Chapter 4 : The years of the Conservatives I. Thatcher She came to power with a radically different agenda from any previous PM. In 1979, the Conservative Party electoral manifesto clearly indicated : “The balance of our society has been increasingly tiled in favor of the state at the expense of individual freedom. This election may be the last chance we have to reverse that process. Her priority concerns were first to liberalize the economy by controlling inflation and restructuring industry, second to strengthen the authority of the state against pressure groups. It was a double aim : privatization and crushing the Union Trades. In 1979n the nationalized industries accounted for 10% of GDP ; in 1988 the privatization campaign had reduced this number to 6,5% of GDP and only 4% in 1992. This privatization was organized in various ways, for instance one way was to sell a certain amount of shares on the market. This was the case for Jaguar and British Airways. Another way was specifically to sell to the companies' employees, for instance with the British transport road company. Moreover, some of the hospitals and services which belong to the National Health Service stated to subcontract to the private sector. One reason for this was obviously to make the new shareholders more open to the arguments of the managers and less to those of the Trade Union (=“popular capitalism”). This privatization program tolled the knell (=sonner le glas, mettre un terme) for many of the industries that have been nationalized by Labour after the second world war. It was also much in keeping with Thatcher's desire to “roll back the frontiers of the state” = one of her mottos. Indeed, when the government presented its first provisional budget for 1979, it was clear that it would follow liberal and monetarists lines. Following Milton Friedman's theories, the government reduced the money supply and tried to bring inflation under control in order to stimulate consumption. The government also decided to cut down public expenditure and the Chancellor of the Exchequer Geoffrey Howe announced that he would cut income tax, especially for the wealthy people where the top band (plus haut revenu) was cut from 83% to 40% (p.20). Unfortunately, these new policies were a disaster for the economy, and as a consequence, employment and output plummeted. The worst effects were in manufacturing : 2 million manufacturing jobs were lost during the 80s. The sector which were mainly affected were engineering and textile. There were a huge number of redundancies and despite these, British firms still had difficulties competing with foreign rivals. As demand rose in the late eighties, British industry lacked the capacity to meet it and imports rose. As industry faltered (= être sur le déclin, sombrer), unemployment again became a significant problem, whereas in the early eighties, unemployment had fallen mostly on Northern England, where the old industries were located. In the second half of the 80s and in the early 90s, the new modern industries of the south-east were hit by the recession. And yet, the government accepted a certain amount of unemployment as a necessary evil to keep inflation under control. Margaret Thatcher's answer to this collapse of the British industry was to go on with privatization. Initially, privatization formed only a small part of Conservative policy, but as the 80s and 90s progressed, it became increasingly important (p 20, tableau 4). Example : the first major privatization was the medical research through Amersham International in 1982. British Telecom and British Airways followed in 1984 and British Gas in 1986. The argument of the government was that privatization would boost the British economy by getting the state out of managerial affairs (idea = boost competition as in a free market economy). In general however, the privatized utilities became private monopolies with very little competition. Privatization was nevertheless popular with the general public as quick gains could be made. By the end of the 80s, the government was making 5 billion pounds a year from privatization. And yet, the money was not invested in long term projects such as, for instance, the modernization of the unreliable and sometimes dangerous transport system, but used for current spending. All in all the success of Thatcher's policy was controversial. Indeed, though she wanted to reduce the role of the state, during their leadership, the authority

of the government became increasingly centralized and interventionist at a number of levels. Another nickname of M. Thatcher was TINA (There Is No Alternative) + the Iron Lady. The privatization of the industry, for instance, was accompanied by a whole series of bodies and quangos (organisation semi publique mais qui a une autonomie). John Major administration from 1990 was in many ways a continuation of Thatcher policies. His policy was still based on Labor economies through redundancies. The dominant characteristic of the British economy was the continued advance of the service sector, especially the media and financial services. Moreover, the government under J. Mayor followed the trend set by Thatcher when he created the private finance initiative in 1992. For example, private contractors pay for the construction costs and then rent project to the public sectors. This allows the government to get new hospital, schools or prisons (former public services) without raising taxes. On the whole though, it proved a disaster as well, because the private sector had to divide the construction into different structures for instance with British railways, the carriages were made by one company, the tracks by another and there was a lack of coordination. Taking stocks (faire le bilan) of the Major years, his economic competence was mixed. His government will best-be remembered for the fiasco of the European exchange rate mechanism = the first stage of the implementation of a single currency. The rate fixed by Euro meant that £1 was worth 2.95 Deutsch Mark, which was too high for the pound. The climax was the disastrous episode of Black Wednesday on the 16th of September 1992, when Britain was forced to get out of this European mechanism. From a vast empire, Britain had thus being reduced to nothing but a small island. At home though, the government was able to bring recovery. The problem however was that John Major's Cabinet had raised billions of pounds in an effort to keep the pound into the European exchange rate mechanism, which destroyed public faith in the Conservatives' economic policies and contributed to their humiliation in the polls in May.