The great illusion goes up in smoke, and markets and credit go with it
CHRISTOPHER FILDES
Anyone who did not believe that we live in a dangerous world knows better now. Anyone who thought that danger could be kept in watertight compartments, well away from markets, must know better, too. Until this week it could be argued, and was, that a world where markets had transcended frontiers would be a peaceful world. This was the benign force of globalisation at work, but now terror turns out to be global, too. On my shelves is a book which asserts in all seriousness that there has never been a war between two countries which have branches of McDonald's. When Belgrade was bombed two years ago, this argument, like the local branch of McDonald's, took a knock. In a loftier form it was put forward 90 years ago. by Sir Norman Angell. He looked at a world where money and capital and trade were flowing freely, and concluded that it was in no one's interest to disturb it. The world's finance and commerce were so inextricably entwined, crossing all national boundaries, that the price of war must be so high as to make the prospect inconceivable. His book found its place on many shelves, ran into six editions, and was called The Great Illusion. Alas, the illusion was his. Three years later Europe went to war, the destruction of wealth was prodigious, and all those who had happily traded and invested and lent money across frontiers learned the hard way what risk meant. Markets, in truth, are fragile things, and credit is, as the word itself tells us, no more than a state of belief. They are exposed to their own excesses — to bubbles that pop and to booms that go bust — and to darker and more potent forces. The gap in the New York skyline bears witness to that.
The bell tolls
LLOYD's of London's glass and steel tower was evacuated on Tuesday as the news of disaster came in from America. Nobody bothered to ring the Lutine Bell on the way out, but the underwriters, as they milled around in Lime Street, must have wondered if it would be worth their while to go back in again. Their losses are all too obvious, but the disaster will bring other losses which are harder to measure. Immediately, it may tip the world's biggest economy into recession. When the week began, the Governor of the Bank of England — whistling, perhaps, to keep our spirits up, as central bankers do in anxious times — was forecasting a gradual American recovery, to start in the new year. That hope may now be deferred. Businesses and people will be moved to keep their heads down. They will risk less, spend less, travel less and stay at home. The barriers will stop coming down and will start to go up again. There will be losers from that close to home, among the leaders of the international money and capital markets, in the City of London and its glass and steel appendage in Canary Wharf. They represent globalisation in action, and if it is under threat, so are they.
Signals at danger
TRY putting a date to this: 'I regard Marconi as a danger signal in its own right. It is not the only business whose order-book has collapsed. It would be complacent to think that these troubles can be confined to the "new" electronic economy.' Or this, about Sir Roger Hurn: 'He has until now been everybody's favourite director. He is chairman of the Prudential as well as Marconi, and is deputy chairman of Glaxo SmithKline and a director of ICI.' (I might have added Cazenove.) 'I hope that he has not contracted Marshall's Syndrome, in which the sufferer finds himself unable to resist just one more directorship.' I was writing all this in July, but somehow it seems longer ago.
The Nursery End
LIKE the latest trundler from the county circuit called up to the Test team to bowl to the Waugh brothers, a new shadow chancellor turns his arm and prepares to take on Gordon Brown. He will be the fifth, for his four predecessors have all been seen off. Clarke. K., served as a change bowler, Lilley, P., was knocked out of the side, Maude, F., found a line but never had the batsman worried, and Portillo, M., disappointed his eager supporters and seemed to be playing a different game altogether. It was always too tempting for them to hope that the economy would turn sticky and thus do their work for them. So it may yet. All the same, the latest bowler should not count on it. He is up against an opponent with a genius for complication and must be able to play him at his own game.
Sitting ducks
DISMANTLING this Chancellor's subjective arithmetic and tracing his path through the labyrinth of the tax and benefit system cannot be done without preparation and application, hard work and expert advice. With the assurance that all of them bring, the newcomer can make the case for taxes which are, as Nigel Lawson said they should be, low and simple and compulsory, and do not eat up every penny of our income from New Year's Day until Derby Day. We as individuals, he would argue, must know better how to spend our money than any Chancellor can. Gordon Brown made his name in the House of Commons by taking on an apparently invincible Chancellor — Nigel Lawson, as it happened — and has faced some bumpers himself in his time. Kenneth Clarke as Chancellor used to lean across the despatch box and yell at him: 'They have no idea! They just sit there like stuffed ducks!' Play.
You can't do it
SOMETIMES I think that the CBI is a slow learner. Its latest effort is to write to the Department of Trade and Industry, which it says is — pointless? Officious? Furnished with Whitehall's most rapidly revolving chair? No: it is, so the CBI says, too weak. A stronger DTI would, of course, spend more time telling business what to do, and Patricia Hewitt, who is in the chair just now, needs no encouragement, least of all from those on the receiving end. The Board of Trade (which the DTI incorporates) once told the cotton trade what to do at such length that a resolution was proposed, demanding clarity. At this point an old hand stood up at the back of the meeting and said: 'Mr Chairman, I oppose this motion. In my experience, clarity in the words of the Board of Trade means you can't do it.'
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