The strangest bank of all

Barclays first defied the Treasury by refusing to take its money. Now it won’t join the Chancellor’s

The gathering of Barclays investors at the Queen Elizabeth II Conference Centre in Westminster on 23 April was inevitably a strange affair. At one and the same time, the bank has managed both to infuriate its investors and to win their admiration.

The patrician leadership of the bank, headed by the former dealmaker Marcus Agius (married to a Rothschild) and John Varley (who married into one of the Barclays-founding Quaker families), has fought with tooth and claw, as the credit crisis descended on the financial system, to keep HM Treasury off its back. While Lloyds Banking Group (the old Lloyds TSB plus HBOS) and Royal Bank of Scotland (RBS) have allowed themselves to fall under direct rule from UK ­Financial Investments – the arm of government set up to own shares in the semi-nationalised banks – Barclays chose a different direction. It has been a case of taking money from anyone, at any price, as long as the interference from Labour and Whitehall can be kept at bay.

The anger from long-term Barclays shareholders (the pension funds and insurance giants who dominate investment decisions in the City of London) stems from last October’s decision by Barclays to eschew an injection of cash from HMG to solidify its crumbling balance sheet, and to look overseas instead. Using a rum collection of intermediaries, including the glamorous ­financier Amanda Staveley (a former girlfriend of the Duke of York), it secured for itself £7.3bn of new capital from the ruling royals in the Gulf statelets of Abu Dhabi and Qatar. It paid an enormous price for this injection of funds, some 14 per cent at a time when official interest rates are close to zero, and in effect gave away 15.5 per cent of the bank to new investors without first asking the permission of the existing owners, the long-term City investors. It was this abandonment of so called “pre-emption rights” that cast Agius and Varley as the City bad boys who should be excluded from class. So great was the anger that the Barclays board had to reopen the fundraising, offering shares to existing investors on similar terms and promising that the bank’s directors would submit their appointment to an annual vote of approval by shareholders. This was a big extension of normal shareholder democracy.

So why did Barclays go to so much trouble to preserve its independence? It was partly about pride and partly about ambition. Barclays is unique among the big names on the high street. The bank, which traces its history on Lombard Street back to the late 17th century, was formed as a result of a series of mergers a century later, which brought together banks from the English regions controlled by wealthy Quaker families.

Even though the founders have very few shares in the modern bank, somehow over the centuries, members of the extended families have managed to pop up in the top jobs. John Varley, the quintessential English solicitor who currently holds the job of chief executive, just so happens to be married to Carolyn Thorn Pease, a descendent of one of the founding Barclays dyn­asties. It used to be said that in the chairman’s ­office at Barclays, there was a secret register that monitored the progress of family members through the bank and fast-tracked their progress. Whatever the truth, this legacy – in which Quaker names such as Tuke, Pease and Buxton, crop up over the years – is decidedly different from that of the other high street banks.

Few bankers are so gripped by history as Varley. His predecessors were forced to retreat from apartheid South Africa in 1986, where Barclays was among the biggest players, by a combination of sanctions and shareholder activism. But when the opportunity to return presented itself nearly two decades later, Varley grabbed it with both hands, spending £2.9bn in 2005 on buying Absa, the biggest retail bank in the country. The honour of his predecessors had been restored.

The second big difference and reason for Barclays wanting to stay independent is its embrace of a US-style investment banking culture. Much of the current debate about the future of banking has been whether there should be new rules that prevent old-style Captain Mainwaring bankers joining up with the “casino” bankers who caused the credit crunch. More than any other UK bank, Barclays is a combination of both.

Barclays Capital, run by Bob Diamond who pocketed a £21m salary in 2007, embraced casino banking with great zeal, turning BarCap into a powerhouse of the debt and bond markets. Indeed, it is one of the biggest players in the securitised debt market – the slicing, dicing and packaging of loans at the heart of the credit crisis. This involvement in securitised debt, including sub-prime mortgages, has cast a large shadow over Barclays, which always claims that the mortgage debt it holds is of a “better vintage” than that of its rivals.

