Flora Lewis and Craig Whitney, New York Times
Prime Minister, I would like to start with Europe. I had this in mind even before I knew you were going to make the speech in Bruges. Now, that has created a great deal of comment, as you know. I would like to put it in a personal way:
Europe is gathering up steam again on the idea of moving on after rather a long period of essentially stagnation and there is not anybody really taking the lead - the person who has the position, the prestige, the personality, who could do it is you, really the only one, and you do not seem to want to. Why not?
Prime Minister
I think you are mistaken. I think, if you look dispassionately at what has happened, you will find we did take the lead right from the time we got into power. [end p1]
First, we sorted out the finances. That took two goes; initially for three years and then Fontainebleau, and finally coming up to the recent one. We were the first actually to tackle and sort out the finances, that is a very great achievement.
Secondly, we were the first to tackle - and insist on tackling - the Common Agricultural Policy. That finished up recently with a policy both to get down surpluses and to reduce production in the future, so we do not accumulate surpluses.
So I think your fundamental premise is wrong.
We have tackled both those enormous measures and it was under the leadership of this country that we did both and the persistence of this country that we did both.
We also, if I might respectfully say so, started the Single Market during my Presidency - in London - and I think we did some forty-two directives during my time, because we have, I think, been far keener on the Single Market and tried to get it going sooner, because in a way, that is what we joined the Common Market for: to have a big market of 320 million people and if you look [end p2] at the Scottish speech, I said that we are going to have a Single Market in 1992 and you say: “Well, what is so new about that? Isn't that what we joined the Common Market for?” and you would be quite right.
It has taken a time, but in fact, we are far further on with the Single Market than most other countries. We have free movement of capital; we have no foreign exchange control; we deal with the Ecu in London; we have the most open financial markets in the world and, in practice, we are far further on.
If I might also respectfully say, though, it was I - together with President Mitterrand - who took the lead about the Channel Tunnel. The Channel Tunnel will come through in 1993, in spite of all the talk of other people. That was an enormous step forward and we influenced thinking a very great deal.
So I think your fundamental premise is wrong.
Flora Lewis and Craig Whitney, New York Times
Why, if I may ask, Prime Minister, did you take such sharp issue with a vision of Europe that is not the same as yours that Mr. Delors has expressed, when in my judgement, very few other people in Europe share his vision of it? [end p3]
Prime Minister
Because I get a little impatient with people talking about visions in vague terms and not proceeding forward with some of the practical steps which it is necessary to take in order to get further and frequently you will find a way of talking in vague terms is a way of avoiding the decisions.
I am not an avoider of decisions. We take them and so when, for example, I find people saying that for the Single Market or for free movement of capital, you have got to have harmonisation of capital taxes, I say: “Nonsense! What you are really saying is that your capital taxes are too high and the rest of us have got to come up to them and what you are doing is not having harmonisation of capital movement; you are trying to tack on to it an imposition on other countries which you have no right to tack on to it and there is no need, because five of us already have free capital movement!”
We did not harmonise our capital taxation and taxation, you know, is the fundamental reason for the existence - historically - of parliaments, so that it is parliament - the representative of the people - who have control of the Executive of their country and parliament in particular has control over the raising of money for the purposes of the Executive and that goes to the root of sovereignty and the nationality of parliaments. [end p4]
So what I am saying to them is: “Yes, in practice, we have been forcing the pace with Europe and we have gone ahead faster. Now you have got to start to perform on things and not talk in vague terms; but you have got to do something else too. The whole philosophy of the Treaty of Rome and the whole purpose of it was so that it would be the practical expression of economic liberty, which as you know, is a condition precedent for political and personal liberty. You cannot have or uphold political or personal liberty without having economic liberty!” And the tendency at the moment, we are finding with the Single Market, is not to get rid of the constraints to freer movement of goods, which you must do - for example, you do not want to have about four different types of computers, you want a standard to which we can all agree; masses of different types of electric plugs; masses of standards for television; masses of different safety standards. You get rid of that multiplicity and get certain standards.
What they are also trying to do is to tie on quite a lot of regulations which are not necessary for the free movement of goods. Now, that is not a deregulation freeing-up, removing, the constraints. If [end p5] we are not careful, we will become one of the most highly-regulated bodies, which is the opposite direction of the founding fathers.
Now these are great big ideas, concepts vital to having the expression of economic liberty, vital to getting a more effective Europe.
