For MT the main event of 1981 in foreign policy terms was the arrival of Ronald Reagan as the 40th US President
foreign policy(1): presidents old & new
Changing of the guard at the White House (26 Feb 1981)
President Reagan's arrival in office was an event for which MT must have had high hopes, though during the presidential election and after she had been very cautious even in private not to say anything that could be construed as supporting him over President Carter, with whom she had worked hard to get on good terms, and with considerable success.
That said, her final exchanges with Carter in office convey a sense of ill ease. Her farewell letter from him on 13 Jan 1981 is boilerplate stuff, with the additional rub that the White House got her name wrong, as they had throughout his presidency (“Margaret R. Thatcher”). In fact this was not his final letter: he sent another when the hostages were released, thanking for support and help, which went beyond mere courtesy, because the Bank of England had played an important facilitating role in the final negotiations. But her farewell letter on 20 Jan strikes an odd note, talking of the release as bringing his presidency “to such a splendid conclusion”. She clearly struggled with this letter: a second version without the phrase, which she had got as far as signing, is in her files. Perhaps she didn’t really know what to say.
One of MT's closest advisers, Alfred Sherman, visited Washington in Jan 1981 to take the measure of the incoming administration and his report warned her of potential disagreements with the new people which he suspected she might not hear from the official diplomatic machine. Ironically her Chief of Staff held back the document till after her first visit to Reagan at the end of February. "The Thatcher-Reagan similarities are double-edged. Until the elections, genuine and spontaneous pro-Thatcherism was really nationwide, and was used by Reaganites as a portent of victory. Since November, Reaganites have quite brutally differentiated themselves from the Conservative government here, to counter forecasts by the East-coast media and defeated democrats that as soon as the new administration learns the facts of life in domestic and foreign affairs it will act like Carter. The Americans tend to be volatile and less committed to the niceties in their style of doing things, but this simply made more explicit what was implicit". He warned too, presciently, a point MT underlined as she read through: "They now expect Britain to see Caribbean problems in terms of America's strategic interest and not in terms of Britain's residual commitments in the area ("A rocket-base in Grenada would not be aimed at London")".
In fact the official machine had more than adequately reported the distancing taking place, which was focussed on economic policy. Britain’s economic troubles were heavily reported in the US throughout 1980 and 1981, indeed economic decline had been the dominant 'narrative' in US discussion of Britain for many years. That all this was changing, and that Britain under Thatcher had lessons to teach, was a hard sell at this point. Any number of government officials on the economic side were keen to make clear that the Reagan administration would not be making the same mistakes as MT (i.e., as they saw it, failing to cut spending, increasing not cutting taxes, failing to control inflation). The roll call of critics includes almost the whole economics team in fact: David Stockman (director of the OMB), Donald Regan (Treasury Secretary), Beryl Sprinkel (Treasury Under-Secretary for monetary affairs – an odd name for a man, which he pronounced ‘Burl’), Martin Anderson (White House economic adviser). From outside, Congressman Jack Kemp was saying similar things, and Milton Friedman, a particularly embarrassing critic. Finally, after months of this, a personal letter of reproach was sent to Sprinkel by a senior Treasury official, Ken Couzens, on Howe’s authority, copied personally to MT, who must have authorised it. Don Regan had made some criticisms of the UK to a Congressional Committee: Couzens acidly pointed out “one or two mistakes of fact”, at some length.
The issue arose in MT’s first phone conversation with the new President, where she handled it elegantly, raising the problem herself and treating as coming from the press rather than the Administration itself. The President had called her on inauguration day to thank her for her letter of congratulation (already published, on this site). Looking forward to her state visit to Washington in February, the first visitor to receive the honour, she commented (21 Jan): "The newspapers are saying mostly that President Reagan must avoid Mrs. Thatcher's mistakes so I must brief you on the mistakes".
The Administration continued the distancing, all the same. During her visit at end of Feb 1981 the White House Press Secretary actually handed the press a two page document by Martin Anderson setting out the economic differences between Reaganism and Thatcherism, and Sprinkel was still making critical comments over the summer. When Howe visited Washington for the IMF-World Bank Annual Meetings in late September he and his team had a private conversation with Regan, Sprinkel and others - coincidentally released by the US Treasury the same week as these 1981 Thatcher files - in which the issues were ventilated in apparently friendly style. Howe's "main message was for the US to raise taxes and cut expenditures", while Regan questioned the wisdom of UK tax increases. The British acknowledged the US view, Couzens commenting that "the thrust of US criticism was that the UK policy was contrary to supply-side theory", Howe admitting a negative supply-side effect, but the retort was that "the Thatcher Government had always given overriding priority to reducing the deficit". In other words, there was a kind of polite standoff, while the gap endured.
