Strange Rebels: 1979 and the Birth of the 21st Century (31 page)

Harris and Seldon took pride in embracing the unfashionable. One of the institute’s earliest pamphlets was a strident defense of the value of advertising at a time when the industry was under attack for allegedly misleading consumers. The provocation was entirely calculated. Harris and Seldon knew that they would not be able to make their mark without challenging orthodoxy head-on. Another early project was a pamphlet on pensions that attacked the notion of a comprehensive state system of social insurance for the elderly right at the moment when Labour was introducing just such a system. The IEA tried to keep its works relatively short and inexpensive to ensure the widest possible distribution. Throughout the 1960s and 1970s, the IEA’s authors became known among the cognoscenti for a steady stream of works on trade-union reform and monetary stability. Hayek and Friedman both wrote on these subjects. One of Friedman’s most notorious works bore the revealing title
The Counter-Revolution in Monetary Theory
. It was a line of thinking that would soon come into its own as the horrors of stagflation became clear.
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There were other voices challenging the consensus, to be sure. Enoch Powell was one. But his political self-immolation with the “Rivers of Blood” speech had only reinforced the popular image of free marketeers as cranks who were out of step with the times. What the market proselytes needed was intellectual credibility, and the IEA supplied it. Increasing numbers of young academics, policy makers, and politicians began beating a path to the IEA’s door. But the IEA’s growing impact was such that even some on the Left were forced to acknowledge it. In 1968, David Collard of the Fabian Society published an analysis that shockingly
conceded the intellectual coherence of the “New Right” exemplified by the IEA theoreticians.
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Margaret Thatcher joined their number rather late in the game; it was only in 1971, during her stint as a junior minister in Heath’s government, that she first cited one of the institute’s papers on education in a parliamentary debate. In the 1960s she appears to have focused more on building her Tory Party career than exploring fresh policy ideas. It was the profound disillusionment of the Heath U-turn, and the attendant realization that believers in the free market needed to articulate a persuasive case for their views, that finally convinced her, later in the 1970s, to seek out the work of the IEA. Before any notion of “Thatcherism” emerged, the IEA had already articulated a body of ideas that encompassed the major themes of Thatcher’s prime ministership.

O
ne of the IEA’s biggest admirers was a rising Conservative Party star by the name of Keith Joseph. Despite the IEA’s ties to individual Conservatives, the institutes directors had always insisted on remaining unaffiliated with any of the major British political parties—leaving an opening for the creation of another organization that would specifically supply Tory policy makers with ideas. Joseph, who had served with Thatcher in the Heath government, became increasingly dissatisfied with the British situation in the 1970s, and he vowed to mix things up. He found his opportunity in 1974, when Heath, now leader of the opposition once again, entrusted Joseph with the creation of a new Conservative Party think tank. Joseph took him at his word. He quickly turned the Center for Policy Studies into a place that aimed to challenge consensus politics—including those who defended it within his own party. Joseph saw the CPS as an arsenal of ideas for a future conservative revolution, happily subverting the received notion of the think tank as natural left-wing territory. “What Britain needs is more millionaires and more bankrupts,” Joseph famously declared.
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This was provocation of the first sort, and Joseph and his followers knew it. Yet they spread the word with the insurgent zeal of the student disciples of Mao and Che (from whom, evidently, they had learned a thing or two about the seductions of revolutionary style). He chose Alfred Sherman, a recovering socialist, as its first director. The IEA had tried to keep above the political fray. The CPS had no such scruples. Joseph was eager to assault the status quo, and he was happy to take on his own party in the process.
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This desire only intensified after his own bid for leadership collapsed—opening the way for his ally Thatcher to gain election as the party’s new leader. (She was, incidentally, one of the cofounders of the CPS.)

Joseph firmly believed in the power of ideology. “A gun is certainly powerful,” he told the Tory party conference in 1976, “but who controls the man with the gun? A man with an idea.”
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And Joseph was good at expressing what he believed. One of his most forceful programmatic exercises came in April 1976, in a famous lecture he gave at the CPS. It was called “Monetarism Is Not Enough”:

            
We were as a country in a transitional stage from world industrial primacy, and our need was in fact to adjust to new realities. The technological decline of our old staple industries, now having to face fierce competition from other countries, was not sufficiently off set by the growth of our new industries, particularly as depression and protection dramatically cut world trade. The response of government, industry, trades unions, advisers was to move rather to work-sharing cartels, rationalization and restrictive trade oligopolies than to modernization and competition.

