Thatcher's legacy: Citadel of finance

2013-04-17 15:04
The view of London's Canary Wharf as seen from the 68th floor of "The Shard" in central London. (File, AFP)

The view of London's Canary Wharf as seen from the 68th floor of "The Shard" in central London. (File, AFP)

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London - Where a maze of derelict warehouses and old cranes once testified to Britain's decline, glass skyscrapers teeming with traders now dominate London's docks, a metaphor - for good and ill - for Margaret Thatcher's free-market revolution.

Thatcher called the dockside development one of the most exciting projects she had ever known. Its aim: To transform a virtual wasteland into a cluster of towers that would, combined with her 'Big Bang' reforms of the City of London, become the spine of the only financial capital to threaten New York.

"One of the things she would have put on her CV was that she was the mother of Canary Wharf," said Sue Street, a guide at the Museum of London Docklands, referring to the area where London's mini-Wall Street is centred.

"There was nothing here. Cobbled streets, darkness, no shops and only one bus route on and off the island," said Street, who drove its desolate roads in the 1970s. "Look what it's like now. There are lots of bus routes, no graffiti and no rubbish."

Built in the face of bitter opposition from locals and finished after its Canadian-owned developer went to the wall, Canary Wharf reflects the contradictions of Thatcher's 11-year attempt to arrest half a century of British economic decline.

Now one of the most powerful financial citadels on earth, its gleaming Manhattan-style skyscrapers soar above some of London's poorest social housing blocks.

Physical reminder of change

For Thatcher's foes, Canary Wharf is also a morally bankrupt celebration of mammon: They say its financiers played a major role in fomenting the 2008 financial crisis, for which taxpayers across the Western world have had to pay.

Lehman Brothers' staff left the bank's building in Canary Wharf with their belongings in cardboard boxes after the investment bank filed for bankruptcy on 15 September 2008.

Three decades earlier, the wharfs, which had once been the centre of British imperial trade in everything from tobacco to sugar, were also gripped by despair as the sclerotic economy ground to a halt and the containerisation of cargo shipping pushed work downstream to deeper ports.

"If you want a physical reminder of the change under Thatcher, Canary Wharf is a very good example: When she came along they were derelict docks," said Charles Moore, the author of Margaret Thatcher's authorised biography and former editor of the Daily Telegraph.

"There is a certainly a criticism to be made about the effects of Big Bang leading to some of the problems we have had more recently. But it was basically a great success story of a very Thatcherite kind: It does something new but also reinvigorates something that Britain was good at before."

In 1870, Britain was the world's richest economy, but by the late 1970s it had become the sick man of Europe.

No longer a world power

Its ambassador to Paris was so concerned that he sent a confidential despatch to London entitled "Britain's decline" documenting the loss of influence since the days when Winston Churchill was able to speak to Josef Stalin and Harry Truman on relatively equal terms at the Potsdam Conference in 1945.

"Today we are not only no longer a world power but we are not in the first rank even as a European one," Nicholas Henderson wrote in the 1979 despatch.

"Our decline is shown not simply by the statistics but by the look of our towns, airports, hospitals, local amenities," he said.

After being forced to beg the International Monetary Fund for a bailout during the 1976 sterling crisis, the Labour government faced the strikes of the 1978-79 "winter of discontent" which left Britons struggling with piles of uncollected rubbish and even backlogs at mortuaries as grave diggers demanded higher wages.

"Decline isn't good enough for Britain," Thatcher told a Conservative rally in the northern city of Newcastle on the eve of the 1979 election which brought her to power.

British gross domestic product per person was 40% lower than in the United States and even France and Germany were 10-15% ahead.

Human cost

"If you look at the raw numbers, for 100 years Britain was in a relative decline compared to the United States, France and Germany so although we were improving our standard of living, relative to other countries we were falling further behind," said John Van Reenen, director of the Centre for Economic Performance at the London School of Economics.

Van Reenen, born in 1965, stood on the streets protesting against Thatcher when he was a student at Cambridge in the late 1980s, but said the data showed Thatcher had helped turn Britain round economically, albeit at a human cost.

"The century of relative decline was arrested and to some degree turned around by the policies she had. But it is not all rosy in the garden - there were costs to that strategy. The main one is inequality which also increased hugely over her reign."

By 2007 on the eve of the financial crisis, GDP per capita had overtaken both France and Germany and the gap with the United States had been reduced to about 33%, according to Van Reenen's calculations.

