Speeches, etc.

Margaret Thatcher

Speech to Citibank in Sydney ("Challenges of the 21st Century")

Document type: Speeches, interviews, etc.
Venue: Sydney, Australia
Source: Thatcher Archive: speaking text
Editorial comments:
Importance ranking: Major
Word count: 2625
Themes: Economic policy - theory and process, Privatized & state industries, Trade, European Union (general), Foreign policy (Asia), Foreign policy (Australia & NZ), Foreign policy (USSR & successor states), Trade union law reform

CHALLENGES OF THE TWENTY-FIRST CENTURY

Sydney's success — a tribute to enterprise

In a special way, Sydney always sums up for me the essence of modern Australia. Not surprisingly, perhaps, for modern Australia was born here. It is at one and the same time a great centre of business and of culture, with its Opera House that is rightly seen as one of the world's great architectural wonders. But the message of Sydney has a wider application. For Sydney has thrived not just because of its natural advantages, above all its matchless harbour, but also because the enterprise of generations of rugged, pioneering individuals developed it.

I always maintain that those who want to understand the reality of a market economy should come to one of the great international ports. They would see that trade is not a matter of dry statistics, but rather an exciting, vibrant, human activity — as old and as natural as humanity itself.

Communism — the ideological battle of the century

Today in this last decade of the twentieth century both Britain and Australia can view the world with a greater degree of optimism because since my last visit here in 1988 the world has witnessed a dramatic change. For the best part of this century our nations were forced to take part in a great ideological battle. A battle between liberty and communism.

The twilight struggle we call the Cold War when communism held sway over much of the globe, ended in 1989 when the Iron Curtain came crashing down; and with it an evil empire of lies and injustice, dogma and propaganda fell too.

The power of truth, the power of ideas. Ultimately, they amount to the same thing, because only truthful ideas, ideas that are in tune with the essential dignity and rights of man, can prevail across the years. The ruins of Marxist communism in Eastern Europe and the former Soviet Union testify most eloquently to that.

The collapse of Soviet communism after 73 years was the greatest political victory of my lifetime. Free economics have replaced it because of their success — they work better than any alternative. The philosophy, economics and politics of liberty have won. And our task for the future is to see that this victory is maintained.

Britain's economic links with Australia …

When I came to Sydney as Prime Minister for the bicentennial celebrations in 1988, I said that the bicentenary was not just a celebration of the past, but a moment to look to the future. I added that “Britain wants to be part of that future” . I am glad to say that this aspiration has increasingly come about, as is shown by the figures for trade and investment. The UK is Australia's third largest trade partner. We are the second largest investor in Australia. Australia is the third largest direct investor in the UK. Last year British exports to Australia rose by more than twenty per cent. And next year there will be a major new programme of events called “New Images: Britain and Australia into the 21st Century” .

Those figures speak volumes for the economic links which bind our two countries. But it is important to put them in a wider context. Australia rightly and increasingly regards itself as part of what has come to be called the Asia-Pacific region. Both her economic and strategic interests point in that direction.

What is less well understood — even in Britain and in Europe — is the degree to which Britain's economic future depends upon exploiting the opportunities of the expanding Asia-Pacific markets.

… and with the Asia-Pacific region

Britain is the largest European investor in the Asia-Pacific. We are the second biggest exporter of goods and the biggest exporter of invisibles. Last year, our exports to the ASEAN countries grew by a quarter, to over £5 billion, which makes them our eighth largest market. Quite rightly, the British Government has in recent years given a much greater degree of importance to our diplomatic and trade links with the region. But I believe that Britain needs to consider further the implications of these Asia-Pacific opportunities for our wider foreign policy.

For foreign policy in Britain seems increasingly in practice to be European policy. There are indeed large questions which have to be resolved as regards our relationship with the European Union. But it would be folly for Britain to forget that she is — and always will be — a global, rather than an exclusively European power.

There are, of course, historic reasons for this — reasons which have nothing to do with nostalgia, but rather with continuing attitudes and interests. We have always, as an island nation, had a tradition of trading and investing worldwide. In the City of London we have a great financial centre which is global rather than European. Our economy is far more open than that of our European partners: we enjoy more inward direct investment and more outward direct investment, as a percentage of GDP, than any other European economy. British corporate investors invest more outside the European Union than they do within it. Our huge £1,400 billion of gross external assets — our international portfolio — gives us a stake in economies around the world.

