And now a sentence I never thought I’d utter. Niall Ferguson has written a good book. Actually, I’m not sure it is that good. What I am sure about is that the life he has written about was so interesting that even he is incapable of writing a bad book about it. The life in question is Siegmund Warburg, the banker who fled Nazi Germany and set up SG Warburg and Co in the City. The Book is a biography of him entitled ‘High Financier’, just published.Warburg’s approach to the City was always that of the outsider and one moreover who had been brought up in a very German tradition of banking quite different to that in England. In Germany banking supported (and still supports) business who make things rather than merely affording liquidity to gamblers and speculators.
In line with this difference, what drew my attention in Ferguson’s book was Warburg’s critique of the Bank of England and his insight into the grave errors in monetary policy for which it was responsible. His words strike me as of the moment – this moment – although written in 1942:
“The Governor and the directors of the bank of England ..should be appointed by the Treasury and should not be chosen preferably from representatives of the City. The Board of the Bank of England should of course contain a number of experienced bankers but the majority should consist of industrialists, trade unionists, accountants and economists. The result would be that the Bank of England would be a centre of British economic life which would stimulate commercial and social progress instead of being a bulwark of reaction as it is today to a considerable extent … As to the actual policy of the Bank of England, its chief aim should be to prevent inflation in times of prosperity and deflation in times of depression. Unfortunately during the twenty years before the war the Bank of England did usually just the opposite, namely in times of prosperity they allowed over-investment and in times of depression they accentuated the crisis by restricting the flow of credit.”
The last paragraph describes the last 13 years to a tee, but also the error now being perpetrated by the Government and the Bank itself. Interestingly, the very reason why the policy of the Bank has been wrong for so long is that identified by Warburg 68 years ago. The make-up of the bank’s board or latterly the Monetary Policy Committee has not represented British commerce overall. It has been doiminated by bankers or academics who have done their dirty work for them. I’m not aware of a single trade unionist who has ever served on the MPC and the only person with a background in industry, Kate Barker, who was the CBI chief economist, never acted as though she represented the ‘real economy’ over the finance economy.
This is why it’s quite funny that, like bald men fighting over a comb, Blair is contesting with Balls/Brown as to who is responsible for the independence of the Bank of England. As though this policy had ever been successful! It’s the very rootlessness of the Bank and its lack of accountability to the wider nation (through the political process) that enabled the banking sector’s interests to dominate public policy so disastrously. Who can doubt that a Bank as representative as the one described by Warburg – with links to industry and the regions as much as finance and London – would have managed better than the one we actually had?
Last week I wrote about ‘reforms we can all agree’. Here’s another one. It’s sad that we are not hearing anythinglike this in the Labour leadership campaign – indicating I’m afraid that none of them have learned from the actual economic failings of New Labour and indeed that despite superficial differences largely of ego, there was little to separate ‘Blairism’ from ‘Brownism’ on the economic front. Neither believed in an industrial or regional policy and all embraced the City as the only engine of UK growth, with all the centralisation to the South-East and indeed the moral hazard which that philosophy entailed.
On Blair who I met once and thought had the skills (though not the intellect) of a brilliant barrister (and not much more), I will leave the last words to my late father, councillor D. Ifor Williams. Literally so, as his last words were: ‘when’s he going?’. I know this because though I missed his going by ten minutes the nurse who was with him quoted him and asked what he meant by them. I knew instantly. My very political dad, outraged by Blair’s sophistry over Iraq and his obvious idolatry of the rich, had long before grown tired of TB’s presence on the stage. He’d been asking for some time ‘when’s he going to resign’. He missed his resignation by some weeks. I sometimes imagine that he would have had a new lease of life if he’d survived until the rogue had stopped being PM though he would certainly have suffered a final relapse on the publication of Blair’s treacherous memoirs. For the avoidance of ambiguity I need to tell you that my father, who spent 20 years as a councillor serving his local community for very little return, had more class and grace in his smallest digit than the former PM can produce in a mountain of bling. He might also have reserved a certain amount of contempt for a man who thought he had a drink problem on half a bottle of red a day. He would definitely have asked whether Cherie was drinking the other half!