The third in a three-part series, in which Chris Bambery takes a look at the intertwined history of the state and the City of London
A stress on the dominance of the City and the financial sector is seen as a hallmark of the Thatcher years, but it long pre-dates her. Throughout the 1920s and 1930s the Governor of the Bank of England, Montagu Norman’s stubborn goal was British financial supremacy rather than restoring Britain’s industrial economy:
“…his sights remained stubbornly fixed on the main target: that of restoring the City to its coveted place at the heart of the financial and banking universe. Here was the best and most direct means, as he saw it, of earning as much for Britain in a year as could be earned in a decade by plaintive industrialists who refused to move with the times. The City could do more for the country by concentrating on the harvest of invisible exports to be reaped from banking, shipping, and insurance than could all the backward industrialists combined.” (Andrew Boyle, Montagu Norman, Cassell, 1967, P222)
In 1931 this all came crashing down following the Wall Street Crash. Faced with a collapse in Sterling Ramsey McDonald demanded austerity measures, walked out of Labour to form a coalition with the Tories and was then forced to scrap the Gold Standard, devalue the currency and ditch free trade.
But to return to 1918 it seems to me that this was the missed opportunity for British industry to assert itself, but it didn’t. There would be others, but by then Britain’s decline was relentless. One was in 1945 but the Attlee government had no strategy for rebuilding industry. Another was in 1964 when Harold Wilson was elected on a promise of technological change and charged a new ministry with bringing it about. Under pressure from the banks and a falling pound this was scrapped. Post-war British governments had no programme for rebuilding industry which would have required state intervention to provide investment, as happened in Christian Democratic West Germany and Italy and Charles de Gaulle’s France.
Lack of investment was accompanied by high arms spending, which reached its zenith under Attlee at the time of the Korean War.
It is worth recalling Margaret Thatcher did not aim simply to boost the strength of the City. She was attempting to create a leaner, fitter capitalism, including industry. The problem was, firstly, she did a great job of destruction but the new competitive never emerged because the private sector could not deliver and state intervention was ruled out. Secondly, driving down labour costs and reducing the power of the trade unions wasn’t sufficient because Britain and the West now faced the growth of low cost industrial production in Asia. Faced with that failure the City, post Big-Bang, seized the opportunity to present itself as the cutting edge force of British economic growth.
Capital does not see making things, aside from profits, as a priority. It will find the easiest and least expensive way to make those profits. Rebuilding a British car industry was never on the agenda. Easier to let Japanese multinationals set up shop or let the Germans buy out Jaguar and Landrover.
Britain’s overall economic decline has continued ever since, particularly the decline of its industrial capacity, but the City of London is as determined as ever to be the main global financial centre. It has found a dependable ally in the Bank of England and the Treasury. Here Anderson was correct in identifying the decisive power of these three in government decision making. A revolving door operated, and still does, between the three with officials moving between the three (and now the new post 2008 regulatory bodies).
Why does this matter? Well let’s take Brexit. There was no Plan B in place prior to the EU referendum, such was the elite’s confidence in securing a Remain vote. In the scramble to put something in place two groups have got their act together and are lobbying hard in Whitehall. The first, and most obvious is the City and finance, the second are those multinational corporations which have, since the late 1950s beginning with the Americans, been encouraged to invest here. Thus Nissan’s ability to secure pledges from Theresa May and Philip Hammond it won’t lose out from Britain leaving the EU.
Of course the May government has committed itself to rebuilding Britain’s industrial base but how serious that pledge remains very unsure. That would require investment only the state could provide but the Tories are pledged to cutting the deficit and see the private sector as key to all economic progress, despite its obvious failings.
At this stage the fact Scotland and Northern Ireland voted to Remain opens up the possibility of escape, and of a united Ireland in the latter case (hardly a matter of concern for the British ruling class today). But escape to where? In the Scottish government’s case it seems to reduce itself to being a cheerleader for the EU and ignoring its neo-liberal programme, and much else.
Let’s imagine an independent Scotland subject to EU legal restrictions. The EU Commission can overall its budget and stop “excess” spending on welfare. If an independent Scotland were to succeed and not be reduced to the ranks of the Southern European nations it would need to spend: on education to build on the success of its universities, on infrastructure (rail links from Central and West Scotland direct into Edinburgh), on creating and funding a state investment bank and on industrial rebuilding. That leaves aside health and welfare spending which most of those who voted Yes to independence in 2014 wanted to be more generous than in the current UK.
In other words a radical agenda is required to match people’s hopes.
In England and Wales Jeremy Corbyn and John McDonnell need to take their agenda for industrial and economic renewal into the Leave heartlands: Sunderland, Hull, Doncaster, Barnsley, Newport and the likes. Working class people want decent jobs which give them and their families a future.
In other words Brexit poses real possible if a radical agenda can be made popular. If not we will pay the price as the City and multinationals feather the nest. It is also a chance to beak from a servile “alliance” with the US. That will not happen under May who distanced herself from Obama’s failure to use his UN veto to block a vote criticising illegal Israeli settlements. Clearly she has her eye on cosying up to President Trump.
Britain’s decline will continue, with the majority of the population picking up the tab. Its ruling class has no solution to it. It is the job of the left to identify how we could build a society which benefits the majority, and does not prioritise the needs of the City.
Looking at the British state with all its archaic trappings it might be tempting to look towards modernising it so as to pave the way for change. This would be a major mistake. Like all states it exists to prevent any weakening of capitalist power. The British state has a shambling appearance but that conceals not far beneath a very nasty side. For those of us who recall how we got into today’s neo-liberal nightmare a key turning point was the 1984-1985 Miner’s Strike when the state was crucial to securing victory for Thatcher.
We need to understand the UK state because, ultimately, we will have to confront it. And as Oscar Wilde said on his deathbed of the hotel wallpaper: one of us will have to go.
Chris Bambery is an author, political activist and commentator, and a supporter of Rise, the radical left wing coalition in Scotland. His books include A People's History of Scotland and The Second World War: A Marxist Analysis.
More articles from this author
- Defending the Indefensible: the British Army in Northern Ireland, 1969
- Labour Country: Political Radicalism and Social Democracy in South Wales 1831-1985, and Stories of Solidarity - book review
- How we should remember D-Day
- Spanish election: the left win but society polarises
- A Deutsche Bank and Commerzbank merger spells trouble
- Bloody Sunday: one prosecution is not justice
- Eurozone blues