It was a failure of regulation

The evidence from history is clear. Weakly controlled banking systems tend to have a high proportion

The bank failures of recent weeks have been shocking. For many people it is almost beyond belief that names such as Bradford & Bingley, HBOS, Lehman Brothers and Wachovia could disappear apparently just like that. Yet economic history tells us that the risk of banking crises is ever present, goes up in an age of globalisation as capital becomes more internationally mobile and requires effective regulation to be contained.

The most infamous banking crises in economic history were those of the 1930s and the worst affected country was the United States, in which 9,000 banks failed between 1929 and 1933, a period when the money supply and real GDP fell by 29 and 33 per cent, respectively. As is well-known, the Roosevelt administration responded to the crisis with a "Bank Holiday", the introduction of Federal Deposit Insurance, re-regulation of the banking system and closure of a further 1,000 banks, and then recapitalised the banking system through the Reconstruction Finance Corporation. By 1935, the government in effect owned about a third of the American banking system and the fiscal cost of state aid to the financial system was 13 per cent of GDP. This was not, of course, the end of capitalism but a necessary, temporary phase on the road to recovery in the later 1930s.

The banking crisis of the American Great Depression was an extreme event but the risks and the costs of a milder version are not trivial. It has been found that in recent decades there has been around a 2 per cent chance per year that a country will have a banking crisis and that the cumulative GDP loss when this happens is about 6 per cent of GDP. Moreover, World Bank research shows that the fiscal costs of a banking crisis are frequently 10 per cent or more of GDP.

Mainstream economists are well aware that important "market failure" issues arise in the context of banking. In a world of imperfect and asymmetric information, the banking system is prone to failures of monitoring by depositors (who face a free-rider problem) and excessive risk-taking ("moral hazard") by bankers. Bank runs are an ever-present risk in a context of uncertainty about the true value of bank assets and the inability of depositors to co-ordinate their actions. The implications are that solvent banks with liquidity problems may be forced into bankruptcy and that a scramble for liquidity may entail meltdown risks for the financial system. These points were long ago well articulated by writers such as Frederic Mishkin, and have found their way into the textbooks.

Several equally well-known and important policy lessons follow. These include the crucial role of the central bank as the lender of last resort and the fundamental importance of the state as a regulator and supervisor of the banking system. This should entail ensuring the capital adequacy of banks, overseeing risk management strategies, enforcing appropriate accounting standards and so on. When banking crises occur, the role of the government is to apportion losses between shareholders, depositors and taxpayers and to facilitate the recapitalisation of banks. The politics of this may be difficult but the alternative meltdown risk of inaction is much worse.

The historical evidence is quite clear. Badly regulated banking systems are much more likely to have a high proportion of non-performing loans and to fail. There were no banking crises in western countries in the Bretton Woods era of strict regulation and international capital controls that followed the debacle of the 1930s. Bank failures are generally not random events, although contagion can occur. In 1929, American banks were inadequately regulated and the banks that failed were those that had weak balance sheets before the crisis hit. In the Asian crisis of 1997-98, it was the weakly regulated Korean banking system that collapsed, while the well-regulated Singaporean system emerged unscathed.

Clearly, regulation can be excessive and can impose unnecessary costs. For example, the prohibition of universal banking in the United States by the Glass-Steagall Act of 1933 was a draconian overreaction, as were the restrictions on international capital movements in the 1950s. Nevertheless, a sound regulatory regime is fundamental to the successful functioning of the financial system and to financial stability, and is a central responsibility of government.

It must be questioned how well the British government has performed in terms of financial regulation. For example, the recent Financial Development Report of the World Economic Forum rated the UK only 23rd out of 52 countries on its financial stability index and saw the UK as having a relatively high risk of a systemic banking crisis. It is important that the government acts to prevent the banking crisis getting worse. But it will be poetic injustice if Gordon Brown eventually claims the credit for "saving the British banking system" (with taxpayers' money), given that the roots of the problem lie in the inadequate regulatory regime that he put in place.

