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City of London: The History, By David Kynaston
Strife in the Square Mile? 'Twas ever thus
Sunday 06 November 2011
An inexperienced governor of the Bank of England worries that "financiers are taking larger and larger risks in securities" and worries that "we have most of the elements of a crisis".
Protesters gather in Finsbury Square and march on the City of London when confronted by the authorities. A prime minister warns: "Top salaries in the City make one gasp, they are so large." And an Anglican bishop worries about the amorality of capitalism: "Now men seem vastly rich upon the sudden ... live profusely and in a little time sink unaccountably."
All these are sentiments about the City of London and its financial markets which are on the button today. But the first was William Lidderdale, worrying in 1889 about the risks the City was running, just a year before the Baring crisis that he failed to prevent; the second refers to the Chartist riots in 1848; the prime minister was Margaret Thatcher in 1986; and the cleric was Bishop Fleetwood of Ely, preaching a sermon in the City in 1718.
So what has changed? The quotes all come from the new single-volume history of the City of London by David Kynaston. He is the great chronicler of Britain's recent past, with studies of the working class, the Financial Times, the brokers Cazenove and, most recently, post-war Britain. He wrote a four-volume history of the City, which inevitably is a bit unwieldy, and so this new single-volume version is the most accessible entry point for those wanting to understand how London's financial services industry has developed over the past two centuries.
As you might expect, the book is full of rascals and heroes, of booms and busts, and of tensions between governments of the day and the men – for until recently, it was always men – of money. But it is also about an industry that financed the economic development of just about the entire world in the 19th century; that built up the wealth that enabled Britain to fight two world wars, and over the past 70 years financed the development of the welfare state.
If the overriding theme of this story is the parallel between the past and the present, explaining 200 years of triumphs and catastrophes also leads to the emergence of several other important messages. One obvious one is that financial services are essential to economic prosperity but need a firm regulatory hand to prevent them racing off in one of their periodic bouts of insanity.
Another and contrasting message is that when politicians ignore financial realities they come a cropper. Look at our own experience: the botched return to the gold standard after the First World War, for example, and the IMF rescue of the UK in 1976. Both tales should be read by Greek politicians now. The only trouble is to know which story is more relevant, for the first would suggest that Greece should get out of the rigidities imposed by the euro, while the other that it should knuckle down and, as far as it can, pay off its debts.
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