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9-08-2015, 23:46


Ronald Reagan had many detractors, who directed sneers at the movie actor turned president, the ‘great communicator’ who failed to grasp the essential details of issues, the hands-off president. When he did stumble into trouble, as in the Iran–Contra affair, he did not appear to realise precisely what or who had gone wrong. Yet he retained his personal popularity throughout his two administrations, as troubles just seemed to slide off him, earning him the nickname the ‘Teflon President’. Was Reagan just lucky to be in the White House during a decade most of which brought increasing prosperity to the Western world, in contrast to the difficult 1970s? Was he merely fortunate that the Soviet Union had gained a new leader in the mid-1980s who saw the futility of the Cold War and was determined to end it? Or was there more to it? Perhaps the judgement should be that Reagan spotted opportunities and responded positively to them. He was a likeable, kindly president and he had the skill to project his warmth. The American people were in tune with his optimism; they wanted to put Vietnam behind them. They responded to his upbeat projections of a bright future and rejected Carter’s gloomy ‘crisis of confidence’ diagnosis of what was wrong with America. Reagan was carried forward across the nation, not just in California, by a revival of the conservative tradition that had already made itself felt in the 1970s. It was a scepticism about the ‘nanny state’, about government’s ability to find solutions to all the country’s ills, including the growing and predominantly black underclass, the drug-use, the gun culture and the increasing number of one-parent families. The American people would have to accept their responsibilities. Welfare meant taxation. In California in 1978, the state had to obey the results of a referendum called Proposition 13, which cut property taxes and so left the state budget with insufficient funds for all its welfare and social programmes. Reagan recognised that the California tax revolt was not just a local but a national issue. The diagnosis was that taxation fell too heavily on the creators of wealth. There was too much regulation stifling America’s natural enterprise. In his inaugural address he coined the slogan, ‘Government is not the solution to our problem – government is the problem.’ The US needed government, but it should work with the people, not sit on their backs. The US, he declared with some exaggeration, was the ‘last and greatest bastion of freedom’. But how was America to be restored to greatness and prosperity? An answer was seemingly found. Reagan had been converted before the elections to the theory of supply-side economics, or more precisely to the scientific truth of the ‘Laffer curve’, the discovery of Professor Arthur Laffer. If Carter was a born-again Christian, Reagan was a born-again economist. On the face of it, supply-side economics was a miracle: it held that if you lowered taxes you actually collected more revenue. The theory was that lower taxes gave firms more profit, and consumers more money in their pockets; this in turn would lead to more investment and greater employment; people would have more incentive to work harder, and with increased economic activity more tax revenue would be collected and unemployment and welfare benefits saved. Reagan grasped that this was an attractive policy to put to the American people. It left out of account, however, the effects of inflation, from which higher taxation inevitably followed as more people’s earnings were pushed into higher tax brackets. Without constant rate reductions of tax, taxation would actually become heavier. The objectives of Reagan’s economic policies, as put forward by the administration, were to lower taxes, to reduce government spending, to balance the budget and to restrict money supply so as to lower inflation. Professor Milton Friedman of Chicago University was the moneysupply guru; he and Frederick Hayek attacked the notions of the welfare state and socialism which, they taught, would lead to a totalitarian state. The correct policy was to deregulate, to remove restrictions on business and to allow free-market competition. The combination of all these ideas became known as Reaganomics. The economic cures for inflation and stagnation had already been tested in Pinochet’s Chile with some success. Now they were going to be tried in the US. It sounded too good to be true; indeed, before George Bush became vice-president, while he was still competing with Reagan for the Republican nomination, he coined the memorable phrase ‘voodoo economics’ to describe Reaganomics. And it was too good to be true; all the objectives could not be harmonised. The US did not balance its budget as promised and turned a small national debt into a large one. In other words, the excess of government expenditure over revenue income in the Reagan years injected a significant stimulus to the economy in good old Keynesian fashion at the cost of a ballooning deficit. Deregulation, too, had its limits. Environmental concerns cannot be completely ignored. And there were instances where only one-half of a business’s activities were deregulated. This stored up for the 1990s the Savings and Loans Association disaster. While depositors were federally insured (up to $100,000 in any one Savings and Loans account), the financial managers could now operate without the severe restrictions on their activities of previous years. To attract customers they vied with each other to offer higher savings interest rates and so had to engage in more risky investments themselves to be able to pay them. With the collapse of real-estate markets at the close of the 1980s, the insolvency of many of them and of some banks involved the federal authorities in a huge financial bail-out to compensate the investors. This is one important example of how deregulation has not always led to the expected good results. There was little sign that Reaganomics was really working during the first two years of the administration. Reagan wanted a 10 per cent reduction in corporate and personal taxes in each of the first three years but this meant cutting the federal budget too. Compensating completely for the tax cuts would have been an exceedingly painful process, though Reagan undertook not to cut any essential welfare benefits to the needy and elderly. There was much waste, ‘pork barrel’ expenditure, that could have been cut, but members of Congress fiercely defended their electors’ favourite subsidies. Getting his budget proposals, substantially unaltered, through both Houses of Congress in 1981 despite the Democrat majority in the House of Representatives was a major triumph for Reagan personally. In the end, Congress modified the biggest tax cut in US history only slightly; in the first year the cut would be 5 per cent instead of the 10 per cent originally proposed, so as not to increase the budget deficit to inordinate heights, but accepted 10 per cent in each of the following two years. But the budget director, David Stockman, had presented an incomplete financial prospectus. It would have got any company director into severe trouble. In his very critical inside story of his years in the administration, published after his resignation in 1985, Stockman depicts an almost unbelievable blindness to the realities of financial arithmetic. The budget could not be balanced given the large tax cuts and an increase of defence expenditure of 10 per cent per year. Caspar Weinberger, previously renowned for his costcutting ways, was in charge of defence. A miscalculation had the consequence that instead of a hefty 7 per cent per year real growth