Nicholas Crafts is professor of economic history at the University of Warwick

This article first appeared in the 06 October 2008 issue of the New Statesman, Perils of power

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Einstein’s monsters: what the Cold War films of the 1980s can teach us

Amid the paranoia of the eighties, film-makers attempted to convey the terrifying reality of a nuclear attack. Now in this new age of anxiety we are returning to their prophetic visions

On 1 December 2017, Hawaii’s nuclear war siren network was tested for the first time since the Cold War. Then, on 13 January, a message was sent to that state’s mobile phone networks warning of an incoming ballistic attack (38 long minutes later, this was corrected). On 25 January, the Doomsday Clock was put forward to two minutes to midnight by the Bulletin of the Atomic Scientists, and on 2 February, the US Government published its Nuclear Posture Review, proposing a new arsenal of tactical weapons.

In the space of a few months, the West was transported back to a time that until recently seemed impossibly distant – a time when a new American president was expanding his military ambitions, and a British prime minister was doing anything in her power to galvanise that special relationship.

To grow up in the early 1980s was to grow up with a cloud, one that lifted suddenly into a toroidal fireball usually seen in stock footage or shuddery animation. It was also to grow up with a sound that had been familiar in Britain 40 years earlier: a low wail, rising and descending, like a wounded wolf’s howl. Another eerie sound lingers in the mind from this time: the calm, clipped vowels of a male announcer, advising how to build shelters, avoid fallout, and wrap up your dead loved ones in polythene, bury them, and tag their bodies.

These elements came together in Richard Taylor Cartoon Films’ Protect and Survive series, a collection of public information films made for the government’s Central Office of Information in 1975. They first leaked in 1980, inspiring two groundbreaking British films: a two-hour BBC docudrama that has only been shown three times by the broadcaster, Threads (1984), and a 90-minute animated film about an elderly couple following government advice before, during and after the bomb, called When The Wind Blows (1986).

Threads begins with a close-up of a spider weaving its web, and a voiceover telling us that “everything connects”. We cut to a young couple, middle-class Ruth and working-class Jimmy, heavy-petting in a car in the Peak District; she gets pregnant, and their families nervously meet. The warm hum of TV and radio news forms a comforting haze in the background, until its contents pulse through.

A schoolgirl slowly downs her milk and looks at her wireless. A pub landlord changes a TV channel but his punters want to hear more about Iran. A teenager runs into a shop to tell Mam to come home: the Russians and Americans have started fighting. Forty-six excruciatingly tense minutes into Mick Jackson and Barry Hines’s film, it comes: sirens, upturned buggies, urine down trouser legs, a soft swell of volatile gases above Sheffield. Blasts. Flames. Winds. Silence.

In January, a mass-watching of Threads, hashtagged #ThreadDread on Twitter, was led by Julie McDowall, a journalist and nuclear threat expert campaigning for the BBC to show it for the first time since 2003. The US secretary of state George Shultz saw the film when it aired on CNN in 1985, and it is alleged that it affected the Reagan’s government’s attitude to nuclear war. Jimmy Murakami’s adaptation of Raymond Briggs’ graphic novel When the Wind Blows was brought up by Lord Jenkins of Putney in the House of Lords: he asked Baroness Hooper for an assurance that it would not be banned from being shown in schools. The work of the visual imagination can be powerful; brutal enough to make a difference. 

 The 1984 BBC film Threads was unflinching in its depiction of the horror caused by nuclear fallout after a bomb falls in Sheffield. Credit: AF archive/ Alamy

The Protect and Survive films that had a huge impact on popular culture were only shown twice on British TV: first on 10 March 1980, on the Panorama episode, “If The Bomb Drops” – and once again on a shop’s TV screens in the first section of Threads (the films were declassified in 2005, and are now available on DVD). “They have never been seen before and won’t be seen again until nuclear war is imminent,” explained Panorama’s fresh-faced 29-year-old presenter, Jeremy Paxman. “Their advice is intended to be reassuring.”

Reassurance was the reason that the veteran voiceover artist Patrick Allen was chosen to be their narrator; he was best known at the time for a Barratt Homes TV advert, where he is filmed grinning from a helicopter. (In 1984, he recorded less reassuring lines for a 12-inch mix of Frankie Goes to Hollywood’s No 1 hit “Two Tribes” in a pointed Protect and Survive style: “I am the last voice you will ever hear,” Allen says. “Do not be alarmed.”)

The BBC Radiophonic Workshop’s Roger Limb wrote the series’ electronic theme, which involved two melodies at high and low pitches, coming together – like people, he says. He handed over his tape to the films’ producer, Bruce Parsons in an alley, such was the secrecy required. It is the films’ visual language, however, that remains their most haunting element. They feature a white, cardboard house against a wall of sky-blue, with two faceless parents holding their children’s hands for a logo. The animator Roger McIntosh, then 27, designed this and the film’s mushroom cloud, and remembers signing the Official Secrets Act. “Having a simple style was essential, so the films couldn’t be seen to be entertainment,” he says. “They had to be understood by all audiences, at all levels of education.”