Flora Lewis and Craig Whitney, New York Times
I thought that the essential idea of the Common Act [Single European Act] is really deregulation?
Prime Minister
That is right.
Flora Lewis and Craig Whitney, New York Times
So why are you worried about corporatism?
Prime Minister
Because I am. When I hear some of them say that we want, in order to get trade flowing more freely, a European Statute on Common Law, yes that may be a good idea. When I hear them trying to tack on all sorts of rights for trade unions, on workers' participation, I say: “That is not necessary. That may be what you wish [end p6] to do in your own countries but there is no point in trying to tack that on to a European Statute. That will not enable trade to flow more freely. It will alienate many people and frankly I would not agree to it.”
We got away from that in this country. We rejected it and we are not, having rolled back many regulations, having rejected many corporatist or collective views, we are not going to have them reimposed on us from Europe.
I do not like a corporatist state. They start to talk about something, the jargon is terrible, something called social partners. I said: “Now tell me, what is a social partner, are they different from fellow citizens, are they different from colleagues? What do you do with them?”
Flora Lewis and Craig Whitney, New York Times
Who is they in this case, the bureaucrats in Brussels?
Prime Minister
And some of my fellow Heads of Governments. Social partners, what they mean is a dialogue between industry, your trade unions and the state. [end p7]
Flora Lewis and Craig Whitney, New York Times
That is a common phrase in Germany, the social partner.
Prime Minister
Yes, but I say: “But I frankly must tell you that is an old fashioned idea.” It really stems from a Marxist doctrine. We are all equal in democratic rights, as fellow citizens we all have a vote, all equal in democratic rights. We try to have equality of opportunity. We are all equal before the law.
Now what is it that makes you think that some people have so many more rights than others, that we have to take corporatist sections of them, discuss with them and then say: “We will do that”. That is not being answerable to your Parliament. That is not treating people as democrats.
I remember when it happened here I used to say: “We are not entitled to by-pass Parliament in making these decisions. We are answerable to a Parliament, this is democracy and we are all equal as citizens.” We try to give equality of opportunity and equal in law.
So I think that to try to regard workers as someone who is not somehow a citizen but a different citizen, but different, is ridiculous. They then start [end p8] to talk about something called social space. I said: “What in the world is that?”
Flora Lewis and Craig Whitney, New York Times
I do not know.
Prime Minister
No, I said: “What do you mean? Do you want an extension to your house because you have not got enough space or an extension to your office because you want enough space, what is social space?”
Now it is no good talking in these vague terms or vague jargon or be afraid to say what you mean because people might not accept it. That is part of my job and that is why I say: “Yes, we have got certain tasks to do, we will get on with the practical work, our task is deregulation, removal of constraints, not the imposition of many more and our task is to speak in clear language as to what we mean so that people understand it.” That is what the Bruges speech did.
But it is right in keeping with the spirit.
Flora Lewis and Craig Whitney, New York Times
You put a great emphasis on sovereignty. [end p9]
Prime Minister
So I believe does everyone else.
Flora Lewis and Craig Whitney, New York Times
When you speak of Parliament it seems clear that the British Parliament cannot be constrained by any outside power.
Prime Minister
Again, one has to be very careful not to talk in misleading generalisations. Every Parliament enters into Treaty obligations with other countries. As a sovereign act you enter into a Treaty obligation with another country, which usually goes through their Parliament as well.
That, of course, constrains your own right to act but it is a voluntary Treaty entered into. When we went into the Community and when other people went into the Community, as a sovereign act we yielded up a certain amount of our powers to the Treaty of Rome and any change in that Treaty has to come back to our Parliament as a sovereign act.
So everyone in international affairs puts some kind of fetter on their sovereignty. That is the sovereign act by which they do it. It is a decision [end p10] of Parliament - we have Treaties with you, we have Double Taxation Agreements and so on.
So no country is isolated, because you cannot be in conducting either your international relations or your trading relations. You would never have a GATT, you would not have various other things, you would not have any Treaty obligations, you would not have any obligations with regard to rights of air travel, duties of air travel obligations, environment crosses boundaries, alliances and so on.
When you talk about sovereignty we do fetter our sovereignty through our Parliament.
Flora Lewis and Craig Whitney, New York Times
What I wanted to ask in terms of sovereignty and national identity, do you feel that this is what your voters want to hear, is this something that is overwhelmingly a consensus in this country or is that a divisive issue?
