Margaret Thatcher: Right about nearly everything (The Financial Times)

CPS Board Member Niall Ferguson writes for the Financial Times on the respect Baroness Thatcher commanded abroad. 

“It is still terribly hard for those who opposed her to admit it, but Margaret Thatcher was right about most things.

She was right that Britain’s trade unions had become much too powerful. She was right that nationalised industries had to be privatised. She was right that inflation has monetary causes.

She was also mostly right about foreign policy. She was right to drive the forces of Argentina’s junta out of the Falklands and she was right to exhort a “wobbly” George H.W. Bush to mete out the same treatment to Saddam Hussein’s forces in Kuwait.

Though labelled the “Iron Lady” by a Soviet magazine, her hawkishness in the cold war did not blind her to the possibilities of doing business with Mikhail Gorbachev. Like Ronald Reagan, she was quick to see the opportunity offered by his policies of glasnost and perestroika.

The outcome of the cold war seems inevitable with the benefit of hindsight. But for most of the 1980s, Thatcher had to endure a relentless stream of criticism from fellow travellers and useful idiots: believers in unilateral disarmament who would gladly have allowed the Soviets to establish dominance in intermediate range nuclear forces in Europe, as well as exponents of “convergence theory”, who insisted that the countries of Nato and the Warsaw Pact were gradually and peacefully growing alike (give or take the odd gulag).

Above all, however, Thatcher was right about Europe. She was right to push Europe in the direction of real free trade by backing and signing the Single European Act of 1986. Yet she was equally right to oppose the idea of a single European currency.

On this issue, the Financial Times, as well as a great many other respected publications, owes Thatcher not only the respect due to a great leader, but also an apology. Throughout the 1980s, many critics consistently heaped opprobrium on her for resisting the efforts of her own cabinet to get sterling into the European exchange rate mechanism.

Consistently, Thatcher’s sceptics took the side of those, such as Nigel Lawson, Geoffrey Howe and John Major, who favoured “shadowing” the Deutschmark and then pegging the sterling-mark exchange rate.

Having been dragged kicking and screaming into the ERM in October 1990, Thatcher denounced the Delors plan for a federal Europe with a defiant “No! No! No!” – one “no” apiece for the European parliament, government and senate he envisaged. Just weeks later, deserted by her cabinet colleagues, she was forced to resign.

Yet subsequent events have largely vindicated Thatcher’s view. Sterling’s entry into the ERM was an unmitigated economic policy disaster. Tying Britain’s fortunes to the decisions of the Bundesbank in Frankfurt, ERM membership led to an unnecessarily severe recession in 1990-1992, which ended only when – with some help from George Soros – the pound left the mechanism.

There were those who argued that the ERM fiasco illustrated the even greater advantages of a full monetary union over a system of fixed exchange rates. But once again subsequent events have confirmed the Thatcherite view that an independent monetary policy is an essential part of a nation’s sovereignty. Just ask yourself how Britain would have fared if we had been inside the eurozone when the financial crisis struck. I shudder even to think of it.

It has long been conventional wisdom that Thatcher was wrong about one thing above all. She was wrong, so the argument goes, to oppose German reunification. Indeed, most recent accounts of the events of 1989-1990 portray her as a kind of female Basil Fawlty, stuck in some kind of second world war time-warp.

Yet future historians may look back on negative reaction to German reunification with more sympathy than most commentators felt at the time. In an internal memorandum, written on February 2 1990, Thatcher offered a shrewd commentary on West Germany’s position that reunification would pose no strategic threat if it was accompanied by increased European integration. “The problems will not be overcome by strengthening the E[uropean] C[ommunity],” she wrote. “Germany’s ambitions would then become the dominant and active factor.”

There are rather a large number of people in southern Europe today – and perhaps also in Paris – who would acknowledge that here, too, Thatcher was right. Only last year the Italian prime minister complained of being treated as if Italy was in a “semicolonial” relationship with Germany.

Like many great leaders, Margaret Thatcher has come to be more respected abroad than she ever was at home. Left-leaning Brits who opposed her during the 1980s find it especially hard to admit that she was mostly right and they were wrong.

Date Added: Tuesday 9th April 2013