The Political Economy of the Profitability Crisis in Britain

Abstract

This chapter provides a historical overview of the profitability crisis that undermined the postwar economic boom, gave rise to the phenomenon of stagflation, and ultimately drove the financial liberalizations explored in this book. This chapter puts forward a novel historical categorization of British stagflation, by identifying two distinct phases within Britain’s experience of the global profitability crisis. The first, from 1967 to 1977, was characterized by low rates of profit, rising inflation, and repeated current account imbalances that resulted in currency crises. The second, from 1977 to 1983, still saw low profitability and high inflation, but the rising price of sterling ensured that there were no sterling crises. The chapter then details how governments combined governing strategies of depoliticized discipline and palliation in different ways during these two periods of acute crisis in order to navigate the contradictory imperatives of global competitiveness and domestic legitimacy. Policies of financial liberalization constituted attempts to support these strategies.

Decarbonizing the downturn: Addressing climate change in an age of stagnation

“…The answer tends to be sought in a combination of neoliberal ideology and elite/financier/rentier lobbying in a context of economic turbulence. The fact that this neoliberal policy revolution was in large part a response to the grinding stagnation of the 1970s is inadequately theorized (Copley, 2022). It is this stagnation, which preceded the spike in inequality and the ascent of the financier and rentier, that must be explained.…”

“…These include an expansion of free trade that scooped billions of new workers and consumers into the capitalist fold, '[w]aves of deregulation and privatization' that pried various sectors open to market competition, low corporate tax rates, and the falling price of capital goods (Dobbs et al, 2015: 1-5). Of equal importance has been a tremendous monetary stimulus, powered by financial liberalization, falling interest rates, and infusions of liquidity into the economy by central banks (Copley, 2022). Finally, this period saw China's entry into the world market, with Chinese GDP growing by an average of 9.7% from 1980-89, 10% from 1990-99, and 10.4% from 2000(World Bank, 2021).…”

Monetary sovereignty and the ‘Invisible Leviathan’: the politics of Marx’s theory of money

“…The state's changing control over money was a key part of the so-called 'globalization debate' that dominated political and scholarly discourse in the 1990s (Held and McGrew, 2000). The sovereign capacity to command money had supposedly been transformed by the deregulation https://doi.org/10.1332/26352257Y2024D000000020 of domestic financial centres and liberalization of capital accounts, the granting of independence to central banks, and the narrowing of the scope for discretionary monetary and exchange rate policy by a panoply of rules (Copley, 2022). Such policy shifts found their rhetorical justification in an emerging consensus within Economics on the optimality of liberalized markets (Mirowski, 2013).…”

The role of funding in the ‘performative decarbonisation’ of transport in England

“…The entry of financialisation as key motive in planning and policy is to be understood as an effect of numerous factors, with an ongoing debate on the true direction of causality, including regarding its relation to neoliberalism (Copley, 2021;Davis & Walsh, 2017;Sawyer, 2013). Factors include: national governments' attempts to mitigate damage linked to the 2008 financial crisis (Copley, 2021); the New Public Management approach emphasising evidence-based policy and a business-like management of state affairs; and international political and financial pressures, including the increasing availability of international funds and investments for local government (Godenhjelm et al, 2015).…”

“…The entry of financialisation as key motive in planning and policy is to be understood as an effect of numerous factors, with an ongoing debate on the true direction of causality, including regarding its relation to neoliberalism (Copley, 2021;Davis & Walsh, 2017;Sawyer, 2013). Factors include: national governments' attempts to mitigate damage linked to the 2008 financial crisis (Copley, 2021); the New Public Management approach emphasising evidence-based policy and a business-like management of state affairs; and international political and financial pressures, including the increasing availability of international funds and investments for local government (Godenhjelm et al, 2015). In this paper, we follow Davis and Walsh (2017)'s analysis and consider financialisation in the UK as a historic socio-economic process complementary and overlapping with neoliberalism, but grounded on different epistemological and cultural foundations, centred on "an 'ideal' understanding of 'the economy' centred on finance" (Davis and Walsh, 2017, p. 46) promoted by key state institutions.…”