Hi, welcome back. So we've been talking about a crisis of capitalism, a crisis in the West in the 1970s, a thrashing about, looking for new ideas to get out of the malaise. What you see is some New Thinking in the West. The democratic socialist alternative is faltering, as other revolutionary ideas have developed, really, in a way, a renaissance of liberalism. I mean, liberalism in the terms we've been using it all through this course, not the way in which it's conventionally used in American political life. For instance, economic liberalism, the notion that instead of larger government control over the economy, instead the answers might be to retreat from a government role in the economy. No single person was more influential as an advocate of economic liberalism in the 1970s than that very gentle, avuncular fellow, Milton Friedman. Now, for you to just have to get a sense of what Freidman was like and the kind of impact he had on people in the 1970s, here's a film clip of Friedman appearing on public television in New York City in 1975. I'll just give you about the first two and a half minutes of this. You'll be able to get a sense both of the argument, and of the man. Let's take a look. >> I'm Richard Hefner, your host on The Open Mind. My guest today has been labeled this country's foremost conservative economist. Milton Friedman of the University of Chicago, of Newsweek magazine, and of wherever it is that persons of brilliance and concern gather to discuss the fate of individual liberty in the midst of ever expanding governmental responsibilities. Professor Friedman, I wonder if I might begin the program by saying that you're a kind and a gentle man, yet you're identified by many with those who see, to those who make that identification to want us not to do kind and gentle things. Perhaps not provide for the poor, perhaps not provide for the aged, and I wonder how you'd reconcile these phenomena and whether you feel that it's fair to characterize you as a conservative economist. >> Well, let me start at the end of that first. I never characterize myself as a conservative economist. As I understand the English language, conservative means conserving, keeping things as they are. I don't want to keep things as they are. The true conservatives today are the people who are in favor of ever bigger government. The people who call themselves liberals today, the New Dealers, they are the true conservatives because they want to keep going on the same path we're going on. I would like to dismantle that. I call myself a liberal in the true sense of liberal, in the sense in which it means of and pertaining to freedom. Now, that brings me to your second point. One of the great mistakes is to judge policies and programs by their intentions rather than their results. We all know a famous road that is paved with good intentions. The people who go around talking about their soft heart, I, I share their I admire them for the softness of their heart. But unfortunately, it very often extends to their head as well, because the fact is, that the programs that are labeled as being for the poor, for the needy, almost always have effects exactly the opposite of those which their well-intentioned sponsors intend them to have. >> Friedman, in fact, was quite consciously borrowing from an older intellectual tradition, especially a group of people in Central Europe, like this Austrian economist Friedrich Hayek and the book that he had written that was so influential in the 1940s. Converging with this economic argument is also a political argument about the importance of liberty, about the importance of human rights. It just so happened that in the late 1970s and early 1980s, these issues and arguments about liberty and human rights are taken up both on the left wing and on the right wing of American and West European politics. No one more personifies this peculiar alliance than the figure of the Polish Pope, John Paul II. The particular time at which he became the Pope, the way he represented the aspirations of liberty, for people in Poland, the symbol that he provided for aspirations of liberty around the world, and the way in which that was being held back by the Soviet Union and its Polish government allies, that gives you a sense of the fusion of how political liberty, political liberalism, is crossing some of the usual party boundaries to become a powerful idea of its own at the end of the 1970s and beginning of the 1980s. Also factoring in to the popular support for some of these movements is that yearning for public order that I mentioned in my last presentation-- a reaction to the violence, the terrorist movements of the 1970s and also the shadow of the USSR, the fact that with America out of Vietnam, with America on the defensive, it begins to be the Soviet Union that, at least for a little while, is looking more like the world's bully. In a way then, this revolution that I'm describing in the 1970s and early �80s is a kind of revolution of small business folk, of shopkeepers, and no one seemed to exemplify their aspirations more than the grocer's daughter, Margaret Thatcher in England. So let's look at some of the key political turns in this period. I especially want to focus attention on Europe, because that was such a key battleground area in the struggle between East and West. In Italy and Spain, the communists come close to gaining power, but they do not succeed. They are turned back at the ballot box. On the other hand, Thatcher wins election in 1979, offering the British public a clear alternative. Here's Time magazine noting the victory of Britain's fighting lady. Thatcher's victory is followed at the end of 1980, with the triumph of Ronald Reagan ascending to the American presidency in 1980. In 1981, Francois Mitterrand takes power in France. And then one might think that there's a different direction being followed here, because as I said in my last presentation, Mitterrand is a French socialist. In 1981, he forms a ruling coalition in partnership with the communist party, but in 1982 Mitterrand decides to align with German partners, even with the British to some degree. He's firmly anticommunist on political matters, on economic matters he's decided to recoil from nationalizing the big banks, from pursuing the democratic socialist policies. He decides France just can't afford it. Instead it needs to join a European consensus that will reboot capitalism, not try to turn Europe toward democratic socialism. Mitterrand's conversion