Socialism in the United Kingdom - Granite Grok

Socialism in the United Kingdom

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There was a reason why the United Kingdom was described as “the sick man of Europe.” The UK endured three decades of socialism. The United Kingdom underwent an economic revolution in the 1970s and 1980s. It happened because of one person. That was the Iron Lady, Prime Minister Margaret Thatcher.

Skeptics doubted she could pull it off, The U.K. had become a mere shadow of its once prosperous free-market self. The government-owned the largest manufacturing firms. It was in control in such industries as autos and steel.

The top individual tax rates were 83% on “earned income.” The tax rate on income from capital was 98%. Much of the housing was government-owned. For decades, the U.K. had grown slower than economies on the continent. The “Great” was gone from Great Britain. The nation seemed headed for the economic dump.

The major hindrance to economic reform was trade unions. They had been allowed to spend union funds on politics since 1913. They were entrenched. The unions spent heavily to control the Labor Party. Unions inhibited productivity and discouraged investment. From 1950 to 1975, the U.K.’s investment and productivity record was the worst of any major industrial country.

Trade-union demands increased the size of the public sector. Public expenditures rose to 59% of GDP. Wage and benefits demands by organized labor led to continual strikes. The strikes paralyzed transportation and production. The economy was barely functional.

In 1978, Labor Prime Minister James Callaghan decided not to hold an election. Instead he would “soldier on” to the following spring. It was a fatal mistake. His government encountered the legendary “winter of discontent” in the first months of 1979. Public-sector workers went on strike for weeks. Mountains of uncollected rubbish piled high in cities. Bodies remained unburied and rats ran in the streets. People were not happy…

Enter the newly elected Conservative Prime Minister Margaret Thatcher. She was the United Kingdom’s first female PM. She took on what she considered her main opponent; the unions. Flying pickets were the ground troops of industrial conflict. They would travel to support workers on strike at another site. She banned them. They could no longer blockade factories or ports.

Strike ballots were made compulsory. The closed shop forcing workers to join a union to get a job was outlawed. Union membership plummeted from a peak of 12 million in the late 1970s to half that by the late 1980s. “It’s now or never for [our] economic policies,” Thatcher declared, “let’s stick to our guns.”

The top rate of personal income tax was cut in half, to 45%, and exchange controls were abolished. Privatization was a core Thatcher reform. Not only was it fundamental to the improvement of the economy. She wrote in her memoirs it was “one of the central means of reversing the corrosive and corrupting effects of socialism…”

Through privatization that leads to the widest possible ownership by members of the public, “the state’s power is reduced and the power of the people enhanced.” Privatization “is at the center of any programme of reclaiming territory for freedom.” She was as good as her word, selling off government-owned airlines, airports, utilities, and phone, steel, and oil companies.

In the 1980s, Britain’s economy grew faster than that of any other European economy except Spain. U.K. business investment grew faster than in any other country except Japan. Productivity grew faster than in any other industrial economy.

Some 3.3 million new jobs were created between March 1983 and March 1990. Inflation fell from a high of 27% in 1975 to 2.5% in 1986. From 1981 to 1989, under a Conservative government, real GDP growth averaged 3.2%.

By the time Thatcher left government, the state-owned sector of industry had been reduced by some 60 percent. As she recounted in her memoirs, about one in four Britons owned shares in the market. Over 600,000 jobs had passed from the public to the private sector.

The U.K. had “set a worldwide trend in privatization in countries as different as Czechoslovakia and New Zealand.” The UK was turning decisively away from Keynesian management. The once sick man of Europe bloomed with robust economic health. No succeeding British government, Labour or Conservative, has tried to renationalize what Margaret Thatcher returned to the private sector.

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