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International Socialism, Winter 1965/66


P.A. Walters

Cool Milliards


From International Socialism, No.23, Winter 1965/66, p.33.
Transcribed & marked up by Einde O’Callaghan for ETOL.


Insurance Company Investment
George Claton and W.T. Osborn
Allen and Unwin, 36s.

The success of attempts to construct ‘totalising’ histories and structural analyses of modern British society depends on the quality of the empirical studies of specific institutions and groups. Claton and Osborn perform an admirable function: their clear technical exposition of the post-war resources and investment strategies of British insurance companies makes an effortless transition to a consideration of the companies’ power in the economy. The book provides further insight into the workings of finance capitalism.

Since the early fifties, the insurance companies have expanded their share of the rapidly increasing total of personal savings so that they now attract over 50 per cent of the annual amount. The general impression is that neither monetary theory nor the insurance companies have caught up with the implications of their growth.

Funds for investment are generated mainly by the life assurance business: 70 per cent of general insurance is with foreign clients and the resulting funds are traditionally invested in the country of origin. The size of the life assurance business undertaken means that the majority of companies have up to one million pounds per week to invest.

The weight of such funds has an important effect on their behaviour. Keynes’ model of the individual speculative investor does not apply to them. Their needs for liquid assets are satisfied by incoming money each week; hence the capital certainty of their assets is not crucial. Were they to indulge in speculative manoeuvres the weight of their own actions would turn the market against them. Theoretical omissions have had their practical counterparts. The authors show that during the credit squeezes of 1951, 1955 and 1957 the companies increased available credit by releasing funds from maturing government stocks. In general their growing unwillingness to take government issues has hindered the success of funding operations and thus blunted the impact of government monetary policy. Banks have been compelled to acknowledge their public responsibilities; given the present size of the insurance companies similar demands should be made of them. The size of their industrial holdings is such that by concerted action the insurance companies could control seven out of the 40 largest British companies. The book is suitably scathing of their posture of ‘non-responsibility’: power exercised by default is still the exercise of power.

In proposing remedies for the existing situation the book loses its straightforward approach. Nationalisation, the authors claim, is an extreme measure to obtain public accountability. Their proposals, however, seem an unnecessarily elaborate compromise between some form of public control and accountability and private shareholding. Indeed if this book has one drawback it is a failure to discuss adequately who are the insurance companies. We are given no indication of the pattern of shareholding in the companies and even though the authors conducted a survey of investment managers and their attitudes, their findings are discussed remarkably little.

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