There was an odd parallel in Britain around the same time, an affair known as ‘Westgate’. A small helicopter company called Westland was in trouble, and wished for government help because of defence exigencies; but the American company Sikorsky proposed to buy it. The defence minister, Michael Heseltine, was a vain man, able none the less to arouse enthusiasm at Conservative Party gatherings. He strongly believed that there should have been a government strategy for industrial regeneration, and had tried, in stricken Liverpool, to do his best on a local scale. He had spoken up for local government, even when the Prime Minister (in 1983) wished to close down the rather attitudinizing left-wing apparatus that in theory ran London. He also believed in a European zone. Now he argued that a European consortium should save Westland. More generally this reflected a belief in ‘regional policy’, German examples of which he had no doubt heard of. It was true that in the once industrial powerhouse of Germany, Nordrhein-Westfalen, regional policy had been practised such that towns like Essen, which, had they been in England (or France), would have been stricken in the manner of Liverpool, had recovered. But in Germany, which had nothing like the British problem with inflation, planning could proceed on a relatively confident assumption that costs would not go beyond bearing (and there were also solid critics in Germany of regional policy: it seemed to hold the richer parts back while doing little to improve the poorer parts). Besides, local government there was simply more competent. Now it appeared that Heseltine, whose talents had not, he thought, been adequately rewarded, was using the Westland case to push his way into the Department of Trade and Industry, a monster that reflected sixties gigantomania in a hideous concrete building. He stirred up the more corporatist-minded of his business friends, and was indiscreet in his pursuit of his aims. There were leaks to the press about a warning to him, and it came to a Cabinet meeting early in 1986 at which Heseltine lost his temper, resigned there and then, and stormed out. There were even pompous complaints to the effect that constitutional government had ‘broken down’. It was no doubt true that, by now, the Prime Minister was bypassing some of the Heathite arrangements, and Heseltine’s coup failed. However, sufficient mud stuck to the government and there was more muttering complaint. One minister on the way down was permitted to take such blame as there was, and another, on the way up, delicately indicated that there might be a leadership crisis. ‘Westgate’ was of no interest to even a narrow public, because the country had much else to ponder.
If we look for the moment at which the impetus of the early eighties gave out, it would be 1986, the year of these insignificant symbolical twists. In that year, the seventies came back again, with attempts to rig currencies along lines satisfactory to the powers that be; Europe adopted the Single Market, promptly misused in an anti-market sense; and it became plain that the Thatcher government had lost its overall sense of direction, becoming, as the great historian of government S. E. Finer noted, ‘an unimpressive and unhappy government’. This coincided with a further great problem, that inflation, which had brought this government to power, now returned. Nigel Lawson had been an imposing Chancellor, commanding confidence, and in his own view he was irreplaceable. In March 1988 he brought down the top rate of income tax from 60 to 40 per cent, and the standard rate to 25 (from 27). Labour politicians howled, with the usual shouts that the rich were being given privileges, while the poor suffered. The tax reduction made sense, of course, as it had been shown the advanced world over that if taxes were put at a sensible level, people would not strive very energetically to avoid paying them if they knew that they were getting something in return. The tax reductions cost £6bn, not, by 1988, a large sum, and if they contributed to rich taxpayers returning to the country, there would be no loss at all. In any case, the government’s accounts were in surplus, the first time since 1969.
A far more insidious problem lay in the world of international finance. In 1985 Lawson had in effect abandoned the original monetarist strategy. Instead, he wished to control inflation, as part of a worldwide effort, through the rate of exchange. In 1985 there had been a parallel movement in the United States, and the finance ministers of the main countries met, in an agreement - the Plaza - to bring down the overvalued dollar. These attempts to control the world’s money were not usually successful over the medium term, nor were they now. In February 1987 there was another agreement - the Louvre - to bring the dollar up again. There was then a disagreement between the Germans and the Americans, provoked by some unguarded vinegary statements by James Baker, now a dominant figure in the Reagan administration, and, on the whole, a force for uncreativity. The new trouble was a fear that the dollar would have to be protected by high interest rates, and in October 1987, the midst of the great eighties boom, the stock markets crashed. Understandably, the finance ministers then agreed to cut interest rates, pumping credit into the world, and generally fearing that there might be a repetition of the Slump of the 1930s. In reality these fears were entirely overdone. The stock markets quite soon recovered, and much of the problem had had to do with ultra-new technology, which put the market’s usual herd instincts into fractions-of-a-second velocity. A credit boom was already under way; it went ahead, and inflation went up. But in England there was more to it. Lawson had decided that his best method of controlling inflation was to link the pound with the most stable currency on the Continent, the
Deutsche Mark.
