Big bang: deregulation of the City of London

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pages: 263 words: 80,594

Stolen: How to Save the World From Financialisation by Grace Blakeley

"Robert Solow", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, bitcoin, Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, housing crisis, Hyman Minsky, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low skilled workers, market clearing, means of production, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Ponzi scheme, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

Understanding the Private Equity Business Model”, Work, Employment and Society, vol. 23 8 Clark (2009) 9 Lawrence, M. (2017) “Corporate Governance Reform: Turning Business Towards Long-Term Success”, IPPR. http://www.ippr.org/corporategovernancereform; Kay, J. (2012) “The Kay Review of UK Equity Markets and Long-Term Decision Making” http://www.ecgi.org/conferences/eu_actionplan2013/documents/kay_review_final_report.pdf 10 Mazzucato (2018) 11 This account draws on: Redwood, J. (1984) “Tilting at Castles”, speech given by John Redwood, then an adviser in the Conservative Party, to the Policy Unit, 11 June; Martin, I. (2016) Crash Bang Wallop: The Inside Story of London’s Big Bang and a Financial Revolution that Changed the World, London: Sceptre; Shaxson, N. (2012) Treasure Islands: Tax Havens and the Men Who Stole the World, London: Palgrave; Shaxson (2018); ; Centre for Policy Studies (2006) “Big Bang 20 Years On: New Challenges Facing the Financial Services Sector” 12 Shaxson (2012) 13 Robertson, J (2016) “How the Big Bang Changed the City of London Forever”, BBC News, 27 October. https://www.bbc.co.uk/news/business-37751599 14 Skinner, C. (2011) “How The City Developed, Part Thirteen: The Big Bang”, Chris Skinner’s blog. https://thefinanser.com/2011/12/how-the-city-developed-part-thirteen-thebig-bang.html/ 15 Robertson (2016) 16 Ibid. 17 Warwick-Ching, L. (2007) “1986: British Gas privatisation and the search for Sid”, Financial Times, 23 November 18 Ibid. 19 National Audit Office (1987) Department of Energy: Sale of Government Shareholding in British Gas plc, NAO. https://www.nao.org.uk/pubsarchive/wp-content/uploads/sites/14/2018/11/Department-of-Energy-Sale-of-Government-Shareholding-in-British-Gas-plc.pdf 20 Institute for Economic Affairs (2000) A Review of Privatisation and Regulation Experience in Britain, IEA. https://iea.org.uk/publications/research/a-review-of-privatisation-and-regulation-experience-in-britain 21 Boston Consulting Group [BCG] (2016) Privatising the UK’s nationalised industries in the1980s, BCG Centre for Public Impact’, 11 April 2016.. https://www.centreforpublicimpact.org/case-study/privatisation-uk-companies-1970s/ 22 IEA (2016) 23 Ibid. 24 BCG (2016) 25 Boutchkova, M. and Megginson, W. (2000) “Privatization and the Rise of Global Capital Markets”, FEEM Working Paper 53. https://papers.ssrn.com/sol3/papers.cfm?

It is hard to imagine how shareholders wouldn’t have used the collapse of Bretton Woods and the rise of financial globalisation to increase their power, even if the political struggles that took place within different states determined how much their power grew relative to other actors. Capitalism wasn’t distorted by the changes of the 1980s, it adapted — and it did so in the interests of the most powerful. The balance of social forces in the UK ensured that it developed the financialised corporate culture par excellence. By unleashing the power of the City of London, and crushing everything that stood in its way, Thatcher helped to build a highly exploitative, extractive and unequal economic model in the UK: one which endures to this day. The Big Bang Once upon a time in the City of London, there lived a noble and chivalrous group of knights in a great big castle called the Stock Exchange.11 At least, that was the story told by John Redwood, then head of the Number 10 Policy Unit. Redwood’s 1984 speech — Tilting at Castles — described the City as it existed back then as an elaborate system of knights, barons, kings, and peasants.

But in many ways, its close relationship to the City was one of the defining characteristics of New Labour, which consistently deregulated the finance sector. Blair attempted to woo ordinarily hostile investors and executives in the City through his famous “prawn cocktail offensive”. Financiers have always been, and would continue to be, natural supporters of the Conservative Party. But Blair and Brown made significant inroads with the sector during their tenure. The consequences of this offensive were, as later noted by the FSA, a total failure to properly regulate financial institutions, which ultimately contributed to the financial crisis.2 Given the power that the City of London Corporation holds within British politics, it is perhaps unsurprising that Blair felt the need to get the institution on side.


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I.O.U.: Why Everyone Owes Everyone and No One Can Pay by John Lanchester

asset-backed security, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black-Scholes formula, Blythe Masters, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, George Akerlof, greed is good, hedonic treadmill, hindsight bias, housing crisis, Hyman Minsky, intangible asset, interest rate swap, invisible hand, Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Kickstarter, laissez-faire capitalism, light touch regulation, liquidity trap, Long Term Capital Management, loss aversion, Martin Wolf, money market fund, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, new economy, Nick Leeson, Norman Mailer, Northern Rock, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, South Sea Bubble, statistical model, The Great Moderation, the payments system, too big to fail, tulip mania, value at risk

But the fact is that after Margaret Thatcher came to power, the financial sector underwent a three-decade-long expansion, during which it got everything it asked for from the government. The abolition of exchange controls in 1979 and the increasingly international flow of capital, combining with the abolition of restrictions on trading practices which culminated in the “Big Bang” in 1986, have all led to the City’s increasing dominance of British economic life. The Big Bang in turn caused the “Wimbledonization” of the City, making it a place where most of the major players were foreign. As for the Big Bang, it consisted of a series of rule changes which boiled down to one simple thing: the biggest act of deregulation the financial sector had ever seen. Because financial deregulation has been a primary culprit in the current crisis, there’s a temptation to act as if it is inherently a bad thing. You need a short memory to think that. I grew up abroad and can vividly remember what a pain in the backside things such as currency restrictions were.

., 77, 100, 204 regulation and, 184–86 risk and, 142–43, 164–66 conservatism, housing and, 98 correlation, correlations: CDOs and, 115–16, 158, 167 risk and, 74, 148–49, 158–59, 165, 167 credit, 8, 169–73 banks and, 24–26, 37, 41, 43, 209, 211 bubbles in, 42, 60, 109, 170, 176, 216–17, 221, 223 CDOs and, 114–15, 119–20, 172 crunch in, 37, 41, 43, 54n, 77, 84–86, 92–93, 94n, 136, 163–64, 169, 171–73, 182, 193, 201–2, 215–16, 218–19 histories and ratings on, 85, 100, 123–26, 158, 163, 165, 208–11 housing and, 84–86, 92–93, 94n, 100, 109, 112, 125, 129–30, 132, 163–64 Iceland’s economic crisis and, 10–12 interest rates and, 172–73, 175, 209 risk and, 136, 158, 165 see also banking-and-credit crisis Crédit Agricole, 36 credit cards, 27, 217 credit ratings and, 123–24 Iceland’s economic crisis and, 9, 11–12 risk and, 158–59, 163 credit default swaps (CDSs), 20, 63, 65–80, 117, 158–59, 183–86 AIG and, 75–78, 201 attractive aspects of, 72–74 examples of, 57–58 Exxon deal and, 67–70, 121 over-the-counter trading of, 184–85, 201 regulation and, 68, 70, 73, 184–86 risk and, 58, 66–70, 72–75, 78–80, 212 securitized bundles of, 69–70, 74 streamlining and industrializing of, 68–69 unfortunate side effect of, 74–75 Credit Suisse, 36, 227 Cuomo, Andrew, 99 Cutter family, 126–27 Darling, Alistair, 172, 220 debt, debts, 27–29, 34, 59–63, 118, 172n, 179, 216, 229 in balance sheets, 27–28, 30–31 benefits of, 59–61 bonds and, 59, 61–63, 208, 210 credit and, 123–26, 221 derivatives and, 52, 67, 69–72 housing and, 93, 100, 132, 176 paying the bill and, 220–22 personal, 221–22 regulation and, 181, 190 Russian default on, 55–56, 162, 164–65 see also collateralized debt obligations default, defaults, default rates, 162–65 CDOs and, 114–15 on mortgages, 159–60, 163, 165, 229 risk and, 154, 159–60, 163 of Russia, 55–56, 162, 164–65 see also credit default swaps Demchak, William, 69 democracy, democracies, 15–18, 108–9, 179, 213 free-market capitalism and, 15, 17, 23 housing and, 87, 98 DePastina, Anthony, 85 Depository Institutions Deregulation and Monetary Control Act (DIDMCA), 100 deregulation, see regulation, deregulation derivatives, 45–58, 63–80, 86, 210–12 in balance sheets, 30–31, 70 banks and, 20, 51–54, 57–58, 63–71, 74–75, 77, 79, 115–17, 120–21, 132, 183–84, 200, 205–6, 211 Black-Scholes formula and, 48, 54, 116–17, 151 bonds and, 58, 63–67, 112, 114, 118–19, 210–11 Buffett and, 56–57, 78 and City of London, 56–57, 79, 201 complexity of, 52–54, 56–57 Enron and, 56, 105–6, 185 futures and, 46–47, 49n, 51–52, 54, 184 Greenspan on, 166, 183–84 in history, 45–48, 147 mathematics and, 47–48, 52–54, 115–17, 166 offshore companies and, 70, 72 options and, 46–47, 50–52, 151, 174, 184 over-the-counter trading of, 184–85, 201, 205–6 prices and, 38, 46–52, 54, 56, 75, 158–59, 166 regulation and, 68, 70, 73, 153, 183–86, 200–201 risk and, 46–47, 49–52, 54–55, 57–58, 66–75, 78–80, 114–15, 117–22, 151, 153, 158–60, 163, 166–67, 184–85, 205, 212 size of market in, 48, 56, 80, 117, 201 see also collateralized debt obligations; credit default swaps Detroit, Mich., 81–82 Deutsche Bank, 36, 77, 83, 227 diversification, 146–48, 177 dividends, 101, 147–48 Doctorow, E.

I grew up abroad and can vividly remember what a pain in the backside things such as currency restrictions were. When Margaret Thatcher came to power, you couldn’t take more than £500 out of the country at any one time—a restriction which now seems as distant as that of whalebone corsetry. The City of London was a club, and a particularly unlovable club at that, exclusively white and male and not just conservative but actively reactionary as a social force. Big Bang changed both the clublike nature of City life and also its impact on Britain: global finance was now a radical force, remaking Britain in the image of a laissez-faire free-market economy, tearing up the consensual, all-in-it-together model of governance which both parties had been pursuing since the Second World War. To many observers Margaret Thatcher seemed as pure a nineteenth-century Manchester School liberal as had ever held office: keen on free trade, keen on the distinction between the deserving and the undeserving poor, and keen to make money take the place of class as the determining principle of British life.


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Broke: How to Survive the Middle Class Crisis by David Boyle

anti-communist, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, call centre, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, delayed gratification, Desert Island Discs, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial deregulation, financial independence, financial innovation, financial intermediation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, housing crisis, income inequality, Jane Jacobs, job satisfaction, Kickstarter, knowledge economy, knowledge worker, market fundamentalism, Martin Wolf, mega-rich, mortgage debt, Neil Kinnock, Nelson Mandela, new economy, Nick Leeson, North Sea oil, Northern Rock, Occupy movement, off grid, offshore financial centre, pension reform, pensions crisis, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, positional goods, precariat, quantitative easing, school choice, Slavoj Žižek, social intelligence, too big to fail, trickle-down economics, Vanguard fund, Walter Mischel, wealth creators, Winter of Discontent, working poor

Here they are: The abolition of the Corset which restricted inflationary finance pouring too fast into house prices. The decision may have been inevitable, yet nothing was done to replace it. The destruction of the building societies may have been carried out in the name of banking diversity and competition, but it has had precisely the opposite effect. The disastrous reforms of the City of London known as Big Bang were organized to protect London’s role in global finance, but turned a blind eye to the culture of greed and corruption that followed inevitably in its wake, and ushered in the new elite that is pricing the middle-class life out of the reach of the middle classes. The launch of personal pensions was not a problem in itself, but they allowed policymakers to blind themselves to the way that the most effective pension system in the world was unravelling before their very eyes.

The clues are all there, but the blame still has to be shared between the policymakers and the middle classes themselves. They made a disastrous political mistake over the past generation. They backed the idea of trickle-down economics that failed to trickle. They cheered the corrosive growth of financial services in the City of London and ignored their excesses. They believed those in charge of their financial institutions had their class interests at heart, when they had nothing of the kind. They did not understand where Big Bang would lead — and where it would inevitably lead: if the middle classes had been allowed to share in the new wealth, it would have caused rampant inflation. They did not understand that policies they supposed would benefit middle-class families and reward hard work were actually enriching a new financial elite.

We know now that the culture of massive bonuses was going to encourage traders to take huge bets, gambling with their customers’ money, betting against their own clients, in ways that would have been quite impossible in the old structures. Ending fixed commissions and electronic trading must have been inevitable, but ending the tradition of divisions between different trading functions was not inevitable at all. For those who could peer dimly into the future, the signs were already there. One study published in the week of Big Bang showed that, even before the deregulation, insider trading seemed to be endemic. The great sceptic David Hopkinson, due to retire in the month of Big Bang in October 1986, sent Goodison a public warning letter at the end of that summer, with only months to go. ‘I hope that the big battalions will behave responsibly,’ he replied.[20] It was a forlorn hope. With just weeks to go, the new Bank of England governor Robin Leigh-Pemberton used his Mansion House speech to call rather pathetically for ‘a degree of restraint’.[21] Leigh Pemberton’s own solution was that ‘the most convincing of Chinese walls must be erected between … functions’.[22] But then, as the old, politically incorrect City used to say: ‘Chinese walls have chinks in them.’


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Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens by Nicholas Shaxson

Asian financial crisis, asset-backed security, bank run, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, collapse of Lehman Brothers, computerized trading, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, Double Irish / Dutch Sandwich, failed state, financial deregulation, financial innovation, Fractional reserve banking, full employment, high net worth, income inequality, Kenneth Rogoff, laissez-faire capitalism, land reform, land value tax, light touch regulation, Long Term Capital Management, Martin Wolf, money market fund, New Journalism, Northern Rock, offshore financial centre, oil shock, old-boy network, out of africa, passive income, plutocrats, Plutocrats, Ponzi scheme, race to the bottom, regulatory arbitrage, reserve currency, Ronald Reagan, shareholder value, The Spirit Level, too big to fail, transfer pricing, Washington Consensus

“As the imperial basis of its strength disappeared, the City survived by transforming itself into an ‘offshore island’ servicing the business created by the industrial and commercial growth of much more dynamic partners.”12 Modern histories of the City of London’s growth as a financial center point to the “Big Bang” of 1986—the sudden deregulation of London’s markets under Prime Minister Margaret Thatcher—as the moment when London really took off in its modern form. But Tim Congdon, one of the City of London’s most experienced spokesmen, spotted the real story. “The Big Bang,” he wrote in 1986, “is a sideshow to, indeed almost a by-product of, a much Bigger Bang which has transformed international finance over the last 25 years. The Bigger Bang is—on all the relevant criteria—a multiple of the size of the Big Bang.”13 “An extraordinary situation has arisen where the Euromarket, which has no physical embodiment in an exchange building or even a widely recognised set of rules and regulations, is the largest source of capital in the world.”14 The scholar Gary Burn put it in a different light.

.), 29 Central Bank of Philippines, 141 Chait, Jonathan, 170 Chang, Ha-Joon, 59 Charles II of England, 72–3, 104 Chase Manhattan, 107–8, 112, 114, 172, 197 Chase National Bank, 194–7, 200–1 chasse gardée, 3 Chenoweth, Neil, 7 Chicago, 36, 40–1, 61, 125 meatpackers, 36, 40–1 China, 1, 12, 14, 16, 27, 36–7, 60, 71, 81, 85, 88, 105–6, 121, 147–8, 164, 169, 217 and Britain, 105–6 statistics on oil, 1 Chirac, Jacques, 4 Christensen, John, 19, 103–4, 115–16, 146, 150, 170, 182–91, 207, 233n1 Churchill, Winston, 49 CIMA: See Cayman Islands Monetary Authority Cisco, 14 Citicorp (Citibank), 8, 80–1, 141–2, 152, 194–6, 201 Citigroup, 20, 68, 103 Citizens for Tax Justice, 112, 159, 170 City of London (England, U.K.), 17–19, 24, 26, 54–5, 61, 63–86, 87–8, 98, 103, 105–6, 109, 115, 129–30, 134, 136, 147–8, 182, 212, 222, 224, 235n18, 236n23,25,28, 239n13, 242n27,32,34, 243n36,37,42, 244n72 and Britain’s offshore spiderweb, 68–9 and the Caribbean, 87–106 central organization of, 70–4 See City of London Corporation and City Cash, 74 controlling role of, 45–6, 96–6 and “domicile” rule, 69 global reach of, 18 history of, 63–86, 87 See “Big Bang”; Euromarkets and international financial deregulation, 85–6 and lending, 76–8 and “London-grad,” 69 and loopholes, 67–8 as old boys network, 64–5 and “rehypothecation,” 68 and secrecy, 69 and Special Purpose Vehicles (SPVs), 26 tentacles of: See British Crown Dependencies; British overseas territories; British zones of influence and the U.S., 67–8, 78–84 City of London Corporation (Corporation of London), 70–4, 76, 85–6, 224, 242n25, 243n36–37, 244n72 head of: See Lord Mayor of London history of, 71–2 and voting rights, 71 civil society, 170 Clinton, Bill, 52, 119–20, 150, 160 Clinton, Hillary, 30, 58 Coalition for Tax Competition, 150 Cold War, 75, 109, 138 Coleman, Norm, 121 Colombia, 26, 101, 111, 133, 136 Medellin drug cartel, 101, 133 colonialism, 2–8, 20, 23, 65, 88–9, 93–5, 104–5, 117, 138, 147, 161, 184 Commodity Futures Trading Committee (CFTC), 68 Compact of Free Association, 22 comparative advantage theory, 16 competition, tax, 149–56 Confidential Relationships (Preservation) Law, 101–2 Congdon, Tim, 66 ConocoPhilips, 22 Cook, Geoff, 168 Cornfeld, Bernie, 97–8 corporate governance, 39, 85, 122–5, 201–2 corporate responsibility, 228–9 The Corporation (Bakan), 158 Corporation Trust (Delaware), 125–6 corruption, 126–8, 229 Corruption Perceptions Index (CPI), 126 country-by-country reporting, 222 Cowperthwaite, Sir John, 105 Craven, John, 81 credit cards, 193–201 criminal money See arms trafficking; bribes; drug money; mob/mafia; terrorist financing Crocodile Dundee, 33 Crook, Kenneth, 93–5 Cuba, 88–9, 93 currency trading, 63–4, 70 Cyprus, 10, 27, 33, 138, 238n52 Dai Xianglong, 86 Davison, Daniel, 81 Deepwater Horizon, 22 de la Torre, Lisandro, 36, 38, 46–7 de Rugy, Veronique, 150 deferrals, tax, 112–13 Delaware, 22, 26, 39–40, 120–1, 123–6, 150, 166, 193–201, 204, 207–12, 214, 222, 228, 247n31, 248n34,39,42, 254n3,4, 255n18, 256n40 Chancery Court, 124–5, 248n34 Corporation Trust office, 125–6 history of offshoring, 39–40, 123–6 and jurisdictions, 193–201, 204, 207–12, 214 and securitization/bundling, 26, 125 and usury, 193–5, 200, 204 Delaware Statutory Trust Act (1988), 201 DeLay, Tom, 160–1 Deloitte & Touche, 25, 202, 209 DeLong, Bradford, 49, 55, 158–9 democracy, 7–8, 13, 31, 33, 42, 56, 71, 82, 102, 113, 123, 129, 131, 144–8, 162, 164, 170, 182, 185, 189, 192, 195–6, 198, 206, 210, 212, 219, 222, 224 and taxation, 144–8 Democratic party, 31, 82, 123, 185, 195, 198, 254n4 Democratic Republic of Congo, 131 deregulation, 32, 52, 66, 74–6, 85, 87, 115, 129–30, 132, 155, 159, 182, 193, 200, 209–10, 212, 217 developing countries, 8, 28–30, 57–60, 91, 93, 97, 100, 108, 126, 129–48, 155–6, 164, 169, 183, 217, 222–5, 227, 229, 236n29, 237n44, 240n22, 246n13, 250n26 and blame-the-victim, 8, 29, 140–4 and capital, 57–60 and capital flight, 139–43 and mobile phone charges, 148 and the offshore system, 129–48 and reform, 223–4 and sovereign debt funds, 143–4 and tax, 144–8 and tax treaties, 147–8 See Bank of Credit and Commerce International Deviers-Joncour, Christine, 5 Dill, James B., 39 Disney, 7, 88 Double, Paul, 73 double taxation, 26, 41–2, 130, 146 defined, 26 “Double Irish,” 14 drug money, 6, 9, 18, 20, 22, 26–7, 29, 88, 101–2, 111, 120, 131–3, 136 du Pont, Pierre S.

By the time Margaret Thatcher and Ronald Reagan came to power in 1979 and 1981, the political classes in Britain and the United States were losing faith in manufacturing and genuflecting toward finance. Wall Street and the City of London were at the forefront of a global trend of financialization: the reengineering of manufacturing firms as highly leveraged investment vehicles and, soon, the packaging of mortgages into risky asset backed securities for offloading into global markets. Everything was for sale: school playing fields, post offices, army services, and old fish markets. In the offshore centers, the very sovereign laws of nation-states had become available for sale or rent. After Thatcher’s giant deregulatory “Big Bang” of 1986 deepened London’s offshore status as a freewheeling, anything-goes financial center, “light-touch London” broadcast ever stronger antiregulatory impulses around the world, deregulating other economies and their banking systems as if by remote control.


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The Finance Curse: How Global Finance Is Making Us All Poorer by Nicholas Shaxson

activist fund / activist shareholder / activist investor, Airbnb, airline deregulation, anti-communist, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, British Empire, business climate, business cycle, capital controls, carried interest, Cass Sunstein, Celtic Tiger, central bank independence, centre right, Clayton Christensen, cloud computing, corporate governance, corporate raider, creative destruction, Credit Default Swap, cross-subsidies, David Ricardo: comparative advantage, demographic dividend, Deng Xiaoping, desegregation, Donald Trump, Etonian, failed state, falling living standards, family office, financial deregulation, financial innovation, forensic accounting, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global supply chain, high net worth, income inequality, index fund, invisible hand, Jeff Bezos, Kickstarter, land value tax, late capitalism, light touch regulation, London Whale, Long Term Capital Management, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mont Pelerin Society, moral hazard, neoliberal agenda, Network effects, new economy, Northern Rock, offshore financial centre, old-boy network, out of africa, Paul Samuelson, plutocrats, Plutocrats, Ponzi scheme, price mechanism, purchasing power parity, pushing on a string, race to the bottom, regulatory arbitrage, rent-seeking, road to serfdom, Robert Bork, Ronald Coase, Ronald Reagan, shareholder value, sharing economy, Silicon Valley, Skype, smart grid, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, special economic zone, Steve Ballmer, Steve Jobs, The Chicago School, Thorstein Veblen, too big to fail, transfer pricing, wealth creators, white picket fence, women in the workforce, zero-sum game

The Bill Black quotes come from my telephone interview with him on 15 September 2012, and from ‘Bill Black: Thomas Friedman – Deregulation Makes Banking Safe’, Naked Capitalism, 11 August 2016. 4. Archives 1985 & 1986: Jim Pickard and Barney Thompson, ‘Thatcher policy fight over “Big Bang” laid bare’, Financial Times, 30 December 2014. 5. These quotes are from the superb Swimming with Sharks by Joris Luyendijk, Guardian Faber, 2015, about the City of London. Similar accounts are provided in Karen Ho, Liquidated: An Ethnography of Wall Street, Duke University Press, 2009. 6. Bosworth-Davies’s most detailed comments on the arrival of criminal elements in London after the Big Bang are recorded in ‘Financial Crime – Staring failure in the face’, Rowan’s Blog, 13 December 2006 and subsequent blogs. Some of these quotes come from my telephone conversation with Bosworth-Davies on 17 September 2012, and subsequent email correspondence. 7.

122, 136–7 Cadbury’s 113 Cameron, David 48 Capital Group 84 capital requirements 148–63 Careline Homecare Limited 190–3, 202–5, 206, 216, 220 care sector 4, 190–4, 202–9, 216–17, 220, 228, 229, 234 Carillion 46, 231, 237 Carlyle Group 214 Carvalho, Arnaldo Lago de 233 Cassano, Joe 161 Cayman Islands 1, 2, 3, 59–60, 62, 63–7, 93, 125, 136, 140, 141, 145, 150, 151, 152, 153–4, 157, 162, 179, 188, 200, 211, 228, 242 Cayman Trust Law (1967) 62 Celtic Tiger (Ireland economy) 4, 115, 116–39 Central Bank of Ireland 129, 136 Cheney, Dick 244 Cherwell, Lord 53 Chicago School 28, 29, 30, 46, 71, 74, 98, 110, 197, 209, 253 China 13, 23, 50, 55, 84, 85, 87, 92, 104, 108, 110, 117, 138, 200, 258, 262–7, 272, 274 China General Nuclear Power Corporation (CGN) 262–3 Chinese Communist Party (CCP) 258, 264, 265, 266, 267, 272 Christensen, John 5, 11, 48, 67–8 Christensen, Professor Clayton 197, 198 Citibank/Citigroup 11, 59, 83, 129, 140, 159 City of London 37, 38, 84, 92–3, 183, 185, 252, 271, 272, 273; Big Bang 104, 143–4; capture of British establishment 13, 142, 166–7, 257–60, 265, 266; Chinese influence upon 262–7; evidence machine/lobbying and 257–60; financial brain drain and 6, 108, 259; global financial crisis and see global financial crisis; monopolies and 84; neoliberalism and 37, 38; organised crime and other abusive activities linked to 11–12, 93, 97, 141–6, 154, 166, 167, 168; penetrated and captured by reckless global finance (London loophole) 140–68; rebirth as global financial centre after fall of British empire 4, 10, 50–69; tax havens and see tax havens; Third Way and 92–3, 97, 98, 102, 104, 108, 109, 113; UK economy and growth in size of 5–14, 108, 218–40, 257–61, 262–74 City of London Corporation 257–8 Clearing House Group 130–1 Clinton, Bill 91, 97, 101, 114, 115, 122, 159 Clinton, Hillary 91, 100 Coase, Ronald: The Problem of Social Cost 72–4, 79 Coelho, Tony 98–9 Cohen, Benjamin J. 57 Cohen, Sheldon 254 collateralised debt obligations (CDOs) 165, 235 collateralised loan obligations (CLOs) 165, 200 Commodity Futures Modernisation Act (CFMA) (2000) 159–60 Community Mental Health Fund, Missouri 44 comparative advantage concept 105, 108 Competition and Markets Authority 70 competitiveness of nations/competitiveness agenda 8–9, 13–14, 23, 28–49, 62, 68, 70–1, 73, 80, 95, 97–8, 100–15, 130, 131, 132–3, 136, 142, 143, 149, 159, 160, 161, 164, 165, 180–1, 184–5, 207, 218, 241–3, 246–7, 250, 252–3, 258, 266, 267, 270, 271, 273 Conservative Party 37, 53, 71, 78, 102, 157, 165, 168, 220, 229 consultants 40, 41, 42–3, 66, 117, 230, 232, 233 controlled foreign company (CFC) reforms, U.K. 249–50 Cook Islands 177, 186, 272 Cornfield, Bernie 93 corporation: complexity of 3, 205–6; concept of 196–7 credit, control of 21 credit default swap (CDS) 128, 141, 147, 155–9, 165 Credit Suisse 11, 180, 183 crime/criminal money 12, 56, 58, 61, 62, 63, 64–5, 93–4, 142–3, 144, 145, 153, 154, 167–8, 175, 180, 187, 223, 264, 272, 273 Cromwell, William 22 Daily Mail 113, 251, 252 Darling, Alistair 257 Davidson, Charles 182, 189 Davidson, Kenneth 81, 252 Davies, Will 36, 39, 102 Deaton, Angus 181 debt 7, 34, 58, 69, 121, 152, 160, 165, 169, 186, 190, 193–6, 198–201, 205, 206–7, 208, 210, 215, 221, 234, 235, 244, 248, 262 Delaware, U.S. 181 Deloitte 235, 237 Delors, Jacques 100 Democratic Party, U.S. 39, 97, 98–100, 102, 141, 245 Deng Xiaoping 117 Depfa 133 deregulation, financial 13, 31, 35, 64–5, 68–9, 91, 97, 104, 107, 109, 117–18, 138, 142, 143, 146, 152, 159–60, 164, 165, 260 derivatives 12, 140–1, 142, 144, 146–7, 149, 151, 155, 158–60, 161, 164, 193 Desmond, Dermot 129–30 de Tocqueville, Alexis 75–6 Deutsche Bank 83, 95, 111, 160 Devereux, Professor Mike 243 Director, Aaron 71–2, 78, 79 DIRT (Deposit Interest Retention Tax) 136 Down’s Syndrome North East Association (UK) (DNSE) 169–70, 174 Drexel Burnham Lambert 161, 195 drugs: gangs/money 12, 61, 64–5, 92, 142–3, 145, 167, 185–6; pharmaceutical/Big Pharma 85–6, 126, 247 Dunbar, Nicholas 152, 161 dynamic scoring/dynamic modeling 253–4 East India Company 50, 75 Eddy, Bruce 44 Efficient Markets Hypothesis 150 Elf Affair 94, 187 Enron 46, 141, 165, 235–6 Epstein, Professor Gerald 10–11, 259; Overcharged: The High Costs of Finance 10– 11 Ernst & Young 163, 235, 238 Espino, Ovidio Diaz: How Wall Street Created a Nation 23 Essilor 82; EssilorLuxottica 82 Eurodollar markets/Euromarkets 55–9, 60, 61, 62, 63, 64, 68, 69, 77, 91, 93, 104, 142 European Central Bank (ECB) 137 European Commission (EC) 84, 94, 100, 111, 137; Liikanen Report (2012) 135 European Economic Community (EEC) 77, 98, 118, 123, 124–5 European Round Table of Industrialists (ERT) 100 European Union (EU) 98, 109–10, 111, 124, 132, 147, 238 Export Profits Tax Relief 118 Facebook 23, 71, 84, 88, 171, 173, 185, 226, 271, 274 fallacy of composition 107–8, 247 Fallon, Padraic 124 Fanning, John 126 Fantus Factory Location Service 40 Farm Aid 87–8 Federal Reserve Bank of New York 57 Ferguson, Niall: The Ascent of Money 242 Fiat 250 Finance Acts, Ireland: (1968) 120; (1987) 131 finance curse, concept of 3–14, 15, 18, 19, 22, 31, 37, 48, 68, 71, 103, 108, 111, 132, 136, 174, 184–5, 193, 198, 216, 228, 239, 257, 261, 265, 267, 269, 270, 271, 272, 273, 274 financial capture 13, 68, 96, 153, 257, 259, 265, 266 Financial Conduct Authority (FCA) 25–6, 246 financial crisis, global (2007–8) 4, 6, 25, 83, 90, 99, 109, 113, 114, 116, 128, 130, 133–4, 135–6, 140–68, 169, 195, 202, 224–5, 233, 235, 236, 240, 257 financialisation 2–4, 6, 9, 10, 11, 37, 68–9, 71, 88, 90, 174, 180, 185, 190, 191, 194, 198, 205, 217, 224, 225, 226, 228, 232, 259, 267, 274 Financial Services Authority (FSA) 104, 160, 161, 166, 167 Financial Stability Board (FSB) 83 Financial Times 68, 84, 94, 107, 146, 214, 218, 226, 232, 243, 256 Finger, Bernd 168 Fischel, William 38 Fordism 80 foreign direct investment (FDI) 110, 118–19, 123, 124, 132, 250 Fox News 71, 253 Franks, Oliver 52 Fraser, Ian: Shredded 227 free markets 18–19, 71–2, 99, 126, 128, 241 free-rider problem 30–1, 43, 47, 38 free trade 31, 50–1 Friedman, Milton 28, 30, 37, 59, 72, 73–4; ‘The Social Responsibility of Business Is to Increase Its Profits’ 196–7, 198, 209 Friedmaniacs 28, 30 FTSE 100 228, 238 Gapper, John 232–3 Gash, Tom 230 Gates, Bill 127, 185 Gauke, David 249 Gaydamak, Arkady 186 Gazprom 84 GDP (gross domestic product) 6, 8, 111, 112, 123, 147, 153, 174, 241, 245, 254, 256, 260, 266 General Electric (GE) 86–7 Gensler, Gary 140–1 Gibraltar 60, 63 Giddens, Anthony: The Third Way 105 Gilbert, Martin 83 Gilead 85–6 Giles, Chris 218 Glasman, Baron 258 Glass-Steagall Act (1933) 76, 147, 158–9 globalisation 10, 35, 59, 93, 94–5, 97, 98, 101, 102, 103, 106, 107, 109, 165, 177, 251, 254 Golden Age of Capitalism 34, 69, 91, 92, 118, 196, 251, 254–5 Goldman Sachs 113, 159, 160, 183, 213, 235, 242 Google 71, 88, 226, 271 Graphite Capital Partners VIII A LP 191–2, 205, 206 Great Depression (1929–39) 31, 98 Greenspan, Alan 75, 159, 160 gross national income (GNI) 112, 119, 122–3, 134 Guernsey 60, 181, 191, 220, 222 Hahneman, Daniel 181 Haldane, Andrew 225 Hands, Guy 181 Hansen, Lee 28 happiness, wealth and 181–3, 189 Harlech, Lord 34 Harrington, Brooke 186, 188 Hartnett, Dave 113 Harvard Business School 101, 196, 197 Harvie, Alicia 87–8 Harvoni 86 Haughey, Charles 114–15, 120–3, 129–30, 136 Hayek, Friedrich 35–6, 37, 59, 76; The Road to Serfdom 36, 37 Hayes, Jerry 229 Heaton, David 234 hedge funds 6, 13, 83, 104, 108, 128, 130–1, 140–1, 154, 164, 177, 178, 189, 193, 200, 209, 213, 214–15, 217, 233 Henry, James 166, 260 Hewlett-Packard 39–40 Hinkley C 262–3 HMRC 62, 104, 113, 168, 173, 234, 241, 242, 245, 246, 249, 252–4; Computable General Equilibrium model 241, 252–4 HNWI (high net worth individuals) 180; ultra-HNWI 180 Hodge, Margaret 168, 239 Hofri-Windogradow, Adam 180 Hong Kong 50, 130, 138, 171–2, 266 HSBC 12, 54, 83, 107–8, 167, 266 Hundred Group 242 Hunt Companies 221 HypoVereinsbank 133 Industrial Development Authority (IDA), Ireland 118, 124–5, 126, 129, 131, 135 inequality 4, 11, 31, 34, 36, 47, 48, 59, 90, 109, 138, 179, 187, 225, 251, 255, 256, 257, 259, 267–8, 270, 272, 274 inflation 34, 80, 107, 129 Innes, Abby 229 Institute for Fiscal Studies (IFS) 247 Intel 125 internal rate of return (IRR) 198, 211 International Financial Services Centre (IFSC), Dublin 128–35, 251 International Monetary Fund (IMF) 137, 164, 219, 250, 251, 257 International Public Partnerships Limited (INPP) 220–1 International Swaps and Derivatives Association (ISDA) 158 Intruders 113 Investec Wealth & Investment Limited 220 investment funds 2, 88, 110, 140 Investors Overseas Services (IOS) 93 Iran 53–4 Ireland: Celtic Tiger economy in 4, 114–15, 116–39 Isle of Man 60, 136 Jackson County, Missouri, U.S. 44 Jenkins, Robert 11 Jensen, Professor Michael 196, 197, 198, 209, 215 Jersey 1, 2, 3, 5, 60, 63, 67–8, 131, 136, 169, 171, 173, 174, 202, 221, 222, 223, 228, 258 Jiang Zemin 117 Johnson, Boris 218, 219, 222 Johnson County, Kansas, U.S. 41–4 Johnson, Paul 247 Johnson, Simon 257 Joly, Eva 187 Journal of Political Economy 29, 46 JP Morgan Chase 83, 95, 141, 146, 147, 155, 158, 160, 214 Juncker, Jean-Claude 94–5, 97, 102, 103, 104, 111, 114, 122 Kansas, U.S. 41–4, 244–5, 255–6 Kay, John 9 Kennedy, Edward 78–9 Keynes, John Maynard 31–2, 34, 37, 38, 52, 59, 68, 251 KKR (Kohlberg Kravis Roberts) 2, 3, 195, 214 Koch, Charles 74 Kohlberg Junior, Jerome 194, 195, 199 Kohl, Marius 95 KPMG 114, 235, 237, 238–9 Kraft Heinz 81, 113 Kravis, Henry 2, 195 Kroes, Neelie 110 Krugman, Paul: ‘Competitiveness: A Dangerous Obsession’ 105 Labour Party 77, 97, 102–5, 132, 192, 220, 247, 257 Lack, Simon 214; The Hedge Fund Mirage 214 Laffer, Arthur/Laffer curve 244–5, 254 Lazonick, Bill 225, 226 Leaver, Professor Adam 207, 224–5, 234 Lehman Brothers 140, 162–4 Leigh-Pemberton, Robin 145 LeRoy, Greg 40–1 leveraged buyout (LBO) 195–6 Levin, Carl 134 Liberty Global 250 Libor (London Inter-Bank Offered Rate), manipulation of 12, 85, 109, 166 Linares, Adolfo 185, 188 Linklaters 163 Lloyds Bank 52 Local Government Association (LCA) 224 Loch Alpine Economics 253 London School of Economics (LSE) 37, 105, 229 London Stock Exchange (LSE) 167, 220 London Whale 141 Long-Term Capital Management (LTCM) 140–1 Luxembourg 1, 2, 3, 13, 55–6, 92, 93–7, 98, 111–13, 125, 130, 138, 142, 166, 201, 211, 221, 222, 228, 243 Luxleaks scandal (2014) 95, 109 Luxottica 82 Lycamobile 168 Lydian Capital Partnership 202 Lynn, Barry 87, 88 Macdonald, Ken 168 Macmillan, Harold 34, 53–4 MacSharry, Ray: The Making of the Celtic Tiger 118, 127 Madoff, Bernie 94, 96 Madrid, Miguel de la 58 Major, John 220 Maloney, Carolyn 141 Manafort, Paul 183 Manne, Henry 74 Marchant, David 157 Marx, Karl 15, 18 Masters, Blythe 158 Maugham, Jolyon 156 Maurer, Ueli 45–6 Mazerov, Michael 255 McAlpin, Clovis 62 McCarthy, Joseph 29 McCarthy, Justine 119 McCreevy, Charlie 132 McDonald, Duff 197 Mellon, Tamara 208 mergers and acquisitions (M&A) 26, 71, 81, 82, 83, 84, 87, 99, 110, 155, 225, 226, 251 Metcalf, Stephen 36 Microsoft 125, 185 Midland Bank 34, 54–5 Milken, Michael 195 Missouri, U.S. 41, 43, 44, 244–5, 255 money laundering 12, 145–6, 167, 168, 183 Money Trust Investigation, U.S.

In both areas London and the spider’s web affected other countries’ financial systems in two main ways: first by providing an escape route, and second as a ‘competitive’ battering ram, offering Wall Street lobbyists an example and a threat to justify further deregulation at home along the lines of ‘Do this, or we’ll decamp to London.’ The British web led New York into the global deregulatory race, while Zurich, Luxembourg and a handful of other offshore financial centres played supporting roles. It is almost inevitable that Britain is more deeply ‘captured’ by the City of London than the United States is captured by Wall Street: the two global financial centres are similar in size, but Wall Street is diluted in a much larger democracy, and it also doesn’t have the centuries-old historical roots in the British establishment that are enjoyed by the City and its institutions. Bill Black, a financial criminologist and former US bank regulator, talks of the ‘three Ds’ that incubated the crisis: deregulation, desupervision and the de facto criminalisation of financial firms, which led to fraudulent lending practices and much more.


The Making of a World City: London 1991 to 2021 by Greg Clark

Basel III, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, British Empire, business climate, business cycle, capital controls, carbon footprint, congestion charging, corporate governance, cross-subsidies, deindustrialization, Dissolution of the Soviet Union, East Village, Fall of the Berlin Wall, financial innovation, financial intermediation, global value chain, haute cuisine, housing crisis, industrial cluster, intangible asset, Kickstarter, knowledge economy, knowledge worker, labour market flexibility, low skilled workers, manufacturing employment, Masdar, mass immigration, megacity, New Urbanism, offshore financial centre, Pearl River Delta, place-making, rent control, Robert Gordon, Silicon Valley, smart cities, sovereign wealth fund, trickle-down economics, urban planning, urban renewal, working poor

Available at www.sh.xinhuanet.com/zhuanti2011/ifcd2011/IFCD2011e.pdf. Accessed 2013 Mar 4. York Aviation (2012). London’s Air Connectivity: Emerging and Growth Markets. London: City of London Corporation. Z/Yen (2014). Global Financial Centres: 15. Available at www.longfinance.net/ images/GFCI15_15March2014.pdf. Accessed 2014 Jun 18. Index Abercrombie Plan 12 Abu Dhabi 131 Accra 131 Adonis, Andrew 181 airports 116, 181 Amsterdam 5, 6 art galleries 143 Association of London Government 60 aviation 115–17, 181 Bank of England 14 Barcelona 24, 38 Basel 5 Beijing 127, 128 Berlin 22, 23, 31 Betjeman, John 13 bicycle hire scheme 115 Big Bang deregulation 15–16, 35 Bishopsgate 90 Blundell, Gerry 35 Boston 127 brand reputation 7, 26–7 Breheny, Michael 32 British Broadcasting Corporation (BBC) 15 British Rail 13, 29 Broadgate 8, 87–8, 90 Broadhurst, Robin 40 Brussels 22 Buenos Aires 130 Burdett, Ricky 104 bus services 117 Business Improvement Districts (BIDs) 84–6 business in London 5, 38, 138–43, 182 cable car link 115 Cambridge 30 Canary Wharf 8, 21, 70, 87, 89, 90 Canary Wharf Group 26 carbon dioxide emissions 32 Cassidy, Michael 50 Central London Partnership 62 Central London Rail Study 47 Channel 4 television 15 Channel Tunnel Rail Link (CTRL) 28 Chapman, Honor 3–4 Cheese Grater Tower 88, 90 Cheshire, Paul 105–6 Chicago 127, 131 Cities of Opportunity 126 City Airport 115–16, 181 City Challenge initiative 71 City of London 4, 14 City of London Corporation 39 City of Westminster 4 civic coalitions 7 Clark, Robert Gordon 25 Community Infrastructure Levy 107 Community Land Trusts (CLTs) 103 Confederation of British Industry (CBI) 38 Congestion Charge Zone 26, 113–14 corporate hub accommodation 87–8 diffusion 89–93 emerging developments 97 foreign capital 93–7 high-rise buildings 88–9 timeline of development 90 cost of living 142 council housing 99 Council Tax 162 Courtauld, Toby 138, 146 Covent Garden 13, 80 Crosland, Anthony 13 Crossrail 111, 112, 114–15, 117–18, 181 culture 7, 27–8, 143–5 cycle hire scheme 115 Dawber, Howard 26 death of distance 142 de-industrialisation 6 densification of housing 101 Dickie, John 123 diversity 143–5 ‘DNA’ of London 9, 13, 182 Docklands Light Railway (DLR) 70 Dubai 4, 24, 130 The Making of a World City: London 1991 to 2021, First Edition.

The rise of the Eurodollar markets had vastly increased the City of London banking sector’s scale, but operationally, even with new international actors, the debt and equity markets continued to function within the same archaic system of self-regulation (Pryke, 1991). London’s financial capacity was beginning to play second fiddle to New York, and the fear was that its financial capability would be blunted if it did not liberalise and modernise. The government of Margaret Thatcher was the most pro-City of London national administration in more than a generation, reflecting a political shift towards embracing the new tertiary sector. In 1981, Thatcher declared that “the City of London is a precious national asset” which needed the freedom of deregulation to become more outward-facing (Green, 2004: 172).

The scale, diversity and connectivity of London as an urban agglomeration were becoming, once again, essential assets in this internationalised network of specialisation, expertise and innovation. The 1986 ‘Big Bang’ of financial services activated processes of deregulation, innovation and professionalisation, which were the key drivers of a new generation of employment opportunities in central London (Gordon, 2011). The number of foreign banks operating in London had already surpassed 500 by 1991, nearly triple the level 20 years earlier, and the number of foreign securities firms grew fourfold to 160 over the same period. Gerry Blundell, former Director of European Strategy at Jones Lang LaSalle, has remarked that deregulation associated with the Big Bang not only “created the space for competition”, but also made London “very attractive for overseas talent . . . [as] a place where you could be yourself” (personal communication, 12 February 2012).


pages: 223 words: 10,010

The Cost of Inequality: Why Economic Equality Is Essential for Recovery by Stewart Lansley

"Robert Solow", banking crisis, Basel III, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Branko Milanovic, Bretton Woods, British Empire, business cycle, business process, call centre, capital controls, collective bargaining, corporate governance, corporate raider, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, Edward Glaeser, Everybody Ought to Be Rich, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, Goldman Sachs: Vampire Squid, high net worth, hiring and firing, Hyman Minsky, income inequality, James Dyson, Jeff Bezos, job automation, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, laissez-faire capitalism, light touch regulation, Long Term Capital Management, low skilled workers, manufacturing employment, market bubble, Martin Wolf, mittelstand, mobile money, Mont Pelerin Society, Myron Scholes, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, Tyler Cowen: Great Stagnation, Washington Consensus, Winter of Discontent, working-age population

While many lower income families have been helped into home ownership through such mortgages, weakened regulation has also made it much easier for unscrupulous operators determined to make easy money. While the process of deregulation brought more choice—and more risk—for consumers, it also led to the slow build-up of a massive debt mountain. Given the profit to be made from the mortgage business, the banks had every incentive to try and capture a growing share of the market. A higher share meant bigger profits, share values and executive bonuses. After the freeing up of mortgage restrictions, the lending institutions became increasingly innovative—some would say reckless. In the 1960s and 1970s, the typical mortgage was limited to two and a half times earnings, and rarely more than 80 or 90 per cent of the property value. Some kind of deposit was mandatory. After big bang, these restrictions were mostly axed and mortgage deals became more and more generous.

It can lay claim unchallenged to one title: it is the magnet for the world’s billionaires.’170 Notes 136 H Roberts and D Kynaston, City State, Penguin, 2001, p 48. 137 S Lansley and H Reed, The Red Tape Delusion, TUC Touchstone Pamphlet, 2010, pp20-21. 138 Lansley, Life in the Middle, op. cit. p 28. 139 WD Rubenstein, Men of Property, Croom Helm, London, 1981, tables 3.3-3.7, p 62-66. 140 J Bakan, The Corporation, Constable, 2004, ch 4. 141 Lansley, Do the Super-Rich Matter?, op. cit. p 12-13. 142 C Toulouse, ‘Thatcherism, Class Politics and Urban Development in London’, Critical Sociology, Volume 18, 1992, p 62. 143 D Kynaston, The City of London, Volume IV, Pimlico, 2001, chapter 22. 144 Z/Yen, The Global Financial Centre Index, City of London Corporation, March 2007. 145 http://www.ifsl.org.uk/media/2333/Eco_con_of_UK_fin_ser_2007.pdf. 146 Centre for Research on Socio-Cultural Change (CRESC), An Alternative report on UK Banking Reform, University of Manchester, 2009, p 41. 147 Robin Blackburn,’ Finance and the Fourth Dimension’, New Left Review, 39, May/June, 2006. 148 Boston Consulting Group, Investment Banking and Capital Markets, Annual Reports. 149 Glyn, Capitalism Unleashed, op. cit. p 52.

See Buchanan et al, Undisclosed and Unsustainable, Centre for Research on Socio-Cultural Change, Manchester University, 2009. 130 Centre for Cities, Cities Outlook, 2009. 131 Centre for Cities, Public Sector Cities, Trouble Ahead, July 2009. 132 Buchanan et al, op. cit. p 22. 133 J Hills et all (eds), Towards a More Equal Society, Policy Press, 2009, p 2. 134 Ibid. p 28. 135 Lansley, Life in the Middle, op. cit. figure 8. 4 A FAUSTIAN PACT In early January 1998, a large group of London traders, fund managers and financiers braved the pouring winter rain to gather at the Mansion House, the grand official residence of the Mayor of the City of London. The group—gathered in the very heart of the old financial sector known as the Square Mile—had been invited to debate the motion ‘This house believes that City salaries are totally fair and justified’. Most of the 200 at the debate would have been amongst the highest paid in the land. Supporting the motion was George Cox, a director of LIFFE, the London International Financial Futures Exchange, established in 1982 to trade in ‘futures’, essentially bets about the future course of share prices, currencies and commodities.


pages: 457 words: 143,967

The Bank That Lived a Little: Barclays in the Age of the Very Free Market by Philip Augar

activist fund / activist shareholder / activist investor, Asian financial crisis, asset-backed security, bank run, banking crisis, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, break the buck, call centre, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, family office, financial deregulation, financial innovation, fixed income, high net worth, hiring and firing, index card, index fund, interest rate derivative, light touch regulation, loadsamoney, Long Term Capital Management, Martin Wolf, money market fund, moral hazard, Nick Leeson, Northern Rock, offshore financial centre, old-boy network, out of africa, prediction markets, quantitative easing, Ronald Reagan, shareholder value, short selling, Sloane Ranger, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, too big to fail, wikimedia commons, yield curve

He told an audience of senior bankers assembled to hear the last of his Mansion House speeches: ‘The City of London has risen by your efforts, ingenuity and creativity to become a new world leader.’ In a recent study of the world’s top fifty financial cities, London had come first, leading the chancellor to conclude: ‘The financial services sector in Britain and the City of London at the centre of it, is a great example of a highly skilled, high value added, talent-driven industry that shows how we can excel in a world of global competition. Britain needs more of the vigour, ingenuity and aspiration that you already demonstrate.’3 But one week later, on the very same day that he moved into Number 10, Northern Rock, one of the building societies that had taken advantage of financial deregulation by listing on the Stock Exchange and competing with the High Street banks, unexpectedly issued a profit warning.

He lit a cigarette and read: ‘The Government has said it would call off the legal action against the Stock Exchange in return for reforms which will alter the way stocks and shares are bought and sold in Britain.’1 Faced with a government that disliked anti-competitive price agreements and the threat of a Restrictive Practices Court case, the Exchange had dramatically agreed to abolish its tariff of fixed commissions on share dealing by the end of 1986. In the cosy world of bankers and brokers in which Camoys worked, this was sensational news. But neither he nor anyone else realized then that it would have bigger consequences for British society than any change in business practices since the Industrial Revolution 200 years before. This agreement, the blue touchpaper that lit the explosion which became known as Big Bang, changed the City of London from a tired old lion into a roaring dragon. It breathed fire into the economy but later burned it badly. In a quarter of a century it transformed culture, values and attitudes to money throughout the whole country. It fuelled a housing boom, created unprecedented prosperity but then blew it all away. It made governments’ reputations before leaving them in ruins. Its heroes made millions, yet many ended up in disgrace.

By 1983, Cook was in the final stages of developing TAPS (Trade Analysis and Processing System), a computer system that automated parts of share trading and settlement. This was at a time when traders in the City of London were still doing deals on a handshake and recording the details in pencil in notebooks. It is doubtful whether Camoys, Bevan or Buxton had ever seen a computer, let alone had one on their fine mahogany desks. Even while they were laying their plans, their understanding of investment banking was out of date. Technology would soon turbocharge the developments in financial services brought about by Big Bang. The world Barclays was intent on entering was about to become unimaginably complex and the paths of Bill Cook and Barclays would cross during the next two decades in a surprising way. In 1977, Cook, who had already gained a reputation at US Surgical for developing bright graduate talent, went back to his alma mater, the University of Connecticut, on a hiring trip.


pages: 543 words: 147,357

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society by Will Hutton

Andrei Shleifer, asset-backed security, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, business cycle, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, diversification, double helix, Edward Glaeser, financial deregulation, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liberal capitalism, light touch regulation, Long Term Capital Management, Louis Pasteur, low cost airline, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, mass immigration, means of production, Mikhail Gorbachev, millennium bug, money market fund, moral hazard, moral panic, mortgage debt, Myron Scholes, Neil Kinnock, new economy, Northern Rock, offshore financial centre, open economy, plutocrats, Plutocrats, price discrimination, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Rory Sutherland, Satyajit Das, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, unpaid internship, value at risk, Vilfredo Pareto, Washington Consensus, wealth creators, working poor, zero-sum game, éminence grise

