The Bank of England was founded in July 1694 in Mercers’ Hall, with £1.2m raised in subscriptions from a group of gentlemen. A century and a half later, this is how the American writer Henry Adams described London, the capital of the most powerful nation on Earth: “Heavy, clumsy, arrogant, purse-proud, but not cheap; insular but large; barely tolerant of an outside world, and absolutely self-confident.” He added: “Everyone seemed insolent and the most insolent structures in the world were the Royal Exchange and the Bank of England.”
Fifty years after this, in 1901, a similar insight is provided by a Spanish philosopher, George Santayana, who was invited by a friend for dinner at the Bank. The dining room, he wrote, had a “dingy Dickensian look of solidity grown old-fashioned, a bit shabby”. He noted the “superannuated butler” and a meal consisting of mock-turtle soup, boiled halibut, roast mutton, gooseberry tart, anchovies on toast and a bottle of claret and a bottle of port.
Details such as these provide the foundation for David Kynaston’s commanding history of the Bank of England. This is the ultimate account of the mother of British establishment institutions, replete with detail, meticulously researched, based on a series of interviews with key players and historians, alongside primary source material research, all logged in the copious notes section at the end.
From the South Sea Bubble to the Napoleonic wars via the two world wars, the author paints a picture of an organisation that sought, wherever possible, to insulate itself from the outside world. Only when turbulence threatens its own walls does it take up cudgels, such as in 1780, during the anti-Catholic Gordon riots or in 1848, the year of revolutions across Europe. Kynaston describes the scene: “The Bank took no chances. On Friday, 7 April, with the great Chartist demonstration due to take place at Kennington Common on the 10th, all able-bodied members of staff were sworn in as special constables.”
For all the pomposity, the Bank was rarely sure of its place in the hierarchy. Over its first century, the 18th century, it was but one of many establishments that sought to issue and preside over the distribution of bank notes. As the British empire was gaining ascendancy, the Bank was sometimes seen as rapacious and gauche. David Ricardo wrote to John Stuart Mill in 1815: “I think the Bank an unnecessary establishment, getting rich by those profits which fairly belong to the public.”
One of the great strengths of this 896-page, one-volume tome is the acute portrayal of each and every relationship between Bank governor and prime minister and chancellor of the exchequer. The arguments revolved around issues similar to today – liquidity, money supply, growth and borrowing.
Yet no matter what era, economic circumstance or political party, that relationship depended on the personalities of the three and more often than not it was infused with tension. William Gladstone, for one, could not abide the Bank’s elite. He repeatedly sent them letters on the management of the national debt, requiring them to cut back on the Bank’s internal remuneration. In other words, they were paying themselves too much. Where have we heard that before?
Sometimes, the Bank listened to its political masters; sometimes, it ignored them, convinced it was impervious to pressure. No matter how long they survived, each governor ultimately depended on the political relationship. One, in the modern era, was Gordon Richardson. His last day coincided with Margaret Thatcher’s first in office. She, like many prime ministers, wanted a new broom. He was, the author notes, “the last of the governors to be treated – and, in his case, sometimes to demand to be treated – as akin to an eastern potentate”.
What sticks out about this last phrase is its rarity. For reasons I cannot fathom, Kynaston chooses to denude this book of emotion and opinion. For sure it is a reference book, an authorised history, and some in the financial world will pore over the “who said what to whom” and the micro-detail of a particular chief cashier. But for the general audience, this is a bloodless read, inexplicably so, from a master socioeconomic craftsman. Each war, each trend, is reduced to a sentence of two. Instead they could have been woven into the narrative with much greater colour and context without diluting the core focus.
By the mid 1990s, as globalisation takes hold and Davos Man reigns supreme, the “cult of the central bank was gathering global momentum”. The stunning surprise of the first week of New Labour – granting independence to the Bank – is compellingly recalled. The book ends with the lessons of the financial crash, the recklessness and avarice of the bankers and the weakness of the Bank and the regulator, the FSA. These are my words, not the author’s. He monitors all the detail, but barely hazards a comment, except to say by way of conclusion: “For all our sakes, it is important that central bankers are seen neither as heroes nor villains.”
I close the book, scratching my head. I am absorbed by the material, but I am not sure what to make of it.