Speeches, etc.

Margaret Thatcher

Speech in Santiago ("Challenges of the 21st Century")

Document type: Speeches, interviews, etc.
Venue: Santiago, Chile
Source: Thatcher Archive
Editorial comments: Embargoed until 1800 GMT, 1400 local time. MT - suffering from food poisoning - fainted during delivery of this speech.
Importance ranking: Major
Word count: 4455
Themes: Conservatism, Defence (general), Defence (Falklands), Economic policy - theory and process, Public spending & borrowing, Trade, European Union Single Market, Foreign policy (Americas excluding USA), Foreign policy (Asia), Foreign policy (Central & Eastern Europe), Foreign policy (USSR & successor states), Law & order, Religion & morality, Society

Chile's Achievement

I have long wanted to visit Chile and was delighted to receive your kind invitation.

In thanking you for your warm welcome, I can do no better than quote a modern historian of Latin America and make his words about your country my own:

“Chile has produced an outstanding culture, a virile literature and art, a singularly beautiful music, a large and strong middle class, while her capital, Santiago ... is considered by many foreigners as the most attractive and most intellectually stimulating city in which to live in South America.”

In recent years you have added to that achievement. Since the overthrow of socialism in 1973 you have made your country a shining example of economic reform and material success. And with the return of democracy you are setting an example of political maturity and national reconciliation. I shall return to these themes shortly–and seek to draw out some lessons of wider application.

But just now let me add my own personal tribute. In 1982 you fully understood the stand that Britain took in upholding international law and defending the rights of our people when our territory was invaded. You had occasion to know that there were some forty or so border disputes in Latin America alone at that time, so many of which could have been a pretence for conflict. That possibility was much reduced after the decisive action taken by Britain. Also, I have reason to believe that the cause of democracy in South America was from that date advanced substantially.

In reading your history I am struck by some parallels between our two peoples–in so many superficial ways so different. Compared with your neighbours your population is small–just thirteen million. That was Britain's historic position too. We both have the virtues which small countries are prone to develop in such circumstances–big hearts and broad minds. Your country and mine, similarly, have a strong sense of national identity which comes from welding together in one harmonious whole, different cultural strands. We each have traditions of professional and noncorrupt administration–something whose economic as well as whose political advantages are only now being fully understood.

And, of course, both our countries look outwards to the sea. For Chile's future lies not just with a developing relationship with Latin American neighbours and with the United States but as part of the emerging, dynamic Pacific community. As that remarkable lady Maria Graham wrote in her diary of reflections on a newly independent and highly turbulent Chile in the year 1822:

“Chile is so obviously a maritime country, shut up as she is to landward, by the Andes from the eastern provinces, and the desert of Atacama from those to the north, that I would, were I its legislator, turn every feeling and passion towards the sea.”

The Pacific is Chile's gateway to the world, although fortunately you also have a passage to the Atlantic. Indeed, truly you are a country with a global outlook.

Economic and Political Freedom

Chile has recently returned to full democracy and I am delighted to be here at the time your new President and his Government have just taken office. Because I believe you wise to pursue that policy of reconciliation which I have already praised, I do not intend to go over the political rights and wrongs of the years since 1973. But it is important to observe that far from disproving the thesis to which I passionately hold, your experience proves that economic and political freedom are inseparably linked.

From the mid-1970s, Chile not only secured the economic freedoms which Communism and hyper-inflation had threatened: she extended those freedoms. And she did so in outright and unashamed contradiction of what the experts of the time were urging.

How well I remember–we should never forget–the consensus orthodoxy of the seventies. It was the height of demand management and state intervention. This was so in Europe and in North America. But in Latin America, which has so often been made the testing ground of half-baked theories of social revolution and upside down concepts of economic management, it was so with a vengeance. Hence the huge public sector debts, the prohibitive tariff walls and that poverty which is so frequently itself the child of socialism.

In Chile things were different. You did not expand the public sector, you cut it back. You exerted firm control on monetary growth, rather than resorting to monetary profligacy. You cut tariffs in order to open your country up to trade and your industries to competition. You welcomed foreign investment, when others regarded it as a threat. You curbed your borrowing and reduced your debt, not to secure new loans from international bodies but because you understood that the basic rules of financial prudence that apply to any household must apply just as much to government. You have moved far ahead of other countries in bringing competition and choice to bear on your people's pension arrangements.

