Warnings From History

Chris Waller - December 2020
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In 1368, an insurgency, under its rebel leader Hong Wu, finally drove the Mongols out of China. Having pushed them out beyond the Great Wall, some 150-odd years since they invaded, Hong Wu established himself as emperor and ushered in the Ming dynasty. Having ejected the foreigners, Emperor Hong Wu then set about returning China to some mythical glorious past.

In the 14th century, China was far and away the most technologically and economically advanced country on Earth, and thereby the wealthiest. Paper currency, issued by government, had been in circulation for well-nigh 300 years. The Ming dynasty is commonly regarded as the finest flowering of Chinese culture yet, by the mid-1400s, paper currency had ceased to circulate; China had reverted to gold and silver coinage. China ceased to trade with the outside world.

The Ming dynasty, while it might have represented the zenith of Chinese culture, also began a long, slow process of decline over the next 600 years, resulting in China’s falling prey to the depredations of the rising European powers. By the 19th century, China was a deeply impoverished country, soon to be riven by war and revolution. Hong Wu’s imagined glorious future as a replaying of some imagined past had come to nought.

In the 16th century Spain, under Philip II, believed it could rise to become a global power, not by industry and commerce but by plundering the New World for gold and silver. Spain did just that and, indeed, briefly enjoyed immense wealth, but it initiated a period of inflation in Europe that was to last for a century, disrupting not only the Spanish economy but that of the whole of Europe. Spain was spending what it had not earned.

It is easy to spend windfall wealth and while Spain mocked those who continued to manufacture, it was sanguine about the decline of its own manufacturing, preferring to import goods and foreign artisans to feed its appetite for luxury and fine living. The Spanish Crown went bankrupt 4 times in that century. By the 19th century, Spain was completely overshadowed by Britain. In the 20th century, it was a deeply impoverished economic backwater which, like China before it, fell victim to insurgency and a civil war that scarred the country even until the mid-1970s.

The City of London is the singularity that sits at the heart of those London boroughs that have come to form the black hole of the London economy, which warps the economic space around it. An influx of money, much of it of very questionable provenance, is being invested in breathtakingly expensive property developments which have forced property prices and rents in London to exorbitant heights. It is estimated that £100 billion is laundered every year through London.

Former public housing estates are demolished and their residents decanted to the outer darkness of the grimmer suburbs to make way for yet more prestigious property developments, designed not so much to house the unimaginably wealthy as to provide a home for their dubious lucre. Even the middle classes, who previously saw themselves as immune to the ravages of unbridled finance, now struggle to afford a decent home in that capital of capital.

The regulatory authorities and the police are overwhelmed by the volumes of questionable money and are totally ill-equipped to deal with it. The government, for its part, turns a blind eye while praising free markets and international commerce; it pretends to be shocked in the face of claims of impropriety, but doesn’t hesitate to pocket the winnings. The City of London, no longer the home of ‘gentlemanly capitalism’, as it liked to call itself, is now the magna cloaca of international finance. Beginning 40 years ago, Britain – like Spain in the 16th century – believed that all that was necessary for a flourishing economy was the import of money. Its manufacturing went into decline; its neoliberal cheerleaders mocked those in Europe, such as Germany, who clung to what they regarded as outmoded economic models based on manufacturing. Germany, they confidently predicted, would soon be an economic basket-case, a backwater. Such manufacturing as Britain did retain was largely in foreign ownership.

Here we are, in 2021, with Germany running the world’s biggest trade surplus. while Britain runs the world’s second biggest trade deficit. It may be just my perception, but has the Chancellor of the Exchequer been unusually absent from our television screens of late? Perhaps he is too busy poring over the account books, trying to figure out a way to pay for the current crisis. Or perhaps he has gone below decks in anticipation of great turbulence ahead.

December 21st was not only the winter solstice. but also the occasion of a conjunction of Jupiter and Saturn the like of which had not been seen for almost 800 years. Britain, too, is experiencing its own conjunction – between Brexit and Covid-19. Please be assured that I am not, in this time of crisis, turning desperately to astrology in the hope of deliverance – though I sometimes think that economic forecasting is on a par with astrology when it comes to predicting the future.

While I have not read the details, I fear that the Brexit deal recently announced will actually be a BINO (Brexit In Name Only) – not to be confused with a ‘beano’, which it certainly will not be. The government has promised an economic ‘levelling up’ once Brexit is safe and sound. It has promised to address the grievances of the ‘left behind’, those who overwhelmingly voted for Brexit and, more recently, for this government. I would like to hope that this current political and economic conjunction presages a change to Britain’s economic direction – but I’m not holding my breath.

'The Wealth and Poverty of Nations' – Landes, David; publ. Abacus, 1999 (paperback).
'Alpha City – How London Was Captured by the Super-Rich' - Atkinson, Rowland; publ. Verso, 2020.
'The Economic History of China' - von Glahn, Richard; publ. Cambridge University Press, 2016.

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