John O'Sullivan
The President, the Pope, and the Prime Minister

Loss-making industries were either closed down or reduced in size. Manufacturing industries shed labor, often while increasing output, as they restructured to meet foreign competition. New industries in the financial services, information, and high-tech sectors were established—often by new companies or entrepreneurs from academic and non-industrial backgrounds. Privatization transformed inefficient state-owned industries into dynamic private sector ones. New financial instruments allowed entrepreneurs to take over sluggish low-earning companies and put their assets to more profitable uses. In general the Anglo-American economies were characterized by change, profitability, growth, and the better allocation of resources, including labor.

Pure business efficiency was not the most important result of the Reagan-Thatcher revolution, however. There was a social side to economic liberalization. Start-ups, small businesses, and self-employment played an important role in the restructuring of both economies. Nigel Lawson points out a number of them in the British case:
For many years there was an average increase of five hundred new firms per week—after deducting closures. There was a rise from little more than one million to over three million in the number of self-employed. The UK venture capitalist industry, which scarcely existed when we first took office, had by 1985 become twice as large as its counterparts in the rest of the European Community taken together.
This spirit of enterprise had flourished in the U.S. for so long that such expressions of it were neither novel nor especially impressive. The 1980s merely saw more of them as deregulation and antitrust policy opened up greater opportunities for business outsiders. In Britain the same developments signified something more fundamental—the spread of an enterprise outlook from the small-business middle class to much wider swathes of society.

Allied with the spread of enterprise was the spread of capital ownership. Thatcher had drawn the battle lines with Labour in a 1987 election speech: 'Labour believes in turning workers against owners; we believe in turning workers into owners.' The early first step in this policy was to sell state-owned low-income houses to their tenants at discounts that took account of rent paid over the years. It was a great success socially, politically, and even financially: nearly two million tenants bought their homes, many of them voted Conservative for the first time, and local authorities were no longer saddled with the costs of maintaining the houses sold. Selling shares in newly privatized industries to the general public was the second step. This was even more popular. Two-thirds of Britain's state-owned industries were sold to the private sector, resulting in more efficient industries and wider capital ownership. Between 1979 and 1989 the proportion of the British public owning shares rose from 7 percent to fully one-quarter.

Taken together, the spread of both the enterprise outlook and wider ownership were part of a revival of what Shirley Robin Letwin, the distinguished Anglo-American political theorist, called the 'vigorous virtues' in her philosophically groundbreaking study of Thatcherism. These are such qualities as self-reliance, diligence, trustworthiness, and initiative that enable someone who exhibits them to live and work independently in society. Though they are not the only virtues—compassion and cooperation might be called the 'softer virtues'—they are essential to the success of a free economy and a civil society as both of these rely on dispersed initiative and self-reliant citizens. The revival of the vigorous virtues (in addition to being the heart of Thatcherism) was an indispensable part of the successful transformation of the U.S. and British economies in the 1980s. It was a psychological restructuring that helped sustain the physical restructuring.

That transformation did not stop at the Atlantic's edge. Reagan and Thatcher were also changing the world economy by virtue of the demonstrative effects of Reaganism and Thatcherism (then rapidly becoming known under the portmanteau term of 'neo-liberalism.') They had provided the world with successful models of free and deregulated economies. Their own leftists might disparage the new employment opportunities as 'McJobs,' but other countries began replicating the same policies. Tax cuts were America's principal intellectual export, as privatization was Britain's. Of the two, privatization was probably the more important on a global basis since both Third World and post-Communist economies were lumbered with a vast number of inefficient state industries. Privatization expertise became one of the City of London's most profitable services over the next two decades.

Even the Soviets and Western European Communists were forced to change course by the widespread adoption of privatization internationally—and also the equally widespread acceptance of the market logic behind it. Thus in a 1986 conversation between Gorbachev and Alexander Natta, the general secretary of the Italian Communist Party, there occurs this fascinating little exchange:
Natta: At the same time we, the Communists, having either overestimated or underestimated the functions of the 'welfare state,' kept defending situations which, as it became clear only now, we should not have defended. As a result, a bureaucratic apparatus, which serves itself, has swelled. It is interesting that a certain similarity with your situation, which you call stagnation, can be seen here.

Gorbachev: 'Parkinson's law' works everywhere...

Natta: Any bureaucratizarion encourages the apparatus to protect its own interests and to forget about the citizens' interests. I suppose, that is exactly why the right's demands of re-privatization are falling on a fertile ground in Western public opinion.
In general the recovery of the British economy on free market lines was curiously more impressive than America's revival because it started from a lower economic point—Britain in 1979 was frequently compared unfavorably to East Germany—and occurred in a country that had pioneered social democracy. Still, the essential principles of both experiments were the same. Once the command economies of the Soviet bloc collapsed in 1989, revealing the extraordinary bankruptcy of state planning, it was the Reagan-Thatcher model that the new democracies sought to emulate.

  The World was all before them, where to choose
Their place of rest, and Providence their guide:
They, hand in hand, with wand'ring steps and slow,

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Through Eden took their solitary way.