Speeches, etc.

Margaret Thatcher

Speech to Zurich Economic Society ("The New Renaissance")

Document type: Speeches, interviews, etc.
Venue: The University of Zurich, Zurich, Switzerland
Source: Thatcher Archive: speaking text
Editorial comments: Press release (310/77) embargoed until 1700. Unusually the press release included the full speaking text, preceded by a two page paraphrase of certain sections of the speech. The text presented here opens with the paraphrase and reproduces modifications introduced into the speaking text by MT before delivery (see editorial notes in text).
Importance ranking: Key
Word count: 3818
Themes: Conservatism, Economic policy - theory and process, Industry, Monetary policy, Privatized & state industries, Energy, Taxation, Foreign policy (USSR & successor states), Labour Party & socialism, Religion & morality, Society, Voluntary sector & charity
(1) Opening of press release (partial paraphrase of speaking text)

In spite of our present difficulties, Britain's future need not be at all gloomy. For the very ills which beset us seem to be creating their own antidotes. People of all backgrounds are casting off socialist illusions in the light of socialist reality, and are coming round to our viewpoint. This is the end of the trend to the Left, and the starting point of a new renaissance.

The revolt against excessive taxation, further nationalisation, waste, goes from strength to strength.

The reaction against Socialism is based on moral considerations as well as economic ones. It is not confined to the realm of ideas alone. The economy itself is reacting to heal the wounds just as a body fights back against disease and creates new healthy tissue.

For example, the great occupational pension and life insurance funds, together with the building societies, a kind of people's capitalism, have been growing in strength in spite of burdens placed upon it. These great mutual activities, non-profit-making in themselves but dependent on profits in the private sector where their funds are invested, own a good half of all quoted securities, on behalf of their members.

Eight families out of ten have a stake in stocks and shares through these funds and other non-governmental and charitable service organisations. [end p1]

As shareholders and employees, investors and workers have identity of interest. The class struggle is withering away—to adapt a well-known phrase of Marx and Engels.

Thanks to this new development, which has gone on under our very eyes, capital and labour together can realise that their interests are the same.

We need a free economy not only for the renewed material prosperity it will bring, but because it is indispensable to individual freedom, human dignity and to a more just, more honest society.

We want a society where people are free to make choices, to make mistakes, to be generous and compassionate. This is what we mean by a moral society; not a society where the State is responsible for everything, and no one is responsible for the State.

End of partial paraphrase of speaking text. [end p2]

(2) Modified speaking text begins [end p3]

[Notes by MT] Intro—Privilege—pleasure. Winston—Chartwell—broad sunlit uplands.)

The New Renaissance

You have honoured me by your invitation as a practising politician, not an economist or financier. So I shall not attempt to instruct this highly expert and experienced gathering in economic affairs. Nor would you wish me to come all this way to describe the current situation in Britain, because I could tell you little more than you already know.

What I can offer you of interest is a perspective on the way Britain has developed in the post-war period, and my view of the fundamental change in direction which I believe is about to occur.

Though each country has its own special problems, successes and failures, by and large a similar evolution has taken place, and though I think we in Europe shall sink or swim together—we shall swim only if we will it. [end p4]

So though I shall draw my examples from Britain, about which I can speak with more direct knowledge, the trend to which I refer goes well beyond our shores.

Had I spoken to you last year, I should have expressed faith in our nation and civilisation, and its capacity for survival. But today, I can offer you much more than faith, I bring you optimism rooted in present-day experience. I have reason to believe that the tide is beginning to turn against collectivism, socialism, statism, dirigism, whatever you call it. And this turn is rooted in a revulsion against the sour fruit of socialist experience. It is becoming increasingly obvious to many people who were intellectual socialists that socialism has failed to fulfil its promises, both in its more extreme forms in the Communist world, and in its compromise versions. [end p5]

The tide flows away from failure. But it will not automatically float us to our desired destination. There have been tides before, which were not taken, opportunities which were lost, turning points which came and went.

I do not believe that history is writ clear and unchallengeable. It doesn't just happen. History is made by people: its movement depends on small currents as well as great tides, on ideas, perceptions, will and courage, the ability to sense a trend, the will to act on understanding and intuition.

It is up to us to give intellectual content and political direction to these new dissatisfactions with socialism in practice, with its material and moral failures, we must convert disillusion into understanding. [end p6]

If we fail, the tide will be lost. But if it is taken, the last quarter of our century can initiate a new renaissance matching anything in our island's long and outstanding history.

