The Storytellers (11 page)

C
HAPTER

W
HILE WAITING TO SEE his dentist, Harvey picked up one of the more serious news magazines lying on the waiting room table. It was a May issue of
Business Perspectives
and the leader article caught his eye:

In August last year, President Carter appointed Paul Volker chairman of the US Federal Reserve. An economist by training, whose grandparents were German immigrants, the new chairman found himself confronted by an inflation rate that was already over 11% and rising rapidly. Like James Callaghan in Great Britain, the US president had inherited an economy that was barely growing and prices that were rising. When the cost of oil quadrupled in 1973 following OPEC's embargo, a reaction to the Arab Israeli war started and then lost by the Arabs on the Israeli holy day of Yom Kippur, Western central bankers lowered interest rates to protect their economies, believing that a little inflation was better than no growth. What they got was not much growth and a lot of inflation which we wordsmiths have called stagflation
.

At the start of the Carter presidency in 1977, Western economies had been showing signs of recovery, but the Iranian revolution two years later, which deposed the American-backed Shah and elevated the Ayatollah Khomeini to the position of supreme leader, disrupted oil supplies once more. If the economy isn't a dark
enough cloud, the President's fight for re-election is also being overshadowed by the Iran hostage crisis. It was in November when Iranian revolutionary guards seized the US embassy taking 52 hostages, and despite April's courageous attempt to free them, they remain captive. President Carter's challenger for the presidency is expected to be the former governor of California, Ronald Reagan
.

“Mr Mudd. The dentist will see you now.” The receptionist's unwelcome words brought him back to his own reality. Visits to the tooth doctor were always at Sylvia's instigation. ‘You've got the money now, Harvey. So spend it looking after yourself.'

As he lay there and the inside of his mouth became a Lilliputian version of one of Andrew Champion's factories, the similarities between Britain's and America's situation struck him. As far as he knew, the United States had got rid of its communists and their fellow travellers in the 1950s, so could union militancy in the United Kingdom be as much a symptom as a cause of his country's malaise? And how could the same illness have struck two nations three and a half thousand miles apart? Like the cavities being discovered by his torturer's sickle probe, there were gaps in his understanding that needed to be filled.

* * *

While familiarizing himself with the team Mrs Thatcher had assembled to take up the reins of government, Harvey discovered that one man had started his life in Port Talbot, an industrial town in South Wales where his father was a solicitor. The port itself had been built by the Talbot family and at its peak in 1923, over 3 million tons of coal were being exported from its docks. As demand for Welsh coal declined, the town had reoriented itself and by 1952 was home to one of the largest integrated steel mills in Europe, employing 18,000 people. However, the eyes of the solicitor's son
were set elsewhere. He worked hard at school and secured a place at Cambridge University. There he studied law and became chairman of the university's Conservative Association. But he hadn't quite finished with South Wales.

Twice he'd stood for the Conservative Party in Aberavon, but Labour's grip on the seat was unassailable. Later, as a London solicitor, with a continuing interest in conservative ideas, he had been rewarded with safer seats, eventually becoming a minister in Edward Heath's government until it was brought down by the National Union of Mineworkers. After her election victory, Mrs Thatcher had made him her Chancellor and her brief to him was clear: wring inflation from the system and free the British economy from the dead weight of government and the trades unions.

The Federal Reserve Chairman, Paul Volker, was a Democrat appointed by a Democratic President and the new Chancellor, Geoffrey Howe, was a Conservative appointed by a Conservative Prime Minister, and yet both seemed intent on cutting the level of inflation in their countries. Price controls had been tried and failed. It now seemed to be the turn of monetarism. But where had the idea come from and how was it supposed to work? As a journalist reporting from the frontline, he felt he should have some grasp of these things.

George Gilder was sceptical when they'd discussed it. ‘Just get in there and report, Mudd,' he'd said. ‘The eggheads will come up with the theories to explain why what happened happened afterwards. If you really are interested, though, Dr Ferman Chase is giving a lecture on the subject at the Fishmongers' Hall in a couple of days. I'm told he's good.'

* * *

Harvey arrived in good time. The Fishmongers' Company was
one of London's oldest guilds with 700 years of history. Their hall overlooked the River Thames and the meeting had been readied in the building's magnificent banqueting room. He found a seat near the back and quickly felt the reassuring peace which comes from being enveloped in history.

He knew that the company's first building on the site had succumbed to the Great Fire in 1666 and been rebuilt by Sir Christopher Wren, the genius behind St Paul's Cathedral. The hall was again rebuilt in 1832 to make way for an improved London Bridge, and yet again after sustaining bomb damage in the Second World War. Whatever one might sometimes think, physical structures were important to men. As he sat there waiting, he contemplated on how they were often the only trace of a people's existence.

Dr Chase walked to the podium without fanfare. He tapped the microphone twice with his finger to assure himself that it was working and to alert his audience of around 200, perhaps two thirds students and the rest curious professionals, to the fact that he was in position and about to start.

“Ideas are strange things,” he began. “They can sit around in books, on bookshelves and in cupboards, sometimes for centuries, without anyone giving them a second thought. At other times they can spread as a fire does through dry grass, igniting an eruption of energetic action that bursts forth, Roman candle-like, before quickly dissipating, leaving only a charred landscape in their wake.