Moreover, our investment in the Pacific Rim and developing country economies is, as I have noted, growing fast. In the three years — 1991-1993 — more UK outward direct investment flowed into South East Asia and developing country economies than into the European Community.

It is vital that Britain retains this access to the world economy without being shackled into a high-cost Europe. We have so many natural advantages in international trade and finance — among them one which we share, of course, with Australia, the English language. As the mother tongue of 350 million people, English is inevitably and increasingly the language of international business. It is estimated that by the year 2000 a billion people will be learning it.

The rise of the Asia-Pacific economies …

Both Britain and Australia, therefore, in our different ways are well placed to benefit from and contribute to the development of the Asia-Pacific economies. And already the economic rise of the Asia-Pacific is beginning to turn upside-down many of the old assumptions on which this century's history has been based.

The Asia-Pacific region has a great deal going for it.

First, the qualities of the people: a strong work ethic; a sense of social discipline; a belief in the family; a powerful commitment to education and to self improvement, to thrift and loyalty.

Second, it is not only the qualities of the people, it's the sheer numbers of the people who have those qualities and are in the most economically active and innovative age group — the twenty to thirty nines — which is so significant. By the year 2000 there will be 76 million of these in the United States, 94 million in Europe, 37 million in Japan, but 570 million in East Asia. They will constitute an unparalleled resource. They will also constitute a vast market. Indeed, with the rates of growth we are witnessing we can expect to see by the year 2020 a sharp increase in the proportion of the world's relatively well-off people, from around one billion to around three billion, in the Asia-Pacific region.

Third, although some governments in the region may be authoritarian, they are generally dedicated to allowing the market to operate and to increasing liberalisation of their economies. That applies to virtually all Asian nations in the region including China which, beneath the veneer of Marxism, is following the same Asian path that others, such as South Korea and Taiwan, have already taken.

And, of course, the Asian economies have a huge competitive advantage in terms of low labour costs. China, in particular, is the first example in history of a low-wage high-tech economy. That comparative advantage seems likely to continue.

Certainly there have been economic setbacks in the region: among them Japan's drawn-out recession and lacklustre recovery.

There is also quite a lot of hype around, particularly about China's prospects. China has come a very long way in a very short time particularly in the coastal belt, but she still has some way to go to become anything approaching an economic super-power. Today the total GDP of China is less than that of Belgium and the Netherlands combined. But it is growing very fast.

… is a challenge, not a threat, to the West

Clearly, this shift in the centre of economic power from West to East will have wider political and strategic ramifications.

But both politically and economically my central message is the same. Western politicians and businessmen who see the rise of the Asia-Pacific as a threat are wrong. And similarly those in the region who might be tempted to think that they would be better to go it alone in economic or security matters are equally in error. The West must accept that the Asia-Pacific countries with their growing economies will wish to exert more influence. For their part the Asia-Pacific countries must realise that the West — and particularly America — needs to feel that it has an interest in the region's success. And both sides must understand that global free trade offers the best route to prosperity and political co-operation alike.

Free enterprise works …

In a way, there is something misleading in talking about an Asia-Pacific “economic miracle” . For this economic success is founded on a well tried formula, which has worked to generate wealth wherever it is applied. That formula is the liberation of enterprise.

Some of the Asia-Pacific economies — like Indonesia with its oil and gas, for example — are well endowed with natural resources. But many are not. And even those which are, have not succeeded simply as a result of natural good fortune.

After all, if countries automatically became rich in proportion to their natural resources, Russia would be the richest country in the world. It has oil, gas, diamonds, platinum, gold, silver, the industrial metals, timber and a rich soil. And yet Russia still struggles painfully to achieve a decent standard of living for its people. But they are now learning that man's greatest resource is man himself — his talents and abilities.

… wherever it is applied

The West grew rich in the past and the Pacific Rim countries are growing richer now by mobilising enterprise. For it is not the state which creates wealth, it is the people.

