Margaret Thatcher's Legacy
By David Henderson
I’ve held off commenting on Margaret Thatcher because I didn’t know her legacy as well as many did. In 2011, Bruce Bartlett pointed out that she did not succeed in reducing government spending or government revenue as a percent of GDP. She did have other accomplishments, though. One was bringing down the top marginal tax rates over time from 98 percent on “unearned income” (interest, dividends, etc.) and 83 percent on “earned income” (wages and salaries) to 40 percent. That’s a huge accomplishment. So why didn’t revenues fall as a % of GDP? Because, as Bartlett points out, she did this by substantially raising the VAT. I oppose this second move but I do think that for a given amount of revenue, it’s extremely unfair–and I know it’s extremely inefficient–to single out high-income people so brutally. I’m convinced that that’s why George Harrison of The Beatles wrote the song, “The Taxman” in 1966. The Beatles’ big “earned income” started in 1964 and so by 1965 they would have been earning income [I refuse to use the term “unearning”]–interest and dividends–on this income. Thus his line “one for you [the taxpayer], nineteen for me [the taxman]”. That implies a marginal rate of 95%. Apparently that was the rate at the time under Labor Prime Minister Harold Wilson.
One other huge positive about Maggie: the way she took on the unions in the late 1970s and early 1980s. I have friends who grew up in Britain and remember that in the 1970s, when the unions called strikes, they had their garbage pile up, got electric power only 3 days a week, etc. She changed all this for the better.
Also David Boaz of the Cato Institute sent me a link to this interesting article, not long, on some other positive, somewhat unintended, aspects of her legacy. A highlight:
So this has been an era of remarkable liberty and opportunity. Protectionism of all kinds has been assaulted. Britain’s “immigration problem” (sic) is another consequence of Margaret Thatcher’s success. That she was no great champion of immigration (to put it mildly) matters little; the logic of immigration is at least in part drawn from the success of her economic views. [The (sic) is the author’s, not mine, but I agree with it.]
If capital should be free to move (on both a corporate and a personal level; young people may be astonished to discover that prior to Thatcher’s arrival Britons could not take more than £500 out of the country when they went abroad) so should people.
Tearing down the Berlin Wall and lifting the Iron Curtain was a great victory for western liberalism. So too was expanding EU membership, bringing the countries of eastern europe in from the cold. And this too represented a remarkable expansion of liberty. The Poles and the Czechs valued Margaret Thatcher’s trenchant opposition to Sovietism; they have also valued the opportunities afforded by liberalism.
The creation, still incomplete admittedly, of a more-or-less single european market in both goods and labour has worked wonders. Again, liberalism has prevailed and the Poles working in Britain are a part of Margaret Thatcher’s legacy too.
Note: The photo was taken in the House of Lords in London. Maggie Thatcher gave a short speech to the assembled group–attendees at the Mont Pelerin Society general meeting in 2002. The woman standing beside me is Manual Ayau’s wife, Olga. I don’t remember the content of the speech other than that it was about freedom, but here’s what I do remember. She was asked to speak for no more than 5 minutes and she had prepared a coherent 5-minute speech. She didn’t fall prey to the idea that many U.S. politicians have that, since it’s a short speech, they can wing it, and they turn 5 minutes into 10 minutes of incoherent ramblings. A number of us commented on that afterwards.