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Home , Chief whip, Francis Pym, Humphrey Atkins, John Biffen, John Nott, Jorge Anaya

Margaret Thatcher’s Cabinet 1982

JHUMUNC 2017

1 ’s Cabinet 1982

Topic A: Determining Sovereignty of the

Topic B: Establishing a Path to Economic Recovery

Committee Overview greater, the fate of the , is at stake. This Cabinet’s job is not only to The committee begins on April 2, protect the UK from domestic and 1982. The Falkland Islands have been international threats, but also to help invaded by the Argentinian Junta at the Margaret Thatcher succeed and thrive as the order of Lieutenant General Leopoldo Prime Minister of the United Kingdom Galtieri and Admiral Jorge Anaya. This during a challenging time. Margaret decision was made after Secretary Nott’s Thatcher’s job as Prime Minister is to lead reluctance to keep the only remaining the country, and help guide its social and British ship in the South Atlantic. This economic policies. As the leader of the signaled British weakness to the rest of the Conservative Party, her job is to keep the world. Conservatives in power as long as possible. It is up to these 22 cabinet ministers To accomplish this goal, she also has to to fend off the Argentinian threat, navigate compromise and work with the Labor Party, the quagmire that is British politics, and which is the second most powerful party in advise Margaret Thatcher, who will be the UK. While the Conservatives supports represented by the chair. Domestically, the right-wing measures, the Labor Party country is facing a recession and supports left-wing measures. consequently faces intense polarization with the Labour party. The Irish Republican Army is becoming more opposed to Margaret Thatcher and her manner of rule, which has contributed to her nickname: the “Iron Lady”. To further complicate matters for the cabinet, Britain and the other Western democracies are embroiled in an ideological war with the Soviet Union. Margaret Thatcher has been the leader of the Conservative Party since 1974, when she defeated in a party leadership contest (in a parliamentary democracy the leader of the party that has Pictured: Margaret Thatcher’s 1979 Cabinet the most seats in Parliament becomes Prime prior to the September 1981 reshuffle. Minister.) This is the first female prime minister in the United Kingdom’s history, and she has taken office at a tremendously tumultuous time. Her legacy and even

2 Parliamentary Procedure military-like discipline with the aim of rehabilitation.1 The Parliamentary Procedure used in this committee will be uniform throughout the entire conference. However, at time Secretary of State for Foreign and some procedures may be overlooked to Commonwealth Affairs maintain the fast pace of the committee. For Francis Pym was Lord President of example, in the event of crises, delegates the Council prior to being appointed may change Parliamentary Procedure to Secretary of State of Foreign and reflect the urgency of said crisis. Commonwealth Affairs in 1982, following Lord Carrington’s resignation during the . Pym is known as a “wet,” as Delegate Biographies he is a conservative in opposition to many of Thatcher’s policies, particularly those Note: designed to reduce inflation and public spending. This stance has caused Thatcher’s 1. Cabinet positions are correct as of inner circle to elude Pym despite his high the September 1981 reshuffle. position in the government.2 2. Margaret Thatcher used the term “wet” and “dry” to denote those who supported her and those who didn’t. Secretary of State for Defense ‘Wets’ are those who Thatcher finds Before being reshuffled to Secretary spineless, as opposed to the ‘dries’ of State for Defense in 1981, John Nott who support monetarist policies served as Secretary of State for Trade in (policies that supported cuts in Thatcher’s Cabinet, where he repealed the government spending and Prices & Incomes policy and privatized borrowing) that are in line with British Airways. In this position, he was Thatcher’s viewpoint. criticized for cutting back on naval spending with the 1981 Defense White Paper, which contributed to Britain’s weak naval display William Whitelaw in the South Atlantic.3 Deputy Prime Minister and William “Willie” Whitelaw was Admiral Lewin appointed to the position after having Chief of Defense Staff shadowed the Home Secretary for three Having served in the for years. Thatcher is a staunch supporter of most of his life, Admiral Terence Lewin is Whitelaw, as he had previously served as Margaret Thatcher’s Chief of Defense Staff. Deputy Prime Minister in Thatcher’s first This position, some say, makes Lewin the Cabinet in 1979. Whitelaw took a hard most powerful man in England. This gives approach to governance, bolstering police forces and prisons in the UK during his tenure, and utilizing a “short, sharp shock” 1 Margaret Thatcher, The Years policy of subjecting young criminals to (HarperCollins, 1993), p. 27 2 BBC News. Thatcher's Class of '79 3 Nott, John. Here Today, Gone Tomorrow: Recollections of an Errant Politician. : Politico's, 2002. Print.

