Financialization and Social Structure of Accumulation Theory

Notes

1. An earlier version of this article was presented at the fourth annual conference of the International Initiative for Promoting Political Economy, International Institute for Social Studies, Erasmus University, The Hague, The Netherlands, July 9–11, 2013. The author thanks all who generously gave of their time and patience, and takes full responsibility for the remaining flaws. Special thanks go to Jim Craven and to Stuart Holland for their encouragement and assistance.

2. ITT's chief executive came to symbolize “the rise of the all-purpose professional manager—Harold Geneen was a well-known example of a type who thought he could manage anything” (Owen 2000).

3. This amalgam of the names of R. A. Butler and Hugh Gaitskell epitomized the apparent acceptance by both major political parties of the permanence of the welfare state, state ownership of key industries, and full employment as a central goal of economic policy. The latter two were shattered during Thatcher's premiership, and the ideological attrition waged against welfare provision over the last three decades and more has apparently borne fruit, with a marked decrease in support for benefits provision among the population (Bingham 2012).

4. It is also consistent with earlier work by Bob Jessop (1990) on the evolving nature of the capitalist state, in line with the evolution of the system of accumulation that the state is supposed to facilitate and protect: … changes in the form and content of state intervention are typically required to consolidate the dominant features of succeeding stages [of capital accumulation]. The political discontinuities associated with this restructuring of the state could then provide the basis not only for a periodization of the capitalist state but also for the periodization of capitalist economies … it would be hard to provide satisfactory explanations without noting shifts in accumulation strategy. (Jessop 1990, 204).

5. Volcker has since shown a greater zeal for regulation that would indicate a healthier skepticism of market participants than Thatcher (Volcker 2011). In this respect, he is closer to Adam Smith, who famously warned, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices” (A. Smith [1776] 1827, 54; see also Suskind 2011, 340–44).

6. The website of the US Treasury features brief profiles of all holders of the office of Secretary. Regarding Simon, who succeeded George Shultz in 1974, it says, “In foreign affairs, Simon continued the policies begun under Shultz of pressuring Europe and the Eastern Bloc with U.S. economic weapons and thereby keeping international policy initiative in the hands of the United States”—effectively an unabashed admission of what would appear to have been distinctly hostile behavior toward ostensible allies in the case of “Europe.” See: http://www.treasury.gov/about/history/pages/wesimon.aspx (accessed June 19, 2013). This offers further support for the contention that the International Monetary Fund's (IMF) 1976 intervention in the UK was “a momentous break with Bretton Woods protocol” in that, for the very first time, a major ally of the USA was being treated to the same sort of impositions as those routinely served to borrowers in Latin America and Asia (Panitch 2000, 12), prompting some of them to demand exactly this for Britain in the name of fair play. As Mark Harmon meticulously documents, the US Treasury was happy to oblige, even to the extent of upsetting Henry Kissinger at the State Department (Harmon 1997, 224–25).

7. At the time these were lampooned by Labour's outgoing finance minister Denis Healey as “punk monetarism” and later “sado-monetarism” (Healey 1989, 491). During his last years as finance minister, however, following the IMF intervention of 1976, Healey had been preaching the virtues of monetarism to his fellow finance ministers in a style that was also to become typical of the British approach to Europe under Thatcher and her successors, in which the presumed superiority of UK economic policy was upheld as a model for others to emulate (Holland 1980, 2004).

8. Among the global ramifications of this were the implosions of various states whose anomalous status was revealed to have been tenable only in the context of the Cold War: apartheid-era South Africa, Somalia, Yugoslavia, and Afghanistan, with subsequent regime collapses elsewhere in the global South throughout the 1990s as clients lost their geopolitical rationale, with Indonesia in 1998 perhaps being the most spectacular case.

9. On 8 January 1998, shortly after [US Treasury Secretary Robert] Rubin's return from Seoul, the economist Rudi Dornbusch was quipping on CNBC that the ‘positive side’ of the financial crisis was that South Korea was “now owned and operated by our Treasury.” (Panitch 2000, 5).

10. This gave successive US administrations structural power in trade negotiations—access to the world's most lucrative market could be bought in return for concessions regarding US investors' access to assets in those countries, and those investors' freedom to withdraw their capital at will. While the Clinton administration used the World Trade Organization as its chief instrument of global economic opening, the successor Bush administration employed bilateral trade deals that were even more far-reaching with respect to the concessions forced upon the co-signatories, as with the proscription of capital controls under any circumstances and the protection of intellectual property rights (Williams and Beattie 2006).

