Modern Times: The World From the Twenties to the Nineties (146 page)

The same process was at work in the North American continent, though here it was affected by geographical factors too. Mexico, like Chile, was affected by the new Pacific enterprise culture, though like Chile it had earlier suffered from a grandiose experiment in state-directed collectivism. The economy grew very fast 1940–70, and in the 1970s President Luís Echeverria sought to make Mexico the leader of the Third World as a model Big Government state. He increased the state’s share of the economy by 50 per cent and the number of state-owned corporations from eighty-six to 740. The predictable result was hyper-inflation and a balance-of-payments crisis. José Lopez Portillo came to power in 1976 and wrenched Mexico back towards the market.
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He told the IMF that he feared the ‘South Americanization’ of Mexico life: coups and dictatorships of Left or Right.
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He was helped by the major oil discoveries of 1977, which suggested Mexico might eventually be a producer
in
the same class as Kuwait or even Saudi Arabia. On the other hand the structure of Mexico, essentially a one-party state run by an élite through the Institutional Revolutionary Party (PRI), made cutting state employment (and patronage) difficult.
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By the early 1980s, Mexico’s foreign debts exceeded even Brazil’s. In the summer of 1982 it was unable to meet its interest payments and nationalized the banks. But the economy moved back in a liberal direction during the years 1985–90, making possible a historic trade agreement with the United States.

The Mexican economy, indeed, was merging into the North-East Pacific economy formed by the Western United States, West Canada and Alaska. Some 70 per cent of Mexican exports went to America in the 1970s and 1980s; 60 per cent of its imports were American. There were perhaps as many as 10 million illegal Mexican immigrants in the US; one in seven families in California, and one in three in New Mexico, were Hispanic. It was true that Mexico’s was also a Caribbean economy. So was America’s, especially since the Hispanization of the economy of Florida, which grew rapidly in the quarter-century, 1965–90, tilted it in a Latin-American direction. But from the 1970s both the Mexican and the American economies felt the pull of the Pacific, increasingly a free-market pull.

The shift of America’s centre of gravity, both demographic and economic, from the North-East to the South-West was one of the most important changes of modern times. In the 1940s, the geographer E.L.Ullman located the ‘core area’ of the US economy in the
North-East. Though only 8 per cent of the total land area, it had 43 per cent of the population and 68 per cent of manufacturing employment.
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The pattern remained stable for most of the 1950s. The geographer H.S.Perloff, writing in 1960, saw what he called ‘the manufacturing belt’ as ‘still the very heart of the national economy.’
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But even while he was writing the pattern was changing. In 1940–60 the North still gained population (2 million) but this was entirely accounted for by low-income, largely unskilled blacks from the South. It was already suffering a net loss of whites; this soon became an absolute loss. The change came in the 1960s and became pronounced in the 1970s. In the years 1970–7, the North-East lost 2.4 million by migration; the South-West gained 3.4 million, most of them skilled whites. As the shift was essentially from the frost-belt to the sun-belt, it was reinforced by the rise in energy prices, as the 1980 census showed. Regional variations in income, once heavily in favour of the old ‘core area’, converged, then moved in favour of the South-West. Investment followed population. The ‘core area’s’ share of manufacturing employment fell from 66 per cent in 1950 to 50 per cent in 1977. The South-West’s rose from 20 to 30 per cent.
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The demographic shift brought changes in political power and philosophy. At the election of Kennedy in 1960, the frost-belt had 286 electoral college votes to the sun-belt’s 245. By 1980 the sun-belt led by four and Census Bureau projections showed that for the 1984 election the sun-belt would have a lead of twenty-six.
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The shift marked the end of the old Roosevelt interventionist coalition, dominant for two generations, and the emergence of a South-West coalition wedded to the free market.

