The BBC Business Editor finds the Cheltenham Literature Festival looking to him for answers
If there was one statement Robert Peston made at the Times Cheltenham Literature Festival that boiled down how money works in the world today, it was this: “All money is invented.”
An appreciative sell-out audience were there wanting answers, and perhaps hope, from the BBC Business Editor, who in 2007 appeared to be the only person telling the nation the truth about the financial crisis, beginning with the run on Northern Rock. For much of the talk he addressed the audience directly, rather than interviewer Libby Purves. Full of exasperation, he felt like one of us, but far better informed.
Peston’s father was a Labour peer, Maurice Peston, also an economist. “You shouldn’t follow in your father’s footsteps,” said Peston, “unless you’re a Sainsbury or something of that sort.” Peston junior nevertheless received a household grounding in the working of economics – he said that at a young age it became clear to him that “those people who believed in monetarism were blithering idiots” – while at the same time learning the ways of the world in his comprehensive school.
Drifting into a financial role as a stockbroker, Peston found out “how many crooks there are in the city”. “It wasn’t me,” he said.
As a journalist, Peston has always believed in remaining politically independent, an ethos that brought him into conflict with Alistair Campbell when he was Downing Street press secretary, where he famous received the put-down: “Another question from the Peston school of smart-arse journalism.” Peston described himself as being the exact opposite of Campbell’s campaigning, politically motivated form of journalism. His move into broadcasting taught him first, that not everyone liked his distinctive delivery style, and second that concision is “a brilliant, brilliant discipline”.
To be concise with an explanation, of course, one must understand what one is talking about; one of the most terrifying facts that came out of both Peston’s talk and Alistair Campbell’s later that same day was that the bankers didn’t understand the very systems on which they were gambling our money. Peston related the story of an interview he carried out at Morgan Stanley on leveraged debt trade – his senior interviewee sweated and stammered to explain how it actually works. There was, Peston said, a “failure to understand the risks”.
So how did we get in this mess? “Too much debt in the rich West,” said Peston with just the concision he had praised. And he didn’t just mean governments, but “all of us”. “It was taken for granted that globalisation was a good thing,” but as our industries were being undercut by countries like China, we maintained our lifestyle by borrowing – up to 400% of our GDP. So China was lending us the money to buy their products that were putting our own workers out of business.
Meanwhile, the Euro is in a “Godawful mess”. “Germany has to be prepared to use its enormous wealth and resources to rescue pretty much every other country in the Eurozone,” said Peston. Echoing the sentiments of Nick Clegg at the festival the day before, he said that the banks must be recapitalised, a pot of money put aside and the debut of countries like Greece written off; in the UK, manufacturing must make a comeback. Judging nations on their performance are ratings agencies, like Standard and Poor’s, who almost seem to dictate the fates of countries like Greece. Peston was not exactly kind about them and their expertise: “They’re human – some would say sub-human.” Peston concluded that the Eurozone will be considerably worse off than the UK in the months and years to come.
So what can we expect for the future? Yes, Peston said, the next few years will be “pretty grim”, because people are sensible and have stopped spending now times are tough. And “for politics, everything changes… politicians have to start telling the truth,” because we must choose how they spend what little money they have. Bankers, who got us in this mess by taking risks “explicitly to boost their own pay” must realise “what a bloody mess they’ve made of it that people hate them so much”. As for the next decade, things could be a lot worse, said Peston. “We might be Japan, facing years and years of low growth – but it’s a much richer and happier country than we are.”
Who Runs Britain? by Robert Peston is out now from Hodder. Photo by Alan Davidson.
Robert Peston is the founder of the charity Speakers for Schools, which organises high-profile professional speakers to visit and speak in schools for free.