11. Sex began in academia a decade later than it did for Philip Larkin. From the rise of the women's movement to the postmodern cult of the perverse, few themes have been more persistent in literature departments than sexuality. For most people, writing about multiple orgasms is known as pornography; in academia, it can win you a chair. (Eagleton 2012, 27; see also Boggs 2000, Ch. 7).

12. For a contemporaneous response see also K. Coates and Barratt Brown (1999).

13. As George Orwell pithily put it in 1984: “Who controls the past controls the future. Who controls the present controls the past.”

14. Martin Wolf cites a study of 11,944 abstracts of scientific papers whose conclusion is that “98.4 per cent of authors who took a position endorsed man-made (anthropogenic) global warming, 1.2 per cent rejected it and 0.4 per cent were uncertain” (Wolf 2013a; see also Cook et al. 2013). Climate change deniers, however, receive powerful financial backing (Goldenberg 2013), which helps to explain the nature of the public debate and the slow progress as regards legislative change. Nevertheless, the fact that anonymous billionaires spent as much as US$120 million to solidify political opposition to action on climate change indicates their fear, and the power of their opponents. Of the latter, the climate itself is proving tenacious, as, in the middle of the 2012 presidential election campaign, the previously anti-federal government's governor of New Jersey, Chris Christie, who had been touted as a presidential candidate, did not hesitate to accept the offer of federal aid in the wake of Hurricane Sandy in 2012, and was very grateful for it, and publicly so, much to the disgust of Tea Party Republicans (Barbaro 2012).

15. A major tactical error by the Obama administration, and indeed the British government, has been the apparent avoidance of criminal prosecution of leading bankers associated with even the most egregious collapses and bailouts. In failing to offer up a scapegoat, political leaders are vulnerable to charges of aiding and abetting the avoidance of justice, having already aided and abetted the actions that led ultimately to crisis. This is, of course, the problem—culpability is so widespread as to condemn the entire system. Had Gordon Brown allowed the state to take control of the banks whose ownership it assumed, he could have begun the important and necessary work of burying neoliberalism's anti-state mythology, while harnessing popular support for a more interventionist industrial policy. Instead, public frustration and anger has resulted in the largely ineffective Occupy movement (Craven and Zhang 2012), along with some more idiosyncratic repercussions. In the UK, the former head of the Royal Bank of Scotland, in May 2008, the biggest bank in the world by gross assets, was stripped of his knighthood and a third of his £550,000 annual pension, only after strong public pressure, in 2012. He had “retired” in January 2009, aged 50. Meanwhile, the former head of Halifax Bank of Scotland, following the publication in April 2013 of a damning report of his corporate stewardship, voluntarily gave up his knighthood and almost a third of his £580,000 annual pension, having “retired” in 2006 (Jenkins 2013a; 2013b). He had been appointed non-executive director of the Financial Services Authority (FSA) in January 2004, becoming its deputy chair in November 2007 before resigning in February 2009.

16. Employers in the USA, together with sympathetic politicians, are complaining of a skills gap, and are studying Germany's labor market for clues as regards reform. In a measure of both the rigidity of mainstream economic tenets and their hold over supposedly informed discourse, the lack of inflated wages for engineers is taken to mean that there is no such thing as a skills gap. The typical response of state governments attempting to attract inward investment is tax breaks, but for firms such as Siemens, eager to expand further, the answer lies in better education: According to the OECD, the US comes last out of 29 countries in terms of the work-readiness of its high-school leavers … The US needs to rejuvenate its community colleges, which offer two-year vocational degrees but are often starved of funds. And it needs to fall back in love with apprenticeships. (Luce 2013) The replacement of indigenous, state-led industrial policy with the attraction of inward investment has been a key element of the global neoliberal social structure of accumulation (SSA), disseminated via such bodies as the OECD; such policies “have become standard in most countries, irrespective of their development, geographical location or industrial structure. One of the most important policy questions is: (i) What should be done to attract inward FDI?” (Bellak, Leibrecht, and Stehrer 2008, 3).

17. Ramsay (1998, 115) describes policies pursued by the UK governments of Harold Wilson, Edward Heath, and James Callaghan as promoting a “producers' alliance” (see also Middlemas 1991) between organized labor and organized business. This fragile arrangement fractured under various stresses (see notes 4 and 5 above). The tragic irony was that in aligning itself with the financial sector's dominant interests, UK manufacturing got into bed with its executioner, given that the surest way to cut down the power of organized labor would be to cut down its source of employment, hence the outburst of Terence Beckett at the 1980 conference of the Confederation of British Industry in which he, as Director General of the organization, promised to give Margaret Thatcher's government a “bare-knuckle fight” (D. Smith 1987, 98). A similar story can be told of the USA. Tabb (2012) quotes the then-CEO of Honeywell, Edson W. Spencer, complaining in 1984: “Many factors have turned American industry into a high-stakes poker game,” (36) thanks to the pressure on fund managers to deliver sufficient quarterly returns.