All this should not detract from the larger picture. The President himself made no hint of criticism, even if he didn’t stop his juniors. When MT made free market arguments during her visit to Congressman and Senators on Capitol Hill, his diary notes with pleasure the fact that she was making the argument for him. MT sent near euphoric letters of thanks after her February meeting, such as this one to the British Ambassador, Nicko Henderson. "There will never be a happier party than the one you gave at the Embassy - all due to you both. / I have great confidence in the President. I believe he will do things he wants to do - and he won't give up".
foreign policy (2): getting to know the reagans
The relationship strengthened with their second meeting at the Ottawa G7 in late July 1981. They moved to first name terms (‘Ron’ and ‘Margaret’), marked in an exchange of letters afterwards in which Reagan affably wrote, in a swipe at Trudeau: "We might still be drafting the communiqué if it were not for you". When the President doodled during one of the summit sessions then discarded the page on the table next to hers, she picked it up and carefully filed it away in the flat at No.10, thinking it rather fun: we release it now. The President charmed and intrigued her.
The pattern established itself from their first meeting that they would start off with a one-to-one chat without notetakers. For Ottawa she made her own preparatory aide memoire for the bilateral and fortunately it survives in her files. This is a fascinating document, suggesting these sessions involved much more than an exchange of mood-setting courtesies and that plain-talking was the style. She evidently intended to cover a lot of ground quickly, to do some serious business before other people came into the room. It is striking that she raises the difficult points herself, as she had in their conversation on inauguration day, and right at the beginning. So the Ottawa notes start with the summer riots, MT knowing full well what a significant impact they had had on US perceptions of Britain, before bluntly moving on to the negative effects of high US interest rates on Britain, which was a steady theme in their discussions over the years. The rider to this point of criticism is important too: "But will support in public". Often attacked for her public stance of strong support for the US, in the private setting of a one-on-one meeting MT felt herself licensed to say what she thought. This is surely one of the reasons their political partnership proved so effective, because not the least impressive of President Reagan's qualities as an ally was that he was always ready to listen to candid words from a proven friend.
Here are the key elements of her game plan for the Ottawa bilateral:
"Reassurance (i) Troubles in perspective. Riots - Not a single death. Nobody critically ill. (ii) Inflation. Way he is fighting it is putting our fight in jeopardy. But will support in public asking him to consider others (iii) Productivity pains very great (iv) Pay settlements (v) Interest Rates (vi) Tough budget".
She goes on to Japan where her remarks were very forceful: "Japan. - free trade if we can - laser beam methods imitated by other NICs [newly industrialised countries] - unless we resist that in interests of free trade - shall go for protectionism".
And she expressed firm views on Cold War diplomacy: negotiating with Soviets on SALT & TNF "in own interest". "Stop talking about 'rising tide of neutralism'. Nuclear non-proliferation continue your helpful line". The final item was "T.N". = Trident.
There were productive contacts too one level down, the British Ambassador detecting a sympathetic response from one of Reagan's closest White House advisers, Ed Meese, to an approach on Northern Ireland. This helped perhaps to balance a bizarre incident when MT received two identical letters from Secretary of State Alexander Haig, dated 10 and 22 April. One of MT's Private Secretaries showed them to her with the comment: "These two (identical) letters provide trivial, if rather worrying, evidence of the general muddle which seems to prevail in Washington at the moment". He noticed too that while the letters were the same, the signatures were not even close.
Personal relations at the very top were clearly working well. Nancy Reagan flew to London for the Royal Wedding and aside from all the ceremonial events came to an informal lunch at Chequers. There are letters giving a glimpse of this event. Laurence Olivier was there, about to score a late triumph on British tv screens as Lord Marchmain in Brideshead Revisited. MT sat him next to her at table and he wrote thanking for this "extreme honour". Mrs Reagan wrote afterwards with great warmth and read her hostess well, seeing how much Chequers meant to MT: "What a wonderful retreat for you", her letter says. Interestingly, among the other guests was Walter Annenberg and his wife, old and close friends of the Reagans who had met MT during his tenure as US Ambassador to Britain (1969-75) and helped to bring her into the Reagans' orbit. Walter Annenberg also had a close connection to Chequers, having generously donated a heated indoor swimming pool beside the house, behind which there was a small, pleasantly private garden where MT liked to work on her red boxes, weather permitting. She had been Education Secretary when she first met Annenberg, and in truth his first impressions had been rather mixed: in 1973 he had sent a telegram about her to the State Department reporting that she was a strong Heathite and an asset to the government, "solid, respectable and unspectacular", before concluding "it is most doubtful that she could, or does, realistically expect to lead her party". He would have had to revise just about every bit of that view by 1981. Only weeks before his visit to Chequers he had written her a concerned letter about the riots to which she had sent a reassuring reply.
Typically enough, one of MT’s first acts on taking possession of the house as PM had been to turn off the heat in the pool, since economy begins at home, but in the presence of its billionaire donor good manners demanded a U-turn, if only a temporary one. So the heat was switched back on and guests were invited to take a dip. The wife of the Archbishop of Canterbury, Rosalind Runcie, swam with Robin Day’s wife, though some of the guests shied away: thanking her for inviting him to the lunch, ITN newsreader Alastair Burnet was grateful for her "not making the swimming compulsory", probably not realising what a rare treat he was missing. Whether Mr Annenberg knew the truth of the matter is unknown, but naturally he professed delight in seeing his pool so well used.