Here’s a British bank: Gringotts. Specifically, Gringotts of Diagon Alley, London. In the Harry Potter novels, Gringotts is owned and administered by goblins, creatures of an unfailing and unsmiling courtesy. The bank itself is deathly quiet. We find no chaotic Gringotts trading floor; there are no Gringotts collateralised debt obligations; there are no Gringotts mortgage-backed securities. We meet no goblin Fred “the Shred”. This is only fitting. Gringotts is the conscientious banker to a bloodline aristocracy of wizards. Its business model is suitably cautious. It keeps its assets where it can see them, liquid, and locked deep underground.
Gringotts, and the goblins who run it, are in some ways despised by their wizarding clientele – a victim of that contempt for ready cash which has ever been the proudest boast of hereditary nobility. So it proves. Harry Potter, a member of this nobility, breezes into Gringotts, on the way to pick up a fortune in gold coins, left to him by his parents. There it is. And then he is gone, thinking little of his time there. To Harry, Gringotts and its goblins are simply another part of his extended feudal retinue of helpers. His mind is not there: it is on wands and spells, on his family name, on ancient bloodlines, on his destiny. He wants to be anywhere else. The crusaders in Venice, too, wanted to be anywhere else – they contemptuously took out their loans from the city’s great banking houses, and sailed off to their own higher destiny.
This is one kind of finance, the kind that flourishes under various kinds of despotism. Its purpose is to service the needs of an overbearing ruling caste, not to strike out on its own. It is obsequious, subterranean and, above all, careful.
Here’s another British bank: Barings. Specifically, Barings of – where exactly? It isn’t there any more. During its long existence, which began in 1762, Barings was seldom careful. Its assets didn’t stay underground, but sailed off into the blue horizon. Whether they would ever return was anybody’s guess. Barings made its living by big bets: it bet on the Dutch East India Company, the United States in the War of 1812, the government of Argentina, and, fatally, the Japanese stock market on the eve of its collapse in January 1995. Barings speaks to the kind of arrogant merchant independence that – as historical materialism has it – is meant to eventually give rise to Georges Dantons and Oliver Cromwells. Its eventual demise in 1995 was entirely in character, the result of a wildman trader who made slap-up private bets with the bank’s money.
In its long history, the City of London has at times resembled one bank, at times the other. There is no settled character to the place. There is a basic unreality to it: the City itself is a strange survival of the old medieval municipal liberties, made stranger by the fact that it’s in England, which went further than any country in Europe in abolishing them.
[See also: Is anybody running the Bank of England?]
When we think of Frankfurt, another financial centre, we have – at any point in history – known roughly what we are getting: placidly neutral burghers. We do not with the City. The City raised a militia against Charles I, but fast forward to the postwar era and you will find the City once again a smiling servant of power. One cliché about the City during these years is that it was stuffy and old-fashioned. This is an aesthetic statement, but it was only a reflection of the City’s new remit. Now barred by law from undertaking the old speculations, it instead acted as the genial underwriter of the postwar economic consensus, and of managed decline. The bowler hats, decades out of date, and the shabby Victorian offices completed the look of a thoroughly subordinated institution, now almost a curiosity.
New freedom came with the Thatcherite Big Bang, which reconstituted the City on the old Barings model. A number of regulatory changes recreated – almost overnight – the fast, speculative and anarchic mode of British finance that had persisted from 1689 to 1914. Resurrected, too, were some of the old characters: financiers of great energy, charisma and terror, but little formal education. The leading lights of Big Bang finance, such as James Goldsmith and Simon Murray, did not pass through the staff college of the ancient universities. Nor did the influx of Essex-boys-done-good, who found at last in the new City a stage for their talents.
Fortunes revived soon created a clamour for greater independence. The most obvious physical symbol of this is Canary Wharf, a spillover of the City into east London. Here, there were no medieval pileups and none of Wren’s masterpieces for office towers to duck and swerve around. In the Docklands, the City could come into its full aesthetic swagger. The new City had a whiff of the arriviste and the parvenu; those who made their fortune there won also an independence from old social categories. The highest expression of the City’s new restiveness was modern Euroscepticism, which was bankrolled and led by two of its alumni, Goldsmith and Nigel Farage. An independence from Europe was now possible thanks to the revenues of the City, and in it lay the promise of new worlds to conquer.
But by the end of the 2000s it had been decided that the City had been too free to gamble, and that this had caused the crash of 2008. The City banker, briefly, could be cast as an enemy of society. The criticisms were familiar: these were wideboys from nowhere; arrogant, ungovernable and of no particular loyalty. What had been Fred the Shred’s pertinent credentials for running the Royal Bank of Scotland anyway, it was asked. None, apparently.
The compromise that followed is well known. But even public ownership of major banks after 2008 did not mean their subordination. Pleas for subsidy from the Square Mile were not new; bumper bailouts of, for example, the British East India Company – another old City fixture – hardly spelled the end of laissez-faire in 1772. Companies like these exist to create value for their shareholders; if this value can be huckstered away from the taxpayer, then all the better.
What ended the independence of the City was the long cultural and political crisis that opened in the middle of the 2010s. Modern Euroscepticism may have had its origins in the clamour for freer trading rules, but in 2016, and after, it was seen by the greater share of Britain’s governing classes as a direct attack on social order.
