The Atlantic and Its Enemies

28. ‘Ending History’

As the Iron Curtain collapsed, there was much interest in the causes and consequences. The Left was mainly taken by surprise, and was (and, again mainly, is) quite unable to account for what had happened: Susan Sontag remarked honestly and pertinently that Reader’s Digest had been closer to the truth all along. But the academic observers of the bloc scene were also caught napping. A British expert on international relations, Philip Windsor, remarked, seeing the fall of the Wall on television, that it was the end of an empire; when his companion asked whether he meant the Soviet one, he said, no, political science. Very, very few people in the West had foreseen the end — the first was a 25-year-old Frenchman, Emmanuel Todd, whose The Final Fall (1976) seems to have been inspired by rock music, listened to in a shabby student flat in Budapest. Earlier, in 1970, a very brave Russian, Andrey Amalrik, had guessed, on the basis of day-to-day impressions, that the end was coming, though he got the date wrong. Grave seniors, the world over, shook their heads at such perversity, and when Gorbachev appeared, there was a sort of parade of guards of ‘useful idiots’, including J. K. Galbraith, who thought that the achievement of full employment was the great strength of the USSR. This writer will not plead innocence, having informed students until 1986, though not in print, that the Soviet Union had ‘solved the nationality problem’. But it is clear now that the most reliable guides all along had been the shunned ‘Cold Warriors’, men such as Alain Besançon, Robert Conquest or Vladimir Bukovsky, whose accounts (in Jugement à Moscou) of his dealings with American foundations read tellingly: when he explained to them, back in the 1970s, what was really going on in the Soviet Union, he was no longer welcome, and was even missed off the Christmas card list. In the same way, most of West German academe and much of the media was entirely taken aback when East Germany imploded. There is a counterpart in economics, where the ‘supplysiders’ of the early eighties had been widely dismissed, with derision, and had then turned out to be right, in so far as economics is about prosperity.

In 1991 there was much triumphalism on the Right, the more so as, by a quirk of history, the fall of the Berlin Wall more or less coincided with the fiftieth anniversaries of the Marshall Plan and NATO or, for that matter, of the German Federal Republic itself (celebrants of which could often only mumble a half-remembered and rather soppy version of the old national anthem). It was an Atlantic hour, a triumph of American power, soft, as exemplified by CNN, and hard, as exemplified by the IMF. The Fukuyama thesis, that the West, catchily described as free market and democracy, had won, had captured Japan and South Korea, and would go on turning all countries of the world into versions of Denmark, sounded quite convincing. But which ‘West’? For most of the world, it was Reagan’s United States — and not the European countries that practised the minor virtues, such as thrift, failing to make babies and padding their pensioners.

Efforts were made to parade the European Union (as it was soon to be called) as an alternative model, of ‘Rhenish’ as distinct from ‘Atlantic’ capitalism. On one level, Europe, or at any rate the Europe of the Single European Act, unquestionably did good, in that it could break into stagnant pools of local protectionism, and for a Spain or a Greece, emerging from stupid military dictatorships, joining Europe was important for morale and in a limited degree finance. The same was, on the whole, true for former Iron Curtain countries, which got German investment and remittances from migrants to the West. But, as generally happens with multinational organizations, Europe was good only at dealing with limited and well-defined problems. Her efforts on the world stage were laughable — never more so than when the then presiding officer, a Luxemburger named Jacques Poos, turned up with two other worthies at the start of the Yugoslav civil wars in 1991 to warn against nationalism — in this case, that of the Slovenes, who were ticked off for thinking that their country (an elephant beside his own) was large enough to indulge in independence. At bottom, Europe was itself in any case an Atlantic creation, and French aspirations to make it independent of the United States very speedily broke down. Lacking armed forces, it had only two lines in foreign affairs: ‘Me, too’ to the Americans, and then ‘Oh, dear’ to the Americans.

Even the ‘Swedish model’, long and finger-waggingly upheld as a sort of ‘third way’, broke down. It had thrived, with a small population sitting on raw materials, had thrived further because it had stayed out of both world wars, had done well out of the export of arms, while its political establishment moralized at the rest of the world. Up until the 1970s, Swedish Lapps had been sterilized in tens of thousands on the grounds that they, stunted in growth and drunken in habits, were not worthy to reproduce themselves. In the 1990s, Swedish delegations were appearing in Turkey to reproach Turkey for her handling of the Kurds, a handling that most certainly did not include sterilization. By 1990 Sweden herself had slipped from being second most prosperous country in the world to being seventeenth, and was overtaken by Finland, a former colony, where affairs were less pretentiously managed. In 1990 the only European of any serious interest in the former Communist bloc was Margaret Thatcher, herself, of course, no great respecter of the European Union.

