The New World Order

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The Rt. Hon. The Lady Thatcher, Former Prime Minister of Great Britain
THE NEW WORLD ORDER
Chairman: Michael A. Walker
Executive Director, The Fraser Institute
Introduction by Sir Alan Walters, Vice-Chairman and Director of A.I.G. Trading Corporation and Founding Member of The Fraser Institute’s Board of Editorial Advisors.

It’s very dangerous asking an academic to get up before a microphone, because when you switch them on, you know, they’re pre-programmed to go on automatically for 45 minutes, but I’ll try to strike 40 away and get through in five. Michael described me as a tenuous link. I’ve never been called that before, but I am sure it is something important. Certainly, I have enjoyed my role as an Editorial Advisor of The Fraser Institute and have been pleased to help the Institute with its research from time to time and to reflect today upon its two decades of accomplishment.

It is an enormous pleasure today to introduce Lady Thatcher, because she needs no introduction, of course. And you came to hear her, not me. But because each of you is taking away a copy of Lady Thatcher’s book, The Downing Street Years, I’d like to put a couple of thoughts in your mind, when you look at it. The thing that I have always found amazing about the Prime Minister and looking back over the period from 1979 until today, one of the most amazing qualities which shines through, though it is never really discussed in her book because she couldn’t, is her moral courage. Now, moral courage is a strange thing. I don’t think you can acquire it; I think you have to be born with it. Lady Thatcher has moral courage which illuminates so many of these pages, and of course you can see it coming out time and time again.

I first had occasion to admire her moral courage in the 1981 budget. She had enormous opposition from all the great and the good–364 economists, no less, published their opposition and of course she was opposed by many others. She had political opposition, not just in front of her, but indeed behind her, too. But she went ahead resolutely and won the day. Perhaps you have had some local experience with the reluctance of politicians to demonstrate firm resolve when it comes to budgets–the Prime Minister–I’m sorry, I shouldn’t still call her that but it’s force of habit–she was remarkable in her absolute commitment to the course she felt would be best for the country.

Another occasion was her conflict with the mine workers and their Marxist leader, Arthur Scargill. While you may know of it you can have no real appreciation what it was like for her, virtually single-handedly, beating down this Marxist threat. What a wonderful job that was. But, what a tough job and what courage it took, day after day.

You will also enjoy the wonderful chapters on the Falklands’ episode which in itself would have been test enough for most mortals. And of course later, just before she left office (and I must say this) she put a bit of spine into George Bush, in his dealings in the Gulf.

Her other great achievement was her fight against the Exchange Rate Mechanism. She fought and fought again. And this fight parallels her opposition to a federal, centralized Europe. But even after she left office, I recall I was having dinner with her and news had just come in about German recognition of Croatia, and she said, (and I don’t know whether she’ll remember this) "This is going to light a fuse that’s going to blow up in Bosnia-Hercegovina."

The remarkable thing about this long list of displays of moral courage is that in the event I believe she was proved entirely right: the 1981 budget, everyone admits it now; of course, confronting Comrade Scargill, when she chose a perfectly timed fight, she was entirely right. I believe also that she was entirely right on the Exchange Rate Mechanism. She said the Exchange Rate Mechanism was perverse, and it would lead also to enhanced cyclicality, and it would all end in tears–essentially, break up. So it has; so indeed it has.

Finally I’d like to say something for which I may get into trouble, but it’s important that it be said. The Prime Minister, I’m sorry, Lady Thatcher, will not say it, and it’s never said anywhere publicly, but she was the boss. Occasionally we called her "the boss" and indeed she was the boss, but at the same time she was always open to argument, open to ideas. And after I’d won or lost an argument with her, we would go ahead with the policy that followed from our discussion: a remarkable thing in my view for a politician to be so open to argument from a technical advisor.

One always thinks of "the Iron Lady" as a very tough Prime Minister indeed. But that toughness was combined with the most kind and considerate sort of boss anyone has ever had. That was particularly true as you got down the scale to the porters, the messengers and the drivers and all the people who keep Number 10 running. She was very considerate and very kind, in every possible way: an image that is never mentioned, let alone publicized. It is said that: "No man is a hero to his valet." Well we were valets to her, and she was certainly, and still remains, our hero.