Of course, there were hitches along the way. Privatisation sometimes ran into problems. At one point, it seems to me, you departed somewhat from market principles by trying to peg your currency at an unrealistic rate of exchange. We too in recent years have seen the damaging effects of fixed exchange rates. But after all–even before Britain in my time–you were the standard bearers. And those in the vanguard fall first into the pot holes. But you quickly clambered out. And now it is right to talk, without crossing fingers or touching wood, of Chile's economic miracle.

It is not just that your economy has been growing consistently fast, though that growth is the surest foundation for a better life for all your people. It is also that your economy is better balanced and more diversified. The days when Chile was known as a country which depended almost entirely on the export of copper and its associated metals have long gone. Your service exports including software, know-how on pension funds and tourism are growing. Your fruit and vegetables, your wine and your fish are satisfying customers around the world: you have even earned that unwanted accolade for quality and value -namely that the protectionist European Community wants to keep your products out.

“Well, granted” , the socialist apologist may reply, “but though these policies may have worked wonders economically they were pursued at the expense of political freedom and of social justice” . It is not my task–and it is not my wish–to justify all that happened in your country over these years. But the socialist is wrong for three good reasons.

First, economic freedom is real freedom. Just as coercion exercised on economic grounds is no less real coercion. But don't take my word for it: listen to the Pope John Paul IIPope in his Encyclical, Centesimus Annus where he talks of the collapse of communism, stemming from its economic inefficiency as “not to be considered simply as a technical problem, but rather a consequence of the violation of the human rights to private initiative, to ownership of property and to freedom in the economic sector” .

Second, only a flourishing free enterprise economy can generate the higher living standards at every level and the jobs which people need if we can honestly say that they are enjoying the benefits of freedom. For it is a strange thing that only now when the socialists have lost the economic argument do they rely on a spurious moral superiority to make up for practical failure.

But third and most important, Chile's economic freedom has provided the soundest possible basis for democracy.

Just consider the former Soviet Union where political freedom preceded economic liberty. I would not have wished one solitary dissident to remain an hour longer in the gulag. But it would have been far easier if economic freedom had come first. And the fact remains that the single most important obstacle to entrenching democracy and ensuring social peace in the former Soviet Union is the fact that the free economy has taken such shallow root. For democracy is much more than majority rule. A substantial and self-confident middle class, a reasonable (which by definition does not mean equal) distribution of property and a successful free enterprise economy are necessary, though not sufficient conditions, for democracy to grow. And democracy, like any living thing, has to grow. Suddenly transplanting democratic institutions from one culture and country to another is almost guaranteed not to work. Of course, ideas, like people, flow across frontiers and enliven a nation's political life. But to be at all secure that life in the case of democracies requires home grown nourishment.

Democracy and Capitalism

These are lessons which by now the world should have learnt. Ours should be an age in which democracy and capitalism work together for the benefit of all. Indeed, they are but two sides of the same coin–be it pound or peso.

Both democracy and capitalism require a fair and just law which applies to everybody–rich and poor, citizens, politicians and government alike. Without the assurance such a law, impartially administered and effectively enforced, brings with it, the citizen will feel insecure and the enterprise will misapply its resources.

Both democracy and capitalism are means of giving power to the people. In even the most active form of political democracy, individuals are only asked to cast their votes on the performance of politicians after a period of years nationally, or once or twice a year locally. Yet in the market place of capitalism, men and women are making their economic choices every minute of every day through the goods they buy.

Both democracy and capitalism are bulwarks of liberty because they check state power. Democracy does this by holding politicians to account. Capitalism does so by removing industry and management from the hands of government, by promoting private shareholding and opening government policies to the scrutiny and judgment of domestic and foreign markets.

In 1993 Freedom House, an organisation which monitors these things, found that there were 75 democratic countries, up from 55 a decade earlier; but 31 per cent of the world's population, the greater part in China, still live under repressive regimes, this is down from 44 per cent a decade ago. But just before we raise the roof with shouts of joy let me add a further reflection on this connection. Wherever we find signs of a reversal of free enterprise economic reforms, we must be on our guard against threats to political liberty also. And we know from past experience in dealing with the old Soviet Union that countries which do not respect the liberties of their own people cannot be trusted to respect the rights of other members of the world community. So it is that we must observe closely what happens in Russia and the other countries of the former Soviet Union, remembering that their reliability as neighbours will be signposted by their commitment to political and economic liberty in their own domains.

