At this juncture, the deputy editor gave his verdict on the political, economic, social and cultural institutions that had long made his country the odd man out, in a 1973 survey that also signalled a bitter turn in narratives of national decline. ‘Britain entered the postwar era as the richest country in northwest Europe except Sweden. Because our economic growth rate since then has been about half that of our neighbours we are now the poorest except Ireland.’ In 1964, Macrae had pushed the Economist to back Wilson, in the hopes of unleashing economic growth. Instead, what Britain got was ‘government by inferiority complex’, as Labour ‘solemnly deflated the economy into ever greater unemployment and stagnation, in order to save an exchange rate which almost everybody outside Whitehall knew it was both undesirable and impossible to save anyway’. This episode led Macrae to conclude that Britain was not ruled by parliament, but a ‘bureaucratic oligarchy’ of about 3,000 administrative civil servants – which might have been fine, if these were younger, less risk-shy, and more like their French or Japanese brethren. From 1970, Edward Heath and the Tories offered another lesson, when their attack on the unions’ legal immunities was handily defeated. If this stood, more electrical blackouts could be expected, descending the country into a literal dark age of social disorder, even a ‘Latin American situation’.
Declinist, not defeatist, Macrae advocated a raft of measures to contain this looming crisis – as significant for the neoliberal elements these already contained as for the ways in which they differed with the ideas gaining traction among intellectuals who would be close to Thatcher. Macrae called for a long overdue showdown with organized labour (perhaps through a ‘shock legal action’ as in the 1901 Taff Vale case), and for reversing the ‘Attlee nationalizations’ of 1945–51. This version of nationalized industry – ‘narrow, monopoly production in certain rigidly defined fields’ like coal, railways, power utilities, steel – had always been doomed, not just because public corporations were kept from moving between product lines as did all private firms (Imperial Tobacco now made crisps as well as cigarettes), but because they in turn produced monopoly unions, and cost-push inflation. ‘The crucial point for any reform is not that ownership of particular plants should be wrested from the state but that there should be competition to make the products of nationalized industries.’ No ‘forced sale’ then, but the extension of competition to ‘all municipal or other public services’ – from libraries to trash pickup to prisons – on a performance contract basis.51 Still, it was difficult to be crudely anti-statist in light of the last thirty years, which suggested that Britain did not have adequate planning. In Tokyo, a civil servant at the Ministry of Economy, Trade and Industry once apologized to Macrae for handing over a report brimming with mathematical jargon. ‘There must presumably be something else, if not mathematics, of which those in charge of British economic policy tend to be excessively fond’, ventured the civil servant. ‘Moralising’, replied Macrae.52
What remained almost unthinkable was that monetary methods could or should be the main means of lifting the malaise. Here was the bedrock, as it were, of the weak Keynesian consensus at the Economist, where several reasons spoke against the manipulation of interest rates to increase unemployment or shake out inefficient firms. For Macrae, there were not just the memories of the Depression, as well as the experience of the post-war decades of ‘stop-go’, but overlaying both the logic of the Cold War: near-full employment as the price of democratic legitimacy in Western liberalism’s struggle with the Soviet Union. Amidst the miracle years of post-war capitalism, the bias was for expansion, and against constriction. As if to highlight the gap this left between the Economist and the neoliberal program, Macrae’s survey of the economy in 1973 brought a reply from Arthur Seldon, joint head of the pioneering think tank the Institute of Economic Affairs, who ‘agreed with 90 percent’ of it, but wished Macrae had followed ‘his analysis to its conclusions’ and called for denationalization of the ‘two state services that account for a high proportion of government: education and medical care’.53
Macrae’s frustration with the ‘stop’ in stop-go economics led to overlap with neoliberals like Seldon, however, on an important issue. To avoid the deflationary effects of defending the pound sterling at a fixed exchange rate, Macrae had backed a float since the late 1950s, irrespective of the City’s sterling area ties. More exciting opportunities now beckoned, at the interconnection between Europe and America, whose sluice was the growing Eurodollar market. Starting in the late 1950s, some of the City’s leading merchant bankers joined Treasury and Bank regulators to encourage American, Asian and other multinational banks and corporations to come to London to tap these liquid markets in ‘offshore’ dollars – whose chief attraction was their unregulated status, operating outside Federal Reserve and Treasury oversight and capital controls established under Bretton Woods.54 Since Macrae was neither uncritical of the banks nor a conventional neoliberal, it is all the more striking that he too looked for a partial solution to British difficulties in the speculative innovations of London’s financial hub.
