Published in today’s Observer
Two years after the Great Crash of 1929, the American journalist Frederick Lewis Allen looked back on the Jazz Age of the 20s as if remembering a dream. The daring flappers, abandoning their corsets and lifting their skirts “far beyond any modest limitation” and the swaggering investors, who “expected the Big Bull Market to go on and on”, ought to have been fresh in his readers’ minds. But Lewis knew that the bank failures and mass redundancies of the Great Depression had made the recent past utterly foreign. The optimism brought by prosperity was now as far away as a distant star. Wondering what to call his book, Allen hit on a title which was also a reminder, Only Yesterday
After a deluge, nothing seems as remote as the day before it came. The 30s and the 80s have more to say to us now than the Britain of 18 months ago. For this generation to think about what it was like before the Great Crash of 2008 will take the same mental wrench as the 30s generation needed to see back before the Great Crash of 1929. Only yesterday, level-headed young couples took mortgages of four or five times their joint incomes to buy hutch-like apartments in streets estate agents described as “up-and-coming” and their friends described as “scary at night”. Only yesterday, City dealers in nightclubs threw handfuls of notes in the air for giggling girls to catch as waitresses marching to the theme tune from Rocky brought £500 bottles of vodka and methuselahs of champagne to their tables. Only yesterday, Her Majesty’s Government encouraged speculators from every part of the globe to settle in London by so under-regulating finance capital that NatWest bankers and media moguls involved in scandals as notorious as the Enron affair of 2001 and the collapse of Conrad Black’s empire in 2003 could not be brought before British courts. American prosecutors took the alleged fraudsters to the US for trial, and confessed that Britain’s lenient treatment of serious crimes baffled them. They did not understand that only yesterday politicians and civil servants had boasted that the City’s economy was booming because of their “light-touch regulation” of speculators whose number included potential swindlers. As a few of us noticed at the time, the politicians and civil servants never went on to argue that the inner-city economy might boom if the authorities applied a similarly light touch to the policing of the slums whose inhabitants included potential drug barons.
After the crash, Americans trying to find their bearings could at least hold onto the thought that George W Bush’s right-wing government presided over the bubble. As was to be expected, it did not intervene when sharks more interested in pocketing commissions than the principles of reputable lending sold millions of Americans mortgages they could not hope to repay. The Bush administration, like Herbert Hoover’s Republican administration in 1929, believed that the market knew best and did not worry when financiers offered derivatives of such obscurity no one understood their risks. The conservatives’ neglect made ideological sense. All of the great crashes occurred under politicians who accepted laissez-faire, such as Hoover, or politicians the moneymen corrupted, such as the Georgian oligarchs of 1720 who took the bribes of the South Sea Company.
Until yesterday, that is, when Britain broke the mould. When the bubble reached its peak in the summer of 2007, Texan oilmen and former investment bankers did not govern this country. Nor were our leaders enriching themselves with bribes from the City. The British dreamed their dream under a relatively honest, social democratic government, many of whose members had been fiercely sceptical of finance capital.