Thank you for the opportunity to be with you today on this wonderful anniversary occasion, and please welcome Lady Thatcher.

The Lady Thatcher

Mr. Chairman, Alan, ladies and gentlemen:

First may I wish you a very happy 20th anniversary of The Fraser Institute. I’m delighted to be here to spend it with you, and to honour the great work which you have done. The Fraser Institute is very similar to the Institute of Economic Affairs in London, which had a tremendous influence on the whole of economic and political thought in Britain. Second, I’m delighted that Alan Walters of your Editorial Board was here to share it with us. He was my economic adviser, and we wouldn’t have got it right without him. When he mentions that 364 economists were against him, they didn’t matter at all; it was the half-dozen led by Alan who were with us who prevailed.

I find, as I have been interviewed in Canada, in the few brief hours I’ve been here this time, that all commentators seem to regard one as something of a phenomenon because one set out in politics with convictions. They don’t quite understand that. They say "Well, here we have pragmatism." To this I say, if you are embarking on a great voyage across the oceans, you have to have some stars to steer by, and the stars have to be constant. It’s no good steering by shooting stars. So, yes, I had convictions.

I would have liked to have read to them a favourite quote, but I hadn’t got the quote with me, but I’ve got it now. It’s by a French 19th-century politician, who said: "There go my people. I must find out where they are going so that I can lead them." Well we didn’t start that way. We knew where we were going, we knew the reason why, and we were prepared to persevere until the policies showed good results.

The other thing that I find, is that your commentators are all sold on the idea that politics is the art of the possible. Now my friends, if you take that view in any sphere of life, you will soon lower your sights as to what is possible.

The task that I had ahead of me was enormous, because Britain in 1979 was a country not only in decline but whose people had accepted decline. The task upon which I embarked was to say, politics is the art of making the impossible happen. And that is precisely what we did. I would like in the time available to consider just three examples of making the impossible happen.

I’m going to start off with the economic side of politics. You must get your economics and the enterprise right. For, if you do not, first you’ll have no standing in international affairs, and secondly no one else will listen to you at all. So we knew we had to get the economy right. We had to do four things pretty well immediately.

First, we had to get the rate of income tax down. When I took over, the top rate of income tax on earnings was 83 per cent, and the standard rate was 33 per cent. That was much too high. I believed in incentives, and so in the first budget those rates had to come down immediately and we had to pick up the lost revenue by indirect taxes. Nevertheless, with the extra incentive, people right through the whole piece began to work with more will when there was something to work for. When they knew full well that the lion’s share of the earnings would go to them, to enable them to look after themselves and their families and their future standard of living.

Next, we were all tied up with far too many regulations. Even my own party had been prone to enact more regulations. You couldn’t determine your prices; there was a Prices Commission. You couldn’t determine your incomes; there was an Incomes Commission to determine what was the norm for increase in wages, regardless of the performance of the company. You couldn’t, in fact, determine your dividend, and you couldn’t get the amount of foreign exchange that you wanted. You couldn’t develop your factories where you wanted to because there were Development Certificates.

All of these things went in our very first budget, which was three weeks after we’d taken over. And even some of my best friends said, "Oh come off it, don’t you think you’re going a bit fast?" I tell you that because it is surprising how socialism penetrates even good conservatives sometimes.

Well now those were the first two things, but that wasn’t the end. We had to tackle trade union law. The trade unions had virtually taken over Britain. It had been strike after strike after strike. And gradually I noticed that the trade unions began to understand that although any one of them could attempt to bring Britain to a halt, none of them could protect their own members from the ravages of another trade union. There lay my hope; and in the belief I had that most people would far rather go on working, doing a decent day’s work for a decent day’s pay, given the chance, than they would come out on strike.