3 him direct access to Thatcher as her sole the Falklands War in order to have Havers military advisor during the Falklands War.4 knowledge and expertise regarding the rules of engagement and international .7 Sir Chancellor of the Exchequer As Chancellor of the Exchequer, Sir Secretary of State for Industry Geoffrey Howe is in charge of financial and Patrick Jenkin served as the Minister economic matters in the United Kingdom. for Energy and the Secretary of State for He has adopted policies to reduce inflation Social Services under Thatcher before being and free up the economy, as well appointed Secretary of State for Industry in as transition to indirect taxation. Howe has a 1981. In this position, he headed the tense relationship with Thatcher to say the Department of Trade and Industry, least, as she assured him that any faults and overseeing the energy and technology weakness with their country’s economy sectors. Thatcher recognized Jenkin as loyal would rest solely on his shoulders.5 and trustworthy, despite his decision to vote for Willie Whitelaw.8 Chancellor of the Duchy of Lancaster and pay-master general Chief Secretary to the Treasury Cecil Parkinson was appointed Leon Brittan served in the Queen’s Paymaster-General, the position in charge of Counsel and as the Minister of State in the government payments and funds in 1981 and until 1981, when he was shortly after was named Chancellor of the appointed Chief Secretary to the Treasury, Duchy of Lancaster in 1982. He was also making him the youngest member of appointed to Thatcher’s for the Thatcher’s Cabinet. He warned the other Falklands War despite his relative lack of members of the cabinet that expenditure on experience. Thatcher trusted Parkinson social security, healthcare, and education immensely, giving him positions would have to be cut during the recession, domestically and in her War Cabinet, no matter how unwanted.9 knowing that the Falklands War would have consequences for domestic policy.6 James Prior Secretary of State for Northern Ireland Michael Havers James Prior held the office of Attorney General Secretary of State for Employment under Michael Havers was appointed the Thatcher. In this position, he and Thatcher Attorney-General for England and Wales agreed that trade unions were too powerful and Northern Ireland under Thatcher in and that this must be addressed, but beyond 1979, making him essentially her chief advisor in the governing of these areas. She 7 appointed Havers to her War Cabinet during "Havers, (Robert) Michael Oldfield, Baron Havers (1923–1992)". Oxford Dictionary of National Biography (online ed.). Oxford University Press. 4 The London Gazette: (Supplement) no. 47904. p. doi:10.1093/ref:odnb/51093 8998. 16 July 1979. Retrieved 30 August 2012. 8 "History of Parliament Online." JENKIN, Patrick 5 , Monday 12 October 2015, (b.1926). N.p., n.d. Web. 11 July 2016. Obituary [paper only], p. 29. 9 Parkhouse, Geoffrey (23 September 1982). "Brittan 6 The London Gazette: no. 52979. p. 11141. 2 July warns 'wets' of cuts". The Glasgow Herald. Retrieved 1992. 3 July 2014.

4 that, the two had serious disagreements as to how the issue should be resolved. As a Secretary of State for Employment result, he was considered to be a ‘Wet’. In Norman Tebbit is a staunch 1981, Prior was named Secretary of State for Thatcherite (Dry) and nationalist. He is Northern Ireland. Many believed that this against trade unions and governmental was because of the many disagreements the intervention in markets. He holds far-right 10 two had over economic issues. views on immigration, European integration, and welfare. He is extremely close with Peter Walker Margaret Thatcher. 13 Minister of Agriculture, Fisheries and Food Peter Walker is considered to be a vocal ‘wet’ and a critic of Thatcher’s Secretary of State for Energy economic policies. He was also a masterful Nigel Lawson is a staunch tactician, running the campaign for Edward Thatcherite (Dry), as he supports many neo- Heath, the former head of the Conservative liberal economics policies. He has a strong Party. An entrepreneur at heart, he was a background in journalism, especially millionaire by the time he took office. financial journalism, which makes him Similar to his parents, he is an avid astute in financial matters. 14 conservative and joined the Young Conservatives at age 13 to eventually 11 become national Chairman. Secretary of State for the Environment Michael Heseltine is a major proponent and player in the Right to Buy Secretary of State for Education and Science movement. He disagrees with Thatcher on Keith Joseph is a strong believer in policies of industrial interventionism. He the economic policies of Fredereick von believes in the important role of the Hayek and Professor . He is government in promoting economic growth. considered to be a ‘troika’ of Tory Party He thinks of himself as half wet and half leadership with Margaret Thatcher, and is dry. 15 known to be intellectually razor sharp. He was born into an Ashkenazi Jewish family Norman Fowler and was raised as such. His work has Secretary of State for Health and Social focused on social issues, as he championed Security the ideas of enterprise, initiative, and the Norman Fowler, in his role as need for . He is a trusted Secretary of State for Health and Social advisor to Thatcher, and is a strong believer 12 Security, has strived to promote health in supply side economics. education and provide for the well-being of his citizens. He was one of the longest-

10 Margaret Thatcher, The Downing Street Years (HarperCollins, 1993), p. 28. 13 11 Mark Garnett, ‘Walker, Peter Edward, Baron Oxford University Press, A Dictionary of Political Walker of Worcester (1932–2010)’, Oxford Biography, 1 rev. ed Dictionary of National Biography, Oxford University 14 Oxford University Press, A Dictionary of Political Press, Jan 2014 Biography, 2nd ed. 12 Biffen, John,’Keith Joseph: Power behind the 15 Keegan, William,’Wet or dry, Lord Heseltime throne’, Guardian can’t change the economic weather’, Guardian

