Strange Rebels: 1979 and the Birth of the 21st Century (12 page)

And then there was the fact of her gender. Callaghan was a practiced debater in the Commons, and a certain condescension came through whenever the two of
them sparred. Where he was genial, she was earnest. Where he was smooth, she was grating, sometimes even a bit shrill. What could you expect, really, from a woman? At one point, when Thatcher chastised him for his “avuncular condescension,” Callaghan replied that he found it hard to imagine her as his niece.
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The Winter of Discontent took its toll. As the early months of 1979 gave way to spring, it no longer looked as if Callaghan could count on an economic upturn to counter the prevailing gloom. But his advisers took some consolation from the polls. They showed that Thatcher’s personal approval ratings still lagged behind Callaghan’s. By the time the election came, they reasoned, Sunny Jim could rely on the power of his charm to best the joyless Milk Snatcher.

C
allaghan’s personal popularity was not the only obstacle that Thatcher faced in 1979. She was also confronting the inertia of a well-entrenched political and economic consensus that had reigned since the end of World War II—a consensus that included wide swaths of her own party. In the 1940s, tired of their country’s class conflicts and minimal social protections, Britons had begun to dream of a radical break with the past. It was a dream that first assumed concrete form in a book published under the stewardship of an economist and civil servant named William Beveridge in 1942. The Beveridge Report, as it came to be known, was an instant best-seller. People lined up all night to purchase a copy. It was translated into twenty-two languages, and British airmen dropped copies of it on occupied Europe.
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At the end of the war, two copies of the text, translated into German, were found in Hitler’s underground bunker in Berlin.
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The report was an extremely unlikely candidate for popular success. It was an official publication that bore the notably drab title of
Report of the Inter-Departmental Committee on Social Insurance and Allied Services
. But no matter. The Beveridge Report fired the public imagination because it provided the blueprint for a reorganization of the British state that would eliminate poverty, hunger, and sickness.

“Now, when the war is abolishing landmarks of every kind, is the opportunity for using experience in a clear field,” the report declared. “A revolutionary moment in the world’s history is a time for revolutions, not for patching.” What the report proposed, however, was a distinctly British kind of revolution: a bureaucratic transformation of the state. It declared that full employment should be the goal of economic policy. It proposed the creation of comprehensive public pensions and unemployment insurance. It laid out the basis for a national health insurance system. And it argued for a broad expansion of public education at all levels.

We have no record of how the young Margaret Thatcher regarded the report. But it is entirely possible that, like so many of her young Conservative contemporaries,
she accepted its conclusions. The privations of the Great Depression and the war compelled even many staunch Tories to recognize that the country needed a more extensive welfare state. Even Churchill welcomed the report—within limits. As a young Liberal politician, he had been something of a social reformer, and had even cooperated with Beveridge on some proposals in the years before World War I.
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Now, in a 1943 speech titled “After the War,” he promised that the government would do its best to implement many of the key provisions of the report—including a “broadening field for State ownership and enterprise” and “national compulsory insurance for all classes for all purposes from the cradle to the grave.” But he also warned against saddling the government with too many ambitious obligations that might break the budget and said that any plans for implementing the Beveridge proposals would have to wait until the first postwar elections.
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The result of the general election of 1945 was not what Churchill had expected. Churchill’s Conservatives were buried by a Labour Party landslide. It was the party of Clement Attlee that had campaigned most aggressively on a Beveridge platform, and his newly formed government announced to the British public that it would use the mandate given it by the electorate to move the country forward to the “New Jerusalem” of a comprehensive welfare state. Attlee himself had worked in the slums of East London as a young man, and the experience had left him with a profound sense of the need for wide-ranging social protections.

It took the Labour government just a few short years to implement a raft of social welfare policies that transformed British society. The Labourites established child subsidies, expanded a range of social insurance programs, built vast new tracts of public housing, imposed far-reaching rent controls, and launched a comprehensive program of state-run, single-payer health care (the National Health Service). It all proved enormously popular.

Labour’s economic policies were even more far-reaching. “It is doubtful whether we have ever, except in war, used the whole of our productive capacity,” the Labour election manifesto proclaimed. “This must be corrected.” Attlee and his cabinet set out to do this through a series of measures that transformed British capitalism. They nationalized the “commanding heights” of the economy: coal, oil and gas, communications, railroads, iron, and steel.
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They instituted management boards to oversee the new publicly owned industries. And they put into place a wide-ranging system of price controls and regulations. By 1951 about 20 percent of the British economy was under public ownership.

This was revolutionary, even if it didn’t quite add up to a revolution. Many aspects of capitalism continued to coexist with these reforms. The Labourites borrowed some of their most consequential policies from the thinking of an economist
who had transformed economic theory between the wars precisely as part of his effort to save capitalism from its own weaknesses. This was John Maynard Keynes. A lifelong member of the Liberal Party, Keynes was far from being a socialist. But he had posited that classical economics tended to understate the possibility of market failure. Real markets did not always balance out perfectly, he argued. In some cases, supply and demand could achieve equilibrium without creating full employment. Governments could pick up the slack by stimulating demand through increased spending during economic slowdowns.
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Keynesian prescriptions had picked up many adherents throughout the Anglo-Saxon world since the great deflationary crisis of the Great Depression. The policies he proposed seemed to offer a tool for overcoming the problem of the destructive boom-and-bust cycles that seemed to plague capitalist economies. The Labour government of 1945, which touted its belief in “rational” economic decision making, was ready to follow suit. The centerpiece of Attlee’s New Jerusalem was “freedom from want,” which meant, in practical terms, full employment. Keynes had argued that the best way to sustain full employment was through government spending—even if it led to temporary budget deficits.

