Thatcher Fallacy (9)

     

“Thatcherism produced a North/South divide”

 

It’s not as clear cut as this. The most that can be said is that Thatcherism accelerated a trend. It cannot be said that Thatcherism produced the trend, or that the trend would not have continued without Thatcherism.

In fact the north/south divide, that is, the comparatively slow growth, low incomes and high unemployment of northern regions, has its roots in the inter-war period and before.

The ‘Industrial North’ can be divided into the ‘periphery’ and the ‘heartlands’. It is widely accepted that the periphery, which includes Wales, Scotland and Northern England (with the exception of the Midlands and the North West), experienced a relatively low rate of industrial growth from the 1840’s (1.9% per annum, compared to 3% in the industrial heartlands, 1841-1921). Therefore the periphery’s share of manufacturing output was in relative decline from as early as the mid Nineteenth Century. The same fate became of the manufacturing ‘heartlands’ during the inter-war period.

After the Second World War, manufacturing growth mainly occurred in the South East and to a lesser extent in the Midlands. In effect the economy’s manufacturing capacity from 1841 was draining away from the periphery, then away from the Midlands (although less so from the West Midlands), and towards the South East.

Meanwhile the economy became more dependent on the service sector. Increasingly the balance of payments came to rely on the ‘invisible’ income of the financial sector rather than the ‘visible’ income of industrial exports. As the UK’s prominence as an international finance centre superseded its prominence as an industrial power, the South East, centred around the City of London, was less susceptible to the impact of de-industrialisation and at a comparative advantage in the service era.

This was an established trend. In fact after the post war boom the trend gathered pace. It is now widely accepted that from the early 1970’s most Western economies experienced a major structural shift. This was partly because of an intensification of international competition and also the advent of micro-electronic and processing technology. This put UK manufacturing out of business and required skills which those in the South East were more conducive to. 

The trend was accelerated further by the Thatcher government. The liberalisation of financial markets undoubtedly benefited the south east disproportionately, while anti-inflationary policies, privatisation, and trade union reform squeezed manufacturing.

However, the trend has also post-dated Thatcherism. The Thatcher, Major and Blair government’s have failed to narrow the gap between north and south. Future attempts may or may not succeed, but the causes of the trend are structural and not the fault of agency.

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