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ABSTRACT
Within the financialisation literature, a number of approaches identify the coexistence of financial expansion and productive stagnation. Yet there is no consensus on which direction causality operates between these two phenomena. This impasse has been widened by the lack of attention paid to the role of statecraft strategies in mediating possible causal mechanisms. This article contributes to rectifying this shortcoming by focusing on the governance advantages granted to states through financial deregulation. By presenting archival evidence on Britain’s 1971 Competition and Credit Control deregulation, this article lends support to financialisation accounts that argue that weaknesses in the productive economy spurred financial expansion, yet it also indicates that the state’s desire for depoliticised forms of governance played a crucial role in mediating this relationship. This further suggests that International Political Economy should focus on the strategic manner in which states relate to markets.
Acknowledgements
I would like to thank Matthew Watson, Ben Clift, Maria Eugenia Giraudo, Chris Rogers and the anonymous referees for their very insightful advice. In addition, I would like to extend my thanks to Colin Hay for his editorial guidance and to the Cross-Marx group at the University of Warwick for their helpful comments on an earlier presentation of this work. I am grateful to the Economic and Social Research Council for providing the funding for this research [grant number 1501603].
Disclosure statement
No potential conflict of interest was reported by the author.
Notes on contributor
Jack Copley is a doctoral researcher and teacher at the University of Warwick. His research explores the British state's role in propelling financialisation, through archival analysis of key financial deregulations.
Notes
1 While Brenner (Citation2006) argues that the rate of profit fell due to what he calls ‘investment overhang’, Kliman (Citation2012) argues that the rising ratio of fixed investment to labour (the ‘organic composition of capital’) is the cause of the fall.
2 As Fred Hirsch (Citation1965) approvingly observed in a widely cited polemic, devaluation is in many ways a ‘hoax on the public at large’ (77), in that it ‘is a way of achieving the necessary cut in domestic consumption by making use of the “money illusion”’ (75), whereby people are more willing to accept a rise in money wages and a cut in real wages than vice versa. In this sense, devaluation can itself be seen as a depoliticised strategy to increase domestic cost competitiveness by covert means.
3 TNA T 326/961, Bank lending: Developments up to end-October, 22 November 1968.
4 TNA T 326/961, Dowler to Hawtin, 25 October 1968.
5 TNA T 326/961, Lovell to Armstrong, 14 November 1968.
6 TNA T 326/1352, Note for the Record, 15 April 1971.
7 TNA T 326/1352, Cassell to Ryrie, 16 April 1971.
8 TNA T 326/1109, Note of a Meeting in the Chancellor’s Room, 16 January 1970.
9 TNA T 326/1109, Note of a Meeting in the Chancellor’s Room, 16 January 1970.
10 TNA T 326/1263, Wass to Henley, 10 June 1971.
11 TNA T 326/1263, Wass to Henley, 10 June 1971.
12 TNA T 326/1263, Wass to Henley, 10 June 1971.
13 This measure of profitability is calculated at replacement cost after providing for stock appreciation, which the Department of Trade and Industry argued measured profitability in ‘real’ terms. MSS.200/c/3/dg2/23, Trade and Industry magazine, 22 September 1978.
14 TNA T 326/962, Control of Bank Lending to the Private Sector, 27 March 1969.
15 TNA T 326/963, Lovell to Neale, 16 October 1969.
16 TNA T 326/963, Record of a Meeting, 19 December 1969.
17 TNA T 326/1109, O’Brien to Jenkins, 9 January 1970.
18 TNA T 326/1352, Policy on Bank Lending for the Rest of the Year, 7 August 1970.
19 TNA T 326/1352, Policy on Bank Lending for the Rest of the Year, 7 August 1970.
20 TNA T 326/1109, Armstrong to Figgures, 8 January 1970.
21 TNA T 326/966, Minutes of a Meeting, 29 October 1969.
22 TNA T 326/1352, Painter to Armstrong, 18 May 1970.
23 TNA T 326/791, House of Commons, 24 May 1968.
24 MRC MSS.200/C/3/ECO/2/29, CBI Staff Comment, 4 November 1969.
25 MRC MSS.200/C/3/ECO/2/29, Brief for CBI/Treasury Meeting, 19 January 1970.
26 MRC MSS.200/C/3/ECO/2/29, Brief for CBI/Treasury Meeting, 19 January 1970.
27 MSS.200/c/3/dg2/22, Note of a Meeting, 25 November 1971
28 TNA T 326/962, Note for the Record, 1 April 1969.
29 TNA T 326/963, Brooke to Lovell, 10 September 1969.
30 TNA T 326/1109, Painter to Neale, 2 April 1970.
31 TNA T 326/1352, Note for the Record, 27 July 1970.
32 Emphasis added. TNA T 326/1352, Painter to Kelley, 19 August 1970.
33 TNA T 326/1261, Britton to Posner, 5 March 1971.
34 MacDougall was also concerned that the laxity of CCC could allow an explosion in bank lending for consumption during the transition to the new regime, and that the authorities would have insufficient tools to rectify it (TNA T 326/1261, Minutes of a Meeting, 18 February 1971; TNA T 326/1261, Note of a Meeting, 3 March 1971). This was a prescient insight, considering the experience of the Secondary Banking Crisis, and one that was shared by other Treasury figures, which Needham (Citation2014: 42) explores.
35 TNA T 326/1263, Cassell to Henley, 4 June 1971.
36 TNA T 326/1261, Minutes of a Meeting, 10 March 1971.
37 MRC MSS.200/C/3/ECO/2/29, CBI Staff Comment, 4 November 1969.
38 MRC MSS.200/C/3/ECO/2/29, Anderson to Plumb, 19 May 1970.
39 TNA T 326/1261, Minutes of a Meeting, 10 March 1971.
40 MRC MSS.200/C/3/ECO/2/29, Economic Committee Meeting, 5 July 1971.
41 Indeed, the CBI admitted in 1974 that they ‘had welcomed the liberalisation of monetary policy late in 1971 as providing a much needed stimulus to industry’ (MRC MSS.200/c/3/eco/2/7, Report on the Work of the Financial Policy Committee, 19 September 1974).
42 TNA T 326/1261, Posner to Cowdy, 18 February 1971.
43 TNA T 326/1261, Note of a Meeting, 3 March 1971.
44 TNA T 326/1262, Barber to Heath, 6 May 1971.
45 TNA T 326/1261, Minutes of a Meeting, 1 March 1971.
46 TNA T 326/1702, Note of a Meeting, 18 November 1971.
47 TNA T 326/1702, Note of a Meeting, 18 November 1971.
48 TNA T 338/39, Report of the Group on Monetary Policy, 20 January 1971.
49 TNA T 326/1702, Note of a Meeting, 18 November 1971.