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The Actuary The magazine of the Institute & Faculty of Actuaries
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Book review: Lords of Finance by Liaquat Ahamed

Many readers will have endured history teachers whose marking method was reputed to involve the weighing or throwing of scripts: marks would be proportional to the script’s grammage, or the distance traversed. With his book, author Liaquat Ahamed would have scored well: the 500 pages of financial history, supplemented by a prudent 10% margin of endnotes and index, seem enough to deter all but a few insomniac bibliophiles.

Do not be put off so easily; start by digesting the opening quotation from Disraeli: “Read no history — nothing but biography, for that is life without theory”. Ahamed’s approach has been to tell the history of the world’s financial and economic travails in the period 1914 to 1944 via the lives of the main financial and economic ‘players’ of the era and, of course, the politicians and powerbrokers of relevance. This people-centric approach (apologies for sounding like somebody from HR) works well: there is hardly a page that is not enlivened by the behaviour and idiosyncrasies of the dramatis personae.

The misdiagnosis of Sir Montagu Norman, governor of the Bank of England, by Jung (who thought he had syphilis); Winston Churchill’s rapid self-education in economics when chancellor, while making self-deprecating references to his father’s abilities with decimal numbers ("never could make out what those damned dots mean") and drinking whisky in the middle of his budget speeches; President Roosevelt’s boyish insouciance in the face of his economic experts; Hoover’s depressive pessimism; such details provide excellent leaven.

With a focus on such characters, the ‘lords of finance’ of the time, the book feels in many ways like Tolstoy’s War and Peace, and not just by virtue of its redoubtable mass: both show the events of history through the eyes of some of the central characters of the time, and both show how, ultimately, those characters feel unable to exert much meaningful influence on events — as the author quotes from Herodotus, “Circumstances rule men, men do not rule circumstances”.

The current financial predicament gives the book extra colour. Although much has changed since the 1920s — particular aspects being the much more international and immediate nature of finance now, the ‘computerisation’ of the financial system, the far greater complexity of investments, allegiance to market forces rather than the arbitrary framework of the gold standard and significantly more open cultures in the central banks — “It is a dangerous thing to start to give reasons”, says the deputy governor of the Bank of England in 1930 — much of the book’s account feels ominously close to the last two years. We find rogue financiers, unbelievable bubbles, leaders with feet of clay and rooms full of economists unable to understand events. What’s new? _______________________________________________________________

Matthew Edwards is a senior consultant at Watson Wyatt and a former editor of The Actuary