Philip Booth, of the Institute of Economic Affairs (peace be upon him), has this excellent article about the mix of reforms enacted in the 1980s, which have come in for some criticism from those who claim it contributed to the late unpleasantness in 2008. He refers, in particular, to the “Big Bang” reform changes to the City of London.
So, two things are clear when it comes to Thatcher’s legacy. In many respects she increased regulation of the financial sector in ways previous governments had not considered. Secondly, the most important feature of the Big Bang was that it took regulatory responsibility away from the markets and gave it to the state. In this area Thatcher was a pragmatist, not an unalloyed free market supporter. If these policies led to the crisis, those on the left have some thinking to do.
As always, whether looking at the Cold War, or financial crisis of 2008, or other issues, it is crucial to see how certain groups are trying to “shape the narrative”. The reactions to the death of Mrs T. are a textbook example of how these sort of things play out. Someone should make a film about it.
The removal of exchange controls and so on, was good.
However, the state intervention (in the name of free markets) in the City was mistaken. It was based on a fundemental (and academic inspired) misunderstanding of what a “free market” is.
A free market is not some particular set of practices – it is VOLUNTARY AGREEMENT.
The “restrictive practices” of the City were the voluntary agreements of private companies (such as the company that the London Stock Exchange was from 1801 onwards).
No one was forced to use the London Stock Exchange – it was perfectly legal to set up other exchanges (and there had been other exchanges). Or one could deal “off exchange” (and some people did).
So all this “we can not have a divide between brokers and jobbers and other restrictive practices” stuff missed the point.
It was NOT a violation of the free market – because voluntary agreement (not thousands upon thousands of pages of government regulations) is what a real free market is.
Short version.
The perfect competition model of the economics textbooks is a pile of pants.