Sovereign Debt Management and the Transformation from Keynesian to Neoliberal Monetary Governance in Britain

Private financial markets are central to the implementation of monetary governance. This necessary integration of public and private finance means the way states govern must evolve with developments in financial markets. This article examines how the rise of liability management underpinned a shift to market-based banking and transformed the operation of monetary policy in Britain. It assesses the period of reform between 1967 and 1981 and what this meant for monetary governance. Political economy literature depicts this period as a shift to depoliticised, deregulated governance with public authority giving way to market power. This paper challenges this perspective on the grounds that it misconstrues the problem policymakers faced. The shift from Keynesian to neoliberal monetary governance came in response to the change in banking practice with the rise of liability management and a parallel money market. This underpinned an explosion of credit creation that the old system of monetary policy, organised around the Base Rate and ‘primary’ discount market could not fix. As a result, the monetary authorities had to render this new financial environment governable. The period should therefore be reassessed in terms of the capacities the state attempted to construct to conduct monetary governance

Patient capital in the age of financialized managerialism

This article focuses on the history of financialized management and its connections to shareholder value, which is often viewed as undermining patient strategies of investments. We argue that the rise of financialized management has in fact a long history that goes back to the conglomerate movement in 1960s America. As we show, the conglomerates pioneered the use of financial markets as a baseline for strategy, and the emphasis on financial transactions as an engine for growth. They developed key techniques—high leverage, share-price maximization and accounting manipulation—that later came to be associated with managerial strategies of the shareholder value era. This legacy has important implications for how we think about patient capital. It challenges the idea that patient capital consists foremost in shielding non-financial companies from capital markets and highlights the central role of management too often neglected in these debates

Debt as power: public finance and monetary governance in postwar Britain

It is often thought that a state dependent on debt is in a vulnerable position. But Britain has long been such a ‘debt state’. Since the seventeenth century Financial Revolution and the foundation of the Bank of England, the state has amassed levels of debt it could never realistically repay. Far from a burden, the ability to issue its debt as a form of money has been the basis of great power. It provided the state a readily accessible pool of financing and established a monetary infrastructure through which it could govern the broader economy. For that reason, this thesis claims that the British state has never been a passive recipient of creditor agendas when it raised public finance. This provides a different perspective on the development of monetary governance in postwar Britain and in particular the period of transition from Keynesian to neoliberal techniques of governance in the 1970s and 1980s. This is a time often discussed in terms of the British state ceding power to financial markets as it strived for the ‘credibility’ necessary to support its growing public debt. Instead, this thesis shows how the imposition of monetary targets and neoliberal financial reform were attempts by the state to enhance its capacity to manage liquidity across the British economy. While debt is often assumed to be a problem for the state, this thesis instead shows how debt is a form of state power

Financialisation: A Primer

A beginner’s guide to financialisation: how it works, how it shapes our lives, the forces that lie behind it, and how we can resist

Critical macro-finance: An introduction

Critical macro-finance (CMF) has become an influential avenue of research aimed at shedding light on how the global payments system is governed. In the introduction to this special forum on CMF, we explore three main themes: (1) the intellectual lineage of CMF and its relation to financialisation studies; (2) the policy relevance of CMF; and (3) its ‘critical’ position

How COVID-19 revealed the politics of our economy

Drawing on a new book on the events of 2020-21, William Davies, Sahil Jai Dutta, Nick Taylor, and Martina Tazzioli offer a critical account of COVID-19 as a political-economic rupture, exposing underlying power struggles and social injustices

Neoliberal failures and the managerial takeover of governance

The history of neoliberalism is a messy attempt to turn theory into practice. Neoliberals struggled with their plans to implement flagship policies of monetarism, fiscal prudence, and public sector privatisation. Yet, inflation was still cut, welfare slashed, and the public sector ‘marketised’. Existing literature often interprets this as neoliberalism ‘failing-forward’, achieving policy goals by whatever means necessary and at great social cost. Often overlooked in this narrative is how far actually existing neoliberalism strayed from the original designs of public choice theorists and neoliberal ideologues. By examining the history of the Thatcher government's public sector reforms, we demonstrate how neoliberal plans for marketisation ran aground, forcing neoliberal governments to turn to an approach of Managed Competition that owed more to practices of postwar planning born in Cold War US than neoliberal theory. Rather than impose a market-like transformation of the public sector, Managed Competition systematically empowered top managers and turned governance into a managerial process; two developments that ran directly against core precepts of neoliberalism. The history of these early failures and adjustments provides vital insights into the politics of managerial governance in the neoliberal era

Managers, not markets

Neoliberal policy owes less to the ideology of free-markets than it does the planning techniques born in Cold War America

Sovereign debt management and the globalization of finance: recasting the City of London’s ‘Big Bang’

This article focuses on the central position of sovereign debt securities in the financial system to challenge existing accounts about the 1986 ‘Big Bang’ deregulation of the City of London’s securities market. The reforms are often cast as an iconic moment of neoliberal deregulation and a key episode in the globalization of financial markets. Such accounts stress that the state played an active role in constructing the reforms and upholding the global market relations they produced, yet they remain unclear about the state’s direct interest in pursuing financial market liberalization. The article contends that domestic concerns over sovereign debt management were central to the state’s pursuit of regulatory change. The Big Bang reforms greatly expanded the size and liquidity of the market for British sovereign debt. This empowered the state, improving its capacity to conduct monetary policy and to raise finance on better terms. In doing so, the article demonstrates the necessity of examining sovereign debt management in order to specify the state’s role in the construction of financial globalization

The myth of the shareholder revolution and the financialization of the firm

This article re-examines the shareholder value revolution of the 1980s to challenge the dominant conception of the financialization of the firm. This transformation is widely interpreted as a re-alignment of corporate management in response to growing shareholder power and neoliberal managerial norms associated notably with agency theory. By contrast, we demonstrate how the financialization of the firm has its roots in the innovations made in 1960s America by a small group of outsider firms, the conglomerates, that challenged the corporate establishment. As we show, these firms pioneered financial techniques that profoundly transformed the nature of corporate strategy and launched a process of financialization as firms began to exploit the leverage financial markets could provide in various corporate contests. Taking stock of this historical lineage leads us to re-interpret the shareholder revolution of the 1980s. We demonstrate how the key features of this era: the orientation of firms towards capital market, the increase in shareholder activism, and the rise of agency theory, should be read as unintended outcomes of the success of financialized management and its destabilizing effects on corporate governance