That landslide victory in the House of Commons, however, did not reflect a nation won over to Thatcherism. The Tory vote actually fell by nearly 700,000, and the party’s share of the vote by 1.5 per cent. It certainly wasn’t a ringing endorsement of Thatcherite economics.
Thatcher had repeatedly said that there was no alternative to the monetarist policies pursued in her first term. It was an argument aimed at dissidents within her own party, who were concerned at the scale of the recession – it lasted right through 1980 and well into 1981 – and at the massive rise of unemployment that followed. She derided them for being ‘wet’, and they reciprocated by proving her right: they carped but they failed to strike.
In fact, there was an alternative and Thatcher – a pragmatic politician despite her proclaimed convictions – together with her chancellor, Geoffrey Howe, took it.
The resolute rhetoric continued, but by the 1983 election, monetarism had already been abandoned, and consequently an economic recovery was underway. The pound had been allowed to fall on the foreign exchanges, the tight control of the money supply had been shelved, and government spending had been greatly increased.
These were policies that had been advocated by Peter Shore, Labour’s shadow chancellor, but the inept leadership of Michael Foot meant that no one was paying attention and the arguments weren’t heard. Meanwhile the Labour split that created the SDP meant that the opposition was divided. (Hence that 1983 landslide.)
Politically, there were very clear alternatives. A leadership challenge by, say, Francis Pym could have toppled Thatcher in 1981. A Labour Party led by Denis Healey could have won in 1983. If the Falklands War hadn’t happened, the Liberal/SDP Alliance might have made more electoral headway.
In all cases, the economic policy would not have deviated greatly from the post-monetarist strategy pursued by Thatcher and Howe. It just would have been more openly trumpeted.
The monetarist experiment that began in 1976 with Labour prime minister James Callaghan saying that we couldn’t ‘spend our way out of recession’ ended with a Tory government doing just that: public expenditure was running at 44.6 per cent of GDP in 1979; by the pre-election year of 1982 it had risen to 48.2 per cent.