Margaret Thatcher’s legacy has been the subject of considerable debate over the past three weeks, but one claim seems to stand out above all others as particularly intriguing: that Thatcher oversaw a dramatic period of growth and modernisation, revitalising the country after a period of self-imposed stagnation and decline while restoring it to its rightful place of global prominence. Unfortunately, this is rarely substantiated beyond mere matter-of-fact assertions, and thus merits more meaningful analysis. But can it stand up to appropriate critical scrutiny?

Unfortunately for her supporters, it cannot. In fact, an analysis of the relevant data paints a distinctly different picture of her time in office, suggesting that her performance in this regard was mediocre at best and disastrous at worst. There are many ways that this can be demonstrated. Beginning with the most straightforward, Figure 1 illustrates average annual growth during the Thatcher era:

Fig1 (Crop)

According to Thatcher’s supporters, the positive growth figures recorded throughout much of the 1980s demonstrate a dramatic turnaround of the country’s fortunes that can be directly credited to the government’s radical social and economic policies. The flaws of this reasoning are twofold. First, it is worth considering the Thatcher era in the context of the country’s broader post-war history, especially by comparing it to the period that immediately preceded it and that was characterized by everything that Thatcherism stood against: higher levels of taxation and state expenditures, large-scale public ownership of much of the economy, popular and influential trade unions, and a broadly shared Keynesian consensus on sound economic management. Figure 2 does so by adopting a 30 year perspective:


Such a historical scope is quite revealing. Under Thatcher, the economy grew by an average of 2.28% per year; in comparison, annual growth averaged 2.9% between 1960 and 1978. As a whole, annual growth averaged 2.66% between 1960 and 1990, meaning that, by this measure at least, Thatcher’s economic record actually brings down the 30 year average by almost a quarter of a percent. Looking at these figures, claims of economic revitalisation appear to be completely unfounded. And if ‘modernization’ means slower growth, the country seems like it would have been better off without it.

Second, while Thatcher was leading a conservative revolution in the UK, a number of other states in Western Europe were moving in the opposite ideological direction, with France (1981), Sweden (1982), Spain (1982), and Italy (1983) all electing left-wing or centre-left governments that, in many ways, represented the antithesis of Thatcherism. Figure 3 demonstrates how each of these countries, along with the UK, fared in the Thatcher era:


From this data, it is difficult to make the case that the UK out-performed its left-leaning European counterparts. This point is perhaps more clearly illustrated when the figures for France, Sweden, Spain, and Italy are averaged out and measured against the UK:


Again, between 1979 and 1990, the economy of the UK grew at an average rate of 2.28% per year, slightly less than the cumulative average for France, Sweden, Spain, and Italy at 2.35% per year. When one looks at only the years during this period that left-leaning governments were in power in these four countries, the difference is even more pronounced: France grew at an average rate of 2.39% per year, Sweden at 2.47%, Spain at 3.29%, and Italy at 2.65%.

So Thatcher’s economic record is not only unexceptional by the historical standards of the UK, but also when measured against comparable European countries that adopted dramatically different policies. Worse, as Figures 5-7 demonstrate, Thatcher’s time in office was also accompanied by significant increases in unemployment, inequality, and poverty:




And these graphs do not even tell the whole story, as, for example, the government adopted no fewer than 20 changes to the way unemployment figures were calculated in the Thatcher era, effectively distorting the true extent of the problem. At the same time, the government ran persistent budget deficits despite periods of growth, and the country became increasingly reliant on imports while its balance of payments plummeted. The billions of pounds that the state collected from asset sales and oil production played a significant role in covering up the extent of this economic mismanagement, but these were short-term solutions at best that have had serious lasting implications.

The financialisation of the economy played a similar role in masking the economic failures of Thatcherism with artificial growth, while the short-sightedness of this, and the widespread deregulation that it involved, has been tragically demonstrated by the severity of the recent financial crisis and its aftermath. Compounding these problems, Thatcher’s role in the apparent collapse of Keynesianism in this country has led to a completely inadequate—or even non-existent—recovery, with the UK’s GDP taking longer to reach its pre-crisis level than it did during the Great Depression. This, above all else, is her true legacy. The faster this country leaves Thatcherism behind, the better.

8 thoughts on “Thatcher’s Legacy – the Empirical Argument”

  1. No comparisons with most free market economy of the world and how it faired over the same time period – the USA?

  2. Wow, American economic history is a huge topic, even if you just consider the Reagan administration (or Carter/Reagan/Bush Sr. if you want to look at the same period). Still, you can see a lot of same things happening in the US. GDP growth was not exceptional for the post-war period (, and pretty much all of that growth went to the top ( And that trend has only continued; since the late 1970s, the US has become far more unequal in both absolute and relative terms than any other developed country in the world. And here’s a look at US unemployment ( and poverty (, along with public debt ( and balance of payments ( It looks similar to me.

