Grade A*: History A-level essay (Making of Modern Britain ) on ‘Thatcher’s economic policies were disastrous for Britain’. Assess the validity of this view.
‘Thatcher’s economic policies were disastrous for Britain’. Assess the validity of this view.
Thatcher’s economic situation that she inherited in 1979 was arguably already ‘disastrous’
and therefore it is difficult to disentangle the positive and negative effects of her economic
policies from the changes already in train. Unemployment was already rising, the trend
towards inequality was already established, the new underclass of cities was already
growing. However, this situation was clearly exacerbated by Thatcher’s policies. In terms of
whether Thatcher’s policies were ‘disastrous for Britain’ it is important to assess whether
Thatcher’s economic aims proved to be in line with reality. Thatcher’s pivotal focus was to
reduce inflation and ‘reverse Britain’s economic decline’ which she arguably both managed
to achieve as inflation did fall to 5% by 1983 and economic decline was halted. However,
this was combined with a deep fall in output, long periods of unemployment, social unrest
and deepened divisions in society which all fit the criteria of a ‘disastrous’ impact. Therefore
overall, it can be argued that Thatcher’s economic policies were ‘disastrous’ in the short-
term with the rise of inflation and unemployment. However, in the long-term Thatcher’s
policies did effectively stop Britain’s economic decline, increasing the wealth in the country
and provided a new streamline efficient economy Britain needed.
Thatcher’s priority was to tackle the problem of inflation which she approached with the
economic theory of Monetarism promoted by Friedman. This argued that the best way to
control inflation was by government spending, borrowing restraints and strict curbs on the
money supply. Arguably this policy did achieve its goal as inflation did fall from 19% in 1979
to 5% in 1983. However, this was not without a plethora of initial negative side-effects. In
reality the link between the money supply and inflation was much weaker than predicted by
the monetarist theory and consequently inflation initially rose to 15%. There was a sharp
contraction in industrial output with steel production falling by 30% and core manufacturing
and mining being particularly hard hit. Unemployment rates rocketed reaching over 2
million by 1980, notably the steepest rise since the Great Depression in 1932. The negatives
were clearly outweighing the positive impacts of this policy as there seemed to be a great
deal of pain people had to deal with for no obvious gain. The theory was criticised for not
translating into reality, and in 1981 365 economists wrote to the Times, arguing that these
policies were unnecessarily harming economic output and causing unemployment to be
higher than necessary. Therefore, the short-term cost was huge, however despite this initial
downturn, it can be seen that Monetarism allowed the British economy to escape the ‘stop
and go’ cycle which was a key cause of Britain’s economic decline. However, Monetarism
was actually quietly dropped after the 1983 election and therefore this policy can be
questioned as to whether it ever delivered any substantial benefits.
In terms of supply-side economic policies… (preview ends)
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