I had a great deal of opposition in changing the Trade Union Law. Opposition which was often based on the idea that one shouldn’t do anything very radical; that one shouldn’t upset things. Well I took the view that the trade unions had upset enough, and I really had to cope with what they had done and to change things so that we wouldn’t have to continue just to cope. And so, we in fact brought forward four different pieces of legislation, one after another, which altered the whole balance of trade union law, as between employer and union, and also altered the whole balance between the ordinary member of the union and the trade union boss. You know we had got to the position where any trade union could bankrupt any employer, even though their own members had no quarrel with that employer. I don’t know what your own labour law provides, but we found ours to be intolerable and destructive for the ordinary workers who were the alleged beneficiaries of these laws.

So after the changes, the ordinary member of a trade union could decide by ballot, secret ballot, whether they went on strike, and the officials had to be elected by secret ballot. We stopped the closed shop. It gave the trade union bosses far too much power. And in the end we brought in a law that a trade union’s funds could be sequestered by order of the Court, if that trade union did not obey the law. Now that took us until about 1985. We actually got the coal strike, to which Alan has referred, in 1984. You now know that we won it. I had to live through it every day for a year; every day had to decide the tactics. We decided right at the beginning that the task of the police, as we reminded them, because they’re independent, was not merely to keep the peace by saying, "Look, don’t try to go to work through the picket lines at a colliery, there’ll be demonstrations, it’ll make it difficult." They had in mind keeping the peace, in that sense.

We took the view, and the Attorney General made the appropriate speech to reflect this view, that the task of the police was to keep the law-abiding citizen able to go to his place of work at the time when he was due there. So even though there were terrible pickets, even though there was violence on the picket line, the task of the police was to get through the picket line those miners who wished to go to work. And they did. My belief in the ordinary member of a trade union was upheld many times over, because about one-third of them insisted on working and going through to their pits day after day after day. And my faith in the British character boomed to great heights, as these miners behaved as I had always believed they would. And so we won that.

Fourth, we had 46 major industries in the hands of government, that is, they were nationalized. I took the view that governments don’t know very much about running industry. The people who do know are the ones who are in it. What is more, it gives governments far too much power to have control over those industries, and it gives them far too much temptation, as when you want to make the appropriate changes or get rid of surplus labour and people would come streaming to their MP to ask for extra subsidies. That’s not how you build a prosperous economy. So we had to privatize 46 major industries. Most of them are now privatized.

In that privatization process, I also carried out one of my other great ambitions. It had not hitherto been possible for ordinary people with an ordinary wage or salary to build up their own capital, except perhaps through purchase of a house, which was restricted to far too few. So, first we managed to start to sell council houses at a very reduced rate to sitting tenants, so that people could buy their own house, reasonably, over a period of years. Secondly, when we privatized, we always held a block of shares for the people who worked in that industry, so they could buy those shares at a discounted price.

In this process, we doubled and trebled and quadrupled the number of shareholders that we had in Britain, and it became obvious that an ordinary person, earning ordinary wages or salary, could build up their own capital and therefore have an interest in the progress of the economy generally and through their share holdings an interest in the future.

All of those things we did, all of those things we had great opposition in doing, but it did transform Britain. We did get rid of the surplus labour, we did get rid of the many, many restrictive practices, we did get rid of the regulations. And as we got the tax rates down, government’s revenues did not fall Indeed, we noticed that as we got the top tax rate down from 83 per cent ultimately to 40 per cent, the top five per cent of income tax payers at a 40 per cent tax rate actually contributed a bigger proportion of tax to the Exchequer than they had when they were paying 83 per cent. That is the power of incentives. And I can tell you on both sides of the border here in North America, that you will find the same thing.

So, by tackling things which other people had found they couldn’t or wouldn’t tackle, we did in fact transform Britain. And there’s one further point about this that I want to make to you. Alan referred to moral courage. I found that as we started to build up prosperity in Britain, we were actually growing faster than they were in Germany. We got another attack, "Oh don’t you think your society is too materialistic?" and I said, "Don’t be so absurd. If a Labour Government had managed to have that prosperity they’d have all been dancing in the streets and shouting it from the housetops." (If you can do those two things at the same time.)

