As I hope I made clear in my post on Monday, I’m willing to give the old devil her due. But let’s not get carried away. “Margaret Thatcher had more impact on the world than any woman ruler since Catherine the Great of Russia,” Paul Johnson wrote in the Wall Street Journal. In the Times, David Brooks, perhaps confusing her for the Count of Cavour, said that she led a “fervent bourgeois Risorgimento.” Meanwhile, Speaker John Boehner described her as “the greatest peacetime prime minister in British history.”

Even allowing for a bit of grade inflation since the days of Peel and Gladstone and Disraeli, such comments are over the top. Mainly, they are political. With conservatism in trouble on both sides of the Atlantic, right-leaning politicians and pundits are eager for some of Mrs. Thatcher’s aura to rub off on them. In a survey of academics who specialize in British history, carried out in 2010, Thatcher placed second in a ranking of postwar Prime Ministers, behind Clement Attlee, the self-effacing Labour leader who held office from 1945 to 1951. The Times of London, hardly a socialist organ, produced its own list of great Prime Ministers back to the eighteenth century, and Thatcher ranked fifth—behind Churchill, Lloyd George, Gladstone, and Pitt the Younger.

These rankings seem about right. Everybody remembers Churchill, but Lloyd George and Attlee sometimes get short shrift. In raising taxes to pay for old-age pensions and initiating a system of unemployment insurance, Lloyd George’s liberal government laid the foundation for the modern welfare state, which brought economic security and economic opportunity to millions of Britons from modest backgrounds, myself included. (As head of a coalition government, Lloyd George also led Britain to victory in the First World War.) Attlee’s Administration completed Lloyd George’s work, fashioning a “cradle to grave” social safety net and creating the National Health Service. Mrs. Thatcher undid some of this work, but by no means all of it. Even today, David Cameron and his economic hatchet man, George Osborne, dare not extend their budget cuts to the N.H.S.

Industrial Relations

As has been widely stated, Thatcher’s most lasting achievement was to reform a system of industrial relations that had become sclerotic and dysfunctional, and which was holding back innovation and productivity growth—the ultimate source of rising living standards. But it is important to be clear why this was so. Contrary to much of what has been written in the past couple of days, it wasn’t because Britain’s labor-union barons had too much power, or that unions are always inimical to economic growth. The continuing success of Germany, where labor representatives routinely sit on the boards of major companies, demonstrates that’s not true.

An important historical difference between Britain and Germany (and, to lesser extent, France) was that in continental Europe the unions were mostly national organizations structured along industrial lines. This mattered a lot. It meant that when German union leaders negotiated with management about installing new equipment and making changes to work practices they were able to deliver their members, and make sure the agreements stuck. Consequently, it paid German firms, such as Volkswagen and B.M.W., to invest in new equipment and upgrading their workers’ skills. The result was a high-skill, high-wage manufacturing sector that was able to weather competition from developing countries.

In Britain, by contrast, the unions tended to be fragmented, craft-based, and organized at the plant level. National union leaders, with some exceptions, were too weak to make binding deals. Time after time during the governments of Harold Wilson, Ted Heath, and James Callaghan, national agreements were undermined by stoppages and strikes at the plant level, where local “shop stewards” often exhibited all the foresight and enlightenment of the Peter Sellars character in the 1959 movie “I’m Alright Jack.” German-style corporatism simply didn’t work in Britain. The unions were too self-centered and bolshy to go along with it. The managers were too passive and myopic to overcome their resistance. The result was a low innovation equilibrium that saw the output and productivity of British industry fall steadily behind its overseas rivals.

By outlawing secondary picketing and other strong-arm tactics that the unions employed, Mrs. Thatcher changed the rules of the game. In a phrase, she restored the right to manage. (A more loaded but equally accurate way to put it: she tipped the class war in the direction of capital.) The result, eventually, was a jump in productivity, which closed some of the gap with Germany and the United States. Paul Krugman has pointed out that much of the improvement took place in the nineteen-nineties, after Mrs. Thatcher had left power, raising questions about how much credit she deserves, but that isn’t entirely right. In a 1997 monograph, “Britain’s Relative Economic Decline 1870-1995,” one of my old tutors, Nicholas Crafts, an economic historian who is now at Warwick University, noted that in British manufacturing, especially, productivity growth picked up sharply during the nineteen-eighties.

It’s no mystery how this happened. Newly empowered by the Thatcher government, British managers first closed down inefficient plants and expanded efficient ones, which led to higher productivity and higher unemployment. If this “batting average” effect had been all there was to Thatcherism, it wouldn’t have been very significant. But as the years went on, many British businesses, not just the old-line manufacturers, reorganized their production methods and invested in new technology, which generated more sustained productivity growth. In a follow-up paper published in 2011, Crafts noted, “As the age of information and communication technology came along, Britain was able to embrace the opportunities associated with rapid diffusion of the new technologies, which required big changes in working practices and management hierarchies, better than its continental-European peer group. This would not have happened with nineteen-seventies-style industrial relations and a heavily regulated service sector.”

A few figures that Crafts cites tell the story. In 1979, output per employee in German manufacturing was almost twenty per cent higher than in British manufacturing. A decade later, the gap had been reduced to five per cent. Progress was also made in the fast-growing services sector. In a survey of productivity growth in twenty countries carried out by the Organization for Economic Co-operation and Development, Britain ranked twelfth in the period from 1960 to 1973. Between 1979 and 1994, it ranked fifth. To be sure, dear old Blighty was still no world-beater. Compared to the United States and Japan, for example, it was still lagging badly in manufacturing productivity. But it was no longer the “sick man” of Europe—by 2007, output per head in the over-all economy had reached German levels—and that’s the case for Thatcherite shock therapy.