Financialization
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Go to any of the British towns devastated by industrial decline and you'll see the same landscape: payday loan stores, pawnbrokers and shops selling household goods on credit at hyper-inflated interest rates. Next to the pawnbrokers you'll probably find that other gold mine of the poverty-stricken town: the employment agency. Look in the window and you'll see ads for jobs at the minimum wage — but which require more than minimum skill. Press operatives, carers on night shift, distribution centre workers: jobs that used to pay decent wages now pay as little as legally possible. Somewhere else, out of the limelight, you come across people picking up the pieces: food banks run by churces and charities; citizens' Advice Bureaux whose main business has become advicing those swamped by debt.
Just one generation earlier these streets were home to thriving real businesses. I remember the main street of my home town, Leigh, in northwest England, in the 1970s, thronged on Saturday mornings with prosperous working-class families. There were full employment, high wages and high productivity. There were numerous street-corner banks. It was a world of work, saving and great social solidarity.
Smashing that solidarity, forcing wages down, destroying the social fabric of these towns was done — originally — to clear the ground for the free-market system. For the first decade, the result was simply crime, unemployment, urban decay and a massive deterioration in public health.
But then came financialization.
The urban landscape of today — outlets providing expensive money, cheap labour and free food — is the visual symbol of what neoliberalism has achieved. Stagnant wages were replaced by borrowing: our lives was financialized.
'Financialization' is a long word; if I could use one with fewer syllables I would, but because it is at the heart of the neoliberal project and it needs to be better understood. Economists use the term to describe four specific changes that began in the 1980s:
Companies turned away from banks and went to open financial markets to fund expansion.
Banks turned to consumers as a new source of profit, and to set of high-risk, complex activities that we call investment banking.
Consumers became direct participants in the financial markets: credit cards, overdrafts, mortgages, student loans and motor car loans became part of everyday life. A growing proportion of profit in the economy is now being made not by employing workers, or by providing goods and services that they buy with their wages, but by lending to them.
All simple form of finance now generate a market in complex finance higher up in the chain: every house buyer or car driver is generation a knowable financial return somewhere in the system. Your mobile phone contract, gym membership, household energy — all your regular payments — are packages into financial instruments, generating steady interest for an investor, long before you have decided to buy them. And somebidy you have never met places a bet on whether you will make the payments.
The system may not be specifically designed to keep wages low and productive investments weak — neoliberal politicians constantly claim to be promoting high-value work and productivity — but judged by the results, financialization and low wages are like precarious wook and food banks: they go together.
The real wages of production workers in the USA have, according to the government, stagnated since 1973. Over the same period, the amount of debt in the US economy hasdoubled, to 300 per cent of GDP. Meanwhile, the share of US GDP produced by finance, insurance and real-estate industries has risen from 1.5 to 24 per cent — making it bigger than manufacturing and close to the size of the service sector. (Ref)