Niall Ferguson - High Financier: The Lives and Time of Siegmund Warburg

ALLEN LANE
an imprint of
PENGUIN BOOKS

We should not deceive ourselves into thinking that when we die we shall be remembered intensively for more than a limited number of days except by a very few people to whom we are bound by the closest ties of friendship and emotional attachment.

Siegmund Warburg, 1974

For better or for worse, the City of London today is the worlds preeminent international financial centre. Along with Wall Street, it is a place synonymous with the ascent of money. Where other sectors of the British economy languished after the Second World War, finance thrived, latterly to the point of dangerous preponderance. This was not foreordained. In 1945 London was to all intents and purposes dead as a financial centre, its business catastrophic, in the words of one banker, its grand Victorian counting houses one-third destroyed. The era of gentlemanly capitalism appeared about as likely to revive and endure as the British Empire the gentlemanly capitalists had so loyally served. That the City rose, literally as well as phoenix-like, from the ashes left by the Blitz was a historical surprise harder to explain than would have been its irrevocable demise, had that in fact occurred. This is a biography of the man who, more than any other, saved the City.

From the moment he hit the headlines with the first ever hostile takeover bid in 1959 until his death in 1982, Siegmund Warburg was the Citys presiding genius, a brilliant exponent of high finance haute banque, as he liked to call it who saw with unrivalled prescience the possibilities of global financial reintegration after the calamities of the Depression and two world wars. He was the architect of that transformation of economic institutions which led the Western world back to the free market after the mid-century excesses of state control. Beating down the barriers that had been erected to limit the international flow of capital, Warburg made possible the resurrection of London as the worlds principal centre for cross-border banking. His career illuminates nearly all of the most important historical questions about the role of finance in shaping modern Britain:

• Why was it that bankers of Jewish origin played such a leading role in British financial history?
• Did the gentlemanly capitalism of the City of London undermine the performance of the economy of the United Kingdom and accelerate Britains decline as a manufacturing power?
• Did the City, in alliance with the gnomes of Zurich, thwart the ambitions of the Labour Party to modernize Britains economy in the 1960s?
• Why did financial deregulation end up benefiting foreign banks more than British banks in the period after Warburgs death?

Yet these questions are not the best arguments for this biography. For Warburg was also, as he himself put it, a man who lived in a way several lives, that of a German scholar, of an international banker, of an adherent to Judaism and above all of an ardently enthusiastic citizen of Britain, his country of adoption.were as important as bureaucrats in propelling forward the project for a united Europe, and no banker did more to advance this cause than Siegmund Warburg. He consistently sought to accelerate the process whereby European institutions, in both the public and the private sector, were linked together across national borders. And he strove for decades to overcome the resistance of the British Establishment the political and civil service elites of Westminster and Whitehall to the idea that Britain should be a fully fledged member of a European Union.

At the same time, Warburg remained a committed Atlanticist, seeing no contradiction between Europes economic integration and its strategic dependence on the United States. Despite the fact that he had opted for the City over Wall Street, he never lost sight of his lifelong goal of transatlantic financial integration and spent as much of his working career in New York as in Frankfurt, Hamburg, Paris and Zurich combined. His attempts to salvage Kuhn, Loeb & Co., once one of the titans of Wall Street, is one of the hitherto unwritten chapters of American financial history.

Bankers, it is often said, are the real powers behind the scenes of politics. But how in practice could a banker like Warburg exert power in the post-war world? Part of the answer lies in his pioneering role in corporate finance, which put him at the very heart of successive governments efforts to resuscitate the ailing British economy. It was the emergence of S. G. Warburg & Co. as the masterminds of the takeover bid beginning with the contested bid for British Aluminium that transformed Warburg from an outsider, cold-shouldered by the snobbish old boys network of the City, into one of the key insiders of 1960s politics. To an extent not previously realized by historians, Warburg became one of Harold Wilsons most trusted confidants on economic questions during the latters first term as prime minister. In their regular meetings, about which other Cabinet members knew little, Warburg steered Wilson in the direction of EEC membership and strove, vainly as it proved, to avert first the devaluation of sterling in 1967 and then the descent of Britains economy into the financial maelstrom of the mid-1970s.

Though eternally grateful to England for the opportunities it gave him, Warburg retained a lifelong suspicion of the English social elite, attributing many of the countrys post-war problems to the deadening

What makes Warburg such a fascinating figure is not just his combination of economic power and political influence, however. There is also the extraordinary complexity of his personality. He was certainly among the best-read bankers of all time. Steeped not only in classical and romantic German literature and philosophy, he was also a devoted student of the great Central European modernists from Nietzsche to Freud. An intellectual whom fate rather than free will had made into a financier, he was always more interested in the organizational challenge of running a firm than in the bottom line of the business itself. Indeed, he was one of the great unsung innovators of modern management, a pioneer of open-plan offices and of corporate democracy. A gifted amateur psychologist, he evolved an idiosyncratic but apparently effective system for assessing the personalities of those around him, using graphology to complement his own psychoanalytical insights. The intensity of both his affections and his aversions made him devoted as a friend but unforgiving as a foe, as those unlucky protgs who passed from one category to the other found to their cost.