Indeed, as Macrae contemplated the advantages of British membership of the European Economic Community (EEC), it was the prospects for the City that stood out: the end of fixed exchange rates and sterling area capital controls – which EEC entry demanded – meant that as ‘northern Europe starts exporting its manufacturing industries to the poor south and communist east’, British banks would boom, organizing the flexible holding, licensing and other investment and ownership strategies and structures of the post-industrial world.55 Britain into Europe, a collection of writings from the Economist staff, made the case for entry from this perspective in 1971 – arguing that it was high time for the City to abandon sterling’s reserve status (with the ‘awful record’ of ‘two devaluations, ten grisly postwar sterling crises, ten occasions on which Britain suffered a sharp drain on its gold and foreign exchange reserves’) and most commonwealth preferences in goods.56 The City should instead look to the ‘dollar and Eurocurrency markets’ of the future, becoming ‘the banking centre of the community, where the working dollar balances of Europe are kept – a new, more desired, very much more fruitful European version of the sterling balances used by Britain to finance its profitable investment abroad’. The City would act as a hinge between two eras of political economy, with Britain pivoting to the global currency markets of the future.57
If Keynesian demand management remained a relevant tool in the liberal policy mix, this had as much to do with the US – which Macrae visited for the paper in 1958, 1969, 1975, 1978 and 1980, more than any place else, outdoing even Beedham in his devotion to it. While enthusiasm for the ‘greatest country on earth’, and its mission, ‘to be at once political sedative, social healer and the leader of mankind’s last important economic advance’, never wavered, fears arose that its social and racial conflicts might plunge it into chaos, and then migrate to Britain. ‘Negros have swarmed into rotting ghettos’, Macrae reported in shock in 1969 – that year a turning point in his perception of the inner city – plagued by unemployment and crime, which have ‘sprouted a large charade cast of tough so-called “black power” leaders’. Many whites suffered from ‘feelings of insecurity and terror’, and some in Washington told him they carried guns, ‘just in case’. ‘White Americans fear (probably rightly) that “black power” ideology may make some Negro youths feel that robberies and assaults on white women are almost a noble act of black revolution.’ White students egging on black comrades at protests, as well as the ‘temporary tolerance of violence by many American white liberals’, particularly incensed him. Stimulus was needed on a scale unimagined even by Johnson’s War on Poverty, to head off ‘mortal peril’. America ‘would be wise to give almost overstrained priority to maximum economic growth, even though this will mean tolerating more inflation than its middle classes will like’.58 But just as important was reassuring those middle classes by empowering police and suppressing locally elected community action p
rograms, to ‘encourage an exodus from the ghettos at all deliberate speed’.59
Macrae’s strong feelings about law, order and local democracy in the US had a personal element, which he disclosed towards the end of the survey. Invited to speak at a university symposium on South Africa, he was heckled by students for being a ‘wicked honky’, who, in the Economist, had opposed the immediate implementation of black majority rule. ‘Dreamy, liberal intellectuals in Washington still held some idealistic notions of what a planned disturbance of this kind would be like’, he scoffed. ‘What I found was the dreariest old Nazism … the cult of violence, the cult of youth, the cult of proclaiming that one is ruled by a plutocracy … anyone over the age of 45 knows when and where in Europe youth was last asked to bathe in these emotions.’ Students roamed the hallways carrying buckets ‘into which obviously non-revolutionary middle-aged gentleman were requested to put entirely unaudited dollars “to finance the South African revolution”’. Macrae was petrified. First he tried to run. Then he pretended to be a friendly journalist asking sincere-sounding questions about Vietnam, which the students, he felt, answered stupidly. Later, at an assembly, he saw ‘black-power-uniformed thugs seize [the university president] by the scruff of the neck as a band of black drummers beat an accompaniment’. ‘A man of decency and international eminence’ surrounded by a black drum circle – his overwrought memory of this scene never left him.60
By the turn of the 1970s, Macrae could not hide his contempt for anything that smacked of counter-culture – from the Beatles to black radicals, hippies, feminists, environmentalists, the New Left and gays (he once proposed an Economist leader on a spray to ‘cure’ homosexuals by reversing their aversion to the smell of their mothers). These people were not just enemies but lightweights, who well-meaning liberals mistakenly wished to engage in dialogue. In the end, his economic position dovetailed with Beedham’s politics: in a backward country like Brazil or Chile, or in a poor black neighbourhood in America or Britain, democracy could easily become the enemy of liberal capitalism. Richard Nixon, with scant respect for the former, received barely a slap on the wrist over Watergate. The Economist viewed the affair as a mildly amusing intrigue almost up to the day the president resigned.61 Macrae, at any rate, looking to escape from the corset of fixed exchange, praised Nixon for dismantling Bretton Woods between 1971 and 1973.62
