I’ve just finished David Kynaston’s fluently written “City of London. The History”. It was an exciting read for me dealing with a period I know well but from the perspective of the City of London, It’s based on broad reading; at times I thought the big picture got buried under individuals and details of events. For natural reasons (the focus on the City); the industrial sector tended to be mentioned en passant. To really understand the history and development of British capitalism, I would need to read a book that integrated the industrial and the financial sectors at a higher level of analysis. But there was still a great deal to think about on the topics that interest me.
One such topic is how the financial sector represented by the Stock Exchange articulated and promoted its interests in relation to the UK state (among other things, how coherent these interests were). The pattern that emerges from Kynaston’s book is that the City of London was more effective/cohesive when dealing with relatively short-term threats such as imposition of taxes considered unfavourable and externally imposed tighter regulation but very much weaker at developing long-term strategy for the City/financial sector as a whole. And while there was widespread support for a strategic goal such as the eventual return to the gold standard some time after the First World War, this was based on incorrect assumptions about the ability of the UK economy to cope and unrealistic hopes about how this would restore the pre-First World War predominance of sterling (and thereby the City). The City did revive spectacularly some time after the Second World War but on a different basis to its previous standing. Important for the revival was the Eurodollar market based, among other things, on avoiding the tighter regulation of Wall St and the desire to keep dollars outside the US. A shaky long-term basis as easing of regulations on Wall St could weaken the City of London’s advantages.
In its internal organisation, the City was conservative until the Big Bang under Margaret Thatcher’s government enabled stockbroking and jobbing to take place in the same organisation and restrictions on the international movement of capital were largely removed. Again, while the Big Bang worked more or less as planned at the level of organisational detail, the UK finance sector did not have a strategic vision of its weaknesses or attempt to assess the realism of possible remedies. US capital moved in in earnest and took over almost all of the old merchant banks that still existed (less, for example, Barings!) with a few owned by major European banks. The small UK firms active on the Stock Exchange were no match for the deep pools of capital available to the US banks and finance companies (Here I’m straying beyond Kynaston’s book but his book did confirm much of the picture I have from other reading)..
Unlike the situation in Germany, the British joint stock (high street) banks have been much less involved in financing industry; they had the size (capital) but not the expertise and their attempt to move into the Stock Market was largely unsuccessful. The City of London still exists but, while a number of former UK owners of merchant banks became very rich and many Brits work there, a substantial proportion of the key decisions are made in board rooms in the US.
Kynaston’s book made me reflect on the history of capitalism in the UK. Even though the landowners were supplanted in the nineteenth century by the rising industrial bourgeoisie, aristocratic values lived on in the pre-Second World War Stock Exchange with its relaxed working hours, club-like atmosphere and substantial restriction to the upper echelons of society with its sense of intrinsic worth unrelated to its actual track record. It worked as long as the Stock Exchange was able to operate in a protected environment but crumbled once those conditions no longer applied.
There was much else of interest – the concealment of statistics prior to 1964 so that the situation of the UK economy was much direr than the incoming Wilson Labour government had been led to believe (and reflections about the lack of realism of the social-democratic project even in its highly diluted form). And not just of interest but also of horror at some of the descriptions of casual and not so casual anti-semitism mixed with aristocratic snobbery that flourished in the Stock Exchange environment.
Kynaston’s book is worthy of a second read, a plod read rather than a Wagnerian gallop. I shall try to take notes, which I’m not good at despite having lurked around books for an awful long time. But I shall struggle – the proverb that “old dogs can’t learn new tricks” is ageist (chronochauvinist).