Speech to the American Enterprise Institute ("Re-learning old lessons")
|Document type:||public statement|
|Venue:||Beaver Creek, Colorado|
|Source:||Thatcher Archive: press release|
|Editorial comments:||MT opened the AEI Conference. An edited version of the speech was published in the Daily Telegraph on 30 June 1998 ("Eastern economies have much to learn from the West").|
|Themes:||Civil liberties, Conservatism, Conservative Party (history), Defence (general), Defence (arms control), Foreign policy (Asia), Foreign policy (International organisations), Foreign policy (Middle East), Foreign policy (USA)|
Re-learning old lessons: an overview of recent events
It is a great pleasure to be asked to make some opening remarks at this conference, where I see so many distinguished participants, and not a few old friends. I first met President Ford, who more than qualifies in both categories, when I was very much a novice Leader of Her Majesty's Opposition. He brought dignity and integrity to the highest office in his country and the most powerful position in the world at very difficult times. I am honoured that he is chairing this session - my first visit to Beaver Creek.
It is equally flattering to be asked to perform a kind of duet with Mr Vaclav Klaus. I suspect it will even be quite harmonious, since he is in a way one of my heroes. Mr Klaus will be remembered for many achievements during his immensely creative and successful term as Czech Prime Minister. But perhaps most memorable for me are the lucid explanations he has given us of the merits of the market, the market "without adjectives" as he once put it. On another occasion he remarked that the "Third Way" leads only to the Third World. And this reflection provides an a apt starting point to the substance of my remarks.
When I was British Prime Minister I was not always popular. Reformers rarely are while reforms are going through, though if we struggle on we reap the rewards later. Among those who criticised my approach in the eighties were people who considered that socialism merely needed some modifications in order to deliver all the good things which socialists habitually promised. Some half-way house between collectivism and the free market was thought to be preferable.
There was, for example, an alternative European model on offer, sometimes described as "the social market", which involved a large state sector and a fair amount of state planning but also a significant role for private enterprise. There was also an alternative Japanese model, with a smaller state sector but even more corporatism and complex but powerful intervention exercised by government officials, principally through the banks.
Compromises of this sort are never very attractive. They have no logical justification. After all, if one really believes, as communists once believed, that the state knows best how to generate wealth, collectivism is the answer. If on the other hand one reckons that prosperity and jobs really flow from the interaction of individual consumers and independent businesses, the role of government should be kept to the bare minimum. In any case, the jury is no longer out. We now know that it is the American model of free enterprise capitalism that works best to foster innovation and to create jobs. We know that the more statist economies of continental Europe are not so successful. And we know - as a result of worrying developments in Japan, Korea and Indonesia - that the Asian brand of quasi-capitalism has even greater flaws.
Not so long ago we were all inclined to overlook the weaknesses of the Far Eastern economies and concentrate on their strengths. Those strengths were real: in particular, industrious work-forces, enterprising businessmen and excellent design and engineering skills. The strengths are still there. But they have now been overtaken by still more pervasive weaknesses: corruption and cronyism bred by incestuous interventionism, lack of soundness and transparency in the financial sector, and a failure to develop the political framework and skills needed in advanced industrial and post-industrial societies. These, of course, are generalisations, with the mix applying differently in different Asian countries. But the analysis generally holds true.
Those of us who always preferred the model of limited government, clear, honestly administered law and the free market, should take careful note of what has happened. It is a warning against deviations towards corporatism in our own countries. But we should also resist any temptation to gloat. In particular, the travails of the Japanese economy, still probably the second largest in the world and the source of 60 per cent of Asian output, constitute a greater potential threat than is suggested by changes of a point or two in global GDP. Japan needs to take urgent action to cut taxes - for though its spending is low its marginal tax rates are high. But this needs to be done in conjunction with other measures to be effective. So Japan has to press ahead with making its financial affairs more transparent and open to competition. And it needs a complete re-capitalization of its banking and financial system. But to achieve this it also needs decisive political leadership. That is very difficult within the apparently consensus-oriented, but actually faction-driven, world of Japanese politics. It is why I believe that in due course political change will have to accompany economic reform.
