For the final three years of his 18-year career at Goldman Sachs, Jim O’Neill, the Treasury’s new commercial secretary with responsibility for developing the Northern Powerhouse, served as chairman of Goldman Sachs Asset Management, the company’s least-regarded and most bothersome unit. While two younger executives ran the business, O’Neill was dispatched to faraway conferences to bore audiences of docile suits with his views on whether Nigeria or Malaysia offered a better investment opportunity. When finally in early 2013 he resigned his sinecure, he was not replaced and his title was mothballed.
Since then, he has been all but marching up and down Whitehall wearing a sandwich board pleading for a government job. He chaired an inquiry into the need for anti-microbial drugs, and then another proposing greater devolution of powers to cities. As a Mancunian who has spent most of his adult life living in Surrey and working in the City, he claims now to want to rebalance Britain’s economy away from London and is working for the Treasury free of charge.
There has been plenty of criticism in recent years of the flow of senior figures from Goldman Sachs into the public sectors of the United States and Europe as well as in Britain. The current Governor of the Bank of England, Mark Carney, and head of the ECB, Mario Draghi, both spent time at Goldman, and the bank’s alumni have spread through the US Treasury like bindweed. Politicians are willing to take the risk of seeming in hock to the banking industry in return for a sharp mind and an even sharper pair of elbows. You know what you’re getting with a Goldman Sachs banker: a tough, no-nonsense, pragmatic deal-maker, even to a fault.
Jim O’Neill, though, was not a banker. He was a marketer. His job title for most of his time at Goldman was chief economist. That meant marshalling a young research department to produce ideas to help sell Goldman’s services. While Goldman’s real pirates were out pillaging companies and spitting on borrowers, O’Neill was composing PowerPoint presentations to help idiot-proof the bank’s big investment schemes. While the heavy-hitting partners merged, acquired and traded with Goldman’s own money, O’Neill sat in his office surrounded by framed drawings of his favourite Manchester United players thinking up acronyms. The most famous was Brics — Brazil, Russia, Indian and China — which he coined in 2001 and which became shorthand for the rapid growth of emerging markets.
For years, he wrote a weekly ‘Viewpoint’ for Goldman’s clients which often consisted of a few notes taken from the English edition of the China Daily, some vague macro-economic ramblings and a final laddish paragraph on the fortunes of his beloved football team. He had a peculiar habit of quoting himself: ‘As I like to say, investors don’t eat relative returns, they eat absolute returns.’ He was called a ‘rock-star economist’, not a label Mick Jagger was ever tempted to reverse.
To use an analogy O’Neill might grasp: for the government to think they have entrusted the Northern Powerhouse project to a rough-and-tough Goldman veteran is rather like a soccer team thinking they have recruited Lionel Messi from Barcelona — only to discover they’ve hired Dave Messi, the reserve goalie for the under-16s.
And that’s the good news. The bad news concerns O’Neill’s feel for economic growth. He thinks in terms of sets of numbers and league tables and countries racing to be the biggest, the richest, the wealthiest and the most influential. He spent all those Bric years so busily waving his pompoms that he rarely mentioned the darker sides of the countries he celebrated: the vengeful autocrats of China, the crony union bosses of Brazil, the nationalist socialists of India and the commodity-cursed oligarchs of Russia. Growing pains, he would say. Europe and America had had theirs, now it was the developing world’s turn. Only a snob would dare to judge their ethical or governance failings, or their various models of state-controlled capitalism. He sidestepped the awkward absence of correlation between GDP growth and stock-market returns and investors who followed his advice, notably in China, found that the value of their investments stagnated.
Challenged on the absence of democracy in China, O’Neill would respond with a line he claimed to have heard from an elderly Chinese woman: if democracy was so great, why did only half the people vote? If it were as good as sex, everyone would do it. He should try that at the DfID Christmas party.
O’Neill is a dismal economic determinist. This suited his job at Goldman Sachs, which was to juice deals and investment flows in dubiously governed countries. He never saw a problem with China’s extraordinary reliance on dollar-fuelled credit to fund its steroidal growth, and has argued that we should reward China by grovelling for more trade. He has written that individual European countries should cede their influence in major international economic and political organisations such as the IMF and World Bank to Asian, African and Latin American rivals for the good of the global economy.
Growth, in O’Neill’s view, is the sole economic good. If we challenge its nature or sources we are certainly on the wrong side of history, and almost certainly bigoted. When he talks about cities, he focuses on how proximity fosters competition, how seeing your neighbour’s enormous television makes you want to work for one too. He has lifted most of his ideas about ‘metros’, large multi-city regions, from the American academic Bruce Katz. They both see cities as hubs of innovation and rapid growth. String together enough universities, light railways, local businesses and creative professionals eager to turn factories into lofts, and the effects will save the economy.
But while Katz’s views are now washing up in London, they are going out of fashion in America. They are considered too prescriptive, too devoid of a sense of history. What works in Chicago may not work in St Louis. Encouraging more high-tech service businesses that sell to Asia is not a solution for every city. Sheffield deserves to be more than Shoreditch lite. The Katz-O’Neill consensus trivialises the complexities of city growth, the congestion and pollution, the sprawl. It has no feel for place. It is an airline-lounge view of how economies really work.
The Northern Powerhouse is a thrilling idea, with all kinds of significant implications. It would be a treat to see it in more inspiring hands.