Interviewer
Prime Minister, if we could start by looking abroad, when you came to office the Soviet Union was led by Mr Brezhnev, you were the Iron Lady, you talked of the Soviet Union as a modern version of the early tyrannies of history. Now the Soviet Union is led by Mr Gorbachev, he is, according to you, a man to do business with and he has been talking of defensive strategies and a common European house. From where you sit, is the Cold War over?
Prime Minister
I think if Mr Gorbachev succeeds in his objectives, the Cold War will be over but the necessity to defend freedom and justice will not be.
I think that is the great mistake that people make. They look at intentions, they look at speeches, they do not look at the situation on the ground, they do not look at the dangers, they do not look at the military position which is still virtually intact, [end p1] they do not look at the uncertainties for all of those reasons, although things will improve enormously if Mr Gorbachev succeeds.
But for all of those reasons, you still need to keep a strong defence so that whatever happens either there or anywhere else in the world the future of freedom is certain. And I think that there are many people beyond the Iron Curtain who would also think that way and who would be horrified if we gave in to blandishments and a good public relations exercise.
Interviewer
Broadly speaking, what more must Mr Gorbachev do so that we would not feel threatened?
Prime Minister
Well look, the economy has scarcely changed. You have not yet got the economic system of liberty, very far from it, it is still a command and control economy. They are having great difficulty in turning it into anything else. The overwhelming majority of the structure of the country is still a communist structure, that is the only one they know.
One has to remember that they are attempting to do, in say ten years and he has only been at it, what, for something like four, what took us centuries to achieve. [end p2]
We had the gradual transfer of liberty and authority from the hands of the Kings and the Barons down throughout a Parliamentary system so that the authority came through the people in Parliament, it took centuries. We had the gradual development of an industrial revolution and an enterprise society.
Now it was easier to do it when we had a largely farming, agricultural society, and a rather simpler industrial society. To try to do it with a country that has never known yeoman farmers, that is farmers who own their own plots and are used to making their own decisions, to a time when you have got a highly sophisticated industry so that you cannot just start up on your own very easily in some of the simpler things, that is a major project.
Yes, I am the first to say I hope they succeed, I am the first to say we will give you any help we can, but behind them are a very sophisticated military structure. Behind them are a people, ordinary people and the people who organise it, who know only a communist bureaucratic system and who, having been instructed what to do for years, do not know how to decide for themselves and are fearful.
Now does that give you enough reasons? All of the reasons yes why we welcome. But a time of uncertainty is a time when you must be sure of your own defence. [end p3]
Interviewer
Of course it is at this very moment that NATO finds itself in a major difficulty over the problem of modernising short-range nuclear weapons in Europe. Let me put the point like this. Must those weapons be modernised?
Prime Minister
I do not find myself in any difficulty at all.
Interviewer
The West German Chancellor, Dr Kohl, finds himself in very great difficulty.
Prime Minister
I do not find myself in any difficulty at all. I think they are asking the wrong question. The right question is: what weapons systems, what strengths, what resolve do we have to have to ensure that the shield of NATO, which has given us peace for forty years, is maintained? For that we have to have a mix of conventional systems and nuclear. We know from two wars, world wars, this century that conventional weapons do not deter otherwise we would not have had two world wars. So you have got to have a mix of conventional and nuclear. [end p4]
With the whole strategy of NATO it is no good just having conventional and only the intercontinental ballistic missiles, that is not sufficient deterrent for something that you may get. It is a very much better deterrent to have also your conventional and American smaller nuclear weapons in Europe so that if anyone wanted to cross that line, that vital NATO line, they would know that straight away they could never be certain whether or not they would meet with the short-range nuclear response immediately.
And that is a colossal deterrent and please just let me finish, I know you are getting a little bit anxious, we have only got eighty-eight of them, eighty-eight launchers, it is pretty well an irreducible minimum and if you go for those, to negotiate with those, then in fact you are going for the jugular of NATO because those are the American short-range nuclear weapons which are a deterrent to anyone crossing that line.