Prime Minister
I think the people of almost every country in the Community identify with their national pride, of course they do. That is our history. You cannot just [end p11] identify with Europe, with so many different histories, with so many different customs and traditions. It is natural and worthy that you should be proud of your country, that you should identify with it.
If you try fundamentally to go against that grain then I do not think you will get very far. But if you looked at the beginning of that speech I made it quite clear that I think it is every bit as worthy an ambition to work together, as sovereign independent countries, as it is to try to suppress that national identity which would cause a lot of problems and resentment and you would not get as far as you would by harnessing the national identity and saying we will work together in the traditional way, by looking at everything and then seeing what we do together.
But also, just let us relish our differences. We are different. Don't suppress them.
Flora Lewis and Craig Whitney, New York Times
How do you react to the description of this being essentially a Gaullist position? [end p12]
Prime Minister
De Gaulle was a very very important person. Without him France would not have had the importance that she does today. I think De Gaulle was right when he said: “Yes, we will work together, Europe is a Community of nations”. And it is.
Just let us be practical about it. We go and sit there as members of nations and I sit round that table sometimes and say: “Are you going back to say that we have no basis in our national country, that we are going to surrender everything to a mixture of European Parliament and a Commission?” No you are not. You know you are not.
So in practice, I am in tune with their feelings. In practice, Britain is doing more towards getting further faster, towards solving the problems, than any other country.
Flora Lewis and Craig Whitney, New York Times
In practice, under what circumstances could Britain be willing to join the European Monetary System?
Prime Minister
First, as I indicated, we have got further in free movement of capital and free exchange rates than many [end p13] of those who joined the European Monetary System. Some of them say that they will have free movement of capital by 1990, some others say that they cannot do it by then and cannot join the System.
When others have what we have already, free movement of capital and no foreign exchange control, then we will have to see if the Exchange Rate Mechanism holds. I have some considerable doubts as to whether it will.
We belong to the European Monetary System in that we put some of our reserves with it and sterling is part of the basket of currencies. We do not belong to the Exchange Rate Mechanism, there is far more trade in sterling through London than there is in any other financial centre in Europe, four times as much. So it is far more than through Frankfurt, far more than through Paris. There is much greater volume in trade in sterling through London.
Also, we do I am afraid go up and down a little bit as being a petro-currency, but the next step is to see how they get on when they have got as far as freeing-up their currency as we have already and when, for example, they have got as far as holding in their bank reserves various different currencies. [end p14]
We already do that. The Bundesbank does not, as you know, and we deal in Ecu. So in practice we are further along. Whether some of them will be able to hold in that Exchange Rate Mechanism, when they have free movement of capital and no foreign exchange control is I think an open question.
Flora Lewis and Craig Whitney, New York Times
You are going to Poland next month and I wondered is this a particularly interesting or dicey moment to go, as chance has it? What do you hope to accomplish there?
Prime Minister
I think it is a very interesting moment to go. Poland has always had its own unique character although it is obviously very much part of the Warsaw Pact countries.
It has had a unique character because of its history, it has got its own character in the satellite countries because of the strength of the Roman Catholic Church there and therefore because of the strength there are certain fundamental feelings which are way way beyond and above those of a State-controlled system. [end p15]
I think we are going there at a particularly important and interesting time because I think that what Mr Gorbachev is doing in the Soviet Union is highly and particularly relevant to Poland. You see what Mr Gorbachev is doing in the Soviet Union is saying: “Look, we are freeing up the discussion and we are giving more initiative and personal responsibility in the Soviet Union, that is we are freeing-up the politics a bit and the personal freedom a bit, believing that will give us a much better economic prosperity. We do not know quite how it will come about because we have no experience of management or how to do it yet, but it is the idea that enlarging the liberty and responsibility will give you the greatest economic prosperity”.
Poland needs the greater economic prosperity obviously and you only get it by getting harder work. Poland was ahead in a way by trying to get the more political freedom through Solidarity. She is getting that, so really you are coming to the same thing, she is getting the greater political freedom and it is that which enables you to say: “Now look, you are getting the greater political freedom and responsibility and as you get greater freedom you have to turn round and show that the greater freedom works, in that it does produce more goods and services.” [end p16]
But it is all of a piece you see, in a way, with what is happening there. But Poland is a bit special, let us face it, we went to war because of Poland, because in a way we failed Czechoslovakia, and we realised that Hitler was going on and that it was Poland over which we went to war.
