The financialisation of everyday life must be confronted

Unless we can reverse this financialisation and create a healthier basis for growth, the prospects for working people look grim.

The debate about growth and economic restructuring in Britain ought to depart from the fundamental transformation of UK capitalism during the last four decades. Britain’s economy is now beholden to big finance. Or to put it more accurately, the UK has become financialised, as has the USA but also Japan and Germany. Financialisation is a deep underlying change, and no set of radical or socialist economic policies would make sense unless that was recognised.

The previous decade has cast light on the transformation:

Finance grew extraordinarily in terms of prices, profits, and volume of transactions, but also in terms of influence and arrogance. By the middle of the decade a vast bubble had been inflated in the USA and the UK, the bursting of which was likely to be devastating.

The expansion of finance represented much more than financial excess. Finance had become pivotal to economic activity and to determining economic policy, but also to organising everyday life. Mature capitalism had become financialised. 

In August 2007 the US money market had a heart attack, and in August-September 2008 the global financial system had a near-death experience. Deep recession followed across the world, and then in 2009-2012 the crisis took a further nasty turn. States had become perilously exposed to debt because recession had reduced tax revenues, while rescuing finance had imposed fresh costs on the exchequer. Austerity followed, causing loss of income for working people, unemployment and destruction of welfare. Things became bad enough in the UK, but the impact of austerity in the Eurozone has been catastrophic.

As I argue in my book, Profiting without Producing, published by Verso this November, the crisis has revealed three fundamental trends of financialisation:

First, industrial and commercial enterprises have become increasingly involved in financial operations, often undertaking financial transactions to earn profits. Big business, in particular, relies less on banks, while changing its organisation and investment practices. The ideology of ‘shareholder value’ has become prevalent among large enterprises.

Second, banks have turned toward open financial markets to make profits through financial trading rather than through outright borrowing and lending. They have further turned toward households as a source of profit, often combining trading in open markets with lending to households, or collecting household savings.

Third, households increasingly rely on the private financial system to facilitate access to vital goods and services, including housing, education and health, as well as to hold savings. Everyday life has become financialised.

Financialised capitalism is an economic system of weak and precarious growth, low wages, profound inequality, and deep instability. The ascendancy of finance has resulted in regular financial bubbles, which cause devastation when they burst. Finance first earns enormous profits, and then calls upon society to carry the costs of crisis. Events since 2008, including the imposition of austerity, reflect the enormous influence of financial interests over policy-making, and indicate that financialisation will persist.

On Saturday 2 November I will be speaking at the first conference for the Centre for Labour and Social Studies, where I will be discussing ways working people could oppose and reverse financialisation. This is a vital process but it is far from easy. For one thing, it would be necessary to introduce regulation that could prevent financial institutions from engaging in speculative activities. Such regulation must include direct controls on interest rates and on the lending practices of financial institutions, if it is to have an impact. Time is short as yet another bubble is gradually developing, not least in the UK.

But regulation alone would never be enough. Public property over financial institutions must also be introduced as private banks have failed repeatedly, thus causing enormous pain. The UK needs public banks with a fresh spirit of public service that would support investment as well as meeting the financial needs of working people.

More broadly, financialisation of everyday life must also be confronted by reversing the involvement of private financial institutions in housing, education, health and elsewhere. Imaginative, flexible and creative public provision across a range of goods and services would be vital to reversing financialisation.

If financialisation began to be reversed, a healthier basis could be created for pro-growth macroeconomic policies but also for required restructuring of the UK economy to provide secure income and employment. Otherwise, the prospects for working people look far from optimistic. 

Class Conference 2013 will take place on Saturday 2 November at TUC Congress House. Tickets can be purchased here

Britain’s economy is now beholden to big finance. Photo: Getty
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Supreme Court gives MPs a vote on Brexit – but who are the real winners?

The Supreme Court ruled that Parliament must have a say in starting the process of Brexit. But this may be a hollow victory for Labour. 

The Supreme Court has ruled by a majority of 8 to 3 that the government cannot trigger Article 50 without an Act of Parliament, as leaving the European Union represents a change of a source of UK law, and a loss of rights by UK citizens, which can only be authorised by the legislature, not the executive. (You can read the full judgement here).

But crucially, they have unanimously ruled that the devolved parliaments do not need to vote before the government triggers Article 50.

Which as far as Brexit is concerned, doesn't change very much. There is a comfortable majority to trigger Article 50 in both Houses of Parliament. It will highlight Labour's agonies over just how to navigate the Brexit vote and to keep its coalition together, but as long as Brexit is top of the agenda, that will be the case.

And don't think that Brexit will vanish any time soon. As one senior Liberal Democrat pointed out, "it took Greenland three years to leave - and all they had to talk about was fish". We will be disentangling ourselves from the European Union for years, and very possibly for decades. Labour's Brexit problem has a long  way yet to run.

While the devolved legislatures in Scotland, Northern Ireland and Wales will not be able to stop or delay Brexit, that their rights have been unanimously ruled against will be a boon to Sinn Féin in the elections in March, and a longterm asset to the SNP as well. The most important part of all this: that the ruling will be seen in some parts of Northern Ireland as an unpicking of the Good Friday Agreement. That issue hasn't gone away, you know. 

But it's Theresa May who today's judgement really tells you something about. She could very easily have shrugged off the High Court's judgement as one of those things and passed Article 50 through the Houses of Parliament by now. (Not least because the High Court judgement didn't weaken the powers of the executive or require the devolved legislatures, both of which she risked by carrying on the fight.)

If you take one thing from that, take this: the narrative that the PM is indecisive or cautious has more than a few holes in it. Just ask George Osborne, Michael Gove, Nicky Morgan and Ed Vaizey: most party leaders would have refrained from purging an entire faction overnight, but not May.

Far from being risk-averse, the PM is prone to a fight. And in this case, she's merely suffered delay, rather than disaster. But it may be that far from being undone by caution, it will be her hotblooded streak that brings about the end of Theresa May.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.