But Diamond’s ambitions are without limit and he has seen the credit crunch as an opportunity rather than a drag on the bank’s activities. When Lehman Brothers went under last September, BarCap saw it as an opportunity and moved to buy up Lehman’s New York staff and offices at a knockdown price.

In more recent days, Barclays has been studying whether it, like RBS and Lloyds, should become part of Alistair Darling’s insurance plan for banks: the “asset protection scheme”. Under this insurance policy, the Treasury essentially takes the toxic or bad debts off bank balance sheets in exchange for a premium. Barclays looked carefully at the plan and decided that, if it did so, it would lose the freedom to lend to whom it wants, and perhaps, as importantly, set its own wages and bonuses for staff. So it has decided to stay out and soldier on.

Once again, it has chosen to sell assets to raise the capital it needs to stay independent – on this occasion iShares, part of its investment arm. It will almost certainly mean higher losses in the short term since, unlike the banks with insured toxic debts, Barclays will have to take the direct hit through its profit and loss account.

No one wants to see the return of the bad old days when bankers ran riot. But it is hard not to have a sneaking admiration for Agius, Varley and Diamond. They place the independence of their bank above all else, and are determined not to cast off three centuries of history. It’s a bold gamble that sets Barclays apart from the crowd.

Alex Brummer is City editor of the Daily Mail

This article first appeared in the 27 April 2009 issue of the New Statesman, Rise of the Geek

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Why Jeremy Corbyn is a new leader for the New Times

In an inspired election campaign, he confounded his detractors and showed that he was – more than any other leader – in tune with the times.

There have been two great political turning points in postwar Britain. The first was in 1945 with the election of the Attlee government. Driven by a popular wave of determination that peacetime Britain would look very different from the mass unemployment of the 1930s, and built on the foundations of the solidaristic spirit of the war, the Labour government ushered in full employment, the welfare state (including the NHS) and nationalisation of the basic industries, notably coal and the railways. It was a reforming government the like of which Britain had not previously experienced in the first half of the 20th century. The popular support enjoyed by the reforms was such that the ensuing social-democratic consensus was to last until the end of the 1970s, with Tory as well as Labour governments broadly operating within its framework.

During the 1970s, however, opposition to the social-democratic consensus grew steadily, led by the rise of the radical right, which culminated in 1979 in the election of Margaret Thatcher’s first government. In the process, the Thatcherites redefined the political debate, broadening it beyond the rather institutionalised and truncated forms that it had previously taken: they conducted a highly populist campaign that was for individualism and against collectivism; for the market and against the state; for liberty and against trade unionism; for law and order and against crime.

These ideas were dismissed by the left as just an extreme version of the same old Toryism, entirely failing to recognise their novelty and therefore the kind of threat they posed. The 1979 election, followed by Ronald Reagan’s US victory in 1980, began the neoliberal era, which remained hegemonic in Britain, and more widely in the West, for three decades. Tory and Labour governments alike operated within the terms and by the logic of neoliberalism. The only thing new about New Labour was its acquiescence in neoliberalism; even in this sense, it was not new but derivative of Thatcherism.

The financial crisis of 2007-2008 marked the beginning of the end of neoliberalism. Unlike the social-democratic consensus, which was undermined by the ideological challenge posed by Thatcherism, neoliberalism was brought to its knees not by any ideological alternative – such was the hegemonic sway of neoliberalism – but by the biggest financial crisis since 1931. This was the consequence of the fragility of a financial sector left to its own devices as a result of sweeping deregulation, and the corrupt and extreme practices that this encouraged.

The origin of the crisis lay not in the Labour government – complicit though it was in the neoliberal indulgence of the financial sector – but in the deregulation of the banking sector on both sides of the Atlantic in the 1980s. Neoliberalism limped on in the period after 2007-2008 but as real wages stagnated, recovery proved a mirage, and, with the behaviour of the bankers exposed, a deep disillusionment spread across society. During 2015-16, a populist wave of opposition to the establishment engulfed much of Europe and the United States.