in 1982 then becomes a big part of this emerging trend. But no country perhaps was more important at the beginning of the 1980s in determining the future of Western Europe than West Germany. In West Germany, the Social Democrats were led in the 1970s by someone who was very much a social democrat on economic issues, but very pro-NATO and anti-Soviet in his international stance, strong on defense issues, that was Helmut Schmidt. Schmidt had to govern in an alliance with Germany's liberal party, that is, Germany's small government party, the Free Democrat Party, whose major figure was this man, Hans-Dietrich Genscher. Just to give you a sense of how precarious the balance was in West German politics, here's a basic electoral map that shows you the outcome of the German elections in three years. A quick review of the numbers and you can see that it's the small liberal party that holds the balance of power. And in the 1970s, they're governing in coalition with Schmidt and his Social Democrats. What turns Germany in a decisive direction, and brings the political and economic issues back together again, is actually a crisis over missiles. What basically happened here is the Soviets during the 1970s deployed a much more modern set of long range ballistic missiles from the Soviet Union that could target sites all through Western Europe. Some Western European leaders looked at these missiles and thought, this essentially disables our flexible response strategy, where we would start a nuclear war if the Soviets started a conventional one, because they could hold all our places hostage with their missiles. Therefore we need the Americans to bring missiles to Europe that, from bases in Western Europe, can strike the Soviet Union to keep the United States's security from being decoupled from the security of Western Europe. That sounds a little bit, complicated. It is. But the bottom line is West German leaders like Helmut Schmidt are asking the Americans to deploy missiles to Germany. Schmidt makes that pitch. It comes at a moment in which he already has a lot of tensions with Jimmy Carter over a lot of other issues. At the end of 1979, NATO decides to approve this deployment. It'll hold out the possibility of arms control with the Soviets, but it's going to go ahead with the deployment, which is to be completed by the end of 1983. This particular military issue just became an enormous symbol of confrontation over the political future of Europe. By the way, here is a photograph, there's the SS-20 Soviet missile on the left, the planned American Pershing II missile on the right. The Social Democratic Party, led by Schmidt, moves leftward. It does not want to go along with this missile deployment, which it thinks will make Europe an atomic battlefield in between the superpowers. What they want are agreements against arms. You just see the firm red bar on top of missiles, that's what the SPD says it wants to stand for. At this point in Germany, in the early 1980s, politics is becoming polarized, issues of economic liberalism and political alignment, pro or against NATO, are blurring together. The German liberal party abandons its coalition with the Social Democrats. That small liberal party, instead aligns itself with the Christian Democrats, kind of the national conservatives of German politics. Why? Because the liberals are increasingly alarmed, that the Social Democrats have economic policies that will just enlarge the size of government, which the liberals are against, and increasingly they're worried that the Social Democrats are against NATO. From the Social Democratic point of view, this whole business of NATO versus Warswaw Pact is the wrong way to think about it. It's the superpowers against the rest of us, who might be their victims. Well, those are the issues that are going to divide the German public. And they go through an intense period of huge public debate, demonstrations of hundreds of thousands of people, all through the streets of German cities. The leader of the new German government, in 1982, is Chancellor Helmut Kohl. Kohl, in turn, has been leading an intellectual movement in German conservatism called a sort of Tendenzwende, in which they're seizing on the ideological differences between East and West to reassert the salience of these differences, to the importance of aligning with NATO. No, they are not all alike. The West does stand for ideals, and the East does not. They point to issues of the suppression of unrest in Poland, of Soviet behavior around the world to strengthen their case. Well, anyway, that's the choice, the West German people are facing in 1982 and 1983. Choices like this are being faced in Britain, France, Italy, the United States. It makes 1981, �82, �83, intense years of domestic and international crisis. Just to set the scene: Europe is also, Central Europe, Germany, the most heavily militarized part of the entire planet. Hundreds of thousands of heavily armed soldiers facing each other across the inter-German border, and there are flash points for potential conflict all over the world. The Polish government and its Soviet allies have had to declare martial law in Poland to put down unrest led by the labor union Solidarity and inspired by the example of the Polish Pope. The Soviet war in Afghanistan against the Afghan resistance grinds on. There's economic crisis, domestic and global, from both the high unemployment and the high inflation that's plaguing all the developed countries. Meanwhile, in the less developed world, they can't pay for the imports anymore as oil prices have gotten so high. They borrowed a lot of money to pay for it, and then the interest rates that they have to pay on those loans are going up. There's a huge debt crisis, too, in the Third World. Countries are threatening to go bankrupt. In 1982, the Argentine government seizes a set of islands off the coast of Argentina called the Falkland Islands, long held by Great Britain. Great Britain prepares a navy and an expeditionary army and sends it across the North Atlantic and the South Atlantic to wage war to reconquer the Falkland Islands from Argentina. That's 1982. There's the Euromissile crisis tearing up the politics all across Western Europe. There is intense conflict in Central America, civil wars in El Salvador and Nicaragua, the threat and confrontation between the United States and Cuba and maybe even the Soviet Union. So here's the scene of that struggle. There's El Salvador, and Honduras and Guatemala are also getting