Great numbers of hungry, intelligent Russians (and others from the old bloc) came west, with a view, often dewy-eyed, to learning what the secret had been. Others did not need any such training. Communism had had, in the form of Alain Besançon’s ‘C’ system, its own hidden, brutal and corrupt form of a market, and vicious figures made enormous fortunes out of the Soviet rubble. Russia then went through a very difficult decade, most Russians becoming disillusioned. The end of the Soviet empire was of course the culminating moment of the eighties, but there was an air of anti-climax to it all, as with most such moments, including Victory Day in 1945. Besides, this particular victory would clearly bring great problems, the worse for having been so widely unforeseen by the bureaucracies that had come into existence in the era of détente in the 1970s. Yugoslavia, the very model of Communism-with-a-human-face brotherhood-of-peoples, exploded, and the unification of Germany brought headaches of unemployment and mass migration to the prosperous places of the West. After a year or two of patriotic euphoria, the European countries of the former bloc were mainly taken over by variants of reformed Communists, now generally learning to talk another wooden language, that of ‘Europe’; their young migrated, their agriculture generally languished, particularly when European regulations were used to suppress the old-fashioned ways with, say, ham or smoked fish or wine that might have let them be competitive. Much effort went into making out that this was all a great success for Europe, and for a brief period there was even a parody of the old Sovietology, in which ‘transition’ from Fascism or Communism was solemnly studied, as if there could be any conceivable comparison between Spain and Russia except at the most superficial level. But the reality after 1990 was, mainly, depressive, and the collapse of population growth almost everywhere demonstrated as much.

However, even the extraordinary showcase boom of the eighties came to an abrupt end, as American and German financial problems introduced a recessionary period. Japan herself, where an asset bubble had enabled the Colombians to sell their Tokyo embassy and pay off the national debt, now stuck and shrank. Ronald Reagan had retired in 1988, succeeded by the much more conventional George Bush I; Margaret Thatcher herself lost office in November 1990, manoeuvred out by her own party and especially by the Europe-minded element. The pound had, despite her misgivings, been put into the emerging European single-currency arrangements. Quite soon, her misgivings were shown to be right, as the strains proved too much: interest rates, set by mainly German needs, rose to such a degree that credit was choked off, recession followed, and the pound was pushed out again, much to the benefit of astute speculators. Reagan was lucky to the end, in that he managed to retire before the bill had to be paid for a piece of extraordinary maladministration.

For well-intended reasons, Americans had been encouraged to buy houses on mortgage in the 1930s through federal-regulated institutions, Savings and Loans (as happened with the building societies in England). The interest paid by buyers was fixed, which made sense when there was not much inflation, as, until the 1960s, was mainly the case. However, these institutions, borrowing money, had to pay the going interest rate, which in the 1970s became double that of the interest rate that could be charged from their own borrowers. Money went elsewhere. In 1980, with Paul Volcker’s 20 per cent rate, the Savings and Loans were in trouble, and bankruptcy threatened. If Reagan had adhered to his own announced principles, the hundreds of insolvent institutions would have been allowed to collapse, but in the depression of the early 1980s he shrank from this, and in any case the troubles in the end were not of his making. The government insured deposits up to a value of $100,000. With this collateral, the institutions could borrow a great deal more. In 1985 they could have been shut down for a comparatively modest sum, but the Reagan administration itself encouraged easy credit — deregulation and an Act of 1982 allowed the Savings and Loans to move, beyond simple mortgages, into the world of speculation, and a further move abolished the rule that there had to be at least 400 shareholders: from then on, they could be owned by a single man, thereby empowered to borrow huge amounts of money on the basis of deposits guaranteed by the US government. On top of this, the amount of his own capital that he had to put in was decreased to 3 per cent of the money out on loan. The problem was further put off by accounting rules that allowed losses to be unreported for ten years, during which the institution might go on as before. So the more buccaneering of these institutions went on, especially in Texas, vastly over-building office blocks and the like; by 1990, of the 2,500 that survived, only half could be considered healthy. Some 750 Savings and Loans then went bankrupt, costing $160bn dollars and causing damage to house-building: depression then followed, in 1990, as the bill came in, and it wrecked the presidential career of Reagan’s successor.

The heart of the problem was Reagan’s unwillingness to apply free-market principles to residential housing: nearly 40 per cent of mortgages were guaranteed, whereas in 1970 almost none had been. In 1988 the failure was evident, and, with the deficits, even the tax cuts were reversed, partly formally, but mainly by stealth, as social security contributions went up and up. Federal spending rose by nearly 3 per cent per annum and income by 2.5 per cent: this made for a large deficit, overall of nearly $1.5tn. Defence spending had been part of the story, but only part, and in any case as the arms competition with the USSR ended, it in effect paid for itself in the end. In fact by 1986, to offset the deficit, taxes were raised, and endlessly rising social security taxes nullified the Kemp-Roth tax cut of 1981 for most people. In other words, the Reagan Revolution was something of an illusion, and the same might be said of the Thatcher Revolution. In England, too, taxes were if anything higher and the size of the State had hardly been diminished at all.

