Taken altogether, the Norman approach, heavily reliant on his mixture of charm and force of character, essentially amounted to moral suasion. It did not always work. ‘I regret more than I can say,’ he complained unavailingly in December 1921 to Sir Newton Stabb after learning that a long-term loan to the Siamese government was going ahead, ‘that you should find yourself committed to an issue through the Hongkong Bank [the future HSBC] which actually in the spirit, and practically in the letter, is opposed both to the wishes of the Chancellor and to the policy of the Bank of England.’ Nor were the chairmen of the clearing banks – hugely powerful figures in their own right – automatically inclined to bow to all the governor’s dictates, with Norman enjoying a distinctly mixed relationship with both Frederick Goodenough of Barclays and, perhaps inevitably, Reginald McKenna of Midland. ‘I do not like that type of mind, always anxious to make a personal dash,’ was the Norman view of Cunliffe’s old friend; while McKenna for his part reckoned the governor ‘an intellectual without an intellect’.16 The Bank/City relationship may have been significantly changing in the first half of the 1920s, but the human factor would always be in play.
It did not help on the Norman/McKenna front that the former politician emerged as one of the two most prominent public critics (the other being Keynes) of the Bank’s necessarily deflationary monetary policy – necessarily because it fully accepted the Cunliffe Committee’s conclusion in 1918 that in effect that was the only way of restoring gold parity between sterling and the dollar and thus enabling Britain to return to the pre-war gold standard.17 Unsurprisingly, not least in the immediate post-war context of a spectacular boom rapidly requiring dear-money measures (at this stage supported by Keynes), monetary policy now became increasingly politicised. The stakes and competing interests were clear as early as autumn 1919: wanting an increase in Bank rate, Cokayne warned the chancellor, Austen Chamberlain, that ‘the Court regard the restoration of the gold standard and the resumption of free gold exports at the earliest possible moment as of vital importance to the Country as a whole and consider that it is well worth a temporary sacrifice to secure that end’; but when, soon afterwards, the rate did rise from 5 to 6 per cent, Norman was still far from sure that ‘the certainty of sound money’ was ‘definitely settled’, expressing to Strong his concern about ‘the advocates of expansion and the printing press, which to a considerable extent is the view held by many political leaders’. The denouement to this first post-war phase came in 1920. In April, a fortnight after becoming governor, Norman secured an increase from 6 to 7 per cent; but then in July, pushing for 8, he was informed by Chamberlain that another rise was politically impossible. It was a telling moment. Interest rates, observed Norman in September to a colleague of Strong, ‘are now a political as well as a financial question’; and later that autumn he reproachfully told Chamberlain that ‘when I call to mind your remark to my predecessor (that an independent Rise in the Bank Rate would be an unfriendly act); when I remember our continuing desire for higher rates ever since last July and indeed long before it, and your continuing unwillingness to consent, owing to political reasons … I wonder what (in the spirit as well as in the letter) is the meaning of “political pressure”’. Yet in the long run, however much Norman may have wished otherwise, there was no escaping this politicisation – with the price of money now increasingly seen as impacting directly on levels of unemployment, on housing policy and on economic policy in general.