Otherwise they might think, we could cross that line, they will not use the intercontinental ballistic missiles from the States to Russia. That is why the short-range ones come in.
So I do not find myself in any difficulty, no.
Interviewer
But the West Germans do, Prime Minister. [end p5]
Prime Minister
I wonder if it has been put to them like that. I do not know. It is not for me to say what the West Germans think.
Interviewer
Well that is the point I wanted to insert because as the Christian Democrat Spokesman said: “the shorter the range, the deader the Germans”. What I wanted to ask you was whether you had any sympathy for that point of view.
Prime Minister
Sympathy, of course.
Interviewer
For the idea, for the fears expressed by the West Germans that the shorter the range, the deader the Germans, they mean of course on both sides of the …
Prime Minister
I would not necessarily put it that way. There are also 70,000 British Forces there, with their wives and families. There are also 330,000 American Servicemen there, with their wives and families. We are all standing together.
There are also, I might point out, two countries in Europe which have their own independent nuclear deterrent and therefore by that argument are also vulnerable. [end p6]
I also can point out one further thing. It would not be any difficulty for people in the Soviet Union to take their larger missiles further back and they can target anywhere in Europe. So we are all vulnerable, we are all in it together. That is my point and you do not break up this fantastic Alliance.
I want a war-free Europe. In order to have a war-free Europe we must have nuclear weapons within Europe and weapons that are obsolete do not deter, whether they are tanks, rifles, any kind of missiles, if they are obsolete they do not deter.
NATO has been very precious for liberty, let us keep it that way.
Interviewer
By this one arena of change, Prime Minister, a second arena of change, which has come during your Prime Ministership, is of course within the European Community and the move to an internal free market under the Single European Act.
The press at the present moment are full of reports, one headline said: “Maggie's European nightmare” and there are reports you are planning to give battle on an array of European issues. Can I ask you this, what is your European nightmare? [end p7]
Prime Minister
That there might be so many detailed regulations made that we become tied up, our costs rise and we are therefore unable to compete on the world markets. We are only prosperous if we can compete on those markets.
It does not make any sense to take the topmost cost in each country and apply it to every country. All that you do then is mean that you would have to have an enormous protectionist barrier around Europe because none of our goods could compete with those from Japan, from South Korea, from the United States, from any other country.
My vision of Europe is not a protectionist club within great big tariff walls. That has not been the history of Europe. Look at all the values which were founded on Europe, which were taken the world over. Look, Christendom and Europe were once almost coterminous. Christianity really had its great flowering in Europe. It is that from which derive so many of the human rights and the things which we cherish and the values of the individual.
Look too at democracy, solving things by representation by discussion. That too was founded on Europe.
Look at the fantastic literature, the art, that had its origin in Europe and was taken the world over. Look too at our scientific record, so many scientific discoveries were made elsewhere, particularly on the mathematics, things like turbine, things like the dynamite, some of them were discovered in China, the compass. [end p8]
But they did not take those things and turn them to the advantage of the people. It took the kind of people, the kind of enterprising people, the constant enlargement of personal liberty that we have had.
Look at how we went out from Europe the world over, whether it was from Portugal, Spain, the United Kingdom, out to explore and look at how we took the values that we developed in Europe. The law, a rule of law, developed in Europe, Justinian, the second Roman Empire.
All of this we have done. Europe has been outward-looking, it has taken its values to the world. It cannot turn to be petty bureaucracy. It must have the larger view. It is through the enterprise, the talents, the abilities of people that we have got this higher standard of living.
That is the larger, the enterprising Europe, the Europe of the larger vision, the larger heart, the larger mind.
Interviewer
But you yourself, Prime Minister, actually signed the Single European Act, with its provisions for majority voting, which makes the number of direct reservations on our sovereignty possible, from which these rules and regulations that you are worrying about flow. Did you not recognise at the time that with that Single European Act we were passing some of our sovereignty, merging it at the centre? [end p9]
Prime Minister
By even joining Europe you pool some of your sovereignty, of course you do. You pool for example all your capacity to trade, that is all passed over to Europe. And then you have influence as one of Twelve. We still have not got our trade with Japan right because the interests of the different countries in Europe are different. You pooled your sovereignty on the Common Agricultural Policy. You must pool your sovereignty to get certain standards, certain electrical standards, certain television standards, and so on.