., 17, 36, 135, 177 Cabinet Office, 218–19, 336, 337 Cable, Vincent, 220 Cambridge University, 9, 363 Cameron, David, 20, 179, 233–4, 235, 318, 338, 342; ‘Big Society’ policy, 19–20, 234, 271, 280 Campbell, Alastair, 141, 142, 224, 312 Canada, 121, 354, 358–9, 383 capital controls, abolition of, 32, 161 capitalism: see also entrepreneurs; innovation; amorality of, 16–19; ‘arms race’ effects, 105; boom and bust cycle, 181–7, 392; deregulation (from 1970s), 159–63, 388; fairness and, ix, x, 23–7, 41, 106, 122–3, 206–7, 210, 249, 385, 386, 394; as immutable force of nature, ix, 23, 40–2; incumbent firms, 29–30, 31, 105, 106, 110, 111–12, 253–5, 257, 297; interconnectedness of markets, 200–2, 204; knowledge-entrepreneurship dynamic, 27–8, 31, 103, 110–11, 112–13; liquidity as totemic, 199, 200, 202, 240, 243; need for ‘circuit breakers’, 197, 199, 202, 203; network theory and, 199–204, 206; required reforms of, 205–9, 215–16; stakeholder, x, 148–9; undue influence of, 32–3 Carlaw, Kenneth, 108, 263 Carnegie, Andrew, 195, 303 cars, motor, 91, 108, 109, 134, 269 Castells, Manuel, 317 Cayne, Jimmy, 173–4 CCTV cameras, 10 celebrity culture, 282, 314 central banks, 154, 157, 158, 160, 182, 185, 187, 208; see also Bank of England; Federal Reserve, 169–70, 176, 177, 183 Cerberus Capital Management, 177 Cervantes, Miguel de, 274 Channel 4, 330, 350 Charles I, King of England, 124–5 Charter One Financial, 150 chavs, mockery of, 25, 83, 272, 286–8 child poverty, 12, 21, 74–5, 83, 278, 279, 288–90, 291 China, x, 101, 112, 140, 144, 160, 226, 230, 354–5, 385; consumption levels, 375–6, 379, 380, 381; economic conflict with USA, 376–7, 378–80, 381, 382, 383; export led growth, 36, 169, 208, 226, 355–6, 375–7, 379–81, 382–3; rigged exchange rates, 36, 169, 355, 377, 378–9; surpluses of capital and, 149, 154, 169, 171, 208, 226, 375; unfairness of world system and, 383, 385 Christianity, 53, 54, 352, 353 Church of England, 128 Churchill, Winston, 138, 273, 313 Churchill Insurance, 150 Cisco, 253 Citigroup, 152, 158, 172, 177, 184, 202, 203, 242, 247 city academies, 278, 307 City of London, 34, 137, 138, 178–9, 252, 359; as incumbent elite, 14, 26, 31, 32–3, 210, 249, 355; in late nineteenth-century, 128–30; light-touch regulation of, 5, 32, 138, 145, 146–7, 151, 162, 187, 198–9; New Labour and, x–xi, 5, 19, 22, 142, 144–5, 355; remuneration levels see pay of executives and bankers civic engagement, 86, 313 civil service, 13, 221, 273, 312, 343 Clasper, Mike, 178 Clayton Act (USA, 1914), 133 Clegg, Nick, 22, 218, 318, 327–8, 342, 391 Clifton, Pete, 321 Clinton, Bill, 140, 177, 183 coalition government (from May 2010), 14, 20, 22, 37, 307, 311, 343, 346, 390–2; abolition of child trust fund, 302; capital spending cuts, 370–1; deficit reduction programme, xi, 19, 34, 214, 227, 357, 360–1, 364, 369–71, 373, 390–2; emergency budget (June 2010), 369–70; market fundamentalism and, 370; political reform commitment, 35, 341, 343–4, 346, 350, 390, 391; proposed financial reforms, 208, 209, 245, 252, 371; repudiation of Keynesian economics, xi, 390–1 Cohan, William, 158–9 Cohen, Ronald, 12, 245 collapse/crash of financial system, x, xi, 4, 9, 41, 144, 146, 152–4, 158–9, 168; costs of, 7, 19, 138, 152–3, 172, 214–15; errors responsible for, 136, 187–96, 197–204; global interconnectedness, 375, 382–3; lessening of internationalism following, 376–83; need to learn from/understand, 36–7; predictions/warnings of, 148, 153, 180, 182–5; recommended policy responses, 215–16; results of previous credit crunches, 358, 359–60, 361–2 collateralised debt obligations (CDOs), 155, 167–8, 174 colonialism, 109, 124 Commodity Future Trading Commission, 182–3 communism, collapse of in Eastern Europe, 16, 19, 135, 140, 163 competition, 29, 30, 33, 51, 156, 185, 186, 207–8, 251; see also ‘open-access societies’; City of London and, 160, 178, 179, 198–9; deregulated banking and, 160, 161, 163, 164, 178, 179, 181; European Union and, 251, 258, 259; fairness and, 89–90, 99, 272; incumbent elites/oligarchs and, 104, 114, 129–30, 131–4, 257; innovation and, 40, 114, 257–60; national authorities/regimes, 201–2, 257–60, 316, 318; state facilitation of, 31 Competition Commission, 257–8 computer games, 233 Confederation of British Industry (CBI), 4, 6–7 Conservative Party, xi, 5, 11, 14, 97–8, 220, 343, 378; broken Britain claims, 16, 227, 271; budget deficit and, 19, 224, 357, 360–1, 368, 379; City/private sector funding of, 179, 257, 344; decline of class-based politics, 341; deregulation and, 32, 160, 161; fairness and, 83, 302, 374, 390; general election (1992) and, 140–1; general election (2010) and, 20, 97, 227, 234, 271, 357, 374, 379, 390; Conservative Party – continued government policies (1979-97), 32, 81, 275–6, 290; inheritance/wealth taxes and, 74, 302–3; market fundamentalism and, 5, 17, 138, 147, 160, 161; poverty and, 21, 279; reduced/small state policy, 20, 22, 233–4, 235 construction industry, 5, 33, 268 consumer goods, types of, 266–7 Continental Illinois collapse, 152, 162 Convention on Modern Liberty, 340 Cook, Robin, 142 Cootner, Paul, 194–5 Copenhagen climate change talks (2009), 226, 231, 385 Corporate Leadership Council, US, 93 Corzine, Jon, 177 county markets, pre-twentieth-century, 90 Coutts, Ken, 363 Cowell, Simon, 314, 315 ‘creative destruction’ process, 111, 112, 134 creative industries, 11, 71, 355 credit cards, 64, 354 credit crunch: see collapse/crash of financial system credit default swaps, 151, 152, 166–8, 170, 171, 175, 176, 191, 203, 207 Crédit Lyonnais collapse, 152 credit-rating agencies, 151, 165, 175, 196, 197, 248, 269, 362, 388; funding of, 151, 196, 207 criminal activity/allegations, 7, 101, 103, 104–5, 138, 167–8 Crosby, James, 178 Cuba, 61 culture, British, 12, 187, 282, 314 Dacre, Paul, 324, 326, 329 Daily Mail, 218, 286, 288, 315, 324, 325–7, 339, 342 Daily Telegraph, 288, 317, 319, 327 Darling, Alistair, 149, 204, 252 Darwin, Charles, 31 Data Monitor, 186 Davies, Howard, 198 Davies, Nick, Flat Earth News, 319, 321, 323–4, 326, 331–2 de Gaulle, Charles, 65 debt, 33, 155, 209, 351–63; corporate/commercial, 8, 29, 181, 245, 248, 352, 354, 359, 363, 374; moral attitudes towards, 351–4, 357, 360–1; necessity of, 155, 351, 353, 354; private, 5, 186, 187, 210, 226, 279–80, 354–7, 359, 363, 373; public, 9, 34, 164, 166, 167, 182, 203, 214, 224–6, 356–7, 362–3, 375, 388, 393; sustainable level of, 356–7, 368–9 Defence Advanced Research Projects Agency (DARPA), 265 defence and armed forces, 34, 372 deficit, public, 4, 34, 213, 224–6, 335, 364–74; coalition’s reduction programme, xi, 19, 34, 214, 227, 357, 360–1, 364, 369–71, 373, 390–2, 393; need for fiscal policy, 224–5, 226, 357–8, 364, 365–9, 370, 374; speed of reduction of, 213, 224–5, 360–1, 368, 371 Delingpole, James, 287 Delong, Brad, 27, 106 democracy, 13–15, 235, 310–16, 333–48; centralisation of power and, 14–15, 35, 217, 313, 334, 337, 342; fair process and, 86, 89, 96–9; incumbent elites and, 35, 99; industrial revolution and, 128; media undermining of, 315–16, 317–18, 321–9, 333, 350; ‘open-access societies’ and, 136, 314 Democratic Party, US, 18, 140, 183, 379 Demos, 289 Deng Xiao Ping, 140 Denham, John, 21 deprivation and disadvantage, 10, 34, 288–93, 307–8, 393; low-earning households, 11–12, 13, 291, 361; weight of babies and, 13; young children and, 74–5, 83, 288–90 derivatives, 140, 145, 150–1, 164–8, 171, 175, 188, 207, 209; City of London and, 32, 137, 150–1, 157, 199; mathematical models (‘quants’) and, 188, 191; regulation and, 183, 197–8, 199 desert, due, concept of, 4, 24, 38–43, 45–7, 50–63, 64–8, 73–7, 80–2, 223, 395; see also effort, discretionary; proportionality; big finance and, 40–2, 82, 167, 174, 176, 210; debt and, 351–2; diplomacy/international relations and, 385–6; Enlightenment notions of, 53–6, 58–9, 112; luck and, 70, 73–7, 273; poverty relief systems and, 80–2, 277–8; productive entrepreneurship and, 102–3, 105–6, 112, 222, 392–3; taxation and, 40, 220, 266 Deutsche Bank, 170 developing countries, 71–2, 160, 354–5, 375, 376, 385 Diamond, Bob, 24 Dickens, Charles, 353 digitalisation, 34, 231, 320, 349, 350 Doepke, Matthias, 115–16 dot.com bubble, 9, 193 Drugs Advisory Panel, 11 Duffy, Gillian, 394 Durham University, 263 Dworkin, Ronald, 70 Dyson, James, 28, 33 East India Company, 130 Easyjet, 28, 233 eBay, 136 economic theory, 43–4, 188–9, 366; see also Keynesian economics; market fundamentalism economies of scale, 130–1, 254–5, 258 The Economist, 326, 330, 349 economy, British: see also capitalism; financial system, British; annual consumption levels, 375; balance of payments, 363–4; as ‘big firm’ economy, 254; change in landscape of trading partners, 230–1; coalition capital spending cuts, 370–1; collapse of tax base, 224, 368; cumulative loss of output caused by crash, 138, 153, 172, 214–15; desired level of state involvement, 234–5; domination of market fundamentalism, 16–17; economic boom, 3–4, 5–6, 12, 143, 173, 181–7, 244–5; fall in volatility, 365; fiscal deficit, 368; fiscal policy, 208, 224–5, 226, 357–8, 364–9, 370, 374; growth and, 9–10, 214–15, 218–19, 224, 359, 363; inefficient public spending, 335; investment in ‘intangibles’, 232–3; in late nineteenth-century, 128–30; ‘leading-edge’ sectors, 218–19; need for engaged long term ownership, 240–4, 249–51; as non-saver, 36, 354; potential new markets/opportunities, 231–3; public-private sector interdependence and, 219–22, 229–30, 261, 265–6, 391, 392; required reforms of, 20, 239–44, 249–52, 264–6, 371–4 see also national ecosystem of innovation; ‘specialising sectors’, 219; urgent need for reform, 36–7; volatility of, 297–8; vulnerability of after credit crunch, 358–64 economy, world: acute shortfall of demand, 375–6; Asian and/or OPEC capital surpluses and, 149, 153–4, 169, 171, 208, 226, 354, 375; conflicts of interest and, 137, 138; deregulation (from 1970s), 159–63; emerging powers’ attitudes to, 226; entrenched elites and, 137–8, 210; fall in volatility, 365; international institutions as unfair, 383, 385; London/New York axis, 149, 150–1, 157–8, 160, 187, 202; need for international cooperation, 357–8, 379–80, 381–3, 384, 385–6; post-crunch deleverage pressures, 359–60, 374–5; protectionism dangers, 36, 358, 376–7, 378, 379, 382, 386; savers/non-savers imbalance, 36, 169, 208, 222, 355, 356, 375–6, 378–83; shift of wealth from West to East, 36, 383–4; sovereign debt crises, 167, 203, 214; unheeded warnings, 182–5; wrecking of European ERM, 140, 144 Edinburgh University, 145 education, 10, 20–1, 128, 131, 272–4, 276, 278, 292–5, 304–8, 343; Building Schools for the Future programme, 371; cognitive and mental skills, 288–90, 304–6; private, 13, 114, 264–5, 272–3, 276, 283–4, 293–5, 304, 306 effort, discretionary, 50, 53, 54–5, 58–60, 80, 90–1, 114, 134; see also desert, due, concept of; fair process and, 91–4; indispensability and, 65–7; innovation and invention, 62, 65, 102–3, 105–6, 112, 117, 131, 223, 262–3, 392–3; luck and, 26–7, 65, 67, 70, 71, 73–4, 75–7; productive/unproductive, 43, 46–7, 51–2, 62, 64–5, 102–3, 392–3; proportionate reward for, 26, 39–40, 44, 47, 61, 74, 76–7, 84, 122, 272, 273, 2 84 egalitarianism, 27, 53–4, 55–6, 61, 75, 78–80, 144, 341, 343; Enlightenment equal worth concept, 53, 55, 59–60 Ehrenfeld, Rachel, 333 Eisman, Steve, 207 electoral politics: see also general election (6 May 2010); general elections, 97, 138, 277, 315; fair process and, 96–9; franchise, 128; general election (1992), x, 138, 140–1, 144, 148, 277; general election (1997), x, 138, 141 electricity, 134, 228, 256 electronic trading, 105 elites, incumbent, 23, 31–3, 99, 131; City of London, 14, 26, 31, 32–3, 210, 249, 355; competition and, 104, 113, 114, 129–30, 131–4, 257; democracy and, 35, 99; Enlightenment and, 122; history of (from 1880s), 131–4; history of in Britain (to 1900), 124–30; innovation and, 29–30, 110, 111–12, 113, 114, 115, 116; modern big finance and, 135, 137–8, 180, 210, 387–9; in ‘natural states’, 111, 113, 114–15, 116, 123–4, 127; New Labour’s failure to challenge, x–xi, 14, 22, 388, 389–90; world economy and, 137–8, 210 EMI, 28, 247, 248 employment and unemployment, 6, 75, 291–3, 295, 300, 373, 393; employment insurance concept, 298–9, 301, 374; lifelong learning schemes, 300, 301; lifelong savings plans, 300; unemployment benefit, 81, 281 Engels, Friedrich, 121–2 English language as lingua franca, 124 Enlightenment, European, 22, 30–1, 146, 261, 314–15; economics and, 104, 108–9, 116–17, 121–3; notions of fairness/desert, 53–6, 58–9, 112, 122–3, 394; science and technology and, 31, 108–9, 112–13, 116–17, 121, 126–7 Enron affair, 147 entrepreneurs: see also innovation; productive entrepreneurship; capitalist knowledge dynamic, 27–8, 31, 110–11, 112–13; challenges of the status quo, 29–30; Conservative reforms (1979-97) and, 275; private capital and, 241; public-private sector interdependence and, 219–22, 229–30, 261, 265–6, 391, 392; rent-seeking and, 61–2, 63, 78, 84, 101, 105, 112, 113–14, 116, 129, 135, 180; unproductive, 28–9, 33, 61–2, 63, 78, 84, 101–2, 103–5, 180 environmental issues, 35–6, 71–2, 102, 226, 228, 231, 236, 385, 390, 394; due desert and, 68; German Greens and, 269 Erie Railroad Company, 133 Essex County Council, 325, 332 European Commission, 298 European Exchange Rate Mechanism (ERM), 140, 144, 166 European Union (EU), 11, 82, 179, 379–80, 383–4, 385; British media and, 15, 328, 378; Competition Commissioner, 251, 258, 259; scepticism towards, 15, 36, 328, 377, 378, 386 eurozone, 377 Fabian Society, 302–3 factory system, 126 fairness: see also desert, due, concept of; proportionality; abuse/playing of system and, 24–5, 27; asset fairness proposals, 301–3, 304; behavioural psychology and, 44, 47–50, 59–61; Blair’s conservative view of, 143; Britishness and, 15–16, 392–3, 395; capitalism and, ix, x, 23–7, 41, 106, 122–3, 206–7, 210, 249, 385, 386, 394; challenges to political left, 78–83; coalition government (from May 2010) and, 22, 37; commonly held attitudes, 44, 45–7; deficit reduction and, 226, 227, 374; economic and social determinism and, 56–8; Enlightenment notions of, 53–6, 58–9, 112, 122–3, 394; fair process, 84–94, 96, 98–9, 272; as foundation of morality, 24, 26, 45, 50; individual responsibility and, 39, 78–9; inequality in Britain, 78, 80, 275–6, 277–8, 342; international relations and, 226, 385–6; ‘Just World Delusion’, 83; luck and, 72–7; management-employee relationships, 90–2; models/frameworks of, 43–58; need for shared understanding of, 25, 37, 43; partisanship about, 42–3; politicians/political parties and, 22, 83, 271–2, 302–3, 374, 391–2; popular support for NHS and, 75, 77, 283; pre-Enlightenment notions, 52–3; shared capitalism and, 66, 92–3; state facilitation of, ix–x, 391–2, 394–5; welfare benefits to migrants and, 81–2, 282, 283, 284 Farnborough Sixth Form College, 294 Federal Reserve, 169–70, 176, 177, 183 Fees Act (1891), 128 Fertile Crescent, 106 feudalism, European, 53–4, 74, 104, 105 financial instruments, 103, 148, 157, 167–8 Financial Services and Markets Act (2001), 198 Financial Services Authority (FSA), 24, 147, 162, 178, 198–9, 208 financial system, British: see also capitalism; economy, British; Asian and/or OPEC capital surpluses and, 149, 154, 354; big finance as entrenched elite, 136, 137–8, 176, 178–80, 210, 387–9; declining support for entrepreneurship, 241; deregulation (1971), 161; fees and commissions, 33; importance of liquidity, 240, 243; lack of data on, 241; London/New York axis, 149, 150–1, 157–8, 160, 187, 202; massive growth of, 137, 138, 209, 219; need for tax reform, 209–10; regulation and see regulation; required reforms to companies, 249–50; savings institutions’ share holdings, 240–1; short termism of markets, 241, 242–3; unfairness of, 138, 210 Financial Times, 12, 149, 294, 330, 349, 361 Fink, Stanley, 179 fiscal policy, 208, 224–5, 226, 357–8, 364–9, 374; coalition rejection of, 370 fish stocks, conservation of, 394 Fitch (credit-rating agencies), 248 flexicurity social system, 299–301, 304, 374 Forbes’ annual list, 30 Ford, Henry, 195, 302 foreign exchange markets, 32, 161, 164, 165, 168, 363, 367; China’s rigged exchange rate, 36, 169, 355, 377, 378–9; currency options, 166, 191; eurozone, 377 foreign takeovers of British firms, 8, 388 Fortune magazine, 94 Foster, Sir Christopher, 313 foundation schools, 307 France, 51–2, 123–4, 163, 372, 375, 377 free trade, 163, 334, 379 Frey, Bruno, 60, 86 Friedman, Benjamin, 282–3 Fukuyama, Francis, 140 Fuld, Dick, 192 Future Jobs Fund, 373 G20 countries, 209, 358, 368, 374 Galliano, John, 143 Gardner, Howard, 274, 305–6 gated communities, 13 Gates, Bill, 71 Gates, Bill (Senior), 222 Gaussian distribution, 190–1, 194 ‘gearing’, 6 general election (6 May 2010), 97, 142, 179, 214, 217, 227, 234, 271, 314, 318, 327–8, 334, 378; Gillian Duffy incident, 394; result of, xi, 20, 345–6, 390 ‘generalised autoregressive conditional heteroskedasicity’ (GARCH), 194 genetically modified crops, 232 Germany, 36, 63, 244, 262, 269, 375–6, 379, 380; export led growth, 355–6, 375, 381–2; Fraunhofer Institutes, 252, 264; Greek bail-out and, 377; pre-1945 period, 128, 129, 134, 382, 383 Gieve, Sir John, 339–40 Gilligan, Andrew, 329 Gladwell, Malcolm, 76–7 Glasgow University, 323 Glass-Steagall Act, 162, 170, 202–3 Glastonbury festival, 143 globalisation, 32, 98, 140, 143, 144, 153–4, 163, 182, 297, 363, 366, 380 Goldman Sachs, 42, 63, 103, 150, 167–8, 174, 176, 177, 205 Goodwin, Sir Fred, 7, 150, 176, 340 Google, 131, 136, 253, 255, 258, 262 Goolsbee, Austin, 52 Gorbachev, Mikhail, 140 Gough, Ian, 79 Gould, Jay, 133 Gould, Philip, 142 government: see also democracy; political system, British; cabinet government, 312, 334, 337; centralisation of power, 14–15, 35, 217, 313, 334, 337, 341, 342; control of news agenda, 14, 224, 313; disregard of House of Commons, 14–15, 223, 339, 345; Number 10 Downing Street as new royal court, 14, 337, 338, 346, 347; press officers/secretaries, 14, 180, 224, 312; Prime Ministerial power, 337, 344, 345, 346 GPS navigation systems, 233, 265 Gray, Elisha, 221 Great Depression, 159, 162, 205, 362 Greece: classical, 25, 26, 38, 39, 44–5, 52–3, 59, 96, 107, 108; crisis and bail-out (2010), 167, 371, 377, 378 Green, Sir Philip, 12, 29, 33 Green Investment Bank, proposed, 252, 371 Greenhead College, Huddersfield, 294 Greenspan, Alan, 145–6, 165, 177, 183, 184, 197–8 Gregory, James, 277 growth, economic: Britain and, 9–10, 214–15, 219, 221, 359, 364; education and, 305–6; export led growth, 36, 169, 208, 226, 355–6, 375–7, 378–83; social investment and, 280–1 GSK, 219, 254 the Guardian, 319, 330, 349 Gupta, Sanjeev, 367 Gutenberg, Johannes, 110–11 Habsburg Empire, 127 Haines, Joe, 312 Haji-Ioannous, Stelios, 28 Haldane, Andrew, 8, 151, 153, 193, 214, 215 the Halifax, 186, 251 Hamilton, Lewis, 64, 65 Hammersmith and Fulham, Borough of, 167 Hampton, Sir Philip, 173 Hands, Guy, 28, 178, 246–8 Hanley, Lynsey, 291, 293, 302 Hanushek, Eric, 305–6 Hart, Betty, 289 Harvard University, 47, 62, 198 Hashimoto administration in Japan, 362 Hastings, Max, 217–18 Hauser, Marc, 47–50 Hawley, Michael, 65–6 Hayward, Tony, 216–17 HBOS, 157, 158, 178, 251 health and well-being, 9, 75, 77, 106, 232, 233, 290–1; see also National Health Service (NHS) Heckman, James, 290 hedge funds, 6, 21, 103, 157–8, 167–8, 172, 203, 205, 206, 240; collapses of, 152, 173–4, 187, 202; as destabilisers, 166–7, 168; destruction of ERM, 140, 144, 166; near collapse of LTCM, 169–70, 183, 193, 200–1 hedging, 164, 165–6 Heinz, Henry John, 302 Hermes fund management company, 242 Herrman, Edwina, 179 Herstatt Bank collapse, 152 Hetherington, Mark, 84 Hewitt, Patricia, 180 Hewlett-Packard, 30 Hills Report on social housing, 290 Hilton, Paris, 304 Himmelfarb, Gertrude, 146 Hirst, Damien, 12 history, economic, 121–36, 166, 285–6, 353–4 Hobhouse, Leonard, 220, 222, 234, 235, 261, 266 Hobsbawm, Eric, 100 Hoffman, Elizabeth, 60 Holland, 113, 124, 230 Honda, 91, 269 Hong Kong, 168 Hopkins, Harry, 300 Horton, Tim, 277 House of Commons, 14–15, 223, 312–13, 337–9, 345 House of Lords, 15, 128, 129, 312, 334, 344, 346–7 housing, social, 10, 289, 290–1, 292, 308–9 housing cost credits, 308–9 HSBC, 181, 251 Huhne, Chris, 346 Hunt family, sale of cattle herds, 201 Hurka, Thomas, 45–6 Hutton, Will, works of, x; The State We’re In, x, 148–9 IBM, 29, 164, 254 Iceland, 7, 138 ICT industry, 9, 29–30, 109, 134, 135–6, 182, 229 immigration, 11, 143, 326, 328, 342, 343, 386, 394; from Eastern Europe, 82, 281–2, 283; welfare state and, 81–2, 281–2, 283, 284 incapacity benefit, 27 the Independent, 93, 330 Independent Safeguarding Authority, 339 India, 144, 226, 230, 254, 354–5 individual responsibility, 17, 38, 39, 78–9 individualism, 54, 57, 66, 111, 221, 281, 341, 366; capitalism/free market theories and, ix, 17, 19, 27, 40, 145, 221, 234–5 Indonesia, 168 Industrial and Commercial Finance Corporation (now 3i), 250 industrial revolution, 28, 112, 115, 121–3, 124, 126–8, 130, 315 inflation, 6, 32, 355, 364, 365; targets, 163, 165, 208, 359 Ingham, Bernard, 312 innovation: see also entrepreneurs; national ecosystem of innovation; as collective and social, 40, 131, 219–22, 261, 265–6, 388; comparisons between countries, 67; competition and, 40, 114, 257–60; development times, 240, 243; discretionary effort and, 62, 65, 102–3, 105–6, 131, 222, 392–3; dissemination of knowledge and, 110–11, 112–13, 219–22, 265–6; due desert and, 40, 62, 67, 112, 117; ‘financial innovation’, 63–4, 138, 147, 149, 153–4, 182; general-purpose technologies (GPTs), 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384; high taxation as deterrent, 104, 105; history of, 107–17, 121–7, 131–4, 221; increased pace of advance, 228–9, 230, 266–7; incremental, 108, 254, 256; incumbent elites and, 29–30, 104, 106, 109, 111–12, 113, 114, 115, 116, 257; large firms and, 251–2, 254–5; as natural to humans, 106–7, 274; need for network of specialist banks, 251–2, 265, 371; in ‘open-access societies’, 109–13, 114, 116–17, 122–3, 126–7, 131, 136, 315; patents and copyright, 102, 103, 105, 110, 260–1, 263; private enterprise and, 100–1; regulation and, 268–70; risk-taking and, 6, 103, 111, 189; short term investment culture and, 33, 242–3, 244; small firms and, 252, 253–4, 255–6; universities and, 261–5 Innovation Fund, 21, 251, 252 Institute of Fiscal Studies, 275–6, 363, 368–9, 372 Institute of Government, 334, 335, 337, 343 insurance, 165–6, 187, 240, 242 Intel, 255, 256 intellectual property, 260–1 interest rates, 164, 191, 352–3, 354, 357, 359, 360, 361, 362, 367, 380 internal combustion engine, 28, 109, 134 International Monetary Fund (IMF), 9, 152–3, 177–8, 187, 207, 226, 383, 384; Asian currency crisis (1997) and, 168–9; proposed bank levy and financial activities tax, 209; support for fiscal policy, 367 internet, 11, 28, 52, 109, 134, 227, 256, 265; news and politics on, 316–17, 321, 349; pay-walls, 316, 349; as threat to print media, 324, 331, 349 iPods, 105, 143 Iraq War, 14–15, 18, 36, 144, 329 Ireland, 138 iron steamships, 126 Islam, 352, 353 Islamic fundamentalism, 283, 384 Israel, 251, 322–3 Italy, 101, 103, 317, 328 ITN, 330, 331 James, Howell, 180 Japan, 36, 67, 140, 163, 168, 244, 369, 375, 376, 385, 386; credit crunch (1989-92), 359–60, 361–2, 382; debt levels, 356, 362, 363; incumbent elites in early twentieth-century, 134; Tokyo Bay, 254; Top Runner programme, 269 Jenkins, Roger, 296 Jobcentre Plus, 300 Jobs, Steve, 29–30, 65–6, 71 John Lewis Group, 66, 67, 93, 246 Johnson, Boris, 179 Johnson, Simon, 177 Jones, Tom, 242 Joseph Rowntree Foundation, 21, 278–9 journalism, 318–21, 323–4, 326–7 Jovanovic, Boyan, 256 JP Morgan, 169, 191–2, 195–6 judges, 15 justice systems, 30–1, 44–5, 49; symbolised by pair of scales, 4, 40 Kahneman, Daniel, 94–5 Kant, Immanuel, 73, 112, 274 Kay, John, 175 Kennedy, Helena, 340 Keynesian economics, x, xi, 184, 190, 196–7, 354, 362, 390–1 Kindleberger, Charles, 184 King, Mervyn, 213 Kinnock, Neil, 142 kitemarking, need for, 267 Klenow, Peter, 52 Knetsch, Jack, 94–5 Knight, Frank, Risk, Uncertainty and Profit (1921), 189, 191, 196–7 knowledge: capitalist advance of, 27–8, 31, 110–11, 112–13; public investment in learning, 28, 31, 40, 131, 220, 235, 261, 265 knowledge economy, 8, 11–12, 34, 135–6, 229–33, 258, 273–4, 341, 366; credit growth and, 355; graduate entry to, 295; large firms and, 251–2, 254–5; small firms and, 252, 253–4, 255–6, 261; state facilitation of, 219–22, 229–30 Koizumi administration in Japan, 362 Koo, Richard, 360, 361–2 Kuper, Simon, 352 Kwak, James, 64, 177 labour market, 52, 62, 83, 95; flexibility, 5, 275, 276, 299, 364–5, 387 laissez-faire ideology, 153, 198–9, 259 Laker, Freddie, 30 Lambert, Richard, 6–7 language acquisition and cognitive development, 288, 289 Large Hadron Collider, 263 Latin American debt crisis, 164 Lavoisier, Antoine, 31 Lazarus, Edmund, 179 Leahy, Sir Terry, 295 Learning and Skills Council, 282, 300 left wing politics, modern, 17, 38, 78–83 Lehman Brothers, 150, 152, 165, 170, 181, 192, 204 lender-of-last-resort function, 155, 158, 160, 187 Lerner, Melvin, 83 leverage, 6, 29, 154–6, 157, 158, 172, 179, 180, 198, 204, 209–10, 254, 363; disguised on balance sheet, 181, 195; effect on of credit crunches, 358, 359, 360, 361, 374–5; excess/massive levels, 7, 147–8, 149, 150–1, 158, 168, 170, 187, 192, 197, 203; need for reform of, 206, 207, 208; private equity and, 245–6, 247 Lewis, Jemima, 282, 287 Lewis, Joe, 12 libel laws, 332–3, 348–9 Liberal Democrats, xi, 11, 98, 141, 343, 360–1, 368; general election (2010) and, 97, 142, 179, 271, 390 libertarianism, 234 Likierman, Sir Andrew, 180 limited liability (introduced 1855), 353–4, 363 Lind, Allan, 85 Lindert, Peter, 280–1 Lipsey, Richard, 108, 263 Lisbon earthquake (1755), 54 Lisbon Treaty Constitution, 328 literacy and numeracy, 20–1 livestock fairs, pre-twentieth-century, 90 Lloyds Bank, 176, 178, 186, 202, 204, 251, 259 Lo, Andrew, 195 loan sharks, illegal, 291 local government, 307, 347–8 Locke, John, 54–5, 59 London School of Economics (LSE), 246 London Stock Exchange, 90, 162 London Underground, financing of, 336, 389 lone parent families, 292 Long Term Capital Management (LTCM), 169–70, 183, 193, 194, 200–1 long-term incentive plans (LTIPs), 6 Loomes, Graham, 59 luck, 23, 26–7, 38, 39, 40, 41, 67, 68, 69–77, 222, 273, 393–4; diplomacy/international relations and, 385–6; disadvantaged children and, 74–5, 83, 288–90; executive pay and, 138; taxation and, 73–4, 75, 78, 303 Luxembourg, 138 MacDonald, Ramsey, 315 Machiavelli, Niccolo, 62 Machin, Steve, 283–4 Macmillan Committee into City (1931), 179 Madoff, Bernie, 7 mafia, Italian, 101, 104–5 Major, John, 138, 180, 279, 334 Malaysia, 168 malls, out-of-town, 143 Mandelbrot, Benoit, 194, 195 Mandelson, Peter, 21, 24, 142, 148, 220 manufacturing sector, decline of, 5, 8, 219, 272, 292, 341, 363 Manza, Jeff, 281, 282 Marconi, 142–3 market fundamentalism, 9–19, 32–3, 40–2, 366; belief in efficiency of markets, 188–9, 190, 193, 194, 235–9, 366; coalition government (from May 2010) and, 370; collapse of, 3–4, 7–9, 19, 20, 219–20, 235, 392; Conservative Party and, 5, 17, 138, 147, 160, 161; domination of, 5–6, 14, 16–17, 163, 364–5, 387–90; likely resurgence of, 5, 8; New Labour and, x–xi, 5, 19, 144–9, 388, 389–90; post-communist fiasco in Russia, 135; rejection of fiscal policy, 224–5, 364–5, 367 mark-to-market accounting convention, 175 Marland, Lord Jonathan, 179 Marquand, David, 328 Marsh, Jodie, 64, 65 Marx, Karl, 56–8, 121–2 Maslow’s hierarchy of needs, 232, 274–5 mass production, 109, 134, 182 Masters, Blythe, 196 mathematical models (‘quants’), 105, 149, 151, 152, 165, 169, 188, 190–6, 203; extensions and elaborations, 194; Gaussian distribution, 190–1, 194; JP Morgan and, 195–6 Matthewson, Sir George (former chair of RBS), 25 Maude, Francis, 180 Mayhew, Henry, 285–6 McCartney, Paul, 247 McGoldrick, Mark, 174 McKinsey Global Institute, 253, 358–9, 360, 363 McQueen, Alexander, 143 media, mainstream, 6, 35, 312, 315–20, 321–32, 348–50; commoditisation of information, 318–20, 321; communications technology and, 316, 320, 349; domination of state by, 14, 16, 223–4, 338, 339, 343; fanatical anti-Europeanism, 15, 328, 378; foreign/tax exile ownership of, 218; hysterical tabloid campaigns, 10–11, 298, 319–20; ‘info-capitalism’, 317–18, 327, 328, 342; lauding of celebrity, 281, 314; modern 24/7 news agenda, 13, 224, 321, 343; regional newspapers, 331; as setter of agenda/narrative, 327–31, 342; television news, 330–1; undermining of democracy, 315–16, 317–18, 321–9, 333, 350; urgent need for reform, 35, 218, 344, 348–50, 391; view of poverty as deserved, 25, 53, 83, 281, 286; weakness of foreign coverage, 322, 323, 330 Mencken, H.L., 311 mergers and takeovers, 8, 21, 33, 92, 245, 251, 258, 259, 388 Merkel, Angela, 381–2 Merrill Lynch, 150, 170, 175, 192 Merton, Robert, 169, 191 Meucci, Antonnio, 221 Mexico, 30, 385 Meyer, Christopher, 332 Michalek, Richard, 175 Microsoft, 71, 114, 136, 253, 254, 258–9 Milburn, Alan, 273 Miles, David, 186–7 Milgram, Stanley, 200 millennium bug, 319 Miller, David, 70, 76, 77 minimum wage, 142, 278 Minsky, Hyman, 183, 185 Mirror newspapers, 319, 329 Mlodinow, Leonard, 72–3 MMR vaccine, 327 mobile phones, 30, 134, 143, 229, 349 modernity, 54–5, 104 Mokyr, Joel, 112 monarchy, 15, 312, 336 Mondragon, 94 monetary policy, 154, 182, 184, 185, 208, 362, 367 monopolies, 74, 102, 103, 160, 314; history of, 104, 113, 124, 125–6, 130–4; in the media, 30, 317, 318, 331, 350; modern new wave of, 35, 135–6, 137–8, 201–2, 258–9; ‘oligarchs’, 30, 65, 104 Monopolies and Mergers Commission, 258, 318 Moody’s (credit-ratings agency), 151, 175 morality, 16–27, 37, 44–54, 70, 73; see also desert, due, concept of; fairness; proportionality; debt and, 351–4, 357, 360–1 Morgan, JP, 67 Morgan, Piers, 329 Morgan Stanley, 150 Mulas-Granados, Carlos, 367 Murdoch, James, 389 Murdoch, Rupert, 317–18, 320, 327 Murphy, Kevin, 62, 63 Murray, Jim ‘Mad Dog’, 321 Myners, Paul, 340 Nash bargaining solution, 60 National Audit Office, 340 National Child Development Study, 289–90 national ecosystem of innovation, 33–4, 65, 103, 206, 218, 221, 239–44, 255–9, 374; state facilitation of, 102, 219–22, 229–30, 233, 251–2, 258–66, 269–70, 392 National Health Service (NHS), 21, 27, 34, 92, 265, 277, 336, 371–2; popular support for, 75, 77, 283 national insurance system, 81, 277, 302 national strategy for neighbourhood renewal, 278 Navigation Acts, abolition of, 126 Neiman, Susan, 18–19 neo-conservatism, 17–18, 144–9, 387–90 network theory, 199–201, 202–4, 206; Pareto curve and, 201–2 New Economics Foundation, 62 New Industry New Jobs strategy, 21 New Labour: budget deficit and, 224, 335, 360, 368, 369; business friendly/promarket policies, x–xi, 139–40, 142, 145, 146–7, 162, 198–9, 382; City of London and, x–xi, 5, 19, 22, 142–3, 144–5, 355; decline of class-based politics, 341; failure to challenge elites, x–xi, 14, 22, 388, 389–90; general election (1992) and, 138, 140–1, 144, 148, 277; general election (2005) and, 97; general election (2010) and, 20, 271, 334, 374, 378; light-touch regulation and, 138, 145, 146–7, 162, 198–9; New Industry New Jobs strategy, 21; one-off tax on bank bonuses, 26, 179, 249; record in government, 10–11, 19, 20–2, 220, 276–80, 302, 306, 334–6, 366–7, 389–90; reforms to by ‘modernisers’, 141; responses to newspaper campaigns, 11 New York markets, 140, 152, 162; Asian and/or OPEC capital surpluses and, 169, 171, 354; London/New York axis, 149, 150–1, 157–8, 160, 188, 202 Newsweek, 174 Newton, Isaac, 31, 127, 190 NHS Direct, 372 Nicoli, Eric, 13 non-executive directors (NEDs), 249–50 Nordhaus, William, 260 Nordic countries, 262; Iceland, 7, 138; Norway, 281; Sweden, 264, 281 North, Douglas, 113, 116, 129–30 Northern Rock, 9, 156, 157, 158, 186, 187–8, 202, 204, 251, 340–1 Norton Publishing, 93 Nozick, Robert, 234, 235 nuclear non-proliferation, 226, 384, 394 Nussbaum, Martha, 79 Obama, Barack, 18, 183, 380, 382–3, 394–5 the Observer, 141, 294, 327 Office for Budget Responsibility, 360 Office of Fair Trading (OFT), 257, 258 OFSTED, 276 oil production, 322; BP Gulf of Mexico disaster (2010), 216–17, 392; finite stocks and, 230, 384; OPEC, 149, 161, 171; price increase (early 1970s), 161; in USA, 130, 131, 132 Olsen, Ken, 29 Olympics (2012), 114 open markets, 29, 30, 31, 40, 89, 92, 100–1, 366, 377, 379, 382, 384; see also ‘open-access societies’; as determinants of value, 51–2, 62; fairness and, 60–1, 89–91, 94–6; ‘reference prices’ and, 94–6 ‘open-access societies’, 134, 135, 258, 272, 273, 275, 276, 280–1, 394; Britain as ‘open-access society’ (to 1850), 124, 126–7; democracy and, 136, 314; Enlightenment and, 30–1, 314–15, 394; innovation and invention in, 109–13, 114, 116–17, 122–3, 126–7, 131, 136, 315; partial political opening in, 129–30; US New Freedom programme, 132–3 opium production, 102 options, 166, 188, 191 Orange County derivatives losses, 167 Organisation for Economic Co-operation and Development (OECD), 180, 337, 373 Orwell, George, 37 Osborne, George, 147, 208, 224, 245, 302, 338 Overend, Gurney and Co., 156–7 Oxbridge/top university entry, 293–4, 306 Oxford University, 261 Page, Scott, 204 Paine, Tom, 347 Pareto, Vilfredo, 201–2 Paribas, 152, 187 Parkinson, Lance-Bombardier Ben, 13 participation, political, 35, 86, 96, 99 Paulson, Henry, 177 Paulson, John, 103, 167–8 pay of executives and bankers, 3–4, 5, 6–7, 22, 66–7, 138, 387; bonuses, 6, 25–6, 41, 174–5, 176, 179, 208, 242, 249, 388; high levels/rises of, 6–7, 13, 25, 82–3, 94, 172–6, 216, 296, 387, 393; Peter Mandelson on, 24; post-crash/bail-outs, 176, 216; in private equity houses, 248; remuneration committees, 6, 82, 83, 176; shared capitalism and, 66, 93; spurious justifications for, 42, 78, 82–3, 94, 176, 216 pension, state, 81, 372, 373 pension funds, 240, 242 Pettis, Michael, 379–80 pharmaceutical industry, 219, 255, 263, 265, 267–8 Phelps, Edmund, 275 philanthropy and charitable giving, 13, 25, 280 Philippines, 168 Philippon, Thomas, 172–3 Philips Electronics, Royal, 256 Pimco, 177 piracy, 101–2 Plato, 39, 44 Player, Gary, 76 pluralist state/society, x, 35, 99, 113, 233, 331, 350, 394 Poland, 67, 254 political parties, 13–14, 340, 341, 345, 390; see also under entries for individual parties political system, British: see also democracy; centralised constitution, 14–15, 35, 217, 334; coalitions as a good thing, 345–6; decline of class-based politics, 341; devolving of power to Cardiff and Edinburgh, 15, 334; expenses scandal, 3, 14, 217, 313, 341; history of (to late nineteenth-century), 124–30; lack of departmental coordination, 335, 336, 337; long-term policy making and, 217; monarchy and, 15, 312, 336; politicians’ lack of experience outside politics, 338; required reforms of, 344–8; select committee system, 339–40; settlement (of 1689), 125; sovereignty and, 223, 346, 347, 378; urgent need for reform, 35, 36–7, 218, 344; voter-politician disengagement, 217–18, 310, 311, 313–14, 340 Pommerehne, Werner, 60 population levels, world, 36 Portsmouth Football Club, 352 Portugal, 108, 109, 121, 377 poverty, 278–9; child development and, 288–90; circumstantial causes of, 26, 283–4; Conservative Party and, 279; ‘deserving’/’undeserving’ poor, 276, 277–8, 280, 284, 297, 301; Enlightenment views on, 53, 55–6; need for asset ownership, 301–3, 304; political left and, 78–83; the poor viewed as a race apart, 285–7; as relative not absolute, 55, 84; Adam Smith on, 55, 84; structure of market economy and, 78–9, 83; view that the poor deserve to be poor, 25, 52–3, 80, 83, 281, 285–8, 297, 301, 387; worldwide, 383, 384 Power2010 website, 340–1 PR companies and media, 322, 323 Press Complaints Commission (PCC), 325, 327, 331–2, 348 preventative medicine, 371 Price, Lance, 328, 340 Price, Mark, 93 Prince, Chuck, 184 printing press, 109, 110–11 prisoners, early release of, 11 private-equity firms, 6, 28–9, 158, 172, 177, 179, 205, 244–9, 374 Procter & Gamble, 167, 255 productive entrepreneurship, 6, 22–3, 28, 29–30, 33, 61–2, 63, 78, 84, 136, 298; in British history (to 1850), 28, 124, 126–7, 129; due desert/fairness and, 102–3, 105–6, 112, 223, 272, 393; general-purpose technologies (GPTs) and, 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384 property market: baby boomer generation and, 372–3; Barker Review, 185; boom in, 5, 143, 161, 183–4, 185–7, 221; bust (1989-91), 161, 163; buy-to-let market, 186; commercial property, 7, 356, 359, 363; demutualisation of building societies, 156, 186; deregulation (1971) and, 161; Japanese crunch (1989-92) and, 361–2; need for tax on profits from home ownership, 308–9, 373–4; property as national obsession, 187; residential mortgages, 7, 183–4, 186, 356, 359, 363; securitised loans based mortgages, 171, 186, 188; shadow banking system and, 171, 172; ‘subprime’ mortgages, 64, 152, 161, 186, 203 proportionality, 4, 24, 26, 35, 38, 39–40, 44–6, 51, 84, 218; see also desert, due, concept of; contributory/discretionary benefits and, 63; diplomacy/ international relations and, 385–6; job seeker’s allowance as transgression of, 81; left wing politics and, 80; luck and, 73–7, 273; policy responses to crash and, 215–16; poverty relief systems and, 80–1; profit and, 40, 388; types of entrepreneurship and, 61–2, 63 protectionism, 36, 358, 376–7, 378, 379, 382, 386 Prussia, 128 Public Accounts Committee, 340 Purnell, James, 338 quantitative easing, 176 Quayle, Dan, 177 race, disadvantage and, 290 railways, 9, 28, 105, 109–10, 126 Rand, Ayn, 145, 234 Rawls, John, 57, 58, 63, 73, 78 Reagan, Ronald, 135, 163 recession, xi, 3, 8, 9, 138, 153, 210, 223, 335; of 1979-81 period, 161; efficacy of fiscal policy, 367–8; VAT decrease (2009) and, 366–7 reciprocity, 43, 45, 82, 86, 90, 143, 271, 304, 382; see also desert, due, concept of; proportionality Reckitt Benckiser, 82–3 Regional Development Agencies, 21 regulation: see also Bank of England; Financial Services Authority (FSA); Bank of International Settlements (BIS), 169, 182; Basel system, 158, 160, 163, 169, 170–1, 196, 385; big as beautiful in global banking, 201–2; Big Bang (1986), 90, 162; by-passing of, 137, 187; capital requirements/ratios, 162–3, 170–1, 208; dismantling of post-war system, 149, 158, 159–63; economists’ doubts over deregulation, 163; example of China, 160; failure to prevent crash, 154, 197, 198–9; Glass-Steagall abolition (1999), 170, 202–3; light-touch, 5, 32, 138, 151, 162, 198–9; New Deal rules (1930s), 159, 162; in pharmaceutical industry, 267–8; as pro-business tool, 268–70; proposed Financial Policy Committee, 208; required reforms of, 267, 269–70, 376, 377, 384, 392; reserve requirements scrapped (1979), 208; task of banking authorities, 157; Top Runner programme in Japan, 269 Reinhart, Carmen, 214, 356 Repo 105 technique, 181 Reshef, Ariell, 172–3 Reuters, 322, 331 riches and wealth, 11–13, 272–3, 283–4, 387–8; see also pay of executives and bankers; the rich as deserving of their wealth, 25–6, 52, 278, 296–7 Rickards, James, 194 risk, 149, 158, 165, 298–302, 352–3; credit default swaps and, 151, 152, 166–8, 170, 171, 175, 176, 191, 203, 207; derivatives and see derivatives; distinction between uncertainty and, 189–90, 191, 192–3, 196–7; employment insurance concept, 298–9, 301, 374; management, 165, 170, 171, 189, 191–2, 193–4, 195–6, 202, 203, 210, 354; securitisation and, 32, 147, 165, 169, 171, 186, 188, 196; structured investment vehicles and, 151, 165, 169, 171, 188; value at risk (VaR), 171, 192, 195, 196 Risley, Todd, 289 Ritchie, Andrew, 103 Ritter, Scott, 329 Robinson, Sir Gerry, 295 Rogoff, Ken, 214, 356 rogue states, 36 Rolling Stones, 247 Rolls-Royce, 219, 231 Rome, classical, 45, 74, 108, 116 Roosevelt, Franklin D., 133, 300 Rothermere, Viscount, 327 Rousseau, Jean-Jacques, 56, 58, 112 Rousseau, Peter, 256 Rowling, J.K., 64, 65 Rowthorn, Robert, 292, 363 Royal Bank of Scotland (RBS), 25, 150, 152, 157, 173, 181, 199, 251, 259; collapse of, 7, 137, 150, 158, 175–6, 202, 203, 204; Sir Fred Goodwin and, 7, 150, 176, 340 Rubin, Robert, 174, 177, 183 rule of law, x, 4, 220, 235 Russell, Bertrand, 189 Russia, 127, 134–5, 169, 201, 354–5, 385; fall of communism, 135, 140; oligarchs, 30, 65, 135 Rwandan genocide, 71 Ryanair, 233 sailing ships, three-masted, 108 Sandbrook, Dominic, 22 Sands, Peter (CEO of Standard Chartered Bank), 26 Sarkozy, Nicolas, 51, 377 Sassoon, Sir James, 178 Scholes, Myron, 169, 191, 193 Schumpeter, Joseph, 62, 67, 111 science and technology: capitalist dynamism and, 27–8, 31, 112–13; digitalisation, 34, 231, 320, 349, 350; the Enlightenment and, 31, 108–9, 112–13, 116–17, 121, 126–7; general-purpose technologies (GPTs), 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384; increased pace of advance, 228–9, 253, 297; nanotechnology, 232; New Labour improvements, 21; new opportunities and, 33–4, 228–9, 231–3; new technologies, 232, 233, 240; universities and, 261–5 Scotland, devolving of power to, 15, 334 Scott, James, 114–15 Scott Bader, 93 Scott Trust, 327 Second World War, 134, 313 Securities and Exchanges Commission, 151, 167–8 securitisation, 32, 147, 165, 169, 171, 186, 187, 196 self-determination, 85–6 self-employment, 86 self-interest, 59, 60, 78 Sen, Amartya, 51, 232, 275 service sector, 8, 291, 341, 355 shadow banking system, 148, 153, 157–8, 170, 171, 172, 187 Shakespeare, William, 39, 274, 351 shareholders, 156, 197, 216–17, 240–4, 250 Sher, George, 46, 50, 51 Sherman Act (USA, 1890), 133 Sherraden, Michael, 301 Shiller, Robert, 43, 298, 299 Shimer, Robert, 299 Shleifer, Andrei, 62, 63, 92 short selling, 103 Sicilian mafia, 101, 105 Simon, Herbert, 222 Simpson, George, 142–3 single mothers, 17, 53, 287 sixth form education, 306 Sky (broadcasting company), 30, 318, 330, 389 Skype, 253 Slim, Carlos, 30 Sloan School of Management, 195 Slumdog Millionaire, 283 Smith, Adam, 55, 84, 104, 112, 121, 122, 126, 145–6 Smith, John, 148 Snoddy, Ray, 322 Snow, John, 177 social capital, 88–9, 92 social class, 78, 130, 230, 304, 343, 388; childcare and, 278, 288–90; continued importance of, 271, 283–96; decline of class-based politics, 341; education and, 13, 17, 223, 264–5, 272–3, 274, 276, 292–5, 304, 308; historical development of, 56–8, 109, 115–16, 122, 123–5, 127–8, 199; New Labour and, 271, 277–9; working-class opinion, 16, 143 social investment, 10, 19, 20–1, 279, 280–1 social polarisation, 9–16, 34–5, 223, 271–4, 282–5, 286–97, 342; Conservative reforms (1979-97) and, 275–6; New Labour and, 277–9; private education and, 13, 223, 264–5, 272–3, 276, 283–4, 293–5, 304; required reforms for reduction of, 297–309 social security benefits, 277, 278, 299–301, 328; contributory, 63, 81, 283; flexicurity social system, 299–301, 304, 374; to immigrants, 81–2, 282, 283, 284; job seeker’s allowance, 81, 281, 298, 301; New Labour and ‘undeserving’ claimants, 143, 277–8; non-contributory, 63, 79, 81, 82; targeting of/two-tier system, 277, 281 socialism, 22, 32, 38, 75, 138, 144, 145, 394 Soham murder case, 10, 339 Solomon Brothers, 173 Sony, 254–5 Soros, George, 166 Sorrell, Martin, 349 Soskice, David, 342–3 South Korea, 168, 358–9 South Sea Bubble, 125–6 Spain, 123–4, 207, 358–9, 371, 377 Spamann, Holger, 198 special purpose vehicles, 181 Spitzer, Matthew, 60 sport, cheating in, 23 stakeholder capitalism, x, 148–9 Standard Oil, 130–1, 132 state, British: anti-statism, 20, 22, 233–4, 235, 311; big finance’s penetration of, 176, 178–80; ‘choice architecture’ and, 238, 252; desired level of involvement, 234–5; domination of by media, 14, 16, 221, 338, 339, 343; facilitation of fairness, ix–x, 391–2, 394–5; investment in knowledge, 28, 31, 40, 220, 235, 261, 265; need for government as employer of last resort, 300; need for hybrid financial system, 244, 249–52; need for intervention in markets, 219–22, 229–30, 235–9, 252, 392; need for reshaping of, 34; pluralism, x, 35, 99, 113, 233, 331, 350, 394; public ownership, 32, 240; target-setting in, 91–2; threats to civil liberty and, 340 steam engine, 110, 126 Steinmueller, W.

But once again, when the economists offered their explanations for the catastrophe, they reached the wrong conclusion: rather than realising that deregulation had been a disaster, the consensus was that it had not gone far enough. Twenty years later, light, non-directive regulation based on principles rather than rules would be similarly celebrated by the British FSA … and would end in a similar fiasco.25 Back in the eighties, though, the logic of deregulation forced yet more deregulation. The cartel of stockbrokers and jobbers running the London Stock Exchange with fixed commissions and de facto bans on new entrants was indefensible as the controls came tumbling down, but the scrapping of the old system in the famous Big Bang of 1986 had huge side-effects. American banks were suddenly allowed to do in London what they had been prohibited from doing in New York under the provisions of the Glass–Steagall Act – an integral part of New Deal banking control.

., 156–7 Oxbridge/top university entry, 293–4, 306 Oxford University, 261 Page, Scott, 204 Paine, Tom, 347 Pareto, Vilfredo, 201–2 Paribas, 152, 187 Parkinson, Lance-Bombardier Ben, 13 participation, political, 35, 86, 96, 99 Paulson, Henry, 177 Paulson, John, 103, 167–8 pay of executives and bankers, 3–4, 5, 6–7, 22, 66–7, 138, 387; bonuses, 6, 25–6, 41, 174–5, 176, 179, 208, 242, 249, 388; high levels/rises of, 6–7, 13, 25, 82–3, 94, 172–6, 216, 296, 387, 393; Peter Mandelson on, 24; post-crash/bail-outs, 176, 216; in private equity houses, 248; remuneration committees, 6, 82, 83, 176; shared capitalism and, 66, 93; spurious justifications for, 42, 78, 82–3, 94, 176, 216 pension, state, 81, 372, 373 pension funds, 240, 242 Pettis, Michael, 379–80 pharmaceutical industry, 219, 255, 263, 265, 267–8 Phelps, Edmund, 275 philanthropy and charitable giving, 13, 25, 280 Philippines, 168 Philippon, Thomas, 172–3 Philips Electronics, Royal, 256 Pimco, 177 piracy, 101–2 Plato, 39, 44 Player, Gary, 76 pluralist state/society, x, 35, 99, 113, 233, 331, 350, 394 Poland, 67, 254 political parties, 13–14, 340, 341, 345, 390; see also under entries for individual parties political system, British: see also democracy; centralised constitution, 14–15, 35, 217, 334; coalitions as a good thing, 345–6; decline of class-based politics, 341; devolving of power to Cardiff and Edinburgh, 15, 334; expenses scandal, 3, 14, 217, 313, 341; history of (to late nineteenth-century), 124–30; lack of departmental coordination, 335, 336, 337; long-term policy making and, 217; monarchy and, 15, 312, 336; politicians’ lack of experience outside politics, 338; required reforms of, 344–8; select committee system, 339–40; settlement (of 1689), 125; sovereignty and, 223, 346, 347, 378; urgent need for reform, 35, 36–7, 218, 344; voter-politician disengagement, 217–18, 310, 311, 313–14, 340 Pommerehne, Werner, 60 population levels, world, 36 Portsmouth Football Club, 352 Portugal, 108, 109, 121, 377 poverty, 278–9; child development and, 288–90; circumstantial causes of, 26, 283–4; Conservative Party and, 279; ‘deserving’/’undeserving’ poor, 276, 277–8, 280, 284, 297, 301; Enlightenment views on, 53, 55–6; need for asset ownership, 301–3, 304; political left and, 78–83; the poor viewed as a race apart, 285–7; as relative not absolute, 55, 84; Adam Smith on, 55, 84; structure of market economy and, 78–9, 83; view that the poor deserve to be poor, 25, 52–3, 80, 83, 281, 285–8, 297, 301, 387; worldwide, 383, 384 Power2010 website, 340–1 PR companies and media, 322, 323 Press Complaints Commission (PCC), 325, 327, 331–2, 348 preventative medicine, 371 Price, Lance, 328, 340 Price, Mark, 93 Prince, Chuck, 184 printing press, 109, 110–11 prisoners, early release of, 11 private-equity firms, 6, 28–9, 158, 172, 177, 179, 205, 244–9, 374 Procter & Gamble, 167, 255 productive entrepreneurship, 6, 22–3, 28, 29–30, 33, 61–2, 63, 78, 84, 136, 298; in British history (to 1850), 28, 124, 126–7, 129; due desert/fairness and, 102–3, 105–6, 112, 223, 272, 393; general-purpose technologies (GPTs) and, 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384 property market: baby boomer generation and, 372–3; Barker Review, 185; boom in, 5, 143, 161, 183–4, 185–7, 221; bust (1989-91), 161, 163; buy-to-let market, 186; commercial property, 7, 356, 359, 363; demutualisation of building societies, 156, 186; deregulation (1971) and, 161; Japanese crunch (1989-92) and, 361–2; need for tax on profits from home ownership, 308–9, 373–4; property as national obsession, 187; residential mortgages, 7, 183–4, 186, 356, 359, 363; securitised loans based mortgages, 171, 186, 188; shadow banking system and, 171, 172; ‘subprime’ mortgages, 64, 152, 161, 186, 203 proportionality, 4, 24, 26, 35, 38, 39–40, 44–6, 51, 84, 218; see also desert, due, concept of; contributory/discretionary benefits and, 63; diplomacy/ international relations and, 385–6; job seeker’s allowance as transgression of, 81; left wing politics and, 80; luck and, 73–7, 273; policy responses to crash and, 215–16; poverty relief systems and, 80–1; profit and, 40, 388; types of entrepreneurship and, 61–2, 63 protectionism, 36, 358, 376–7, 378, 379, 382, 386 Prussia, 128 Public Accounts Committee, 340 Purnell, James, 338 quantitative easing, 176 Quayle, Dan, 177 race, disadvantage and, 290 railways, 9, 28, 105, 109–10, 126 Rand, Ayn, 145, 234 Rawls, John, 57, 58, 63, 73, 78 Reagan, Ronald, 135, 163 recession, xi, 3, 8, 9, 138, 153, 210, 223, 335; of 1979-81 period, 161; efficacy of fiscal policy, 367–8; VAT decrease (2009) and, 366–7 reciprocity, 43, 45, 82, 86, 90, 143, 271, 304, 382; see also desert, due, concept of; proportionality Reckitt Benckiser, 82–3 Regional Development Agencies, 21 regulation: see also Bank of England; Financial Services Authority (FSA); Bank of International Settlements (BIS), 169, 182; Basel system, 158, 160, 163, 169, 170–1, 196, 385; big as beautiful in global banking, 201–2; Big Bang (1986), 90, 162; by-passing of, 137, 187; capital requirements/ratios, 162–3, 170–1, 208; dismantling of post-war system, 149, 158, 159–63; economists’ doubts over deregulation, 163; example of China, 160; failure to prevent crash, 154, 197, 198–9; Glass-Steagall abolition (1999), 170, 202–3; light-touch, 5, 32, 138, 151, 162, 198–9; New Deal rules (1930s), 159, 162; in pharmaceutical industry, 267–8; as pro-business tool, 268–70; proposed Financial Policy Committee, 208; required reforms of, 267, 269–70, 376, 377, 384, 392; reserve requirements scrapped (1979), 208; task of banking authorities, 157; Top Runner programme in Japan, 269 Reinhart, Carmen, 214, 356 Repo 105 technique, 181 Reshef, Ariell, 172–3 Reuters, 322, 331 riches and wealth, 11–13, 272–3, 283–4, 387–8; see also pay of executives and bankers; the rich as deserving of their wealth, 25–6, 52, 278, 296–7 Rickards, James, 194 risk, 149, 158, 165, 298–302, 352–3; credit default swaps and, 151, 152, 166–8, 170, 171, 175, 176, 191, 203, 207; derivatives and see derivatives; distinction between uncertainty and, 189–90, 191, 192–3, 196–7; employment insurance concept, 298–9, 301, 374; management, 165, 170, 171, 189, 191–2, 193–4, 195–6, 202, 203, 210, 354; securitisation and, 32, 147, 165, 169, 171, 186, 188, 196; structured investment vehicles and, 151, 165, 169, 171, 188; value at risk (VaR), 171, 192, 195, 196 Risley, Todd, 289 Ritchie, Andrew, 103 Ritter, Scott, 329 Robinson, Sir Gerry, 295 Rogoff, Ken, 214, 356 rogue states, 36 Rolling Stones, 247 Rolls-Royce, 219, 231 Rome, classical, 45, 74, 108, 116 Roosevelt, Franklin D., 133, 300 Rothermere, Viscount, 327 Rousseau, Jean-Jacques, 56, 58, 112 Rousseau, Peter, 256 Rowling, J.K., 64, 65 Rowthorn, Robert, 292, 363 Royal Bank of Scotland (RBS), 25, 150, 152, 157, 173, 181, 199, 251, 259; collapse of, 7, 137, 150, 158, 175–6, 202, 203, 204; Sir Fred Goodwin and, 7, 150, 176, 340 Rubin, Robert, 174, 177, 183 rule of law, x, 4, 220, 235 Russell, Bertrand, 189 Russia, 127, 134–5, 169, 201, 354–5, 385; fall of communism, 135, 140; oligarchs, 30, 65, 135 Rwandan genocide, 71 Ryanair, 233 sailing ships, three-masted, 108 Sandbrook, Dominic, 22 Sands, Peter (CEO of Standard Chartered Bank), 26 Sarkozy, Nicolas, 51, 377 Sassoon, Sir James, 178 Scholes, Myron, 169, 191, 193 Schumpeter, Joseph, 62, 67, 111 science and technology: capitalist dynamism and, 27–8, 31, 112–13; digitalisation, 34, 231, 320, 349, 350; the Enlightenment and, 31, 108–9, 112–13, 116–17, 121, 126–7; general-purpose technologies (GPTs), 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384; increased pace of advance, 228–9, 253, 297; nanotechnology, 232; New Labour improvements, 21; new opportunities and, 33–4, 228–9, 231–3; new technologies, 232, 233, 240; universities and, 261–5 Scotland, devolving of power to, 15, 334 Scott, James, 114–15 Scott Bader, 93 Scott Trust, 327 Second World War, 134, 313 Securities and Exchanges Commission, 151, 167–8 securitisation, 32, 147, 165, 169, 171, 186, 187, 196 self-determination, 85–6 self-employment, 86 self-interest, 59, 60, 78 Sen, Amartya, 51, 232, 275 service sector, 8, 291, 341, 355 shadow banking system, 148, 153, 157–8, 170, 171, 172, 187 Shakespeare, William, 39, 274, 351 shareholders, 156, 197, 216–17, 240–4, 250 Sher, George, 46, 50, 51 Sherman Act (USA, 1890), 133 Sherraden, Michael, 301 Shiller, Robert, 43, 298, 299 Shimer, Robert, 299 Shleifer, Andrei, 62, 63, 92 short selling, 103 Sicilian mafia, 101, 105 Simon, Herbert, 222 Simpson, George, 142–3 single mothers, 17, 53, 287 sixth form education, 306 Sky (broadcasting company), 30, 318, 330, 389 Skype, 253 Slim, Carlos, 30 Sloan School of Management, 195 Slumdog Millionaire, 283 Smith, Adam, 55, 84, 104, 112, 121, 122, 126, 145–6 Smith, John, 148 Snoddy, Ray, 322 Snow, John, 177 social capital, 88–9, 92 social class, 78, 130, 230, 304, 343, 388; childcare and, 278, 288–90; continued importance of, 271, 283–96; decline of class-based politics, 341; education and, 13, 17, 223, 264–5, 272–3, 274, 276, 292–5, 304, 308; historical development of, 56–8, 109, 115–16, 122, 123–5, 127–8, 199; New Labour and, 271, 277–9; working-class opinion, 16, 143 social investment, 10, 19, 20–1, 279, 280–1 social polarisation, 9–16, 34–5, 223, 271–4, 282–5, 286–97, 342; Conservative reforms (1979-97) and, 275–6; New Labour and, 277–9; private education and, 13, 223, 264–5, 272–3, 276, 283–4, 293–5, 304; required reforms for reduction of, 297–309 social security benefits, 277, 278, 299–301, 328; contributory, 63, 81, 283; flexicurity social system, 299–301, 304, 374; to immigrants, 81–2, 282, 283, 284; job seeker’s allowance, 81, 281, 298, 301; New Labour and ‘undeserving’ claimants, 143, 277–8; non-contributory, 63, 79, 81, 82; targeting of/two-tier system, 277, 281 socialism, 22, 32, 38, 75, 138, 144, 145, 394 Soham murder case, 10, 339 Solomon Brothers, 173 Sony, 254–5 Soros, George, 166 Sorrell, Martin, 349 Soskice, David, 342–3 South Korea, 168, 358–9 South Sea Bubble, 125–6 Spain, 123–4, 207, 358–9, 371, 377 Spamann, Holger, 198 special purpose vehicles, 181 Spitzer, Matthew, 60 sport, cheating in, 23 stakeholder capitalism, x, 148–9 Standard Oil, 130–1, 132 state, British: anti-statism, 20, 22, 233–4, 235, 311; big finance’s penetration of, 176, 178–80; ‘choice architecture’ and, 238, 252; desired level of involvement, 234–5; domination of by media, 14, 16, 221, 338, 339, 343; facilitation of fairness, ix–x, 391–2, 394–5; investment in knowledge, 28, 31, 40, 220, 235, 261, 265; need for government as employer of last resort, 300; need for hybrid financial system, 244, 249–52; need for intervention in markets, 219–22, 229–30, 235–9, 252, 392; need for reshaping of, 34; pluralism, x, 35, 99, 113, 233, 331, 350, 394; public ownership, 32, 240; target-setting in, 91–2; threats to civil liberty and, 340 steam engine, 110, 126 Steinmueller, W.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

accounting loophole / creative accounting, active measures, airline deregulation, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Big bang: deregulation of the City of London, bilateral investment treaty, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, full employment, Gini coefficient, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, Kickstarter, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, very high income, Washington Consensus, Works Progress Administration, zero-coupon bond, zero-sum game

While the currency crisis destabilized the EMS and forced the adoption of a much looser Exchange Rate Mechanism, the embrace of these measures by Europe’s states meant that the march towards the single currency could be resumed with the assurance that “discipline” would prevail. Especially significant in this respect, and indeed for the overall shift in the balance of class forces in Europe, was the transformation of European financial markets along US lines.18 The City of London, which had since the 1960s served US banks “as a laboratory for financial innovation” at the center of the Euromarkets, was the leading site of this Americanization.19 The removal of UK capital controls in 1979, the City of London’s own “big bang” in 1987, and the new stock exchange system modeled on the automated NASDAQ in the US, were all about trying to compete with New York on a level playing field, reinforced by direct pressures from the Wall Street investment banks operating in London. It was, ironically, US regulatory changes in the 1970s requiring prudent investment on the part of US pension funds that led to the diversification of these funds into equity and bond investments abroad, and US banks in London were especially well positioned to attract such funds to the London equity market.20 The 1987 Financial Services Act, the most “crucial piece of regulatory reform introduced in Britain,” was only adopted after the US model had been closely examined by “a stream of British visitors”;21 and the first chairman of the new Securities and Investment Board explicitly acknowledged: “[W]e shall, to all intents and purposes, be exercising the power of an SEC in this country.”22 As one experienced City insider put it: The triumph of American values and American ways provided an ideal background for the Wall Street investment banks.

The 1971 Report of the Hunt Commission, appointed by Nixon to study how to “improve the functioning of the private financial system,” had already been oriented to move “as far as possible towards freedom of financial markets and equip all institutions with the power necessary to compete in such markets.”67 And in August 1973 Nixon, arguing that “the public is better served by the free play of competitive forces than by the imposition of rigid and unnecessary regulation,” proposed to Congress the gradual elimination of interest-rate ceilings.68 This would in fact be delayed until 1980, but with the famous “big bang” it delivered to Wall Street in 1975, the SEC dramatically shifted away from its long-maintained support for the cartel-like structures of brokers, investment banks, and corporate managers that had dominated the capital markets since the 1930s. Congressional investigations attracting considerable media attention had provided the pension and mutual funds and insurance companies, supported by retail-oriented investment banks like Merrill Lynch, with a forum to make their case for the abolition of fixed rates on brokerage commissions on Wall Street. What was notable, however, about the amendments to the Securities Acts that ushered in this foundational instance of “deregulation” was that this did not amount to reducing the power of the state.

(The Soviet Union was of course an entirely different matter, and insofar as it also played an imperial role in the postwar era, it did so in a very different way, precisely because it was not a capitalist state.) Economic Crisis and the Illusion of Hegemonic Decline By the 1960s, alongside the activities of MNCs abroad, the international operations of US management, legal, accounting, and consultancy firms also facilitated the making of global capitalism under the aegis of the American empire. This was further enhanced when the City of London switched its international allegiance from sterling to the dollar, and became by the 1960s the Eurodollar satellite of Wall Street. But, together with the appearance of US balance of payments deficits due to the flow of imports from Europe, as well as increased US foreign direct investment (FDI from here on) in Europe, this raised severe problems for the dollar’s fixed exchange rate, even though the US Treasury bond market still served as the foundation for all calculations of value in the global capitalist economy.


pages: 398 words: 105,917

Bean Counters: The Triumph of the Accountants and How They Broke Capitalism by Richard Brooks

accounting loophole / creative accounting, asset-backed security, banking crisis, Big bang: deregulation of the City of London, blockchain, BRICs, British Empire, business process, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Strachan, Deng Xiaoping, Donald Trump, double entry bookkeeping, Double Irish / Dutch Sandwich, energy security, Etonian, eurozone crisis, financial deregulation, forensic accounting, Frederick Winslow Taylor, G4S, intangible asset, Internet of things, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, light touch regulation, Long Term Capital Management, low cost airline, new economy, Northern Rock, offshore financial centre, oil shale / tar sands, On the Economy of Machinery and Manufactures, Ponzi scheme, post-oil, principal–agent problem, profit motive, race to the bottom, railway mania, regulatory arbitrage, risk/return, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, statistical model, supply-chain management, The Chicago School, too big to fail, transaction costs, transfer pricing, Upton Sinclair, WikiLeaks

As Professor Lee Seidler had written in his 1969 comparison of American and British bean counters, while American accountants were ‘proud of their ability to minimize clients’ taxes’, their British counterparts ‘appear to display little enthusiasm for such tactics’.6 Since then, however, British accountancy had become part of the global bean-counting business and had less time for old-fashioned notions like public responsibility. PLAYING CHARADES As the 1990s post-Big Bang City of London created new financial instruments to enrich itself, amenable governments adapted antiquated tax laws to accommodate them. But new laws meant new loopholes. A low, rumbling level of UK corporate tax avoidance became an all-out assault by the bean counters on the national coffers. The firm with the most substantial American heritage, Ernst & Young, was at the forefront. One of the few schemes to become public knowledge, in a country that liked its tax system kept as secret as possible, showed just what contortions the firm was prepared to put clients through to avoid tax.

Such issues had acquired added significance with the permanent reintroduction of income tax in 1842 and its application to business profits. The bean counters were making themselves increasingly indispensable. The man who gave his name to the world’s largest accountancy firm today made it by exposing malpractice in the railway companies. William Welch Deloitte was the grandson of an aristocrat who had fled revolutionary France, learning his craft in the City of London’s bankruptcy court before setting up on his own in 1845 at the age of 27. Four years later, he was called in by concerned shareholders in the Great Western Railway. There he uncovered accounting that was shoddy even by the standards of the day, forcing the amateur auditors and four of the company’s directors to resign. The young bean counter was immediately given the task of periodically auditing the company’s books, making him the first independent ongoing professional auditor of a major company.

It promised ‘the existence of a class of persons well qualified to be employed in the responsible and difficult duties often devolving on Public Accountants’. Across the United Kingdom chartered accountancy was now elevated to somewhere approaching the status of other professions, with demanding training and examinations for its practitioners. In its first thirty years, at its new home in the City of London, the Institute of Chartered Accountants in England and Wales would count as president the men whose names still stand at the top of the profession: William Deloitte, Edwin Waterhouse, William Peat and both of the Cooper brothers. BUST AND BOOM Nineteenth-century laissez-faire economic policy certainly gave these professional accountants (and plenty of unprofessional ones) much to do.


pages: 290 words: 83,248

The Greed Merchants: How the Investment Banks Exploited the System by Philip Augar

Andy Kessler, barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, business cycle, buttonwood tree, buy and hold, capital asset pricing model, commoditize, corporate governance, corporate raider, crony capitalism, cross-subsidies, financial deregulation, financial innovation, fixed income, Gordon Gekko, high net worth, information retrieval, interest rate derivative, invisible hand, John Meriwether, Long Term Capital Management, Martin Wolf, new economy, Nick Leeson, offshore financial centre, pensions crisis, regulatory arbitrage, Sand Hill Road, shareholder value, short selling, Silicon Valley, South Sea Bubble, statistical model, Telecommunications Act of 1996, The Chicago School, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, tulip mania, value at risk, yield curve

We exerted enormous pressure on clients to transact. We helped to raise and recycle lots of capital, yet we employees seemed to benefit more than our clients and shareholders. We never seemed to face up to the truth about what we were really doing. To start with I thought this was a London problem. My first book, The Death of Gentlemanly Capitalism,1 described how the City of London’s investment banks and brokers had lost out to foreign, mainly American, competitors in the years after Big Bang in 1986. I expected that this book would end my interest in finance, but I kept a weather eye on investment banking. Some firms used me as a consultant; others asked my opinion informally; friends in the business kept me in touch with what was happening. It was hard to ignore: the media was full of the most extraordinary goings-on: the boom and bust of the dot-com bubble, corporate scandal in recession-hit America and lay-offs on Wall Street and in the City.

One of the few occasions when lobbying failed was when SEC chairman Arthur Levitt introduced Fair Disclosure, a rule that required corporate executives to make public any information that they passed on to analysts, but even then ‘When Levitt announced his fair disclosure plan, the Wall Street firms and their corporate clients raised a huge, self-serving ruckus.’33 Lobbying is of course the American way: every interest group lobbies Washington and the financial services industry’s is a particularly effective lobby. Inevitably, after the takeover of the City of London by Wall Street’s banks, a similar process is now under way in Britain. The Labour Government was initially uncomfortable with the City but sensed that it needed it and built relations with the investment banks. Prime Minister Tony Blair spoke at a meeting for business people organized by Goldman Sachs34 and, as if to confirm that top politicians would appear at investment banks, shortly afterwards, in April 2004, Gordon Brown opened the new London offices of Lehman Brothers.

Stewart, Den of Thieves, op. cit. 19. Bruck, Connie, op. cit., pp. 369–72. 20. Burrough, Bryan, and Helyar, John, Barbarians at the Gate (Random House, 2001), p. 622. 21. Geisst, Charles R., Wall Street, op. cit., pp. 357–9; Roberts, Richard, Wall Street, op. cit., p. 79; Stiglitz, Joseph, The Roaring Nineties, op. cit., pp. 37–8. 22. Kochan and Pym, The Guinness Affair, op. cit.; Kynaston, David, The City of London (Chatto & Windus, 2001), vol. 4, pp. 673–81, 725–6 and 743–4. 23. Endlich, Lisa, Goldman Sachs (Alfred A. Knopf, 1999), p. 118. 24. Eichenwald, Kurt, Serpent on the Rock (HarperBusiness, 1995); Business Week (18 December 1995). 25. Endlich, Lisa, Goldman Sachs, op. cit., p. 197. 26. Fay, Stephen, The Collapse of Barings (Arrow Books, 1996); Gapper, John, and Denton, Nicholas, All that Glitters (Penguin Books, 1997). 27.


pages: 614 words: 174,226

The Economists' Hour: How the False Prophets of Free Markets Fractured Our Society by Binyamin Appelbaum

"Robert Solow", airline deregulation, Alvin Roth, Andrei Shleifer, anti-communist, battle of ideas, Benoit Mandelbrot, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, Celtic Tiger, central bank independence, clean water, collective bargaining, Corn Laws, correlation does not imply causation, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, desegregation, Diane Coyle, Donald Trump, ending welfare as we know it, financial deregulation, financial innovation, fixed income, floating exchange rates, full employment, George Akerlof, George Gilder, Gini coefficient, greed is good, Growth in a Time of Debt, income inequality, income per capita, index fund, inflation targeting, invisible hand, Isaac Newton, Jean Tirole, John Markoff, Kenneth Arrow, Kenneth Rogoff, land reform, Long Term Capital Management, low cost airline, manufacturing employment, means of production, Menlo Park, minimum wage unemployment, Mohammed Bouazizi, money market fund, Mont Pelerin Society, Network effects, new economy, oil shock, Paul Samuelson, Philip Mirowski, plutocrats, Plutocrats, price stability, profit motive, Ralph Nader, RAND corporation, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Bork, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Peltzman, Silicon Valley, Simon Kuznets, starchitect, Steve Jobs, supply-chain management, The Chicago School, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, trickle-down economics, ultimatum game, Unsafe at Any Speed, urban renewal, War on Poverty, Washington Consensus

When a matchmaker tried to persuade the partners in one British firm to fly to New York to meet potential suitors, he was told that one of the partners had no passport because he had never thought to go anywhere else. Danny Fortson, “The Day Big Bang Blasted the Old Boys into Oblivion,” The Independent (London), October 29, 2006. 49. In the first year after the Big Bang, one quarter of the 300 members of the exchange came under foreign ownership. 50. Julia Tanndal and Daniel Waldenstrom, “Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang,” Economica 85, no. 338 (2018). 51. Jesse Eisinger, “London Banks, Falling Down,” Portfolio, August 1, 2008. 52. The rise of financial profits in the United States was even more spectacular, from about 15 percent of all corporate profits in the early 1980s to around 40 percent on the eve of the financial crisis.

As Thatcher’s aides debated the issue, however, most came down on the side of price competition. Nigel Lawson, the chancellor of the exchequer, insisted the United Kingdom needed to keep pace with its rivals. Redwood said investors would police the market. “People are, on the whole, pretty canny about their own money,” he said.47 The makeover of the London Stock Exchange, on October 27, 1986, was dubbed the “Big Bang.” American and continental banks rushed into the City of London, the historic financial district, and gobbled up venerable British brokerages like so many Pac-Man pellets.48 Wits compared the City with Wimbledon, the tennis tournament dominated by foreign players.49 Broker fees quickly dropped by half, and the volume of trading on the London market roughly doubled.50 The longer-term impact was to restore London’s place as a center of finance.

John Reed, “We Were Wrong About Universal Banking,” Financial Times, November 11, 2015. 47. Jim Pickard and Barney Thompson, “Thatcher Policy Fight over ‘Big Bang’ Laid Bare,” Financial Times, December 30, 2014. With regard to Redwood’s views, suffice it to say that people are roughly as canny about money as Redwood was about people. Interestingly, price competition has turned out to require a larger regulatory apparatus than price controls, underscoring that more complex markets require more complex regulation. By one count, the ratio of regulators to bankers rose from 1 per 11,000 in 1979 to 1 per 300 in 2010. On the evidence, of course, the regulators still were badly outmanned. See Philip Booth, “Thatcher: The Myth of Deregulation,” May 2015, Institute of Economic Affairs. 48. The British firms were helpless to resist. They were relatively small and they had no foothold in global markets.


pages: 333 words: 76,990

The Long Good Buy: Analysing Cycles in Markets by Peter Oppenheimer

"Robert Solow", asset allocation, banking crisis, banks create money, barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, business cycle, buy and hold, Cass Sunstein, central bank independence, collective bargaining, computer age, credit crunch, debt deflation, decarbonisation, diversification, dividend-yielding stocks, equity premium, Fall of the Berlin Wall, financial innovation, fixed income, Flash crash, forward guidance, Francis Fukuyama: the end of history, George Akerlof, housing crisis, index fund, invention of the printing press, Isaac Newton, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kickstarter, liberal capitalism, light touch regulation, liquidity trap, Live Aid, market bubble, Mikhail Gorbachev, mortgage debt, negative equity, Network effects, new economy, Nikolai Kondratiev, Nixon shock, oil shock, open economy, price stability, private sector deleveraging, Productivity paradox, quantitative easing, railway mania, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Simon Kuznets, South Sea Bubble, special economic zone, stocks for the long run, technology bubble, The Great Moderation, too big to fail, total factor productivity, trade route, tulip mania, yield curve

Even then, small improvements in time could be critical in winning business (by the new millennium, speeds would accelerate dramatically as average trade execution times would go from multiples of a second to millionths of a second1). But this was just one small innovation in a wider environment of rapid change and disruption that was about to revolutionise financial markets. The City of London was on the brink of the ‘Big Bangderegulation of 1986. For the first time, face-to-face transactions were replaced by computers and telephones, resulting in an explosion of volumes. The old way of doing business was under threat. Barriers to entry were blown apart and gave way to a new wave of entrants, many from overseas. Technology was fast changing the landscape of business and society more generally. Personal computing also saw major innovations at this time.

