The Downing Street Years
by Margaret Thatcher
Harper Collins Publishers • 1993 • 914 pages • $30.00
The View From No. 11: Memoirs of a Tory Radical
by Nigel Lawson
Bantam Press, London • 1993 • 1,119 pages • $40.00
A quite startling revolution occurred in Great Britain during the years 1979 to 1990. Under the guidance of Prime Minister Margaret Thatcher, with Nigel Lawson as her Chancellor of the Exchequer from 1983 to 1989, Britain steered a course away from democratic socialism toward democratic capitalism. Or, as Lawson observed, a shift to “Thatcherism” defined as “a mixture of free markets, financial discipline, firm control over public expenditure, tax cuts, nationalism, ‘Victorian values' (of the Samuel Smiles self-help variety), privatization and a dash of populism.”
Though more hard-nosed, free-market critics might assert that Thatcherism did not go far enough, or went astray from its fundamental principles at times—and it was most assuredly guilty on both counts—movement away from such a firmly ensconced government “dependency culture” toward an “enterprise culture” should not be underrated. This political and economic journey has been captured by its two principal and supremely self-confident navigators.
Nigel Lawson's The View From No. 11 is a workmanlike, interesting mix of recent economic and political history, an exploration of various economic theories, and analyses of fiscal and monetary issues. In The Downing Street Years, Margaret Thatcher offers a sweeping account of economic and political developments from the local level in Great Britain to the international venue. By the very natures of their positions in government, one would expect greater emphasis by Lawson on economic and fiscal issues, and a more comprehensive tome—covering not only economic and budget issues, but foreign affairs, terrorism, social and cultural policies, defense issues, etc.-by Thatcher. While this is the case, fortunately for the reader Lawson does not shy away from venturing beyond the Treasury's purview, while Lady Thatcher focuses a major portion of her tome on economics.
Both Thatcher and Lawson possess relatively good instincts on economic principles and policies—especially when compared to most of their twentieth-century predecessors in Great Britain. Both, however, falter occasionally as will be the habit of politicians.
Thatcher summarizes her government's general approach on the economy: “Firm control of the money supply was necessary to bring down inflation. Cuts in public expenditure and borrowing were needed to lift the burden on the wealth-creating private sector. Lower income tax, combined with a shift from taxation on earning to taxation on spending, would increase incentives.”
On the matter of industrial policy—which has had a long and dismal run in the British Isles—Thatcher simply concludes that “the fact is that in a market economy government does not—and cannot—know where jobs will come from: if it did know, all those interventionist policies for ‘picking winners' and ‘backing success' would not have picked losers and compounded failure.”
Thatcher sums up her economic policies as follows: “All these areas—trade union power, training, housing and business regulation—were ones in which in varying degrees we made progress in strengthening the ‘supply side' of the economy. But the most important and far-reaching changes were in tax reform and privatization. Tax cuts increased incentives for the shop floor as well as the board room. Privatization shifted the balance away from the less efficient state to more efficient private business. They were the pillars on which the rest of our economic policy rested.” Indeed, the most spectacular gains of Thatcherism were in these two areas.
Lawson offers detailed accounts of various British privatization efforts. He notes: “By the 1992 general election, about two thirds of the formerly State-owned industries in the UK had been transferred to the private sector. Some forty-six major businesses, employing some 900,000 people, had been privatized.” As Lady Thatcher confirms, “Britain under my premiership was the first country to reverse the onward march of socialism. By the time I left office, the state-owned sector of industry had been reduced by some 60 percent.”
Today, it remains easy for armchair economists to declare that more should have been done by Thatcher in the privatization area. However, they fail to appreciate the political difficulties involved. Lawson states: “In advance of every significant privatization, public opinion was invariably hostile to the idea, and there was no way it could be won round except by the Government going ahead and doing it.” As any great leader does, Thatcher moved ahead on privatization based on her principles and was proven correct. This type of action remains scarce among poll- reading politicians.
On the matter of taxes, the Thatcher-Lawson record, though not unblemished, must be commended for its fundamental achievements. Capital gains taxes were indexed for inflation. And as Lawson notes: “Between 1979 and 1989 [Exchequer predecessor] Geoffrey Howe and I between us reduced the top rate of tax on earned income from 83 to 40 percent, and the top rate on savings income from an even more ludicrous figure of 98 percent to 40 percent.”
Areas where these two politicians' otherwise sound economic views faltered—such as succumbing to the “overheating” myth of economic growth and inflation, often irrelevant concerns regarding trade deficits, and convoluted excuses to raise some taxes—tend to stand out against the backdrop of generally positive achievements. Also, a fundamental disagreement between Lawson and Thatcher over international monetary theory damaged the Thatcher government, the British economy, and led to Lawson's resignation. Both books fully explore this rift, as one might expect, from their own passionate perspectives. In many ways, this disagreement is a microcosm of some fundamental monetary differences among market-oriented economists—fixed versus floating exchange rates. Lady Thatcher made the case for free-floating exchange rates, while Lawson pushed for maintaining targeted exchange rates. Unfortunately, neither Thatcher nor Lawson considered gold as a viable monetary standard. Lawson's fixed exchange rates particularly suffered from the absence of an anchor such as gold.
As for the economic future of Great Britain, Lawson correctly calls for more Thatcherism: “More privatization, more tax reform, and a firm grip on public spending.” As for whether or not Thatcher's successor, John Major, believes the same is, to say the least, an open question.
Both The Downing Street Years and The View From No. 11 provide valuable insights into British economics and politics of the past 15 years. Thatcher's book is more readable, though Lawson's adds detail to many economic issues. At a combined total count of over 2,000 pages, reading both books is a hefty undertaking. Obviously, each readily stands on its own. But for those wishing to gain a better understanding of the Thatcher revolution, the benefits of reading both even outweigh the size of these tomes. 
Mr. Keating is Director of New York Citizens for a Sound Economy.