On this day: Margaret Thatcher’s 100th birthday

Britain owes everything to the woman who saved it from socialism, says Rainer Zitelmann

Margaret Thatcher would have been 100 years old today. He served as Prime Minister of the United Kingdom for almost 12 years, making him the longest-serving Prime Minister of the 20th century. No other political leader has ever implemented tax cuts, deregulation, and privatization to reform the advanced welfare state as radically as he did. Today, when many European countries face similar challenges, the question that arises is: What conditions allowed Thatcher to implement such sweeping reforms?

To lay the foundations for significant market economic reform, three main conditions must be met: First, the situation must be very bad for most of society. Second, the intellectual groundwork must have been laid – the right ideas must have been disseminated by opinion leaders over several years. And only then – the third – does a charismatic politician stand a chance. Something similar happened in Argentina before Javier Milei was elected, and the same thing happened in Britain during Thatcher’s rise to power.

Socialist experiment

Before Thatcher took office, experiments in “democratic socialism” almost brought the country to the brink of death. Inflation has soared to 27 percent, the tax rate for the highest earners has reached 83 percent, and those with large capital incomes are hit by the highest tax rate of 98 percent. About 30 percent of employees work in state-owned companies. When productivity stagnates, national debt continues to increase. In 1979, government subsidies for largely unprofitable industries, such as mining, amounted to £4.6 billion (equivalent to £29 billion today). In the end, the British government was forced to accept assistance from the International Monetary Fund (IMF), an organization that usually provides assistance to developing countries. This was an insult to British pride. Radical, communist-dominated trade unions held firm control of the country. In the 1970s, more than 2,000 strikes occurred annually, taking an average of nearly 13 million working days and increasing to nearly 30 million working days in 1979.

Thatcher understood that her mission was more than reform – she was engaged in a battle of ideas. His biographer Charles Moore wrote, “He had neither an intellectually organized mind, nor an original one. Rather than developing his own ideas, he was a kind of ‘stage door Johnny’ for the ideas of others.” As a student, he was impressed by Friedrich August von Hayek’s account of socialism, The Road to Serfdom. Pro-capitalist think tanks, such as the Center for Policy Studies, the Adam Smith Institute, and the Institute of Economic Affairs (IEA), played an important role in shaping his ideas. As opposition leader from 1975 to 1979, Thatcher frequently attended IEA events and read the think tank’s publications. Through the IEA he also got to know Hayek and Milton Friedman personally. After his first election victory in 1979, he praised the IEA for creating “the climate of opinion that made our victory possible.” The Adam Smith Institute, and its president Madsen Pirie, provided the blueprint for its reforms, including its extensive privatization program.

It was these two prerequisites, namely the economic environment and the intellectual foundation built by think tanks, that opened the door for Thatcher’s rise to power. The main contribution is the ability to absorb and communicate the right ideas effectively. Additionally, like Ronald Reagan and Milei, he excelled at public relations and self-promotion. The only public figure in Britain who handled photographers and the press as skillfully as Margaret Thatcher was Princess Diana.

The only public figure in Britain who handled photographers and the press as skillfully as Margaret Thatcher was Princess Diana

Privatization played a decisive role in his second term. British Telecom, a company with 250,000 employees, is listed on the stock exchange. This was the world’s largest IPO at the time, and two million Britons, almost half of whom had never owned shares before, bought BT shares. Under Thatcher’s government, the percentage of British citizens who owned shares increased from 7 to 25 percent.

Social rental housing units are offered for sale by local municipalities to renters. This policy turned 1 million renters into homeowners. But in this case, it may be better to sell the state-owned house to a professionally managed private housing company or sell it to the stock exchange. The success of privatization in England was so brilliant that it became a good example for other countries and triggered a global wave of privatization.

In her autobiography, Thatcher admitted that she wanted to privatize more companies, but added: “Britain under my leadership was the first country to reverse socialism. By the time I left office, the state-owned industrial sector had been reduced by around 60 percent. About one in four people owned shares. More than six hundred thousand jobs had moved from the public to the private sector.”

He also takes much credit for the creation of 3.32 million new jobs in Britain between March 1983 and March 1990. In 1976, Britain was on the brink of national bankruptcy; in 1978, the country’s budget deficit reached 4.4 percent of gross national product (compared with 2.4 percent in Germany at the time). Ten years later, in 1989, the UK recorded a budget surplus of 1.6 percent. The national debt, which amounted to 54.6 percent of GDP in 1980, had fallen to 40.1 percent in 1989.

Rainer Zitelmann is the author of the book The Power of Capitalism