Churchill had contributed to his Conservative Party’s defeat in the 1945 election by expressing skepticism about the degree of state control that a Beveridge-style reform program would entail. In so doing, he alienated not only many members of the electorate but also quite a few Tories as well—especially younger ones. By the time the Conservatives returned to power in 1951, many members of the party had to concede that the reforms of the Labour era were deeply entrenched in the public mind. The Conservatives offered a few modest corrections but left most of the Attlee-era edifice in place. The generation of Conservative leaders, embodied by the centrist R. A. Butler, acknowledged the virtues of the mixed economy. Conservatives argued that their greater business expertise would enable them to manage it better. But they did not challenge the fundamental assumptions of the Labour model. A consensus of sorts, often called “the postwar settlement,” had been achieved.

There were good reasons the postwar settlement proved so durable. First, it accurately reflected the spirit of the times. Soviet planning—its apparent success in speedy industrialization with zero unemployment in the 1930s as well as its astonishing performance in marshaling resources against the Nazis during the war—had many admirers in Great Britain; the immense human costs of this achievement had received far less notice. America’s New Deal experiments with government intervention and an expanded social welfare state also found considerable resonance in Britain, whose leaders had responded to the Great Depression mostly by
muddling through. And finally, the UK’s own experience with government planning of the economy during the war had been remarkably positive. It demonstrated that shrewd government management could “squeeze much more production out of the industrial machine than its capitalist owners had done before the war.”
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Second, the postwar consensus worked—at least for a while. Indicators of health and social welfare climbed sharply during the immediate postwar period. Wartime rationing took longer to eliminate, but in the 1950s and early 1960s, the British economy grew steadily. Broad swaths of society that had been left out of earlier upswings now tasted the benefits of prosperity. The same Britons who had suffered through the turmoil of the 1920s and 1930s now enjoyed a notably far higher standard of living, cushioned by the state against the threats of disability, job loss, or sudden illness. Jobs were plentiful. The Keynesian magic seemed to work. When the economy began to slow, you could stimulate demand through fiscal “fine-tuning,” adjusting government spending and taxation to promote full employment. And if these policies led to inflation, it was to be controlled by regulating wages and prices (known as “incomes policy”).
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In the 1960s and 1970s, however, a darker side of the postwar consensus began to show through. Inflation proved naggingly persistent. Government attempts to tame it through incomes policy found increasingly little traction; indeed, it began to look as though each round of wage hikes was actually exacerbating the problem. Financing the welfare state was becoming an increasingly onerous burden. Income tax rates had reached levels that were driving entrepreneurs out of the country. By the third decade after the war, faith in the near omnipotence of economic policy makers was beginning to wane.

In 1970, with the Conservatives in opposition again, party leader Edward Heath convened his shadow cabinet in a hotel in the London suburb of Selsdon. The program that emerged from the meeting betrayed a strong free-market bent, arguing strongly for curtailing government intervention in the economy, putting the fight against inflation at the center of monetary policy, and cutting back on the power of organized labor. Prime Minister Harold Wilson dubbed the Conservative mentality behind the document “Selsdon Man.” (The allusion to “Piltdown Man” was intended to evoke the allegedly antediluvian quality of the Conservative program.) To everyone’s surprise, however, the Conservatives won the election; the electorate did not appear to find the ideas from Selsdon quite as frightening as Wilson did.

But the Heath government soon discovered the limits of its mandate. The powerful trade unions, now enshrined at the very heart of British economic policy, soon grew restive. As unemployment ticked upward, Heath abandoned the Selsdon
principles. He launched a new round of monetary expansion, restored controls over incomes and prices, widened industrial subsidies, and put plans for union reform on the back burner. He even nationalized Rolls-Royce. Finding an alternative to the postwar consensus was proving a challenge.

T
hough few dared to criticize it publicly, Heath’s “U-turn,” as it became known, profoundly disillusioned some of the members of his cabinet. One of them was his young secretary of state for education and science, Margaret Thatcher. She was, perhaps, the most unusual member of Heath’s team. She fulfilled very few of the typical attributes of a leading Tory at the time. She was of solidly middle-class origins. She attended a girls’ grammar school outside her hometown rather than one of the posh private boarding schools for boys that still turned out England’s highborn leaders. She had not served in the army. She attended Oxford, though on a scholarship, and was unable to join the Oxford Union, that training school of future politicians, since it was closed to female students. Nor was she a member of any of the famous London clubs that were frequented by an upper-class clientele that included many leading Conservatives. These establishments, too, were off-limits to her gender.

These peculiar circumstances explain a great deal about Margaret Thatcher, but they do not explain everything. We should be wary of biographies that rely excessively on social determinism. People are not only the products of their surroundings. Other Chinese men of Deng Xiaoping’s generation emerged from environments comparable to his, but that didn’t necessarily turn them into leaders of the Chinese Communist Party. Unlike Khomeini, most Shiite clerics did not end up challenging the shah and engineering revolution.

What circumstances can do, though, is give peculiar shape to the predilections we were born with, and it is easy to imagine how Thatcher’s upbringing contributed to the politician she was to become. She was born Margaret Roberts in the Midlands town of Grantham in 1925. Her father, Alfred—by her own testimony the central influence in her life—raised his two daughters in an atmosphere of strong discipline and clearly articulated values. He was a greengrocer and shop owner—the owner of two shops, to be precise—and an active participant in city government. (For all his traditionalism, however, he was not a Conservative; he was a Liberal who seems to have believed firmly in the postwar principles of the mixed economy.)