That is also clearly the case elsewhere in Asia. In South Korea and most recently in Indonesia economic crisis has led to political upheaval. It seems unlikely that Indonesia, at any rate, is going to emerge as a liberal democracy over-night. But equally the old attempt by some Asian rulers to claim that "Asian values" precluded Western style democracy and vitiated individualism now looks pretty unconvincing.
And that brings me to China, a country which sometimes attracts more superlatives than commonsense evaluation. There is no doubt of the dynamism of the Chinese economy, which in the years since Deng Xiao Ping's reforms has grown, until recently, by perhaps ten per cent a year. But neither should we doubt the immense problems which Prime Minister Zhu Rong-Ji has still to face. The comparison is sometimes made between China and Japan, to the disadvantage of the latter. But let's remember that Japan's problems are those of a highly sophisticated economy: China's successes are those of a rudimentary quasi-capitalism. It is widely believed that Mr Zhu will have to cut by as much as half the number of central and local government employees, which means finding jobs for some four million people. Still more important, I believe, is the need to go a good deal further in creating a clear, stable, honestly administered legal system.
There is also the question of human rights, which has been the focus of a good deal of debate in the United States recently, and which has caused us in Britain much heart-searching over a longer period because of Hong Kong. We have, I suggest, to be (as the Bible puts it) "cunning as serpents and innocent as doves", which, like many biblical injunctions, is not in practice easy. Thus we have to be both strong in our moral convictions and hard-headedly realistic in assessing how to handle China - an emergent super-power and a vast potential market. Our interests require that in all senses (and to coin a phrase) we "do business" with the Chinese. And in doing business we should recognise that we do not have much ability to influence China's behaviour just by economic means, however much we want to. That said, we do have a moral duty to the brave dissidents, the persecuted Christians and the slave labourers in the Laogai, which must not be shirked. We also have an interest in ensuring that the Chinese regime evolves into one that respects its own people, because that is also the kind of regime we can trust not to threaten us. Getting the balance right allows of no absolute rules, though since as human beings we are generally tempted to be shifty and feeble, we should at least try to err on the side of moral principle.
Chinese history is largely a tale of more or less cultured tyranny. In our own day, during the horrors of the so-called Great Leap Forward and the Cultural Revolution, it is estimated that between 40 and 80 million died. But I am not an historical determinist. I do believe that there is a reasonable prospect of some kind of democratic rule ultimately emerging in China. There is a useful rule of thumb, though I'm not a determinist on this score either, that people whose income reaches a certain level begin to demand political freedom to match their affluence. At some point that ought to affect China too. The Chinese Government has, after all, seen in Hong Kong just how successful is the combination of a British-style rule of law and the Chinese flair for enterprise. That is why the Chinese have been so careful to try to maintain confidence there since the hand-over. I am optimistic that the lessons of Hong Kong's success will slowly permeate into China itself and at least ameliorate the unacceptable aspects of that regime.
So, to return to my argument, the economic lessons of recent events in Asia basically confirm that our conservative analysis, there as in the West, is the correct one. The same is true of the political and strategic lessons. As a conservative (with a small as well as a big "C"), I believe that working with, not against, the grain of natural instincts and existing institutions is most likely to lead to orderly relationships. In international affairs that means recognising the role of nation states and recognising too the fruitful concept of a balance of power between them. Indeed, if there is one constant feature of conservative thinking on international issues it is that we are not shocked or dismayed by the realities of power, above all military power. This, incidentally, is why conservative politicians are generally much better practitioners of foreign policy than liberals.
We conservatives are also better placed to understand Asia today. There, a number of powers are now jostling for position. Japan's current problems and its historical baggage rule it out for the present from asserting a leadership role commensurate with the size of its economy. But it should not be over-looked, let alone disparaged. China is, of course, the fast emerging super-power. A recent survey by Peter Rodman, published by the Nixon Centre, Between Friendship and Rivalry - China and America in the Twenty-First Century, provides a much-needed reminder that for all the hype about the Chinese economy and all the angst about Chinese internal misdeeds, we should be concentrating far more on China's military capability and intentions. As Mr. Rodman observes:
"China's military build up is ...troublesome [although] it starts from a low base. ...[Its] new weaponry will be sufficient in the near term to raise the risks and inhibitions to an American President who contemplates intervening in a future crisis in the Taiwan Strait or South China Sea. China is also doing serious R and D into high-tech ‘information warfare’." (ie knocking out the enemy's computers).
