Margaret Thatcher, Britain’s longest-serving prime minister, changed Western thinking about the welfare state. Many Europeans saw the welfare state as a mainstay of democracy, which would alleviate the hardships that had turned workers toward either socialism, from Bismarck’s time onward, or toward Mussolini’s and Hitler’s fascism during the difficult interwar years. Thatcher, however, believed that programs to provide health care, education, and housing coddled the lazy. She thought the money for such programs should be invested in private industry, to produce a profit and to encourage more investment and greater productivity. Here she outlines her thoughts on public spending to members of the Conservative Party.

I and my colleagues say that to add to public spending takes away the very money and resources that industry needs to stay in business, let alone to expand. Higher public spending, far from curing unemployment, can be the very vehicle that loses jobs and causes bankruptcies in trade and commerce. That is why we warned local authorities that since rates [taxes] are frequently the biggest tax that industry now faces, increases in them can cripple local businesses. . . .

That is why I stress that if those who work in public authorities take for themselves large pay increases, they leave less to be spent on equipment and new buildings. That in turn deprives the private sector of the orders it needs, especially some of those industries in the hard pressed regions. Those in the public sector have a duty to those in the private sector not to take out so much in pay that they cause others’ unemployment. That is why we point out that every time high wage settlements in nationalised monopolies lead to higher charges for telephones, electricity, coal, and water, they can drive companies out of business and cost other people their jobs.

If spending money like water was the answer to our country’s problems, we would have no problems right now. If ever a nation has spent, spent, spent, and spent again, ours has. Today that dream is over. All of that money has got us nowhere, but it still has to come from somewhere. Those who urge us to relax the squeeze, to spend yet more money indiscriminately in the belief that it will help the unemployed and the small businessman, are not being kind or compassionate or caring. They are not the friends of the unemployed or the small business. They are asking us to do again the very things that caused the problems in the first place. . . .

I am accused of lecturing or preaching about this. I suppose it is a critic’s way of saying, “Well, we know it is true, but we have to carp at something.” I do not care about that. But I do care about the future of free enterprise, the jobs and exports it provides, and the independence it brings to our people.

Source: Juliet S. Thompson and Wayne C. Thompson, ed., Margaret Thatcher: Prime Minister Indomitable (Boulder: Westview, 1994), 230–31.

Question to Consider

According to Thatcher, how does public spending harm the private sector and the citizens of Great Britain as a whole?