By ALISTAIR MACDONALD

LONDON— Margaret Thatcher, the uncompromising British prime minister who became one of the most influential global leaders of the postwar period, died on Monday, three decades after her championing of free-market economics and individual choice transformed Britain's economy and her vigorous foreign policy played a key role in the end of the Cold War.
"We've lost a great prime minister, a great leader, a great Briton," said U.K. Prime Minister David Cameron, who cut short a Europe trip to return to the U.K. on Monday afternoon. "She saved our country and I believe she will go down as the greatest British peacetime prime minister."
Mrs. Thatcher, who was 87, grew up in an apartment above her father's grocery store in Grantham, eastern England. She went on to become Britain's first female prime minister and arguably the country's most dominant political figure since Winston Churchill.
She was a key ally and close friend of President Ronald Reagan, sharing with him a view on free-market, monetarist solutions to the economic problems of the day, as well as an implacable stance toward the former Soviet Union, earning her the nickname the Iron Lady. The two led a rightward shift in Western politics that extolled the virtues of economies with little government intervention that has largely endured, though aspects, such as the deregulation of financial services, have been questioned since the credit crisis.
In moves that were widely copied, Mrs. Thatcher took on Britain's powerful trade unions and privatized state-run industries, governing with a take-no-prisoners style that earned her both admiration and dislike.
"She showed everyone what a political leader with a powerful agenda could accomplish," said George Shultz,
who was secretary of state to Mr. Reagan.
"She was the last outlier from the ideological wars against Marxism, an epoch-making politician, but an incredibly polarizing force," said Patrick Dunleavy, professor of political science at the London School of Economics.
Downing Street said funeral services for Mrs. Thatcher will be held next week at St. Paul's Cathedral in London and will be followed by a private cremation. It will be a ceremonial funeral with military honors.
Mrs. Thatcher is remembered within Britain mostly for her role in revolutionizing the fading economy, in a process that caused huge social change and division, and for the successful retaking of the Falkland Islands, the British South Atlantic territory invaded by Argentina in 1982—after which she declared "We have ceased to be a nation in retreat."
In Europe, she is remembered as a prickly leader who thrived on confrontation, but who ultimately agreed to foster some of the European Union's most significant developments, such as the creation of a single EU market.
Mrs. Thatcher was forced from office in 1990 following a rebellion within the Conservative Party after more than 11½ years in power, making her the longest-serving 20th-century British prime minister. By the time the opposition Labour Party took power in 1997, its leader, Tony Blair, had forced his party to accept much of her legacy, dropping its commitment to nationalized industries and embracing free markets.
Even many of her ideological enemies admired Mrs. Thatcher as a person of conviction who eschewed the focus-group politics that characterizes many in her line of work.
"She said what she meant and meant what she said and did what she said she would do," said Tony Benn, a radical left-wing minister in the Labour governments that preceded Mrs. Thatcher.
Mrs. Thatcher herself described consensus as the process of "abandoning all beliefs, principles, values and policies…something in which no one believes and to which no one objects."
Born Margaret Roberts on Oct. 13, 1925, in the Lincolnshire market town of Grantham to Alfred and Beatrice Roberts, Mrs. Thatcher was schooled from an early age in an ethic of hard work and self-reliance. She grew up in a house with no hot water and an outdoor toilet. Her father, a Methodist lay preacher, was active in local politics and a major early influence.
"He taught her, don't go with the herd if you think that the herd is wrong," said Sir Bernard Ingham, who served as Mrs. Thatcher's press secretary for 11 years.
Her father's interest in politics provided the books and newspapers that would stimulate her own. The brutalities of World War II and the accounts of a young Austrian Jew for whom her father had arranged shelter in Grantham filled her with a hate of all totalitarianism. She later recalled in her autobiography that as a 13-year-old she took on a group of adults, to their astonishment, in a prewar fish-and-chip shop line after one said that at least Adolf Hitler had given Germany back its self-respect.
Mrs. Thatcher attended local state schools at a time when Conservative politicians were still mainly drafted from Britain's elite private schools. She studied chemistry at Oxford University and spent her early career in research laboratories.
Mrs. Thatcher took power following Britain's "winter of discontent" of 1978-1979, in which nationwide strikes over pay by public-sector workers from gravediggers to garbage collectors brought an economy that had for years been growing at half the rate of its peers close to a standstill. In her first full two years as prime minister, the nation's economy shrank around 3.5% and unemployment rose by a million, hovering at three million until the mid-1980s. There was widespread rioting in inner cities as both these conditions and racial tensions fomented dissent.
Mrs. Thatcher responded with radical reforms, shaped by the ideas of free-market economists Friedrich Hayek and Milton Friedman on minimizing government control and allowing markets free rein in deciding the shape of the economy. "Without economic liberty, there could be no true political liberty," she told European leaders in 1979.
She took on Britain's labor unions and whittled the size of the state through sweeping privatizations and the closure of unprofitable state-owned enterprises from coal mines to steel plants. The resulting long showdown between striking coal miners and Mrs. Thatcher split the country.
