3 October 2015

CapX Reviews: Thatcher’s Trial


Thatcher’s Trial: Six Months That Defined a Leader. Kwasi Kwarteng, Bloomsbury Publishing, RRP £21.99

History is written backwards. Before he embarks on the story, the historian already knows the ending. That can cause a problem. It is possible to slip into the complacency of hindsight and conclude that outcomes were inevitable when they were anything but. For life is lived forwards, often in the fog of uncertainty and conflict.

That is why Kwasi Kwarteng’s latest book is so valuable. In the sparkling light of retrospect, Margaret Thatcher dominates British politics throughout the Eighties and becomes a world-historical figure. One of her favourite phrases was “there is no alternative.” By the end of her Premiership, and even though she had been overthrown, she had stamped that idea on the national consciousness. But as our author reminds us, in all seemed very different in 1981.

Dr Kwarteng concentrates on six embattled months. Riots in Liverpool, more riots in Brixton, an economic crisis, a fiercely controversial Budget, a drastic Cabinet reshuffle, the hunger strikes in Northern Ireland: it seemed that anything which could go wrong was rushing to do so. The social fabric seemed under threat. Even readers who lived through those days will find themselves reminded just how bad things were.

There is a further point. The Margaret Thatcher of that troubled early period had still not established her authority, over her party or the country. She had won the Tory leadership because of a backbench insurrection, and many of the party’s leading figures had never reconciled themselves to her new order. She proclaimed her intention of breaking with the post-war consensus. She scorned any suggestion of the orderly management of decline and invented an insult for those who held such views: the Wets. Someone like Ian Gilmour would have retorted that if arrangements had become consensual, there would be a good reason and it would be folly to brush it all aside. As for orderly decline, that was surely better than steering straight for the rocks.

Mrs Thatcher was having none of that, but there is a paradox. She began this momentous year with a retreat. The miners threatened to strike. She concluded that the government was not yet ready to meet such a challenge. So she ordered a tactical withdrawal. Quintus Fabius Cunctator would have applauded. Others, including Arthur Scargill, drew the wrong conclusion and assumed that the miners would always win. Not when she was good and ready for them, they wouldn’t – and by sending Nigel Lawson to build up the coal stocks, she made sure that Scargill’s second challenge would also end in surrender: his.

For the rest of the year, there was little in the way of withdrawal, though there was a strategic shift, little noticed at the time, which was of great importance. When she came to power, Mrs Thatcher had one overriding objective: to defeat inflation. In her view, this was at the core of all the country’s difficulties. She also decided that there was a simple way to deal with inflation: controlling the money supply.

At that point, however, simplicity was not enough. It is all very well to talk about controlling monetary aggreggates, but how do you measure them? Margaret Thatcher often spoke scornfully about governments which had tried to buy their way out of unpopularity by “printing money” as if the whole problem could be solved by halting the printing presses. In a modern economy, credit creation is a far more complex business and the government struggled to find the right monetary target. it finally lighted on Sterling M3, an indicator which is now only relevant to monetary archaeologists. But as it included interest- bearing assets, it was not appropriate. You decide that £M3 is growing too fast. So you put up interest rates to slow it down. But that has the opposite effect, as money is switched to earn higher interest, thus further increasing the growth of £M3.

By 1981, interest rates were far too high, imposing an unnecessarily harsh economic contraction. There is one valuable indicator which proves this. Ruth Lea, the admirable free-market economist, was so concerned that she left the Tory party – and joined the Liberals. Ian Gilmour, the ablest of the Wets, said that a monetarist was like a car driver who only looked at the insruments on the dash-board and paid no attention to what was happening on the road. In the era of the £M3 fetish, that was a fair criticism.

But everything was about to change. Alan Walters arrived in No.10 at the beginning of the year as an economic advisor. He was no Wet, but he did look at the road. So did Jurg Niehans, a Swiss economist whom Alan Walters imported to help him persuade the Prime Minister than monetary policy was too tight and fiscal policy too lax. She took their advice. Hence the most controversial budget in British history. The economy was stagnant. Unemployment was rising. Most conventional economists would have known what do do: increase government borrowing to finance a Keynesian stimulus. Instead, the March Budget tightened fiscal policy.

364 economists promptly wrote a round robin the Times to express their dismay. The economy promptly began to recover. It is important to remember that the government’s standing in the polls had started to improve even before the Falklands War. Within months, the round robin had turned into a dead parrot. Geoffrey Howe came out with the best joke; an economist is someone who knows 364 ways of making love, but does not know any women.

As she showed over the miners and monetarism, Mrs Thatcher was capable of pragmatism. She knew that she would sometimes have to give ground, though she hated admitting it. But anyone reading this book will be struck by her ability to defy the doubters. “U-turn if you want to” she told the 1980 Tory Conference: “The Lady’s not for turning.”

Nor was she. In analysing the reasons for her successful stubbornness, Kwasi Kwarteng stresses her Manichean cast of mind. To her there was right, and wrong. Politicians either stood up for truth and decency, or they backslid into wetness and failure. In this, the influence of her father Alderman Roberts was crucial. In his superb biography, Charles Moore has discovered that the father/daughter relationship was more complex that the myths had suggested. She was happier to cite her father than to socialise with him. But his Methodist morality did mould her thinking. Her exemplar was Mr Valiant-for-Truth.

She was strong: she was also lucky. In late 1980, the Labour Parliamentary party chose Michael Foot to succeed Jim Callaghan. Mr Foot could have been an impressive Prime Ministerial candidate, if he had been up against Jeremy Corbyn. Against Margaret Thatcher, he was never convincing, especially when the Labour party split.

Mrs Thatcher was also fortunate in her internal opponents. Her Wet critics could have mustered formidable numbers, but they always lacked jugularity. They could not hang together, so she hanged them separately at her leisure. In September 1981, Ian Gilmour, Christopher Soames and Peter Thorneycroft gave way to Norman Tebbit, Nigel Lawson and Cecil Parkinson.

She had recast the Cabinet in her image and the Wet challenge was effectively over. Some of those Wets had thought that Willie Whitelaw would protect them, but that was a misreading of his character. Willie believed in loyalty, even to a Leader with whom he had little rapport. She, of course, had defeated him for the Leadership. To that lovable, admirable, delightful figure, this made the duty of loyalty all the greater.

Lucky, but she used her luck on a Parable-of-the Talents scale. This fascinating book isa testimony to the problems she faced and the magtnitude of her achievement. She was lucky. So was the country.

Bruce Anderson is a political commentator.