Freeman

ARTICLE

The Thatcher Revolution

AUGUST 01, 1983 by JOHN T. MURRAY

Mr. Murray is a long-time observer of the British economic and industrial scene.

On May 4, 1979, the British Conservative Party brought forth a new leader, selected democratically, and dedicated to the proposition that an ounce of personal effort is worth a ton of public charity. Mrs. Margaret Thatcher, in her sex, her origins and her convictions symbolizes a transformation in the Conservative Party, which had become associated in the public mind with stick-in-the-mud attitudes. The truth is that the British people as a whole had developed an alarming resistance to change. Enormous damage had been done by a succession of governments, mostly socialist, which, despite much revolutionary rhetoric, had acted on the assumption that the good old days could be resurrected by persisting in our bad old habits.

Mrs. Thatcher ushered in a real revolution by challenging the two sacred cows of contemporary economic thought, the Keynesian notion that endless prosperity could be assured by giving state handouts to those who were out of work, and the Marxist view that this Utopia should be financed by expropriating the earnings and savings of those in work. The situation which led the Conservative Party to choose such a leader, and the progress she has already made in correcting that situation, is in many respects peculiar to Britain, but it has a wider relevance.

The British political scene differs from the American in one important feature. In Britain we have a Socialist Party, dedicated in its written constitution to the public ownership of the means of production, distribution and exchange. It is the political arm of the trade union movement and is largely financed by a special political levy on union mere-bers and a similar levy made on purchases in the associated national network of cooperative shops. The politically active unions, exercising monopoly control of labor in most industries, and enjoying remarkable immunity from normal legal process, are well placed to blackmail the rest of the community and to inflict great damage on the national economy.

To recognize the dangers inherent in this situation it is only necessary to recall Lenin’s instruction to his comrades operating in foreign countries: “We must be able to agree to any sacrifice and even—if need to resort to all sorts of stratagems, artifices, illegal methods, to evasions and subterfuges, only so as to get into the trade unions, to remain in them, and to carry out Communist work within them at all costs.”

Working-class movements tend to attract middle-class supporters whose compassion for the underdog is greater than their passion for Marxism. Many of such recruits, notably the late Hugh Gaitskell, have tried to wean the British Labour Party away from the pure milk of the socialist gospel to a watered-down version, in which belief in equality rather than public ownership was to be the acknowledged criterion of orthodoxy. The attempt failed, but be cause of it Britain has suffered from a succession of Labour governments which have adopted policies not only of nationalization and central economic planning but also of statutory leveling, principally though not exclusively, through penal taxation.

Equality vs. Liberty

Imposed equality and statutory expropriation strike at the heart of free societies. For enterprise, invention, daring and unstinting effort are the children of freedom—freedom to stretch for personal reward and to keep it. They are brought forth in an individual when the objectives to which they are harnessed are compatible with his own interest as he sees it. Tocqueville held that liberty and equality are incompatible aims, for men who are free will not long remain equal, and if you would have men equal you must first deprive them of their liberty.

Alongside these philosophical truths one may place some practical observations of human behavior. Men look after their own possessions much more carefully than they do those of other people. Even the idealists of the early Israeli Kibbutz had to abandon communal ownership of tools. Where no one owns, no one cares. The abuses prevalent in the British National Health Service are a public scandal. That which is free is seldom valued. Certainly people spend other people’s money more irresponsibly than they spend their own. Economic disciplines are most poignant when they are most personal.

None of this is to disparage idealism. The ideal is the polestar of human progress. But ideals are realizable only by the self-reliant; parasites build nothing. John F. Kennedy touched the mainspring of national greatness when he said: “Ask not what your country can do for you. Ask what you can do for your country.” 0nly a man who has met the challenge to look after himself will have in him the strength and ability to help others. Only a government which calls for the maximum effort from the vast majority of its citizens who are fit and able- bodied can command the abundance with which to care for the poor and unfortunate. Charity therefore begins at work, for the fruitfulness of our labors determines the scope of our generosity.

The child is father to the man. For half a century we have been teaching our children that capitalism is exploitation of the poor by the rich, that the wicked white man corrupted and enslaved the “noble savage,” and that our nineteenth-century forebears devoted themselves to creating slums, overworking infants and waging war, with a relish which only the darkest insights of Dr. Freud can explain. Little mention has been made of the fact that capitalism alone created the modern world, with its unique abundance and greatly extended life span, by developing and harnessing science; and that our ancestors showed the world the way to civilized living by abolishing slavery, introducing public health regulations and establishing education for all.

The Myth of Utopia

The myth of primitive Utopia, propagated by such naive or phony anthropological studies as Margaret Meade’s recently debunked Coming of Age in Samoa, has masked the fact that the “noble savage” was more corrupt, more enslaved and more diseased before he received the white man’s visitation. The benisons the white man brought have been forgotten; a whole industry has been built on reminding the world of his shortcomings. We will not build a more peaceful world by cherishing these hateful distortions of history. The greatest danger to Western civilization comes not from the enemies without, but from the treason of intellectuals within, who have made our children ashamed of their heritage.

