The City – London and the Global Power of Finance
Tony Norfield
Verso 2016
Len Arthur
The title disguises a significant and needed Marxist contribution to the
increasingly unstable relationship between the global capitalist financial
system, financialisation, the state, commodity production, monopolies and
imperialism, as well as placing the UK economy and the City of London into this
context. The author writes from the coal face having worked in the City as an
analyst and dealer for banks. He also brings his radical understanding of how
the global financial system works to place this firsthand experience into a
social and economic context.
There have been some excellent reviews published since the book’s
publication in 2016, one of the best being Michael Roberts[1]. Robert’s review covers a
synopsis of the key points made in the book and thus they do not need repeating
here in such detail. Roberts also defends the importance of continuing to work
toward an evidence base of Marx’s claims about the tendency of rates of profit
to fall as an explanation of the rise of the role of finance. Norfield places a
key emphasis on this tendency whilst questioning the possibility of developing
an adequate evidence base.
The main aim of this review is to propose avenues of further research
and discussion exploring the social and economic threats identified by Norfield
and using the results to develop demands and policies that socialists can take
forward.
Norfield argues that contrary to seeing the financial system completely
as a parasitical entity sucking the life out of the ‘real economy’, it is in
fact ‘an integral part of the capitalist economy… it is more like a central
nervous system: without finance, modern capitalism is dead’. Globally the UK is
surprisingly still second to the US on a range of measures as part of a small
group of powerful countries having a ‘privileged position in production,
commerce, investment and financial relationships…’. Pervading all economic
activity the global financial system is in a tension with the real economy of
commodity production. The financial system depends on the extraction of surplus
value and hence profitability for stability in the long run. However, the
system also has the potential to create financial assets that are separately
tradeable, commanding a market value based on expected value and income.
Norfield uses Marx’s term ‘fictitious capital’ to describe the second stage.
Tensions start to disrupt both spheres of activity when it become more
profitable to invest and trade in fictitious capital than to invest in
commodity production in the ‘real’ economy; driving ‘financialisation’ of the
world economy. Investment falls, speculative future value takes precedence over
the production of surplus value and eventually unsustainable expected value is
faced with delivery something tangible and the bubble pops as in the last
financial crisis. Being an integral part of the capitalist economy a crisis in
the global financial system feeds back into the global economy of commodity
production.
Norfield explores the consequences of this process for the interaction
between states and corporate monopolies. He identifies the current state of
imperialism where global monopolies are largely based in powerful nation states
and gain world advantages being identified with this state. Likewise an
imperialist state is one that can exert power on behalf of its ‘national’
capitalist companies. The US remains the dominant imperial power in this sense
not just through the number of corporations associated with the country but
also through the dollar continuing to remain the world currency giving it and
its corporation access to cheap low risk finance. This gives the US the power
to globally control financial securities. Fictitious capital ‘... is a very real
form of capital when it comes to exercising power, empire building and
appropriating value today’. Moreover, the UK continues to play a very big role
in the world financial markets having the second biggest current account
surplus on financial services and, if insurance services are added the UK
surplus is the highest. The City’s privileged status in the world economy
enables it to still facilitate the transfer of revenues into the UK from what
the rest of the world produces. The UK remains an imperial power through the
City of London.
Given the instability of the relationship between the production of
surplus value and fictitious capital it is hardly surprising that imperialism
that has evolved and rests on this relationship will also reflect this
instability, both in terms of financial crises and in ongoing competition to
sustain power and control. In this regard the UK continues to have a major role
in global ‘financial parasitism’ largely due to historical reasons and is consequently
in an unbalanced and vulnerable position.
Norfield also refers to the more questionable financial activities that
the City is turning to expand business in an attempt to sustain its domination.
Tax avoidance advice and organisation as revealed by the Panama[2] and Paradise[3] papers and writers such as
Nicholas Shaxson[4]
and the Tax for Justice Network[5]; the LIBOR scandal; welcoming
haven for ‘non’domiciled’ residents; purchase of UK commercial, residential
property; football teams; newspapers and other trophy items giving
‘opportunities such ownership might give for money laundering’. He also
includes in this expansion of business the connection with sovereign wealth
funds such as the £7bn injection of capital into Barclays from the Abu Dhabi and
Qatar. The list could have been extended to include the UK Private Liability
Partnership law allowing people from around the world to obscure ownership and
control as exposed by Private Eye[6]. More recently McMafia the
BBC TV series dramatically catches where these tendencies can lead[7].