Besides, as the economic tide went out, various grasping monsters were beached, as indeed had happened in 1930, and that again gave ‘the eighties’ a bad name. In 1934 the Stavisky scandal had almost destroyed republican, democratic France, since government ministers and parliamentary deputies had been found to be involved in an upended credit pyramid, the apex of which stood in the municipal pawn-shop of Bayonne; the Madoff running it was found dead in mysterious circumstances. Now, in New York, life imitated art, in this case Tom Wolfe’s Bonfire of the Vanities and Oliver Stone’s Wall Street: the makers of ‘junk bonds’ vanished into prison as recession pricked their bubbles. In London the empire of Robert Maxwell collapsed. He (repulsively: the baseball cap making it worse), larger than life, was a lie from the start. He was not, as he claimed, a Czech and therefore a gallant ally. He was born in an eastern part of Czechoslovakia which had been part of Hungary, and where the local (Hassidic) Jews all spoke Hungarian. His name was the Germanic ‘Hoch’, the Hungarian for which is ‘Magas’, no doubt the inspiration for his Anglicized or Scotticized ‘Maxwell’, to which was attached the army rank of ‘Captain’, when he became a Labour MP. His money came from Soviet connections: he had bought up the patents of German scientific magazines for a song in Soviet Berlin, and he performed useful services for the Soviet Communist Party, which probably paid him by letting him know in advance when they would be selling gold or timber, so that he could one-way-bet-ly speculate accordingly. When the Soviet Union collapsed, Maxwell stole his pensioners’ money and then fell overboard from his yacht, in mysterious circumstances. His US equivalent, Armand Hammer, was not caught, though upon his death he was found to have left, net, very little money. Both Hammer and Maxwell used a small orchestra of lawyers to silence enquirers.

By 1991, therefore, the critics of the eighties appeared to be justified. The notable books on the subsequent period — for instance, Joseph Stiglitz’s Roaring Nineties or even Edward Luttwak’s Turbo-Capitalism — rather shook their heads. Later booms and busts (most recently the crash of 2008) caused a veritable vibration of heads, and the ‘decade of greed’, as the eighties had been called, once more came in for condemnation. It is of course legitimate to ask what went wrong, and when. However, in this, the critics of the eighties were misleading. The great weakness in books of the Stiglitz type, knowledgeable and well-intended as they unquestionably were and are, was to suffer a strange nostalgia for the seventies; in fact one very good reason for the triumphs of ‘Reagan-and-Thatcher’ was that their critics were not only very wide of the mark, but disagreed badly among themselves, and were themselves products of the seventies, when their orthodoxies had indeed proven calamitously wrong. The record of development economics, for instance, is unimpressive; countries such as Tanzania, spoiled with World Bank largesse, spiralled down in planning, whereas South Koreas and Taiwans, with hardly any help at all, shot up. This phenomenon made the reputation of the economist Peter (Lord) Bauer, also of Hungarian origin (and also Jewish, but he was educated in Budapest at the grand and otherwise anti-semitic Piarist School, since his father, a bookmaker, had agreed to put a red line through the debts of the chairman of governors, a Count Sigray). His observations did not earn him a Nobel Prize, but, nowadays, the critical literature of the 1980s can mainly only be read as a sort of archaeology, turning up the urn burial practices of some once great tribe, the terror of its neighbours. This irrelevance applied still more when it came to the artistic artefacts of the anti-eighties. British film had a wonderful tradition to it, classics such as The Third Man still watched. In the 1960s, the film schools had been sixtified, in the sense that their students were supposed to develop an updated version of 1930s social realism, allied with hyper-active (or hyper-passive, in the German case) camerawork. Public subsidy was then showered upon films that would otherwise have been utter financial flops, the beneficiaries afterwards rounding upon the subsidy-givers to complain at their parsimony. In the opera, one Fidelio after another evoked Pinochet and the SS; you would hardly have been surprised to find the Dove in Parsifal represented by a B-52 bomber over Vietnam. There was a characteristic episode, in the context of President Mitterrand’s celebrations of the bicentenary of the French Revolution. The Bastille: ideal place for a popular opera, ran the thinking. The episode was chronicled by Maryvonne de Saint-Pulgent in her Syndrome of the Opera (1991) — vastly over-budget, vastly late, strikes at the opening, peacock-screeching between major participants, flouncings-out. Opponents of the eighties very frequently missed the entire point, and only really showed how accurate had been their own critics of the later seventies. However, it was true that the decade had not ended as these self-same critics had wanted. What had gone wrong, and where?

