Abstract

The two decades following the collapse of the Bretton Woods regime witnessed a sea change in the architecture of international finance. The abolition of capital control, by boosting a flow of international capital across the frontier, prompted de-regulation of the financial sector throughout the developed countries and the re-emergence of global finance. This paper examines the political and economic backgrounds to two key decisions made by the Thatcher government, and their consequences: the abolition of all exchange controls in 1979, and the decision not to introduce restrictions on capital inflow to the UK. These two decisions helped the City of London to restore the status of the international financial centre but left the manufacturing sector in a dire predicament. My analysis shows that all of this happened even though Margaret Thatcher cared about the fate of the manufacturing sector more than previously thought. It seems that her influence on economic-policy making was limited, at least during her first term.