Looking further northwards, Russia is a major military power in Asia still, for all its grave economic difficulties. North Korea remains a real menace, which has recently shown new signs of obstructionism: the Japanese believe that North Korea is capable of firing nuclear war-heads to hit their country and Pyongyang has certainly been selling ballistic missile technology with abandon.
Although I realise that it is breaking one of the great taboos to says so, I hardly think it surprising that in such circumstances, with mighty China on its border, India should assert its claim to be a nuclear power - nor that, in view of long-standing traditional rivalry, Pakistan should aspire to this as well. It is faintly absurd and indeed hypocritical for the five permanent members of the UN Security Council to react with such pained outrage to India's and Pakistan's tests. It is at least arguable - and after all we used to argue it ourselves during the Cold War - that possession of nuclear weapons makes all war, including conventional war, unthinkable: applying that to the relations between India, Pakistan and China, we might therefore be tempted to welcome what has happened.
But we don't actually need to welcome it. We just need to react sensibly. Part of that is a matter of recognising that no amount of huffing and puffing about test bans and non-proliferation is going to stop major regional powers and possible future super-powers, like India, also becoming nuclear powers. I would much prefer that we concentrated our energies on matters we can affect and on action that we ought already to have taken.
I don't necessarily urge abandonment of all attempts to deal with proliferation by means of international diplomacy. I do say that we should accept that our success will at best be limited. The difficulty of trying to force Iraq to comply, even after a severe military defeat was inflicted, should prove the wisdom of that observation. Our priorities instead should be two-fold: first we must take all necessary measures to ensure that rogue states do not develop weapons of mass destruction, or acquire the means to deliver them: and second we must ensure that we have adequate ballistic missile defence systems greatly to reduce, and perhaps eliminate, the threat of strikes by these powers. We sometimes hear Western politicians minimising the effectiveness of ballistic missile defence, largely I suspect because it is expensive and they would rather spend public money on welfare or pork-barrelling at home. But it is interesting that the Chinese take ballistic missile defence very seriously indeed, and roundly criticise US plans to develop it.
That brings me to the role of America in Asia. American conservatives, I know, sometimes differ about the degree to which the United States should be actively engaged around the world. But we can all agree, I hope, that only the United States has the wealth, weaponry and technology to be both a European and an Asian power, and that even America's quite narrowly defined national interests will ensure it remains engaged in some fashion in both regions.
America's military presence and commitment to Asia at the present time is indeed vital. I have mentioned the value of the balance of power as a force for equilibrium. But all equilibriums can be destroyed by miscalculation. North Korea, of course, is a case apart: it is an inherently unstable and potentially aggressive force. China, though, is also still learning how far and by what means it can successfully advance its interests. Admittedly, since the dangerous confrontation with Taiwan in 1996 China has shown somewhat greater restraint. But America's engagement in the area's future, most importantly by its commitment to Japan's security, is a vital guarantee against some Chinese adventure that might go terribly wrong. And to perform that regional as well as its wider global role, America must remain strong, and receive the full moral and material support from its allies that it has a right to expect.
The single most important lesson of developments in Asia as elsewhere, then, is stark and clear: it is that there is no new world order and that the world now is more similar to that of the Cold War than liberal optimists expected. True, there is no global confrontation between two opposing super-powers, economic systems, social models and political ideologies. Today's real and potential conflicts are more ethnically based, more religiously oriented, more unpredictable. That is a very big change indeed. But the risks themselves are not so different - risks of unsound economic policies which undermine prosperity, risks of government interventionism which diminish liberty, and most of all, risks of military unpreparedness which leave us vulnerable at best to blackmail and at worst to annihilation.
In fact, my friends, the world is the kind of place in which conservatives are still needed.