Burnham’s Break with Thatcherism Matters for All Europe

Undoing Thatcher?

In his inaugural speeches, the new Labour leader and Prime Minister of the United Kingdom, Andy Burnham, pointed to Thatcherism as a source of economic maldevelopment and social malaise in the country. While some see little point in speaking about history when people want pragmatic solutions to the cost-of-living crisis — and others have found fault with the speeches themselves — this shift in the framing of the political agenda matters greatly, not only for Britons but for continental social democrats too.

There is a lot to unpack from Thatcher’s decade, when “a series of wrong turns” was taken; but let us just focus on the essentials. Margaret Thatcher walked up Downing Street after the stagflationary 1970s: the UK had been forced to seek funding from the International Monetary Fund (IMF), and a sense of disorder lingered after the “Winter of Discontent”. What was the Conservative answer? Avoiding technical language, Burnham sums it up by placing the question of power at the centre: “Political power was centralised and economic power was privatised.”

Thatcher chose to impose a free-market agenda — neoliberalism, as it came to be known — on the economy, and ruthlessly eliminated all opposition to it. The Conservatives used mass unemployment to break the backbone of the trade unions and to tame inflation. They bought the votes of part of the working class through the privatisation of council houses and promoted the idea of a “people’s capitalism” in which, for many of the people, the participation proved temporary.

While British Conservatives went to ever further extremes in the 1980s, the continental European Union did not. France was governed by the Socialist François Mitterrand, who — at least at the start — experimented in the opposite direction. Germany under Helmut Kohl maintained the comfortable “social market” status quo at home and opened the door to deeper European integration, allowing German business to benefit from economies of scale. Spain under Felipe González chose social democracy as its model.

Black Wednesday — Britain crashing out of the Exchange Rate Mechanism in September 1992 — made it evident to anyone paying attention that Thatcher had delivered no economic miracle. Later, in the 1990s, the UK did enjoy stronger growth in gross domestic product (GDP) than much of the continent, but this owed to the coincidence of a post-Thatcher recovery in Britain and the post-Maastricht transition of the continental EU into Economic and Monetary Union, with its fixation on nominal convergence — which is another story.

Responsibility for decline

Until Burnham’s entry, Britons who felt that life was increasingly stressful — for some, even miserable — had two narratives of blame on offer. The right-wing movement running from the UK Independence Party (UKIP) through Brexit to Reform, together with a growing share of the Conservative Party, has blamed the EU — or, if you prefer, Brussels. The Lib-Lab consensus of the past decade, on the other hand, has blamed Brexit.

The point today is that while Brexit undoubtedly reduced the growth potential of the British economy, Brexit itself is a consequence rather than simply a cause. The immediate cause was the post-crash austerity imposed by David Cameron and George Osborne, coinciding with the perception of rising immigration, rampant inequality, and the unravelling of affordable public services. Gordon Brown once believed he had solved the problem of “boom and bust”, but the casino capitalism left behind by the Thatcher era did not allow this to become a lasting achievement.

Deindustrialisation, northern decline — with the exception of Manchester over the last 30 years — and other territorial imbalances go back to the Thatcherite counter-revolution. In the 1980s and afterwards, Thatcher and her followers built a cult of services and financialisation. The Conservatives did not modernise British industry; they shrank it. Rejoining the EU would cut costs and help overall competitiveness, but on its own it could not bring a complete remedy.

Thatcher’s political centralisation — the abolition of the Greater London Council, for example — has been partly undone through metro mayors in major cities and Scottish devolution, but it is worth exploring today what else can be done. There were also post-Thatcher economic reforms in the Blair-Brown period, such as the introduction of the minimum wage and boosted investment in education, but these were followed in turn by 14 years of Tory rule in ever messier forms. Two years ago, Labour was given a strong mandate to bring change; now Burnham has taken over with the promise to deliver it in real.

