An American Life

by Ronald Reagan

  This was indeed a very bleak time for many Americans. But sometimes, as my mother said, troubles carry with them the seeds of something better. These were difficult years, but their hardships forced American industry to take a look at itself, and to become leaner, more efficient, more competitive. And thanks to provisions in the tax bills, businesses had new incentives to invest in the future and make their workers more productive.

  I remember visiting a huge lumber mill in the state of Washington, which, like many in the region, had been forced by the slump in lumber sales to lay off almost half of its workers. When I visited, the tax cuts and lower interest rates were beginning to stimulate a rise in home sales. The lumber mill was coming back; it had rehired many of its laid-off workers—but they were now producing twenty-five percent more finished lumber per worker than before the recession, thanks to improvements in productivity that the hard times had forced management to think about and introduce.

  I saw another example of the resilience of American industry at a motorcycle plant in York, Pennsylvania.

  At one time, dozens of American manufacturers made motorcycles, but now only one was left, the Harley Davidson Company. And until the mid-1980s, its future was in doubt, largely because of the growing competition of cheaper motorcycles made in Japan. To preserve the last American motorcycle company, we had imposed temporary tariffs on Japanese motorcycles, making them more expensive in this country. But when I visited the Harley Davidson plant in York in the spring of 1987, company executives informed me that I could cancel the tariffs a year ahead of schedule, because they had made a turnaround and no longer needed protection to compete with the Japanese.

  I’d been hearing stories of how American industry was learning to be more competitive, but at the Harley Davidson plant—as I later did in every corner of the country—I saw firsthand what was happening, and it was a thrilling experience. I’d always believed that the vast majority of American workers, whatever their work, have an inherent pride that makes them want to excel, and that when this fund of pride and energy is liberated, we are unbeatable at whatever we do.

  We are not a lazy people; we are an innovative, pragmatic, industrious people, and have demonstrated as much time and again during more than two centuries of problem-solving. At the Harley Davidson plant, I was told how managers and assembly-line workers had joined in a team to figure out how they could beat back their competition from Japan. Meeting around a table, production workers and their bosses talked over their jobs. They discussed how they ordered and handled inventory, and how parts were utilized on the assembly line. The workers pitched in and came up with ideas for doing their jobs more efficiently and improving the quality of the products they made. As the workers became more involved in decision-making, the result was a drastic change in operations that made the whole plant more efficient. Also, where the company had once made a single model, it had now developed a family of motorcycles of different sizes to compete with the motorcycles from Japan.

  The Harley Davidson workers told me they could now compete with anyone in the world. What a difference, I thought, between a factory worker like that and one in a Communist factory, who is given no choice of a job, just ordered to go there, and given no incentive to make a decent product or excel in any way. The men and women on the Harley Davidson line had a fervor and pride that was uplifting and contagious.

  “That’s not a factory,” I told someone after the visit, “that’s a religion.”

  What I saw at the motorcycle plant and the lumber mill were just samples of a quiet revolution that was going on all over the country.

  Few industries complained as much to me or to Congress as our textile industry, which demanded restrictive trade barriers so that it wouldn’t have to face such stiff competition from foreign manufacturers. We wouldn’t give it the concessions. As a result, the American textile industry undertook its first comprehensive modernization program in decades: Companies closed obsolete plants, built more efficient ones, and installed millions of dollars’ worth of modern computer-controlled spinning, weaving, and other equipment that drastically cut production costs and increased productivity for each employee by an average of more than twenty-five percent. Although the demand for unskilled workers in the textile industry declined, there was an upsurge in higher-paying jobs for workers who were given more demanding, more interesting, more responsible, more productive work.

  In different ways, much of American industry underwent a similar transformation during the 1980s. Faced with new competition and responding to forces in the free market, our companies went out and made better products and became more efficient at doing it, a transformation borne out by statistics: Between 1982 and 1987, the productivity of American industry increased at an annual rate of more than 4.2 percent, more than one and one-half times the average for the postwar period, while the productivity of individual workers grew by an average of 1.8 percent a year, fifty percent more than the average rate of growth during the seventies.

  Adversity made us tougher. New competition made us work harder.

  Again, I don’t take credit for this. The American people did it. And it wasn’t only factory workers and plant managers who brought America back. A lot of our growth during the eighties didn’t come from the giants of American industry but from smaller, innovative companies that tapped new markets, often with new products born out of their own ingenuity. Most of those millions of new jobs produced during the economic expansion were created by entrepreneurs—independent businesspeople pursuing one of the oldest of American dreams.

  I met a lot of them while I was president, and if ever there was evidence of why Communism failed and capitalism triumphed, it was in the faces of these people. They were the people capitalism was all about. I heard story after story of someone taking an idea to the bank, borrowing, working hard, then experiencing the joy of seeing a business flourish. They were just ordinary Americans who had had an idea or a dream or a longing for economic independence, and they had gone after it. They had taken risks, worked, and realized their goal. Not all of them succeeded, but America gave every one of them the opportunity to fulfill their dream.

