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Friedrich Hayek

In 1944, Friedrich Hayek, an Austrian-born a professor at the London School of Economics since the early thirties, had his book published - The Road to Serfdom. The book was popular among people who disliked socialism and the totalitarianism of Hitler's Germany and the Soviet Union. Hayek championed human freedom and private enterprise. He was a democrat. He believed that government guided by majority opinion made sense only if that opinion was independent of government, and he believed it best to leave a free play of ideas among the masses in matters economic. People following their own innovations and doing what they see as their own interest is better, he proposed, than some bureaucrat (or a few bureaucrats) trying to constrict economic development into a plan of his making - no matter how bright the planner. No one person is able to see the future with enough thoroughness that his planning would be superior to freedom. An economy works best, Hayek believed, when individual risk-takers are free to innovate and to allocate their resources as they please and consumers are free to spend their money as they please - old fashioned economic liberalism.

Hayek attracted little attention in Britain, but more in the United States. He was invited to speak before an audience of more than 3000 - a new experience for him. In 1945, Hayek's, Individualism and Economic Order was published. In 1950, he was hired to teach at the University of Chicago. In 1960 his Constitution of Liberty was published and, in 1967, his Studies in Philosophy, Politics and Economics.

Through the 1950s, while many intellectuals were still impressed by the Soviet Union's economy, Hayek's views were unpopular, and his views remained unpopular through the 1960s. In 1967, Britain's Marxist historian, Eric Hobsbawm, called Hayek a "prophet in the wilderness." A British philosopher, Anthony Quinton, called him a "magnificent dinosaur." Hayek was criticized for exaggerating the threat to liberty presented by Europe's Social Democrats - his attacks, for example, on compulsory health insurance, state-financed education, and regional development programs.

By the early seventies, flaws in the planned economies of the Soviet Union and its satellite countries were more apparent. Soviet-style enterprises were welfare institutions, making shoddy products, with a lot of people hanging around who needed incomes but had little or nothing to do, with over-production here, under-production there, distribution breakdowns and goods rotting or rusting alongside rail platforms - not because people in the Soviet Union were dumb but because the system was flawed.

Hayek's overview of economics and freedom gained, and, in 1974, he was accepted enough that the committee that selected Nobel Prize winners offered him an award - for work on technical matters concerning money and  economic fluctuations. Hayek shared the prize with the well-known Swedish economist Gunnar Myrdal, a Social Democrat who said later that had he known he would be sharing the prize with Hayek he would not have accepted it

U.S. Conservatism in the 1950s and '60s

Hayek said that he was not a conservative. Before the 1950s, including the 1800s, it  was not a word used by U.S. politicians to describe their political leanings. Senator Robert Taft of Ohio, a leader of the Republic Party into the 1950s said he was not a conservative. In Europe, conservative was how some landed aristocrats described themselves. From the 1800s the liberals were merchants and intellectuals who relished freedom for commerce, freedom in thought and publication and more representational government; conservatives were more supportive of traditional authority, including monarchy and church privileges.

In the 1950s a few Republicans began calling themselves conservative. One of them was Barry Goldwater, Senator from Arizona. These were men who sought more individualism, a greater appeal to incentives, more free-enterprise, less government bureaucracy and less spending on social programs and less taxation. They tended also to be traditional in values associated with morality. Many were also religiously conservative. They saw communism as a threat to their way of life and to civilization. Many of them disliked the Franklin Roosevelt's New Deal, and they disliked Harry Truman for his Fair Deal. Among the conservatives were those who faulted President Truman for failing to win against the communist challenge. They hated the argument that the U.S. should merely try to contain communism while it fell apart from its internal contradictions.

A few conservatives suspected the motives of liberals in government and questioned whether liberals were guilty of treason. But Senator Goldwater, the champion of conservatives, backed away from this position, saying that "our nation's leaders ... favored neither surrender nor treason." But he complained that it was clear that "our leaders have not made victory the goal of American policy." 

