Chapter 34 Chapter 2 Thinking Again for the First Time

Although my role as spokesperson for environmental affairs took up most of my time and energy, from late June of that year I was involved in another cause.This cause will have profound consequences for the Conservative Party, for the country and for me personally.The establishment of the Policy Research Center was actually Keith Joseph's idea, not mine.He came out of the wreckage of the Heath government, adamant on the need to rethink our policy on fundamentals.For this, Keith was indeed the ideal man.He has the requisite wisdom, integrity and humility.He has a keen interest in both economic and social policy, and he has long-standing political experience.He has an uncanny knack for building friendship and mutual respect with people of diverse personalities, viewpoints, and backgrounds.While his words can be fierce and persuasive when feelings are strong, he is also great at listening to others, and he is never a passive listener.He researched arguments and claims and wrote down the questions he went home to ponder.He impresses because of the intellectual self-confidence that his constant introspection imparts to him.His unusual courage in front of a hostile audience won him the admiration of his friends, for we all know him to be shy, even timid, by nature.He was too good a man to be in politics, except that politics would be intolerable without some good people.

Without Keith I would not be Leader of the Opposition, nor would I have achieved what I have achieved as Prime Minister.But it is also fair to say that Keith would not have achieved what he has achieved without the Center for Policy Studies and Alred Sherman.These two men have nothing in common other than being Jewish, and it would be hard to believe they could work together without first-hand seeing how productively they work together. As far as I know, Keith and Alfred first met in 1962, when Keith was housing secretary and Alfred was reporting on local government in the Daily Telegraph.They are in constant contact.Later, after a discussion at the "Reform Club," Keith sought Alfred's opinion on a speech he had brought, and Keith has often sought Alfred's opinion ever since.In the early days of the Heath government, they had less contact.But during the 3-day working cycle, Keith and Alfred often meet to discuss Middle East issues. Alfred can be said to be an expert on Middle East issues. He writes articles for a major Hebrew newspaper in Israel.

Alfred's talent has its own characteristics.With the zeal of a convert (a former communist), combined with his vast knowledge and skills as a sharp polemicist, he set out to conceive of a new free-market conservatism.I think he is more interested in the philosophy behind the policy than in the policy itself.He is better at untangling many sloppily structured arguments than at coming up with novel solutions.However, his clarity of mind and his ability to completely ignore other people's feelings and opinions about him made him a stark contrast to Keith and a powerful fit with Keith.Alfred helped Keith turn the Policy Research Center into another source of Conservative ideas on economic and social matters.

I wasn't involved in this from the beginning.But I understand from Keith that he is looking for ways to move the policy research work he has undertaken in the shadow cabinet into constructive channels. In March, with Ted's consent, Keith established a research institution to conduct comparative research on the economies of other European countries, especially the so-called "social market economy" practiced by West Germany.Ted put Adam Ridley on the board of the Central Policy Research Center (Adam served as his economic adviser within the Conservative Party's research department).Beyond that, Keith is largely left to his own devices.Nigel Vinson, a successful entrepreneur who strongly believed in free enterprise, was responsible for finding an office for the center.Later found on Wilfred Street near Victoria.Simon Webley, who chairs the British-North American Studies Association, ensures that the articles in the Center's publications always take into account economic theory and business realities.Then, in 1974, the current director, Jerry Frost, joined the center and established some administrative order for what might have been a hectic intellectual.Others who made important contributions were Jock Bruce-Gedan and Peter Utley.The success of the Center is also due to the hard work of the Secretary and the Chef, who serves London's best and cheapest lunches twice a week. (Perhaps not always cheap: Jerry Frost once wrote in the guestbook: "We seem bound to disprove the assertion that there is no such thing as a free lunch.") The center gradually It has become a gathering place for a large number of free market economic thinkers.Not all of them were members of the Conservative Party, but they were all seeking to change the climate of public opinion and gain insight into the role of markets and the ills of state-ruled economies.

