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  1. Wealth
April 19, 2016

Book reviews — Rolls Royce: The Magic of a Name by Peter Pugh and Capitalism: Money, Morals and Markets by John Plender

By Spear's

Peter York on a chewy history of our most famous car brand and Christopher Silvester on an erudite and witty defence of capitalism.

Rolls Royce: The Magic of a Name

The first 40 years of britain’s most prestigious company, 1904-1944

Peter Pugh

The magic in Rolls-Royce’s name means that the smallish top-end British car brand – the origins of the R-R business  – completely eclipses the huge economically important aero-engine manufacturers – now a completely separate company – in the public consciousness. Everyone’s first image is of a period Rolls – shot from the front, with its great Greek Temple radiator with that logo – as we’d call it now – its emblem/badge topped with the Spirit of Ecstasy mascot (introduced in 1911).

And the language comes unbidden too: ‘the best car in the world’ or ‘the Rolls-Royce of….whatever’. Rolls-Royce became a national byword for excellence, a measuring-stick for everything, and one with practically global brand recognition. The car’s the star.

And the point of the car was more than mechanical excellence – quietness, durability, performance, etc: it was luxury, social smartness, extravagant display. It’s the history of the amazingly bling transport ‘coach-built’ – i.e. bespoke – for Maharajahs and Hollywood stars, for British royalty and – in the early days at least – the aristocracy. This is a social phenomenon, and a marketing one. It’s a brand story.

But although the cover photograph shows toffs in an Edwardian Rolls-Royce, only a third of the book is about cars – the rest is about aero engines. And Although the Edwardian Gilded Age is the story of the New Technology, New Money and New People, the fascinating social context of Rolls-Royce’s origins (founded in 1904) doesn’t interest Peter Pugh much, beyond remaking the class differences between the founders – Rolls was a relatively plutocratic Etonian, Royce more the product of the apprenticed artisan classes. But what an opportunity this would have been for a social historian like Richard Davenport-Hines to trace the original owners back over the years – to do a taxonomy of R-R ownership as a picture of a changing world.

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But this isn’t a social history or a brand history or a business history either, because we don’t get much idea of how the business performed.

It’s actually something else entirely, more like the kind of book designed to be given away rather than sold, and acknowledged rather than widely read. It really belongs in that curious category called ‘the company history’. Books commissioned, sponsored and approved by their subjects. Peter Pugh runs a company which turns out company histories – he’s done 30 of them himself – and the acknowledgements and credits are full of Rolls-Royce people, past and present (this is a reprint of a book first published in 2000) and for Sir Ralph Robins the then CEO of Rolls-Royce. Rolls-Royce the aero-engine manufacturer, that is; the two businesses parted company in 1973.

It’s not clear whether this was a commissioned and paid-for history, but it certainly reads like one. If you exclude the social, biographical and business approaches to the Rolls-Royce story, and if you avoid analysis and interpretation, you’re left with a kind of history based on the undigested flow of events and page-long quotes. And technology.

The market for this book is a particular kind of enthusiast. The pre-geek, train-spotting kind, someone who knows most of the story already but can’t get enough of it. Someone used to reading long monographs published by enthusiasts’ groups and contributing a trial of corrections (“I think you will find…”). This readership is almost exclusively male and getting on a bit.

These people – the absolute salt of the earth – just know that this quite epically stodgy book is chock full of interesting things if you know where to find them, or you’re prepared to chew through it steadily from beginning to end. There are Fascinating Facts like the first working car production in Vienna in 1865 (I’d no idea!). And there are glimpses of a manly, pipe-smoking, moustachioed Lost World of the technical enthusiasts who never slept when they were developing a new ignition system or a better cylinder block. And of a counterpart cohort of Mr Cholmondey-Warners, in a variety of between-the-wars ministries and institutions. I’m sure it’s all riveting to a small group of people who so aren’t me.

And then there’s the question of style. Pugh is an experienced professional writer, a Cambridge history graduate, not a Co-op area manager with a Saturday obsession. And yet he produces prose of a kind I haven’t read for years outside of the ‘Proceedings of…’ genre. As Horace Fletcher, the Great Victorian Masticator said ‘chew every mouthful a hundred times’. It’s something of an achievement to take the Edwardian Gilded Age and the world’s most definitive luxury brand, underwritten by two 20th-century crucial technologies and come up with anything quite as chewy as this.

Capitalism: Money, Morals and Markets

John Plender

‘Continuing revelations of unethical and criminal behaviour since the financial crisis suggest that the stock of moral capital has fallen to a much lower level than has prevailed in recent decades.’ That is the conclusion of John Plender, a financial journalist of many years’ standing (first at the Economist, later at the FT) and a lecturer at various business schools. He also served on the UK Company Law Review steering group, which provided the blueprint for the UK’s 2006 Companies Act.

