The Downing Street Years, 1979-1990

by Margaret Thatcher

  As it happened, this was Chancellor Schmidt’s last G7 summit. In September his governing coalition broke up when the liberal Free Democrats changed sides and put the Christian Democrat Leader, Helmut Kohl, in as Chancellor. Although I had had serious disagreements with him, I always had the highest regard for Helmut Schmidt’s wisdom, straightforwardness and grasp of international economics. Sadly, I never developed quite the same relationship with Chancellor Kohl, though it was some time before the implications of this became important.

  But my most vivid recollection of the proceedings at Versailles is of the impression made by President Reagan. At one point he spoke for twenty minutes or so without notes, outlining his economic vision. His quiet but powerful words provided those who did not yet know him with some insight into the qualities which made him such a remarkable political leader. After he had finished, President Mitterrand acknowledged that no one would criticize President Reagan for being true to his beliefs. Given President Mitterrand’s socialist policies, that was almost a compliment.

  From Paris President Reagan flew to London for an official visit where he addressed both Houses of Parliament in the Royal Gallery of the Palace of Westminster. The speech itself was a remarkable one. It marked a decisive stage in the battle of ideas which he and I wished to wage against socialism, above all the socialism of the Soviet Union. Both of us were convinced that strong defence was a necessary, but not sufficient, means of overcoming the communist threat. Instead of seeking merely to contain communism, which had been the West’s doctrine in the past, we wished to put freedom on the offensive. In his speech President Reagan proposed a worldwide campaign for democracy to support ‘the democratic revolution [which was] gathering new strength’. In retrospect, however, that speech had a larger significance. It marked a new direction in the West’s battle against communism. It was the manifesto of the Reagan doctrine — the very obverse of the Brezhnev doctrine — under which the West would not abandon those countries which had had communism forced upon them.

  I remember the speech for another reason as well. I was full of admiration that he seemed to have delivered it without a single note.

  ‘I congratulate you on your actor’s memory,’ I said.

  He replied, ‘I read the whole speech from those two perspex screens’ — referring to what we had taken to be some security device. ‘Don’t you know it? It’s a British invention.’ And so it was that I made my first acquaintance with Autocue.

  THE BONN NATO SUMMIT, JUNE 1982

  The NATO summit of heads of government in Bonn on 10 June was generally linked to the Versailles summit. At Versailles the G7 had demonstrated that with one or two exceptions, such as France, the major countries were committed to a return to sound economic policies. At Bonn the West was similarly able to demonstrate its commitment to strong defence.

  Of course, all of us wanted both strong defence and successful negotiations with the Soviet Union to reduce the level of armaments. But there was a real question about which should come first. There continued to be a muted but important argument about the ‘dual track’ policy. Some countries hoped to be able to delay virtually indefinitely the implementation of the decision to deploy Cruise and Pershing missiles. For example, in the dying days of the Schmidt Government there were strong voices in Germany arguing that deployment would jeopardize the prospect of successful negotiations. By contrast, the Americans and we in Britain felt that a strong defence posture is an absolute prerequisite for any constructive relationship with the USSR and therefore deterrence is the condition for détente. Indeed, the original idea for the Bonn summit had come from us in Britain because we believed that it was vital to demonstrate the unity of purpose of NATO at this time. The result more or less fulfilled that intention.

  But there continued to be Soviet pressure, supported by demonstrations by the so-called ‘peace movement’ and encouraged by the appeasement of the left-wing politicians in Europe right up to the moment when Cruise and Pershing were deployed. We were never able to rest our argument or relax our efforts.

  HONG KONG AND CHINA

  By the time I visited the Far East in September 1982 Britain’s standing in the world, and my own, had been transformed as a result of victory in the Falklands. But one issue on which this was, if anything, a drawback was in talking to the Chinese over Hong Kong. The Chinese leaders were out to demonstrate that the Falklands was no precedent for dealing with the Colony. I was well aware of that myself, both from the military and the legal viewpoints.

  On the morning of Wednesday 22 September I and my party took off from Tokyo, where I had been visiting, for Peking. Fifteen years remained of the lease to Britain of the New Territories which constitute over 90 per cent of the land of the Colony of Hong Kong. The island of Hong Kong itself is British sovereign territory, but, like the rest of the Colony, dependent on the mainland for water and other supplies. The People’s Republic of China refused to recognize the Treaty of Nanking, signed in 1842, by which the island of Hong Kong had been acquired by Britain. Consequently, although my negotiating stance was founded on Britain’s sovereign claim to at least part of the territory of Hong Kong, I knew that I could not ultimately rely on this as a means of ensuring the future prosperity and security of the Colony. Our negotiating aim was to exchange sovereignty over the island of Hong Kong in return for continued British administration of the entire Colony well into the future. This I knew from my many consultations with politicians and business leaders of Hong Kong was the solution which would suit them best.