I know that many of you in continental Europe are gloomy about the economic and political condition of the United Kingdom. But I would remind you of the saying: the darkest hour is just before the dawn.

I come to you in a mood of optimism, and I base it on two changes which I believe are taking place: a change in ideology, that is to say, in people's beliefs and attitudes; and a change in economic circumstances. [end p7]

For forty years now, the progressive—the up-to-the-moment—thing in Britain has been to believe in the virtues of collectivism. Ever since the 1930s, the intellectual Left of British politics has looked through rose-tinted spectacles at the real or imagined successes of planned economies, like those in Eastern Europe. Even Mr Callaghan, for example—not conspicuously a member of the intellectual Left—said as recently as 1960:

I have not the slightest doubt that the economic measures and the Socialist measures, which one will find in the countries of Eastern Europe, will become increasingly powerful against the unco-ordinated planless society in which the West is living at present.

This view has been carrying increasing weight in the Labour Party. [end p8]

It is true that in what they have said, senior Socialist politicians have continued to affirm their faith in the mixed economy. But in the mixed economy, as in a cocktail, it is the mix that counts. In their favoured mix, collectivism has taken an ever larger proportion. The words of these politicians expressed a belief that private enterprise had a major role to play in the economy. But their deeds extended government into almost every part of business life. The progressives had their way.

The nationalised sector of the economy has been extended far beyond the major industries of fuel, transport and steel. In the next few weeks the aircraft and shipbuilding industries will be nationalised; whilst the Labour Party's programme for the future, published last year, includes plans for taking over Banks and Insurance Companies. [end p9]

Private firms in difficulties have been taken into public ownership. More and more of the taxpayer's money has been pumped into companies that no prudent banker could go on supporting for long, because instead of creating wealth, they use up wealth created by others.

The State sector has come to dominate the mixed economy. Its insatiable demand for finance has inhibited the operation of the market sector. Yet the public sector can only live on private enterprise on whose surplus it relies. [end p10]

Manuscript addition by MT

Indeed a flourishing private enterprise is the surest base on which to erect a healthy public sector. The profits wages & salaries of private business provide the tax base for financing welfare services, like health & education and for supporting the old, the unemployed and the unfortunate.

Socialism promised to raise the provision of education, health, and housing. As is becoming patent to almost everyone, the result has been the opposite. Standards are [remaining words cut off].

Socialism whetted appetites for more, but has resulted in less being available.

Typescript resumes

This is where we now stand. But I believe that we have come to the end of the trend. [end p11]

There is a growing realisation in Britain the the progressives were wrong. They are being proved wrong by the failure of the very system they advocated. To finance the extension of Socialism on so vast a scale, taxation has risen to penal levels. We have all seen the results—for living standards, for incentive and for enterprise—of the excessive tax burden in Britain.

[Manuscript addition by MT] 83%; 98%; 35%;. Over last 20 years share of GDP taken by State has risen from 40–60%;. In 20 years, the State took control of almost another fifth of national income.

Typescript resumes.

Yet even these unacceptable levels of taxation have not been enough to finance the public sector. The Government has been borrowing vast sums of money, both within Britain and overseas. But even these borrowings were not enough. The Government turned to printing money in order to finance a public sector deficit that neither taxpayers nor lenders would finance in full. With a huge rise in the money supply, hyper-inflation became a real threat: and that threat does not end with economics. When money can no longer be trusted, it is not only the economic basis of society that is undermined, but its moral basis too.

I shall return to that part of the argument later. [end p12]

And when the economic foundations are undermined, those who suffer most are the ordinary working people, the very people in whose name the Socialists claim to be acting.

For it is our system, the free enterprise system, which delivers the goods to the great mass of the people. We may have been remiss in not saying this with sufficient vigor in the p* well, I shall not be remiss this evening.

For it is not only in my country that Socialism has failed the nation. It is well known that the ultimate aspiration of every Soviet planner is for his country to equal the levels of production in the USA. It is the West, not the East, which sells off surpluses of grain and other foodstuffs to the planned economies, and also gives them to the countries of the third world. [end p13]

It is Western technology which the East seeks to acquire. And it is the Western world, those countries with essentially capitalist economies, from which the British Government has recently sought, and received, help for the pound.

The Socialist countries do not attempt to conceal their admiration for the productive achievements of the free economy.

[Manuscript addition by MT] Karl Marx, even as he erred in the paths of collectivism, wrote of the free enterprise economy—It has been the first to show what man's activity can bring about. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals. It has conducted expeditions that put in the shade all former [illegible word] of nations and crusades.