Except at the extremes – Greece perhaps being the most notable example – the left was not a beneficiary: on the contrary it, too, was punished by the people in the same manner as the parties of the mainstream right were. The reason was straightforward enough. The left was tarnished with the same brush as the right: almost everywhere social-democratic parties, albeit to varying degrees, had pursued neoliberal policies. Bill Clinton and Tony Blair became – and presented themselves as – leaders of neoliberalism and as enthusiastic advocates of a strategy of hyper-globalisation, which resulted in growing inequality. In this fundamental respect these parties were more or less ­indistinguishable from the right.

***

The first signs of open revolt against New Labour – the representatives and evangelists of neoliberal ideas in the Labour Party – came in the aftermath of the 2015 ­election and the entirely unpredicted and overwhelming victory of Jeremy Corbyn in the leadership election. Something was happening. Yet much of the left, along with the media, summarily dismissed it as a revival of far-left entryism; that these were for the most part no more than a bunch of Trots. There is a powerful, often overwhelming, tendency to see new phenomena in terms of the past. The new and unfamiliar is much more difficult to understand than the old and familiar: it requires serious intellectual effort and an open and inquiring mind. The left is not alone in this syndrome. The right condemned the 2017 Labour Party manifesto as a replica of Labour’s 1983 manifesto. They couldn’t have been more wrong.

That Corbyn had been a veteran of the far left for so long lent credence to the idea that he was merely a retread of a failed past: there was nothing new about him. In a brilliant election campaign, Corbyn not only gave the lie to this but also demonstrated that he, far more than any of the other party leaders, was in tune with the times, the candidate of modernity.

Crises, great turning points, new conjunctures, new forms of consciousness are by definition incubators of the new. That is one of the great sources of their fascination. We can now see the line of linkage between the thousands of young people who gave Corbyn his overwhelming victory in the leadership election in 2015 and the millions of young people who were enthused by his general election campaign in 2017. It is no accident that it was the young rather than the middle-aged or the seniors who were in the vanguard: the young are the bearers and products of the new, they are the lightning conductors of change. Their elders, by contrast, are steeped in old ways of thinking and doing, having lived through and internalised the values and norms of neoliberalism for more than 30 years.

Yet there is another, rather more important aspect to how we identify the new, namely the way we see politics and how politics is conceived. Electoral politics is a highly institutionalised and tribal activity. There have been, as I argued earlier, two great turning points in postwar politics: the social-democratic era ushered in by the 1945 Labour government and the neoliberal era launched by the Tory government in 1979.

The average Tory MP or activist, no doubt, would interpret history primarily in terms of Tory and Labour governments; Labour MPs and activists would do similarly. But this is a superficial reading of politics based on party labels which ignores the deeper forces that shape different eras, generate crises and result in new paradigms.

Alas, most political journalists and columnists are afflicted with the same inability to distinguish the wood (an understanding of the deeper historical forces at work) from the trees (the day-to-day manoeuvring of parties and politicians). In normal times, this may not be so important, because life continues for the most part as before, but at moments of great paradigmatic change it is absolutely critical.

If the political journalists, and indeed the PLP, had understood the deeper forces and profound changes now at work, they would never have failed en masse to rise above the banal and predictable in their assessment of Corbyn. Something deep, indeed, is happening. A historical era – namely, that of neoliberalism – is in its death throes. All the old assumptions can no longer be assumed. We are in new territory: we haven’t been here before. The smart suits long preferred by New Labour wannabes are no longer a symbol of success and ambition but of alienation from, and rejection of, those who have been left behind; who, from being ignored and dismissed, are in the process of moving to the centre of the political stage.

Corbyn, you may recall, was instantly rejected and ridiculed for his sartorial style, and yet we can now see that, with a little smartening, it conveys an authenticity and affinity with the times that made his style of dress more or less immune from criticism during the general election campaign. Yet fashion is only a way to illustrate a much deeper point.

The end of neoliberalism, once so hegemonic, so commanding, is turning Britain on its head. That is why – extraordinary when you think about it – all the attempts by the right to dismiss Corbyn as a far-left extremist failed miserably, even proved counterproductive, because that was not how people saw him, not how they heard him. He was speaking a language and voicing concerns that a broad cross-section of the public could understand and identify with.