But that is an enabling and freeing provision. It is the interpretation of the Single European Act, for example, let me give you some things we have not yet got freed up which we should.
We have not in fact got the same rights on insurance in Germany that so many other countries have here. That Single European Act should be used to free up those things. It is quite wrong not to.
Interviewer
Where do you draw the line Prime Minister between what you think is necessary for the full functioning of the Community and …
Prime Minister
Let me just give you some other things as well. For example, we in this country, being enterprising and free and open will allow ships from the European Community to pick up trade in [end p10] our ports, to take from one port to another. The Single European Act should be used to allow that to happen. We do it, they do not.
This was my idea of an enlargement of liberty, of a challenge to freer trade. What they are doing is tying it up with so many things that it is becoming a restraint on trade between Europe and the outside world. So really it is not the Single European Act, it is the way you use it, the way you interpret it.
Yes there is a battle on from my vision and the vision of many other people I think when they think about it, of a really enterprising people, dynamic people, of having the minimum of restrictions necessary for safety and certain standards, to enable us all to trade so we all know where we are, so does the rest of the world do not forget. Not in fact to put so many regulations on that you do not get a freer Europe at all, you do not get an enterprising Europe, and you have identified it, that is the battle.
Interviewer
Centred on the proposals from the Commission now for a social charter, are you going to battle that at Madrid?
Prime Minister
But of course. [end p11]
Interviewer
An all out assault?
Prime Minister
An all out assault, I am battling for the things I believe in. This country has come out of a period of decline, has raised its reputation in the eyes of the world, the world, by getting away from petty bureaucracy and petty regulations.
Interviewer
People say our reputation will be diminished if we keep hammering on at the minor things of Europe, the health warning on cigarette packets, for instance, do we really need to spend our reputation on something which in the end everyone approves of?
Prime Minister
I am not hammering on at that.
Interviewer
Kenneth Clarke voted against it.
Prime Minister
Of course he did, of course he did.
Interviewer
But why of course? [end p12]
Prime Minister
Why of course he did. What do you think Europe is doing? Did we join this great Europe for twelve Ministers of Health to go to Europe to sit round a table, not to say there should be a health warning on packets, but actually to sit down and draft it. The significance of that is not the actual thing, the significance of it is the length to which Europeans will go because that is what they think it is all about. I do not.
Interviewer
There are bigger issues ahead.
Prime Minister
Of course there are bigger issues and I want the bigger ones solved. What is it that they are so concerned about the producer interests in Europe that they are not in fact getting rid of some of the constraints on air fares. They prefer their cosy cartels. I do not.
You free things up. It is better for the consumer when it is freed up. How is it it costs you far more to fly from one European capital to another than it does from here to New York? Yes, they should address that.
Yes, they are in fact subsidising some of their industries far more than we are, that is not free competition, those things must go. [end p13]
Yes when you have a merger we have to submit to Europe so they are all on a fair basis. These are big concepts. You free things up for the consumer because you are big enough to compete.
That is what they should be turning their attention to. And you think it is a really good thing to have them all there round a table, not only saying there should be a health warning on packets but actually drafting it. Goodness gracious me, goodness gracious me! They will soon be telling you what you can say and what you can do on a programme, how many minutes it must take, what questions you must ask!
Interviewer
Well, let me ask my next question in that case.
Prime Minister
Good.
Interviewer
Of course a much bigger issue is the question of monetary union and at the heart of that for the moment the European Monetary System. We have been told that Britain will join when the time is right, the pound has gone up, the pound has gone, inflation has gone down, inflation has gone up. Is the time ever going to be right? [end p14]
Prime Minister
I do not know. What I do know at the moment is that a number of people, we are in the European Monetary System as you know, but not in the Exchange Rate Mechanism, a number of the people in that system do not have the same amount of freedom as we do. When they have got the same amount of freedom, they will have taken a big step forward.
