The big three financial centres-New York, Tokyo and London-are simultaneously confronting what could be the biggest regulatory upheaval since the war. Oh dear. With Wall Street and London looking suspiciously near the end of a long bull market, this may spell global trouble.
The most obvious risks are in Tokyo, where a big bang is being imposed before a banking crisis is resolved. Things are less clear in the US, but the odds on repeal of Glass-Steagall, the anachronistic law which puts a barrier between banking and securities business, are better than for some time. In Britain we have Gordon Brown's enlarged Securities and Investments Board, which is to run banking supervision and just about everything else too.
The separation of the Bank of England's role as lender of last resort from prudential supervision is not without precedent: the Germans and Swiss manage fine that way. But it still makes me nervous. Good communication between super-SIB under Howard Davies and a down-sized Old Lady under Eddie George will be crucial. It is worth recalling that before the fringe banking crisis of the mid-1970s, friction between Threadneedle Street and Whitehall led to a threadbare exchange of information. Since the Department of Trade and Industry (which licensed the secondary banks) was remote from the markets, this was unfortunate. The rest is financial history.
Much will hinge on Davies's management of the bloated new watchdog. A senior City wag has suggested that it be called Howard's End. Meanwhile, the newspapers are already speculating on the next job but one for a man whose career has been a magnificent affirmation of the virtues of labour mobility.
All rather disconcerting, especially in the light of comments from Gerald Corrigan, a former head of the New York Fed. He says it will be much harder to manage big dis- ruptions such as the 1987 stock market crash because of the growing volume, complexity and interconnectedness of financial flows. Perhaps we shall see what the 19th century banker Lord Overstone called "a slight premonitory movement" on the tenth anniversary of the October 1987 crash.
the transformation of British Airways was one of the triumphs of the Thatcher era. How depressing to see some of those gains slipping away in the atavistic confrontation with the TGWU. Are the British simply incapable of managing large organisations? Maybe those economic historians who argue that Britain never made the transition from 19th century craft control to 20th century managerial capitalism are right. Britain's most competitive companies tend to be the ones that bypass the problem. Glaxo is a non-hierarchical company with no "them and us" syndrome because it is a middle class outfit peopled by doctors and scientists. Other success stories are in sectors such as music (EMI, Virgin) and software (myriad small fry) which border on a cottage industry culture. The best multinationals have Dutch organisational rigour, as at Shell and Unilever.
The City? Yes, but it seems to be the barrow boys in the dealing rooms, not the officer class, who are internationally competitive. Witness the poor performance of British-owned investment banks. The only front-rank survivor, Schroders, owes its success over the past decade to the careful guidance of two Germans, George Mallinckrodt and Win Bischoff. Hap-pily, British managerial deficiency can nowadays be made good through inward investment. The Germans have guest workers; we have guest managers.
running the royal Opera House is in the best haphazard British tradition, judging by the way it casts off chief executives and what it charges for seats. That's opera, say apologists. But the economics of the business remind me of nothing so much as a camped up pre-Murdoch Fleet Street, with the blackmail exercised not by workers but by star columnists. The people who pay, as state-subsidised opera bids up the price of Domingos and Pavarottis, are not just Vivian Duffield but you and me. The outcome is often poor opera, because rehearsal time for super-egos is prohibitively expensive. Why not a buyers' cartel to stop the blackmail? The New York Met, living on private money, might continue to over-bid. But a European buyers' strike would still be a blow for music sanity.
gordon brown's populist first budget was never going to satisfy the pundits, given pre-election promises on income tax. Even so, the government has surely been too fastidious in observing its pledges. Take the decision to reduce the top rate of tax on unearned dividend income from 40 per cent to 32.5 per cent in order to protect rich individuals from the dividend tax changes. There is no comparable protection for ordinary people with money purchase pensions, corporate or personal, who have been taken to the cleaners. Funny way to encourage savings and investment. Luckily for the government, few-apart from the rich-seem to have noticed.
