Periodically a book illuminates and orders a complex and vexed question not so much by discovering anything new or by fresh theory, but simply by looking at it systematically and avoiding premature conceptualization. In setting out to close ‘the most outstanding lacuna in the understanding of our recent past’, through a study of the City of London ‘as a historically located institutional complex’, Geoffrey Ingham has done this for the nature of British capitalism—or rather, of capitalism in Britain: by the end of his book it makes sense in a way that it has not done previously.footnote1 It is a major achievement, all the more so for being modestly and briefly stated. Ingham has read the histories of the City, the Bank of England, the insurance companies, the Treasury, the international trading and currency systems, many company histories and much else; and the result is that the dynamics of the system—or rather its static equilibrium—become for the first time more or less selfevident. Much of the mystery has gone, and with it some of the scope for prevarication about policy on the left.
Ingham’s central thesis is that capitalism requires a world trading system which in turn requires a trustworthy world currency and an efficient way of settling international accounts, insuring international trade, arranging international shipments, extending credit and the like. Some of these services can be dispersed in various world centres but many of them need to be centralized. Moreover, the political requirement of a world currency is above all that the issuing state can be relied on not to subordinate the interests of foreign users of that currency to purely national economic needs. The providers of commercial services in a country whose state acts in this way can make large profits from handling a large share of the world’s commercial business. Britain has so far been the only country whose commercial activities have made its currency capable of playing this role, and whose state has been willing to let it. German and Swiss governments have always given priority to national economic policy, as of course have the Japaneše. More significantly, perhaps, given the dominance of laissez-faire ideas in the
In Ingham’s view, the reasons for this lie in the City’s centrality to world trade before industrialism. Its interests were consistent with industrial expansion so long as British machinofacture was essentially unchallenged—a period that lasted long enough to permit the consolidation of a number of key institutional and political relationships. First, the dominance in the City of short-term markets for financing trade, coupled with the low capital requirements of early industry, meant that the City and industry were neither linked nor in conflict. The City was and still is essentially based on commerce. Commercial functions accounted (and still account) for the great bulk of its profits. When industrial shares came to be quoted on the stock exchange the City appraised them as marketable commodities, like bills of exchange, and not as claims on the future profits of an enterprise. Insofar as industrial companies needed to raise equity, they mainly did so in the provinces where they were located and where bankers and investors understood something about them. But the bulk of the country’s savings were from trade, by the City. Second, the Bank of England was established to regulate the currency and interest-rates in relation to the needs of trade and of the funding of the national debt. When the Bank was nationalized in 1946, its mandate was not significantly changed. Its guiding principle has always been to ensure that monetary and fiscal policy is consistent with the stability and growth of world trade. Third, the Treasury acquired its modern role as a result of Tory efforts in the early nineteenth century to free the government from its dependence on the holders of the national debt (debt interest accounted for 75 per cent of state expenditure in the late eighteenth century) and to end the instability caused by the City’s efforts to manipulate interest rates for the benefit of the state’s creditors. The tying of the currency to gold stabilized it and made it secure for international trade purposes; and the expansionist proposals of the ‘Birmingham school’ of industrially oriented economists were rejected, at the cost of a lower level of activity and prolonged unemployment after the Napoleonic wars. The debt was progressively reduced and state spending was cut to a minimum through Treasury control. What began, then, as a movement against the ‘moneyocracy’ ended as a fiscal counterpart to the trade-oriented monetary management of the Bank and the commercial services economy of the City, and has remained such. In this framework the Treasury developed its own bureaucratic ethos of parsimony and rooted opposition to state intervention in the productive economy, so that at the end of the nineteenth century a Treasury official could remark: ‘I do not know who is to check the assertion of experts when the government has once undertaken a class of duties which none but such persons understand.’footnote2
None of these developments, nor the free trade policy which naturally flowed from them, was initiated by manufacturers. The whole package
