The good, the bad and the lucky oil break

With all truly great political leaders, disentangling the persona from the natural course of history is a virtually impossible task. Are they mere products of their time, or do they shape its course? Margaret Thatcher was plainly both.

Her election coincided with a process of free market reform that was to sweep the world, from China to the US and Europe. As such, she was only the personification of an age that was ripe and desperate for change.

Yet she pursued this agenda with a passion, tenacity and conviction that even like-minded leaders, such as Ronald Reagan, struggled to match. She knew what she stood for, and she made sure that everyone else did, too. In her determination, she pioneered many of the flagship economic reforms of the era. From financial and labour market deregulation to privatisation, her policies were widely copied and emulated.

In their book, The Commanding Heights: The Battle for the World Economy, Daniel Yergin and Joseph Stanislaw chart a worldwide pattern of evolution away from the failed Keynesianism of the postwar period back to the principles of individualism, small state, low tax and self-determination.

State control was giving way, more or less everywhere, to a new period of free-market determinism. But perhaps nowhere was this process quite as overt as in the UK.

During the 1980s, the Thatcher government drove through huge structural changes, transforming Britain from the "sick man of Europe" into a once-more confident nation with one of the highest levels of per capita income.

When Mrs Thatcher came to power, the country was slipping into the sea, brought low by a combination of staggeringly inept stop-go economic management, ineffective, backward-looking management and union militancy. Only recently released from the terms of an International Monetary Fund bailout, Britain saw headlines being made almost daily by the likes of Derek "Red Robbo" Robinson, a notorious union convener credited with more than 500 walkouts.

While Japanese, American and even European manufacturers were making the big leap forward in productivity, quality control and just-in-time stock management, their UK rivals were sinking beneath a quagmire of restrictive practices and wildcat strikes.

Thatcher is often accused of hollowing out the remaining core of Britain's once-mighty manufacturing prowess but the truth is that the die had been cast long before her arrival at No. 10. It took only North Sea oil finally to finish off these industries.

North Sea oil transformed the pound into a kind of "petro-currency". Unable to live with a high exchange rate, great swaths of manufacturing industry were rendered uncompetitive and closed down. Hundreds of thousands of workers lost their jobs in the consequent shakeout.

Thatcher was lucky in some respects. North Sea oil rescued Britain from the repeated balance-of-payments crises of the past and provided a crutch for the public finances at a vital time, but it also set the stage for a peculiarly unbalanced form of economic growth that dogs the country to this day.

One of the reasons why Thatcher's reforms are still so divisive is that they can be as easily criticised as lauded. Financial deregulation, epitomised by the "Big Bang" stock exchange reforms of 1986, lit a long fuse that led directly to today's all-embracing banking crisis.

With Big Bang, the City embarked on the greatest financial boom of all time, transforming London into the world's pre-eminent financial centre.

In this sense, Thatcher's death is almost exquisitely timed, with the pendulum she so forcibly set on its course to market liberalisation now swinging violently back in the other direction.

Privatisation failed to bring about the "share-owning democracy" she dreamt of but it finally broke the destructive postwar link between government and the means of production and drove huge gains in productivity, efficiency and competitiveness.

Today, all this is taken for granted. Back then - when you had to join a waiting list, sometimes for months, even to get a telephone line installed - it was radical stuff. Anyone who had been to the big US cities soon came to appreciate that Britain was living with almost Soviet levels of consumer deprivation.

Thatcher broke the power of the unions and gave birth to a brand new era of British entrepreneurialism, in which individuals were again left free to profit from the fruits of their own labours and ingenuity.

Even in China, state ownership is now widely regarded as unnecessary and undesirable. The sight of Britain's bank bailouts must have made Thatcher sick to her bones. Indeed, although she is often accused of culpability in the present crisis, it is hard to imagine her ever allowing the implicit state support that underpinned the recklessness of bankers.

I still vividly recall the pyrotechnics of Thatcher era budgets - big, reforming, tax-cutting affairs with a seemingly transformational announcement between every sip of whisky. By comparison, today's budgets are pathetically unambitious exercises in tinkering and muddling through.

Then finally there was Europe, in a sense Thatcher's biggest failure. With probably greater clarity than anyone of her generation, she foresaw the dangers of monetary union and announced she was going to stop the euro locomotive in its tracks. But the train did not stop and it duly ran her over.

But under her watch, Britain was reformed into a vibrant, post-industrial, modern economy.