Mrs. Thatcher’s Last Stand?

Since the celebration, on May 4, 1989, of the tenth anniversary of her becoming prime minister, not much has gone right for Margaret Thatcher. By the end of last year the euphoric talk of an “economic miracle” that had followed Nigel Lawson’s tax-slashing budget of 1988 had given way to gloomy forebodings about the return of the “British disease”—inflation and chronic uncompetitiveness. By last October, on the eve of the annual Conservative party conference at which Thatcher would celebrate her sixty-fourth birthday, the base interest rate had been raised to a penal 15 percent as a means of squeezing out inflation but also of supporting the exchange value of the pound. Not long after that Nigel Lawson, the chancellor of the Exchequer, resigned from the cabinet in spectacular fashion, saying he had basic disagreements with the prime minister and her private advisers over monetary policy and the European Community.

This resignation came after a clumsy cabinet reshuffle in July in which Mrs. Thatcher had abruptly removed Sir Geoffrey Howe from the Foreign Office because he wanted Britain to participate in the exchange rate mechanism of the European Monetary System and she did not. Her strident animosity toward European integration according to any model that implied federalism had contributed to the debacle of the Conservatives in the June elections to the European Parliament. For the first time under her leadership her party suffered a defeat at the polls.

This defeat planted the thought in the minds of MPs that she might have become a loser in Westminster elections too. At local elections a month earlier, and a parliamentary by-election in South Wales, voters had registered their dissatisfaction with the government and their disaffection with Mrs. Thatcher; people told reporters “she’s gone too far.” Opinion polls commissioned for the occasion of her tenth anniversary told the same story and must have made dispiriting reading at Number 10 Downing Street. The Gallup Poll reported that only 37 percent of voters agreed with the proposition “overall this is a better country to live in than it was 10 years ago,” while nearly twice the number who thought that “people’s pride in Britain” had increased during the Thatcher years considered it to have diminished. The phrase “Mrs. Thatcher’s Britain” had a negative ring to more than half of Gallup’s respondents. Other polls told a similar story and, all in all, some 60 percent of the voters were of the opinion that enough was enough of Mrs. Thatcher.

This was by no means the first time she had found herself in a trough of deep unpopularity. Her low rating in the polls—the worst since Neville Chamberlain after Munich, which is as far back as Gallup goes—was no worse than in the dire autumn of 1981 amid deepening recession and rising unemployment. Her fortunes reached a similarly low point halfway through her second term after the Westland affair in 1986, which was her nearest equivalent to Watergate. Yet on each occasion she had sprung back to win landslide victories at the polls in 1983 and 1987. Admired and respected by most of the British for the qualities that had won back the Falkland Islands or faced down Arthur Scargill and his striking coal miners, Margaret Thatcher has never been much loved; she is the curious phenomenon of an unpopular populist.

This time, however, there are differences. For all her time in office hitherto she was spared effective parliamentary opposition. Since it went lurching to the left in 1980 the Labour party has been virtually unelectable. The attempt to form a new, nonsocialist constellation on the center-left flourished briefly but served the purpose chiefly of dividing the forces of opposition under an electoral system which is hostile to third parties. By last year, however, the centrist alliance of Liberals and Social Democrats had fallen apart in personal and sectarian disagreement, opening the way for Labour to move back into the center ground of British politics. This, under Neil Kinnock, it had been seeking to do, and it junked many of its socialist policies along with the vote-losing cause of unilateral nuclear disarmament.

By the end of 1989 Labour had built up a lead of eight to ten points in the opinion polls, and, for the first time in a decade, looked as if in contention for power. Today, as the government’s unpopularity has deepened Labour’s lead is nearer 20 percent. At least there is now the possibility of the Conservatives losing the election if they try hard enough. Try hard they will have to, for the electoral demography of Britain is increasingly on their side. For decades Labour’s power base has been in the declining regions of the north, the depopulating inner cities, and among the dwindling ranks of the old manual working class while Conservative power has become increasingly entrenched in the more populous and prosperous southern region of the country, the burgeoning suburbs and smaller towns, and the new home-owning, share-owning middle classes.