William F. Buckley versus Ayn Rand

Religiously devout conservatives attacked the Soviet Union's atheism and suppression of the freedom of worship. Religion was a major concern of William F. Buckley Jr., one of conservatism's rising stars. Buckley attended Yale from 1946 to 1950 and he wrote a book, published in 1951, entitled God and Man at Yale: the Superstition of "Academic Freedom." Buckley advised his readers that he did not favor turning Yale into a seminary school. His concern, he said, was the question "whether Yale fortifies or shatters the average student's respect for Christianity." Buckley complained that a large percentage of the sociology department regards "religion as nothing more than a cultural 'phenomenon' caused by human ingenuity to serve as an opiate to make life seem more meaningful and to promise - falsely, of course - an afterlife."

The book was popular among conservatives. In 1954 another book by Buckley was published, McCarthy and His Enemies, in which he defended Senator Joseph McCarthy's anti-communist crusade. In 1955 Buckley was approached by conservatives who spoke of the need of a new conservative journal. In November 1955, the magazine National Review was launched, with Buckley as both editor and publisher. Conservative writers rushed to contribute to the magazine: Russell Kirk, James Burnham, Frank Meyer and Whittaker Chambers among them. Max Eastman resigned from the magazine's Board of Association on the grounds that it was too explicitly pro-Christian.

Another conservative hostile to Buckley's brand of conservatism was Ayn Rand, who was famous for her novels The Fountainhead, published in 1943, and Atlas Shrugged, published in 1957. Rand, born Alissa Rosenbaum, had migrated to the United States from Russia in 1926 at the age of twenty-one. Since a teenager she had opposed all forms of mysticism, and she saw all religions as basically mystical.

Like Hayek and Buckley, Rand was an anti-collectivist. She believed in allowing everyone, especially the creative individual, freedom. The right of people to their own lives she saw as primary, and this, she believed, included the right to property. She believed in the exceptional man. It was, she believed, the exceptional person who invented. Others were copyists. The individual innovator was the great contributor to society. Her way of looking at the world has been summed up as Reason, Individual, Achievement and Freedom. It was called Objectivism and had a following among college students and recent graduates who identified with her fictional heroes.

Rand's views were compatible with views of the German philosopher Friedrich Nietzsche, who also held that real achievement is the product of individual ability and effort. Rand disliked the accusation that she had borrowed from Nietzsche. She denounced Nietzsche, but like him she believed that altruism was a vice, and like him she was hostile toward Christianity.

Both Rand and Buckley were celebrities, and at gatherings Rand went out of her way to avoid Buckley. Buckley was the more tolerant. He had no hostility toward Rand. He was affable by nature, but Rand wanted to have nothing to do with him, not even pleasant exchanges. She was not a devotee of Christian love. Buckley was more traditional than Rand and was destined for greater success in promoting conservatism.

Russell Kirk, Academic Guru

Aside from the pronouncements of some members of Congress, the major thrust of conservatism was organized around Buckley's National Review. And an early intellectual hero and contributor to the National Review was Russell Kirk (1918-1994).

Kirk graduated from Michigan State College in 1940, received a Masters from Duke University in 1941 and his doctorate from St. Andrews University in Scotland in 1952. In 1953 his book The Conservative Mind was published, a book described by his publisher as "one of the most influential books of the postwar period."

Russell Kirk's focus was on character. People should be humble, he believed - like Christians were supposed to be before God. Pride, he pointed out, was the most ancient and cardinal of vices and evils. Western man, with his overweening pride, his belief in progress and secularism, has tried to transform society, said Kirk, but he has failed. Modern man, he wrote, has believed that, through government, human nature and human society could be improved. Instead, claimed Kirk, everyone's goal should be the improvement of his own character. It was character, he believed,  that "distinguished the civilized man from the brute." In modern life, he wrote, men and women forget or deny the true "objects of life and so fritter away their years in trifles or debauchery." The self-centered are not interested in the elevation of character, he complained. They are interested in pleasure seeking. It was, he wrote, their sloth of spirit.