It is curious to see that, in 1986, there was some crisis, in itself insignificant but generating headlines, that seems to have marked a caesura on the Right. Ronald Reagan’s administration was lamed by ‘Irangate’. After Vietnam, Congress had found ways to stop intervention abroad by the CIA, regardless of any national interests that might be involved. Nicaragua had undergone a revolution in 1979, and the ‘Sandinistas’ who took charge talked Cuban language; Central America was full of combustible material, and American interests were at stake. The CIA wanted to keep a counter-revolutionary movement (the ‘Contras’) going and found a complicated way round the congressional prohibition: through Israeli mediation, a deal was done with Iran for the release of hostages, some of the proceeds going under the cover to the Contras. Nothing much about the affair was quite what it purported to be but the Washington media were only too happy to have another Watergate, and though Reagan always protested innocence, some of his senior staff suffered. This coincided with the much larger failure, in 1986, to clean up the overall mess that had become of the budget — an objective that had been stated in the first Inaugural. ‘Irangate’ was a symbol that the Reagan Revolution had failed, at least in its own terms. By 1993 the tax take was almost where it had stood in 1980.

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).

In matters to do with society, the Welfare State, the National Health Service and education, uncreativity was on display. Perhaps this reflected an obsession with ‘information technology’. Computers, programmed for this or that, were supposed to replace manned offices, and there were fantasies as to how ‘paper’ would just disappear. Boxes would be ticked, managers would know how, automatically, to respond, and if need be management consultants could be brought on to advise. This was to confuse efficiency with efficacy, and it was extraordinary that the Thatcher governments went in for a degree of centralization that enfeebled ‘the little platoons’ which had so distinguished British history. Ferdinand Mount noted in effect how the growing central state had turned everyone into a functionary or a prole: exactly what had been said in the later 1970s. Government was not cut back at all. True 600,000 workers — a seventh — had been moved from public to private sectors, but the effort meant that more, not fewer, public servants were required, and Mrs Thatcher even appointed a minister to the National Health management board — precisely what was not supposed to happen. The government did indeed try to manage the civil service better but the Welfare State had become a great monster, the DHSS having fifty volumes of rules created since 1980. Samuel Finer said that Margaret Thatcher was ‘historic rather than historical’: greater for what she represented than for what she did. Businessmen were asked to look at the whole problem. In 1984 there had been some improvements, some money saved by elimination of the more extravagant absurdities, such as the experiment-rats that cost £30 each. But most of this was tinkering.

English education had suffered from the abolition of the grammar schools in the later 1960s. The head of Margaret Thatcher’s political centre, a Welsh non-conformist, had ‘an almost fanatical horror of the way education was now done in schools’ but where could he restart? Reform meant a parade of acronyms which, not long before the 1987 election, Die Zeit could mock unmercifully (a German correspondent in London, with an English wife and modish Hamburg views, lamented that his fourteen-year-old son, taken from his German school, was being diseducated). A National Curriculum was hammered out and hijacked by the educationalist bureaucracy; a universal examination called GCSE was installed, absurdly easy for some, impossibly difficult for others. Melanie Phillips listed the resulting woes, in a book, All Must Have Prizes (1996), which took all the tricks and had no effect. George Walden, who could handle the international comparisons, also wrote in the same sense, also to no effect. The minister in charge, Kenneth Baker, was himself a businessman, a believer in head office intervention, who did not see that without the threat of dismissal for the delinquent branch officials and of bankruptcy for the main firm itself such ways of doing things did not work. As Walden sadly pointed out, the fact was that the politicians (and many of the bureaucrats) could side-step the entire mess because they, like a rough tenth of British parents, used private (‘public’) schools which were often world-beaters. Margaret Thatcher herself had briefly been Minister of Education when the calamitous comprehensive reform had been going ahead, and had herself abolished many of the grammar schools. She later regretted this. But it was strange that the government waved aside its own supporters. There were similar problems in the USA, but there (as, to some degree, in Germany) there was such decentralization that good ideas could be tried out locally, in defiance of an educational establishment that a forthright Reaganite, William Bennett, dismissed as ‘the Blob’, with its weasellings and jargon (though even he proved ineffective at controlling it).

