With the debate swirling about Margaret Thatcher’s legacy and her government’s record, it’s worth taking a look at what the cold, hard economic data has to say about her time in office. Of course, growth rates and unemployment figures can’t tell us everything about a period, but they can at least provide a bit of substance to mix with the well-worn rhetoric.
1. Average growth. Under Thatcher, GDP rose by 29.4 per cent — an average of 0.6 per cent growth per quarter. (That’s the same as the average growth rate from 1955 to 2013.)
2. Manufacturing jobs lost, but more service jobs created. A net of 1.6 million jobs were created under Thatcher. The manufacturing industry lost 1.9 million, while the services sector grew by 3.6 million.
3. Unemployment up, then down, then up again. The unemployment rate rose from 5.3 per cent to a high of 12 per cent in 1984, before falling to 7.5 per cent when Thatcher left office. It began to rise again in 1990, and continued to do so after she left, reaching a high of 10.8 per cent in January 1993.
4. Inequality rose dramatically… The Gini coefficient went from 0.25 in 1979 to 0.34 in 1990.
5. …but were the poor better off? Thatcher said she didn’t care about the gap between rich and poor, but rather that everyone became better off in absolute terms. So did the poor get richer over the Thatcher years? As the below graph shows, they did (slightly) before you take into account rising housing costs. The income of the 10th percentile rose by 4.6 per cent in real terms before housing costs (the income of the 90th percentile rose by 47 per cent). But after housing costs, the real income of the 10th percentile fell by 2.4 per cent — so the poor were in fact worse off in 1990 than in 1979 (the 90th percentile were 48 per cent better off after housing costs).
6. Shrinking the state? Government spending actually rose by 17.6 per cent in real terms under Thatcher, but because that was slower than overall growth it came to represent a smaller share of the economy. Spending was 45.1 per cent of GDP when Thatcher took office and 39.4 per cent when she left.
UPDATE: And, as a seventh graph, here’s inflation under Thatcher. On the Retail Prices Index, it peaked at 21.9 per cent after her first year in office, and fell to a low of 2.4 per cent in the summer of ’86. But then it began to rise again, to a peak of 10.9 per cent in Autumn 1990. So inflation was 10.3 per cent when Thatcher took office and 9.7 per cent when she left it. But the difference was that 10 per cent and rising in 1979, but 10 per cent and falling in 1990.
Tags: Economics, Growth, Inequality, Margaret Thatcher, Public spending, UK politics, Unemployment