For example, we have absolute capital freedom, one reason why we are so successful, people know if they move their money in here they can move it out, so they are prepared to move it in. They have not got that throughout Europe, Germany has but not the others. They know full well that we have no foreign exchange control so for the same reason they can get at their money.
They have not got that and what some of them were talking about was: “Oh, if they are to have free capital movement, we must all have taxes imposed on us at the same rate”. Nonsense! That is not an enlargement of freedom, it is an encroachment on freedom.
Germany and we have free capital movement without having capital taxes of the same level imposed upon us. Indeed let me say this, it is very nice for Germany coming round to our view, they imposed a withholding tax on their capital so promptly the capital moved out of Germany to Luxembourg. The Luxembourgers were delighted and so Germany has now knocked off that tax.
So you see, I have got people in Europe coming really and saying: “Well, we will not admit it, but she was right you know, we have had to take off that tax.” [end p15]
Interviewer
But you have got people in Britain saying that we ought to join the Exchange Rate Mechanism of the EMS in order to reduce inflationary expectations here, to help to stabilise the pound, and to signal our determination in the current economic circumstances to maintain a hard pound. Would it not in the end be profoundly helpful for the economy at the moment if we were in the Mechanism?
Prime Minister
First, two points. First, we actually picked up our inflationary tendency during a time when we were trying to hold our pound level with deutschmarks, three marks, and we had to do that because our pound tended to rise because people held sterling in high regard, the pound tended to rise so we had to do it by piling in sterling, selling sterling to hold it down, that is where we picked up the inflation, actually by trying to shadow the deutschmark.
Interviewer
Because we were half-hearted about it, neither in nor out?
Prime Minister
No, no, I assure you we were not half-hearted about it. It was in fact shadowing it very very closely and that is where we picked up inflation. [end p16]
Interviewer
So the Chancellor was wrong on that point.
Prime Minister
I am very grateful to you for giving me this opportunity because I heard someone on the radio this morning giving the impression that all you had to do to get inflation down was to go into the Exchange Rate Mechanism and, hey presto, magic wand, no more effort needed! What utter, absolute nonsense!
You know there are some people who thought that we only had to go into Europe to solve our union problems, what utter, absolute nonsense, we had to do things ourselves. And if you are going to solve inflation you have got to do precisely the same things within as you would have to do without.
Yes, if you have got your money supply too high you have to have a high interest rate and those people, and there are some commentators giving that impression, go in, it is a magic wand, no effort. Life is not like that and I do not know any serious commentator who at the moment is suggesting we go in until we have in fact tackled our inflation and really got it down.
Do not forget inflation is also rising in Europe. We are still ahead of them but there have been times when some of those countries have been ahead of us, worse than us, in inflation, even though they have been in. My point is this: you have got to take the right steps to get it down and we have to do that and going in does not make it easy, it merely means that you have no option [end p17] whatsoever as to the extent of the steps you take and when you take them.
Interviewer
It looks as though it might be very painful indeed to keep inflation down to around the 5 - 6 percent mark if we are not in the European Monetary System.
Prime Minister
What makes you think that it would be easier if you are in than out?
Interviewer
It would reduce inflationary expectations. The alternative people say is a higher level of unemployment.
Prime Minister
Look, the level of unemployment in some countries in Europe which belong to the Exchange Rate Mechanism is higher than ours. Ours has been falling faster than in any other European country and the proportion of our people of working age in work is higher here than either France or Germany and most other European countries.
So the point I want to get over is please do not think of the Exchange Rate Mechanism as a magic wand to do things without any effort. It is not. [end p18]
Of course we have a look at it and we have a look at it from time to time and will continue to do so. But the only way to get our own economy in order is to take the steps that have to be made and our experience of artificially holding to an exchange rate has been such that it really makes it quite clear that you must take your own steps.
One final point. The turbulence in the market often does not come from anything in the Exchange Rate Mechanism, it comes from the great currencies in which the enormous part of world trade is done, the greater part, it comes in the dollar and it comes in the yen. And of course the value of those will be the view which people take of the United States and of Japanese trade.