5 serving cabinet ministers under Margaret Nicholas Edwards 16 Thatcher. Secretary of State for Wales He is a staunch Tory (Conservative) George Younger and supports many of Thatcher’s policies Secretary of State for Scotland (Dry) taking effect in Wales. He is proud to Younger comes from a family of be of Welsh descent and attempts to support brewers and is an active Conservative Welsh cultural initiatives whenever possible. Politian. He is a former army veteran and is 20 completely supportive of the armed forces, regardless of the budget they required. He Lord Hailsham of St. Marylebone also supports interventionist policies in Lord Chancellor 17 Scotland. Lord Hailsham is a war veteran and is seen as a left-wing conservative. He is also a major player in the Justice Secretary of State for Trade and President Department. He is not a supporter of of the and could be considered a Biffen is the former secretary of the ‘wet’. He wants to establish a Britain where Treasury. He has been suffering from a immigrants are not second-class citizens. He blood disorder for quite a while. Biffen is considers himself to be a British patriot. 21 considered to be a dry as he supported Thatcher’s economic policies (reduced public spending and lower taxes). Biffen, on principle, does not support international 18 Humphrey Atkins served as military involvement. Margaret Thatcher’s Chief and retained his position because of his David Howell neutrality during the conservative leadership Secretary of State for Transport battle in 1975 and his skills as chief whip. Howell is a staunch conservative, Atkins misjudged the Falklands situation believing in the restoring power of the and saw negotiation as the best tactic as economy and in smaller government. He is would not invade. The Lord Privy against socialism, labor unions, and over- Seal is largely a symbolic post and is taxation. He views himself as a British appointed to a trusted colleague. 22 patriot. 19

16 Bloomberg,’Norman Fowler’, Bloomberg 17 Mark Stuart, ‘Younger, George Kenneth Hotson, Baron Younger of Prestwick and fourth Viscount 20 Younger of Leckie (1931–2003)’, Oxford Dictionary Davies, Daniel, ‘Margaret Thatcher: Her contested of National Biography, Oxford University Press, Jan legacy in Wales”, BBC.com 2007; online edn, Jan 2011 21 S. M. Cretney, ‘Hogg, Quintin McGarel, second Viscount Hailsham and Baron Hailsham of St 18 Simon Heffer, ‘Biffen, (William) John, Baron Marylebone (1907–2001)’, Oxford Dictionary of Biffen (1930–2007)’, Oxford Dictionary of National National Biography, Oxford University Press, Jan Biography, Oxford University Press, Jan 2011 2005; online edn, Jan 2011 19 Howell, David. ‘Notes to Margaret 22 Cosgrave,Patrick, ”Obituaries: Lord Thatcher’Margaret Thatcher’s Personal Collection Colnbrook”Independent.co.uk

6 Topic A: Determining Past Action Sovereignty of the Falkland 1594 Claimed by Richard Hawkins for

Islands Queen Elizabeth 1

1764 Introduction & Historical French Diplomat Louis Antoine de Bougainville settled at Port Louis on East Background Falkland (See Appendix A for a Map of the Falklands) Margaret Thatcher’s popularity is 1766 decreasing at home. The Social Democratic Captain John MacBride settled at Party is resurging and internal conflict rages Port Egmont for the British. The same year, on with the wets. Action in the Falklands the Spanish agreed to take over Port Louis may resolve some of these issues, as it may from Bougainville and re-named Puerto de solidify support behind Thatcher and a La Soledad under the jurisdiction of the common cause: retake the Falklands. Spanish. The Falkland Islands (known as the Malvina Islands to the Argentines) are group 1770 of islands 300 miles (480 km) off the coast Spain takes Port Egmont from the of Argentina. They are a United Kingdom British Overseas Territory and have been for the past 150 years. The current population of the 1771 Falkland consists of 1,800 Falklanders. Through diplomatic talks, Port The Falklands Islands, though in Egmont is given back to the British. dispute for the better part of 3 centuries, has been under British control for quite some 1774 time. Although there are not many British Britain withdrew from Port Egmont forces stationed near the Falklands, it is to supply more troops to dispel the essential to Britain’s interests in South American Revolution America due to its positioning near South American markets. British Intelligence 1811 Analysts claim the recession at home in Spain withdraws from Puerto de la Argentina has led to the invasion. The Soledad, as the Latin American colonies Department of War believes that the were in revolt. recession in Argentina has decreased popularity. In an effort to bolster popularity, the leader of the military junta General 1816 has authorized and The old Spanish colonies on the 23 Falklands declare unrecognized planned an invasion of the Falklands. independence from Spain

1825 A Treaty of Amity, Trade, and 23 The Week, ‘Falklands War anniversary: How did Navigation signed by the Government of the conflict start?’, theweek.co.uk Buenos Aires and Britain. Recognition of

