Similarities:

- Create lower taxes (As indicated in the previous part by Ngoc)

- Privatisation policies help reduce governmental power so that economic power
was transferred from the government into private hands. Government-owned
businesses and other assets were sold off to private sector.

In UK, Thatcher sold off public monopolies like British telecom, British Airways
and British Gas, The privatization of public sector institutions has created a lot of
government revenue. It is estimated that about 67 billion of revenue was raised between
1980 and 1997.
 Privatisations: number of sales
5

0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

The table shows that the number of privatisations was highest during the 1980s (under
Thatchers era), peaking in 1987 when there were five sales
In US: During his 1st term, Reagan didnt run on an explicit privatization platform, but
he embraced the idea as central to his agenda. By his second term Reagan had made
privatization a centerpiece of his agenda. His 1987 budget proposal included more
privatization proposalsthan any president had ever recommended, including the sale of
two federally owned airports, a railroad, four regional power agencies and their electricity-
generating dams, and weather satellites. However, because of the Democratic congress,
Reagan only succeeded in privatizing a few companies.

- Thatcherism and Reaganomics both lowered the threat of inflation, with

the 1986-1987 period as the least inflationary one
Inflation means a sustained increase in the aggregate or general price level in an
economy. Inflation means there is an increase in the cost of living.

inflation means that your money wont buy as much today as you
could yesterday.

In UK: before Thatcher became PM, at the start of 1980, the biggest problem facing the UK
(and other countries) was cost push inflation. In the late 1970s, UK inflation reached over
20%. This was caused by rising oil prices and wage push inflation
 The UK government under Thatcher then aggressively tackled inflation. To tackle inflation,
the government

Increased interest rates

Reduced Budget deficit through higher taxes and spending cuts
Pursued monetarist policy of trying to control the money supply.
Inflation rate fell from 16.4 % in 1980 to 6.9% in 1990

In US:
As can be seen from the table, US inflation rate under Ford Carter reached a high level of
roughly 14%. However, when Reagan presided over US, the statistic decreased
dramatically, to almost 3.5 % in 1987.
- Increase poverty rate which accounts for greater wealth inequality
Both Thatcher and Reagan proposed many tax cuts, most of which targeted at the
upper class. Especially, Reagans trickle-down economics promised that lower tax
rates should have helped all income levels as the extra money for the wealthy could
trickle along to low-income groups so the wealthy. However, in reality, poverty rates
kept going down, thus wealth inequality worsened.
Specifically:

In UK: according to the Institute for Fiscal Studies, the poverty percentage
climbed up from 13.4% (1979) to 22.2% (1990)
In US: in terms of statistics, the rate of Americans living below poverty
line actually fell slightly under Reaganomics effect, from 14% (1981) to
13% (1988). Nevertheless, that the poverty rate quickly shot up even higher in the
first year of his successor's term, implying that the full effect of Reagan's policies didnt lead
to a decrease in poverty

Percentage of Americans living below the poverty line in 1979: 11.7%

Percentage of Americans living below the poverty line in 1980: 13.0%
Percentage of Americans living below the poverty line in 1981: 14.0%
 Percentage of Americans living below the poverty line in 1982: 15.0%
Percentage of Americans living below the poverty line in 1983: 15.2%
Percentage of Americans living below the poverty line in 1984: 14.4%
Percentage of Americans living below the poverty line in 1985: 14.0%
Percentage of Americans living below the poverty line in 1986: 13.6%
Percentage of Americans living below the poverty line in 1987: 13.4%
Percentage of Americans living below the poverty line in 1988: 13.0%4

Differences:
- Employment:
+Thatcherism caused mass unemployment whereas Reaganomics contributed to
high employment and reduced unemployment.
Thatcherism, particularly monetarism, induced mass unemployment over UK. This partly
explains why there was widespread criticism of the government. As unemployment
reached the unprecedented level of approximately 3 million, in 1981, in a famous letter to the
Times, 365 economists signed a letter calling on the government to alter its economic policy and put an
end to the recession. Yet Thatcher was stubborn enough to deny the call with her u-turn speech To those
waiting with bated breath for that favourite media catchphrase, the U-turn, I have only one thing to say: You turn if you want to. The
ladys not for tu

rning! (BBC)
 + Reaganomics:
The unemployment rate when Reagan stepped into office was 7.6% and peaked during the
recession from 1981 to 1982. When he left office, the rate was 5.5%. Also, eight million jobs were
created when he was in office.

- Budget deficit:
Thatcherism Reaganomics
Trend Decrease Increase
When he took office
(1981), he inherited a
budget deficit at 2.5% of
the economy, then the
deficit increased to 5%
when he left (1989).

Average government
spending increased (
from 20.3% in 1974-
 1981 to 21.6% in 1982-
1989)

Average federal
revenues reduced (from
17.8% in 1974-81 to
17.5 % in 1982-1989)
Indicator National debt tripled
Lady Thatcher's
from less than 1 (32.5%
government did a of GDP) to roughly 3
good job of driving trillion dollars (43.8 %
of GDP)
down government This led to the U.S.
moving from the
debt, which was 43.6 world's largest
international
per cent of Gross creditor to the
Domestic Product world's largest
debtor nation
(GDP) in 1979, and
26.7 per cent in 1990.

Reason Her privatization Reagan increased

policies brought billion
pounds of revenues spending by 2.5% a
During her first years as year, mostly for
PM, she raised Value
Added Tax to pay for defense. Cuts to
revenue loss other discretionary
programs only
occurred in his first
year. Reagan did not
cut Social Security or
Medicare payments at
all.
UK budget deficit as part of GDP
The UK ran a budget deficit till the end of the Thatcher years, with a peak of
2.2 percent of GDP in 1981. In the mid to late 1980s deficits declined, and
went into surplus in 1989 at 1.9 percent GDP.