Financialization is a key feature of neoliberalism. It refers to the capturing impact of financial markets, institutions, actors, instruments and logics on the real economy, labor, households and daily life. Essentially it has significant implications for the broader patterns and functioning of an (inter)national economy, transforming its fabrics and modificating the mutual embeddedness of state-economy-society. As well as neoliberalism, financialization is substantially a state project.

Financialization was already widely discussed in our previous posts. It is impossible to have a comprehensive account and profound understanding of financialization without scrutinizing the role of the state in its evolution and development.

In this interesting and illuminating (open access) paper “The Role of the State in the Financialisation of the UK Economy“, Aeron Davis and Catherine Walsh analyze what role did the UK state agencies play in the rise of financialization in Britain? and what were the institutional mechanisms by which financialization came to be supported?

Based on evidence from a mix of interviews with central actors, published insider accounts and an analysis of budget statements in the period 1976–2010, the researchers make two arguments. First, the UK state has had a rather more active role here than most observers have acknowledged. Successive governments and civil servants since the 1970s have not merely abandoned manufacturing and industry, they have handed much of their control to the financial sector and in favour of local and international finance.

Second, as Davis and Walsh stress, at the heart of this pro-finance institutional shift was a changing balance of power between the Treasury and the Department of Trade and Industry. In the late 1970s, both departments went through a series of dramatic changes that left the Treasury far stronger relative to the DTI. The Treasury then attempted to remake the DTI in its own image (by making appointments with City and Treasury links), subjugating its alternative economic outlook to that of its own. This both boosted the City and disadvantaged industry, thus propelling the UK towards financialisation at a faster pace.

The contemporary societies are enslaved by finance and capital; it is the time to bring the real economy back in for the benefit of all, and not only for a handful of (political) financiers.

***

Join the Economic Sociology and Political Economy community through

Facebook / Twitter / LinkedIn / Google+ / Reddit / Tumblr