The Atlantic and Its Enemies (66 page)

Whatever the troubles of the first year, there was no doubt as to Margaret Thatcher’s determination to avoid ‘decline on the instalment plan’. It was true that target plans for the money supply (a 10 per cent increase, at most) were overshot. Unemployment had gone up by almost one million, and manufacturing output was in decline, as exports became dearer through the strong pound. It was an immensely difficult time. She was under attack, open and surreptitious, from men such as Chris Patten and other Heathites, and knew that she herself was irreplaceable: ‘If I give up, we will lose. If I give that up, I just think we will lose all that faith in the future . . . I hope that doesn’t sound too arrogant.’ Earlier, there had been breaches in her line - the inflation-upgrading of ‘benefits’ (£1bn) and an increase in defence estimates even though everyone knew, at the time, that defence could have been more prudently and more productively handled. Even John Hoskyns said that, if a U-turn were intended, it should be done quickly. In the winter, unemployment touched 3 million, and output fell by 6 per cent. But in January 1981, just as Alfred Sherman was losing influence (his own fault: he lectured at length on the private telephone line as to his own merits and deserts), Alan Walters joined the financial team (in 1975, like several others, he had gone to the USA, out of contempt for what was happening in England, where he had a post at the LSE). He and the Chancellor, Geoffrey Howe, had agreed on a measure of the money supply (M0, crude but reasonably accurate given the inflow of foreign money) and said the deficit must come down, from its £11bn. This meant higher taxes, and of course at least a stop on further spending. Walters called this ‘the biggest fiscal squeeze of peacetime’ as ‘benefits’ were not index-linked whereas inflation stood at 21.9 per cent.

That was an outright challenge. At the time, there were 3 million unemployed, three times as many as in 1979, and the real figure, given some manipulation of the figures, was probably considerably higher. Up to 1982, manufacturing output had fallen by 15 per cent, the GDP by 5 per cent. Mrs Thatcher’s anchor figure, Whitelaw, did not think there would be an election victory: probably a ‘hung’ parliament, without any natural majority. Besides, as Hugo Young says of this period, ‘another count on which ministers were vulnerable was their detailed failure to achieve what they said they would achieve by the methods they said they would use’. Taxes had not been reduced, except for people earning more than twice the average, and the doubling of VAT had affected the poorest hardest. No-one really knew how to measure money: M3 had grown by 65 per cent from 1980 to 1984, as against the 24-44 per cent expected. No-one, as yet, had noticed that privatization would be this government’s real innovation. The only bright spot was the fall in inflation (from 21.9 per cent in May 1980 to 3.7 per cent by May 1983). At the turn of 1980-81 there were ugly scenes, and what even appeared to be race riots. Interest rates, because of the dollar’s movements, went up to 16 per cent. The economists were almost all in favour of spending. A new political party, set up by Labour grandees who had also been distressed at the turn of events, was winning in the polls, and at her own later party conference the level of grumbling was such that she had to acknowledge it in her speech, saying, ‘the lady is not for turning’. Some of the more obvious critics left the Cabinet (including Sir Christopher Soames, responsible for the civil service, who berated her for twenty minutes: ‘he was, in effect, being dismissed by his housemaid’). It was Margaret Thatcher herself who stiffened Howe’s faltering resolve: and when she saw Walters before the budget, as she was packing hats in the private flat at 10 Downing Street, she said, ‘You know, Alan, they may get rid of me for this. At least I shall have gone, knowing I did the right thing.’ In any case, she was sceptical, or even contemptuous, of the welfare system: ‘I asked myself how people could live in such circumstances without trying to clear up the mess and improve their surroundings. What was clearly lacking was a sense of pride and personal responsibility - something which the state can easily remove but almost never give back . . . television undermined common moral values . . . The results were a rise in crime (among young men) and illegitimacy (among young women).’ She simply thought, ‘Oh, these poor shopkeepers’ as she saw the mayhem on television. In her memoirs she rightly says of the 1981 budget, ‘I doubt that there has ever been a clearer test of two fundamentally different approaches to economic management.’ There was much anger when the budget appeared (Tory enemies heard of it only a few hours before). It was famously denounced by 364 academic economists, including the best-known names, in a letter to
The Times.
It was their profession’s suicide note, and economics as a subject moved substantially to the United States, where the ‘orthodoxy’, as these Keynesian views had now ossified, was seriously under challenge. In England, apart from pockets here and there in academe, interesting economics came from financial journalists, a few of whom taught at business schools (this writer will again not plead innocence: he submitted an article to
The Times
, suggesting that the overall atmosphere was similar to that of the last years of the Weimar Republic, and that deflationary budgets might be fatal. The editor, the brave Charles Douglas-Home, spiked it).

