For the past thirty years politicians in Britain have tried to build a new prosperity. They wanted to make an old nation that had fallen behind in the world recapture the glories of its past. They turned for help to what they believed was a science of money. One after another Labour and Conservative governments believed that if they followed what they thought were a set of scientific laws, the economy would grow faster. The perceived tide of decline could be reversed. Adam Curtis, Pandora’s Box: A Fable from the Age of Science III: The League of Gentlemen, BBC 1992
Politicians came to believe there was a technical way to make Britain great again. ibid.
In 1961 the Conservative government set up NEDDY, the National Economic Development Council, in what had been a gentlemen’s club in Westminster. It was advised by young economists convinced they could make the economy grow much faster. ibid.
They saw themselves as followers of the economist Maynard Keynes. He had shown how to manage an economy by increasing or decreasing demand. ibid.
Labour promised a national plan run by a separate department of economic affairs under George Brown. It would make Britain grow by a quarter in just six years … But Labour had come to power just as the boom the Conservatives had begun was overheating. Imports were flooding in and wages were rising. ibid.
The economists who had began to realise the economy was far beyond their control; they were being used. ibid.
The attempt to plan growth had failed. Britain was left with little expansion and political disaster. Most economists blamed it on the government’s failure to devalue. ibid.
In the early 1970s many economists began to find they no longer understood how money behaved … Prices and unemployment began to rise together: people called it stagflation. ibid.
Monetarism offered an attractive technical explanation for the problem of inflation but from it would come in less than ten years another scheme for Britain’s salvation: a set of scientific rules which if the politicians followed them correctly would create the right conditions for economic growth … The time was right for the monetarists. ibid.
Then in March 1976 Britain fell into the abyss. Foreign investors led by American bankers panicked. The £ began to slide against the $ and nothing would stop it. Britain faced bankruptcy. In desperation Labour turned to the International Monetary Fund for a loan. An IMF team came to London. ibid.
The supply of money was to be reduced by increasing interest rates and cutting public spending. Inflation would fall and enterprise flourish. ibid.
But the economy did not behave in the way the monetarists had predicted … Even more mystifying was the behaviour of the money supply. ibid.
In the budget of 1981 public borrowing was cut by a fifth; 364 leading economists wrote to The Times and the prime minister accusing her of virtually destroying the economy. That summer there were riots in English cities. ibid.
In the 1950s Britain was dominated by a small group of men – the captains of industry. They were eminent industrialists and bankers who met together at the court of the Bank of England. Men like these were powerful because of the vast industrial empire they controlled. They worked in partnership with the politicians to shape the future of the nation. What these men did not realise was that within fifteen years their whole world would be destroyed. Their power would be taken away from them and their factories torn down and sold off. And the man who began their destruction was a suburban accountant called Jim Slater. To do it Slater awoke a force that had been dormant since before the war: the Stock Market. And as he grew powerful, Slater became an ally of politicians, but what neither he nor they realised was that the force he had awoken would overwhelm all of them. Adam Curtis, The Mayfair Set II: Entrepreneur Spelt S.P.I.V ***** BBC 1999
The stock market was something that frightened both the politicians and industrialists because it was unpredictable and threatened their control over the economy. Both lived with the terrible memory of the crash of 1929 and the unemployment it had caused. And as the boom continued to grow and excite the public interest, the Bank of England became worried. ibid.
He [Jim Slater] decided to try and work out a way of predicting which shares would go up and which would go down. ibid.
In 1964 Slater formed a company with a young Tory MP called Peter Walker. Slater-Walker was an investment company, and as the market continued to boom, Slater became rich managing other people’s money. ibid.
Jim Slater had discovered that the Coote family no longer had a majority shareholding [Cork Manufacturing]. And he decided to try and take the company over. He [Slater] made a hostile takeover. ibid.
He [Slater] immediately sold off large parts of the land of the factories: they were demolished for property development. Slater had invented a formula which he now repeated. The sales of assets from each takeover were then used to fund the next and bigger one. ibid.