A good measure of the value of Ingham’s analysis is his review of Britain’s response to the collapse of the liberal economic order at the end of the nineteenth century. It may not contain many surprises, but it certainly makes the whole story seem more ‘natural’. The City’s insulation from the crisis of profitability that afflicted industry becomes obvious when we are shown so clearly that, at least in the medium run, it depended on world commerce and not the productive performance of domestic industry. Similarly, its close integration into the state apparatus, which allowed it almost to ignore the calls for tariff reform and national efficiency, is more understandable when we see the social relations between the City and the mandarinate as resulting from the key role played by the City–Bank–Treasury system in world capitalism, rather than the other way round. Equally fascinating and persuasive is Ingham’s account of the inter-war debate over the return to the gold standard, because he is able to show how radical the choice was from the point of view of the City, Bank and Treasury. The gold standard had not, in fact, been the sole basis of the world’s confidence in sterling, and in the long run it would actually undermine it if the parity rate were kept at a level which would lead to a contraction in Britain’s world trading role. But the return to pre-war parity, at the (clearly anticipated) cost of severe wage cuts, unemployment and bankruptcies, was an eloquent way of telling world traders that Britain remained willing to keep sterling a world currency. ‘To talk of the “sacrifices” which the nation would have to make was thus not altogether hypocrisy—it also added credence to the pledge to remain honourable bankers and honest traders . . . Indeed, from this standpoint a decision not to restore gold would have been more enigmatic’ (pp. 179 and 187). The same point can be made about Mosley’s 1930 Memorandum, and Wilson’s 1964–67 modernization project. What Ingham clearly sees is the lack of contingency in the way in which the interests that were based on keeping Britain as the foremost world trading centre closed ranks and successfully resisted all policies aimed at expanding not immediate profits, but what Friedrich List called the ‘productive powers’ of the nation. The challenge was often feeble, seldom integrating political and economic proposals in a coherent fashion. But as Ingham comments, ‘Significantly, whenever coherent and integrated pro
When it comes to the theoretical implications of Ingham’s analysis, there is perhaps more room for demurral. His criticisms of Anderson, Nairn, Longstreth and others have a common basis in a criticism of Marx himself, namely that he, and they following him, tend to assume that the general logic of capitalist production is normally expressed more or less similarly in each national economy, subject to the specific patterns imposed by the historical course of the class struggle in each one. They therefore seek to explain British ‘exceptionalism’ in terms of the ‘peculiarities of the English’: whereas on Ingham’s analysis, Britain is exceptional mainly, if not exclusively, in always having been the home of the major world currency, and the centre for international commercial services, that capitalism requires. It is therefore not a national peculiarity but an international normality that explains the political power of the City, and the ‘attenuated relations’ between the City and British industry. This does not, in my opinion, contradict the theses of Anderson, Nairn and the rest, so much as reorganize the relations between the elements correctly identified in their more impressionistic approaches. One may doubt whether Longstreth and others who have conceptualized the issue in terms of different ‘fractions’ of capital are so wrong, and whether Ingham’s own concept of ‘dominant class’ (to grasp the reality of the City-based aristocracy) is any less problematic. In particular, to insist, as Ingham does, that state agencies exercise power independently of class forces seems to me to confuse different meanings of the term ‘power’. It is true that the Treasury had a vested interest in the restoration of the gold standard in 1926; it offered a prospect of restoring its pre-eminence in Whitehall that the war years had eroded. But it is equally true that the Board of Trade had a vested interest in launching a long-term, state-led project for industrial modernization at the end of the Second World War. It is hard to explain why the former interest prevailed, and the latter was defeated, without recourse to the balance of class power, into which the force at the disposal of various units of the state apparatus also enters.
Nonetheless, Ingham does ‘naturalize’ all these relationships, in a way that is profoundly consistent with Marx’s most general thesis that, left to itself, the market gives rise to an economic stability and social incoherence which are contradictory for capital. The reason why so many other industrial countries have not generated equivalents to the short-term markets in commodities, securities, money and services that have been so central in Britain is that they could not afford it politically. There is good money to be made in these markets. But since it tends to undermine any ‘national political economy’ and the competitive promotion of productivity, other states have discouraged and prevented it (and certainly not allowed it to protect itself by means of monopolies, as Britain has done).