You simply have to give people the opportunity to do better. It enriches their lives, they have money left over to give to preserving historic sites, to the arts, to the sciences, to music, and so on. Most importantly, we all want to get other people out of poverty, and you can only do it by the wealth you have created.

But there is another point, in this connection, which is not so very frequently stressed as it should be: capitalism is the moral way of running an economy. Socialism is the planning by the few over the lives of the many. You have seen where it ultimately led to in the Communist society.

The many had no freedom. Everything was exercised by the few at the top.

Everyone is born with some God-given talents and abilities, and he has a fundamental right to develop those within a rule of law. In other words, freedom has a moral quality. Developing it is a moral attribute. You can only do that within a civil society, and you have to have a strong rule of law and a rule of justice.

The creative factor in society is a direct result of the responsible exercise of freedom, which is the moral quality. In the context of freedom you can only produce goods and services by the voluntary joint action of a group of people acting together. You can only satisfy people in a capitalist society if you produce what they want to buy, or a service which they also want to buy. People prosper in a capitalist society by serving the needs of others, which are expressed through the marketplace. We must never forget that it is in fact capitalism which has the moral quality in society, not socialism, which is the elevation of the power of the government over the people.

This moral quality of freedom is reflected in a true democracy in that the people give power to the government so that the people can achieve certain things through government that they might find difficult to do in ordinary ways. But the key is that this power that they give they can also take away and give it to someone else, as you know, from time to time.

My overriding conclusion from my own experience is that in seeking to be rewarded by the people with this gift of power the most important thing is to get your convictions right. Ensure they are based upon the very best values, in the very best traditions, in the very best character of your country, and you’ll find there’s a good deal of conservatism in a nation. I am certain you will find that here, as I have found it in Britain.

So, that was the first thing, to make the impossible happen by not running away from doing difficult things. The second major issue was when we suddenly were faced with the invasion of the Falkland Islands. Quite suddenly on a Wednesday we found that they might be invaded on the Friday, because the Argentine fleet had sailed. From the equipment on board, and its formation, we knew this was different than when they’d been on an exercise. And we had to face the decision, to make a choice. Would we say there’s nothing we can do about it. After all, these islands are 8,000 miles away, if we send a fleet down there they’ll go into the Antarctic winter. It is cold, there are bitter winds, how can we fight a war from ships bouncing about in those terrible seas? How can we fight a war with aircraft on aircraft carriers when the enemy has airfields only 400 miles away from the battle scene (and of course by that time a small airfield on the Falkland Islands)? How can we fight a war when they will know we’re coming for three to four weeks; is it possible?

Had you fed all that into a computer, you’d have got the answer "No"! But that denies the spirit and determination and guts of a nation; it denies the sheer professionalism of your armed forces. So we took a decision. The fleet would sail, and it was assembled within 48 hours.

We went to Parliament, we called them on a Saturday. And the fleet sailed–the full task force sailed–25 ships led by two aircraft carriers on the Monday, and another group of seven from Gibraltar, where they had been exercising. They sailed, and you know the eventual result.

For the first three weeks we negotiated with the Argentinians: negotiate, negotiate, negotiate. Everyone urged us to negotiate. Gradually it became apparent that there wasn’t a single new negotiation to do. The Argentinians weren’t going to get off. I’d never expected any dictator to get off those islands. So we had to bring the negotiations to an end, and we had to land and retake them. I can only tell you as a Prime Minister, having been through it, they were the most agonizing days I have ever lived, because no Prime Minister expects to put their people into battle. You hope that the deterrent effect of having strong armed forces will be sufficient. There comes a time when it isn’t.

Any invader will ask himself three questions about what his adversary is likely to do. First, has my adversary a strong defence? He can do nothing without that; yes, we had a strong defence. Second, can he get his forces to the scene of action required? Well it was very very difficult, but we did it. Third, has he, or she, the resolve? Yes, we had the resolve. And Galtieri miscalculated totally: about our ability to get there; about our resolve to get there; about our skill and professionalism when we got there. It was the first time in the post Second World War world when an aggressor had been stopped, and the international law that you shall not take anyone else’s territory or possessions had been upheld.