In due course, Bank rate did come down – eventually to 3 per cent by July 1922 – but in many external eyes all too slowly and timidly, given the sharp recession that had followed the boom. Yet, for Norman and his most trusted colleagues, there remained no alternative to deflation if a plausible road map to a return to the gold standard was to be charted and followed. One of those colleagues was the highly regarded international banker Sir Charles Addis, a director since 1918. Giving his presidential address to the Institute of Bankers in November 1921, he saw ‘no hope of the restoration of the old standard of living and of comfort for the great middle class of this country until prices are further reduced’; called on the country to ‘take a long pull, a strong pull, and to pull all together’; repudiated the ‘ingenious and insubstantial nostrums of claustral economics’; and, demanding a return to gold as soon as possible, beseeched, ‘Let us have done with short cuts and by-pass and, ohne hast ohne rast, bend our energies to return to the old standard.’ Norman would undoubtedly have agreed with every word, but it was a strategy that by 1923 was under increasing attack from the fluent pen of Keynes. In July he publicly declared that ‘so long as unemployment is a matter of general political importance, it is impossible that Bank rate should be regarded, as it used to be, as the secret peculium of the Pope and Cardinals of the City’; later that year he published A Tract on Monetary Reform (dedicated, perhaps ironically, to the Bank of England), which consigned the gold standard to oblivion as a ‘barbarous relic’ and instead advocated a system of managed money through which the central bank would be able to control the supply of credit and thus, in the words of one of his biographers, ‘even out fluctuations in business activity’. Norman for his part remained adamant that the Bank’s was the only true course. ‘We can have & perhaps deserve nothing but troubles until we are again anchored to Gold,’ he confided in Strong that autumn, though adding almost despairingly, ‘How & when can we do it?’18
In practice, that happy day came a little sooner than expected. During 1924, Labour’s first-ever chancellor, Philip Snowden, proved surprisingly City-friendly, finding in Norman, he would recall, the very reverse of the ‘hard-faced, close-fisted, high-nosed’ financier of socialist caricature, but instead someone herculean in his efforts, of international cast of mind and with ‘one of the kindliest natures and most sympathetic hearts it has been my privilege to know’. That summer, giving evidence to a parliamentary committee, the suitably encouraged governor calmly addressed the possible sacrifice to be made in the short term by ‘the trader’ (meaning those in the commercial and industrial world at large, as opposed to the financial) through a return to gold ‘at the earliest practicable date’:
I should think the thing is, in every country in the world and in every trade in the world unless he can obtain stability he will not prosper and in order to obtain stability through the only means by which I think it can be obtained, that is the gold basis, it is worth while for him to make once this sacrifice for the good of his business and for his future success, and if he does not make it he will be in a state of uncertainty and at the mercy of other countries until he does.
Furthermore, insisted Norman, ‘the danger of waiting is much greater than people imagine, much greater, not to currency, but to the trade of this country, to the financial standing of this country’. The winter of 1924–5 saw not only a new, unexpected chancellor in the person of Winston Churchill, after Stanley Baldwin’s election victory, but Strong at last swinging fully behind Norman over an early return at the pre-war parity. Churchill himself remained doubtful and reluctant until almost the last moment – ‘I would rather see Finance less proud and Industry more content,’ he wrote at one agonised point to his main Treasury adviser, Otto Niemeyer – but was ultimately unable to resist the formidable combined weight of Treasury and Bank opinion. By late March the decision was taken, with the announcement to be made in the budget at the end of April. ‘Let us be thankful we have escaped the “managed currency” people,’ declared Addis to Strong ahead of the public confirmation; ‘a signal triumph for those who have controlled and shaped our monetary policy, notably the Governor of the Bank,’ proclaimed The Times the day after Churchill had informed the world about a fateful step that in the end was as much a moral-cum-sentimental judgement as a strictly economic one; but some ten days later, writing to Strong, the governor himself was in thoughtful and far from triumphalist mode:
Many of the financial community do not realise the importance and even the possible dangers of the step which has been take
n. They have lived for ten years in a dream: they have not had to use their wits … They ignore the fact that London is probably short of dollars; that India, almost irrespective of the Exchange, is a great absorber of gold; that Australasia is over-borrowed in London and may require the position to be put right, and that such a country as Egypt is not only in a position to draw a great deal of gold from London but for national or political reasons might not be averse from doing so …
Still, as he had scribbled to Churchill in his congratulatory note on the evening of the announcement, ‘Pray count on me to try to do my little bit.’19
Having become governor in the spring of 1920, Montagu Norman was still governor when Britain returned to the gold standard five years later, thereby equalling Cunliffe’s hitherto record length of tenure; he would still be governor at the end of the decade; and indeed would remain in post until almost the end of the Second World War – altogether, a phenomenal twenty-four years. There has been no single more important person in the Bank’s entire history. What sort of man was he? And why did no one else displace him during the 1920s?