The typical British left-wing intellectual is visionary, sentimental and revolutionary in an amateurish way. He demands a fuller life for all as a natural right, and prefers mystic insight and apocalyptic utterance to mundane concern with productivity, industrial costs and market signals. He studiously avoids real problems and current events, preferring to concentrate instead on nostalgic adulation of the “pioneers” and impassioned, though somewhat imprecise, intimations of the millennium.

Such types usually come from, or enjoy, a bourgeois life style and practice professions or occupations in which their capacity to manipulate intellectual abstractions is almost never brought to the acid test of practical execution. They constantly underestimate the precariousness of the hard-won civilization which they are bent on changing, and project the assumptions of their own comfortable and sheltered lives into all their thinking, whether it be some Utopian idealization of working-class aspirations, or some purblind reliance on Soviet sincerity. They command the support of the dreamers, the failures and the misguided; all those in fact for whom the burden of reality has become too great and who yearn to cast it upon some miracle-working system or omniscient superman, so that they may explain away failure and frustration as someone else’s fault.

All such potential Fascists are doomed, when they achieve office, to increasing invasions of the democratic process and destruction of individual freedoms as they struggle to make intractable humanity conform to their smooth premises. In the modern world the accession of such revolutionary simpletons to power is doubly dangerous, for as they recklessly destroy traditional controls and institutions, democratic capitalist society becomes increasingly unworkable and that anarchical situation develops in which the disciples of Lenin flourish.

No intelligent industrialist would underestimate the importance of industrial communications, or deny the historical role of the trade unions in improving them. Certainly in any society which calls itself civilized each citizen should have an important say in the terms and conditions under which he works. But entitling workers to a seat on the Board of Directors is another matter. In a world of universal educational opportunity anyone in our society can achieve Board status. Look around any company and you will find plenty of directors who came through the ranks.

Empowering Workers to Manage

The future of our industrial society depends on people earning power and responsibility, not being given it as a political or trade union perk. There is little sense in imposing directors on industrial boards in a free enterprise society where promotion is already open to talent and acquired expertise. Abraham Lincoln once pointed out that a sheep does not have five legs if you call the tail a leg, for you do not make a tail into a leg merely by calling it one. Likewise you do not make a worker into a director merely by calling him one.

There is a popular notion that we should buy industrial peace by giving workers shares in industry. But capitalism involves the clear recognition that the rewards of capita] for denial of immediate satisfactions, for risk bearing, for acceptance of losses as well as profits, and for patient enterprise, are quite distinct and separate from the immediate and effectually contractual rewards of labor. This is a very fundamental distinction, a line which we blur at our peril. You do not, to use a socialist phrase, “bring ownership to the people” without issuing a license to expropriate the property of others, which is the essence of Communism.

Capitalism is about people earning their own money, saving some of it to acquire property, and subsequently being permitted to enjoy the fruits of that property, if any. The process has long been freely available to anyone in Britain who cared to participate. Significantly, only 3.8 per cent of the working population have sought to avail themselves of this opportunity to participate in industrial ventures. Clearly workers do not want the responsibilities and downside risks of shareholding but, understandably, they would not be averse to being given free entitlement to its rewards.

It would be difficult to conceive of a single measure better calculated to weaken the mainspring of capitalist free enterprise. Yet many decent people clutch at this purported panacea which, they think, would provide a viable half-way house between capitalism and communism. Such people, including an eminent religious leader who has recently taken to anathematizing both systems as if there were nothing to choose between them, should take note of Bertrand Russell’s observation that on the frontiers which run between capitalist and communist countries, the refugees are all moving in one direction.

Opening the Books

Another idea now favored by the British trade unions and their Socialist friends is that companies should be compelled to open their books to continuous inspection by union officials, in order that they may monitor management performance and, if they think fit, ask the government to intervene in the company’s affairs. The proposal reveals a complete failure to comprehend the nature of management in a free market economy. Apart from the vital importance of commercial and technical security, which is recognized in Company Law by the limitations placed on information given to shareholders, they have not grasped the primary role of management which is to make decisions, and, which is more, to make decisions continuously and quickly, often on the basis of inadequate information.

The mercurial shift in the pace and pattern of commercial events seldom leaves top management time for deliberation and research. Under such conditions no manager can be infallible. The best one can hope is that he will be more often right than wrong. If, however, you place him in a situation where every decision he makes is the subject of continuous scrutiny and criticism and endless inquests—if you place him permanently in a kind of public pillory—then you will achieve only one result, he will cease to make any decisions at all. That is the end of all enterprise, the beginning of bureaucratic procrastination and industrial stagnation.

Coping with Uncertainty

One of the great delusions of the present century is that human rewards can be determined by what are usually referred to as prices and incomes policies. Adam Smith taught us long ago, and Hayek has brilliantly updated the lesson, that individual freedom is the prerequisite of economic efficiency. Only the fluid coupling of a free market system can keep the motor of demand and the wheels of production in continuous and fruitful harmony. What free individuals will collectively want cannot be foreseen because you cannot forecast fancy and you cannot anticipate innovation.

