How do we theorize and analyze the structural power of finance when global capitalism itself undergoes constant and profound structural transformation? The literature continues to assume that the source of financial structural power is its unique ability to provide credit to the real economy, playing a crucial role in meeting the investment imperative. But recent research documents that most financial market activities no longer facilitate productive investment and can even be a drag on economic development. If the financial sector's primary (...) role is not to support productive investments, then on what basis does it continue to hold structural power? The contributions to this special issue engage with how decades of financialization have transformed the basis of structural power toward alternative functions that have gone unnoticed in the existing literature. These include household and real estate lending that fuels consumption-led growth, concentration and expansion of financial institutions as tools of geo-economic strategy, financing current account deficits that facilitate global imbalances, and wealth preservation that bolsters inequality. (shrink)

This article examines the structural power of domestic finance in developing and emerging economies in the context of a shift toward increasingly activist financial development planning and financial sector reform. Focusing on efforts to create large, internationally competitive banks in Malaysia and Nigeria dating to the late 1990s and early 2000s, it highlights that banks have not played their envisaged role in financing structural transformation via industrial growth and economic development. Nonetheless, banks in DEEs have attained considerable structural power over (...) financial policy, supporting their ability to shape growth and investment strategies. Therefore, the article proposes a revised model of the structural power of finance, recognizing its contingent nature. States pursue various forms of financialization both as a substitute to, or in conjunction with, industrial policy. Financialized development strategies enhance the structural power of large banks in DEEs, notwithstanding their limited role in meeting the investment/development imperative. (shrink)

This article analyzes business power in the context of noisy politics by comparing business involvement in two British referendum campaigns: one about membership in the European Communities in 1975, and the Brexit referendum about European Union membership in 2016. By exploring these two contexts, the article seeks to identify the conditions under which business elites can and cannot be effective in a context of noisy politics. Three key factors are identified as determinants of business influence during periods of noisy politics: (...) the incentives to get directly involved in noisy politics; the legitimacy of business involvement; and, finally, the capacity to act in a cohesive way. The article shows that these factors have changed substantially over the last four decades because of wider changes in the nature of capitalism, and their impact on business power in the United Kingdom and more generally is discussed. (shrink)

How can finance be durably democratized? In the centers of financial power in both the United States and the United Kingdom, proposals now circulate to give workers and the public more say over how flows of credit are allocated. This article examines five democratization proposals: credit union franchises, public investment banks, sovereign wealth funds, inclusive ownership funds, and bank nationalization. It considers how these plans might activate worker and public engagement in decision making about finance by focusing on three modes (...) of public participation: representative democracy, direct democracy, and deliberative minipublics. It then considers the degree to which democratization plans might be resilient to de-democratization threats from business. It argues that of the five, bank nationalization goes furthest in guarding against de-democratization threats but is still pocked with pitfalls if it relies solely on representative democracy. It argues that two criteria appear necessary for democratically durable alternatives: the active direct participation of workers and citizens and the weakening of businesses’ capacity for democratic retrenchment. (shrink)

Through empirical investigation of the Eurozone and Greek debt crisis 2010–12, this article demonstrates how a peak organization of financial firms—the Institute of International Finance —was able to mobilize its members transnationally to secure several key political and economic objectives. At the height of the crisis, large European banking firms were threatened by the prospect of a disorderly Greek default, coercive intervention by governments, and, potentially, a regional banking collapse. In this context, representatives from the IIF entered the policymaking process (...) to facilitate concerted private sector action, assisting EU officials with the negotiation of a substantial and orderly creditor writedown, and cooperating with legal action by the Greek government to sideline a minority of financial firms hostile to the deal. The article shows that the IIF’s disproportionate influence over policymaking was a result of their technical expertise, their ability to recruit individuals with long-standing experience of sovereign debt restructuring from the public and private sector, and the operation of elite revolving-door processes. In contrast to recent studies showing that financial actors are able to exercise more power at the national level by remaining collectively inactive, these findings suggest that, at the transnational level, financial actors can be most effective at securing their preferences when they are well organized and when they coordinate politically on the basis of collective interests. (shrink)

This article argues for the utility in conceiving of two distinctive approaches to the structural power of finance—New Structural Power and Traditional Structural Power. While both are crucial to political economy scholarship, this article highlights the intellectual trade-off that is inherent to the adoption of one perspective over the other, and it stresses the explanatory advantages of the TSP perspective specifically. First, it shows how the TSP framework can facilitate an understanding of when policymaker ideas do and do not matter (...) in the exercise of structural power, retaining the concept of “automaticity” in structural power operations. Second, it demonstrates how each framework is custom-built to explain substantively different aspects of the policy process, with TSP research aimed at system-oriented limitation mechanisms and NSP research aimed at agent-oriented selection mechanisms. Third, it contends that TSP formulations must be embedded within a model of functional explanation, which is the best way to gain empirical traction on the most important macrostructural developments in contemporary finance-led capitalism. Methodologically, this implies an agenda of “explanation through commonalities” rather than the NSP-favored “explanation through variation.”. (shrink)

This paper takes a social epistemology perspective on markets in general and trade deals in particular. Normatively, it is based on considerations of democratic accountability and contestation. Empirically, it is based on the assumption that all markets are embedded in institutional frameworks. Knowledge plays an important role in the institutional framework of markets: it matters both at the level of content – which knowledge has to be processed in what way, according to the market rules? – and at the level (...) of process – whose knowledge counts in setting the rules? While these considerations apply to both domestic and international markets, there are good reasons to allocate certain epistemic tasks to the frameworks of international markets, for example trade deals. While the TTIP and CETA negotiations fell short of democratic standards about transparency, the debate about them indicates growing public awareness of the importance of the institutional frameworks for international trade. (shrink)

Before the 2007–2008 global financial crisis, the vast majority of social scientists were not paying much attention to the politics of central banking, despite the fact that, since their creation, central banks have been pivotal institutions between private financial institutions and public authorities (Singleton, 2010). During the past decades, central banks acquired considerable independence from public officials under the Central Bank Independence (CBI) template (McNamara, 2002). Governments justified their decisions to delegate monetary competences by relying on a narrow conception of (...) monetary policy, in which central bankers should only seek to control inflation and ignore the implications of their policies on other economic issues such as financial stability or wealth inequalities (Issing et al., 2001; Marcussen, 2009). Heterodox economists and critical political economists opposed this view by declaring that monetary policy is fundamentally political as it deals with complicated policy trade-offs, which generates winners and losers (Epstein & Gintis, 1995; Forder, 2005). However, until 2007, their concerns were very marginal and remained at the fringes of the political debate. The vast majority of policy-makers, economists, and central bankers themselves agreed on the fact that the CBI template was the optimal institutional arrangement between fiscal and monetary authorities. (shrink)