of expenditure on defence, it actually came out at 10 per cent per year from 1980 to 1986, that is rising from $142 billion in 1980 to a planned $368 billion by 1986. As it turned out, defence spending was trimmed so that by 1986 it had ‘only’ doubled to $273.4 billion. How then were the budget figures to add up to produce a balanced budget by 1984? The computer provided a simple answer. The supply-side economic stimulus would increase output by some 5 per cent a year. Instead the economy went into recession in 1981 and 1982, thus creating a burgeoning deficit. The recession brought inflation under control, but unemployment increased to 10 per cent – more than 11 million Americans were out of work across the country. In some regions unemployment was far worse than in others, and black people and other ethnic minorities were especially hard hit. The ability of trade unions to defend their members was weakened by Reagan’s policies. The most dramatic showdown came in 1981 when the air-traffic controllers’ union called a strike. Reagan took the tough decision to dismiss all the strikers after they had refused to return to work. Military air-traffic controllers filled the gap until new personnel had been trained. It was an example that Mrs Thatcher was to bear in mind during her confrontation with the miners in 1984. With defence spending protected by Reagan on the ground that it was essential for facing down the Russians, and with his insistence on persevering with tax cuts, reductions in the growth of welfare spending took the brunt of the economies, but they were quite insufficient to halt the growth of the budget deficit. Some tax increases, implemented despite the fashionable economic theories, proved too small to bring the deficit under control, and the tax cuts turned out to have benefited the rich far more than the middle-income families and the poor. Wealth had failed to trickle down to the bottom 20 per cent, as the theories had predicted it would. Reagan persisted with his unpopular policies. The economic turnaround began in 1983. There followed six years of economic growth, despite temporary blips (as in 1987), and the creation of 17 million jobs, though many of these were in low-paying service industries. But was this due to the virtuous effects of supply-side economics? Federal spending increased instead of declining on all the major items, including social security and various welfare payments. As the national debt increased, so interest on it doubled, adding $68 billion in just five years. Easy credit and the deficits put more money in people’s pockets and they spent more. The supply-side economists’ prediction that investment would increase proved wrong. By the end of the 1980s the US also had the largest trade deficit of any major industrialised country. Even the proportion of gross national product collected in taxes did not significantly decrease from the post-war average. So was Reaganomics all smoke and mirrors? Was the US prosperity of the years 1983 to 1990 simply based on borrowed time, on credits that have to be paid for in the future? There is no simple answer. The US is immensely rich in resources. By West European standards, outlays on welfare were woefully inadequate before 1981 and even increased federal spending has not brought it proportionally to the same level as in Germany, Britain or France. That the US deficit was not allowed to soar out of control for a time owed much to a reform enacted by the Senate and proposed by two Republican senators, Phil Gramm and Warren Rudman. This required the implementation of phased reductions of the deficit and automatic spending cuts (to fall equally on military and non-military provision) when deficit targets were exceeded. Pension and poverty programmes were excluded from the cuts. Reagan reluctantly signed the measure in December 1985. It held back the growth of the deficits until the slowdown in the economy later in the decade. The Reagan revolution was not as revolutionary as it seemed. But the American people, who had overwhelmingly re-elected him in November 1984, gave the ‘old Gipper’ the benefit of the doubt. He remained throughout his latter years of office one of the most popular presidents in American history. The economy continued to respond and unemployment did not rise above 7 per cent; people felt good – at least, most of them did. The darker side was there too: ethnic discrimination and poverty, crime and drugs, the decay of big cities, increasing indebtedness and an adverse trade balance. Despite the Laffer curve, there is no miracle cure. Reagan, in fact, was a big spender on programmes other than defence. The only way to bring the budget into balance was by raising taxes. Reagan would not hear of it, nor would George ‘read my lips’ Bush during the presidential election of 1988. It was one important reason for Bush’s election victory that November over the Democratic candidate, who had been too frank. Yet the spending spree of the mid-1980s came to haunt his successor in the White House when the economy once more turned down. If there was less of a revolution in US domestic policies than was thought at the time, a real revolution did occur during the Reagan years in America’s role and standing in global politics. As recently as 1988 distinguished academics were vying with each other to analyse the reasons for America’s terminal decline. ‘Overstretch’ of America’s ‘imperial’ global responsibilities was the favourite diagnosis. How the picture has changed since then! No doubt academics will catch up. Reagan certainly began his years in the White House as an outspoken enemy of communism the world over. Russia was an ‘evil empire’, and the ‘focus of evil in the modern world’. The spread of communism, especially in what Reagan perceived as America’s backyard, Central America and the Caribbean, he saw as a direct threat to the security of the US, because communist victories in Nicaragua and El Salvador could spread to Mexico and so to the very borders of the US. The domino theory was revived. Behind the global dangers, the administration did not doubt, was the hand of the Kremlin. The condemnation of the Soviet Union reached its peak when a Soviet fighter in September 1983 shot down a Korean civilian airliner that had strayed over militarily sensitive Soviet territory. Many lives were lost, including those of Americans. But there was always a positive side to the administration’s and Reagan’s policy calculations. The Soviets were rational. If the US did not flinch from confrontation, from spending whatever was necessary to ensure potential military dominance, the basis would eventually be reached for an accommodation, and for disarmament, especially of the nuclear arsenals. When Reagan launched his Strategic Defence Initiative, or Star Wars as it was popularly known, in March 1983 he knew that the Soviets could not afford to keep pace. SDI would, it was hoped, enable the US ultimately to defend itself against nuclear attack far more effectively than the Soviet Union could. The thinking was that there was not the remotest possibility that the US would be the aggressor in a superpower war, so the world would be safe from nuclear war. Once the Soviet Union could also be persuaded to accept that the US was not likely in the future to become an aggressor, the huge nuclear arsenals would become redundant. Serious disarmament could be given a chance, with nuclear and other weapons serving as a limited deterrent insurance. The great change occurred in the Reagan era of the 1980s. The transformation in US–Soviet relations would not have happened but for events outside Reagan’s control, the changing leadership in the Kremlin and the Soviet Union’s worsening economic plight. When