The Margaret Thatcher Era Isn't Over Yet

The cover of Newsweek recently announced that it's the end of the era of Thatcher. The Washington Post followed suit. These headlines suggest a very significant confusion about what, precisely, Margaret Thatcher stood for. They are an injustice to her legacy.

It is true that Thatcher promoted deregulation. But the deregulation she favored had nothing to do with the meltdown on Wall Street. She was certainly not an advocate of regulation-free capitalism, as these headlines imply: No free-market economist in his right mind asserts that there should be no regulations or laws whatsoever. In fact, contract law and certain kinds of regulation -- remember that "regulation" is just another word for "law" -- are fully understood by free-market enthusiasts to be essential to the functioning of a free-market economy.

No one connected to Thatcher would have dreamt of disputing this. 

Thatcher's point was that the laws and regulations on the books must be good ones. Thus did she favor removing regulations that massively burdened the British economy. But at the same time, she was a passionate proponent of the kind of regulation that makes free markets function properly. Those who say Thatcherite deregulation has been discredited never say which regulations and laws shouldn't have been passed during her time in power, or which ones should have been, and when. They don't say so because the laws and regulations she did promote were good ones and remain good. 

The exotic financial instruments now widely regarded as the cause of the subprime mortgage crisis hadn't been invented when she and her team took power. It makes no more sense to blame Thatcher for having failed to regulate them than it does to blame Lincoln for the rise of al-Qaeda. 

So what kind of deregulation did Thatcher actually promote, and what does this suggest about her beliefs? 

In 1983, Thatcher's government eliminated the foreign exchange controls that had been in place since the Second World War. 

In 1986, in an event known as the Big Bang, her government opened the stock market to foreign and domestic traders. British investors became free to seek the best rates of return abroad, and foreign investors were in turn free to invest in Britain. Her government simultaneously eliminated the separation of brokers and jobbers on the London Stock Exchange, abolished the fixed minimum commissions for buying and selling securities, and eliminated restrictions on ownership and membership of the Stock Exchange by outside corporations. That's what "Thatcherite deregulation" comes down to.