There is now incontrovertible evidence that centrally directed economies cannot supply the abundance and variety produced by free market economies. The fundamental principle of free market economics is that prices and incomes cannot be fixed but must flex to market require ments. Ignoring this principle has cost us dear, for labor is a commodity and in a market embarrassed with surplus labor the price of labor must fall to clear the market and stimulate new demand.

Wages have not fallen as they should have done in recent years because politicians infected with half-baked Keynesian notions have introduced all kinds of artificial dampers to price responses to market signals, preferring to keep workers in subsidized idleness rather than encouraging them to adapt to ruling economic conditions. Having thus inhibited the market coordinating and clearing functions, we are now faced with massive unemployment of workers who have priced themselves out of a job.

The bureaucratic mandarins who conspire with the politicians to design national plans for instant Utopia, will not understand that even if the feat were possible without doing violence to our liberty, it still would not please us. Human beings are perverse. They prefer self- government even to good government. They want freedom not only to do what they like but to do what the planners think they should not like. Socialists will have none of this, for at the heart of every socialist there is a censor, and Utopia must be drawn in their colors.

Remaking the Individual

If man as he is will not conform to their wonderful plans then additional plans must be drawn up to improve him so that he will conform. Thus the walls of the prison house are fashioned with kindly hands and all around us, in our social planning, our economic planning and our town planning, the monuments of misguided benevolence cast their shadows wherein no spirit dwells.

Paradoxically, in the planned economy the only equality which matters, equality before the law, what A. V. Dicey called equality of consideration, soon joins liberty in the collectivist dust bin. Justice resides in equal application of rules which reflect the moral sense of the community, and not in the selective application of regulations aimed at establishing an arbitrary interpretation of Utopia. When a Socialist talks about justice he usually means punishing those who do not conform to his plan.

You cannot expect much justice from those who share Proudhon’s premise that private property is theft. The right to own private property and to have the state ensure the protection of that right is one of the oldest and most fundamental conditions of a civilized society. Yet collectivist administrations throughout the world have been for so long insidiously nibbling away at that right that we scarcely recognize the scale and importance of our loss. This is the root of the crime wave surging through our societies.

Moral decay and economic nonsense flourish in our society under the camouflage of such high-sounding euphemisms as “redistribution of wealth,” “the planned economy” and “the just society.” The penal levels of taxation, effectively forced labor at the behest of the state, are excused as charity, or even as some sort of deserved penance for the wickedness of having become rich. Yet stealing in the name of charity is still stealing and discouraging the wealth makers is no service to the homeless and the hungry.

There is no system at once so self-adjusting and so productive as that which enables men of talent, thrift and effort to acquire capita] which they can then plough back into the system, backing their own judgment with their own money. The cumulative investment decisions of such individuals, men of proven shrewdness, are obviously going to be more careful and more correct than the huge central investment decisions of bureaucrats investing other people’s money.

The annals of British industry are. filled with endless illustrations of this truth, from the successes of our merchant venturers and the rags-to-riches sagas of engineering geniuses like Lord Nuffield (Morris Motors) and Henry Royce (Rolls-Royce), to the chronic loss-making record of almost all our state-owned enterprises. Marx said that the only true wealth comes from work but his modern disciples in Britain deliberately discourage work, telling their supporters that by working they are only lining the capitalist’s pocket.

Capitalism Triumphs by Offering Consumer Satisfaction

Fortunately capitalism has triumphed over this nonsense by showing the worker the jam, an incredible abundance of consumer satisfactions, ranged tier upon tier in our capitalist supermarkets, changing in assortment and specification continuously in precise response to the signals of consumer demand. That does not happen in Omsk. And despite all the egalitarian claptrap to which he has been subjected, the average man recognizes that his living standard and that of his children depends on more able men than himself and he is prepared to hire that ability.

The wonders of the modern world which surround him, the space ships and the nuclear power, the computers and the new world of genetic engineering, no less than the press-button magic which increasingly transforms modern living and which creates in the lay mind an awe and admiration for the technician and the scientist formerly reserved for the witch doctor and the high priest, are tangible rewards for which John Citizen will pay. Everyone pays the messenger bearing gifts. Capitalism is a cornucopia, a veritable horn of plenty.

Our experience, our traditions and our wisest philosophers are now delivering one clear message. The centrally planned state, with its egalitarian measures and its assumptions of economic omniscience is a recipe for economic failure, social sterility and political tyranny. The Thatcher revolution is therefore founded on three simple themes. Restore the authority of free markets. Encourage effort and discourage idleness. Reduce the role of the state and pro mote the sense of personal responsibility. Pursuing these policies she has, in four years of office, transformed the British situation.

The rate of inflation which as recently as 1975 was twenty-six per cent has been reduced to only five per cent. She has shaken up management and shaken out chronic overmanning, causing a dramatic rise in individual productivity and considerably reducing the time lost in industrial disputes. The complex process of denationalizing the basic industries has begun and the pruning knife has been systematically applied to the public services. Despite the inevitable transitional increase in unemployment caused by these new disciplines her persona] .popularity with the electorate remains high. Not since Churchill in war has Britain had a Prime Minister who so completely measured up to the challenge of the times.

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August 1983

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Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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