Kirk was opposed to breaking with the ancient truths and virtues. Here was a point of view compatible with the Church's opposition to the human-centeredness that was a part of the Renaissance. The Renaissance, he complained, produced a surge of the spirit and temper of the modern age, and, in the modern age, people expected too much, denied eternal truths and denied the "nature of man." Kirk faulted Machiavelli (1469-1527), the humanist republican from Tuscany. Machiavelli had claimed that a ruler should be concerned with things as they were rather than what they ought to be, and he had denied the marriage between good government and God's will. Kirk was opposed to separating politics from traditional ethics and moral considerations. Kirk found fault with men of the Enlightenment and pointed to the failures of the French Revolution (a connection between French intellectuals of earlier decades and revolutionaries late in the 1700s that many historians would not make).

Russell Kirk liked Plato. Plato, he claimed, understood the crucial need "to teach men how to bring their souls into harmony with divine order." Kirk elevated Plato's Republic from a utopia into a pragmatic metaphor. He wrote:

The Republic is an inquiry into the real nature of spirit and social harmony. It is an allegory of personal order, not a model constitution.

Central to character, claimed Kirk, was Christian love. The just and ordered society is one guided by Love. Christian love is the key to a rekindled and vibrant moral imagination capable of restoring order in the individual and the commonwealth. States and their agent planners should not try to intervene with their own designs. And the state should not try to treat unequal things equally.

What Kirk admired about Western Civilization was the character of its best people. He connected this superior character with Western culture. Segregation of the races dominated the United States and South Africa at this time, and Russell Kirk wrote articles defending segregation in America's South and in South Africa. This was compatible with the editors of the National Review, who, in their August 24, 1957, issue ran an unsigned editorial entitled "Why the South Must Prevail." It argued that giving blacks the vote would undermine civilization in the South. Conservatives would change their view on this, learning not from antiquity and academic works but from modern developments.

Leo Strauss, Conservative Professor at the University of Chicago

Leo Strauss (1899-1974) was a professor of political philosophy at the University of Chicago from 1949 to 1968 and remained a member of the faculty until 1973 (when he turned seventy-four). He has been described by William F. Buckley as "unquestionably one of the most influential teachers of his age." Strauss was one of those who believed that the thinkers of ancient times had a closer connection to truth than did modern thinkers. Antiquity's philosophers and playwrights were basically the same biologically as modern thinkers, and modern thinkers had more historical knowledge to draw from. But modern genius, according to Strauss, was corrupted.

Like Kirk, Strauss believed that Western Civilization was facing a great moral crisis. He wrote of the West "having become uncertain of its purpose." However much the West may have declined, he claimed, it would "go down in honor if it was certain of its purpose."

The purpose of Western Civilization, according to Strauss, was morality. To find the West's moral purpose, he believed, one had to study the "enduring works" of the great thinkers of the ancient past. Strauss was especially attracted to classical Greek political philosophy, and to Plato, preferring Plato over Aristotle. He favored people being Socratic like Plato and asking about the right way of life.

Strauss reduced human struggle to "one thing needful." Standing over the abyss is not terrifying, he claimed, if one is aware of the one thing needful. Strauss has been accused of being an atheist who believed in "noble lies." [note]   He looked down upon the intellect of common people and claimed that one thing needful is a love relationship with God, a surrender to God's call to love Him "with all one's soul and with all one's might."

Against Agnostics and Atheists

William F. Buckley was displeased by the positivists dominating philosophy in the universities, and so too were numerous believers who justified their own metaphysics by claiming that positivists were equally metaphysical. Conservatives were annoyed too by the devotion of positivists to linguistic analysis. Language was the instrument with which people tried to create meaning, and the advocates of linguistic analysis believed that an analysis of meaning required an analysis of language. Some conservatives, despite their belief in philosophical contemplation, disliked the claim by the linguists that some of their metaphysical formulations were no more than tautologies.