Gorbachev became the Soviet leader in March 1985, the scene was set for a pas de deux that began with each leader keeping a careful distance from the other and ended in an embrace, with Reagan strolling cheerfully around Red Square in the spring of 1988. Perhaps only a president with Reagan’s impeccable anti-communist credentials could have persuaded Congress to accept that the Soviet Union could be trusted to abide by the agreements reached and that it had ceased to be an ‘evil empire’. During his first administration, Reagan’s crusading rhetoric castigating communism and the Soviet empire never really matched the administration’s actual policies. Although not ratified by the Senate, the SALT II treaty provisions were observed; this in the end proved to be to America’s advantage. The scope for using American military forces was limited by a law passed by Congress after the Vietnam War to restrict the president’s freedom of action: this was the War Powers Act of 1973. The president as commander-in-chief was still able to use armed force when he thought it necessary, but he had to inform Congress within forty-eight hours of their deployment abroad and would have to withdraw them after sixty days unless Congress specifically directed otherwise. There were other realistic restraints. The Soviet invasion of Afghanistan in December 1979 had led to the retaliatory American grain embargo. But the US farmers came first; their plight induced the Reagan administration to lift Carter’s embargo on the sale of wheat in April 1981 and to follow this up with further huge sales in 1983. That in turn made it difficult for the US to dissuade West European firms from supplying the apparatus to the Soviet Union for oil and gas pipelines. Meanwhile public opinion in the US and Western Europe was becoming ever more hostile to further nuclear escalation. Reagan declared that he was committed to arms control, but negotiations with the Soviet Union made no progress during his first administration. Meanwhile, the Russians became increasingly bogged down in Afghanistan. For the US it was a Vietnam in reverse. With Pakistan as an ally, it was able to arm the desperate mujahideen in Afghanistan, who inflicted casualties on the Soviet troops, which proved unacceptable in an unwinnable war. US involvement in the Lebanon and a Middle East peace process likewise made little headway. The US was not willing to use all its power to coerce Israel and the Arab nations, and in any case it was extraordinarily difficult to make much progress on the Palestinian question. That part of Carter’s Camp David agreements remained a dead letter. Reagan sent 2,000 marines to the Lebanon as part of an international peacekeeping force after Israel’s invasion in 1982; in October 1983, 241 marines were killed in their barracks by a fanatical Muslim. There was an outcry in the US, and after a decent interval the marines were withdrawn in 1984. The Middle Eastern problems were now too great, and US policy too indecisive, for the US navy in the Mediterranean and a few hundred marines to provide a solution. The liveliest area of foreign policy was in Central America and the Caribbean. In October 1983 marines were sent into the island of Grenada to remove an illegitimate left-wing regime. Since Grenada was a member of the British Commonwealth, Margaret Thatcher was much annoyed. More serious was US intervention in Central America. Here Reagan and Secretary of State Alexander Haig (and later his successor, George Schultz) were fighting communism most actively. The Sandinista victory in Nicaragua had brought a communist-style government to power, and the US had cut off aid; in El Salvador there was a left-wing insurrection. The Reagan administration sent increasing quantities of military and economic aid to the El Salvadorian government, despite its appalling human-rights record. A war by proxy was being waged in Nicaragua, with the Soviet Union supplying the Sandinistas, and the CIA from 1981 funding the opposition forces, which became known as the Contras, operating from bases in El Salvador and Honduras. With memories of Vietnam still vivid, however, Reagan faced strong public opposition, which was reflected in Congress. Most Americans cared less about the excesses of the Sandinistas and the leftwing rebels in El Salvador than about the possibility that young US soldiers would be dragged into the conflict, many of them to come home in body bags. Reagan’s convincing victory in the 1984 election strengthened his hand considerably. In the course of his second term he was to meet the new Soviet leader Mikhail Gorbachev five times. At their very first meeting in Geneva in November 1985, the ice was broken. Reagan was a great believer in the power of personal relations to overcome set ideological positions. He came to share Margaret Thatcher’s view that Gorbachev was a new kind of Soviet leader with whom it would be possible to negotiate on a more trusting basis. The various on-and-off arms-reduction negotiations had achieved very little so far. On the table since 1981 was Reagan’s ‘zero option’: if the Soviets withdrew their SS20 and other intermediate-range missiles in Eastern Europe, the US would not counter them by sending over Pershing and Cruise missiles to Britain and other NATO allies. The proposal did not affect missiles outside Europe, that is in the US or Siberia. So far the Soviets had rejected this, and the US had rejected Soviet proposals for deep cuts in both sides’ nuclear arsenals. When Gorbachev and Reagan met at Reykjavik in October 1986, the Soviet leader hoped that he could get Reagan to give up Star Wars by tempting him with a spectacular agreement to reduce nuclear arms. Despite his obvious disappointment at the failure of all his efforts, Reagan stood firm. The setback proved temporary. The Soviet need for Western technological assistance and for defence savings was urgent. In December 1987 the signing of the INF (intermediate-range nuclear forces) Treaty in Washington set the seal on the new US–Soviet relationship, not only in settling direct issues between them but also in the context of regional conflicts all over the world. The treaty banned the production and testing of intermediate-range missiles, and all existing missiles in this class were to be destroyed. Reagan’s policies in Central America were the most controversial in the administration’s conduct of foreign relations. His appeal for support for the Nicaraguan Contras – ‘freedom fighters’, as he called them – was rejected by Congress, which confined help strictly to non-military aid. Meanwhile the peace initiative undertaken by the Central American presidents was looked upon with suspicion in the White House. The American economic embargo of Nicaragua, the CIA’s mining of its ports (1984) and the administration’s efforts to keep the Contras in the field did enormous damage to Nicaragua’s economy, which had been placed on a war footing. Sandinista mismanagement did the rest. When the Soviet Union and its satellites eventually cut off aid to the Sandinistas, the hardline Marxist–Leninists conceded genuinely free elections, which to their surprise they lost. For the time being at least, Reagan’s victory over communism in Latin America was complete. The handling of the Middle East was the least successful aspect of the administration’s conduct of external relations. It led to the one major scandal of the Reagan era, the so called Iran–Contra affair. In the Gulf War between Iran and Iraq, there was no doubt which side the US favoured, though it imposed an arms embargo on both countries. Ayatollah Khomeini’s hate campaign against the US as enemy number one and the fanaticism of Iran’s Muslim fundamentalists threatened the conservative