The Thatcher era saw the implementation of supply side reforms that ended and then reversed the relative decline of UK productivity.
That word "relative" is doing some work. Looking solely at UK data on GDP per hour worked, taken from the Bank of England, productivity growth has been slower since Thatcher than it was before.Between 1985 and 2007, productivity grew by 2.1% a year; this time period is as flattering as can be for the pro-Thatcher argument. But in the previous 22 years, it grew by 2.9% a year.
Productivity, then, has grown more slowly in the era of quiescent unions and "neoliberalism" than it did in the social democratic-corporate era.
However, if we look at the UK's performance relative to other major nations, things are kinder to the Thatcher reforms. OECD data shows that UK productivity grew 2.3% a year between 1985 and 2007. That's faster than the average for G7 countries, of 2%. By contrast, in the previous 15 year (the data begin in 1970), UK productivity grew slightly more slowly than the G7 average, by just under 2.7% against just over 2.7%.
What's going on here? There are, I reckon, two competing stories. The pro-Thatcher one is something like this:
After 1973, global growth slowed markedly. This depressed productivity through (at least) two channels. One is that Verdoorn's law - the tendency for strong output growth to generate productivity growth thanks to increasing returns - depressed such growth. The other is that a more sclerotic economy generated increased class conflict as bargaining became more like a zero-sum game. The productivity growth of the 60s, therefore, could not be repeated. We needed a new economic model, and Thatcher provided one. Had we not had the Thatcher revolution, our productivity growth would have been even worse. The fact that productivity growth fell so much in Japan, Germany, Italy and France shows the sort of slowdown we'd have had, had we not had Thatcherism.
The more critical version is something like:
The fact that productivity grew quickly in the 60s shows that strong trades unions are quite compatible with a thriving economy.Productivity slowed globally after the 1970s because macroeconomic policy globally abandoned Keynesian-style reflation in favour of policies which gave us serious recessions in the 80s and 90s and these (via Verdoorn's law) reduced productivity growth. Productivity growth isn't merely a microeconomic phenomenon, but also the product of macro policies. And bad macro policies depressed it.If the UK - and better still world - had had decent macro policies, we could have achieved good productivity growth without the huge social costs involved in bashing the unions.
As a Marxist rather than a Keynesian, I have no dog in this fight.My point is just that if you want to claim that Thatcher did improve the UK's productivity performance, you need to argue for a particular type of counterfactual.