The preposterous over-centralization was on display over universities. A sage at the London School of Economics was Elie Kedourie. He wrote a pamphlet called Diamonds into Glass which summed up the problem: that the spending of money on the second rate would destroy the first rate. At least the American system was mixed, public and private of various sorts, the tax system encouraging towards the private side. If a Cornell collapsed in chest-beating self-righteousness, a San Diego would manage its affairs differently. The world’s young wanted to go to American universities, and European ones, easily within living memory a target for bright Americans, no longer attracted them. As Kedourie showed, in the thirties and forties British universities had been very good; the ‘boffins’ of the Second World War had worked wonders, with radar, jet engines, penicillin, nuclear physics and much else to their credit. Such facts were then misinterpreted, and the problem, as ever, went back to the later 1950s. Back then, national decline had had to be addressed. The spending of money on universities looked like an obvious start, the more so as universities always complained about money. A great man, Lionel Robbins, was commissioned to write a report, which doubled universities, created thirty-two polytechnics, and asserted that there must be ‘parity of esteem’. Architects made (ugly) whoopee, concrete went up and, as Noel Annan said, ‘all students could be given a Rolls-Royce higher education’, modelled on Oxford. In fact British education was set to be the beggar’s Oxford. It was a variant — on a small and therefore potentially rescuable — scale of the Continent’s experience, which had led to 1968. The fact was that Robbins’s report had set up ‘financially unviable arrangements’ after 1958 that ‘no country could afford’. The Thatcher government continued this, without embracing an alternative and creative course. In due course it made the problem even worse, by upgrading polytechnics, and thus doubling the number of universities.

Here again at work was the vociferous irrelevance — or downright humbug — of the critics. They went on as if the universities were wonderful, and as if there were a straight line between higher education and national prosperity, an argument easily defeated by the instance of Romania, which produced more graduates in the natural sciences than anywhere else, and where the lights frequently went out. Such thinking, in England, had caused provision for women students to take places in the natural sciences which, at considerable cost, they then failed to take up. Oxford ‘dons’ were especially pleased with themselves, whereas the conversation at their high tables would generally have made the exchanges in the bus stop in the rain outside seem exhilarating.

In the early 1980s there was a cut in public grants, of 5-8 per cent, and teacher-student ratios did rise, because of the overall attempt to control government spending and inflation. This had started under Labour, and, with Mrs Thatcher, it did not last for very long. Private money easily made up the gap, and the number of dons did not decline: it rose, from 43,000 in 1981 to 47,000 in 1987. Even by the somewhat questionable measure of published papers, the British were producing a third more of them per capita than the French and Germans, and twice as many as the Japanese (even then the index of such papers did not include periodicals started after 1973). This did not stop a wave of hysteria: Sir Denis Noble at Oxford started a campaign, ‘Save British Science’. Nature and New Scientist produced endless doom and gloom. A Sussex ‘unit’ referred solemnly to the ‘catastrophe that we face as a scientific and educational nation’, and there were loud references to a ‘brain drain’. A Times letter signed by over a thousand people in 1993 claimed that civilian research and development had declined as a proportion of the GDP, but that ignored the fact that the GDP had gone up considerably in the meantime: one thing that was very obvious all around in the 1980s. These claims simply did not square with obvious evidence. The Royal Society itself showed that, apart from some very high-profile moves to the USA, there was not even much movement abroad among the 300,000 people whom it surveyed: only about twenty-four per annum, easily made up for by immigration. ‘Save British Science’ was just the usual euphemism, verging on hypocrisy, of an older complaint. Academic salaries were going down relative to others, and especially in terms of housing costs. Junior pay was less than in the police or even the National Health Service. A professor earned three quarters of a medium-grade civil servant’s pay in 1979, and half in 1996, but the problem predated the Thatcher government, academics’ pay having been arbitrarily held back in the early and middle seventies. A distinguished American applied for the Drummond Chair in Economics at Oxford, and was accepted. He received his first month’s salary and enquired whether it was intended to cover removal costs. When informed that it was the salary, he realized he had made a mistake, having assumed that the figure quoted in the job advertisement had been a monthly rather than an annual salary. Such nonsense had to do with inflation and, more broadly, the attempt to fund too many universities on a sort of watering-can principle, Oxford professors having the same salary as sages of the sticks; and British students, like Continental ones, were hardly expected to pay anything at all for their higher education. As Kedourie said, it would have made sense to give each university an endowment of £50m and then let them sink or swim. Instead, by the end of the decade, ‘managerialism’ was being applied to the universities, and the principle was introduced of student loans. For students able to do summer jobs these were pocket money, for others, not enough to live on. The Treasury put on a ceiling of £420m, and the banks refused to operate the scheme as collecting the debts might alienate customers. Eventually a loan company was established (in Glasgow) but in 1995 the Brezhnevite results were plain to all — an eighth of the loans irrecoverable, a backlog of 17,000 unanswered applications, only one in twenty-seven telephone calls answered, and an assessor appointed who managed to adjust all of seven cases in five years. Meanwhile, in pursuit of student numbers, the universities abandoned entrance qualifications and adulterated their courses, with ‘modules’ to be picked and chosen. Did this contribute towards graduate employment? No. Only two thirds of graduates got a job or professional training within months and at Sussex one quarter of the graduates seem simply to have chosen unemployment in preference to some job as a receptionist or stacking shelves.

