Austerity Britain, 1945–51 (68 page)

A handful of snippets offer some anecdotal support. A ‘nightmare uniformity of ugliness’, for instance, was all that the popular, middlebrow travel writer S.P.B. Mais could find to say in 1948 about the drive from Stockport to Bolton – an ugliness all the more marked ‘after the gracious meadows and lawns of the south country’. For Kenneth Preston, devoting his life to teaching English at Keighley Grammar School, the rewards for entrepreneurial activity were out of all proportion to their true worth. ‘He was telling me about an insurance man who is making £2,000 a year and he is a man who cannot make his subject agree with his verb,’ he noted somewhat resentfully in July 1949 after a conversation with a friend. ‘He told me of a man who went round buying up derelict mills and sold one the other day for £7,000 for which he gave a few hundred a few years ago . . . Of course, I know I could not do this sort of thing but why should people be able to make such easy money?’ In May 1951 the Oxford undergraduate and budding writer V. S. Naipaul contributed an article, ‘When Morris Came to Oxford’, to
Isis
. The general thrust of the piece was that gown and town (in the form of the Morris plant at Cowley) had learnt to live with each other, but it was clear that there were still some lingering resentments and touchiness. ‘If the University people had known that we were going to expand so much,’ a car worker told Naipaul, ‘they would have done their best to get rid of us.’ And when at about this time a young industrialist called Quinton Hazell, managing director of a motor-components company that bore his name and in the process of rapidly becoming Colwyn Bay’s biggest employer, applied to join an exclusive professional club there, he found himself being brusquely rejected – on the grounds that he was ‘in trade’.
^5.

High taxation; Victorian-style private enterprise stigmatised by its inter-war association with mass unemployment; large-scale concerns (public like the BBC or the Bank of England, private like ICI or Shell or the clearing banks) offering jobs for life and career paths predetermined to almost the smallest detail; the state fresh from its finest hour and now offering the opportunity to transform society – altogether, it is instinctively plausible that the ‘1945’ moment represented a nadir of capitalism’s animal spirits. Such a view holds almost irrespective of the extent to which one buys into Wiener’s much-contested cultural critique. But in the end, an economy is only as good as its main functioning parts – and, in the post-war British economy, each suffered from crucial defects.

The most visible aspect of the financial sector was the high-street clearing banks, for half a century after the First World War dominated by the ‘Big Five’ of Barclays, Lloyds, Midland, National Provincial and Westminster. During most of this period, they operated more or less as a cartel, showing little appetite either for innovation or for new business – even though as late as the mid-1950s only about a third of the working population had their own bank accounts. Britain was a pre-plastic, cash society; deposit banking was a world run by the middle class for the middle class; and the lack of competition, including no obligation to publish profits, was hardly a stimulus to change. ‘It was like driving a powerful car at twenty miles an hour’ was how the gifted Oliver Franks (academic, civil servant and diplomat) recalled his chairmanship of Lloyds Bank that decade. ‘The banks were anaesthetised – it was a kind of dream life.’

Most bankers, though, had no doubts about their linchpin role in what was probably the most stable financial system in the Western world. ‘We should be proud of the universal respect our profession commands,’ Franks’s predecessor, Lord Balfour of Burleigh, told the Institute of Bankers in 1950. ‘This is due not only to the faithfulness with which our members perform their responsible duties. It is also a tribute to the manner in which they are meeting the special difficulties of the times, and continuing to maintain a high standard of personal integrity amid the maze of regulations which complicate everyday affairs.’ George Mainwaring, that pillar-of-the-community bank manager at Walmington-on-Sea by now approaching retirement, would no doubt have nodded sagely.

Balfour was speaking in the City of London, the very heart of the financial system. It was still by mid-century a club-like Square Mile – a village. Here thousands of small, often specialist firms did much the same work in much the same way that they had been doing 50 or 100 years earlier; connection (family/school/social/sporting) and a personable manner enjoyed a higher premium than more meritocratic qualities; trust (‘My word is my bond’) lubricated and made possible the whole undeniably impressive machine; and the village policeman (aka the Governor the Bank of England) had only to raise his eyebrows for his wishes to be obeyed. It was a village, in its higher echelons, of middle-aged or elderly men who unambiguously saw themselves as gentlemen performing gentlemanly tasks and adhering to a gentlemanly code. ‘Shoes have laces’, ‘motor cars are black’, ‘jelly is not officer food’: such were the timeless aphorisms of Cedric Barnett, the austere, dignified, top-hatted partner in charge of gilts (British government securities) at the leading stockbroking firm Cazenove’s.

Deeply suspicious of any face that did not fit, it could be an intensely difficult village for an outsider – however able – to penetrate. Perhaps the most telling case involved Denis Weaver of the atypical, deliberately non-nepotistic stockbroking firm Phillips & Drew.
^6.
A trained actuary who by the late 1940s was expected to become the next senior partner, he hit an immovable roadblock when the Stock Exchange Council refused to countenance his membership. His crime was that he was a Quaker who during the war had registered as a conscientious objector. Nothing changed during the 1950s (with Weaver concentrating on becoming the British pioneer of investment analysis), and by the time the authorities eventually relented in 1960 his chance of becoming senior partner had gone. The fact that the Stock Exchange’s chairman through the 1950s, the ultra-respectable, establishment-minded Sir John Braithwaite, himself came from a Quaker family background only added salt to the wound.