    Again, all of this has had serious effects on the present crisis, which, as I said in another one of my articles, has capped off “30 years of stagnating middle and lower class incomes, endless boom and bust cycles, growing income disparities, decreasing social mobility, and the collapse of domestic industries that have historically driven economic growth.” ( So trends in the US seem to point to the same conclusion as I reached in this article. The country should ditch Reagan’s disastrous legacy as well.

  3. You should have excluded 1979 as an outlier; if anything it shows Thatcher’s merits for returning the country to growth so quickly. As you noted, though, other western-European countries experienced similar trends, so part of the return to growth clearly was due to global economic trends. To what extent Thatcher’s policies aided or hindered this growth is not stated. I’m sorry, but graphs do not constitute an “empirical” approach; for this you would need to use econometrics. They are, however, useful as visual aids, and in this case I think they prove that those who praise Thatcher as an economic genius, unless they’ve actually crunched the numbers themselves, are making a dubious claim. I think Britain would do good to rid itself of Thatcherism, but only because, just like the liberals before her, it does not allow for any amount of moderation.

  4. I don’t know why I could have excluded 1979, as that would provide an incomplete picture of the data. And how does that suggest that she returned the country to growth more quickly? If anything it brings up her average growth figure. And if you want to conclude that Thatcher’s policies had no affect on the return to growth, then great; that’s the point I was making. If you look at the other data though, the effects are pretty terrible.

    And empirical refers to anything derived from experimentation or observation, so doing complex econometrics isn’t really necessary, especially to observe obvious trends.

  5. Because the downturn in 1979 was an exogenous outlier that had nothing to do with Thatcher’s policies. You give an average for GDP growth in the UK for the Thatcher years, then compare it to averages over 30 year spans. Thus, the effects of the 1979 recession are given added weight to the average for the Thatcher years, dragging the figure downwards. By the way, Republicans use the exact same logic as you used above to attack Obama’s economic policies; would you say he is responsible for slow economic growth in the U.S.? They’re both incorrect applications of statistics. The graphs can suggest things; they prove nothing.

  6. No, the recession of the early 1980s and the current economic downturn are entirely different. The former was directly caused by government policies carried out in the name of combating inflation, even though, again, the UK didn’t do a noticeably better job than other countries. The current downturn was caused by the housing bubble and massive failures and abuses in the financial sector, neither of which involved the government. Where the government failed was in creating the conditions for the crisis and not adequately responding to it. Interestingly, the roots of both lie in the Thatcher/Reagan conservative revolution.

  7. No, it was caused by the oil shortage created by OPEC; if not, then why does the GDP growth of the UK resemble that of other countries during the same period? It was a global economic recession. To say that Thatcher/Reagan policies exacerbated this pre-existing recession would be an entirely different argument, but since you tackle inflation with monetary policy, which is conducted by the central bank, no anti-inflationary policy could be blamed on one political party or another. I haven’t studied the actual policies put in place at that time, but my guess is they restricted the money supply, thus decreasing inflation but also GDP. IF they somehow were culpable in anyway, though, I would say the blame would fall on the US and Reagan; the UK couldn’t be the cause of a global recession.

    I just don’t believe everything Thatcher did was bad. Do people actually believe that Britain should have continued to allow the size of its welfare state and the power of its unions to grow unchecked indefinitely? Look at the crises within the euro-zone today; these are happening because countries relied to heavily on entitlements and government employment. This was bound to happen to them as soon as a crisis occurred, and if they thought a crisis would never occur, then they were foolish (okay, it was a particularly big crisis, but be honest: they weren’t going to make any changes to entitlements or government employment until a crisis forced them to). The problem with those doing the cutting, like Thatcher, is that they never stop insisting on cutting. But when do you suppose Labour would have reformed the welfare state they worked so hard to create? No one ever takes a middle ground and acknowledges the merit of the other side’s viewpoint. Thatcher was wrong because her viewpoint wasn’t adaptable to circumstance, but occasionally circumstance favored her point of view. To not acknowledge this is to simply take the opposite of her view. My impression is that this is what you are doing, since you are rejecting “Thatcherism,” as though everything Thatcher did and stood for can be summed up and rejected in one word. Or I could just be putting words in your mouth.

  8. No, the OPEC crisis started in 1973 and had its main effects in the 1970s. It was a major cause of inflation, but that’s the only connection. And it’s completely not true to suggest that the rise of monetarism is not tied to a specific political party in either the UK or the US. And if you’ll notice, the downturn in the UK was much more severe than it was in other places. Policies matter, and the evidence is pretty striking.

    And what’s wrong with welfare states and unions exactly? As I argued here, the UK was much better off before Thatcher’s reforms than after them. Do you have any data to back up your claims? The Eurozone crisis wasn’t caused by government spending. That’s just wrong. In fact, many of the countries with the most generous welfare systems are also the strongest economically. Take a look at Scandinavia, with its high taxes, high government expenditures, progressive social programs, and, yes, extremely popular and powerful unions. The UK went down a very different path, and look where that’s taken them. These reforms are not only not necessary; they’re also a terrible idea.

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