There was a terrifying flipside to that innocent, familiar world. “Their instructions seemed absolutely pointless, to be honest with you,” McIntosh adds. “But, in the face of Armageddon… well, it was a job.”

The editor of Panorama in 1980, Roger Bolton, was shocked when he first saw the films. Now the presenter of Radio 4’s listener programme, Feedback, he remembers visiting the US in late 1979, and realising the impact expanding international defence programmes would have on the UK, which disbanded its civil defence corps in 1968. Panorama’s producer, David Darlow, convinced a local government commissioner to leak the Protect and Survive films to him; Bolton knew broadcasting them was a gamble. “But these films’ instructions were ludicrous. I knew the military would think them ludicrous. So I didn’t ask permission – I just put them out.”

 After broadcast, remarkably, there were few repercussions, although Darlow claims his name was blackened in intelligence circles. The Protect and Survive booklets, which the documentary claimed would take four weeks to produce in the immediate wake of a nuclear threat, were also printed up later that year, and sold, to those who could afford them, for 50p.

But attitudes towards the government were changing, Bolton says. “We have to remember this was only 35 years after the Second World War. People in government were older then, and still believed in the power of authority in wartime. But we were children of the Sixties. We knew we had to question everything.” The economic and political volatility of Britain in 1970s contributed to this mood, and Bolton’s young team rode with the spirit of the times.

“We were very young, and doubtless very arrogant, back then. But with the BBC’s resources, as they were then, at our disposal, if the basic question, ‘Should we do this?’ came up…” He laughs. “Well, we did this.”

 Jim consults his Protect and Survive pamphlet in When the Wind Blows (1986). Credit: AF archive/ Alamy

Across the Atlantic, in his Los Angeles sunroom, Mick Jackson is remembering his days as a BBC documentary maker too. He reads the handwritten letter framed on its wall, dated 24 September 1984, from the then leader of the opposition, Neil Kinnock:

Dear Michael Jackson and Barry Hines,

I’d like to thank you and everyone involved in the making of Threads for your important and impressive work. The story must be told time and time again until the idea of using nuclear weapons is pushed into past history. Don’t, by the way, be troubled by the possibility that some people might be inured to the real thing by seeing horrifying films. The dangers of complacency are much greater than
any risks of knowledge.

Neil Kinnock

“Great rhythmic phrase at the end,” Jackson says, proudly. “Very Kinnock-like.”

 Now a Hollywood director – the Whitney Houston/Kevin Costner blockbuster, The Bodyguard, and the David Irving biopic Denial are on his CV – Jackson began his career making science programmes. An electronic engineering graduate who “changed his mind and then went to film school”, he joined the BBC in 1965, soon after it had decided not to broadcast Peter Watkins’s The War Game, the first film to depict brutally the effects of a nuclear bomb (it was shown in cinemas instead and won the 1966 Oscar for Best Documentary).

“There was a real sense of shame pervading the BBC about that decision,” says Jackson. It had wanted to share the responsibility for broadcasting the film with the Home Office, he explains; the Cabinet Secretary at the time, Burke Trend, said the government “would be relieved” if the BBC didn’t transmit. “That was a clever move. The War Game obviously had a political agenda. And that’s also a problem, obviously, for the BBC.”

After the Panorama special, however, the BBC had renewed confidence, and protest movements against nuclear programmes were also developing at pace (the first women’s peace camp at Greenham Common took place in late 1981, after Margaret Thatcher’s government announced its acquisition of US Trident missiles). Now working on a new BBC science series, QED, Jackson proposed a “scrupulously factual, unbiased” episode, “A Guide to Armageddon”, which coolly described the effects of a one-megaton blast.

Throughout it, images of ordinary life are juxtaposed with horror-movie detail: Jackson used a photo of his local butcher’s in Holland Park, then a close-up of animal fats burning from a pig’s leg, to show the effects of nuclear blast on human flesh. Couples are also seen building or buying shelters of various kinds: Joy and Eric build one under the stairs that will save them for 17 seconds. “I’d wanted to call it ‘A Consumer’s Guide to Armageddon’,” Jackson laughs. “For some reason, the BBC thought that unduly provocative. ‘But I am a scientist,’ I said. ‘Everything will be citable, provable.’” Jackson’s documentary was broadcast on 26 July 1982 and Threads went into pre-production the following year.