Index 100 year bond 34 1920s, United States 148, 154, 157, 160 1945-1968, post-war boom 129–131 1960s ‘Nifty Fifty’ 114, 130–131, 233, 235 structural bear market 130 1970s Dow Jones 131 equity cycle 56 oil crisis 108 1980s bull markets 131–133 Dow Jones 15–16, 131–132 equity cycle 56–57 Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 technology 12–15 1990s 16–17 Asia crisis 108, 133 equity cycle 57 S&P concentration 114 technology bubble 33, 93–94, 149–150, 156–157, 158–159, 161, 164 2000-2007 equity cycle 57 2007-2009 financial crisis 169–174 emerging markets 171–173 forecasting 19–21 growth vs. value company effects 94–96 impact 169–170 phases 171–174 quantitative easing 173–174, 178–179 sovereign debt 170, 171–173 structural bear market 110, 118–119 A accounting, bubbles 163–165 adjustment speed 74, 89–90 Akerflof, G.A. 23 American Telephone and Telegraph (AT&T) 154, 225, 235–236, 238 Asia crisis, 1998 108, 133 ASPF see Association of Superannuation and Pension Funds asset classes across phases 66–68 contractions and expansions 63–65 cyclical 83–89 defensive 83–89 diversification 42, 45–47, 178–179 growth 83–84, 90–96 and inflation 65–66, 70 levels of yield 74–76 relationship through cycle 68–76 returns across cycle 63–79 speed of adjustment 74 structural shifts 76–79 value 83–84, 90–96 see also bonds; commodities; equities Association of Superannuation and Pension Funds (ASPF) 77 AT&T see American Telephone and Telegraph austerity 239 Austria, 100 year bond 34 B bank margins 214–215 bear markets 49, 99–125 1960s 130 characteristics 100–106, 117–118 cyclical 105, 106–107 deflation 109, 113 duration 100–101, 106–111, 117 employment 121–124 event-driven 105, 107–109 false negatives 119–120 financial crisis 118–119 growth momentum 122–123 indicators 106, 108, 109–110, 119–125 inflation 101–103, 109, 121–122 interest rates 106, 111–113 prior conditions 121–124 private sector financial balance 124 profitability 115–117 recovery 101 risk indicator vs MSCI index 124–125 S&P 500 103–105 structural 105 triggers 101–105, 106, 108, 111 valuations 123 yield curve 122 behavioural factors 5, 22–25 Berlin Wall, fall of 133 Bernanke, B. 133 betas 65, 85 ‘Big Bangderegulation 12 Bing 237 Black Monday 16, 102, 148 Black Wednesday 16–17 ‘bond-like’ equities 96 bonds, 100 year 34 bond yields across phases 66–68, 72–76 current cycle 95–96, 191–193, 201–220 cyclical vs. defensive companies 87–88 and demographics 215–217 and equity valuations 72–76, 206–208 and growth companies 92–94 historical 43, 202 and implied growth 210–215 and inflation 65, 70 quantitative easing 173–174, 202–205 and risk asset demand 217–220 S&P 500 correlation 72–73 speed of adjustment 74, 89–90 ultra-low 201–220 and value companies 92–94 vs. dividends 78–79 vs. equities 43–45, 68–76, 78–79 Bretton Woods monetary system 102, 130–131 broadcast radio 154, 225 Bubble Act 147, 157 bubbles 143–165 1920s US 148, 154, 157, 160 1980s Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 accounting 163–165 canal mania 152 characteristics 145–146 deregulation 157–159 easy credit 160–161 famous 145 financial innovation 158–159 government-debt-for-equity swaps 151–152 Mississippi Company 147, 151 ‘new eras’ 150–157 personal computers 155 psychology 144–145 radio manufacturing 154 railways 148, 152–154, 157, 160, 163 Shanghai composite stock price index 156 South Sea Company 147, 151, 153 structural bear markets 113 sub-prime mortgages 70, 102, 118, 133, 145, 159 technology, 1990s 33, 93–94, 149–150, 156–157, 158–159, 161, 164 tulip mania 146–147 valuations 161–162 bull markets 49, 127–142 characteristics 127–141 composition 138 cyclical 134–136 disinflation 131–133 duration 136–138, 139–141 equity performance 135–136 Great Moderation 133–134, 187–189 non-trending 138–141 post-war boom 129–131 quantitative easing 134 secular 127–134 United States 136 C canal mania 152 CAPE see cyclically adjusted price-to-earnings ratio capital investment, Juglar cycle 3 CDO see collateralised debt obligations characteristics bear markets 100–109, 111, 117–118 bubbles 145–146 bull markets 127–141 cyclical bear markets 106–107 event-driven bear markets 108–109 structural bear markets 111 China 15, 156 Cold War 14–15, 133 collateralised debt obligations (CDO) 159 commodities across phases 66–68 Kitchin cycle 3 composition of bull markets 138 concentration structural bear markets 115 and technology 238–240 contractions asset performance 63–65 mini cycles 60 see also recessions Cooper, M. 162 corporate debt 65, 110, 114, 160–161 corporate profitability bear markets 107, 115–117 current equity cycle 185–186 monetary policy 239 credit crunch 78–79, 170, 171 crowds, psychology of 21–22, 144–145 cult of the equity 77–78 current equity cycle 57–58, 167–240 bank profitability 214–215 bond yields 191–193 demographic shifts 215–217 drivers 179–180 earnings per share 195–196 employment and unemployment 183–185 equity valuations 206–208 ‘first mile problem’ 226–227 future expectations 246–247 global relative performance 193–196 growth momentum 174–178, 182–183, 227–231 growth and value companies 190–196, 239–240 implied growth 210–215 inflation 180–182, 203–205 interest rates 180–182, 239–240 Japan, lessons from 196–200 lessons from 244–245 market and economy incongruence 174–178 monetary policy 178–179, 201–205 opportunities 230–231 profitability 185–186 quantitative easing 202–205 returns 174–179 risk asset demand 217–220 structural changes 76–79, 93–96, 169–200 technology 189–190, 221–241 term premium collapse 204–205 ultra-low bond yields 201–220 valuations 233–235 volatility 187–189 cycles 1970s 56 asset returns 63–79 cyclical vs. defensive companies 85–89 equities 49–62 growth vs. value companies 90–96 investment styles 81–96 long-term returns 29–47 riding 11–27 sectors 83–85 valuations 53 cyclical bear markets 105, 106–107, 117, 118 vs. event-driven 109 cyclical bull markets 134–136 cyclical companies bond yields 193 inflation 88 sectors 83–84 vs. defensive 85–89 cyclical growth 83–84 cyclically adjusted price-to-earnings ratio (CAPE) 37–38, 44–45 cyclical value 83–84 D DDM see discounted dividend model debt levels bubbles 160–161 structural bear markets 110, 114 decarbonization 13 defensive companies 63–65 bond yields 193 inflation 88 Japan 198 sectors 83–84 vs. cyclical 85–89 defensive growth 83–84 defensive value 83–84 deflation bear markets 109, 113 Volker 102, 131 delivery solutions 226–227 demographics and zero bond yields 215–217 deregulation 12, 132–133, 157–159 derivative markets 158–159 design of policy 25–26 despair phase 50–52, 53, 55–56, 60, 66–68 cyclical vs. defensive companies 86, 88 growth vs. value companies 92 Dice, C. 161 Dimitrov, O. 162 discounted dividend model (DDM) 36, 69 discount rate 68 disinflation 131–133 disruption 1980s 12–15 current equity cycle 189–190, 221–241 electricity 226 historical parallels 222–227 printing press 223–224 railway infrastructure 224–227 telecoms 225–226 divergence, and technology 238–240 diversification 42, 45–47, 178–179 dividends asset yields 38–41, 69 reinvestment 38–40 value of future streams 209 vs. bonds 78–79 Dodd, D. 163, 164 domain registrations 12–13 dominance of technology 231–233 dotcoms 12–13, 33, 93–94, 102, 161, 237 Dow Jones 1970s 131 1980s 15–16, 131 Black Monday 16, 102, 148 Draghi, M. 17, 173 drivers of bull markets 138 current equity cycle 179–180 duration bear markets 100–101, 106–111, 117 bull markets 135–138, 139–141 cyclical bear markets 106–107, 117, 118 cyclical bull markets 135–136 dominance of technology 231–233 event-driven bear markets 108–109, 117–118 non-trending bull markets 139–141 structural bear markets 109–111, 117 term premia 204–205 DVDs 227 E earnings per share (EPS) bear markets 115–117 historical 189 since pre-financial crisis peak 195–196, 209–210 easy credit, and bubbles 160–161 ECB see European Central Bank Economic Recovery Act, 1981 132 efficient market hypothesis 4 electricity 226 email 13 employment 121–124, 183–185 Enron 164 environmental issues 13 EPS see earnings per share equities across phases 66–68 ‘bond-like’ 96 and bond yields 72–73, 74–76, 206–208 bull market performance 135–136 CAPE 37–38, 44–45 dividends 38–41, 69, 78–79, 209 and inflation 65–66, 70 mini/high-frequency cycles 58–61 narrowing and structural bear markets 114–115 overextension 36–37 phases of investment 50–58 quantitative easing 173–174, 178–179 S&P 500 historical performance 42 valuations and future returns 43–45 vs. bonds 43–45, 68–76, 78–79 equity cycle 49–62 1970s 56 1980s 56–57 1990s 57 2000-2007 57 current 57–58, 76–79 historical periods 56–58 length 49 mini/high-frequency 58–61 phases 50–56 structural shifts 76–79 equity risk premium (ERP) 35–38, 69–72, 210 ERM see exchange rate mechanism ERP see equ ity risk premium ESM see European stability mechanism Europe dividends 39–40 exchange rate mechanism 16–17, 111 Maastricht Treaty 17 market narrowing in 1990s 115 privatisation 132 quantitative easing 17, 204–205 sovereign debt crisis 170, 171–173 European Central Bank (ECB) 17, 171, 173 European Recovery Plan 129–131 European stability mechanism (ESM) 173 event-driven bear markets 105, 107–109, 117–118 vs. cyclical 109 excess see bubbles exchange rate mechanism (ERM) 16–17, 111 exogenous shocks 108 expansions, asset performance 63–65 F false negatives, bear markets 119–120 fat and flat markets 128, 139 features see characteristics Federal Reserve 16, 102, 131, 134, 150–151, 157, 203 financial crisis, 2007–2009 169–174 forecasting 19–21 growth vs. value company effects 94–96 impact 169–170 structural bear market 110, 118–119 financial innovation 158–159 ‘first mile problem’ 226–227 Fish, M. 19 fixed costs 84–85, 173–174 fixed income assets 35, 65, 69–70, 205 flat markets 138–141 see also non-trending bull markets forecasting 2008 financial crisis 19–21 bear markets 106, 108, 109–110, 119–125 behavioural aspects 22–25 difficulties of 18–22 future growth 211–212 neuroeconomics 24–25 and policy setting 25–26 recessions 20–21 and sentiment 21–25 short-term 17–18 weather 18–19 France Mississippi Company 147, 151 privatisation 132 Fukuyama, F. 15 future expectations 246–247 G Galbraith, J.K. 160 GATT see General Agreement on Tariffs and Trade General Agreement on Tariffs and Trade (GATT) 129 Germany Bund yield 207 fall of Berlin Wall 133 wage inflation 185 Glasnost 14 Glass-Steagall Act, 1933 132 global growth 182–183 globalisation 14–16 global relative performance 193–196 global sales growth 212 global technology bubble 33, 93–94, 149–150, 156–157, 158–159, 161, 164 Goetzmann, F. 151 ‘Golden Age of Capitalism’ 129–131 Gold Standard 130 see also Bretton Woods monetary system Goobey, G.R. 77 Google 237 Gorbachev, M. 14 Gordon Growth model 209 government-debt-for-equity swaps 151–152 Graham, B. 161, 163, 164 Great Britain South Sea Company 147, 151, 153 see also United Kingdom Great Depression 4 Great Moderation 133–134, 187–189 Greenspan, A. 16, 113, 150–151 gross domestic product (GDP) cyclical vs. defensive companies 87 labour share of 185, 238–239 phases of cycle 52–53 profit share of, US. 186 growth bear markets 122–123 current equity cycle 174–178, 182–183, 227–231 technology impacts 227–231 and zero bond yields 208–210, 210–215 growth companies bond yields 92–94, 191–193 current cycle 190–196 definition 90–91 since financial crisis 94–96 interest rates 92–94 outperformance 239–240 sectors 83–84 vs. value 90–96 growth phase 50–52, 54–56, 67–68 cyclical vs. defensive companies 86 growth vs. value companies 92 Gulf war 102 H herding 21–22, 144–145 high-frequency cycles 58–61 historical performance 10 year bonds, US 43 bonds 43, 202 equities cycles 49, 56–58 S&P 500 38–39, 42 trends 29–31 holding periods 31–34 Holland, tulip mania 146–147 hope phase 50–52, 53–54, 55–56, 66–67 cyclical vs. defensive companies 86 growth vs. value companies 92 housing bubble, US 70, 102, 118, 133, 145, 159 Hudson, G. 163 I IBM 13, 155, 236 IMAP see Internet Message Access Protocol IMF see International Monetary Fund impacts of diversification 42, 45–47 financial crisis, 2007-2009 169–170 technology on current cycle 221–241 ultra-low bond yields 201–220 Imperial Tobacco pension fund 77 implied growth 210–215 income, Kuznets cycle 3 indicators bear markets 106, 108, 109–110, 119–125 cyclical bear markets 106 event-driven bear markets 108 structural bear markets 109–110 industrial revolution 224–226 industry leadership, S&P 500 232–233, 237–238 inflation asset performance 65–66, 70 bear markets 101–103, 109, 121–122 current equity cycle 180–182, 203–205 cyclicals 88 Volker 102, 131 Institute of Supply Management index (ISM) 59–61 bear markets 123 cyclical vs. defensive companies 86–87 interest rates bear markets 106, 111–113 current equity cycle 180–182, 239–240 growth vs. value companies 92–94 structural bear markets 111–113 and yield 69, 74–76 International Monetary Fund (IMF) 129 internet 12–13, 225–227 search 237 see also dotcoms Internet Message Access Protocol (IMAP) 13 inventories 84–85 Kitchin cycle 3 investment, Juglar cycle 3 investment cycle bear markets 122–123 current 57–58, 76–79 historical periods 56–58 lengths 49 mini/high-frequency 58–61 phases 50–56 structural shifts 76–79 see also cycles ISM see Institute of Supply Management index J Japan bubbles 114, 148–149, 155–156, 158, 160–161, 162, 164 defensive companies 198 dividends 39–40 lessons from 196–200 John Crooke and Company 160 Juglar cycle 3 K Kahneman, D. 22–23 Kennedy Slide bear market 102 Keynes, J.M. 22 Kindleberger, C.P. 22 Kitchin cycle 3 Kondratiev cycle 3 Kuznets cycle 3 L labour share of GDP 185, 238–239 land and property bubble, Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 laptop computers 13 largest companies S&P 500 237–238 technology 234–237 light touch regulation 157–159 see also deregulation Live Aid 13–14 Loewenstein, G. 21–22 long-term returns 29–47 M Maastricht Treaty 17 Mackay, C. 21 market forecasts short-term 17–18 see also forecasting market narrowing structural bear markets 114–115 and technology 238–240 markets current equity cycle 174–178 psychology of 21–25, 144–145 see also bear markets; bubbles; bull markets market timing 41–43 market value of technology companies 234, 235–238 Marks, H. 6–7 Marshall Plan 129–131 MBS see mortgage-backed securities Microsoft 12, 236–237 mini cycles 58–61 Mississippi Company 147, 151 monetary policy 157–159, 178–179, 201–205, 239 austerity 239 European Central Bank 17, 171, 173 Federal Reserve 16, 102, 131, 134, 150–151, 157, 203 quantitative easing 17, 70–71, 119, 133–134, 173–174, 178–179, 202–205 Montreal Protocol 13 mortgage-backed securities (MBS) 159 MSCI indices 91 N narrow equity markets 114–115, 238–240 NASDAQ 149–150, 161 negative bond yields 201–220 demographics 215–217 and equity valuations 206–208 and growth 208–210 implied growth 210–215 monetary policy 201–205 quantitative easing 202–205 risk asset demand 217–220 neuroeconomics 24–25 ‘new eras’ 113–114, 150–157 ‘Nifty Fifty’ 114, 233 non-trending bull markets 138–141 nudges 26 O oil 108, 226 opportunities, technology 230–231 optimism phase 50–52, 54–56, 67–68 cyclical vs. defensive companies 86 growth vs. value companies 91–92 output gaps 4 Outright Monetary Transactions (OMT) 171, 173 overextension 36–37 ozone layer 13 P pension funds 77, 218–219 Perestroika 14 Perez, C. 159 performance bull markets 134–136 current equity cycle 174–179 and cycles 53–56 diversification impacts 42, 45–47 dividends 38–41 equities vs. bonds 43–45 factors 41–45 historical trends 29–31 holding periods 31–34 interest rates 69, 74–76 long-term 29–47 market timing 41–43 risks and rewards 35–38 valuations 43–45 volatility 30–31 personal computing introduction 12–13, 155 phases 2007-2009 financial crisis 171–174 asset classes 66–68 bear markets 123 cyclical vs. defensive companies 86 of equities cycle 50–56 growth vs. value companies 91–92 Phillips curve 182 Plaza Accord, 1985 148–149, 158 PMI see purchasing managers’ index policy, design of 25–26 population decline 216 post-financial crisis see current equity cycle post-war boom 129–131 prediction see forecasting price-to-earnings ratio (P/E) 53–56 printing press 223–224 prior conditions to bear markets 121–124 private sector debt 65, 110, 114, 160–161 private sector financial balance 124 privatisation 132 productivity growth 227–230 profit labour share of 185, 238–239 share of GDP, US. 186 profitability banks 214–215 bear markets 107, 115–117 current equity cycle 185–186 property and land bubble, Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 psychology bubbles 144–145 of markets 21–25 policy setting 25–26 public ownership 132 purchasing managers' index (PMI) 59–61, 86–87, 89–90 Q QE see quantitative easing Qualcom 149–150 quality companies 193 quantitative easing (QE) asset returns 70–71, 119, 178–179 bond yields 173–174, 202–205 start of 17, 133–134, 171 United Kingdom 17, 204–205 United States 134, 171, 202–204 R radio, expansion of 154, 225 Radio Corporation of America (RCA) 154 railways bubbles UK 148, 152–153, 157, 163 US 153–154, 160 infrastructure development 224–227 Rau, P. 162 RCA see Radio Corporation of America Reagan, R. 14, 131–132 real assets 68 real estate bubble, US 70, 102, 118, 133, 145, 159 recessions bear markets 101–103 current equity cycle 174–178 forecasting 20–21 recovery bear markets 101 current equity cycle 174–178 reinvestment of dividends 38–40 return on equity (ROE) 43–45 returns bull markets 134–136 current equity cycle 174–179 cycles 53–56 diversification impacts 42, 45–47 dividends 38–41 equities vs. bonds 43–45 factors 41–45 historical trends 29–31 holding periods 31–34 interest rates 69, 74–76 long-term 29–47 market timing 41–43 risks and rewards 35–38 valuations 43–45 volatility 30–31 reverse yield gap 77 risk assets, demand for 217–220 risk-free interest rate 68 risk indicators bear markets 119–125 event-driven bear markets 108 structural bear markets 110–111, 113–114 risk premia equity 35–38, 69 neuroeconomics 25 term premia 204–205 ROE see return on equity Rouwenhorst, G. 151 Russian debt default, 1997 108 S S&P 500 bear markets 103–105 and bond yields 72–73 concentration in 1990s 115 dividends 38–39 historical performance 38–39, 42 industry leadership 232–233, 237–238 and ISM 60 largest companies 237–238 US Treasury yields 206 sales growth 212 savings, current equity cycle 182 Schumpeter, J. 150 search companies 237 ‘search for yield’ 217–220 secondary-market prices 229–230 sectors across the cycle 83–85 dominance 231–233 secular bull market 127–134 disinflation 131–133 Great Moderation 133–134, 187–189 post-war boom 129–131 secular stagnation hypothesis 181 sentiment 5, 21–25 see also bubbles Shanghai composite stock price index 156 Shiller, R.J. 4–5, 23 short-term market forecasts 17–18 skinny and flat markets 139–140 smartphones 226, 229–230 Solow, R. 229 South Sea Company 147, 151, 153 sovereign debt crisis 170, 171–173 Soviet Union 14–15, 133 speed of adjustment 74, 89–90, 122–123 Standard Oil 235 structural bear markets 105, 109–115 1960s 130 bubbles 113 debt levels 110, 114 deflation 113 duration 109–111, 117 financial crisis, 2007 118–119 interest rates 111–113 narrow equity markets 114–115 ‘new eras’ 113–114 risk indicators 110–111, 113–114 triggers 111 volatility 105, 115 structural changes 6 1980s 12–15 current equity cycle 76–79, 93–96, 169–200 sub-prime mortgage bubble 70, 102, 118, 133, 145, 159 Summers, L. 181 Sunstein, C.R. 26 ‘super cycle’ secular bull market 127–134 see also secular bull market T technology 1920s America 154 bubble in 1990s 33, 93–94, 149–150, 156–157, 158–159, 161, 164 current equity cycle 189–190, 221–241 and disruption in 1980s 12–15 dominance 231–233 and growth 227–231 historical parallels 222–227 industrial revolution 224–226 Kondratiev cycle 3 largest companies 234–237 market value 234, 235–238 opportunities 230–231 personal computers 12–13, 155 printing press 223–224 railway bubbles 148, 152–154, 157, 160, 163 railway infrastructure 224–227 and widening gaps 238–240 telecommunications 13, 154, 225, 235–236, 238 telegrams 225 term premium collapse 204–205 TFP see total factor productivity growth Thaler, R.H. 26 Thatcher, M. 14, 132 Tokkin accounts 158 ‘too-big-to-fail’ 133 total factor productivity (TFP) growth 238–240 triggers bear markets 101–105, 106, 108, 111 cyclical bear markets 106 event-driven bear markets 108 structural bear markets 111 tulip mania 146–147 Tversky, A. 22–23 U ultra-low bond yields 201–220 demographics 215–217 and equity valuations 206–208 and growth 208–210 implied growth 210–215 monetary policy 201–205 quantitative easing 202–205 risk asset demand 217–220 UNCTAD see United Nations Conference on Trade and Development unemployment 121–124, 183–185 unexpected shocks 108 United Kingdom (UK) Black Wednesday 16–17 bond yields, historical 202 canal mania 152 deregulation 132 exchange rate mechanism 16–17, 111 privatisation 132 quantitative easing 204–205 railway bubble 148, 152–153, 157, 163 South Sea Company 147, 151, 153 United Nations Conference on Trade and Development (UNCTAD) 129 United States (US) 10 year bond returns 43 Black Monday 16, 102, 148 bull markets 136 credit crunch 78–79, 170, 171 disinflation 132 dividends 38–39 Dow Jones 15–16, 131 equities in current cycle 207–208 housing bubble 70, 102, 118, 133, 145, 159 labour share of GDP 185, 238–239 market narrowing 114 NASDAQ 149–150, 161 ‘Nifty Fifty’ 114, 130–131, 233, 235 post-war boom 129–131 profit share of GDP 186 quantitative easing 133–134, 171, 202–204 radio manufacturing 154, 225 railway bubble 153–154, 160 stock market boom, 1920s 148, 154, 157, 160 vs.

National Institute of Economic and Social Research, 225(1), 3–13. 8 See Marks, H. (2018). Mastering the cycle: Getting the odds on your side (p. 293). Boston, MA: Houghton Mifflin Harcourt. Part I Lessons from the Past: What Cycles Look Like and What Drives Them Chapter 1 Riding the Cycle under Very Different Conditions In 1985, when I started as a graduate trainee at Greenwells & Co, a stockbroking firm in the City of London, I spent a short period on the floor of the London Stock Exchange, along with the other new graduate recruits. At that time, many of the practices were probably much as they had been for many decades. The government Gilt brokers still wore top hats, and it was just 12 years since the first women had been elected as members of the exchange. One of my classmates was jeered for turning up in brown shoes and was sent home to change.


pages: 312 words: 93,836

Barometer of Fear: An Insider's Account of Rogue Trading and the Greatest Banking Scandal in History by Alexis Stenfors

Asian financial crisis, asset-backed security, bank run, banking crisis, Big bang: deregulation of the City of London, bonus culture, capital controls, collapse of Lehman Brothers, credit crunch, Credit Default Swap, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial innovation, fixed income, game design, Gordon Gekko, inflation targeting, information asymmetry, interest rate derivative, interest rate swap, London Interbank Offered Rate, loss aversion, mental accounting, millennium bug, Nick Leeson, Northern Rock, oil shock, price stability, profit maximization, regulatory arbitrage, reserve currency, Rubik’s Cube, Snapchat, the market place, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, Y2K

Demand by multinational corporations definitely played a crucial role in justifying the market, but obvious causality becomes difficult to establish as the growth rate of the Eurodollar market overtook that of international trade and investment. The rapid deregulation of the financial markets around the globe during the 1980s was also crucial. The City of London changed remarkably after Margaret Thatcher launched the ‘Big Bang’ in 1986, and similar fireworks took place in a number of financial centres around the same time. In fact, since then, the Eurodollar market has often been downplayed as a historic ‘event’. Rather, focus is placed on the processes of liberalisation, globalisation, privatisation and financialisation that appear to have started in conjunction with the financial deregulation that took place in the 1980s. Whereas this might be logical, the approach can also be misleading. Financial deregulation did not prompt Eurodollar trading. It was the other way round: Eurodollar trading was pivotal in prompting financial deregulation.

Moreover, there had been a failure to supervise my ‘activity’ and to manage effectively market risk limits in respect of my activities.1 Effectively, they had shirked their responsibility to oversee what I was doing. In March 2010, when the FSA had concluded its investigation, I was handed a five-year prohibition order. This was, in effect, a ban from working in the City of London. Considering the status of the FSA and of the City of London as a global financial centre, it basically meant being barred from working in the financial services industry anywhere in the world. The case was closed. *** This book project started when I sent myself an email on 19 February 2009. The email contained everything I could remember of what had happened two days previously. I wrote it to myself out of fear and paranoia and not thinking much more about it.

It almost sounded like a machine gun, ‘80–83, 80–83, 80–83, 80–83’, until the broker said ‘Given!’, ‘Taken!’, ‘Off!’ or changed the ammunition to ‘80–82, 80–82, 80–82, 80–82’. ‘The old image is of East End barrow boys paid to give prices and be entertaining,’ a former ICAP broker said during a LIBOR trial.12 The stereotypical broker came from the East End of London or Essex, leaving school at 16 to work in the City of London. Several of my brokers ticked every single box in that respect, whereas others had joined the broking business after having had a go at trading in one of the large banks. Either way, brokers who survived the cutthroat business of competing against each other to win business from traders were generally good at two things. First, they might not have been mathematicians, but they tended to have a natural flair with numbers.


pages: 391 words: 102,301

Zero-Sum Future: American Power in an Age of Anxiety by Gideon Rachman

Asian financial crisis, bank run, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Bretton Woods, BRICs, capital controls, centre right, clean water, collapse of Lehman Brothers, colonial rule, currency manipulation / currency intervention, deindustrialization, Deng Xiaoping, Doha Development Round, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, global reserve currency, greed is good, Hernando de Soto, illegal immigration, income inequality, invisible hand, Jeff Bezos, laissez-faire capitalism, Live Aid, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, mutually assured destruction, Naomi Klein, Nelson Mandela, offshore financial centre, open borders, open economy, Peace of Westphalia, peak oil, pension reform, plutocrats, Plutocrats, popular capitalism, price stability, RAND corporation, reserve currency, rising living standards, road to serfdom, Ronald Reagan, shareholder value, Sinatra Doctrine, sovereign wealth fund, special economic zone, Steve Jobs, Stewart Brand, The Chicago School, The Great Moderation, The Myth of the Rational Market, Thomas Malthus, trickle-down economics, Washington Consensus, Winter of Discontent, zero-sum game

As the historian Harold James notes, this liberalization of capital flows meant that “economic issues became globalised—in other words, it was ever harder for national authorities to control them.”9 By 1981, three of Thatcher’s signature policies were in place: the abolition of exchange controls, cuts in direct taxation, and moves to curb the power of trade unions. Britain was in the midst of a deep recession and manufacturing industries were suffering badly. But the foundations for a boom in the City of London had been laid. In 1982, the evocatively named LIFFE futures trading exchange opened in the City. In 1986, the Thatcher government pushed through the “Big Bang” of financial deregulation in the City, which Andrew Marr suggests “has a claim to be the single most significant change of the whole Thatcher era.”10 The brash city trader, along with the striking miner, became one of the emblematic figures of the Thatcher era. Thatcher herself seemed ambivalent about the surge in conspicuous consumption in the City.

In his State of the Union address in 1996, Bill Clinton proclaimed that “the era of big government is over” and then launched into an ambitious reform that cut back welfare benefits in order to improve incentives to work, an idea that would have appealed only to hard-line conservatives just a decade before.19 In 1994, three years before they took power in Britain, Gordon Brown and Tony Blair, the duo who defined New Labour, visited Alan Greenspan in his office in the Fed in Washington. As Greenspan noted, “Brown in particular espoused globalization and free markets.”20 The Fed chairman was impressed. In the spring of 1997, shortly before his election as the first Labour prime minister in eighteen years, Tony Blair gave a speech at the Corn Exchange in the heart of the City of London in which he announced, “We accept, and indeed embrace, the role of free enterprise in the economy. There will be no retreat from any of that.”21 In particular, Labour announced that there would be no retreat from the 40 percent top tax rate introduced under Margaret Thatcher—a point of crucial importance to the City audience. Blair also took it upon himself to become an evangelist for free markets to the more skeptical left-wing parties of France and Germany.

. … Reform was mentioned only once.” 18. James Kynge, China Shakes the World (London: Weidenfeld & Nicolson, 2006), 14. 19. Ibid., 16. 20. Quoted in “Second Long March.” 21. Quoted in Francis Fukuyama, The End of History and the Last Man (London: Penguin, 1992), 98. 2. BRITAIN, 1979: THATCHERISM 1. Quoted in Richard Roberts and David Kynaston, City State: A Contemporary History of the City of London and How Money Triumphed (London: Profile, 2001), 117. 2. Andrew Marr, A History of Modern Britain (London: Pan Macmillan, 2007), 365. 3. Margaret Thatcher, The Downing Street Years (London: HarperCollins 1993), 10. 4. Quoted in Marr, Modern Britain, 386. 5. Ibid., 387. 6. Ibid., 411. 7. John Campbell, Margaret Thatcher, vol. 2, The Iron Lady (London: Vintage, 2008), 18. 8.


pages: 767 words: 208,933

Liberalism at Large: The World According to the Economist by Alex Zevin

activist fund / activist shareholder / activist investor, affirmative action, anti-communist, Asian financial crisis, bank run, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, business cycle, capital controls, centre right, Chelsea Manning, collective bargaining, Columbine, Corn Laws, corporate governance, corporate social responsibility, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, desegregation, disruptive innovation, Donald Trump, Edward Snowden, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Francis Fukuyama: the end of history, full employment, Gini coefficient, global supply chain, hiring and firing, imperial preference, income inequality, interest rate derivative, invisible hand, John von Neumann, Joseph Schumpeter, Julian Assange, Khartoum Gordon, land reform, liberal capitalism, liberal world order, light touch regulation, Long Term Capital Management, market bubble, Martin Wolf, means of production, Mikhail Gorbachev, Monroe Doctrine, Mont Pelerin Society, moral hazard, Naomi Klein, new economy, New Journalism, Norman Macrae, Northern Rock, Occupy movement, Philip Mirowski, plutocrats, Plutocrats, price stability, quantitative easing, race to the bottom, railway mania, rent control, rent-seeking, road to serfdom, Ronald Reagan, Rosa Parks, Snapchat, Socratic dialogue, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade liberalization, trade route, unbanked and underbanked, underbanked, unorthodox policies, upwardly mobile, War on Poverty, WikiLeaks, Winter of Discontent, Yom Kippur War, young professional

Alexander Cockburn, A Colossal Wreck: A Road Trip through Political Scandal, Corruption, and American Culture, London 2013. 125.Though much copied and expanded since, London’s Big Bang remained ‘the most rapid and complete regulatory reform of any market.’ John Plender, ‘London’s Big Bang in International Context’, International Affairs, 63, no. 1, 1 December 1986, p. 40; Eric K. Clemons and Bruce W. Weber, ‘London’s Big Bang: A Case Study of Information Technology, Competitive Impact, and Organizational Change’, Journal of Management Information Systems 6, no. 4, 1 April 1990, p. 42. 126.‘Capital of Capital’, 11 October 1986. On the ‘pre-Big Bang scramble’, see David Kynaston, The City of London: A Club No More, London 2002, Vol IV, pp. 715–20. 127.‘Capital of Capital’, 11 October 1986. See also, Philip Augar, The Death of Gentlemanly Capitalism: The Rise and Fall of London’s Investment Banks, London 2000. 128.

The money pouring into finance seemed to vindicate its stance on Big Bang at home, while the fall of communism did the same for its long slog on behalf of Western liberalism abroad. At the same time, it rapidly gained readers and influence in the US, which became its home away from home. Pennant-Rea stepped down in 1993 just as the ‘new economy’ of the Clinton years got underway – to its boosters a break from all precedent, as information technology unleashed investment and growth alongside low inflation, low unemployment and near-constant productivity gains, which were bound to attenuate or even eliminate the business cycle itself.1 Since then, three points have connected the constellation of liberal ideas at the Economist: the planetary primacy of finance, vast enough to be shared out between Wall Street and the City of London; the American Empire, as both policeman and journalistic training ground; and globalization, its precondition the prior two, as cornucopia for former colonies and satellites.

Contrasting Smith, Burke and Bentham with the Mills and Tocqueville, Pitts maintains that ‘no explanation that rests on some set of basic theoretical assumptions in the liberal tradition can possibly explain such flexibility on the question of empire’, concluding that ‘liberalism does not lead ineluctably either to imperialism or anti-imperialism’ – claims that rest partly on the notion that liberalism already existed in the eighteenth century and can be elided with thinkers in the nineteenth century: A Turn to Empire, pp. 1, 4. For a different sense of Smith’s ‘anti-imperialism’, see Donald Winch, Adam Smith’s Politics, Cambridge 1978, pp. 140, 151, 180. 40.Kynaston has written a comprehensive survey. David Kynaston, City of London. 4 vols, London, 1994–2001. For caution in ascribing coherent policy interests to the City, see The British Government and the City of London in the Twentieth Century, eds. Ronald Michie and Philip Williamson, Cambridge 2004, pp. 11–12. 41.The Economist, 1843–1943: A Centenary Volume was a ‘modest memorial’ comprising a slim collection of essays published two years after the offices, printers, library and records burned in the Blitz. The next two works appeared for the sesquicentennial in 1993.


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The Enigma of Capital: And the Crises of Capitalism by David Harvey

accounting loophole / creative accounting, anti-communist, Asian financial crisis, bank run, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, equal pay for equal work, European colonialism, failed state, financial innovation, Frank Gehry, full employment, global reserve currency, Google Earth, Guggenheim Bilbao, Gunnar Myrdal, illegal immigration, indoor plumbing, interest rate swap, invention of the steam engine, Jane Jacobs, joint-stock company, Joseph Schumpeter, Just-in-time delivery, land reform, liquidity trap, Long Term Capital Management, market bubble, means of production, megacity, microcredit, moral hazard, mortgage debt, Myron Scholes, new economy, New Urbanism, Northern Rock, oil shale / tar sands, peak oil, Pearl River Delta, place-making, Ponzi scheme, precariat, reserve currency, Ronald Reagan, sharing economy, Silicon Valley, special drawing rights, special economic zone, statistical arbitrage, structural adjustment programs, the built environment, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, Thorstein Veblen, too big to fail, trickle-down economics, urban renewal, urban sprawl, white flight, women in the workforce

The suspension in 1999 of the distinction between investment and deposit banking in the United States that had been in place since the Glass–Steagall act of 1933 further integrated the banking system into one giant network of financial power. But as the financial system went global, so competition between financial centres – chiefly London and New york – took its coercive toll. The branches of international banks such as Goldman Sachs, deutsches Bank, UBS, rBS and HSBC internalised competition. If the regulatory regime in London was less strict than that of the US, then the branches in the City of London got the business rather than Wall Street. As lucrative business naturally flowed to wherever the regulatory regime was laxest, so the political pressure on the regulators to look the other way mounted. Michael Bloomberg, the mayor of New york City, commissioned a report in 2005 that concluded that excessive regulation in the US threatened his city’s future financial industry. Everyone on Wall Street along with the ‘Party of Wall Street’ in Congress trumpeted these conclusions. ——— The successful politics of wage repression after 1980 allowed the rich to get much richer.

If crises are moments of radical reconfigurations in capitalist development, then the fact that the United States is having to deficit-finance its way out of its financial difficulties on such a huge scale and that the deficits are largely being covered by those countries with saved surpluses – Japan, China, South Korea, Taiwan and the Gulf States – suggests this may be the occasion for such a shift. It is even possible to interpret the current difficulties in the US and UK as payback for what Wall Street and the City of London did to east and south-east Asia in 1997–8. Tectonic shifts of this sort have occurred before, as described at length in Giovanni Arrighi’s 1994 book The Long Twentieth Century. There is, he notes, a clear pattern in which periods of financialisation precede a shift in hegemony. To accommodate endless accumulation, hegemony moves from smaller (e.g. Venice) to larger (e.g. the Netherlands, Britain and then the United States) political entities over time.

Why did Larry Summers when he was Clinton’s Treasury Secretary violently oppose regulating finance, and why did Joseph Stiglitz, who now positions himself on the left of mainstream but who was Clinton’s Chief Economic Adviser in the 1990s, find himself supporting moves that ‘incidentally’ ended up always making the rich richer? Did George W. Bush embrace taxation principles that immensely favoured the rich just because he liked them or needed their support for re-election? Was it simply that the ‘Party of Wall Street’ had taken power both in Congress and in the executive branch? If so, why did Gordon Brown, New Labour’s Chancellor of the Exchequer in Britain, also so easily go along with it? (Did the City of London get to him, too?) And why was it that the wealthier grew immeasurably wealthier everywhere, from Russia and Mexico to India and Indonesia? In the absence of any limits or barriers, the need to reinvest in order to remain a capitalist propels capitalism to expand at a compound rate. This then creates a perpetual need to find new fields of activity to absorb the reinvested capital: hence ‘the capital surplus absorption problem’.


pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, John Meriwether, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

Pottersville is riven by self-interest and characterised by tawdry commercialism, and the housing project that was George Bailey’s great achievement is unbuilt. Capra could never have imagined that Pottersville might actually come into being. But by the time my contemporaries accepted early retirement, the world they joined had altered beyond recognition. The causes of this transformation include globalisation, deregulation, technological and product innovation, new ideologies and narratives as well as a shift in social and cultural norms. These factors were not independent: each was bound up with the others. Finance has always been global. The City of London became a pre-eminent financial centre as a result of Britain’s imperial role. The Fidelity Fiduciary Bank in which Mr Banks was manager financed ‘railways through Africa, dams across the Nile’. Wall Street rivalled London in scale and importance because of the size of the US domestic market and the voracious need for finance implied by the scale of its landmass.

The American finance sector, which had been publicly humiliated in 1933, became a more and more powerful lobby. That lobby secured steady relaxation of the restrictions that had been imposed on the industry fifty years earlier. The separation of investment from commercial banking – the principle that had become synonymous in the public mind with the Glass–Steagall Act – was steadily weakened, although not finally repealed until 1999. In Britain, the trigger for change was the ‘Big Bang’ – the deregulation of finance in 1986 – which swept away a mass of restrictions, including most obstacles to the creation of financial conglomerates. The large British commercial banks, with the enormous capital strength derived from their retail deposit base, were immediate diversifiers. These changes in the structure of banking were related to changes in the organisation of stock markets. Traditionally, buyers and sellers of securities traded through agents, and the London and New York stock exchanges enjoyed a monopoly on trading in stocks.

Some people suggested that it might be cheaper to repair the scales, but they were derided: why go back to relying on the judgement of a single auctioneer when you could benefit from the aggregated wisdom of so many clever people? And then the ox died. Amid all this activity, no one had remembered to feed it. INTRODUCTION Far too much of a good thing In the City, they sell and buy. And nobody ever asks them why. But since it contents them to buy and sell, God forgive them, they might as well. Humbert Wolfe, The Uncelestial City, 1930 Anyone passing the skyscrapers of Wall Street or the City of London and its annexe at Canary Wharf will be impressed by the scale and scope of modern finance. Logos display familiar names such as Citigroup and HSBC. More discreet brass plates identify organisations that do not deal with the general public. The most important headquarters building in the industry, the head office of Goldman Sachs, at 200 West Street in Manhattan, remains anonymous. The premises are lavish, the limousines ubiquitous.


World Cities and Nation States by Greg Clark, Tim Moonen

active transport: walking or cycling, Asian financial crisis, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, business climate, cleantech, congestion charging, corporate governance, deindustrialization, Deng Xiaoping, financial independence, financial intermediation, Francis Fukuyama: the end of history, full employment, global supply chain, global value chain, high net worth, housing crisis, immigration reform, income inequality, informal economy, Kickstarter, knowledge economy, low skilled workers, megacity, new economy, New Urbanism, Norman Mailer, open economy, Pearl River Delta, rent control, Richard Florida, Silicon Valley, smart cities, sovereign wealth fund, special economic zone, stem cell, supply-chain management, The Wealth of Nations by Adam Smith, trade route, transaction costs, transit-oriented development, upwardly mobile, urban planning, urban renewal, urban sprawl, War on Poverty, zero-sum game

Amid open political hostility, the GLC leadership defied many national initiatives that were intended to improve competitiveness and inspire an outward‐looking agenda in other UK cities. Central government responded in 1986, coincidentally the year of London’s Big Bang in financial services, by abolishing what it saw as a bureaucratic and anti‐business GLC. In a new, more centralised framework, the London councils had to ‘bid’ for central government funds for regeneration projects, and a number of ‘quangos’ – taxpayer‐funded organisations – gained remits over specific city functions. A hiatus in London government therefore appeared just as the city began to take on new global business roles. In the years after 1986, London’s future was managed by four main actors: the boroughs, the City of London Corporation ­representing the historic commercial centre, central government departments and the Government Office for London, a small central government body with a budget of just £1 billion that was not equipped to play the role of a metropolitan authority.

Published 2017 by John Wiley & Sons, Ltd. 278 Index Egypt, 19 Europe, 15, 19, 20, 36, 46, 47, 52, 55, 127, 164, 234 European Investment Bank, 46 European Union, 15, 43, 220, 224, 227 Federal systems, 9–10, 13, 16, 30, 62, 95, 210, 237, 239 Federation of Canadian Municipalities, 143–144, 147, 237 Fiscal redistribution, 90, 225, 229 Forum for Consultations, 88, 93, 237 France, 8, 10, 20, 21, 55, 57, 58, 60–63, 66, 67, 211, 216, 222, 229, 231, 232, 236 performance of second cities, 231 Frankfurt, 7, 46 Friedmann, John, 23 Fukuyama, Francis, 23 Gatwick Airport, 50 Geneva, 7 Germany, 20, 230 Giuliani, Rudy, 113 Global cities, see World Cities Globalisation, 5–9, 18, 19, 25, 28–30, 36, 43, 75, 85, 100, 179, 181, 203, 216, 221, 224, 227, 231, 237, 239 Greater Manchester, 44, 52, 233, 236 Guangzhou, 21, 155, 157, 159, 180, 184, 230, 231 Haddad, Fernando, 126 Hamburg, 11, 206 Hanseatic League, 20 Heathrow Airport, 50 High Speed 3 (HS3), 46, 234 Holland, 21 Hollande, Francois, 58, 60 Hong Kong, 7, 9, 11–14, 17, 24, 25, 29, 85, 91, 149–162, 184, 186, 190, 199, 204, 206, 208, 210, 211, 213–215, 220–222, 226, 227, 233, 234, 239 advocacy, 221 Chief Executive, 161–162 Closer Economic Partnership Arrangement (CEPA), 155 Consultative Committee on Economic and Trade co-operation, 161 density, 13, 157 economic sector output, 25 economic transformation, 154–155 empowerment and centralisation, 211 Financial Services Development Council, 161 future political arrangements, 159 government system, 9, 208 growth and performance data, 152 national tradition in globalisation, 29 in One Belt, One Road initiative, 158 one country, two systems, 152 Pearl River Delta (PRD), 154, 156, 157, 159 population and visitor growth, 204 regional governance, 213 relationship with Beijing, 154–156 size, 12 India, 10, 16, 30, 98–108, 134, 166, 210, 231, 234, 236 Jawaharlal Nehru National Urban Renewal Mission (JNNURM), 103–104 Make in India Week, 103 performance of second cities, 231 Indus Valley, 19 Inter‐governmental conflict, 13, 235 Istanbul, 21, 50, 227 Italy, 20 Japan, 10, 71, 82–94 Meiji era, 83 National Planning Act, 85 performance of second cities, 231 Jinping, Xi, 185 Johannesburg, 8 Johnson, Boris, 41, 42, 92 Khan, Sadiq, 49, 51 King James I, 38 Korea, 69–80, 183, 192, 210, 212, 216, 228, 229, 231, 232, 233, 235 performance of second cities, 16, 231 Lahore, 20 Lastman, Mel, 210 Latin America, 4, 21, 123, 128, 133, 134, 238 Leiden, 21 Lisbon, 21 Lister, Sir Edward, 48 Livingstone, Ken, 41, 210 London, 5, 6, 9, 11–15, 21–27, 29, 30, 33–53, 59, 63, 67, 69, 92, 93, 108, 123, 134, 145, 154, 155, 204–208, 210–216, 220–222, 226–229, 231, 233, 234, 236, 238 Abercrombie Plan, 39 advocacy, 221 air capacity, 50 ‘Big Bang,’ 40 boroughs, 42, 45, 48, 236 Brexit, 36, 42, 46–48, 52, 220 business leadership, 93 Canary Wharf, 39 Channel Tunnel Rail Link, 40 city leadership, 220 Index City of London, 38, 40, 42 city‐state, 27 collaboration with other cities, 236 Crossrail, 1, 2, 37, 51, 205, 216, 221 Davies Commission, 50 de‐industrialisation, 39 density, 13 diversity, 227 Docklands regeneration, 40, 216 economic sector output, 25 empowerment and centralisation, 211 escalator region, 226 fiscal devolution, 48–49, 69, 145, 212, 216 fiscal outflows, 215 Government Office for London, 22, 36, 40 government system, 9, 208 Greater London Authority (GLA), 40, 41, 50, 209, 210 Greater London Council (GLC), 26, 39, 40 Greater South East, 36, 39, 50, 52, 213, 214 green belt, 39, 52 growth and performance data, 36 High Speed 2 (HS2), 46, 234 Home Counties, 39 housing, 49–50, 206 Jubilee Line, 37, 40 London Assembly, 37 London County Council, 39 London Development Agency, 41 London Docklands Development Corporation, 39 London Enterprise Panel (LEP), 42, 51 London Finance Commission, 48–49, 216 London First, 40, 108, 134, 221, 222 London Land Commission, 50 Mayor, 42, 51, 221, 236 mayoral system, 36, 210, 233 Metropolitan Board of Works, 39 Millennium projects, 37, 40 national tradition in globalisation, 29, 30 performance of second cities, 231 population and visitor growth, 204 regional governance, 50–51, 213 size, 12, 211 South Bank, 40 system of cities, 13, 229–230 Transport for London (TfL), 41, 51 2012 Olympics, 37, 215, 218 world city literature, 23, 24, 27 Los Angeles, 7, 23, 195, 231 Luzhkov, Yuri, 166, 210 Lyon, 21, 61, 231, 232 Madrid, 7, 13 Masuzoe, Yoichi, 92–93 McLoughin, Patrick, 51 279 Mediterranean, 19, 20 Melbourne, 8 Mercantilism, 21 Merv, 20 Mesopotamia, 19 Metropolitan areas, 7, 53, 61, 76, 104, 106, 108, 115, 133, 135, 234, 236 Metropolitan government, 9, 15, 16, 36, 52, 56, 67, 72, 123, 208, 212 Milan, 13, 227 Modi, Narendra, 103 Montreal, 8, 14, 138, 139, 143, 231 Moscow, 9, 11, 13, 14, 17, 18, 24, 25, 29, 30, 163–176, 204, 205, 208, 210, 212, 215, 216, 220, 221, 226, 229, 236, 237, 239 Central Federal District, 175, 237 city and federal government relationship, 165–169 density, 13, 172 economic sector output, 25 empowerment and centralisation, 211 financial services, 168 geopolitical tensions, 168 government system, 9, 208 growth and performance data, 164 higher education, 166 mayoral system, 210 Moscow River, 172 Moscow Urban Forum (MUF), 175, 237 national tradition in globalisation, 29, 30 New Moscow, 167, 173 oblast, 166 1980 Olympic Games, 166 patterns of development, 164 population and visitor growth, 204 Rail and road investments, 172 regional governance, 213 Russian spatial hierarchy, 170 size, 12 Skolkovo innovation district, 165, 172 Soviet model, 165–167 tax revenue, 164, 167 transition after 1991, 166–169 transport, 205 2018 football World Cup, 165, 174 Mughal Empire, 20 Mumbai, 14, 16, 30, 97–109, 123, 206, 207, 210, 212, 217, 226, 227 advocacy, 221 Bollywood, 98 Bombay First, 103, 106, 108 Delhi Mumbai Industrial Corridor (DMIC), 106 density, 13, 101 economic sector output, 25 empowerment and centralisation, 211 280 Index Mumbai (cont’d) fiscal imbalances, 102 fragmented governance, 105–106 government system, 9, 208 Greater Mumbai, 98 Greater Mumbai Development Plan, 102–103 growth and performance data, 98 High Powered Expert Committee, 101 intergovernmental conflict, 101 investment capacity, 106 Maharashtra state government, 98, 100–102 Mumbai Metropolitan Regional Development Authority (MMRDA), 99, 214 Municipal Corporation of Greater Mumbai (MCGM), 99, 100 national tradition in globalisation, 29, 30 Navi Mumbai, 107 constitutional amendment, 100 population and visitor growth, 204 regional governance, 213 relationship with higher tiers of government, 99–101 size, 12, 14 Smart City Mission, 103, 105 Transit Oriented Development, 104 weak growth management, 98, 100 Munich, 7 crime, 113 density, 13 economic sector output, 25 empowerment and centralisation, 211 fiscal crisis, 113 government system, 9, 208 growth and performance data, 111 housing, 118 Housing Authority (NYCHA), 114 Hurricane Sandy, 114, 119 immigration, 116 Metropolitan Transportation Authority (MTA), 113 national tradition in globalisation, 29, 30 New York State, 111, 115 9/11, 112, 114 performance of second cities, 231 population and visitor growth, 204 regional governance, 213 Regional Plan Association (RPA), 120 size, 12 transport infrastructure, 117 tri-state area, 111, 119–120 Urban Development Action Grant, 113 New Zealand, 10 North America, 4, 17, 19, 107, 137, 146, 227 Northern Powerhouse, see North of England North of England, 21, 229 North East, 236 Northern Powerhouse, 45, 228, 234 National Conference of Cities (ConCidades), 128, 134, 237 National frameworks, 29–30, 207, 231–237 National governments, 4–6, 8, 10, 11, 22, 25–32, 46–51, 57–58, 62–64, 70, 72–74, 76–79, 86–92, 99–100, 102–107, 116–119, 130–134, 143–147, 167, 168, 171–175, 183–187, 204, 220–224, 227–229, 231–239 National urban policy, 7, 67, 103, 112, 128, 157, 165, 171, 233, 237 Nation states, 3–4, 6–8, 13, 14, 20–32, 38, 48, 196, 204, 210–212, 220, 225, 229, 231, 236 age of, 3, 6 century of, 6, 239 Netherlands, see Holland New York City, 5, 7, 10, 14, 16, 24, 26, 27, 30, 63, 67, 92, 93, 110–121, 123, 137, 155, 206, 210, 212, 214, 215, 220, 222, 227, 229, 239 advocacy, 221 airport system, 117–118 Bloomberg, Michael, 114, 119 city and nation state relationship, 113–115 Ohmae, Kenichi, 23 One country, two systems, 11, 52, 152, 155, 210 Organisation for Economic Co-operation and Development (OECD), 22, 26, 30, 74, 75 Osborne, George, 45, 222, 236 Ottoman Empire, 20 Paris, 13, 15, 22, 23, 25, 27, 32, 46, 50, 54–67, 92, 205–207, 211, 212, 214–218, 222, 232, 238 advocacy, 221 APUR (Paris Urban Planning Agency), 67 Chirac, Jaques, 57 density, 13 division of responsibilities, 60 economic sector output, 25 empowerment and centralisation, 211 fragmentation, 56, 62 government system, 9, 208 Grand Paris Express, 56, 59, 64–66 growth and performance data, 204 Ile de France (Regional Council), 56–58, 60, 64 Law for Solidarity and Urban Renewal, 59 Index Maptam law, 61, 66 mayoral system, 210 Metropole du Grand Paris, 56, 59–60, 62 Mobilisation Plan for Development and Housing, 63 national tradition in globalisation, 29 NOTRe bill, 64 Paris‐Saclay, 56, 59 population and visitor growth, 204 regional governance, 213 relationship with national government, 57–60 size, 12 state-region contracts, 63 territorial development contracts, 59, 63, 66 Pearl River Delta, 7, 11, 12, 17, 152, 157, 159, 161, 211, 213 Persia, 20 Provincial governments, see State governments Putin, Vladimir, 167 Rayy, 20 Regional policies, 22, 28 Republic of Ireland, 10 Rio de Janeiro, 6, 123, 129, 130, 231 Russia, 8, 17, 18, 21, 30, 31, 164–172, 174–176, 210, 212–213, 229, 236–237 Rust Belt, 21 Samarkand, 20 San Francisco, 7, 231 São Paulo, 13, 14, 17, 30, 122–135, 206, 207, 212, 215–217, 220, 226, 229, 231, 235 advocacy, 221 business climate, 132–133 density, 13, 124, 133 economic sector output, 25 empowerment and centralisation, 211 fiscal constraints, 130–132 fiscal outflows, 215 government system, 9, 209 growth and performance data, 123 housing, 133 Minha Casa Minha Vida, 126 national tradition in globalisation, 29, 30 performance of second cities, 231 Plano de Aceleracao de Crescimiento, 129 population and visitor growth, 204 regional governance, 213 relationship with its nation state, 125–127 revenue sources, 129–130 São Paulo 2040, 126–127 São Paulo State, 123, 125 size, 12 Urban Mobility Pact, 126 281 Sassen, Saskia, 24 Seoul, 6, 9, 13, 15, 24, 27, 68–80, 85, 210, 215, 218, 227, 231, 235, 238 advocacy, 221 capital region, 69 Cheonggyechoen River regeneration, 72, 73 de-concentration, 68, 71, 75, 76, 80 density, 13 economic sector output, 25 empowerment and centralisation, 211 fiscal devolution, 77–78 fiscal outflows, 215 government system, 9, 209 growth and performance data, 69 jaebol, 71, 72, 76 mayoral system, 210 metropolitan government, 73, 78 national tradition in globalisation, 29 1988 Summer Olympics, 72 population and visitor growth, 204 regional governance, 213 relationship with central government, 70–74 segyehwa, 72 self‐government, 72 Seoul Republic, 71 size, 12 Shanghai, 7, 11, 14, 18, 27, 153, 154, 157, 159, 160, 177–188, 207, 216, 217, 220, 226, 227, 230, 233, 239 advocacy, 221 bond issuance programme, 184 de-centralisation, 181 density, 13, 184 economic sector output, 25 empowerment and centralisation, 211 free trade zones, 182, 186 government system, 9, 209 growth and performance data, 178 hukou, 184–185 internationalisation, 181–182 land leasing, 183 national tradition in globalisation, 29 performance of second cities, 231 population and visitor growth, 204 Pudong New Area, 181 region, 7 regional governance, 213 relationship with central government, 179–183 revenues, 187 size, 12 state owned enterprises, 180 treaty port, 180 2010 World Expo, 182, 218 Yangtze River Delta (YRD), 178, 181, 184 282 Index Sheffield, 43, 45, 52, 231, 236 Silk Road, 20, 158 Singapore, 11, 18, 30, 85, 91, 189–200, 206, 207, 215, 219 advocacy, 221 Civil Service, 196 Concept Plan, 192 density, 13, 198, 200 Economic Development Board (EDB), 191, 194 economic development model, 198 economic sector output, 25 empowerment and centralisation, 211 governance history, 191–193 government linked companies, 194–195 government system, 9, 209 growth and performance data, 191 Housing Development Board (HDB), 191 independence, 191–192 internationalisation, 191–192 land management, 195 Ministry of National Development (MND), 195–196 National Trade Unions Congress (NTUC), 193 national tradition in globalisation, 29 National Wages Council, 193 People’s Action Party (PAP), 191, 195–196 performance of second cities, 231 population and visitor growth, 204 regional governance, 213 self‐rule, 191 size, 12 water management, 195 Smith, Adam, 21 Sobyanin, Sergei, 167 Soon, Cho, 210 South Africa, 8, 134 Sovereignty, 15, 16, 19, 20, 26, 152 Soviet Union, 23, 166 Special cities, 9, 17, 239 State governments, 7, 10, 100–103, 105, 111, 114, 124, 127, 216, 217, 234 St Petersburg, 21, 164, 168, 170, 175, 236 Sun Yat‐Sen, 154 Switzerland, 7, 20 Sydney, 8, 25 Systems of Cities, 4, 7, 13–14, 28 Taylor, Peter, 21 Territorial development, 8, 22, 73 30 Years’ War, 20 Tokyo, 5, 6, 11, 16, 23–25, 27, 74, 77, 81–94, 207, 210, 215, 220, 226, 227, 235, 238 advocacy, 221 aging population, 92 business climate, 91–92 de‐centralisation, 84, 85 de‐concentration, 84, 88 density, 13 devolution, 89 economic sector output, 25 empowerment and centralisation, 211 fiscal redistribution, 90 government system, 9, 209 growth and performance data, 82 industrialisation, 84–85 metropolitan government, 82, 84, 87, 89, 93 National Strategic Special Zones, 86, 90 national tradition in globalisation, 29 population and visitor growth, 204 regional governance, 213 relationship with central government, 83–88 size, 12 Tokyo Metropolitan Government, 84–85, 88 Tokyo Problem, 88 2020 Olympics, 86, 87, 91 2002 Urban Regeneration Law, 85–86 Urban Renaissance HQ, 87 Toronto, 8, 13, 14, 17, 23, 25, 136–149, 207, 210, 212, 215, 216, 218–220, 222, 227, 231, 234 advocacy, 221 density, 13 economic sector output, 25 empowerment and centralisation, 211 fiscal vulnerability, 145 government system, 9, 209 Greater Toronto Area, 137 Greater Toronto Civic Action Alliance, 147 growth and performance data, 137 immigration, 141, 146 infrastructure investment, 144–146 mayoral system, 210 Metrolinx, 140 national tradition in globalisation, 29 1998 City of Toronto Act, 139, 140 Ontario, 137 population and visitor growth, 204 regional governance, 213 relationship with the nation state, 138–143 size, 12 Smart Track, 140 Toronto Board of Trade, 147–148 universities, 137, 141 US–Canada Auto Pact, 139 Waterfront Toronto, 141–142 Trade, 5–7, 20–22, 99, 128, 146, 152, 161, 186, 205, 225–226 Index Travers, Tony, 49 Treaty of Westphalia, 20 Trudeau, Justin, 143 Turkmenistan, 20 UKIP, 46 Unitary systems, 9–10, 15, 21, 238 United Kingdom, 10, 21, 24, 36, 37, 154, 210, 231, 238 United Nations, 21 United States, 7, 10, 21, 24, 26, 71, 112, 231, 235 Advisory Commission on Intergovernmental Relations (ACIR), 115 US federal reserve, 24 War on Poverty, 113 Uzbekistan, 20 Wallerstein, Immanuel, 24 Washington, 27, 113, 114, 116–117, 119–120, 231 The West, 27, 69 Western liberal democracy, 23 West Midlands, 52, 228, 236 Won-sun, Bak, 74 World Bank, 30–31, 157, 174, 196 World cities advantages and disadvantages, 225–231 age of, 5–6, 203–223 collaboration between world cities and other cities, 236–237 definition, 3–4 in the future, 237–239 literature, 22–24, 27–28 typology, 29–31 Xiaoping, Deng, 180 Valls, Manuel, 66 Vancouver, 8, 143, 231 Zurich, 7, 227 283

London has a rich tradition of local government going back to 1185 when the City of London was founded to express the mercantilist ethic of local businesses. The City first received a self‐governing charter in 1067 and ever since it has played a dual role as a trading centre and a fiercely independent government that has resisted reform or assimilation. The UK national government has wielded centralised power over London’s investment and policy goals for several centuries. The country’s small size, history of unifying separate kingdoms, parliamentary tradition and intensity of industrialisation, trade and empire led to an unusual concentration of the national population in London and economic activity in the City of London. Central governments have therefore long been concerned about the city’s impact on national affairs, and vigilant about the risk of London self‐government.


pages: 1,066 words: 273,703

Crashed: How a Decade of Financial Crises Changed the World by Adam Tooze

Affordable Care Act / Obamacare, Apple's 1984 Super Bowl advert, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, Boris Johnson, break the buck, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, dark matter, deindustrialization, desegregation, Detroit bankruptcy, Dissolution of the Soviet Union, diversification, Doha Development Round, Donald Trump, Edward Glaeser, Edward Snowden, en.wikipedia.org, energy security, eurozone crisis, Fall of the Berlin Wall, family office, financial intermediation, fixed income, Flash crash, forward guidance, friendly fire, full employment, global reserve currency, global supply chain, global value chain, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, Hyman Minsky, illegal immigration, immigration reform, income inequality, interest rate derivative, interest rate swap, Kenneth Rogoff, large denomination, light touch regulation, Long Term Capital Management, margin call, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, mittelstand, money market fund, moral hazard, mortgage debt, mutually assured destruction, negative equity, new economy, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, old-boy network, open economy, paradox of thrift, Peter Thiel, Ponzi scheme, predatory finance, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, reserve currency, risk tolerance, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, structural adjustment programs, The Great Moderation, Tim Cook: Apple, too big to fail, trade liberalization, upwardly mobile, Washington Consensus, We are the 99%, white flight, WikiLeaks, women in the workforce, Works Progress Administration, yield curve, éminence grise

By the early 1980s both Britain and the United States had abolished all restrictions on capital movements and this was followed in October 1986 by Thatcher’s “Big Bangderegulation. The City of London was thrown open to outside investment, sacrificing guildlike structures that dated back centuries to the imperative of creating a genuinely global financial center. Within a decade the UK’s own investment banks had been swallowed by their American and European competitors.20 American, Asian and European capital flooded in. This involved not only regulatory change and huge financial flows but the physical reconfiguration of the medieval heart of the City of London. To house the gigantic new offices and electronic trading desks needed by global banks, Canadian real estate moguls undertook the construction of a massive new office complex in the abandoned postindustrial docklands of Canary Wharf.

The Tories, as much as any party, had participated in that drive. The City of London in its twenty-first-century form had emerged as one of the most important strands of the UK-EU relationship. Its offshore relationship to the eurozone had defined both Britain’s and Europe’s places in the networks of financial globalization and their relationship to the United States. Now, in an extraordinarily high-risk bid to channel and manage the politics of popular nationalism, the Tory government was putting London’s position as a crucial node in the network of the global economy in play. I Less than ten years earlier, the City of London had been riding high. It was the prized jewel in New Labour’s economic crown. It was Britain’s ticket to global significance. It was the standard the deregulators of Wall Street aspired to, the location of choice for fast-moving, high-end global finance.

For many of the most fast-paced global transactions, it was London, not Wall Street, that was the location of choice. By 2007, 35 percent of the global turnover in foreign exchange, running at a staggering $1 trillion per day, was conducted between computer systems in the City of London.22 European banks were the biggest players in the business. London was also the hub for the over-the-counter (OTC) interest rates derivatives business, a means of hedging against the risk of interest rate fluctuations and an essential complement to repo deals. Of an annual turnover in interest rate derivatives in excess of $600 trillion, London claimed 43 percent, to New York’s 24 percent.23 A decade after Thatcher’s Big Bang, with Britain’s native banking industry under intense competitive pressure, Tony Blair’s New Labour government set about further streamlining the City’s regulatory system.24 Nine specialist regulators were combined into a single agency, the Financial Services Authority (FSA).


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

active measures, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, business climate, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, correlation coefficient, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, declining real wages, deindustrialization, endogenous growth, eurozone crisis, financial innovation, first-past-the-post, full employment, Hyman Minsky, industrial robot, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, light touch regulation, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, market fundamentalism, Mexican peso crisis / tequila crisis, money market fund, mortgage debt, Myron Scholes, negative equity, new economy, Northern Rock, paper trading, Paul Samuelson, planetary scale, post-oil, price stability, quantitative easing, reserve currency, rising living standards, Ronald Reagan, special economic zone, Steve Jobs, structural adjustment programs, systematic trading, too big to fail, trickle-down economics, urban renewal, War on Poverty, WikiLeaks, Yom Kippur War

In the end, household debt, house prices and consumer spending all went up in perfect unison. Meanwhile, the City of London’s traditional strength in the realm of finance, its deregulation under the Thatcher government (also known as the Big Bang) and the City’s links with Wall Street all ensured that a significant portion of the foreign capital flight to the United States passed through the City. That passage gave its institutions access to large sums of money, even if for only a short period of time. Nothing excites bankers more than the challenge of making money for themselves by using transient funds. Together with the proceeds from domestic privatizations of UK industries and of the nation’s stock of social housing, as well as the Great British public’s mountain of borrowing, these financial streams merged into a potent torrent, which allowed the City of London to prosper. In conclusion, over the past three decades, much ink has been spilt in assessing the Reagan–Thatcher years.

Cultural origins In September 2008, Europeans looked smugly over the pond, shaking their heads with a self-serving conviction that the Anglo-Celts, at long last, were getting their comeuppance. After years and years of being lectured on the superiority of the Anglo-Celtic model, on the advantages of flexible labour markets, on how inane it was to think that Europe could retain a generous social welfare net in the era of globalization, on the wonders of an aggressively atomistic entrepreneurial culture, on the wizardry of Wall Street and on the brilliance of the post-Big Bang City of London, the news of the Crash, its sights and sounds as they were beamed all over the world, filled the European heart with an ambiguous mix of Schadenfreude and fear. Of course, it was not too long before the crisis migrated to Europe, metamorphosing in the process into something far worse and more threatening than Europeans had ever anticipated. Nevertheless, most Europeans remain convinced of the Crash’s Anglo-Celtic cultural roots.

From the late 1970s up until 2008, the reason why the world kept growing at a seemingly stable pace was the Global Minotaur. While deregulation, privatization and financialization were running riot, the lack of a discernible Global Plan was tempered by the beast’s active role as a surrogate global surplus recycling mechanism, without which the world economy cannot function. Under the Minotaur, as this book has been arguing, the United States and its satellites (e.g. Britain) were accumulating external national debt, Anglo-American families were amassing retail debt, and Wall Street was generating and accumulating toxic private money. Meanwhile, the oil-producing nations, Germany, Japan, South East Asia (especially after the East Asian crisis of 1998) and, latterly, China, were all building up gargantuan currency reserves, which they were pumping into Wall Street and the City of London. In a never-ending cycle, these capital flows financed America’s twin deficits in ways that kept surplus production going in Europe and East Asia.


pages: 405 words: 109,114

Unfinished Business by Tamim Bayoumi

algorithmic trading, Asian financial crisis, bank run, banking crisis, Basel III, battle of ideas, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, buy and hold, capital controls, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, currency peg, Doha Development Round, facts on the ground, Fall of the Berlin Wall, financial deregulation, floating exchange rates, full employment, hiring and firing, housing crisis, inflation targeting, Just-in-time delivery, Kenneth Rogoff, liberal capitalism, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, market bubble, Martin Wolf, moral hazard, oil shale / tar sands, oil shock, price stability, prisoner's dilemma, profit maximization, quantitative easing, race to the bottom, random walk, reserve currency, Robert Shiller, Robert Shiller, Rubik’s Cube, savings glut, technology bubble, The Great Moderation, The Myth of the Rational Market, the payments system, The Wisdom of Crowds, too big to fail, trade liberalization, transaction costs, value at risk

On the other hand, the overwhelming number of transactions involving banks with different business models were cross-border (the black areas). This is the dynamic that created universal banks with investment banking operations in market centers such as London. The overseas expansion into investment banking reflected the adoption of a universal banking model in Europe combined with the permissive attitude of the UK regulators to foreign entry, especially after the “big bangderegulation of the City of London in the late 1980s. Indeed, a significant part of cross-border activity involved the dismemberment of the UK merchant banks (the local name for independent investment banks). By 2002, thirteen major UK merchant banks had been acquired by overseas institutions; seven by European Union banks (including Deutsche Bank’s purchase of Morgan Grenfell), two by Swiss ones, and four by US banks.30 As will be discussed in the next chapter, the independent US investment banks proved much more resilient.