  One woman I met had graduated from college with plans to become a classical pianist. Then she had developed arthritis in her hands and couldn’t play anymore. So, there she was, wondering what she would do with her life. One of her aunts said, “You’ve always made wonderful brownies, why don’t you make some and sell them down at the neighborhood grocery store? At least you’ll have some spending money until you find out what you’re going to do.” Well, she started doing that and before long she was selling more than $1 million worth of brownies a year and had thirty-five employees.

  Other Americans I met or corresponded with pursued other unique dreams: A father-and-son team turned family recipes into a $10-million-a-year business making frozen Mexican dinners. In a small town in Illinois, dozens of people lost their jobs when a local factory closed—then, through their own determination and labor, and with a little capital from someone who placed faith in them, they created a thriving metal fabrication business. . . . And they were just a few of the quiet heroes who helped turn around our economy.

  As I have often said, governments don’t produce economic growth, people do. What government can do is encourage Americans to tap their well of ingenuity and unleash their entrepreneurial spirit, then get out of the way.

  The tax cuts and the Tax Reform Act allowed people to accumulate money to start new businesses. As the tax laws began to have an effect, people began doing so in record numbers, not only enriching their own lives but adding to the national wealth and helping to send a wave of prosperity across the land.

  Reduced interference by the government also helped. Although I wasn’t able to eliminate as much governmental red tape as I would have liked, we did manage to reduce government interference in the economy and make available more money for investments in the future.

  Then, as I say, Americans did the rest.


  53

  I WAS THE NEW BOY in school when I flew to Ottawa in the summer of 1981 for my first economic summit, the annual meeting of the heads of seven industrialized nations held on a rotating basis in each country. Before leaving, my “sherpas”—that’s what they call the specialists and assistants who prepare presidents for international summit meetings—told me the United States was likely to come under fire in Ottawa for our high interest rates, which several of the countries blamed for their own economic troubles. Margaret Thatcher of Great Britain, Pierre Trudeau of Canada, Zenko Suzuki of Japan, Helmut Schmidt of West Germany, François Mitterrand of France, and Giovanni Spadolini of Italy and I had a freewheeling discussion about the state of the world’s economy. None of us was very enthusiastic about it. Schmidt, a socialist, was in a particularly gloomy mood. Although Mitterrand suggested our interest rates were contributing to the world’s problems by draining off capital from other countries, he didn’t find any support around the table. Everyone knew I was new on the job, and when I described the economic recovery program I was trying to get through Congress, they wished me well. I suspect, however, that several of them didn’t think much of some of my more radical ideas for cutting taxes and reducing the government’s interference in economic affairs.

  Two years later, the economic summit convened amid the breathtaking colonial beauty of Williamsburg, Virginia, just as the economic turnaround in the United States was beginning to gain a strong head of steam. It was my turn to serve as chairman, and I was a little edgy. At dinner the first night, the seven of us sat down around a big round table, everyone fell silent, and someone—I believe it was Helmut Kohl, who had replaced Schmidt as chancellor of West Germany—spoke up: “Tell us about the American miracle.”

  He wanted to know how we had 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.

  Looking at a semicircle of faces, I launched into what I guess was a variation of the speech I’d been making for years. First, I gave them my thoughts about how excessive tax rates take away the incentive to produce, and how lower tax rates, in the end, generate more economic growth and also greater revenue for government. Then I told them what we had done to lower our tax rates, and some of the other things we were trying to do, such as reducing the size of government, eliminating unnecessary regulations and interference in the free market, and turning over to private enterprise some of the functions government had taken over. Everyone around the table just listened in silence as I spoke.

  It wasn’t long after that that I began reading about a wave of tax cutting in several of their 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.

  No one did more in this regard than Margaret Thatcher. But I don’t claim credit for convincing her of the merits of free enterprise and downsizing government. She was at least as determined as I was to get government out of the pocketbooks and off the backs of the people. From our first meeting, we’d been on the same wavelength. Whenever we saw each other, she usually told me her ability to point to the success of our policies in the United States had made it easier for her to convince Britons the policies had merit. As everyone now knows, her policies touched off a boom that brought great prosperity to the British people. In many ways she accomplished more than we did in returning government-run enterprises to where they belonged—the private sector—and created a model that has since been copied by other countries. I wish we could have done as well on this as she did. Maybe the difference between what a prime minister can accomplish and what a president can do has to do with the fact that a prime minister automatically has a majority in Parliament, and a president can’t say the same thing about our Congress. For all of my eight years in office, the opposing party had a majority in our House of Representatives.

  Before going to my first economic summit, I’d wondered what it would be like to have the heads of seven nations in the same room: What tensions of ego and status would be at work? As I will explain shortly, we did have occasional conflicts. But, as our first meeting got started, I was surprised to hear the others addressing each other by their first names. When I got my first chance to speak, I said, “My name’s Ron . . .”