‘A small, carefully-trimmed beard adds length and distinction to his fine-drawn, sensitive face,’ noted a profile in an American paper shortly before the return to gold. ‘His hair is brushed back from a high forehead, which is notably prominent just above the dark, searching, thoughtful eyes.’ The writer then portrayed Norman in his Threadneedle Street fastness:
In his room at the Bank, he receives visitors with his back to the fire, standing. His characteristic attitude is long legs apart and thumbs stuck in the armholes of his easy-fitting waistcoat. He does not like talking whilst sitting at a desk.
Talk to him, and you get his measure. His physique may not be powerful, but his brain is a vibrant dynamo. He speaks in a soft voice and each of his words is significant. ‘What d’you want?’ he will often ask people who come to see him. He never uses conventional phrases.
As for his life outside the Bank:
He goes for long walks, and he works in the garden. This is his only exercise, for sport has no attraction for him. He neither hunts, golfs, shoots, nor rides.
He reads much. Kipling is his favourite, and he is himself an earnest believer in the Empire idea and the Kipling man. He collects etchings, and is a connoisseur of silver-points.
No governor before, and possibly since, was the subject of more newspaper and magazine profiles than Norman over his long governorship, notwithstanding his own intense secretiveness; and this was one of the better ones.
Contemporaries whom he encountered were almost invariably fascinated. A selection from their descriptions and assessments gives us a three-dimensional (if occasionally contradictory) sense of a remarkable, enigmatic man who combined charm and steel in roughly equal measure:
He appears to have stepped out of a Van Dyck painting; elongated figure, pointed beard, a big hat; he has the bearing of a companion of the Stuarts. It is said that Israelite blood flows in his veins. I know nothing of this, but Mr Norman seemed, perhaps because of it, full of contempt for the Jews about whom he spoke in very bad terms … He adores the Bank of England. He told me: ‘The Bank of England is my only mistress. I think only of her and I have given her my life.’ (The Bank of France’s Emile Moreau on meeting Norman in Paris in 1926)
His beard and hair though greying are still mainly black or give that impression. His flashing eyes are probably brown but leave the impression of being black. His broad brow is of the kind one sees in the Dutch masters but rarely in real life. His movements are graceful and flowing and he has a voice of a singularly compelling and attractive timbre … I doubt if this man has an equal, never mind a superior, at controlling situations and putting the men who come to meet him where he wants them firmly and kindly but ever so effectively. (The Manchester Chamber of Commerce’s Raymond Streat after seeing Norman at the Bank, 1931)
He could enlist warm friendships and elicit the most devoted service, yet he could seriously upset the nerves of some of his most faithful collaborators. He disliked politicians as such, but found a congenial soul in Baldwin [a cousin of Kipling]. He was a mystic and read widely, but he had no clear-cut views on some of the most profound issues of thought. Although he disliked explaining himself to more than one person at a time, his written communications were admirably expressed. He could never have been a success on television. He would have despised it … (The veteran economist Sir Theodore Gregory, writing in the 1960s)
He had funny little tricks, he was vain – but it wasn’t the sort of vanity that mattered at all. And he was always using strange expressions. I remember he said to me once about someone, ‘Your friend’s a bit hairy in the heel, eh?’ The one thing Monty never wanted to be asked was why he did anything. He didn’t really know quite, but he had this extraordinary intuition … He never made jokes or anything of that kind. He was just amusing. A continual bubble of wit. (George Booth, a director of the Bank throughout Norman’s governorship)
He was a great banker, banking was his life, he created the ‘mystique’ of the Central Banker. But he did not look like a banker at all. There was something of the actor in him – but he did not act a part, he was very much his own real self. He had the touch of the artist in dealing with situations and people – he was not an artist. Intuition guided him but he was very rational and reasoned in his conception of problems. He was a traditionalist with an entirely unconventional approach. He exerted power but always through influence. He was, in every respect, immensely interesting. (J. W. Beyen, a Dutch banker who got to know Norman in the 1930s)
We see Norman in daily action through his desk diary (now accessible online) – invariably crisp, sometimes cryptic, in its judgements on his many visitors. The characteristic flavour comes through in a December 1922 entry: ‘Rob Martin. Fluff.’ Or the following autumn: ‘Dufour: a miserable man “with a tale of woe”.’ Of course, a request to attend the governor was almost a royal command. ‘A summons would come to Alfred Wagg,’ recalled Lawrence Jones of the merchant bank Helbert Wagg, ‘who must put on a top-hat in which to obey it, for the wide-brimmed soft hat that hung outside Mr Governor’s room would tolerate no rival.’ That hat became part of City lore, with Norman travelling on the Underground each day to the square mile with his ticket stuck in the hatband, before at the exit he bowed his head for the collector to remove it.