To many of her own supporters Mrs. Thatcher seemed to be doing her best to lose. Having attributed the troubles of her second term to the lack of a clear program, the Conservatives had run in 1987 on a new radical platform, in effect the second stage of what had by then been dubbed the “Thatcher Revolution.” At the time it seemed like an inspired electioneering coup, today it looks like a major error. Instead of tackling real problems, of which there are enough, it set the government down the path of ideologically inspired and highly contentious institutional reform, none of which would seem to offer much electoral payoff. To take the most egregious example, Mrs. Thatcher rashly pledged herself to abolish local property taxes (“rates”) that finance local government and to replace them with a thoroughly regressive, inequitable, and explosively unpopular tax on each adult citizen, which has provoked renewed left-wing violence outside town halls and is in large part responsible for Labour’s commanding lead in the polls. Privatizing publicly owned industries, popular during her first and second terms, has become unpopular now that it is being extended to the electricity and the water industries. More contentious still is the proposal to introduce market discipline into the National Health Service, the most popular of Britain’s postwar institutions. This was the result of a purely reflexive initiative by Mrs. Thatcher herself and has led to running warfare with the medical profession. A similar upheaval in the school system has left teachers more dissatisfied than ever with their pay.

This surge of Thatcherite zeal has enhanced the impression that the government’s values are out of touch with those of the people at a time when inflation is rising, mortgage rates are punitive for many young home buyers, public services run down and starved of finance, and the streets disfigured by homeless people inhabiting cardboard boxes. To round off her disastrous anniversary year Mrs. Thatcher was challenged for the leadership by Sir Anthony Meir, a stalking-horse candidate, himself a nonentity, who nevertheless caused seventy MPs to deny their votes while a further thirty, it is said, informed the Whips that their loyalty could be stretched no further.

Hugo Young’s biography of Mrs. Thatcher was published in Britain to coincide with her tenth anniversary as prime minister and may have contributed to the sourness of those proceedings. Published in the United States as The Iron Lady, in Britain it was called One of Us, a title rich in irony. “One of us” is a Thatcherite catch phrase—“Is he one of us?” she used to inquire of people’s ideological credentials—but as the title of Young’s book implied, the irony was that Mrs. Thatcher was not at all “one of us,” the British people. This is the unspoken question that runs through Young’s biography. Is she to be seen as some kind of aberration or does she embody the spirit of her age in a real and lasting way?

The Thatcher story is by now mostly familiar, but Young tells it with studied fairness and natural elegance and constructs a rich and subtle portrait. The daughter of a grocer, she was brought up over the store, which is the nearest the British have to the American logcabin myth; in fact, her father was a well-to-do grocer, a moral pillar of the local community, and extremely ambitious for his daughter, who attended fee-paying schools and Oxford at his expense. She lacked nothing in political education, Young notes, commenting that “few scions of the nobility, however high their destiny in the Conservative party, have been able to say the same.” No thread of destiny ran through her early career as aspirant politician. She was elected to Parliament in 1959 at the age of thirty-four and became the “statutory woman” in Edward Health’s cabinet between 1970 and 1974. It is the typical story of an ambitious politician marked by a mixture of self-serving loyalism and calculated opportunism.

Much history had to be rewritten to accommodate the Thatcherite myth that the true Tory cause was destroyed by Macmillan and Heath and rescued by her efforts. As Young demonstrates, there is little trace of “Thatcherism” in Mrs. Thatcher’s early career. Much of what she became after she had wrested the leadership of the Conservative party from Health in 1975 she learned on the job; and when she came to power in 1979 there was no ideological blueprint for transforming Britain although, as Young several times stresses, she had been guided throughout by a strong certitude that whatever she is doing is morally right. He correctly identifies the 1981 budget as a major turning point. Keynes was stood on his head; taxes were lowered so as to curb public expenditure, even though unemployment was continuing to rise sharply. It was undoubtedly an act of great boldness and it worked, though at the cost of much manufacturing capacity and still more social hardship. Victory in the Falklands war the following year guaranteed her reelection “unopposed,” as Young puts it, in 1983.

