8 - The Political and Electoral Dimensions of the Conservative Economic Strategy

Summary

For a decade and a half, the British Conservative government engineered a radical break with the economic management practices in place during most of the postwar period. On the one hand, demand management policies coupled with a periodic resort to income pacts were replaced with tight monetary policies and fiscal discipline. The public budget was balanced by 1988 and public debt was cut in half from 1979 to 1990. Inflation went down from an average of 16 percent in 1974–79 to less than 4 percent in the early 1990s. On the other hand, the Tory cabinet engaged in a drastic overhauling of the structural conditions of the British economy. After overshooting in the early 1980s, public spending was contained and progressively reduced. Tax rates were cut to spur private savings and investment. The labor market was deregulated. Finally, the public business sector was thoroughly dismantled.

As in the case of the Spanish Socialist government, Thatcher's economic strategy must also be thought of as a political strategy – intent both on making Tory principles hegemonic and on building a stable social and electoral coalition that could maintain the Tory Party in power. In a period of increasing partisan and social dealignment, the Conservative government consciously deployed its economic strategies to secure high levels of electoral support.