(‘Lawrence of Arabia’), (i) Lehman Brothers (US investment bank) assets, (i) bankruptcy and collapse, (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv) competes with other investment banks, (i) and European bank competition, (i) lightly capitalized, (i), (ii) non-participation in rescue of LTCM, (i) as regulated bank, (i) rescue, (i) Leigh-Pemberton, Robert, (i), (ii), (iii) leverage, (i), (ii), (iii), (iv), (v), (vi) Lewis, Michael: The Big Short, (i) light touch regulation, (i), (ii), (iii), (iv), (v) lira (Italian currency) Bundesbank ceases to support, (i), (ii) ejected from ERM and rejoins, (i) see also Italy Lisbon accords (2000), (i) loan-to-value ratios, (i) London ‘big bang’ (October 1986), (i) as financial center, (i) London Interbank Offering Rate (LIBOR), (i) Long Depression (1870s), (i) Long-Term Capital Management (LTCM; hedge fund), (i), (ii) Louvre Accord (1987), (i), (ii) Lucas, Robert E., (i) Luxembourg in European Coal and Steel Community, (i) and monetary union, (i) Maastricht Treaty on Economic Union (1992), (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii) macroeconomics and ‘Abenomics’, (i) and attitude to free markets, (i), (ii) and business cycle fluctuations, (i) and DSGE models, (i) and effect of single currency, (i) and ‘homo economicus’, (i), (ii) internal balance, (i) origin after Great Depression, (i) orthodoxy and policy challenges, (i), (ii), (iii) and policy cooperation/integration, (i), (ii) and private sector, (i) and role of central banks, (i) unsettled environment, (i) and wariness of major structural reforms, (i) Maine (US state): and interstate banking, (i) Malaysia: Asia financial crisis (i), (ii), (iii), (iv) Manufactures Hanover (US bank), (i) markets (financial) and competition, (i) differ from country to country, (i) and macroeconomic theory, (i), (ii) unpredictability, (i) see also efficient market hypothesis Merrill Lynch (US investment bank) and European competition, (i) lightly capitalized, (i), (ii) as LTCM creditor, (i) merges, (i) as regulated bank, (i) size, (i) Merriweather, John, (i) Merton, Robert, (i) Mexico: debts, (i) micro-prudential regulation and supervision, (i), (ii) misery index, (i), (ii) Mitterrand, François, (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Models Task Force, (i) ‘Monetarists’ (Euro area): differ from ‘Economists’, (i), (ii), (iii), (iv), (v), (vi) monetary policy, (i), (ii), (iii), (iv), (v) see also currency unions monetary union see European Monetary Union; single currency Monnet, Jean, (i) monopolies, (i) Morgan Grenfell (UK investment bank), (i), (ii) Morgan, John Pierpont, (i) Morgan Stanley (US investment bank) applies for bank holding company status, (i) assets, (i) becomes regulated bank, (i) and European competition, (i) lightly capitalized, (i) as LTCM creditor, (i) as shadow bank, (i) size, (i) mortgages back assets and securities, (i), (ii), (iii), (iv), (v) bundling, (i) creditworthiness and securitization, (i), (ii), (iii), (iv), (v) European investment in US, (i) market collapse, (i) residential, (i) sale of, (i), (ii) subprime, (i), (ii), (iii), (iv) in US, (i), (ii), (iii) Moynihan, Daniel, (i) Mullins, David, (i) Multilateral Development Banks (MDBs), (i) Mutual Assessment Process (MAP), (i) mutual funds, (i), (ii) mutual recognition (European Union), (i) Napoleon I (Bonaparte), Emperor of France, (i) NationsBank (US bank), (i) Natixis (French bank), (i), (ii) net asset value (NAV), (i) Net Capital Rule (US), (i), (ii) net stable funding ratio (NSFR), (i) Netherlands aims for European integration, (i) bank assets, (i) banking expansion, (i), (ii), (iii) banking system (2002), (i), (ii) close economic ties with Germany, (i) and ERM crisis, (i) in European Coal and Steel Community, (i) exports to Germany, (i) and financial crisis, (i) guilder revalued, (i) and investment banking, (i) and monetary union, (i), (ii) trade boost, (i) New Deal (US, 1930s), (i) New England (US): house prices, (i), (ii) New York city: as financial center, (i) New York (US state): interstate banking, (i) Nixon, Richard M., (i), (ii) North Atlantic crisis and Basel rules, (i) causes, (i) and currency unions, (i) and debt flows, (i) and economic models, (i) effects and consequences, (i), (ii), (iii), (iv) ends European banking boom, (i) European monetary union effect on, (i) and fall in confidence in experts, (i) financial boom and bust, (i), (ii) misery index, (i) origins (August 2007), (i), (ii), (iii) output losses, (i), (ii) responses to, (i), (ii), (iii), (iv) responsibility for, (i) and speculative ventures, (i) unpreparedness, (i), (ii), (iii) as watershed event, (i) Norway invited to join European Economic Community, (i) in Scandinavian monetary union, (i) Obama, Barack, (i) Office of the Comptroller of the Currency (OCC; US), (i), (ii), (iii) oil prices, (i), (ii) Organisation for Economic Cooperation and Development (OECD), (i) output losses, (i), (ii) volatility, (i) Outright Monetary Transaction (OMT, Euro area), (i), (ii), (iii) Padoa-Schioppa, Tommaso, (i), (ii) Parvest Dynamic ABS, (i) petrodollars, (i), (ii) Philippines, (i) physics: parallel with economic models, (i) Plaza Agreement (1985), (i), (ii), (iii) Pöhl, Karl Otto, (i), (ii), (iii) Pompidou, Georges, (i) Portugal borrowing interest rate, (i) commercial loans, (i) connected firms in, (i) in currency union periphery, (i) in Euro area, (i) European aid to, (i) excessive borrowing, (i) in Exchange Rate Mechanism, (i) expansion in bank assets, (i) financial crisis in, (i), (ii), (iii) high interest rates, (i) product market improvements, (i) reduces fiscal deficit, (i) ten-year bonds, (i) pound sterling (UK currency) Bundesbank ceases to support, (i), (ii) devalued, (i) diminishing role, (i) leaves ERM, (i) prisoners’ dilemma, (i) public sector borrowers, (i) quantitative easing, (i) quantum mechanics, parallels to economics, (i), (ii) Quantitative Impact Studies (QISs), (i) Rajan, Raghuram, (i) random walk theory, (i) rational expectations, (i) Reagan, Ronald, (i), (ii), (iii), (iv) Regulation Q see United States of America Reigal Neal Interstate Branching Efficiency Act (US, 1997), (i) renmimbi (Chinese currency): depreciation against dollar (1994), (i) repurchase agreements (repos) broker-dealers exploit, (i) collateral, (i), (ii), (iii), (iv) expansion, (i) and foreign borrowing, (i) freeze, (i) fund housing bubble, (i) liquidity, (i) market shrinks in US, (i) as source of investment bank funding, (i) Ricardian equivalence, (i) Ricardian offset, (i) risk models, (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv) risk-weighted assets, (i), (ii), (iii) Rochard, Michel, (i) Rome, Treaty of (1957), (i), (ii), (iii), (iv), (v), (vi) Roosevelt, Franklin D., (i) Roubini, Nouriel, (i) Royal Bank of Scotland (RBS; UK bank), (i) Russia exchange rate collapse (1998), (i) joins WTO, (i) safe haven bankruptcy protection (US), (i) Sanio, Jochen, (i) Santander (Spanish bank) assets expanded, (i) capitalization, (i) international scope, (i) as mega-bank, (i) takeovers, (i) Sants, Hector, (i) Savings and Loans (US), (i), (ii) Scandinavia: monetary union, (i) Schmidt, Helmut, (i), (ii), (iii) Schoales, Myron, (i) Securities and Exchange Commission (SEC; US) and mortgage-backed securities, (i) registers hedge funds, (i) and regulation, (i), (ii), (iii), (iv) Release 47683 widens repurchase agreement collateral, (i) and repo market, (i), (ii), (iii), (iv) securitization and mortgages, (i), (ii), (iii), (iv), (v), (vi) private label, (i) in US, (i), (ii), (iii), (iv), (v), (vi) Security Pacific Corporation (US bank), (i) shadow banks see United States of America share prices: fluctuations and predictions, (i), (ii) Shiller, Robert, (i), (ii), (iii) Silva-Herzog, Jesus, (i) silver: in US money supply, (i) single currency benefits, (i) effect on trade, (i) and macroeconomic shocks, (i) see also Euro area Single European Act (1986), (i), (ii), (iii), (iv), (v) Smith, Adam, (i), (ii) Smithsonian Agreement, (i), (ii) snake currency arrangement (Europe), (i), (ii) Société Générale (French bank): expansion, (i), (ii), (iii) South Korea, (i), (ii), (iii), (iv) Spain borrowing interest rate, (i) caja savings banks, (i) commercial loans, (i) in currency union periphery, (i) ejected from Exchange Rate Mechanism, (i) excessive borrowing, (i) in Exchange Rate Mechanism, (i) expansion in bank assets, (i) and ESM funding to restructure banking system, (i) financial crisis in, (i), (ii), (iii) high interest rates, (i) housing, (i), (ii) included in Euro area, (i) local governments in, (i) reduces fiscal deficit, (i) successful effect of reforms, (i) ten-year bonds, (i) Stability and Growth Pact (SGP, Euro area), (i), (ii), (iii), (iv), (v) Strasbourg summit (of European leaders, 1990), (i), (ii) Strauss-Kahn, Dominique, (i) stressed value-at-risk models (SVARs), (i) Suez (French bank), (i) supply and demand, law of, (i) Sweden in Basel Committee, (i) and currency fluctuations, (i) in Scandinavian monetary union, (i) Switzerland in financial crisis, (i) trade with EMU members, (i) taxes cuts, (i), (ii), (iii), (iv) favor debt over equity, (i) kept low, (i) little effect on private spending, (i) TCW (US bank), (i) Texas: house prices fall, (i) Thailand, (i), (ii), (iii), (iv) Thatcher, Margaret, (i), (ii), (iii), (iv), (v), (vi) trade: affected by single currency, (i) trade balance, (i) Travelers Group (US financial institution), (i) Trichet, Jean-Claude, (i) Trump, Donald elected President, (i) and fiscal stimulus, (i) looser view on bank regulation, (i) proposes tax cuts, (i) UBS (Swiss bank), (i) UniCredit (Italian bank), (i), (ii), (iii) United Kingdom (Britain) bank assets reduced since 2008, (i) banking expansion, (i), (ii) banking system, (i) bond markets, (i) central bank independence, (i) common capital standard agreed with US, (i) core Euro banks expand into, (i) and currency fluctuations, (i) favors larger bank capital buffers, (i) favours EU-wide bank regulator, (i) financial crisis (1866), (i) foreign banks in, (i) foreign investments in, (i) high inflation, (i), (ii) invited to join European Economic Community, (i) joins Exchange Rate Mechanism, (i) large outflows, (i) leaves European Union, (i) leaves Exchange Rate Mechanism, (i), (ii) ‘light touch’ regulation, (i), (ii), (iii), (iv), (v) in North Atlantic financial crisis (2008), (i) opts out of Maastricht Treaty, (i) owns US assets, (i), (ii) product market, (i) rebate from EEC budget, (i) resists monetary union, (i), (ii) scale of banking, (i) separated commercial and investment (merchant) banks, (i) trade with EMU members, (i) see also pound sterling United States of America accepts Basel 3 framework for large banks, (i) accounting practices, (i) adopts new leverage ratio, (i) aggregate spending, (i) anchor regions and peripheries in currency union, (i) and Asian crisis, (i) assets held by European banks, (i), (ii) bank assets reduced since 2008, (i) bank deposits migrate, (i) bank failures and prompt corrective action, (i) bank mergers, (i) bank size compared with Europe, (i) bankers’ morality, (i) banking expansion, (i) banking regulation, (i), (ii), (iii), (iv), (v), (vi), (vii) and Basel 2 accord, (i) in Basel Committee, (i) bond markets, (i) bond yields fall, (i) business cycles, (i) champions internal risk models, (i) common capital standard agreed with UK, (i) consumer price index, (i) core Euro banks expand into, (i) as crisis country, (i) currency as international standard, (i) currency union in, (i), (ii), (iii) debt outflows, (i) deregulation, (i), (ii) devaluation, (i) effect of break-up of Bretton Woods on, (i) effect of post-crisis changes, (i), (ii) Euro area lends to, (i), (ii) European universal banks in, (i), (ii) favors larger bank capital buffers, (i) federal support for banks, (i) federal tax system, (i) financial boom, (i), (ii) financial reform in, (i), (ii) financial system (2002), (i), (ii) floating exchange rates, (i) Flow of Funds data, (i), (ii) fractured banking system, (i) and gold market, (i) high tech boom collapses, (i) house prices, (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv) imposes surcharge on foreign imports, (i) improved monetary policy, (i) inflation fluctuates, (i), (ii), (iii), (iv), (v), (vi) integrated banking system, (i) interest rates limited, (i), (ii), (iii) investment bank expansion, (i), (ii) investment bank regulation, (i), (ii), (iii) labor market flexibility, (i) and Latin American debt crisis, (i), (ii) misery index, (i) modest recovery from crisis, (i) national (interstate) banks, (i), (ii), (iii), (iv) national price movements, (i) and oil prices, (i) output volatility, (i) policy coordination fades, (i) post 2002 financial boom, (i) product market, (i) recessions (1985–2005), (i) regulation of shadow banks, (i) and repo market, (i) response to crisis, (i) responsibility for macroprudential policies, (i) and risk measures, (i), (ii) securitization, (i), (ii) separates commercial and investment banking, (i), (ii), (iii) shadow banks develop, (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) and small bank regulation, (i) trade balance, (i), (ii) trade with EMU members, (i) unprepared for financial crisis, (i) United States Federal Reserve Bank belief in market discipline of investment banks, (i), (ii), (iii), (iv), (v) and business cycle, (i) conducts stress tests, (i) cooperation of monetary and fiscal policy, (i) eases rates, (i), (ii) easy financing conditions, (i) emergency funding, (i), (ii) faith in investors’ judgment, (i) helps stabilize markets, (i) and house price boom, (i) and inflation rates, (i) monetary policy, (i) as proposed model for European Central Bank, (i) provides safety net, (i), (ii) regulates mortgage lending standards, (i) and regulation of investment banks, (i), (ii) Regulation Q, (i) regulatory function and practice, (i), (ii), (iii), (iv) response to crisis, (i) and risk models, (i), (ii), (iii) and tax cuts, (i) urges reform of Basel (i), (ii) warns about loans to Latin America, (i) value-at-risk models (VARs), (i) Venezuela, (i) Versailles Treaty (1919), (i) Vietnam War, (i) Volcker, Paul, (i), (ii) rule, (i) Wachovia Corporation (US bank), (i) Wall Street: reform, (i) waterfall investment structures, (i) welfare payments, (i) Wells Fargo (US bank), (i), (ii) Werner Commission Report (Europe) (1970), (i), (ii), (iii) West Germany economic growth, (i) in European Coal and Steel Community, (i) see also Germany White, Bill, (i) White, Harry Dexter, (i) won (S.

In the United States, the boom in shadow banking involving the nexus of securitization, non-insured deposits, and investment banks was well under way and house price inflation was starting to gain steam. However, these strains were limited and essentially isolated from each other. The boom of the 2000s saw these risks grow and intermingle (Figure 19). The core Euro area banks were central protagonists in the unsustainable financial boom and bust, in stark contrast to the popular portrayal of them as hapless victims of US financial deregulation. To be sure, US deregulation played a role. In particular, reforms designed to provide greater liquidity in US repurchase (repo) markets supported the explosion of substandard mortgage-backed assets and gave foreign banks easy access to dollars. However, this coincided with a massive boom in lending by the core Euro area banks as a result of inadequate regulation and supervision. As domestic lending opportunities dried up, the core Euro area mega-banks expanded into foreign markets, financing housing booms in the United States and the Euro area periphery.


Money and Government: The Past and Future of Economics by Robert Skidelsky

anti-globalists, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, Basel III, basic income, Ben Bernanke: helicopter money, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, constrained optimization, Corn Laws, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Graeber, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, Donald Trump, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial innovation, Financial Instability Hypothesis, forward guidance, Fractional reserve banking, full employment, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, incomplete markets, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, law of one price, liberal capitalism, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, market clearing, market friction, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, mobile money, Mont Pelerin Society, moral hazard, mortgage debt, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, placebo effect, price stability, profit maximization, quantitative easing, random walk, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, rising living standards, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, shareholder value, short selling, Simon Kuznets, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, value at risk, Washington Consensus, yield curve, zero-sum game

The Clinton Administration overturned this in 1999 with the Gramm–Leach–Bliley Act, allowing both sets of activities to be done by the same bank. In the UK, Thatcher’s ‘Big Bang’ of the 1980s, which allowed banks into the mortgage market and commercial banks to merge with securities’ houses, had similar consequences, and the model of the do-it-all, universal bank emerged. Regulatory loosening led to the loosening of moral restraints. Whereas traditional banking focused on developing long-term relationships with customers and providing them with a good service, investment banking is marked by an emphasis on short-term opportunism and risk-seeking behaviour.28 The effect of the deregulation of lending was to undermine the public utility aspect of banks: they became free to do whatever financial business they wanted. They grew so large that their failure would have a devastating impact on the rest of the economy.

., 179 Erie Canal, 90 Eshag, Eprime, 71 European Central Bank, 139, 188, 198, 217, 242–3, 253, 254, 361 institutional constraints on, 50, 234, 242, 249, 274–5 misreading of Eurozone crisis, 275 quantitative easing (QE) by, 273–4 on ‘stress testing’, 364 taxing of ‘excess’ reserves, 266 use of LTROs, 257 European Commission, 139, 3612, 365 European Exchange Rate Mechanism, 188 European Investment Bank, 354 European Union (EU, formerly EEC), 153, 318, 379, 383 Financial Stability Board (FSB), 363 ‘Four Freedoms’, 375 lack of state, 376 Single Resolution Board, 365 Eurozone current account imbalances, 333, 334, 335, 336–7, 341–2 Juncker investment programme, 274 proposed European Monetary Fund, 376, 382 structural flaw in, 341, 375–7 two original sins of, 274, 376–5 Eurozone debt crisis (2010–12), 50, 223, 377, 382 and double-dip recession, 241, 242–3, 274 ECB’s misreading of, 275 and financial crowding-out theory, 234 and Greece, 32, 224, 224–5, 226, 233, 235, 242–3, 243, 365 and ‘troika’, 32, 139, 243 469 i n de x exchange-rate policy, 127–8, 139 and Congdon’s ‘real balance effect’, 285 and domestic interest rates, 251 fixed rates under Bretton Woods, 16, 159, 161, 162, 168 floating rates from 1970s, 16–17, 184 and Friedman, 182 IMF ‘scarce currency’ clause, 380–81 Nixon’s dollar devaluation (1971), 153, 154, 165 and quantitative easing, 267, 267 sterling crisis (1951), 145 sterling devaluation (November 1967), 152 sterling-dollar peg (from 1949), 148, 150, 152 sterling/franc/deutschmark devaluations (1949), 152 ‘Triffin paradox’, 161, 165 ‘expansionary fiscal consolidation’, 192, 225, 231 Fabian socialism, 96 Fama, Eugene, 208, 311–12, 313 Fanny Mae, 217, 256, 309, 320 fascism, 13, 98, 131, 175 Federal Reserve, US and 2008 crash, 50, 217, 254, 256 AIG bail-out (2008), 325 Federal Open Market Committee (FOMC), 185–6 and Great Depression, 104–6 inflation targeting, 188 and monetarism, 185–6, 188 monetary policy in 1950s, 146 ‘Operation Twist’, 268 quantitative easing (QE) by, 256–7, 273–4 ‘Reserve Position Doctrine’ (1920s), 103–4 and under-consumption theory, 298 Ferguson, Niall, 73, 79, 80, 91 financial collapse (2007–8) acute phase, 218–20, 223 ‘Austrian’ explanation, 104, 303 banks as proximate cause, 343, 361, 365 Bear Stearns rescue, 217 British analogies with Greece, 235 British debate after, 225–8 causes of, 3–4, 343–4, 365, 366, 368 central bank responses, 3, 217, 219, 234–5, 253–4, 254, 256–8, 359 comparative recovery patterns, 241–4, 242, 273, 273–4 compared to 1929 crash, 218 Conservative narrative, 226–8, 229–31, 233, 234–5, 237–9 and crisis of conservative economics, 17 and embedded leverage, 318, 322, 325 five distinct stages of crisis, 216–19 ‘global imbalances’ explanation, 11, 331, 333, 336–43, 337 government responses, 3, 217–18, 219–20, 221–36, 237–47 Hayekian view of cause, 303 hysteresis after, 239–41, 240, 241, 370 inequality as deeper cause of, 299–306, 368 Lehman Brothers bankruptcy, 3, 50, 217, 365 leverage (debt to equity) ratios on eve of, 317–18 liquidity-solvency confusion, 317 outbreaks of populism following, 13, 371–3, 376, 383 post-crash deficit, 226–33, 229, 237–8 private debt as proximate cause, 3–4 470 i n de x stagnation of real earnings as deep cause, 4, 303, 367 standard account of origins of, 3–4 as test of two theories, 2–3, 76 theoretical and policy responses, 10, 129, 219–20, 223–36, 237–47 see also austerity policy and under-consumption theory, 303–6 US sub-prime mortgage market, 3, 216, 304–5, 309, 323, 328, 341 see also Great Recession (2008–9) Financial Services Authority, U K, 321–2, 330 financial system and causes of 2008 collapse, 3, 4–5, 253, 307–9, 361 and crisis of conservative economics, 17 deregulation, 307–9, 310–16, 318–22, 328, 332–3, 384 East Asian financial crisis (1997–8), 202, 339, 371, 382 ‘Efficient Market Hypothesis’ (EMH), 311–13, 321–2, 328, 388 ‘financialization’ of the economy, 5, 305, 307–9, 366–7 fraud and criminality, 3, 4, 5, 7, 328, 350, 365–6, 367 and free-market orthodoxy, 5, 308–16 loosening of moral restraints, 319 mark-to-market (M2M) framework, 314 offshore euro-dollar market, 308, 332 privatised gain and socialised loss, 319–20 released from national regulation (1980s/90s), 131, 318–22 structural power of finance, 6–7, 14, 309 systemic under-estimation of risk, 314–16, 316*, 320–22, 323, 329–30 Thatcher’s Big Bang (1980s), 319 tradable public debt instruments, 43, 80–81 Turner’s ‘financial intensity’ concept, 366 unrealism of assumptions, 310–16 value at risk (VaR) framework, 314–15, 315, 330 ‘Washington consensus’ deregulation, 198, 200 see also banks FinTech, 356 First World War, 86, 95, 106–7, 374, 375 ‘fiscal consolidation’, 10–11, 129, 225 Darling’s plan (2009), 225–6 ‘expansionary’, 192, 225, 231 and Osborne, 227–8, 229–30, 231, 233, 237–9, 243–4, 244, 245 fiscal policy and 2008 collapse, 10, 217–18, 219–20, 223–36, 265–6, 273–4, 286 ‘Barber boom’, 167, 168 during Blair-Brown years, 221–4, 223, 225–6, 227 British experience (1692–2012), 77 Congdon’s total rejection of, 280, 285–6 ‘crowding out’ argument, 83–4, 109–11, 226, 233–5 current and capital spending, 107–8, 114, 142, 155–6, 193, 221–3, 237–8, 355–7 directing flow of new spending, 286–7 fiscal multiplier, 110–11, 125–6, 133–6, 138, 230–31, 233, 235, 244–5 471 i n de x fiscal policy – (cont.) in inter-war Britain, 106–17 and Keynesian economics, 2–3, 109, 111, 114–17, 125–7, 129–31, 133–4, 137–8, 173, 278 Keynesian full employment phase (1945–60), 141–8 Krugman’s ‘confidence fairy’, 117 Lawson counterrevolution, 185, 192–3, 222, 358 legacy of monetarism, 190–93 May Committee (1931), 112 national income accounts, 138 New Classical view of, 200 in new macroeconomic constitution, 351–2, 355–7, 360–61 nineteenth-century theory of, 9, 29 post-Keynesian disablement of, 193, 221, 258, 304, 328 pre-crash orthodoxy, 221–2, 223–4, 230–31 Public Sector Borrowing Requirement (PSBR), 155–6 see also balanced budget theory; public investment; taxation Fisher, Irving, 9, 52, 61, 99, 280 ‘compensated dollar’ scheme, 66 equation of exchange, 62–4, 71–2, 258, 278–9, 283, 284, 287 QTM formulation, 62–7, 71–2 and quantitative easing, 258, 278–9 Santa Claus money, 62–4, 258, 278–9 Fitch (CR A), 329 France assignats in 1790s, 64–5 and gold standard, 50, 102, 104, 127 ‘indicative planning’ system, 150 ‘physiocrats’in, 81 protectionism in late nineteenthcentury, 59 state holding companies, 356 statism in, 140, 144 university campus revolts (1968), 164 Freddie Mac, 217, 256, 309, 320 free trade, xviii, 9, 58–9, 76, 79, 81–2 abandoned in Britain (1932), 113 general presumption in favour of, 377 and Hume’s ‘price-specie-flow’ mechanism, 37–8, 53, 54, 104, 332 and Irish potato famine, 15 List’s ‘infant industry’ argument, 88–9, 90, 378–7 and nationalist–globalist split, 371–3 and post-war liberalization, 16, 374 and presumption of peace, 379 repeal of Corn Laws (1846), 15, 85 Ricardo’s doctrine of comparative advantage, 88, 378, 379, 379 US conversion to (1940s), 90 Freiburg School, 140 Friedman, Milton adaptive expectations theory, 180–81, 183, 194, 206–11 and Cartesian distinction, 22 as Fisher’s heir, 278 The Great Contraction (with Schwartz; 1865), 105 idea of ‘helicopter money’, 63 and monetary base, 185, 280 and Mont Pelerin Society, 176–7 and ‘natural’ rate of unemployment, 163, 177, 181, 195, 206, 208 onslaught on Keynesianism, 170, 174, 177–83, 261 ‘permanent income hypothesis’ (1957), 178, 183 and Phillips Curve, 38, 180–81, 194, 206–8, 207 472 i n de x policy implications of work of, 182–3 political motives of, 177, 183–4 and quantity theory, 61, 70, 177–9, 182, 183, 194 ‘stable demand function for money’, 179 view of Great Depression, 104–6, 179, 183, 256, 276, 278 weaknesses in arguments of, 183 Frydman, Roman, 389 Fullarton, John, 49 Funding for Lending programme, 265–6 G20 Financial Stability Board, 363 summits (2009/10), 219–20, 223, 225 G7 finance ministers meeting (February 2010), 224–5 Galbraith, James, 303, 361 game theorists, 389 Gasperin, Simone, 357* Geddes, Sir Eric, 108 German Historical School, 88–9 Germany and 2008 crash, 217, 218, 243 current account surplus, 333, 334, 341, 342, 380, 381 employer–union bargains, 147, 167 and Eurozone crisis, 341, 365, 376, 377 and Great Depression, 97, 111, 129–30 growth Keynesianism (1960–70), 153–4 high growth rates in 1950/60s, 149, 156 Hitler’s reduction in unemployment, 111, 112, 129–30 hyperinflation of early 1920s, 275 as Keynesian in 1960s, 140 nineteenth-century expansion and unification, 89, 91 ‘ordo-liberalism’ in, 140 post-war modernization/catch-up, 156–7 protectionism in late nineteenthcentury, 59 return to gold standard (1924), 102 ‘Rhenish capitalism’ model, 154 Giffen, Robert, 51 Giles, Chris, 219, 302 Gini coefficient, 299, 300 Gladstone, William, 42–3, 86 Glass–Steagall Act (1933), 319, 361, 362 global imbalances basic theory of, 335–6 and capital account liberalization, 318–19 capital flight, 59, 334, 337, 341, 343 Eurozone see Eurozone: current account imbalances as explanation for 2007–8 crash, 11, 331, 333, 336–43, 337 and financial deregulation, 318–19, 332–3 and First World War, 95 increases in pre-crash years, 333, 333–4, 334, 335 problematic nature of, 333–4 reserve accumulation, 336, 337–41 ‘saving glut’ vs ‘money’ glut, 338–41, 342 structural causes still in place, 344 US dollar as main reserve currency, 338 global warming, 383 globalization, 17, 300, 334–5 absence of the state, 350, 373, 375–6 anti-globalist movements, 371–2, 373 first age of, 51, 55, 57, 59, 374, 375 473 i n de x globalization – (cont.) future of, 382–4 Geneva and Seattle protests (1998/99), 371 and inflation rate, 252–3 and lower wages in developed world, 252–3, 300, 379 nationalist-globalist split, 371–3 ‘neo-liberal’ agenda of IMF, 139, 181, 318–19 popular protest against, 351, 371–2 resurgence of after Cold War, 374 Rodrik’s ‘impossible trinity’, 375 gold, 23, 24, 25, 28, 35, 37 new gold production, 51, 52, 55, 62 gold standard, xviii, 1, 9, 27, 29, 338 and Britain, 9, 42, 43, 44, 45–50, 53, 57–9, 80, 101, 102, 113 collapse of US exchange standard (1971), 160, 165 commitment to convertibility, 55–6 and Cunliffe model, 54–5, 102 depressions in later nineteenthcentury, 51–2 dysfunctional after First World War, 95, 97 final suspension in Britain (1931), 113, 125 Fisher’s ‘compensated dollar’ scheme, 66 Hume’s ‘price-specie-flow’ mechanism, 37–8, 53, 54, 104, 285, 332 and international bond markets, 92 as international by 1880s, 50–52 Keynes on, 58, 101, 127 Kindleberger thesis, 58–9 move to ‘managed’ system, 71, 99–100 replaces silver standard (1690s), 42, 43 restored (1821), 48 return to in 1920s, 102, 104, 107 suspension during Napoleonic wars, 43, 45–7 suspension of convertibility (1919), 101–2 triumph of by mid-nineteenthcentury, 44, 50 working and design of, 52–9 as working in tandem with empire, 57, 58 Goldberg, Michael D., 389 Goldman Sachs, 315 Goodhart, Charles, 168, 187 Graeber, David, 28 Great Depression (1929–32), 9, 13, 96, 97–8, 110–13, 127 compared to 2008 crash, 218 Friedman-Schwartz view, 104–6, 179, 183, 256, 276, 278 impact on US policy-makers in 2008 period, 256, 275, 278 left-wing explanations of, 298 rise in inequality in lead-up to, 289 and second wave of collectivism, 15–16 Great Moderation (early 1990s–2007), 4, 53, 202, 278 economic problems during, 348 financial deregulation during, 318–22, 328 financial innovation during, 322–8 and independent central banks, 215 inflation during, 106, 215, 216, 252–3, 253, 348, 359, 360 international financial network, 309, 318–28 output growth during, 215, 253, 348 Great Recession (2008–9), xviii Congdon’s view of, 281–2, 287 co-ordinated global response, 219–20, 383 decline in productivity after, 305–6 474 i n de x initial signs of recovery (2009), 218–19, 225, 226 monetary interpretation of, 105, 106 ‘premature withdrawal’ of fiscal stimulus, 219–20, 223–36, 245, 352 reform agenda after, 361–8 rise in inequality in lead-up to, 289–90, 299–300 see also financial collapse (2007–8) Greece and Eurozone debt crisis, 32, 224, 224–5, 226, 233, 235, 242–3, 243, 337, 341, 365 in gold standard era, 59 Greenspan, Alan, 188, 313 Hamilton, Alexander, 88, 90, 92 Hammond, Philip, 236, 352 Hannover Re scandal, 329 Harrison, George, 105 Harrod, Roy, 123 Harvey, John, 333, 387 Hawtrey, Ralph, 109–10, 280 Hayek, Friedrich, 33, 46, 177, 195, 350, 367 founds Mont Pelerin Society, 176 ‘over-consumption’ theory, 296 The Road to Serfdom (1944), 16, 175–6 on Wall Street Crash, 104 Heath, Edward, 167–8 Heckscher, Eli, 37 Help to Buy programme, 265, 266 Henderson, Hubert, 109 Henderson, W.

According to Chancellor Snowden, ‘An unbalanced budget is regarded as one of the symptoms of national financial instability.’ This was the end of the attempt to pay back debt. It also marked the end of the gold standard. Sound finance was supposed to maintain confidence in the currency, but the government’s economy measures failed to prevent a continuing flight from sterling, as the merchant banks of the City of London were seen to have borrowed short, and lent long to failed and failing banks on the continent of Europe. No foreign funds were available to ‘bail out’ the City of London, and the obligation to exchange sterling for gold was suspended on 21 September 1931, never to be restored. Release from the ‘golden fetters’ liberated monetary policy. Bank Rate came down from 6 per cent to 2 per cent in 1932. Free trade was also abandoned with the Import Duties Act of the same year. Thus the three pillars of Victorian finance – sound finance, sound money and free trade – crumbled, not from conviction but under the pressure of extreme events.


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The Weightless World: Strategies for Managing the Digital Economy by Diane Coyle

"Robert Solow", barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, blue-collar work, Bretton Woods, business cycle, clean water, computer age, Corn Laws, creative destruction, cross-subsidies, David Ricardo: comparative advantage, dematerialisation, Diane Coyle, Edward Glaeser, everywhere but in the productivity statistics, financial deregulation, full employment, George Santayana, global village, hiring and firing, Howard Rheingold, income inequality, informal economy, invention of the sewing machine, invisible hand, Jane Jacobs, Joseph Schumpeter, Kickstarter, knowledge economy, labour market flexibility, laissez-faire capitalism, lump of labour, Marshall McLuhan, mass immigration, McJob, microcredit, moral panic, Network effects, new economy, Nick Leeson, night-watchman state, North Sea oil, offshore financial centre, pension reform, pensions crisis, Ronald Reagan, Silicon Valley, spinning jenny, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tobin tax, two tier labour market, very high income, War on Poverty, winner-take-all economy, working-age population

Thus VHS drove out Betamax, and Microsoft’s Windows dominates the Apple operating system, except in publishing where there exists a subsidiary network because the superiority of the Apple Mac software is so pronounced. London’s triumph One example that illustrates the new geography is the growing dominance of London as a centre for financial market transactions. The financial services industry is on the frontier of the information technology revolution in economics. The ‘Big Bang’ reforms in the City of London in 1986 and similar changes in other financial centres were defined as much by huge investment in information technology and telecommunications as by regulatory change. This investment, the need to stay in the techno- The Weightless World 20 logical wild west, remains the hallmark of the financial markets — the first and biggest cyber-industry. William Mitchell of the Media Lab at the Massachusetts Institute of Technology calls complex financial derivatives ‘pure creations of cyberspace’.27 The economic engine of the financial services industry is the production, transformation, distribution and consumption of digital information.

It is a paradox that as its activity has dematerialised, London as a place has become ever more important. Obviously, some things that were done in London have moved thanks to high technology. This includes back offices, registrars — any functions where the information can be put on a production line. And there has been geographical dispersion within London itself, out of the Square Mile of the City of London to Docklands and the West End. But the high value added functions remain and are becoming increasingly concentrated in London rather than any other centre in the same time zone as more foreign banks move in. There are certainly cost pressures to move out. Rents and taxes are high in the City, the burden of commuting is heavy, deliveries and logistics are difficult, there is even the threat of terrorism.

Small private companies that have gone through a cut-throat tender to get the business will cut wages, reduce holidays, demand longer hours and harder work, and pay less. The pattern is mirrored in the private sector, where it is the norm for cleaning and catering at a minimum to have been contracted out. Look around your own office, if you have one, and see the cleaning staff. Chances are they will be wearing the uniform of some other company, and their faces will be grey with fatigue. Of course, cleaners have some meagre privileges. One tale of the City of London during the recession in the early 1990s records two highly paid financial traders getting into work extra early. They get into the lift with one of the cleaning staff, and ask her to press the fifth floor button. ‘Fifth?’ she says. The Weightless World 108 ‘I’ve been told not to bother with that floor any more.’ This was how they learnt that their entire trading team had been fired overnight thanks to a takeover.


pages: 387 words: 119,244

Making It Happen: Fred Goodwin, RBS and the Men Who Blew Up the British Economy by Iain Martin

asset-backed security, bank run, Basel III, beat the dealer, Big bang: deregulation of the City of London, call centre, central bank independence, computer age, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, deindustrialization, deskilling, Edward Thorp, Etonian, Eugene Fama: efficient market hypothesis, eurozone crisis, falling living standards, financial deregulation, financial innovation, G4S, high net worth, interest rate swap, invisible hand, joint-stock company, Kickstarter, light touch regulation, London Whale, Long Term Capital Management, moral hazard, negative equity, Neil Kinnock, Nick Leeson, North Sea oil, Northern Rock, old-boy network, pets.com, Red Clydeside, shareholder value, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, value at risk

This was the flipside of the increasing internationalisation of the City that came with Big Bang. First the stockbrokers and then even the grand British merchant banks were steadily snapped up and subsumed by foreign buyers. More aggressive outfits, such as Goldman Sachs, J. P. Morgan and Merrill Lynch, were staffed with a new breed of young bankers prepared to work the punishing hours demanded in an era when large ‘compensation’ packages were becoming the dominant currency of the industry. The British firms, which tended to be sleepier, more conservative and sometimes downright inept, were exposed to competition and struggled to adapt. Foreign rivals sought to snap up their customers and their assets. They also wanted to strengthen their presence in a resurgent and increasingly international City of London. The UK’s Morgan Grenfell was consumed by Deutsche Bank in 1989; S.

., ref 1, ref 2 Agnew, Jonathan, ref 1 AIG, ref 1 Alemany, Ellen, ref 1 Allan, Iain, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7 and CDOs, ref 1, ref 2, ref 3, ref 4 Antonveneta, ref 1 Argus, Don, ref 1 Argyll, 2nd Duke of, ref 1 Armitstead, Louise, ref 1 Arsenal FC, ref 1 Arthur Andersen, ref 1, ref 2 asset-backed securities (ABSs), ref 1, ref 2 AstraZeneca, ref 1, ref 2 Aviva, ref 1 Ayr Bank, ref 1, ref 2 BAA, ref 1 Bailey, Andrew, ref 1, ref 2, ref 3 Bailie Gifford, ref 1 Balfour Beatty, ref 1 Balls, Ed, ref 1, ref 2, ref 3 Bank of America, ref 1 Merrill Lynch sold to, ref 1 Bank Bosses are Criminals, ref 1 Bank of China, ref 1, ref 2 Bank of Credit and Commerce International (BCCI), ref 1, ref 2, ref 3 Bank of England: and banking supervision, see banks: regulation of; Financial Services Authority and County NatWest, ref 1 culpability of, ref 1 Darling reassurance to RBS concerning, ref 1 founding of, ref 1, ref 2 Gieve role in, ref 1 house prices ignored by, ref 1 independence of, ref 1, ref 2, ref 3, ref 4, ref 5 King becomes governor of, ref 1, ref 2 Monetary Policy Committee of, ref 1, ref 2, ref 3 and RBS collapse, ref 1, ref 2 and RBS privatisation, ref 1 and Scottish banks’ own notes, ref 1 and tripartite regulation, ref 1, ref 2, ref 3, ref 4, ref 5; see also Financial Services Authority Bank of Scotland, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6 founding of, ref 1, ref 2 as joint stock-bank, ref 1 modern British banking pioneered by, ref 1 national networks developed by, ref 1 and NatWest, ref 1, ref 2, ref 3, ref 4, ref 5 RBS early rivalry with, ref 1 ‘sues for peace’, ref 1 Whigs distrust, ref 1 see also Halifax; HBOS bankers: accountants versus, ref 1 ‘“canny” Scottish’, ref 1 Labour honours and ennobles, ref 1 large remuneration of, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8, ref 9, ref 10, ref 11, ref 12, ref 13 prosecution avoided by, ref 1 banks: auditing of, ref 1; see also banks: regulation/supervision of bailouts of, ref 1, ref 2, ref 3, ref 4, ref 5 passim, ref 1 and Basel regulation, ref 1 and Big Bang, ref 1, ref 2, ref 3, ref 4 Brown wish for competition among, ref 1 Darling promises support for, ref 1 Darling meeting with CEOs of, ref 1 deregulation of, ref 1 foreign investment, presence of, in UK, ref 1 globalised nature of, ref 1 growing profits of, ref 1 innovative activities embraced by, ref 1; see also individual banks and interest rates, ref 1, ref 2, ref 3, ref 4, ref 5 lighter scrutiny of, ref 1; see also Financial Services Authority more credit offered by, ref 1 proposed ring fence for, ref 1, ref 2 regulation/supervision of, ref 1, ref 2, ref 3; see also banks: auditing of; Basel; Financial Services Authority reluctance of, to deal with RBS, ref 1 remodelling of, ref 1 revelations about conduct of, ref 1 ‘too big to fail’, ref 1 tripartite regulation of, ref 1, ref 2, ref 3, ref 4, ref 5; see also Basel; Financial Services Authority UK, balance sheets of, ref 1, ref 2, ref 3, ref 4 UK, clearing, balance sheets of (since 1960), ref 1 UK, growth of, ref 1 UK, steady fall in number of, ref 1 and Value at Risk (VaR), ref 1, ref 2 see also City of London Banque de France, ref 1 Barclays, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8, ref 9 and ABN Amro, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8 FG hates, ref 1 fines paid by, ref 1 growing profits of, ref 1 Barclays Capital, ref 1, ref 2 Barings, ref 1, ref 2 Basel, ref 1 Bear Stearns, ref 1 Better Regulation Action Plan, ref 1 see also banks: regulation of Better Regulation Task Force, ref 1 Big Bang, ref 1, ref 2, ref 3, ref 4, ref 5 Birmingham and Midshires, ref 1 Black, Joseph, ref 1 Blair, Cherie, ref 1 Blair, Tony, ref 1, ref 2, ref 3 and 1997 election, ref 1 and bank regulation, ref 1 bankers fêted by, ref 1 Brown wants to oust, ref 1 FG Chequers meal with, ref 1 and Gaddafi, ref 1 leadership won by, ref 1 Blank, Victor, ref 1 Bloomberg, ref 1 Blue Arrow affair, ref 1 Blunkett, David, ref 1 BNP Paribas, ref 1, ref 2 boom and bust, ‘end’ of, ref 1, ref 2, ref 3, ref 4, ref 5 Botín, Emilio, ref 1, ref 2, ref 3, ref 4 BP, ref 1 Bradford & Bingley, ref 1, ref 2 Braveheart, ref 1, ref 2, ref 3 Briault, Clive, ref 1, ref 2 Brown, Andrew, ref 1 Brown, Gordon, ref 1, ref 2 passim and 1997 election, ref 1 ‘appalled’ by RBS crisis, ref 1 and bank bailouts, ref 1, ref 2, ref 3 and bank regulation, ref 1, ref 2, ref 3 bankers fêted by, ref 1 becomes Chancellor, ref 1 and BoE independence, ref 1, ref 2, ref 3 boom–bust conference speech of, ref 1 and boom and bust, ‘end’ of, ref 1, ref 2, ref 3, ref 4, ref 5 Chancellorship aspirations of, ref 1 Darling joint press conference with, ref 1 economic growth under, ref 1 father influence on, ref 1 FG compared to, ref 1 and Greenspan, see Greenspan, Alan house prices rise under, ref 1 and interest-rate control, ref 1, ref 2 King relationships with, ref 1 last Mansion House speech of, ref 1 leadership bid lost by, ref 1 and Lloyds–HBOS, ref 1 RBS bailout announced by, ref 1, ref 2 and RBS collapse, ref 1, ref 2 Smith influence on, ref 1 and socialism, ref 1 at university, ref 1 and US politics, ref 1, ref 2 Brown, John, ref 1 Brown, John Ebenezer, ref 1, ref 2 Buccleuch, Duke of, ref 1 Buchan, Colin, ref 1, ref 2, ref 3, ref 4, ref 5 Buffet, Warren, ref 1 Burlington Resources, ref 1 Burns, Robert, ref 1 Burns, Terry, ref 1 Burnside, Howard, ref 1 Burt, Peter, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6 Bush, George H.W., ref 1, ref 2 Bush, George W., ref 1, ref 2, ref 3 Bush, Laura, ref 1 Butler, Lord, ref 1 Cable, Vince, ref 1 Caledonia, naming of, ref 1 Cameron, Donald, ref 1 Cameron, Johnny, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7 passim, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8, ref 9 passim, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7 and ABN Amro, ref 1, ref 2, ref 3, ref 4 FG stands by, ref 1 FSA investigates, ref 1, ref 2 at Gogarburn opening, ref 1 and hedging exposure, ref 1 and worsening liquidity situation, ref 1 Camerons of Locheal, ref 1, ref 2, ref 3, ref 4 Campbell, Archibald, see Ilay, Earl of Campbell, John, ref 1, ref 2, ref 3 Canary Wharf, ref 1 Caplan, Rick, ref 1, ref 2, ref 3, ref 4, ref 5 Carpenter, Ben, ref 1, ref 2, ref 3 Charles, Prince of Wales, ref 1, ref 2, ref 3 Charter One, ref 1, ref 2 Chase, ref 1 Chirac, Jacques, ref 1 Chisholm, Andy, ref 1 Churchill, ref 1, ref 2 Churchill, Winston, ref 1 Cicutto, Frank, ref 1, ref 2, ref 3 Citibank, ref 1 Citigroup, ref 1, ref 2, ref 3 Citizens Bank, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8, ref 9, ref 10, ref 11, ref 12 and Mellon, ref 1 new CEO for, ref 1 City of Glasgow Bank, ref 1 City of London, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8, ref 9, ref 10, ref 11, ref 12, ref 13, ref 14, ref 15 modernisation of, ref 1 see also banks Clarke, Charles, ref 1 Clarke, Ken, ref 1 Clinton, Bill, ref 1, ref 2, ref 3 Clydesdale Bank, ref 1, ref 2, ref 3, ref 4, ref 5 away days of, ref 1 celebrations at, as FG leaves, ref 1 FG becomes CEO of, ref 1 Cochrane, Alan, ref 1 Cole-Hamilton, Richard, ref 1 Coleman, David, ref 1, ref 2 collateralised debt obligations (CDOs), ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8, ref 9, ref 10, ref 11 index of, ref 1 varieties of, ref 1 see also sub-prime mortgages Commonwealth Bancorp, ref 1 Community Bancorp, ref 1 Compagnie Bancaire, ref 1 Company of Scotland, ref 1 founding of, ref 1 ‘Competition in UK Banking’, ref 1 Connolly, John, ref 1, ref 2, ref 3, ref 4, ref 5 ConocoPhillips, ref 1 Conservatives, see Tories consumer debt, ref 1 Conti, Tom, ref 1 Cooper, Yvette, ref 1, ref 2 Corbett, R.Y., ref 1 Cornwall, Duchess of, ref 1 Countrywide Financial, ref 1 County NatWest, ref 1, ref 2 Coutts, ref 1, ref 2, ref 3, ref 4, ref 5 Cox, Archie, ref 1 credit crunch, see financial crisis credit default swaps (CDSs), ref 1 Crosby, James, ref 1, ref 2, ref 3, ref 4, ref 5 knighthood lost by, ref 1 Crowe, Brian, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8, ref 9, ref 10, ref 11, ref 12 and CDOs, ref 1 and hedging exposure, ref 1 moved to ABN Amro, ref 1 ordination of, ref 1, ref 2 withdrawn from ABN Amro, ref 1 and worsening liquidity situation, ref 1 Crowe, Russell, ref 1 Cruickshank, Don, ref 1 Crutchley, John-Paul, ref 1 Cryan, John, ref 1, ref 2 Cummings, Peter, FSA fines, ref 1 Cummins, John, ref 1 Currie, Jim, ref 1 Daily Telegraph, ref 1, ref 2 Daniels, Eric, ref 1 Darien Scheme, ref 1, ref 2, ref 3, ref 4 Caledonia emerges from, ref 1 Darling, Alistair, ref 1, ref 2 and bank bailouts, ref 1, ref 2, ref 3 banks’ CEOs meet with, ref 1 and Brown–George spat, ref 1 Brown joint press conference with, ref 1 at ECOFIN meeting, ref 1 and FG knighthood, ref 1 and FG pension, ref 1, ref 2, ref 3 FSA and BoE meet with, ref 1 at Gogarburn opening, ref 1 Goodwin meets (2007), ref 1 King follows plan of, ref 1 King relationships with, ref 1 memoirs of, ref 1 MPs briefed on financial crisis by, ref 1 RBS bailout announced by, ref 1, ref 2 and RBS collapse, ref 1 Treasury meeting called by, ref 1 UK banks supported by, ref 1 Darroch, Kim, ref 1 Davidson, Joanna, ref 1, ref 2 Davies, Howard, ref 1, ref 2 Davos, ref 1 de la Renta, Oscar, ref 1 deficit, sharp rise in, ref 1 Deloitte & Touche, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7 Deutsche Bank, ref 1, ref 2 Dewar, Donald, ref 1 Diamond, Bob, ref 1, ref 2, ref 3 forced out of post, ref 1 Dickinson, Alan, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8, ref 9, ref 10, ref 11, ref 12, ref 13 Dime Bancorp, ref 1 Direct Line, ref 1, ref 2, ref 3 District Bank, ref 1 Dixon Motors, ref 1 Dixon, Paul, ref 1 Dixon, Simon, ref 1 dotcom bubble, ref 1 Dow Jones, ref 1 Drake-Brockman, Symon, ref 1 Dresdner Kleinwort Wasserstein, ref 1, ref 2 ‘Drivers for Growth’ conference, ref 1 Drummond Bank, ref 1, ref 2, ref 3 Dundas, Lawrence, ref 1 Dundee Banking Company, ref 1 Dutch Central Bank, ref 1 Duthie, Robin, ref 1 East India Company, ref 1 Economic and Financial Affairs Council (ECOFIN), ref 1, ref 2 Economist, ref 1, ref 2 Eden, James, ref 1, ref 2 Elizabeth II, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7 emerging economies, ref 1 Emirates Stadium, ref 1 Enron, ref 1, ref 2 Equitable Life, ref 1 Equivalent Company, ref 1 Ernst & Young, ref 1 euro, see single currency Exchange Rate Mechanism (ERM), ref 1, ref 2 ‘failure of the Royal Bank of Scotland, The’ (FSA), ref 1, ref 2 Fastow, Andy, ref 1 Federal Reserve, ref 1, ref 2, ref 3 Ferguson, Adam, ref 1 Ferguson, Alex, ref 1 Ferguson, William, ref 1 Ferrovial, ref 1 Fidelity, ref 1 Fildes, Christopher, ref 1 Financial Conduct Authority., ref 1 financial crisis: beginning of, ref 1 Darling updates Commons on, ref 1 government spending at start of, ref 1 insurers crack under weight of, ref 1 recessions follow, ref 1 spreads to UK high street, ref 1 studies and reports of, ref 1 Financial Services Authority (FSA), ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8, ref 9, ref 10, ref 11, ref 12 ‘Arrow’ reports of, ref 1 and auditors, ref 1 and RBS collapse, ref 1 RBS on watch-list of, ref 1 self-investigation by, ref 1 successors to, ref 1 and tripartite regulation, ref 1, ref 2, ref 3, ref 4, ref 5; see also Bank of England Financial Times, ref 1, ref 2 First Active, ref 1 Fish, Larry, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8, ref 9 chairs RBS Americas, ref 1 criticised, ref 1 pension of, ref 1 Fisher, Mark, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7 at Gogarburn opening, ref 1 moved to ABN Amro, ref 1 Fitch Ratings, ref 1, ref 2 Fleming, Ian, ref 1 Fletcher, Andrew, ref 1 Forbes, ref 1 foreign exchange, ref 1, ref 2 Formula 1, ref 1, ref 2 Fortis, ref 1, ref 2, ref 3 Fountain Workshop, ref 1 Franklyn Resources, ref 1 Freshfields, ref 1 Friedrich, Bill, ref 1, ref 2 Fuld, Dick, ref 1 Gaddafi, Muammar, ref 1 Gartmore, ref 1 GE, ref 1 George II, ref 1 George, Eddie, ref 1, ref 2, ref 3, ref 4 Gibson, Mel, ref 1, ref 2 Gieve, John, ref 1 Giles, Chris, ref 1 Gladiator, ref 1 Glass–Steagall Act, ref 1 global financial crisis, see financial crisis Global Transaction Services, ref 1, ref 2 Glyn, Mills & Co., ref 1, ref 2 Goldman Sachs, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6, ref 7, ref 8, ref 9 Goodwin, Andrew (brother), ref 1 Goodwin, Dale (sister), ref 1 Goodwin, Fred: affair of, ref 1, ref 2, ref 3, ref 4 after RBS, ref 1 and away days, ref 1, ref 2 bailout terms heard by, ref 1 Barclays hated by, ref 1 becomes Clydesdale CEO, ref 1 becomes RBS CEO, ref 1 birth of, ref 1 Brown compared to, ref 1 Brown likes, ref 1 Bush dinner guest, ref 1 and car dealership, ref 1 CDO presentation by, ref 1 at CEOs–Darling meeting, ref 1 at CEOs meeting, ref 1 Chequers invitation to, ref 1 ‘classic bully’, ref 1 cleanliness campaigns of, ref 1 at Clydesdale, see Clydesdale Bank colleagues testify to abilities of, ref 1 cult status of, ref 1 at Darling 2008 meeting, ref 1 Darling visited by (2007), ref 1 document criticises management of, ref 1 early life of, ref 1, ref 2 extraordinary general meeting appearance of, ref 1 face-to-face firing disliked by, ref 1, ref 2, ref 3 first job of, ref 1 fixation on detail by, ref 1, ref 2, ref 3, ref 4, ref 5, ref 6 and Forbes, ref 1 ‘Fred the Shred’ nickname of, ref 1, ref 2, ref 3, ref 4 and FSA, ref 1, ref 2 at Gogarburn opening, ref 1 Harvard study on, ref 1, ref 2 ‘has shut out the world’, ref 1 Hester view of, ref 1 ‘I want to be bigger than J.

The Royal Bank was looking like a tired bit-part player, overly reliant on invoking receding memories of past glories, which had only avoided takeover thanks to a political campaign and the work of the competition authorities. Elsewhere, finance was being revolutionised. The so-called Big Bang, the radical deregulation introduced by Margaret Thatcher’s government in 1986, was designed to allow London to compete properly in a new age of international finance.4 Computerisation swept away the polite old world of the City with its sedate institutions operating, mostly, according to the motto of the Stock Exchange: ‘my word is my bond’, a promise that obscured considerable amounts of skulduggery and some insider trading, meaning trading on privileged information to which the general investor was not privy. With Big Bang, the traditional way in which stockbroking business had been conducted – on the floor of the exchange with buying and selling done verbally and on paper – was replaced by computer trading and various restrictive practices abolished.


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Broken Markets: A User's Guide to the Post-Finance Economy by Kevin Mellyn

banking crisis, banks create money, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, labor-force participation, light touch regulation, liquidity trap, London Interbank Offered Rate, market bubble, market clearing, Martin Wolf, means of production, mobile money, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Ponzi scheme, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, seigniorage, shareholder value, Silicon Valley, statistical model, Steve Jobs, The Great Moderation, the payments system, Tobin tax, too big to fail, transaction costs, underbanked, Works Progress Administration, yield curve, Yogi Berra, zero-sum game

When exchange control came into force in 1939, the Bank had in its sole discretion the right to extend or withdraw a foreign exchange license, the equivalent of a death sentence for banks. Only after the end of exchange control in 1979 was it felt necessary to establish a formal system of regulation presided over by an independent organization—the Financial Services Authority (FSA)—in place of the Bank.This was part of the sweeping series of reforms called Big Bang that came into force in 1986. The old clubby culture of the City of London quickly collapsed as American institutions and practices took over much of UK banking. As a result, the UK financial system balance sheet grew to over five times GDP and came to drive the entire economy, especially greater London. In the wake of the 2008 crisis, which required two trillion-pound banking groups to be bailed out by the government, it is hard to believe that this was a good bargain for the UK taxpayer.

When the bubble was going strong, banks were making major investments in brick-and-mortar Main Street branches, creating jobs and real estate income. This can all go away very quickly. Download from Wow! eBook <www.wowebook.com> Distortion of Bank P & Ls and Balance Sheets Banking is often viewed by the uninformed as the very model and engine of capitalism, which is why critics of capitalism choose to occupy Wall Street and the City of London. Actually, banking has always been in many ways a creature of government and politics. Capitalism demands what the great Austrian economist Josef Schumpeter called “creative destruction.” When markets decide which firms deserve money and which don’t, the latter will fail; and along with the failure of firms, whole communities and thousands of workers may suffer real hardship. However, by trial and error, markets will tend to give capital to new, innovative companies, such as Apple, and take it away from companies with no future, such as GM.

Restriction of Financial Access When the first joint-stock banks (banks owned by shareholders) emerged in the United Kingdom nearly two centuries ago, the established banks were all private partnerships with unlimited liability (the one exception being the Bank of England, which was as a government-backed monopolist a de facto enemy of the privately owned banks and kept out of the clearinghouse). The joint-stock banks were also shunned by the clearinghouse run by the private banks, given their shocking business model: they opened branches where the general public, not just rich City of London merchants and brokers, could open accounts and make payments using checks. The fact that they were public companies allowed them to raise the capital needed to convince the public their money would be safe without unlimited liability and, of course, to put up 63 64 Chapter 3 | The Economic Consequences of Financial Regulation branches on every British High Street.The business proved insanely profitable by the estimates that Bagehot gave in Lombard Street, but banks were very choosy about who was a suitable customer, and they required substantial sums to open an account (the equivalent of three or four years income for the average UK subject).


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An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy by Marc Levinson

affirmative action, airline deregulation, banking crisis, Big bang: deregulation of the City of London, Boycotts of Israel, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, car-free, Carmen Reinhart, central bank independence, centre right, clean water, deindustrialization, endogenous growth, falling living standards, financial deregulation, floating exchange rates, full employment, George Gilder, Gini coefficient, global supply chain, income inequality, income per capita, indoor plumbing, informal economy, intermodal, invisible hand, Kenneth Rogoff, knowledge economy, late capitalism, linear programming, manufacturing employment, new economy, Nixon shock, North Sea oil, oil shock, Paul Samuelson, pension reform, price stability, purchasing power parity, refrigerator car, Right to Buy, rising living standards, Robert Gordon, rolodex, Ronald Coase, Ronald Reagan, Simon Kuznets, statistical model, strikebreaker, structural adjustment programs, The Rise and Fall of American Growth, Thomas Malthus, total factor productivity, unorthodox policies, upwardly mobile, War on Poverty, Washington Consensus, Winter of Discontent, Wolfgang Streeck, women in the workforce, working-age population, yield curve, Yom Kippur War, zero-sum game

Some factories and power plants had contracted to buy natural gas at fixed prices years into the future; if immediate deregulation enticed owners of old wells to bring more gas to market, the average price of gas would fall, and users with fixed-price contracts would be stuck paying far more than their competitors. On the other hand, if the price of new gas were set free but the price of old gas remained capped, owners of old wells might simply shut them rather than selling their gas at below-market prices. Would oil prices fall if price controls went away entirely, or would they rise to the level set by the Persian Gulf exporters? No one could be certain. And what if US natural gas reserves were so depleted that deregulation failed to stimulate new production? In that case, Congress was warned, Americans’ heating bills would soar.15 Instead of abolishing regulation with a single big bang, Congress and four successive presidential administrations would vacillate, acting to encourage drilling while holding down consumer prices and assuring various interests, from farmers to transit systems to chemical manufacturers, that they would have enough energy.

Like Burns, he had propelled himself across a longstanding class divide by the sheer force of brains and ambition. Born in 1915, the son of a Nottingham grocer, Richardson had become head boy at Nottingham High School, a prestigious independent boys’ school, and then won a scholarship to study law at Cambridge. After World War II, he climbed to prominence as a corporate lawyer at a London firm. He was recruited to join J. Henry Schroder & Co., one of the most venerable merchant banks in the City of London, and became chairman in 1962. Known for his immaculate appearance, his regal bearing, and his dry martinis made “the way they mix them in New York,” Richardson built the sleepy family-owned Schroders into the most international of financial institutions, handling mergers and takeover bids from America to Australia. In July 1973, at age fifty-seven, he reached the pinnacle of British public life when Edward Heath, the Conservative prime minister, asked him to become the 116th governor of the Bank of England.2 The world’s oldest central bank, where visitors were greeted by a doorman clad in a pink frock coat and top hat, sat at the heart of the British economy, with extraordinary powers.

On the crisis, see Capie, Bank of England, 531–577; Michael Flanden, “Secondary banks: an end to freewheeling,” Financial Times, December 24, 1973; Margaret Reid, “How the ‘Bankers Lifeboat’ came to the rescue,” Financial Times, January 29, 1974; and Derek Matthews, “London and County Securities: A case study in audit and regulatory failure,” Accounting, Audit and Accountability Journal 18 (2005): 518–536. On legal authority, see the statement by Sir Geoffrey Howe, the minister responsible for fringe banks, in Hansard, House of Commons Debates, December 3, 1973, vol. 865, 909. 6. Paul Thompson, “The Pyrrhic Victory of Gentlemanly Capitalism: The Financial Elite of the City of London, 1945–90, Part 2,” Journal of Contemporary History 32 (1997): 433; Capie, Bank of England, 532, 596–597. 7. Capie, Bank of England, 499–507, 824. 8. Ibid., 605–614. 9. Otmar Emminger, “Probleme der Stabilitätspolitik,” address to the Association of Public Credit Institutions, Frankfurt, November 9, 1973, BA, B102/165947. 10. Henry C. Wallich, “Notes on BIS Meeting of March 11–12, 1974,” March 18, 1974, in Federal Open Market Committee, “Memorandum of Discussion,” March 18–19, 1974, Attachment B; Federal Open Market Committee, “Memorandum of Discussion,” April 15–16, 1974. 11.


Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Pérez

agricultural Revolution, Big bang: deregulation of the City of London, Bob Noyce, Bretton Woods, business cycle, capital controls, commoditize, Corn Laws, creative destruction, David Ricardo: comparative advantage, deindustrialization, distributed generation, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Hyman Minsky, informal economy, joint-stock company, Joseph Schumpeter, knowledge economy, late capitalism, market fundamentalism, new economy, nuclear winter, offshore financial centre, post-industrial society, profit motive, railway mania, Robert Shiller, Robert Shiller, Sand Hill Road, Silicon Valley, Simon Kuznets, South Sea Bubble, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, trade route, tulip mania, Upton Sinclair, Washington Consensus

Steam-powered and refrigerated shipping technology made it possible for her to become a supplier of meat and wheat for Britain and the northern hemisphere. The investment boom that brought the English and the Germans to build railways and ports and to develop the huge expanses of ‘pampas’ created a situation very comparable to the recent Asian boom. The international stock market was awash with stocks and bonds to profit from the South American success story. The City of London even thought Argentina would be the next USA.148 After the crash, it took the Argentinians nearly a decade to half get back on their feet, though the British Central Bank had bailed the Baring Brothers out right away.149 Though it is more complex, an argument could be made to interpret the case of the USA in the 1820s and 1830s as a phenomenon of the same kind. As in the other two cases, the United States, then a peripheral country, also had a booming economy with internal dynamics and intense foreign investment coming from Britain during the installation period of the second great surge.

As represented in Figure 4.1, this frenzy involves an untenable acceleration of the diffusion of the paradigm. The recession creates the conditions for institutional restructuring and for re-routing growth onto a sustainable path. 36 The Propagation of Paradigms: Times of Installation, Times of Deployment Degree of diffusion of the technological revolution Figure 4.1 37 Two different periods in each great surge INSTALLATION PERIOD Turning point DEPLOYMENT PERIOD Time big-bang Next big-bang This chapter takes a broad look at the interrelated technological, economic and institutional changes involved in the process. A. Creative Destruction and Social Polarization Schumpeter’s notion of ‘creative destruction’ aptly portrays the effects of radical innovations. When the core products of a technological revolution start coming together, they inevitably clash with the established environment and the ingrained ways of doing things.

In the next chapter, there will be a brief discussion of what happens in the peripheries and how it contributes to blur the regularities being depicted here. 47 Figure 5.1 Degree of diffusion of the technological revolution 48 big-bang Irruption of the technological revolution Decline of old industries Unemployment Crash Institutional recomposition Intensive investment in the revolution Decoupling of the whole system Polarization of rich and poor Gilded Age Golden Age Coherent growth with increasing externalities Production and employment Next big-bang Time Next Great Surge Socio-political split Last products and industries Market saturation and technological maturity of main industries Disappointment vs. complacency MATURITY DEPLOYMENT PERIOD SYNERGY Turning point Financial bubble time FRENZY Techno-economic split IRRUPTION Previous Great Surge INSTALLATION PERIOD Recurring phases of each great surge in the core countries 48 Technological Revolutions and Financial Capital The Four Basic Phases of Each Surge of Development 49 Before going on, it should be clear that what is being constructed is a heuristic device, not a straitjacket to force upon history.


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The Establishment: And How They Get Away With It by Owen Jones

anti-communist, Asian financial crisis, bank run, battle of ideas, Big bang: deregulation of the City of London, bonus culture, Boris Johnson, Bretton Woods, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, centre right, citizen journalism, collapse of Lehman Brothers, collective bargaining, don't be evil, Edward Snowden, Etonian, eurozone crisis, falling living standards, Francis Fukuyama: the end of history, full employment, G4S, glass ceiling, hiring and firing, housing crisis, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, James Dyson, laissez-faire capitalism, light touch regulation, market fundamentalism, mass immigration, Monroe Doctrine, Mont Pelerin Society, moral hazard, Neil Kinnock, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, old-boy network, open borders, plutocrats, Plutocrats, popular capitalism, profit motive, quantitative easing, race to the bottom, rent control, road to serfdom, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, stakhanovite, statistical model, The Wealth of Nations by Adam Smith, transfer pricing, union organizing, unpaid internship, Washington Consensus, wealth creators, Winter of Discontent

The modern Establishment has been financialized to an unprecedented degree. Above all, the financial sector is a threat to British democracy. Governments have surrendered their economic powers, whether it be through the abandonment of exchange controls or the promotion of deregulation. Through lobbying, political donations and the concentration of so many former City figures at the heart of power, the financial sector wields formidable clout. It sums up the notion of ‘one rule for the elite, another rule for everybody else’. Those who oppose the dominance of this sector face being sidelined and ridiculed. The City of London is surely the Establishment in its purest, undistilled form. 8 The Illusion of Sovereignty The ambitions of the outriders were never confined to Britain’s borders. These are ideologues whose ideas coincided with the interests of corporate power regardless of national boundaries, and their project was always global in scope.

A list of some of the cases of benefit sanctions that have trickled into the press is kept here: http://stupidsanctions.tumblr.com. 2. Andrew Hill, ‘The Urge to Punish all Bankers has Gone Far Enough’, The Financial Times, 25 March 2009. 3. David Kynaston, City of London: The History (London, 2011), p. 422. 4. E. H. H. Green, ‘The Conservatives and the City’, in R. Michie and P. Williamson, The British Government and the City of London in the Twentieth Century (Cambridge, 2011), pp. 171–2. 5. Kynaston, City of London, p. 542. 6. Jonathan Kirshner, Appeasing Bankers: Financial Caution on the Road to War (Princeton, NJ, 2007), p. 165. 7. Kynaston, City of London, p. 544. 8. Earl Aaron Reitan, The Thatcher Revolution: Margaret Thatcher, John Major, Tony Blair and the Transformation of Modern Britain (London, 2002), p. 86. 9. Ibid., pp. 587–9. 10. Ewald Engelen et al., After the Great Complacence: Financial Crisis and the Politics of Reform (Oxford, 2011), p. 147. 11. http://www.nao.org.uk/highlights/taxpayer-support-for-uk-banks-faqs. 12. http://blogs.spectator.co.uk/coffeehouse/2012/08/qe-the-ultimate-subsidy-for-the-rich. 13. http://www.bath.ac.uk/news/2012/10/09/quantitative-easing. 14.