  Although I never asked her about it, I think the idea of addressing the other summit leaders by their first names was Margaret Thatcher’s. It did wonders to make the meetings cordial and productive. I was always Ron to the others and I addressed them by their first names.

  Once I was no longer the freshman of the group, I went out of my way to tell newcomers about the policy. When the new Japanese prime minister, Yasuhiro Nakasone, came to his first summit, for example, I asked him, “What does your wife call you at home?”

  He said, “Yasu.”

  I said, “Well, Yasu, my name’s Ron, and here we all go by our first names.”

  I liked the idea so much that after the Ottawa meeting, when I met the heads of other nations during their state visits to Washington, I would suggest (unless there was a custom or cultural reason that made it inappropriate) that we go on a first-name basis. It worked wonders in breaking the diplomatic ice. Suddenly, instead of a formal meeting between government officials, you had two people sitting across from each other.

  Not everything at the Williamsburg summit went as cordially as on that first night when I was asked to explain the “American miracle.”

  As I’ve mentioned, in November of 1981 I had made my zero-zero proposal to eliminate all intermediate-range nuclear weapons from Europe. After that, we reopened negotiations with the Russians in Geneva with the proposal on the table. But now, more than a year later, the talks were deadlocked. The Soviets refused to give up their intermediate-range missiles targeted at European cities and accept parity with NATO. I still believed the only acceptable INF agreement was one eliminating all intermediate nuclear missiles from Europe. If they wouldn’t give up their missiles, I thought the only way we would persuade them to do it was to proceed with our plans to deploy Pershing II and cruise missiles as a counter to their missiles in Europe.

  At the time we met at Williamsburg, the newly developed missiles were almost ready for deployment in Europe. I opened our discussion by reminding the others that the Geneva talks were at an impasse. I thought we had to go ahead and deploy NATO’s new weapons on schedule in order to apply pressure on the Soviets to accept zero-zero parity. After a lengthy discussion, we agreed on the principles of a communiqué incorporating this position, and asked our foreign ministers to draw up a statement reaffirming support for the “two-track” policy that included deployment of the new missiles as well as continued negotiations aimed at eliminating intermediate-range weapons from Europe.

  Everything was settled, or so it seemed. The next morning, however, François Mitterrand and Pierre Trudeau declared that they couldn’t support the statement, and in effect called those of us who favored installing the new missiles warmongers. Obviously, they had gotten together the night before and decided to renege on the previous day’s agreement.

  Our discussion became very hot, with the two of them entrenched on one side of the argument and the rest of us on the other. I was angry at their turnabout and spoke for twenty minutes straight defending our position.

  Because of the disagreement, we were an hour late for lunch. As we left the meeting for the building where lunch was to be served, our group walked together and they walked alone. Neither group spoke to the other throughout lunch. In our afternoon session, we asked our foreign ministers to work on a revised statement that would satisfy Mitterrand and Trudeau but not water down the heart of the communiqué; then we started working on a statement of economic policy endorsing liberalization of trade policies. Once a
gain, from out of the blue, Mitterrand and Trudeau objected.

  “I thought at one point Margaret Thatcher was going to order Pierre to go stand in a corner,” I recorded in my diary that night. “It was hard to remember [that] we had started the day with a prayer service in the tiny church. Maybe that’s what did it because we closed the day with both issues resolved, cordiality restored and no winners or losers.”

  A year later, there was a similar dispute at the economic summit in London, with Mitterrand and Trudeau again squaring off against the rest of us. Pierre bitterly lit into Margaret, the chairman of the meeting, and told her she was being heavy-handed and undemocratic in dealing with their objections. I was horrified by his rudeness and the insulting way that he spoke to her; but she ignored him, kept her cool, and never skipped a beat. When the session was over, I caught up with her in the hall and said, “Margaret, he had no business talking to you like that, he was way out of line.” But she just said very quietly: “Oh, women know when men are being childish.”

  That night over dinner at Buckingham Palace, Pierre mentioned that he had read someplace that I could recite by heart “The Shooting of Dan McGrew” by the Canadian poet and storyteller Robert W. Service. I’m not sure he really believed I could do it; maybe he just wanted to put me on the spot and see how I’d handle it. Sitting between Pierre and me was the Queen Mother, and as it turned out she was a great fan of that story and one of its characters, “the lady known as Lou.” So when she heard what Pierre said, she turned to me and said, “Oh, do you know ‘The Shooting of Dan McGrew’?”

  I said, well, yes, then she started urging me to say it. She wouldn’t let up, and the whole table fell silent waiting to see what I would do. Across the table were Prince Philip and the queen. Everybody was waiting for me. I was on the spot, and so I plunged into reciting that poem I’d memorized when I was a lad back in Dixon, and every time I said “the lady named Lou,” the Queen Mother chimed in with me. When we were through, everybody at the table applauded.