The flipside of that was that unemployment on her watch rose and old industries such as coal mining began to shrivel up as she focused on privatisation and boosting the service sector and home ownership.

If London's docks epitomised the national decline she was trying to reverse, Canary Wharf would come to symbolise the international capitalism she helped create.

'Look for yourselves'

Part of what was once the world's largest port, it processed imports from the British Empire such as rum and sugar before being used to land tomatoes and bananas from the Canary Islands.

By the time Thatcher came to power in 1979, it was a semi-derelict ghost town that still bore the scars of bombs dropped by Hitler's Luftwaffe in the Second World War.

Wrongfooted by the introduction of containers, the docks couldn't accommodate the new generation of larger cargo ships which needed deep-water ports. Over 150 000 port-related jobs were lost in East London between 1967 and 1981.

Pictures of the time show crumbling red brick warehouses and signs defaced with graffiti. Under Thatcher, the government seized direct control of the area, declared it an enterprise zone, and offered generous tax breaks to attract investment backed by a promise to extend the London underground.

"Look for yourselves what is happening in London's Docklands. Canary Wharf is remarkable," Thatcher said in a 1988 speech inaugurating the development.

"In a few years we have begun to transform Docklands from a wasteland of industrial dereliction into a lively varied new centre of employment, housing and leisure for London."

Foreign exchange volumes

Construction began two years after Thatcher's sweeping 1986 'Big Bang' reforms of the City of London which were aimed at ensuring London stayed at the top table of global finance.

By allowing outside ownership of member firms of the London Stock Exchange, Thatcher gave Wall Street's most powerful companies a ticket to the City of London. US giants like Goldman Sachs and Salomon Brothers beefed up their presence.

The abolition of exchange controls in 1979 granted British residents the unrestricted right to buy and sell currencies for the first time in 40 years, cementing London's position as undisputed leader of the global foreign exchange market.

According to figures quoted in a book about the history of the London market by John Atkin, a former adviser to Citibank, daily foreign exchange volumes doubled to $49bn in 1984 from $25bn in 1979, then soared to $184bn by 1989, $504bn in 2001 and $1.85 trillion in 2010.

By then, London accounted for 37% of the global trade, more than double the market share of the United States.

"Margaret Thatcher made London an attractive destination for financial firms," Anil Prasad, head global head of foreign exchange and local markets at Citi, told Reuters by e-mail.

Culture clash

"Banks and financial institutions flocked to London, and FX thrived. The market grew even more when the physical capacity for it to do so was created in Canary Wharf," said Prasad.

The reforms brought Wall Street to London, a culture clash that former bond salesman Michael Lewis helped document in his book Liar's Poker: Out went the boozy lunches and gentlemanly capitalism as US banks bought out smaller British rivals.

The month Thatcher was deposed as leader by her own party, a steel pyramid was installed to crown One Canada Square, Canary Wharf's 235m centrepiece tower.

Canary Wharf welcomed its first tenants in 1991 but the collapse of billionaire Paul Reichmann's developer Olympia & York the following year threw the project into jeopardy and triggered a decade-long battle for control.

As a symbol of British power, Canary Wharf became a target of Irish republican militants: In 1996 the IRA planted a half-ton bomb there, killing two people and causing £100m worth of damage.

Today it is thriving. Home to Barclays, Citi, Credit Suisse, HSBC, JP Morgan, Morgan Stanley, State Street and Thomson Reuters, it hosts more than 100 000 people working in an area that is as powerful as the traditional City of London.

Growing inequality

The 50-floor One Canada Square, whose lobby contains 8 360m² of Italian and Guatemalan marble, houses offices of Coutts, Moody's, NYSE Euronext, Deutsche Boerse, BNY Mellon and even the Chinese Communist Party's online newspaper.

Estate agents nearby advertise a 3-bedroom, 3-bathroom flat with its own bar and access to a swimming pool and gym for £5 000 a month. A 201m² flat at West India Quay is on offer for £1.75m.

Some of the most memorable images of growing inequality under Thatcher were of City of London traders talking on absurdly large cellular phones or downing champagne after work. The phones are smaller, but in the noisy bars of Canary Wharf the champagne flows unabated.

For residents of the rundown social housing in its shadow, it is still an island of prosperity far removed from life.

"They trade their billions and I live here on £100 a week sick [benefit]," said John, who lives in a flat just a few hundred metres from Canary Wharf.

Read more on:    margaret thatcher

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