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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Trade unions must change or face permanent decline

Union membership will fall below one in five employees by 2030 unless current trends are reversed. 

The future should be full of potential for trade unions. Four in five people in Great Britain think that trade unions are “essential” to protect workers’ interests. Public concerns about low pay have soared to record levels over recent years. And, after almost disappearing from view, there is now a resurgent debate about the quality and dignity of work in today’s Britain.

Yet, as things stand, none of these currents are likely to reverse long-term decline. Membership has fallen by almost half since the late 1970s and at the same time the number of people in work has risen by a quarter. Unions are heavily skewed towards the public sector, older workers and middle-to-high earners. Overall, membership is now just under 25 per cent of all employees, however in the private sector it falls to 14 per cent nationally and 10 per cent in London. Less than 1 in 10 of the lowest paid are members. Across large swathes of our economy unions are near invisible.

The reasons are complex and deep-rooted — sweeping industrial change, anti-union legislation, shifts in social attitudes and the rise of precarious work to name a few — but the upshot is plain to see. Looking at the past 15 years, membership has fallen from 30 per cent in 2000 to 25 per cent in 2015. As the TUC have said, we are now into a 2nd generation of “never members”, millions of young people are entering the jobs market without even a passing thought about joining a union. Above all, demographics are taking their toll: baby boomers are retiring; millennials aren’t signing up.

This is a structural problem for the union movement because if fewer young workers join then it’s a rock-solid bet that fewer of their peers will sign-up in later life — setting in train a further wave of decline in membership figures in the decades ahead. As older workers, who came of age in the 1970s when trade unions were at their most dominant, retire and are replaced with fewer newcomers, union membership will fall. The question is: by how much?

The chart below sets out our analysis of trends in membership over the 20 years for which detailed membership data is available (the thick lines) and a fifteen year projection period (the dotted lines). The filled-in dots show where membership is today and the white-filled dots show our projection for 2030. Those born in the 1950s were the last cohort to see similar membership rates to their predecessors.

 

Our projections (the white-filled dots) are based on the assumption that changes in membership in the coming years simply track the path that previous cohorts took at the same age. For example, the cohort born in the late 1980s saw a 50 per cent increase in union membership as they moved from their early to late twenties. We have assumed that the same percentage increase in membership will occur over the coming decade among those born in the late 1990s.

This may turn out to be a highly optimistic assumption. Further fragmentation in the nature of work or prolonged austerity, for example, could curtail the familiar big rise in membership rates as people pass through their twenties. Against this, it could be argued that a greater proportion of young people spending longer in education might simply be delaying the age at which union membership rises, resulting in sharper growth among those in their late twenties in the future. However, to date this simply hasn’t happened. Membership rates for those in their late twenties have fallen steadily: they stand at 19 per cent among today’s 26–30 year olds compared to 23 per cent a decade ago, and 29 per cent two decades ago.

All told our overall projection is that just under 20 per cent of employees will be in a union by 2030. Think of this as a rough indication of where the union movement will be in 15 years’ time if history repeats itself. To be clear, this doesn’t signify union membership suddenly going over a cliff; it just points to steady, continual decline. If accurate, it would mean that by 2030 the share of trade unionists would have fallen by a third since the turn of the century.

Let’s hope that this outlook brings home the urgency of acting to address this generational challenge. It should spark far-reaching debate about what the next chapter of pro-worker organisation should look like. Some of this thinking is starting to happen inside our own union movement. But it needs to come from outside of the union world too: there is likely to be a need for a more diverse set of institutions experimenting with new ways of supporting those in exposed parts of the workforce. There’s no shortage of examples from the US — a country whose union movement faces an even more acute challenge than ours — of how to innovate on behalf of workers.

It’s not written in the stars that these gloomy projections will come to pass. They are there to be acted on. But if the voices of union conservatism prevail — and the offer to millennials is more of the same — no-one should be at all surprised about where this ends up.

This post originally appeared on Gavin Kelly's blog