When BAE Systems sold its one-fifth stake in the European Airbus project to EADS in 2006, declaring its intention to focus instead on defence sales in the US, I predicted that ‘the best bits of BAE’ would end up under American ownership while the rest would ‘go the way of the Comet’, the 1950s British airliner that was knocked out of the competitive skies by the Boeing 707. Since then, BAE has worked assiduously to reinforce its position as one of the few foreign-owned suppliers to the Pentagon: it has 40,000 employees over there under a feisty female American boss, generates 40 per cent of revenues from US sales, and like BP does its best to pretend not to be British. But now BAE and the Franco-German-Spanish EADS propose to merge — thereby instantly jeopardising relationships in Washington, where no one trusts the French or the Germans, everyone fears the loss of high-tech defence secrets, and the commercial interests of Boeing and Lockheed Martin prevail over any stated belief in free markets.
Is this the fatal step that will make my prediction come true, or an about-turn in the nick of time? After a decade of unpopular wars, with defence cuts looming both sides of the Atlantic, a business plan predicated on continuing Anglo-American military co-operation is no longer an obvious winner.
On the other hand, EADS has made a huge success of Airbus, and has a healthy balance sheet and forceful management under a German former paratrooper (there’s a tag for the tabloids to play with) called Tom Enders. British strengths in civil aerospace still reside largely in BAE and the Airbus UK factories at Filton and Broughton, so there’s logic in bringing them back together at a time when long-term global demand for passenger aircraft looks strong.
BAE and EADS are already partners in the Eurofighter project, and Anglo-
European mergers such as Royal Dutch Shell and Unilever have an honourable track record, whereas British companies from Marconi to Marks & Spencer have come unstuck in American markets. If the problem of EADS is that its French and German government shareholders have too big a say in its strategic decisions and senior appointments, that influence is likely to be diluted when the merger goes ahead. It may seem an odd moment in history to throw in our lot with a European champion, but I’m thinking positive about this one.
Apology for a Chancellor?
‘I felt like a TV surgeon in Casualty realising his patient was dead,’ wrote Norman Lamont on last week’s 20th anniversary of Britain’s exit from the European Exchange Rate Mechanism. ‘All we had to do was unplug the system.’ The subliminal suggestion that being a key decision-maker at that moment of national crisis was like being an actor rather than like being a real surgeon is both a curious reflection on modern politics and a glimpse of the inner mechanism that enabled the then Chancellor to cope with such a career-shattering episode. Recollecting in tranquillity, he musters a lucid revisionist argument that ERM membership — which in any case he inherited from Thatcher and Major rather than instigated — wasn’t all bad. It is not now regarded as the root cause of the early-1990s recession, which was coming at us anyway after the late-1980s boom, but its punitive interest rates did help bring inflation back under control. And economists have long recognised that coming out of the ERM on Black Wednesday in 1992 gave impetus to a recovery that had actually begun in the last quarter of 1991 — when Lamont was mocked for talking about ‘green shoots’.
After two decades of tetchy defensiveness, is he entitled to a reappraisal of his Chancellorship or perhaps even one of those formal apologies which now punctuate public life? I fear not: the truth remains that he was a never credible in the role and there is no reason to revise the judgment of Christopher Fildes, writing here when Lamont was sacked by John Major in June 1993: ‘Best of all, [Ken Clarke, his successor] will have what Mr Lamont never had — a predecessor he can blame. That is the outgoing Chancellor’s last service, and the curtain line in a small personal tragedy.’
What are my odds?
Curious that the Treasury chose to advertise for the next Governor of the Bank of England in the Economist but not in The Spectator. Given the embarrassing paucity of obvious candidates — so many having been knocked back in the Paddy Power odds by their proximity to money-laundering, sanctions-busting and Libor — it might prove more fruitful to appeal to the sort of sophisticated dark horse who spends Sunday afternoons browsing the small ads at the back of this paper. Tuscan farmhouse, tantric massage, ‘advanced understanding of financial markets… strong communicator… good interpersonal skills’: it all fits the image of the Spectator Renaissance man.
Indeed, perhaps I should shake off my natural modesty and whack in an application myself. Here’s a first draft. In my previous globe-trotting career as an investment banker, I spent plenty of time hanging around the lobbies of exotic central banks and freeloading on the international conference circuit, plus I’m on nodding terms with the present Governor’s butler, so I think I’ve got a fair idea what’s involved. In terms of the technicalities of monetary management, I’m sure I could press ‘Print’ on the Quantitative Easing machine in the Threadneedle Street basement. Unlike other names in the frame, I combine an appetite for a big City lunch with a close view of provincial, small-business life. As an economic forecaster, I could hardly be more wrong than the Bank itself has been these past few years.
And I certainly have the attribute that was missing from the ad but must be essential in a job whose incumbent is blamed for all economic ills and financial failures but rarely praised for disasters averted and corners turned: a good sense of humour.
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