rfmcdonald | [LINK] "Margaret Thatcher: European." (Reply)

Alex Harrowell's A Fistful of Euros post making the argument that, as a politician, Margaret Thatcher was much more pro-European integration than her successors in the Conservative Party would have preferred is a great revisionist take. Thatcher as a practitioner of the German doctrine of ordoliberalism? Makes sense.

Margaret Thatcher was underrated as a European politician. As prime minister, she was very much in favour and deeply engaged in the creation of the Single European Act and therefore of the single market. It is a cliche to say that the Brits only think of the European Union as a single market, but this is ahistorical – in the mid-80s, single market completion was the absolute top priority on the European agenda. If Europe is a project under construction, the single market was the phase that was completed in the 80s. The notion of catching up with Europe, competing with Europe, trading across Europe – all of this was ingrained in Thatcherite style, tone, and rhetoric.

British macro-economic policy in the Thatcher years was also driven by European integration. After giving up on monetarism, the UK government decided to establish a fixed exchange rate with the D-Mark, and later formalised this by joining the Exchange Rate Mechanism. In fact, the UK spent as much time under Thatcher tracking the D-Mark as it did targeting the money supply. The notions of “importing credibility” that were used to promote the Euro in the 90s and 00s had an earlier run-out in the UK in the 1980s.

With an open capital account and a currency pegged to the D-Mark at a dramatically high parity, the UK in the late 1980s looks rather like a peripheral European economy of the mid-2000s, with inflows of capital chasing yield, a growing financial sector, a trade deficit, a housing bubble, and a political elite frantically clapping themselves on the back, before the crash.

The UK’s broader foreign and defence policy could have been reduced to the word “NATO”, which is another way of saying that it was focused on Europe. In the early 1980s, UK defence plans were all about the BAOR operational area in Germany and the NATO Northern Flank. In fact, if it hadn’t been for the accident of the Falklands, they would have been much more so, sharply reducing the Navy at the expense of the Army and RAF and the nuclear world. Similarly, Thatcher really didn’t care about the Commonwealth or anything much outside, yes, Europe or the North Atlantic.