From France, Jean-Paul Sartre (1905-80) had been a world influence - and thought by conservatives as a corrupting influence. Sartre was a popular novelist and playwright as well as a philosopher. He believed that humans were incapable of finding ultimate meaning, that everyone - believer and non-believer -  had to make choices as best they could, that taking direction from authority was itself a decision and no escape from responsibility. Morality, for Sartre was not an automatic product of faith. To the annoyance of some conservatives, Sartre left God out of his world of decisions and justifications.

Contrary to the conservative belief in the immutability of human nature, Sartre spoke of individuals choosing what they were to be. He must have believed these choices to be limited, but philosophical opponents, including Mortimer J. Adler, charged him with having denied human nature altogether. And metaphysically oriented conservatives, Strauss among them, believed that to deny human nature was to deny human morality. Conservative philosophers believed the claim of antiquity's Greeks that the highest moral law conformed to humanity's nature, and, clinging to this absolute, these conservative philosophers accused Sartre of moral subjectivism. Conservatives believed in the superiority of Western Civilization and their cultural heritage, believing that this heritage had its origins in God - confirmed by Western Civilization's success and influence. They accused Westerners who did not appreciate their views as guilty of either cultural relativism or cultural nihilism, and this charge of nihilism they leveled against Sartre - although Sartre opposed slavery and the ancient Greek philosophers whom they admired did not.

Western Europe in the 1970s

In 1968, Portugal's conservative ruler, Antonio de Oliveira Salazar (1889-1970), was incapacitated in an accident and was replaced by a protégé who tried to modernize and liberalize Portugal's authoritarian political system. His moves were thwarted by others of Salazar's old guard. And finally in April, 1974, military officers wanting change staged a coup d'etat. Delighted Portuguese poured into the streets to celebrate and to demand more change. Soon the secret police and censorship were overwhelmed and abolished. Workers took over shops from owners, and peasants seized land. Hospital employees took over hospitals from doctors and administrators. Labor and peasant leaders came out of hiding. The head of Portugal's Communist Party returned from exile and received a hero's welcome. In 1975, Portugal's colonies were gaining independence, and, in  November 1975, an attempt by communists to grab political power failed. In 1976, Portugal held its first free general elections in more than fifty years. General Ramalho Eanes was elected president, and, in keeping with the success of Portugal's Socialist Party, Mario Soares was appointed prime minister. Portugal was on its way toward the give and take of left-of-center and right-of-center democratic politics.

Another old-fashioned conservative, Francisco Franco, died in 1975. Juan Carlos de Borbón was proclaimed king, as Franco had wished. Spain was a constitutional monarchy, and Juan Carlos had progressive intentions. In 1976 he replaced Franco's last prime minister with Adolfo Suarez, a centrist who introduced political reforms, including the legalization of Spain's communist party. Elections for parliament were held in 1977 - the first since 1936. In December 1978, a new democratic constitution was established with overwhelming approval. Some old-fashioned conservatives remained disgruntled, wishing for more obedience and reverence than was offered by democracy.

In France, meanwhile, a conservative more modern than Salazar or Franco had held political power. Charles deGaulle was France's president, and, under deGaulle, France functioned with democratic elections and popular support for the government. DeGaulle stepped down in 1969 and died in 1970. His successor as president was his former assistance, Georges Pompidou. And, in 1974, Pompidou was succeeded by another moderate conservative, Valery Giscard d'Estaing, leader of the Independent Republicans, which had been allied with the Gaullists. D'Estaing weathered the oil crisis and an international economic recession. Rather than wait for initiative from private enterprise, he encouraged the development of France's computer and telecommunications industry. Between 1974 and 1979 the number of telephone lines in France doubled. And d'Estaing played a crucial role in several international initiatives. He participated in the creation of periodic meetings between heads of state - called the European Council; he helped create elections to a European parliament, the first election held in June 1979; and he participated in the creation of a new European monetary system - matters beyond the imagination of the ancient Greeks.

