The frightful tumble of the league of gentlemen

<i>The Death of Gentlemanly Capitalism </i>by Philip Augar (Allen Lane, &pound;20)

Inspirational this book certainly ain't. Nevertheless, it is undeniably useful as a detailed history of how foreigners took over virtually every major institution in the City of London. It took them a mere decade after 1983, when the old restrictive practices disappeared after a deal between the London Stock Exchange and the Thatcher government produced the "Big Bang".

Inspirational this book certainly ain't. Nevertheless, it is undeniably useful as a detailed history of how foreigners took over virtually every major institution in the City of London. It took them a mere decade after 1983, when the old restrictive practices disappeared after a deal between the London Stock Exchange and the Thatcher government produced the "Big Bang".

The book is also authentic, since the author had a distinguished career bridging the old and new eras. But it's bloodless stuff, with no real sense of the individuals involved. Philip Augar seems to have been the piano player in the brothel, unaware of what was going on upstairs. The feeling is enhanced by the way he discusses the scandals which afflicted the City.

So we find little or nothing about the Guinness mob, the Johnson Mathey affair or Cap'n Bob Maxwell's light-fingered dealings with Mirror Group pension funds.

However, Augar's approach works when he discusses the downfall of Barings in impersonal terms, concentrating on its shoddy, arrogant and amateur managerial culture and on the inability of the Bank of England to provide proper supervision. The Bank, like those it regulated, was simply too, well, gentlemanly.

Unfortunately, Augar-the-piano-player does not examine the ethics of the old City he so admires. This was the mirror image of the world of the Krays. Outsiders were safe; the City insiders trusted one another (up to a point) - but individual investors were fair game.

Before the Big Bang, the City contained three classes of business: the jobbers, who dealt in bonds and shares (traders, upper-class gamblers and Essex boys); the brokers who dealt with the clients, private and institutional; and the merchant banks, who advised companies. Neither the jobbers nor the brokers had ever seen the need for anything so vulgar as a management structure. In the early 1980s, even the biggest merchant banks were a tenth the size of their American equivalents.

Moreover, the British clearing banks, who had the capital, repeatedly proved their total incapacity to manage the deal-makers when they participated in the battle for City businesses. Significantly, the only British merchant bank with a chance to make it to the top table, SG Warburg, was a newcomer founded by the refugee genius Sigismund Warburg in 1947. It lost its nerve when it allowed in too many natives, and was simply too small to absorb losses which would not have caused larger institutions to blink.

The clearers were not the only losers. So too were many of the foreign banks, for they all paid well over top dollar for their City purchases. Not surprisingly, the partners involved were generally only too happy to be taken over. Greed won out over corporate loyalty in takeovers of tiny institutions with no real assets except their brand names. These deals created at least 750 millionaires. But they also ensured that the world financial markets are as heavily concentrated in London as they were a century ago.

The foreigners could carry out a clean sweep because Britain was a free market for takeovers. Perhaps this was just as well, given the general managerial incapacity of the Brits. Witness the current row over the London Stock Exchange itself, now the helpless victim of a battle involving Americans, Germans and even Swedes.

Part of the British problem is an endemically gloomy outlook. Augar displays what might be described as the wrong sort of pessimism in believing that London will become simply one spoke in a wheel centred in New York. The idea that Frankfurt, let alone Paris, will be competitive spokes is ridiculous. Sure, the City is now dominated by the US; but continentals have their own languages and Americans are almost invariably monolingual. London's market may be safe, but it sure ain't British any more - except, irony of ironies, for Caz (Cazenove to the uninitiated), the poshest broker of all, which is still doing very nicely, thank you, as an independent band of highly professional gentlemen.