A group of takeover men grew up who began to break up the old paternalist world that had dominated British industry. The social centre for the takeover men was the Clermont Club, a gambling club in Berkeley Square in Mayfair. It was run by a right-wing aristocrat called John Aspinall; he was a ferocious professional gambler, and those he admired and let into his club were those he described as risk takers. ibid.
Goldsmith now became a close friend of Slater’s. Goldsmith specialised in targeting food companies. ibid.
To the establishment the Clermont set were a group of destructive gamblers. They were tearing up British industry and fuelling a dangerous boom in the stock market. ibid.
But Jim Slater was to stop being a despised outsider. Politicians were going to turn to him for help and make him an influential force in British politics. ibid.
In 1964 a Labour government had been elected. They came to power promising to create a modern prosperous Britain. But almost immediately they were faced with a crisis: the boom the Tories had begun five years before had gone out of control. British industry simply couldn’t cope with the demand created by the boom. A new government faced growing inflation and a balance of payments crisis. They had to cancel many of their election promises and cut spending. ibid.
What Slater argued was that he was using the stock market as a tool to reshape industry. He sold off any part of a company that didn’t make a healthy profit. What remained automatically became more efficient. And he pointed to his phenomenal growth in profits to prove this. ibid.
What Slater argued was that he was using the stock market as a tool to reshape industry. He sold off any part of a company that didn’t make a healthy profit. What remained automatically became more efficient. And he pointed to his phenomenal growth in profits to prove this. ibid.
The Labour government copied Slater’s methods. Under Tony Benn’s guidance they masterminded massive takeovers and mergers in British industry. Old companies were forced together to make new conglomerates. Upper Clyde shipbuilders was created on Clydeside. And in the process, as with Slater’s takeovers, thousands of workers were sacked. It wasn’t just shipbuilding. Britain Leyland was formed by the forced merger of old car companies. ibid.
Slater and the other takeover men were not the saviours of industry they pretended to be. ibid.
The wave of takeovers created by the Labour government had little or no effect on productivity. The British economy stubbornly refused to grow. But the takeovers were having a hidden revolutionary effect on the structure of power in Britain. Both Slater and now the politicians were liquidating many of the assets of industry. They were feeding them as cash into an ever booming stock market. In future it would be the millions of small shareholders who would decide where that money would go. The market was now increasingly shaping the future of the economy, not the politicians. ibid.
Tiny Rowland now became a close friend of Jim Slater and the other takeover tycoons. They dined together at the Clermont and sold each other companies. All of these new tycoons were making fortunes by tearing up an old system of industrial power that had dominated Britain and its empire for over 100 years. ibid.
The government would assert control over the economy. Heath now went to other extreme: he poured money into the economy. He increased government spending and relaxed borrowing. It was called the Dash for Growth: but much of the money went into making a stock market bubble that did nothing to make industry more efficient. Above all, it invested in the new companies of the takeover men. And Jim Slater’s share price soared to astounding heights. Using the power of his extraordinary share price Jim Slater now became the dominant force in the City of London. He set up his own banking operation and a network of satellite companies each of which set about asset-stripping British industry. He gave thousands of pounds to the Tory Party, while his former partner Peter Walker became a Cabinet minister. Jim Slater was now all powerful. ibid.
The takeover tycoons had finally supplanted the old captains of industry. They had forged a new partnership with politicians. But what few people realised was that their success was based on a facade. They were doing nothing to reconstruct British industry. They were merely profiting from its decline. But drunk on this moment of power they portrayed themselves as the inheritors of the great industrialists of Britain’s past. They also forced the captains of industry to bow down to them. ibid.
But the tycoons’ brief moment of power was about to be destroyed. By 1973 it was clear that Heath’s Dash for Growth had failed. It had created rampant inflation, and when the government tried to hold down wages, it led to violent strikes. ibid.
Edward Heath publicly called him [Rowland] ‘the unacceptable face of capitalism’. ibid.