The Atlantic and Its Enemies

have been more different. England came back onto the world stage, and Margaret Thatcher became a figure of worldwide significance. But she had a very hard fight in the first two years, much harder than did Ronald Reagan.

Margaret Thatcher came in on 3 May with a larger swing than any other politician since Clement Attlee, and the right size of majority — forty-three, enough to survive, not enough to encourage greedy zealots. There was one gambit that was essential for her. The Anglo-American crisis brought wise heads together. In Heath’s time, the American connection had been weakened, Heath showing his usual ineptness when it came to intuition of reality. But there was an Atlantic strand in the Tory party, and it had powerful consequences, especially through NATO and the international financial institutions. As soon as Margaret Thatcher was elected, she made it her business to travel to the USA. There, she established herself rapidly. She also guessed at the importance of Ronald Reagan — at the time, thought to be of such little account that, except for Margaret Thatcher, even as late as 1977 he was given only polite, cursory treatment when he came to London. But there was a very bright and energetic group of younger people in Republican circles who were thinking hard about what had gone wrong, and what had to be done. Margaret Thatcher became quite widely known in the USA, and in 1979 Carter gave her forty-five minutes in the White House, more than he had given Mitterrand. He complained that she had done all the talking; but she had something to say, and England, not in good condition, provided the perfect rather crumbling sounding-board. What had been common-sense saloon bar grumbling was well-orchestrated and now became a swelling chorus, with some challenging thinking behind it.

There was also quite a good team, professionally managed. A sensible strategy for the trade union problem was worked out by an astute and affable businessman with a military background, John Hoskyns. The press spokesman was Bernard Ingham: a Yorkshireman, at times a stage Yorkshireman, and a one-time left-wing journalist (on the Guardian), he managed public relations very well. An astute television producer, Gordon Reece, knew about modulated voices and suitable hairstyles. Ronald Millar, a playwright who could manage one-liners, and John O’Sullivan, a Telegraph journalist who could structure a speech, made a Thatcher public performance memorable. She herself knew about oratory, and she got better and better on television, as she knew how to answer back (a warhorse of the BBC, Robin Day, helped). When asked how it felt to be the first woman Prime Minister she said, ‘I don’t know, I’ve never experienced the alternative.’ In fact, she probably did not give the matter much thought, though she was very good indeed at the feminine-as- leader, since she knew when to be Circe and when to be the nanny from hell. In the end these were reasons for her downfall. She was notably bored by the company of women not on her own rare level, and they, at night, resentfully chewed husbands’ ears; on the other hand, men such as old William Whitelaw, loyal, a believer in the party, old- fashioned and bluff, did not much like it when she caused them to burst into tears about being late, or told the Foreign Secretary, also a loyalist, that he was being so boring that someone needed to open the window and let in some cold air so that the Cabinet could wake up. Resentments were stoked up. However, so also were loyalty and affection: there were no stab-in-the-back memoirs. Number 10, Downing Street, was well-managed, and when she left office, the staff were in tears, because, whatever the pressures upon her, she had always been personally very kind to them, remembering to give words of comfort if any had had troubles. At any rate, as her political secretary, Ferdinand Mount, said, ‘Far outweighing minor weaknesses, she radiated a sense of possibility.’ It made a change. There had not been a Prime Minister of this ability since David Lloyd George. She was to sink in the end into the subconscious of the world, in that taxi-drivers from Valparaiso to Vladivostok or Istanbul would have favourable things to say, perhaps the last British figure ever to have this effect (Princess Diana being the shadow). What she had to do took a very great deal of courage.

Inflation had two sides, an internal one to do with government behaviour, and an external one, to do with the amount of money going from one country to another. The first involved endless argument about ‘cuts’ — governments just spending less, or not providing credit, or preventing banks from providing credit: there were variations on that theme, familiar in the old days as ‘open-market operations’. That was one aspect of monetarism, and in the early eighties the internal manufacturing of inflation did matter a very great deal in an England that had simply been irresponsibly governed: the government deficit of 1970, nil, had reached ?10bn in 1975, and it was probably no great wonder that, as questionable banks and property speculators and toilers in the local government bran-tubs flourished, the trade unions also could see no reason why their members should be excluded. There had been much talk of the ‘Swedish model’, in which the trade unions co-operated in wage policies that suited national needs, and the temptation to follow that model was considerable. The French Left, taking over under the Communist-supported Mitterrand, tried yet another of its ‘singing tomorrows’, and found that the original Swedish example was crashing. Here, with a small population in a vast country containing raw materials — especially newspaper- and even medicine-making timber — that the world prized, was a chance for socialism in one country if ever there was one. This was all the more so as the country had avoided wars; there is even an argument that had Sweden not traded with Germany, the world wars would have ended two years before they did.