Andrew Knight: Special Relationships, 1974–86
The Economist may have applauded the delinking of the dollar from gold and the effective end of the Bretton Woods system of fixed exchange in 1973. But this drastic step also pointed to a deep, rumbling crisis of the liberal capitalist order that America had built after 1945. In one sense, this was a testament to its success, in particular in Germany and Japan. Two decades after their wartime defeat, newer, lower-cost industries in both countries – making everything from cars to consumer electronics – began to capture market share from American firms abroad and at home. For the first time in the twentieth century, the US recorded a trade deficit in 1971. The decline in profitability suffered by US manufacturers soon engulfed their foreign rivals too, while attempts to restore profit rates unleashed trade union militancy across the advanced economies. The problem was not just economic, but political and imperial. Mired in Vietnam, Washington had little to show for its efforts there besides monetary chaos. In the context of low interest rates, dollars spent on ‘butter and guns’ sloshed through the global economy, joining huge pools already ‘offshored’ in the City of London, where investors used them (among other things) to bet against the US currency. Nixon’s devaluation in 1973 was a defensive strike, meant to wind up a long, losing battle to maintain confidence in the gold convertibility of the dollar, and restore competitive capacity against German and Japanese exporters. As a means of reviving the world economy, it came to grief immediately. The oil price quadrupled after the Yom Kippur War, and a new word was coined to describe the effects this had down the decade: stagflation. Perhaps most alarming of all, these very developments seemed to strengthen the Soviet Union, which gained hard currency from surging oil prices and a freer hand abroad after America’s geopolitical setback in Southeast Asia.63
At this moment of apparent crisis for the American-led liberal world order, Andrew Knight became editor of the Economist. In contrast to past occupants of this position, Knight found it more difficult to get hired in the first place than to obtain the top job. On his second try in 1964, Brian Beedham thought him ‘brooding’ but ‘with the large advantage of not being a smooth young man’, and ‘worth bearing in mind’. Two years later Fred Hirsch, the intellectually distinguished finance editor, was about to end a third interview, dismissing a bungled explanation of monetary policy with, ‘I don’t think much of that’, when Knight rejoined, ‘Well, what do you expect for £1250 a year?’64 Quick wits won him a spot covering investing. But he had a bumpy ride. The business editor, Mary Goldring, criticized his knowledge of the money markets, and foisted him on the American Survey in 1968. Knight enjoyed this – too much for his superiors John Midgley and Nancy Balfour, who wanted less socializing and more business articles; he was recalled from Washington after just two years. On top of this, Knight was ‘basically illiterate’, according to one section editor, ‘his command of grammar left something to be desired’.
Yet two chances appeared and Knight seized them. The first was an opening in Europe, which he began to write about in 1970 as an assistant editor – lobbying for British membership of the EEC as well as a separate section devoted to it, to be edited by him from Brussels. There in 1973, his address book swelled: Valéry Giscard d’Estaing, the French presidential hopeful, was just one of the illustrious friends he made in the bureaucratic capital of Europe. Knight’s second break came that year when Burnet opted to leave and caused an uproar by pushing Beedham as his successor. ‘There was a strong feeling among younger members of staff that it would be nice to have someone more accessible and less right-wing’, recalled Johnny Grimond.65 Balfour and Mary Goldring protested to the board of directors, though in opposing Beedham, none had in mind the alternative of Knight, with Goldring resigning at the prospect. During this row, Knight crossed the Channel to make his case – most forcefully to the new chairman, the financier Evelyn de Rothschild, as well as to the board member and grocery magnate John Sainsbury, and assistant editor David Gordon. Knight’s pitch? He would conquer America, a challenge for which his two years of hobnobbing in Washington now seemed an asset. ‘The American Survey had given us a great reputation in the US. I could go to the White House anytime I wanted’, Knight told them. ‘The Economist could fulfil a unique function: analytical, opinionated, with distance’. It offered ‘something Newsweek and Time couldn’t’. Rothschild agreed that ‘exposing the Economist, at the risk of loss, to the American market was worth a shot’; Sainsbury, ‘the most prestigious board member’, clinched the consent of the rest of this ‘mildly obstructionist’ group.
