As the ‘high eighties’ went ahead, a great wave of money swept over the Atlantic world, and the outcome was a long boom — ninety-two months of growth, compared to fifty-eight in any earlier period (outside wartime, as with the Vietnam era). No recessions got in the way of the compounding of growth: 1984 was spectacular enough — almost 7 per cent growth — but the other years are remembered for the extraordinary prosperity of the Atlantic world. Geoffrey Owen, an expert on this dismal subject, shows how even the motor car industry was recovering. In 1984 Toyota and Nissan were adopted and invited, and Michael Edwardes could simply close the hopeless Merseyside plant. Jaguar was privatized, and some of the excessive manpower was at last shed, but the new models were still not much of a success (even in 1986 there were of course industrial-policy Conservatives arguing for continued support) and in the end the Japanese were brought into north-eastern England to show the way forward. Honda-Nissan insisted upon a single-union agreement, as did Toyota-Honda at Swindon. By 1997 output was 1.7 million cars and exports accounted for a million of them. The world of the sixties albatross had at last been overcome, but essentially through foreign management. By 1988 100,000 new firms were registered. As Bernard Connolly remarks, ‘the bullishness of the country’ became visible. Business investment rose by 20 per cent. The adaptation of advanced computers to financial transactions somehow catapulted London back to the centre of the world’s money, and as the bond market got under way, older divisions between deposit banks, operating on classic old-fashioned lines, and investment ones, involved in speculation, were elided. In October 1986 came an important moment, deregulation of the City, otherwise known as ‘Big Bang’, such that old-fashioned banks and stockbroking firms gave up their staid ways. Venerable (and well-run) establishments such as Lawrence, Prust were bought up by a Deutsche Bank anxious to escape from the stuffy confines of Frankfurt, where, it was said, there was a night-life, but she went to see her aunt on Tuesdays. In New York and London the money poured in, and in the British case Alan Walters himself called it a ‘miracle’, comparable with the earlier German one, for there had been steady growth since 1981, weekly earnings had risen by 14 per cent in real money between 1983 and 1987, and inflation had been held below 5 per cent.
However, as the money poured into government coffers, what next? It mattered that Margaret Thatcher was now a world figure. As with an American presidency, the possibility always existed that a British Prime Minister would escape into foreign affairs. To begin with, she had been rather contemptuous of these international gatherings — what had begun as a decent enough idea for small, informal gatherings soon degenerated into a media circus, and at meetings of the G7 the final communiqués would be drafted before the people had even met. Photographs and television images with foreign leaders were thought (mysteriously) to win votes. Besides, abroad there was sometimes adulation — none of the abuse shouted back home. Patriotism could be on display, without any sniggering. It also mattered that NATO had come under considerable pressure. In 1982 there was a great fight over the placing of intermediate-range ultra-modern missiles on European soil, and vital countries, Germany, especially, saw enormous demonstrations against this, a matter in part of KGB manipulation which Bukovsky, from Politburo documents, was able to demonstrate. In this atmosphere of the ‘Second Cold War’, as commentators called it, the transatlantic link became all-important. Margaret Thatcher took her eye off the domestic ball, and moved on to what appeared to be a much larger one, foreign affairs. Instinctively, she did not like the Foreign Office: it was too ‘European’, talking platitudes, and inclined not to be as fervently Atlantic as she was. If the Americans took a hand in anti-terrorist action, as they did in the spring of 1986 against Gaddafi in Libya, then Mrs Thatcher could follow her instincts and offer support. There had been an outburst of terrorist killings, organized from Iran or Libya or elsewhere, and at Christmas 1985 nineteen people had been killed at Vienna and Rome airports. Three British hostages were taken in the Lebanon and killed, and her view of such things was that proper retaliation should be made. It duly was, and the problem greatly lessened, though she was regarded as reckless in the usual quarters. In general, she remained forthright in her opposition to the humbug of Third World goody-goodies, Scandinavian ladies, lecturing and the like, and at the waste-of-time ‘summits’ which now proliferated she was at ‘new levels of manifest arrogance’.