Italy, meanwhile, was in political turmoil. Moderate conservatives called Christian Democrats were dominating politics, and in the seventies Italy suffered from labor unrest, inflation, frequent government scandals and violence from the Left and the Right. In 1970 divorce was legalized in Italy, and in 1978, Italy legalized abortion. Italy was still officially Roman Catholic, but old ways were fading and in 1984 came a separation of Church and state.

In 1969 in West Germany (the German Federated Republic), a Social Democrat, Willy Brandt (1913-1992), became chancellor. Brandt worked for a more united Europe, and, over vociferous opposition by West Germany's conservatives, he courted cooperation with Moscow and its satellites, including East Germany - a policy called Ostpolitik. The Communist leader in East Germany, Walter Ulbricht, was unenthusiastic about Brandt's policy, fearing the image of a friendly, reasonable West Germany.

Brandt won the Nobel Peace Prize - to the chagrin of many conservatives. In April 1974, a member of Brandt's personal staff, Günther Guillaume, was uncovered as a communist spy. Brandt resigned that year and was succeeded by another Social Democrat, Helmut Schmidt. He was a moderate who worked with d'Estaing of France in creating the European Community, which he believed in strongly. He tried to maintain Brandt's policy of good economic and political relations with the communist powers. Conservatives were more conformable with Schmidt, and, in 1979, Schmidt approved of the installation of U.S. intermediate range nuclear missiles in Germany.

In Sweden, conservatives believed that the welfare state was squelching incentive. In the 1960s tens of thousands of businessmen had fled Sweden seeking freedom from government controls. Sweden's Social Democrat government, led by Olof Palme, pressed ahead with plans to build nuclear power plants and to give labor unions control over a few industries. Palme's government was dependent on the support of Sweden's Communist Party and was losing support among the middleclass. In 1976 a conservative-centrist coalition defeated the Social Democrats and established the first non-socialist government in Sweden in forty-four years. The coalition remained in power until 1981, fighting among themselves and failing to dismantle the welfare system that Social Democrats had put in place. Sweden's economy remained largely free-enterprise, the government owning around ten percent of business enterprises. But taxes remained high compared to the United States - averaging around fifty percent of one's income.

In Britain in 1974, a conservative government, led by Edward Heath, fell and was replaced by one led by the Labour Party. In 1976, Margaret Thatcher replaced Edward Heath as leader of the conservatives. She entered a room filled with old-time party researchers and came upon someone writing a paper proposing a middle of the road course for the party. She was upset and pulled from her briefcase a copy of Frederick Hayek's recent book, The Constitution of Liberty. She held the book high for everyone to see. "This," she announced, "is what we believe."

Thatcher wanted no compromise with socialism, and her intentions, she said, was "to destroy the socialist fallacies - indeed the whole fallacy of socialism that the Labour Party exists to spread." She advocated tax cuts, believing that lower taxes would stimulate the economy and bring more revenues (supply-side tax cuts). She favored the privatization of state owned industries. And, referring to recent immigration she spoke of Britain having been "swamped by alien cultures."

In 1979, Britain was suffering from an annual inflation of  20 percent. The oil crisis and international recession had been hard on Britain's economy and on the Labour government of James Callahan. The conservatives won enough elections in 1979 that Thatcher was able to form a government. Conservatives were in power once again, and Thatcher was ready to set things straight in accordance with her conservative views.

The U.S. in the 1970s and '80s

Since 1966, William F. Buckley had been hosting a successful syndicated television discussion program, Firing Line. His magazine, the National Review, was also a success. Russell Kirk was contributing a column called "From the Academy" in which he was saying little about ancient times but complaining about contemporary education. But it was politics and contemporary society that most interested readers of the National Review. Little was written about religion or the wisdom and morality of the ancients. And ads for cigarettes and whiskey abounded - the conservatism of the 1970s not quite the same as the conservatism in suburban and rural America during the century's first two decades.

