The Books Interview: David Kynaston

The new, condensed edition of your four-volume history of the City of London will be read through the prism of the 2008 crisis. How do you feel about that?
I think it's inevitable. The past should nevertheless stand on its own terms and have its own intrinsic validity. It can get a bit reductive looking at the past purely through the prism of the present.

Could some aspects of the way the City used to work have prevented the crash?
It might have been helpful. There was a moment in the late 1950s when the then governor of the Bank of England said something like, "Well, if
I want to, I can gather everyone who matters in my room in half an hour." That was a reflection of the physical proximity of everyone. That kind of clubbishness came with all kinds of downsides, but face-to-face dealing is better in terms of trust than screen-based dealing. Now, the whole thing has become so much more remote.

Your account of debates on the gold standard in the 1920s shows how they focused on maintaining the global primacy of the City. The City today seems gripped by that same anxiety.
Absolutely. It's a deep tension between London as an international financial centre and the City of London in relation to the UK as a whole. After the Second World War, no one imagined that London would return to anything like what it had been. But there were the Euromarkets from the 1960s and Big Bang in the 1980s; it returned to being a very powerful financial centre. Britain's economy and industry were not its main purpose - the point of the City was international. Since the 1960s, [the City] has felt like a very different place from the rest of the UK.

One of the morals of your book is that antagonism between financial and industrial capital is a perennial feature of economic life in this country.
The point where the two start to diverge, in terms of function and importance, is the 1960s. In the 1970s, the British economy as a whole was not doing that brilliantly, but the City was starting to recover through the Euromarkets. And then, in the 1980s, you have the starkest contrast, because you've got the early years of Margaret Thatcher and deindustrialisation at the very moment when the City was poised for Big Bang.

It's tempting to see Big Bang as a definitive break from the postwar situation but, as you say, liberalisation started much earlier.
I think Big Bang, in a way, was a catching-up, because you've got the Euromarkets, dollar markets and, above all, the bond markets well established in the course of the 1960s, attracting foreign banks. The early 1970s changed the relationship between the state and the markets, making the markets much more powerful.

The question by the 1980s was: how does one bring the stagnant, stock-market side of the City into line with this kind of development? In the 19th century, three things made the City great - the return to the gold standard, free trade and the Bank Charter Act 1844. In each case, the City was opposed. It was not so different with Big Bang. Obviously, once the stock exchange realised it could sell itself to banks for a huge amount of money and partners could make a considerable sum, it came round to the attraction of Big Bang quite swiftly. But essentially change was imposed by the Thatcher government.

How do you view Gordon Brown's time as chancellor of the exchequer?
Brown is historically literate. I think he was happy to give the Bank of England independence because it would be off his back, and more broadly to give the City considerable leeway. He did not want to be any of those other postwar chancellors who had often inherited appalling positions and always came up against the City.

You say that Labour abandoned its mission to tame capitalism in 1976 when it accepted the IMF loan demanded by the markets.
If you take that moment in 1976 with the one later when Callaghan abandoned Keynesianism and embraced monetarism, [that is] quite distinct.
I wouldn't want to say this was purely to do with City pressure because, to dispassionate observers, there was stagflation in the mid-1970s and it was not clear that the Keynesian approach was still delivering the goods. But it meant that, come the 1979 election, Labour seemed like a busted flush - it had nothing distinctive to offer. Not unlike the Labour election last year.

Were you tempted to write a post-crash update?
No. I'm more comfortable where one can try to get some material that isn't just in the public domain. I would want to be a historian rather than a journalist-plus - which is not remotely to decry those first drafts of history.

David Kynaston's "City of London: the History" is published by Chatto & Windus (£30)