I am not the first to note that Queen Elizabeth II’s death on September 8th, 2022 heralds the end of an era. For many, her presence was the one constant during these past seventy years of change, and her death has come at the tail end of a summer representing a fork in the road for Britain. Public uncertainty surrounding the fate of the monarchy has also become representative of the general sense of unease that the United Kingdom has dealt with over the past year. In the few months since Boris Johnson stepped down, inflation has skyrocketed, energy bills have nearly doubled, the pound sterling has slumped nearly to parity with the dollar, strikes have continued to intensify, the airlines have continued to face challenges, and public satisfaction with the much-lauded National Health System (NHS) is at an all-time low. As such, it comes to nobody’s surprise that the very real fears of a recession have dominated the headlines. All of this comes at the heels of a fraught few years of former PM Boris Johnson’s repeated scandals, echoes of the coronavirus pandemic, and the continued economic fallout of Brexit.
To anyone who gives even a cursory look to 20th century British history, it is hard to stave off comparisons to the political and economic situation that gripped the UK in the mid to late 1970s, which was also characterized by internal turmoil. During the unprecedented freezing winter of 1978-1979, the so-called Winter of Discontent took hold, during which the country realized the status quo was no longer tenable. Over forty years later, the country seems poised at an eerily similar turning point. While the winter of 1979 heralded Margaret Thatcher’s rise to power, the 2022 so-called “Summer of Discontent” has left the country with new Prime Minister Liz Truss. Ms. Truss has famously attempted to fashion herself as a second Thatcher, and while there are similarities between the two, there are 40 years between them and the contexts in which they are operating. While there isn’t a single solution to fix national sentiment, Britain must understand that Truss is no Thatcher and that the new government must take immediate strides for structural reform, or face a series of dark, recessionary years in the foreseeable future.
For context, in the two decades following the Second World War, Britain experienced an economic "Golden Age”, during which the country experienced its fastest ever economic growth, 2% unemployment, the construction of national motorways, increased productivity, housing construction, the establishment of a strong welfare state, and overall raised standards of living. The prosperity reached such a degree that in 1959, Queen Magazine–now Harper’s Bazaar–declared that “Britain has launched into an age of unparalleled lavish living,” where average wage was high and unemployment low. Keynesian economic thinking came to dominate the post- war economic consensus, and Britain enjoyed nearly twenty years of economic success. All of this came to a screeching halt in the mid 1970’s.
Even though the UK finally entered the European Economic Community in 1972, throughout the decade, Britain experienced mass strikes by coal miners and rail workers, the effects of the 1973 oil crisis, and widespread blackouts due to lack of available electricity. Unemployment rose once again, exceeding 5%, and inflation peaked at a staggering 25%. In 1976, the Labour Government was forced to borrow $3.9 billion from the International Monetary Fund (IMF) to prop up the value of the pound sterling, which had severely dropped in value in relation to the dollar. All of which culminated in the aforementioned Winter of Discontent, where nearly every industrial union went on strike. This included everyone from gravediggers to waste collectors, NHS employees, and truck drivers. They demanded pay raises greater than the limits the Labour government was willing to give, as the government was desperate to tamp down inflation. The strikes caused massive public unrest and inconvenience amid unprecedented freezing temperatures. Unsurprisingly, the Labour government fell in 1979 and Margaret Thatcher was elected as Prime Minister.
Thatcher is perhaps the most controversial figure in modern British politics, equally reviled and beloved. Her government marked a new era in economic policy, adopting what is recognizable to Americans as traditional conservative policies. This included deregulation, privatization, an emphasis on the free market, an overhaul of relations with labor unions, and massive tax cuts. The government adopted stringent economic and fiscal policies to reduce inflation and stuck to them. And to Thatcher’s credit, they were overwhelmingly successful, as inflation was tamped down from 20% in 1980 to around 4% in 1987.
British conservatives are famously known for flip-flopping on issues and are not known for their ideological consistency. Most cynically put, the Conservative manifesto is to adopt policies that will help them stay in power and remain popular with voters. But Margaret Thatcher was famous for sticking to her policies. While there is no doubt as to the widespread suffering Thatcher’s policies caused through cuts to welfare and reduced government spending, she took the country off the brink of economic collapse.
