Despite Britain's painful plunge into a deep recession, Prime Minister Margaret Thatcher is resisting increasing pressure to relax her harsh, survival-of-the-fittest economic policies because she still believes they are the best way to reduce inflation and restructure the British economy.
The widespread layoffs, plant closings and business failures that have alarmed business and labor leaders alike are seen by Thatcher as evidence that her policies are beginning to work. She believes that waste, inefficiency and deadwood are being squeezed out of the economy and that wages and prices also will eventually be forced down.
Thatcher, who with her Cabinet will be conducting a major assessment of the progress of her radical economic policies next month, told a group of American reporters this week that she was tackling "structural" British problems of dying industries, featherbedding and the expectation that pay will always keep up with inflation whether or not the economy expands.
"We had an accumulation of problems in this country which had not been fundamentally dealt with," Thatcher said. "They are the structural problems of having tried continually to support dying industries at the cost of having inadequate resources for the growth industries."
"We are having in fact to run down some of the older [industries], to slim them right down," she said. "And because a lot of it has not been done in the past, a lot of it is coming all at once now.
"We have traditional overmanning and restrictive practices. At a time when you have to be competitive to survive, you can't just go on supporting these things if you're to keep your flourishing industries going."
Although she acknowledged that this "day of reckoning" is putting Britain through "a difficult time" just as it and most other major industrial nations are being hit by a recession and the latest round of oil price increases, Thatcher remained much more optimistic about the likely outcome than economic analysts, press commentators and business and labor leaders have been here recently. This week the serious British press was filled with such headlines as: "Unemployment Climbs to Postwar Peak," "Prospects for British Industry Grow Worse," "Industry Enters a Coma," and "Recession's Dead, It's a Depression Instead."
Answering questions with eager self-confidence in a small, wood-paneled formal dining room at 10 Downing Street, Thatcher insisted that her way "is the only sound way to conduct an economy in the long run. The problem is to conduct it for long enough for the people to see that you mean what you say and to make it work."
She discounted warnings from labor unions of a nasty confrontation with her government this winter is she tried to hold wage increases well below the inflation rate and rejected pleas from business leaders that she quickly lower record-high interest rates that are squeezing them. Thatcher appeared to regard their complaints as signs of the correctness of her policies.
She said business leaders, who had been among her strongest supporters, were partly to blame for the high interest rates because they borrowed too much money to "give larger increases in pay than they can afford" or to "put more money into stocks than was wise. They want interest rates lower to make it easier for them to go on doing that."
The problem with pay, Thatcher said, was that "many of our people have come to expect an automatic increase each year of almost as much as whatever is the inflation figure." She confirmed that she planned to try to keep down pay raises for government workers as an example for private industry, even if that appeared to her critics to be a departure from her philosophy of keeping hands off collective bargaining.
"Some people say to me, 'Ah, you've got a pay policy,'" she said. "Of course I have. My pay policy is for the public sector to live within what the nation earns. It was called good housekeeping and living within your means long before it was called a pay policy."
Thatcher played down the possibility of widespread strikes by government workers, such as those during early 1979 that helped topple the Labor Parlty government of her predecessor, James Callaghan.
"That winter was a rather shattering experience for many people and particularly the trade unions," she said. "Because the whole of public opinion was massively against them, I think they'll think twice before they go through that again."
Thatcher maintained familiar, unyielding positions on other issues as well. In contrast with French President Valery Giscard d'Estaing, who said this week that he believed the Soviet leadership was seeking a political solution to the crisis in Afghanistan, Thatcher said, "At the moment there's total unwillingness on the part of the Soviet Union to withdraw all her forces."
"I see no signs of negotiation with Russia over Afghanistan," she said. "The fact is that [Afghanistan] is an occupied country, and the occupying power must withdraw [its] troops."
She said West German Chancellor Helmut Schmidt will "speak wholly for Germany and not for the West" when he confers with Soviet President Leonid Brezhnev in Moscow. "He's not going as the emissary of the West in any way," she said, although she added that "I have not the slightest shadow of doubt that whatever he says, he will be a totally devoted member of the Western alliance."
Thatcher also reiterated her doubts about a "North-South dialogue" on the "recycling" of Arab oil money to the world's hard-pressed developing countries.
Calling these concepts "jargon," she said, "There's no point in talking about it in terms of recycling Arab money, which usually means putting it through a banking system and lending it" to countries that cannot afford to repay the money or the interest.
"It's no good recycling money to them," she said. "They've got to have grants" that only the Arab oil-producing nations can afford to give them.
Asked about the American hostages being held in Iran, Thatcher said she thought Western Europe's watereddown economic sanctions nevertheless were "another difficult factor" pressuring the Iranians "on top of the difficulties they're already experiencing." She pointed out that Britain, West Germany and Japan also have continued for eight weeks now to refuse to purchase Iranian oil on the ground that it is priced too far above prevailing OPEC prices.
"We believe," Thatcher said, that the American hostages will eventually be released unharmed. "We can't precisely see the time and the way, but I think all of us believe that they will, that there's an increasing number of people in Iran who would really like to solve the problem."
Pressed about whether she had any new evidence on which to base this belief, Thatcher said, "No, it's just a feeling that Iran will eventually release them. I don't see what they're gaining by holding them except the condemnation of a large part of the world and sanctions on the part of some. I feel that, don't you?"
She expressed the same kind of fundamental faith and optimism about the future of the battered British economy. Asked how British industry could regenerate itself from the rapid rundown it was now experiencing, Thatcher answered, "Look at how industry regenerates itself in the United States."
"It will come," she promised. "I don't know quite where it will come from, but it will come."