Here we are again, chatting about the defining political ideology/movement of the last 40 years. Welcome to Part 3 of our quadrilogy: The Millennial Guide to Neoliberalism.

This week, we finally get around to talking about the era when Neoliberalism broke into politics: the 1980s. Ubiquitous shoulder pads, masters of the universe roaming the streets of Manhattan and London, Shakin’ Stevens inexplicable fame. All terrifying developments. But none quite as terrifying as the policies and success of the key figures from this week’s pod.

That’s right. It’s time to talk about Margaret Thatcher and Ronald Reagan.

Part 1 of the Millennial Guide to Neoliberalism was all about what it actually is, conceptually, and what gave rise to it. You can check it out here.

Part 2 takes in the big thinkers behind it all and how they became mainstream. See that here.

Part 4 takes us into the 90s and the rise of the Third Way. Listen to that here .

. Part 5 brings us right up to the financial crisis — the end of the End of History. Listen now.

Was Thatcher a Neoliberal?

Margaret Thatcher was the UK’s first Neoliberal politician, and moved quickly to apply Milton Friedman’s monetarist policies. She jacked up interest rates to stem the money supply and lower inflation. And it worked, in a way. Inflation fell very quickly. But there were consequences to that.

Her policies caused a sharp rise in the value of the pound which crippled manufacturing and caused a recession. Unemployment rocketed up from 4% to around 11%, and stayed there for a decade. That’s over 3 million people unemployed, in a society that hadn’t seen that kind of unemployment for two decades, bringing with it terrible effects on deprivation and mental health and family breakdown and even racial tensions. It’s one of the key reasons the British working class looks back on Thatcher with total disdain.

But don’t loads of people love Thatcher? Why?

During the 1970s, stagflation was rampant and voters were pissed off. The UK was suffering and the dominant Keynesian economics of the time had no answers. With prices rising, unions were demanding wage increases to match, which in turn contributed to prices rising. In 1978, the Labour government decided to cap public sector pay rises, which led to widespread strikes during the coldest winter for 16 years. This was the so-called Winter of Discontent.

The whole decade of national decay and union strife in the 70s is burned into the memories of our parents. It’s why many were ready to vote for a radical right-wing government, and why as a demographic our elders tend to be quite cynical of democratic socialism.

So in 1979, Margaret Thatcher’s Conservatives swept into power promising greater control of inflation — now at a whopping 14% — and to tame the trade unions, who were perceived as simply too powerful.

Thatcher applied her own version of shock treatment, taking advantage of a population reeling from the Winter of Discontent. She could only push it as far as her powers would allow, and as far as her voters could stomach. This was quite far though, helped by some clever framing of policies. “The medicine is harsh, but the patient requires it in order to live” is one good example. We’ve seen similar messages accompanying right-wing policy ever since.

What were her policies?

In Part 1 we explained the three core policy prescriptions of Neoliberalism: lowering taxes, privatization, and deregulation.

Over the course of Thatcher’s eleven years in office, she cut income tax massively. The base rate fell by 8% to 25%, and the top rate by more than halved to 40%. To put that in perspective, that is a higher base rate, and lower top rate, than we have today.

Thatcher really kicked off the trend for privatisation. British Petroleum, British Telecom, British Airways, utilities like electricity and water — these were all privatised. This was unthinkable a few years before, but it kicked off a trend — we now have privatised trains, prisons, postal services, state schools, and countless other public assets sold to the market. There are some benefits to privatisation that Neoliberal governments are keen to play up — government gets a nice cheque from the sale; and in some instances, services have improved since privatisation.

Then, Thatcher waged something of a war against local government (a process that has continued ever since). Her supporters claimed that it didn’t deliver value for the taxpayer and was riddled with cronyism. Her response — to close the Greater London Council and six other major metropolitan councils — was quite controversial. This kind of move is typical of Neoliberal administrations. Certain areas tend to vote left-wing leadership into local councils, which then acts as a blocker to implementing Neoliberal policies across the country. By shutting down local government, and centralising power to Westminster, Neoliberal policies have a greater chance of going unchallenged.

What about Reagan?

He became President of the USA in 1981, about two years into Thatcher’s premiership. They were close friends and allies, with a similar story once they got into government. Both came to power during poor economic conditions, and both pushed through a similar programme of monetarism, tax and spending cuts, privatisation, and deregulation.

Many of his policies were arguably beneficial for the economy, but many were problematic for American society long-term. He rolled back social programmes like Medicaid, food stamps and federal education. He popularised the stereotypes of ‘welfare queens’ and ‘benefit cheats’ that have helped qualify stripping back the social safety net ever since. By 1986, he had managed to halve the number of federal regulations that existed before he took office, de-regulating the broadcast industry, the financial sector, and the environment. These have had all sorts of awful consequences. Like Fox News.

Was he just copying Thatcher?

Yes and no. Reagan harnessed that narrative of the American Dream, while Thatcher was all about Victorian values. Once you persuade people that working hard inevitably means wealth, it’s a small step to persuading everyone that the poor aren’t hard-working. And then you’ve justified inequality.

Reaganomics, like Thatcherism, redistributed a lot of wealth into the hands of the rich, with the claim that this would ultimately benefit everyone. The idea was that the rich would then invest in business and spend on the economy, benefiting us all. Critics called this ‘trickle-down’ and even ‘voodoo’ economics. It’s completely discredited, but still popular across American and Right-Wing politics - the Republicans just passed a massive tax cut based on this very story.

A lot of this is still mainstream. What are people turning against?

Inequality was built into Neoliberal policies and it is probably going to take them down. Particularly among Millennials, the consequences of pushing policies that drive inequality are becoming mainstream gripes.

OECD studies show that more unequal societies have both worse social and economic outcomes. There are many reasons why trickle-down doesn’t work. The rich tend to save their money in tax havens rather than contributing to the economy. When they do invest their money, this tends to be on assets not business, which delivers no jobs but can push prices up for everyone else. A great example of this is here in London, which suffers very high house prices and endemic homelessness, while plutocrats sit on swathes of empty housing in central areas simply watching the value go up.

Of course, people dispute this. Around the time of Thatcher and Reagan a network of Neoliberal think-tanks were set-up, promoting Neoliberal policies at all levels of politics and long after they left office. Organisations like The Heritage Foundation, Cato Institute, Manhattan Institute, Centre for Policy Studies, Institute for Economic Affairs and Adam Smith Institute are still with us today, and still highly influential.

Thatcher and Reagan won successive elections, thanks to a mix of things like some attractive policies, personal charisma, blaming the poor, a more stable global economy, and boosters like the Falklands War. But the collapse of Keynesianism had seriously undermined democratic socialism, and when the Democrats and Labour lost consecutive elections they had to rethink their philosophy.

And that takes us to next week.

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We’re on the home stretch! Part 4 of the Millennial Guide to Neoliberalism is the last part of this odyssey, a dive into Third Way politics and the economic shocks that have gone on to define our generation.

The Google Doc that houses all our research is already 28 pages long and Warren has near exhausted himself putting everything together. Show your appreciation by giving us love on social media and/or subscribing to the podcast.

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