An ambulance operator asked to speak to the police, but officers refused to do so. The initial police story could hardly have been less accurate.5 ‘I sat in the police station in the City of London on the 8th of April, eight days after he’d died,’ says Jules Carey. ‘I listened to the City of London investigator claiming that the dog bite on Tomlinson’s leg was probably glass thrown by protesters, or that the baton mark on his leg was probably caused by baton handles belonging to the protesters. He claimed that protesters had stolen police officers’ uniforms, and he wasn’t ruling out the assault on Tomlinson being a protester.’ Initially, the City of London coroner Paul Matthews appointed Dr Freddy Patel to conduct a post-mortem on Tomlinson’s body. The conclusion was that Tomlinson had died of coronary artery disease.


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The Flat White Economy by Douglas McWilliams

"Robert Solow", access to a mobile phone, banking crisis, Big bang: deregulation of the City of London, bonus culture, Boris Johnson, Chuck Templeton: OpenTable:, cleantech, cloud computing, computer age, correlation coefficient, Edward Glaeser, en.wikipedia.org, Erik Brynjolfsson, eurozone crisis, George Gilder, hiring and firing, income inequality, informal economy, Kickstarter, knowledge economy, loadsamoney, low skilled workers, mass immigration, Metcalfe’s law, Network effects, new economy, offshore financial centre, Pareto efficiency, Peter Thiel, Productivity paradox, Robert Metcalfe, Silicon Valley, smart cities, special economic zone, Steve Jobs, working-age population, zero-sum game

Because of the historic importance of property in the London economy,1 it took nearly a decade to work off the excess supply of commercial property in central London and re-establish growth in that sector. But the dominant factor in the economic history of London in this period was the rise of financial services following the “Big Bang” – the deregulation of financial markets in October 1986. Oddly, I was there right at the beginning of the Big Bang. In a rare invitation to 10 Downing Street in the mid-1980s I had my longest ever conversation with Margaret Thatcher, to which my contribution was only three words – “Yes, Prime Minister”. She then left me to cuddle up on a sofa with Sir Nicholas Goodison. Sir Nicholas was then the Chairman of the Stock Exchange, hence the critical figure in the bonfire of regulations that created the Big Bang for London’s financial service industry, that explosion of financial service activity in London. Sir Nicholas was a very straight-laced figure who seemed to shrink further and further into the sofa as the Prime Minister flirted with him.

I was amused that someone as powerful as the Prime Minister was prepared to use feminine wiles to get what she wanted. It had become clear to me while analysing the statistics that, since the Big Bang, London underwent an economic growth to rival the mega-growth of Far East economies. I called it the “Tiger Economy on the Thames”. London’s growth continued until 2007; indeed, for the entire period from 1997–2007, London’s economy grew at an annual rate of 6.2% in cash terms. With inflation averaging perhaps 2% over the period this meant real GDP growth grew at an annual rate of over 4% – fast enough to rival Far East economies. This growth was underpinned by the City of London: the number of “City jobs” rose from a plateau of 170,000 in the mid-1980s to a peak of 230,000 in 1989; it collapsed to 190,000 in 1993; but it had recovered to over 350,000 by 2007.2 As the number of jobs increased, so did the money on the payslips.

As early as 2007, Cebr identified for the Corporation of London a potential symbiotic relationship between the City and its fringes. The City Fringes are defined as the boroughs neighbouring the City of London – Camden, Hackney, Islington, Lambeth, Southwark, Newham and Tower Hamlets. In 2007 they all had unemployment substantially above the London average.5 Moreover, all these boroughs were in the top 25 most deprived of the 354 boroughs (or equivalent) in the UK; this was measured by using the government’s Index of Multiple Deprivation.6 But even then these areas benefited from £1.8 billion of spending from businesses and organisations based in the City of London, with advertising being the largest single area and market research, computer services and auxiliary financial services also contributing. This proved to be the basis of the burgeoning digital economy.


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When the Iron Lady Ruled Britain by Robert Chesshyre

Berlin Wall, Big bang: deregulation of the City of London, British Empire, corporate raider, deskilling, Etonian, Fall of the Berlin Wall, financial deregulation, full employment, housing crisis, manufacturing employment, mass immigration, means of production, Neil Kinnock, North Sea oil, oil rush, plutocrats, Plutocrats, Right to Buy, Ronald Reagan, school choice, Silicon Valley, the market place, trickle-down economics, union organizing, wealth creators, young professional

(Although he added the caution that further cuts in supplementary benefits might yet reduce the poor to the dire straits of the past.) Was the renewed fascination, he suggested, because – despite the brave new world apparently emerging from the ‘Big Bang’ in the City of London – the more probable future for most of us lay here in the north where the post-industrial age had already dawned? Two Swiss television teams had recently been in the region pursuing just this thesis. It seemed unlikely to the bishop that money could perpetually breed money in the way it appeared to in the City of London. In this the bishop is in tune with his flock: an Easington miner said: ‘We can’t all live on services like tourism, like those buggers in Spain.’ The bishop himself had just heard of what he considered the ultimate unproductive service industry – a company set up in London to deliver takeaway food from restaurants to diners too idle to go themselves.

Other crucial skilled people – accountants, scientists and surveyors – were being drained away from public service by Big Bang. The report concluded: ‘Analysis shows that salary is one of the reasons for withdrawal given by half of all respondents in the specialist areas.’ In simple English, the Civil Service no longer paid enough, and old-fashioned rewards, like the satisfaction derived from duty, failed to compensate as they once had for comparative poverty. But, as in any gold rush, alongside the admirable entrants, Big Bang drew in those whose avarice outstripped their judgement and morality. Oddly, perhaps, it was an upmarket ‘bookmaker’ who first blew the whistle from inside the Square Mile of the City of London. Christopher Hales, who – after a brief period as a professional golfer – had started in the City as a stock jobber and had been a commodity broker, ran an outfit called City Index, which offered odds on, among other things, the movement of the Financial Times and Wall Street indices.

Those less enamoured with the theory call it ‘trickle-down’ economics, and are frequently cynical about how far the trickle reaches. Supply-siders consider that ‘trickle-downers’ suffer from a further condition – ‘the politics of envy’. The consequence of the new philosophy appeared to be the unabashed spending of money, and rewards for certain classes of people that so distorted the value system that they threatened social stability: while young nurses lived on ‘peanuts’, the City of London’sBig Bang’ had propelled a not particularly productive class of young person towards six-figure salaries; while a civil engineer might earn £15,000 a year, a foreign-currency dealer, without any formal qualifications, could earn ten times that much. These were not, as some of the defenders of these high salaries argued, special people like sports or pop stars, but people with quick wits and fairly readily acquired trading skills.


pages: 261 words: 86,905

How to Speak Money: What the Money People Say--And What It Really Means by John Lanchester

asset allocation, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamonds, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, commoditize, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, financial innovation, Flash crash, forward guidance, Gini coefficient, global reserve currency, high net worth, High speed trading, hindsight bias, income inequality, inflation targeting, interest rate swap, Isaac Newton, Jaron Lanier, joint-stock company, joint-stock limited liability company, Kodak vs Instagram, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, negative equity, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, plutocrats, Plutocrats, Ponzi scheme, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Right to Buy, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Jobs, survivorship bias, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trickle-down economics, Washington Consensus, wealth creators, working poor, yield curve

I think Great Recession about covers it. deregulation The process of ripping up rules, and the main demand of the financial world in the Anglo-American world for about thirty years. The financiers got what they wanted, culminating in measures such as the repeal of the Glass-Steagall Act separating retail and investment banking in the United States, and the “Big Bangderegulating the City of London in October 1986. The momentum behind deregulation grew to such an extent that in the case of newly invented financial derivatives, the industry was able successfully to lobby Congress to pass a law, the Commodity Futures Modernization Act, which prohibited the making of any laws to regulate the new inventions. In other words, not just deregulation, but an outright ban on any regulation in the future. The idea behind deregulation was that markets could do a better job of regulating themselves than regulations ever could.

And then the two things converged, as things sometimes do. The editor of the London Review of Books, Mary-Kay Wilmers, called me up and suggested that I do “one of my pieces about companies” about banks; as it happened that was exactly what I had just started to think about for the purposes of my novel. I’d realized that you can’t really write about London without starting to take an interest in the City of London, because finance is so central to the place London has become. So that was how I ended up getting my education in the language of money: by following the subject in order to write about it. It wasn’t a crash course; I didn’t immerse myself in it up to the eyeballs and try and ingest every single detail about economics in one go. Instead I just followed it, for years, by reading the financial papers and financial pages, and following the economic news.

It’s impossible for an outsider to know for sure, but if you’re a hedge fund, and you own a lot of something, and plan to sell it, you will hedge your position and try to make money if the market moves against you. If you get the hedge wrong, and prices move outside the limits you’ve allowed for, you can end up losing a lot of money. My hunch would be that something like that happened to Armanjaro. Remember, pretty much all hedge funds close or go broke; this is just an unusually vivid example. City of London A term often used as a metonymy for the UK’s financial services industry, equivalent to “Wall Street” in the United States. As it happens, most of the people who work in the financial services in the UK don’t work in London at all; even the ones who work “in the City” often don’t work in the City but at, say, Canary Wharf (whose inhabitants include Barclays, Citigroup, HSBC, JPMorgan Chase) or Mayfair (which is where the hedge funds tend to be).


pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Boris Johnson, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, disruptive innovation, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, starchitect, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

A recent study found that 60 percent of the increased share in income of the top 10 percent went to bankers—meaning that nearly two-thirds of the enrichment of the earners at the top was driven by the City of London. As in the United States, the gains are skewed to the very tip of the pyramid: among the financiers who are part of Britain’s top 1 percent, the top 5 percent (or 0.05 percent of workers overall) take 23 percent of the total wages of that gilded slice of the population. The dominance of top dogs in finance is even stronger than that of the 0.05 percent in other jobs. — One reason the preeminence of the financiers within the global super-elite matters is that it highlights how crucial financial deregulation has been to the emergence of the plutocracy. That story has been told most convincingly in a historical study published in 2011 by economists Thomas Philippon and Ariell Reshef.

In the knowledge economy, more and more professions use a laptop rather than a steam engine, and that means that the superstars in these fields are earning ever greater rewards. The intellectuals are on the road to class power. THE STREET AND THE SUPERSTARS The biggest winners are the bankers. They did well enough, to be sure, in the industrial revolution. They were among that era’s plutocrats—think J. P. Morgan in New York, or Siegmund Warburg in the City of London. But these were the owners of capital. Their employees, the salaried financial professionals, weren’t nearly as richly rewarded. Their job was just to keep score. In the postwar era, with the steady rise of the knowledge economy, the bankers’ role has been dramatically transformed. Instead of working for the owners of capital—whether they are industrial magnates or the shareholders of publicly traded companies—financiers have discovered they can themselves own the capital and, with it, the companies.

Which is why the real story of Kryvorizhstal isn’t the successful multibillion-dollar sale of a Ukrainian steel mill to an Indian magnate, it is how it dramatizes the vast giveaway of the rest of the assets of the former Soviet Union. That shift from state to private ownership is probably the single largest transfer of assets in human history. When it comes to the creation of twenty-first-century billionaires, the USSR’s sale of the century is also the most powerful driver, more important than Silicon Valley’s technology revolution or the flourishing of finance on Wall Street and in the City of London. Just consider: of the 1,226 billionaires on the Forbes 2012 rich list, 111 were oligarchs from the former Soviet Union, 90 were technologists, and 77 were financiers. The number of billionaires relative to the size of the economy and the gap between the billionaires and everyone else are even more striking: The fortunes of Russia’s billionaires could buy roughly a fifth of the country’s annual economic output.


pages: 207 words: 86,639

The New Economics: A Bigger Picture by David Boyle, Andrew Simms

Asian financial crisis, back-to-the-land, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, carbon footprint, clean water, collateralized debt obligation, colonial rule, Community Supported Agriculture, congestion charging, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delayed gratification, deskilling, en.wikipedia.org, energy transition, financial deregulation, financial exclusion, financial innovation, full employment, garden city movement, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, Kickstarter, land reform, light touch regulation, loss aversion, mega-rich, microcredit, Mikhail Gorbachev, mortgage debt, neoliberal agenda, new economy, North Sea oil, Northern Rock, offshore financial centre, oil shock, peak oil, pensions crisis, profit motive, purchasing power parity, quantitative easing, Ronald Reagan, seigniorage, Simon Kuznets, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trickle-down economics, Vilfredo Pareto, Washington Consensus, wealth creators, working-age population

Those who grew up with George Orwell’s novel with that year as its title looked ahead to 1984 as a symbol of everything that could go wrong with society – and with the hope that the world might be different from that experienced by Big Brother and Winston Smith. In the event, there were certainly convulsions enough – the British Miners’ Strike, the emergence of Mikhail Gorbachev and the arrival in the UK of cruise missiles. There was the Greenham Common Women’s Peace Camp, and the start of the countdown towards the Big Bang deregulation in the City of London, and the wild worldwide speculation that we have become used to since. There was no one Big Brother, but there was – in a sense – a series of them. They were the six Big Brothers and one Big Sister of the G7, the leaders of the seven richest industrial countries of the A BRIEF HISTORY OF THE NEW ECONOMICS 23 world, whose increasingly influential summit meetings every summer presumed to decide the economic future of the planet.

But if they had peered out of the window of that tower, and if the politicians do now, they might be forced to ask themselves why the system requires huge indebtedness, from rich to poor, just to chug on. Nearly all the money in circulation was created in the form of bank loans: under the current system we need these loans in order to have the money to exchange goods and services. And since most of that money began as mortgages, we need them – in this sense at least – in order to survive. There is also the peculiar irrelevance to real life of this bizarre dance in Wall Street and the City of London, justified by their occasional ability to raise loans for productive expansion, but actually leaching vast fees and bonuses from the income of savers, pensioners, insurance payers and taxpayers. And behind that, there is a more fundamental problem: this global financial system, underpinning all our lives yet increasingly disconnected from real life, accelerates $3 trillion through the system every day, nearly 90 per cent of which is speculation, mostly speculation in the foreign exchange markets.9 We find ourselves colluding in that system through our savings, pensions and credit card debts, but it has nothing to do with the job that the financial system is supposed to do – to facilitate the exchange of goods and services, to make capital available for people so that they can create productive businesses in the future. 8 THE NEW ECONOMICS The money system is no longer designed for this basic work of economics.

Escos, or energy service companies, contract with a city, or housing developer or hospital, for example, to install energy efficient technology. The city gets the equipment and the Esco gets paid back from a share of the energy savings that result. The Esco idea was developed mainly in eastern Europe to deal with the need for urgent investment after 1989. And in the UK, once again, it was Woking that took the lead. And once again, it was Danish investors, rather than their conservative equivalents in the City of London, who put up the money. Woking’s Esco began by building a co-generation plant in the town centre – cogeneration means combined heat and power – which now powers local businesses, car parks and events centres, as well as the council’s offices and leisure centre. Public housing and old people’s homes are getting photovoltaic cells and the council’s vehicle fleet is being converted to liquid natural gas.


pages: 309 words: 85,584

Nine Crises: Fifty Years of Covering the British Economy From Devaluation to Brexit by William Keegan

banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, British Empire, capital controls, congestion charging, deindustrialization, Donald Trump, Etonian, eurozone crisis, Fall of the Berlin Wall, financial innovation, financial thriller, floating exchange rates, full employment, gig economy, inflation targeting, Just-in-time delivery, light touch regulation, liquidity trap, Martin Wolf, moral hazard, negative equity, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, oil shock, Parkinson's law, Paul Samuelson, pre–internet, price mechanism, quantitative easing, Ronald Reagan, school vouchers, short selling, South Sea Bubble, The Chicago School, transaction costs, tulip mania, Winter of Discontent, Yom Kippur War

Bill White, then chief economist at the Bank for International Settlements in Basle, issued many a warning, reported by, among others, Martin Wolf of the Financial Times and, indeed, by me in The Observer. Unfortunately, the supposed wonders of deregulation were all the rage, and the consensus and herd instinct ruled. There was a notorious remark by Chuck Prince of Citibank that, even if problems were on the horizon, participants just had to ‘keep dancing’. At which point, I should like to pay a tribute to the late Margaret Reid, who was a colleague of mine on the FT in the 1970s, and whose book on the 1986 Big Bang, All Change in the City, published in 1988, was remarkably perceptive about the likely deleterious consequences of rampant deregulation. She was especially concerned about the fact that ‘the money washing through the currency markets is now thirty or more times the scale of underlying trade and invisibles business’.

The decisions and policy advice of the Chancellor are dependent on the talent and accumulated wisdom of the Treasury, as well as other Whitehall departments with a direct interest in the economy, and the Bank of England. Then there are the channels which flow into this sea of advice: the various pressure groups such as the Confederation of British Industry (CBI) and the Trades Union Congress (TUC); trade associations and chambers of commerce; major industrial corporations, whose bosses are seldom reticent in promulgating their views of what is good for the rest of the economy; and the City of London, with its view of what the financial markets want from economic policy – or what they are prepared to put up with. It is by now generally accepted that the financial sector – bankers! – exercised far too much sway over policy-making in the run-up to the 2007–08 financial crash. In the background are the individual economic departments – the ultimate suppliers of formal and informal economic advisers – and a proliferation of think tanks, not to say commentators and contributors to the media.

Such ‘fuddy-duddy’ conservative practices went out of fashion under the Thatcher market reforms of the 1980s. Then came the fall of the Berlin Wall in 1989, the collapse of the Soviet Union in 1991, and the unleashing of an extreme free market approach, which I like to think I warned about in my book The Spectre of Capitalism. The banking crisis was the apotheosis of this trend. The invasion of the City of London by American investment banks had imported a new culture – harder working, longer hours, bigger risks and absurdly high rewards for what was deemed to be successful trading. The raison d’être of the financial district had once been to serve the interests of business, industry and ordinary people. Unfortunately, a large gulf had emerged between banks and their customers – not all banks, I hasten to add, but there was sufficient corrosion of traditional values for the more flamboyant banker to lose touch with reality.


pages: 457 words: 125,329

Value of Everything: An Antidote to Chaos The by Mariana Mazzucato

"Robert Solow", activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, bank run, banks create money, Basel III, Berlin Wall, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, business cycle, butterfly effect, buy and hold, Buy land – they’re not making it any more, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, cleantech, Corn Laws, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, debt deflation, European colonialism, fear of failure, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, full employment, G4S, George Akerlof, Google Hangouts, Growth in a Time of Debt, high net worth, Hyman Minsky, income inequality, index fund, informal economy, interest rate derivative, Internet of things, invisible hand, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, laissez-faire capitalism, light touch regulation, liquidity trap, London Interbank Offered Rate, margin call, Mark Zuckerberg, market bubble, means of production, money market fund, negative equity, Network effects, new economy, Northern Rock, obamacare, offshore financial centre, Pareto efficiency, patent troll, Paul Samuelson, peer-to-peer lending, Peter Thiel, profit maximization, quantitative easing, quantitative trading / quantitative finance, QWERTY keyboard, rent control, rent-seeking, Sand Hill Road, shareholder value, sharing economy, short selling, Silicon Valley, Simon Kuznets, smart meter, Social Responsibility of Business Is to Increase Its Profits, software patent, stem cell, Steve Jobs, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, transaction costs, two-sided market, very high income, Vilfredo Pareto, wealth creators, Works Progress Administration, zero-sum game

Under the Heath government in 1971, the UK adopted a temporary policy known as ‘Competition and Credit Control', whereby quantitative ceilings on bank lending were lifted and reserve ratios for commercial banks were reduced.16 In 1978 minimum commissions were abolished on the New York Stock Exchange, clearing the way for competition and higher trading volumes. A year later, the Thatcher government in the UK abolished exchange controls. Then, in 1986, Big Bang financial reforms in the City of London did away with fixed commissions for buying and selling shares on the London Stock Exchange, allowed foreigners to own a majority stake in UK stockbrokers, and introduced dual capacity which allowed market makers to be brokers and vice versa. Most of London's stockbroking and marketmaking firms were absorbed by much bigger foreign and domestic banks. In the late 1990s, supercharged by the IT revolution, the volume of securities trading rocketed.

From the 1980s onwards the financial sector was on a mission to convince governments that it was productive. In the minds of policymakers, finance had become an increasingly productive industry, an idea they were keen to convey to the public. Strange as it might seem now, policymakers largely ignored the danger of financial turmoil. Only a few years after his 2004 Mansion House speech, in which he paid fulsome tribute to the productivity of the City of London's financial and business elite, then Labour Chancellor of the Exchequer Gordon Brown voiced the hubris which financiers, regulators, politicians and many economists shared when the economy was still apparently robust. In his 2007 Budget Statement, months before the first signs of the coming crash appeared on the horizon, Brown solemnly declared (not for the first time): ‘We will not return to the old boom and bust.'

That’s why the Glass-Steagall Act and its counterparts elsewhere, forcing banks to choose between taking customer deposits or playing the markets, was so unpopular in banking circles, and why they celebrated its repeal at the turn of the twenty-first century. The move into investment banking was made more attractive by other aspects of financial deregulation. It enabled investment banks to poach some of the commercial banks’ most profitable clients: large businesses which could finance investment by issuing bonds rather than taking bank loans, and high-net-worth individuals seeking private wealth management. And it opened up a range of new financial markets for investment banks to gamble on, trading instruments which had long been known about but which past regulations had effectively banned. Two classes of financial instrument in particular were made available to investors by deregulation from the 1970s onwards, and were central to the subsequent massive growth in financial transactions and profitability. These were derivatives, contracts on the future delivery of a financial instrument or commodity which allowed investors to make bets on their price movement; and securitizations, bundles of income-yielding instruments that turned these into tradable securities (and enabled their inclusion in derivative contracts).


pages: 317 words: 71,776

Inequality and the 1% by Danny Dorling

Affordable Care Act / Obamacare, banking crisis, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Boris Johnson, Branko Milanovic, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, centre right, collective bargaining, conceptual framework, corporate governance, credit crunch, David Attenborough, David Graeber, delayed gratification, Dominic Cummings, double helix, Downton Abbey, en.wikipedia.org, Etonian, family office, financial deregulation, full employment, Gini coefficient, high net worth, housing crisis, income inequality, land value tax, longitudinal study, low skilled workers, lump of labour, mega-rich, Monkeys Reject Unequal Pay, Mont Pelerin Society, mortgage debt, negative equity, Neil Kinnock, Occupy movement, offshore financial centre, plutocrats, Plutocrats, precariat, quantitative easing, race to the bottom, Robert Shiller, Robert Shiller, TaskRabbit, The Spirit Level, The Wealth of Nations by Adam Smith, trickle-down economics, unpaid internship, very high income, We are the 99%, wealth creators, working poor

That resistance is spreading, and is expressed in many ways, from street demonstrations to the graffiti and other art of the Occupy movement. London is where financial deregulation began, in the 1980s. It is London that benefited most, and it is in London that those with some of the greatest debts now reside. London is home to most of the 1 per cent, most of the rest of whom live just a short distance away from the capital. London’s financial markets were constrained between 1929 and 1978, just as they were in the US, when the 1 per cent was forced to become more normal (see Figure 3.5). Since those constraints were lifted, on both sides of the Atlantic, the very rich have become richer and everyone else’s lives more precarious. Leepower In it together? Occupy London 2011 The City of London’sBig Bang’ took place in 1986, with extensive government deregulation of the UK’s financial markets. Top-paid employees have secured a doubling of their income since then, only to trail way behind the ‘top’ bankers and similar members of the 1 per cent who have received so much more than the average top-paid employee.

This duo recently explained how the power of people at the bottom of the income distribution has been smashed in recent decades, while the power of those at the top has accelerated away.3 They also showed that the better-off have secured high salaries largely by ‘licensing’ their work, so that only a small number of people are said to be qualified enough to carry it out. Since 1979, two-thirds of all the gains in income made by the top tenth of earners in the UK have been taken by the top 1 per cent alone. In the UK these are far more likely to be bankers than in the US because, compared to their respective national economies, the City of London is much bigger than Wall Street.4 This matters because financiers have started to use qualifications as a means to try to legitimise their take, including securing masters of business administration degrees (MBAs). It is the young who tend to dominate in low-paid, unlicensed jobs. In 1993 7 per cent of employed young women between sixteen and twenty-four worked in low-paid, low-skilled jobs in the UK, but by 2013 that had increased to 21 per cent.

Perhaps higher-than-average testosterone levels help, but the UK’s men are unlikely to have a much higher than average level of that hormone; and there are artificial stimulants too. A few months before the Times told us how lucky we were to have so many extraordinarily well-paid bankers in our midst, the Sunday Times had reported that it had been bankers using cocaine who had got us into this terrible mess.32 Verso/Leo Hollis The City of London: expanding its horizon When they were later interviewed about the 2008 crash, UK bankers said they had become ‘over-confident’ and ‘took more risks’, leading to the meltdown. The biggest gamblers of all, in the US, took the most cocaine. People like Bernie Madoff, once described as a financial genius and then lampooned in the tabloids, worked from an office described as ‘the north pole’ – because it contained so much white powder.33 Cocaine is the drug of the 1 per cent and of inequality.


pages: 368 words: 32,950

How the City Really Works: The Definitive Guide to Money and Investing in London's Square Mile by Alexander Davidson

accounting loophole / creative accounting, algorithmic trading, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Big bang: deregulation of the City of London, buy and hold, capital asset pricing model, central bank independence, corporate governance, Credit Default Swap, dematerialisation, discounted cash flows, diversified portfolio, double entry bookkeeping, Edward Lloyd's coffeehouse, Elliott wave, Exxon Valdez, forensic accounting, global reserve currency, high net worth, index fund, inflation targeting, intangible asset, interest rate derivative, interest rate swap, John Meriwether, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Nick Leeson, North Sea oil, Northern Rock, pension reform, Piper Alpha, price stability, purchasing power parity, Real Time Gross Settlement, reserve currency, Right to Buy, shareholder value, short selling, The Wealth of Nations by Adam Smith, transaction costs, value at risk, yield curve, zero-coupon bond

This removed a restriction on the rise of sterling that had been in force since 1939. UK institutional investors started adding substantially to their overseas investments, although mostly through foreign brokers. _________________________________________ THE CITY OF LONDON 7  In the 1980s, the London Stock Exchange (LSE) was the unrivalled leader among European exchanges. In July 1983, it came to a historic agreement with the government to abolish fixed commission rates and single capacity in stockbrokers, a move intended to make them more competitive. The changes came into force on 27 October 1986, and were known as Big Bang. The jobber had been a wholesaler of stock to the broker but was suddenly made obsolete. In came broker dealers, whose role merged the previous responsibilities of the jobber and broker, and market makers. Overseas securities firms could for the first time become members of the LSE, and trading on the floor of the Exchange was replaced with the screen-based Stock Exchange Automated Quotations (SEAQ) system.

Index 419 fraud 204 9/11 terrorist attacks 31, 218, 242, 243, 254, 257 Abbey National 22 ABN AMRO 103 accounting and governance 232–38 scandals 232 Accounting Standards Board (ASB) 236 administration 17 Allianz 207 Alternative Investment Market (AIM) 44–45, 131, 183, 238 Amaranth Advisors 170 analysts 172–78 fundamental 172–74 others 177–78 Spitzer impact 174–75 technical 175–77 anti-fraud agencies Assets Recovery Agency 211–13 City of London Police 209 Financial Services Authority 208 Financial Crime and Intelligence Division 208 Insurance Fraud Bureau 209 Insurance Fraud Investigators Group 209 International Association of Insurance Fraud Agencies 207, 210, 218 National Criminal Intelligence Service 210 Serious Fraud Office 213–15 Serious Organised Crime Agency 210–11 asset finance 24–25 Association of Investment Companies 167 backwardation 101 bad debt, collection of 26–28 Banco Santander Central Hispano 22 Bank for International Settlements (BIS) 17, 27, 85, 98, 114 bank guarantee 23 Bank of Credit and Commerce International (BCCI) 10, 214 Bank of England 6, 10–17 Court of the 11 credit risk warning 98 framework for sterling money markets 81 Governor 11, 13, 14 history 10, 15–16 Inflation Report 14 inflation targeting 12–13 interest rates and 12 international liaison 17 lender of last resort 15–17 Market Abuse Directive (MAD) 16 monetary policy and 12–15 Monetary Policy Committee (MPC) 13–14 Open-market operations 15, 82 repo rate 12, 15 role 11–12 RTGS (Real Time Gross Settlement) 143 statutory immunity 11 supervisory role 11 Bank of England Act 1988 11, 12 Bank of England Quarterly Model (BEQM) 14 Banking Act 1933 see Glass-Steagall Act banks commercial 5 investment 5 Barclays Bank 20 Barings 11, 15, 68, 186, 299 Barlow Clowes case 214 Barron’s 99 base rate see repo rate Basel Committee for Banking Supervision (BCBS) 27–28 ____________________________________________________ INDEX 303 Basel I 27 Basel II 27–28, 56 Bear Stearns 95, 97 BearingPoint 97 bill of exchange 26 Bingham, Lord Justice 10–11 Blue Arrow trial 214 BNP Paribas 145, 150 bond issues see credit products book runners 51, 92 Borsa Italiana 8, 139 bps 90 British Bankers’ Association 20, 96, 97 building societies 22–23 demutualisation 22 Building Societies Association 22 Capital Asset Pricing Model (CAPM) see discounted cash flow analysis capital gains tax 73, 75, 163, 168 capital raising markets 42–46 mergers and acquisitions (M&A) 56–58 see also flotation, bond issues Capital Requirements Directive 28, 94 central securities depository (CSD) 145 international (ICSD) 145 Central Warrants Trading Service 73 Chancellor of the Exchequer 12, 13, 229 Chicago Mercantile Exchange 65 Citigroup 136, 145, 150 City of London 4–9 Big Bang 7 definition 4 employment in 8–9 financial markets 5 geography 4–5 history 6–7 services offered 4 world leader 5–6 clearing 140, 141–42 Clearing House Automated Payment System (CHAPS) 143 Clearstream Banking Luxembourg 92, 145 commercial banking 5, 18–28 bad loans and capital adequacy 26–28 banking cards 21 building societies 22–23 credit collection 25–26 finance raising 23–25 history 18–19 overdrafts 23 role today 19–21 commodities market 99–109 exchange-traded commodities 101  fluctuations 100 futures 100 hard commodities energy 102 non-ferrous metals 102–04 precious metal 104–06 soft commodities cocoa 107 coffee 106 sugar 107 Companies Act 2006 204, 223, 236 conflict of interests 7 consolidation 138–39 Consumer Price Index (CPI) 13 contango 101 Continuous Linked Settlement (CLS) 119 corporate governance 223–38 best practice 231 Cadbury Code 224 Combined Code 43, 225 compliance 230 definition 223 Directors’ Remuneration Report Regulations 226 EU developments 230 European auditing rules 234–35 Greenbury Committee 224–25 Higgs and Smith reports 227 International Financial Reporting Standards (IFRS) 237–38 Listing Rules 228–29 Model Code 229 Myners Report 229 OECD Principles 226 operating and financial review (OFR) 235– 36 revised Combined Code 227–28 Sarbanes–Oxley Act 233–34 Turnbull Report 225 credit cards 21 zero-per-cent cards 21 credit collection 25–26 factoring and invoice discounting 26 trade finance 25–26 credit derivatives 96–97 back office issues 97 credit default swap (CDS) 96–97 credit products asset-backed securities 94 bonds 90–91 collateralised debt obligations 94–95 collateralised loan obligation 95 covered bonds 93 equity convertibles 93 international debt securities 92–93  304 INDEX ____________________________________________________ junk bonds 91 zero-coupon bonds 93 credit rating agencies 91 Credit Suisse 5, 136, 193 CREST system 141, 142–44 dark liquidity pools 138 Debt Management Office 82, 86 Department of Trade and Industry (DTI) 235, 251, 282 derivatives 60–77 asset classes 60 bilateral settlement 66 cash and 60–61 central counterparty clearing 65–66 contracts for difference 76–77, 129 covered warrants 72–73 futures 71–72 hedging and speculation 67 on-exchange vs OTC derivatives 63–65 options 69–71 Black-Scholes model 70 call option 70 equity option 70–71 index options 71 put option 70 problems and fraud 67–68 retail investors and 69–77 spread betting 73–75 transactions forward (future) 61–62 option 62 spot 61 swap 62–63 useful websites 75 Deutsche Bank 136 Deutsche Börse 64, 138 discounted cash flow analysis (DCF) 39 dividend 29 domestic financial services complaint and compensation 279–80 financial advisors 277–78 Insurance Mediation Directive 278–79 investments with life insurance 275–76 life insurance term 275 whole-of-life 274–75 NEWICOB 279 property and mortgages 273–74 protection products 275 savings products 276–77 Dow theory 175 easyJet 67 EDX London 66 Egg 20, 21 Elliott Wave Theory 176 Enron 67, 114, 186, 232, 233 enterprise investment schemes 167–68 Equiduct 133–34, 137 Equitable Life 282 equities 29–35 market indices 32–33 market influencers 40–41 nominee accounts 31 shares 29–32 stockbrokers 33–34 valuation 35–41 equity transparency 64 Eurex 64, 65 Euro Overnight Index Average (EURONIA) 85 euro, the 17, 115 Eurobond 6, 92 Euroclear Bank 92, 146, 148–49 Euronext.liffe 5, 60, 65, 71 European Central Bank (ECB) 16, 17, 84, 148 European Central Counterparty (EuroCCP) 136 European Code of Conduct 146–47, 150 European Exchange Rate Mechanism 114 European Harmonised Index of Consumer Prices 13 European Union Capital Requirements Directive 199 Market Abuse Directive (MAD) 16, 196 Market in Financial Instruments Directive (MiFID) 64, 197–99 Money Laundering Directive 219 Prospectus Directive 196–97 Transparency Directive 197 exchange controls 6 expectation theory 172 Exxon Valdez 250 factoring see credit collection Factors and Discounters Association 26 Fair & Clear Group 145–46 Federal Deposit Insurance Corporation 17 Federation of European Securities Exchanges 137 Fighting Fraud Together 200–01 finance, raising 23–25 asset 24–25 committed 23 project finance 24 recourse loan 24 syndicated loan 23–24 uncommitted 23 Financial Action Task Force on Money Laundering (FATF) 217–18 financial communications 179–89 ____________________________________________________ INDEX 305 advertising 189 corporate information flow 185 primary information providers (PIPs) 185 investor relations 183–84 journalists 185–89 public relations 179–183 black PR’ 182–83 tipsters 187–89 City Slickers case 188–89 Financial Ombudsman Service (FOS) 165, 279–80 financial ratios 36–39 dividend cover 37 earnings per share (EPS) 36 EBITDA 38 enterprise multiple 38 gearing 38 net asset value (NAV) 38 price/earnings (P/E) 37 price-to-sales ratio 37 return on capital employed (ROCE) 38 see also discounted cash flow analysis Financial Reporting Council (FRC) 224, 228, 234, 236 Financial Services Act 1986 191–92 Financial Services Action Plan 8, 195 Financial Services and Markets Act 2001 192 Financial Services and Markets Tribunal 94 Financial Services Authority (FSA) 5, 8, 31, 44, 67, 94, 97, 103, 171, 189, 192–99 competition review 132 insurance industry 240 money laundering and 219 objectives 192 regulatory role 192–95 powers 193 principles-based 194–95 Financial Services Compensation Scheme (FSCS) 17, 165, 280 Financial Services Modernisation Act 19 financial services regulation 190–99 see also Financial Services Authority Financial Times 9, 298 First Direct 20 flipping 53 flotation beauty parade 51 book build 52 early secondary market trading 53 grey market 52, 74 initial public offering (IPO) 47–53 pre-marketing 51–52 pricing 52–53 specialist types of share issue accelerated book build 54  bought deal 54 deeply discounted rights issue 55 introduction 55 placing 55 placing and open offer 55 rights issues 54–55 underwriting 52 foreign exchange 109–120 brokers 113 dealers 113 default risk 119 electronic trading 117 exchange rate 115 ICAP Knowledge Centre 120 investors 113–14 transaction types derivatives 116–17 spot market 115–16 Foreign Exchange Joint Standing Committee 112 forward rate agreement 85 fraud 200–15 advanced fee frauds 204–05 boiler rooms 201–04 Regulation S 202 future regulation 215 identity theft 205–06 insurance fraud 206–08 see also anti-fraud agencies Fraud Act 2006 200 FTSE 100 32, 36, 58, 122, 189, 227, 233 FTSE 250 32, 122 FTSE All-Share Index 32, 122 FTSE Group 131 FTSE SmallCap Index 32 FTSE Sterling Corporate Bond Index 33 Futures and Options Association 131 Generally Accepted Accounting Principles (GAAP) 237, 257 gilts 33, 86–88 Giovanni Group 146 Glass-Steagall Act 7, 19 Global Bond Market Forum 64 Goldman Sachs 136 government bonds see gilts Guinness case 214 Halifax Bank 20 hedge funds 8, 77, 97, 156–57 derivatives-based arbitrage 156 fixed-income arbitrage 157 Hemscott 35 HM Revenue and Customs 55, 211 HSBC 20, 103 Hurricane Hugo 250  306 INDEX ____________________________________________________ Hurricane Katrina 2, 67, 242 ICE Futures 5, 66, 102 Individual Capital Adequacy Standards (ICAS) 244 inflation 12–14 cost-push 12 definition 12 demand-pull 12 quarterly Inflation Report 14 initial public offering (IPO) 47–53 institutional investors 155–58 fund managers 155–56 hedge fund managers 156–57 insurance companies 157 pension funds 158 insurance industry London and 240 market 239–40 protection and indemnity associations 241 reform 245 regulation 243 contingent commissions 243 contract certainty 243 ICAS and Solvency II 244–45 types 240–41 underwriting process 241–42 see also Lloyd’s of London, reinsurance Intercontinental Exchange 5 interest equalisation tax 6 interest rate products debt securities 82–83, 92–93 bill of exchange 83 certificate of deposit 83 debt instrument 83 euro bill 82 floating rate note 83 local authority bill 83 T-bills 82 derivatives 85 forward rate agreements (FRAs) 85–86 government bonds (gilts) 86–89 money markets 81–82 repos 84 International Financial Reporting Standards (IFRS) 58, 86, 173, 237–38 International Financial Services London (IFSL) 5, 64, 86, 92, 112 International Monetary Fund 17 International Securities Exchange 138 International Swap Dealers Association 63 International Swaps and Derivatives Association 63 International Underwriting Association (IUA) 240 investment banking 5, 47–59 mergers and acquisitions (M&A) 56–58 see also capital raising investment companies 164–69 real estate 169 split capital 166–67 venture capital 167–68 investment funds 159–64 charges 163 investment strategy 164 fund of funds scheme 164 manager-of-managers scheme 164 open-ended investment companies (OEICs) 159 selection criteria 163 total expense ratio (TER) 164 unit trusts 159 Investment Management Association 156 Investment Management Regulatory Organisation 11 Johnson Matthey Bankers Limited 15–16 Joint Money Laundering Steering Group 221 KAS Bank 145 LCH.Clearnet Limited 66, 140 letter of credit (LOC) 23, 25–26 liability-driven investment 158 Listing Rules 43, 167, 173, 225, 228–29 Lloyd’s of London 8, 246–59 capital backing 249 chain of security 252–255 Central Fund 253 Corporation of Lloyd’s 248–49, 253 Equitas Reinsurance Ltd 251, 252, 255–56 Franchise Performance Directorate 256 future 258–59 Hardship Committee 251 history 246–47, 250–52 international licenses 258 Lioncover 252, 256 Member’s Agent Pooling Arrangement (MAPA) 249, 251 Names 248, one-year accounting 257 regulation 257 solvency ratio 255 syndicate capacity 249–50 syndicates 27 loans 23–24 recourse loan 24 syndicated loan 23–24 London Interbank Offered Rate (LIBOR) 74, 76 ____________________________________________________ INDEX 307 London Stock Exchange (LSE) 7, 8, 22, 29, 32, 64 Alternative Investment Market (AIM) 32 Main Market 42–43, 55 statistics 41 trading facilities 122–27 market makers 125–27 SETSmm 122, 123, 124 SETSqx 124 Stock Exchange Electronic Trading Service (SETS) 122–25 TradElect 124–25 users 127–29 Louvre Accord 114 Markets in Financial Instruments Directive (MiFID) 64, 121, 124, 125, 130, 144, 197–99, 277 best execution policy 130–31 Maxwell, Robert 186, 214, 282 mergers and acquisitions 56–58 current speculation 57–58 disclosure and regulation 58–59 Panel on Takeovers and Mergers 57 ‘white knight’ 57 ‘white squire’ 57 Merrill Lynch 136, 174, 186, 254 money laundering 216–22 Egmont Group 218 hawala system 217 know your client (KYC) 217, 218 size of the problem 222 three stages of laundering 216 Morgan Stanley 5, 136 multilateral trading facilities Chi-X 134–35, 141 Project Turquoise 136, 141 Munich Re 207 Nasdaq 124, 138 National Strategy for Financial Capability 269 National Westminster Bank 20 Nationwide Building Society 221 net operating cash flow (NOCF) see discounted cash flow analysis New York Federal Reserve Bank (Fed) 16 Nomads 45 normal market share (NMS) 132–33 Northern Rock 16 Nymex Europe 102 NYSE Euronext 124, 138, 145 options see derivatives Oxera 52  Parmalat 67, 232 pensions alternatively secured pension 290 annuities 288–89 occupational pension final salary scheme 285–86 money purchase scheme 286 personal account 287 personal pension self-invested personal pension 288 stakeholder pension 288 state pension 283 unsecured pension 289–90 Pensions Act 2007 283 phishing 200 Piper Alpha oil disaster 250 PLUS Markets Group 32, 45–46 as alternative to LSE 45–46, 131–33 deal with OMX 132 relationship to Ofex 46 pooled investments exchange-traded funds (ETF) 169 hedge funds 169–71 see also investment companies, investment funds post-trade services 140–50 clearing 140, 141–42 safekeeping and custody 143–44 registrar services 144 settlement 140, 142–43 real-time process 142 Proceeds of Crime Act 2003 (POCA) 211, 219, 220–21 Professional Securities Market 43–44 Prudential 20 purchasing power parity 118–19 reinsurance 260–68 cat bonds 264–65 dispute resolution 268 doctrines 263 financial reinsurance 263–64 incurred but not reported (IBNR) claims insurance securitisation 265 non-proportional 261 offshore requirements 267 proportional 261 Reinsurance Directive 266–67 retrocession 262 types of contract facultative 262 treaty 262 retail banking 20 retail investors 151–155 Retail Prices Index (RPI) 13, 87 264  308 INDEX ____________________________________________________ Retail Service Provider (RSP) network Reuters 35 Royal Bank of Scotland 20, 79, 221 73 Sarbanes–Oxley Act 233–34 securities 5, 29 Securities and Futures Authority 11 self-regulatory organisations (SROs) 192 Serious Crime Bill 213 settlement 11, 31, 140, 142–43 shareholder, rights of 29 shares investment in 29–32 nominee accounts 31 valuation 35–39 ratios 36–39 see also flotation short selling 31–32, 73, 100, 157 Society for Worldwide Interbank Financial Telecommunications (SWIFT) 119 Solvency II 244–245 Soros, George 114, 115 Specialist Fund Market 44 ‘square mile’ 4 stamp duty 72, 75, 166 Sterling Overnight Index Average (SONIA) 85 Stock Exchange Automated Quotation System (SEAQ) 7, 121, 126 Stock Exchange Electronic Trading Service (SETS) see Lloyd’s of London stock market 29–33 stockbrokers 33–34 advisory 33 discretionary 33–34 execution-only 34 stocks see shares sub-prime mortgage crisis 16, 89, 94, 274 superequivalence 43 suspicious activity reports (SARs) 212, 219–22 swaps market 7 interest rates 56 swaptions 68 systematic internalisers (SI) 137–38 Target2-Securities 147–48, 150 The Times 35, 53, 291 share price tables 36–37, 40 tip sheets 33 trading platforms, electronic 80, 97, 113, 117 tranche trading 123 Treasury Select Committee 14 trend theory 175–76 UBS Warburg 103, 136 UK Listing Authority 44 Undertakings for Collective Investments in Transferable Securities (UCITS) 156 United Capital Asset Management 95 value at risk (VAR) virtual banks 20 virt-x 140 67–68 weighted-average cost of capital (WACC) see discounted cash flow analysis wholesale banking 20 wholesale markets 78–80 banks 78–79 interdealer brokers 79–80 investors 79 Woolwich Bank 20 WorldCom 67, 232 Index of Advertisers Aberdeen Asset Management PLC xiii–xv Birkbeck University of London xl–xlii BPP xliv–xlvi Brewin Dolphin Investment Banking 48–50 Cass Business School xxi–xxiv Cater Allen Private Bank 180–81 CB Richard Ellis Ltd 270–71 CDP xlviii–l Charles Schwab UK Ltd lvi–lviii City Jet Ltd x–xii The City of London inside front cover EBS Dealing Resource International 110–11 Edelman xx ESCP-EAP European School of Management vi ICAS (The Inst. of Chartered Accountants of Scotland) xxx JP Morgan Asset Management 160–62 London Business School xvi–xviii London City Airport vii–viii Morgan Lewis xxix Securities & Investments Institute ii The Share Centre 30, 152–54 Smithfield Bar and Grill lii–liv TD Waterhouse xxxii–xxxiv University of East London xxxvi–xxxviii

Most stakeholders welcomed the FSA’s recent move to a risk-based approach to fraud prevention within regulated firms, but there was a view that it might leave room for abuse. ___________________________________________ FINANCIAL FRAUD 209  City of London Police The City of London Police force has 158 officers dedicated to preventing and investigating fraud, and is well resourced for this purpose in comparison with other police forces. In 2006, 75 per cent of crime investigated by the unit was cleared up. The fraud squad makes good use of fraud data. It has a good database on plastic cards, and another on boiler room frauds. If government proposals following consultation on the Fraud Review come about (see early in this chapter), the City of London Police will be elevated from south-east lead to national lead force. The force has agreed to take on between four and six cases of serious fraud a year that fall just below the Serious Fraud Office’s (see below) acceptance criteria.


pages: 169 words: 52,744

Big Capital: Who Is London For? by Anna Minton

Airbnb, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Capital in the Twenty-First Century by Thomas Piketty, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, Donald Trump, eurozone crisis, Fall of the Berlin Wall, Frank Gehry, high net worth, housing crisis, illegal immigration, Kickstarter, land value tax, market design, new economy, New Urbanism, offshore financial centre, payday loans, quantitative easing, rent control, Right to Buy, sovereign wealth fund, the built environment, The Wealth of Nations by Adam Smith, urban renewal, working poor

It was abandoned by the Conservatives in 1954 after which successive Labour governments introduced variations of it, which were then dropped by the Tories. In 1967 Labour introduced a ‘betterment levy’ set at 40 per cent of profit, which was scrapped by Edward Heath in 1970, then Labour brought in a development land tax in 1975 set at 80 per cent of the increase in land value, which was maintained by the Thatcher government at 60 per cent. But in 1985 Nigel Lawson scrapped it, in tune with the spirit of the age and the deregulation of finance which came with ‘Big Bang’ a year later. The consequence is that the planning system is not working as its architects intended because one half of it, the tax mechanism to dampen speculation and provide benefits to the community, is no longer there. Meanwhile, the remaining half, which protects the greenbelt, restricts the amount of land available and makes it even more valuable. Since the early 1990s there have been attempts to get developers to contribute to affordable housing under a clause in legislation called Section 106, also known as ‘planning obligations’.

In his book Treasure Islands, Nicholas Shaxson describes London as the centre of a spider’s web that links to the Channel Islands, the Isle of Man and the Caribbean.19 This impression of super prime London as a tax haven to rival Monaco is borne out by the everyday experience of residents. Helen Kirwan-Taylor, a journalist who writes for the Sunday Times, lives on one of the most prestigious roads in Notting Hill. She moved in twenty-two years ago as part of an earlier wave of ‘super gentrification’20 characterized by the arrival of very wealthy professionals working in the City of London. ‘We were the generation of bankers who pushed out the artists and journalists – our home was lived in by two elderly artists, there was a film reviewer next door,’ she remembered. ‘The bankers pushed out the artists, then the next wave came – this neighbourhood has become Monaco.’ Today it’s mostly made up of ‘super-wealthy connected European families with trust funds so complicated you need a PhD to work it out.

Western governments wanted to prove to their populations that social democratic capitalist societies could also provide public goods such as hospitals and housing for all, which were available beyond the Iron Curtain alongside authoritarian government and censorship. In Britain and across the West these competing pressures kept capitalism in check. But over the last thirty years, since the fall of the Berlin Wall, unbridled capitalism in the form of a new neoliberal framework has brought the market into every aspect of public policy, in the NHS, in education and in housing, where privatization, deregulation and property speculation are now the dominant approaches. The result is a system in crisis, rife with the contradictions of two opposing ideologies – socialism and neoliberalism – combined with the unintended consequences of a market-led approach to public goods. Public housing accounted for a huge proportion of British housing throughout the twentieth century. Since the 1980s, it has been steadily removed from the system, through the combination of Right to Buy, which saw the sell-off of 2 million council homes, and Buy to Let, which has resulted in 40 per cent of those former council homes now being owned by private landlords who rent them out for three and four times the money.


pages: 443 words: 98,113

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay by Guy Standing

3D printing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, bilateral investment treaty, Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, credit crunch, crony capitalism, crowdsourcing, debt deflation, declining real wages, deindustrialization, disruptive innovation, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, gig economy, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, income inequality, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, James Watt: steam engine, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, mini-job, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, plutocrats, Plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Altman, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, The Rise and Fall of American Growth, Thomas Malthus, Thorstein Veblen, too big to fail, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Y Combinator, zero-sum game, Zipcar

THE BRITISH DISEASE Economists have a theory called the Dutch Disease, named after the Dutch experience following the discovery of gas deposits; this led to a rise in the currency that resulted in lost manufacturing exports and employment. Today, a variant could be called the British Disease, since it is most pronounced in Britain. It arises from the domination of financial capital over the whole economy, stemming from the Big Bang of 1986, when the City of London was deregulated. One outcome has been a persistently strong currency, which has made manufacturing exports uncompetitive and accelerated deindustrialisation. It has also boosted inequality.52 Canada suffered similarly after 2008, when money flowed into its financial sector because it had largely escaped the turbulence of the banking crisis. This pushed up the value of the Canadian dollar, causing the manufacturing sector to lose 20 per cent of its capacity.

D’Erasmo, A Quantitative Model of Banking Industry Dynamics, mimeo, March 2013. 49 For example, Chris Huhne and Vince Cable, former Liberal Democrat ministers in the British coalition government, cited in C. Huhne, ‘Gloomy, but right’, Prospect, October 2015, pp. 72–4. 50 M. Wolf, ‘Helicopter drops might not be far away’, Financial Times, 23 February 2016. 51 Standing, 2014, op. cit. 52 J. Tanndal and D. Waldenstrom, Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang, Centre for Economic Policy Research, DP11094, February 2016. 53 K. Cooper, ‘Emerging market loans threaten British banks’, Sunday Times, 4 October 2015, p. 2. 54 A. Haldane, ‘A radical prescription’, Prospect, October 2015, pp. 36–8. 55 J. Kay, Other People’s Money: Masters of the Universe or Servants of the People? (London: Profile Books, 2015); W. Hutton, How Good We Can Be (London: Little, Brown, 2015). 56 ‘The other deficit’, The Economist, 17 October 2015, p. 38. 57 R.

Manufacturing production and employment have continued to shrink. In 2015, over a million people – about one in twenty-five of all those employed – were in financial services, with another million in associated professions such as accountancy and legal services. The financial sector accounts for nearly 10 per cent of GDP, higher than in any other rich country, and is the world’s biggest exporter of financial services. Increasingly, the City of London has channelled money into speculative or rent-extracting activities rather than productive ones. Net bank lending to non-financial business in 2014 and 2015 was negative, to the tune of over £14 billion. Yet British banks have lent vast amounts to China and other emerging market economies – £800 billion between 2006 and 2015, representing three and a half times their capital, according to the Bank of England.53 This has provided a flow of rental income, albeit exposing the UK to the growing risk of bad debts in China.


pages: 475 words: 155,554

The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge by Faisal Islam

Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, British Empire, capital controls, carbon footprint, Celtic Tiger, central bank independence, centre right, collapse of Lehman Brothers, credit crunch, Credit Default Swap, crony capitalism, dark matter, deindustrialization, Deng Xiaoping, disintermediation, energy security, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial innovation, financial repression, floating exchange rates, forensic accounting, forward guidance, full employment, G4S, ghettoisation, global rebalancing, global reserve currency, hiring and firing, inflation targeting, Irish property bubble, Just-in-time delivery, labour market flexibility, light touch regulation, London Whale, Long Term Capital Management, margin call, market clearing, megacity, Mikhail Gorbachev, mini-job, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, North Sea oil, Northern Rock, offshore financial centre, open economy, paradox of thrift, Pearl River Delta, pension reform, price mechanism, price stability, profit motive, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, reshoring, Right to Buy, rising living standards, Ronald Reagan, savings glut, shareholder value, sovereign wealth fund, The Chicago School, the payments system, too big to fail, trade route, transaction costs, two tier labour market, unorthodox policies, uranium enrichment, urban planning, value at risk, WikiLeaks, working-age population, zero-sum game

But there was no clear divide between these high-risk operations and the conventional banks. The ‘universal’ banks that bestrode this divide were increasing risky exposures to, say, property on their trading books, while reining in property exposure on their conventional loan books. It made little sense. It goes back to the deregulatory Big Bang of 1986, and even before that. One British financial CEO filled me in. ‘What is the City since Big Bang? Mostly American-owned or American-influenced,’ he told me. ‘You should stop thinking of the City of London during the boom time as anything other than an extension of Wall Street.’ The City grew fat on offshore dollars traded internationally (nicknamed ‘eurodollars’). From the 1960s a US tax change called ‘Subpart F’ offered huge tax breaks to US multinationals on dollars earned abroad, as long as they stayed abroad.

David Cameron himself, in a speech to the City after the crisis began in March 2008, fully endorsed the strategy of outcompeting Wall Street on deregulation. ‘The UK has a long history of benefiting from over-regulation elsewhere,’ he told his audience. ‘The worst response to the current crisis would be a knee-jerk response and proscriptive over-regulation.’ A crisis bank chief executive concurs: ‘There’s some truth in the Americanisation story. The City moved to take advantage of the Sarbox Act, and Gordon [Brown] was not interested in taxing “nondoms”. The Nondom rules were designed specifically to attract American bankers.’ The Americans brought meritocracy, technology and a can-do attitude to the cosy gentlemen’s club of the pre-Big Bang City. Many City figures bitterly resisted the Big Bang reforms forced upon them by Mrs Thatcher. It was another example of the City not even knowing what was good for itself – at the time, at least.

Events had been set in train that would lead to the collapse of hedge funds, the collapse of investment banks, the collapse of lending to banks, the collapse of Northern Rock, and eventually the collapse of half the UK banking system. The conventional high-street banking crises, epitomised by the bank run on Northern Rock, was the most visible manifestation of failure in UK banking. But there were twin crises in Britain, centred on the City of London. The one most commonly read about in the news, and another, just as important, in the invisible banking system. So May 2007 was also the high watermark of what would become known as the ‘shadow banking’ system – a parallel international system of loans, lending, creditors and debtors that operated on low levels of capital, and had few of the safety systems of the conventional banking system.


pages: 632 words: 159,454

War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt by Kwasi Kwarteng

accounting loophole / creative accounting, anti-communist, Asian financial crisis, asset-backed security, Atahualpa, balance sheet recession, bank run, banking crisis, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, California gold rush, capital controls, Carmen Reinhart, central bank independence, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, Deng Xiaoping, discovery of the americas, Etonian, eurozone crisis, fiat currency, financial innovation, fixed income, floating exchange rates, Francisco Pizarro, full employment, German hyperinflation, hiring and firing, income inequality, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, liberal capitalism, market bubble, money: store of value / unit of account / medium of exchange, moral hazard, new economy, oil shock, plutocrats, Plutocrats, Ponzi scheme, price mechanism, quantitative easing, rolodex, Ronald Reagan, South Sea Bubble, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, The Wealth of Nations by Adam Smith, too big to fail, War on Poverty, Yom Kippur War

., 296–7, 305–14, 321, 330–2, 348 Business China, 292 Byrnes, James, 182 Cajamarca, 16 Callaghan, James, 241 Calonne, Charles-Alexandre, 43–5 Cambridge Apostles, 111, 149 Campbell, John, 245 Canada, 39, 352 Cantor, Eric, 349 capital, free movement of, 243–4 capitalization rates, 326–7 Cardin, Benjamin, 297 Carnegie, Andrew, 75, 77, 80 Carter, Jimmy, 235–6, 238–9, 249, 308, 310 Case, Walter, 128 Cassel, Sir Ernest, 88–9 Cassel, Gustav, 114–15 Cato Institute, 309 central banks Burns’s paradox, 239–40 and currency stability, 207, 239–40 and global gold stocks, 358–9 invention of, 22 and issue of paper money, 59–60, 64–5 as lenders of last resort, 50 US establishment of, 66–8, 78–80, 108 Chamberlain, Neville, 138 Chandos, Duke of, 37 Charles II, King, 24, 357 Charles V, Emperor, 11–12, 19–20 Chase, Salmon, 71–2 Chase Manhattan Bank, 230–1, 238 Cheney, Dick, 132 Chiang Kai-shek, 193 China communist victory in, 193 and currency value, 285–8, 291–2, 296–9, 319, 351 dollar reserves, 299–301, 318–19 economic expansion, 78, 83, 282–300 and financial crisis, 351–2 financial reforms, 293–4 foreign exchange reserves, 287, 358 and global financial system, 358 gold reserves, 358 infrastructure spending, 294–6 Japanese war in, 191 and Korean War, 163 and mercantilism, 284–5 national debt, 295 state enterprises, 293–4 symbiosis with US, 318–19, 321 welfare provision, 296 Chinese Communist Party, 282, 288, 294 Chongqing, 293 Church assets, taxation of, 44–6 Churchill, Winston, 4, 100, 107, 118, 138, 142, 147, 181, 246, 331 Cieza de Léon, Pedro, 13 Citicorp, 230 Citizens Against Government Waste, 310 City of London, 24–5, 27 ad hoc financial arrangements, 86 Bagehot’s account of, 63–4 and Barings crisis, 85–6 Big Bang deregulation, 258 decline as financial centre, 97, 106, 108 dependence on government, 38 in Edwardian period, 82–3, 86–90 and outbreak of First World War, 91–3 post-war, 171–2 social structure, 86–9 working week, 88 see also Lombard Street Clarke, Richard (‘Otto’), 173 Clay, Henry, 70–1 Clay, Lucius D., 181–5 Cleveland, Grover, 74 Clinton, Bill, 307–8, 310, 348 Cobbett, William, 52 Cobbold, Cameron, 178–9 Cobden, Richard, 160, 246 Coggan, Philip, 5, 320, 325, 329, 355 Cold War, 157, 159, 186, 198, 234, 237, 261 collateralized debt obligations (CDOs), 324–7 Colombian Mining Association, 56 Columbus, Christopher, 12 Compagnie d’Occident, 30–1, 34 Companies Act, 87 company indebtedness, high levels of, 233 Company of the Indies, 31–3 ‘compensatory finance’, 203 ‘competitive devaluation’, 132 Connally, John, 216–19 conquistadors, 12–16, 23 Conrad, Kent, 305 ‘consumption function’, 136 ‘contagion’, 290 Continental Congress, 41–2 ‘continental’ currency, 5, 41–3, 46, 71 Cooke, Jay, 71 Coolidge, Calvin, 119 Cornwell, Rupert, 277 Cortés, Hernan, 12–15 Council of the Indies, 19 Countrywide mortgage lenders, 322–3 Covarrubias, Diego de, 20 Craggs, James, 32, 37 Crawford, Thomas, 35 credit bubbles, ending of, 123 Crimean War, 61 Cripps, Sir Stafford, 175, 179–80 Crosland, Anthony, 172 ‘Currency School’, 64 Curtice, Harlow, 154 Curtis, Timothy Abraham, 57 Czechoslovakia, 157 Daily Mail, 180 Dalton, Hugh, 171–2, 174–5 Darling, Alistair, 332–3, 343 de Gaulle, Charles, 209–11, 214 de Zoete, Walter, 88 debt-for-equity swaps, 31 Delors, Jacques, 262, 264, 267–8, 276 Delors Committee, 272, 276 democracy, and public spending, 2–3, 93, 279 Deng Xiaoping, 282–4 Der Spiegel, 275–6, 279 deregulation, of financial services, 257–8 derivatives, 320 Detroit Bank, 193, 207 Deutschmark devaluation, 188 dollar exchange rate, 254–5 and ERM, 264, 266–72 and German reunification, 266, 268 introduction of, 183–7 and single currency, 274–5, 278 and the snake, 263 Dillon, Douglas, 210 Disraeli, Benjamin, 56–7 Dodd, David, 161 Dodd–Frank Act, 351 Dodge, Joseph, 184, 193–6, 201 dollar break with gold, 5, 214, 218–20, 223, 225, 255, 262 Bretton Woods and link to gold, 140, 143–4, 149–50, 167–70, 208–12, 250–1 defined value of, 42–3 devaluation, 131–2 establishment of, 42–3, 279 importance of exchange rate, 254–6 stabilization of, 237–9 suspension of link to gold, 71–2, 74, 76, 219 Dollar Drain Committee, 175, 179 ‘dollar financing problem’, 154–5 ‘dollar shortage’, 158, 181 dot-com bubble, 314, 316 Dow Jones average, 218, 226, 237, 259–60, 331 Drew, Daniel, 75 ducats, 11 duelling, 27–8 Duncan, Richard, 315–16, 355 East Germany, 186, 266, 268 East India Company, 32 Eckstein, Otto, 228 Economic Club of Detroit, 165, 207–8 Economic Journal, 97, 107, 111 Economist, 82, 91, 99, 104, 113, 142, 226, 292, 299, 338 articles on Japan, 198–9 Friedman obituary, 234 and launch of euro, 279–80 and shift in economic power, 228–9 Eden, Anthony, 246 Edward VII, King, 89, 147 Eichengreen, Barry, 131–2 Einzig, Paul, 135–6 Eisenhower, Dwight D., 168–70, 193, 202, 204, 207, 252, 259, 306, 308, 311, 339 Ekali swimming pools, 335–6 El Dorado, 13 Elizabeth II, Queen, 270 Ellerman, John, 87–8 ‘emerging markets’, 289 Emminger, Otmar, 187, 254–6 English, Phil, 297 Erhard, Ludwig, 182 ERM (exchange rate mechanism), 263–72, 276, 280 euro conditions for joining, 272–3, 277, 336 Greece joins, 280–1, 335–7 introduction of, 272–81, 334–5 and moral hazard, 274 risk of collapse, 346–7 European Central Bank, 272, 346 European Commission, 346 European Economic Community (EEC), 211, 226, 262, 276 European Financial Stabilization Facility (EFSF), 338 European Union, 267, 276, 337, 352 Evening Standard, 118 excess profits duty, 104–5 Export-Import Bank of Japan, 195 Export-Import Bank of Washington, 154, 164 Fairchild, Fred, 103 Faisal, King, 229–30 Federal Reserve Accord of 1951, 164–5, 169 under Bernanke, 327, 343 under Burns, 215, 233 establishment of, 108 Federal Open Market Committee (FOMC), 163–4 and Great Depression, 126–8 under Greenspan, 258–60, 301–4, 310, 313–14, 325 and market stabilization, 259–60 under Martin, 205–6, 215 Meltzer’s history of, 212–13 relationship with Treasury, 163–7, 169 Strong and New York branch, 123 under Volcker, 223, 237–8, 249–50 Feis, Herbert, 83 Ferguson, Niall, 6, 90, 318–19, 351 fiat money, 5, 61, 320 Field, Marshall, 75 ‘Financial Revolution’, 24 Financial Times, 227, 265, 271–2, 326, 347 Finland, 278 First Bank of the United States, 67 First World War, outbreak of, 90–3 fiscal policy, primacy of, 2–3 ‘fiscal repression’, 357–8 Fish, Hamilton, 157 Fisher, Irving, 121–2 Fisk, James, Jr (‘Big Jim’), 76 Fleming, Ian, 4 floating currencies, 226, 231, 234–5, 262, 299 florins, 11 Forbes, Steven, 299 Ford Motor Company, 121 Ford, Gerald, 232, 235, 308 foreign exchange controls, abolition of, 242–3 Forster, E.

A Britain which still had a vast quantity of state-owned assets on its balance sheet would probably have been forced to sell them at very low prices in the wake of the global recession which descended in 2008–9. State assets would undoubtedly have made Britain’s poor public finances in the aftermath of the events of 2008 even worse. In addition to privatization, there also occurred the regulatory reform of the City of London. In 1986, ‘Big Bang’ changed life within the Square Mile for ever. The ‘traditional and class-based’ culture of the City was swept away. Big Bang itself happened on 27 October 1986, but for three years, following the 1983 agreement between the Stock Exchange and the Department of Trade and Industry, ‘the structure and the form of the City’ underwent a revolution.49 As one historian explains: ‘A new dealing system was established together with a new regulatory framework to police it.

Relationships with clients had to be redefined. Within firms a new contract between employer and employee had to be created.’50 There were inevitably cultural tensions as big American banks acquired more traditional English brokerage firms and merchant banks. The initial 1983 deal between the Stock Exchange and the government had been an undertaking, on the part of the City of London, to drop fixed commissions and to open itself to competition. These steps had ushered in the market reforms of 1986 known as Big Bang. In the light of the events of October 1987 in which international markets crashed, many questioned the pace and efficacy of the reforms that Mrs Thatcher’s government had introduced.51 Yet, as in so much else associated with her government, the direction and philosophy were clear. Policies flowed consistently from a set of ideological premises.


pages: 301 words: 88,082

The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business by Richard Brooks

accounting loophole / creative accounting, bank run, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, carried interest, Celtic Tiger, collateralized debt obligation, commoditize, Corn Laws, corporate social responsibility, crony capitalism, Double Irish / Dutch Sandwich, financial deregulation, haute couture, intangible asset, interest rate swap, Jarndyce and Jarndyce, mega-rich, Northern Rock, offshore financial centre, race to the bottom, shareholder value, short selling, supply-chain management, The Chicago School, The Wealth of Nations by Adam Smith, transfer pricing

Offshore plc While the exploitation of industrial tax breaks was taking serious avoidance from Mayfair to the City, outside the tax advisers’ and inspectors’ offices the era of late-twentieth century economic liberalization was dawning. From 1979 Margaret Thatcher’s government began implementing the monetarism and financial deregulation advocated by the ‘Chicago school’ of economic theory and championed here by the new prime minister’s favoured think tanks such as the Institute for Economic Affairs. Her first and perhaps most significant move was the abolition of exchange controls, the system of currency regulation designed to prevent destabilizing inward and outward flows of finance. Soon followed by the removal of credit controls and the ‘Big Bangderegulation of the City, the reforms opened up the British economy in more than just the intended sense. They created a perfect freebooting environment for tax avoidance at a level to dwarf anything seen thus far.