Gulf oil states, Kuwait, Saudi Arabia and the Gulf Emirates. Consequently they supported Saddam Hussein’s Iraq, even though he had started the Gulf War with his invasion of Iran. When Iran countered by attacking oil shipments from Kuwait, the US and an international naval force moved in to protect them. Kuwaiti tankers were reflagged in May 1987 so that they came under direct US protection. US warships shelled Iranian oil installations in reprisal for attacks on the oil tankers. Yet by a twist of fate the scandal that broke concerned illegal arms shipments from the US by way of Israel to Iran. The cause was humanitarian. In the Lebanon imbroglio eight American hostages were taken by Lebanese groups such as the Hezbollah, the ‘Party of God’, believed to be responsive to Khomeini’s commands. Their release was secretly arranged in 1985 in return for secret shipments of desperately needed arms and spare parts to the Iranians. These were paid for handsomely as well. The immediate organiser of the deal was an intelligence operative in Washington, Lieutenant-Colonel Oliver North. It appears to have been his ‘neat’ idea that the profits from the deal should be illegally channelled to the Contras. One hostage had been released and more releases were in prospect when the deal leaked. The subsequent judicial and congressional investigations found that the participants in the scheme, and Colonel North’s boss Rear Admiral John M. Poindexter, the national security adviser, had broken the law. President Reagan accepted responsibility for dealing with Iran, but not for the diversion of funds to the Contras. It does seem unlikely that he fully grasped what was going on. But the Iran–Contra affair tarnished the administration’s record. With the Iran–Iraq war ending in the summer of 1988, the immediate urgency for active Gulf diplomacy appeared to have ended. But peace in the Gulf was soon to prove illusory. When Reagan delivered his farewell address to the American people on 11 January 1989 he could claim with justice that ‘America is respected again in the world, and looked to for leadership’. It was also true that countries ‘across the globe are turning to free markets and free speech – and turning away from the ideologies of the past. Democracy, the profoundly good, is also the profoundly productive.’ The astonishing changes in Eastern Europe in 1989 and 1990 were suddenly to fulfil Reagan’s prophecy. Americans still felt good when it came to choosing between the two presidential candidates in November 1988. The problems of deregulation, the deficit budgeting, easy credit and junk bonds largely lay in the future. The economy was still going strong, the balance of payments improving and unemployment dropping to around 5 per cent. But the Republican candidate Vice-President George Bush was not very inspiring and early in the summer looked like losing to the Democratic candidate Michael Dukakis, the governor of Massachusetts, who had greatly improved the economy of his state. More charismatic than either was the Democratic leader, the Reverend Jesse Jackson. But the time was not ripe for an African American Democratic vice-presidential runningmate. Bush further handicapped himself by choosing Senator Dan Quayle, a personable conservative politician who was considered too young and too inexperienced. The election turned largely on domestic issues. Dukakis warned of the need for higher taxes. Bush riposted with ‘Read my lips, no new taxes’; it became virtually his campaign slogan. The Dukakis campaign, by way of contrast, was inept and lost him his big early lead. ‘Contented America’, to use Professor Galbraith’s phrase, was in the majority and turned to the safety of Bush and to the comforting conclusion that spending more money on welfare and urban deprivation provided no solution to America’s social problems. It was enough for Bush to promise help where it was really needed and to express the wish to create a ‘kinder, gentler nation’. On 8 November 1988, he won convincingly. In Congress in 1989 Bush faced Democratic majorities in both Houses. The Democrats were not inclined to vote for measures to reduce the large deficit if it meant cutting welfare, social security, medical care for the old or any of the pet ‘pork-barrel’ projects that gained Democrats and Republicans alike support from their constituencies. The president’s policies at home began cautiously in 1989; with an eye on the deficit, he rejected public-spending increases. But the deregulation of the Savings and Loans institutions during the Reagan years had led to imprudent lending and the imminent bankruptcies that ensued required a large federal bail-out. The deficit grew instead of shrinking, and the economy began to show signs of downturn after the credit expansion and stock-market wheeling and dealing of the 1980s. A severe recession began in 1990 and continued through 1992. Despite his campaign promises, President Bush was forced to raise indirect taxes and reduce exemptions from tax for the better-off. He was widely blamed for not giving sufficient attention to the state of the economy and the rapidly growing unemployment. Yet for a time his popularity reached extraordinary heights. The explanation for this lies in ‘patriotic’ America. Bush’s forceful handling of Panama gained him enthusiastic support. The strongman of Panama was the virulently anti-American General Manuel Noriega, who was wanted in the US for drug dealing. In May 1990 Noriega had forcibly prevented the democratic opposition leader from gaining the presidency: the elections had been accompanied by violence, intimidation and corruption. The US pressed for the removal of Noriega, but without success. Finally on 20 December 1989, a large US military force descended on Panama City, causing some loss of life and destruction. Noriega was cornered, captured and brought to the US for trial, and the opposition candidate of the previous May was installed as president. But such forceful intervention raised renewed fears in Latin America of ‘gunboat diplomacy’. A much bigger issue was the Gulf crisis after the Iraqi invasion of Kuwait in August 1990. President Bush’s consistent and decisive response in leading the United Nations and forming a coalition of European and Arab nations to defend Saudi Arabia won him general support. The despatch of ground troops, however, caused considerable anxiety inside and outside Congress. By the end of the year, from the Democratic side of Congress especially, there was opposition to the use of force and an insistence that negotiations and sanctions should be continued and allowed time to work. When the Gulf War was quickly and brilliantly won with few American casualties in 1991, Bush’s reputation was at its height. But Bush’s decision to stop the fighting once Kuwait had been liberated without toppling Saddam Hussein was a profound misjudgement as Hussein defied the UN and was anything but cowed. Nor did the immense efforts at mediation by Secretary of State James Baker, which brought together Israel and its Arab neighbours to try to negotiate a peace settlement at conferences in Madrid and Washington in the autumn of 1991 and early in 1992, appear to lead to much progress. The Bush administration could certainly take credit for responding positively to the changes in the Soviet Union and for recognising that to welcome the reunification of the two Germanys was a more realistic and productive policy than the more hesitant reactions in Western Europe. Nor should Bush or Baker be criticised for not recognising the independence of the Baltic states sooner, which would only have added to Gorbachev’s difficulties. Gorbachev’s credentials as an international statesman and peacemaker were impeccable, while