I was directly involved in the work of the center at the end of May 1974.Whether Keith thought about inviting other members of the shadow cabinet to work with him at the center I do not know.If he invited, they must not have accepted.He was in a risky position of exposure, and the fear of provoking Ted's wrath and ridicule from left-wing critics was a powerful barrier to taking center work.I jumped out at a time like this and became Keith's deputy director. The Center for Policy Studies is the least bureaucratic institution.Calling it a "think tank" is inappropriate because it doesn't conjure up the momentum of any of the big American foundations known.Alfred Sherman sensed this, calling the center "inspirers, agents of change, and political enzymes."The social market approach first proposed showed no particular effect and was quietly forgotten in the end, save for a pamphlet entitled Why Britain Needs a Social Market Economy.The concept of the social market - like other overly literal loan terms - is clouded by a number of issues.Is it possible to be as simple as merely rephrasing that only a successful market economy can sustain social progress?Since there is a high degree of "social security" or regulation, to what extent does it appear to be a market economy?Even its most famous proponent, West German Chancellor Ludwig Erhard, was clearly skeptical of the implementation of a social market economy in later years.

What the Center then does is expose extensively the futile and self-defeating consequences of government intervention.This is followed by the initiation of an open political debate at the highest intellectual level with the aim of effecting change, changing the climate of opinion, and changing perceptions of the "possibility" of change.In order to do this, it is necessary to borrow another Alfred saying, "Dare to think the unthinkable".After a while, this approach began to cause some controversy. Keith decided to give a series of lectures during the summer and fall of 1974, in which he would conduct his own analysis of what had gone wrong and point out the actions that should be taken.The first presentation, this time to attract potential fund donors, took place at Upminster on Saturday 22 June.Alfred was the main drafter.But, like all of Keith's speeches—except for that important Edge Baston speech—which I'll get to later—he endlessly circulated drafts of his speeches for comments.He carefully considered all feedbacks and deleted every redundant word, thus making the text very concise.Keith's speeches have always focused on rigorous analysis and precise language more than style of speech.Taken as a whole, these speeches are powerful rhetorical works.

The speech angered Ted and the Conservative establishment because Keith lumped together mistakes made by Conservative and Labor governments under what he termed "30 years of socialist fad".The last time someone dared to say such a thing was "The Road to Serfdom" by Heike et al. in 1944.Keith pre-empted the criticism that would surely be directed at him, and pre-empted full responsibility for the Conservative Party's mistakes then and since.He took out and criticized things that had been considered sacrosanct in the past one by one.Referring to the frantic pursuit of economic growth, he said: "Growth is good, but we just don't know how to speed it up; faster growth, like happiness, should not be the main goal but a by-product of other policies. "

He bluntly said the public sector had been "sapping the wealth created by the private sector" and took issue with the value of the government's "investment" in tourism and expanding universities.He denounced the socialists' hatred of profit and pointed out the harm to labor mobility caused by rent controls and the provision of public housing.He concludes with "the inherent contradictions of the mixed economy, which are especially inexcusable in the eyes of the consensus advocates".This short speech has had a huge impact, and it is important that everyone knows that more content is yet to come.

Keith, in his own way, deliberately avoids ill-intentioned practices that have done so much harm to Britain, such as excessive state spending, nationalization, managerial control of the economy, taxation, and trade union power.Instead, he believes, all this happened out of good intentions.Perhaps he was being too generous on this point, thinking that others were as noble as himself.But his apparent sincerity and fraternity, combined with his devastating critique of the politics of the past 30 years, enhanced the practical impact of the speech. In August he returned to the subject at Leith.At the time, I myself was more involved with the Center for Policy Studies, attending Keith's conferences, commenting on his insights, and preparing my own opinions and contributions in the areas of education and social affairs with which I was most familiar.

I learned a lot from Keith and Alfred.I re-read books with innovative perspectives on liberal economics and conservative thinking.I also regularly go to lunches at the Institute for Economic Matters where there are people like Ralph Harris, Arthur Selden, Alan Waters - in other words, when our administration went terribly wrong People with the right views - they are busy charting a new, non-socialist economic and social path for Britain.I often dined with Professor Douglas Haig, an economist who later became an informal economic advisor to me. Around this time I also met the suave and funny Gordon Reese, a former television producer.He was an adviser to the Conservative Party on television image issues at the time.I think he has an unusual sense of the medium of television.In fact, by the eve of the October 1974 general election, I had established a great deal of contacts with those whom I had relied heavily on during my leadership of the Conservative Party.