Meanwhile, the Thatcher governments responded with greater doses of managerialism, as with the schools; costs were held down arbitrarily: small, possibly creative, departments were closed down, for minuscule savings that turned out to be costly, such that Middle Eastern or Balkan studies imploded, much to the country’s loss when both areas turned out to make for great international crises later on. A White Paper even asserted that ‘If evidence of student or employer demand suggests subsequently that graduate output will not be in line with the economy’s needs government will consider whether the planning framework should be adjusted’ — meaning, no money. In 1987 one Lord Croham reported in business-schoolese, and a fake ‘market’ was set up, in which the universities were to ‘compete’ for funds. This meant encouraging them to produce publications, which could be totted up. The overwhelming majority went unread. The ‘bidding’ system was of course dominated by a single ‘buyer’, the government, which held down fees. Even clinical medicine was paid for at just over £5,000, and politics rated £2,200 per student, roughly what might be demanded by a decent infants’ school for a term. Even then, the fees were supposed to include ‘research’. As Simon Jenkins remarked, ‘What is so strange about [these] higher education reforms is how little headway was made by the Right.’ Government cack-handedness was such that it mismanaged a scheme for early retirement. In principle there was something to be said for clearing dead wood and promoting the young. However, academic salaries were already so low that even a three-quarter pension was not to be lived on. What happened was that the dead wood stayed, whereas men who could find another job took the pension and then moved on — 4,500 of them in 1985, generally from departments that were specially favoured, such that 800 new posts had to be set up. There was a puzzle at the heart of it all. British universities had produced brilliant results at a time when nuclear physicists had to go through a committee to get higher-quality box-wood for an experiment, and had to break in to the Cavendish Laboratory after 6 p.m. to see how their experiments were going. By the 1980s they had a level of money that could be described in the words of the Habsburg prime minister a hundred years before as ‘supportably unsatisfactory’. Where were their split atoms and radar and penicillin? There are imponderables in the world of academe, and quantification — box-ticking — could drive them out. The world, at any rate, voted with its feet and preferred America, warts and all.

The disintegration of the Thatcher government can be dated from the early months of 1986. Triumphalism reigned, and for the most part deservedly so. However, there was no strategy to deal with longer-term problems, and, almost casually, an expedient was found for a shorter-term one: the Poll Tax, which, by 1989, was causing great numbers of the MPs to think that they would be vastly defeated at the next election. Local government in Great Britain had once worked remarkably well, in an apparently messy way: the great Victorian cities had led the world in prevention of epidemics, in provision of transport and even as regards schools, where the half-dozen semi-public institutions of each, such as Glasgow High School or Manchester Grammar, were of legendary quality. The local owners of property paid the bills, and controlled the results. Then came votes for all, industrial decline, inflation and sixties grandiosity. Great cities put up concrete housing estates — soon hideous and crime-ridden — and local government descended often enough into corrupt stagnation, most voters not bothering, and the rest supporting a system by which absurdly cheap rents made it unprofitable to look elsewhere for employment. Meanwhile, property-owners paid. In London, 75 per cent of the income came from voteless businesses. Of 35 million local voters, only half paid rates. As a matter of principle, the rates were both inadequate and provocative of much anger, because they could be unjust: an elderly widow paying the same as a working family next door, on the one side, more than a better-off family in a public-rented house on the other, and more than a widow in some better-run place across the street. London was absurdly run, more or less by Whitehall but with fifty non-elected bodies and a general misunderstanding as to what made Paris work. Only a fifth of people on the various boards were elected, and there was the usual modern English problem that acronyms mean mess.

Was there not some way of sorting out the mess? There were wrangles between government and local government, especially London and Liverpool, where high spenders proposed to ignore government guidelines for the control of inflation. The only way to deal with this was to set a rates ‘cap’ and here there were battles, one problem being that if the government ‘capped’ rates, it would necessarily be responsible for the ‘cuts’ that followed — old folks’ homes closed, etc. How could this problem be solved? There had been inquiries, six since the war, but there seemed to be no alternative to rates, from property. In the USA there was a local sales tax, and the country was easily large enough to have endless variety. Neither there nor in Germany did central government take detailed control of local finance, and in both cases there were large units, ‘states’, which produced somewhat different and healthily competing ways of doing things. The Heath government had attempted a reform along these lines, ending up with things that were too large to be changed or too small to be effective. Local government was an unrewarding karst of a subject, and the matter was now dealt with in an almost casual way. Had local government’s powers been confined, what followed might have made sense. As matters came to a head, there emerged the most absurd piece of reactionary triumphalism since Charles X of France, in 1830, had appointed as prime minister a man who had visions of the Virgin and decreed a closure of the press. The revolution of 1830 quickly ensued.