Every now and then, amid Norman’s voluminous correspondence, there is a moment of apparent revelation, a moment when we seem to draw close. Take a trio of examples from the 1920s. ‘Hawtrey is extraordinarily clear and clever,’ he wrote in 1922 to Benjamin Strong about the senior Treasury figure R. G. Hawtrey, ‘but he seems to me to treat his subjects as if they existed in a vacuum; whereas, as we see more and more, Currency and Finance are continually at the mercy of political and psychological and international and incalculable influences.’ It was a distinctive and perhaps very English approach, prompting in the 1960s one exasperated economic commentator, Andrew Shonfield, to recall Norman as ‘the apotheosis of the English cult of the administrator as artist-leader – a kind of Künstlerführerprinzip’. The second example came in January 1928, as the bachelor governor, writing again to his American friend, let himself go about the Bank’s recent recruit from the Treasury insisting on taking his wife with him on a working trip to New York: ‘Niemeyer pretends to me that he will be as free with a wife as without: that she will sit in the hotel & twiddle her thumbs & ask no questions: I might just as well pretend to be the same with the toothache as without it – he is trying to prove that you can serve God & Mammon – I don’t believe it.’ Echoes indeed of ‘the Bank of England is my only mistress’ … Finally, also to Strong but the previous summer, this from on board the ship as he left New York after a difficult visit: ‘What about it? Where does it all lead & what can we do? I always come away with the same thoughts – flies in a web: can lift one (but only one) foot clear: hard work to keep steady: the personal touch largely usurped by the mechanics of th
e web: & so on.’20
There is little doubt that, despite precedent and despite occasional protestations to the contrary, Norman during the 1920s was determined to stay on as governor for as long as he could – and, broadly speaking, his colleagues fell into line with that in the overriding context of the very changed post-war financial world, though not without some perturbation on the way. ‘I earnestly hope you may be persuaded to serve for at least another year,’ his deputy, the merchant Henry Trotter, wrote to him during Norman’s third year as governor. ‘I am convinced it would be in the best interests of the Bank and the Country.’ Norman himself conceded soon afterwards to Strong that ‘people prefer the Rotation’, before adding: ‘But how swap horses just now?’ Trotter’s successor from 1923 was Cecil Lubbock – managing director of the brewers Whitbread and a classical scholar, though not really governor material in the new world – before in 1925 an altogether tougher egg, the ambitious shipper Sir Alan Anderson, became deputy. ‘A masterful & strong man,’ Norman had already informed Strong, and Anderson by October 1925 was insistent that he would not stay on as deputy governor unless (recorded the director Charles Addis) ‘assured of being made Governor in a year’. Norman held firm – ‘the trouble is’, he informed Strong, ‘not that he is not clever & courageous & a good fellow but that his wishes are contrary to our ideas & the whole of our tradition & while we admit they may perhaps be suitable for a shipping business we are sure they are not suitable for a Central Bank’ – and the outcome was that Trotter agreed to return as deputy in spring 1926, but only on the basis of a moral undertaking that he would become governor in 1927. Autumn 1926 was decision time, and once again Norman declined to play the rotation game. ‘We tried to get him to accept Trotter for a year,’ Edward Peacock told Strong, adding that Norman had been adamant that if he stepped down as governor but continued at the Bank under Trotter, ‘it would break down within three months’. As the Committee of Treasury’s support for him crumbled, Trotter accepted the inevitable outcome graciously enough – assuring Revelstoke that ‘we must retain the master hand’ and that he was ‘without one particle of feeling of having been let down’ – but his cousin Robert Boothby would subsequently relate how not becoming governor ‘broke’ him.21 As for the deputy governorship, the musical chairs continued with Lubbock succeeding Trotter in spring 1927.
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