Political Promise

Playing Politics with Ideas: Once Credit, Now Society

In Oliver Cardinali on October 12, 2010 at 12:30 pm

Olly Cardinali says that the abuse of the bankers is similar to the abuse faced by the advocates of a “Big Society”.

Two years ago, on Sunday the 14th October 2008, I moved to London to study a Masters Degree in the History of Political Thought. That chilly night Lehman Brothers filed for bankruptcy. The following day I could not resist visiting Canary Wharf and witness the bankers washing down their sorrows with champagne before midday. I knew then that day was historic, but I did not know that it would cause me a historian’s peculiarly regular sense of déjà vu.

During my historical studies I found that the outrage that followed the ‘financial crisis’ was reminiscent of the period that followed what has been described as the ‘financial revolution’, at the turn of the eighteenth century. The term ‘financial revolution’ was coined because it describes the period in which the Bank of England was founded (1696), the National Debt exploded and accounted for the making of Britain’s thriving financial services industry… just as the turn of the twenty-first century may be considered by future historians as the breaking of it. The concept of credit was the divisive curiosity of the era, as it has become the wicked spectre of the present.

            Tories were outraged at the depths of the National Debt, whilst commentators and the press bewailed the venality of politicians and financiers and the vice and malevolence of the ‘monied men’ in the City of London. This sentence was as reflective of the early eighteenth century as it is now in the early twenty-first century. It was the era’s salient satirist, Jonathan Swift, who used the term the ‘monied men’. Swift complained in 1711 that the wealth had been taken away from the landowners, the traditional economic driving force until the ‘financial revolution’, as many present day commentators bemoan the decline of the manufacturing industry. Economist Charles Davenant complained that the ruling political establishment had ‘fleec’d the Publick’ and had ‘run the Nation over Head and Ears in debt’, which are evocative of present day complaints about the expenses scandal and the budget deficit.

In 1720, the South Sea Company’s stock crashed and to prevent widespread financial turmoil it was effectively bailed out by prime minister (small ‘p’ and ‘m’ required) Robert Walpole, by dividing its stock between the Bank of England and the East India Company. In reaction, novelist Daniel Defoe praised the City as ‘the centre of commerce and wealth’ but condemned the ‘stock jobbing’ that had ‘bewitched the nation almost to its ruin’. ‘Stock jobbing’ seems to be the early eighteenth century’s great financial evil, as short selling is today. The more I read the more I was finding that I had heard all this before, it was just being said about three hundred years later.

            The ruling Whig party establishment used credit to incredible effect. The government’s mostly able financing of the National Debt, allowed the Royal Navy to double in size during the eighteenth century. By winning wars and protecting trade, the Royal Navy then speared Britain’s aggressive commercial growth. Britain consistently paid off the State’s creditors and became the world’s dominant commercial power by the beginning of the next century. This historic example may be used to justify a large National Debt. Public services may be compared as the modern equivalent of the Royal Navy; both could be described as indirect bloodlines to the respective old and new economies. It has been said over and over again that investing heavily in public services to protect the economy and that by expanding the State, you will stimulate sufficient growth to pay back the interest on the National Debt, justifying its size. However this is not the example that history is setting in the case of the ‘Financial Revolution’.

The reason this would be the wrong conclusion to draw from the example of the ‘Financial Revolution’, is that using State credit to boost the economy can no longer be considered revolutionary and for that reason it will not stimulate the necessary growth in current economic climate. Europe and the United States are proving this as quantitative easing and fiscal stimulus measures are failing to generate considerable growth. Credit is no longer the radical and divisive concept it was; in the eighteenth century for a government to rely on credit so heavily was bold, a risk, but in retrospect it was essential to compete against nations with greater resources. Britain needs an equivalently radical idea to compete in today’s less bloodthirsty but more aggressive global economy, amongst the enormous state spending power of the world’s economic giants, China to name one. I think and I hope that at the Conservative Party Conference last week, the Prime Minister (capital ‘P’ and ‘M’ required) may have just referred to this radical idea. He may have indirectly suggested what could be the twenty-first century’s equivalent of State credit; bold, a risk, but perhaps in the future it may retrospectively considered essential.