Far from collapsing, as these academic economists warned, the economy began to move up, headed by the Stock Exchange, in spring 1981. As 1982 began, exports recovered, and retail sales rose. Investment returned, and property prices moved up again. At least the government’s determination to deal with inflation was not, now, doubted, and that had its own effect, for confidence returned. The very clever Nigel Lawson was now at Energy, with a brief to prepare for trouble with the miners. He had devised the Medium-Term Financial Strategy, which laid out plans for budgets and monetary growth in a credible way, a more sophisticated method of presenting monetarism. It was the start of the ‘Golden Eighties’, and any economist with a sense of history ought to have known that its verities were being reasserted. There were blocks - ‘rigidities’, they had once been called - to the proper exploitation of this in an England so strongly marked by the recent past. In America, Donald Regan was saying in public that Margaret Thatcher had failed for not being radical enough, but, as she replied, in England ‘socialism’ had just made more inroads than in the USA. She had indeed had a very difficult time, but her success made the enemies more devious, and there were even modest gifts in the following budget, as the Medium-Term Financial Strategy - the money supply - was revised, to make life easier. The criticism of this was that the lady was reverting to old practices - not carrying out the serious cuts, the change in the way of life that the original Thatcherites had wanted. They began to drop away, or to lose their sense of fight. But they had had a good moment.

22

Reagan

As happened with Margaret Thatcher, one immediately interesting thing about Ronald Reagan was his enemies. They wrote him off as a lightweight, a product of the Californian television world. The intelligentsia had of course been very strongly on the side of Roosevelt, and had again been very strongly - gushingly so - on the side of Kennedy. Reagan could hardly have been more different. He was sixty-nine when he took the presidential election in 1980, and showed not much evidence of serious education - nothing remotely comparable with Kennedy’s grooming at Harvard and the London embassy. He also offered simplistic answers that the professionals regarded with derision and disbelief. ‘Virtually brain-dead’, said the
New Republic
; ‘a seven-minute attention span’, said the
New York Times
; ‘amiable dunce’, said Clark Clifford, grand old man of Cold War affairs. Word went round that he had more horses than books. He also went in for presidential fol-de-rols that struck the great and good as kitsch. His predecessor, the worthy Carter, had sold off Richard Nixon’s operetta guard uniforms, but Reagan had near replicas made for his own, and pranced happily around as the band played ‘Hail to the Chief’. Besides, Reagan’s answers to economic or national problems struck most professional commentators as absurdly simple-minded. His relations with academe went from bad to worse, and Harvard shuffled rather clumsily out of giving him an honorary degree, which was awarded instead, for some reason, to Lord Carrington. But Reagan was much loved outside such circles. The apparent nonentity won by a landslide because he could talk to voters worried about taxes and government inefficiency, and he could do so with humour and style - not for him the upraised-finger repetitive moralizing that came naturally to so many of his allies. Of the federal government, he remarked, ‘If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it’: a neat enough way of expressing the irritation felt by so many businessmen and property owners at government doings in the age of Johnson’s Great Society. On the whole, businessmen do not make good politicians, and Ronald Reagan was useful to them.