We each have quite considerable Polish communities, both here and in the United States, but it is this freeing up the political system that gives you not only the greater dignity of freedom but it also produces the better economic results.
They were slightly ahead of it in Poland because of the Solidarity Movement which was really saying we know this.
Flora Lewis and Craig Whitney, New York Times
I would like your assessment of what is going on in the Soviet Union, how important, how far-reaching, where you think it will come out?
Prime Minister
It is very important, it is very far-reaching, it is extremely both bold and prophetic at this time for the Soviet Union to have a leader who comes right to the [end p17] top, who says: “For seventy years communism has not produced the hopes and dreams that we had for it. Those hopes and dreams crumbled and we have got to go in the direction both of freeing-up the speech, the discussion, of freeing-up the responsibility” is really in itself very considerable.
We have to remember that Mr Khrushchev started to have a go at freeing-up the politics, it was he you know who actually turned round and revealed what Stalin had done, it was he who actually turned round and gave Solzhenitsyn the right to publish one of his books. It was he who was responsible for saying that Austria could be free of the yoke and then his whole movement was snuffed out by some of his other colleagues and it has taken a long time for this further thing to come. Much more fundamental if I might say, a much more fundamental assessment of the communist state.
I think it is in the interests, as I said when I went there, I had to decide precisely what stance I would take, I as you know had known Mr Gorbachev for some time, had to decide whether I thought it was not only in the interests of the Soviet Union, but in Western interests that he succeeded and I think it is. [end p18]
The enlargement of liberty is in the interest of all the free nations of the world and I believe passionately it is in the interests of the Russian people, both for liberty and for prosperity it is really in the interests of all mankind.
We must support it in every way we can without interfering internally. We must support it, support our ideals and never cease to propagate them.
Now, having said that, at the same time when I was there I did point out and to those who are supporting vigorously Mr Gorbachev, that they have got to go on giving their vocal support because it is an enormous difficulty, it is a great endeavour on which he has embarked. It is a massive turn-round. Where you have in fact been saying to people for seventy years you do not do anything unless you are told, unless you have got permission to do it, to turn round and say now you have got to do quite a lot on your own initiative.
If you have a manager of a factory, he has hitherto been told where he buys his raw material, how much he pays for it, how many people he employs, how much he pays for them, how much he produces and someone will pick it up and market it. Now he is told you have got to decide as part of production what you produce. You have to see where you get your raw materials, [end p19] take on people, decide what you are going to produce, how you are going to produce it, how you are going to pay them.
Flora Lewis and Craig Whitney, New York Times
That causes some turmoil?
Prime Minister
Fear, it causes fear. Change causes fear. “How am I going to do it?” They have not got any experience of management, they have not got any experience of management, they have not got any experience to revive, like the Czechs had, because it was not not known in Tsarist Russia. Before a member [sic] of Alexander IIthe Tsar gave freedom to what had previously been a position of serfdom, unfortunately it is a tragedy of history he did not at the same time give them enough land on which they could support their families and develop their own market system.
So it is a massive change. I think they know what they want to do but do not know quite how to do it and I say sometimes: “Yes, we simply must have as many joint ventures with you as possible. This means that we have got to have certain guarantees that you can get your money out because you will learn management by [end p20] doing it with someone who knows it”.
So what happens when you do this and when you first say well we are not going to take the goods you have been producing unless the quality is right. Now that means that you have first to discard quite a lot of goods so it seems as if your production goes down. So you see what I am getting at. Sometimes, economically, the adverse effects happen economically first before you get the beneficial effects. Although I do think that the great thing was to do it with your glasnost, your freedom of discussion first, because that itself is a great move and it has been going on long enough now and the conduct of their Party Conferences was unheard of in the Soviet Union. People could come up and say what they wished and when someone said: “You have got rid of Mr Yeltsin”, Mr Gorbachev said: “Well let us hear what Mr Yeltsin has to say, come and take the floor, take the rostrum” and gave him half an hour to do it.
This is extraordinary, but the other things will take longer and there will be people who profited very much by being in positions of authority, of giving little privileges, of having privileged positions [end p21] because they were officials in the Party. To go from a position where your standing depends upon your Party and not on merit, to a position where it depends upon your performance and merit is a fantastic opportunity for some people and fearful for others.
So it is going to take a time but we have to make it quite clear that this is a fantastic movement, we believe, in the right direction which will be of enormous advantage to the people of the Soviet Union and which is really worth going for.
