“No one would remember the Good Samaritan if he had only had good intentions.  He had money as well (and) pennies don’t fall from Heaven, they have to be earned on earth.  (Let’s get this clear)… there is no such thing as Society; there are only individual men and women, and there are families”¹.

Both the British economy and the authority of its’ parliament looked pretty fragile that day in April 1979 when Margaret Thatcher entered No. 10 Downing Street quoting St. Francis of Assisi, “Where there is discord, let us bring peace”.  Since the oil price ‘hike’ in 1972 all western economies had been shaky, none more so than the U.K. whose annual inflation rate had peaked at over 25% in 1975².  Conventional economic policies of re-flation, direct control of prices and income policies advocated in turn by both Labour and Conservatives, had fought it out with the unions who demanded wage increases, and with the employers who sought subsidies to prolong the senility of many traditional industries³.  The political reputations of three previous prime ministers, Wilson⁴, Heath⁵ and Callaghan⁶, had been destroyed.  By early 1979 inflation was down to 11%, maintained by interest rates of 12%, and unemployment at 6%.  The future was problematic.

It was the values of her father, the self-employed working-class grocer and Wesleyan preacher, that helped Thatcher revitalise the worn out Tory Party, and it was the rationale of the economist, F. A. Hayek⁷ that shaped the core of her political beliefs.  Big government was not only an economic disaster, Hayek confirmed for her in “The Road to Serfdom”, for this devastated people’s sense of personal responsibility; specifically, “Extensive government control produces a psychological change (in people).  It extends over… perhaps one or two generations… and the political ideals of a people and their attitudes towards authority are as much the effect as the cause of the political institutions under which they subsequently live”⁸.  In other words, if you create an over-riding institution to do for you what you won’t do for yourself, you’ll end up not even wanting to do anything for yourself.  Big government is like a cancer that works from the inside to emasculate the entire country.

So, Thatcher set out to slash taxes, deregulate industry, create a stable currency, cut back on government bureaucracy, and steadfastly refused to extend further credit to any ailing industry⁹.  The budget of march 1981 was the turning point; Thatcher refuted the economic consensus of the time and actually cut taxes and withdrew subsidies because, as she saw it, an economy was utterly dependent on a sound currency.  When 364 of the country’s leading economists wrote to The Times saying that her policies would be disastrous, she was asked if she could name two economists who agreed with her¹⁰.  She did.  On returning to Downing Street a civil servant is reputed to have said to her, “It’s a good job he didn’t ask you to name three!”  Thatcher was on her own as she set out to buck the conventional wisdom.  Initially it looked as if this would be a disaster; interest rates shot up to 17%, and unemployment reached 12.5% in two years.

Let the factory chimneys fall she told anyone who would listen, find new work that would pay better, get on your bikes…¹¹ look after yourself, and your family.  Ignore the rest.  For a woman who, whilst an Oxford undergraduate, sometimes preached in Wesleyan chapels, she interpreted the parable of the Good Samaritan very narrowly¹².  She gained full control of her cabinet, but her popularity within the country fell dangerously.  Had it not been for the opportunity to demonstrate her toughness by sending the army to the Falklands¹³ in 1982 she might well not have been re-elected the following year.  As her confidence grew Thatcher would accept no criticism — she was infuriated when, in the Thanksgiving Service for the victory in the Falklands the Archbishop prayed for the dead and wounded of both armies, and she took it out on him with a vengeance when, three years later, the Church sought to highlight the plight of the inner-cities¹⁴.  Caring conservatism was something for private conscience, not public policy.  Schools were encouraged to sell-off all unnecessary playing fields, and school kitchens were sold in favour of providing ‘fast food’ bought in from some central caterer.  As the harsh medicine took effect, so the country started to boom.

By 1985 as Thatcher’s confidence in herself grew, so her popularity with the new entrepreneurial middle-class, those who were doing very well out of the more business-friendly regime, knew no bounds.  They relished the tax cuts that enabled more of them to send their children to elite independent schools just at the stage when the other side of Thatcher’s economic policy of tight money control was cutting the annual grants to local authorities to help fund, amongst other things, the state schools¹⁵.  Some local authorities, believing that quality education was more important than tight money control, simply raised the local tax rate to compensate for this.  Immediately Thatcher introduced legislation that would ‘rate-cap’ any authority who did this by simply cutting their annual grant by the same pound-for-pound.  At a single stroke Westminster removed the local authority’s autonomy to put their money where they believed it was necessary¹⁶.  The immediate implication of this was that while the independent schools could increase their fees as far and as fast as an ever richer clientele could afford, the state schools were kept in an ever tighter straight-jacket.  From the mid 1980s the gap between the state and independent schools grew wider with every year¹⁷.  In turn this encouraged still more parents to forsake state education in favour of the independent sector.

71: Fool’s Gold     25^th August 2006