those of Boris Yeltsin (then only a possible successor) were still untried. Bush remained cautious throughout, preferring what looked like the safer bet. Nor was he ready to commit American resources or to sacrifice the lives of US servicemen for ideological reasons or to engage in war a day longer than was required to meet American objectives. He could claim that his had been a safe pair of hands. But the election in November 1992, with the Cold War over, no longer turned on foreign issues or defence. Attention focused on domestic problems, the state of the economy, the frustrations of the economically disadvantaged and of the middle class, many of whom were threatened by unemployment. The nation had become increasingly polarised, not simply between black and white Americans but between the haves and the have-nots, as the destructive Los Angeles riots demonstrated in May 1992. The US might in this respect prove to be something of a model for the future of other highly industrialised nations. The development of an ‘underclass’ of the poor, with the black ethnic group its largest but not its only component, could produce further violence, crime and drugtaking and increased dependence on welfare. A vicious circle was set up: inner-city ghettos with deteriorating education and employment opportunities became the derelict homes of the poor. Well-paid employment requires education and skills, and the market economy provided less rather than more jobs for the unskilled. To put them to work, to provide training and education, to revitalise the inner cities, to provide more manual jobs – all this would require more public spending, which in turn would mean higher taxation and sacrifices by the better-off. When the poor and those on low wages constituted a majority they represented political power, as in F. D. Roosevelt’s day. In the last quarter of the twentieth century their numbers had shrunk, however, and many were alienated from the democratic process, which they saw as unhelpful to them. They no longer constituted so significant a group among those who vote. Less government interference and lower tax burdens appealed to those who vote, among them a large elderly population who claimed medical and social benefits fully, without regard to their income and wealth. As long as the violence of the poorest section of society was contained there was little real incentive to ‘declare war’ on poverty, especially as it was comfortingly argued that past efforts to do so in the 1960s had not been effective. Now that the Cold War was over, would the American people resolve the crisis in many inner urban centres, which at times of eruption could resemble a war? That was one of the large questions of the 1990s. The November 1992 election was a ‘three horse race’. A millionaire, Ross Perot, stood as an independent. It is a measure of America’s disenchantment with politics and a tribute to Perot’s gutsy television performances that he won 19 per cent of the popular vote. A rather lacklustre Bush, who could not persuade the American people that the recession was over, lost the presidential election but only by a small margin of popular votes. The reforming governor from Arkansas, Bill Clinton, and his vice-presidential running-mate Albert Gore, a senator from Tennessee, turned the White House Democrat. The two men, both still in their forties, belong to a new post-war generation. Clinton projected the aura that reminded America and the world of the dynamic Kennedy years with one significant contrast. Unlike Jacqueline, the new First Lady Hillary Rodham Clinton, was a formidable partner actively involved in politics. The question for the 1990s was how far a change in direction, and the abandonment of ‘Reaganomics’ would meet the challenge of guiding the world’s largest economy forwards successfully and curing the ills of poverty and deprivation that continued to exist in an avowedly affluent society. The Clinton years at home were fortunate years. The Cold War dividend appeared to be that the US no longer faced any serious threats. Clinton could choose to act abroad or not. No longer need the president send soldiers abroad to risk limb and life. The US could look after its own interests at home. The American people would give their support to a relaxed, comfortable president who concentrated on making their lives better and when it came to the end of the first term they would re-elect him. The lesson learned from Bush was that what mattered was the economy. Clinton’s conduct of foreign affairs changed markedly during his first administration from 1993 to 1997. In his election campaign he accused Bush of looking abroad and neglecting domestic issues. Clinton inherited the ill-fated intervention in Somalia and the problem of Haiti, where the military had driven out the elected president; desperate refugees were fleeing to the US, many perishing in their overcrowded boats. The inhuman war in Bosnia had been raging for a year, the Bosnian Muslims unable to defend themselves. Clinton called for aid to Bosnia, NATO air strikes and the lifting of the arms embargo, but at this time, early on in his administration, his stance lacked conviction. He could do no more than Bush for the Bosnian Muslims, the victims of aggression, since the administration was not prepared to send ground troops, and air strikes were vetoed by Britain and France. In October 1993 more forceful intervention by the marines to end the clan wars in Somalia ended with the naked corpse of an American helicopter pilot being dragged through the streets of Mogadishu. Evidence of American impotence was displayed on television screens around the world. Clinton also dithered in his attempts to deal with Haiti’s military junta; he was not prepared to risk American lives to restore democracy. The 600 lightly armed US and Canadian peacekeepers were ordered not to land on the island in the face of an angry Haitian crowd assembled by the military. The following year Clinton took the plunge and the force sent to Haiti in October 1994 restored the elected president Jean-Bertrand Aristide, despite his suspected Marxist leanings. It was one thing to take military action in the Western hemisphere – America had been doing so for a century or more – but quite another to intervene anywhere else. With the end of the Cold War, Clinton’s attention turned from Europe to Asia, to trade with Japan and China, and human rights. The US was no longer prepared to serve as a universal policeman and in this Clinton reflected the majority view in America. But the wider world regarded the president as unequal to the task of leadership. At home during the first year of Clinton’s administration Congress frustrated many aspects of his domestic agenda, in spite of the Democrats’ majority in both the Senate and the House of Representatives. His only partial success was the passage of a budget that demonstrated a measure of financial prudence, raising the taxes of the rich and providing some help to the poorest section of society; the underprivileged would be encouraged to move back into work, cutting welfare spending. The flagship reform, universal health provision, which had won him many votes in the 1992 election, was in the hands of his redoubtable wife, Hillary, but she lacked experience in handling Congress. Her ambitious plans to help 37 million Americans who had no health care were vetoed by special-interest groups and conservative Democrats and Republicans in the House; they raised the old scare of socialised medicine, claiming that the ‘new tax’ would increase unemployment. Meanwhile, Hillary Clinton’s own standing was being undermined by allegations of wrong-doing. The Whitewater scandal even cast doubts on the credibility of the president