Her second term Young sees as characterized chiefly by rudderless improvisation, a period of accident and error, the chief of which was the Westland affair, in which she allowed a relatively minor dispute over the award of a helicopter contract to be blown out of proportion by leaks and countercharges in the press. The result was the resignation of the Minister of Defense, Michael Heseltine, “the only man in Mrs. Thatcher’s cabinet,” Young writes, “whose fearlessness and ambition came close to matching her own.” Although she by then reigned victorious over her colleagues after purging her successive cabinet dissidents, she remained curiously vulnerable. As Young explains it, “A consequence of being dominant was that failures as well as successes were laid only at her door.” He dates her true apotheosis from her third successive electoral victory in 1987, for only then, he suggests, could she know “she had changed the course of history.” Young walks around his subject with fastidious fascination. He takes pains to distinguish her real achievements from the mist of moral theology which has come to surround them and which, quite plainly, he finds repellent. In the end he attributes her successes largely to the failure of others. It was

the failure of non-Conservative opinion to modernise and organise itself, rather than the impossibility of such opinion ever speaking for a British majority, which enabled the Thatcherite experiment to turn, in the course of three terms, into the new orthodoxy…. As far as the history of prime minister Thatcher is concerned, one need note only that it was integral to her existence and survival, an adventitious blessing, which need not have happened but which, if you were seized as she was of the need to save Britain by a revolutionary offensive against old ideas, could not have been more helpful.

This I take to mean that the “revolution” was not strictly necessary. My chief difference with Young is that, in fastidious recoil from Mrs. Thatcher, he underestimates the severity of the crisis in British institutions—particularly the intransigence of the trade unions in resisting modernization of industry—that brought her to power and the cumulative change since brought about. The claim to have made something of a “revolution” must rest chiefly on the performance of the economy. On this Peter Riddell’s workmanlike account in The Thatcher Decade is more helpful than Young’s majestic biography.

Formerly political editor of the Financial Times and now that paper’s Washington bureau chief, Riddell has a formidable grasp of government policy, especially on economic matters, and his book is indispensable for any student of Mrs. Thatcher’s Britain. Riddell gives “two cheers” for her economic achievements although since his book went to press the rate of inflation exceeded 8 percent, wage settlements have lagged ahead of growth in productivity, and the trade balance has deteriorated. Does this mean that the “Thatcher Revolution” was an illusion, merely a cyclical phenomenon enhanced by the temporary oil bounty of the North Sea?

There are some who think so. A year ago the Paris-based Organization for Economic Cooperation and Development (OECD) and the British National Institute for Economic and Social Research, both neo-Keynesian in their approach, were ready to allow that the “British disease,” the failure of British industry to improve productivity and compete with other European nations, might have been at last overcome; but today some of the symptoms look ominously familiar. Diagnosis depends in large part upon whether the resurgence in inflation and the deterioration in the trade balance are to be explained chiefly as caused by excess demand, the result of errors in monetary policy, or put down to such deep structural deficiencies as a rigid labor market and a shortage of industrial capacity.

There is no certain answer at the moment. Monetary policy undoubtedly became too lax following the stock market crash in 1987. Nigel Lawson was not alone in expecting it to have a deflationary impact and he allowed interest rates to soften. He also misjudged the strength of the credit-fueled spending spree upon which the British people had embarked in the euphoric wake of the boom he produced before the 1987 election and the tax slashing the following spring. The consumer boom sucked in expensive imports as the economy continued its rapid expansion. The result today is a rate of inflation about twice that of Britain’s chief competitors in spite of continuing high unemployment. Most ominously, the improvement in the growth of productivity has tailed off, leaving unit costs rising considerably faster than those of Britain’s competitors. Britain is once again experiencing relative decline.

