Christopher Silvester on the peculiarly English Big Bang three decades on, and Mark Le Fanu on the struggle of Eastern European aristocrats.
Crash Bang Wallop
The Inside Story of London’s Big Bang and the Financial Revolution that Changed the World by Iain Martin
In his first sentence, Iain Martin asks the most obvious question: was Big Bang a good thing? And straight away he acknowledges that 30 years on, ‘there is no consensus about what it meant or on whether its impact was benign or malign’. In the narrowest sense, what Big Bang meant was the end of dual capacity, the practice whereby stockjobbers and stockbrokers traded shares on the floor of the old Stock Exchange. In its stead was introduced a computerised system which ushered in electronic trading.
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In the wider sense, however, Big Bang represented a lot more than that. It represented a wider cultural shift, whereby a workshy gentlemanly clubbish world, in which caddish characters existed but were ostracised as ‘dodge’, was supplanted by a more hard-headed world of thrusting and dynamic working practices, in which the villains had to be tamed by legal regulation. There was also an invasion of foreign personnel: Americans, Japanese, Europeans, especially French. As Martin writes: ‘Out went British ownership and dominance in the City; in came ever more of the hard-working Americans, ensuring that something intangible and peculiarly English was lost.’
Yet Big Bang was also as peculiarly English as Dunkirk. It was hardly the result of a strategic plan to reinvent the City as a global financial centre. It was forced upon the City by external factors: the threat of legal action before the Restrictive Practices Court and a new Conservative government which did not look with sympathy on the City’s attempt to reach a cosy deal. Mrs Thatcher was wary of being nobbled by Sir Nicholas Goodison, the chairman of the London Stock Exchange. Indeed, to some extent Mrs Thatcher regarded the City’s traditional mindset as part of the problem of Britain’s economic decline and not necessarily part of the solution. ‘One of the great myths — fostered by the privatisations and reforms she introduced from which flowed great wealth to an old and new City generation — is that she was always a natural supporter of the Square Mile and its grandees, and deliberately designed a deregulatory cornucopia of delights for
them,’ writes Martin. ‘This was not the case.’
Similarly, Canary Wharf, which became inextricably linked with the post-Big Bang City, was not a government initiative, or even an expansionist initiative on the part of the City of London Corporation, but rather the vision of a US property developer called Gooch Ware Travelstead and the chairman of Credit Suisse First Boston’s London operation, Michael von Clemm. Both had moved on by the time Canary Wharf came to fruition, while the City of London Corporation eventually caught up and began to plan for large-scale redevelopment within the Square Mile.
What Big Bang meant above all else was a deluge of wealth and new forms of ostentation. The bonus culture became the new orthodoxy, giving rise to the joke about the employee who complained that he couldn’t live on his salary eliciting the response from an executive: ‘You live on your salary?’
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The great strength of Martin’s book is that it effortlessly locates Big Bang and the characters who changed City practice in the wider picture of events. As early morning starts became the norm in the Square Mile, ‘the price of country houses along the M4… began to rise sharply’ and ‘the need for a week-time London pied-à-terre — and a bonus to buy it with — became greater’.
Martin’s early chapters give us a whirlwind history of the City before Big Bang. He starts with the Elizabethan merchant and financier Thomas Gresham, then covers the South Sea Bubble, the railway failures and Victorian banking crises, and the overtaking of the City by Wall Street following the First World War. The Luftwaffe did a pretty good job of destroying as much as a third of the physical fabric of the City during the Blitz, but as if that were not enough the post-1945 Labour government forced through a programme of nationalisation which undermined its activities: ‘The normal operation of the private sector was constrained, which meant fewer shares and less scope for what the City did, namely trading.’
What rescued the City was the trading revolution that ensued from Siegmund Warburg’s Eurobond in the 1960s — a debt instrument that helped to reconstruct Europe when President Kennedy clamped down on American financiers investing overseas. By the end of the 1960s, $3 billion of Eurobonds were issued annually. In 2013, that annual figure had reached $4 trillion.
Again predating Big Bang was the wave of takeovers of City firms by overseas, mainly American, banks in the early 1980s. Around 750 millionaires were created in the process, with the total being paid for these firms estimated at £1.5 billion.
Again, although it seemed preordained, it was coincidence that Big Bang happened at the same time as the Thatcher government’s privatisation drive, which Martin calls ‘the biggest sell-off in the history of capitalism’. City institutions had to learn on their feet, but the merchant banks and the City law firms as well as the Stock Exchange more than rose to the occasion.
Of course, there were the scandals: Guinness’s fraudulent share-support operation, insider trading, Nick Leeson’s gambling with shareholders’ money, etc. Morgan, Grenfell, Warburg, and Barings bit the dust, taken over by foreign entities. There was a frenzy of creative destruction after the 1987 Black Monday crash laid waste to excessive capacity and many of the old firms went under or were acquired by overseas companies.
In conclusion, the avowedly ‘pro-market’ Martin allows some of the key players in Big Bang to give their retrospective assessments. The sternest critic is Stani Yassukovich, Goodison’s deputy chairman at the Stock Exchange. ‘The worst result of Big Bang was that most of the partners took the money and ran to buy estates in Gloucestershire, which meant a huge exodus of talent and experience,’ he says. ‘That changed the ethos and culture of the City for the worse. We saw the departure of people who had worried about the reputation of their firm rather than whether bonuses will be paid. It created a movement towards acquisition and to consolidation, which led to too big to manage and too big to fail.’