18. This is precisely as depicted by O'Connor (1973, 6). Jan-Werner Müller (2012, 43) notes the European Union's (EU) inherent “constitutionalist ethos” that was the elite's response to its “inbuilt distrust” of popular sovereignty.

19. China's financial system has long been careening out of control. Total credit had expanded by more than 30 per cent of gross domestic product every year since the global financial crisis. During April total credit issuance was up an extraordinary 59 per cent on the previous year. (Chancellor 2013) Now that the Chinese government has expressed its desire to reduce the supply of credit, the worry is that a slowdown will become a crash. Ironically, the risk of the latter is heightened by the government's “expressed desire … to rely on market mechanisms” (Wolf 2013c).

20. And the more shareholder value became a guide to action, the worse the outcome. On the board of the Halifax Building Society, I voted in 1995 for its conversion to a “plc.” We would allow the company to pursue the goal of maximising its value untrammelled by outmoded concepts of mutuality: in barely a decade, almost every last penny of that value was destroyed. (Kay 2010).

21. The long-running dispute between the EU and the USA involving the use of genetically modified crops has opened cleavages within the British government, with the environment minister accused by Liberal Democrat coalition partners and a fellow Conservative MP, of being “an industry puppet” (Bawden 2013).

22. These are likely to be magnified in Europe by the publication of a study by München-based Ifo economic think tank that calculated that a trade deal would provide a far larger boost to the US economy than to the EU (Politi 2013b). In the USA, meanwhile, domestic political struggles, arising in large part due to widespread dissatisfaction with the financial sector's lingering political hegemony, make a trade deal less likely than in the past (Hill 2013).

23. Suskind also notes the desire of Obama to involve ex-Goldman Sachs CEO, Clinton's Treasury Secretary, and subsequent Citigroup director/adviser Robert Rubin in his economic team. Like Lew, Rubin's role at Citigroup and consequent vulnerability to scrutiny meant that his former deputy, Lawrence Summers, who succeeded him as Treasury Secretary, became head of Obama's National Economic Council. Earlier, upon leaving Treasury in 2001, Summers became President of Harvard University, which appointed Rubin a member of the Harvard Corporation, the university's executive governing body, in 2002. Meanwhile Summers received substantial payments from Wall Street firms, including Citigroup, during this time. So, too, did Obama's deputy national security adviser for international economic affairs Michael Froman, who “received more than $7.4 million from [Citigroup] from January 2008 to when he joined the White House” in 2009 (Zeleny 2009). Froman, who was made US Trade Representative in April 2013, had previously worked for Rubin in Clinton's Treasury team and had followed Rubin to Citigroup. Froman reputedly introduced Obama to Rubin (Kantor 2008).

24. In the original online version of Houlder and Pickford's article, Tax Justice Network's (TJN) Nicholas Shaxson is quoted to this effect. In the UK print edition, however, a much abbreviated version of the article shorn of any criticism appears.

25. The phrase “forces of conservatism” was employed by Tony Blair in his speech to the Labour Party conference of 1999. A classic of ideological triangulation, it managed to enthuse party loyalists, who thought that finally the tables would be turned on their conservative foes, while, in fact, it was directed primarily against the defenders of policies previously associated with social democracy, such as state earnings-related pensions (Bickerstaffe 2002).

26. See also Majone (1998).

27. In unintentionally sacrificing his personal reputation, Alan Greenspan may have done his beloved libertarianism a significant service.

28. Turner was appointed FSA chairman in September 2008. It is very likely that Turner's regulatory activism and willingness to embrace comparatively radical perspectives, including support for a global financial transactions tax (Parker 2009), sank his candidacy to succeed Mervyn King as Governor of the Bank of England in 2013. While FSA chairman, Turner published a damning report of the financial sector's activities (Turner 2009), was very publicly positioning himself as an activist regulator (Masters 2012), and was immediately appointed full-time Senior Fellow at the George Soros—funded Institute for New Economic Thinking on April 1, 2013, as the FSA was disbanded (Gray and Jenkins 2013).

