Surprise, surprise. As the bastions of the world financial system come crashing to the ground, a small voice cries from the ruin. It is that of the goddess, greed, assuring us she is still good.
In 2005, the retailer Philip Green paid himself £1.2 billion from his stores empire. He conduited it through his "offshore" wife to avoid tax and received a knighthood from Tony Blair. Last year, the 54 billionaires said to work in Britain were estimated to have paid just £15m tax on earnings of some £126 billion. Four thousand City employees received bonuses of £1m or more, and if any of them paid the 40% tax the rest of us pay they were mugs. Most will still receive the same bonuses today.
If Thatcherism smiled on the rich, Blair beamed on them until his face cracked. The "Gini coefficient", measuring the distance between the very rich and the very poor, yawned ever wider under Labour (until last year). Average earnings doubled while those of average bosses trebled. For Blairism read hyper-Thatcherism.
This would once have had the left out in the streets and foaming at the mouth. Yet according to Robert Peston, in his devastating account of Blair's "producer capture" by high finance, the cabinet had "an almost neurotic determination never to be associated with the antibusiness image of old Labour". When the magnates of Britain's new financial sector wanted something - be it nondomicile tax breaks or lower capital duties or just a peerage - they walked into Downing Street and got it.
The recent deal for Northern Rock was reportedly stitched up not by the customary process of analysis and inquiry, but between Gordon Brown and his favourite tycoons on a trip to China. The resemblance between Britain's government and a banana republic is no longer coincidental.
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Peston's Who Runs Britain? is mistitled. In reality, it is an account of the new rich of the City, with whom he seems almost in love. They do what clever people have done for centuries - make quick fortunes by spotting weaknesses in the market economy. These weaknesses were first exposed by Margaret Thatcher's City "Big Bang" in 1986, which broke down cartels and internationalised London finance. But they were not fully exploited until the late1990s, when low interest rates and Brown's tax concessions released colossal sums for mergers and acquisitions.
Some of this was old-fashioned asset-stripping. The private equity firm, Permira, bought and sold Travelodge in 2003-5 for a cash profit of some £450m on an outlay of £712m. Some of it was incompetence, such as the Treasury's sale of QinetiQ, its defence arm, to the American finance house, Carlyle, at an eighth of its value. But the chief reason why money poured into corporate aggression was that sharp-eyed financiers could borrow from liquid Arab and Soviet funds, saddle their acquisitions with tax-free debt and take their own cut offshore. This was tax-payer-subsidised industrial restructuring, but rarely with any value returning to the employees, the Exchequer or the economy.
When Debenhams was bought by private equity it was paying £40m a year in tax. For the two years that it was owned privately it actually received £8m from the Treasury. Likewise the AA/Saga consortium, valued at £6.1 billion, paid no tax at all when owned by private equity.
Peston navigates with ease the shark-infested waters of hedge funds, sub-prime borrowing, defined-benefit pensions and loans for honours. Some of his heroes are giants of corporate restructuring, such as Green, and Stuart Rose of Marks & Spencer, but most are money men, Brown's friend Ronnie Cohen, the shy billionaire, Damon Buffini of Permira and the civil servant, John Chisholm, of QinetiQ, who contrived to turn a stake of £130,000 into a profit of £21m from what should have been the public's money. These men persuaded Blair and Brown that their greed was in the public interest and that offshore private equity was the same as American "venture capital", when it was not.
They ensured that their effective tax rate of 10% (or nothing) was defined as a "trickle-down" benefit to all British commerce. When last year Brown reduced capital taxes from 40% to 18%, "they could not believe their luck". Under Blair/Brown, inner London became an offshore tax haven running a business - money - on which the British economy has become alarmingly reliant.
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The new citizens of this privileged realm operate from Mayfair addresses with meaningless Anglo-American titles such as KKR, Apax, TPC and CVC. Brown naively allowed them to hijack British pension funds to the point, says Peston, that firms "no longer ask what it will cost them to provide a comfortable retirement for their staff", merely how to rid themselves of any such liability. The collapse of defined-benefit pensions (except, needless to say, for those in government) will be Brown's most lasting legacy to his country.
Like old Soviet leaders, Blair and Brown appeared to believe all this was for the best. Each hedge-fund coup, each private equity deal must surely bring tears of joy to smiling school children and hospital patients. They should be glad to forego £3 billion in tax to keep 112,000 non-domiciles living in London style. Small wonder that, within months of leaving office, Blair has negotiated lucrative contracts with the bank JP Morgan and with Zurich Finance Services.
But where does this take us? "It may not be pretty, but on the whole greed is good," says Peston a little too often. Despite the casualties of the dotcom and sub-prime bubbles, capitalism needs periodically to shake out its cobwebs, and that rarely comes cheap. At least in the late-20th century, claims Peston, such added value from what some term turbo-capitalism "tended to outweigh any resentment about the widening gap between rich and poor".
Yet just when his affection for the plutocrats borders on infatuation, he gets a sudden attack of puritanism. He says that talk of greed being good is today "for the birds". In his view, London's status as an offshore state has become nonsensical. When income taxes were 90%, sheltering wealth was to be expected. But Britain's central and local taxes are now among the lowest in the developed world. London's super-rich give almost nothing back, through taxes, charity, public works or anything. That any government should permit them "a hiding place from fair taxation" Peston regards as obscene.
I am inclined to agree. Where I am more doubtful is over his subsidiary claim, that these rich run Britain. There is an awful truth in Dr Johnson's maxim that making money is "one of the few ways in which a man can be innocently employed". Britain is not run by the rich, but by those elected to regulate them, the government.
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The villain of Peston's piece is not the market but its political custodians. This book is a catalogue of cluelessness on the part of Blair, Brown and their advisers, on everything from pension funds, capital taxes and non-domiciles to the wilder shores of private equity. The much-vaunted Treasury was most clueless of all.
Now, as the world faces credit crunch and recession, we shall all pay the price for this, while Blair dances off into the sunset. That is the terrifying moral of this tale.
Who runs Britain?? The Super-rich and How They're Changing Our Lives by Robert Peston
Hodder £20 pp352