And this brings me to the wider international scene in which Chile has a stronger interest than ever through her expanding economy and exemplary status within Latin America.

New World Disorder–The Need for Strong Defence

Even today it is hard to grasp the magnitude of the historical changes we have witnessed over the last four years. From August 1989 to the present a seemingly stable world structure crumbled into nothingness. In quick succession we saw the end of the Cold War, the spread of independence in Eastern Europe, the disintegration of the Soviet Union and the re-emergence of nationalism as the communist ice melted.

But some people you just can't please. I detect in some comments we hear these days a peculiar nostalgia for the atrophied certainties of the Cold War world. I do not share it. Of course, in a sense life was simpler then. Where a balance of terror keeps the peace; where national identities are suppressed by police states; where power bloc politics prevails over issues of justice and self-determination–this is a world which politicians and civil servants find easier to manage. But it could always have gone wrong even in terms of the “stability” which seemed to prevail. In many parts of the world–including Latin America–the “Cold War” was far from being “cold” . Revolutionary violence was promoted by the Soviet Union in every continent. Its appalling legacy is still felt. Above all, the monstrous evil of communism not only denied the fundamental rights of human beings to self-expression and self-development: it actually sought to change the nature and instincts of human beings, corroding loyalty to family, love of country, respect for truth, the belief in religion. So I assert that the fall of communism, through most of the world between 1989 and 1991 was the most profound and beneficial revolution of our times.

A world without the Soviet Union and its constant threat is a different place: it is a better place: but what we must do is to remember the lessons we learnt in the struggle against communism and put them into effect in this freer but barely less dangerous and certainly more disorderly world in which we find ourselves. Our victory over communism in the Cold War was only achieved because the United States, staunchly supported by its allies including Britain and your own country, remained strong and because we had the will to use that strength.

It was right that there should be a reassessment and some reduction in the West's armed forces once the threat from the Soviet Union receded and then the Soviet Empire itself crumbled. But we still have to ensure that military superiority–particularly technological superiority–remains with nations (above all the United States) which can be trusted with it. We must never allow the sanction of force to rest exclusively with those who have no scruples about its use. There is now a real danger that in one of those periods of false optimism to which Western democracies are all too prone we will cut back our defences too far.

For there is no shortage of threats to peace–indeed the skies are darkening. I have the greatest admiration for President Yeltsin and I believe that wealthy Western nations should have done more earlier to assist Russia to build a market economy and the structures of sound administration. But I also believe that the West must now take full account of the trends and risks which are ever more clearly apparent in Russia. There are ample grounds for disputes, not least concerning the Russians outside the Russian state itself, what they call the “near abroad” , which could tempt malign forces towards military or other forms of intervention. The Russians certainly still have the means to embark upon such policies.

So far, we in the West could not have done more to demonstrate our weakness in the face of future threats by the way we are all rushing to disarm and showing such grave divisions and such wavering will-power over the fate of Bosnia–an internationally recognised sovereign state in the heart of Europe. The fact that even at this belated hour the threat of air strikes against the Serbs besieging Sarajevo had such a salutory effect demonstrates how much, earlier, decisive action could have achieved.

I repeat that I have every confidence in President Yeltsin. With him at the helm, the Russian ship of state has every chance of navigating the reef strewn waters which lie ahead. But the Russians are now installed in Sarajevo at the traditional fault line of East and West. There are significant problems over Ukraine and the Baltic States. In Russia itself there are signs that the reformers are out of favour and influence. Prudence both on our own behalf and on behalf of the sincere democrats in Russia itself therefore requires that we prepare for the worst even though working, hoping and praying for the best.

Nor, of course, can we always hope to foresee where the next threat will arise. We know something–enough to be seriously alarmed–about the military capabilities of the dictatorship in North Korea. But how many more dictators thrown up by some brutal totalitarian creed, some fundamentalist fanaticism or some primitive dream of national glory or racial destiny will we see in our times? How many more in the century about to unfold? One of the best practical rules in life and one of pre-eminent value in politics is to recognise the limits of your own knowledge. It is ultimately because we know that we do not as politicians have the information available to second guess the market that we understand that the market must be left by and large to make its own judgments. And similarly in international politics it is because we know that we cannot know where the next threat will arise that we keep up our defences against whatever may come.