However, the ‘Swedish model’ had observers gasping: rich, well-organized, some world-class products and also a very elaborate welfare system. There was very high taxation — even, in one notorious case of a writer who was hit for capital gains and income tax on a bestseller, 108 per cent (one of the system’s architects, Pierre Vinde, later deputy secretary-general of the OECD, operated it with humour: this writer asked him on a plane journey to Colombia, did he not appreciate the damage that such tax rates did. He said, yes, of course, but he enjoyed the screams of pain from the smug bourgeoisie). There was no poverty, on the other hand, and egalitarianism had gone so far that use of the polite, unfamiliar form of the word ‘you’, a feature of all continental languages, was abolished. There was an underside: 70,000 Lapps were sterilized, on the grounds that they were not worthy of reproduction, a practice continued into the 1970s. But the ‘Swedish model’ was not what the outside world thought it to be. The Lutheran Church (which organized the first strikes) had pushed for a corporate solution to labour problems: employers, State, unions. This had been very successful in the 1930s. But it then encountered problems: women entered the labour market, got divorced, and argued for an elaborate system of social welfare, which indeed developed, with very high taxes to match. The system coasted on for a while, and the great Swedish concerns exported as before, but it was on notice. The currency ran down, inflation mounted, and the country, most prosperous of places in the sixties, drifted down to seventeenth on the list by 1980; some trade unions deserted the system. The great architect of Swedish social democracy, Olof Palme, lost an election, and his party lost another one, more convincingly, a decade later. Palme himself was murdered, probably by a Kurd. As Andrew Brown writes, ‘You might say that he devoted his career… to ensuring that no Swede would ever need to experience the American combination of material poverty and boundless optimism, and that he succeeded so completely that… he left a country where no-one was poor and no-one had room for optimism.’ Finland was a more interesting place, her leaders considerably less keen on preaching morality to the rest of the world, as Swedes tended to do. At any rate, the ‘Swedish model’ was no longer of interest.

Versions of the internal inflationary problem had happened before, and there was even a sort of Ur-version of a cure. France had attempted this, with ‘austerity’ programmes that did not quite succeed until de Gaulle came in. Italy had carried it out in the later 1940s, in the teeth of a Communist Party. But the origin in modern times went back to Germany, after the First World War, when, at the end of 1923, a cross-party government just set up a new currency altogether, wiping out the national debt, rewarding people who had property, and expropriating the savings or earnings of people still dealing in the old currency. The programme meant a year or two of extreme discomfort, as the government cut back its spending, and although the established trade unions accepted it, it also meant unemployment for the hundreds of thousands, and latterly millions, who not only were not protected by them, but were actively excluded, because they offered cheap competition. In 1948 the Germans had pushed through a similar reform, but had had to do so under Allied occupation, and at a time when trade union power was greatly weakened by the millions of refugees willing to work for very low wages. Such reforms indeed amounted to a brutal business, but the rewards for the pain were clear enough, a year or so down the line. At bottom, that was what the monetarists in London and Washington were doing, and in 1981 there were indeed fears that civil peace might break down altogether.

Where the monetarists faced difficulties, which were never really resolved, was in the external aspect of inflation. In conditions of free trade and money movement, inflation could be imported. The German Bundesbank, with the lessons of 1923 and 1948 well within living memory, was naturally concerned to keep inflation down, and was independent, in so far as any central bank can be independent. On occasion it had arguments with governments, and on the whole it won them. However, whatever the Bundesbank did, it could not stop foreigners buying Marks, and increasing the domestic money supply; Germany, too, suffered inflation in the 1970s, though at a