Norman Stone - The Atlantic and Its Enemies

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).