communism. She was willing to stand up for free market principles during a time when such concepts were not fashionable among political elites. For that, she redefined her era. Thanks to Thatcher’s bold leadership. The UK was able to break the shackles of economic stagnation and have its economy take off throughout the 1980s. After 1985, the British economy was averaging a robust 4% to 5% annual GDP growth rate.
Thatcher was one tough customer. Along with United States Ronald Reagan, she played a key role in setting a moral example for the rest of the world to follow and helped discredit the Soviet Union’s Communist model. Such leadership is obviously lacking in the present-day. It’s a sign of the decadent state of the West.
While not all of us can be Maggie Thatcher, we can do our part by engaging in productive activity in the private sector that enriches ourselves and our loved ones.
In the Empowered Investor Pro community, we strive to take advantage of America’s wonderful system of free enterprise in order to maximize our return on life.
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