Framing Financialization and the State

In the age of financialization, it appears that financial elites dominate both the economy and politics. Indeed, much of the academic literature on the state’s role in propelling financialization argues that states liberated finance precisely due to the political power of finance capital and the influence of pro-finance, neoliberal ideas. This chapter, however, argues that during the 1970s and 1980s, when the most important financial liberalizations were passed, British policymakers were not directly dominated by an ascendant class of financiers. Rather, they found themselves indirectly dominated by the pressures of the global profitability crisis upon Britain’s economic balances with the rest of the world. This chapter theorizes this form of impersonal domination through an interpretation of Marx’s value theory. When the market-dependent agents of capitalist society interact through money-mediated commodity exchange, they unleash a dominating, competitive logic that sets them against one another in a race to raise labour productivity while pushing the economy into crises of falling profitability. Within this system, policymakers must simultaneously respond to the impersonal pressures of world market competition and maintain domestic legitimacy. In order to balance these contradictory imperatives, especially during crises, policymakers employ strategies of depoliticized discipline and palliation—the former seeking to impose competitive discipline on the domestic economy in a politically insulated manner, and the latter seeking to delay competitive market pressures so as to protect governing legitimacy. This chapter argues that the policies of financial liberalization pursued by the British state in this era can be understood through this lens.