Keith will make three policy speeches, the last of which will be held in Preston on Thursday 5 September. (At the time he was Home Secretary in the Shadow Cabinet).Keith's views were discussed earlier in the shadow cabinet but were inconclusive.Ted rejected Keith's call for a full reassessment and discussion of the economy.Keith decided that his views could neither be silenced nor cast aside, and he announced that he was about to make a major speech on economic policy.Ted and most of our colleagues tried hard to prevent him from doing this.Geoffrey Howe and I were considered the two members of the shadow cabinet most likely to influence him, and were sent to try to persuade him not to, or at least to tone down what he had to say: anyway, Keith I read a draft of the speech.This is one of the most powerful and persuasively analyzed speeches I have ever seen.I did not propose amendments.Neither did Jeffrey, as far as I know.The Preston speech should still be regarded as one of the few speeches that fundamentally influenced the views of a generation of statesmen. This speech lays out the monetarist approach in more detail than ever before.Its somber opening line, "Our society is threatened with being destroyed by inflation," is usually dismissed as alarmist.However, the inflation rate was 17% at that time and remained high. The impact of inflation on the lives of ordinary people made them feel helpless.This situation only makes Keith's claim that successive governments are responsible for inflation reaching such a level all the more explosive.He rejected the view held by the shadow cabinet that inflation was "imported", caused by soaring prices around the world.In fact, inflation is the result of excessive growth in the money supply.He explained that there is a time lag of "a few months or even a year or two between loose monetary policy and inflation."He also implicitly - and certainly accurately - blamed the Heath government for an inflation problem that was just beginning to grow to catastrophic levels the next year.He also rejected income policy as a means of curbing inflation.The whole analysis is nuanced and aggressive: "Merely using income policy (I think the word mere is a small concession to the official line of the shadow cabinet) as a way to curb inflation caused by excess money supply is like trying to plug a leaky pipe by not turning off the spigot. It's like trying to plug a loophole, plug one and you'll find two... But we knew all these arguments long before this year. We used them when we were in opposition in 1966-1970. So Why are we trying to use income policy again? I think we are desperate to believe in it because we are so afraid of its alternative: sound monetary policy." (Of course, I also accepted the monetarist analysis in my 1968 speech at the Conservative Political Research Center, so I feel it applies to me as well.) Keith then pointed to the root cause of our disastrous 180-degree turn—the fear of losing our jobs.When the number of unemployed reached one million, the Heath government became nervous.Keith explained, however, that this unemployment statistic is somewhat watery because it includes "short-term unemployment" -- that is, people who are out of work for a while and are switching jobs -- as well as a large group of people who could be laid off for one reason or another.Likewise, there is a large number of fake unemployment, people who receive benefits while earning income.In fact, Keith points out, the real problem is a labor shortage, not a surplus.We should be prepared for and acknowledge that there may be a danger of temporarily increasing unemployment as a result of controlling the money supply to curb inflation, he said.But to keep inflation down (inflation itself reduces jobs, an argument that Keith and I will make several times later), the growth of the money supply has to be kept in check.Keith is not arguing that if our money supply is normal then everything else will be normal.Keith specifically states that this is not his opinion.However, if we cannot achieve monetary control, we must never achieve any other economic goal. The impact of Preston's speech was enormous.Of course, he made Ted and the Conservative establishment extremely embarrassed.Some still hope that warnings of dire socialism, combined with hints of forming a national government and our new policies on mortgage rates and local taxes, will bring the Conservatives back into power - a poll the day of Keith's speech suggests we Leading the Labor Party by two percentage points, this again contributes to the above illusion.The Preston speech shed light on Keith's strategy, as it became clear that if the Conservatives returned to government with Ted Heath as Prime Minister, it would be nearly impossible to reassess policy as Keith advocated.Keith himself was cautious, deciding to spend more time at the Center for Policy Studies in Wilfred Street than to go to Westminster, where some of his colleagues were so annoyed with him.For my part, I don't see any real chance of our party winning at all.In the short term, I am prepared to fight to the best of my ability for our policies, and it is my duty to defend them.In the long run, I'm sure we have to get the whole party on Keith's lines, and ideally under Keith's leadership.