It also gives a great uncertainty and unknown to the satellite countries. Because some of their people are on top at the satellite countries because they are even more orthodox, they are absolute orthodox communists, without the freedom to think in the way in which Mr Gorbachev has thought.
That is not necessarily true of Hungary which is always trying to enlarge her freedom as much as she could within the system. Hungary has been the first country to take advantage of the enlarged freedom.
Czechoslovakia much less so because you remember Mr Dub&chacek;ek tried to do it previously so I think that there will be considerable uncertainty in the satellite countries as to precisely what it means for them, but Hungary is already trying to enlarge her liberty [end p22] in the full spirit of it. The others unknown. Solidarity is of course also trying to enlarge the freedom in Poland and I think according to what has been going on recently maybe succeeding possibly with this new spirit.
But the point I wanted to make is, at a time when you are getting big change, it is not a time when you sit back euphorically and say: “Well now, that is that.” The directional change and the desire to make it means it is accomplished. It does not. Great change is a time of great uncertainty. It is uncertainty for the West as well as for the satellite countries and for the Soviet countries and at a time of great uncertainty is a time which requires total Western unity and preparedness. So that whatever happens, if they succeed it is marvellous, we go on always negotiating, always with the door open, always hoping for the best, always prepared, just in case the worst should happen.
Flora Lewis and Craig Whitney, New York Times
Do you feel this means that the threat of communism is over and if so what is the implication for defence? [end p23]
Prime Minister
No, it does not mean the threat is over, that is why if you pop that question in front of the answer I have just given you will find it answers perfectly.
This is one of the greatest changes we have seen as an act of policy. You know it is not a thing that is growing, it is an act of policy, it is “This will not do, we have to change,” and it is a very big change and they do not know quite how to do it and they do not know quite the strength of the opposition.
I am quite convinced that Mr Gorbachev will go on with this great endeavour to which he has put his hand and I believe that he will have very considerable achievements and I believe there is a good possibility that he will get through.
But at time of uncertainty, coupled with a time when it takes such a long period to build up your defences with your latest equipment, I mean at the time of the last War we had not got the aircraft, we had not got the ships, we could turn round and make them within the time-frames that we had and the tanks and so on.
Those are not these days. New equipment takes a long time. So if you let your defences down or go, you may be fettering your liberty for years ahead. So you do not. You keep up your defences, you keep your [end p24] total Western unity, at the same time always negotiating and always regarding your relationship not only as one of defence and arms control but a relationship on a much broader base, many many more contacts, helping if we can with teaching about what management is like in a free enterprise society. Helping. Having more contacts, having more relationships, not only at the top, more visits. I think the more schools and people who come out of the Soviet Union and see what countries are like outside, the more they will realise they can do it, the better.
So it is a much more total relationship. The Atlantic Community, both sides of the Atlantic, are the custodians of liberty and the rule of law for the world. The idea of democracy came from Europe, it went both sides of the Atlantic with European people.
The rule of law, as being something which is not only the law passed by the nation, but it is something of fundamental human rights and the fundamental human rights doctrine is one which came from Europe. It was, as I said in that speech about Europe, it was because Christianity spread in Europe and of all religions it is Christianity that has given the great significance, sanctity to the individual and therefore the right of [end p25] choice, therefore the human rights.
So we are the custodians - Europe and the Atlantic, the whole Atlantic community - we have been the custodians and the centre from which these ideals, they are not doctrines, they are ideals, have spread throughout the world. We are custodians of liberty and the rule of law. People the world over must know that we think so highly of these things that we are always prepared to defend them.
You see there is very much a changing world outside as well, that is probably your next question. We have been lucky in having virtually non-proliferation of nuclear weapons beyond the first five who have got it now. India I think could have a nuclear weapon, there will be other countries which could have nuclear weapons, so in a way there is a good deal of uncertainty there too. So we have to keep up our defences and may every person know, whether they are longing for liberty or whether they are trying to get it, that the future of liberty is sure and that for the first time in my life time we are not merely defending it, our ideas, we are winning the battle of ideas, and liberty is extending outwards. [end p26]
Flora Lewis and Craig Whitney, New York Times
The main issue coming within NATO is whether or not the Germans should have new missiles to replace the Lance and that obviously is going to be a very difficult argument. Do you have a definite position on this?
Prime Minister
NATO has a position on it. We had this battle at the last NATO meeting of Heads of Government. It was absolutely vital that we got the right communique so that the high-level military planning groups can go ahead with it.