It was called a service charge. In theory, high-spending and inefficient councils would be penalized by their own voters, because the service charge would be so high, higher than in comparable areas. Nigel Lawson and one or two others demurred, but in January 1986 the plan was introduced, with preparation time of ten years. Parliament’s system of select committees strangely allowed it through, and a one-time Heathite, scorned by Sherman, and greatly promoted thereafter, introduced the Bill more or less without criticism, so long as he was given money (over £5bn) to smooth its passage. There were to be safety nets and rebates, complications that made the Bill very difficult to understand. Nigel Lawson argued that the best thing would be to remove education from local government responsibility, as it accounted for half of its spending. At any rate, serving bills for several thousand pounds on a family not used to paying anything at all was not a sensible method of gaining popularity, especially as so much of local government was inefficient and pointless (Oxford had forty times as many AIDS ‘counsellors’ as there were AIDS victims). By 1989 a large number of Conservative MPs were feeling their heads. The details, as monks, the disabled, etc. had to be exempted, were surreal.

All of this amounted to a piano and chromatic version of a funeral march, but there was another version in the major going on very loudly at the same time. The government had failed in its aims, a failure concealed by some magnificent victories, and above all by the legendary status of its leader. Neither in England nor in the USA had ‘the State’ really been cut back. The concomitant, inflation, now returned. By the end of 1988 house prices were rising by almost one third per annum. In 1987 the consumer price index rose by only 2.7 per cent, but in 1988 it was rising and in 1989 was at 15 per cent — more or less the figure with which this administration had started. The pound slid, and the balance of payments registered alarm. To all of this, the European lobby in London responded with cries for closer co-operation with the Europeans. The Confederation of British Industry was important in this respect. It consisted mainly of well-established businessmen of the older type, not expert in finance, and brought up in the corporatist world of the seventies, when businesses really flourished only through their links with a then all-governing government. The Economist, the Financial Times and a small host of respected commentators all blamed the troubles upon failure to join the ERM, the early stage on the way towards a European currency, in the context of the Single European Act. The monetarists had been waved aside, and the one-time Chancellor, Geoffrey Howe, was now in favour of some British co-operation with the would-be European currency (he had recently and very uncomfortably given up smoking). So was his successor, Nigel Lawson (soon to give up eating). Charles X had been overthrown by his cousin Louis-Philippe, a man for the wallet, and the Orleanists now gathered, to conspire in London.

The point as to the ERM was that it was the product of a world of two decades before, the failure of the Bretton Woods system. It could only really be made to work if there were real partnership, i.e. if the German Bundesbank agreed to support currencies such as the pound that were based on very different economies from the high-saving German one. Any restriction of credit, in pursuit of exchange rate stability through higher interest rates, would mean unemployment, but the ERM had become a sort of totem, and the Americans, who had invented its original version, were in support. ‘Europe’ was a sort of deus ex machina for dealing with intractable internal problems, as the Italians, welcomingly, had found, and as Mitterrand in France, needing a bomb to blow up his allies on the Left, astutely discovered when his wooden Brave New World collapsed in 1982-3. It became, as a nineteenth-century English radical had observed of foreign affairs, a sort of outdoor relief for a sort of aristocracy, and for that matter the Foreign Office, not, generally, having much of a role, and having weakened its esprit de corps with half-baked positive discrimination, now found a role: it could interpret the awful complexities of Europe for politicians who had many other things on their minds.

A Sir David Hannay was apparently deputed to ‘Europeanize’ Margaret Thatcher, to inform her of the advantages of the institutions of what was supposed to be a united Europe. She took up the invitation to address the training school for European bureaucrats, the Collège d’Europe, at Bruges, in Belgium. Even then, she went not out of enthusiasm but because she had to be in Luxemburg anyway. Just then, the ‘president’ of the European Commission, Jacques Delors, was promoting his own candidacy for renewal quite vehemently: Germans, latterly, had been collecting such functions (as Manfred Wörner had done with NATO) and Delors wished to keep his. He went the rounds, making European speeches, announcing that within six years there would be a real government and a real parliament, responsible for ‘80 per cent’ of all laws passed in Europe. A few weeks later, the British Trades Union Congress gave him a standing ovation, as he sketched a picture of a left-wing Europe, with social benefits and low unemployment. In September 1988 Margaret Thatcher made her Bruges Speech, having lost from the draft a good part of the Foreign Office emollients, and made a characteristic assessment of Europe as she saw it — she played up the British contribution, but then told truths, to the effect that Brussels had been painfully slow and reluctant as regards the freeing of markets and capital movements, and that ‘we have not successfully rolled back the frontiers of the state in Britain only to see them reimposed at a European level, with a European super-state exercising a new dominance from Brussels’. It was a good swan-song; but the fact was that she had already lost the campaign. ‘Europe’ was marching on regardless, and even Geoffrey Howe, the Foreign Secretary, regarded the speech with ‘a weary horror’.