Before many readers scoff at the implication, I understand that the Big Society has quickly become the marmite of politics; but just remember that the whole idea of State credit was once too disparaged by some of the great minds of the early eighteenth century. Mr Ed Miliband claims that Labour are now the party of the optimists, but the Big Society is one of the most refreshingly optimistic political ideas of modern times; in fact the chief criticism of its detractors is that it is too optimistic. A nationwide embrace of Citizenship cannot be created in a few speeches; it could take a generation to occur. Community empowerment will inevitably have its teething problems during its introduction, while also having both successes and failures in its application. The greatest strengths of the Big Society are the radical aspects of the agenda to liberalise, decentralise and to transparently open up the State; particularly through digital technology. 

            The bold idea will be to transform and radically accelerate Britain into the world’s largest e-Government; place the as many State services as possible online and reduce public spending because of it. The Labour Governments did make some effort to begin this process, but Directgov is only the start. There should be a National Directory of every service the State performs, locally and nationwide. Taxes, laws, rights, regulations, restrictions, proposals, debates, consultations, forums, documents, finances, statistics, contacts, duties, expenses, appointments, vacancies, services, benefits, applications, translations and even voting in elections and referendums should be online in the future and fast. Private enterprises should be able to advertise their services on special sections of TheState.net to encourage choice and competition. Decentralise and shrink the State physically, centralise and expand it virtually and we may revolutionise Britain’s tiring economy.

The freedom and ease of access to the public should allow innovation and encourage market expansion into niches they many were not aware of; it would put faith into the ingenuity of the British public. The public will be all equal in their freedom of access to services; as long as public libraries with computer access are expanded to ensure the poorest in society are given access. Social mobility would flourish because the traditional economic barriers of access to information will be removed; the public will not need solicitors and accountants to tell them their rights or obligations. Citizenship can grow through the online interaction of the social networking generation. Many may fret that digitalising the State may threaten jobs, but ask yourself what is the primary skill of the majority next generation of Britain’s workforce? You will come to the realisation that it is not manual labour, it is using Facebook! A digital economy will provide work in the future for skills that the young have today. The Big Society should aim not to transform the social structure of the country, but the economic structure too.

During the ‘financial revolution’ the British ruling establishment saw the advantages that could be gained by capitalising on State credit. The Whig government saw how credit built successful private enterprises such as the East India Company and made the smaller states like the Netherlands, supported by the Bank of Amsterdam, a great power in the seventeenth century. Credit was also necessary to finance many, many wars with France; the financial revolution was essential to allow Britain to compete with and beat France. An equivalent digital revolution will be essential to compete with the economic pressures of the present.

Private enterprises that have flourished most in recent years are those whose operations mainly take place online, such as Google, Facebook and Amazon. The countries ranked with the best digital economies include the Scandinavian nations with vast welfare states and the U.S.A., Hong Kong and Singapore with relatively small welfare states, all of which have fairly prosperous economies. Britain is currently forth on the e-Government readiness index, behind the most “ready”, South Korea, then the United States and Canada. The Big Society idea should be used with the intention of making Britain the world’s foremost e-Government and a leading digital economy. It is also necessary to be able to reduce the deficit without choking economic growth.

            Mr Cameron’s Big Society related speeches have been lacking in clear references to e-Government or the digital economy, despite the agenda for the radical decentralisation and liberalisation of the State that seems to me so compatible with it. I am making a bold statement myself by suggesting that online technology is comparable to the concept of credit, which evolved so rapidly at the turn of the eighteenth century. I think historians in the future will refer to the turn of the twenty-first century as the ‘digital revolution’, I hope they will also say that the Big Society was designed and implemented to further it. The fall of the Lehman Brothers may mark the end of an old economic order and the beginning of a new one that Britain could be at the forefront of. Yes, I am an optimist too, but I would rather be an optimist than a defeatist.


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