A more optimistic prognosis depends chiefly on showing that an underlying improvement in productivity has taken place. Until very recently, growth in output per worker had under Mrs. Thatcher exceeded the average for the seven leading industrial nations. In manufacturing alone it grew at an annual 4.5 percent between 1979 and 1988 compared with an average for other countries of 3 percent. This improved performance resulted chiefly from the reorganization of production made easier by the redress in the balance of industrial power at the expense of trade unions and in favor of management. The shock therapy of the early days, especially the 1981 budget, may have had a lot to do with it. The scale of overmanning in much of British manufacture was vast and thus the scope for an increase in productivity as redundant employees were laid off was huge; the level of productivity was around one-third below the American and a quarter below the major European economies.

The brutal policies of the early days also brought inflation under control, although there has been no further improvement since 1983—the chief economic failure of the Thatcher years, Riddell thinks. Moreover, these initial successes gave her the ideological confidence to limit state intervention in the economy even further. The effects of privatization, welfare reform, and further trade union reforms in encouraging investment are hard to quantify but they may have contributed to the most unquantifiable factor of all, a change in the ethos of British society in the direction of enterprise. My own opinion remains that while it is inherently improbable that a hundred years of economic decline can have been halted and reversed in the space of a decade, there has been an underlying improvement in economic performance during the Thatcher years which is likely to outlast the most recent dip in the business cycle.

This improvement has been made at the expense of economic equality or, as the Thatcherites would have it, is the result of the greater inequality necessary to an enterprise society. The rich have grown considerably richer as the result of substantial increases in pre-tax earnings supplemented by tax cuts. The poor have grown relatively poorer as the result of unemployment and changes in the welfare system, notably the end of the practice of linking benefits to average earnings. Within the work force white-collar workers have fared better than blue, skilled workers better than unskilled, and private sector better than public employees. Thatcherite policies may well have contributed to these occupational earning trends but they are also observable in most other developed industrial, or postindustrial, societies. British society, like others, is assuming the shape of a fat diamond, three nations not two—“the haves, the have nots, and the have lots,” as John Rentoul has put it.^* The “have nots,” by this classification, are assuming the character of an underclass on the American model; they are disproportionately black and they consist largely of long-term unemployed, one-parent families, and youths without skills, all of whom are largely excluded from the opportunities of the society at large. This may also be a social development common to countries with governments as different as those of France and the US but there is no doubt that specifically Thatcherite policies have contributed to it.

In spite of this result, welfare spending continued to rise throughout the Thatcher years, as until very recently did the overall burden of direct and indirect taxation. Yet the public consistently supposed the government to be cutting taxes at the expense of welfare and public services—partly because the increased expenditure was not sufficient to enable the welfare system to keep up with the growing demands upon it. Attempts to contain the sharply increasing costs of welfare under the pressures of an aging population and rising costs of medical technology have created an army of losers more vocal than the mass of people who have benefited from increased prosperity without having suffered a loss of welfare. As the hospital waiting lists grew, the Thatcher “cuts” were blamed. Her government became hoist on its own rhetorical petard; her talk of “Victorian values” and self-reliance, together with the studies published by the Thatcherite think tanks, convinced the public that the welfare state was in the process of being dismantled in favor of a market approach. It was not true but the belief that it was has become deeply ingrained, and Mrs. Thatcher’s future depends on whether the satisfaction much of the population takes in having more money to spend will continue to override a pervasive social dissatisfaction.