Please note: it was not upheld by the United Nations, nor was getting Iraq out of Kuwait done by the United Nations; it was done by lead nation states with a strong defence. And never let it be forgotten.

In all my life in politics, the unexpected has happened. The Falklands was the unexpected. Later, it was the Gulf. But at no time did I ever, I or President Reagan, or President Bush, have to think: have we got the requisite defensive weapons? Because wise foresight had seen to it that we had. Even when we cut down government expenditure, within the total I increased expenditure on defense; we were never prepared to let that go down. And I hope it’s a lesson that people have learned.

When it came to Bosnia, I was no longer on the scene, and I’m afraid the invader asked himself the same questions: Has my adversary the defense? Yes. Can he get it there? Yes. Has he the resolve? No. I could wish it had been different, because I had not expected to see those events happening in the heart of Europe, ever again, in my lifetime. But in the Falklands we did the impossible, and for the first time international law was upheld, because of our strength of defense and our resolve.

The third impossible thing that happened during my time in office was the collapse of Communism. I came in in 1979, with the idea we must have a strong defense and strengthen it, although we had to cut our total expenditure, and of course we did. Ronald Reagan came in just at the end of 1980, also with the idea that Communism was an evil empire, that we must strengthen our military capability, and we must also fight the battle of ideas. And we agreed about that. The policy until that time had been the containment of Communism. We couldn’t do anything else. And of course the Communist policy was world domination. As you know, they challenged us first in the Korean War, and again under the leadership of America we went in. They challenged again in Vietnam, and it is my view that had the Americans not gone there, Communism would have spread much further throughout southeast Asia than it did. In my view, the Americans fighting there held back Communism in that part of the world long enough for the fight–back to come as it did later.

But Ronald Reagan and I started by saying, let’s make it quite clear to the Soviet Union that they will never win militarily; if they start to station new kinds of nuclear weapons, we will station more, and we did. If they start to go ahead with their technology, we will go ahead of them. The critical thing there was Ronald Reagan deciding to go ahead with SDI, which was a great leap forward. The Soviet Union knew they could never compete; they hadn’t the computer capacity; they just hadn’t either the knowledge of that particular part of science nor the capacity to turn it into action. And of course we learned a fantastic amount from the programme.

Don’t believe some of the reports that have come out. We learned a fantastic amount about getting everything very, very much smaller. It started very big, and it became very much more minute; fantastic advances in the whole of electronics. That was the last straw. When Mr. Gorbachev first came to see me, he asked if I thought I could prevent Ronald Reagan from going ahead with SDI. I said "No." First, we’re helping; secondly, I believe in it; thirdly, and most importantly of all, I am not a mediator between the United States and the Soviet Union.

Mr. Gorbachev had realized that the Soviet Union’s economy was not performing and that the West was performing. He knew and realized that with the fantastic number of people from within–the Sakharovs, the Sharanskys, the Ida Nodles, the Bukovskys–working for greater freedom there was an opportunity to break with the past. He eventually (and it would not have happened without him), gave those people what you and I regard as our birthright–personal freedom, freedom of worship, freedom to elect their own representatives–and the whole atmosphere changed. That really helped to bring about, with the other things, a collapse of the Cold War.

Mr. Gorbachev was slow, in fact, to disperse economic power from Moscow to the other Republics, very slow, which Mr. Yeltsin spotted. Yeltsin said, "We will not keep the political liberty unless you have the economic liberty with it. You must have private property, you must have independent industries showing enterprise, you must have dispersal of power from the centre and limitation of the power of government." However, as Mr. Gorbachev was trying to complete that freedom by bringing about this dispersal, there was the attempted coup. The attempted coup failed, but of course in the end the Soviet Union fell apart, and we now have 15 separate Republics, three of which are the Baltic Republics, which should never have been under the Soviet Union.

In a way, we again tried to make the impossible happen. If either Ron Reagan or I had said in 1979, or 1980–together with what we did, with what was accomplished by people within the Soviet camp working for us in the sense that they were working for liberty, and with what was done by a new leader in the Soviet Union–that we would, during our terms in office help to bring about the collapse of Communism, no one would have believed us.