By 1971, inflation became a recognized problem. Richard Nixon (U.S. President from 1969-73) defied his advisors and tried to fix it with wage and price controls. These created shortages and did not stop inflation. Much of the world still believed in economic planning, either as practiced by Britain or the Soviet Union. Germany's economic success was largely ignored - the success that had begun in 1948 with the end of price controls, led largely by West Germany's director of economic policy, Ludwig Erhard. In Germany the end of price controls had dried the black market, diminished inflation and brought a booming economy, but people outside Germany had not been  looking to Germany as an economic model. William F. Buckley and contributors to his National Review preferred free-market economics similar to that of Erhard and Hayek. Responding to President Nixon's policies - which included programs in health, the environment and full employment - Buckley declared that he had gone about as far as he could with the Nixon administration.

In the mid-seventies, the National Review was expressing fear of communist expansion, that Portugal was joining the communist camp and that there was a danger of the Soviets obtaining control of South Africa's resources. The magazine was delighted with the fall of Olof Palme's government in Sweden, and its editors extended to Palme their Quisling award for conscious service to totalitarianism. And the magazine denounced Ostpolitik, claiming that coming to terms with Russia inevitably meant "coming to terms on Russia's terms."

Much of the magazine was devoted to criticism of Jimmy Carter - president from January 1977 to January 1981. Carter was criticized for weakness vis-à-vis the Soviet Union. And an article by Donald Rumsfeld expressed concern over the amount that the Soviets were investing in their military and concern over Soviet advances in technology.

When Carter took office in 1977, inflation was running at a rate of 7.7 percent a year. Economic stagnation and inflation was being being described as stagflation. Carter tried to stimulate the economy with government spending and an expanded money supply. In 1979, inflation reached a rate of 13.3 percent. Carter began a shift toward free-market economics and fighting inflation. He nominated Paul Volker as chairman of the Federal Reserve system. Volker - said to be Wall Street's candidate - was a believer in Hayek-economics. He was determined to crush inflation through high interest rates and a reduced money supply. During Volker's chairmanship, interest rates began rising and the stock market remained down around the low 800s, with people holding their money in instruments that gave them more than 10 percent interest per year. The Carter administration tried additional free-market economics to battle stagflation:deregulation. Airlines, other transportation industries, oil and the savings and loan industry were deregulated, the Carter administration believing that deregulation would free up competition, stimulate new investment and force owners to be more interested in efficiency. Towns began suffering from cutbacks in bus, rail and airline services. Workers in the trucking and railroad industries began losing economic benefits. And rates began rising for cable television viewers.

Ronald Reagan for President

In 1980 the Republican Party nominated Ronald Reagan as their candidate for president. Reagan had been a supporter of Goldwater and the favorite of the conservative wing of the party. Reagan was a born again Christian, but so was Carter, and both were a secularist - the American way, in keeping with the United States Constitution.

Reagan spoke of the Founding Fathers knowing that a government cannot control the economy without controlling people. Close to Hayek's belief, he said that a government trying to control the economy must use force and coercion to achieve its purpose. He spoke of "man's age-old dream" of maximizing individual freedom, consistent with social order. He spoke of people who, regardless of their humanitarian motives, were putting civilization on a downward course by their willingness to sacrifice freedom for security.

Reagan criticized Carter for the economy's average of 1.2 percent growth rate during his administration. Adding inflation and unemployment into what Carter in 1976 had called a "misery index," Reagan pointed out that the misery index was at 20, and he asked voters whether they were better off than they had been before Carter took office.

Reagan announced his plan for economic recovery. He denounced the thirty-seven cents on every dollar earned that people were paying in federal taxes. Like Margaret Thatcher, he believed that tax cuts would pay for themselves, with people paying a smaller percent of their income in taxes but more because of raised incomes. He spoke also of cutting spending and balancing the budget. Balancing the budget had been a big issue among conservatives, some of them having supported a balanced budget Constitutional amendment. Supporters of Reagan's economic policies hoped that his tax cuts would increase incentive and stimulate more initiative, enterprise and work. This they believed would stimulate the economy and bring more tax revenues. They hoped that with this and with Reagan's reduction in spending on programs having to do with welfare, energy, transportation and the environment, the budget could be balanced.