Richard Nixon’s landslide victory of November 1972 was a foretaste of the political consequences of this shift, but that was overshadowed by Watergate and its aftermath. On 4 November 1980, however, the trend became unmistakable when Ronald Reagan, a successful two-term Governor of California – and from one of California’s most powerful interest-groups, the movie industry – trounced Jimmy Carter, the first elected sitting president to be defeated since Herbert Hoover in 1932. Reagan won by a huge popular margin, taking 43.9 million votes to Carter’s 35.4 million. On 6 November 1984 he repeated his success by an even bigger margin, taking 59 per cent of the popular vote, with majorities in every major bloc of voters except blacks, Jews and trade unionists. He beat his Democratic opponent, Walter Mondale, in all but one of the fifty states. It was no coincidence that the 1980s, when California, already the richest, became the most populous state in the USA with the most electoral college votes, was in many ways the Californian Decade.

But Reagan’s dominance during the 1980s was by no means mainly due to changing demographics. Better than any other politician except Margaret Thatcher herself, he caught the spirit of the age. He was undoubtedly inspired by her victory and example – she was his John the Baptist or, to put it another way, he was her aptest pupil – and for eight years, with one exception, they formed a mutual admiration society of two. But most of his few, simple and popular ideas had entered his head long before. ‘By 1960,’ he wrote, ‘I realized the real enemy wasn’t big business, it was big government.’
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Twenty years later, he was a man whose time had come. Oddly enough, he did not succeed substantially in reducing the size of government. In this respect he was the victim of a growing dichotomy in American politics: a tendency to elect Republican presidents and Democratic congresses. His party controlled the Senate for a time but never the House of Representatives. There, indeed, the Democratic grip tightened during the 1980s. As the cost of electioneering rose, the chances of displacing a sitting congressman declined, until by the end of the decade the turnover was less than 10 per cent; and Congressional tenure depended to a growing extent on satisfying groups of interests through federal spending. Hence it was beyond the power of Reagan, or indeed his Republican successor George Bush, to cut federal domestic spending. What Reagan could and did do however was cut taxes. The result was the steady growth of the budget deficit. In the first six years after the initial tax cuts came into effect in late 1981, the resulting stimulation of the economy actually increased tax revenues by $375 billion. But during the same period Congress increased domestic spending by $450 billion.
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The budget deficit was accompanied by a growing trade imbalance which during the four years of Reagan’s second term reached the cumulative total of $541,243 million. The budget deficit began to fall in 1988 but remained large and that year total government debt passed the $2,000,000-million mark.
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The sale of government bonds and private business to finance these two deficits meant that foreign holders and investors, with Japan in the lead but Britain not far behind in the investment field, were securing a significant grip on the American economy, or so many Americans feared.

On the other hand, Reagan’s policies, or Reaganomics as they were called by friends and enemies alike, produced a dynamism America had not known since the Eisenhower years. Over six years, 1982–87, GNP (adjusted for inflation) rose by 27 per cent, manufacturing by 33 per cent, median incomes by 12 per cent (against a decline of 10.5 per cent during the 1970s).
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An estimated 20 million new jobs were created. Moreover, Reagan succeeded in getting across at the popular level the notion that America was a dynamic,
successful nation again, after the doubts of the 1970s. He won for himself, from an initially hostile media, the grudging accolade of ‘The Great Communicator’. The result was that America, as a nation, began to recover its self-confidence, lost during the 1970s’ suicide attempt. The prognostications, too, were that the dynamism would continue. Research conducted by the high-level Commission on Long-Term Strategy, which Reagan appointed, reported in January 1988 that between 1990 and 2010 the United States economy would grow from $4.6 trillion to nearly $8 trillion, and at the later date would still be nearly twice as large as the world’s next biggest economy.
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America’s growing self-respect went a long way to erase the masochism generated by the Vietnam débâcle, and enabled Reagan, who had no inhibitions about the legitimate use of America’s enormous power, to perform on the world stage with growing aplomb. He was not a rash man, and certainly not a bellicose man, but he was a staunch believer in absolute values of conduct with a clear view of the difference between right and wrong in international affairs. When he felt the need to act, he acted; not without careful deliberation, but without any feelings of guilt or
arrières-pensées.
But here again Mrs Thatcher served as a mentor. On Friday 2 April 1982, without warning or any declaration of war, large Argentinian amphibious forces invaded and occupied the British crown colony of the Falkland Islands. (They also occupied South Georgia, to the east.) These islands, known to Argentinians as the Malvinas, had been in dispute for two centuries (Dr Johnson had published a pamphlet on the subject, rejecting British claims of ownership). However, all the inhabitants were of British descent, from settlers who arrived in the 1820s, and were thus natives by right of six generations of ownership. The head of the then Argentine military junta, General Leopoldo Galtieri, was (as it happened) himself a second-generation immigrant from Europe, a distinction he shared, interestingly enough, with Ian Smith, leader of the Rhodesian whites, and Fidel Castro, the Cuban dictator. Argentine claims that they were engaged in an act of anti-colonial liberation carried little conviction, and the United Nations Security Council voted 10–1 in favour of an immediate Argentine withdrawal (Resolution 502). The British, however, were caught completely unprepared, with no forces of any significance in the area. Their Foreign Secretary, Lord Carrington, felt it right to resign to atone for the failure of his department to foresee the aggression. Margaret Thatcher, followed by her cabinet, determined to recover the islands, by diplomacy if possible, by force if necessary.