At age thirty-four, Knight became the second youngest person ever to edit the Economist. Despite serious scepticism from many staff, he was uniquely suited to the mission he had set himself: transforming the Economist from a fellow traveller into an active participant in the political and economic debates that mattered in America. What had prepared him for this role? Though born in New Zealand, Knight was bundled off to England as a child. His father, an air force officer, chose Ampleforth, the elite Catholic public school, where Knight rose to head boy and became a favourite of his housemaster Cardinal Basil Hume. At Balliol, Oxford, he took a second in Modern History, before being sent, again by his father, to a merchant bank in the City. Knight did not like being a banker and tried a lateral move to what seemed the more exciting world of financial journalism. In 1964, he joined the Investors Chronicle, before stepping up and up: editor of the Economist, chief executive of the Daily Telegraph, the chairman of News International. If the Economist greatly enhanced Knight’s standing, this reflected his success in raising its profile, too.
&
nbsp; In every written account of Knight, the word ‘ambition’ appears repeatedly – almost as if it were a physical attribute, to be noted along with his height or eye colour. ‘Written in neon’, said a former section editor. ‘He even worked funeral services.’ Profiles tend to place him behind closed doors, partly obscured, amidst padded leather and polished wood. The journalist and military historian Max Hastings recalled their first meeting in 1985 at Brooks, a private club in Saint James. ‘A man of striking pale, ascetic good looks … he had long ago shed any evidence of his family roots in New Zealand … and could have been mistaken for a youthful ambassador or Whitehall permanent secretary.’ Hastings observed Knight carefully as they changed parlours. ‘He acquired an almost oriental look when his eyes narrowed as he smiled. His meticulous courtesy also held a touch of the East. He had always possessed the ability to make the mighty feel safe in his hands.’66 Andrew Neil, another journalist who served under Knight at the Economist and then at News International, called him ‘an accomplished courtier to the rich and powerful, especially outsiders who needed help with the British establishment’.67 These included Canadian mogul Conrad Black, whom Knight advised to buy the Daily Telegraph in 1986, in a deal Evelyn de Rothschild underwrote, and all three toasted atop the Economist tower (asked who he intended to make managing director of the Telegraph, Black replied, ‘Our genial host, Andrew S. B. Knight, Esquire, peerage anticipated’); and Rupert Murdoch, the Australian who purchased the Sunday Times in 1983, briefly making Knight chairman of his growing media empire in 1989.68
At the Economist, Knight turned a transatlantic love affair into a new business model. The strategy rolled out in 1977 when Clive Greaves, head of advertising, went to New York to ‘spend money’. ‘There was no market research, just intuition based on my years in Washington. I get and deserve credit for getting into America.’ Greaves consulted advertisers with a goal to double circulation in time for the 1980 presidential election, at the same time hiring subscriber acquisition mailings expert Beth O’Rorke.69 In 1987, Abbott Mead Vickers BBDO devised a white-on-red ad campaign that began to appear in taxis, buses, subways and airports in cities in Europe and North America: ‘Would you like to sit next to you at dinner?’; ‘Protects against foot-in-mouth disease’; ‘World domination without the laser death ray master plan’. ‘We lost money for six months when we expected losses for the first two years’, Knight recalled with pride, ‘27,500 subscribers were there when I started. That was 125,000 when I left.’ Today more than half of all circulation flows through the US and Canada, about 850,000 copies. But making it in America was not just about sales; it also affected the layout (the American Survey moved ahead of Britain) and the outlook of the paper. On taking over, Knight assured Beedham that ‘I basically agreed with him’ and ‘history bore him out, if not on Vietnam, certainly on the need to resist the Soviets’. For Moss he had the highest regard, entrusting him for the next seven years with some of the highest profile leaders on foreign affairs.70
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