“The domain of ideas is consciousness, but like a seed of wheat an idea needs the right conditions before it can germinate. To exist at all, however, it must possess structure. The essential form of this structure is simple,” he maintained. “It should comprise a subject, a verb and an object. ‘I eat you' is such a structure, but this is merely a statement, not an idea. To become an idea it also has to possess causality. ‘Eating you will make me sick' introduces such causality. In effect what we have are two statements – ‘I eat you' and ‘I vomit'
(‘I' being both subject and object) – joined by the assertion that one causes the other.

“Consciousness,” he asserted, “is really all about causality. It entails an ability to create a set of ideas about how the world around us works. The process of being conscious is the process of interposing this map of causality between us and that world so that we may act upon it and achieve specific results.

“Now the alert amongst you,” he said with a wry smile, “will note that our map and what it purports to describe are unlikely to fit that well. So let's give managers and forecasters some slack and,” he added, pausing for effect, “ask the Almighty to endow them with a little humility.”

Realizing that they had been treated to a joke, a ripple of laughter spread through the audience and Ferman Chase sipped from the glass of water provided.

“The medium of ideas is language,” he continued. “Language has evolved to incorporate many subtleties, which are simply conditionalities. ‘I will eat you tomorrow' introduces a temporal condition. ‘I will vomit violently' introduces a quantitative one. The combination of causality and conditionality is, in many ways, contradictory. If A only causes B when there is C, A does not really cause B, at least unaided. But this is where the power of ideas lies. Ideas are intrinsically creative.

“When a wheat seed finally germinates in response to the right amount of warmth and the right amount of moisture, it expresses its structure. And although this structure is largely predetermined, variations in soil content, moisture and warmth influence its exact shape and character such that, over time, it may evolve differently from wheat growing under different circumstances, even into a new species and perhaps a new genus. That is creativity.

“Although an idea, like a grain of wheat, is self-contained – and has to be if it is to be coherent and understood at all – it must exist in
a dynamic environment. Indeed, we construct ideas so as to impose some understandable order on the world around us. This has two implications. The first is that what we regard as reality is, to some degree (perhaps even to a large degree) a construct of our own making. The second implication is that individual ideas, like soldiers in an army, are often only relevant in the context of the whole that sustains them. This gives rise to a third implication. Ideas and context interact.

“Think of shared consciousness as a complex network of interlocking ideas that more or less rub along together in a more or less sensible fashion. These sit within a framework we sometimes call our culture or story and are reflected in our structures which can be both hard, like this splendid building, and soft, like laws and customs. It is not difficult to see why new ideas are often rejected. If an idea supports the existing edifice, fine. If it undermines the existing edifice, no thank you. But change does happen.

“This, of course, leads into political structures and the nature of their hierarchies and the stories that support them. The impulse for change comes from individual dissatisfaction which may start amongst a few people, but then spreads. Martyrdom, for example, challenges the status quo. Can such and such an idea really be right if this man or this woman is willing to die opposing it? The social consciousness inherent in Marxist thinking, where one part of a society perceives that it is being subjugated by another part and rebels, is also a method by which change can occur.

“The embedded nature of ideas was described well by John Maynard Keynes who said, ‘The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.' Had he been alive in the 1970s, he would have
appreciated the irony of his remark.”

Once again the audience felt able to laugh. On the half-page programme describing the good doctor's background and accomplishments, Harvey had written the word ‘genus' followed by a question mark. He hoped there would not be too many more things he would need to look up when he got home.

With the mention of Lord Keynes, however, members of the audience were reminded of what they had come to hear Ferman Chase talk about and started to regain their footing.

“Until the depression of the 1930s,” he said, returning his listeners to more comfortable territory, “the prevailing economic ‘idea' was that markets would self-correct. Upswings and downswings would take place around a trend of steadily improving economic activity. Governments, it was felt, should leave well alone. However, the stubborn nature of what became known as the Great Depression challenged this view.

“Keynes's great insight was that economic activity was ultimately a function of aggregate demand. If an economic shock undermined people's ability to purchase things, companies would stop producing them and economic activity would get stuck at a permanently lower level, which was exactly what seemed to have happened in the 1930s.

“His solution was elegant and simple. To offset a collapse in personal consumption, governments should step in and purchase things on their behalf. This would increase aggregate demand and lift economic activity up to a level that brought employment back to where it had been, at which point governments could reduce their own expenditure.

“It is probably true to say,” he expounded, “that rearmament ended the depression, first in Germany and then elsewhere, although that was hardly the kind of government expenditure Keynes had in mind. Following the Second World War, however, demand management by governments, using both fiscal levers (taxation and government
expenditure) and monetary levers (interest rates), was an idea that had firmly taken root. Importantly, it also dovetailed nicely with the more general idea that management was a scientific discipline that could be learned and applied.

“But by the 1970s it was becoming clear that in mitigating the discipline of economic contraction, this demand management, which increasingly followed the political calendar, was causing inflation in the general economy and overmanning in many companies, especially those possessing political influence.