The first British warships left for the south Atlantic two days
after the invasion. A week later Britain declared a 200-mile exclusion zone around the islands, a variation on the ‘quarantine’ President Kennedy had imposed on the Cuban area during the 1962 missile crisis. It was a hazardous decision to send an expeditionary force 8,000 miles, with naval escort but without full air cover (the two British carriers were equipped only with subsonic Harrier jump-jets, whereas Argentine supersonic aircraft could operate from airfields on her mainland, as well as the Port Stanley airport on the Falklands itself). It aroused the admiration of, among other people, Ronald Reagan himself, who throughout the operation not only gave the British government full diplomatic support at the United Nations and elsewhere but provided covert intelligence assistance. The daring operation succeeded. On 25 April South Georgia was recovered. Exactly a week later, the Argentine heavy cruiser
Belgrano
was sunk by the British submarine
Conqueror
, with the loss of 385 lives; thereafter, the Argentine navy retired to harbour and took no further part in the conflict. The Argentine air force fought rather better, using missiles to sink a total of four British warships and transports, though loss of life was tiny. Otherwise the amphibious operation proceeded according to plan. On 21 May the British army established a bridgehead at San Carlos; a week later paratroopers took Port Darwin and Goose Green, and on 14 June the entire Argentine garrison surrendered. Some 255 British and 652 Argentine lives were lost in the land fighting. Three days afterwards, Galtieri was ousted. Indeed, the British victory led directly to the end of military rule in Argentina and the restoration of democracy. On 10 December 1983, Raúl Alfonsín was elected Argentina’s first civilian and democratic president for eight years, an immediate investigation was begun into the thousands of dissidents who had ‘disappeared’ during the junta’s rule, and Galtieri and many of his colleagues were sentenced to long terms of imprisonment.

The effect on Reagan was also striking. The Falklands action served to reinvigorate the Western sense of the proprieties of international behaviour and to remind the United States of her responsibilities as the leading democracy and defender of the rule of law. The first geopolitical consequences occurred late in 1983. On 19 October Maurice Bishop, premier of the small West Indian island of Grenada, which was a member of the British Commonwealth, was murdered during a left-wing
putsch
, aided and possibly planned by Cubans. Two days later, the leaders of Grenada’s neighbours, Jamaica, Barbados, St Vincent, St Lucia, Dominica and Antigua, reported a large Cuban military build-up on the island and, fearing for the safety of their own democratic governments, secretly petitioned for US military intervention. Reagan, on a golfing weekend
in Georgia, was woken at four o’clock on a Saturday morning with this news. Informed by the Joint Chiefs of Staff that a ‘rescue operation’ could be mounted within forty-eight hours, his response was, ‘Do it.’ As Cuban reinforcements were feared, and eight hundred United States medical students were in Grenada, all potential hostages, the highest secrecy was imposed.
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This had one unhappy consequence; Mrs Thatcher was not informed of what Reagan planned to do, and as Grenada was a Commonwealth country, she (and the Queen) took umbrage, and she made her view public, an unfortunate error.
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This was the only serious disagreement she and Reagan had in eight years, and she later privately admitted she had been mistaken. Otherwise the operation was well received and attained all its objectives. US troops landed on 25 October, restored constitutional authority, and began withdrawing promptly on 2 November.