His period as Governor had not been particularly successful. He had a Democrat legislature, and although relations with it were surprisingly good, he was in no position to put through what would soon be called a ‘conservative’ programme. Taxes did not go down, and government spending went up; however, Reagan did gain an important bridgehead in what would soon be called the culture wars. In the later sixties, there were endless problems with academe, particularly Berkeley. Not long before, it had stood out as a successful state - as distinct from private - university, and the central European émigrés to California had clustered there. Franz Werfel had made a great deal of money out of a book, turned into a film, about Lourdes (the nuns of which had saved his Mahler manuscripts from the Nazis) and he was very generous in supporting other exiles, such as Schoenberg, who lived in straitened circumstances. Thomas Mann was less generous. A curious link between Reagan’s Hollywood period and his time in office occurred with the Communist element. At Hollywood, film music had been composed by central Europeans, such as Erich Korngold or Max Steiner (who composed the music for
Gone With the Wind
- as it turned out, Hitler’s favourite film). There was Hanns Eisler, whose brother Gerhart was not just Communist, but chief link with the Chinese Party (and who broke with his sister, Ruth Fischer, when her Communism turned dissident) - the very type of astute Communist who knew how to stage-manage front organizations. At Berkeley, philosophers came, of whom the last, Herbert Marcuse, taught heady stuff as to liberation. Berkeley set itself up as a rival to nearby Stanford, which was privately funded and dominated by a business school. Here, two Americas confronted each other: the one anarchic and on-the-road, the other briefcase-wielding and besuited before its time. The Berkeley anarchists of course behaved absurdly, and Ronald Reagan could make some political capital out of them (‘a haircut like Tarzan, walked like Jane and smelled like Cheetah’). The president of the University of California system, Clark Kerr, refused to discipline students who were wrecking classes and taking over buildings; like many, many others, he shrank from appearing oppressive. On the whole, the natural scientists also wanted to get on with their hard work, and frequently regarded their colleagues in the Humanities as offering only ‘recreational subjects’ which did not matter very much. They therefore tended to vote ‘soft’. Universities everywhere in the USA were set on a path leading towards ‘Black Studies’ and the rest, and the great outside public shook its head. Reagan helped the regents to get rid of Clark Kerr, and there were confrontations with students, where, again, Reagan’s allies were generally helpless - either blundering or expostulating. Reagan found ways of disarming the demonstrators. They were generally fairly shallow and they handed tricks to the quick-witted Reagan: when they said they were the new generation, that in his youth he knew nothing of aircraft, television, etc., he had the good answer that this was true but that his generation had invented them all. Besides, he knew perfectly well that, on television, the rebarbative, shouting demonstrators would only make for sympathetic viewers and votes. He had a presence of mind and a light touch that set him quite apart from the preachy, humourless figures mostly to be found in his own political camp, the money-mad doctors with rimless spectacles from Pasadena, the evangelical versions of Dickens’s Reverend Melchidesech Howler of the Ranting Persuasion, and the rest. Whatever his shortcomings as Governor, he had one sure way of uniting his camp: he became somehow the chief figure of a general movement against the sixties. As such, he entered a sort of political subconscious, symbolizing something greater than himself.

After 1974, when he had to retire as Governor, Reagan faced some wilderness years. But events in the later 1970s went his way, as they did Margaret Thatcher’s. The
National Review
had been set up by William Buckley in 1955 as a sort of
épater les bourgeois
venture, to spit in the progressive winds of the age. In 1964 Barry Goldwater had forlornly stood as Republican candidate against these winds, and had got nowhere - he had even made the cause ridiculous, as it seemed to be associated with grasping and very provincial people from Arizona, a state quite fraudulently claiming to be rugged and individualistic, which would hardly have existed at all had it not been for the enormous amounts of money poured by the government into making the desert green. Goldwater had taken the Republican nomination by surprise, for it would normally have gone to an East Coast figure, in this case Nelson Rockefeller: but his divorce alienated proper-minded supporters. There was of course more to it. The Republicans were beginning, even then, to establish themselves in the South, because the Democrats had started advancing the cause of black rights, at the expense of state rights, and a great shift of the parties was under way. The Democrats under Johnson became
the
sixties party, and collected votes from, for instance, great numbers of women who now, for the first time, were in employment and, at that, often public employment, of course dependent upon taxes. The Republican vote - or at any rate support, since Democrats in the South did not always change party allegiance - grew in Democrat areas, such as Texas or California. In California, in 1978, there was a remarkable straw in the wind, Proposition 13. There was a property tax, which was sometimes cruelly high - for instance, affecting elderly homeowners who did not have much income. With inflation, as house prices rose, so did the tax assessments, and the money was not even spent locally: it was redistributed, following Federal prescriptions for the equalization of school funds and the like. The state constitution allowed referenda, and there was a great taxpayers’ revolt, despite an alignment of almost the entire Californian establishment against the Proposition, which passed by a large majority. It was a sign of things to come. With the inflation of the 1970s, many none-too-well-off people were paying more tax than before, simply because the levels at which higher tax was paid were not shifted upwards to take account of the lower value of money (‘bracket creep’). A programme of tax reduction therefore made sense, though of course it was also a direct attack on government employment.