[Once Upon a Time] The British Disease and Thatcher’s Remedy

Britain, which succeeded in industrialization early on, built the world’s mightiest empire on which the sun never set. Until the early 20th century, the standard of living of the British people was unquestionably the highest in the world.

Yet that prosperity also contained the seeds of decline. Industrialization led to urbanization, and workers concentrated in cities became fertile ground for socialist revolution. With the publication of Karl Marx’s *Capital*, the intellectual climate of British society tilted even further toward socialism.

The British socialists who formed the Labour Party advocated, as their platform, a welfare state “from cradle to grave” and the nationalization of industry. They first came to power in July 1945, just before the end of World War II. The British people voted Winston Churchill of the Conservative Party out of office and elected Labour’s Clement Attlee as the new prime minister. As promised, Attlee’s Labour government carried out the nationalization of major industries and introduced rationing for food and other daily necessities.

For more than 30 years thereafter, Britain followed the socialist path laid down by Attlee. The principles of property rights and individual liberty that had made Britain the world’s strongest power gradually faded from the public mind. Because the government took care of everything, citizens no longer felt the need to work for themselves. To make matters worse, in trying to sustain the welfare state, the top marginal income tax rate rose as high as 90 percent, further eroding the incentive to work. Workers often won higher wages through strikes regardless of productivity. The world came to call this state of affairs “the British disease.”

The British disease reached its peak in late 1978, in the “Winter of Discontent.” As public-sector workers went on strike, hospitals ceased functioning, and mountains of garbage piled up in the streets. Because gravediggers also struck, bodies were left unburied.

At this point, Thatcher, a young female politician from the Conservative Party, became prime minister. She put Hayek’s liberal philosophy into practice through policy. She privatized state-owned enterprises that had been nationalized and sold public housing to citizens. While sharply cutting welfare spending, she also reduced taxes to about half their previous level. There was tremendous resistance from labor unions and others, but because she stood firm and upheld her principles, the British economy began to revive. Thereafter, Thatcher’s policies spread to the United States, New Zealand, Canada, and Australia, and even came to be known as Thatcherism. In the end, even the Labour Party, which had led British socialism, came to accept the foundations of Thatcherism. Britain has once again become a country with a highly dynamic economy.

Original title: [옛날옛적에 ] 영국병과 대처의 처방

Author: Center for Free Enterprise (CFE)

Date: 2006-06-22

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=21&idx=10673