Where Thatcher’s age shows most, after ten years in power, is in foreign affairs. The world has changed around her more rapidly than she can absorb. In the year of her anniversary the pace of the change became breathtaking, leaving her standing. The radical found herself for once a true conservative, the champion of the status quo, the Metternich of the post-cold war. Quite suddenly, she has come to look old-fashioned. With her friend Ronald Reagan gone, her special version of the “special relationship” with the United States was at an end. The new American administration is more committed to the European Community than any since Kennedy. Germany, for obvious reasons, is its central preoccupation. This makes life difficult for Mrs. Thatcher. In a speech at Bruges in September 1988 she declared herself roundly against any development that might lead to a “European superstate” and, echoing General de Gaulle, in favor of a Europe of nation-states.

Since then she has been on a permanent collision course with her European partners as they move toward the creation of an economic and monetary union. Her relations with Bonn are particularly bad as the result of her scarcely veiled hostility to the idea of German unification. Jubilant though she was at the rout of Communism in Eastern Europe, and inclined to see this as the further triumph of “Thatcherism,” she nevertheless sensed that the ending of the cold war threatened Britain’s position in the world.

The process of disarmament if carried much further will put in question Britain’s national deterrent. The world she had grown up in was the Atlanticist world in which Britain was cast in the leading supporting role, the only other nuclear power within NATO, America’s loyalist ally and special relation, permanent member of the UN Security Council, member of the exclusive four-power club charged with responsibility for Berlin. Instinctively, therefore, her response to the revolution sweeping Eastern Europe was to cling to the old order. Her personal rapport with Mikhail Gorbachev made her the first Western leader of note to endorse perestroika and wish for its success. When she saw him in peril of being consumed by his own revolution she endeavored to sustain him in power and gave further offense to Bonn by trying to put the brakes on German unification.

Obsessed by Britain’s relations within the European Community, and the specter of creeping federalism, she seized upon the resurgence of nationalism in the East as an argument against further integration in the West. Her foreign policy became a series of unconnected reactions. At home few voters seem to care much about these matters, although there are signs that the British people have become more reconciled to participation in the European Community than she has; nevertheless, Britain’s unsplendid isolation is the cause of deepening concern among her cabinet colleagues and among the civil servants, politicians, academics, and press people who take an interest in foreign policy.

Her conduct of foreign policy raises more general questions about her judgment and her style. As Young points out, Thatcher’s very dominance makes her vulnerable: her highly personal exercise of prime ministerial power causes everything to be laid at her door. The power is personal in the sense that she has done nothing to expand the scope of her office. It is power wielded imperiously in the manner of a king, even resorting to the royal “we.” (“We have become a grandmother,” she declared the other day.) She exercises her will by edict or anathema, through indications of royal pleasure or displeasure, the latter where necessary accompanied by what is known as a “hand-bagging,” the equivalent of a flogging at the court of Mrs. Thatcher. Her favorites live in fear of execution: for a minister to be identified in the press as heir apparent has been as good as a death warrant.

Like Queen Elizabeth I, she has outlived a generation of courtiers and favorites and in the process grown more confident in her exercise of power. She is said to listen less and less. But who dares tell her anyway? Her entourage at 10 Downing Street has come more and more to resemble a court, a nest of malice, intrigue, and suspicion bordering on paranoia. There is now a whiff of last days about the Thatcher administration. Governments do not become accident-prone by accident. Usually corruption of the kind Lord Acton had in mind sets in. Mrs. Thatcher does not wield absolute power but power of the kind that corrupts by eliminating all but yes men from the ruler’s entourage.

When she falls, she may fall hard. When that will be we cannot say. The state of the economy will chiefly determine the outcome of an election late next year or, if need be, postponed into 1992. It is unlikely to be bad enough to ensure defeat. The Labour party must climb an electoral Everest in order to regain office. There is little sign yet in Britain of the change in the intellectual climate which comes before a political watershed. To me the Conservatives look entrenched in power for a while yet. But still there is Mrs. Thatcher. The British have never loved her. Now they are tired of her. Her very style and demeanor, once the driving force of her transforming zeal, today invite her comeuppance.