The true importance of finance

I’ve been reading a fascinating, if rather grim, book called The Secret State, by the distinguished British historian, Peter Hennessy. Based on interviews and a range of declassified official files, it’s a detailed picture of the secret arrangements made in the UK during the cold war for preparing for, fighting and supposedly surviving a nuclear war. Among the frankly very chilling details are a few amusing facts, including the members of the government who would be moved to a secret underground bunker if nuclear conflict occurred. There are representatives of most government departments, but not HM Treasury, on the basis that money and finance skills would be of no value in the post-holocaust world. There was a discussion about how soon money might be re-circulated after the conflict but wiser views emphasised that in any post-nuclear world the value of money would be zero. Any survivors would want food and shelter; bits of paper with the Queen’s head on would not be much use.

This, admittedly extreme scenario shows that money is simply a social convention. We all accept pounds (or dollars, euros etc) for payment only because everybody else does. The paper and coins have no intrinsic value. During hyper inflation this convention breaks down and the currency loses its value. The recent hyperinflation in Zimbabwe ended when the economy shifted to using foreign currency instead. Some gold enthusiasts seem to think that gold-backed currency is an improvement on what economists called fiat currency (the Latin for “let it be”) but gold, although tangible and having some direct use as jewelry (and some industrial purposes) is just as much a social convention. Having no yield, there is no rational way to assign a fundamental value to gold. In a post-nuclear world gold coins would be much less useful than a can opener.

So the planners were quite right to de-prioritise finance expertise in their wargames. In any case, the UK would not have survived any full scale nuclear war, being highly vulnerable owing to its high population density and the large number of military targets. Her Majesty’s realm would have been left a blackened, irradiated ruin, apart perhaps from a few bits of the Scottish Highlands. Cambridge would have been wiped out very early on as it is close to several US air force bases and was for a while one of the designated post-war regional seats of government. So we can expect the Soviets to have allocated a few megatons in our direction. The old nuclear bunker on Brooklands Avenue was demolished a few years ago and is now the site of an award-winning housing development.

The book includes some other interesting information. It seems that British and American Trident submarines use a lot of formica inside because it reduces fire risk. Russian nuclear subs have a lot of steel and glass and include a sauna. And the French ones have not only wood panelling but a fish tank. National differences, as expressed through the style of nuclear deterrents.

In case readers are concerned at the depressing tone of my holiday reading, I should mention that the two other books I’ve recently been reading are a superb analysis of the Chinese Communist Party (Richard McGregor’s The Party) and a re-reading of F. Scott Fitzerald’s beautiful, sad novel Tender is the Night. There may be a linking theme in these choices but I’m not sure what it is.

4 Responses to The true importance of finance

  1. I perfectly agree with you on the point that money is simply a social convention and it’s value is determined by society.

    I have read and enjoyed all the pieces you have posted and cannot wait to be taught by you.

    Greetings from Accra, Ghana

  2. I would have never thought that they would let finance experts die out had there been another nuclear attack, but it does make some morbid sense.

    Thanks for sharing this.

  3. Hahaha-I am very surprised that there would be no place for HM Treasury in the nuclear shelter but am not quite sure that finance experts would die out (didn’t somebody say that cockroaches, rats and bankers are one of few species which can survive a nuclear catastrophe). I must advocate, however, that the Treasury be let into the shelter because who would otherwise count the cans of Spam, allocate saltine crackers/Russian dictionaries, and decide who gets the more sought-after pickles and jam? Once the nuclear attack is over, who would tax the remaining population in Scotland (some form of money would be in use by this time), wire/transport this money to the USSR through the Bank for International Settlements (which would surely survive) and raise loans from the St. Petersburg-based BBRR (Britanskii Bank dla Rekonstrukcii i Razvitia – the British Bank for Reconstruction and Development)? Or perhaps the reason why HM Treasury is not planned to go to the secret underground bunker with the rest of the government is because they would go to an alternate, not yet declassified, business-class bunker in the Cayman Islands:):):) But jokes aside, I think that finance professionals will always be needed and useful in all societies. I also think that, despite their bad reputation at the moment, finance professionals are not any more corrupt or irresponsible than people on average.

  4. I personally experienced, like most people from ex-socialist countries, galloping inflation but it was during the war in my country (Bosnia and Herzegovina) that money really lost its value. However, it’s worth pointing out that the need for Treasury and some type of currency did not disappear even after the society fell into a total abyss of material and moral destruction, comparable to a situation after a nuclear disaster perhaps in areas not directly hit. The Treasury issued monopoly-looking currency which could be used to pay the few occasionally available public services. It also allocated salaries to more important professionals (like soldiers and physicians) in the form of cigarette packs (quite useful and liquid as a currency unless one actually smoked). People also used German marks (at a tiny fraction of their value in Germany), produced things on their own and bartered. Soon after the war, the Treasury coordinated aid money, the Central Bank introduced a convertible currency, and banks provided wire-transfer services for remittances and loans for reconstruction and development. All these proved vital in bringing things back to normal.

    Sorry for the length but I just loved the topic

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