The last oik of the British Empire

Six and a half years in the Singapore slammer sounds like a stiff sentence - it is certainly more than Nick Leeson was bargaining for when he agreed to abandon his fight against extradition from Germany and to co-operate with the Singapore authorities.

But when you reflect that Leeson managed to lose pounds 927m of other people's money, then perhaps the punishment is on the lenient side. I calculate (roughly) that he will serve just a day in prison for every pounds 390,000 that he blew. Now, if he had walked into the Barings head office with a stocking over his head and asked for pounds 390,000 over the counter, you can bet he would have been sentenced to more than a day in prison.

If nothing else, that simple bit of arithmetic helps to put the Leeson affair in some sort of perspective. Do another sum if you still cannot get your head round the figures. Last Tuesday, the Chancellor of the Exchequer told MPs that spending on the NHS would increase by about pounds 1bn next year. That is a mere pounds 73m more than Nick Leeson managed to lose through his Error Account 88888. Alternatively, try this for size: even if Leeson sells the film rights of his book Rogue Trader - which has already notched up a sizeable advance - he will still only have earned back 0.4 per cent of his total losses.

What, then, are we to make of an "error" so mind-bogglingly huge?

The obvious answer - what might be called the Hack Sociology Answer - is that Barings was a victim of class conflict. On the one hand, you have the stuffiest, most blue-blooded bank in the City; the Queen's bank, no less; an ancient house with a long and hallowed tradition of, well, going bust actually. (It crashed in 1890, too, as a result of dodgy loans to Argentina.)

On the other hand, you have the plasterer's son from Watford who left school with four O-levels and two As (C for English, D for history - he conspicuously failed mathematics). A man who became Barings' number one trader on the Singapore International Monetary Exchange (Simex), partly because county court cases against him - for debt! - prevented him holding a trader's licence in England. A man who was arrested for baring (ha, ha) his arse to a young woman outside a Singapore waterfront bar in June 1994 - at a time when he had already run up losses totalling pounds 96m.

So what was it that brought them together - this resistible force and this all-too movable object? The Big Bang of the Eighties forced stuffy old firms such as Barings to bring in the red-braced barrow-boys and set up off-shoots like Baring Securities. Alas (for them and their bondholders), by the time the old fogeys had realised that this particular barrow-boy was out of control it was too late.

Raised in the great tradition of "gentlemanly capitalism", the Barings directors were simply incapable of grasping what Leeson was up to. Not only did they fall for the simple forgery by which Leeson concealed his vast losses; they also believed in the huge profits he appeared to be remitting to London every week - blissfully unaware that the money was being borrowed by Leeson from Barings itself.

There is a footnote to the sociological interpretation. It is that when an oik like Leeson finally gets found out, nothing can save him from the drop. No one seems to have noticed where the Princess of Wales got the idea for her recent tear-jerking appeal to the nation via Panorama. The answer is surely that it was inspired by Leeson, who tried the same trick months before with David Frost. Well, it may have worked for the Princess - but not for Leeson. All those pleas to the Serious Fraud Office to save him from a trial in Singapore fell on well-plugged ears.

Somehow this sociological interpretation of the affair does not quite satisfy me - not least because it is too introspectively Anglocentric. As such, it misses out on Leeson's real significance - as one of the last British imperialists in the Far East. Like a B-movie prelude to the surrender of Hong Kong in 1997, what his conviction really symbolises is the final, bathetic demise of Britain's once-vast might in the Orient.

Contrary to the usual interpretation of the Leeson affair, there was nothing so very unusual about Barings' recruitment of an oik like Leeson. In the days when the Far East was dominated by Scottish firms such as Jardine, Matheson & Co, it used to be said that firms recruited by setting a "porridge trap". Bank agents would dig large pits on desolate moors in Scotland, leave bowls of porridge in them and thus trap hungry youths - who would then be sent down to London, trained and dispatched to Hong Kong or Shanghai by the next steamer.

Well, Leeson was not a Scot and he ended up with a very different kind of porridge, but in essentials his career started in the same way (though what bait they use in Watford is anyone's guess).

From its earliest days, Britain's role in the Far East was primarily financial. As soon as the East India Company's monopoly on Chinese trade ended in 1833, it was banks such as Jardine, Matheson that made the running, setting up shop in the "treaty ports" forcibly opened after the wars of 1839-42 and 1858-60.

Despite initial optimism, there proved to be relatively limited amounts of money to be made by exporting Indian cotton and opium to China. Instead, the British banks - above all, the Hongkong & Shanghai Bank - came to specialise in loans to the ailing but not quite dead imperial government. This business grew rapidly, especially after the Sino-Japanese war of 1894, as the imperial government was persuaded to embark on expensive railway construction projects. Indeed, the serious involvement of Barings in the Far East really dates from this period. On the other hand, the taxes needed to service the resulting external debt contributed to the instability of the regime. The Boxer Rising of 1900 and the 1911 revolution that overthrew the empire weakened the British monopoly, opening the Chinese market to other powers, notably Germany.

This marked the beginning of a protracted retreat, which culminated in the ignominious collapse of British power in Asia during and after the Second World War.

In this sense, the collapse of Barings in Singapore was a faint echo of a far greater collapse in 1942. Sure, the banks have never stopped trying to rebuild their positions in the Far East. Indeed, many City pundits continue to believe that the economic future lies on the Pacific Rim as China continues in the direction of a market economy.

They are half-right. The economic future does lie there. But the established London banks are not going to play much part in it if they continue to conduct their affairs in the manner exposed by the Leeson affair. The Man who Blew a Billion was no mere "rogue trader". He was, and is, the embodiment of the City's decline as a global financial centre.