What can we do about this as socialists?
Theory development: Norfield has made a
major and timely contribution to our contemporary understanding of the social
and economic power of capital and imperialism. We need to see this as a start
of the discussion not the end. As will be seen in Michael Roberts review above
of this book, Norfield’s position on the evidence of a declining rate of profit
remains controversial. Norfield has himself moved on to suggesting that
the effect of finance is now such that it may outweigh Marx's commodity analysis
in the first volume of Capital[8]. The dangerous
consequences of the exercise of social power globally by corporations is often
lost in the aggregate and detail of economic analysis and Norfield has started
to put this back on the agenda. A key work in this regard produced by the Swiss
engineers[9] requires further research
to expose the people who are actually making decisions that affect us all.
Making the links
between theory and practice: Continuing competition between imperial powers to
secure share of value and markets creates an instability that drives capital
toward continued financial crisis, making workers pay through austerity
policies and increased rates of exploitation, continued over exploitation of
the resources of the planet, together with associated populist and neofascist
cooption and division of workers. Finally, of course, competition morphs into
the use of force through wars. As socialist we need to continue to make the
links between this context and the problems experienced daily by people as a
consequence. Emphasising how integrally important to building resistance are
international links like the European Left. And how local acts of resistance
can, through starting to block the strategies of capital, can have wider
impacts and develop international solidarity against a common enemy.
A danger in making links to the wider context of resistance us
‘hegemonic pessimism’ where the task can be seen so big it overwhelms the
confidence to resist. A key to avoiding this danger is the development of
transitional demands and actions[10]. Of course, as Michael
Roberts argues, Norfield lays the grounds for the radical socialist case of
collective and democratic ownership of the process of investment and financing
so wealth can be used for need and not profit. If Norfield’s case is convincing
then it is important that Labour Party members start to toughen up the next
manifesto with demands that take this forward. In addition a series of other
policy demands could start to legitimate this radical position.
Although Norfield suggests that a Financial Transaction Tax would hardly
touch the surface of the issues he identifies this, combined with other
demands, could start to make a package so challenging that it could help to put
collective ownership on the agenda. Such a package might include a radical
‘opening of the books’ so that commercial confidentiality becomes a thing of
the past with the real owners of corporations being named and their total
remuneration fixed at say a 4:1 ratio with their lowest paid employee; their
companies being taxed according to where their income is generated at
internationally fixed high rates of corporation tax; all companies, no matter
what size, directorship and accounts are made publicly available; partnerships
are covered by the same rules; all personal income and tax publicly made
available and a public register of wealth for everyone with more than say
£500,000 in assets. These are just some suggestions, but given the power and
influence the rich have over our lives they should be made publicly accountable
and, if they don't like it, then their objection starts to lay the basis of
legitimating a radical take over.
Of course the challenge of political transitional demands also has to be
supported by those that people feel they are prepared to fight for through
direct action. Clearly at the moment the central issue facing people are the
policies and politics of austerity that directly derive from the strategy of
making workers pay for the financial crisis. Demands relating to ending public
sector pay capping, defending the NHS, demanding that elected representatives
such as councillors refuse to vote for cuts budgets, these all amount to a
direct challenge to the implementation and legitimation of the strategies of
our imperialist governments that derive from the instability of their system.
So, thanks to Tony for putting this updating of how international
capitalism and imperialism works back on the agenda. Hopefully, through this
journal we can take the renewed discourse about contemporary imperialism
forward as well as develop demands and actions that start to challenge the
power of the rich and their corporations.
Notes
[1] https://thenextrecession.wordpress.com/2016/02/24/british-imperialism-the-city-of-london-and-brexit/
[4] Shaxson, N, 2011 Treasure Islands: Tax Havens and the Men Who
Stole the World, The Bodley Head, London.
[10]
Arthur,
Len, 2017 Where we are and where we could
be: Transitional demands and actions, Tranform – Journal of the Radical
Left, 2, PRR UK, London.
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