We believe in the nuclear deterrent. A deterrent is not a deterrent if it is obsolete. Therefore, you have to modernise your weapons, whether they be nuclear or conventional. Now this is so elementary it is astonishing you would have to say it and therefore we accept it. We must modernise our nuclear weapons as appropriate.
We took that fence, I think the phrase we used was &oq;up-to-date’.
Flora Lewis and Craig Whitney, New York Times
Exactly, because modernise they would not swallow. [end p27]
Prime Minister
I do not know how you bring things up-to-date. I think perhaps they are much more closely akin in German translation than they are in ours.
We took that and it just goes to common sense and this is what I have so much difficulty with, not so much difficulty but that I insist in politics in bringing common sense in.
We believe in the nuclear deterrent, a deterrent is not a deterrent if it becomes obsolete or if it cannot get through. So you must modernise and they will. You cannot do everything at once, there are other things that we have to do first. But as you know, I said that after the INF Agreement and the START Agreement which I do not think now can be fully done during the period of office of President Reagan because it is too complicated.
These Agreements are not to undermine your defence, they are to enable you to have sure defence but at a lower level of weapons. After that the imbalance in conventional weapons is so great we have got to tackle that and, of course, we are all, as the President said in his United Nations speech yesterday, very worried about chemical weapons. [end p28]
I have been worried about them for some time because we got rid of ours but you know the Soviet Union was both modernising them and stock-piling them and now they have been used in Iran&slash;Iraq, we have to give considerable attention to this.
But the difficulty, there is always a difficulty in these matters, is of getting assurances and a certain system of verification, because they are so easy to make. You can make one lot over there, another lot over there during the ordinary work of a chemical factory and this is the real problem about it.
But you see if any nation had chemical weapons and another nation did not, you see we have no chemical weapons, we have relied on the chemical weapons of the United States, some of them in Europe. If you have not got chemical weapons and someone else has your only response is nuclear.
I think there is a good argument for people saying that rather than a nuclear response they would really, they remembered in the last War we did not have chemical weapons used because anyone else knew that if they used them we would use them and that was the most effective deterrent. [end p29]
So we are having to pursue this very vigorously. Our first priority is to try to have no chemical weapons. There is a Treaty against no use of chemical weapons, 1925. The next thing is to try to get no development of them and actually no manufacture, but it is difficult to verify and of course there is a Treaty of no development of biological weapons and it is getting the verification.
But again the more open the society you get the easier the verification. [end p30]
Flora Lewis and Craig Whitney, New York Times
Are you saying that you do not expect the START Treaty in President Reagan's term? It leads me to ask you whether you are concerned about the coming change of Administration in Washington and whether you think it is likely to bring any change in your close relations that you have now?
Prime Minister
Look the direction forward of NATO was set out by all countries at the last Heads of Government meeting so we are all obligated to one another to pursue that and continue it. It is vital for NATO which has been responsible for this coming together of nations, our security over the last forty years and that is set out and its governments that are are obligated to it. When you go, I do not go and sign a Treaty or give my name to a communique as Mrs Thatcher, I go as Prime Minister of the United Kingdom, committing my country. [end p31]
So that is there and it is absolutely vital that Europe and the United States, as the Atlantic Community, stands together in unity for the reasons I have already indicated. These are the really big reasons.
When it comes to the economic policy, it is very interesting. If you look at the pattern of the seven economic countries, that meets each year as the Summit of Seven, you will find that our economic policies have actually converged - no they are not identical, but they have converged. They have converged in an interesting way. For the first seven years of economic summitry people were doing what we call fine-tuning, which you know. You know well let us get a little bit extra demand, a little bit of inflation, it might help with more jobs, and what happened? We got increasing inflation and we got increasing unemployment. That was the doctrine which reigned, well you kind of expand, with a little bit of inflation, and it will help with unemployment. It helped for about a year and then it came through to increasing inflation and inflation kills jobs, it does not in the long-term.
So in the second seven years we changed and we changed to do the fundamentals of economic policy. You must have a policy which keeps inflation down. You [end p32] must keep your public expenditure under control. You must have incentives to production, so we got our taxation down. Now these are the big things and in fact it is the pursuit of those things which have produced a standard of growth in the leading nations of the world, greater than that we have ever known. Yes sometimes it goes too fast and you have to take measures to correct it.