7 territory or legal rights were not covered by Details of the Argentinian Coup this treaty. Juan Peron, a former beloved 1826 conservative President who served two non- Louis Vernet – Citizen of Buenos consecutive terms, died in 1974. The Aires – settled Puerto de la Soledad with the unsuccessful efforts of his successor and permission of the British. widow, Eva Peron, to prevent government corruption and economic degradation led the 1829 military to overthrow the government in a Buenos Aires claims island, bases it coup and establishe a military junta. At the on a claim that it has inherited from Spain. head of this new military junta was the army Britain issues a formal protest and claims commander and now President Jorge Videla. sovereignty over the Falklands Islands. Many were arrested and killed while torture and mass executions became the norm. It 1833 has been estimated that roughly 9,000 Captain Onslow declared Port Louis people ‘disappeared’ in military jails. for Britain, the small group of soldiers sent In 1977, a supportive Leopoldo from Buenos Aires a few years earlier left. It Galtieri became the commander-in-chief of has been under British administration since the army. This was his first introduction to this date. the national stage as the one of the most prominent leaders of the military. By 1980, 1845 under President Videla, inflation dropped to Stanley becomes the capital. under 120 percent from the previous 500 percent inflation that was prevalent when 1947 Videla had taken power. Government The United Nations classifies the spending had decreased, wage increases Falkland Islands as a Non-Self Governing were squashed, inefficient public industries Territory (NSGT) were sold to private industries and private investment was encouraged. Regular 1960 Argentines, still suffering the effects of the previous regime, were excited by the UN Resolution 1514 grants Self – prospect of an economic recovery. Determination to all peoples in a NSGT In 1980, after Videla retired, power

was passed to General Roberto Viola,the 1966 former army chief. Under his leadership, the Britain and Argentina begin talks economy was not as strong as originally due to UN pressure. thought and it soon began to weaken; inflation increased and economic growth 1971 decreased. Essentially, Videla’s work Communications Agreement ratified unwound and was found to be unsustainable. by Britain and Argentina agreeing that This caused discontent which eventually led external communications are to be provided to demonstrations and the further to the Falkland Islands by Argentina. disillusionment of Argentinians. They were waiting for a leader who would assuage and solve these problems. This created the perfect opportunity for Leopoldo Galtieri.

8 Galtieri soon began to express political Contemporary Conditions ambitions and even visited the United States of America twice to position Argentina as an Roughly two weeks ago, Argentine anti-communist country. He was described scrap metal workers hoisted the Argentine as a “majestic general”, a charismatic and flag on South Georgia, a territory under the charming individual. control of the British 810 miles east of the Soon after his return from his second Falklands. South Georgia is uninhabited visit to the United States of America, except for a British Science group. Galtieri foresaw the end of General Viola’s The group of about forty workers, presidency and took his place as the head of led by Constantino Davidoff, received a the Argentine political establishment. He contract to take apart an old whaling station took the opportunity and solidified control. on the island of South Georgia, at Leith He fired rival generals and awarded his Harbor. They hoisted the Argentine flag, supporters with the positions. On December which may or may not have been on the 22, he was sworn in as a two-year term orders of General Leopoldo Galtieri. 25 president, the third since the coup in 1976. British forces sent the HMS Endurance, an In an effort to be seen as Argentina’s Antarctic Research Vessel, and 21 Royal savior, Galtieri enacted significant economic Marines to disperse the unlawfully stationed reforms. He reformed government salaries Argentines until they returned back to allow government workers to continue Argentina after a few days. This increased having purchasing power and move the tensions over the Falklands War and began economy forward. While Galtieri enacted to bring more attention to the issue. the well-intentioned reforms they led to even Although Argentina and Britain were further demonstrations. Galtieri’s savior attempting to solve the question of complex had backfired. sovereignty through diplomatic means, this In an effort to regain popularity and was a physical and possibly military attempt prevent further disapproval, Galtieri at an infringement on established British attempted to regain Argentine’s trust by sovereignty. solving a problem held deeply ingrained in On April 2nd, General Leopoldo the conscious of Argentina: the sovereignty Galtieri sent 3,000 Argentine Special Forces of the Falkland Islands. Every Argentine to invade the capital of the Falklands – Port grew up learning that the Malvinas Stanley. Governor Rex Hunt and the few (Falkland Islands) belonged to Argentina, Royal Marines there surrendered. although it was controlled and governed by Coincidentally, 6 months ago, the British Britain. intelligence service had looked at the Since Galtieri became President of situation and claimed, “The Argentine Argentina, confidential plans were drafted to nd government would prefer to pursue their invade the Falklands. On April 2 , 1982, sovereignty claim by peaceful means.”26 In these plans became a reality and after a short the same 1981 defense report, Secretary battle with the few British soldiers located John Nott (one of the strongest dries) on Port Stanley, Governor Rex Hunt advised to move the HMS Endurance from reneged to the Argentine invaders. General Falklands region. Leopoldo Galtieri had taken the Falklands 24 for Argentina. 25 The Belgrano Inquiry, ’How It Began’ 26The Week, ‘Falklands War anniversary: How did 24 The Telegraph, ’General Leopoldo Galtieri’ the conflict start?’, theweek.co.uk

