It was the fall of 1976. I was part of a small group entertaining the leader of Britain's Conservative Party, Margaret Thatcher, at dinner in a private room at the Cafe Royal in London's West End.
After dinner the conversation moved from economic freedom to matters of personal freedom. It was a natural development, since the host for the evening, an aspiring Member of Parliament (MP), believed that economic and personal freedoms are inseparable and indivisible. And he perceived that the "libertarian " right of the Conservative Party was supporting economic freedom while either ignoring or being openly hostile to questions of personal freedom.
He began to explore this matter with Thatcher and illustrated his theme by advocating the legalization of marijuana. Thatcher was completely and utterly appalled. Sensing he was on rocky ground, our host moved away from the philosophical case to a more practical approach. Marijuana, he claimed, was freely available, so why not recognize reality? He knew at least one person who sold the substance.
"My personal detective is sitting outside that door," said Thatcher. "Call him in and give him this dealer's name and address. "
Our host changed the subject, and Thatcher let the matter drop. The detective was never called in, Thatcher went on to become prime minister, our host's aspirations to a seat in Parliament were fulfilled-and the dope dealer is probably still in business.
I met Thatcher many times over a period of 10 years from her days as education secretary and later shadow environment secretary to her time as leader of the opposition and later prime minister. My view of her has been shaped by those many glimpses of her political development.
Opinions on Margaret Thatcher among America n conservatives and libertarians tend to fall into one of two groups. Either she is viewed as the best thivg since sliced bread, a crusading antistatist who is creating a new climate of freedom and free enterprise, or she is a typical politician, knee-deep in broken promises, who has failed to cut taxes, reduce expenditures, dismantle the state, and restore freedom. But I must say from my personal knowledge and observation that neither view is correct.
It's now been five years since Thatcher was first elected prime minister and it seems an appropriate time to assess her personal philosophy, promises, and progress. But before that can be attempted it is necessary to understand the decades leading up to her election as Conservative leader in 1975 and her election as prime minister in 1979 and 1983.
During World War II, the level of government control of the British economy exceeded that of National Socialist Germany. Sixty percent of all production went to the state; five and a half million men and women were in the military; 40 percent of the working civilian population-and there was zero unemployment-was involved in war production; rationed goods absorbed over a third of after-tax income; and a worker could not change jobs without a government permit. So many people were involved in so many ways that it was known as the "people's war."
On top of this large-scale collectivism, the 1944 Beveridge Report on social security proposed state support "from the cradle to the grave." Memories of the depression that had followed World War I were very much alive. In 1918 the troops had been promised a return to "a land fit for heroes," not unemployment; and this second time around people were not about to be "cheated." Strong central control of all aspects of the economy was perceived to have pulled the country through six years of war; now, so people thought, a strong state could turn the "people's war" into the "people's peace."
Influenced by Friedrich Hayek's free-market classic The Road to Serfdom, Winston Churchill based his 1945 election campaign against the Labour Party on a vehemently antisocialist platform. Socialism, he said, is "inseparably interwoven with totalitarianism." To implement a socialist program, one would have to "fall back on a form of Gestapo."
Yet throughout most of the war, the Labour leaders had been in Churchill's coalition cabinet, running the country while he ran the war. There had been no "Gestapo," his charge made no sense, and Labour romped to power.
The new government of Clement Attlee kept the war-time controls and sent John Maynard Keynes to America to secure new loans. It nationalized the Bank of England, road transport, the railways and independent domestic airlines, iron and steel, and the fuel and power industries. The Beveridge Report was implemented with three major welfare bills passing through Parliament. Just as World War I had earlier served as a training ground for those who later administered the New Deal in America and the corporatist policies of the British government of that time, World War II led to the establishment of the welfare state and strong government control of the economy in the United Kingdom.
During the six years from 1939 to 1945, Keynesian doctrines of government management of the economy had completely conquered British academia and opinion-forming circles. Hayek now believes that in 1939 he still had a good chance of defeating such views, but by 1945 the war had reduced his chances to all but zero. War-socialism had ensured the Keynesian victory.
However, huge shortages rapidly emerged. Bread was suddenly rationed for the first time. Two months after coal was nationalized, there was no coal. Newspapers were limited to four pages. For five hours every day there was no electricity. Many ration levels were reduced. And it became a criminal offense to turn on a fire in summer.