Margaret Thatcher became prime minister of the UK on May 4 1979 and remained in office for more than 11 years. Her government reshaped the politics of the UK and, after the election of Ronald Reagan as president of the US in 1980, these two reshaped the world. But, in the aftermath of the biggest financial crisis since the 1930s, one that centred upon the US and UK, where the world's two leading financial centres are located, what is left of the Thatcher revolution?
Mrs (now Lady) Thatcher entered office determined to reverse a national decline marked by high inflation, slow growth and trade union militancy. Her government emphasised monetary control, deregulation, particularly of the financial sector, flexible labour markets, and privatisation. The post-1997 Labour government did not overthrow these policies but built upon them. Labour increased public spending but not hugely: in 2007-08, expenditure was below where it had been under Mrs Thatcher until 1988-89. Labour also abandoned active fiscal policy, adopted inflation targeting, introduced central bank independence and welcomed the vigour of the financial sector.
The world has now changed. The state has been forced to rescue the financial sector from implosion. Macroeconomic stability has vanished: in the third quarter of 2009, UK gross domestic product was 10 per cent below where it would have been if the trend from 1991 (annual growth of 3 per cent) had continued after the beginning of 2008. A huge fiscal deficit has also emerged: current spending for this financial year was forecast in the March 2009 Budget to be 3 per cent higher than had been forecast a year earlier, but the forecast of nominal GDP was 9 per cent lower and of current revenue 18 per cent lower. This last debacle largely explains the deficits experienced and forecast.