Mrs. Thatcher said those who stood in the middle of the road risked getting hit by traffic coming both ways. "I'm not here to be liked," she often said.
"It was obvious by the late '70s and early '80s that change was absolutely essential but there was no effort to try and manage the change with an expansion of vocational education or training for people whose whole economic life was being shattered," said Neil Kinnock, who was leader of the opposition Labour Party for most of Mrs. Thatcher's reign.
Ian Lavery, who worked in coal pits in Ashington, a town in northeast England, watched his father, two brothers and several uncles all lose their jobs as miners. Mrs. Thatcher "ripped the heart out of the place in a short few years," said Mr. Lavery, now a Labour Party lawmaker. "There was never anything put in place to replace what was lost."
Mrs. Thatcher relished an argument, and got so bored on vacations that young Conservative politicians were dispatched to join her family so she could argue politics, colleagues remember.
"I watched some people in her presence who were intimidated and [would] not say much and I don't think she liked that. She enjoyed a good argument," said Mr. Shultz, a key figure in the Reagan administration.
Britain's economy recovered, in part as a result of the more flexible, U.S.-style labor markets she ushered in, helped by revenue from oil discoveries in the North Sea. In addition, the widespread privatization program she drove through—amid often-fierce public opposition—put inefficient, unprofitable state giants into private hands and provided a template for many other countries in Europe. By the end of 2009, state-run industry accounted for only 2% of the U.K. economy, compared with 10% in 1979.
Her deregulation of the financial industry helped turn London from an increasingly obsolete financial center into a rival to Wall Street. Known as the "Big Bang," for the many changes made at once, the 1987 deregulation moved trading from the floor to electronic screens and blew away barriers to entry, bringing in bankers and businesses from around the world. Critics said it also kicked off the process of scaling back regulation that contributed to the credit crisis.
Mrs. Thatcher's term was punctuated by several recessions. The worst, in the early 1980s, saw a peak-to-trough decline in output of 6%. While her government reduced annual inflation from the double-digit figures of the 1970s, it was only in the 1990s that inflation came under control.
During Mrs. Thatcher's decade in power, the economy grew at an average annual rate of 2.46%, above the 2.1% average in the troubled 1970s but lower than some European peers, including Germany and France. Unemployment was 7.5% when she left, in 1990, up from 5.3% in the quarter she took office in 1979.
"On macroeconomic policy, the record was patchy, but the theme throughout had been pro-business, pro-market," which laid the foundation for later successes, said Ken Clarke, a minister in the current government, who was in Mrs. Thatcher's cabinet throughout her time in power and became Treasury chief under her Conservative successor, John Major.
The close and candid relationships Mrs. Thatcher formed with both Soviet leader Mikhail Gorbachev and Mr. Reagan, and her vocal support of the uncompromising U.S. position toward the Soviet Union, proved an important element in the end of the Cold War.
At her first meeting with Mr. Gorbachev, she leaned over the table to tell her Soviet counterpart over lunch: "Welcome to the United Kingdom. I want our relationship to get off to a good start, and to make sure there is no misunderstanding between us—I hate Communism," said Sir Bernard, her press secretary at the time.
"Thatcher was a politician whose words carried big weight," Mr. Gorbachev said Monday in a statement on the Gorbachev Foundation's website.
"In the end we managed to achieve mutual understanding, and this was a contribution to the changing atmosphere between our country and the West, and to the end of the Cold War," he said.
In her later years in power, the woman who famously said "the lady's not for turning" was criticized for her inflexibility while the introduction of a new and widely disliked local tax system further sapped her popularity. In November 1990, the longest-serving member of her cabinet, Geoffrey Howe, resigned over her hostile position on a process of European integration, under which more national powers, on issues from banking regulation to working practices, were moving to Brussels.
In a resignation speech that kicked off a Conservative Party leadership contest—which Mrs. Thatcher lost—Mr. Howe told Parliament she seemed to "look out on a continent that is positively teeming with ill-intentioned people."
Her former Defense Minister Michael Heseltine challenged her for the party leadership. He failed to win, but garnered enough votes from Conservative members of Parliament to show they wanted a change. Mrs. Thatcher, who had won three national elections, was persuaded by her party and advisers to resign before a second ballot. Mr. Major, her Treasury chief, became prime minister.
An emotional Mrs. Thatcher left No. 10 Downing Street on Nov. 28, 1990, and went to sit in the House of Lords, the upper house of the U.K. Parliament. As Baroness Thatcher, she continued to attack old enemies for a while, such as the European Union, and to exert a sometimes divisive influence within the Conservative Party.
After a series of small strokes in March 2002 and the death of her husband, retired oil executive Denis Thatcher, Mrs. Thatcher largely withdrew from public life in 2003. In a rare public appearance in 2007, she unveiled a bronze statue of herself in the House of Commons. "I might have preferred iron," she said, "but bronze will do."

—Cassell Bryan-Low contributed to this article. Write to Alistair MacDonald at [email protected]