What is striking about the seemingly never-ending coverage of Thatcher’s death is the extent to which most of the media, while superficially striving for balance and neutrality when discussing her premiership, have so completely internalised and accepted Thatcher’s own narrative of economic history. Most obituaries have accepted her reforms as necessary – indeed, inevitable – and debate only whether they may have been pursued slightly too harshly and divisively. This is a grave misunderstanding.

To comprehend what Thatcher’s premiership was about means understanding the story of the post-war British economy. Britain has not always been a manufacturing basket case. It was, after all, the home of the industrial revolution, and ran large trade surpluses for much of the 19th and early 20th centuries. However, after 1945, European manufacturing relentlessly caught up with, and then overtook, its British counterpart. This was down to low levels of investment in research, development and cutting edge technologies, which in turn has a lot to do with labour relations. On the continent, centralised and relatively consensual unions collaborated with the government and business in setting wages. This system was known as corporatism; it allowed for restraint in immediate, short term wage increases, with the promise that these would be spent on investment, improving technology and R and D, which in turn would safeguard future employment and prosperity. In Britain, however, a more militant and oppositional union movement existed, making the corporatist bargain impossible. Furthermore, in Germany and the continent more generally, technical education was highly prized and the state invested a great deal in skills and technical training. In Britain, technical education – which was meant to be the 3rd vital component of the tripartite education system, along with grammar schools and secondary moderns – was neglected and ridiculed.

This, then, was the situation which greeted Thatcher: a British economy falling behind because of dysfunctional labour relations and low skills, leading to falling competitiveness and productivity, which then had to be propped up by public subsidies. Unfortunately, her prescriptions were inherently flawed, and her policies have directly contributed to the unbalanced economy we have today. Rather than investing in making these industries competitive again – for instance, by investing in research, development and science, and spending more on education, skills and training the workforce – Thatcher instead cut subsidies for failing industries, destroying the manufacturing base and throwing entire communities into permanent unemployment, while violently confronting and alienating the union movement, rather than engaging and reforming it.

Thatcher saw manufacturing – making things other people want to buy – as old fashioned. She put faith instead in the financial and services sectors, deregulating the City of London and expanding household and share ownership. This was based on her Randian belief in the detached and atomised individual as the only unit of a dynamic society – indeed, she dismissed the very idea of society and the ties of solidarity which bind it. The economy which resulted, rooted in individualism and personal consumption, had to be supported by consumer spending, underwritten either by continually rising house prices – which it was assumed would go up forever – or by greater levels of household debt. Both of these have proven to be a chimerical basis on which to build a sustainable economy.

These short sighted policies in turn also completely undermined Thatcher’s other main goal, which was to shrink the size of the state and reduce the burden of taxation. It is a fact seldom mentioned in the recent pages of obituaries that during Thatcher’s time in office the size of state spending relative to the size of the economy stayed almost exactly the same – at around 40% of GDP – despite her famous claim to have ‘rolled back the frontiers of the state’. This is because, by suddenly ending subsidies to manufacturing, her government made entire communities, many of whom had only ever worked in a certain industry, unemployed, without providing for their retraining. This was based on her dogmatic neoliberal beliefs; it was assumed that the private sector would, magically and unaided, absorb these workers. Instead, there are now entire family’s which have been out of work for more of their working life than not, which must be supported by state funds.

All politicians since Thatcher have been essentially trying to humanise the economic paradigm she constructed, without fundamentally challenging any of it assumptions. The problem is, her legacy is an economy which is systemically broken: a structural unemployment problem which discredits the welfare system and makes it extremely difficult to reduce the budget deficit, accompanied by an emaciated manufacturing system unable to compete with China and the rising economic powers and a dependence on the City of London.

This, then, is the great irony we are facing at the moment of Thatcher’s death: just as Osbourne and Cameron are praising her for ‘saving the nation’, they are beginning to realise the necessity of ‘rebalancing’ the economy back towards the manufacturing and export sectors which her government unnecessarily destroyed, and away from a culture of debt, consumption and financial services which she enthusiastically unleashed. Unfortunately for us all, having bought so completely into the Thatcherite mythology, they are temperamentally and ideologically unequipped for this task.

By David Yarrow