  The immediate danger, which had already been illustrated by reaction in Hong Kong to the provisions of our Nationality Bill and to various remarks by the Chinese communists, was that financial confidence would evaporate and that money and in due course key personnel would flee the Colony, impoverishing and destabilizing it well before the lease of the New Territories came to an end. Moreover, it was necessary to act now if new investment was to be made, since investors would be looking some fifteen years or so ahead in judging what decisions to make.

  I had visited Peking in April 1977 as Leader of the Opposition. The ‘Gang of Four’ had been deposed a few months before and Hua Guo Feng was Chairman. Deng Xiaoping, who had suffered so much during the Cultural Revolution, had been ousted by the ‘Gang of Four’ the previous year and was still in detention. But on the occasion of this, my first visit as Prime Minister — indeed the first visit of any British prime minister while still in office — Deng Xiaoping was indisputably in charge.

  On the afternoon of Wednesday 22 September I had my first meeting which was with the Chinese Prime Minister, Zhao Ziyang — whose moderation and reasonableness proved to be a great handicap to him in his subsequent career. We had a discussion of the world scene in which, because of the Chinese hostility to Soviet hegemony, we found much to agree about. However, the Chinese Prime Minister and I were aware that the following morning’s meeting we were to have on Hong Kong would be a very different matter.

  I began that meeting with a prepared statement setting out the British position. I said that Hong Kong was a unique example of successful Sino-British co-operation. I noted that the two main elements of the Chinese view concerned sovereignty and the continued prosperity of Hong Kong. Prosperity depended on confidence. If drastic changes in the administrative control of Hong Kong were to be introduced or even announced now there would certainly be a wholesale flight of capital. This was not something which Britain would prompt — far from it. But nor was it something we could prevent. A collapse of Hong Kong would be to the discredit of both our countries. Confidence and prosperity depended on British administration. If our two Governments could agree on arrangements for the future administration of Hong Kong; if those arrangements would work and command confidence among the people of the Colony; and if they satisfied the British Parliament — we would then consider the question of sovereignty.

  I had hoped that this practical and realistic line of argument would prove persuasive. After all, C
hina gained large amounts of foreign currency and investment by having a capitalist Hong Kong on her doorstep. Even at the height of the Cultural Revolution, though riots had been fomented in the Colony by the communists, the Red Guards had never been permitted to launch a full-scale attack on Hong Kong. I tried to persuade Mr Zhao that we should agree a fairly noncommittal joint public statement saying that our common objective was to maintain the prosperity of Hong Kong and that there would be early official talks between us about this.

  However, it was quite clear from the Chinese Prime Minister’s opening remarks that they would not compromise on sovereignty and that they intended to recover their sovereignty over the whole of Hong Kong — the island as well as the New Territories — in 1997 and no later. The fundamental position underlying the Chinese position was that the people of Hong Kong were Chinese and not British. That said, Hong Kong could become a special administrative zone administered by local people with its existing economic and social system unchanged. The capitalist system in Hong Kong would remain, as would its free port and its function as an international financial centre. The Hong Kong dollar would continue to be used and to be convertible. In answer to my vigorous intervention about the loss of confidence which such a position, if announced, would bring, he said that if it came to a choice between sovereignty on the one hand and prosperity and stability on the other China would put sovereignty first. The meeting was courteous enough. But the Chinese refused to budge an inch.

  I knew that the substance of what had been said would be conveyed to Deng Xiaoping whom I met the next day. Mr Deng was known as a realist. Indeed, it was he who effectively unlocked the way to a solution in Hong Kong. He had accepted that two different economic systems could exist in one country, a fact demonstrated by the setting up of special economic zones behind Hong Kong, within China itself. On this occasion, however, he was obdurate. He reiterated that the Chinese were not prepared to discuss sovereignty. He said that the decision that Hong Kong would return to Chinese sovereignty need not be announced now, but that in one or two years’ time the Chinese Government would formally announce their decision to recover it. I repeated that what I wanted was agreement in further talks that after 1997 British administration would continue with the same system of law, the same political system, and the same independent currency. If we could at a later stage reach such an agreement there would be a tremendous upsurge in confidence. I could then go to the British Parliament and have the whole question of sovereignty dealt with to China’s satisfaction.

  But he was not to be persuaded. At one point he said that the Chinese could walk in and take Hong Kong later today if they wanted to. I retorted that they could indeed do so, I could not stop them. But this would bring about Hong Kong’s collapse. The world would then see what followed a change from British to Chinese rule.

  For the first time he seemed taken aback: his mood became more accommodating. But he had still not grasped the essential point, going on to insist that the British should stop money leaving Hong Kong. I tried to explain that as soon as you stop money going out you effectively end the prospect of new money coming in. Investors lose all confidence and that would be the end of Hong Kong. It was becoming very clear to me that the Chinese had little understanding of the legal and political conditions for capitalism. They would need to be educated slowly and thoroughly in how it worked if they were to keep Hong Kong prosperous and stable. I also felt throughout these discussions that the Chinese, believing their own slogans about the evils of colonialism, just did not realize that we in Britain considered we had a moral duty to do our best to protect the free way of life of the people of Hong Kong.