Reagan also wanted moral restoration, while many voters believed a moral decline had been taking place in their country. The divorce rate had risen to one in two marriages. The number of single parent families had risen by 50 percent in the seventies. The number of unmarried couples had tripled. And crime was still much higher than it had been in 1960.

Reagan was sworn in as president in January, 1981. In  his inaugural address he said "Let us together make a new beginning." In his first year in office, he and Congress cut taxes for corporations and individuals. Paul Volker, chairman of the Federal Reserve Board, was still on course in his fight against inflation, and by the middle of 1981 inflation was to down to 9.7 percent per year. The deficit was rising and there were continual calls for raising taxes in order to better balance the budget. The recession deepened in 1982, but Volker was winning his war against inflation, and, with a dropping inflation rate, Volker was lowering interest rates. Some began taking their money out of instruments that were paying them less (treasury bills had been paying around 10 percent per year) and putting it back into the stock market, which began rising from its depressed state. 

In 1983, consumer spending began lifting the economy out of recession, people buying autos and homes. In his autobiography, Reagan describes the economy beginning "to gain a strong head of steam" during the spring of  that year, and during the economic summit that spring, at a dinner for the heads of state, Germany's Helmut Kohl, asked Reagan  to "Tell us about the American miracle." He wanted to know, writes Reagan., 'how we managed to turn the tide on both inflation and unemployment while most of the rest of the industrialized world was still gripped by the recession." Reagan writes that he responded with "a variation of the speech" that he had been making for years. "It wasn't long after that," writes Reagan, "that I began reading about a wave of tax cutting in several of the countries. And at subsequent economic summits, several leaders told me they were introducing economic and taxation policies based on ours - not only cutting taxes, but reducing the regulation of business. The next time I'd see them, they'd say the policies were stimulating a turnaround like the one we had had in the United States." [note]

In 1984 the economy was booming, and Reagan won re-election for another four-year term, with a big gains for his Republic Party. In 1985 inflation in the United States was at 3.2 percent per year. But instead of a balanced budget, the Reagan administration was still  running up huge deficits. The Gross Federal Debt in 1980 was at 38.7 percent of the nation's Gross Domestic Product (the total market value of all the goods and services produced in the nation in one year). By 1985 the Gross Federal Debt was at 45.8 percent. Prosperity and an increase in military spending was being paid for by borrowing. It was, claimed the liberal economist, J. Kenneth Galbraith, in so many words, Keynesian economics all over again - without a depression or a great war. [note]   Some conservatives claimed that the deficits were worthwhile. President Reagan had increased military spending substantially as a challenge to the Soviet Union. The debt, some conservatives would claim, won the Cold War. Reagan, moreover blamed deficit spending on Congress.

Prime Minister Margaret Thatcher

Like Ronald Reagan, Margaret Thatcher took office while inflation was running high. A believer in fiscal discipline, she hated inflation. She combated inflation with a restrictive monetary policy - although she described herself as other than a strict monetarist. And, as in the United States, tight money induced recession, beginning in her first year in office: 1979. Despite the recession, many in Britain clung to the hope that Thatcher would bring relief from the bad economic years of the earlier seventies when the Labour Party was in power. They hoped that the recession would be good medicine.

In 1979, 4.1 per cent of the workforce had been unemployed - 1.09 million people. In 1981 this rose to 2.13 million. There was rioting that year in the streets of London, Liverpool and other cities, with Thatcher - a grocer's daughter - appearing to her critics as void of sympathy for the hardship of the unemployed and poor while having much sympathy for the shopkeepers whose stores were trashed. The riots had come as recession was hitting bottom. The economy began to recover without a concomitant rise in inflation, and conservatives lauded Thatcher for her success and courage. Rather than give credit to Thatcher, some others described the recovery as more of a product of revival in world trade and deficit financing in the United States. The recession, they reminded people, had been global.

