Thatcher and the Big Bang

She was especially hostile to what she saw as the excessive independence of the European Central Bank. In her last speech in Parliament as Prime Minister, she attacked the ECB as an institution accountable to no one, and drew attention to the political implications of centralizing monetary policy, accurately forecasting the dangers of a democratic deficit, which now worries many in Europe, and not just in Cyprus or Portugal.

So, in the financial arena, as elsewhere, there is light and shade in the Thatcher inheritance. Her Alan Greenspan-like belief in the self-correcting features of financial markets, and her reverence for the integrity of the price mechanism, do not look as well-founded today as they did in the 1980’s. So, in that sense, she can be seen as an enabler of the market hubris that prevailed until 2007.

On the other hand, it is difficult to imagine that a Thatcher government would have run a loose fiscal policy in the 2000’s. And it is equally unlikely that, had she had her way, the eurozone would be the camel – a horse designed by committee – that it is today.

Howard Davies, former Chairman of Britain’s Financial Services Authority, Deputy Governor of the Bank of England, and Director of the London School of Economics, is a professor at Sciences Po in Paris.

Copyright: Project Syndicate, 2013.

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