Margaret Thatcher’s greatest economic legacy may well have been to leave business up to business, a mantra that spread around the world as her government privatized a raft of inefficient state-run enterprises that accounted for a sizable chunk of the British economy.
By the time she was finished, her government had whittled down and sold off nationalized businesses operating in everything from steel, gas, electricity, railways and luxury cars to trucking, airlines and telecommunications, as well as state water distribution and even public housing.
She was so successful that the opposition Labour Party, architect of most of the nationalizations, effectively abandoned the policy because it could never again be a winning strategy once Britons had a taste of better service at lower cost.
And her program inspired similar measures in Canada, where the Mulroney government sold off the likes of Air Canada, Petro-Canada, CN Hotels, Teleglobe Canada, de Havilland and Canadair.
“Margaret Thatcher was the greatest advocate for competition that we have had in a long time,” famed entrepreneur Richard Branson wrote on Twitter as news emerged Monday of her death.
Some privatizations, such as water and electricity, sparked considerable controversy and continuing doubts about their effectiveness.
Others, such as vehicle maker British Leyland and British Steel, later fell into foreign hands or were dismantled.
But in typical fashion, Lady Thatcher never wavered in her resolve. And the program’s essential success in paring government costs and boosting domestic competitiveness quickly won converts cross the capitalist world.
“All too often the state is tempted into activities to which it is either ill-suited or which are beyond its capabilities,” Lady Thatcher wrote as recently as 2006 in a piece for the Reason Foundation, a U.S. free-market-focused think thank. “Perhaps the greatest of these temptations is government’s desire to concentrate economic power in its own hands. It begins to believe that it knows how to manage business.”
State control, she flatly declared, “can’t be made good merely because it is run by ‘clever’ people who make the arrogant assertion that they ‘know best’ and that they are serving the ‘public interest,’ which of course is determined by them.”
Lady Thatcher “changed the whole economic system,” said Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington and an Oxford University student when she came to power in 1979. “You don’t see the word privatization before Margaret Thatcher.”
It was a bold revival of the western liberal capitalist model that would sweep the world and help sink the Soviet empire, some analysts argue.
“I would say the Thatcherite move to privatization, together with the fall of the Berlin Wall, really spelled the death knell of a whole allegedly alternative approach to economic management,” said Brian Lee Crowley, managing director of the Macdonald-Laurier Institute think tank in Ottawa, who was a graduate student in Britain during the latter years of the Thatcher government.
State monopolies in telecom, rail and other services provided dreadful service at high costs and a terrible return on the public’s investment. “The key was not privatization per se. It was to subject these previously sheltered government monopolies to the bracing winds of competition,” he said.
Lady Thatcher’s reforms also turned many more Britons into shareholders – not necessarily a positive, given stock market returns over the past decade. But it was a move that paved the way for similar flotations of state companies across Eastern Europe after the Soviet empire collapsed.
“This is a very mixed legacy, as similar efforts were much less successful in places such as Hungary and the Czech Republic, given the profound differences in the sophistication of the existing financial markets,” said Alexander Dyck, professor of finance and business economics at the Rotman School of Management in Toronto. Also, “the absence of a controlling entity often allowed for gutting of enterprises for personal gain.”
Much of what Lady Thatcher launched was experimental, Mr. Crowley said. “It really had not been done before. …Was that the right way to do it? Has it produced all the benefits [her government touted]? All these are perfectly legitimate questions. But the fact that so many other countries followed her lead is a good indication that the benefits of privatization have clearly outweighed the costs.”