Returning to the present, it is easy to see where the parallels lie, and on the surface, the current economic situation does not look so different. Liz Truss, another young, female star of the party, from a state-school background, has quickly risen through the ranks to become Prime Minister. Truss has leaned wholeheartedly, and sometimes ridiculously, into this comparison, positioning herself as the second coming of Thatcher. A much-lampooned photo-op saw her in Moscow wearing a nearly identical outfit to Thatcher, and she is even known for wearing the same kind of blouse for which the Iron Lady was famous. However, there are some more meaningful parallels, perhaps best encapsulated by her Reagan-esque belief that cutting taxes will somehow spur productivity growth.
However, this is not 1979, Truss is no Thatcher, and ultimately, her policies make little coherent sense. The ongoing war in Ukraine has defined the current energy crisis, and it was recently announced that the UK was going to face a staggering 80% increase in household energy prices due to limited supply. One of Truss’s first announcements as PM was to cap the per unit cost of energy that providers can charge. This was too popular not to pursue, as the public was nearly united in a push for the government to do something about it. However, this seems to be more of a band aid on a bullet wound, as the government cannot credibly control inflation for the long term by placing a price cap on a good.
The panic surrounding the Nord Stream 2 Pipeline sabotage is representative of this crisis and how a continued reliance on energy sources from Russia will continue to plague the UK. While Thatcher was saved by the discovery of North Sea oil, a miraculous new discovery of oil and gas resource in British waters seems unlikely. If the war drags on, which it seems likely to do, the scarcity of natural gas available to the UK will persist and prices will continue to rise, ultimately placing more pressure on the government to cover the difference, increasing the deficit––which could ultimately cause inflationary effects. Whether it be a serious investment in renewable energy sources or a shift back towards nuclear, Britain must shift away from this continued reliance on natural gas and oil, especially from foreign sources.
Despite the inflationary effects that seem bound to occur, Truss seems determined to cut taxes, even as the government remains adamant that they will cover the shortfall between what consumers pay for energy and the market rate. The plan to avoid a fresh windfall tax on energy producers would mean pushing costs on to taxpayers, with as little as 1 pound in every 12 spent on energy support for households recouped from higher taxes on energy firms. Even Thatcher made the unpopular decision to raise taxes in 1981 to manage the deficit and inflation.
While currently Truss appears to hold steadfast in her views to not raise taxes and remain tough on labor unions, for many, she embodies the flip-flopping for which the conservatives are so well-known. For a historical example, she backed the Remain campaign during the 2016 election, but as the tide began turning, and looked as if they were going to lose, she quite suddenly changed her tune and became one of Boris Johnson’s most ardent supporters. While she has timidly announced increased government spending in the form of energy cost caps, she also remains determined to cut taxes, and reduce inflation. But this mixture is far from the Thatcherite policies that worked, and by pursuing what is popular, she remains sailing with the prevailing wind.
While Truss attempts to pursue Thatcherism 2.0, her government must face that they are operating in a completely different time and context. Thatcher was successful in dismantling the postwar economic consensus that was centered around Keynesian thought and instituting neoliberal economic policies, but Truss is operating in a country that is already neoliberalized and thus must face the fact that state intervention is necessary. The war in Ukraine is certain to drag on, and energy prices will continue to rise, especially during the coming winter when demand goes up as well. The leadership also must accept the reality that if they don’t stop the flood of discontent surrounding the party, they are in danger of losing the next general election in two years, as it was under their watch, not Labour’s, that the country has entered its current predicament. And the leader to get the economy back on track does not need to be from the Conservative party.
For millions, Queen Elizabeth II represented stability, reliability, and greatness. Now, without her constancy, the future state of the United Kingdom has been thrown into sharp relief. National sentiment is polling at an all-time low, and it's hard to find anyone in Britain who is optimistic for the future. The Conservative party must adopt hard and fast policies that take aim at the ailments of our time or risk losing the next election. But whether it occurs under Labour or the Tories, a serious change to the status quo is in order.
A special thank you to Daniel Dorey Rodriguez, who contributed much needed economic policy facts and lived experience for this piece!