Governing Financialization : The Tangled Politics of Financial Liberalization in Britain

Capitalism has become 'financialized'. Since the 1970s, the swelling of financial markets and asset price bubbles has occurred alongside weaker underlying economic growth. Yet financialization was not a spontaneous market development - it was deeply political. States fuelled this process through policies of financial liberalization, and the British state lies at the heart of the story. Britain's radical financial liberalizations in the 1970s and 1980s were instrumental in creating a financialized global economic order in which the City of London emerged as a central hub. But why did the British state propel financialization? The conventional wisdom points to the lobbying power of financial elites and the strength of neoliberal ideology. However, Governing Financialization offers an alternative explanation through an in-depth exploration of declassified state archives. By examining key financial liberalizations in the 1970s and 1980s - including the notorious 'Big Bang' - this book argues that these policies were not part of an intentional scheme to create a new finance-led economic model. Instead, they were designed to address immediate governing dilemmas related to the grinding 'stagflation' crisis and its aftershocks. In this era, British governments found themselves trapped between global competitive pressures to enforce painful domestic adjustment and national political pressures to maintain existing living standards. Financial liberalization was pursued in a trial-and-error manner to navigate this dilemma. By unleashing financial markets, the state hoped to either postpone the worst effects of the crisis, or enact tough economic restructuring in an arm's-length fashion. Financialization was an accidental outcome, not an intentional result. Cover Governing Financialization: The Tangled Politics of Financial Liberalization in Britain Copyright Dedication Acknowledgements Contents List of Figures Abbreviations 1: Introduction Financialization, Stagnation, and States The Financialization of . . . Financial Expansion, Economic Stagnation Financialization and the State Financialization and the Contradictions of Liberal Governance Plan of the Book 2: Framing Financialization and the State Money and Impersonal Domination Value and Competition Wealth and Crisis The Antagonism of Value The Political Constitution of the Law of Value The Paradox of Liberal Between Depoliticized Discipline and Palliation 3: The Political Economy of the Profitability Crisis in Britain From the Golden Age to Stagflation Britain’s Crisis: National, Global, or Both? Governing Stagflation From One Currency Crisis to the Next, 1967–77 The Strong Pound and the Deep Recession, 1977–83 4: Competition and Credit Control The City in Flux The Dilemmas of Monetary Discipline Personal Borrowing Company Liquidity The Politicization of Discipline The Search for a New Approach 5: Abolition of Exchange Controls The Sterling Dilemma The Callaghan Administration Market Uncertainty and Union Militancy The Thatcher Administration The Winter of Discontent and Spooking the Market 6: The Big Bang ‘Hooked on Competition’ The ‘Political Economy’ of MTFS When the Rubber Hit the Road Overfunding and the Stock Exchange 7: The Financial Services Act Tying a Bow on an Era of Liberalization Phase I: Gower’s Discussion Document and the Big Bang Phase II: Depoliticizing Gower’s Proposals The GRG and the Number 10 Policy Unit The Bank’s Practitioner Group Phase III: Defending Depoliticization 8: Conclusion Governing Contradictions The Politics of Liberalizing Finance in Britain Afterlives of Liberalization Annex Bibliography Index The book offers an alternative explanation of why the British state propelled radical financialization in the 1970s and 1980s.