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
Photo: Getty
Show Hide image

Rising crime and fewer police show the most damaging impacts of austerity

We need to protect those who protect us.

Today’s revelation that police-recorded crime has risen by 10 per cent across England and Wales shows one of the most damaging impacts of austerity. Behind the cold figures are countless stories of personal misery; 723 homicides, 466,018 crimes with violence resulting in injury, and 205,869 domestic burglaries to take just a few examples.

It is crucial that politicians of all parties seek to address this rising level of violence and offer solutions to halt the increase in violent crime. I challenge any Tory to defend the idea that their constituents are best served by a continued squeeze on police budgets, when the number of officers is already at the lowest level for more than 30 years.

This week saw the launch Chris Bryant's Protect The Protectors Private Member’s Bill, which aims to secure greater protections for emergency service workers. It carries on where my attempts in the last parliament left off, and could not come at a more important time. Cuts to the number of police officers on our streets have not only left our communities less safe, but officers themselves are now more vulnerable as well.

As an MP I work closely with the local neighbourhood policing teams in my constituency of Halifax. There is some outstanding work going on to address the underlying causes of crime, to tackle antisocial behaviour, and to build trust and engagement across communities. I am always amazed that neighbourhood police officers seem to know the name of every kid in their patch. However cuts to West Yorkshire Police, which have totalled more than £160m since 2010, have meant that the number of neighbourhood officers in my district has been cut by half in the last year, as the budget squeeze continues and more resources are drawn into counter-terrorism and other specialisms .

Overall, West Yorkshire Police have seen a loss of around 1,200 officers. West Yorkshire Police Federation chairman Nick Smart is clear about the result: "To say it’s had no effect on frontline policing is just a nonsense.” Yet for years the Conservatives have argued just this, with the Prime Minister recently telling MPs that crime was at a record low, and ministers frequently arguing that the changing nature of crime means that the number of officers is a poor measure of police effectiveness. These figures today completely debunk that myth.

Constituents are also increasingly coming to me with concerns that crimes are not investigated once they are reported. Where the police simply do not have the resources to follow-up and attend or investigate crimes, communities lose faith and the criminals grow in confidence.

A frequently overlooked part of this discussion is that the demands on police have increased hugely, often in some unexpected ways. A clear example of this is that cuts in our mental health services have resulted in police officers having to deal with mental health issues in the custody suite. While on shift with the police last year, I saw how an average night included a series of people detained under the Mental Health Act. Due to a lack of specialist beds, vulnerable patients were held in a police cell, or even in the back of a police car, for their own safety. We should all be concerned that the police are becoming a catch-all for the state’s failures.

While the politically charged campaign to restore police numbers is ongoing, Protect The Protectors is seeking to build cross-party support for measures that would offer greater protections to officers immediately. In February, the Police Federation of England and Wales released the results of its latest welfare survey data which suggest that there were more than two million unarmed physical assaults on officers over a 12-month period, and a further 302,842 assaults using a deadly weapon.

This is partly due to an increase in single crewing, which sees officers sent out on their own into often hostile circumstances. Morale in the police has suffered hugely in recent years and almost every front-line officer will be able to recall a time when they were recently assaulted.

If we want to tackle this undeniable rise in violent crime, then a large part of the solution is protecting those who protect us; strengthening the law to keep them from harm where possible, restoring morale by removing the pay cap, and most importantly, increasing their numbers.

Holly Lynch is the MP for Halifax. The Protect the Protectors bill will get its second reading on the Friday 20th October. 

0800 7318496