There were Europeans of some enthusiasm in influential positions all around; they, too, were somewhat shocked. It was put about that there was no such ambition for a European federal state, that ‘federal’ meant something different to the Germans in particular, that it was all xenophobic fantasy. In 1988-9, interest rates were rising, with inflation, and the ERM appeared to be the solution. It was quite widely advocated by very influential people, and the Americans, by now, were in favour of it, because it would support their own efforts to control the dollar’s value abroad. In the spring of 1989 a report, given the name the ‘Delors Report’, outlined what should be done to unify the Continent and its various currencies. Robin Leigh-Pemberton, Governor of the Bank of England, had signed it. It outlined ‘stages’ towards unity, in a manner supposed to be non-committal but in practice very influential. The fact was that a very powerful establishment wanted the Europeans’ ‘stages’, and certainly the ERM. Margaret Thatcher had, as ever, a large voting army. But many of her senior officers were near mutiny. The Delors Plan was supposed to be discussed by European heads of government in Madrid, in June 1989. The Spanish expected to make their first important mark at this, their first presidential European ‘summit’. The Prime Minister rejected this, but then found that even in private the people to whom she listened disagreed. Both Howe and Lawson asked for a joint interview on 25 June 1989 and threatened to resign. She gave way. At Madrid, she did agree to ‘Stage One’, though privately adding to Charles Powell, ‘We can’t stay in this bloody common market any longer.’ The full-scale European Monetary Union had been postponed, but ERM, as a stage towards it, had been in effect endorsed.

That summer, the post-war Conservative Party started to disintegrate. The Poll Tax was supposed to take effect in the spring (1990) and the party stood low in the opinion-soundings. At that point, one of her few remaining allies, Nicholas Ridley, spoke indiscreetly, as he was wont to do, and denounced the ERM as ‘a German racket designed to take over the whole of Europe’. The sentiment was wildly expressed, and it was an exaggeration: but, as with much that Ridley said, there was truth in it, in so far as German credit conditions would have to be valid for all of Europe, and that, in Britain, would mean high unemployment. Misfortune again came when some Irish terrorists assassinated Ian Gow, a wise adviser, and his successor as Parliamentary Private Secretary was not, by far, of the same class (he even wanted to extract a public oath of loyalty from the MPs). The middle party took Gow’s seat at a by-election, with a very large majority. There was of course the perennial stalking of the foreign stage, but Margaret Thatcher’s great moment had passed, with the waning of the Soviet Union. Her last act was to stiffen the resolve of the American President, George Bush, when Saddam Hussein invaded Kuwait in August 1990.

The next round of exhausting European wrangling was set for Rome, with the Italians chairing proceedings. Early in October, the concession, to join the ERM, was at last made. But the Europeans wanted more, an advance towards the Delors stages for proper unification. In their view it mattered much more, now, because, without formal unity, an enlarged Germany might be a great and malevolent force once more. One of the ‘stages’ involved an irrevocable commitment to monetary union (as it happens, with fixed exchange rates planned for 1994). Mrs Thatcher hated the ‘grand and vague words’ of these European occasions, and disliked what they portended. She said, about the tired metaphor of not taking the European train as it was leaving the station, that ‘people who get on a train like that deserve to be taken for a ride’. She denounced the Italians’ ‘mess’ of a presidency, and said, in Parliament, in grand-actress style, ‘No, no and no’ to all three Delors proposals. Howe resigned, and wrote a powerful letter; when the party chairman attempted to explain this away, he spoke on 13 November very powerfully indeed in the House of Commons, apparently much of the statement at the dictation of his wife. And then Margaret Thatcher had to face re-election as leader of the party. She won, but by a very narrow margin and under a strange rule that required a second-round election. It was of course an extraordinary humiliation for an outstanding figure, though in British affairs it had happened before, not least to Churchill. Her ministers, on the whole, told her that they would not support her, and in the end Denis Thatcher told her that that was that. The next day, 22 November, there was a brief, tearful Cabinet. She broke down, and had to start the business again. Then she had to appear for a final Commons debate, on a motion of no confidence. She spoke with a command performance, perhaps her greatest speech ever; one of the greatest occasions in the history of the House of Commons. The eighties had been a magnificent counter-attack: just when the enemy thought it had won, its ammunition dump had exploded. The look on the faces of the seventies was a poem. But what did the eighties do, in England and America, with the victory of the ‘Seven Fat Years’? It had been in so many ways the best of times: Russia back in the Concert of Europe, China returning as a great world civilization, a recovered Germany with an entirely healthy relationship with her neighbours, an Atlantic that had recovered its vitality. There had been downsides to the eighties, perhaps those associated with democracy by the classical writers. But it had been the most interesting, by far, of the post-war decades.