Margaret Thatcher Was a Privatization Pioneer, and This Is the Story of How Her Agenda Did Nothing But Make Life Worse for Millions of People
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On January 16 she opened the debate in the House of Commons by describing how the “transport of goods by road was widely disrupted, in many cases due to secondary picketing of firms and operators not involved in the actual disputes. British Rail had issued a brief statement: ‘There are no trains today.’ . . . many firms were being strangled, due to shortage of materials and inability to move finished goods. There was trouble at the ports, adding to the problems of exporters. At least 125,000 people had been laid off already and the figure was expected to reach a million by the end of the week. The food industry, in particular, was in a shambolic state, with growing shortages of basic supplies like edible oils, yeast, salt and sugar. And all this on top of a winter of strikes – strikes by tanker drivers, bakers, staff at old people’s homes and hospitals; strikes in the press and broadcasting, airports and car plants; a strike of grave diggers.”
She reported that Labour’s George Brown had complained to her that “the unions had been falling more and more under the control of left-wing militancy.” But Prime Minister Callaghan then urged that the government make further concessions to the unions, including “exemptions from the 5 per cent pay limit, tighter price controls and extension of the principle of ‘comparability,’ under which public sector workers could expect more money. All these were intended as inducements to the unions to sign up to a new pay policy. But he signally failed to address what everyone except the far Left considered the main problem, excessive trade union power.”
Using language recalling that used to denounce weak-willed opposition to Hitler on the eve of World War II, she heaped scorn on Mr. Callaghan for “appeasing” the unions. Rather than fearing to alienate them, she urged her own party leaders to seize the opportunity to gain public favor by riding on wave of reaction against union over-reaching. British wages no longer were set by fair bargaining between workers and their employers, she claimed, but were negotiated by trade union leaders dictating terms to weak-willed government managers. The alternative, of course, was the kind of austerity dictated by IMF monetarists maintaining an employers’ market by imposing chronic under-employment and shifting enterprise out of the unionized public sector to newly privatized, non-unionized enterprises – precisely the kind of austerity that Keynesian income policies had sought to prevent.
Upon winning the general election, Mrs. Thatcher appointed loyal monetarists, who developed a more subtle alternative to the tight-money programs imposed by the IMF on hapless third world counties. A general monetary stringency would have lowered profits and stifled capital gains as well as wages. Britain’s monetarist strategy was to depress wage levels through “structural reform” or “structural adjustment.” The restructuring was achieved not by macroeconomic policies affecting the overall money supply and incomes, but by changing the legal framework and institutional structures within which markets operated. Union power was broken by changing the legal rules, while government economic power was dismantled by cutting taxes and selling off enterprises. The industries being privatized were subjected to much the same downsizing and asset stripping as private companies taken over by corporate raiders and/or leveraged buyouts in the 1980s.
How Monetarism Laid the Groundwork for Privatization
Ostensibly a theory of money and prices, monetarism became an ideology to attack government spending and organized labor. The theory’s guiding idea was that price levels could be determined by controlling the money supply – by the central bank managing the rate at which government deficits were monetized. Meanwhile, wage-push inflation could be countered by taking legal steps to break the power of unions to strike and to declare boycotts. The effect was to remove economic planning from the hands of government. The vacuum would be filled by global investment bankers. Efficient management was to take the form of maximizing stock-market gains, not the promotion of full employment and other non-market social welfare objectives.