The spivvery of the City afflicted the political left as severely as its blind optimism. Early on in the Labour government, I had an argument with one of Robin Cook’s aides about a project I thought a waste of public money. I cannot remember the details but I cannot forget his incredulity at meeting an apparent leftist who worried about value for money for taxpayers. The left allowed its supporters to condemn businesses that exploited the vulnerable. In 2006, Farepak, a hamper company that collected monthly payments from humble families saving for a Christmas treat, collapsed. The left knew instinctively that it was wrong for its capitalists to run off with other people’s money. They did not need to have it explained to them. They felt it in their bones. When employers underpaid their workers, the left again had no trouble in condemning them. But when the state took taxes on pain of imprisonment and then threw them away, the left treated other people’s money as casually as a Lehman Brothers dealer. So accepting of profligacy and confident of future growth did Gordon Brown become, he saved nothing during the boom years to help Britain through a recession. When the crisis came, his country was naked before the storm.
And so in an unprecedented manner, and with not wholly bad intentions, the left in power went along with a lawless market, and only after it went down did it show the boldness of true social democrats by taking over much of the banking system. It left it too late because while the bubble lasted it did not want to think what would happen if the City fell apart. Failure was an unimaginable eventuality because, in truth, no one on the left or right had the faintest idea how else a country in which agriculture formed a tiny part of the economy and manufacturing industry had withered could make a living. The political left might have tightened the regulation of the banks and the City, but the financiers did not seem to be joking when they said that they would respond by emigrating and leaving the economy in the lurch. It might have given the Bank of England the authority to raise interest rates to stop the growth of debt and the rise in house price inflation, but the economic consequences would have seemed too severe to contemplate. By 2007, the only sectors of the economy that were booming were retail and leisure, funded by consumer debt, financial services, dedicated to getting consumers further into debt, housing, bought with yet more debt, and state spending, based on levels of government debt which made borrowers from Northern Rock seem like paragons of responsibility. If they brought down the debt economy, what else could they put in its place?
By the end, Labour politicians were boxed in. Even if they had realised the danger Britain was in—and there is no evidence that they did—the price of changing course would have struck them as unacceptably high. They couldn’t challenge the status quo, until the status quo changed and challenged them.
Politicians and pundits are already providing many reasons for England’s crash, and there is merit in blaming the Bush administration, Gordon Brown’s catastrophic complacency and global financial forces beyond any government’s control. Yet too few commentators could say why the British left’s recession looked like being worse than recessions in comparable developed countries.
The best answer is also the simplest: England crashed because England did not have a Plan B.
THE LIBERAL INTELLIGENTSIA that dominated Britain’s cultural life as completely as Labour politicians dominated its government, might have reminded the politicians of the need to stick to leftish principles. But, and here I come to the second theme of this book, liberal England’s dereliction of duty surpassed that of its political leaders. The roots of its recklessness are to be found in another unprecedented feature of the 2008 crash.
Previous stock market crises occurred in times of peace. The South Sea Bubble began four years after the end of England’s long war against Louis XIV’s France in 1715. The railway and the canal manias flourished in the Pax Britannica after Waterloo. The destruction of Wall Street shares in 1929 came a decade after the end of the First World War, while the Japanese bubble peaked once the cold war was over.
Peace breeds booms. Politicians grow lazy and no longer feel the need to stop speculation before it imperils the national interest. Their citizens, meanwhile, have nothing to distract them from getting and spending.
The crash of 2008 broke the pattern. Britain and America were at war in Afghanistan and Iraq, and had been for years. For if the chaos in the markets represented the end of the liberal economic dreams of the era of globalisation, a dark shift in world politics had dashed liberal political hopes long before.
When the Berlin Wall fell in 1989, it was possible to believe that Immanuel Kant’s dream of enlightened nations living in ‘perpetual peace’ was at last being realised. Liberalism in the form of democracy, open government, free markets, common security and respect for human rights seemed the best and only way for societies to grow and prosper. Francis Fukuyama proposed that history was over, and although his many critics mocked and misunderstood him, he was making what seemed an unanswerable argument. Certainly, if a gang of totalitarian fanatics in Afghanistan wanted to order their territory according to the barbaric principles of medieval religion, it could. Fukuyama was not saying that every society had to be liberal; simply that if societies wished to be successful, liberalism was the only model on offer.
Twenty years on, his confidence lay in tatters. The most rapidly advancing power was China, whose dictators combined repression with economic success. Individual dissidents protested, but there was little doubt that the majority of the Chinese went along with their rulers’ mixture of nationalism, capitalism and authoritarianism. Russia, which had seemed likely to become a normal nation, turned its back on the Europe of human rights conferences and limited government, and embraced autocracy. Liberal Russians protested, but again only optimists could doubt that most were happy with Putin’s plans to rebuild the empire of the tsars and commissars. Meanwhile radical Islam, the most psychopathically anti-liberal ideology since Nazism, was not confined to the mountains of Afghanistan, but swept the Muslim world. Although polite commentators maintained that only a ‘tiny minority’ of Muslims supported clerical fascism, it was embarrassingly obvious to honest reporters that a far wider section of the Muslim population was unwilling to oppose it.
The American strategic thinker Robert Kagan encapsulated the shift from the late twentieth to early twenty-first century by putting himself in the shoes of an aspiring dictator. In the nineties, a potential strongman would have thought autocracy a bad bet. Everyone believed that you could not combine dictatorship with economic growth, and if you did not have economic growth, your power as an autocrat would fade, leaving you at the mercy of your enemies. Twenty-years on, Kagan continued, well, the world was looking a much better place.
The Chinese and the Russians are demonstrating that economic growth and strong autocracy can coexist perfectly happily. Now in Russia’s case it’s mostly about oil, but it’s not entirely about oil. In China’s case, it’s not at all about oil. China clearly is an increasingly market economy; it’s an increasingly capitalist system but nevertheless with rigid political controls. And the bargain that’s being offered to both of these peoples is a very old bargain. It is the bargain that says, ‘you can live your life, you can have whatever private life you want, no one’s going to come and in and tell you what to read or how to think (within certain limits), you can make money, you can prosper…just keep your nose out of politics. And if you get your nose involved in politics, we’ll cut off your nose.’ If the money is flowing, I think that’s a bargain people will take for a very long time.
He might have added that Islamists and other apocalyptic sects did not even need a successful economy to hold the world in thrall. The growing availability of weapons of mass destruction meant that the twenty-first century would have to live with the nightmare of relatively small bands of psychopathic