In a way, this was inconsistent with his earlier stance. He had been an efficient manager of the sound-money Medium Term Financial Strategy, an attempt, not senseless, at domestic financial management. However, the Single European Act was emerging, and the Americans were trying to recover control of the dollar; and there was in truth almost no way in which domestic money could now be measured, because Britain had recovered as a trading and foreign-currency-dealing nation. Inflows of foreign money were vast, much of it connected with Japanese investment. The British balance of payments had been suffering, because oil prices declined, and Lawson took the circumstances of 1985 as guide: the pound had indeed declined by 16 per cent against the Mark, which would of course add to inflation.
In 1986 these circumstances were to change, as the boom went ahead. ‘Big Bang’ meant that the City could bid for world financial supremacy, and ‘popular capitalism’ was an enormous success, with a great part of the population now owning assets in property or even shares. The City firms turned into ‘security houses’ as in New York, and the wonder occurred that the British sold automobiles again, even if they were from foreign-managed factories. The British addiction to buying property meant that credit based upon property assets was in heavy demand. In natural circumstances, this would have meant a rise in the pound, just as in the Reagan boom the dollar had risen. Any deficit on trade would be met, as in the USA, by foreign investment. However, that was not Lawson’s idea, and he preferred to control the pound otherwise. Lawson agreed with the Bundesbank that the pound would be kept at just under DM3,
i.e.
if it threatened to go higher or lower, he would change interest rates and sell foreign exchange or bonds accordingly. This allowed him, of all things, to cut interest rates in October 1987, and again in the March, to 7.5 per cent.
But, as things turned out, DM3 was too low: with foreign investment pouring into ‘booming Britain’, the pound was undervalued, and inflation was a consequence. This link to the
Deutsche Mark
was intended to attach Britain to the Exchange Rate Mechanism (ERM), which was the Europeans’ contribution to world financial stability. Lawson had argued for this in 1985, when the monetarist recipes turned out to be inadequate. Back then, Margaret Thatcher had resisted - she preferred the markets to set exchange rates, and anyway disliked handing sovereignty to the Europeans. It was a sign of her loss of power that Nigel Lawson started to devise his own exchange rate policy, ‘for which there are few precedents in modern economic policy-making’. The chief civil servant was not told until after several months had gone by, and the Bank of England just did what it was told, without asking why. Margaret Thatcher found out from an interview in the
Financial Times
, and on 7 March 1988 heard from her own people that their opposite numbers at the Treasury themselves disagreed with the policy. She at once told Lawson that the pound must rise, which it did, to DM3.10. Lawson, though humiliated, survived because of his triumphant budget. But the economic climate began to worsen, in the sense that inflation was returning, and now the demand for a link with the ERM, to prevent the inflation (as the French
franc fort
was alleged to be doing), became very very strong. The French had high unemployment, because credit rates and the franc were kept high. But this was ‘Europe’, an apparently sacred cause. An excellent account of the problem appears in Bernard Connolly’s book,
The Rotten Heart of Europe
(1995). Writing as a European civil servant, he exposed the rough dealings of Brussels, and the machinations to which Lawson exposed himself.