Filmed in 17 days in early 1984 on a budget of £250,000, Threads featured a cast of extras consisting mainly of CND supporters, loaned by Sheffield City Council (the area had recently declared itself a nuclear-free zone). Its script was by Barry Hines, best known for the uncompromising 1968 film Kes: he knew how to write Yorkshire because that’s where he was from. He battled ferociously with Jackson about Paul Vaughan’s intermittent, newsy voiceover, feeling that it smothered his drama, but Jackson knew a sui generis form for the film was essential to make it stand out.

This attitude hardened in November 1983 after Jackson saw the American post-apocalyptic TV movie, The Day After. Watched by 100 million people in the US, and featuring a similarly slow-burning series of real-life stories to Threads, well-known actors such as Jason Robards and Steve Guttenberg prettied it up, and its setting was sanitised. “I mean, the hospital scene in it – the electricity was working!” Jackson rants. In Threads, amputations are delivered without anaesthetic; people bite on rags. Jackson says: “The idea of nuclear war informing a new species of made-for-TV disaster movies was the worst thing that could happen, to my mind. I wanted to show the full horror. I felt that was absolutely my responsibility.”

There were other motivations behind this attitude, he says. A day after Threads was broadcast, as part of a night that also featured a political debate, Jackson went on BBC One’s Pebble Mill with a beeper on his belt – his wife was due to have their first child. Her being pregnant throughout the filming of Threads puts three of its scenes in a particularly tough light: Ruth sees a woman rocking her dead baby, her eyes numb and wide; she herself gives birth in a rural barn, alone, biting through her daughter’s umbilical cord with her teeth; and her own daughter, Jane, gives birth ten years later. In the final scene, Jane is handed her baby, but we don’t see the child. Jane looks at it and she screams. “For Threads to work, I had to try to let images and emotion happen in people’s minds,” Jackson says. “Or rather in the extensions of their imaginations.”


Sheffield City Centre, January 2018. Around the corner from The Moor, the square in which we see the upturned buggies after the bomb, 75-year-old Rita May sits in BBC Sheffield’s reception. “When the bomb goes off, the camera’s on me!” she says, half-surprised – she watched Threads the day before for the first time in decades, seeing herself in a front room in her early forties, next to a window unprotected from the blast. “It’s dated a bit, I thought. But oh, that make-up. Bran flakes and gelatine. Horrible, it was.”

She played Mrs Kemp, the mother of Jimmy, a woman oblivious to the encroaching horror. Her character screams for the first time when she realises her youngest son, Michael, isn’t with her – then her skin is horrendously burned. She goes into the fallout minutes later with her husband, against all advice, and finds Michael’s blackened foot in the rubble.

May keeps her maroon anorak on while she talks, her manner all no-nonsense northern. After the bomb drops the film continues for an hour and seven minutes, covering another ten years. Backstage was a gala of cheap, terrifying special effects, she remembers. Racks of clothes were blowtorched daily on-set by the wardrobe team. Karen Meagher, who played Ruth Beckett, wore her cataract contact lenses while doing her supermarket shopping, in order to get used to them. And the umbilical cord Ruth chewed through? “Made of liquorice!” This cheapness is often apparent in the film, but other moments ensure it doesn’t matter: Mrs Kemp’s husband trying to find food while holding on to Michael’s favourite toy, a broken electronic game; Ruth carrying Jimmy’s old book of birds. Old threads being clung to, before they finally yield.

The subtle familiarity of the faces in Threads is a large part of its power today. May has played minor characters in Coronation Street, larger roles in BBC and Sky One sitcoms, and after Threads was in the ITV kids’ series Children’s Ward for years. This may explain why Threads had a disturbing effect on the generation who
were aware of the nuclear threat as children, but only saw the films a little later. Recognisable faces made it more chilling.

May remembers a screening for the whole cast and extras just before the BBC broadcast. It was a Sunday, in Sheffield’s Fiesta Nightclub, the tables set in a cabaret style. “After it finished, no one could speak.” (Jackson recalls this event too: “These people had known what they were doing in the film, taken part in the crowd scenes, but the effect the whole thing had on them was extraordinary – all these people weeping.”)