himself. In the summer of 1994 the health bill was withdrawn. Hillary Clinton, both admired and derided for running a ‘copresidency’, had to abandon her key role in the administration, changing her image and supporting good family causes. Clinton displayed remarkable resilience in the face of political setbacks and personal attacks and doggedly pursued his agenda of building a solid foundation for America’s future prosperity and influence, primarily through economic diplomacy. He overcame the opposition of both Democrats and Republicans who feared that free trade would lead to unemployment, securing the passage of the North American Free Trade Association (NAFTA), which linked the US with Canada and Mexico, in November 1993, and of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in December 1994. He planned to extend free trade agreements to include Chile and the Argentine, and the whole of Latin America (except Cuba) by 2005. Another free trade goal was to link the US with Asia. First, however, he needed to correct the trade imbalance with Japan. Clinton’s threats had little impact on the Japanese who, in many ways, continued to maintain barriers against foreign imports. His efforts to link human rights in China to trade with the US and to the granting of ‘most favoured nation’ status were even less successful. In the last resort American exporters were keener on markets than on dissidents in China and Clinton’s economic agenda in the end took precedence. ‘Constructive engagement’ was now deemed the best way to influence China. Fences were mended with the European Union and in December 1995 free trade between Europe and the US was set out as a future aim. Thus Clinton was seeking to position the US, already the most powerful economy in the world, as the fulcrum of global trade in the twenty-first century. But in the autumn of 1997 Congress baulked at allowing Clinton wider powers – fast track – to negotiate further trade deals. The failures of policies in China and Japan during the early Clinton years were obvious; the successes, whose benefits lay in the future, did not make as much impression on the public as the continuing scandals enveloping the White House. Clinton alienated many of his own supporters; the liberal Democrats condemned the policy of granting China most favoured nation trading status despite its human-rights abuses; they were also opposed to his plans for limiting welfare and to the introduction of a tough crime bill. Clinton’s agenda was changing and moving to the right; his approval rate was falling. Recognising that there was a political vacuum and a lack of a clear mission, congressman Newton Gingrich, the Republican whip in the House of Representatives, seized the initiative and set out a new Republican manifesto for the November 1994 congressional elections, a ten-point conservative ‘Contract with America’ which sought to end ‘undeserving’ welfare for unmarried teenage mothers; to provide tax breaks for the better-off; to oppose US participation to UN peacekeeping all around the world; and to promote fiscal responsibility. Many voters, disillusioned with politicians in general and the Clinton presidency in particular, chose to stay away from the mid-term elections. The Republicans won a sweeping victory, capturing both the House and the Senate; Newton Gingrich became the new speaker of the House. Despite a largely Republican Congress, from the low of autumn 1994 Clinton managed to win back the support that would lead to his reelection in November 1996, showing a new political astuteness and employing successful measures at home and abroad. In the Bosnian wars the US seized the initiative and put an end to the fighting: the UN embargo on arms was ignored and the Croats and the Bosnian Muslims were persuaded to form an alliance to defeat the Serbs. Diplomatically the US played a predominant role in fashioning the Dayton Agreement in November 1995. A week later, on his visit to Northern Ireland, Clinton was greeted as a peacemaker. In March 1996 he took a firm line on China’s threat to the Taiwanese presidential elections; China engaged in military manoeuvres, firing missiles close to Taiwan, but the crisis was averted. In foreign affairs Clinton could no longer be regarded as a novice. At home Clinton succeeded in portraying the Republican Congress as extremist in its domestic policies while he himself took the centre ground. The ‘New Democrat’ agenda was tough on crime and tough on welfare for the ‘undeserving poor’; the government would provide education and training to enable welfare recipients to return to work, punishing the recalcitrant by withdrawing support. The programme sounded attractive to the majority of Americans, who were enjoying a buoyant economy with unemployment under 5 per cent. The declining auto industry was restructured and modernised; ‘Silicon Valley’ symbolised America’s leadership in the field of information technology; up and down the country in businesses large and small management and workers demonstrated their capacity to change and compete. Prosperity now depended on the export of goods and services, which made up a third of the Gross Domestic Product. A political consensus had been reached for the government to downsize and to balance the budget by 2002. On these fundamental issues the New Democrats and the Republicans were largely in agreement, although Clinton vetoed the more stringent cuts to such entitlements as the Medicare programme for the aged. However, in December 1995 Congress and the administration were deadlocked over the budget. The spectacle of unpaid federal employees rebounded on speaker Gingrich and the Republicans, who were forced to compromise. Clinton’s appeal became a broad one for moderates across party lines. However, on racial issues he followed more conservative and traditional policies of integration through education and training. As black and Hispanic Americans climbed the ladder in economic-social terms so, it was argued, would the bitter divides of race diminish. By November 1996 Clinton was well placed. His most dangerous potential opponent in the presidential elections, General Colin Powell, chairman of the joint chiefs of staff during the Gulf War, had declined to be considered for the Republican nomination. The Republican contestant Senator Robert Dole fought a campaign marked by its decency; Ross Perot dropped out as a third party candidate. Clinton was now helped by an economic boom: living standards for the majority of Americans were rising for the first time in years. Violent crime was falling, but so too was job security for the professional managerial class and blue collar workers as industry and services restructured, often with scant regard for employees. Flexibility was now the key. Those at the top made huge profits; far more lost out. Great problems remained to be solved: the decaying inner cities, drugs, health care, and the situation of the underclass in deprived areas – predominantly black and Hispanic people. It was clear, however, that the American democratic process was crying out for reform. Anyone seeking election in the US requires a huge campaign chest. The public money allocated to a presidential candidate is overshadowed by donations made by people who usually expect something in return. Clinton’s fund-raising activities laid him open to criticism. A night in Lincoln’s bedroom in the White House is innocent of consequences; more questionable are large donations, especially those made by foreign fundraisers. In their quest for funds candidates are sometimes tempted to cross the uncertain line between legitimate dealings and corruption. Throughout his years as president Clinton has had to answer accusations of misconduct of one kind