People often talk about the “peace dividend” . It is an expression which can be misunderstood. The peace dividend is not the quantity of money and resources available to be used on other things because peace is now secured and defence can be reduced. That is the wrong way around. Peace is the dividend that comes from sustained and heavy investment in weapons and defence technology. For peace is guaranteed not by weak but by strong defence in the hands of peace loving powers.

Spending on defence is not just one element in a government's public spending programme. It is the condition upon which all of the rest of public spending and indeed private spending, public activity and private activity, depend. If you do not have sufficiently strong defence to face down an aggressor–and to do so when he chooses to attack–everything is lost. Perhaps the single greatest imperative in the Western world today is to reassess our defence requirements on cold, realistic and even pessimistic assumptions and to apply ourselves urgently to fill the gaps.

As the poet T.S. Eliot put the point so well in his Choruses from ‘The Rock’:

“It is hard for those who live near a Police Station To believe in the triumph of violence. Do you think that The Faith has conquered the World? And that lions no longer need keepers? Do you need to be told that whatever has been, can still be?”

The Benefits of Trade

The second great international challenge we must face is that of securing and enlarging free trade. And the strains and stresses which almost led to failure in the recent GATT negotiations show how far we still have to go in convincing continents, countries and pressure groups that open trade is in the interests of all.

Chile, like Britain, is a trading nation. A protectionist world is the very last thing which either of us can afford. Exports are our life blood.

We in Britain joined the European Community and were at the forefront of creating the Single European Market because we saw it as a means of expanding trade. Sadly, in recent years, the contrary trends towards keeping imports out of the Community and towards over-regulation have been in the ascendant. It was shameful, but all too predictable, that the European Community should have proved so obstructive in the GATT Round.

Chile should learn from Europe's mistakes. I know that your country is on course for agreement with the United States on a free trade treaty. As in the case of Mexico, such an agreement is in your and the United States' economic and political interest. But it is also significant that Chile is to become a member of the Asia Pacific Economic Cooperation forum. This is an exciting prospect.

Asia/Pacific: Fulcrum of World Growth

Today the Asia/Pacific has the highest growth rates in the world despite the recession. Asia is constantly becoming more efficient, and saving and investing more; output per person is doubling every ten years; savings rates are typically running as high as 30 per cent of GDP; Asian banks now hold over one third of the world's foreign currency reserves. The result is that trade and investment within the region are growing exceptionally fast and will continue to do so.

There is also the special case of China. What has happened there since Mr Deng Xiaoping threw his weight whole-heartedly behind opening China to market forces is a transformation without precedent in the annals of economic growth. I know there are problems with over-heating and speculation at present but they are the problems of success. I do not believe it is possible to turn the clock back on economic reform even if anyone should want to do so; rather I would expect to see Hong Kong's return to China in 1997 speed it up still further. All the indicators point to China, Hong Kong and Taiwan becoming the main powerhouse of world growth in the opening part of the next century.

The political consequences cannot be evaded–and here again Chile led the field. When the market is allowed to work and prosperity spreads, you create a society where people are more educated, have more contact with the outside world and outside ideas, have more money to spend as they wish, travel more widely, speak more freely and work for individual firms not for the state. Communists can denounce democracy as much as they like now, but as recent events have shown, democracy follows economic freedom sooner or later and no-one can stop it.

But open trade is not, I insist, just to be regarded in terms of the dry statistics of balance of trade and theories of relative advantage. Trade is a vibrant, living thing which brings movement, variety and colour to great trading nations. Moreover, free trade brings three huge benefits.

First, it is a force for political cooperation, harmony and peace. It is no mere chance that rising protectionism in the 1930s preceded global conflict. And by contrast the arts and conditions for peace flourish through free exchange of goods and services.

Second, free trade allows small enterprises and indeed small countries to compete on equal terms with the commercial and political giants. If there is one single trend which we can associate with the advance of liberty it is that towards small economic and political units in which people can feel more comfortable and at home.

And finally through free trade poor regions and countries can penetrate international markets and raise their peoples' living standards.

The West's post-War prosperity could never have been achieved without the orderly framework of free trade. Let us over the next half century resolve to sweep away the remaining obstacles: there could be no greater contribution to prosperity and indeed to peace.

