Before Margaret Thatcher pushed her way into 10 Downing Street, the United Kingdom had two major political parties, both engaged in the country's longstanding class war. The Labour Party courted and served the lower class, the people who worked with their muscles. The Conservative Party represented the interests of the upper class, the people whose inheritances allowed them not to work.

After Margaret Thatcher finished reorganizing the politics of her country, both major parties more closely represented and courted the middle class, the people who work with their brains to make money.

Sneered at by the gentry and envied by the navvies, the middle class was struggling to survive between 1945 and 1979, as Britain and the productive part of its economy were overtaken by Germany and France.

Merchants like Thatcher's father and small manufacturers like her husband found themselves represented at last. Financiers also prospered after Thatcher's government pushed through the Big Bang, deregulating an ossified banking sector and making the City of London a leader in finance. And for the first time, new wealth conferred status.

The fourth British class, which consists of intellectuals and chatterers working with their minds to tell people what to think and do, generally failed to understand what Thatcher was about, and most despised her out of the depths of their ignorance. Even at her death last week, more than 20 years after she left the political stage, she was vilified in columns, editorials, and blogs.

The Back Story of Thatcherism

Bitter stories of Margaret Thatcher's 11 years in office were told many times last week. What was usually left unsaid was the economic depth to which Britain had sunk before it found a principled, stubborn leader.

At the end of World War II, the Labour Party won an election with a landslide. Its government nationalized most major industries: the Bank of England, telecommunications, coal-mining, iron and steel, electricity, gas and water utilities, railways, civil aviation, trucking, buses and subways, canals, shipyards, docks, and health care.

Upstairs, Downstairs and Downton Abbey gave way to I'm All Right Jack.

The postwar government heavily regulated the economy, with high taxes on income (up to a top marginal rate of 98%), wealth, estates, and property. It vastly increased government housing and government schools and universities, and it greatly expanded the cradle-to-grave welfare state that had been under construction in stages by Liberals and Labourites since 1908.

Other features of the Labour conquest after 1945 included continuation of wartime price controls, wage controls, rent controls, and rationing. The Labour government also gave unions new rights and powers to organize and to strike. With painful irony, the dockworkers struck in 1947 so effectively that imported food rotted on the docks.

There was much talk about an equal partnership between labor and capital, but it was a government run by and for labor. It was trade-union socialism, in which the workers work for the government.

Bipartisan Mismanagement

Although the Conservative Party regained a parliamentary majority in 1951, it did not undo Labour's trade-union socialism. It did not even undo meat-rationing until 1954. There was an unwritten treaty, known as "consensus politics," that seemed to say the voters would let the Conservative Party politicians administer trade-union socialism if they would not abolish it. Labour Party politicians had a similar deal when they returned to power in 1964: They could fine-tune their trade-union socialism but not expand it very much.

As each party in turn was empowered to mismanage the economy, Britain suffered a deplorable brain drain. Over three decades, the quality of British manufactured goods declined, the pound weakened, inflation and unemployment rose, and politicians waged intraparty fights on such issues as joining the European Economic Community.

Labour's left wing proclaimed a cure for the country's economic troubles in the 1970s with a "fundamental and irreversible shift in the balance of power and wealth in favor of working people and their families," including further nationalization of failing corporations, notably in the auto and aircraft industries.

Oil-price shocks and other manifestations of economic reality forced the Labour government of the 1970s to retreat from its new program, which embittered its left wing and weakened its right wing. The trade-union movement became more militant, leading strike after strike against its own government. The strikes of 1978-79 were dubbed the Winter of Discontent by journalists with a Shakespearean bent, but a Conservative campaign poster put it more effectively: "Labour isn't working." The 1979 election and the next two went to Thatcher and the Conservatives.

A Harder Road

Because Britain had gone so far down the road to serfdom, Margaret Thatcher had to fight harder and make more enemies than any other economic reformer of her time. But the British system makes a prime minister a virtual dictator for a term of up to five years. For a decade, she could close or sell state-owned industries without much regard to her popularity. With the opposition split, the British electorate never had to give Thatcher a majority vote. Conservatives won majorities in the House of Commons with 42% of the national vote.

But many Conservatives feared losing the next election more than they feared the economic collapse of their country. Eventually, their fear got the better of them. They replaced her as leader of the party to win one election, then lost the next three to Tony Blair's "New Labour," which dumped trade-union socialism to appeal to the middle class.

Before Thatcher, British governments of both parties admired central planning and central power. They made investments with public money to create jobs and promote growth. Neither the party politicians nor the ever-present civil service understood that government-managed investment would never create new wealth.

This lesson may be Margaret Thatcher's most important legacy, but it's being forgotten on both sides of the Atlantic. 

Editorial page editor Thomas G. Donlan receives e-mail at