When New Labour came to power in 1997 Blair and Brown were paralysed by fear of a radicalism they never possessed.
They had been rewarded with a huge majority and an unprecedentedly broad coalition of support for, at the very least a programme of social investment, in a country which was literally falling apart, as both society and transport infrastructure creaked after a period of two decades where major infrastructural investment had been limited to a new bankers metro in the east end and even our great national museums were reduced to excluding the poor and charging the rich in order to remain open.
As one senior forex expert of my acquantance put it at the time - it makes more sense for me to vote Labour than to keep buying more expensive alarms for my house'.
This was the first time in the 40 or so years he had been eligible to vote that he had felt that such an action made sense, the excesses of Thatcher and the incompetence and thievery of the Major years when, as his patrician city peers used to put it, 'the shit floated to the top', had horrified him - he saw the future and he didn't like it.
Flying over the Favelas of the Future
'I don't want to end up like a member of the Brazilian ruling class,' he continued, 'flying home by helicopter to my gated compound, to avoid driving through the favelas'.
He had worked across the globe, from the States to Asia, he loved Japan and indeed New York, though more for the salt beef and beigels than for the new Wall Street ethics downtown. He respected the dynamism of the Chinese and hoped that the cultural revolution would be as strong a lesson to the emergent nation as had been the period of warlord dominance, probably the strongest cultural lychpin in the development of the Chinese nation, a sort of outrider of chaos, standing as a warning of what could befall the nation should the unwritten rules of deference be forgotten. He knew the value of money and the fact this was mobile, this after all was his trade.
And he voted Labour in 1997, because, like so many of us, he believed in society, in ethics, in the need for laws as well as returns, for values as well as valuations. Because valuations change, because markets can go down as well as up. Because one of his friends spent the cultural revolution paraded in a dunces cap for the crime of teaching and was then sent to work in the fields - but was now an international banker, employed by the Chinese state.
He was to be fair an experienced man with connections across global business, whereas the leading lights of New Labour had Peter's friends in Notting Hill, their old [Labour] friends in the unions giving them sleepless nights like a sort of postmodernist tsetzuo or bogey man; and a profound lack of experience.
Rabbits in the Headlights of History
So they started not with a Barack-style bang but witha whimper. Two Years of Tory Spending. 'No change while we think of what to do, eh, Gordon,' whispered Tony breathily, 'settle in, find our way around, chat to people a bit, reassure them; really we'll do nothing in the first term, just a sort of creating foundations thing' .
'We can play some of those tax changes Kenneth was planning as 'aid for the forgotten poor', though' says Gordon, 'they will help, after all, those who actually work, and we can do some work around the tax credit ideas I have, to emphasise that. Telling a story of hard work and reward, not scrounging and the rewards of sloth and shiftless inactivity'.
Thus followed a period in which New Labour listened. To lobbyists, to Thatcherites, to deregulators, to American republicans and democrats in equal measures, to Goldman Sachs, to a brash new city which had found ways for international markets to create money without burdening public treasuries. Growth was to be funded through a proper and realistic assessment of risk and the trading and insuring of this risk to spread it. In a curious echo of the old imperialism, the new imperialism consisted of emergent Asian economies buying Western debt in order to fund the consumerist longings of the developed world they were rapidly becoming a fully-paid up part of.
Odd warnings had sounded, banks had occasionally broken throughout this period and indeed before it, the Leeson Barings debacle the clearest parallel, as the trader tried to trade his way out of a derivatives hole in a market which notoriously lacked a ceiling and, he thought, a floor; and operated without either external regulation of any meaningful sort or even the most mundane of internal controls.
Yet New Labour, the ultimate professionals, the managerialists who thought they knew the Rulers of the World and worse still that they had been invited to join the club, took a rationalist approach. The institutions would self-police because it was in their own interests not to suffer the ignominious meltdowns that had befallen aberrant old-timers like Barings. The message they heard was that Barings were old-fashioned, unable to cope with brash new realities. The Banks of the New Church, Jesuit priests of international capitalism would take their boys at five and make them compliance-friendly men.
Duracell Bunnies in the Debt Disco
So for ten years the Duracell bunnies of New Labour danced in the debt disco. Occasionally they would turn to each other asking,
'Any idea whats going on with this economic cycle Gordon? Seems to have been going on rather a long time...'
'Huh, huh, huh, no idea Tony'
pants Gordon, his huge lop ears flopping to the pumping music,
'I doon't really care, but I'm happy to keep dancing as long as someone keeps giving me these brilliant free Es.... sorry dollars'.
And traded debt derivative dollars at that.
The bad news
The bad news is that the derivative-funded industries in the UK don't simply extend to the financial services sector.
A few days ago Home Shopping Direct [Littlewoods catalogues as was] announced huge job cuts.
The really bad news is that cheap credit card debt to fund catalogue shopping you can't afford is just another version of buying houses you can't afford, just another part of the 'debt time bomb' if you like, Daily Express. Leading to the view among some people, not least Foreign Exchange experts that our whole economy may be over-valued.
Better start making something fast, but not cars, please, Peter.