As the great 19th Century French political writer, Alexis de Tocqueville, put it:

“Do you want to test whether a people is given to industry and commerce? Do not sound its ports, or examine the wood from its forests, or the produce of its soil. The spirit of trade will get all these things, and without it, they are useless. Examine whether this people's law gives men the courage to seek prosperity, freedom to follow it up, the sense and habits to find it, and the assurance of reaping the benefit.”

It is quite wrong to say, as some do, that this classical liberal model — of small but strong government, low taxes, limited regulation, a wide distribution of private property, and a rule of law — is something which only suits wealthy Western countries. It is in large part because countries like the United States adopted that model that they became wealthy. And it is because others did not adopt it that they remained less developed. Moreover, it remains a good rule of thumb that those economies in which the state takes a smaller share of the national income forge ahead — and those in which the state's share swells towards (or even beyond) a half of GDP soon get into trouble. (I am happy to note that the OECD reports that Australia's rate is 37 per cent — just above Japan and the United States — but a good deal less than all of Europe.) But notwithstanding this figure I understand your deficit on current account as a proportion of GDP gives cause for concern.

Of course, that is not the whole story. There are indeed social, cultural and political reasons why some countries are more enterprising than others. But you have only to look at nations which have been divided, and lived under free and unfree systems, to see which flourish the more. West Germany compared to East Germany, before the fall of the Berlin Wall, South Korea compared with North Korea, and Hong Kong compared with China. Just listing the cases proves the point.

It also worked in Britain during the 1980s

We can also pray in aid the experience of Britain. The government which I led for eleven and a half years systematically put state control and collectivism into reverse. We curbed public spending. We cut income tax, particularly at the penally discouraging higher rate. We also removed controls on prices, incomes and dividends. We abolished exchange controls — in those days that was an almost unheard of revolution.

We also cut back the privileges and powers of trade unions, which in recent times had become more powerful than the government. Our aim was to get a better balance in industrial relations; for we understood that excessive union power is not just measured in working days lost, but in restrictive practices retained, in profits squeezed, in investment postponed and in jobs aborted. I knew that if I got those trade union reforms right I would have a majority of trade unionists on my side, for they too had become tired of being pushed around by their own leaders.

Every bit as important, we set about privatising state-owned industries. And I know that this is something on which the Australian government has already embarked — and which I hope will go further.

Let me emphasise that for me privatisation is not simply an aspect of economic policy. It is part of a broader approach. I believe that private property should be spread as widely as possible, as a bulwark for the liberty and independence of the people, and to enhance a sense of responsibility to future generations. Every man a capitalist was my purpose, privatisation and home ownership were two of our methods.

By the time I left office, the state-owned sector of industry had shrunk by sixty per cent and about a quarter of the population owned shares. Because of all these reforms and the way in which we gave people a stake in capitalism I do not believe that even a Labour government — should Britain be unfortunate enough to suffer one — would seek to reverse the fundamental changes made in the 1980s.

The economic challenge now: succeeding in a global market …

The challenge facing us all now is to proceed further and faster in the direction of free enterprise. We have to go on reducing the burdens of government, controlling spending and deficits, cutting taxation and reducing costs.

Unfortunately, the European Union seems intent on pushing its members in precisely the opposite direction. It wants to increase the costs of the most competitive economies, so that the over-regulated economies do not need to undertake the painful reforms which Britain undertook in the 1980s.

I hope that the countries of the Asia-Pacific will not be tempted to follow the protectionist thinking which still holds considerable sway within the European Union, in spite of British attempts to alter that.

I am convinced that our ultimate objective should be global free trade.

Britain and Australia — a common goal

Britain and Australia today have much more in common than a shared heritage of history. We share an interest in ensuring that world markets remain open for trade. We share an interest — as well as a passionate commitment — to see democracy follow in the wake of economic liberty across the Asia—Pacific. We share an interest in encouraging the United States to remain an outward-looking superpower, active in the defence of liberty and order both in the Pacific and in Europe.

For all these reasons, narrow regionalism suits neither our instincts nor our interests. Our two countries — two established democracies in a world where democracy is dominant, two English-speaking nations where English is the language of world affairs — have an influence beyond our numbers and a duty beyond our shores.