Opportunity lost: Mystification, elite politics and financial reform in the UK

Abstract

The first phase of the crisis in Britain – from the 2007 failure of Northern Rock to the post Lehman systemic crisis of autumn 2008 – was a demystifying moment, when finance sector alibis, technocratic expertise and the assumptions of the political classes were tested and found wanting under pressure of unanticipated events. The banking rescue of 2007-8 amounted to the socialization of banking losses at a cost to the UK taxpayer of up to £1,000 billion or more (if we include contingent liabilities and exclude quantitative easing). British taxpayers got very little in return. The challenge of a brief democratic moment was met by the restatement of old pre-crisis narratives about the importance of ‘flexible’, market responsive regulation, and about the social value of finance. The result so far is marginalisation of left and radical forces (or no change on the past twenty-five years). Against this background, this essay has two interlinked aims. First, it presents an analysis of political obstacles to democratic control and reform of the finance sector that caused the financial crisis of 2007-8; a crisis that, after extreme intervention to save banks and support markets, has by 2010-11 become a fiscal crisis for individual states and a sovereign debt crisis for the eurozone. Second, it addresses (in this context) the role of ‘ideology’ within the socio-political process by examining how discourses format the world through what is now called ‘performativity’. And it shows how this new kind of discursive description can be developed and integrated with more established kinds of institutional analysis so as to generate new insights into the political obstacles to reform. The argument below is illustrated with UK evidence and our aim is to provide an analysis of national peculiarities, but the issues raised are relevant to other jurisdictions (national and supra national). We hope to raise broad questions about the mechanisms of elite power in present day capitalism where the importance of narrative has intensified since Reagan and Thatcher. We also aim to encourage reflection on how narrative power could be challenged so as to deliver a more democratic reform of finance