When formal income tax was first introduced by William Pitt at the end of the eighteenth century his Whig opponents claimed the tax, then at no more than 10% and reserved for the very wealthy of the day, ‘would strike with peculiar force at industry and the fruits of industry’. The other main objection, voiced by a landed Scottish MP, was that the tax ‘would encourage a spirit of migration’. The City of London was characteristically helpful, calling it a ‘galling, oppressive and hateful inquisition’.‌45 There is no evidence to bear out the naysayers’ prophecies, which have wearying echoes of today’s empty threats from industry bodies that companies will ‘quit the UK’ at the slightest tax rise (or even failure to reduce tax). The main difference is that, over 200 years on, governments either cynically or cravenly capitulate.‌46 History would in fact go on to show that relatively high tax levels have coincided with better economic performance, possibly because tax cuts for the wealthy translate not into greater investment, as neo-liberal economic theory would have it, but lower public investment, greater inequality and lower productivity (see figure 3). ‌ ‌

But stroll around Mayfair, pausing to gawp at the Aston Martins and outrageously priced restaurant menus, and it’s clear that many of the funds’ managers are actually nowhere near the Alps or a small coral island in the Caribbean. The ‘hedgies’ revel in the London life without the fruits of their toil facing any meaningful taxation here. This is largely thanks to a generous tax exemption introduced in 1970 to give the expanding City of London an edge in the market for managing what were then more sedate ‘offshore funds’. Without this concession the profits of such funds were likely to have faced UK taxation because their management in London would, in effect, have made the profits those of a UK branch. The ‘investment management exemption’, expanded to cover greater levels of management by Tory chancellor Ken Clarke in 1995, keeps the funds’ profits out of the taxman’s grasp.


pages: 334 words: 98,950

Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Ha-Joon Chang

affirmative action, Albert Einstein, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, business cycle, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, land reform, liberal world order, liberation theology, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, mega-rich, moral hazard, Nelson Mandela, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

The tribute paid to foreigners is … odious … We have outgrown the necessity of submitting to the humiliation of going to London, Paris or Frankfort [sic] for capital has become amply abundant for all home demands.’ 33 Foreign lenders were also badly treated. In 1842, the US became a pariah in the international capital market when 11 state governments defaulted on foreign (mainly British) loans. Later that year, when the US federal government tried to raise a loan in the City of London, The Times hit back, saying: ‘[t]he people of the United States may be fully persuaded that there is a certain class of securities to which no abundance of money, however great, can give value; and that in this class their own securities stand pre-eminent’. As cited in T. Cochran & W. Miller (1942), The Age of Enterprise: A Social History of Industrial America (The Macmillan Company, New York), p. 48. 34 The second Bank of USA, set up in 1816 under a 20-year charter, was 20% owned by the government and federal tax revenue was deposited there, but it did not have note issue monopoly, so it could not be considered a proper central bank. 35 As cited in Wilkins (1989), p. 84. 36 Even until as late as 1914, when it had become as rich as the UK, the US was one of the largest net borrowers in the international capital market.

.* In addition to the impact of the introduction of New Public Management, neo-liberal policies have also indirectly, and unintentionally, increased corruption by promoting trade liberalization, which weakens government finances, which, in turn, makes corruption more likely and difficult to fight.14 Also, deregulation, another key component of the neo-liberal policy package, has increased corruption in the private sector. Private sector crookedness is often ignored in the economic literature because corruption is usually defined as the abuse of public office for personal gain.15 But dishonesty exists in the private sector too. Financial deregulation and relaxation of accounting standards have led to insider trading and false accounting even in rich nations – recall cases like the energy company Enron, and the telecommunications company WorldCom and their accountancy firm Arthur Andersen in the ‘Roaring Nineties’ in the US.16 Deregulation can also increase the power of private-sector monopolies, which expands the opportunities for their unscrupulous purchasing managers to take bribes from sub-contractors.

It looks like Vietnam!’ There was less than 20 years’ age gap between us, but scenes that were familiar to me were totally alien to her. I turned to Joe and told him how ‘privileged’ I was as a development economist to have lived through such a change. I felt like an historian of mediaeval England who has actually witnessed the Battle of Hastings or an astronomer who has voyaged back in time to the Big Bang. Our next family house, where I lived between 1969 and 1981, at the height of Korean economic miracle, not only had a flushing toilet but also boasted a central heating system. The boiler, unfortunately, caught fire soon after we moved in and almost burned the house down. I don’t tell you this in complaint; we were lucky to have one – most houses were heated with coal briquettes, which killed thousands of people every winter with carbon monoxide poisoning.


pages: 347 words: 99,317

Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity by Ha-Joon Chang

affirmative action, Albert Einstein, banking crisis, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, business cycle, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, land reform, liberal world order, liberation theology, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, mega-rich, moral hazard, Nelson Mandela, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

The tribute paid to foreigners is … odious … We have outgrown the necessity of submitting to the humiliation of going to London, Paris or Frankfort [sic] for capital has become amply abundant for all home demands.’ 33 Foreign lenders were also badly treated. In 1842, the US became a pariah in the international capital market when 11 state governments defaulted on foreign (mainly British) loans. Later that year, when the US federal government tried to raise a loan in the City of London, The Times hit back, saying: ‘[t]he people of the United States may be fully persuaded that there is a certain class of securities to which no abundance of money, however great, can give value; and that in this class their own securities stand pre-eminent’. As cited in T. Cochran & W. Miller (1942), The Age of Enterprise: A Social History of Industrial America (The Macmillan Company, New York), p. 48. 34 The second Bank of USA, set up in 1816 under a 20-year charter, was 20% owned by the government and federal tax revenue was deposited there, but it did not have note issue monopoly, so it could not be considered a proper central bank. 35 As cited in Wilkins (1989), p. 84. 36 Even until as late as 1914, when it had become as rich as the UK, the US was one of the largest net borrowers in the international capital market.

If they know that they are not going to stay in the civil service very long, they will have all the more incentive to cultivate their future employment prospects.iii In addition to the impact of the introduction of New Public Management, neo-liberal policies have also indirectly, and unintentionally, increased corruption by promoting trade liberalization, which weakens government finances, which, in turn, makes corruption more likely and difficult to fight.14 Also, deregulation, another key component of the neo-liberal policy package, has increased corruption in the private sector. Private sector crookedness is often ignored in the economic literature because corruption is usually defined as the abuse of public office for personal gain.15 But dishonesty exists in the private sector too. Financial deregulation and relaxation of accounting standards have led to insider trading and false accounting even in rich nations – recall cases like the energy company Enron, and the telecommunications company WorldCom and their accountancy firm Arthur Andersen in the ‘Roaring Nineties’ in the US.16 Deregulation can also increase the power of private-sector monopolies, which expands the opportunities for their unscrupulous purchasing managers to take bribes from sub-contractors.

It looks like Vietnam!’ There was less than 20 years’ age gap between us, but scenes that were familiar to me were totally alien to her. I turned to Joe and told him how ‘privileged’ I was as a development economist to have lived through such a change. I felt like an historian of mediaeval England who has actually witnessed the Battle of Hastings or an astronomer who has voyaged back in time to the Big Bang. Our next family house, where I lived between 1969 and 1981, at the height of Korean economic miracle, not only had a flushing toilet but also boasted a central heating system. The boiler, unfortunately, caught fire soon after we moved in and almost burned the house down. I don’t tell you this in complaint; we were lucky to have one – most houses were heated with coal briquettes, which killed thousands of people every winter with carbon monoxide poisoning.


pages: 292 words: 85,381

The Story of Crossrail by Christian Wolmar

Ada Lovelace, autonomous vehicles, Beeching cuts, Big bang: deregulation of the City of London, Boris Johnson, data acquisition, Kickstarter, megacity

32–3 and the Central London Rail Study 40 and the Channel Tunnel 66 and the Cross London Rail Links team 69 and cross-town railways 37–8 and Crossrail routes 122 privatization 77, 85, 89, 90, 98 British Transport Commission, London Railways Plan 26 Brown, Gordon 145–7, 151, 153, 158, 274–5 Browne, Liam 170 Buck, Martin 150 Burnham station, potential impact of Crossrail on 130–2 Business Case for Crossrail 95–6, 98–100, 103, 104, 105–6, 113 business case methodology, and benefit–cost ratio 46, 54 businesses agglomeration effects 38, 48, 152–3 funding Crossrail 112, 147–8, 151, 156 Cameron, David 161, 203–4 Canada Water 222–3 canals 23–5 Canary Wharf 56, 62, 64, 65, 98, 123, 128, 132, 146, 150 Crossrail HQ at 164 and the DLR 58, 59, 60 funding Crossrail 150, 151, 152 petition to the House of Lords 142 station construction 150, 158–9, 210–11, 221 tunnel construction 179, 183, 202, 257 Canvey Island 201 Cassel, Sir Ernest 13 Cassidy, Michael 220–1 CBI 110 CBTC (Communications-Based Train Control) 139, 236 Central Line 69, 120–1, 123, 127 Central London Rail Study 34, 38, 40–3, 45, 62, 65, 69–70, 73, 81, 83 and benefit–cost ratio of the Crossrail scheme 49–50 and Docklands 59 Central Railway 9, 12–19, 20 electric locomotives 15–16 fares 17–18 passenger numbers 18 ventilation 16–17 Centre Point 158, 229 Chambers, Mr Anthony 136–7 Channel Tunnel Rail Link (now HS1) 66, 79, 89, 91, 98, 164, 165, 186 construction 169, 186, 209, 274 Chelsea–Hackney line see Crossrail 2 (Chelsea–Hackney line) China 138–9 CIL (Community Infrastructure Levy) 114, 149, 279 Circle Line 10, 122, 125, 161, 249 City & South London 10–12, 13, 15, 17 City of London 95, 96 and the benefits of Crossrail 270 Big Bang (financial services) 38, 40, 123 and Crossrail tunnel construction 176–7 and the first Crossrail bill 77 and the first Tube railway 11 funding Crossrail 146–7, 150–1, 152 petition regarding Liverpool Street 136, 141 City of London Corporation 220–1 Clark, Katy 134 coalition government (Conservative–Liberal) 155–6, 159, 161 Colin Buchanan & Partners 153 the Combine 25 Community Infrastructure Levy (CIL) 114, 149, 279 commuter trains 41, 98 Comprehensive Spending Review 149, 159, 160, 163, 173 Connaught Tunnel 126, 132, 191, 196–7, 203 Conservative governments Conservative–Liberal Democrat coalition 155–6, 159 and the Crossrail 2 project 278–9 transport policies 28–9 construction industry changing patterns of employment 260–1 cost savings on Crossrail 162 health and safety 170–2 construction work (Crossrail) dealing with contractors 259–63 deaths and injuries cyclists 231–2 workers 172, 228–9, 263–4 demolition work 158 design contracts 172–3 lorry movements and safety record 228–32 safety regime 169, 169–72, 178–9, 194 tenders for contracts 163 testing regime 264–5 see also stations (Crossrail); tunnel boring machines (TBMs); tunnels (Crossrail) cost–benefit analysis agglomeration effects 38, 48, 152–3 of transport megaprojects 45–54 County of London Plan (1943) 25–6 Cross London Rail Links 69, 70, 73, 96, 119, 120, 125, 143 Business Case 95–6, 98–100, 103, 104, 105–6, 113 Environmental Statement 117, 129–32 and ownership of Crossrail 158 Race Equality Impact Statement 132–3 see also Crossrail project Crossrail 2 (Chelsea–Hackney line) 29, 41–2, 50, 65, 70–1, 91, 277–81 funding 279–80 politics of 278–9 Crossrail project benefit–cost ratio of 52–3 benefits of 270–1, 280 communication systems 262–3 criticisms of 267–8 Crossrail Limited established 143 delay in opening 162, 265, 269 estimated passenger numbers 128, 268 HQ 164 innovation programme 53 invisibility of 269–70 job creation 96, 128–9 legal status of 157–8 maintenance 249, 265 management structure 164–5, 168–9, 208–9, 233 planning process 71–4, 133–4 programme partner 167–8 project delivery agreement 163–4 project delivery partner 166–7 public awareness campaign 116–17 routes 97–9, 267 inside tunnels 71–2, 97–8, 119–22, 126–8 Kingston branch 104–6 outside tunnels 99, 104–6, 122–5 safety culture 39–40 Transport and Works Act application 88–9 website 117, 151, 276 see also construction work (Crossrail); Cross London Rail Links; Elizabeth Line; funding Crossrail; Parliamentary bills; trains Custom House station 226 cyclists, killed by Crossrail contractors’ lorries 231–2 Daily Mail 17 Darling, Alistair 99–100, 101–3, 105–6, 110 Dartford 127 Department for Transport 46, 66, 78, 96, 100, 138 building of Crossrail 143 and Crossrail station 209, 220 and Crossrail trains 239, 243, 251 funding Crossrail 146, 147, 160, 274 legal status of Crossrail 157–8 project delivery agreement for Crossrail 163 disabilities, people with, accessibility at Crossrail stations 141, 214, 226, 250–1 District Line 24, 97, 105, 133, 161, 249 District Railway 19 Dix, Michele 278, 279, 280 DLR (Docklands Light Railway) 54, 58–62, 196, 226 Dobson, Frank 146 Docklands 43, 54–67, 71, 95, 96, 280 Crossrail route 97–8, 125 Development Corporation 56–9, 60 East London docks 55 Limehouse Link 58 Docklands Light Railway (DLR) 54, 58–62, 196, 226 Dog Kennel Bridge 142 driver-only trains 104 East London docks 55 East London Line 97 Extension 129 East London Rail Study 63–4 Eastern Counties & Thames Junction Railway 196 Ebbsfleet 98, 127 economic growth 83–4 Edward, Prince of Wales (later Edward VII) 14, 17 Electric Traction Company 13 Elizabeth Line 271 as part of Transport for London 249–50 stations see stations (Crossrail) tunnels 183 employment apprenticeships 276–7 central London 38, 40 changing patterns of 268 in the construction industry 260–1 and City deregulation 123 and the Crossrail concept 30 Crossrail and job creation 96, 128–9 in west London 124 English Heritage 116 English Nature 116 Ennis-Hill, Jessica 190 Environmental Statement 117, 129–32 Essex 122–3 ETCS (European Train Control System) 236–7, 245–7, 248 Eurostar 127 Fairfield Conservation Area Residents Association 136 Farringdon 7, 8, 25, 120–2, 128, 142, 179, 250 station construction 211, 221 station design 216 tunnel construction 182–3, 187, 189, 203, 204 Fennell, Desmond 38 The Fifteen Billion Pound Railway 195 financial services, Big Bang 38, 40, 123 Finsbury Circus 194, 224–5 Finch, Spencer 221–2 First World War 20, 25 Fleet Line see Jubilee Line Flyvbjerg, Bent 51, 52, 165 France, RER (Réseau Express Régional) 34–6, 41, 81–2, 107 freight trains 139–40 Fugro 178–9 funding Crossrail 82, 111–16, 143, 145–56 annual statements on 159 businesses 112, 147–8, 151, 156 Canary Wharf Group 150, 151, 152, 158–9 City of London 146–7, 150–1, 152 Comprehensive Spending Review 149, 159, 160, 163, 173 cost escalation 267, 274 and savings 159–63 cost estimates 74, 99, 128–9, 147, 159 cost-saving measures 104 Heathrow Airport 149–50 National Audit Office report on 272–3 Network Rail 148, 151, 160–1 property development at stations 112–14 trains 237–40, 243 Transport and Works application 88–9 Gatwick Airport 121 G.E.

The obvious route for Crossrail after it emerged from the eastern end of the central London tunnel was to take over the existing services to Shenfield, an affluent suburb of Brentwood which has long been the terminus for the trains from Liverpool Street to outer east London and Essex. The trains on this route had become severely overcrowded because of Big Bang, experiencing a growth of 40 per cent in the decade running up to 1991 as the deregulation of the City had created jobs for baristas, brickies and clerks as well as bankers. In Michael Schabas’s words: ‘Essex had become known somewhat disparagingly as the “county of clerks” most of whom walked out of Liverpool Street station every morning and into a job in the City.’12 Many also transferred at Liverpool Street onto the Central Line to get to the West End and it was these people whose journeys to work would be greatly improved by Crossrail.

32–3 and the Central London Rail Study 40 and the Channel Tunnel 66 and the Cross London Rail Links team 69 and cross-town railways 37–8 and Crossrail routes 122 privatization 77, 85, 89, 90, 98 British Transport Commission, London Railways Plan 26 Brown, Gordon 145–7, 151, 153, 158, 274–5 Browne, Liam 170 Buck, Martin 150 Burnham station, potential impact of Crossrail on 130–2 Business Case for Crossrail 95–6, 98–100, 103, 104, 105–6, 113 business case methodology, and benefit–cost ratio 46, 54 businesses agglomeration effects 38, 48, 152–3 funding Crossrail 112, 147–8, 151, 156 Cameron, David 161, 203–4 Canada Water 222–3 canals 23–5 Canary Wharf 56, 62, 64, 65, 98, 123, 128, 132, 146, 150 Crossrail HQ at 164 and the DLR 58, 59, 60 funding Crossrail 150, 151, 152 petition to the House of Lords 142 station construction 150, 158–9, 210–11, 221 tunnel construction 179, 183, 202, 257 Canvey Island 201 Cassel, Sir Ernest 13 Cassidy, Michael 220–1 CBI 110 CBTC (Communications-Based Train Control) 139, 236 Central Line 69, 120–1, 123, 127 Central London Rail Study 34, 38, 40–3, 45, 62, 65, 69–70, 73, 81, 83 and benefit–cost ratio of the Crossrail scheme 49–50 and Docklands 59 Central Railway 9, 12–19, 20 electric locomotives 15–16 fares 17–18 passenger numbers 18 ventilation 16–17 Centre Point 158, 229 Chambers, Mr Anthony 136–7 Channel Tunnel Rail Link (now HS1) 66, 79, 89, 91, 98, 164, 165, 186 construction 169, 186, 209, 274 Chelsea–Hackney line see Crossrail 2 (Chelsea–Hackney line) China 138–9 CIL (Community Infrastructure Levy) 114, 149, 279 Circle Line 10, 122, 125, 161, 249 City & South London 10–12, 13, 15, 17 City of London 95, 96 and the benefits of Crossrail 270 Big Bang (financial services) 38, 40, 123 and Crossrail tunnel construction 176–7 and the first Crossrail bill 77 and the first Tube railway 11 funding Crossrail 146–7, 150–1, 152 petition regarding Liverpool Street 136, 141 City of London Corporation 220–1 Clark, Katy 134 coalition government (Conservative–Liberal) 155–6, 159, 161 Colin Buchanan & Partners 153 the Combine 25 Community Infrastructure Levy (CIL) 114, 149, 279 commuter trains 41, 98 Comprehensive Spending Review 149, 159, 160, 163, 173 Connaught Tunnel 126, 132, 191, 196–7, 203 Conservative governments Conservative–Liberal Democrat coalition 155–6, 159 and the Crossrail 2 project 278–9 transport policies 28–9 construction industry changing patterns of employment 260–1 cost savings on Crossrail 162 health and safety 170–2 construction work (Crossrail) dealing with contractors 259–63 deaths and injuries cyclists 231–2 workers 172, 228–9, 263–4 demolition work 158 design contracts 172–3 lorry movements and safety record 228–32 safety regime 169, 169–72, 178–9, 194 tenders for contracts 163 testing regime 264–5 see also stations (Crossrail); tunnel boring machines (TBMs); tunnels (Crossrail) cost–benefit analysis agglomeration effects 38, 48, 152–3 of transport megaprojects 45–54 County of London Plan (1943) 25–6 Cross London Rail Links 69, 70, 73, 96, 119, 120, 125, 143 Business Case 95–6, 98–100, 103, 104, 105–6, 113 Environmental Statement 117, 129–32 and ownership of Crossrail 158 Race Equality Impact Statement 132–3 see also Crossrail project Crossrail 2 (Chelsea–Hackney line) 29, 41–2, 50, 65, 70–1, 91, 277–81 funding 279–80 politics of 278–9 Crossrail project benefit–cost ratio of 52–3 benefits of 270–1, 280 communication systems 262–3 criticisms of 267–8 Crossrail Limited established 143 delay in opening 162, 265, 269 estimated passenger numbers 128, 268 HQ 164 innovation programme 53 invisibility of 269–70 job creation 96, 128–9 legal status of 157–8 maintenance 249, 265 management structure 164–5, 168–9, 208–9, 233 planning process 71–4, 133–4 programme partner 167–8 project delivery agreement 163–4 project delivery partner 166–7 public awareness campaign 116–17 routes 97–9, 267 inside tunnels 71–2, 97–8, 119–22, 126–8 Kingston branch 104–6 outside tunnels 99, 104–6, 122–5 safety culture 39–40 Transport and Works Act application 88–9 website 117, 151, 276 see also construction work (Crossrail); Cross London Rail Links; Elizabeth Line; funding Crossrail; Parliamentary bills; trains Custom House station 226 cyclists, killed by Crossrail contractors’ lorries 231–2 Daily Mail 17 Darling, Alistair 99–100, 101–3, 105–6, 110 Dartford 127 Department for Transport 46, 66, 78, 96, 100, 138 building of Crossrail 143 and Crossrail station 209, 220 and Crossrail trains 239, 243, 251 funding Crossrail 146, 147, 160, 274 legal status of Crossrail 157–8 project delivery agreement for Crossrail 163 disabilities, people with, accessibility at Crossrail stations 141, 214, 226, 250–1 District Line 24, 97, 105, 133, 161, 249 District Railway 19 Dix, Michele 278, 279, 280 DLR (Docklands Light Railway) 54, 58–62, 196, 226 Dobson, Frank 146 Docklands 43, 54–67, 71, 95, 96, 280 Crossrail route 97–8, 125 Development Corporation 56–9, 60 East London docks 55 Limehouse Link 58 Docklands Light Railway (DLR) 54, 58–62, 196, 226 Dog Kennel Bridge 142 driver-only trains 104 East London docks 55 East London Line 97 Extension 129 East London Rail Study 63–4 Eastern Counties & Thames Junction Railway 196 Ebbsfleet 98, 127 economic growth 83–4 Edward, Prince of Wales (later Edward VII) 14, 17 Electric Traction Company 13 Elizabeth Line 271 as part of Transport for London 249–50 stations see stations (Crossrail) tunnels 183 employment apprenticeships 276–7 central London 38, 40 changing patterns of 268 in the construction industry 260–1 and City deregulation 123 and the Crossrail concept 30 Crossrail and job creation 96, 128–9 in west London 124 English Heritage 116 English Nature 116 Ennis-Hill, Jessica 190 Environmental Statement 117, 129–32 Essex 122–3 ETCS (European Train Control System) 236–7, 245–7, 248 Eurostar 127 Fairfield Conservation Area Residents Association 136 Farringdon 7, 8, 25, 120–2, 128, 142, 179, 250 station construction 211, 221 station design 216 tunnel construction 182–3, 187, 189, 203, 204 Fennell, Desmond 38 The Fifteen Billion Pound Railway 195 financial services, Big Bang 38, 40, 123 Finsbury Circus 194, 224–5 Finch, Spencer 221–2 First World War 20, 25 Fleet Line see Jubilee Line Flyvbjerg, Bent 51, 52, 165 France, RER (Réseau Express Régional) 34–6, 41, 81–2, 107 freight trains 139–40 Fugro 178–9 funding Crossrail 82, 111–16, 143, 145–56 annual statements on 159 businesses 112, 147–8, 151, 156 Canary Wharf Group 150, 151, 152, 158–9 City of London 146–7, 150–1, 152 Comprehensive Spending Review 149, 159, 160, 163, 173 cost escalation 267, 274 and savings 159–63 cost estimates 74, 99, 128–9, 147, 159 cost-saving measures 104 Heathrow Airport 149–50 National Audit Office report on 272–3 Network Rail 148, 151, 160–1 property development at stations 112–14 trains 237–40, 243 Transport and Works application 88–9 Gatwick Airport 121 G.E.


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Brexit, No Exit: Why in the End Britain Won't Leave Europe by Denis MacShane

3D printing, banking crisis, battle of ideas, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, British Empire, centre right, Corn Laws, deindustrialization, Doha Development Round, Donald Trump, Etonian, European colonialism, first-past-the-post, fixed income, Gini coefficient, greed is good, illegal immigration, James Dyson, labour mobility, liberal capitalism, low cost airline, low cost carrier, Martin Wolf, mass immigration, Mont Pelerin Society, negative equity, Neil Kinnock, new economy, non-tariff barriers, offshore financial centre, open borders, open economy, price stability, purchasing power parity, quantitative easing, reshoring, road to serfdom, secular stagnation, Silicon Valley, Thales and the olive presses, trade liberalization, transaction costs, women in the workforce

After joining the EEC in 1973, shortly after the end of Bretton Woods system and the emergence of such new global economic powers as Japan or the Gulf States, with money-making cities like Hong Kong and Singapore giving the first signs of what Chinese capitalism could become, London took much of the new international financial market in raising capital and in currency trading. Mrs Thatcher’s ‘Big Bangderegulation of the 1980s and the image of London as the epicentre of finance capitalism attracted every unsentimental money-maker in the world. One can moralise about them, but as money flowed in and through London every bank in the world needed an office or an operation, big or small, in the Square Mile. But the so-called Big Bang – in essence a move from slow-moving paper and handshake transactions to round-the-clock, seven-days-a-week on-screen trading – did not make London the Wall Street of Europe. This was entirely due to the European Single Act and the aggressive dismantling of barriers to financial business done across Europe.

Without European regulatory authorisation, imports and exports of nuclear material, including medical isotopes, would stop until a new system was in place and agreed internationally. Insurance and Savings Brexit. The EU regulates under its 2016 Solvency II law and under EIOPA – the European Insurance and Occupational Pensions Authority – the cross-border operations of the insurance and pensions profession in which the UK is a specialist. This sector of the financial services industry is a major UK profit centre. Firms from all over the world based in the City of London have freedom to operate anywhere under EU rules in 27 countries. British officials and UK MEPs have been at the heart of shaping EU rules and laws. With Brexit, British firms in these sectors will not be able to operate in Europe unless they abide by the law and accept, ultimately, that the European Court of Justice is the final arbiter on a dispute. EIOPA represents British and other insurance firms at global supervisory bodies including IAIS, the International Association of Insurance Supervisors.

Indeed, Mrs May described in October 2015 as ‘unsustainable’ the arrival of Europeans into her country. To sugar the pill, Barnier is dangling the carrot of a provisional agreement on tariff-free movement of goods and agricultural products between the UK and the EU, which he would like to see as part of the withdrawal package. It would not cover services, which represent about 80 per cent of the UK economy – including most importantly the huge financial services provided by the City of London, which since the 1980s have been a major money earner for Britain. In addition, the EU would expect rules-of-origin obligations to be respected, which could mean that most made-in-Britain foreign, notably Japanese, cars might fall short of having enough of their total value actually produced in the EU not just assembled on Nissan, Toyota and Honda assembly lines. Free trade in agricultural products would help Northern Ireland, where the main export is dairy and meat products.


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Owning the Earth: The Transforming History of Land Ownership by Andro Linklater

agricultural Revolution, anti-communist, Anton Chekhov, Ayatollah Khomeini, Big bang: deregulation of the City of London, British Empire, business cycle, colonial rule, Corn Laws, corporate governance, creative destruction, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, facts on the ground, Francis Fukuyama: the end of history, full employment, Gini coefficient, Google Earth, income inequality, invisible hand, James Hargreaves, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kibera, Kickstarter, land reform, land tenure, light touch regulation, market clearing, means of production, megacity, Mikhail Gorbachev, Mohammed Bouazizi, Monkeys Reject Unequal Pay, mortgage debt, Northern Rock, Peace of Westphalia, Pearl River Delta, plutocrats, Plutocrats, Ponzi scheme, profit motive, quantitative easing, Ralph Waldo Emerson, refrigerator car, Right to Buy, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, spinning jenny, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade route, transatlantic slave trade, transcontinental railway, ultimatum game, wage slave, WikiLeaks, wikimedia commons, working poor

“the General Motors of the housing industry”: Quoted in American Family Home, 1800–1960 by Clifford Edward Clark (Chapel Hill, NC: University of North Carolina Press, 1986), 221. you are inferior: Von Mises to Rand, letter dated Jan. 23, 1958. “intellectually limited”: Greenspan’s remarks appear in his autobiography, Age of Turbulence: Adventures in a New World (New York: Penguin, 2008). the deregulation of the City of London: Big Bang was the centerpiece of a wave of deregulation that included airlines, utilities, and communications. “unfettered market competition”: Greenspan testified to Congress Oct. 23, 2008. the value of subprime mortgages: $1.3 trillion of subprime mortgages, figure from “Move over prime,” The Economist, February, 5, 2009. Chapter Twenty-Two: Undoing the Damage shot herself with a handgun: Mrs. Addie Polk’s tragedy stood out because it happened quite early in the fallout from the crash, but as the tidal wave of foreclosures washed across private property economies, the loss of shelter, security, and even identity that a home represents brought millions more close to her despair.

In its attempt to break the cycle, Britain became the first private property economy to hatch the Austrian egg. After her election in 1979, Prime Minister Margaret Thatcher began a crusade on behalf of Hayek’s economics. Her privatization of Britain’s airlines, telecommunications, energy suppliers, and even public housing were all inspired by his “crisp, clear analytical arguments against socialism.” In 1986, her government endorsed the deregulation of the City of London’s financial markets in a single measure, known as the Big Bang. Not only were the barriers between investment and commercial banking abolished, it became apparent that virtually any kind of institution of any nationality that borrowed and lent money could trade with the lightest supervision in London’s financial markets. In the fallout, Wall Street’s greater muscle allowed American investment banks such as Goldman Sachs and Lehman Brothers to prosper in London, providing an extra inducement to push for the same sort of freedom in the United States.

But repeatedly, the new, property-owning members of the House of Commons watered down government proposals. When yet another royal bill against enclosure was presented to Parliament in 1547, the Commons flatly rejected it, making clear that the royal government’s cause was lost. The parliamentary battle was in a way the most significant result of the land revolution. Politics had traditionally taken place in the king’s council where the great nobles and the City of London’s leading merchants had argued with the king’s servants, his chancellor, his chief justice, and the keeper of the royal purse. But the new property owners sought to protect their interests in the House of Commons where landowners outnumbered courtiers. One of the earliest symptoms of their growing influence came in a prolonged battle over the tax-avoidance trusts they set up, or “uses” in sixteenth-century language, to own their new properties.


How to Be a Liberal by Ian Dunt

4chan, Alfred Russel Wallace, bank run, battle of ideas, Big bang: deregulation of the City of London, Boris Johnson, bounce rate, British Empire, Brixton riot, Carmen Reinhart, centre right, David Ricardo: comparative advantage, Dominic Cummings, Donald Trump, eurozone crisis, experimental subject, feminist movement, Francis Fukuyama: the end of history, full employment, Growth in a Time of Debt, illegal immigration, invisible hand, John Bercow, Kenneth Rogoff, liberal world order, Mark Zuckerberg, mass immigration, means of production, Mohammed Bouazizi, Northern Rock, old-boy network, Paul Samuelson, Peter Thiel, price mechanism, profit motive, quantitative easing, recommendation engine, road to serfdom, Ronald Reagan, Saturday Night Live, Scientific racism, Silicon Valley, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, Winter of Discontent, working poor, zero-sum game

Unemployment was passed down from generation to generation. When work was found, it was in low paying retail or hospitality jobs, whose meagre wages were a drop in the ocean next to the riches made in capitalism’s headquarters in Wall Street, the City of London and Silicon Valley, the heart of the new tech industry. The state retreated from the market. Government spending was cut, particularly in education, housing and transport. Trade unions were legally restrained. Taxes were cut, especially for the wealthy. Nationalised industries were privatised, particularly in areas like gas, water, steel, airlines and rail. Sectors were deregulated. In some areas, such as aviation and trucking, these changes were positive, leading to greater competition and reduced prices. In others, such as electricity, private companies ended up with vast monopoly powers, which they sometimes went on to abuse.

The Gramm–Leach–Bliley Act allowed banks, no matter their origins, to bounce between retail and investment operations. Under Blair, British bank regulation was streamlined into a single light-touch entity, the Financial Services Authority (FSA). ‘The philosophy of the FSA from when I set it up,’ its first chair said, ‘has been to say “consenting adults in private? That’s their problem.”’ A deregulating causal cycle developed between the City of London and Wall Street, in which both lobbied, usually successfully, for their own government to lower and limit regulation of financial services so they could stay competitive with each other. These measures were supported by the new chairman of the Fed, Alan Greenspan. He repeatedly put forward the argument that there was no need to regulate financial services, because they would do it themselves by virtue of market logic.

In 2007, half of Lehman Brothers’ $691 billion balance sheet was funded by repo. For Goldman Sachs, Merrill Lynch and Morgan Stanley it was 40 per cent. In the UK, which was even more heavily deregulated, the repo market became more complicated. ‘Broker dealer’ banks holding securities engaged in a process called collateral rehypothecation. This involved using the collateral as further collateral in a separate repo deal. In the US, this was limited by regulation to no more than 140 per cent of the value of the collateral being held. But in the UK there was no limit. So investment banks – both European and American – used the looser rules in the City of London to secure up to 400 per cent collateral multiplication, adding up to around $4.5 trillion in additional funding. Another mechanism was called asset-backed commercial paper.


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The Rise of the Network Society by Manuel Castells

"Robert Solow", Apple II, Asian financial crisis, barriers to entry, Big bang: deregulation of the City of London, Bob Noyce, borderless world, British Empire, business cycle, capital controls, complexity theory, computer age, computerized trading, creative destruction, Credit Default Swap, declining real wages, deindustrialization, delayed gratification, dematerialisation, deskilling, disintermediation, double helix, Douglas Engelbart, Douglas Engelbart, edge city, experimental subject, financial deregulation, financial independence, floating exchange rates, future of work, global village, Gunnar Myrdal, Hacker Ethic, hiring and firing, Howard Rheingold, illegal immigration, income inequality, Induced demand, industrial robot, informal economy, information retrieval, intermodal, invention of the steam engine, invention of the telephone, inventory management, James Watt: steam engine, job automation, job-hopping, John Markoff, knowledge economy, knowledge worker, labor-force participation, laissez-faire capitalism, Leonard Kleinrock, longitudinal study, low skilled workers, manufacturing employment, Marc Andreessen, Marshall McLuhan, means of production, megacity, Menlo Park, moral panic, new economy, New Urbanism, offshore financial centre, oil shock, open economy, packet switching, Pearl River Delta, peer-to-peer, planetary scale, popular capitalism, popular electronics, post-industrial society, postindustrial economy, prediction markets, Productivity paradox, profit maximization, purchasing power parity, RAND corporation, Robert Gordon, Robert Metcalfe, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, social software, South China Sea, South of Market, San Francisco, special economic zone, spinning jenny, statistical model, Steve Jobs, Steve Wozniak, Ted Nelson, the built environment, the medium is the message, the new new thing, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, transaction costs, urban renewal, urban sprawl, zero-sum game

The ratio between the annual turnover of foreign exchange and the volume of world exports increased from 12:1 in 1979 to 60:1 in 1996, thus revealing the predominantly speculative nature of currency exchange. The global interdependence of financial markets is the result of five main developments. The first factor is the deregulation of financial markets in most countries, and the liberalization of cross-border transactions. A turning point in this process of deregulation was the so-called “Big Bang” of the City of London on October 27, 1987. This new financial freedom allowed capital from all sources to be mobilized from anywhere to be invested anywhere. In the US, between 1980 and the late 1990s, investment by pension funds, mutual funds, and institutional investors increased by a factor of 10, so that in 1998 stock market capitalization in the US amounted to 140 percent of GDP.

The Asian financial markets, particularly Hong Kong and Singapore, took advantage of their loosely regulated environment to attract financial transactions, winning market shares over a more regulated Tokyo stock-exchange market. The full deregulation of financial markets in the City of London in October 1987 opened a new era of financial globalization, in spite (or because?) of the simultaneous October 1987 crash in the New York stock exchange. Yet, the first round of supply-side economic policies did not work entirely to the expectations of their ideologues in the US and Britain because of a basic, internal contradiction in their position: they were, at the same time, nationalists and globalizers. In principle, these two positions are not contradictory under the condition of imperialist policies – and, indeed, that was the case of Victorian England which is often presented as an historical example of earlier globalization.

Thompson, E.P. (1967) “Time, work-discipline, and industrial capitalism”, Past and Present, 36: 57–97. Thrift, Nigel J. (1986) The “Fixers”: the Urban Geography of International Financial Capital, Lampeter: University of Wales Department of Geography. —— (1990) “The making of capitalism in time consciousness”, in J. Hassard (ed.), The Sociology of Time, London: Macmillan, pp. 105–29. —— and Leyshon, A. (1992) “In the wake of money: the City of London and the accumulation of value”, in L. Budd and S. Whimster (eds), Global Finance and Urban Living: A Study of Metropolitan Change, London: Routledge, pp. 282–311. Thurow, Lester (1992) Head to Head: the Coming Economic Battle among Japan, Europe, and America, New York: William Morrow. —— (1995) “How much inequality can a democracy take?”, New York Times Magazine, special issue: The Rich, November 19: 78.


pages: 741 words: 179,454

Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das

affirmative action, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Fall of the Berlin Wall, financial independence, financial innovation, financial thriller, fixed income, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, happiness index / gross national happiness, haute cuisine, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, job automation, Johann Wolfgang von Goethe, John Meriwether, joint-stock company, Jones Act, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Mikhail Gorbachev, Milgram experiment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, negative equity, NetJets, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, plutocrats, Plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Thaler, Right to Buy, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, survivorship bias, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game

In the sixteenth century the Conquistadors brought the ambitions, prejudices, attitudes, and values of Spain to the New World. Achievements were validated with riches, rank, and power. Failures brought disease and death, mollified by the consolations of faith and the afterlife. The financial elite undertook similar conquest and plunder, marshaling vast sums of money and creating intricate financial structures. In the new age, Masters of the Universe strutted through the City of London, Wall Street, Finanzplatz Deutschland, Zurich’s Bahnofstrasse, Singapore’s Raffles Place, Hong Kong’s Exchange Square, and Tokyo’s Marunouchi, parodying a banker in the movie The Bank who believes he is just like God, but with a better suit. Factories for Unhappy People7 In the 1967 film The Graduate, Dustin Hoffman’s character Ben Braddock received career advice. Then it was “PLASTICS,” now it was “MONEY.”

The term “shadow banking system” is attributed to Paul McCulley of PIMCO, who coined it at the 2007 Jackson Hole conference; see Paul McCulley “Teton reflections” (July/August 2007), Pimco Global Central Banking Focus. 2. Roger Merrit, Ian Linnell, Robert Grossman and John Shiavetta “Hedge funds: an emerging force in global credit markets” (18 July 2005), Fitch Ratings, New York. 3. Speech at the Lord Mayor’s Banquet for Bankers and Merchants of the City of London (17 June 2009), Mansion House, London. 4. Gretchen Morgenson and Louise Story “Bundled bad debt, bet against it and won” (23 December 2009) New York Times. 5. Based on Yves Smith (2010) ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism, Palgrave Macmillan, New York: 257–61. It is assumed that 80 percent of the underlying loans were subprime, 80 percent of the Magnetar transactions were synthetic, and 20 percent of subprime component of these CDOs were 2006 vintage BBB subprime tranches.

One English merchant banker described Goldman Sachs as: “nothing more than high-priced interlopers who produce a massive stream of impractical ideas that have no relevance.” The banker gave the Americans credit only “for making a lot of noise.”4 Cool Britannia Under Margaret Thatcher, things changed. Exchange controls were abandoned in 1979. Freer capital movements allowed London to recapture its position as an international market. In 1989 the government implemented the Big Bang, reforms ending the City’s archaic practices. Financial regulations were overhauled, becoming more market friendly. In 2001 a single regulator—the Financial Services Authority (FSA)—was created to oversee financial markets. London’s resurgence was helped by Wall Street’s stumbles. John F. Kennedy’s interest equalization tax (closing access to the U.S. market for foreign borrowers) prompted the creation of the London based euro dollar market—attributed to Siegmund Warburg.


pages: 309 words: 96,434

Ground Control: Fear and Happiness in the Twenty First Century City by Anna Minton

Albert Einstein, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Broken windows theory, call centre, crack epidemic, credit crunch, deindustrialization, East Village, energy security, Francis Fukuyama: the end of history, ghettoisation, hiring and firing, housing crisis, illegal immigration, invisible hand, Jane Jacobs, Jaron Lanier, Kickstarter, moral panic, new economy, New Urbanism, race to the bottom, rent control, Richard Florida, Right to Buy, Silicon Valley, Steven Pinker, the built environment, The Death and Life of Great American Cities, The Spirit Level, trickle-down economics, University of East Anglia, urban decay, urban renewal, white flight, white picket fence, World Values Survey, young professional

The foundations of the landmark tower, One Canada Square, the tallest building in Britain, were laid at the height of the 1980s’ boom. It followed the deregulation of the financial markets, which was the catalyst for the exponential growth of the global financial services industry in Britain. The 1980s established the physical, technological and regulatory framework for an unfettered financial services industry in the UK, to replace the failing industrial economy. This ‘new’ economy was powered by the abolition of exchange controls and the 1986 deregulation of the stock exchange, an event known as ‘Big Bang’ because of the increase in market activity. It not only changed the culture of the City of London for ever, it brought with it a boom in property development which created a new corporate architecture. Small firms, with their personal connections, made way for global investment banks, which required very large electronic trading floors, trading in abstract and complex financial instruments like options, derivatives and futures.

Small firms, with their personal connections, made way for global investment banks, which required very large electronic trading floors, trading in abstract and complex financial instruments like options, derivatives and futures. As the 1980s progressed, ‘Big Bang’ architecture saw two new financial centres emerge: in Docklands, and at the nearby Broadgate Centre, also in east London. These places were quite unlike any others in Britain. Not because they were centres for international finance, but because they were privately owned. The Canary Wharf Estate and the Broadgate Centre are private property, in the same way that a country estate, a shopping mall or someone’s house is private property. The rules that govern the rest of the city do not apply. Rather than being unconditionally open to the public, like the rest of the city, it is up to the owner to decide who is allowed in and what they are allowed to do there.

On the other side of the road an enormous box structure looms, emblazoned with the logo ‘Westfield’ in a jaunty red script. Westfield London, the biggest shopping centre in central London, which opened in 2008, is another place which reflects its function and its time, built towards the end of a decade when property development and shopping radically changed every British town and city. During the eighties, alongside the ‘Big Bang’ architecture of Canary Wharf and Broadgate, the phenomenon of out-of-town shopping centres was the architectural signature of Thatcherism. Places such as Bluewater in Kent, Lakeside in Essex, Meadowhall in Sheffield, the Trafford Centre in Manchester and the MetroCentre in Gateshead opened as a result of Mrs Thatcher’s loosening of the planning system, a policy which was later reversed, because of the damaging effect it had on high streets in towns and cities.


pages: 736 words: 233,366

Roller-Coaster: Europe, 1950-2017 by Ian Kershaw

airport security, anti-communist, Ayatollah Khomeini, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, British Empire, business cycle, centre right, colonial rule, cuban missile crisis, deindustrialization, Deng Xiaoping, Donald Trump, European colonialism, eurozone crisis, Exxon Valdez, failed state, Fall of the Berlin Wall, falling living standards, feminist movement, first-past-the-post, fixed income, floating exchange rates, Francis Fukuyama: the end of history, full employment, illegal immigration, income inequality, Johann Wolfgang von Goethe, labour market flexibility, land reform, late capitalism, liberal capitalism, liberation theology, low skilled workers, mass immigration, means of production, Mikhail Gorbachev, mutually assured destruction, Nelson Mandela, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open borders, precariat, price stability, quantitative easing, race to the bottom, reserve currency, rising living standards, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, Sinatra Doctrine, The Chicago School, trade liberalization, union organizing, upwardly mobile, washing machines reduced drudgery, Washington Consensus, Winter of Discontent, young professional

And both state debt and the deficit on spending had been at manageable levels before the crisis. But the charge stuck. Another effective criticism was that Labour had failed to impose sufficient regulation on the banks, thereby encouraging the speculative bubble that led to the crisis. There was more substance to this charge. However, the Conservatives favoured deregulation even more than the Labour government had done, and had indeed themselves abruptly deregulated financial markets in the so-called ‘Big Bang’ of 1986 that had turned the City of London into such a vital centre of global finance. And, like Labour, the Conservatives would have felt compelled to rescue the banks in order to protect savers. The undeniable reality, even so, was that the crash had happened under a Labour government. And since the initial financial crash the budget deficit had doubled while the level of government debt had also sharply increased.

Privatization, spasmodic during the 1960s and 1970s, now became routine. Western European states profited from privatization – at least in the short term – by some $150 billion by the late 1990s. Britain, the closest European country to the American ideals of deregulated capitalism that had been emphatically reinforced under Ronald Reagan, led the way. Margaret Thatcher was, in fact, more single-minded in her zeal for deregulation than the American President, and privatization was a central component of her determination to reduce the size of the state. By 1986 the British financial sector was largely deregulated. This bolstered the primacy of the City of London in the British economy, turning Britain more sharply than anywhere else in Europe into heavy dependence on its service and, especially, its financial sector. The rapid shrinkage of Britain’s manufacturing base was the opposite side of the coin.

Instead of ‘inefficient’ public ownership, New Labour looked to control and utilize the wealth creation of a competitive free-market economy to provide a framework for social justice. Under New Labour there was strong economic growth – which had already begun under the Conservatives in the mid-1990s (themselves benefiting from the upward swing in the global economy). Aided by further deregulation, the City of London consolidated its position as Europe’s (and by some measures the world’s) financial capital. Gordon Brown, an astute Chancellor of the Exchequer, made funds available to enable Blair’s government to finance much-needed improvements in schools, universities and hospitals. Many among the poorer sections of society certainly benefited. Changes in taxation and welfare benefits saw the incomes of the poorest rise by 10 per cent.


pages: 823 words: 220,581

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? by Steve Keen

"Robert Solow", accounting loophole / creative accounting, banking crisis, banks create money, barriers to entry, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, business cycle, butterfly effect, capital asset pricing model, cellular automata, central bank independence, citizen journalism, clockwork universe, collective bargaining, complexity theory, correlation coefficient, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, diversification, double entry bookkeeping, en.wikipedia.org, Eugene Fama: efficient market hypothesis, experimental subject, Financial Instability Hypothesis, fixed income, Fractional reserve banking, full employment, Henri Poincaré, housing crisis, Hyman Minsky, income inequality, information asymmetry, invisible hand, iterative process, John von Neumann, Kickstarter, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market microstructure, means of production, minimum wage unemployment, money market fund, open economy, Pareto efficiency, Paul Samuelson, place-making, Ponzi scheme, profit maximization, quantitative easing, RAND corporation, random walk, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Coase, Schrödinger's Cat, scientific mainstream, seigniorage, six sigma, South Sea Bubble, stochastic process, The Great Moderation, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, total factor productivity, tulip mania, wage slave, zero-sum game

Often, these revolutions outpace the popular understanding of a science. Astronomy provides an example of this. I expect that most lay people think that the dominant theory of how the universe came into being is the ‘Big Bang.’ In this theory, the universe originated in a ‘quantum singularity’ some 12–15 billion years ago. This explosion kick-started matter and time, leading to the immense universe we observe today. Back in the 1950s, this theory won out against its rival, that the universe had always been in a ‘steady state’ of expansion. The Big Bang was indeed the dominant theory for some time – until it was pointed out that, according to calculations from quantum mechanics, the Big Bang would have resulted in a universe consisting of a mere handful of elementary particles. A rival theory then developed which argued that, for a substantial period of time, the laws of physics of the current universe did not apply.

For stock market investors, uncertainty means that the expected yield of an investment over the medium- to long-term future simply can’t be known: Our knowledge of the factors which will govern the yield of an investment some years hence is usually very slight and often negligible. If we speak frankly, we have to admit that our basis of knowledge for estimating the yield ten years hence of a railway, a copper mine, a textile factory, the goodwill of a patent medicine, an Atlantic liner, a building in the City of London, amounts to little and sometimes to nothing; or even five years hence. In fact, those who seriously attempt to make any such estimate are often so much in the minority that their behavior does not govern the market. (Keynes 1936) Uncertainty, not risk, is the main factor standing between investors and an accurate knowledge of the future prospects of companies. As a result, the expected yield of an investment, the other variable in the EMH model of investor behavior, simply can’t be known.

A rival theory then developed which argued that, for a substantial period of time, the laws of physics of the current universe did not apply. Matter, for example, could move much faster than the speed of light. This ‘inflationary universe’ theory has subsequently been embellished to predict that there are many universes – as opposed to the one universe postulated by the Big Bang. The shifts from the Big Bang paradigm to the inflationary universe, to ‘multiverses,’ are big ones conceptually. The first envisages a single finite universe, while the last muses that ours may be only one of many universes, each with different ‘fundamental’ physical laws. But the science of astronomy made this move over a period of about twenty years, and it continues to undergo development today. Now even the inflationary/multiverse theory is under challenge, as measurements imply that the rate of expansion of the universe is actually increasing with time.5 Economics, in contrast, has had only one acknowledged revolutionary episode in the last century – the Keynesian revolution during the 1930s.


pages: 270 words: 73,485

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One by Meghnad Desai

"Robert Solow", 3D printing, bank run, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, correlation coefficient, correlation does not imply causation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, German hyperinflation, Gunnar Myrdal, Home mortgage interest deduction, imperial preference, income inequality, inflation targeting, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, market bubble, market clearing, means of production, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, women in the workforce

abolition of slavery (i) absolute poverty (i) accelerator principle (i) accounting, concealing problems (i) accumulation, of profit (i) adaptive expectations (i), (ii) Adelman, Frank and Irma (i) aggregate demand curve (i), (ii) equation (i) price (i) aggregate effective demand (i), (ii) aggregate supply curve (i), (ii) equation (i) price (i) aggressive lending (i) agrarian unrest (i) agricultural prices (i) alternative narrative long perspective (i) merits (i) optimism/pessimism (i) overview (i) America, post-revolution (i) see also United States American Keynesianism (i), (ii) American Revolution (i) Anglo-French War (i), (ii), (iii), (iv) animal spirits (i), (ii) anti-communism (i) Arab-Israeli War, 1973 (i) Aristotle, view of money (i) Arrow, Kenneth (i) Asian countries, foreign exchange (i) Asian Crisis, 1997 (i), (ii) Attwood, Thomas (i) August 15, 2007 (i), (ii) Austrian capital theory (i) Austro-Hungarian Empire (i) average costs (i) Baby Boom (i) bank credit access to (i) as driver of investment (i) Bank of England (i), (ii), (iii) Bank of International Settlements (BIS), warnings of crisis (i) Bank of the United States (i) banking (i) deregulation (i) growth in (i), (ii) political debate (i) banking system, as root of cycles (i) banknotes convertibility (i), (ii) excess (i) issuing (i) non-convertible (i) bankruptcy, prediction of (i) banks Great Depression (i) Great Recession (i) lending (i) recapitalization (i) regulation (i) rescue programs (i) run on (i) Baring Brothers (i), (ii) Bastard Keynesianism (i), (ii) Battle of Beachy Head (i) Battle of Waterloo (i) Bear Stearns (i), (ii) bell-shaped distribution (i) Berlin Wall (i) Bernanke, Ben (i) Big Bang (i) Black, Fisher (i), (ii), (iii) Black Swan event (i) Black Thursday (i) Board of Trade (i) Böhm-Bawerk, Eugene (i) bonds (i), (ii), (iii) boom and bust (i), (ii), (iii) boom, post–World War II (i) borrowing (i), (ii) beyond capacity (i) brokers (i) as cause of recession (i) as response to recession (i) bourgeoisie (i) Brazil (i) bread, production and supply (i) Bretton Woods system (i), (ii), (iii) BRICS countries (i) Britain post-war status (i) see also United Kingdom Brookings-SSRC Econometric Model of the US Economy (i) Brown, Gordon (i), (ii) Bryan, William Jennings (i) bubbles (i) budget deficit, US (i) built-in stabilizers (i) bull run (i) Bullion Report (i) Bundesbank (i) Burns, Arthur (i), (ii) business attracting capital (i) dependence on credit (i) Butler, R.

The inverted pyramid of credit created on the base of cash could get steeper and steeper as the process of check clearing got quicker and more efficient. But, of course, there was a risk of overlending and being caught short of cash when depositors demanded their cash back. Often, if there was a rumor that a bank was in trouble, depositors would rush to get their cash out and this in itself would drive the bank to a closure. It was in such an atmosphere of hectic activity that in 1866 the Bank of England was called upon to save a City of London bank – Overend & Gurney – which was under the threat of bankruptcy. The Bank of England decided that it would lend cash of its own to save a supplicant bank if there was on offer some “sound paper” – loans which had been given which could be recovered, investments made which could be cashed. Thus was born the idea of the Bank of England – a Central Bank – as a “lender of the last resort.” The Bank of England, although still a private company, became the supervisory agent which regulated the behavior of commercial banks.

Along the way, economics was challenged to come up with new ideas to cope with the new reality and to find ways to nudge the economy back on to the path of prosperity. Budgets had to be balanced again. The debt incurred during the war had to be serviced, adding to public spending. There was a need for “retrenchment,” as public spending cuts were then called. Returning to the Gold Standard was also high on the agenda. Orthodox opinion in the Bank of England and the City of London favored going back at the old parity of $4.86 to the pound. John Maynard Keynes (1883–1946) pointed out in a series of articles, which later became his book A Tract on Monetary Reform, that, given the movement of wholesale prices in the UK and US, it would be better to fix the exchange rate at a lower level. Despite a year of severe deflation, the two postwar years of inflation had kept prices permanently above their prewar level.


pages: 726 words: 172,988

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It by Anat Admati, Martin Hellwig

Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bonus culture, break the buck, business cycle, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversified portfolio, en.wikipedia.org, Exxon Valdez, financial deregulation, financial innovation, financial intermediation, fixed income, George Akerlof, Growth in a Time of Debt, income inequality, information asymmetry, invisible hand, Jean Tirole, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Larry Wall, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, margin call, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nick Leeson, Northern Rock, open economy, peer-to-peer lending, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, Satyajit Das, shareholder value, sovereign wealth fund, technology bubble, The Market for Lemons, the payments system, too big to fail, Upton Sinclair, Yogi Berra

Information that has become available since his estimate—for example, on the sizes of the “bad bank” portfolios of Hypo Real Estate and WestLB and of losses in these portfolios from the sovereign debt crisis in Europe—suggests that this estimate should be raised by some €20–30 billion. The Dexia bailouts in 2008 and 2011 were costly to France as well as Belgium (see note 3). In the mid-1990s, Crédit Lyonnais, then the largest French bank, had losses in excess of €20 billion and required an injection of taxpayer money amounting to €15 billion. 8. As an example, see the discussion of the role of the City of London in ICB (2011, 15), which reads, “The recommendations in this report will be positive for UK competitiveness overall by strengthening financial stability. That should also be good for the City’s international reputation as a place to do business.” Andrew Tyrie, chair of the Parliamentary Committee on Banking Standards, wrote that banking is “one of the UK’s most important industries and if banks are to be at the heart of our economy, they must be allowed to remain internationally competitive” (“A Mandate to Tackle Our Banks’ Failure,” Financial Times, October 1, 2012).

See also Chapter 5, note 28, and Chapter 10, note 46. 28. The Depository Institutions Deregulation and Monetary Control Act of 1980 was the key piece of federal legislation that ended the regulation of the banking industry. This act deregulated banks while giving the Federal Reserve more authority over nonmember banks. Particularly, it required nonmember banks to abide by Federal Reserve decisions but allowed for greater leeway in bank mergers. It also allowed savings institutions to offer demand deposits, eliminated interest rate ceilings for all deposits other than demand deposits, and permitted individual banks to set their own interest rates for loans. In addition, the Act raised deposit insurance to $100,000 per account. Further deregulation—in particular, of savings institutions—came through the Garn–St. Germain Depository Institutions Act of 1982, which authorized savings institutions to make commercial loans and gave the federal agencies the ability to approve bank acquisitions. 29.

See Susanne Craig, Ben Protess, and Mathew Saltmarsh, “UBS Faces Questions on Oversight after a Trader Lost $2 Billion,” New York Times, September 14, 2011, as well as “Chronology: UBS in Turmoil,” http://www.drs.ch/www/de/drs/nachrichten/wirtschaft/ubs-vom-musterschueler-zum-problemfall/72270.218256.chronologie-die-ubs-in-turbulenzen.html, accessed October 14, 2012. 57. See, for example, “Basel III Implementation Delay Looms,” Wall Street Journal, August 22, 2012, describing delays in Europe, China, and elsewhere. “Europe’s Big Bang for Bank Rules Set to Sputter” (Reuters, August 24, 2012) quotes the chair of the EU committee involved in negotiating the banking regulation as saying, “It is likely that dates will be revised” and an accounting consultant as stating, “Banks have a good idea of what might be required but it’s a bit of a range at the moment.” In Chapter 11 we discuss how banks and the system can be strengthened fairly quickly given the authority that regulators already have under existing rules. 58.


pages: 264 words: 76,643

The Growth Delusion: Wealth, Poverty, and the Well-Being of Nations by David Pilling

Airbnb, banking crisis, Bernie Sanders, Big bang: deregulation of the City of London, Branko Milanovic, call centre, centre right, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, dark matter, Deng Xiaoping, Diane Coyle, Donald Trump, double entry bookkeeping, Erik Brynjolfsson, falling living standards, financial deregulation, financial intermediation, financial repression, Gini coefficient, Goldman Sachs: Vampire Squid, Google Hangouts, Hans Rosling, happiness index / gross national happiness, income inequality, income per capita, informal economy, invisible hand, job satisfaction, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, Monkeys Reject Unequal Pay, mortgage debt, off grid, old-boy network, Panopticon Jeremy Bentham, peak oil, performance metric, pez dispenser, profit motive, purchasing power parity, race to the bottom, rent-seeking, Robert Gordon, Ronald Reagan, Rory Sutherland, science of happiness, shareholder value, sharing economy, Simon Kuznets, sovereign wealth fund, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, transaction costs, transfer pricing, trickle-down economics, urban sprawl, women in the workforce, World Values Survey

Ergo giving free rein to banks must be good.” That led ambitious governments around the world, including Iceland’s, to ape the Anglo-Saxon model, one that involved liberalization, deregulation, and privatization. Really anything with a “tion” on the end of it would do. Banks were allowed to get on with the business of “wealth creation”—which mostly meant shuffling bits of paper among themselves, lending recklessly, and paying themselves fat bonuses. The global cheerleaders for these policies were the US and the UK, where Ronald Reagan and Margaret Thatcher had set the deregulation agenda in motion and where Wall Street and the City of London were rampant. Not only was it obvious how much money bankers were making—you only had to look at the cars they were driving to see that—but they also spent formidable amounts of money lobbying governments to make life yet easier for them.

As the idea that an unbridled banking industry led to a strong economy took hold, governments did all they could to foster the growth of the financial sector. For the most part, that meant getting out of the way. From the mid-1980s, states rolled back banking industry regulations, many of them put in place after the 1929 Wall Street crash. In America the separation of investment from commercial banking was steadily eroded until it was abandoned altogether with the repeal of the Glass-Steagall Act in 1999. In the mid-1980s London had its Big Bang, which swept away regulations and paved the way for huge financial conglomerates. As in Iceland, banks that had once relied on steady retail depositors for their capital took to the wholesale markets, sucking up and recycling first petro-dollars from the Middle East and then the surplus savings of workers and peasants in booming China.13 A process now known by the hideously ugly term “financialization” took hold.

In the latest iteration, he said, the self-same elite had taken over a banking sector that had expanded exponentially in the first years of this century. The story of Iceland’s banking industry illustrates one of the messages of this book. Not all economic growth is good. Rapid growth comes in many flavors, and some of them are less appetizing than others. In the 1990s David Oddsson, Iceland’s longest-serving prime minister, oversaw a Thatcherite orgy of deregulation that transformed Iceland from sleepy fishing nation to pioneer of turbocharged “Viking capitalism.”3 After the banks were privatized in 2002, three institutions, Glitnir, Kaupthing and Landsbanki, went on an incredible expansion binge fueled by cheap borrowing from other cash-flush banks. They lent money to friends and to each other and set off on a madcap spending spree, picking up assets all across Europe, from English football teams to Danish airlines.


The Fix: How Bankers Lied, Cheated and Colluded to Rig the World's Most Important Number (Bloomberg) by Liam Vaughan, Gavin Finch

asset allocation, asset-backed security, bank run, banking crisis, Bernie Sanders, Big bang: deregulation of the City of London, buy low sell high, call centre, central bank independence, collapse of Lehman Brothers, corporate governance, credit crunch, Credit Default Swap, eurozone crisis, fear of failure, financial deregulation, financial innovation, fixed income, interest rate derivative, interest rate swap, Kickstarter, light touch regulation, London Interbank Offered Rate, London Whale, mortgage debt, Northern Rock, performance metric, Ponzi scheme, Ronald Reagan, social intelligence, sovereign wealth fund, urban sprawl

John Varley, who took over as CEO in September 2004, said in a 2007 interview with Diamond’s college newspaper: “When he joined Barclays, which was about ten years ago, I think that what we had then was an underperforming, subscale investment banking capability. And what we have today is an outperforming world leader. That’s quite a transformation in ten years. And Bob has personally led that.” Diamond’s arrival in the U.K. coincided with the advance of American firms in the capital, and his success mirrored the City of London’s in the decade after Tony Blair’s New Labour government swept into power promising “things can only get better”. The light-touch regulatory environment created by the Big Bang reforms of 1986 lured American powerhouses like Goldman Sachs, Citigroup, JPMorgan and Merrill Lynch. They brought with them a new professionalism and an increased appetite for risk. Twelve-hour days replaced boozy lunches, and prestigious British names like Schroders, Smith New Court, Barings and Cazenove were taken over, supplanted or crushed by the competition.

The BBA established a panel of banks that would be polled each day and tweaked the original formula to strip out the bottom and top quartile of quotes to discourage cheating. Otherwise the rate looked similar to the one first conceived by Zombanakis. In the quarter-century between then and Hayes’s time at UBS, the suite of currencies was expanded to 10 and the process became electronic, but not much else changed. The same could not be said of the U.K. banking industry, which was transformed by Prime Minister Margaret Thatcher’s “Big Bang” financial deregulation program of 1986. Overnight, Thatcher cleared the way for retail banks to set up integrated investment banks that could make markets, advise clients, sell them securities and place their own side bets, all under one roof. She also removed obstacles to foreign banks taking over U.K. firms, leading to an influx of big U.S. and international lenders that brought with them a more aggressive, cutthroat ethos.