Typescript resumes

But what they do argue is that the avalanche of goods which the capitalist system produces is available only for the well-to-do. This is totally false. It misconceives the very essence of capitalist achievement. As Josef Schumpeter put it—The capitalist engine is first and last an engine of mass production, which unavoidably means also production for the masses. It is the cheap cloth, the cheap fabric, boots motor cars and so on that are the typical achievements of capitalist production and not as a rule improvements that would mean much to the rich man. [end p14]

In brief, the material superiority of the free society gives its main benefits to the very people the Socialists claim to cherish.

Continuing benefits depend upon innovation. It is innovation which lies at the heart of economic progress. And only the free economy can provide the conditions in which it will flourish.

Alfred Marshall, doyen of 19th century British economists, said the capitalist economy frees constructive genius to work its way to the light and to prove its existence by attempting difficult tasks on its own responsibility, and succeeding in them: for those who have done most for the world have seldom been those whom their neighbours would have picked out as likely for the work. [end p15]

How much more will the remote, central planner fail to pick the winner?

This inability to forsee from the centre where the next innovation will come is a key failing of the planned economy.

Collectivists may flatter themselves that wise men at the centre—with whom they identify—can make better decisions, and waste fewer resources than a myriad of individual decision-makers and independent organisations all over the country.

Events in Britain have shown that, wise or not, those at the centre lack the knowledge, foresight and imagination required. They are overworked and overwhelmed. They are certainly surprised by events. [end p16]

I have dwelt so far on the material superiority of the free society.

But we must not focus our attention exclusively on the material, because, though important, it is not the main issue. The main issues are moral. In warfare, said Napoleon—the moral to the material is as three to one. You may think that in civil society the ratio is even greater.

The economic success of the Western world is a product of its moral philosophy and practice.

The economic results are better because the moral philosophy is superior.

It is superior because it starts with the individual, with his uniqueness, his responsibility, and his capacity to choose. [end p17]

Surely this is infinitely preferable to the Socialist-statist philosophy which sets up a centralised economic system to which the individual must conform, which subjugates him, directs him and denies him the right to free choice.

Choice is the essence of ethics: if there were no choice, there would be no ethics, no good, no evil; good and evil have meaning only insofar as man is free to choose.

In our philosophy the purpose of the life of the individual is not to be the servant of the State and its objectives, but to make the best of his talents and qualities. [end p18]

The sense of being self-reliant, of playing a role within the family, of owning one's own property, of paying one's way, are all part of the spiritual ballast which maintains responsible citizenship, and provides the solid foundation from which people look around to see what more they might do, for others and for themselves.

That is what we mean by a moral society; not a society where the State is responsible for everything, and no-one is responsible for the State.

I said earlier that the better moral philosophy of the free society underlies its economic performance. In turn the material success of the free society enables people to show a degree of generosity to the less fortunate—unmatched in any other society. It is noteworthy that the Victorian era—the heyday of free enterprise in Britain—was also the era of the rise of selflessness and benefaction. [end p19]

The second reason why the free society is morally better is because it entails dispersal of power away from the centre to a multitude of smaller groups, and to individuals.

On the other hand, The essence of collectivism, is the concentration of power in large groups, and in the hands of the State at the centre: as Lord Acton reminded us, all power corrupts and absolute power corrupts absolutely!

The Left had traditionally argued that the dispersal of power, coupled with the freedom given to the individual, could, and did, lead to power being unjustly used. But part of the price of freedom is that some will abuse it. And in free societies this problem is dealt with by a strong and impartial legal system designed to ensure justice between individuals, and to safeguard the weak against the strong. The evolution of such a system was an essential element in the growth of freedom. [end p20]

It is ironic that many intellectuals espoused the Socialist creed because they thought it would prevent the development of harmful monopoly power and that their system would obviate it.

They took it for granted that Socialism would protect the weak against the strong. They forgot that when the Socialists gained power they would become the strong, and they would resist any check on their own power.

How shaken and disabused are many of these intellectuals today. And rightly so, for, we are now facing the crisis of Socialism: economic failure, social and political tensions; a decline in freedom of choice in education, health, economic activity. [end p21]

Manuscript addition by MT

Socialism claimed to work in the interests of the common man to reduce the differences and antagonisms between groups. But the results have been different.

Typescript resumes

Experience has shown that Socialism corrodes the moral values which form part of a free society. Traditional values are also threatened by increasing State regulation.

The more the State seeks to impose its authority, the less respect that authority receives.

The more living standards are squeezed by taxation, the greater is the temptation to evade that taxation.

The more pay and prices are controlled, the more those controls are evaded.