The City soon found itself conscripted in the defence of this social order. During these years, defenders of the status quo found great comfort in the traditional fixtures of the British ancien régime. Many rallied to institutions like the Speakership of the House of Commons; the House of Lords; the House of Windsor; the “Rolls-Royce” civil service; and Queen’s Counsels. The plummy-voiced Sir Nicholas Soames was wheeled out into television and radio studios. We were informed that he was Winston Churchill’s grandson. A jowly Polish aristocrat challenged Farage to a duel in 2014, to the delight of many. There was often an aesthetic distaste for these institutions, but it was generally agreed that there was something basically decent and civilised about them. They were Orwell’s scarlet-robed judges who, whatever their flaws, were a bulwark against a greater evil. They represented a hidden cache of “adults in the room”, who would defend civilised standards and the rule of law against the forces of demagoguery.
This attitude drew on a number of sources. One of them was the oeuvre of Stefan Zweig, who recounted how his native Austria-Hungary – crusty, musty, yet more or less benign – was swept away by the darker forces of the 20th century. His memoir, The World of Yesterday – rediscovered and reissued in the mid 2010s – seemed to speak to the timbre of the times. Less optimistically, it drew on the TV shows Downton Abbey and Yes Minister, in which characters defend standards of procedure and decorum with old-world politeness.
The City was an obvious beneficiary of the new sentiments. It was a grand fixture of Britian’s old establishment, perhaps the grandest of them all. In the midst of crisis, the City was very quickly reimagined on its old model: an institution of sober, bowler-hatted clerks who, with exquisite courtesy, would put the kibosh on any wild fiscal schemes – Gringotts writ large. Mentions of Fred the Shred and “bankers’ bonuses” were quietly dropped. To defenders of the status quo, the City was imagined to be their ultimate trump card. It was thought that “the Markets” would act as an ancient British establishment’s hard veto against radical change – including a putative exit from the European single market. The City would be the final underwriter of the social order established by New Labour.
For its part, the City was happy to oblige. Euroscepticism had captured the hearts of a strong minority of its members, but was never anything close to the dominant view. The City’s internal conflict over Brexit was an internal conflict over the shape of its own future. The City’s Remain faction made much of the Square Mile’s role as a clearing house for various assets, and how Brexit would put this in jeopardy. This meant, in other words, the City as a body of dutiful clerks who process pro forma transactions, such as foreign exchange and over-the-counter swaps. The City’s role would be to service the accounting needs of rising powers; it spoke to the “valet economy” of David Cameron and George Osborne. City Euroscepticism, by contrast, spoke to the old yearning for the high seas, for high risk and speculation. In the end, the former proved far stronger, and during the long crisis after 2016 the City was generally counted as a force for the status quo. Its Court of Common Council quietly voted to endorse EU membership by 17-3; HSBC, less quietly, gave in a series of adverts a full-throated endorsement of New Labour’s system of migration.
Even the triumph of Euroscepticism did little to change this; it did not refound the City on the old Thatcherite model. One reason for this was education. The generation of self-made, self-assured wideboys that dominated the City in the 1980s was the last generation to be educated in grammar schools, and the last to be educated before a degree from a university became the norm. The onward march of credentialisation, which the City has not resisted, does not lend itself to these kinds of animal spirits.
The second is legislation. As part of the remoralisation of the City after 2016, it has become accepted that the Square Mile does not exist to make money, but rather to fund the projects and initiatives of Britain’s governing classes. A large body of legislation, broad in scope, has created a whole new structure of incentives for the City, incentives which seldom reward the old freewheeling style. Net zero and levelling up are two examples; investments in these sectors have the distinct advantage of being guaranteed by the taxpayer. Another is environmental, social and governance (ESG) initiatives, which are guaranteed by force of law – chiefly the Equality Act of 2010. The act’s wide scope for “positive action” to enforce ruling pieties greatly enhanced the power of human resources departments, and was the making of figures such as Alison Rose – recently forced to resign as chief executive of NatWest because of a scandal involving Farage’s bank account. For its loyalty, the City has been welcomed back into the fold. The price has been its freedom of action, and it is a price that the City has been very willing to pay.
The political and cultural pact had been sealed. A proof of concept was found in Liz Truss. Whether it was, in fact, the bond markets of the City that had torpedoed the prime minister’s “mini-Budget” is of little moment. The bulk of Britain’s establishment believed that it had, and the City was glad to take the credit. The refrain was: buccaneering Brexiteers worship the City, but the City finds them vulgar, and regards them with cool contempt. This is a just-so story. But it is a powerful one.
As the purpose and social position of the City has changed, so too has its aesthetics. In keeping with its more conservative role, the look of the City in the 2020s skews traditionalist; it is the looping cursive of stately old banks like Coutts and Hoares. More and more is made of the old livery companies, as well as the various gothic Freedoms that the City can bestow on people like Amy Lamé and Stephen Fry. The architecture, too, has become more circumscribed. The Square Mile has always been a careful balancing act between modern and medieval elements. This has now tipped in the latter direction. There has been a complete loss of confidence in the idea of the City as a force for modernity; its new office towers are now duly built in a spirit of self-effacing twee: “the Cheesegrater”, “the Walkie Talkie”.
The most potent symbol of this was the de-banking of Farage. In a technical sense, this had its origins in ESG and anti-corruption legislation. But it was appreciated primarily for its symbolic value. Coutts, the banker to the King, the pinnacle of the British ancien régime, had seemingly dispatched Farage, the demagogue, the widest of wideboys.
The transformation is now complete. In the 2020s the Square Mile has little appetite for bold speculation, and is happy in its new remit: service and accountancy, not adventure. No new Barings has been forthcoming. The City processes subsidies, it processes the tightly-controlled Yuan, it processes green finance – whatever that means. The increasing prominence of fintech, which also merely processes payments, further speaks to this new role. This is a cultural and political choice as much as it is a financial one. The City no longer represents a confident class of independent merchants. It has instead regressed to its medieval mode: as an obliging financier of the status quo.