For all the wealth created by Big Bang, and the much-vaunted pre-eminence of the City as a global financial centre, this seems like a sober and reasonable charge against a generation that abnegated its responsibility.
Comrade Baron
A Journey through the Vanishing World of the Transylvanian Aristocracy by Jaap Scholten
As aristocracies go, the Transylvanian variety of the species must be one of the most exotic. One might even be tempted to wonder whether the institution exists, outside of fiction. But here we are with a new book on the subject, whose subtitle tells us, not that it has definitively ‘vanished’, but that it is vanishing, in the present tense. By definition, therefore, still with us — at least for the time being.
And Transylvania? That exists too, not just in the fervid imagination of Bram Stoker and his fictional Count Dracula. The word means literally ‘beyond the forests’: it signifies the quite sizeable portion (103,000sq km) of the eastern Austro-Hungarian empire nestling against the arc of the Carpathians. Historically Hungarian, this fertile and beautiful territory was handed over to Romania by the Treaty of Trianon in 1920, as a penalty to Hungary for being on the ‘wrong side’ in the First World War.
A somewhat divided place, perhaps. The majority of the population is Romanian (with a sizeable admixture of Gypsies), whereas that vanishing ruling class is — or was — Hungarian, and proud of it. But peasants and masters seem to have got on together, in their feudal way. It was only with the coming of communism, after another appalling world war, that the class as a whole faced extinction.
Jaap Scholten’s book tells the story of that minor catastrophe in a manner at once personal and scholarly. The author has done a huge amount of research, yet the result is pleasingly mixed in with autobiography, with the end result coming across as a genuine voyage of discovery. A Dutchman by birth, the author married into the caste in question in the early 1990s, and the book takes the form of a sort of massive oral history of his wife’s multitudinous relatives.
Bethlen, Teleki, Pálffy, Mikes, Bornemissza: the literary reader will have come across some of these names before. Paddy Leigh Fermor’s pre-war journey across the continent on foot (chronicled in his memoir Between the Woods and the Water) lingers long over the castles of Transylvania, where he conducted a series of love affairs with exotic chatelaines.
Then there is that fascinating figure of Count Miklos Bánffy, author of a stupendously Proustian trilogy of novels that came out between the wars and has recently been translated into English. From this work we learn a number of interesting and possibly surprising facts; for example, that the class as a whole was Protestant, not Catholic. Also that titles, as such, weren’t at a premium. While there were a fair number of counts and barons sprinkled among this aristocracy’s ranks, the oldest families of all (such as the Ugrons) were and remain proudly untitled — though of course they possessed patents of nobility, along with the privileges and wealth that descended from this.
The flavour of dolce far niente is given in Scholten’s early chapter headings: ‘Purdeys, plus-fours and whist’, ‘The hand kiss’, and ‘For four years we did nothing but dance’. A charming early episode recounts the adventure of a pet bear named Nikolai who had his own bedroom in the castle with a large square divan and soft pillows. Apparently he sat in an armchair and drank beer from a bottle. ‘When visitors arrived from Kolozsvár,’ says Countess Erzsébet T, who is telling the story, ‘we would send Nikolai to answer the front door bell.’
These happy, innocent days came to an end with the accession to power, in 1947, of Nicolae Ceausescu’s predecessor, a sinister Stalinist named Gheorghe Gheorghiu-Dej, at the head of a party dedicated to the eradication of ‘class enemies’. Shortly afterwards, on 2 March 1949, a law was adopted under which all estates of 50 hectares or more were nationalised. The dispossessed owners were left to fend for themselves. Some fled to Hungary or further afield. Those spared jail or execution were forced into lowly occupations, while their offspring were vengefully denied entry into higher education.
The systematic cruelty of the communist regime in pursuit of its ideological goals is gone into in detail by Scholten and makes harrowing reading, whether he is describing the slave labour conditions that operated during the construction of the Danube-Black Sea Canal or telling us what it was like to be forced to live for twenty years in a stinking underground cellar. There is no beating about the bush here: Romanian communism was an unmitigated evil for as long as it lasted, and some of Scholten’s most vivid pages mount an appropriately eloquent denunciation of the horrors of the collectivist fantasy.
That all came to an end in December 1989 with the downfall of the regime and the execution of the ghastly Ceausescus. Unlike neighbouring Hungary, Romania set in place a liberal restitution policy, so that Scholten’s story could be said to have a surprise happy ending. A fair number of his interviewees and their descendants got their castles back.
The book concludes with an account of a marvellous summer ball held in the ruined courtyard of Bonchida, the Bánffys’ great baroque palace a few miles north of Cluj-Napoca. For a few happy hours the dream of civility lived again. It is not the done thing these days to praise elites, but one can’t help thinking that some elites are more attractive than others. Those Transylvanian aristocrats possessed (and possess) style and elegance, in buckets. And they were brave too. After reading this book, it is difficult to avoid wishing good luck to them.