  For all the difficulties, however, the talks were not the damaging failure which they might have been. Although I failed to achieve my initial objective, I managed to get Deng Xiaoping to agree to a short statement which, while not pretending that we had reached agreement, announced the beginning of talks with the common aim of maintaining the stability and prosperity of Hong Kong. It was essential that something of the sort be said to bolster the fragile confidence back in Hong Kong. Neither the people of the colony nor I had secured all that we wanted, but I felt that we had at least laid the basis for reasonable negotiations. We each knew where the other stood.

  The visit had been a full and tiring one. It was not all business, however, and there was time for a little sightseeing. While I was in China I had been able to visit the extraordinarily beautiful Summer Palace on the north-western outskirts of Peking, known in Chinese as the Garden of Peaceful Easy Life. I felt that this was a less than accurate description of my own visit to the Far East.

  THE BERLIN WALL

  The following month I visited another monument which, unlike the Summer Palace, has now crumbled into rubble and dust. After talks with Chancellor Helmut Kohl in Bonn, I flew to Berlin and gained my first sight of the Berlin Wall and of the grey, bleak and devastated land beyond it in which dogs prowled under the gaze of armed Russian guards. Chancellor Kohl accompanied me on this visit and, whatever difficulties would arise in the future, on matters like the evils of communism and commitment to our American allies we were as one. I suspect that the German press understood, as their comments later suggested, how powerfully moved I was by Berlin. The city was vibrant and exciting, larger than I had thought, surrounded by beautiful woods — yet uniquely scarred by the two totalitarian creeds of the twentieth century.

  In my speech that afternoon — Friday 29 October — I said:

  There are forces more powerful and pervasive than the apparatus of war. You may chain a man — but you cannot chain his mind. You may enslave him — but you will not conquer his spirit. In every decade since the war the Soviet leaders have been reminded that their pitiless ideology only survives because it is maintained by force. But the day comes when the anger and frustration of the people is so great that force cannot contain it. Then the edifice cracks: the mortar crumbles… one day, liberty will dawn on the other side of the wall.

  My prophesy has been vindicated earlier than I could ever have expected.

  CHAPTER X

  Disarming the Left

  Winning the arguments and formulating the policies for a second term — 1982–1983

  THE POLITICAL SCENE, 1982–1983

  It is no exaggeration to say that the outcome of the Falklands War transformed the British political scene. In fact, the Conservative Party had begun to recover its position in the opinion polls before the conflict, as people began to realize that economic recovery was underway. But the so-called ‘Falklands factor’, beloved of political commentators and psephologists, was real enough. I could feel the impact of the victory wherever I went. It is often said that elections are won and lost on the issue of the economy, and though there is some truth in this, it is plainly an oversimplification. In this case, without any prompting from us, people saw the connection between the resolution we had shown in economic policy and that demonstrated in the handling of the Falklands crisis. Reversing our economic decline was one part of the task of restoring Britain’s reputation; demonstrating that we were not the sort of people to bow before dictators was another. As I emerged from the strain of the period in which the Falklands dominated almost every moment, I found that people were starting to appreciate what had been achieved during the last three years. I drew attention in my speeches to the record and to the fact that none of it would have happened if we had followed the policies pressed upon us by the Opposition.

  The Opposition itself was divided between Labour and the new ‘Alliance’ of the Liberal and Social Democratic parties. Though we were not to know it at the time, Alliance support had peaked and it would never be able to recapture the heady atmosphere of late 1981 when it had led in the opinion polls and its supporters had claimed they had truly ‘broken the mould’ of British two-party politics. In fact, of course, the one thing you never get from parties which deliberately seek the middle way between left and right is new ideas and radical initiatives. We wer
e the mould-breakers, they the mould. The SDP and Liberals hankered after all the failed policies of the past — incomes policies, reflation by fiscal boosts to demand, shifting more power to a European bureaucracy and away from genuinely democratic national governments. The SDP’s instincts on defence were sound — as opposed to the Liberals, perpetually tempted by unilateralism — and they were contemptuous of Marxist dogma. But I always felt — and still do — that the leaders of the SDP would have done better to stay in the Labour Party and drive out the far Left. The risk was that by abandoning the Labour Party to its militant wing, while attracting support away from us, they might actually let into power the very people they were seeking to keep out.

  As for Labour, the Party continued an apparently inexorable leftward shift. Michael Foot is a highly principled and cultivated man, invariably courteous in our dealings. If I did not think it would offend him, I would say he was a gentleman. In debate and on the platform he has a kind of genius. But the policies he espoused, including unilateral disarmament, withdrawal from the European Community, sweeping nationalization of industry and much greater powers for trade unions, were not only catastrophically unsuitable for Britain: they also constituted an umbrella beneath which sinister revolutionaries, intent on destroying the institutions of the state and the values of society, were able to shelter. The more the general public learned of Labour’s policies and personnel the less they liked them. I was not among those many Conservatives at the time who thought that Labour would be displaced by the Alliance. Socialism represents an enduring temptation: no one should underestimate Labour’s potential appeal. But there was no doubt that in the extreme form adopted under Michael Foot’s leadership it was easier to beat.