Sovereignty, Regimes, and ‘Cooperation’

Abstract

In late November and early December 1976, at the height of one of the most intense financial and political crises in the United Kingdom since World War Two, Prime Minister Jim Callaghan was under sharply conflicting pressures. On one side, he faced external demands from the International Monetary Fund (IMF) that his Government commit to further deflationary economic policy measures as a condition of the $3.9 billion IMF loan it was seeking; on the other side, he found adamant resistance to deflation among the majority of ministers in his Government. In a transatlantic telephone conversation with US President Gerald Ford on 1 December, Callaghan related his predicament and attempted a bit of gallows humor. Ford a few weeks earlier had been defeated in the 1976 US Presidential election and was in his final weeks in office. Callaghan joked with Ford that ‘it’s just a question of which of us remains in office longer.’ The President, knowing that the British Cabinet would take a decision on the IMF policy demands the next day, replied drily, ‘you might be out of office first’ (Benn 1989: 672). When the British Cabinet decided on the following day to cut the size of the Public Sector Borrowing Requirement (PSBR) by £1.5 billion for the next fiscal year, Callaghan sent Ford a cable that outlined the differences that still remained between the Government’s decisions and the IMF’s demands. The Cabinet meeting had been ‘long and difficult,’ the Prime Minister confessed, ‘and I do not yet know whether I shall be able to carry all the Cabinet with me… I must tell you that I am not sanguine, and I can only hope the IMF really understand the consequences’ (Callaghan 1976b).