In the week of writing this review, a bunch of defendants (as David Cameron might see fit to call them) were acquitted on charges of conspiracy to manipulate the Libor benchmark. An Italian working for a French investment bank in London told me that his compliance department now contains multilingual officers whose principal activity is to read the emails of the bankers. If these emails contain silly stuff, the monitors are happy. The sillier, the better, in fact, just so long as there is no criminality.

The problem with modern-day rogue traders, says Plender, is that they ‘appear to have no shame gene’. They might face tougher jail sentence and find religion in the United States, but it is ‘only a mild exaggeration to say that European rogue traders serve relatively short sentences before taking to the lecture circuit to tell the world that the damage they wrought was largely the fault of their arrogant and stupid bosses’.

Capitalism displays Plender’s wisdom, learning and wit in equal measure. In 300 pages (twelve chapters and an introduction) he skewers the various themes that have preoccupied assessors of capitalism through the centuries, including religion and morality, finance versus industry, trade, debt, speculation, and taxation.

Contrasting the 30 pages of Glass-Steagall with the 30,000 pages of Dodd-Frank, Plender calls the former ‘throat-clearing’. European rules are likely to go further still, he notes, and might run to as many as 60,000 pages.

He is generous towards entrepreneurs (Edison is a hero) and considers the negative Keynesian view of them as ‘seriously anti-social’. If entrepreneurs (who are found ‘at all points of the ethical spectrum’) are the true capitalists, bankers are the capitalists who give capitalism a bad name. Plender has little time for them. ‘To put it crudely, capitalism has been hijacked by the banks,’ he writes, and it is only a matter of time ‘before the system blows up again’. Not especially bothered about ring-fencing, he nonetheless believes that ‘the banks’ market-making activity in derivatives needs to be taken outside banks and kept as small as possible to ensure that bankruptcies do not bring down the whole system’.

If bankers are not worthy of admiration, much the same may be said for economists. Their ‘quest for the status of physical science for their discipline has also encouraged them to seek to drain their academic discipline of moral content’. With the noted exception of Hyman Minsky, they tend to be Walter Mitty-ish and ahistorical in their thinking. Efficient market theorists and the Chicago School come up against such weird facts of life as Madame Onoe Nui, the Osaka restaurant owner to whose establishment the cream of Japanese bankers and stock market players made pilgrimage so that they could worship her pet ceramic toad. ‘At his peak in 1990, the toad controlled more than $10 billion in financial instruments, making its owners the world’s largest individual stock owner.’ As Plender drily observes: ‘It is a curious irony that so many economists who believe passionately in the market process are surprisingly myopic in their understanding of markets.’ He even goes so far as to say that economists lack usefulness.

Plender has read numerous books about economics and business so that we don’t have to. If you’re never likely to get round to reading Robert Skidelsky’s biography of John Maynard Keynes, fear not. For Plender has disinterred the salient facts about Keynes’s own career as a speculator. In the late 1930s, while taking a punt on the price of wheat during a price fall, he bizarrely contemplated turning the chapel of King’s College, Cambridge, where he was a don and also responsible for managing the college’s own investment fund, into a giant temporary grain warehouse until the price of wheat should recover. In fact, the chapel wouldn’t have been large enough for him to take delivery of his allocation of the physical commodity, so he ingeniously objected to the grain’s quality and waited for it to be cleaned, by which time the price should recovered. Keynes’s net worth in 1936 was the equivalent of £25 million in today’s money, although it had more than halved to £12 million by the time he died ten years later.

But it is not just tidbits such as this with which he laces his argument. His range of literary reference is impressive. There are obvious ports of call, such as Defoe, Voltaire, Goethe, Mandeville, Balzac, Trollope and Dickens, but also John Steinbeck’s East of Eden, Ogden Nash, and T. S. Eliot, to name but a few. There is an entire chapter on the relationship between art and money. The art market is as susceptible to herd mentality as stock markets, but it is also skewed towards top incomes, so that ‘contemporary artists increasingly deliver, in effect, what hedge fund managers want’ and museums follow their lead.

He defends the social utility of speculation, which helps prices adjust to true levels of supply and demand, and of short selling, most of which ‘consists of arbitrage trades… rather than straight bets on companies performing badly’, though he notes that ‘the same people who are delighted if short sellers in the oil market bring down the price of oil will criticise those who go short of shares in an oil company’.

Plender’s vision of the future is neither rose-tinted nor unduly bleak. Inflation is likely to come back with a vengeance, he believes, as ‘the young impose an inflation tax on the elderly to secure what they believe to be their rightful share of the spoils of the capitalist system’. He doesn’t hold out much hope that we shall ‘curb the excesses of an inherently unstable system through more stringent and coherent regulation’. Instead, capitalism will just carry on ‘muddling through’.

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