Finch lives with his wife, Cece, and two boys, Oscar and Milo, in Brighton. 193 The Fix: How Bankers Lied, Cheated and Colluded to Rig the World’s Most Important Number By Liam Vaughan and Gavin Finch © 2017 Liam Vaughan and Gavin Finch Index 4 p.m. fix 171–2 Aarons, Lee 64–5 ABC News 107 ABN Amro 93 Adoboli, Kweku 154–5 Adolph, Guillaume 84, 117, 129, 151 Agius, Kate 140 Agius, Marcus 95, 137, 138–9, 140–1, 142, 143–4, 145 Ainsworth, Sarah 10, 61 Allen & Overy 126, 127 Alykulov, Mirhat 80, 124–6, 130, 148 American Electric 42 American International Group 57 Arcuri, Jennifer 132 Argus 41 Armstrong, Lance xii Armstrong, Neil 13 Atlas Mara 170 Audit Bureau of Circulation 42 Bailey, Andrew 142, 143, 144 Ball, Matthew 148 Bank for International Settlements 43, 54–5 Bank of America 47, 103 Bank of England xi, 16, 53, 54, 56–8, 60, 89–91, 94–100, 105–7, 139, 141–6, 163 Bank of Japan 22 Bank of Scotland 163 Barclays Capital 47, 90, 92, 142 Barclays Global Investors (BGI) 108 Barclays xi, 46, 47, 51, 76, 87–8, 90, 92–9, 101, 104, 106–8, 126, 128, 133–43, 145, 146, 149, 170, 172, 174 Barings 92 basis swaps 10 basis trade 23 BBA Libor see LIBOR Bear Stearns 40 195 196 IN DEX Bermingham, David 154 “Big Bang” financial deregulation program (1986) (U.K.) 16, 92 Black Wednesday 54 Blair, Tony 92 Blankfein, Lloyd 137 Bloomberg 46, 51, 171 Blue Index 159 BNP Paribas 49, 163 Bond, Tim 46–7 Born, Brooksley 71 Bowles, Stan 152 Brasserie Roque 28 Breuer, Lanny 103, 104, 149 Bribery Act (2011) (U.S.) 66 British Bankers’ Association (BBA) 16, 42, 49–51, 54, 56, 59, 60, 75, 93, 105, 161–3, 167 “Understanding the Construction and Operation of Libor—Strengthening for the Future” 58 brokers relationship 27 relationship with traders 27 role of 26–7 technical 27 Brown, Gordon 96, 105 BT Group 144 Calyon Securities 10 Cameron, David 28, 137 Cantwell, Maria 71 Caplin, David 31 Casterton, David 68 Cazenove 92 Cecere, Chris 81–2, 83, 112, 113, 114, 115, 120, 121, 124, 130 Cela, Phyllis 109 Celtik, Burak 113, 115, 118, 119, 120 CFTC 17, 39–40, 41, 44–7, 57, 58, 67, 70, 73–6, 87–90, 99, 101–2, 104, 105, 107–9, 115, 117, 119, 126, 128, 129, 133, 135, 136, 139, 140, 152, 157, 163, 168, 169, 173 CGMJ 124 Chadwick, Matthew 148 Chance, Clifford 108 Chawla, Mukul 158–9, 160, 163, 165, 169 Chicago Mercantile Exchange (CME) 17, 46 Chicago Sun-Times 42 Christofferson, Robb & Co. 17 Citibank 57 Citigroup x, 43, 46, 47, 57, 62, 75, 81–3, 92, 103, 104, 111–16, 118–24, 126, 130, 148, 161, 164, 172, 174 Clark, Robin 66 Clinton, Bill 103 administration 70 Clinton, Hillary 70, 169 Cole, Margaret 105–6, 107 Commodity Exchange Act 45 Commodity Futures Modernization Act (2000) (U.S.) 71 Commodity Futures Trading Commission see CFTC Compton, Steve 116 Confederation of British Industry 144 Contogoulas, Stylianos 88 Cooke, Jeremy 158, 164, 168 Corney & Barrow 9 Cornthwaite, Richard 155 Covington & Burling 103 Cravath Swaine & Moore 107 credit default swap prices 46 Credit Suisse 139 Credit Suisse First Boston 91 Criminal Cases Review Commission 168 Cryan, Noel 78–9, 85, 123, 168, 169 Dallas Morning News, The 42 Danieli, Francesca 72 Daniels, Eric 95 Index Danziger, Neil 7, 64, 65–6, 129, 148 Darin, Roger 33, 34–5, 80, 81, 82, 86, 126, 149, 152 Davies, Brent 118, 123, 148 Dearlove, Mark 89, 90, 93, 99 Del Missier, Jerry 89, 97, 98–9, 134, 141–2, 143, 145 Department of Justice 41–2, 67, 101–3, 104, 108, 125–6, 128, 133, 134, 139, 149, 150, 152, 168, 174 Deutsche Bank 84, 117, 119, 129, 134, 135, 151 Dewar, Sally 106 Diamond, Anne 90 Diamond, Robert Edward, Jr.


pages: 851 words: 247,711

The Atlantic and Its Enemies: A History of the Cold War by Norman Stone

affirmative action, Ayatollah Khomeini, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, British Empire, business cycle, central bank independence, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, European colonialism, facts on the ground, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, Gunnar Myrdal, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, illegal immigration, income per capita, interchangeable parts, Jane Jacobs, Joseph Schumpeter, labour mobility, land reform, long peace, mass immigration, means of production, Mikhail Gorbachev, Mitch Kapor, new economy, Norman Mailer, North Sea oil, oil shock, Paul Samuelson, Ponzi scheme, popular capitalism, price mechanism, price stability, RAND corporation, rent-seeking, Ronald Reagan, Silicon Valley, special drawing rights, Steve Jobs, strikebreaker, The Death and Life of Great American Cities, trade liberalization, trickle-down economics, V2 rocket, War on Poverty, Washington Consensus, Yom Kippur War, éminence grise

Carrington, Peter, 6th Baron cars see automobile industry Carter, Jimmy: background and character Camp David accords (1978) and Chile and CIA defence policy economic policy education policy election as President energy policy failures of Administration Governor of Georgia and Iran loses 1980 election to Reagan and Margaret Thatcher moralizing refuses to meet Bukovsky reputation retirement and Turkish coup (1980) work regimen Carter, Rosalynn Casaroli, Cardinal Agostino Casey, William Castro, Fidel: background and education and Bay of Pigs invasion and Crisis of 1962 imprisonment and Khrushchev revolution US campaign to limit appeal visits Chile Castro, Raúl Catherine the Great Catholic Church: in Austria in Chile and Christian Democracy and Communism Counter-Reformation in Czechoslovakia and economic development in France in Germany in Hungary in Ireland and the Left in Poland and Reagan administration Rerum Novarum (enyclical) Thirty Years War Vatican(ecumenical council) in Vietnam see also Vatican CDU see Christian Democrats (German) Ceauşescu, Elena Ceauşescu, Nicolae cell phones censorship: in Czechoslovakia in USSR in West Central African Empire Centre National de la Recherche Scientifique (CNRS) Cézanne, Paul Chaldean Christians Chambord, château de Chams (Vietnamese Moslems) Chandler, Alfred Channel Tunnel Chaplin, Sir Charlie Charles, Prince of Wales Charles X, King of France Chateaubriand, François-René de Chaudhuri, Nirad Chaunu, Pierre Chechens Chechnya Cheka (Russian secret police) see also KGB Chéreau, Patrice Chernenko, Konstantin Chevalier, Maurice Chevron (oil company) Cheysson, Claude Chiang Kai-shek: American view of andwar government in Taiwan mausoleum Chicago Chicago school of economics Chile: under Allende Carter’s handling of Catholic Church Christian Democrats civil war (1891) Communist Party copper industry coup of 1973 DINA (secret police) education system (see also universities) and Falklands War (1982) geography inflation land reform native Indian population peasantry Pinochet regime political instability population growth poverty privatizations trade unions unemployment universities wine industry China, Republic of: backwardness civil war Communist Party emergence of communist movement intelligentsia Japanese invasion and occupation Kuomintang (Nationalists) land redistribution Long March (1934-5) membership of UN Security Council peasantry Protestant missionaries Second World War Soviet invasion trade unions see also Taiwan China, People’s Republic of: and Afghan War atomic and nuclear weapons border conflicts with India border conflicts with Russia/ USSR ‘cultural revolution’ economic growth famines and starvation friendship treaty with USSR (1950) ‘hundred flowers’ campaign intelligentsia international support for Korean War Mao’s inauguration of People’s Republic Nixon’s visit (1972) and ‘peaceful coexistence’ doctrine Sino-Soviet split and Taiwan Tiananmen Square massacre (1989) tyranny and destruction of regime and Vietnam Chirac, Jacques Cholkovsky, Konstantin Chonchol, Jacques Chou En-lai Christian Democrats (Chilean) Christian Democrats (German; CDU) Christian Democrats (Italian) Christian Women’s Camp (Hungarian) Chrudinák, Aladár Chrysler (automobile manufacturer) Church of England Churchill, Sir Winston: calls for European unity and Chiang Kai-shek Congress of Europe (1948) declining influence and Eden’s premiership and Greece hopes for reconciliation with USSR on India ‘Iron Curtain’ speech loses 1945 election and Poland reputation Teheran conference (1943) Yalta conference (1945) and Yugoslavia CIA (US Central Intelligence Agency): and Afghanistan and Bay of Pigs invasion and Cambodia and Chile and collapse of USSR Congressional restriction of establishment of and Greek Colonels’ coup (1967) journalists’ attacks on and overthrow of Mossadegh and ‘Second Cold War’ and Suez crisis and Vietnam Ciba (chemical company) Čierna nad Tisou cigarettes smoking bans City of Londonbig bang’ (1986) Clark Kerr, Archibald, 1st Baron Inverchapel Clark, William Clay, Lucius Clayton, William. Clifford, Clark climate change Club of Rome CNN (television network) Coal Board (British) coal mining: Belgium Britain ECSC (European Coal and Steel Community) Germany Luxemburg Poland Turkey USA Cobb, Richard CoCom (Coordinating Committee for Multilateral Export Controls) Code Napoléon Cohen, Warren Cohn-Bendit, Daniel coin-clipping Çolakoğlu, Nuri Colby, William collectivization, agricultural Cuba Czechoslovakia East Germany Poland USSR Vietnam Cologne Colombia Colt, Samuel Combes, Émile Comecon Comédie Française Cominform Comintern schools Common Agricultural Policy (CAP) Common Market see European Economic Community Communist Party of the Soviet Union: Brezhnev’s reforms Central Committee characteristics of documentation and meetings Gorbachev’s reforms International Department of Central Committee Khrushchev’s reforms Kosygin’s reforms nomenklatura Party Congresses; 17th (1934); 20th (1956);t (1959); 23rd (1966); 24th (1971); 27th (1986); 28th (1990) Politburo power struggle following Stalin’s death Praesidium relationship with KGB Stalin’s purges suicides of members Comnena, Anna Compaq (corporation) computers: development of as emblem of the eighties and financial markets manufacturers and public sector in USSR see also information technology concentration camps: East European Communists’ Nazi Soviet Concorde (aircraft) condom sizes Confederation of British Industry Conference on Security and Cooperation in Europe (Helsinki, 1975) Congdon, Tim Congress of Europe (1948) Congress of the Peoples of the East (1920) Connally, John Connolly, Bernard Conquest, Robert Conservative Party (British): 1945 election association with Church and State Margaret Thatcher replaces Heath as leader Margaret Thatcher’s election victories Margaret Thatcher’s fall from power Constant, Benjamin contraceptive Pill Cooperative for American Remittances to Europe (CARE) copper Copts Corbusier, Le Corpus Christi College, Cambridge Corsica Corvalán, Luis Council of Europe council housing (British) Counter-Reformation Cracow Craig, Gordon Crichel Down scandal (1954) Crimea Crimean War (1853-6) Cripps, Sir Stafford Croatia Croham, Douglas Allen, Baron Cronkite, Walter Crosland, Anthony Cruzat-Lorrain (Chilean conglomerate) Csap CSCE see Conference on Security and Cooperation in Europe Cuba: and Angola Batista regime Bay of Pigs invasion (1961) Communist Party Crisis of 1962 Guantanamo naval base independence from Spain land reform and collectivization peasantry revolution sugar production trade unions Cuba Socialista (journal) Currie, Lauchlin Çürükkaya, Selim Curzon, George, 1st Marquess Curzon of Kedleston Cyprus Czechoslovakia: Agrarian Party agricultural collectivization anti-clericalism author’s imprisonment in Catholic Church censorship Communist Party communist takeover (‘Czech coup’) and Cuban crisis of 1962 ethnic German population fall of communism under Husák industry intelligentsia Khrushchev’s relaxation attempts ‘Little Entente’ and Marshall Plan National Front National Socialists/Radicals under Novotný peasantry ‘Prague Spring’ purge trials (1951) Second World War ‘Protectorate’ Social Democrats Soviet invasion StB (security service) territorial gains from Hungary territorial losses to USSR trade unions treaty with West Germany see also Slovakia Częstochowa Da Nang Dahrendorf, Gustav Dahrendorf, Ralf, Baron Dakhichev, Viktor Daley, Richard J.

Business investment rose by 20 per cent. The adaptation of advanced computers to financial transactions somehow catapulted London back to the centre of the world’s money, and as the bond market got under way, older divisions between deposit banks, operating on classic old-fashioned lines, and investment ones, involved in speculation, were elided. In October 1986 came an important moment, deregulation of the City, otherwise known as ‘Big Bang’, such that old-fashioned banks and stockbroking firms gave up their staid ways. Venerable (and well-run) establishments such as Lawrence, Prust were bought up by a Deutsche Bank anxious to escape from the stuffy confines of Frankfurt, where, it was said, there was a night-life, but she went to see her aunt on Tuesdays. In New York and London the money poured in, and in the British case Alan Walters himself called it a ‘miracle’, comparable with the earlier German one, for there had been steady growth since 1981, weekly earnings had risen by 14 per cent in real money between 1983 and 1987, and inflation had been held below 5 per cent.

They had exploded their own first bomb in October 1952 and were obviously looking for some independent role. In the first place, Churchill himself hoped to have a last grand international moment, reconciling the USSR and the rest, and in the early fifties, before German competition properly started, British exports boomed, and there was some life in the British Commonwealth. A third of the world’s trade was conducted in pounds, and money therefore came back to the City of London: Churchill could imagine that he had an independent role. With the French, matters were simpler. There was a large Communist Party; there was a great deal of resentment against Germany; there was cultural resentment of American domination; and there was a colonial war going on, in Vietnam, where Soviet help might be helpful. To have pushed all of them together, in NATO, had been extraordinarily clumsy.


pages: 382 words: 100,127

The Road to Somewhere: The Populist Revolt and the Future of Politics by David Goodhart

Affordable Care Act / Obamacare, agricultural Revolution, assortative mating, Big bang: deregulation of the City of London, borderless world, Boris Johnson, Branko Milanovic, Bretton Woods, British Empire, call centre, capital controls, carbon footprint, central bank independence, centre right, coherent worldview, corporate governance, credit crunch, deglobalization, deindustrialization, Donald Trump, Downton Abbey, Edward Glaeser, en.wikipedia.org, Etonian, European colonialism, eurozone crisis, falling living standards, first-past-the-post, gender pay gap, gig economy, glass ceiling, global supply chain, global village, illegal immigration, income inequality, informal economy, job satisfaction, knowledge economy, labour market flexibility, low skilled workers, market friction, mass immigration, mittelstand, Neil Kinnock, New Urbanism, non-tariff barriers, North Sea oil, obamacare, old-boy network, open borders, Peter Singer: altruism, post-industrial society, post-materialism, postnationalism / post nation state, race to the bottom, Richard Florida, Ronald Reagan, selection bias, shareholder value, Skype, Sloane Ranger, stem cell, Thomas L Friedman, transaction costs, trickle-down economics, ultimatum game, upwardly mobile, wages for housework, white flight, women in the workforce, working poor, working-age population, World Values Survey

The single market was also first announced in 1986, and was seen as a liberalising free market measure against the more protectionist instincts of countries like France, and, not coincidentally, it was championed by Margaret Thatcher’s Britain. (Britain’s dramatic liberalisation in the 1980s had more to do with the EU than is generally acknowledged, symbolised by the so-called ‘big bangderegulation of the City of London partly inspired by EU competition rules.) Moving from a tariff-free customs union to what is sometimes called the ‘common economic space’ of a single market is a bigger step than it sounds. The idea was to make a reality of the so-called four freedoms of goods, services, capital and people by harmonising and coordinating a huge range of factors, from state subsidies to product specifications.

But, as Michael Lind points out, if the nation state is an illegitimate expression of bigotry, like racism, then the legitimacy of democracy and the welfare state, which today exist only in national forms, is also thrown into doubt.26 Post-nationalism was never a majority view, even among Anywheres, but a looser notion that the national was unfashionable and embarrassing—partly because of the imperial legacy—became part of the common sense of the liberal wing of the educated and affluent in 1970s and 1980s Britain. This discomfort about the national also overlapped with a more establishment view, in part of the business class and the City of London, which favoured maximum openness to financial globalisation, immigration and as much European integration as possible. Anywheres with wide but loose attachments tend to have little sympathy for the communitarian ambivalence about immigration of the Somewheres. In any case, they say, we are surely a ‘mongrel nation’. Britain is, in fact, rather less mongrel than most countries unless you regard successive waves of people arriving between one and two thousand years ago as somehow invalidating its national status.

About one in five of the social housing stock is occupied by foreign nationals, which suggests a much higher proportion of new lets is going to newcomers.50 Meanwhile, a Financial Times investigation discovered that as a result of rapidly rising house prices in the capital members of the professional middle class—architects, engineers and academics—could no longer contemplate buying a house in whole sections of London: the City of London, Kensington, Westminster, Wandsworth, Islington, Camden and Hammersmith. In fact, in only three London boroughs is home ownership affordable to people on median incomes. Even the old upper classes feel discombobulated by changes to their neighbourhoods in places like Chelsea and Kensington as new, foreign, money pours in, according to social commentator Peter York.51 So, contrary to the ‘greatest city in the world’ boast, London is one of the least good places to live in Britain on most counts.


pages: 464 words: 139,088

The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King

"Robert Solow", Andrei Shleifer, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crowdsourcing, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Doha Development Round, Edmond Halley, Fall of the Berlin Wall, falling living standards, fiat currency, financial innovation, financial intermediation, floating exchange rates, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, German hyperinflation, Hyman Minsky, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labour market flexibility, large denomination, lateral thinking, liquidity trap, Long Term Capital Management, manufacturing employment, market clearing, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Nick Leeson, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open economy, paradox of thrift, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, quantitative easing, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Satoshi Nakamoto, savings glut, secular stagnation, seigniorage, stem cell, Steve Jobs, The Great Moderation, the payments system, The Rise and Fall of American Growth, Thomas Malthus, too big to fail, transaction costs, Tyler Cowen: Great Stagnation, yield curve, Yom Kippur War, zero-sum game

In the USA, Federal banking regulators’ increasingly lax interpretation of the provisions to separate commercial and investment banking introduced in the 1933 Banking Act (often known as Glass-Steagall, the two senators who led the passage of the legislation) reached its inevitable conclusion with the Gramm-Leach-Bliley Act of 1999, which swept away any remaining restrictions on the activities of banks. In the UK, the so-called Big Bang of 1986, which started as a measure to introduce competition into the Stock Exchange, led to takeovers of small stockbroking firms and mergers between commercial banks and securities houses.10 Banks diversified and expanded rapidly after deregulation. In continental Europe so-called universal banks had long been the norm. The assets of large international banks doubled in the five years before 2008. Trading of new and highly complex financial products among banks meant that they became so closely interconnected that a problem in one would spread rapidly to others, magnifying rather than spreading risk.11 Banks relied less and less on their own resources to finance lending and became more and more dependent on borrowing.12 The equity capital of banks – the funds provided by the shareholders of the bank – accounted for a declining proportion of overall funding.

Before the crisis, hubris – arrogance that inflicts suffering on the innocent – ran riot, and changed the culture in financial services to one of taking advantage of the opportunity to manage other people’s money rather than acting as a steward on behalf of clients.45 But ‘the true steward never forgets that he is a steward only, acting for a principal’.46 The maxim ‘my word is my bond’, which underpinned the traditions of the City of London for many years, means little if those words are incomprehensible. The sale of complex financial products by people who only half understand the risks involved to those who understand even less is not an attractive advertisement for the financial services industry. What kind of person takes pride in parting a fool from his money? I have explained the principles on which a successful reform of the system should rest.

Kotlikoff, Laurence J. (2010), Jimmy Stewart is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking, John Wiley and Sons, Hoboken, New Jersey. Kranister, W. (1989), The Moneymakers International, Black Bear Publishing, Cambridge. Krawczyk, Jacek and Kunhong Kim (2009), ‘Satisficing Solutions to a Monetary Policy Problem’, Macroeconomic Dynamics, Vol. 13, pp. 46–80. Krugman, Paul (2011), ‘Mr. Keynes and the Moderns’, Vox, 21 June 2011. Kynaston, David (1994), The City of London: Vol 1: A World of Its Own, 1815–90, Chatto and Windus, London. Lainà, Patrizio (2015), ‘Proposals for Full-Reserve Banking: A Historical Survey from David Ricardo to Martin Wolf’, University of Helsinki, mimeo. Levitt, Steven and Stephen Dubner (2005), Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, William Morrow/Harper Collins, New York. Lewis, Michael (1989), Liar’s Poker, W.


pages: 1,335 words: 336,772

The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow

always be closing, bank run, banking crisis, Big bang: deregulation of the City of London, Bolshevik threat, Boycotts of Israel, Bretton Woods, British Empire, buy and hold, California gold rush, capital controls, Charles Lindbergh, collective bargaining, corporate raider, Etonian, financial deregulation, fixed income, German hyperinflation, index arbitrage, interest rate swap, margin call, money market fund, Monroe Doctrine, North Sea oil, oil shale / tar sands, old-boy network, paper trading, plutocrats, Plutocrats, Robert Gordon, Ronald Reagan, short selling, strikebreaker, the market place, the payments system, too big to fail, transcontinental railway, undersea cable, Yom Kippur War, young professional

., 309–10, 324–25, 348, 369 Wheeler hearings and, 413–14 Vatican, the, 285–86, 296, 407, 521, 546–47 World War II and, 451, 455–59 Verbeck, Guido, 532 Vermilye, Peter, 561, 564, 565 Victoria, Queen, 12, 25, 98, 100 Peabody and, 7, 14, 15 Villa, Pancho, 239 Volcker, Paul, 545, 644, 660, 690 Preston and, 643, 645, 658, 659, 716, 717 Volpi, Count Guiseppe, 281, 479 Voting trust, 38, 68–69, 152–53, 189 W Wachtell, Lipton, Rosen, and Katz, 600 Wadsworth Atheneum, 59–60, 119, 174 Wagg, Helbert, 524 Walker, Barney, 570–71 Walker, Elisha, 416 Wallace, Henry, 441 Wallace, Lila Acheson, 510 Wall Hall, 97, 191, 264, 410, 430, 460, 475 Wall Street, 151 assumption of government protection, 229 conscience of, 19, 114 crashes on, see Stock market crash of 1929; Stock market crash of 1987 Depression and, 346, 376, 381–84 explosion on, 212–14 fire of 1835 on, 18 Jewish-Yankee competition on, 30, 36, 84, 88–90, 195–200, 205, 215–17, 258 Northern Pacific corner and, 88–94 panic of 1873 and, 37 panic of 1907 and, 123–28 Pecora hearing revelations and, 355–57, 362, 370–74 power of, 65, 98–99, 205–207, 225–29, 244–45, 257 Reagan years on, 690–91 rise of, 33, 36, 99 Roaring Twenties on, 255, 302–15 robber barons and, 30–32 short selling and, 351–53 speculation on, 84–86, 91–93, 122, 124, 375 triumph over the City of London, 65, 98–99, 184–85, 270–71, 518–19 trusts and, 68–69, 81–86, 105, 109; see also New York Stock Exchange Walsh, Graham, 675, 678, 687–88, 689 Walston, Vernon, 623 Walston and Company, 623 Walter, Norma, 564, 565 Wang, Stephen Sui-Kuan, Jr., 712–13 Warburg, Paul M., 130, 182, 217, 252 Warburg, Siegmund, 522–26, 570, 573, 576, 713 Euromarkets and, 545 Warburg bank, S. G., 522–26, 545, 570, 572, 590, 615, 674, 677, 679, 689, 715 after Big Bang, 675 Ward, Thomas, 5, 6 Wardwell, Allan, 254–55 Warner-Lambert, 596 War Resources Board, 441 Washington Post, 152 Wasserstein, Bruce, 602, 632, 692, 711 Weatherstone, Dennis, 568, 656, 719 Webster, Daniel, 6, 339, 340 Webster, Edwin, 325 Weinberg, Sidney, 124, 512 Welles, Sumner, 455 Wells, H.

Unlike Warburgs, it never graduated into the front ranks of the City’s Eurobond and foreign-exchange markets. In that larger City, capital was decisive, with cosy ties counting for little—the reason takeover work had been such a godsend to Morgan Grenfell. The firm had thrived only in the insular City of British work, which would be a dangerous shortcoming as the decade progressed. The so-called Big Bang deregulation of October 1986 tore down the walls that had divided the two Cities since the Euromarkets emerged in the early 1960s. To guarantee London’s survival as a financial center, the Thatcher government decided to stop cosseting London banks and expose them to more domestic and foreign competition. Despite their evocative names, British merchant banks were tiny beside the new global conglomerates.

., 5, 39, 40 Belridge Oil, 631, 632 Bendall, David, 589–90, 592, 613 Bendix Corporation, 500 Benét, Stephen Vincent, 278 Bennett, John, 626 Berenson, Bernard, 117, 141, 173, 280 Berkovitch, Boris S., 656 Berle, Adolf A., 419, 420 Bernard, Lewis W., 581, 595, 596, 624, 634, 663, 695 Bethlehem Steel, 417, 534 World War I and, 189, 190, 200 Bicester, Lord, see Smith, Vivian Hugh Big Bang deregulation, 673–76, 684, 685, 688, 714, 715 Biggs, Barton, 587, 700 Bishop, Jerry E., 564, 565 Bismarck, Otto von, 26, 27 Black, Eugene, 518, 552–53 Black, William, 512, 518, 623 Blackett, Basil, 187, 198, 246 Black Monday, 664, 699, 700–702, 717 Black Thursday, 303, 313, 315–17, 355–56 Block Community Organization, 347 Blood Brotherhood, 342–43 Blough, Roger M., 536–37 Blum, Léon, 478 Blumenthal, Charles, 215, 216, 248 Blunden, George, 687 Blyth, Charles, 390–91 Boer War, 98, 99, 195 Boesky, Ivan, 683, 684, 685, 686, 712–13 Bolivia, 354 Bolshevism, 210, 211, 225, 292, 338 Bonsal, Dudley J., 565–66 Boocock, Howard and Adele, 218 Booth, Willis, 282–83 Borglum, Gutzon, 347 Boston and Maine Railroad, 175–76 Brackenridge, A.


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The Verdict: Did Labour Change Britain? by Polly Toynbee, David Walker

banking crisis, Big bang: deregulation of the City of London, Bob Geldof, Boris Johnson, call centre, central bank independence, congestion charging, Corn Laws, Credit Default Swap, decarbonisation, deglobalization, deindustrialization, Etonian, failed state, first-past-the-post, Frank Gehry, gender pay gap, Gini coefficient, high net worth, hiring and firing, illegal immigration, income inequality, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, labour market flexibility, market bubble, mass immigration, millennium bug, moral panic, North Sea oil, Northern Rock, offshore financial centre, pension reform, plutocrats, Plutocrats, Ponzi scheme, profit maximization, purchasing power parity, Right to Buy, shareholder value, Skype, smart meter, stem cell, The Spirit Level, too big to fail, University of East Anglia, working-age population, Y2K

., 1, 2, 3, 4 business, 1 company governance, 1 competition policy, 1 see also manufacturing Business Links, 1, 2 Cable, Vince, 1 Cadbury, 1 Caine, Judy, 1 Callaghan, James, 1 Cameron, David, 1, 2, 3, 4 Campaign for Real Ale, 1 Campbell, Alastair, 1, 2 Campbell, Naomi, 1 Canada, 1 cancer research, 1 cannabis, 1, 2 Cannock Chase Hospital, 1 Capel Manor College, 1 Carbon Trust, 1 Cardiff, 1, 2 Millennium Stadium, 1 see also Welsh assembly Care Quality Commission, 1, 2, 3 carers, 1 Carousel children’s centre, 1 Casey, Louise, 1, 2 casinos, 1 Castle, Barbara, 1 cataracts, 1, 2 Cator Park School, 1 CCTV, 1, 2, 3 celebrity culture, 1 Central Office of Information, 1 Ceuta, 1 Charity Commission, 1 Charleroi, 1 Chase Farm Hospital, 1, 2, 3 Cheltenham, 1 Cheney, Dick, 1 Chicago, 1 Chilcot inquiry, 1, 2, 3, 4 Child Maintenance and Enforcement Commission, 1 child poverty, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 Child Support Agency, 1 child trafficking, 1 Child Trust Funds, 1, 2 childcare, 1, 2, 3, 4, 5, 6 children, 1 in care, 1 and crime, 1, 2 and pre-school education, 1 and reading, 1, 2 and safety, 1 and targets, 1 children’s centres, 1, 2, 3 Chile, 1 China, 1, 2, 3, 4, 5, 6, 7 and foreign policy, 1, 2, 3, 4 Chinese cockle pickers, 1 Christian Voice, 1 Chumbawamba, 1 Church of England, 1 Churchill, Winston, 1 cigarette smoking, 1, 2, 3, 4, 5, 6 see also smoking ban citizenship curriculum, 1 City of London, 1, 2, 3, 4, 5, 6, 7 City of London police, 1 civil partnerships, 1 civil service, 1 Clapham Common, 1 Clapham Park estate, 1, 2 Clarke, Charles, 1 Clarke, Ken, 1, 2 Clarke, Michael, 1 Clarkson, Jeremy, 1, 2 ‘clean technologies’, 1 Cleveland Way, 1 climate change, 1, 2, 3, 4, 5 and transport and energy policies, 1 Climbié, Victoria, 1 Clinton, Bill, 1, 2, 3 Clitheroe, 1 cloning, 1 coal, 1 coalition government, 1, 2, 3, 4, 5 Cockermouth, 1 Cohen, Sir Ronnie, 1 Cole, Vanessa, 1 Collins, Colonel Tim, 1 Comer, Beryl, 1, 2, 3, 4 Common Agricultural Policy, 1, 2 community sentences, 1 Confederation of British Industry (CBI), 1, 2, 3, 4, 5, 6 conflict diamonds, 1 Congo, 1 Connelly, Peter (Baby P), 1 Connexions, 1, 2 Contactpoint database, 1 Cook, Robin, 1, 2 Cool Britannia, 1, 2 Cooper, Robert, 1 Cooper, Yvette, 1 Copenhagen summit, 1, 2, 3, 4, 5, 6 Corby, 1, 2 Corn Laws, repeal of, 1 Cornwall, 1, 2 Coronation Street, 1 coroners, 1 Corus, 1 Countryside Alliance, 1, 2 County Durham, 1 Coventry, 1, 2, 3 Cowley, Philip, 1 Cox, Brian, 1 Crawford, Texas, 1 creative industries, 1, 2 credit card debt, 1 Crewe and Nantwich by-election, 1 Crick, Bernard, 1 cricket, 1 Crime and Disorder Reduction Partnerships, 1 crime, 1 car crime, 1 cyber-crime, 1 and demography, 1, 2 and drugs, 1 gun crime, 1, 2 juvenile crime, 1, 2, 3 knife crime, 1, 2 organized crime, 1, 2, 3 street crime, 1 Criminal Records Bureau, 1 Cruddas, Jon, 1 Cullen, Janet, 1, 2, 3, 4 Cumner-Price, George, 1 cycling, 1, 2, 3 Cyprus, 1, 2 Daily Mail, 1, 2, 3, 4, 5 Daily Telegraph, 1 Darfur, 1 Darling, Alistair, 1, 2, 3 Darwen, 1, 2 Darzi, Lord (Ara), 1 Data Protection Act, 1, 2 Davies, Norman, 1 Davies, Ron, 1 Davis, David, 1 Dearlove, Sir Richard, 1 defence policy, 1, 2, 3, 4, 5 Delhi, 1 dementia, 1 demonstrations, policing of, 1 Demos, 1 Denham, John, 1 Denison, Steve, 1 Denmark, 1, 2 dentistry, 1 depression, 1 Derby, 1 devolution, 1, 2, 3, 4, 5, 6, 7 Dewar, Donald, 1, 2 diabetes, 1 Diana, Princess of Wales, 1, 2, 3 Dilnot, Andrew, 1 disabilities, 1, 2, 3, 4, 5 disarmament, 1 divorce rate, 1 DNA database, 1 Dobson, Frank, 1, 2 doctors consultants, 1 GPs, 1, 2, 3 night and weekend cover, 1 pay, 1, 2, 3 working hours, 1 domestic violence, 1, 2, 3, 4 Doncaster, 1, 2, 3 Dongworth, Averil, 1 Dorling, Professor Danny, 1, 2, 3 Drayson, Paul, 1 drones, 1 drug dealers, 1, 2 drugs, 1, 2, 3 Dublin, 1 Duffy, Bobby, 1 Dundee, 1 Dunn, John, 1 Dunwoody, Gwyneth, 1 EastEnders, 1 Ecclestone, Bernie, 1 ‘eco towns’, 1 ecstasy, 1 Edinburgh, 1, 2, 3 see also Scottish parliament Edlington, 1 education, 1 further education and training, 1, 2, 3, 4 higher education, 1, 2, 3, 4, 5, 6 nursery education, 1 productivity in, 1 pre-school education, 1 and selection, 1, 2 and social class, 1, 2 spending on, 1, 2 and targets, 1, 2, 3 Welsh Assembly and, 1 see also schools education action zones, 1 Education Maintenance Allowance, 1, 2, 3 e-government, 1, 2 Egypt, 1 electoral reform, 1, 2, 3 electricity generation, 1, 2 Elgar, Edward, 1 Elgin marbles, 1 Elizabeth, Queen, the Queen Mother, 1 Elizabeth II, Queen, 1, 2, 3 employee buy-outs, 1 employment, 1 flexible, and migration, 1 part-time, 1, 2 state and ‘parastate’, 1, 2 women and, 1, 2 working hours, 1, 2 energy policies, 1 English for Speakers of Other Languages, 1 English Heritage, 1 Enron, 1 Environment Agency, 1, 2 equalities legislation, 1, 2, 3 Equality and Human Rights Commission, 1, 2, 3 Ericsson, 1 ethnic minorities, 1 euro, 1, 2 Eurofighter, 1 European Court of Human Rights, 1 European Union, 1, 2 European Union Emission Trading Scheme, 1 Eurostar, 1 Exeter, 1 Fairtrade products, 1 Falconer, Charlie, 1 Falklands War, 1 Family Intervention Projects (FIPs), 1 Farlow, Andrew, 1 farmers, 1, 2 fashion, 1 Feinstein, Professor Leon, 1, 2 Financial Services Authority, 1 financial services, 1, 2, 3 Financial Times, 1 Finland, 1 fire and rescue service, 1 fiscal stimulus, 1 floods, 1, 2, 3, 4 Florence, 1 flu, 1, 2 swine flu, 1, 2 Folkestone, 1 food and drink, 1, 2 foot-and-mouth disease, 1, 2 football, 1, 2, 3 Football Association, 1 forced marriages, 1 foreign policy, 1, 2, 3 France, 1, 2, 3, 4 economy and business, 1, 2 and education, 1, 2 and health, 1, 2, 3 Frankfurt am Main, 1 Franklin, Tom, 1 Frears, Stephen, 1 free speech, 1, 2 freedom of information, 1, 2, 3, 4, 5, 6 Freud, Lord, 1 Full Monty, The, 1 Future Jobs Fund, 1 G20 summit, 1, 2, 3 Gainsborough, 1 Galbraith, J.K., 1 Gallagher, Liam, 1 Gallagher, Noel, 1 gambling, 1 gangmasters, 1, 2 gas, 1 Gates, Bill, 1 Gateshead, 1 Gaza, 1 GCHQ, 1 GCSEs, 1, 2, 3, 4 Gehry, Frank, 1 Geldof, Bob, 1 gender reassignment, 1 General Teaching Council, 1 genetically modified crops, 1 Germany, 1, 2, 3, 4, 5, 6, 7 economy and business, 1, 2, 3, 4 and education, 1, 2 and health, 1, 2 Ghana, 1 Ghandi’s curry house, 1 Ghent, 1 Gladstone, William Ewart, 1, 2 Glaister, Professor Stephen, 1 Glasgow, 1, 2, 3, 4 Gleneagles summit, 1, 2, 3, 4, 5 globalization, 1, 2, 3, 4, 5, 6, 7 and crime, 1 and foreign policy, 1, 2, 3 and inequality, 1 and migration, 1, 2 Gloucester, 1 Goldacre, Ben, 1 Good Friday agreement, 1 Goodwin, Sir Fred, 1 Goody, Jade, 1 Gormley, Antony, 1 Gould, Philip, 1 grandparents, and childcare, 1 Gray, Simon, 1 Great Yarmouth, 1 Greater London Authority, 1, 2 Greater London Council, 1 green spaces, 1 Greenberg, Stan, 1 Greengrass, Paul, 1 Greenspan, Alan, 1, 2 Greenwich, 1 Gregg, Paul, 1 Guardian, 1, 2, 3 Guizot, François, 1 Gulf of Mexico oil spill, 1 Gummer, John, 1 Gurkhas, 1 Guthrie of Craigiebank, Lord, 1 Guy’s and St Thomas’s Hospital, 1 habeas corpus, suspension of, 1 Hacienda Club, 1 Hackney, 1 Hale, Baroness Brenda, 1 Hallé Orchestra, 1 Ham, Professor Chris, 1 Hamilton, Lewis, 1 Hammersmith Hospital, 1 Hammond, Richard, 1 Hardie, Keir, 1 Hardy, Thea, 1 Haringey, 1, 2 Harman, Harriet, 1 Harris of Peckham, Lord, 1 Harrison, PC Dawn, 1, 2 Harrow School, 1 Hartlepool, 1, 2 Hastings, 1, 2 Hatfield rail crash, 1 Hatt family, 1, 2, 3, 4 health, 1 and private sector, 1, 2 and social class, 1 spending on, 1, 2 Health Action Zones, 1 Health and Safety Executive, 1 Heathcote, Paul, 1 Heathrow airport, 1, 2, 3, 4 Hellawell, Keith, 1 Hennessy, Professor Peter, 1 Henry, Donna Charmaine, 1, 2, 3 heroin, 1 Hewitt, Patricia, 1, 2 Higgs, Sir Derek, 1 Hills, Professor John, 1, 2, 3 Hirst, Damien, 1 HMRC, 1, 2, 3 Hogg, John, 1, 2, 3 Hoggart, Richard, 1 Holly, Graham, 1 homelessness, 1, 2 Homerton Hospital, 1 homosexuality, 1, 2, 3 ‘honour’ killings, 1 Hoon, Geoff, 1 hospital-acquired infections, 1 hospitals and clinics, 1, 2, 3, 4 A&E units, 1, 2 closures, 1, 2, 3 foundation trusts, 1, 2, 3, 4, 5 and PFI, 1 House of Commons reforms, 1, 2 House of Lords reforms, 1, 2, 3, 4 housing market, 1, 2, 3 housing policies, 1, 2, 3, 4, 5 Howe, Elspeth, 1 Hoxton, 1 Huddersfield, 1 Hudson, Joseph, 1 Hull, 1, 2, 3 Human Rights Act, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 Humber Bridge, 1 hunting ban, 1 Hussein, Saddam, 1, 2, 3, 4 Hutton, John, 1 Hutton, Will, 1, 2 identity cards, 1, 2 If (Kipling), 1 Imperial War Museum North, 1 income inequalities, 1, 2, 3 gender pay gap, 1, 2 and high earners, 1 and social class, 1 Independent Police Complaints Commission (IPCC), 1 Independent Safeguarding Authority, 1 independent-sector treatment centres (ISTCs), 1 Index of Multiple Deprivation, 1 India, 1, 2, 3, 4, 5, 6 individual learning accounts, 1 inflation, 1 and housing market, 1, 2 International Criminal Court, 1 International Monetary Fund (IMF), 1, 2, 3 internet, 1, 2, 3 and crime, 1 and cyber-bullying, 1 file sharing, 1 gambling, 1 and sex crimes, 1 Iran, 1, 2, 3 Iraq, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 arms supplies, 1 Chilcot inquiry, 1, 2, 3, 4 and Territorial Army, 1 and WMD, 1 Ireland, 1, 2, 3 Irish famine, 1 Irvine of Lairg, Lord, 1, 2 Ishaq, Khyra, 1 Islamabad, 1 Isle of Man, 1 Isle of Wight, 1, 2 Israel, 1 Italy, 1, 2, 3 and football, 1 Ivory Coast, 1 Japan, 1, 2, 3, 4 Jenkins, Roy, 1, 2 Jerry Springer: The Opera, 1 Jobcentre Plus, 1, 2 John Lewis Partnership, 1, 2 Johnson, Alan, 1, 2, 3, 4 Johnson, Boris, 1, 2 Judge, Lord (Igor), 1 Judge, Professor Ken, 1 Julius, DeAnne, 1 jury trials, 1, 2 Kabul, 1 Kapoor, Anish, 1, 2 Karachi, 1 Karadžic, Radovan, 1 Kashmir, 1 Kaufman, Gerald, 1 Keegan, William, 1 Keep Britain Tidy, 1 Kelvingrove Art Gallery and Museum, 1 Kensit, Patsy, 1 Keynes, John Maynard, 1 Keys, Kenton, 1 Kidderminster Hospital, 1 King, Sir David, 1, 2 King, Mervyn, 1 King Edward VI School, 1 King’s College Hospital, 1 Kingsnorth power station, 1 Kirklees, 1 Knight, Jim, 1 knighthoods, 1 knowledge economy, 1 Kosovo, 1, 2, 3, 4 Kynaston, David, 1 Kyoto summit and protocols, 1, 2, 3 Labour Party membership, 1 Lacey, David, 1 Ladbroke Grove rail crash, 1 Lamb, General Sir Graeme, 1 Lambert, Richard, 1 landmines, 1 Lansley, Andrew, 1 lapdancing, 1 Las Vegas, 1 Lawrence, Stephen, 1 Lawson, Mark, 1 Layard, Professor Richard, 1 Le Grand, Professor Julian, 1 Lea, Ruth, 1 Lea Valley High School, 1, 2, 3, 4, 5, 6 Leahy, Sir Terry, 1, 2 learndirect, 1 Learning and Skills Council, 1 learning difficulties, 1, 2 learning mentors, 1 Leeds, 1, 2, 3, 4 legal reforms, 1 Leigh, Mike, 1 Lenon, Barnaby, 1 Lewes, 1 Lewisham, 1 Liberty, 1 licensing laws, 1, 2 life expectancy, 1, 2, 3, 4, 5 Life on Mars, 1 Lincoln, 1 Lindsell, Tracy, 1, 2 Lindsey oil refinery, 1 Lisbon Treaty, 1 Liverpool, 1, 2, 3, 4, 5, 6 Liverpool FC, 1 living standards, 1, 2 living wage campaign, 1, 2 Livingstone, Ken, 1, 2, 3, 4, 5 Livni, Tzipi, 1 Loaded magazine, 1 local government, 1, 2, 3 and elected mayors, 1 Lockerbie bomber, 1 London, 1, 2, 3, 4, 5, 6 bombings, 1, 2 congestion charge, 1, 2 detention of foreign leaders, 1 G20 protests, 1 Iraq war protests, 1, 2 mayoral election, 1, 2 and transport policy, 1, 2, 3 London Array wind farm, 1 Longannet, 1 Longfield, Anne, 1 Lord-Marchionne, Sacha, 1 Lorenzetti, Ambrogio, 1 lorry protests, 1, 2 Lowry Museum, 1 Lumley, Joanna, 1 Luton, 1, 2, 3, 4 Lyons, Sir Michael, 1 Macfadden, Julia, 1 Machin, Professor Stephen, 1, 2 Maclean, David, 1 Macmillan, Harold, 1 Macmillan, James, 1 McNulty, Tony, 1 Macpherson, Sir Nick, 1 Macpherson, Sir William, 1 McQueen, Alexander, 1 Madrid, 1, 2, 3 Major, John, 1, 2, 3, 4, 5, 6 Malaya, 1 Malloch Brown, Mark, 1 Manchester, 1, 2, 3, 4, 5, 6 club scene, 1, 2 and crime, 1, 2 Gorton, 1, 2, 3, 4, 5, 6 and local government, 1 and transport policy, 1, 2, 3 Manchester Academy, 1 Manchester United FC, 1, 2 Manchester University, 1 Mandelson, Peter, 1, 2 Manpower Services Commission, 1 manufacturing, 1, 2, 3 Margate, 1 ‘market for talent’ myth, 1 marriage rate, 1 Martin, Michael, 1 maternity and paternity leave, 1, 2 Mayfield, Charlie, 1 Medical Research Council, 1 mental health, 1, 2, 3, 4 mephedrone, 1 Metcalf, Professor David, 1 Metropolitan Police, 1, 2, 3 Mexico, 1, 2 MG Rover, 1 Michael, Alun, 1 Middlesbrough College, 1, 2 migration, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 Milburn, Alan, 1, 2, 3, 4, 5 Miliband, David, 1, 2, 3, 4, 5, 6 Miliband, Ed, 1, 2, 3 Millennium Cohort Study, 1, 2 Millennium Dome, 1, 2, 3 Miloševic, Slobodan, 1 Milton Keynes, 1 minimum wage, 1, 2, 3, 4, 5, 6, 7 Mitchell, Senator George, 1 modern art, 1 Mohamed, Binyam, 1 Monbiot, George, 1 Moray, 1 Morecambe, 1, 2 Morecambe Bay cockle pickers, 1 Morgan, Piers, 1 Morgan, Rhodri, 1 mortgage interest relief, 1 Mosley, Max, 1 motor racing, 1 Mowlam, Mo, 1 Mozambique, 1 MPs’ expenses, 1, 2, 3, 4, 5 MRSA, 1 Mugabe, Robert, 1 Muijen, Matt, 1 Mulgan, Geoff, 1 Mullin, Chris, 1 Murdoch, Rupert, 1, 2, 3 Murphy, Richard, 1 museums and galleries, 1, 2, 3 music licensing, 1 Muslims, 1, 2, 3, 4, 5 mutualism, 1 Myners, Paul, 1 nanotechnology, 1, 2, 3 National Air Traffic Control System, 1 National Care Service, 1 national curriculum, 1 national debt, 1 National Forest, 1 National Health Service (NHS) cancer plan, 1 drugs teams, 1 and employment, 1, 2 internal market, 1 IT system, 1 league tables, 1 managers, 1, 2 NHS direct, 1 primary care, 1 productivity, 1, 2 and public satisfaction, 1 staff numbers and pay, 1 and targets, 1, 2, 3 waiting times, 1, 2, 3, 4, 5, 6, 7, 8 National Heart Forum, 1 National Institute for Health and Clinical Excellence (NICE), 1, 2 National Insurance, 1, 2, 3, 4, 5 National Lottery, 1, 2, 3 National Offender Management Service, 1 National Savings, 1 National Theatre, 1 Natural England, 1, 2 Nazio, Tiziana, 1 Neighbourhood Watch, 1 Netherlands, 1, 2 neurosurgery, 1 New Deal, 1, 2, 3, 4, 5, 6, 7 New Deal for Communities, 1, 2 New Forest, 1 Newcastle upon Tyne, 1, 2 Newham, 1, 2 newspapers, 1, 2, 3, 4, 5 Nigeria, 1 Nightingale, Florence, 1 non-doms, 1 North Korea, 1 North Middlesex Hospital, 1 North Sea oil and gas, 1 Northern Ireland, 1, 2, 3, 4, 5, 6, 7 Northern Rock, 1, 2, 3, 4, 5 Norway, 1 Nottingham, 1, 2 NSPCC, 1 nuclear power, 1 Number Ten Delivery Unit, 1 nurses, 1, 2, 3, 4 Nutt, Professor David, 1 NVQs, 1 O2 arena, 1 Oakthorpe primary school, 1, 2 Oates, Tim, 1 Obama, Barack, 1, 2 obesity, 1, 2 Octagon consortium, 1 Office for National Statistics, 1, 2 Office of Security and Counter Terrorism, 1 Ofsted, 1, 2, 3, 4, 5 Ofwat, 1 Oldham, 1, 2, 3, 4 O’Leary, Michael, 1 Oliver, Jamie, 1, 2 Olympic Games, 1, 2, 3 Open University, 1 O’Reilly, Damien, 1, 2 orthopaedics, 1 Orwell, George, 1, 2 outsourcing, 1, 2, 3, 4 overseas aid, 1, 2 Oxford University, 1 paedophiles, 1, 2, 3 Page, Ben, 1, 2 Pakistan, 1, 2, 3, 4, 5, 6, 7 Palestine, 1, 2 parenting, 1 absent parents, 1 lone parents, 1, 2 teenage parents, 1 Paris, 1, 2 Park Lane, 1 Parkinson, Professor Michael, 1 particle physics, 1 party funding, 1, 2, 3 passport fraud, 1 Passport Office, 1 Patch, Harry, 1 Payne, Sarah, 1, 2 Peach, Blair, 1 Pearce, Nick, 1 Peckham, 1, 2 Aylesbury estate, 1 Peel, Sir Robert, 1 pensioner poverty, 1, 2 pensions, 1, 2 occupational pensions, 1, 2 pension funds, 1, 2 private pensions, 1 public-sector pensions, 1 state pension, 1, 2 Persian Gulf, 1 personal, social and health education, 1 Peterborough, 1 Peugeot, 1 Philips, Helen, 1 Phillips, Lord (Nicholas), 1, 2 Phillips, Trevor, 1 Pilkington, Fiona, 1 Pimlico, 1 Pinochet, Augusto, 1 Plymouth, 1, 2 Poland, 1, 2 police, 1 and demonstrations, 1 numbers, 1, 2, 3 in schools, 1, 2, 3 pornography, 1 Portsmouth FC, 1, 2 Portugal, 1 post offices, 1 Postlethwaite, Pete, 1 poverty, 1, 2, 3 see also child poverty; pensioner poverty Premier League, 1 Prescott, John, 1, 2, 3, 4, 5 press officers, 1 Preston, 1 Prevent strategy, 1 Primary Care Trusts (PCTs), 1, 2 prisons, 1, 2 Private Finance Initiative (PFI), 1, 2 probation, 1, 2 property ownership, 1 prostitution, 1, 2, 3 Public Accounts Committee, 1 public sector reform, 1, 2 public service agreements, 1 public spending, 1, 2, 3 and the arts, 1 and science, 1 Pugh, Martin, 1 Pullman, Philip, 1 QinetiQ, 1 Quality and Outcomes Framework, 1 quangos, 1, 2 Queen, The, 1 Quentin, Lieutenant Pete, 1, 2 race relations legislation, 1 racism, 1, 2 RAF, 1, 2, 3 RAF Brize Norton, 1 railways, 1 Rand, Ayn, 1 Rawmarsh School, 1 Raynsford, Nick, 1 Reckitt Benckiser, 1 recycling, 1 Redcar, 1 regional assemblies, 1, 2 regional development agencies (RDAs), 1, 2, 3 regional policy, 1 Reid, John, 1 Reid, Richard, 1 religion, 1, 2 retirement age, 1, 2 right to roam, 1 Rimington, Stella, 1 Rio Earth summit, 1 road transport, 1 Rochdale, 1, 2 Roche, Barbara, 1 Rogers, Richard, 1 Romania, 1, 2 Rome, 1 Rooney, Wayne, 1 Roosevelt, Franklin D., 1 Rosetta Stone, 1 Rosyth, 1 Rotherham, 1, 2, 3 Royal Opera House, 1 Royal Shakespeare Company, 1 Royal Society for the Protection of Birds, 1 Rugby, 1 rugby union, 1 Rumsfeld, Donald, 1 rural affairs, 1, 2 Rushdie, Salman, 1 Russia, 1, 2 Rwanda, 1 Ryanair, 1, 2 Sainsbury, Lord David, 1 St Austell, 1 St Bartholomew’s Hospital, 1, 2 St Pancras International station, 1 Salford, 1, 2, 3, 4 Sanchez, Tia, 1 Sandwell, 1 Sarkozy, Nicolas, 1, 2 Savill, Superintendent Paul, 1 Saville, Lord, 1 savings ratio, 1 Scandinavia, 1, 2, 3 Scholar, Sir Michael, 1 school meals, 1, 2 school uniforms, 1 school-leaving age, 1 schools academies, 1, 2, 3, 4 building, 1 class sizes, 1 comprehensive schools, 1, 2 faith schools, 1, 2, 3, 4 grammar schools, 1, 2, 3 and inequality, 1 nursery schools, 1 and PFI, 1, 2, 3 police in, 1, 2, 3 primary schools, 1, 2, 3, 4, 5 private schools, 1, 2 secondary schools, 1, 2, 3 in special measures, 1 special schools, 1 specialist schools, 1 and sport, 1 science, 1, 2, 3, 4, 5 Scotland, 1, 2, 3, 4, 5, 6, 7, 8, 9 and children, 1 devolution, 1 electricity generation, 1 and health, 1, 2, 3, 4, 5 Scottish parliament, 1, 2 Section 1, 2 security services, 1 MI5, 1, 2, 3 Sedley, Stephen, 1 segregation, 1 self-employment, 1 Sellafield, 1 Serious Organized Crime Agency, 1 sex crimes, 1 Sex Discrimination Act, 1 Shankly, Bill, 1 Sharkey, Feargal, 1 Shaw, Liz, 1 Sheen, Michael, 1 Sheffield, 1, 2, 3, 4, 5, 6 Sheringham, 1 Shetty, Shilpa, 1 Shipman, Harold, 1 shopping, 1 Short, Clare, 1 Siemens, 1 Siena, 1 Sierra Leone, 1, 2 Skeet, Mavis, 1 skills councils, 1 slavery, 1 Slough, 1 Smith, Adam, 1 Smith, Chris, 1 Smith, Jacqui, 1, 2 Smith, John, 1, 2 Smithers, Professor Alan, 1, 2 smoking ban, 1, 2 Snowden, Philip, 1 social care, 1, 2, 3 Social Chapter opt-out, 1 social exclusion, 1, 2 Social Fund, 1 social mobility, 1, 2 social sciences, 1 social workers, 1 Soham murders, 1, 2, 3, 4 Solihull, 1, 2 Somalia, 1, 2 Souter, Brian, 1 South Africa, 1 South Downs, 1 Spain, 1, 2, 3 special advisers, 1 speed cameras, 1 Speenhamland, 1 Spelman, Caroline, 1 Spence, Laura, 1 sport, 1, 2 see also football; Olympic Games Sri Lanka, 1, 2 Stafford Hospital, 1 Staffordshire University, 1 Standard Assessment Tests (Sats), 1, 2, 3 Standards Board for England, 1 statins, 1, 2, 3 stem cell research, 1 STEM subjects, 1 Stephenson, Sir Paul, 1 Stern, Sir Nicholas, 1, 2 Stevenson, Lord (Dennis), 1 Stevenson, Wilf, 1 Steyn, Lord, 1 Stiglitz, Joseph, 1 Stockport, 1 Stonehenge, 1 Stoppard, Tom, 1 Straw, Jack, 1, 2, 3, 4, 5 student fees, 1 Stuff Happens, 1 Sudan, 1, 2 Sugar, Alan, 1 suicide bombing, 1 suicides, 1 Sun, 1, 2 Sunday Times, 1, 2 Sunderland, 1, 2 supermarkets, 1, 2 Supreme Court, 1, 2 Sure Start, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 surveillance, 1, 2 Sutherland, Lord (Stewart), 1 Swansea, 1 Sweden, 1, 2, 3, 4, 5 Swindon, 1 Taliban, 1, 2 Tallinn, 1 Tanzania, 1 Tate Modern, 1 Taunton, 1 tax avoidance, 1, 2, 3 tax credits, 1, 2, 3, 4, 5, 6, 7, 8 council tax credit, 1 pension credit, 1, 2, 3 R&D credits, 1 taxation, 1, 2 10p tax rate, 1 capital gains tax, 1, 2 corporation tax, 1, 2, 3, 4 council tax, 1, 2 fuel duty, 1, 2, 3 green taxes, 1, 2 and income inequalities, 1 income tax, 1, 2, 3, 4 inheritance tax, 1, 2 poll tax, 1 stamp duty, 1, 2, 3 vehicle excise duty, 1 windfall tax, 1, 2, 3 see also National Insurance; VAT Taylor, Damilola, 1 Taylor, Robert, 1 teachers, 1, 2, 3 head teachers, 1, 2 salaries, 1, 2 teaching assistants, 1, 2 teenage pregnancy, 1, 2, 3 Teesside University, 1 television and crime, 1 and gambling, 1 talent shows, 1 television licence, 1, 2, 3 Territorial Army, 1 terrorism, 1, 2, 3, 4, 5, 6, 7 Terry, John, 1 Tesco, 1, 2, 3, 4 Tewkesbury, 1 Thames Gateway, 1 Thameswey, 1 Thatcher, Margaret, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 Thatcherism, 1, 2, 3 theatre, 1 Thornhill, Dorothy, 1 Thorp, John, 1 Tibet, 1 Tilbury, 1 Times, The, 1 Times Educational Supplement, 1, 2 Timmins, Nick, 1 Titanic, 1 Tomlinson, Mike, 1 Topman, Simon, 1, 2 torture, 1, 2 trade unions, 1, 2, 3 Trades Union Congress (TUC), 1, 2, 3 tramways, 1 transport policies, 1, 2 Trident missiles, 1, 2, 3 Triesman, Lord, 1 Turkey, 1, 2 Turnbull, Lord (Andrew), 1 Turner, Lord (Adair), 1, 2, 3 Tweedy, Colin, 1 Tyneside Metro, 1 Uganda, 1 UK Film Council, 1 UK Sport, 1 UK Statistics Authority, 1 unemployment, 1, 2, 3, 4, 5, 6, 7 United Nations, 1, 2, 3 United States of America, 1, 2 Anglo-American relationship, 1, 2, 3, 4, 5, 6, 7 and child poverty, 1 and clean technologies, 1 economy and business, 1, 2, 3 and education, 1, 2, 3 and healthcare, 1, 2 and income inequalities, 1 and internet gambling, 1 and minimum wage, 1 universities, 1, 2, 3, 4, 5 and migration, 1 and terrorism, 1 tuition fees, 1 University College London Hospitals, 1 University for Industry, 1 University of East Anglia, 1 University of Lincoln, 1 Urban Splash, 1, 2 Vanity Fair, 1 VAT, 1, 2, 3 Vauxhall, 1 Venables, Jon, 1 Vestas wind turbines, 1 Victoria and Albert Museum, 1 Waitrose, 1 Waldfogel, Jane, 1 Wales, 1, 2, 3, 4, 5, 6, 7, 8, 9 and children, 1 devolution, 1 Walker, Sir David, 1 walking, 1, 2 Walsall, 1 Wanless, Sir Derek, 1 Wanstead, 1 Warm Front scheme, 1 Warner, Lord Norman, 1 Warsaw, 1 Warwick accord, 1 water utilities, 1 Watford, 1 welfare benefits child benefit, 1, 2 Employment Support Allowance, 1 and fraud, 1, 2, 3, 4 housing benefit, 1 incapacity benefit, 1, 2 Income Support, 1 Jobseeker’s Allowance, 1, 2, 3 and work, 1, 2 Welsh assembly, 1, 2 Wembley Stadium, 1 Westfield shopping mall, 1 Wetherspoons, 1 White, Marco Pierre, 1 Whittington Hospital, 1 Wiles, Paul, 1 Wilkinson, Richard, and Kate Pickett, 1 Williams, Professor Karel, 1 Williams, Raymond, 1 Williams, Rowan, 1 Wilson, Harold, 1, 2, 3, 4, 5, 6, 7 Wilson, Sir Richard, 1 wind turbines, 1, 2 Winslet, Kate, 1 winter fuel payments, 1 Wire, The, 1 Woking, 1, 2 Wolverhampton, 1 Woolf, Lord, 1 Wootton Bassett, 1, 2 working-class culture, 1 working hours, 1, 2 World Bank, 1 Wrexham, 1 Wright Robinson School, 1, 2, 3 xenophobia, 1 Y2K millennium bug, 1 Yarlswood detention centre, 1 Yeovil, 1 Yiewsley, 1 York, 1, 2, 3, 4 Young Person’s Guarantee, 1 Youth Justice Board, 1 Zimbabwe, 1, 2 About the Author Polly Toynbee is the Guardian’s social and political commentator.

A ‘health’ government would have cut hospitals and expanded home and community care, but ministers were reluctant to invite riotous campaigns to keep open inefficient, expensive and much-loved hospitals. They had not helped themselves when in opposition they had shamelessly attacked the Tories over closures, and they came to power promising to save every hospital under threat, including the redundant St Bartholomew’s in the City of London; the Tories repeated the error in 2010 with what sounded like a promise never to close a single unit. Yet it is all too easy to prescribe calm and considered policy-making when ministers’ lives were made nasty and short thanks to the brutish hysteria of the media. Labour’s attachment to Tory spending plans intensified the pressures during their first three years. As Mrs Thatcher had found, the NHS is a smouldering volcano.

Leisure Parcs, the company that had bought tracts of Blackpool in anticipation of the super-casino, sold the tower and Winter Gardens to the council. It still hoped, like Margate, Hastings, Morecambe and other forlorn English seaside towns that had seen better days, that strategy and regeneration pots could somehow mitigate alteration in leisure habits and the British weather. From 2001 gambling tax came from bookmakers’ gross profits rather than bets laid by punters. The UK gambling industry – the one located outside the City of London – boomed, but winnings were not pouring into the Treasury. Betting was moving into new exchanges, interactive television, mobile phones, online and offshore. In 2009 William Hill and Ladbrokes moved abroad, threatening to cut the tax take. Labour could have followed the American example. Congress dealt with the new phenomenon by banning online gambling altogether, stopping US credit-card companies paying out to gambling sites.


pages: 502 words: 128,126

Rule Britannia: Brexit and the End of Empire by Danny Dorling, Sally Tomlinson

3D printing, Ada Lovelace, Alfred Russel Wallace, anti-communist, anti-globalists, Big bang: deregulation of the City of London, Boris Johnson, British Empire, centre right, colonial rule, Corn Laws, correlation does not imply causation, David Ricardo: comparative advantage, deindustrialization, Dominic Cummings, Donald Trump, Edward Snowden, en.wikipedia.org, epigenetics, Etonian, falling living standards, Flynn Effect, housing crisis, illegal immigration, imperial preference, income inequality, inflation targeting, invisible hand, knowledge economy, market fundamentalism, mass immigration, megacity, New Urbanism, Nick Leeson, North Sea oil, offshore financial centre, out of africa, Right to Buy, Ronald Reagan, Silicon Valley, South China Sea, sovereign wealth fund, spinning jenny, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas Malthus, University of East Anglia, We are the 99%, wealth creators

Similarly, London – the single largest and richest city on the planet not so long ago – fell into what Patrick Wright called ‘ruins’ in his prescient 1991 book on Britain at the height of the Thatcher years.32 London had become ‘ruined’ by 1991 because the money had run out. A new way to bring money in was then found, no longer through the tribute of unfair terms of trade, but by becoming the supreme financial juggler for the world. The 1986 Big Bang of the City of London was born out of the ruins. The Big Bang was shorthand for deregulation, initiated so that enormous profits could be made – profits large enough to emulate the tribute of the past. For the following twenty-two years, the City laid golden eggs for the British (or rather, the southern English) until, in 2008, the banks fell apart and almost bankrupted the UK. They fell apart because they had been so poorly regulated. Then something new was needed, and the next escape plan was to go it alone; a brave new Britain throwing off the shackles of Europe.

Instead, it was thought, Britain could enjoy superior status by becoming the supreme financial juggler for the world. The 1986 Big Bang of the City of London heralded a new era. For twenty-two years, the City laid golden eggs for the country – until, in 2008, the banks fell apart. They fell apart because they had to. You cannot make more and more money out of doing less and less of productive use for ever. But that is what the plan is, if you aim to enrich a country mainly by concentrating on banking. Even in 1986, two of the Big Bang’s authors forecast that it would come to be seen, when and if it resulted in ‘scandals and liquidations’, as the ‘unacceptable face of unpopular capitalism’.4 So, when the crash of 2008 spelled the failure of Big Bang, the next grand plan to revive the British economy was to suggest going it alone – a brave new Britain throwing off the shackles of Europe.

The Rothschilds also had a big hand in making Britain great under the empire, supporting the De Beers Company, which funded Cecil Rhodes, as well as backing the South African Rio Tinto Group and funding the building of the Suez Canal. As we mentioned at the beginning of this chapter, in 1986 the Thatcher government changed the rules governing the London Stock Exchange. In their project, called Big Bang, the Conservatives deregulated London’s financial markets and London became a more dominant global centre for banking and trading in money. As the BBC explained in 2008: Trading is one of the most coveted jobs in the financial markets. A good trader can make tens of millions of dollars for his company every year and take home vast bonuses. It is a stressful job. One wrong move and your profits can be wiped out, your reputation destroyed, and your job gone.30 With no sense of what might be just around the corner, the BBC ended its report on City traders in January 2008 with the following warning: ‘But the system can break down, as in the case of Barings in 1995.


pages: 497 words: 150,205

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right by Philippe Legrain

3D printing, Airbnb, Asian financial crisis, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, BRICs, British Empire, business cycle, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, cleantech, collaborative consumption, collapse of Lehman Brothers, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, debt deflation, Diane Coyle, disruptive innovation, Downton Abbey, Edward Glaeser, Elon Musk, en.wikipedia.org, energy transition, eurozone crisis, fear of failure, financial deregulation, first-past-the-post, forward guidance, full employment, Gini coefficient, global supply chain, Growth in a Time of Debt, hiring and firing, hydraulic fracturing, Hyman Minsky, Hyperloop, immigration reform, income inequality, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Irish property bubble, James Dyson, Jane Jacobs, job satisfaction, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, labour mobility, liquidity trap, margin call, Martin Wolf, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, North Sea oil, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, open economy, peer-to-peer rental, price stability, private sector deleveraging, pushing on a string, quantitative easing, Richard Florida, rising living standards, risk-adjusted returns, Robert Gordon, savings glut, school vouchers, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, smart meter, software patent, sovereign wealth fund, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, working-age population, Zipcar

In early 2010, British banks had a $13.5 billion exposure to Greek, Irish and Portuguese government debt – much less than French banks’ $56.1 billion or German ones’ $36.4 billion, but more than Spanish banks’ $11.7 billion or Italian ones’ $6.4 billion.56 It’s not just central bankers and financial regulators who encouraged or ignored bankers’ excesses, so too did the financial police, who failed to step in to stop bankers’ recklessness. Britain’s financial watchdogs prided themselves on their “light touch” – ie, soft-touch – approach. Instead of reining in the City of London’s excesses, they became cheerleaders for it. Their Continental counterparts were more suspicious of the City’s “casino capitalism”, but just as corporatist in championing, rather than curbing, their country’s banks. Financial self-interest and economic nationalism often overlap. Infamously, Jacques de Larosière chaired a high-level group tasked by the European Commission in 2008 with writing a report for EU leaders on EU financial regulation and supervision while on the payroll of France’s biggest bank, BNP Paribas.

Perhaps unsurprisingly, the report argues that banking oversight should involve “more reliance on judgement” by wise, impartial financial supervisors in his vein.57 For the most part, international watchdogs such as the European Commission and the International Monetary Fund (IMF) failed to bark. Only Bill White at the Bank for International Settlements spoke out (and was first ignored then rubbished). Last but not least, blame lies with politicians who are meant to take a wider view of financial safety yet failed to protect voters’ interests. As Britain’s finance minister from 1997 to 2007, Gordon Brown argued that what was good for the City of London was good for Britain, seeing the City’s profits as a means of paying for a Scandinavian-style welfare system with American levels of tax.58 As City minister, Ed Balls, now the opposition Labour party’s finance spokesman, championed London’s light-touch regulatory approach. The ties between the French government and BNP Paribas are so intimate that its traders boast that it is inconceivable that the government would let it fail.

It wasn’t clear whether Germany and the ECB wanted the euro to survive in its current form or would be willing to do enough to prevent its break-up. On 1 December Draghi hinted that, following agreement on a “fiscal compact”, “other things might follow”, triggering a burst of hope. EU leaders duly complied, agreeing eight days later to a compact that would entrench stringent limits on government borrowing in national constitutions. While David Cameron “vetoed” the deal after his bid to get special treatment for the City of London was given short shrift, other EU governments proceeded without him. With Britain marginalised, the eurozone crisis had now become an EU one too. Merkel was delighted by the new fiscal straightjacket. Others hoped that Berlin might reciprocate with a roadmap towards Eurobonds. Above all, they hoped the ECB would finally step in. But on 15 December, Draghi disingenuously said that his comments had been misinterpreted.


Migrant City: A New History of London by Panikos Panayi

Big bang: deregulation of the City of London, British Empire, Brixton riot, call centre, discovery of the americas, en.wikipedia.org, financial intermediation, ghettoisation, gig economy, glass ceiling, haute cuisine, immigration reform, income inequality, Mahatma Gandhi, manufacturing employment, mass immigration, multicultural london english, New Urbanism, offshore financial centre, plutocrats, Plutocrats, transatlantic slave trade, upwardly mobile, urban sprawl, white flight

The importance of London as an international financial centre from the eighteenth century has proved fundamental, a status which European Jews helped to cement from the Napoleonic period onwards and which attracted bankers from other parts of Europe over the following century. The proportion of foreign bankers may have remained stable or declined during the course of the twentieth century but the ‘Big Bang’ in financial services at the end of that century gave the City of London a new lease of life and power comparable with its Victorian and Edwardian status. This in turn helped to create a new service sector to provide for the needs of the growing international bourgeoisie with a key centre in the City, whether, for example, as cleaners or restaurant staff. But these elites have also included individuals who moved to London directly as a consequence of the opportunities which the presence of British and international bankers provided.

At the top of the Jewish social scale stood ‘a relatively small handful of highly successful magnates in the City of London, typically involved in merchant banking, government finance and contracting, the Stock Exchange, insurance, as foreign merchants involved in overseas dealing, and as wholesale and sometimes retail merchants’. Jews often had more success than Gentiles because of their international links as a result of the global diasporic nature of their settlement patterns, although the Christian elites would certainly have outnumbered their Jewish counterparts.51 The economic and financial success of both Jews and Gentiles in the eighteenth century clearly came about as a result of the growth of British economic and geopolitical power, based, in financial terms, in the City of London.52 The story of the Jewish elite in this period, as reflected in the family history of the Gideons, consists of one of increasing integration which involved social mobility and the adoption of mainstream cultural norms, whether attending the theatre and opera, shedding traditional Jewish attire, marrying a Gentile or no longer keeping kosher.53 As the eighteenth century progressed, Jewish settlement increasingly became Ashkenazi with newcomers originating in Germany and, to a lesser extent, Poland and Holland.54 Together with Jews, other foreigners, especially Germans, but also Dutch and Huguenots, played a role in the economic success of Britain during the seventeenth and eighteenth centuries, partly because of the relatively open attitude towards immigration compared with continental European states, reflected in a liberal naturalization regime and, once again, because of the burgeoning of international trade emanating from London.

., Greek Diaspora and Migration since 1700: Society, Politics and Culture (Farnham, 2009), pp. 45–60. 74. Catsiyannis, Greek Community of London, pp. 39–40. 75. Ibid., pp. 45–6; Maria Christina Chatziioannou and Gelina Harlaftis, ‘From the Levant to the City of London: Mercantile Credit in the Greek International Commercial Networks of the Eighteenth and Nineteenth Centuries’, in Philip L. Cottrell, Evan Lange and Ulf Olsson, eds, Centres and Peripheries in Banking: The Historical Development of Financial Markets (Aldershot, 2007), pp. 29–30. 76. Chatziioannou and Harlaftis, ‘From the Levant to the City of London’, p. 27. 77. Catsiyannis, Greek Community of London, p. 44. 78. John Gennadius, Stephen A. Ralli: A Biographical Memoir (London, 1902), pp. 21–2. 79. Timotheous Catsiyannis, Pandias Stephen Rallis, 1793–1865: The Founder of the Greek Community in London (London, 1986), pp. 29, 47–8. 80.


pages: 613 words: 151,140

No Such Thing as Society by Andy McSmith

anti-communist, Ayatollah Khomeini, Berlin Wall, Big bang: deregulation of the City of London, Bob Geldof, Boris Johnson, British Empire, Brixton riot, call centre, cuban missile crisis, Etonian, F. W. de Klerk, Farzad Bazoft, feminist movement, fixed income, Francis Fukuyama: the end of history, friendly fire, full employment, glass ceiling, God and Mammon, greed is good, illegal immigration, index card, John Bercow, Kickstarter, liberal capitalism, light touch regulation, Live Aid, loadsamoney, long peace, means of production, Mikhail Gorbachev, mortgage debt, mutually assured destruction, negative equity, Neil Kinnock, Nelson Mandela, North Sea oil, Northern Rock, old-boy network, popular capitalism, Right to Buy, Ronald Reagan, Rubik’s Cube, Sloane Ranger, South Sea Bubble, spread of share-ownership, strikebreaker, The Chicago School, union organizing, upwardly mobile, urban decay, Winter of Discontent, young professional

Instead, an extra clause was slipped into the Bill as it was going through its committee stage in the Commons.9 When the Big Bang came, on 27 October 1986, the separate tribes of jobbers and brokers merged and huge multinational finance houses moved in. The City of London regained its competitive edge, at the cost of ending what had been, for many, a cosy way of staying prosperous. On the day of the Big Bang, Sir Nicholas Goodison was sharing a lift with Guy Farage, a well-known character in the city, who accepted that the changes had to happen, but regretted them. Asked for his opinion, he told Sir Nicholas: ‘You have destroyed the finest gentleman’s club in the world.’10 The City became a draw for American investment banks that were going through a stage of aggressive expansion, backed by a US administration as keen on deregulation as Mrs Thatcher. In the three years from December 1985, the number of staff employed in London by the Wall Street investment bank Salomon Brothers rose from 150 to 900, with state-of-the-art new premises near Victoria Station to accommodate them.

