Socialist Criticism of the Financial Sector from 1986

The present savage cuts to the welfare state by the Tories and their Coalition partners are legitimated by an appeal to the massive debt created by the financial crisis of four years ago. The root cause of this was ultimately the wholesale deregulation of the financial sector by Thatcher’s government, a policy that was carried on by Major’s, Blair’s and Brown’s administrations, and which the Coalition today promotes even further. The conspiracy/ parapolitics magazine, Lobster, has also carried a number of articles showing how the Tories’ preference for the financial sector has severely damaged British manufacturing industry. This was clear from as long ago as 1986, when the book Socialist Enterprise: Reclaiming the Economy, by Diana Gilhespy, Ken Jones, Ton Manwaring, Henry Neuberger, and Adam Sharples, was published. Looking through it recently, I found this passage criticising the rise of the financial sector and the harmful effect it was having on society and the economy:

The continued growth of the finance sector is also highly significant in terms of the distribution of economic power. Industrial companies in this country have behaved as independent and usually competitive organisations, even though they have sometimes acted in alliance. But the finance sector is far more centralised, and serves as an organising focus of class power. The growth of the finance sector reflects the decreasing ability of manufacturing companies to finance investment from their own retained profits. In the era of manufacturing dominance, manufacturing companies used to finance their relatively limited investments from their own substantial profits. Since then, the underlying trend in profitability has been downwards, while the costs of new investment have increased (especially because of higher inflation). As a result, manufacturing and commercial companies have increasingly come to rely on banks for new finance, both for working capital and for fixed investment needs. This often takes the form of short-term finance through overdrafts or leasing arrangements whereby companies hire equipment owned by banks. The effect of the latter is to concentrate the control of a large amount of equipment, at least in principle, in the hands of the banks.

These development have left the banks with considerable power over industry and commerce. But the banks have not developed the same sense of responsibility shown by their German and Japanese counterparts, who have been the source of finance for their industries for much longer. The form in which British banks provide their finance does not encourage them to take a long-term view of the companies and industries in which they are involved. Recently banks have been forced by the economic recession to become more directly involved, but even when acting collectively, as in the case of the Stone Platt engineering company, they have overwhelmingly taken a short-term view.

There have also been changes in the ultimate source of finance, as witnessed by the rise of the pension funds. Thirty years ago rich individuals were the main source of outside finance for industry. But now pension funds have taken over. Some people argue that this has somehow d9ispersed the ownership of property, in a way, which has also increased democratic control. In practice, however, the members of a pension fund have no control over the way in which it is operated, and have no legal rights to challenge its investment policies. The rise of pension funds has simply concentrated even more economic power in the hands of the City institutions which operate and ‘advise’ the pension funds. It has also had the effect of providing them with greater political power: when it comes to defending the rights of property there are 13 million members of pension funds, many of them trade unionists, who can be made to feel they have a stake in the free enterprise economy. (pp. 32-3).

This pessimistic analysis has been born out to a very large extent by history, and particularly by the recklessness of the banks’ policies, which created the crash. It was this, not the Labour government’s welfare spending, that has resulted in the massive budget deficit.

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5 Responses to “Socialist Criticism of the Financial Sector from 1986”

  1. Mike Sivier Says:

    Reblogged this on Vox Political.

  2. leonc1963 Says:

    Reblogged this on Diary of an SAH Stroke Survivor.

  3. Martin Kroupa Says:

    I wonder where the German and Japanese counterparts had gone better?

  4. b-b-p Says:

    Considering we eat less Natural Home Grown Food now and more processed junk it is surprising we are actually living longer .Has our Wellbeing been enhanced .Has our Social environment changed for the Better .Does job satisfaction hold the key .Does regular Exercise help our decreasing years .
    Are we Better School Educated .Are we less Stressed .
    Exercise is about the only the only named above that has any bearing on Longevity in the context of this post .
    For centuries we have been oppressed ,taught to be subservient culminating in our thoughts and free spirit being repressed .
    Politically that is how we have been controlled over the years by repression .Stress in the Biggest Killer of people .After WW11 allotments sprung up all over the Country .New Social Housing projects were being built throughout .You could leave one job one day and walk into another the next .We had a system of Education whereby the Brighter children went to Grammar Schools and the Less Bright to Secondary Modern Comprehensive schools that taught us the fundamentals of Maths ,English and prepared us for the Bigger world of work .
    They were really good years Governed by Labour and Tory alternately .The Rot started with Thatcher carried on by Blair and now Cameron has Brought in Draconian Laws that oppress and repress us because we have learnt to see through all Politicians and that we have lived a lie for years through them .We now have a Voice and they do not like it – Less stressed more frustrated .Drastic measures were needed to get us back under control ,Welfare Reform – nothing to do with Austerity .
    Look at Social cohesion now –Failed ,Education Failed ,Work satisfaction Failed ,Healthy Eating Failed all in the name of Materialism and Control .They don’t want us to Live Longer .Non Tax paying McDonalds ,Liverpool Care Pathway ,Privatisation of NHS .Ambulance Emergency Attendances .New Medical Helpline .FAILURES ? Workfare ,Benefit Sanction ,Atos Assessments ,Bedroom Tax .
    The EU and Germany’s Merkel have another 28 Countries to Control –we the Public are on our own. German Chancellor Angela Merkel, perhaps the most powerful woman on earth and the principal engineer behind Europe’s campaign to resolve its debt crisis, has shrugged off a new book that claims she was a very active member of the Communist Party during her youth in (then) East Germany.

  5. davemunnik Says:

    Reblogged this on davemunnik christchurch labour party member.

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