So do not think that you are getting stable exchange rates just by joining the Exchange Rate Mechanism, you are not. The big swings will continue and remember, when we had Bretton Woods fixed exchange rate, the whole thing collapsed because it could not be held.
So yes we will continue to look at it but first we must get inflation down and we must take the steps, whatever they are needed, to make that our top priority.
Interviewer
Including allowing or tolerating a rise in unemployment? [end p19]
Prime Minister
At the moment, as you know, unemployment is falling and falling very fast, you saw the figures coming out and we hope that we can do it by what the Nigel LawsonChancellor calls a soft landing, which is by not putting the expansion of the economy into reverse, by slowing down the rate of growth but not putting it into reverse.
Interviewer
Prime Minister, what has gone wrong with the economy? We have got a trade deficit, inflation is 8 percent, interest rates are up, we have skills shortages, wage claims running ahead of productivity, what has gone wrong with the economy?
Prime Minister
When your wage claims are running ahead of productivity, it means there is rather more money in the system than you are getting out of it by productivity so come back to the same point.
Interviewer
What has gone wrong though?
Prime Minister
You say what has gone wrong, I can tell you it is going slightly too fast. That is why we have had a larger rate of growth than we can sustain. You know that and I know that. That is why you have to calm it down a little bit to get a rate of growth that you can sustain. [end p20]
But as far as people are concerned, they have a higher standard of living than they ever had before, they have a higher standard of social services than we have ever had before. They seem to have so much confidence in the future that they are not only spending what they are earning, but they are borrowing a lot as well. And therein lies the nub of the problem and that is why you have had to put up interest rates, to make the borrowing more expensive and to make the saving more rewarding, and putting up the interest rates does too.
Interviewer
Of course, your Secretary of State for Social Services, John Moore, has said that it is the end of the line in Britain for poverty. People walking the streets and seeing those sleeping there in cardboard boxes and people who know about the difficulties of one-parent families would say that poverty has not come to an end in Britain.
Prime Minister
Those were not the precise words John Moorehe used, in any way. What he was saying is it is totally wrong to say that a large proportion of our people are in poverty. What this government has done is to increase the incomes of people, at which we are prepared to give extra help. [end p21]
So you put up the income on what you are prepared to give what is called family credit, to help families, so you can have a person working properly and still we think not having sufficient for a decent standard of living so you give family credit to the children.
And it is because we have put up the income at which we give that, and increased the help, that of course if you regard that as a poverty line then in theory there are more people within that line. And if you take that view, all you have got to do to cut the poverty is to depress the incomes to which you give help. Well, that is absurd.
But the basic standard of living, the absolute standard of living has increased of those in the bottom tenth, which does say that under this government those who had the lowest income still have a higher standard of living, which is a good thing. And I get very very fed up when there are people who say, or seem to imply, they would rather that those at the bottom had a lower standard of living provided they dragged everyone down with them. That is not a good principle for an economy.
Interviewer
Many saw the real issue as being not absolute levels of poverty but increasing in equality in society, where the top 10 percent have done much better than the bottom 10 percent. How far, Prime Minister, would that in fact worry you or would you see [end p22] inequalities as a necessary consequence of an enterprise society?
Prime Minister
I see people of such talent and ability that whether they can create a whole new industry, as many have, build it up, sell goods, employ people, give them a standard of living, a hope of owning their own houses, that they have never had before, give me more of them, whether it be in industry, whether it be in industry, whether it be in the services, the great financial services, or whether it be in entertainment, whether it be a person who in fact can create a marvellous show which goes to America, create records that are sold in America, these are the creative people that provide jobs for the rest of us.
Do not depress them. Depress them and you depress everyone in our society. Give me more of them, do not run an economy on resentment, envy. Say look, whatever your background, if you have got what it takes you can build up a new business, you are the chap we want and we want more of you and that is why we are trying to give more and more opportunity in education.