9 This shows how this invasion had Argentine Military Strength 28 surprised Thatcher and her cabinet, as her The last war Argentina was involved main focus had been on improving the UK’s in between 1865 and 1870. economics performance. If action is to be As of April 2nd 1982, Argentina has taken, it needs to be done swiftly to show the following Air and Naval Capacities: the British government acts decisively in the face of adversity. John Nott has also Argentine Air Force reminded Prime Minister Thatcher of the • 45 Skyhawk A-4B and C attack large economic costs that would be incurred bombers, if the UK decides to get involved militarily. • 37 Dagger Aircrafts The last poll taken by Ipsos, polling • 17 Mirage Fighter Aircrafts put roughly 60% of the British public at • 10 Canberra Light Bombes ‘dissatisfied’ with Prime Minister Thatcher, • 35 Pucara Support Aircrafts while only 25% of the public is satisfied 9 Hercules C-130 Tankers with her performance. These polls indicate • that morale and support of Thatcher’s • 3 Learjets government is at an all-time low. 27 • 3 Boeing 707’s

Naval Aviation Command Respective Military Strength 4 Super Etendard Fighter Jets 1982 was a strategic time to invade • (French gift) the Falklands. Just as the recession was pushing Britain towards cutting its Navy, • 8 Skyhawk A-4Q Attack Bombers Argentina was augmenting its military • 10 Aermacchi MB.339's capabilities. If Britain is to engage in this • 15 Mentor T-34C's war, it will have to be mostly fought on • 1 Tracker anti-submarine aircraft water and air. Land battles will be costly and • 1 Lynx Helicopter logistically difficult to coordinate. If • 1 Alouette Helicopter Thatcher’s cabinet would like to engage in • 1 Sea King Helicopter war and re-establish sovereignty, then they should be informed on the relative military Navy - Armada Republica Argentina(30,000 capabilities of both parties. soldiers strong) The ships and aircrafts listed are • 4 Patrol Submarines those available to send to the Falklands • 1 Light Fleet Cruiser Islands if necessary. Both armies are able to • 1 Heavier Cruiser mobilize 30,000 soldiers to participate in • 6 Destroyers (Ships with missiles battle. and serves as a communication hub) The purpose of this section is to • 3 Frigates (Similar to Destroyers but compare the two militaries and their smaller) capabilities, not necessarily the precise model and makes of the vehicles. This section is intended to provoke thought of the best military strategies if Britain is to go to war with Argentina. 28 The National Museum: Royal Navy. "Argentine Navy, Army, Air Force - Falklands War 1982." Argentine Navy, Army, Air Force - Falklands War 27 Ipsos Polling, ‘Margaret Thatcher Poll Rating 1982. The National Museum: Royal Navy, 31 May Trends’ 2013. Web. 24 Aug. 2016.

10 British Military Strength helicopters, or planes would be best used for a specific mission? Capabilities29 • 20 Sea Harrier Fighter Jets Questions to Consider • 5 Sea King Helicopters ● How will a potential military intervention affect the already 30 Royal Navy Capabilities suffering economy? • 12 Nuclear Submarines ● What, if any, are the economic • 4 Operational Surface Ships (Carrier benefits to an invasion? Ships) ● What would the ramifications or • 8 Destroyers consequences be to an invasion? • 15 Frigates ● What is the most effective way of establishing and retaining Military Analysis sovereignty? Through established Britain’s Navy and Air Force are diplomatic channels? Through a more technologically advanced, although brute show of force? Argentina has the advantage in number of aircrafts and proximity to the Falklands War. If war does become inevitable, it will Further Research be up to the cabinet to decide how best to use the forces at hand. For further research Margaret Due to the logistic difficulties of Thatcher’s personal website has thousands transporting men halfway across the world, of notes, speeches, and articles from her if war were to break out (and the cabinet time in office, which may be helpful in the moves to retake the Falklands), it would be a jargon that may be used in committee. mostly a naval and air war. Argentina has The BBC covered the Falklands War the sole advantage of being physically extensively and even produced a closer. This places much more pressure on documentary about it. any British war plans, as the British should anticipate the Argentine’s ability to continually repair and re-launch attacks. During the committee, logistical restraints may be placed on what tactics and vehicles the is able to use, therefore it is of utmost importance to prioritize them. In a battle, what ships,

29 The National Museum: Royal Navy. "Fleet Air Arm, Falklands War 1982." Fleet Air Arm, Falklands War 1982. The National Museum: Royal Navy, 31 May 2013. Web. 24 Aug. 2016. 30 National Museum: The Royal Navy. "Royal Navy Warships - Falklands War 1982." Royal Navy Warships - Falklands War 1982. The National Mus, 31 May 2013. Web. 24 Aug. 2016.

