How the City survived two wars

DAVID Kynaston's first two volumes of his history of the Square Mile since 1815 have been highly praised and rightly. His third, with another to come, traces the decline of the sacrosanct Gold Standard from its heyday in 1914 to the end of the second of two cataclysmic wars. The City has never recovered its world-dominating position but it gets along pretty well all the same. The cats are not exactly thin.

The key figure in the inter-war years was Montagu Norman, Governor of the Bank of England 1920-1944.

"Always absolutely charming," wrote JM Keynes, "and always absolutely wrong." But he was the Pope of the City. Heretics had to beware. Norman was a mother-dominated bachelor until a happy marriage in 1933. When he retired at the age of 75, she was 96 and wished she could find him another job. Norman was pro-Mussolini, anti-Jewish, got on well with Hitler's banker Schacht, and strongly supported appeasement. His obsession was inflation. The fate of the pound in postwar Britain would have horrified him. Who could say that his fears were wholly misplaced even though he became a hate figure to politically correct "liberals". He was a complex mixture of generosity, vindictiveness, sensitivity, secrecy and depression. He looked as if he had stepped out of a Vandyke portrait. To tread a clear path through the complications, subtleties, vendettas, triumphs and failures in the City is not an easy task. Many of the firms whose names figure in the period are still there today. Some of them may not entirely welcome the reminder of the narrow escapes they experienced eg, Schroders, Klein-worts and Lazards. But they may not mind unduly. After all, they did survive. A lot did not. It would be easy to write a dry-as-dust account of the City which no one would read. Variations in the discount rate of bills of exchange are not a subject to quicken the blood. David Kynaston, while giving us the basic essentials and technical details, never forgets that financiers are people, not symbols, and that they operated in a real world of jokes (blue), lunches (prolonged), drinks (copious) and much male bonding. Women were kept apart. Rothschilds' men employees were given vouchers to lunch where they pleased. The women had to make do with a dismal office base- ment. The Rothschilds were not good at "the common touch". Lionel, a notable horticulturist, told his clerks "no garden, however small, should contain less than two acres of rough woodland". Useful advice for Mr Pooter. The City leaders constituted a world of their own and did not always command respect outside it. In the testing crisis of 1914 their boasted capacity to weather any storm collapsed. "The greatest ninnies I ever had to tackle, in a state of funk like old women chattering over the tea cups in a cathedral town," wrote Asquith of this collection consisting largely of second-rate Old Etonians who had chosen the City rather than farming or the Army, the other refuges for intellectual duds - and much more profitable. But there were exceptions. Norman, who was certainly no intellectual dud, achieved his object, the restoration of the Gold Standard in 1925, despite the doubts of the Chancellor of the Exchequer, Winston Churchill. It is a subject of controversy to this day. Only six years later, the crisis of 1931 threw it into what Marx called the "dustbin of history". But Popes do not resign. Norman adapted himself to a new world with all the skill of an old survivor. He even welcomed Keynes to the Court of the Bank of England. The Second World War left the City physically in ruins. The book ends at this nadir in its fortunes with a prospect almost as black as it could be - an anti-capitalist government in power with national-isation of the Bank of England as a top priority and world currencies in chaos. Yet it is with us still. This is a fascinating book, deeply researched and admirably written by an author who is a master of his subject and also of the light touch. Although the City has never got back to where it was in 1914, it remains a great financial centre, even if red braces and other sartorial oddities have replaced Old Etonian ties. David Kynas-ton's fourth volume will recount the recovery and, if it is as good as the first three, will be well worth reading. I particularly look forward to his account of Barings and Nick Leeson.

Copyright 1999
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