Between the wars, the City’s traditionally rather remote relationship with British industry had become significantly closer: partly because much of its own international business had dried up, partly through its government-encouraged financial-midwifery role (especially on the part of the Bank of England) in response to the serious structural problems of steel and cotton. Indeed, by mid-century it almost seemed a consummated marriage. Industrials, as they were called, represented a key section of the stock market, giving it much of its daily tone (mainly through the FT 30-Share Index); the new issue market retained a strongly domestic orientation; and the newly established Industrial and Commercial Finance Corporation (subsequently known as 3i), with the clearing banks as its main shareholders, was the City’s very deliberate riposte to criticism, especially from the left, that there was inadequate capital-raising provision for medium-sized companies.

Overall, the financial system seems to have played a positive if somewhat flawed role in this post-war phase of industrial finance. The commercial banks could be relied on to give rollover loans to well-established clients but tended to be less accommodating – and less willing to make a fact-finding effort – if the industrial supplicant was newer or more innovative; in the domestic capital market, there was often a similar lack of diligence on the part of the sponsoring merchant banks, though here the result was excessive liberality rather than restrictiveness; the ICFC was regarded by its shareholders as at best a regrettable necessity; and in general there was little sign of any change in the endemic condition, so eloquently lamented by Keynes, known as City short-termism. Yet the divide that persisted was less economic than social and cultural – and indeed political, given the not unjustified suspicion of leading industrialists that their City counterparts found it appreciably easier than they did to get close to the decision-makers in Westminster and Whitehall. Ultimately, the City–industry relationship was one of business rather than of the heart – a truth appreciated by Frank Perkins, a Peterborough-based manufacturer of diesel engines. Compelled in 1951 to decide between two of the City’s historic merchant banks, Barings and Morgan Grenfell, as his issuing house, he chose Barings on the very sensible grounds that it had fewer peers as directors.
^7.

Like Rothschilds, like Schroders, like Kleinworts, like other august City names, those houses had enjoyed their finest, most prosperous hour during the long nineteenth century, when London had been the world’s undisputed leading international financial centre. The guns of August 1914 had changed all that, leading directly to New York’s almost immediate ascendancy. Could London ever hope to restore its position and become once again an economic powerhouse in its own right? The prospects by the early 1950s were poor: exchange controls were firmly in place; sterling was prone to sudden collapses of international confidence; London’s classic role as an exporter of capital barely functioned; and the City’s international markets (such as the futures markets in commodities) were stagnant. Nevertheless, amid widespread sluggishness and deeply inbred conservatism, there were two outstanding figures who
did
have some sort of vision of how London might return to its past glories.

One was Siegmund Warburg, a cerebral, fiercely ambitious German Jew with
haute banque
in his blood, who had fled from Hitler in the 1930s and who in 1946 launched upon the City establishment his own merchant bank, S. G. Warburg & Co. He was no great admirer of the natives. ‘One of the dominant attitudes in the City is tolerance towards mediocrity,’ he noted in the mid-1950s, adding that ‘most of the important people’ were ‘so anxious to avoid any unpleasantness that they will knowingly make blunders, with the sole aim of sparing themselves any conflict’. He was especially unimpressed by the English habit of meeting any prospective difficulties with the stock phrase ‘Let’s cross that bridge when we come to it’ – and he would contemptuously call such people ‘bridge-crossers’. Warburg did not know precisely how London was going to escape from being permanently condemned to an existence as a rather insular, largely domestic financial centre, but he did know that somehow it had to be done, preferably with his own merchant bank in the vanguard.

The other person with a visionary streak was George Bolton, a talented, restless banker who had come up on the Bank of England’s international side but lacked the social poise and indeed breeding of his main rival Cameron (‘Kim’) Cobbold, the latter becoming Governor in 1949. ‘A pleasant Etonian’ was how Raymond Streat the next year described the City’s new head. ‘Able and adequate, but not tremendous.’ Soon afterwards, Hugh Gaitskell was less polite: ‘I must say that I have a very poor opinion of him – he is simply not a very intelligent man.’
^8.
In fact it was easy to underestimate Cobbold, who though certainly no intellectual was a pretty capable operator and had the great gubernatorial virtue of not getting flustered by events. But he was not (and would not have wanted to be) a man for the really big, demanding, risk-taking picture. As for Bolton, bitterly disappointed not to get the top job, he would bide his time and wait for London’s circumstances to become more propitious.

Where Bolton, Cobbold and any number of practical City men would have instinctively agreed was about the general uselessness of politicians – of whichever party, though naturally with Labour politicians viewed as dangerous as well as hopeless. They might have relished Correlli Barnett’s scathing verdict half a century later on the Labour Cabinet of 1945. Thirteen out of 20 were ‘amateurs without direct experience in industry’, with all but one of the other seven being trade unionists; of the seven members belonging to the ‘upper-middle-class progressive Establishment’, none had ‘ever studied anything so rudely vocational as, say, engineering’, with only one having ‘ever stooped so low as to work in a factory’; Attlee himself ‘lacked any direct experience of industry’ and, with his ‘deeply conventional and matter-of-fact mind’ was ‘happier in the efficient transaction of current business than in thinking strategically about Britain’s long-term future, industrial or otherwise’. All in all, in Britain’s unexpectedly harsh post-war circumstances, these 20 Labour politicians ‘found themselves in a plight to which a lifetime’s assumptions were quite inappropriate, for instead of redistributing wealth they were faced with the urgent and immensely more difficult task of creating it’.