Such bluntness went down well, domestically, and it was no doubt utterly deserved: the British had given away too much for membership of the Common Market and the cant of ‘North’ and ‘South’ needed to be dismissed. But there was similar and greater cant at home, and here the lady was being sidetracked. More and more, foreign affairs took over: the endless grind of domestic reform was too exhausting, and the divisions on the Right too difficult to bridge. Increasingly, too, matters European came centre-stage, generally in a cantankerous way. For a good generation the Common Market had been bumbling along, but in 1985 Margaret Thatcher herself had promoted the ‘Single European Act’, which was supposed to simplify things. It would end the hidden protection devices and stop the endless haggling over uniform standards that got in the way of trade. But, unnoticed at the time, that same Act allowed the larger countries, and of course Germany especially, to override opposition provided they could take on a lesser ally or two. This meant that in matters of some importance the British might be outvoted and yet compelled by the Europeans to go ahead. ‘Europe’ took attention that diverted and exhausted; it was also in the end destructive of constitutional ways. The British Parliament soon found itself nodding through great heaps of small-print legislation in obedience to European directives, and since Parliament had absolute power, the police were soon prosecuting people who illegally killed bats in their attics, and the absurd persecution of smokers got under way.
Deregulation, privatization, the existence of powerful computers that could be programmed to buy and sell at an advanced level, with endless manipulations of complicated IOUs (‘swaps’, ‘options’, ‘warranties’): much of it came down to mortgages on bricks and mortar, whether the Colombian embassy in Tokyo being sold to pay off the national debt, or a broom cupboard near Harrods in London being sold for £35,000. As ever in such a world (after Louis Napoleon’s Eighteenth Brumaire there was a similar bonanza with property in Paris, and even a form of unit trust) there were figures, part child, part ogre, who understood the system, made vast sums of money mainly by borrowing from people who did not, and discredited the system as a whole. There had been Armand Hammer, who had managed to make money in Stalin’s Russia, with a monopoly for the sale of pencils made on a German model, just as every child in the USSR needed a pencil for the expansion of schooling — Stalin ended this in 1929, but Hammer was allowed, in compensation, to take two waggon-loads of icons and art, confiscated from the original owners, out of the country; he set up shop in Park Avenue, used the profits to buy oil in the early 1930s, when its price was very low, and then boomed: at the end of his life, while watching cricket at Lord’s with the Prince of Wales, he was harassing his sister-in-law for the $15,000 that he had lent to his much less successful brother for a life-saving operation which had failed. There was Robert Maxwell, fraud to the core, claiming to be a Czech, but in effect Hungarian (he had been born in what had been north-eastern Hungary, and cut his teeth, financially, on cross-border smuggling). He survived by doing his own people out of their retirement fund, and died by drowning, probably suicide, in circumstances that were never cleared up. In the USA ‘junk bonds’ created fortunes and led to discredit of the whole system. These involved a real risk, being bonds raised against the possibility of taking over, via the stock exchange, some firm or other, allegedly badly managed and overextended. In 1980 such bonds raised $5bn, but by 1986 almost $50bn, falling back to around $35bn thereafter. Their chief architect, Michael Milken, made himself vastly unpopular and eventually was imprisoned (though on a lesser offence). He financed Turner Broadcasting and many other well-known, now well-established, concerns, and two thirds of the ‘junk bond’ money went quite productively into such corporate growth, not into the spectacular takeovers. It was all, in the end, brought about as a consequence of the seventies inflation, and the distortion that that had produced, but there was a great deal of head-shaking. Economists stuck in the Left could be waved aside. Those on the Right, with views as to probity, not so, and the best were worried. In the mid-1980s Tim Congdon wrote in warning against what was happening, and was followed a decade later by Peter Warburton. They were proven right, but only a decade later, in 2008, when the bubble appeared to collapse, and trillions disappeared, the exports of Japan (at this moment of writing) dropping a quarter in a month (January 2009). But such works appeared in the 1980s to be wolf-crying. Michael Milken might be led off, to boos, in handcuffs. But a far greater drama was going ahead elsewhere: Moscow and Peking had noticed what was happening.