Which would you look, say, if you were looking at from Mars, which would you say is the better society, the one that encourages such enterprise in people, after all some of them went to discover America and other countries in the world years ago. Or would you say, “Oh, they do not like anyone who can do well.” Which do you think would be better, which do you think would be more virile, more independent? [end p23]
Interviewer
We have been talking about change in the decade in which you have been here in Downing Street. Have you still got work to do, even after a decade?
Prime Minister
Of course. Look, when I listen to some of the arguments you are putting to me I know I have still got work to do.
Interviewer
Not by interviewers but by people as a whole in the country, Prime Minister.
Prime Minister
Yes, they listen to what you say but they know full well in the country that their standard of living is higher than it has ever been, that it took this government to get capital widely distributed.
Interviewer
But what more work have you got to do Prime Minister? [end p24]
Prime Minister
I want to get rid of this whole sort of idea that envy and that equality, it is equality of opportunity you want, it is the opportunity, it is much wider distribution of capital which people can get for themselves, much better. They are now owners. By the time we get within twenty years almost every person, grandma, will have something to pass on to their children, their home, their savings, their shares, they will have a stake in the future, it will be not a one generation selfish society, a society concerned for the future, concerned to give them opportunity.
Yes we have to get some standards of self-discipline back, not a society which accepts that marvellous dictum of George Bernard Shaw who I am sure would be on my side if he were alive today.
Interviewer
Though he was of course a socialist.
Prime Minister
Yes, but he said freedom incurs responsibility, that was his kind of political doctrine and it is mine too. If you are going to take the freedom you must take the responsibility as well. It is not for people, who I call the socialist Marxists, to say people are not fit to have their own freedom. “We the Marxist, socialist bureaucracy, must have so many rules and regulations because we know better than the ordinary people.” That is what I hate. [end p25]
Not what I hate, it is not right for humanity.
Interviewer
As we come towards the end of our conversation, Prime Minister, go back to 1979 and something that the then Labour Prime Minister said, or is reported as saying, he said: “There are times when there is a sea-change in politics, I suspect (this is 1979) there is now such a sea-change and it is for Mrs Thatcher”.
How far would you put the changes you have achieved down to a general movement in society or to your own hard work?
Prime Minister
It was time for a sea-change. At the time James Callaghanhe said we had just had some of the health service on strike, strikes throughout the whole country, a real terrible time, it was time for a sea-change and people were not going to be governed that way.
My whole belief has been based on the fact that the wealth of a country resides in the talents and abilities of its people. And the task of government is to run things, in finances soundly, in defence and a general framework of law to protect the weak from the strong and a general framework of law within which people can exercise those talents and abilities so you get an enterprising society. [end p26]
And as well as that, always to give opportunity. I would not be here unless the education system in the Thirties had given me opportunity. Opportunity, opportunity is what matters.
It was that belief, do not talk about economics, you will never understand economics unless you understand human nature and you have to bring out the best in human nature by incentives so that people will go the way of improving themselves and by improving themselves improve the community, of which they are a part.
Adam Smith, to whom I am devoted, who wrote those marvellous books on the creation of the wealth of nations, was not an economist, most people think of him that way, he was a Professor of Moral Philosophy, he understood human nature, he understood how to work with the grain of it, he understood that you must get education right if children are to be given opportunity.
That is where you simply must start, not with graph paper economics, not with a mass of statistics, but how to bring out the best in human nature and how to stop some of the worst things in it so that the whole of society is protected against it.
Interviewer
Those are the beliefs which have inspired you, Prime Minister, for ten years here in Downing Street. Of course the question everyone is asking, how long, how much longer? Is there anyone else to whom you could hand over this torch? [end p27]
Prime Minister
Yes of course, yes of course. Of course there is, there are several of them. It is not for me to say who. I do not know how long, I do not know when, but there are several and it has been a great joy to me to see that the things which I believed in have proved right for this country, have increased our reputation.
And the number of politicians from other countries who come in here and who emulate everything we have done and say: “Well Mrs Thatcher, we have tried everything else, now we are going to try Thatcherism”. And it really is a great joy that they look and see that our system works.
But when, I cannot tell you. But do not worry, there are plenty to take over, do not worry at all.