Diary

W.G. Runciman

The play Serious Money, now transferred from the Royal Court to the West End, is a disappointment. It is neither farce nor satire, only caricature. The City is a splendid target for mockery, but loud doggerel and insistent overacting are no substitute for wit. The play may well enjoy a steady run simply because its subject is topical and its script full of four-letter words. But if you want to indulge your hatred, envy or disdain, as the case may be, for the wonderful world of financial capitalism, you can just as well stay home and read the ‘Slicker’ column in Private Eye.

Yet serious money raises serious issues, including the question whether the world of Big Bang, global markets and six-figure bonuses for twenty-five-year-old traders is really any different from what has gone on in financial markets ever since Brutus, that honourable man, was lending money to the city of Salamis in Cyprus at an interest rate of 80 per cent per annum. Serious Money seems to want to persuade us that insider dealing, asset-stripping takeovers, the Latin American drug trade, the troubles of the International Tin Council and five more glorious years of Thatcherism are all somehow part of the Same Thing. But are they? The play itself kicks off with a prelude from Thomas Shadwell’s The Volunteers, or the Stockjobbers of 1692 (‘Look ye Brethren, hye ye into the city and learn what ye can; we are to have a Consultation at my home at four, to settle matters as to lowing and heightening of Shares’); and the moral of that, presumably, is that greed and chicanery are to be found wherever and whenever serious money is there to be made. There were stock-exchange scandals long before Big Bang; the post-tax incomes of the top earners in the City before the Second World War were, in real terms, much as they are today; and nobody can pretend that the incidence of financial corruption has been all that much less under Labour governments than Tory ones. What is more, the seriously rich in Britain have, as shown by the researches of W.D. Rubinstein, always been more likely to be financiers than industrialists. So what’s new?

One possible answer is that the scope and scale of the transactions now conducted in the City daily, not to say hourly, together with the 101 per cent support of a re-elected Conservative government, has created a totally different ball game on which, if Labour had won, Neil Kinnock and his fellow referees could, should and would have blown the whistle. But even if Kinnock had been electable – and betting that he wasn’t was easier money than ringing up Geoffrey Collier for a share tip – it is difficult to believe that a Labour administration would really like to see the business going elsewhere to the benefit of the competition. Statutory regulation by government department and higher rates of personal taxation, perhaps: but deliberate killing of geese who lay that many golden eggs, hardly. Finance, like insurance and retailing, is one of the things the Brits have always been rather good at, and with golden eggs in precarious supply it would be rash not to hold onto whatever geese we have. At this point, I had better declare my interest as a member of the Securities and Investments Board, which may well be enough to persuade some readers that I must be a capitalist fiend who ought to have been barred the hospitality of the LRB’s columns. But perhaps it will help if I add that I am also Treasurer of the Child Poverty Action Group, so you may be assured that for all the merits which I recognise in capitalism as a serious means of generating national wealth, I recognise also that it raises some serious problems of distribution.

Those who would prefer as a matter of principle a society in which a smaller cake is more equally sliced to one in which the cake is larger but some of the slices are of positively gob-stopping size will remain unmoved by calculations of the City’s contribution to the profit-and-loss account of UK Inc. For them, a return to 98 per cent marginal rates of income tax is well on the low side, and the sooner the fat cats of the Golden Mile are paraded outside the Mansion House with placards round their necks and then shipped off for a stint in the Yorkshire coalfields the better. But would it not be more sensible to encourage the making of serious money in the City of London as long as it not only adds to GNP per head but confers some serious benefits, indirect as they may be, on the less well-off as well as the fat cats and the various wine merchants and restaurateurs who minister to them? Provided the market is properly policed – and I hope nobody will accuse the regulatory authorities of not trying these days – what is there that anyone other than the stern unbending Levellers ought to be worried about?

The answer, I suggest, is that there are two related worries which have still to be taken seriously and which cut across the usual party-political lines. The first is the worry that financial services are not only parasitical on, but may in the longer term be destructive of, the extractive and manufacturing industries which alone generate wealth which is ‘real’. Pecunia pecuniam non facere potest, as the Kinnocks of an earlier epoch used to say. It is a worry which is easy to overstate. Nobody in the Labour Party seriously believes that unlimited amounts of tax revenue should be applied to subsidise workers to go on producing whatever it is that they have been producing up to now even if nobody wants it at any price. Nobody in the Conservative Party seriously believes that an economy based entirely on currency arbitrage is better than one based on chemicals and electronics. But if we aren’t reinvesting enough in fixed assets of the kind which will generate high added value in the longer term – and we do appear to lag behind our major competitors in this respect – can we afford a strategy which deliberately favours the financial sector, however good the pickings in the shorter term?

The second worry is the size of the differentials in reward. If the market is functioning properly, then those Bolly-swilling twenty-five-year-old traders should start regressing towards the mean as the number of entrants continues to rise, the markets start to wobble, and the downside risks take their toll. But if, apart from a few spectacular casualties, those who provide financial services to industry go on being very much better remunerated than the industrialists themselves (let alone those who educate and train them), can that be right? The argument that lower personal tax rates will benefit everyone because of all the able and hard-working people who will come forward to regenerate British industry falls at the first fence if they are all attracted into the City (or the Media) instead. Again, the worry is easy to overstate. Some industrialists like to talk about bond-traders’ Porsches in the same shocked tones as they used to talk about mineworkers’ holidays in Spain, when their own recruitment policies are what they ought to be looking to. But if the differentials remain as they are, it isn’t only green-eyed hypocrites and hair-shirted killjoys who may feel that some people in our society are being paid a lot more than they deserve and other people a lot less.

My personal preferences, for what little they may be worth, distance me as much from my right-wing friends as from my left-wing ones. Unlike my right-wing friends, I would be happy to see higher rates of personal tax, provided I could be sure that the money was going to provide better social services and not being siphoned off into the pockets of feather-bedded public-sector trade-unionists. Unlike my left-wing friends, I would be happy to see more people acquiring significant sums of capital, provided I could be sure they were doing so as a function of their serious contributions to the welfare of their fellow-citizens and not out of trafficking in paper at false prices on the basis of inside information. Ought it not to be possible – to put it no more strongly – to transfer a higher proportion of wealth than we are doing at present from the best-off to the worst-off without thereby reducing the amount of wealth which is being produced?

I pose the question in full awareness that nobody can square the circle, and no government, whatever its protestations of wisdom and skill, can deliver the best of all worlds to all of its citizens. But is it unreasonable to suggest that something a little bit nearer to the best of all worlds ought to be possible than a state of the nation in which the seriously rich are getting seriously richer while unemployment remains obstinately high, borrowing rates for industry are unpredictably variable, outdated industries can neither be modernised nor closed, industrialists and financiers are both blaming each other for the country’s loss of international competitiveness, inequalities between classes are compounded by inequalities between regions, there are two left-of-centre parties which are divided both between and within themselves, and the Left of the Labour Party is as much disliked and distrusted by its own front bench as it is ridiculed (while being at the same time secretly welcomed) by the Conservatives?

I ask that final question not because I have an answer to it, but only, I’m afraid, to reinforce the point with which I began. You have (or so I intended) read the description which I have just given as being of Britain in the 1980s. But it is the 1920s which I had in mind. And there is nobody in the City who doesn’t know what happened in 1929.