***

The reason a large majority of the PLP was opposed to Corbyn, desperate to be rid of him, was because they were still living in the neoliberal era, still slaves to its ideology, still in thrall to its logic. They knew no other way of thinking or political being. They accused Corbyn of being out of time when in fact it was most of the PLP – not to mention the likes of Mandelson and Blair – who were still imprisoned in an earlier historical era. The end of neoliberalism marks the death of New Labour. In contrast, Corbyn is aligned with the world as it is rather than as it was. What a wonderful irony.

Corbyn’s success in the general election requires us to revisit some of the assumptions that have underpinned much political commentary over the past several years. The turmoil in Labour ranks and the ridiculing of Corbyn persuaded many, including on the left, that Labour stood on the edge of the abyss and that the Tories would continue to dominate for long into the future. With Corbyn having seized the political initiative, the Tories are now cast in a new light. With Labour in the process of burying its New Labour legacy and addressing a very new conjuncture, then the end of neoliberalism poses a much more serious challenge to the Tories than it does the Labour Party.

The Cameron/Osborne leadership was still very much of a neoliberal frame of mind, not least in their emphasis on austerity. It would appear that, in the light of the new popular mood, the government will now be forced to abandon austerity. Theresa May, on taking office, talked about a return to One Nation Toryism and the need to help the worst-off, but that has never moved beyond rhetoric: now she is dead in the water.

Meanwhile, the Tories are in fast retreat over Brexit. They held a referendum over the EU for narrowly party reasons which, from a national point of view, was entirely unnecessary. As a result of the Brexit vote, the Cameron leadership was forced to resign and the Brexiteers took de facto command. But now, after the election, the Tories are in headlong retreat from anything like a “hard Brexit”. In short, they have utterly lost control of the political agenda and are being driven by events. Above all, they are frightened of another election from which Corbyn is likely to emerge as leader with a political agenda that will owe nothing to neoliberalism.

Apart from Corbyn’s extraordinary emergence as a leader who understands – and is entirely comfortable with – the imperatives of the new conjuncture and the need for a new political paradigm, the key to Labour’s transformed position in the eyes of the public was its 2017 manifesto, arguably its best and most important since 1945. You may recall that for three decades the dominant themes were marketisation, privatisation, trickle-down economics, the wastefulness and inefficiencies of the state, the incontrovertible case for hyper-globalisation, and bankers and financiers as the New Gods.

Labour’s manifesto offered a very different vision: a fairer society, bearing down on inequality, a more redistributive tax system, the centrality of the social, proper funding of public services, nationalisation of the railways and water industry, and people as the priority rather than business and the City. The title captured the spirit – For the Many Not the Few. Or, to put in another way, After Neoliberalism. The vision is not yet the answer to the latter question, but it represents the beginnings of an answer.

Ever since the late 1970s, Labour has been on the defensive, struggling to deal with a world where the right has been hegemonic. We can now begin to glimpse a different possibility, one in which the left can begin to take ownership – at least in some degree – of a new, post-neoliberal political settlement. But we should not underestimate the enormous problems that lie in wait. The relative economic prospects for the country are far worse than they have been at any time since 1945. As we saw in the Brexit vote, the forces of conservatism, nativism, racism and imperial nostalgia remain hugely powerful. Not only has the country rejected continued membership of the European Union, but, along with the rest of the West, it is far from reconciled with the new world that is in the process of being created before our very eyes, in which the developing world will be paramount and in which China will be the global leader.

Nonetheless, to be able to entertain a sense of optimism about our own country is a novel experience after 30 years of being out in the cold. No wonder so many are feeling energised again.

This article first appeared in the 15 June 2017 issue of the New Statesman, Corbyn: revenge of the rebel

Martin Jacques is the former editor of Marxism Today. 

This article first appeared in the 15 June 2017 issue of the New Statesman, Corbyn: revenge of the rebel

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