May herself had a recurring dream afterwards, she says, in which she was standing by a window, just like Mrs Kemp had been. “My boys were young in it, playing outside, and then I saw a mushroom cloud behind them. Funny that, isn’t it?” It also made May think about her mother, who’d seen a doodlebug suddenly, one day in Sheffield, during the Second War. “Apparently, it destroyed the house next door,” she says. May tugs her gold locket. “We forget what that fear feels like easily, don’t we?”


There is, however, an appetite to remember. On a late winter’s afternoon in London, the BFI Southbank’s NFT3 cinema is full of people ready to experience When the Wind Blows on a big screen. It begins gently: Jim Bloggs (John Mills) bumbling about the house, a Protect and Survive booklet in his hand acquired from his local library. He gazes out of his window in the countryside, seemingly so far away from danger. After the bomb drops, his wife, Hilda (Peggy Ashcroft), worries about trivial things: the filth on her cushions, her blackened, slashed curtains – then later, as reality hits her, the weals on her legs. At the end of the film Jim prays, his mind unravelling with sickness, as the couple tuck themselves up in the bags that become their forgotten coffins.

The film’s executive producer, Iain Harvey, talked to the BFI audience. He explained that it took three years to raise funds to make When the Wind Blows, despite it being developed after the success of another Raymond Briggs adaptation, The Snowman. Nuclear weapons policy had hardened, if anything, in Britain in the mid-1980s:  as late as April 1986 Thatcher was writing her first open letter on the topic to her local paper, the Finchley Times. “Nuclear weapons have kept the peace for over 40 years,” she wrote. “Of course, in an ideal world there would be no weapons of mass destruction. But they exist, and they cannot be disinvented.” Fifteen days later, on 25 April, the No 4 reactor at Chernobyl Nuclear Power Plant exploded, sending clouds of radioactive caesium-137 slowly drifting westwards.

When the Wind Blows felt particularly vital at its world premiere just six months after Chernobyl. The film is dedicated to the children born to the relatively young cast and crew during its production: Harvey’s daughter, now 32, is in the audience today. Two women raise their hands, admitting that When the Wind Blows haunted them after they saw it as children. “We weren’t out to terrify you,” Harvey assures them. He tells me later how angry he would get when the film was criticised as being too party political. “After all,” he says, “what is party political about trying to ensure the world isn’t destroyed by nuclear war?”

A week later, Raymond Briggs calls me: now 84, he rarely ventures from his rural Sussex home. He also couldn’t stop watching When the Wind Blows the other day – but for different reasons. “That box separate to the telly – I couldn’t bloody switch it off.” He’s grumpy this morning and half-apologises; he’s softer recalling an old memory that inspired his anti-war stance.

“I remember standing at my window in Wimbledon Common, thinking of those ships on their way to Cuba. ‘All this out here,’ I remember thinking, ‘could be gone.’” He was 28 in 1962. “And now all this North Korea business. One bloke speaking off the cuff and the next day…” He tails off. “Thank God I’m 84, that’s all I can say.”

When the Wind Blows acknowledges how easy it is to become romantic about war. Briggs used his childhood experiences in the Second World War to address this nostalgia in the film, inserting his own Morrison shelter, covered with pin-ups, for Jim Bloggs’s, and taking inspiration from his own brief evacuation to a rural idyll far away from the bombs.

But as Threads and When the Wind Blows made clear, there is no rural idyll away from the bombs. And while modern dramas and documentaries have not confronted this reality, these older, bolder films still have a power to draw people together – on social media, in government, or even in smaller, more familiar ways. Mick Jackson’s father spent time in the Royal Army Medical Corps during the war. After he saw Threads, he started talking about what he’d seen for the first time. “That was absolutely what our work was about,” says Jackson, 34 years later. “To never forget, but to try, with the power we had, to change things.” 

“Threads” is released on DVD through Simply Media on 9 April; “When the Wind Blows” is out now on DVD, through the BFI

Tom Gatti and Kate Mossman are joined by Jude Rogers to discuss the 1984 nuclear disaster drama Threads. Then they talk about the Oscar-nominated film I, Tonya, and finally celebrate the noniversary of Jarvis Cocker invading the stage at the 1996 Brit Awards.

Listen on iTunes here, on Acast here or via the player below:

Our theme music is "God Speed" by Pistol Jazz, licensed under Creative Commons.

This article first appeared in the 06 October 2008 issue of the New Statesman, Perils of power