By Choong Pui Yee
In 1979, when Margaret Thatcher became the first and to date, only female Prime Minister in UK, Britain was experiencing high inflation. The newly minted Prime Minister wasted no time and immediately reformed the economic policies to combat inflation. As a fan of Milton Friedman, Thatcher applied monetarist policies and cut public spending; she believed in the efficacy of free markets over government intervention. Thatcher hence introduced privatization, financial deregulation, increasing labor market flexibility, ending state subsidies for major manufacturing companies, private ownership of houses, reducing the power of trade unions and devolving government’s power to local authorities. Today, these measures are also known as Thatcherism to pay homage to the Iron Lady.
“If a man do not work, he shall not eat”
Notwithstanding her goal to reduce inflation, Thatcher’s economic policies was controversial and not well received in conservative Britain. She was known to prefer personal responsibility over government’s intervention. For instance, in her famous ‘Sermon on the Mound’ addressed to the General Assembly of the Church of Scotland, she was quoted saying, “If a man do not work, he shall not eat”. At best, her justification is deemed controversial, at worst, it is a travesty to the gospel. In general, it was just an unpopular idea at that time.
Thatcher’s economic policies resulted in the immediate rise of unemployment rate and recession in the early years of 1980s. She also battled with the miner’s union strike and outwit the union by changing the union trade laws. Although the state suffered unemployment rate in the early 80s, the subsequent recovery saw a four to five percent of annual growth. One of Thatcherism lasting legacies is the results of privatization. As she sold off some key industries, she instantly freed up a great deal of money and created a more competitive market. Some of the companies that was privatized such as British Telecom, British Gas and British Petroleum have also become successful private companies. The financial industry, especially private equity firm also experienced tremendous growth, thanks to Thatcher’s deregulation. The woman who turned UK’s economy around was decisive even when her economic policies were criticized. Despite the criticisms and the initial challenges, her economic policies is proven with enduring success in the form of product-market competition and labor market flexibility.
Now as we compare Britain in 1979 with today’s Malaysia, there are in fact some level of similarities. For instance, both inflation rate and public spending are soaring. Worse, many Malaysians are trapped in the middle income gap as their salary do not rise in tandem with the inflation rate. Consequently, household savings has also dropped annually and those who are in the lower income group have to tighten their belts to survive. Many critics have already called on the Malaysian government to reduce public spending and privatize some of the government linked companies, such as what Thatcher did more than three decades ago. However, opponents of Thatcherism has also warned that the rise of unemployment rate will follow. Thus, it will not just be economic implication per se but political implication because if the ruling government were to take such measures, they will become even more unpopular than it already is. Yet, this may be what Malaysia truly needs now – genuine economic reform. The question is will the government take the risk to make an unpopular decision to change the tide?