In short, where the State is too powerful, efficiency suffers and morality is threatened. [end p22]

Britain in the last two or three years provides a case study of why collectivism will not work. It shows that the ‘progressive’ theory was not progressive. On the contrary, it proved retrograde in practice. This is a lesson that democrats all over the world should heed.

Yet I face the future with optimism. Our ills are creating their own antibodies. Just as success generates problems, so failure breeds the will to fight back and the body politic strives to restore itself.

The ordinary Briton is neither political philosopher nor economist. He has no clearly articulated theory to tell him why the free society is superior to the collectivist one. But he has felt the shortcomings of collectivism and he senses that something is fundamentally wrong. [end p23]

This explains why many people are giving up their support for Socialist ideas and policies.

Nor is the reaction against Socialism confined to politics and ideology. It is also practical. Under our very eyes, new forms of free association, free economic activity, great and small, are being born, thanks to the resourcefulness of many men and women.

I am reminded of an observation by Adam Smith who said: [end p24]

The uniform, constant and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government and of the grea test errors of administration. Like the unknown principle of animal life, it frequently restores health and vigour to the constitution, in spite not only of the disease, but of the absurd prescriptions of the doctor.

The great mutual benefit activities, the people's capitalism, are burgeoning. Between them, occupational pension funds and life insurance own a good half of all quoted securities on behalf of their members. [end p25]

Thanks to them, and to other and non-profit-making activities and charities which hold securities, it is estimated that 85 per cent of the population has an indirect, if not direct, share in British industry. The vast majority of the population is thus participating in capitalism. [end p26]

Passage inserted by MT

These funds have grown inspite of coolness, sometimes even hostility from governments. They are a great potential political force.

They are in a unique position to bring home to their members and beneficiaries a majority of the population, the economic facts of life. They represent more than twice the numbers represented in trade unions.

What a reserve army for economic freedom this sleeping giant constitutes. What a chance to kill once and for all the image of the egotistical capitalist and bring the public to understand the simple truths of economics, the relationship between labour and capital when it is realised that the people who sell their labour also own much of the capital, an increasing amount if government does not take it away. I know that in Germany, insurance and pension funds take their higher-educational task more seriously. It has great socio-political potential. [end p27]

Thanks to these funds [Typescript resumes] the investors and the workers are becoming the self-same people. As shareholders and employees they have an identical interest in industrial and commercial prosperity.

We may soon be witnessing the withering away of the class struggle, to adapt a well known phrase.

Then there are the building societies (which are mutual mortgage banks), which have enabled a good third of the population to buy their homes, lending and borrowing without subsidies or assistance, asking only to be allowed to get on with their job.

There is the phenomenon that however many resources are poured into the existing nationalised sector, its employment and share of production tend to fall, while private activities expand, when they have half the chance. The City of London responds to reduced scope for its activities on behalf of British industry, (because industry's profits hav e been eroded) by expanding its services on behalf of the rest of the world.

[Manuscript addition by MT]

Invisible overseas earnings now account for ⅓ of our total earnings on current account. They have increased every year for the past 180 years. [Typescript resumes]

Our manufacturers expand overseas and in Europe, attracting local capital—using the initiative and capacity which, under present circumstances, are only partly used at home. [end p28]

That way they keep their management teams in being for the day when industry will be able to expand in Britain. And were it not for their repatriated earnings, our economic position would be worse.

The great North Sea oil adventure was initiated and financed entirely by free enterprise, without help from government. The oil companies overcame not only the unprecedented technological problem created by North Sea weather hazards, but also the political hazard posed by hostility to free enterprise and profit.

All these developments and potentialities illustrate the inherent vitality of our people. We need have no fear as we engage in the battle of ideas. [end p29]

We have a ready audience. The younger generation may produce its wild men, but it also produces large numbers of young people for whom the post-war settlement has failed, and who are ready to examine our arguments on their merits. The opportunity is ours if we can grasp it instead of meeting the Socialists half-way. [end p30]

Mr Chairman—

When Winston Churchill spoke in this Hall in September 1946, he called for an act of faith in recreating the European family. It is an act of faith too, which is required today by all of us in restoring the free society.

Not far from Winston Churchill's country home lived one of our best known national poets, Rudyard Kipling. He and Winston were great friends and mutual admirers. The new renaissance of which I spoke was perhaps best described by Kipling:

So when the world is asleep, and there seems no hope of waking
Out of some long, bad dream that makes her mutter and moan,
Suddenly, all men arise to the noise of fetters breaking,
And everyone smiles at his neighbour and tells him his soul is his own.