caught up in this conflict, too. And again, the issue seems polarizing because the anti-communist forces in El Salvador and Nicaragua are committing all kinds of human rights violations, right wing death squads. So, if you're anti-communist it looks like you're lining up with right wing death squads. But if you're for the insurgence, are you also on the side of the Cubans? So, if you're beginning to get a sense of tension from all of this, you're recovering the mood of the early 1980s, and it comes to a head in 1983, really the most intense year of international crisis since 1962. Using these wonderful Time magazine covers, I'm just going to give you a set of snapshots, just to give you a feel for the turmoil of that year. Brezhnev dies, a new leader takes charge in the Soviet Union at the end of 1982, Yuri Andropov, he was the head of the Soviet secret police, the KGB. Third world debt problems: the looming bankruptcy of countries all across Latin America and other parts of the world. That's the debt bomb Time Magazine is writing about in January 1983 as banks had loaned people money to pay their higher oil import bills and then the loans came due. Meanwhile, the Euromissile crisis is intensifying. The two sides seem to be playing nuclear poker as the stakes get higher. You see the conflict of Central America, spotlighted here in May 1983, while Reagan proclaims America has a vital interest, a moral duty to assist the anti-communist resistance in Nicaragua. And Time is still noting problems in the Atlantic alliance. [LAUGH] This cover may have spoken for a lot of Americans by June of 1983 and the way they were feeling from reading all of this -- and more turmoil over Central America. By August of 1983, still more trouble in Central America. In September of 1983, a Korean Airlines passenger jet carrying hundreds of passengers strayed accidentally over Soviet airspace in Siberia. The Soviets sent up fighter jets to intercept it and simply shot it down, killing all the hundreds of people aboard. You can imagine the global reaction as the United States plays tapes of the Soviet air controllers getting word from the fighter aircraft that the target is destroyed. Meanwhile, there is a proxy war going on in Lebanon, where American troops had gone onto the ground to try to help solve problems in a long running civil war. The American troops are being pressured by local forces backed by Syria, backed by the Soviet Union. In Lebanon, in the fall of 1983, it looks like the Marines are holding the line helping to prop up one side in the civil war, but the Syrians and their allies aren't done yet. With Hezbollah, they blow up Marine barracks outside of Beirut. More than 200 Marines are killed. As the United States asks itself questions about whether to get out of Lebanon, the United States sends a small force to invade the tiny Caribbean island of Grenada where a left wing dictator, possibly aligned with Cuba, has just taken power. The escalating crisis in Lebanon seems to put the United States on a road to possible war against Syria, then lead by Hafez Assad. Yes, that's the same Assad family whose son has been ruling Syria during the recent civil war there. But if the United States clashes with Syria, it will face Soviet fighter jets and Soviet anti-aircraft missiles that are protecting Syria, another danger of conflict. And at the end of the year, the Soviets walk out of the arms control negotiations that were trying to manage the disputes over the deployments of the Euromissiles. And there were some other things going on behind the scenes. The Soviets were getting erroneous intelligence telling them that a NATO exercise in the fall of 1983 might even be preparations for a possible US or NATO attack on the Soviet Union. As tensions, perhaps, seemed to be spiraling out of control, there was an increasing sense, on both sides, US and Soviet, that they needed to take a step back. The popular culture is full of the nightmares of what might be coming. You can see this evidenced by this huge bestselling book about what might happen if the Soviets invaded Western Europe. This book published in the end of the 1970s was still being read all through the early 1980s. In America, a powerful television drama called The Day After showed just what might happen in America after a nuclear war. Ronald Reagan himself watched this film and was moved by it, shaken by it. Other films even speculated about the scenario of a Soviet invasion of the United States, accompanied by their Cuban allies such as this movie, Red Dawn, from which there has recently been a silly remake trying to invent new invaders of the United States. Or this reaction, this is a movie in which, of course, young people, Matthew Broderick and his girlfriend, try to save the world from an accidental nuclear war created by the war machines getting out of control. In the 1984 election year, Ronald Reagan and his advisers want to project an image of strength to the American people, but they also know that the American people want to elect someone who is interested in peace as well. In effect, voters in Europe and in the United States are going to make some choices in this polarized battle of ideas symbolized by this TIME cover showing Reagan and Andropov and their confrontation as the dominant story of the year. Thatcher, Kohl, Reagan, all get huge momentum coming from their vindication in those elections. Look at the results here in the German elections. In 1983, clearly the German voters support the Christian Democrats. The liberals' share dwindles. The Social Democrats dwindle even more, with many voters simply defecting to the anti-missile, pro- environment Green Party. Margaret Thatcher, the same year, triumphantly wins re-election, propelled by her victory over Argentina, her victory over the miners, she seems to be the reassuring figure Britons want. Kohl re-elected, Thatcher re-elected, and at the end of 1984, Reagan is re-elected, too, winning 49 out of 50 states. And in the Soviet Union, by contrast, Yuri Andropov dies. He's replaced by another leader, Konstantin Chernenko, who within a year is also dead. So there's a sense of domestic momentum, there's also a sense of international momentum, one side moving, the other side falling backward. But another key element of this story is what's going on with capitalism anyway? How was capitalism doing? Capitalism survived. In fact, capitalism Reboots, and it's that story that we'll be coming to next time. See you then. [BLANK_AUDIO]
