Neo-Liberal Thought and Thatcherism Robert Mark Ledger
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Robert Ledger Neo‐liberal Thought and Thatcherism ‘A Transition From Here to There?’ Neo-liberal Thought and Thatcherism Robert Mark Ledger Submitted in partial fulfillment of the requirements of the Degree of Doctor of Philosophy 1 Robert Ledger Neo‐liberal Thought and Thatcherism Abstract This PhD thesis asks how ‘neo-liberal’ was the Thatcher government? Existing accounts tend to characterise neo-liberalism as a homogeneous, and often ill-defined, group of thinkers that exerted a broad influence over the Thatcher government. This thesis - through a combination of archival research, interviews and examination of ideological texts - defines the dominant strains of neo-liberalism more clearly and explores their relationship with Thatcherism. In particular, the schools of liberal economic thought founded in Vienna and Chicago are examined and juxtaposed with the initial neo-liberals originating from Freiburg in 1930s and 1940s Germany. Economic policy and deregulation were the areas that most clearly linked neo-liberal thinking with Thatcherism, but this thesis looks at a broad cross section of the wider programme of the Thatcher government. This includes other domestic policies such as education and housing, as well as the Thatcher government’s success in reducing or altering the pressures exerted by vested interests such as the trade unions and monopolies. Lastly, while less associated with neo-liberal theory, foreign policy, in the area of overseas aid, is examined to show how ideas filtered into the international arena during the 1980s. Although clearly a political project, the policies of Thatcherism, in so far as they were ideological, resonate most with the more expedient, or practical, Friedmanite strain of neo-liberalism. This encapsulated a willingness to utilize the state, often in contradictory ways, to pursue more market- orientated policies. As such, it sat somewhere between the more rules-based ordoliberalism and the often utopian Austrian School. 2 Robert Ledger Neo‐liberal Thought and Thatcherism Contents Figures and tables p.4 Acknowledgements p.5 Introduction p.6 Chapter One: The New Right and neo-liberal thought p.30 Chapter Two: The New Right and the Thatcher government. Domestic Economic Case Studies p.88 Chapter Three: Social Policy Case Studies: council house sales, education and NHS reform p.127 Chapter Four: Vested Interests, Monopolies and Thatcherism p.183 Chapter Five: Neo-liberalism and the Foreign Policy of the Thatcher Government p.250 Conclusion p.309 Bibliography p. 331 3 Robert Ledger Neo‐liberal Thought and Thatcherism Figures 1. How the ideas of the New Right were transmitted, 1944-1979 p.67 2. UK Inflation (RPI) 1970-2005 p.105 3. Trends in home ownership, 1981-2006 p.147 4. The hypothetical neo-liberal development model p.272 5. Helping the poorest or retaining influence in former colonies? The top 5 recipients of British aid 1988/89 p.283 4 Robert Ledger Neo‐liberal Thought and Thatcherism Acknowledgements I would like to express my thanks to my supervisor Professor Tim Bale, whose advice helped to focus my thinking when this project was looking rather unwieldy. The clarity of his feedback, as well as his encouragement, has been invaluable. I would also like to thank him for taking on my supervision when he came to Queen Mary in 2012, when I had already been working on this project for four years. A special thanks also to my initial supervisor, Dr. Peter Catterall, who enthusiastically supported me and helped shape my research and ultimately this thesis. A number of people have commented on earlier versions of this project, in particular Lord Hennessy, who acted as a mentor in my early years at Queen Mary, as well as assisting me with primary sources and interviews. The Queen Mary Postgraduate Seminar Group provided me with useful feedback on a shorter version of chapter five. I would also like to thank Richard Morris, Martin Longstaff and Peter Finn for their comments on various parts of this thesis. I am grateful to the librarians and archivists who have assisted me in my research, particularly Andrew Riley at the Churchill Centre in Cambridge. I would also like to thank Dr. David Craik for encouraging me in taking my interest in history further. Finally I am grateful for the support of my family, who have helped me both financially and emotionally during my almost unending years in education. 