During a long and thoughtful review of The Rise and Fall of the City of Money by Ben Wray, a respected commentator on politics and economics from a left perspective, he brings up an interesting point: have I fallen into the trap of giving too much weight to individuals and not enough to the political, economic and social tides sweeping across the globe?

To quote Wray: ‘Questions arise about Perman’s account when it reaches the most recent period of Scottish financial history. Although his book is full of enthralling stories about the characters involved in Scottish banking, he does have a tendency to exaggerate the role of such individuals in shaping events. This inclination towards the Great Man theory of history causes him to neglect major transformations in the world of finance, such as the end of the gold standard in the early 1970s, Thatcher’s financial “big bang” of the 1980s, and a shift in the orientation of finance away from manufacturing to personal loans — and finance itself — as deindustrialization accelerated.’

There are some obvious errors in this statement: Britain actually left the gold standard in 1931, some 40 years earlier than Wray suggests. He is possibly confusing this with the end of exchange controls, which did not come ‘in the early 1970s,’ but was one of Mrs Thatcher’s first actions in becoming Prime Minister in 1979. I do not ignore “big bang” – I cite it as a factor in hastening the end of the Scottish Stock Exchange, Edinburgh stockbroking and the consolidation of the life assurance offices, once a major Scottish strength, now completely gone.

I did not dwell on Mrs Thatcher’s 1986 deregulation as far as the Scottish banks were concerned, because it hardly affected them. They did not follow their London counterparts in buying stockbroking firms or going into proprietary trading. Only when Royal Bank of Scotland took over NatWest 14 years later did it acquire an American subsidiary trading in financial securities of increasingly dubious value.

The lure of easy profits

In deciding to keep, rather than dispose of this company, which was its initial inclination, it abandoned traditional Scottish prudence for the lure of ephemeral easy profits. But that decision was made by individuals – it wasn’t inevitable. A few years later Fred Goodwin as chief executive of RBS, compounded the error by buying the Dutch bank ABN-Amro, despite a warning that its balance sheet was stuffed with worthless financial instruments.

But back to Wray’s main point: have I over-played the influence of individuals? The book is a popular history not a Phd thesis, so I plead guilty to making the most of some of the colourful characters involved – the devious William Paterson, the hard-drinking Presbyterian minister who helped invent actuarial finance, the cunning Henry Dundas who conspired against his own cousin to gain control of both major Edinburgh banks.

I could – perhaps should – have made more of the capitalisation of agriculture, which came later in Scotland than in England, the role of the banks in financing the rise of industry in the West of Scotland and the globalisation of finance in the late 19th and early 20th centuries – an opportunity largely missed by the banks, but grabbed by the investment trusts and insurance companies.

But history is not entirely made by impersonal forces and in my own 45-year experience of observing Scottish finance I have been amazed at the effect individuals have had on institutions – for good and ill.

Sales instead of service

The culture change wrought quite brutally by George Mathewson at RBS in the 1980s and much more gently by Bruce Pattullo by Bank of Scotland not only made both banks more remunerative for their shareholders, but also better places to work and providing better services to their customers. Could you argue that if those two men had not existed the same changes would have happened because that was the prevailing trend in banking? It did not happen at NatWest or Barclays, which went through the last two decades of the 20th century lurching from crisis to crisis – most of them self-inflicted.

Those changes were not entirely benign, a sales-driven culture progressively replaced the service-culture which had been the hallmark of Scottish banking, but it was what came next – the much more radical style of leadership which came with Fred Goodwin at RBS and the team of non-bankers who led HBOS, the unlovely conglomerate which swallowed Bank of Scotland – which destroyed the distinctive Scottish banking sector.

Lord Stevenson, chairman of HBOS, claimed to me that it was not the management and cultural changes over which he presided which led to its downfall, but the US sub-prime crisis, which swept the bank away. I didn’t believe him and neither did the parliamentary inquiry, which condemned his leadership and pinned the blame squarely on the board, which set the strategy which led to destruction.

There are, of course, impersonal forces at work, but that cannot absolve individuals of responsibility for their actions.

Images from the Financial History of Edinburgh walk with Ray Perman and Russell Napier of the Library of Mistakes.

Rise and Fall of the City of Money was to have been part of the Edinburgh Book Festival. Both walks and talks are pandemic-postponed but bookshops are open.