or another; his wife’s involvement with the failed Whitewater venture has been another source of attack. Allegations of false testimony led to impeachment proceedings in Congress and personal humiliation. Clinton was shown to have been hair-splitting with his interpretation of the facts. The drama was played out on countless TV screens and in the press and diverted attention from more serious issues. The American people avidly read the latest revelations of the longdrawn- out Monika Lewinsky affair: a pretty young intern, a middle-aged charismatic president, a stoical family, then the clues, a black dress, a semen stain, talk of cigars – denials and admissions, the indefatigable prosecutor’s hunt for precise sexual detail at a cost of over 40 million dollars; did the president lie about his personal life? If anyone but the president had been involved, the story would not have rated a mention in the media, it is commonplace. It certainly does not rate with Watergate. The House of Representatives sent the case for impeachment to the Senate. In the Senate ten Republicans joined the Democrats in February 1999 to acquit the president of perjury, in any case the Republicans could not have secured the necessary two-thirds majority to convict. The real loser was not Clinton but Al Gore the next Democratic presidential candidate who shunned the support of Clinton in the campaign. Soon it was politics as usual again. Clinton was riding high astride the longest economic expansion in US history, unemployment rate down to 4 per cent, personal incomes had soared and fuelled increasing consumption, the housing index up by a third, despite the warnings of the chairman of the Federal Reserve Alan Greenspan of ‘irrational exuberence’, the stock-market rise made everyone feel rich, able to afford more, never mind the mounting debt; the federal treasury was a beneficiary as lower taxes kept the coffers full. ‘Goldilocks’ was the name given to this wonderful ‘new economy’; fortunes were made overnight as gullible investors chased the offerings of new high-tech startups and dot.coms to stratospheric heights ignoring their lack of earnings. Old traditional telecoms too were caught up in the bubble, and ‘creative accounting’ made sure that wonder companies became ever more wonderful and enriched their promoters including venerable and trusted Wall Street brokers. The Reagan tax cuts, however, rather than Clinton’s policies had fuelled a boom that could not be sustained. It was coming to an end as Clinton left office. At least he had done nothing during his two terms to get in its way and the American people were grateful. His personal popularity remained high matching the country’s optimistic mood. But the election of 2000 was bitterly contested. Abroad Clinton had tried in vain to steer clear of using US power aggressively. But after diplomacy had failed he did intervene in Kosovo in March 1999 to put an end to Milosˇevic´’s murderous campaign against the ethnic Albanian people; he did so in a way that would endanger the least American lives, from the air. He resisted the call by Britain’s prime minister Tony Blair to oust the Serbians by an offensive on the ground using such of the NATO allies prepared to participate. This prolonged the conflict and caused even greater suffering. It was left to the Serbs in the following year to oust Milosˇevic´. The same reluctance to act marked his policy towards Iraq even after the UN weapons inspectors were thrown out. Saddam Hussein defied the UN who countered with economic sanctions. Britain and the US limited their intervention by defining protective no-fly zones in the south and north of Iraq and from time to time punishing the military by missile attacks on their bases. No US military personnel would be put at serious risk. On reducing the nuclear missile threat, Clinton made little headway. The technology for an effective missile defence system, successor to Star Wars, simply proved inadequate and hugely costly if attempted. US intervention in Haiti in 1994 turned sour. The military were turned out but Bertrand Aristide installed as the elected president did not halt violence or the country falling into deeper poverty. In Cuba, Castro continued to symbolise the patriot standing up against the bullying US. Clinton did not lift the trade embargo applied practically by the US alone, though contacts increased and tensions lessened. US policies have done nothing to increase its influence. Clinton deserves credit for his attempts, down to his final days in the White House, to move forward the Palestinians and Israelis in a peace process. Had he succeeded that alone would have ensured his place in history. It was not due to lack of effort on his part that he failed when at one time a peace deal seemed within grasp at the Camp David negotiation between Arafat and Barak in September 2000. Clinton left the White House, a well-liked president at home and respected for his contributions to peacemaking abroad. His years in the White House are remembered for continuous prosperity and no fatal adventures abroad, in the end a respectable record of achievement. Vice-President Gore should have been able to capitalise on the successful Clinton White House years. The scandals and sleaze of the Clinton years were not the uppermost election issue Gore had to fear. Gore had none of Clinton’s easy charm and fought an uninspiring election campaign. George W. Bush, son of former president George Bush, also started with a handicap, a notorious inability to speak English without making errors. As a popular two-time governor of Texas, he had earned a reputation for toughness on crime. His ideology was ‘compassionate conservatism’. During his election campaign he avoided the mistake his father had made of making promises it turned out he could not keep. His promise to cut taxes was popular, his undertaking to put ‘a touch of iron’ in foreign relations not sufficiently specific to be alarming; on the hotly contested question of abortion, he was non-commital. Gore’s proposed tax cuts were targeted more to the less well-off and more cautious than those proposed by Bush. Gore’s health plan reforms relied less on private insurance and added a benefit for prescriptions; Bush relied more on private provision, Gore on state and federal assistance. The differences were not huge, the electorate equally divided between the two candidates. After the votes had been cast on 15 November 2000, the outcome was in doubt and depended on a few hundred cast in Florida. In Palm Beach County the arrangement of candidates on the ballot paper had confused some voters; in the wealthiest country in the world, punch card technology of voting machines functioned imperfectly; manual recounts, the famous ‘chard’ pieces of paper hanging from holes had to be examined to see whether the hole had been effectively pierced to enable the machine to count the vote. State law and local officials decided the outcome. Gore did not concede; the legal wrangles were finally adjudicated by the Supreme Court five weeks after election day. Although Gore had won more votes nationally, he had lost the votes cast by the Electoral College based on who had come first in each of the Union’s states. Would George W. Bush be able to claim sufficient legitimacy to be able to act as president? The US constitutional process and Gore’s graceful concession triumphed. All doubts were dispelled that whatever reservations people had about the functioning of the electoral laws, which differed from state to state, the imperfect machines and other flaws, the nation had to rally behind President George W. Bush on his inauguration in January 2001. During the Reagan–Bush era the US’s northern neighbour Canada faced serious