11 Topic B: Establishing a Path to Organization of Arab Petroleum Exporting Countries (OAPEC) to launch an embargo Economic Recovery on the United States and their closely tied allies such as Canada, Japan, the Introduction Netherlands, and the United Kingdom. The price for a gallon of oil, which sat at only In 1973, the British economy, under $4.75 in 1973, rose to $12.21 by the end of the purview of then Prime Minister Edward 1975.32 This surge in oil prices meant that Heath, faced a crippling recession. While business leaders would have to raise their this recession was officially only two years prices to maintain a similar revenue long, its detrimental consequences affected structure. Consequently, this sparked an the British populace for well over a decade. inflationary rise in most major consumer The recession, which was not exclusive to goods in Great Britain. The raised price of Great Britain, wounded many of the major oil, and the terribly horrific inflation that economies in the West, including that of the followed, is what lead to the British United States. recession in 1973. Even though unemployment and Historical Background GDP were in recovery phases when Thatcher took office, the Prime Minister still had to confront economic concerns lingering from the 1973 recession. Inflation remained in double digits, trade unions held an enormous amount of power, and there was a general feeling that British trade simply lacked the competitiveness it once had before the recession.33 Margaret Thatcher, in order to combat these issues, imposed an economic plan of . Monetarism is an economic theory formulated by Milton Friedman in the mid-1960s. In its most basic form, monetarism states that the government Protests against Edward Heath in 197331 should play an active role in curtailing the expansion of the money supply through th On October 6 , 1973, Egypt and various monetary policies, such as imposing Syria launched a major attack on Israeli- high interest rates. controlled territories, most notably the Sinai “Thatcherism,” the coined term for Peninsula and the Golan Heights. This major Thatcher’s political and economic offensive on the part of Egypt and Syria is philosophies, additionally included lowered what sparked the Yom-Kippur War. During tax rates and a large of state this war, the United States came to the aid of controlled businesses.34 Thatcherism was Israel by supplying them with weapons. This decision by the United States caused the 32http://inflationdata.com/inflation/inflation_rate/hist orical_oil_prices_table.asp 33 31 Heath. Digital image. N.p., n.d. Web. http://www.economicshelp.org/blog/glossary/thatch . Apr. 2013. Web.

12 based around the idea of self-reliance and Inflation keeping the government out of citizen’s High inflation restricts consumers personal lives – this directly influenced her from being able to buy as much as they were economic ideology. previously able to. Essentially, the power of their money has decreased and this has led to consumer dissatisfaction and a decrease in Contemporary Conditions investment, which can lead to a recession. Current Economic Issues As a result, the economy stagnates. The Currently, real GDP Growth is below graph shows the changes in inflation around 5%, which is higher than the average before Thatcher took office: of 3% for developed countries. Unemployment for the most part has stayed steady, hovering within ±2% of 5%.

Inflation until the 1970’s in the UK36

In order to fight against inflation, Thatcher strongly believes in keeping the money supply stagnant. Money supply is the amount of money in a specific nation’s Unemployment and Real GDP Growth up to economy. If she were to increase the money 1970’s in the UK35 supply, prices and inflation would only continue to rise (the inspiration for this Given these rates, Thatcher did not inherit policy came from Milton Friedman). much of a problem regarding unemployment Thatcher is a strong believer in supply-side and GPD growth. Increasing GDP growth economics, also known as trickle-down may actually have been due to increasing economics, and uses this economic theory as consumer confidence in the leadership of the basis for her economic policies. Margaret Thatcher and her cabinet. It is up Within Thatcher’s cabinet, however, to Thatcher’s cabinet to continue growth and there has been a division between the Wets deal with the larger impending problem of and Dries, which was most directly related inflation. to their support of Thatcher’s economic policies.

35 Wets, thought by Dries to be spineless like a Elliott, Larry. "Did Margaret Thatcher ‘wet’ rags, support more Keynesian policies. Transform Britain's Economy for Better or Worse?" . Guardian News and Media, 08 Apr. 2013. Web. 21 Oct. 2016. 36 Ibid.

13 Dries, on the other hand, broadly support a manage business.” For Thatcher, managers branch of economic thought known as have to “be free” from stringent government Austrian Economics. regulations, especially companies operated and owned by the national government. Tax Policies in the Cabinet Thatcher has set out to achieve this freedom Tax Policies of Margaret Thatcher through privatization. In fact, by the time upon entering office:37 she took office, she had already privatized 38 1979 Budget, British Petroleum and . Geoffrey When enacting sweeping economic Howe reforms, the government may cause Income tax Basic rate cut from 33% unintended consequences, which expands to 30%. further than just the economic livelihoods of Top rate cut from 83% to those who reside in the UK. For example, 60% on earned income this cabinet should be careful that their and from 98% to 75% on economic plans do not contribute to income unearned income. inequality here in the UK, as the struggling VAT Two-tier rates of 8% and middle class may suffer even more if 12.5% replaced by single specific taxes are implemented. 15% rate. Implementation of bad economic policies Excise duties Alcohol and tobacco could also affect home ownership: if the duties reduced; petrol economy is not doing well due to issues like duty increased. high inflation, people are not as confident Company Petroleum revenue tax and hence refrain from buying homes. taxes rate increased from 45% to 60%. The Political Climate Margaret Thatcher has ascended to Government programs such as power against the backdrop of soaring welfare programs, public education, or other inflation and a “winter of discontent,” in public services are mostly paid through which a multitude of labor unions went on taxes. Based on varying different tax rates, strike. Elected on a conservative platform, people may either choose to pay the taxes or Thatcher has pursued strict monetarist seek a lower overall tax rate by using tax policies. However, as her policies have loopholes. It will be up to the committee to failed to produce any significant discuss the tax policies of Margaret Thatcher improvements to the British economy in the and determine which would be the most first 10 months, her Cabinet ministers have effective in easing the economy into become divided in regard to the course of recovery following the recession. action that this government was to Thatcher strongly believes in the undertake. The hardliners, eager to revitalize privatization of draconian British industries, the deteriorating economy, have pressured as she thinks “managers have to be free to