The framing of a transformative progressive agenda matters in Britain but also on the continent. Though very few in the old EU member states copied Thatcher in the neoliberal 1990s, many in Central and Eastern Europe — later called the “new member states” of the EU — actually did. It was understood that Thatcherism caused pain, but the reading was that this was a reasonable price for healing. The necessary pain.

In the eastern EU region it was not only the extreme right but also the centre-right, and sometimes even the centre-left, that was mesmerised by the “Iron Lady”. The privatisation of everything became an agenda, with Thatcher as constant reference. And the UK did indeed go to extremes, selling off water supply and rail transport — the latter the regrettable contribution of John Major, who in many other respects tried to correct the flaws of Thatcherism.

The UK was always among Europe’s champions of inequality, but Thatcher pushed Britain further down the road of polarisation. Some at the top of the Labour Party, in a post-Thatcher mood, became — in Peter Mandelson’s phrase — “intensely relaxed about people getting filthy rich”. This had an effect not only inside the UK but across the international policy networks of the progressive family. In Europe and beyond, it became a badge of honour to be called an Iron Lady — not excluding Ursula von der Leyen, who as European Commission president has centralised far more decision-making in her own hands than any of her predecessors.

Today the UK is not an EU member, but we share many concerns, industrial decline and stubborn territorial imbalances among them. Like the late Thatcherites in the UK, the right-wing axis of Friedrich Merz and Giorgia Meloni blames excessive EU regulation and bureaucracy for the decline of industry. And von der Leyen is preoccupied with removing regional development from the EU’s economic governance architecture.

The European dimension

The titanic clash of west European economic philosophies over European integration took place between Thatcher and the European Commission president Jacques Delors. In September 1988, Delors travelled to the Trades Union Congress (TUC) in Bournemouth to tell the unions that there was a social democratic vision of European integration. In response, Thatcher went to the College of Europe in Bruges to declare her opposition to federalism. From then on, the British opted out of almost every new initiative — until eventually, under the leadership of a new Thatcherite generation, they voted themselves out of the EU altogether.

Though not in a straight line, the EU has managed to follow Delors more than Thatcher. There has always been a way to add to the integration when it was necessary and justified. Today’s example is housing policy. Now that the EU engages in this field, it needs to attach analysis and policy advice to the funds made available for tackling the housing crisis. Burnham can certainly be helpful here, since he too has chosen housing as an area where he wants to make a difference. Thatcherism prioritised the “owner-occupier” model, which today accounts for roughly two-thirds of the housing stock, while both Britain and the EU need other models if affordability and sustainability are to be brought together in this field.

The question today is whether Thatcherism can be undone in little steps or in a paradigmatic and systemic way. Becoming confrontational about Thatcher and her legacy should not, however, revive any “Golden Ageism”. Progressives by definition need to look forward and embrace bold ideas. Industrial policy has floated around as a progressive buzzword at least since the great financial crisis, but without a proper definition. Perhaps Burnham’s team can now help define the content. For that, they would need not only to talk the talk but also to walk the walk. Labour in the UK has embraced Mariana Mazzucato‘s ideas of mission-oriented policy, but so far the implementation has been diluted. There is always a risk that office-holders conclude, as John Maynard Keynes observed, that “it is better for reputation to fail conventionally than to succeed unconventionally”.

When Europeans witnessed the introduction of the US Inflation Reduction Act four years ago, at first they did not believe their eyes — and then they convinced themselves that the last thing Europe needed was to do something similar. When Mario Draghi rolled out his report on boosting European competitiveness, EU leaders focused only on its small section about simplifying regulation, instead of prioritising the construction of a common fiscal capacity for innovation and investment.

For social democrats in Europe — and Democrats in the United States — it has become too easy a reflex in recent decades to engage in bogus triangulation and adopt controversial elements of the policy landscape left behind by conservative reforms. “Responsibility” is sometimes deployed as a compelling argument for accepting a conservative economic status quo ante, or a right-dominated centrist agenda. Perhaps this is exactly the point where a “circuit breaker” is needed — in both the UK and the EU.