constitutional problems. The Liberal Party, in power since 1963 except for a period of nine months, was swept out of office in the general election of 1984 by the Progressive Conservative Party led by Brian Mulroney. It was the end of the Trudeau era; Pierre Trudeau himself gave up the leadership of the Liberal Party. Canada thus followed the sea change of Western politics, adopting policies to roll back the frontiers of the state, cut government spending and encourage business enterprise. Mulroney also promised to solve Canada’s longstanding constitutional problems, especially the question of French-speaking Quebec. His approach was conciliatory, though he was soon perceived as too irresolute. Canada benefited from the upswing that lifted Western economies after 1982, and its gross national product grew strongly until 1990. A major plank of Mulroney’s strategy was a drive for free trade. After fierce debate about the threat to its independence, Canada in 1988 concluded a treaty with the US that came into force in January 1989 and provided for the dismantling of all trade barriers over a ten-year period. Already 70 per cent of Canada’s trade was with the Americans. The satisfactory state of the economy enabled Mulroney’s Progressive Conservative Party in the federal election of 1988 to retain power with an overall majority. But the constitutional issue raised by the passionate desire of French-speaking Quebec to preserve its identity was becoming the burning question in Canadian politics. For the first time Canadians were talking of the unthinkable, namely that the Canadian federation could break up. A new constitution designed to regulate relations between the provincial and federal governments, devised by Trudeau in 1982, had foundered on the objections put forward by Quebec. Nonetheless, Mulroney and the prime ministers of the ten provinces reached an agreement in June 1987 known as the Meech Lake Accord, which accepted French-speaking Quebec’s demand to be recognised as a ‘distinct society’. The agreement next required ratification by the parliaments of the provinces. In December 1988 Quebec’s prime minister Robert Bourassa insisted that in Quebec only external signs in French would henceforth be permissible. That infringed the rights of the 12 per cent of the province’s population who were Englishspeaking. The language issue was symbolic of deeper intentions and aroused a storm in the English community. Two English-speaking provinces now put off decisions to approve the Meech Lake Accord. If it was to come into force, it required the unanimous approval of all the provinces by June 1990. In the end only eight, including Quebec, had approved and Manitoba’s and Newfoundland’s refusal to ratify meant that the Accord lapsed. Negotiations for a solution had to be begun anew. The pro-independence parties in Quebec gained in strength. The chances of a successful outcome had deteriorated since the abortive Meech Lake Accord. The English-speaking provinces questioned why Quebec, which had already benefited disproportionately from federal economic aid, should be granted special status. Mulroney was further weakened by his personal unpopularity, and that of his government, while Bourassa had to maintain his position in Quebec against the rising tide of sentiment favouring independence. Nevertheless, a new agreement was eventually hammered out and announced in September 1991 by the federal government and the provincial prime ministers embodying farreaching constitutional changes. These included the crucial recognition of Quebec as a ‘distinct society’ and the granting of self-government to Canada’s indigenous peoples, the Amerindians and the Inuit. The referendum throughout Canada in October 1992 saw the rejection of the constitutional proposals. This in part reflected the unpopularity of Mulroney; moreover, the majority of English-speaking Canadians felt that the concessions to French-speaking Canadians went too far. Three years later, in October 1995, a referendum in Quebec failed to gain a majority for independence by the narrowest of margins. A political sea change occurred in 1993. The October election results nearly wiped out the Progressive Conservative Party, reducing their representation in Ottawa from 155 to 2; the Liberal Party won 177 of the 301 seats, the separatist Bloc Québécois, led by Lucien Bouchard, 54 seats, and the right-wing Reform Party of Western Canada 52 seats. These elections were the first to be held on the basis of ‘first past the post’ in each constituency instead of proportional representation and so no longer reflected the percentage vote cast country-wide. That is why the Bloc Québécois, whose support was concentrated in French Canada, gained 54 seats with 14 per cent of the vote nationally, while the Conservatives, with 16 per cent spread widely, captured only 2 seats. After the elections Prime Minister Jean Chrétien, after nine years in opposition, formed a Liberal government. His administration set out to cure Canada’s economic ills: at the cost of unemployment the government cut its spending and the deficit. The economy revived, though unemployment remained at 9 per cent in 1997. The problem of Quebec appeared to have eased after the issue of separation was addressed in 1995, when a dramatic referendum for independence failed by only 50,000 votes. Canada’s federal future continued to defy any agreed solution and looms large in national politics. Earlier attempts to agree on constitutional change at Meech Lake in 1987, or Charlottetown in 1992, ultimately failed to win the approval of the English-speaking voters. In the west, Preston Manning led the Reform Party opposed to special treatment of Quebec and recognition of its ‘distinct society’, but he too wanted to win greater autonomy from the federal government in Ottawa. The general election called by Chrétien in June 1997 left the Liberals as the largest party but also reflected the growing divisions of Canada. During the last years of the twentieth century and early years of the twenty-first the political issue that had divided Canada for decades – the demand of francophone Quebec for independence – began to ease. The federal elections in June 1997 though reducing the strength of the Liberal Party, returned Jean Chrétien to the premiership. He was now prepared to take a stronger line on the issue of Quebec, and was fortified by a decision of the Supreme Court in the following year that a unilateral declaration of independence would not be legal. While the charismatic leader, Lucien Bouchard, prime minister of Quebec province, continued to claim that the aim of his party, the Parti Québécois, was independence, after having already lost referenda in 1980 and 1995 he was in no mood to attempt a third. His more flexible attitude and good government contributed to his continuing in power after elections in Quebec in 1998, but the opposition had also found a charismatic leader in Jean Charest. In Canada there was general satisfaction with Chrétien’s government, the strong economy in 2000 helping to secure his third victory in seven years in the November general election. Canadians were more concerned with the economy, unemployment and health care than with constitutional issues. This was true also of Quebec where in elections in April 2003 the Parti Québécois was ousted from office after nine years. Although 80 per cent of the 7.4 million population of Quebec is French-speaking they deserted their old-style political leadership and voted for a third party, so helping Charest and his Canadian liberals to a stunning victory. The uncertainty over the stability of Canada has lifted, and government could address the economic issues during a period of difficult world conditions.