                    
In short, they tried to thwart change rather than smooth a path for it.
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The proper remedy, he said, was not just to impose limits on the monetary supply in accordance with the theory some called “monetarism”—a view that was gradually winning favor even among some Labourites, like Callaghan’s son-in-law Peter Jay, who did some work for the IEA—but to pursue a whole suite of measures that would get the government out of the business of economic micromanagement and restore space for entrepreneurship and commercial innovation. “Risk-taking has little appeal these days: the upward potential is small: the downward risk is almost unlimited,” Joseph noted. In a passage that sounded the death knell for years of Keynesian “fine-tuning” in Britain, he showed how rising government spending crowded out private investment and boosted inflation. While the resulting high taxes, dense regulation, and rising costs drove private firms out of business, public companies simply relied on the government to come to their aid—thus fueling even more spending and upward pressure on prices. The “inflationary spiral” that Joseph described came to be known as the “ratchet effect,” and it offered up a devastatingly convincing picture of Britain’s economic situation.

It was a vision that Thatcher undoubtedly shared. It is true enough that her understanding of academic economics was limited (but this applies to many politicians). Her economic thinking emerged organically from her firmly held notions of patriotism, thrift, and individual responsibility. But this should not be taken to mean that she lacked any deeper interest in economic ideas. After the fall of the Heath government, she avidly consumed the work produced by Joseph’s CPS, and
she actively solicited its recommendations (and those of the IEA) during her time as leader of the opposition. Along the way she rediscovered the work of Hayek, whom she had first read during the war, and became a convert to the monetarist theories of Milton Friedman, who rejected Keynes with a decisiveness that was just beginning to resonate among the English-speaking political elite. These were the main purveyors of what came to be known as the “market revolution” of the 1980s and 1990s—although, of course, their works actually constituted a reaction to the ideas of the socialists and the “Keynesian Revolution.”

Again, this body of thought was not new. But instead of asking what thinkers like Hayek and Friedman gave to Thatcher, we might be better off turning the question around: what did she do for their ideas? The answer soon revealed itself. What Thatcher contributed to the cause of the free marketeers was the unstinting force of her convictions. Ordinary politicians had programs. The grocer’s daughter had a mission.

T
hroughout the 1970s the United States and China had been negotiating, on and off, about opening formal diplomatic relations between the two countries. The process had started with Henry Kissingers secret trip to Beijing in 1971, and President Nixon’s historic visit to China the following year firmly established a common agenda. But both countries soon found themselves slogging through periods of pronounced domestic turmoil. Watergate derailed Nixon’s presidency and led to an era of uncertainty in US politics. In China, Mao’s senescence and death, followed by the arrest of the Gang of Four and the rise of Hua, similarly diverted the political elite from sealing a deal with the Americans.

The Sino-American rapprochement arose from a shared desire to counter the Soviet Union’s growing geopolitical ambitions, a problem that assumed increasing urgency as the decade wore on. By 1977 the worried Chinese, anxious about the growing Soviet role in Vietnam after the US defeat, began pushing the Americans to restart the talks on diplomatic normalization. The new American president, Jimmy Carter, was at first preoccupied with pursuing his predecessors’ policy of détente with the USSR. But soon he was able to dispatch his own national security adviser, the tough-minded Zbigniew Brzezinski, to work out the foundations of a deal that would finally allow Beijing and Washington to exchange ambassadors.

The major stumbling block was the status of Taiwan. Though the Carter administration was willing to acknowledge the People’s Republic as the sole government of China, the Americans made clear, just as the two sides were about to go public with the normalization announcement, that they were determined to go on selling arms to Taiwan. Chinese negotiators had somehow failed to understand this point, and the Americans’ last-minute clarification threw Deng into a rage. But he elected to go ahead with the deal anyway. The People’s Republic of China and the United States of America agreed to establish formal diplomatic relations as of January i, 1979. Nixon had made several visits to Beijing, and protocol suggested that it was time for the Chinese to return the honor. And so, four weeks into the new year, fresh from his Third Plenum triumph, Deng set off on his state visit to the United States.

