Monday, December 8, 2008

Margaret Thatcher's Contribution To UK Economy

As mentioned in the earlier post, due to Lady Thatcher’s strict view on less-government intervention, austerity measures such as budget cut on education, healthcare & housing was introduced. This was on top of higher interest rates proposed by her

During this time in 1981, UK went into a deep recession. As a result she reduced direct tax on income, but some 364 leading economists had written in to warn the possible consequences. This is followed by an increase in indirect taxes

She also contributed largely in reducing the power of trade unions. The largest single confrontation faced by her was the National Union Mineworkers (NUM) strike which lasted for a year from 1984-85. The strike was due to opposition against government’s decision to close down large number of mines & slashing down thousands of jobs. In 1985, the NUM conceded without a deal. In the same year 25 mines were closed & many more followed suit later. The remaining one were privatised

Privatisation is the process of transferring the ownership of business from the public sector to the private sector. Some large businesses are separated into several private entities. The aim is to prevent the abuse of private monopoly power, create more competition & allowing firms to operate more efficiently since now there are profit motives. Among firms are British Rail, British Petroleum, British Shipbuilders, British Coal, British Telecom etc

Owing to Thatcherism, UK economy had since then prospered. Macroeconomically, UK is faring better than France, Germany & Italy with an average annual growth of about 2.5%. Labour union has been tamed unlike those in France. Relatively UK also has lower unemployment if match against other large EU economies, thanks to the flexibility in labour market that she had brought in

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