In the inflationary boom of the later eighties, as stocks and house prices doubled and trebled, the popularity of the Reagan and Thatcher governments was unassailably strong; and, besides, especially in Margaret Thatcher’s case, they had demonstrably dealt with at least the short-term problems confronting them in 1979. It would not be wrong to say that she had turned round the temper of the country. The same was also obviously true of Ronald Reagan, as witness his triumphant re-election in 1984. However, both had been sucked more and more into foreign affairs. The ending of the Cold War was quite well managed, and was maybe the last moment at which a British Prime Minister could claim a true world role (although she had an unnecessarily carping tone when Germany was reunited). But both in London and in Washington, when it came to matters of the longer term, the Right fell apart. Here again, those critics with their hearts in the seventies can be dismissed out of hand as irrelevant. It was certainly correct to observe, as did the reactionary critic Anthony Daniels (a prison psychiatrist with considerable qualifications), that the British had achieved the feat of becoming much richer while also having a more uncomfortable life. But the seventies-minded commentators were quite mistaken in blaming the rising crime and growing coarseness on ‘the Thatcher cuts’ or an alleged ethos of ‘greed’. The problems had been well in evidence before, and had even caused the rise of Margaret Thatcher in the first place. If she can be faulted, it would have to be in failing to take up a strategy to deal with such problems. The Atlantic, or ‘the Anglo-Saxons’ if we are to include Australia, struck French observers as undergoing a sort of social crisis, for all the money, or perhaps because of all the money, that was pouring out. Plantu, the cartoonist of
Le Monde
, wrote the line, ‘socialism is the hope of Europe’, and then drew three representative British figures - the Prime Minister saying, ‘What’s Europe?’, the banker saying, ‘What’s socialism?’, and the young street hooligan saying, ‘What’s hope?’. ‘Yob’ was the reinvigorated word used for this last figure, while ‘yuppie’ entered the language to describe the noisy young products of the financial revolution.
England was visibly changing in very unpleasant ways. In 1944 Orwell had called attention to British orderliness: football matches resembling church parades; Richard Hoggart in a famous book thought that the working classes’ future would be a sort of ‘virtuous materialism’. By 1990, in a neat little Westphalian town, before some football match, there was a notice, ‘English people not served’. Richard Tawney had done much to develop the Welfare State. When he died in 1962, he can have had no idea of what, very shortly, was to come about. For him the best things in England were stable families and internal peace. No policeman even needed a Perspex shield until 1977, let alone a gun. In 1955 there were fewer than 1,000 crimes per 100,000 people, a figure steady since the middle of the nineteenth century. It crept up to 1,700 in 1960, 2,600 in 1965, 3,200 by 1970, over 5,000 by 1980 and 10,000 by 1990. In Sunderland there were 480 armed robberies in 1980 and 5,300 in 1991. Again, the facts of family breakdown were incontrovertible. In 1942 10,000 divorces occurred. There was a Divorce Reform in 1969 and in 1971 there were 100,000 divorces. This was expected to be the last of it - unhappy marriages at last over. But there have been at least 100,000 divorces per annum ever since, even where children are involved. In 1990 there were nearly 200,000 divorces, but the figure then levelled out because people did not marry. In 1971 under one in ten births was illegitimate; in 1981, the figure was 13 per cent and in 1990 nearly one third, 50,000 of them to teenage mothers.
That children born in such circumstances would probably go wrong was simply a commonplace of the wisdom of the ages. From the sixties, an often asserted line was that, where there were problems, these had to do with money. It was of course true that single-parent families had less money, and three quarters of unmarried single mothers were indeed on ‘income support’. For many years, the evidence was fought over, but in the United States, where the whole problem had come up earlier, a long-term study had been made, and by 1993 the evidence was published. It showed that ‘the dissolution of intact two-parent families is harmful to large numbers of children . . . [It] dramatically weakens and undermines society.’ It was not difficult to make a list of the stupidity, cowardice and lying that had been involved in denying this common-sense generalization. Even the educational pundit A. H. Halsey, who came very close to apologizing for his own part in the creation of the world of the 1990s, could not help blaming ‘Mrs Thatcher’ because the housing estates where the mayhem occurred were broken down and poor, although he admitted that family breakdown had caused his own educational reforms to fail. But for governments to deal with these things is obviously difficult; the best writing on this subject is by Margaret Thatcher’s own one-time political secretary Ferdinand Mount, whose
Mind the Gap
(2004) argues for a restoration of civil institutions, even the Church. In the United States, so much larger and with a far higher degree of decentralization, various answers could be variously tested, and it was there, rather than in England, that some progress was made as regards such problems, vigorously identified by Charles Murray or Myron Magnet (
The Dream and the Nightmare
, 1993).