5 Robert Ledger Neo‐liberal Thought and Thatcherism Introduction The policies associated with Margaret Thatcher’s government, as well as the contested and often opaque term Thatcherism, have been closely linked with liberal economic ideology. Many books on the subject simply state this as a fact while others question either the assumption itself or at the very least wonder to what extent it is true.1 The events of 1979 to 1990 have proved fascinating and controversial with much literature being generated about the formation of the policies that came to define Thatcherism, the government’s time in power and, of course, its legacy. Why, then, revisit the subject? Mainly because the link between ideas and the Thatcher government has frequently been over-generalised and under-specified. The connection between individual thinkers and schools of thought has been to present them as a bloc, in some ways encouraged by economic liberals, in particular ‘the Mont Pelerin collective’.2 The result has been often to blur significant distinctions. For instance Eric J. Evans, in Thatcher and Thatcherism (2004), describes Keith Joseph’s conversion to monetarism in the 1970s. Above all, following the theories of the so-called Chicago school of anti- Keynesian economists, F.A. Hayek and Milton Friedman, Joseph called for strict control of the money supply.3 1 One example of the explicit link between Hayek and Thatcherism is found in Anthony Seldon, Daniel Collings Britain Under Thatcher, (London: Longman, 2000), p. 68. 2 Margaret Thatcher Foundation (hereafter MTF), MTF 117203, ‘Friedrich Hayek letter to Arthur Seldon’, 13 May 1985. 3 Eric J. Evans, Thatcher and Thatcherism, (Abingdon: Routledge, 2004), p. 7. 6 Robert Ledger Neo‐liberal Thought and Thatcherism Lastly, the application of liberal ideas to specific policies has not been explored as extensively as the overall picture of Thatcherism, political events like the Cold War and Falklands conflict or individual personalities. The intricacy of policy formulation and ideology has informed later events and trends. These points, and an attempt to differentiate the components and impact of free market ideas, form the core of this thesis. The strands of modern liberal economic thought, sometimes dubbed ‘neo- liberalism’, will be brought into sharper focus and compared with the policies of the Thatcher government. The question of how and to what extent these ideas were implemented in particular policies is the second objective of this project. ‘The Thatcher government was influenced by Hayek and Friedman’ or internationally ‘Thatcher and Reagan brought about free-market revolutions in the 1980s’ typifies the kind of statements found in many texts.4 The Thatcher government has also been seen as being at the vanguard of a neo-liberal project or a shift toward ‘market fundamentalism’.5 In the very broadest sense all these assumptions are true but it is rather like saying the Soviet Union was influenced by Karl Marx or, to use a more obscure example, that New Labour was influenced by Anthony Giddens. The reality is far more complex. This thesis adds to the growing interest in how neo-liberalism has developed since the early to mid-twentieth century and its different positions. Apart from the analysis of ideological models and actual policy, this project attempts to link ideas with policy makers and politicians, if indeed any existed. 4 Joseph Stiglitz, Freefall. Free markets and the sinking of the global economy, (London: Penguin, 2010), pp. 17-18. 5 Taylor Boas and Jordan Gans-Morse, ‘Neoliberalism: From New Liberal Philosophy to Anti-Liberal Slogan’, In: Studies in Comparative International Development, (44:2, June 2009), p. 138. 7 Robert Ledger Neo‐liberal Thought and Thatcherism The eleven and a half years that the Thatcher government was in power is clearly of great historical significance. Contentious, polarising and controversial, these years did much to change the political landscape of Britain. Lower taxes, for the most part low inflation, mass consumerism, home ownership, ‘choice’ in public services, trade unions as an ‘outsider’ group and privately owned utilities are all now the norm. This list would have seemed unlikely to mainstream public and establishment opinion from the Second World War until the late 1970s but to reverse the new orthodoxy now would require huge upheaval. Two unique aspects of the government between 1979 and 1990 mark it out. Firstly, the personality, character and leadership style of Margaret Thatcher. Secondly, the ideas, dogma or philosophy that the government’s policies embodied. The former has been the subject of reams of material, biographies, films - and clichés. With over thirty years since Margaret Thatcher came to power, and with an increasing number of government and personal papers now being declassified, there is space for further investigation of the relationship between liberal economic ideas and Thatcherism. Research Questions • To what extent was the Thatcher government influenced by liberal economic thought? Which strands of thought and which thinkers exerted most influence and in which areas? • How closely did the policies implemented by the Thatcher government match neo-liberal models? Why were there differences? • Was Thatcherism a macro or microeconomic project? How did this alter over time? 8 Robert Ledger Neo‐liberal Thought and Thatcherism • To what extent did the Thatcher government actually reduce the power of vested interests? • What impact did liberal economic thought have on the foreign as well as on the domestic policy of the Thatcher government? • How did economic liberals view the policies of the Thatcher government? Research Methods This study uses a variety of qualitative research methods.