38 Osborne, Alistair. "Margaret Thatcher: 37 "Tax Measures Introduced in Each One Policy That Led to More than 50 Budget and PBR." Fiscal Facts: Tax and Companies Being Sold or Privatised." The Benefits. The Institute for Fiscal Studies, Telegraph. Telegraph Media Group, n.d. n.d. Web. 02 Sept. 2016. Web. 20 Oct. 2016.

14 Thatcher to go tougher with her current By the election of 1979, many households policy platform. They want her to shrink the were beginning to view labor unions as the money supply further, make bigger cuts to source of discord and economic struggle in tax and government spending, and more the UK, a force that even their own party restrictions for labor unions.39 Such (Labour Party) couldn’t control. individuals support privatization efforts as a means of reducing government spending. List of strikes Their opponents, however, think differently. • Jan. 1970- Postal Workers’ Strike They are afraid that this government has • Jan. 1970- (North already alienated too many voters and that Ireland) unnecessary confrontations with labor • Nov. 1970- Colour Strike unions may lead to labor upheavals, which • Jan. 1972- UK Miners’ Strike contributed to the downfall of the last • Dec. 1972- Violence peaks in North Conservative government. Indeed, public Ireland throughout 1972, ending with opinion polls show that that the voters had 500 dead already become restive with Thatcher’s • Jan. 1974- Three-Day Week Strike economic policies. The tension between the • May 1974- Ulster Workers’ Council two camps in Thatcher’s Cabinet continues Strike to escalate. Thatcher, on the other hand, • Winter of 1978- Winter of cannot politically afford to purge the Discontent, including Gravediggers’ dissenters since such a move would make it and Garbage Strikes easier for her opponents to bring down the Conservative government. Economic events • 1960s- Conservative Government Labor Unions in the 1970’s implements ‘stop-go’ economy to prevent inflation The decade before Thatcher became • 1967- Labour Party devalues the Prime Minister was fraught with internal pound again conflict between protesting union workers • Aug. 1971- Nixon takes US off gold and the government’s efforts to revive its standard, marking the collapse of the failing economy. Endless strikes humiliated Bretton Woods system both the Conservative and the Labour • Oct. 1973- OPEC oil crisis, UK parties, prompting many to call the UK an dubbed the “sick man of Europe” “ungovernable government.” During the 1970’s, the British economy lost almost 62,000 worker years of Labor Unions 1979-1981 (under production from strikes and work stoppages Thatcher’s administration) due to labor disputes. The British rate of lost Overview production due to strikes and work There are two major narratives of stoppages was about 150% higher than in Thatcher’s approach to labour unions: the United States during the 1970’s. This 1. She destroyed the labour market, heated political gridlock is often cited as the cheating many workers of living leading reason for Thatcher’s rise to power. wages and sometimes even their jobs. 39 Downie, Leonard, Jr. "Thatcher's Cabinet Sharply 2. She effectively checked labour union Divided on Economic Policy." Washington Post. The power that, for ten years, had been Washington Post, 12 Feb. 1980. Web. 08 Oct. 2016.

15 terrorizing the British economy with impossible demands. Through her harsh yet necessary policies, Thatcher saved the British economy and built the fiscal framework on which the UK continues to thrive upon . These narratives are heavily debated, and Thatcher will likely remain an extremely polarizing figure long after her death. However, there are some ideas which both sides can agree upon: 1. Thatcher was truly seeking to stamp out almost all labour union influence 2. Thatcher backed a fiscally conservative economic model 3. Labour unions strongly resisted Thatcher’s reforms, sometimes resorting to violence

Questions to Consider ● What is the best way to address the recession through all the different means addressed above? ● As a member of Thatcher’s Cabinet, how do you plan to deal with the division in the government? ● What course of action would you advise her to pursue that would both help improve the economy and maintain the necessary public popularity?

16 Appendix A

40 Map of the Falklands

40 The Week, ‘Falklands War anniversary: How did the conflict start?’, theweek.co.uk

17 Appendix B: Review of Basic they would not be able to buy the same amount of goods they were previously able Economic Concepts to due to the relative depreciation of the value of their money.

