Full text: Wirtschaft und Gesellschaft - 1996 Heft 3 (3)

22. Jahrgang (1996), Heft 3 Wirtschaft und Gesellschaft 
of the 1980s' ,  while they claim that it has rendered reformist strategies of 
the Left "obsolete" (14) .  
The Thatcher government found neo-classical economics generally 
and "monetarism" and "supply-side" economics specifically in tune 
with its ideological preoccupations. A myth was created that Mrs. 
Thatcher and her associates had, while still in opposition, "worked out a 
full programme for government" (15) which in office they pursued 
consistently and with full success. In reality, the Thatcher period was 
characterised by the "persistence of intractable problems" (16) such as 
slow growth and high unemployment, the ongoing contraction of manu­
facturing capacity, repeated bouts of high inflation and balance of pay­
ments problems. The thatcherites had mocked as "fine tuning" the 
attempts by the governments that preceded them to stabilise demand 
and output, leading to "stop-go" (or, more correctly, "go-stop" ) economic 
phases of the 1950s and 1960s. But the thatcherites turned them into the 
much more virulent "boom and bust" phases of the 1980s and 1990s.  Nor 
did the Thatcher period see the unfolding of a master plan. The govern­
ment changed tack several times as earlier strategies came to grief, but 
never acknowledged it: substance changed, the rhetoric persisted. 
Take monetary policy, the central and "magic" ingredient of thatche­
rite mecro-steering: setting targets for the (generally to be reduced) 
growth of the money supply over a number of years ahead to eliminate 
inflationary expectations (the "Medium-Term Financial Strategy" ) 
would do away with booms and slumps, assuring stability of growth. 
Monetary targets would be set and adhered to by cash-limited (mostly 
reduced) public expenditure, controlling government demand for credit. 
Variations of interest rates would control demand for credit by the pri­
vate sector. (This system had, in fact, in essence been first introduced by 
the Labour government of the late 1970s, following a particularly severe 
sterling crisis, under pressure from the IMF. One analyst has even 
suggested that, with the arrival of the IMF loan monitors in London, 
"thatcherism took office . . .  in 1976 " (17) .  Mrs. Thatcher's government 
was not formed until 1979 . )  
However, in the first two years, responding uncritically to (often mis­
leading) signals given out by the changes in the growth of monetary 
aggregates, Mrs. Thatcher's ministers, in order to tighten policy, set ever 
higher levels of interest rates, which contributed to an inappropriate ap­
preciation of the currency: the "petro-pound" . High interest and ex­
change rates combined to reduce British industrial competitiveness at a 
time when the world conjunctural conditions were deteriorating, and 
pushed Britain into an unnecessarily deep and prolonged recession. Bet­
ween 1978 and 1981  relative export prices rose by nearly 20% and 
relative unit costs by 50% (! ) (18) .  Output fell sharply, one-fifth of the 
manufacturing sector disappeared never to return and in eighteen 
months unemployment doubled to over three million. The Thatcher 
government had inherited a (declining) rate of 4% in 1979 ;  in 1981  it 
averaged 8 .3%.  By 1985 it had reached 1 1%  (19) .  

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