29. The recent criticisms by French Industry Minister Arnaud Montebourg of the European Commission as having “institutionalised the EU as being anti the European people” and having responsibility for the rise of the populist and racist right (Carnegy 2013b) have much evidence to commend them. They were prompted by Commission President Jose Manuel Barroso's criticism of French critics of globalization as “reactionary,” which came in response to President Francois Hollande's efforts to recapture the economic policy initiative in Europe. Even conservative former Prime Minister Alain Juppé has retorted that Barroso is “archaic” for pursuing ultraliberal trade policies (Carnegy 2013a). Such exchanges strongly echo German Chancellor Gerhard Schröder's outspoken criticisms of the Commission at the start of his campaign for re-election in 2002, before the impending US-led invasion of Iraq gifted him with a more immediately effective campaigning weapon (Black and Hooper 2002).

30. Owen Jones' book, Chavs , explaining the long-term impact of England's deindustrialization in great detail, was published a few months prior to the riots and was therefore a very timely intervention.

31. Mexico's lower costs and proximity to the US, which reduces transport costs and increases flexibility, will make it increasingly competitive as a manufacturing location, analysts say. Groups including Honda and Nissan, the Japanese car manufacturers, and General Motors of the US, have announced new investments in Mexico. (Crooks 2013) More generally, prospects for the container shipping industry are described by Maersk Line's chief executive as “downbeat,” with “US and European ‘offshoring’ of production to Asia … all but over and in some cases … being reversed,” while containerization has gone as far as it can go (Odell 2013). See also Fishman (2012).

32. This is a central demand of a recent book by a doyen of US foreign policy (Haass 2013).

33. Increasing multipolarity is expected also by Duménil and Lévy (2011) and Desai (2013).

34. Turkey has since stepped up its efforts to achieve full membership, ostensibly as a rebuke to the EU, but with more profound implications for US geopolitical strategy (see Keck 2013).

35. This is also a long-term goal of many in Japan, rivalries with and provocations of China notwithstanding (Johnson 2006, Chapter 5).

36. Prior to his removal from office in July 2013, Egypt's President Mohamed Morsi's regime was using a dispute with Ethiopia, involving the latter's proposal to build a dam that threatens to reduce the flow of the river Nile, to shore up domestic support (Daragahi 2013). China's almost total monopoly in rare earths has become a matter for nationalistic breast-beating in recent years (Dombey 2010).

37. I have argued elsewhere that such a possibility existed while Gerhard Schröder was German Chancellor. However, the German trade union movement does not have the social activist tradition and ethos of its French counterpart, preferring instead to focus on traditional sectoral struggles over the share of the surplus. Schröder, having eked out a victory in 2002 on the basis of campaigning against German involvement in any US-led invasion of Iraq, was too discredited by adherence to neoliberal policies by 2005, when he lost to Angela Merkel (see Black and Hooper 2002; Keaney 2005, 281n40).

38. See: http://www.researchonmoneyandfinance.org. The Centre for Research on Socio-Cultural Change (CRESC), based at the University of Manchester, is less theoretically focused but also attracts a great deal of positive media attention. See: http://www.cresc.ac.uk/home. Perhaps the most effective counterpunch in recent times has been the discrediting of the claim of Harvard economists Carmen Reinhart and Kenneth Rogoff that public debt higher than 90 percent of gross domestic product (GDP) stifles growth. Through this, researchers from the heterodox economics department of the University of Massachusetts very publicly undermined the European Commission's case for austerity policies (Herndon, Ash, and Pollin 2013; Pollin and Ash 2013). These are just a few prominent examples.

39. In the UK, the last official review of pay relativities was led by Hugh Clegg in 1979, before being consigned to history by the incoming Thatcher government, which regarded it as an outdated interference in the labor market (Middlemas 1991, 164). However, support for a regulated approach to incomes comes from management theorist Peter Drucker, who came to argue that pay differentials within corporations should be such that the highest paid should not earn more than 20 times the income of the lowest paid worker (Crumm 2010, 74). Following the crisis, the financial press has been especially full of negative commentary as regards the stratospheric awards enjoyed by executives, irrespective of their performance (e.g., Skapinker 2011). And, in response to public pressure, the Dutch government in 2013 announced that it would impose “the strictest cap on bonuses for financial services staff in Europe,” exceeding the EU's bonus limit of 100 percent of salary with a ceiling of 20 percent (Marriage 2013).

40. The Federal Reserve is promising to implement risk management rules that are tougher than the Basel III capital regime (Braithwaite 2013), and the European Commission is restricting how banks trade credit derivatives, in parallel with similar US efforts led by Gary Gensler at the Commodity Futures Trading Commission (Gapper 2013), while Britain pledges to implement the recommendations of a high-level panel. Nevertheless, the predictable omission of more stringent measures means that pressure must be maintained (Parker and Masters 2013; Plender 2013; Wolf 2013b).

41. See Wray (2009).