Unemployment Gross Domestic Product (GDP) 42 There are three types of unemployment. GDP can be measured in 3 ways The unemployment rate consists of three, ● Output measurement: Calculated by detailed statistics adding up the value of all the goods ● Frictional: People moving between and services produced by every jobs single industry in a specific economy ● Cyclical: Temporarily without a (e.g fast food, heavy industry) work due to the economy not being ● Expenditure Measurement: as strong, e.g a recession. Calculated by adding up the value of ● Structural: This type of all the goods and services purchased unemployment is the most by individual consumers/citizens. problematic. This statistic is about a The value you get when you subtract ‘mismatch’ between the number of imports from exports is also factored jobs and the number of people in. searching for a job. This could be ● Income Measurement: Calculated by due to a lack of skills, e.g a miner the adding the total incomes of all could not work in a call service producers in the economy. center after he/she has been trained The Output measurement is the easiest to in one specific area and has one understand and measure – this will be the specific skill. method used when discussing the GDP of the United Kingdom. Inflation Investopedia explains it best: Recession “Inflation is defined as a sustained increase This refers to negative GDP growth, in the general level of prices for goods and a recession is typically classified as such services. It is measured as an annual when there are two consecutive quarters of percentage increase. As inflation rises, every negative GDP Growth, this means that the dollar you own buys a smaller percentage of producers and consumers in each individual 41 a good or service.” economy is not increasing. 43 For example, a milkshake at McDonalds in the 1950’s cost about $.05, currently they cost about $3. As the price of goods has gone up, so has wages of workers In some instances, wages may not continue to rise with inflation. People may be making 42 News, BBC. "Q&A: What Is GDP?" BBC the same amount of money, but if News. N.p., 26 Apr. 2011. Web. 03 Sept. hyperinflation occurs(exorbitant inflation), 2016.

43 "Bureau of Economic Analysis." US 41 Staff, By Investopedia. "Inflation: What Is Department of Commerce, BEA,. Bureau of Inflation? | Investopedia." Investopedia. Economic Analysis, 31 Mar. 2008. Web. 05 N.p., 01 Dec. 2003. Web. 05 Sept. 2016. Sept. 2016.

18 Two schools of economic thought movement had been substantially weakened. Keynesian Economics (Championed Today’s British economy is more vibrant by John Maynard Keynes) and Austrian and dynamic in part due to the labor union Economics (Championed by FA Hayek and reforms of the Thatcher government. During Milton Friedman). the 1979 election, Thatcher’s Conservative Keynesian economics is also known Party described a five point plan for the as interventionism, while Hayek and country. The first task in the Conservative Friedman believed in the restoring power of Party platform (Manifesto) was restoring “a the free economy. For example, following a fair balance between the rights and duties of recession, Keynesian economics would the trade union movement.” It was dictate the involvement of the government. Thatcher’s view that British labor were Hayek would advise that no action be taken in need of reform because “militant” pro- – markets are self-correcting. union legislation enacted by the Labour Thatcher believes in “free markets, Party had allowed unions to bargain for free trade, competition, [and] low tax.” wages and working conditions that made British firms uncompetitive in an Different types of taxes: increasingly global economy. Mrs. Thatcher Income Tax: Tax levied on income also believed that labor laws encouraged received by citizens unions to use strikes and work stoppages “as VAT(Value-Added Tax): Tax on a weapon of first rather than last resort” and goods due to the cost of manufacturing led to “increasingly bitter and calamitous processes industrial disputes.” By the 1990’s, after the Excise Duties: Tax induced on goods Thatcher government reforms, lost produced within the own country’s borders production due to strikes were less than 5% Company taxes: Taxes a company of the levels in the 1970’s. In fact, during has to pay to operate in a specific country, the 1990’s, lost production due to strikes and can be levied on multiple things: number of labor disputes were 22% lower in Britain workers, annual revenue. than in the United States (relative to the size of the countries’ labor forces) and remain Articles For and Against Thatcher lower to this day. Labor union reforms did In defense of Thatcher: not come easily. The coal miner’s strike of Margaret Thatcher was one of the 1984-1985 was long, bitter and violent. The most influential leaders of the 20th Century. global recession in the early 1980’s hit Great She was Prime Minister of Great Britain for Britain especially hard. The British eleven years and was probably the most unemployment rate remained above 10% for important leader of the conservative six years from 1982 through 1987 and movement of the 1970’s and 1980’s. Among peaked at 11.8% in 1984. The employment her many accomplishments, part of her to population ratio of men age 16 to 64 fell legacy will certainly be her role in the by 10.3 percentage points between 1979 and transformation of British labor markets and 1983 (compared to 5.1 percentage points in the labor union movement. When Mrs. the U.S.). Thatcher became Prime Minister in 1979, British labor unions were quite powerful but A critique of Thatcher: labor markets were rigid, inflexible and in Margaret Thatcher was the nemesis many ways uncompetitive. By the time Mrs. of the trade union movement. Together with Thatcher left office in 1990, the labor union miners' leader Arthur Scargill, she managed

19 to destroy the power of the trade unions for almost a generation. Only now, more than 13 years after her departure, are they beginning to find their feet again. Her economic policies helped weaken the unions. The recession of the early 1980s saw manufacturing, the main area of union strength, shrink by half while unemployment soared to over three million. Flying pickets, the shock troops of industrial warfare, were banned and could no longer blockade factories, ports, public bodies and much more during disputes. Strike ballots became compulsory. The closed shop, which forced people to join a union if they were seeking employment in a particular trade, was outlawed.

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