But now there are some very important lessons also to be learned, because people tend to think that to bring about the collapse of Communism is equal to bringing about democracy for all nations. It is not. No one in the world has ever had such a big job to do as going from a nation which has been under Communism for 70 years, to democracy. Communism is the most total tyranny. It has all of the most hideous things of Nazism, together with something else: it operated by taking away all private property, at gunpoint. Millions of people were murdered when they resisted as their land was taken away by Stalin. It operated also by taking away everyone’s jobs. You had to apply to the Soviet Union, to the Communist Party, for your job. So you had no liberty, you had no land.

Communism was never a revolution from the bottom. Communism was an intellectual idea, by not very good intellectuals, for the power of a Marx and a Lenin and the Bolsheviks over the rest of the people. They who, although made of the same human clay as the rest of us, said they were so marvellous, that they could plan everything, decide everything, and they took away everyone else’s liberty; and to make certain that people didn’t rise up, they took away everyone’s property; and so they created a totally passive society. So it’s not easy to bring them to democracy. President Yeltsin made a very good try at it in spite of the fact that he and the Parliament were working with a 1978 Communist Constitution. Also, he was dealing with a Parliament elected before the failed coup. So he’s now trying to get it back to democracy with neither a currency on which they can depend, (and hasn’t the governor of your central bank done a good job here?) nor the rule of law. Everything was done by dictate of the Communist Party. So they have no rule of contract, no independent courts, and so far they’ve got very, very little free enterprise. And until you can get a proper law of contract, and a rule of property, which they are beginning to get, it’s difficult in fact to get things going.

Don’t think either that the end of the Cold War means that peace has automatically broken out. There are many many things which Communism suppressed, the ethnic clashes and historic difficulties, and it kept some of its client states under tight control so none of this could come to the surface. What has happened since the end of the Cold War is that we have had two places of hot war. One was the Gulf, where Saddam Hussein was free to go into Kuwait. The second was Bosnia, where Slobodan Milosevic would never have dared to do what he has done at a time when we had the world cleft into two.

But do not let that lead you to the impression that I was in favour of the Cold War stability. I was not. It was a sheer rule of oppression. The collapse of that evil empire is the best event, and the most hopeful event, in my lifetime. But it is going to take some considerable time to bring it to a full democracy in which people begin to accept responsibility for their own lives, begin to accept responsibility in building up new enterprise of every kind, both economic and social, and also get a totally non-corrupt administration. It is little appreciated that what is there now, the natural legacy of the Communist corruption, is corruption and protection rackets from top to bottom. And that is very, very difficult to deal with and to change. It is going to take time even though there are some people working to bring the corruption to an end.

Now the final thing that I have to say is this: the United Nations, important as it is, consists of 184 nations, not all of them democratic by a long shot. You must not rely upon them ever to make peace where there is none. As you have seen this has not happened in Bosnia. They haven’t even insisted that the humanitarian convoys get through. A few Serb guerrillas have been able to stop those humanitarian United Nations convoys, which is appalling. The only way to keep peace in the world is through the actions of a very powerful nation, such as America. We should always be extremely grateful that the most powerful nation in the world, the greatest democracy, the greatest believer in freedom and justice from its very Declaration of Independence marvellously drafted by Jefferson (of course he had been an Englishman by descent)-twice this remarkable country, aided and abetted by other people of like mind, in Canada and in Britain, (in the last world war in Europe, of course, it was only Britain that stood out against Hitler), has in fact come to keep freedom alive in the world. At the moment, there still is no substitute for American leadership. All of the united nations I said that fought in the Gulf–there was Britain and France and other nations including your own who came to join in-were a coalition put together of nation states. So, that leadership we hope must continue, and we must all be prepared to help. You’ve already seen two wars since the end of the Cold War. My friends, we must never, never let our defences go down. Never!

Tyrants and dictators have been born across the ages. They will continue to be born, and we must never let them achieve their aim of taking other people’s land or possessions. That is the task which our generation has. This century, which was entered into before your time and mine, with such enormous hopes, (of c

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