Beyond Economics

Chile is a country which has a strong sense of tradition. It is a remarkably homogenous and predominantly Christian society. This gives you great strengths to which in good times as in bad you have to hold. In Britain and the United States there is a lively debate about the values required to sustain political and economic freedom. We are conscious that in many ways we have provided too many incentives for irresponsible behaviour and removed its penalties. The state has taken too much power and left individuals with too little. It has substituted dependency in place of independence. It has dwarfed the individual human being and impoverished his sense of duty.

The desire to do well for one's own family, local community and country is perhaps the greatest force for good. Yet too often by cramping initiative and eliminating risk the state has undermined those fundamental instincts. Family breakdown, juvenile delinquency, street violence, the so-called drug culture–these are all symptoms of a sickness in society which we cannot just shrug off or ignore if we are to live in secure prosperity in the next century.

Of course, politicians and the state can do relatively little to reform human nature. But we can try to create the framework in which we bring out the best and discourage the worst in people. This does not, by and large, involve radically new thinking. Rather, it requires a return to old assumptions. For too long, the Left has been setting the agenda on social policy. I know that that is just as much the case in Latin America as it is in Western Europe, perhaps more so.

Wealth Creation is the Way Forward

In particular, there is the fashionable argument that calls for the redistribution of wealth as a priority over its creation. This view draws apparent strength from the real misery of poverty found in many South American countries. Of course, it is right that there should be a minimum below which no one can fall and that the weak and vulnerable, in particular the very young and very old, should be cared for. But redistribution is not the answer. It involves high taxation and sometimes confiscation, both of which penalise the very effort and talent that we need to build up more business, thereby providing more jobs and creating more wealth.

Let us remember that it was Marxism, the creed of the intellectual not of the people, which took away all property and all freedom and ultimately produced a world of fear, misery and servitude.

Chile's own experience bears out that of Britain: namely that it is when the state does less and individuals and businesses do more that wealth and jobs are generated. Of course, there is some poverty in capitalist societies: but there is far more poverty–as well as far less freedom–in socialist ones. And capitalist societies create the resources to provide the infrastructure and conditions of civilised life which everybody, rich and poor alike, need.

Upholding the Law

The main area in which the state must be strong is in upholding the rule of law. Those who speak as if the rule of law–operating through a freely elected legislature, impartial and independent courts and an effective and noncorrupt police force–were something that matters more to the rich than the poor could not be more wrong. In all our countries, it is the poorer and more vulnerable members of society who are most likely to be the prey of crime and violence and it is sheer nonsense to suggest that such crime and violence stems from social idealism rather than human wickedness.

When all is said it is the values by which a society lives which really matter. Like many of you I came from a Christian home. But whether they were practising Christians or not most of my generation accepted that Christian values were right. Thus they were equipped with a compass of values by which to steer their lives.

The intellectual de-bunkers have fought a long, sustained and all too successful culture war against that legacy. We have to revive it. In doing so we should not lose hope for, as Professor James Q. Wilson has reminded us, people “have a natural moral sense, ..... [which] shapes human behaviour and the judgments people make of the behaviour of others” . This wheel does not need to be reinvented–only set in motion.

A New Beginning

Anyone who comes to this country feels a sense of excitement. With a vibrant economy, a relaunched democracy and under-pinned by national pride and shared values–Chile is setting the standard which the rest of Latin America should follow. And it is good to find a people so confident that they have found the right way forward.

Perhaps each country has in its essence an inscrutable mystery. And perhaps for some inexplicable reason we British find a natural sympathy with yours. The opening passage of Maria Graham's journal describes how that intrepid lady at the end of her long sea voyage first glimpsed the Chilean horizon:

“Today the newness of the place, and all the other circumstances of our arrival, have drawn my thoughts to take some interest in the things around me. I can conceive nothing more glorious than the sight of the Andes this morning on approaching the land at daybreak; starting, as it were, from the ocean itself. Their summits of eternal snow shone in all the majesty of light long before the lower earth was illuminated, when suddenly the sun appeared from behind them and they were lost.”

It is with a little of that sense of wonder that today the foreign visitor to Chile witnesses the scale of your achievement. You have chosen your path well and wisely. Stick to it. For where you lead others will surely follow.