In Lombard Street: A Description of the Money Market, his classic 1873 essay on finance, Walter Bagehot described banking as a “watchful, but not laborious trade”. “The modes by which money can be safely lent are not many,” he wrote, “and a clear-headed, quietly industrious person may soon learn all that is necessary about them.” Bagehot would not recognise the rarefied world of 21st-century high finance. Were he to ask a bleary-eyed new recruit at Goldman Sachs or Citibank whether banking is a laborious trade or not, they would laugh him off the trading floor. As for “the modes by which money can be safely lent”, the list of products banks will sell to their clients has grown beyond recognition to Bagehot’s Victorian eye and now includes schemes so complicated that even those selling them don’t always fully understand them. One casualty of this complexity has been language. Where would Bagehot’s “clear-headed, quietly industrious” person start were he to come across a vanilla mezzanine RMBS synthetic CDO? Baffling vocabulary like this has helped cut finance off from the rest of us.
John Lanchester has decided to do something about that fact by writing How to Speak Money: What the money people say — and what they really mean (Faber & Faber, £17.99). The book is a lexicon of financial and economic terminology, accompanied by two essays in which Lanchester argues convincingly that language is partly to blame for many people’s near-magnetic repulsion by all things money. Don’t let them baffle you, he tells his reader, encouraging more of us to join in the debate over the economic direction of Britain.
Lanchester has earned his place at the front of the classroom. His account of the financial crisis, Whoops!: Why Everyone Owes Everyone and No One Can Pay (2010) — written while researching his most recent novel, Capital (2012), set in London during the 2008 crash — won deserved praise for its clarity and wit. Yet, in How To Speak Money the teacher is tired of sticking to the syllabus. He’s had enough of playing by the rules of the “banksters”. As with many books, the problems begin when the phrase “neo-liberal” starts to crop up. How to Speak Money begins as an entertaining and informative guide for the perplexed but soon descends into an unimaginative polemic in which the free-market consensus “is a con”. The sarcasm drips from the page when, while suggesting further reading, Lanchester claims that arguments on the political and economic Right “aren’t well represented in book form”. “Maybe” — and by now you can almost hear the sniggers — “neo-liberal capitalism is so well entrenched it doesn’t need defenders or advocates.”
Like many disgruntled teachers before him, Lanchester’s sarcasm makes it very difficult for his class to learn anything. Consider his description of the Laffer Curve. We are told that it was “the most influential idea ever to have first arrived in the world on a cocktail napkin” and that the idea “was in essence that governments would raise more tax by cutting tax rates”. Then, instead of any serious consideration of whether cutting tax rates can in fact generate more revenue, Lanchester resorts to pointing out that Arthur Laffer pitched his theory to Donald Rumsfeld and Dick Cheney, “so it is literally the case that the same people who cooked up the second Iraq war also brought us tax cuts for the rich”. This will leave a certain type of reader reassured — the baddies are exactly who you always thought the baddies were — but what has happened to Lanchester’s admirable goal of greater financial literacy?
The alarm bells should have begun to ring before “L”. In his entry for debt, Lanchester reassures his readers that “a high level of accumulated debt, though, is more a question of political choice; stable democracies can operate with high levels of debt for a long time”. Oh. Well, what has all the fuss been about then? Reader, it’s important that you learn to speak money; just pick your teacher carefully.