In 1982, Thatcher responded with determination to Argentina's move to take the Falkland Islands. The islands were British, she announced. The people living there wanted it to remain British. And, she said, it was her and Britain's responsibility to see to it that it remained British. The Falkland Islands were 8,000 miles away, and many in Britain had never heard of them (or the Malvinas Islands as they were called in Argentina), but their patriotism was aroused by Thatcher and the challenge from Argentina. And following Britain's victory over the Falklands, Thatcher tied that success to a revitalized British economy. "We have ceased to be a nation in retreat," she announced. "We have instead found a new confidence."

In May and June of 1983, inflation was down to an annual rate of  3.7 percent - down from 27 percent during the Labour government. Personal incomes were rising, although unemployment remained high. In June, Thatcher led the Conservative Party in winning an overwhelming majority in Parliament and her second term as Prime Minister. In 1984, Thatcher boasted that during the previous year more than a quarter million new jobs had been created.

Thatcher pursued her quest for reducing government participation in the economy, for privatization and reduced government spending. It was said that she was out to kill British socialism. She wanted to stimulate enterprise, to restore vitality to the British economy, to stimulate moves to new technology and to greater economic efficiency. Some of her critics accused her of  promoting greed.

She sold off some government-owned industries, including the British Steel Corporation. This ended the billions of dollars of taxpayer's money that was being spent on subsidizing these industries, and the proceeds from the sale of these businesses produced needed money for the government. Thatcher's supporters spoke of privatized businesses returning to management based on economic rationality - profits - rather than political considerations.

Prime Minister Thatcher had begun to support the diminishing power and influence of labor unions. The Trade Union Act of 1984 required that a union hold a ballot before it endorsed or authorized any industrial action.

Unemployment remained high, at 3.13 million in 1986. Manual workers in Britain had gained only 5.7 percent in pay since 1979. But white collar employees in this same period had gained 22.4 percent in earnings. And managers and administrators had gained nearly 29 percent. Thatcher's critics, including the Church of England, expressed their fear that her policies were dividing the nation between rich and poor.

Thatcher was reducing government borrowing, to around 1.5 percent of the GDP in 1986, down from 4.8 percent of the GDP during the recession years of 1979-80. And she was not cutting unemployment insurance, child care, rent subsidies or the National Health Service - socialized medicine. She maintained her popularity enough that in 1987 she led her Conservative Party to another electoral victory and her third term as Prime Minister. In 1988 she became 20th century Britain's longest serving prime minister. A strong personality, she was admired in the Soviet Union, where she was mobbed friendly crowds during her visit. And she was admired in the United States, where she had spoken to a joint session of Congress.

In 1988, personal incomes rose 4 percent. In 1988-89 the government was running a budget surplus. Taxes had been reduced, and Britain was attracting more foreign investment in industry than the United States, Japan or other European country. But monetarists in Britain were complaining that the money supply had been allowed to increase too much and that Britain was in a syndrome of  boom-inflation-recession. In 1989, inflation and unemployment were rising again. In 1989, inflation reached 7.8 percent, and in 1990 10.9 percent. Interest rates in 1990 rose to 15 percent, making it difficult for people buy homes or make payments on their mortgages. And  by October 1990 unemployment was 1.7 million.

It was not only Britain that was suffering. Recession appeared elsewhere, including the United States, where George Bush (the elder) was president. The view of Margaret Thatcher as a fresh start to the rescue of the economy had dimmed. And she was making a large issue of a tax that was resisted by many - a tax on each person living in a home rather than on the value of the home. Her combativeness was seen by many in her own party as a liability. For the sake of the party's fortune in upcoming elections, conservatives in parliament and members of her own cabinet voted her out as party leader, replacing her with a more bland conservative, John Major.

In 1992 Margaret Thatcher entered the House of Lords and became Baroness Thatcher of Kesteven. She has taken pride in what she believes was her influence in changing the Labour Party, as it was under Tony Blair.

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