But it is the change from the fine tuning to these big things, inflation down, public expenditure under control, incentives, individual enterprise to production. Now these big things we all agree in the Economic Summit and we agree with them whether we are Francois Mitterrand, whether we are Chancellor Kohl, whether President Reagan, whether Margaret Thatcher, and so have got really a convergence on the agreement of the big things of economic policy. Those things I think will continue.
Beyond that, I am not going to get involved in your election problems for very obvious reasons.
Flora Lewis and Craig Whitney, New York Times
The big US budget deficits are still a problem for everybody in the West aren't they? What do you expect the next President, whoever he is, to do about that? [end p33]
Prime Minister
There are two ways of reducing your budget deficit: one is of cutting your expenditure, cutting the increase in your expenditure; another is changing your taxation. How you do it is a matter for the United States but what is important is that your public expenditure is under control and that you have incentives to taxation.
Flora Lewis and Craig Whitney, New York Times
Do you expect the closeness of relations to continue, regardless of who is in the White House?
Prime Minister
I shall struggle to see that close relations continue. I hope that it will not be a struggle. I shall see, it is my purpose to see that the United States and the United Kingdom, which has a very special relationship, retains that and that NATO continues strongly and that this great Atlantic Community retains its unity in the interests both of the things for which we stand and for the wider world. It is vital. [end p34]
Flora Lewis and Craig Whitney, New York Times
When you were talking about Gorbachev and how his attempts to create far-reaching reforms …
Prime Minister
Let me say that I shall make strenuous efforts to see that it does …
Flora Lewis and Craig Whitney, New York Times
This leads to a domestic question if I may, you talked about the importance of glasnost and yet in this country you are tightening up your secrecy laws, why?
Prime Minister
Of course.
Flora Lewis and Craig Whitney, New York Times
Isn't that a contradiction?
Prime Minister
No, it is not. It is one of the most difficult things we have to get across to the press and the media. In order to preserve freedom we have to have Security Services against terrorism, against crime, against those who would undermine the State. [end p35]
It is as much in the interests of the press and the media that that freedom is preserved as it is of any other citizen. Indeed the interests of the press and the media in that respect are identical with those of other citizens and I must know that when we communicate information to other countries, that they will respect certain confidentiality. It is vital.
If you are going to have a system under which you break open the secrecy of these Services, who will you be helping - the terrorist, who is against democracy, those who move drugs, which can undermine democracy, the criminal and you are helping those who would use freedom to destroy freedom? In other words, they use the freedoms that we have to try to put in place a system with which we would not agree.
Now, your interest as the press, and ours as citizens, is not different and in the end you just have to understand this and I believe accept it.
Let me say this, when the Socialist Government was in power and they came from time to time to say we are going to deport so and so or we have looked at this matter which you have raised and there is no truth in it or it is vital that we keep security, they could always rely on me, as Leader of the Opposition, to go in and [end p36] say: “I know the difficulty that you have, I know it is vital for our security that we stay, that this remains a confidential matter, and I must tell you that our opposition will vote to support your Home Secretary or your Prime Minister on these matters”.
Flora Lewis and Craig Whitney, New York Times
When you were speaking about Gorbachev and about his attempts to reform that society first cause trouble and pain, people are afraid of change, and the good aspects of it become evident later, was I wrong in detecting that you are speaking a little bit from your own experience here?
Prime Minister
I know that we had a much smaller turn-round to do from a highly regulated society into something like a corporate state, your income control, prices control, foreign exchange control, dividend control, development certificates required, you could not develop a factory where you wanted to, you had to get a certificate from the Government, and so on. [end p37]
Therefore, if anything was wrong, it was the State's fault and you did not get good management or responsibility.
I knew we had to turn around on that and for the first two years we got all the difficult things happening. Certainly I had to do it at a time when we got another doubling of the oil price from 1979, which happened at that time, and that did not help so I had to do it at the worst possible time. It would have been easier if we had been doing it before the oil price. But we certainly had a very very difficult two years, and that is with a small turn-round.
As you know, the trade unions were practically in charge at one time and strikes here, there, and everywhere, so yes I did have, I knew, because we got all of the criticism but people were prepared to give one a reasonable time to do it because they had had recent experience - socialism, which they really did not like, and knew we were prepared to tackle those things.
But it is going to take a longer time to do it in the Soviet Union because there is not any experience to retrieve. [end p38]
Flora Lewis and Craig Whitney, New York Times
Is the danger of socialism …
Prime Minister
The two are not really comparable but one is just a little miniature of the problems you could get in the other.