Sir Nicholas knew a good offer when he saw one. It was very likely that the Stock Exchange would lose the court case that OFT was bringing, which was due to be heard in January, and would have to disentangle its centuries-old customs in one chaotic Big Bang. After consultation, he came back to Parkinson and said that the Stock Exchange would comply with the law, and organize its own Big Bang, but not yet. Instead of doing it almost overnight, as Wall Street had already done, they would have a gentle three-year changeover. Parkinson agreed. There followed a slow explosion in the City. Size was going to count in a deregulated money market, so firms merged and recruited, and salaries spiralled, sweetened by huge golden hellos, golden handcuf s and other perks. House prices shot up within miles of the City as banks and finance houses encouraged their young employees to take on huge mortgage commitments in the hope of tying them down.

Enfield, a Labour supporter, did not mind that, but he did not like it when the Sun took it up as a celebration of Thatcherism, using ‘£oadsamoney’ to plug its Lotto and Bingo games. He instructed his solicitors to try to warn them off, but gave up after the Sun counterattacked, telling him to ‘buy yourself a sense of humour’.1 The phenomenon that Enfield was observing did not originate in Tottenham’s White Hart Lane. It came out of the City of London, which in a few dramatic years was transformed from a club run by an old-boy network of public-school alumni to a place where the ambitious sons of working-class families were given free rein to make a great deal of money quickly. This development could be said to have begun when Margaret Thatcher called Cecil Parkinson to her office in June 1983 to reward him for his valiant work as chairman of the Conservative Party, presiding over the party’s best election result since the 1930s.


pages: 358 words: 104,664

Capital Without Borders by Brooke Harrington

banking crisis, Big bang: deregulation of the City of London, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, complexity theory, corporate governance, corporate social responsibility, diversified portfolio, estate planning, eurozone crisis, family office, financial innovation, ghettoisation, haute couture, high net worth, income inequality, information asymmetry, Joan Didion, job satisfaction, joint-stock company, Joseph Schumpeter, liberal capitalism, mega-rich, mobile money, offshore financial centre, race to the bottom, regulatory arbitrage, Robert Shiller, Robert Shiller, South Sea Bubble, the market place, Thorstein Veblen, transaction costs, upwardly mobile, wealth creators, web of trust, Westphalian system, Wolfgang Streeck, zero-sum game

See also compliance; inheritance laws; lawyers; rule of law lawsuits, 196 lawyers: in American College of Trust and Estate Counsel, 30; in asset-holding-structure creation, 13, 53; from elite universities, 103; fiduciary responsibility absent for, 82; informal relationship between regulators and professionals, 222; long-term relationships with clients, 320n1; nineteenth-century growth of trust in, 75; norms and interaction rituals in, 93; in offshore financial centers, 131; opinion letters by, 210; professional innovation in law, 279; professionalization of, 283; the rich can afford the best, 208, 274; sensitive information known by, 79; state licensing of, 233; training programs for, 97–98; wealth managers as, 3, 35, 205, 234; wealth managers compared with, 4, 7 leak, 148, 197 legal lists, 49 leisure class, 10–11 less developed countries: development and postcolonial conundrum, 253–67; international finance in, 236; philanthropic trusts and foundations address social problems in, 252; political instability and corruption in, 140–49; wealth inequality in, 203; wealth managers in, 109–10 Levin, Carl, 13 liability, 71, 182 Lian (China-based wealth manager), 106–7 limited liability, 182 Lloyd’s Bank International, 125 London: City of London, 37–38, 295; luxury properties in, 144, 145, 242 loopholes, 13, 17, 228–29, 299 Louis (London-based wealth manager), 109, 177, 228–29, 239, 248 loyalty: in fiduciary relationships, 44, 45, 65, 87, 176; in knightly ethic, 38, 40, 43; in wealth managers, 43, 65, 87 Luc (Saudi Arabia–based wealth manager), 67, 71, 108, 111–12, 174 Lula da Silva, Luiz Inácio, 224 Luxembourg, 37, 293, 296 Lynn (Panama-based wealth manager), 298 Maitland, Frederic, 164 Malik (New York–based wealth manager), 211 Manhattan luxury properties, 144–45 manners, 93 Marian (Los Angeles–based wealth manager), 83–84 Mark (Dubai-based wealth manager), 80, 81, 88, 89, 106, 117, 124, 126, 136, 228, 244, 298 marketing, 98 markets: complexity of international financial, 272; deregulation of financial, 126; dynastic wealth destabilizes, 203; family institutions that rival those of, 250–52; financial crises continue, 298; private, 90–91; STEP frames its work as defense of free, 226; wealth management affects, 16, 18–19, 272 marriage: “all heiresses are beautiful,” 215; couverture doctrine, 165; divorce, 162–64; intermarriage, 4, 215; multiple, 165 Marx, Karl, 16, 204 Mary (New Jersey–based wealth manager), 137 Massachusetts, 237 “matchmaker” firms, 73 Mauritius: as conduit haven, 142–43; Indians use, 145–46, 258; interviews for this study in, 32 Mauss, Marcel, 2 McKenzie, Chris, 222 Medicare, 224 MEGOs, 13 Meinhard v.

This is not coincidental: both trusts and guilds, as self-organizing and self-governing institutions, challenged state power.5 In addition, some have noted that the impact of wealth management—its success in protecting wealth from taxation and regulation—“is taking us back in time, back to the values and society of the feudal world.”6 Still others have observed that many of the microstates that have become leading global centers of wealth management activity are a “feudal remnant,” their territories and sovereignty created from duchies and principalities predating the Westphalian political order by centuries. These include the Channel Islands of Jersey and Guernsey—the last sovereign fragments of the Duchy of Normandy, once held by William the Conqueror—along with Luxembourg, Liechtenstein, and Malta, among others.7 The most important of these feudal holdovers is undoubtedly the City of London, the self-governing square mile enclosed by but distinct from London, the national capital. An estimated $1.1 trillion in personal wealth originating outside the United Kingdom—11 percent of the private offshore finance business worldwide—passes through the 1,000-year-old City, making it literally “a medieval commune representing capital.”8 My point, while related to these, is more specific to the practices and norms that define the work of contemporary wealth management.

To a greater extent than Zucman’s work, this study emphasizes the decline in states’ political legitimacy as a result of offshore activity. The offshore world has created zones of lawlessness: not just in regard to tax laws but with respect to all laws. As some observers have already noted, there is an “anarchic” aspect to wealth management, with the result that the locales where this activity takes place—whether that is offshore, on Wall Street, or in the City of London—can seem surprisingly akin to the havens created by left-wing anarchists, such as pirate radio platforms.77 Such comparisons are not just metaphorical. The anarchic effects of wealth management can be observed in the chaos unleashed in 2008, when bad debts and risks hidden from regulators in obscure offshore vehicles grew to unmanageable size and nearly destroyed the world financial system.


pages: 438 words: 109,306

Tower of Basel: The Shadowy History of the Secret Bank That Runs the World by Adam Lebor

banking crisis, Basel III, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, central bank independence, corporate governance, corporate social responsibility, deindustrialization, eurozone crisis, fiat currency, financial independence, financial innovation, forensic accounting, Goldman Sachs: Vampire Squid, haute cuisine, IBM and the Holocaust, Kickstarter, Occupy movement, offshore financial centre, Ponzi scheme, price stability, quantitative easing, reserve currency, special drawing rights

Crocket came to the BIS in 1994 from the Bank of England, where he had spent four years as an executive director. There he could observe firsthand the after-effects of the “Big Bang,” the 1986 deregulation of the City of the London. Until the Big Bang, the Square Mile had been still a clubby, comfortable place of old school tie connections and long lunches, where Montagu Norman would have felt at home. That world vanished almost overnight. Wall Street investment banks poured into the Square Mile, bringing aggressive new tactics. The 1933 Glass-Steagall Act, which separated investment banking and deposit taking, was still in force in the United States. London, newly unburdened from cumbersome regulations, offered fabulous opportunities, heightened by the rapid growth of computer technology, which accelerated trading. The BIS gave the Big Bang a cautious welcome. “It was feared that if nothing was done, the Stock Exchange would be unable to compete with foreign institutions and business would move abroad,” the BIS noted in its 1987 Annual Report.18 The changes had brought a “major inflow” of capital to British and foreign banks, the BIS noted, but had highlighted the importance of Chinese walls within firms to avoid conflicts of interest.

Randolph, 50 Buro IG, 51, 101 Bush, Prescott, 145 C Caesar, Hans, 107 Canada, xi, 198 Carney, Mark, 249–250, 263 Caruana, Jaime, xi, 259–260 Casey, William, 186 Catto, Thomas, 1st Baron Catto, 125, 139 Cecchetti, Stephen, 254, 259, 260, 272 CEEC (Conference for European Economic Cooperation), 140, 146 Central bankers economic and political power of, 43–44 growing prominence of, 249 need for awareness of concerns of public, 251 responsibility for financial stability, 250, 253 Central banks, argument for, 31 Chamberlain, Neville, 48, 70 Chase National Bank, 106–108, 133, 144 Château de Rougemont, 81 Château d’Oex, 81 Chemnyco, 101 China, xi, xxii, 228, 257 Churchill, Winston, 173 Cicero, “sinews of war” quote from, 66 City of London, deregulation of, 227–228 Clay, Lucius, 138 Clements, Piet, 60, 85, 259 Cochran, Merle, 41, 49, 54, 73, 80, 106 Cold War, 201–202 Committee for Foreign Economic Affairs, 153 Committee for the Study of Economic and Monetary Union, 210 Committee on Global Financial System, xxii, 239, 250, 257 Committee on Gold and Foreign Exchange, 189 Committee on Payment and Settlement Systems, xxii, 257 Concentration camp inmates, use of in industry, 184, 185 Conference for European Economic Cooperation (CEEC), 140, 146 Connolly, Frederick, 145, 146 Coombs, Charles, xv, 179–181, 188, 189–191 Craig, Bruce, 142 Cravath law firm, 142, 169 Credit Anstalt bank, 44 Croatia, 184 Crockett, Andrew, 225–226, 243, 258–259 Czechoslovak gold affair, 59–63 Czechoslovakia Act, 62 D Daily Herald, on transfer of Czech gold, 61 Dalziel, Charles, 76 Das Reich, on BIS, 124–125 Dawes, Charles, 9 Dawes Committee (1924), 9–10 Dawes Plan German External Loan, 74 De Gaulle, Charles, 194 The Death of a Diplomat (Jacobssen), 52 Degesch, 104 Delors, Jacques, 210, 215, 226, 233 Delors Committee, xxi, 210–214 Denmark, 8, 245, 246 Deutsche Bank, 74, 153, 154 Deutschmark, 151–152 Devisenschutzkommando (DSK), 86 Dodd, Thomas, 106, 177 Donovan, William J.

“I do hope we shall become friends,” said Norman, with a shy smile. Schacht told Norman that he wanted the Bank of England to lend $25 million to a new subsidiary of the Reichsbank, the Gold Discount Bank. The new bank would instantly alter global perceptions of the country’s financial prospects. The imprimatur of the governor of the Bank of England would open doors throughout Wall Street and the City of London. Tenacious as ever, Schacht got his money. SCHACHT HAD SWEET-TALKED Norman, but the reparations question remained unresolved. America was tired of squabbling Europeans who could not get their houses in order and also recognized that there could be no lasting prosperity while Europe lurched from one financial crisis to another. A new reparations committee was set up under the chairmanship of Charles Dawes, an irascible American banker.


pages: 98 words: 27,201

Are Chief Executives Overpaid? by Deborah Hargreaves

banking crisis, Big bang: deregulation of the City of London, bonus culture, business climate, corporate governance, Donald Trump, G4S, Jeff Bezos, loadsamoney, Mark Zuckerberg, Martin Wolf, performance metric, principal–agent problem, profit maximization, Ronald Reagan, shareholder value, Snapchat, trade liberalization, trickle-down economics, wealth creators

This pay revolution was also a symptom of the move among some of the leading western economies – mainly the US and UK – to focus more of their resources on finance in Wall Street or the City of London. It was called the ‘financialization’ of the economy, or how everyone wanted to be paid like a banker. With the opening up of the London Stock Exchange under so-called Big Bang reforms in 1986, large American investment banks moved across the Atlantic, bringing with them their culture of big bonuses. One veteran banker recalls how the US banks went on a frenzy of hiring and acquisitions and suddenly everyone became greedy. This culture leaked out of the City of London and into British boardrooms, where company bosses wanted their pay to be similarly performance-related. It should be clear that there were political choices involved in unleashing a high-pay culture.

She also launched a series of privatizations of companies such as British Gas and British Telecom, which saw the former civil servants running these businesses suddenly pitched into the premier pay league. Similarly, Ronald Reagan came to power during a period of deep recession and stagflation – characterized as double digit economic downturn accompanied by double digit rate of inflation – in 1981. He was convinced that tax cuts for the rich, deregulation of markets and business, and control of the money supply to counter inflation, would improve the economy for all through the so-called ‘trickle-down effect’. President Reagan gave his name to the branch of monetarist economics he popularized – Reaganomics – but much of his legacy has since been called into question. Time men of the year The concentration of wealth among top businessmen has a long legacy in America but a look at the choices made by Time magazine for its person of the year illustrates a flood of value to the top in recent years.


pages: 872 words: 259,208

A History of Modern Britain by Andrew Marr

air freight, Albert Einstein, anti-communist, battle of ideas, Beeching cuts, Big bang: deregulation of the City of London, Bob Geldof, Bretton Woods, British Empire, Brixton riot, clean water, collective bargaining, computer age, congestion charging, cuban missile crisis, deindustrialization, Etonian, falling living standards, fear of failure, Fellow of the Royal Society, financial independence, floating exchange rates, full employment, housing crisis, illegal immigration, Kickstarter, liberal capitalism, Live Aid, loadsamoney, market design, mass immigration, means of production, Mikhail Gorbachev, millennium bug, Neil Kinnock, Nelson Mandela, new economy, North Sea oil, Northern Rock, offshore financial centre, open borders, out of africa, Parkinson's law, Piper Alpha, Red Clydeside, reserve currency, Right to Buy, road to serfdom, Ronald Reagan, Silicon Valley, strikebreaker, upwardly mobile, Winter of Discontent, working poor, Yom Kippur War

The new Chancellor after the 1983 election, Nigel Lawson, a former financial journalist, and the new Trade Secretary, Cecil Parkinson, decided to do a deal with the increasingly archaic looking Stock Exchange. It was struggling with a long and wearisome court case brought by the Office of Fair Trading. The ministers promised the legal action would be dropped if the Stock Exchange reformed itself. This was the final piece of action which led to the ‘Big Bang’ of City deregulation, something which has a claim to be the single most significant change of the whole Thatcher era, on a par with confronting the unions or privatization. The situation in 1983–4 could be compared to an old market town high street, with its long-established specialist shops, the fishmonger and the drapers, old Mr Bunn at the bakery and Miss Manila the trusted postmistress, at just the moment when a huge new retail park opens on the outskirts.

All this would end in tears with the bust that followed and would be used for many years afterwards by Labour’s Gordon Brown as evidence of the Tory ‘boom-and-bust’ policies. But it was the consequence of a decisive break in the financial regulations governing City and everyday life, which changed Britain, probably for ever. It felt heady and exhilarating to millions. It was like getting properly drunk for the first time. The Big Bang itself was thus only a moment in a longer process, rooted in the Eurodollar market of the sixties and given its most dramatic kick by Geoffrey Howe’s abolition of exchange controls, followed by the deregulation of lending. It meant that Britain for the first time in her history, and entirely willingly, gave up control over financial dealings done from her soil except as a neutral regulator. The State lost control over credit. In return the City gained a huge quantity of international financial business, the profits dripping down from some of the biggest deals in the world which might otherwise have gone to Berlin, Tokyo or (more likely) New York.

Index 7/7 ref1 9/11 ref1 Abbey National ref1 abortion ref1, ref2, ref3, ref4 Abortion Law Reform Association ref1 Abse, Leo ref1, ref2, ref3 Acheson, Dean ref1 acquired immune-deficiency syndrome (AIDS) ref1 Adam, Ruth ref1 Adams, Gerry ref1, ref2 Admiralty, the ref1 Afghanistan ref1 Africa ref1, ref2, ref3 agriculture ref1 AIDS (acquired immune-deficiency syndrome) ref1 airliners ref1 Aitken, Jonathan ref1 Aldermaston ref1 Allawi, Ayad ref1 al-Qaeda ref1 Amin, Idi ref1 Amis, Kingsley ref1 anarchy ref1 Anatomy of Britain (Sampson) ref1, ref2 Anderson, Ian ref1 Anderton, James ref1 Angry Brigade ref1 ‘Angry Young Men’ ref1 animal rights movement ref1 anti-Americanism ref1 anti-Semitism ref1, ref2 anti-war movement ref1 Anti-Nazi League ref1, ref2 Anti-Social Behaviour Orders (ASBOs) ref1 appeasement ref1 Apprentice Boys of Derry ref1 Arab nationalism ref1 arms race ref1 art colleges ref1 Argentina see Falklands War Arts Council ref1 ASBOs (Anti-Social Behaviour Orders) ref1 Asda ref1 Ashdown, Paddy ref1 Astor, Lord ‘Bill’ ref1 Astor, Nancy ref1 A Streetcar Named Desire ref1 Aswan, High Dam ref1 asylum seekers ref1, ref2 see also immigration; multiculturalism Attlee, Clement ref1, ref2, ref3, ref4, ref5, ref6, ref7 Austin, Herbert ref1 Austin Seven ref1 AWACS ref1 Bailey, David ref1 Baker, Kenneth ref1 Balcon, Michael ref1 Balls, Ed ref1, ref2 Banda, Hastings ref1 Bank of England ref1, ref2, ref3 Barings Bank ref1 Barnett, Correlli ref1, ref2 Barry, Gerald ref1 BBC ref1, ref2 Beadle, Hugh ref1 Beatles, the ref1, ref2, ref3, ref4 Beaton, Cecil ref1 Beaumont, Hugh (Binkie) ref1, ref2 Beckett, Samuel ref1 Beeching, Richard ref1, ref2 Behan, Brendan ref1 Belgrano ref1 Bell, Martin ref1 Benn, Tony ref1, ref2, ref3, ref4, ref5, ref6, ref7, ref8, ref9, ref10, ref11, ref12 domestic policy ref1 on the Eurodollar ref1 on Europe ref1 and Labour reform ref1, ref2 Bentine, Michael ref1 Bentley, Derek ref1 Berger, Vivian ref1 Berners-Lee, Tim ref1 Bernstein, George ref1 Bevan, Nye ref1, ref2, ref3, ref4, ref5, ref6 Beveridge Report ref1 Beveridge, William ref1, ref2 Bevin, Ernest ref1, ref2, ref3, ref4, ref5 Bevins, Reggie ref1 Beyond the Fringe ref1 Biba ref1, ref2 Bicknell, Franklin ref1 ‘Big Bang’, City deregulation ref1 ‘Big Brother’ ref1 Bin Laden, Osama ref1 bio-metrics ref1 Birch, Nigel ref1 Birthday Party, The (Pinter) ref1 Blackburn Technical College ref1 Black, Cilla ref1 black market ref1 Black Wednesday ref1 Blair, Cherie ref1 Blair, Tony ref1, ref2, ref3, ref4, ref5, ref6, ref7 and Brown ref1 and Bush ref1 and celebrity ref1 and civil liberties ref1, ref2 death of Diana ref1, ref2 and the euro ref1 final years ref1 and fuel duty protests ref1 and hunting ref1 and Iraq ref1, ref2 leadership election ref1 on multi-culturalism ref1 Northern Ireland ref1 and the press ref1 resignation ref1 and Serbia ref1, ref2 and Thatcher ref1 ‘war on terror’ ref1 on weapons of mass destruction ref1, ref2, ref3 Blake, George ref1 Blake, Peter ref1 Blaney, Neil ref1 Blue Streak ref1 Blunkett, David ref1, ref2, ref3, ref4, ref5 ‘Bloody Sunday’ ref1 Blunt, Antony ref1, ref2 Blunt, Maggie Joy ref1 BMC (British Motor Corporation) ref1 BNOC (British National Oil Corporation) ref1 Bono ref1 Boodles Club ref1 Booker, Christopher ref1 Boothby, Lord ref1 Borges, Jorge Luis ref1 Bose, Subhas Chandra ref1 Bosnia ref1 Bourne, Alec ref1 bovine spongiform encephalopathy (BSE) ref1 Boxer, Mark ref1 Bowe, Collette ref1 Bowie, David ref1 Braddock, Bessie ref1 Braithwaite, Rodric ref1 Bramley, Ted ref1 Bretherton, Russell ref1 Britain Can Make It (1946) ref1 British Aeroplane Company ref1 British Airways ref1 British Antarctic Survey ref1 British Empire ref1, ref2 British Gas ref1, ref2, ref3 British Guild of Creative Designers ref1 British Housewives’ League ref1, ref2 British Leyland ref1 British Medical Association ref1, ref2 British Motor Corporation (BMC) ref1 British Nationality Act ref1 British National Oil Corporation (BNOC) ref1 British National Party see National Front British Rail ref1, ref2, ref3 British Steel ref1 British Telecom (BT) ref1, ref2 British Transport Commission ref1 Brixton ref1 Broccoli, Albert ‘Cubby’ ref1 Brodie, Tom see Glorious Glosters Brown, George ref1, ref2, ref3, ref4 Brown, Gordon ref1, ref2, ref3, ref4, ref5 anti-poverty agenda ref1 and Blair ref1 economy ref1, ref2 and the euro ref1, ref2 fuel taxes ref1 ID cards ref1 BSE (bovine spongiform encephalopathy) ref1 B-Specials ref1 BT (British Telecom) ref1, ref2 Buchan, Norman ref1 Bulger, James ref1 Bupa ref1, ref2 Burgess, Guy ref1, ref2 Bush, George ref1 Bush, George W. ref1, ref2, ref3 Butler, R.


pages: 357 words: 110,017

Money: The Unauthorized Biography by Felix Martin

bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, call centre, capital asset pricing model, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, creative destruction, credit crunch, David Graeber, en.wikipedia.org, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, Fractional reserve banking, full employment, Goldman Sachs: Vampire Squid, Hyman Minsky, inflation targeting, invention of writing, invisible hand, Irish bank strikes, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, mobile money, moral hazard, mortgage debt, new economy, Northern Rock, Occupy movement, plutocrats, Plutocrats, private military company, Republic of Letters, Richard Feynman, Robert Shiller, Robert Shiller, Scientific racism, scientific worldview, seigniorage, Silicon Valley, smart transportation, South Sea Bubble, supply-chain management, The Wealth of Nations by Adam Smith, too big to fail

In the days when Lloyds and Barclays were still little more than provincial counting houses, one bank ruled the City like no other before or since. This was the famous Quaker firm of Overend, Gurney and Co., or the “Corner House” as it was known to a generation of Victorian financiers, because it stood as a rival to the Bank of England itself, not only metaphorically in the financial markets, but in hard reality on the corner of Lombard Street and Birchin Lane in the heart of the City of London. The Gurney family had begun as wool merchants in the prosperous farming district of East Anglia, and had evolved naturally into merchant bankers by borrowing on their good name in London and lending to the local sheep-farmers. As Britain’s economy grew and diversified, the opportunity to capitalise on this generic line of business—connecting the local capitalists in need of credit at the base of the pyramid to the London banks in its higher echelons—became more and more attractive.

As the Governor put it afterwards, “I do not think that anyone would have thought of predicting, even at the shortest period beforehand, the greatness of those advances.”32 By Saturday, everything was confusion. In the morning, the Chancellor of the Exchequer, William Ewart Gladstone, reassured the House of Commons that although there was “panic and distress … without parallel in the recollection of even the oldest men of business in the City of London,” he had “not the least reason to suppose” that the Bank would ask him to suspend the Act stipulating the strict upper limit to the note issue.33 He then returned to the Treasury to find the Bank’s Governor telling him that with only £3 million left in its reserve, the Bank could not withstand another day like Friday, and asking just that. Gladstone acceded, signing a letter of suspension like the ones that had been needed in 1847 and 1857, on the condition that Bank Rate be further raised to 10 per cent.

The acute phase of the crisis began to subside, and though the demand for sovereign money remained unusually high for months following the crisis, the focus shifted to counting the casualties in the post-Overends era. These were considerable. Three English and one Anglo-Indian bank had been forced into liquidation—at a time when there was no deposit insurance. Dozens of bill brokers and finance companies had gone under. But as always, the real ramifications of the crisis were felt far beyond the medieval wards of the City of London and long after the acute panic had subsided. All over the country, the credit crunch resulting from the damage to confidence brought a severe contraction of business. More than a hundred and eighty bankruptcies were recorded in the three months following Black Friday.34 Unemployment rose from 2.6 per cent in 1866 to 6.3 per cent in 1867, and rose again in 1868 before a proper recovery took hold.


pages: 261 words: 81,802

The Trouble With Billionaires by Linda McQuaig

"Robert Solow", battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, British Empire, Build a better mousetrap, carried interest, collateralized debt obligation, computer age, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Douglas Engelbart, Douglas Engelbart, employer provided health coverage, financial deregulation, fixed income, full employment, George Akerlof, Gini coefficient, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invention of the wheel, invisible hand, Isaac Newton, Jacquard loom, Joseph-Marie Jacquard, laissez-faire capitalism, land tenure, lateral thinking, Mark Zuckerberg, market bubble, Martin Wolf, mega-rich, minimum wage unemployment, Mont Pelerin Society, Naomi Klein, neoliberal agenda, Northern Rock, offshore financial centre, Paul Samuelson, plutocrats, Plutocrats, Ponzi scheme, pre–internet, price mechanism, purchasing power parity, RAND corporation, rent-seeking, rising living standards, road to serfdom, Ronald Reagan, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, trickle-down economics, Vanguard fund, very high income, wealth creators, women in the workforce

In 1970, the New York Stock Exchange lifted its ban on investment banks becoming public corporations with listings on the stock exchange. As a result, the major US investment banks gradually switched over to the public model. In Britain, with the sudden financial deregulation of the Big Bang in 1986, small partnerships were also replaced by large investment houses. In both countries, investment banks, no longer constricted by the responsibilities inherent in partnerships, were able to raise huge amounts of cash and grow much larger in size. ‘The Big Bang generation became millionaires at the same time as they were freed from the responsibility of looking after the partnerships,’ notes former British investment banker Philip Augar in ‌The Death of Gentlemanly Capitalism.6 Senior bank executives were no longer personally liable for their firms’ debts.

In the most recent ranking, the UK itself was in thirteenth position among seventy-three countries, but the authors note that if the entire British network were considered, it would easily be ranked as the world’s number one secrecy jurisdiction. In his book Treasure Islands: Tax Havens and the ‌Men Who Stole the World,32 Nicholas Shaxson tells the story of how the UK became the centre of a web of tax havens in the 1950s in a deliberate attempt to funnel illicit funds from the crumbling British Empire to the City of London. While it’s impossible to estimate accurately the revenue loss from granting non-domicile status to the super-rich living in London, it probably amounts to ‌billions of pounds a year33 – an unconscionable loss at a time when ordinary UK citizens are being subjected to austerity measures to reduce the deficit. Presumably, the policy has been maintained because of the political influence of the fantastically wealthy non-doms, who have reportedly contributed millions of pounds to political parties.

The basic thrust of their agenda has been to marginalize the democratic political system and to concentrate power in the private sector, where they can operate free from serious constraint. To achieve this end, they have denigrated and cut back every democratic policy instrument that citizens use to achieve their collective goals: state enterprises have been privatized; industrial and financial sectors have been deregulated; environmental and consumer regulations have been abandoned; social security programmes have been reduced; union power has been curbed; and public institutions such as universities and health facilities have been partially privatized. The main focus of their attack, however, has been on the tax system. They have campaigned to disable the tax system as a vehicle for redistributing income and wealth, and furthermore, have attacked the very idea of taxes.


pages: 476 words: 139,761

Kleptopia: How Dirty Money Is Conquering the World by Tom Burgis

active measures, Anton Chekhov, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Boris Johnson, British Empire, collapse of Lehman Brothers, coronavirus, corporate governance, COVID-19, Covid-19, credit crunch, Credit Default Swap, cryptocurrency, do-ocracy, Donald Trump, energy security, Etonian, failed state, Gordon Gekko, high net worth, Honoré de Balzac, illegal immigration, invisible hand, Julian Assange, liberal capitalism, light touch regulation, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Mohammed Bouazizi, Northern Rock, offshore financial centre, Right to Buy, Ronald Reagan, Skype, sovereign wealth fund, trade route, WikiLeaks

On October 15, 2011, a group of protesters were prevented by the police from staging the demonstration they had planned outside the London Stock Exchange. They proceeded instead to the square overlooked by St Paul’s Cathedral. There they remained, erecting an encampment of 150 tents. The City of London police issued a warning. It was headed, ‘Terrorism/Extremism update for the City of London Business Community’. The force had intelligence that the Occupy London camp contained ‘individuals who would fit the anti-capitalist profile’. Upstanding capitalists in the area were warned to be on the lookout for ‘suspected activists’. Nigel had recently finished his three years working for the City authorities. ‘I share the concerns about the way the City of London Police endeavour to brand protest groups such as Occupy in the same group as extremist and terrorist groups,’ he wrote in his notebook. ‘This is the same police force that did nothing to tackle the large-scale market manipulation taking place within the banks located in the City.

Assad ruled by theft and fear – like Mubarak, like Ben Ali in Tunisia, who had fallen after Mohamed Bouazizi ignited himself and began an uprising, like Muammar Gaddafi and the king of Bahrain, both of whom deployed troops to uphold kleptocracy. Whichever of them would topple, whichever of them would endure, Nigel understood there was a machine that would continue to ensure that either they or whoever succeeded them could turn power into money and smuggle it out. The machine was both corrupted and corrupting. Nigel knew where its master cog lay: the City of London. Like a soldier addicted to war, he couldn’t stay away from it. After BSI fired him, he took a job at the City of London Corporation, the arcane, opaque, half-private, half-public body that ran the financial district’s affairs. For three years he worked there, until a better opportunity arose. On July 1, 2011, he received a letter from the ‘HR Transactions’ department of the City’s regulator. It confirmed the offer of a job at the Financial Services Authority.

., 383n Magnex 2000 (Mogilevich company), 377n Magnitsky Act, Global, 307–8 Major, John, 121 Makarov, Andrei, 361n Makarov, Igor, 379–81n Malaysia, 327–9, 419–20n Manchester, 5 Mandelson, Peter, 163, 211–12, 387n manganese, 279, 283, 308, 403–4n, 405n Mapelli, Alberto, 353n Marcos, Ferdinand, 50, 350–1n Markowitz, Michael, 77–8, 79, 356n Martin, Charlotte, 6, 71, 89, 208, 229, 239, 240, 243, 271, 289–90, 341n Massimov, Karim, 61, 157–8, 371n Matrosskaya Tishina prison (Moscow), 39 May, Theresa, 257 Mbeki, Thabo, 57 McCarthy, Kevin, 302 McCormick, Shawn, 17–18, 19–20, 21–2, 23, 174, 284–6, 300, 342–3n, 344–5n, 406–7n, 410n Mennes, Ernest, 383n Merrill Lynch, 202 Meryweather Investments Limited, 352n, 355n Mexican drug cartels, 201 Mezhidov, Tamirlan, 391–2n Michigan State University, 133–5 Midland Resources, 223 Mikhailov, Sergei (‘Mikhas’), 99–100, 175–6, 181, 222, 223, 360–1n, 377n Miller, Alexei, 381n mineral reserves: in Australia, 10, 55; in Kazakhstan, 10, 126, 130, 132–3, 157, 211, 368n; in Africa, 23–4, 49–53, 55–6, 73, 201, 273, 277, 278–82, 306, 351–2n, 402–4n, 404–5n; in South Africa, 23–4; Congo’s copperbelt, 49, 51–3, 56, 280–3, 306, 351n, 402–3n, 404–5n; Chinese demand for, 55; Russian aluminium, 132 Mirakhmedov, Abdumalik, 333–5, 421n Mirtchev, Alexander, 363–4n Mnangagwa, Emmerson (the Crocodile), 49, 50, 51, 53, 306, 336, 350n Mnuchin, Steven, 415n Mobil, 156 mobsters, Russian: and money laundering, 15–16, 76, 176–80, 314, 315; and Russian capitalism, 15–16, 176–84, 314; and Russian state, 16, 182–4; in USA, 75–6, 77–87, 182, 356–7n; avtoritet (business gangster), 99–100, 175–6, 360–1n; and Boris Birshtein, 99–100, 174, 358n, 360–1n, 376n; Solntsevskaya brotherhood, 99–100, 175–6, 360–1n, 377n; and Sasha Machkevitch, 174–5, 181, 183, 184, 374–5n Mobutu Sese Seko, 49–50 Mogilevich, Semyon (‘Seva’, ‘Brainy Don’), 76, 174–7, 180–1, 337–8, 356n, 358n, 375–83n; detained in Moscow (2008), 15–16, 182–3, 381n; and money laundering, 15–16, 176–80, 314, 315; UK warrant for arrest of, 177–8; and natural gas pipelines, 182, 183, 222, 289, 331; in Wilkins’ red boxes, 331, 332 Mohamad, Mahathir, 328 Mohammed bin Salman, 320–2 Moldova, 98, 99 Monaco, 28, 174–5, 214–15, 420n money laundering: the Trio in Belgium, 14, 112, 155–6, 304–6; and Semyon Mogilevich, 15–16, 176–80, 314; and Russian mobsters, 15–16, 76, 176–80, 314, 315; and Carl Levin’s Senate hearings (2008), 44–7, 58, 59, 349n; Proceeds of Crime Act (2002), 71; and real estate, 76, 200–1, 202–5, 236, 245–7, 305, 314–16, 324–5, 384–5n, 384n, 392–3n; and Soviet Party gold, 97–8, 101; and Brink’s-Mat robbery, 118–19, 365n; at HSBC, 170; Bank of New York scandal (1999), 179, 181, 314; loopholes in US regulations, 200; Black Market Peso Exchange, 201–2, 315; by drug cartels, 201–2; and Donald J. Trump, 202, 250, 274–5, 303, 314–16, 319, 324–6, 384–5n; City of London’s tolerance of, 241–2, 395n; and FBME Bank, 246, 396n Montevecchi, Ernest ‘Butch’, 79, 83 Morgan Stanley, 13 Mossack Fonseca, 328, 365n Mossad, 258 Mubarak, Hosni, 119 Mueller, Robert, 310, 325, 326, 413n, 419n Mugabe, Robert, 53–4, 185–6; and 2008 elections, 48, 54, 56–7, 73, 277, 336, 351–3n; and massacre in Matabeleland, 49, 306; and Congo, 51, 52–3; and City of London, 54, 73; and 2013 election, 306–7, 336; relinquishes power (November 2017), 306, 336 Mukhudinov, Ruslan, 234 Muratbaev, Talant, 371n Murcia Guzmán, David, 202, 315, 384n Najib Razak, 327–9, 419n Napolitano, Giorgio, 254–5 Nathan, Judge Alison J., 410n National Security Council (NSC) (USA), 17, 285 Nazarbayev, Nursultan, 106; and loyalty, 10–12, 67–9, 111–15, 116, 123–5, 127, 172–3, 303; and the Trio, 10–14, 94, 123–5, 127, 132, 158–9, 198, 210–12, 245, 294, 300; crushing of opposition, 12, 67–9, 111–15, 116, 127, 160–1, 166; secret bank accounts in West, 14, 112, 155–6, 160, 161, 226; designs on BTA, 61, 62, 64, 67–9, 110, 116; expropriation of BTA, 62–3, 64–6, 69, 103–5, 116–17, 144, 190–1, 205, 235; and Astana’s architecture, 63, 330; and oil industry, 78, 143–50, 156–7, 369n; assets in Britain, 107, 362n; ‘active measures’ against oligarchs, 115; use of British courts, 116–17, 159–60, 190–1, 192, 196, 237, 238, 246–8, 255–6, 296–7, 394n; Sasha as enforcer for, 123–5, 198, 235, 245; Zhanaozen massacre (December 2011), 140–53, 154–5, 163, 165–8, 195, 292, 297–8, 369–70n; mansion at Kendirli, 142; visit to Zhanaozen (December 2011), 148–9, 167; Tony Blair as consultant, 154–5, 161, 163, 165, 166, 372n; Cambridge speech (July 2012), 154–5, 163–6, 168–9, 372–3n; ‘Kazakhgate’ in USA, 156–7, 160; and propaganda, 161, 196, 256, 264; Aitken’s biography of, 162, 372n; and Third Way, 163, 372n; and ENRC buyout/delisting, 210, 211–12; use of US courts, 238, 244–9, 324, 395–6n; Kazaword material, 256–7, 258, 259–60, 264–5, 292; and Fraenkel’s Dual State, 268; Ablyazov’s opposition from France, 295–6; steps down from presidency (March 2019), 295, 409n; and Nicolas Sarkozy, 305–6 Nazi Germany, 26, 32; as Fraenkel’s Dual State, 37–8 Nemtsov, Boris, 34, 233–5, 236, 237, 321, 347n, 390–1n Netanyahu, Benjamin, 337 New Labour, 14, 163, 187, 372n New York: Russian mobsters in, 75–6, 77–87, 356–7n; Italian crime families, 76–7, 78–9, 83–4, 314, 338, 356–7n; Italian-Russian fuel scams, 77–9, 179, 201, 356n; criminal infiltration of Wall Street, 83–4; Bayrock Group, 84–5, 110, 126–7, 199–200, 314, 315, 357n, 362n, 366–7n; real estate market, 84–5, 87, 110, 126–7, 199–200, 314, 315; pursuit of Ablyazov in courts, 244–9, 324, 395–6n Nice (France), 205–6, 246–7, 252, 255 Nigeria, 273, 400n North Korea, 322 Northern Rock, 8, 29, 59 Novikova, Anastasiya, 113–14 Novosyolov, Sergei, 22, 342–3n, 345n Nurgaliyev, Nurlibek, 146, 147, 369n Nurkadilov, Zamanbek, 111 Obama, Barack, 274, 275, 321, 400n Obiang, Teodorin, 201 Occupy London camp, 136, 137, 369n Och, Daniel, 54, 56 ‘offshore’ system, 155, 176–7, 225–6, 240–1, 294, 387n; Swiss bankers establish, 26–7; size of, 27, 346n; and Nigel Wilkins, 28–9, 186–8, 215, 216–17, 271–2; ownership of commercial property, 29, 347n; and Fat Larry’s fuel stations, 77; and hedge funds’ money, 186–7 Ogay, Eduard, 157, 371n oil industry: Caspian Sea reserves, 10, 140–2, 156; TNK-BP joint venture, 16–23, 182, 285, 303, 342–5n; Yukos, 34, 35–6, 38–43, 64, 65; OzenMunaiGaz (OMG) labour strike, 140–53, 154–5, 163, 165–8, 195, 292, 297–8, 369–70n; American kickbacks to Nazarbayev, 156–7, 226; Mobil’s purchase of Tengiz field, 156–7; and dirty money, 201, 273, 320, 330, 338, 417n; and Equatorial Guinea, 201; and ‘Petro’ kleptocrats, 338; Chechen oil, 391n oligarchs: infiltration of City of London, 12–15, 16, 121–2, 128–31, 367n; TNK-BP joint venture, 16–23, 182, 285, 303, 342–5n; Yukos expropriation, 34, 35–6, 38–43, 64, 65; Khodorkovsky prosecution, 35–6, 38–9, 40–3, 64, 65; birth of in Yeltsin era, 35, 347n; Putin brings to heel, 35, 38–43, 65, 115; emergence of new crop loyal to Putin, 42–3; Nazarbayev’s ‘active measures’ against, 115; in Wilkins’ red boxes, 138, 330; in Ukraine, 224, 225, 289 see also the Trio and entries for individuals Olisa, Ken, 13, 210, 367n Omar, Mullah, 82 Opec, 338 Orange Revolution (2004–5), 224–5, 330 Osborne, George, 170, 187, 209, 241, 373n, 386n, 394–5n OzenMunaiGaz (OMG), 140–53, 154–5, 163, 165–8, 195, 292, 297–8, 369–70n Pacolli, Behgjet, 11–12, 330, 342n Panama, 28, 202, 315, 384–5n, 414n Panama Papers, 328, 403n, 419n Paris, 190–2; Ablyazov’s extradition case, 251–2, 255, 257–8, 260–70, 291, 297, 398–9n Parker, Judge Katharine H., 386n, 395n, 396n, 409–10n, 418n Patriot Act, US, 200 Pavlov, Alexandr (Ablyazov’s bodyguard), 191, 195, 263, 268, 291, 383n, 399n Persico, Danny, 83, 357n Petelin, Dimi, 109, 203, 205 Petelin, Gennady, 109, 205, 245, 386n Petropavlovsk (gold mining company), 394n Petrushova, Irina, 160–1, 371n Philippines, 50, 337, 350–1n Pinochet, Augusto, 50, 262, 351n, 398n platinum, 49, 56, 277, 351–2n Pluzhnikov, Igor, 330–1, 332 political power, privatisation of: and Russian capitalism, 9–12, 24, 35, 39–40, 95–6, 98–9, 100–2, 154–69, 370–3n; role of money, 24, 48, 54–7, 61–2, 73, 120, 137–9, 162–3, 183, 224–7, 296–7; and Yeltsin, 39–40, 100–2; in Mugabe’s Zimbabwe, 48, 52–4, 55–7, 73, 185–6, 277, 306–7, 336; in the Congo, 51–3, 56, 276, 277, 279, 280, 284, 306, 307–8, 413n; and City/hedge fund finance, 54–7, 120, 121, 137–9, 185–6, 280–1, 404–5n; the Trio in Africa, 73, 135, 173, 174, 275–87, 306, 308–9; Nazarbayev regime, 111–16, 154–69, 210–13, 236, 237–8, 291–8, 370–3n; use of Western courts, 116–17, 159–60, 190–1, 192, 196, 237, 238, 246–8, 255–6, 296–7, 394n; and consultancy work, 162–3, 211–12, 372n; ‘presumption of regularity’ concept, 195–6, 322; Ukraine as frontier/membrane, 221–2, 224–7, 316–17; Nemtsov’s stand against, 234–5, 236–7; enormous success of perpetrators, 275; truth as secondary, 295; and emergence of Trump, 312–16; end of Cold War as trigger, 314–16; by Trump administration, 316–24, 418–19n; global alliance of kleptocrats, 319–22, 324, 336, 416–17n, 423n; and selective justice, 327–9; and Panama Papers, 328; Soares de Oliveira’s use of term, 373n see also entries for individual kleptocrats and countries Portland (PR consultancy), 117, 196, 253, 383n Potanin, Vladimir, 35 precious stones, 9–10, 49 Presti, Karim, 353–4n, 353n Prince, Erik, 106, 274, 400n Private Eye, 136, 342n, 352n, 354n Proceeds of Crime Act (2002), 71 Prokhorov, Vadim, 390n, 391n Prosper, Pierre, 307, 413n prostitutes, use of, 15, 122 pump-and-dump schemes, 75, 81, 82, 83, 85–6, 204, 313 Putin, Vladimir, 342n; and Peter Sahlas, 33, 34; takes power (2000), 34; and Semyon Mogilevich, 184, 382n; and VEB, 225–6; golden presidential toilet, 233, 237, 390–1n Putin regime: arrest of Mogilevich (2008), 15–16, 182–3, 381n; as gangster state, 16, 182–4; FSB as central cog, 18–23; and Litvinenko murder, 18, 20–1, 344n, 382n; Khodorkovsky prosecution, 34, 35–6, 38–9, 40–3, 64, 65; and ‘the utility of legitimacy’, 38–9; and gas supply to Europe, 181–2, 222, 224, 289, 381n; conquest of eastern Ukraine (2014), 221, 233, 237, 311, 388n; economic base in eastern Ukraine, 225–7, 316; annexation of Crimea (2015), 242 PwC, 13, 65, 231, 342n Qatar, 330 Raffe, Victoria, 386n Raiffeisen (Austrian bank), 181, 182 Rakishev, Kenes, 235–6, 237, 238, 244, 324, 392n, 393n, 418n Rappo, Patrick, 173–4 Ratzel, Max-Peter, 365n Rautenbach, Billy, 350n; background of, 48–9; and the Crocodile, 49, 51, 53, 306–7; and Congolese mining rights, 51–3, 56, 280–3; at Elephant Hills (July 2000), 52–3, 306, 308, 351n; deal funding Mugabe’s 2008 election violence, 56–7, 73, 277, 336, 351–2n; resolves legal problems in South Africa, 72–3, 355n; and ENRC in Africa, 73, 276–8, 284, 285, 406n; sanctioned as Mugabe crony, 277, 278, 401n; sanctions on lifted, 306–7; as prosperous white farmer in Zimbabwe, 306 Raytheon (military contractor), 318 real estate: and money laundering, 76, 200–1, 202–5, 236, 245–7, 305, 314–16, 324–5, 384–5n, 384n, 392–3n; Bayrock Group, 84–5, 110, 126–7, 199–200, 314, 315, 357n, 362n, 366–7n; and Felix Sater, 84–5, 87, 110, 126, 199–200, 203–5, 313–14, 315, 324–5, 385–6n, 414–15n; and Iliyas Khrapunov, 199–200, 203–5, 245, 246–7, 314, 324, 385–6n; and peso scams, 202, 315, 384n; and Grenfell survivors in Kensington, 289, 408n; Sater and Trump, 313–14, 315, 324–5, 414–15n reality television, 312–13, 314 Red October steel mill (Ukraine), 223–4 Reed Smith (City lawyers), 257–8, 397n, 398n, 410n Reuben brothers, 132–3, 159, 175, 368n, 376n Rich, Marc, 51–2 Rights and Accountability in Development (Raid), 352n, 401–2n Risk Analysis (private intelligence agency), 29, 332–3, 346n Ritual Service (undertakers), 379n RJI Capital, 259, 362n, 398n Robertson, Patrick, 261–5, 294, 398n, 399n Rome, 191–4, 195–7, 198, 251, 252–5, 291–2, 397n Rosneft (Russian state oil company), 43 RosUkrEnergo, 181–2, 226, 331, 374–5n, 381n Rothschild, 13 Royal Bank of Scotland (RBS), 62, 117, 177, 365n Rozenbaum, Vadim, 361n Rubio Holdings, 403n Rudny (Kazakh iron mine), 94–5, 128–31, 133–5 Russia (post-Soviet): Peter Sahlas in, 33–4, 69; Yeltsin’s reforms, 33–5, 100, 102, 361n; civil legal code for post-communist era, 33, 34, 36; and Fraenkel’s Dual State, 38–9; corruption under Yeltsin, 100–2, 330, 361n, 420n; ‘aluminium wars’, 132; Moscow police and Seva, 177–8, 180; conquest of eastern Ukraine (2014), 221, 233, 237, 311, 388n; Nemtsov murder (2015), 233–5, 237, 321, 390–1n; annexation of Crimea (2015), 242; demands Ablyazov’s extradition, 255, 265; Trump’s connections to, 303, 310, 311, 315, 325–6, 414–15n; interference in US election (2016), 310, 311; global alliance of kleptocrats, 319; interference in British politics, 337; as Ur of Kleptopia, 337 see also capitalism, Russian; Putin regime Rutskoi, Aleksandr, 100–2, 174, 361n Rwanda, 51, 328 Rybolovlev, Dmitry, 315 Sahlas, Peter, 347n, 354n; background of, 30–1; and Russian legal system, 30, 33, 34, 36, 38–9, 40, 42, 43; in Czechoslovakia (1990), 31–2; in Soviet Union (1991), 32–3; moves to Russia (1996), 33–4; and Fraenkel’s Dual State, 36, 38–9, 348n; and Yukos defence team, 36, 38–43, 64, 65, 190; and BTA case, 64–6, 69, 103–5, 160, 190–1; Tower 42 meeting with Ablyazov, 65–9, 103, 116, 255, 260; and role of psychology in history, 103; life in Paris, 190–2; and Ablyazov kidnapping, 192–7, 251, 252–5, 263, 291–2; ‘presumption of regularity’ concept, 195–6, 322; and Ablyazov extradition case, 251–2, 255, 257–8, 260–70, 291, 297; and Kazaword material, 256–7, 258, 259–60, 264–5; threats and abuse from Patrick Robertson, 260–5, 294, 398n; ‘The Dual State Takes Hold in Russia: A Challenge for the West’, 349n Sam Pa (Chinese businessman), 336 Sants, Hector, 342n Sapir, Tamir, 314 Sarkozy, Nicolas, 266, 305–6 Sarsenbayev, Altynbek, 111, 113 Sater, Felix, 355–6n, 366–7n; background of, 74–5; pump-and-dump fraud, 74, 75, 81, 82, 84, 85–7, 204; sentencing hearing before Judge Glasser (October 2009), 74, 75, 82–7, 355n, 357n; as US intelligence agent in Russia, 81–2; as FBI informant, 82–4, 86, 87, 199, 249, 313; New York Times reveals criminal record, 84–5, 199–200, 357n; and real estate, 84–5, 87, 110, 126, 199–200, 313–14, 315, 324–5, 414–15n; real estate project with Iliyas, 110, 198, 199–200, 203–5, 245, 246–7, 314, 324, 385–6n; and Ablyazov kidnapping, 198, 253, 383n; turns against Iliyas and Ablyazov, 204–5, 238, 244–9, 324, 395–6n; pursuit of Ablyazov in US courts, 244–9, 324, 395–6n; and Donald J.


pages: 381 words: 101,559

Currency Wars: The Making of the Next Gobal Crisis by James Rickards

Asian financial crisis, bank run, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, buy and hold, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, high net worth, income inequality, interest rate derivative, John Meriwether, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, private sector deleveraging, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, sovereign wealth fund, special drawing rights, special economic zone, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, War on Poverty, Washington Consensus, zero-sum game

Leading English banks had made leveraged investments in illiquid assets funded with short-term liabilities, exactly the type of investing that destroyed Lehman Brothers in 2008. As those liabilities came due, foreign creditors converted their sterling claims into gold that soon left England headed for the United States or France or some other gold power not yet feeling the full impact of the crisis. With the outflow of gold becoming acute and the pressures of the bank run threatening to destroy major banks in the City of London, England went off the gold standard on September 21, 1931. Almost immediately sterling fell sharply against the dollar and continued dropping, falling 30 percent in a matter of months. Many other countries, including Japan, the Scandinavian nations and members of the British Commonwealth, also left the gold standard and received the short-run benefits of devaluation. These benefits worked to the disadvantage of the French franc and the currencies of the other gold bloc nations, including Belgium, Luxembourg, the Netherlands and Italy, which remained on the gold exchange standard.

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation. Hoboken: Wiley, 2007. Braudel, Fernand. The Structures of Everyday Life: Civilization and Capitalism, 15th–18th Century, Volume 1. New York: Harper and Row, 1979. ———. The Wheels of Commerce: Civilization and Capitalism, 15th–18th Century, Volume 2. New York: Harper and Row, 1979. Brown, Cynthia Stokes. Big History: From the Big Bang to the Present. New York: New Press, 2007. Brown, Stephen R. Merchant Kings: When Companies Ruled the World, 1600–1900. New York: St. Martin’s, 2009. Bruner, Robert F., and Sean D. Carr. The Panic of 1907: Lessons Learned from the Market’s Perfect Storm. Hoboken: Wiley, 2007. Buchanan, Mark. Ubiquity: The Science of History, or Why the World Is Simpler Than We Think. New York: Crown, 2001. Capie, Forrest.

We also received “Baseline Scenario” briefing books, which described the near future economic world of 2012, in which we would be playing the game, and a “Mechanics” book, which was basically a rulebook. I recalled how my brothers and I used to fight over the rules in Risk as kids and often had to dig the Parker Brothers rulebook out of the game box to settle disputes. Now we had a war game rulebook, but this would go quite differently. I wanted to break as many rules as I could to help the Pentagon understand how capital markets really work in an age of greed, deregulation and bad intent. Wall Street was like the Wild West in the best of times, but with globalization and too-big-to-fail government backing, it was now even more out of control. After a few hours of instruction, orientation and snap training on the groupware, we broke out to our separate capitals to work on move one. This broadly involved a long-term trade agreement between Russia and Japan that would reduce the availability of Russian oil and natural gas to the rest of the world.


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The Money Machine: How the City Works by Philip Coggan

activist fund / activist shareholder / activist investor, algorithmic trading, asset-backed security, Bernie Madoff, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, call centre, capital controls, carried interest, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, disintermediation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, endowment effect, financial deregulation, financial independence, floating exchange rates, Hyman Minsky, index fund, intangible asset, interest rate swap, Isaac Newton, joint-stock company, labour market flexibility, large denomination, London Interbank Offered Rate, Long Term Capital Management, merger arbitrage, money market fund, moral hazard, mortgage debt, negative equity, Nick Leeson, Northern Rock, pattern recognition, purchasing power parity, quantitative easing, reserve currency, Right to Buy, Ronald Reagan, shareholder value, South Sea Bubble, sovereign wealth fund, technology bubble, time value of money, too big to fail, tulip mania, Washington Consensus, yield curve, zero-coupon bond

The more fully people understand these principles, the more they will be able and willing to criticize, and perhaps even participate in, the workings of the financial system. Like all areas of public life, it needs criticism to ensure its efficiency. Even those who do not own shares should care about how the City performs. It is one of the UK’s biggest industries and a vital overseas earner in areas such as insurance and fund management. THE CITY First of all, what is the role of the UK financial system, and in particular of the City of London, which is at its heart? Its primary function is to put people who want to lend (invest) in touch with people who want to borrow. A simple example of this role is that of the building societies. They collect the small savings of individuals and lend them to house buyers who want mortgages. Why do the savers not just lend directly to borrowers, without the intervention of financial institutions?

The money could be lent (and interest earned) in the knowledge that the day-to-day requirements of depositors could still easily be covered (see Chapter 2). The Italian Influence Among the earliest bankers were goldsmiths and silversmiths from the Lombardy region of Italy who were granted land in London by King Edward I. One of the sites they received – Lombard Street – is at the heart of the modern City of London. Back in Italy, the money lenders had conducted their business from wooden benches in market places. The Italian word for bench, banco, was corrupted by the English into ‘bank’. The Italians were also responsible for introducing the symbols that were synonymous with British money until 1971 – £, s. and d., or lire, solidi and denarii. It is a nice irony that those who wear the £ symbol as a signal of opposition to Europe are in fact displaying an Italian figure.

Partington, Applied Economics in Banking and Finance, 3rd edn (Oxford University Press, 1984) William Clarke, Inside the City, rev. edn (Allen & Unwin, 1983) C. J. J. Clay and B. S. Wheble, Modern Merchant Banking, 2nd edn, rev. by the Hon. L. H. L. Cohen (Woodhead-Faulkner, 1983) Jerry Coakley and Laurence Harris, The City of Capital (Basil Blackwell, 1985) Brinley Davies, Business Finance and the City of London, 2nd edn (Heinemann, 1979) Peter Donaldson, Guide to the British Economy, 4th edn (Penguin, 1976) ——, 10 × Economics (Penguin, 1982) Paul Erdman, Paul Erdman’s Money Guide (Sphere, 1985) Paul Ferris, Gentlemen of Fortune (Weidenfeld & Nicolson, 1984) Frederick G. Fisher III, The Eurodollar Bond Market (Euromoney, 1979) ——, International Bonds (Euromoney, 1981) J. K. Galbraith, Money: Whence it Came, Where it Went (Penguin, 1976) Bernard Gray, Investors Chronicle Beginners Guide to Investment, 2nd edn (Century, 1993) Tim Handle, The Pocket Banker (Basil Blackwell/Economist, 1985) Godfrey Hodgson, Lloyd’s of London: A Reputation at Risk (Penguin, 1986) R.


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London: The Autobiography by Jon E. Lewis

affirmative action, Big bang: deregulation of the City of London, Brixton riot, John Snow's cholera map, side project, strikebreaker, Winter of Discontent

During the twentieth century the City’s fortunes sank in line with the contraction of British trade. However, courtesy of the Big Bang of 1987 the City was able to establish highly-competitive, multipurpose financial conglomerates that used electronic dealing technology instead of the old scrummage on the Stock Market trading floor. By the late 1990s the City was processing over $300 billion of exchange per day. The City had become the globe’s capital for processing capital. Like the City burghers of old, the City players of the twenty-first century celebrated their wealth and power in buildings. Arisen from the Wreckage: 30 St Mary Axe, December 2003 Jonathan Glancy THE DAY I visited 30 St Mary Axe, the City of London was smothered in a Dickensian mist. Norman Foster’s 180m tour de force was all but invisible.

A copy of the British Library Cataloguing in Publication data is available from the British Library UK ISBN: 978-1-84529-942-2 eISBN: 978-1-78033-750-0 1 3 5 7 9 10 8 6 4 2 First published in the United States in 2009 by Running Press Book Publishers All rights reserved under the Pan-American and International Copyright Conventions No part of this work may be produced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage and retrieval system, without permission in writing from the publisher. 9 8 7 6 5 4 3 2 1 Digit on the right indicates the number of this printing US Library of Congress Control Number: 2009920964 US ISBN: 978-0-7624-3734-4 Running Press Book Publishers 2300 Chestnut Street Philadelphia, PA 19103-4371 www.runningpress.com Printed and bound in the EU For Penny, a London girl Contents List of Illustrations Foreword Boudicca Sacks Londinium, AD 60 TACITUS The Romans in London: Graffiti VARIOUS Londoners Reject Christianity, 616 THE VENERABLE BEDE Viking Raids, 842–1009 THE ANGLO-SAXON CHRONICLE London Bridge is Pulled Down by King Olaf, c. 1014 SNORRI STURLUSON Edward the Confessor Builds Westminster Abbey, 1060–5 A MONK OF ST BERTIN’S ABBEY The Coronation of William the Conqueror, Christmas Day, 1066 ORDERIC VITALIS The Charter of Henry I in Favour of the Citizens of London, Michaelmas 1130–August 1133 HENRY I A Description of the City of London, c. 1173 WILLIAM FITZ STEPHEN Building Regulations, 1189 THE LONDON ASSIZES Tax Riot, 1194 ROGER OF WENDOVER The Thames Floods, 1241 MATTHEW PARIS Misadventures in Childhood, 1301–37 CALENDAR OF THE CORONERS’ ROLLS Street Life, 1301–80 VARIOUS Trick of the Trade: A Fraudulent Baker, 1327 THE CITY OF LONDON LETTER-BOOK The Ordinances of the Spurriers, 1346 ANONYMOUS City of the Dead: The Black Death, 1348 ROBERT OF AVESBURY Flagellants, Michaelmas 1349 ROBERT OF AVESBURY Expulsion of a Leper, 1372 THE CITY OF LONDON LETTER-BOOK An Inventory of the Goods in a Fishmonger’s City House, 1373 CALENDAR OF PLEA AND MEMORANDA ROLLS The Peasants’ Revolt Comes to London, 1381 SIR JOHN FROISSART Richard II Quarrels with the City of London, 1392 THE MONK OF WESTMINSTER London Lickpenny, c. 1410 ANONYMOUS Henry V’s Victory March After Agincourt, 23 November 1415 ANONYMOUS Richard Whittington is Elected Mayor for the Third Time, 13 October 1419 THE CITY OF LONDON LETTER-BOOK Public Nuisances, 1422 THE GENERAL COURT OF THE MAYOR OF THE CITY OF LONDON Wars of the Roses: The Beginning of Strife, 1454 JOHN STODELY The Dignity of the Mayor of London, 1464 ANONYMOUS The Joust Between Lord Scales and the Bastard of Burgoyne, 1467 EDWARD HALL The Sweating Sickness, 1485 EDWARD HALL Tudor London: A Portrait, 1497 ANDREAS FRANCISCUS Evil May Day, 1 May 1517 THE CHRONICLE OF THE GREY FRIARS The Beheading of Sir Thomas More, 1535 WILLIAM ROPER Protestant Revolution: Edward VI Suppresses Popery in London, 1547 THE CHRONICLE OF THE GREY FRIARS Queen Mary Seizes the Crown, 1553 HENRY MACHYN Mary Persecutes the Protestants: The Burning of Bradford and Leaf at Smithfield, 1555 JOHN FOXE Elizabethan London: City Life, 1564–99 VARIOUS Elizabethan London: The Oath of Every Freeman, 1580 ANONYMOUS Riots, Puritans and Shakespeare: Theatre-going, 1584–1613 WILLIAM FLEETWOOD, THE LORD MAYOR AND ALDERMEN, AND THOMAS PLATTER Queen Elizabeth at Greenwich, c. 1596 PAUL HENTZNER The Torturing of a Jesuit Priest in the Tower of London, April 1597 FATHER JOHN GERARD The Diary of a Tourist, 5 July 1598 BARON WALDSTEIN The Gunpowder Plot, 5 November 1605 SIR EDWARD HOBY The Attempted Arrest of the Five Members, 4 January 1642 JOHN RUSHWORTH The Battle of Newbury: Sergeant Henry Foster in Action, 20 September 1643 SERGEANT HENRY FOSTER, RED REGIMENT OF THE TRAINED BANDS OF THE CITY OF LONDON The Execution of Charles I, 30 January 1649 PHILIP HENRY Ranters, 1651 JOHN TAYLOR A Whale in the Thames, 3 June 1658 JOHN EVELYN The Restoration: The Arrival of Charles II in London, 29 May 1660 ANONYMOUS Notices for a Lost Dog, 21–8 June 1660 CHARLES II Journal of the Plague Year, 1665 SAMUEL PEPYS The Great Fire, 2–7 September 1666 JOHN EVELYN The Dutch in the Thames, June 1667 JOHN EVELYN A Visit to a Gaming House, 1 January 1668 SAMUEL PEPYS Highway Robbery, 11 May 1674 JOHN VERNEY London Arisen from the Ashes: Wren Rebuilds St Paul’s Cathedral, 1675–1710 DANIEL DEFOE The Great Frost, 1683–4 JOHN EVELYN Cockfighting, 18 June 1710 ZACHARIAS VON UFFENBACH Making Hay in Chelsea, 19 May 1711 JONATHAN SWIFT The Mohock Club, March 1712 LADY STRAFFORD Handel’s Water Music, 17 July 1717 DAILY COURANT Coffee-houses, c. 1722–5 JOHN MACKY AND CÉSAR DE SAUSSURE John Wesley Stoned, 12 September 1742 JOHN WESLEY A Hanging at Tyburn, c. 1745 SAMUEL RICHARDSON Earthquake, 11 March 1750 HORACE WALPOLE Gin Lane, 1751 WILLIAM HOGARTH Man About Town: A Rake’s Progress, 25 November 1762–4 June 1763 JAMES BOSWELL Wilkes and the Mob, 1768 HORACE WALPOLE The Lord Mayor’s Banquet, 1768 WILLIAM HICKEY The Gordon Riots, 6 June 1780 IGNATIUS SANCHO Ranelagh Pleasure Gardens, 12 June 1782 KARL PHILIPP MORITZ London Hospitals, 1788 JOHN HOWARD ‘The Rage for Building’: The Growth of London, 8 June 1791 HORACE WALPOLE London: A Georgian Poet’s View, 1794 WILLIAM BLAKE Mr Whitbread’s Brewery, c. 1800 JOHANNA SCHOPENHAUER Shooting Under London Bridge in a Boat, 12 July 1810 LOUIS SIMOND The Season: Jane Austen’s Party, April 1811 JANE AUSTEN Death of a Climbing Boy, 29 March 1813 THE PARLIAMENTARY COMMITTEE ON CLIMBING BOYS Mrs Fry at Newgate, March 1822 MARIA EDGEWORTH ‘Peelers’: The Formation of the Metropolitan Police, October 1829 SIR ROBERT PEEL William IV Rambles the Streets, 19 July 1830 CHARLE S GREVILLE King Cholera, 1832 CHARLES GREVILLE The Opening of the London to Deptford Railway, 14 December 1837 JOHN O’LONDON Queen Victoria at Her Coronation, 28 June 1838 QUEEN VICTORIA The Condition of the Working Class in London, c. 1844 FRIEDRICH ENGELS Chartist Demonstration, 10 April 1848 LORD JOHN RUSSELL Victorian London: Street Life, c. 1850 HENRY MAYHEW A Visit to the Great Exhibition, 7 June 1851 CHARLOTTE BRONTE High Society: A Fancy-dress Ball at Buckingham Palace, 1851 ANNE THACKERAY RITCHIE Karl Marx at Home, 1852 KARL MARX Some London Wonders: Gaslights, Penny Gaffs and Omnibuses, 1853 MAX SCHLESINGER Fog, 1853 CHARLES DICKENS The Great Stink, Summer 1858 CHARLES DICKENS AND GEORGE GODWIN Nine a.m.: Clerks on Their Way to Work, 1858 GEORGE AUGUSTUS SALA White Slavery: Maids and Match Girls, 1860–83 HANNAH CULLWICK AND JAMES GREENWOOD A Day at the Races: The Derby, Epsom, 28 May 1861 HIPPOLYTE TAINE Tothill Fields, 1861 HENRY MAYHEW AND JOHN BINNY Prostitutes on the Haymarket, 1862 FYODOR DOSTOEVSKY Into Hades: The Metropolitan Underground Railway Commences Service, 9 January 1863 THE TIMES Murder on the North London Railway, July 1864 ILLUSTRATED LONDON NEWS The Founding of the International Working Men’s Association, Covent Garden, 28 September 1865 KARL MARX William Morris at Home, 10 March 1869 HENRY JAMES A Socialist March Through the West End, Autumn 1886 H.M.

The GLC, in truth, had made itself an easy target, being a by-word for profligacy and ‘loony Leftism’ – the nadir being reached when the head of an infant school in Hackney banned her pupils from watching Romeo and Juliet because it was ‘blatantly heterosexual’. Whatever the reason, London was now the only capital in the West to not have its own government. The GLC went out with a bang, holding a massive firework party outside County Hall. Across in the City, there was a ‘Big Bang’ of a different sort. On 27 October the City was deregulated. No longer was the City the site of small gentlemanly firms operating eons-old price-fixing cartels, it was an international casino where the game was stocks and shares. To prepare and run the deregulated system banks and brokerage firms paid bright young things handsome wages. So was born the ‘Yuppie’, the Young Urban Professional. A favourite haunt of the Yuppie was the East End, then being redeveloped by the London Docklands Development Corporation into chichi housing and spangly glass office blocks.


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What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems by Linda Yueh

"Robert Solow", 3D printing, additive man