City and Business: The vision that turned me from bear to bull

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The Independent Online
I was sitting in a beach chair a fortnight ago reading the Bank of England's 1999 annual report - my wife applying suntan lotion to my back; my son mocking my choice of beach book - when suddenly I had the business-world version of an epiphany.

The shore on which we sat was a sandbar off the coast of New Jersey called Long Beach Island. The view across Barnegat Bay to the mainland is unobstructed. There is nothing between the island and the UK except the Atlantic. All at once, I could see with absolute clarity what was happening to the US economy, and what the future of the British economy would be under New Labour.

Nothing momentous triggered this chimera. I was on page four of the annual report, reading a particularly fine passage of the elliptical prose favoured by central bankers. Of the Asian financial crisis some anonymous financial Shakespeare had written: "During the course of the year we saw some real examples of potential systemic risk arising out of the emerging markets financial crisis.

"For a brief period investors' attempts to cut their exposures to all but the best credits, and then only in highly liquid instruments, threatened to engulf the industrial as well as emerging world in a serious credit crunch. Such fears were not, thankfully, realised ..."

Nevertheless, by the end of this passage, I had metamorphosed from a bear into a bull. Why I cannot say - although I have long suspected that bears and bulls are divided as much by temperament as by rational analysis. Perhaps, approaching 50, my world view is dictated not by increasing wisdom but by declining testosterone levels.

WHATEVER the psychology, I felt compelled to construct a rational superstructure for my new bullish state. When I moved from New York to London in 1983, globalisation was a glimmer on the economic horizon. The first post-war financial market - for eurobonds - was already 15 years old. But bankers still communicated by telex. The 24-hour-a-day market was still in the process of construction.

Over the past 17 years it has remorselessly taken shape. As it has, I have waited for it to self-destruct.

Chapter one of my 17-year wait focused on the Latin American debt crisis. I expected the recycling of Opec-inspired Middle Eastern petrodollars to Latin America - where government leaders were modernising and ripping off their people to stuff their Swiss bank accounts - to sink the big Western banks channelling this flow of funds.

Latin America declared bankruptcy. But the Western banks remained afloat.

Then came the October 1987 stock market crash, prompted by a thinly veiled slanging match between Washington and Bonn over the floating exchange rate regime. Washington wanted the dollar to go one way, Bonn another, and the financial markets panicked.

During the crash I expected a financial meltdown and a return to the 1930s. Instead, the crash turned out to be a buying opportunity for savvy investors.

Then, on my annual holiday in the US a year ago - during which America seemed dangerously feverish about the stock market - Russia defaulted. This led to the events still fresh in the memory - the early closing of the New York Stock Exchange last October, the virtual default of the hedge fund LTCM, and the common view, as obliquely acknowledged by the Bank of England, that the world economy really did teeter on the brink of meltdown.

This winter and spring the financial crisis abated. But I still carried in my head the graph of globalisation that I constructed in the early 1980s. In this graph there is a series of rising peaks. Each peak signifies a financial crisis. The last peak, yet to come, is off the chart, signifying the day when globalisation smashes to bits. Following this peak is a long line down and then a trough signifying depression.

ON THE beach a fortnight ago, this mental graph dissolved - disappeared in a puff of smoke. I no longer think globalisation carries within it the seeds of its own destruction. I believe that, in one form or another, the global economy is here to stay. I have stopped waiting for the Big One, the crash taking us back to the 1930s.

Partly, this thinking was influenced by the mood I encountered in the US. The feverishness of the previous summer was gone. In its place there seemed a calm acceptance of the situation. Democracy is down the chute. Washington is a freak show. Wall Street and the Fortune 500 run the country. And for most people this is fine.

Partly, my thinking follows from the new thought that the Latin American debt crisis, the October 1987 crash and the emerging market financial crisis of last autumn all served a purpose. They taught the Group of Seven's governments and central bankers how to manage the global economy.

None of this makes globalisation look any prettier to me. From my beach chair I saw my sister-in-law in San Francisco working as an occupational therapist. For a private hospital. No health insurance. No holiday pay. No benefits whatsoever. And I saw her former husband, living in his car.

Across the Atlantic I saw the UK, where I feel at home because it shares my discomfort with globalisation. But the Third Way looked almost ridiculous. The Government's efforts to soften the ruthless forces of globalisation attract. But they look like the work of clever schoolboys playing at being adults.

Does the public - other than the denizens of Westminster, listeners to Radio 4, and readers of the national broadsheets - care about the debate between New and Old Labour? Does the working class, whatever that is, identify with Blair and Brown's efforts to increase national wealth by boosting social justice? Or is it waiting for a leader of its own - someone who can speak of globalisation in a language not derived from financial markets?

The future of the British economy under New Labour looked bright on the beach a fortnight ago, not because of the Third Way, but because Blair and Brown seemed astute at positioning it in the global economy. The conceit that they are positioning British citizens on a more equal footing at the same time seemed a joke, if not a con.

I'm back in the office now and the epiphany has faded. But one thing sticks in my mind. The old narrative is finished. I'm not waiting for a crash anymore. I'm looking ahead to a period of prosperity for the lucky majority - one that extends into New Labour's second term and George W Bush's first as Wall Street's man in the White House.

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