Flora Lewis and Craig Whitney, New York Times
Is the danger of socialism in England now quite rooted out?
Prime Minister
No you have to re-win your battles every day, you have to re-win the battle against inflation every year, you have to continue to keep people with you.
There is still some extreme socialism in some of the local authorities in this country, so it is not completely rooted out. We have quite a long way to go before that.
Flora Lewis and Craig Whitney, New York Times
One question on the economy if we still have time … [end p39]
Prime Minister
Socialism is not a movement of the mass of the people. It is a movement of a particular kind of intellectual who believes so much that he is right that he wants to control everyone else's lives. It is a movement to control other people's lives and it is pursued always in the same way. “Let me control your lives and we will have everything planned and then you will all be very much better off,” and so they are put in power and the people control their lives and they are very much worse off and they have very much less liberty for the ordinary people.
But it is still an argument you have to counter. It is easy to counter it now because we can say: “But look at the difference, it did not work”. Other countries are saying, look we have tried it and we are also coming to the same kind of convergence of economic policy that we have had in this country.
I can remember someone, a Minister of Finance, come in here one day and say, about 1980: “We are watching you very carefully Mrs Thatcher, if you can roll back the frontiers of socialism, other people will then be able to do it too”.
It was tough in the first two years, it is still tough sometimes. It goes on being tough but we are used [end p40] to the criticism we get and we give as good as we get. But you know when you have got a track record to show, it does help enormously, yes.
Flora Lewis and Craig Whitney, New York Times
The position that Britain now occupies in the West I think is largely due to your perseverance and the strength of your own personality and of your accomplishments as Prime Minister over the years. But is the economy matching that, is it a firm enough base for Britain now, is its future assured?
Prime Minister
You constantly have to watch your economy to see that it is something that is not getting out of line. For example, let me put it this way, after the October Stock Exchange crash last year, we were just coming back from Vancouver, we had two things, the October Stock Exchange crash and a hurricane on the same day here, but we all of us thought it was such a sudden reduction that we thought inevitably that people would feel that their assets were reduced, the assets of their Pension Funds were reduced, the assets of their insurers' funds, because that is how many of us hold our assets on the [end p41] Stock Exchange, and therefore that they would pull in their horns. Do you have the same expression in the United States? You join their horns and spend less because it was an unknown uncertainty.
So immediately, because we felt this would be the natural human reaction, we pretty nearly all of us reduced our interest rates to try to make certain that we would avert a tendency to a recession.
Now we were successful in that and that was a great achievement, let us not under-estimate that. What I think we under-estimated was that despite that the underlying strength of the economy that was happening, and so it has been going very strongly, in this country, going very strongly indeed. Not only were people carrying on their spending, but they were actually borrowing very heavily. At the same time that they were borrowing very heavily the savings ratio was coming down, they felt more confident of the future and the savings ratio was coming down.
So what we had at the same time, as you know your borrowings and your savings must be equal, they were borrowing much too much, some companies borrowing for investment which was good, but also people borrowing. What they would call investment, sometimes for house building, sometimes for doing up your house, [end p42] but they were borrowing more than the country was saving and so it was giving us a trade deficit.
So you cannot leave it like that, you have got to take action. We had been coming up with the interest rate because we realised that things were going too fast and inflation was rising so we had to put the brake on there. So we put the interest rate up to 12&pcnt;, that has two effects: first, it makes borrowing a good deal more expensive, so it will damp it down; it makes savings very much more attractive because you get very much more for your money and so it will increase them. It will also help to keep down inflation and it also means that people have not as much money to spend on imported goods.
The investment that has been going on means that we have a greater capacity to produce more goods. So that is the mechanism of its working and I go round duly explaining this and say: “No, we do not like having to put interest rates up but we are not prepared to risk inflation and we cannot carry on with a trade deficit”. The thing about this Government is that you know we will be frank with you, if something is wrong we will say so, we will say what we are going to do and why it will work. The only reason we keep confidence in everything [end p43] when things are a little bit difficult is people know that this Government will take whatever steps are necessary and will not flinch from them.
But you know battles in life are never won. You do not have your household budget permanently balanced, you have to balance it every year and see that your conduct is such that you balance it every year. In business your success is never won, you have got to bring the new products forward every year, you have got to have good management every year, you have got to have a good design every year, you have got to have good marketing, every year.
Life is a continuous business and so is success and requires continuous effort.