On January 28 he arrived in Washington, accompanied by a delegation of twenty senior officials. He was received with all the honors befitting a full-fledged head of state. Hua, his putative superior, stayed at home. Deng’s agenda was appropriately ambitious. His visit extended over eight days and took him across the entire country. Deng and his wife spent the first three days in Washington, where his schedule included three meetings with President Carter—in itself a mark of the significance afforded to the new relationship, since Carter rarely granted foreign visitors more than two meetings. Deng and his wife stayed in Blair House, which White House staff had carefully equipped with spittoons (an acknowledgment of the vice premier’s legendary spitting habit). The first evening featured a gala performance at the Kennedy Center and a state dinner at the White House. The guests included former president Richard Nixon, whom Deng had expressly invited out of respect for his efforts to renew diplomatic ties between the two countries. (Some liberal Democrats considered declining the invitation, but relented when they were told that they would not have to sit at the same table with the villain of Watergate.)

It was a trip rich in odd cultural juxtapositions, but the most surreal moment came when actress Shirley MacLaine, seated at Deng’s table during the state dinner in the White House, gushed to him about her last trip to China. MacLaine, an enthusiastic supporter of New Left causes, had chosen the waning years of the Cultural Revolution to shoot a documentary about the wonders of Chinese socialism. She told Deng how she and her friends had been taken to visit a rural commune. There they ran into a professor who was plowing a field. How wise the party had been, he told the Americans, to send him and his fellow academics to the countryside to learn the true ways of the people. MacLaine thought this was marvelous.
Deng looked at her scornfully and said, “He was lying.” Professors, he told her, should be teaching university classes, not planting crops.

Deng had always been a man with little tolerance for pleasantries, and he proved it again in his meetings with the US president. He wasted little time in confirming to Carter what US intelligence experts, armed with satellite reconnaissance data, had already been suspecting: China was preparing to send its army into Vietnam. For years tensions between the two countries had been rising, fueled primarily by Hanoi’s increasingly cozy relations with the Soviet Union. By giving the Soviet Navy privileged access to Cam Ranh Bay, the Vietnamese had tipped the regional strategic balance, as the Chinese saw it, into Moscow’s favor. Beijing was also worried about the Vietnamese Communist government’s expressed intention to establish a Communist “Indochinese Federation” with Hanoi at the helm. Here, too, the Soviets would clearly be the ultimate beneficiary. It was incumbent upon China to “teach Vietnam a lesson,” Deng declared.
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The Chinese troops would not stay for long on Vietnamese territory, he told Carter. Once the Vietnamese had been “punished,” the Chinese troops would pull out. His American interlocutors refrained from endorsing the invasion plans, but they also made it clear that they would not condemn Beijing if it did so. That, indeed, was just what Deng wanted to hear. (Later, as a demonstration of their goodwill, the Americans would even share some of their intelligence with the Chinese.)

The rest of the visit said a great deal about the various motives behind China’s new friendship with the United States. The possibility of American investment in China’s economy loomed large. At every possible occasion the vice premier repeated his country’s earnest desire for modern technology and management know-how. Deng visited Coca-Cola headquarters in Atlanta, where he took a good, thorough look at a modern, highly automated production facility. He also took a tour of a Ford car-assembly plant with Henry Ford II as his guide. The itinerary also included a call on Boeing headquarters in Seattle. (China had already ordered three Boeing 747s from the company.) At the Lyndon B. Johnson Space Center in Houston, Deng was given a chance to try out a flight simulator that enabled him to practice flying a space shuttle—an experience he enjoyed so much that it proved difficult to pry him away. He and his party comrades also attended a rodeo in a small Texas town, where Deng, attired in his usual dark-gray Mao suit, happily donned a cowboy hat for the cameras. He turned out to be a natural at public relations. During one of his meetings with members of the US Congress, lawmakers asked Deng whether he was prepared to allow Chinese the freedom to travel. “Oh, that’s
easy,” Deng replied. “How many do you want? Ten million? Fifteen million?” That effectively ended the discussion.
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A bit unexpectedly, the tiny Deng—“blunt, outgoing and humorous,” as one reporter wrote—proved something of a hit with the US public.
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