On 15 December, I published a video under the title What will happen if economic growth has come to an end?.
In turn, this explored themes I had already discussed in a blog post, entitled The End of Growth, published a few days earlier.
Steve Hinton posted this comment as a result of the video, and it made me think - although I have come to no firm conclusions as yet. I thought it was worth sharing.
This is very deep, Richard, as it contains the seeds of what I have been seeing you develop: the new political economy of the post-financialisation. Here is how I see it:
Post-Financialisation as a School of Thought
This framework constitutes a distinct political-economic school, separable from:
-
- Neoliberalism (market primacy, growth absolutism)
- Keynesianism (demand management within growth)
- Degrowth (often socially under-specified)
- Green growth (technologically optimistic but materially evasive)
Core commitments of the Post-Financialisation School
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- Resource truth precedes financial design
- Real capital formation is the measure of success
- Finance is a public utility, not a growth engine
- Distribution is a precondition for stability
- Care and maintenance are central economic functions
- Democracy requires material honesty
This school does not reject markets or money — it demotes them to instruments subordinate to real-world constraints.
Is Steve right? Is this a direction of travel?
Is it possible, in other words, to capture the insight from MMT that real constraints are what matter when managing the economy, since this then permits reversal of the ordering that neoliberalism imposed?
Instead of assuming finance, markets and prices tell us what is possible, might post-financialisation ask first what the economy must do in material, social and ecological terms, and only then design the financial system to serve that purpose?
By rejecting the idea that affordability is discovered in markets and suggesting instead that it is determined by real capacity, which the government can enable, does it dissolve a great deal of the pseudo-constraint neoliberalism seeks to impose on both the government and society?
Simultaneously, by emphasising real capital formation as the measure of success, might it make a decisive break with GDP fetishism and asset-price growth?
Instead, by reframing prosperity as maintenance, renewal and resilience, and not throughput, is it proposing fundamentally sustainable success criteria for the economy and society?
What I agree with Steve on, without hesitation, is that seeing finance as a public utility is crucial. It explains why financialisation is destabilising. Utilities are, after all, meant to enable activity, and not extract rents from it. Once finance becomes the growth engine, everything else becomes subordinate and brittle. This logic is rejected in a post-financialisation model. That works precisely because it starts by reversing the ordering that neoliberalism imposed.
This is emphasised in the suggestion that distribution is a precondition for stability. This moves beyond both Keynesian demand management and moral arguments about fairness. It recognises inequality as a structural macroeconomic failure that must be addressed ex ante, not compensated for ex post.
And, of course, placing care and maintenance at the centre is vital. Most economic schools treat care as residual. In this post-financialisation idea, it becomes constitutive of economic success.
Vitally, though, this is not anti-market or anti-money. It is about demoting them to their appropriate instrumental roles within democratically chosen material goals. That, I think, is where political economy has to go next.
Thoughts?
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Certainly worth a try, especially as neoliberalism and socialism are gods that have failed. It is vital we tackle Climate change, eliminate poverty, balance wealth and avoid war and move greenwards.
Looks spot on to me, Richard, Steve.
As you so often say, “much to agree with”. So many people in the City, or influenced by it, seem to regard the acquisition of wealth, and even flaunting their own wealth, as a laudable objective in itself. Most of the rest of us surely only respect what people with wealth do with it for other people/communities/nations – for the common good, in other words. Is that what you mean by “care”? And although there are notable examples of ultra-rich people doing really good work with their wealth, some of them doing it quietly without seeking glory for themselves, I doubt if that is the most efficient use of resources compared with what governments can (ideally) achieve.
Agree, the current slavery to “the markets” has always seemed bonkers to me.
In my own sphere of building services and plumbing I see time and time again contractors bidding the price of a job down in an effort to secure the work, which then ecourages the unscrupulous practice of finding loads of extras to actually make a living wage.
Same for various GOVT subsidy schemes, green new deal, MCS, etc many seemed to involve loads of paperwork and admin duplicating systems already in place, leaving a margin that isn’t profitable for many.
A new system that values the outcome rather than the process is needed IMHO.
In a sense though we have democratically chosen our material goals by consistently voting in neoliberal based parties pushing the line that Government debt is bad, Government must live within its means, etc.
We are left currently hoping that the Green Party can get enough media traction to at least get some visibility on the truth of MMT and what that can mean for the political economy.
Thanks to Steve Hinton, you and your team for such a positive socio-economic article!
Might socio-economics be like democracy in their both being better assessed by analysis of practical outcomes/outputs rather than theoretical inputs?
Maybe….
Abba Lerner. Use SMART indicators?
You have pointed out quite rightly that high interest rates are simply a means for allowing the already wealthy to accumulate wealth and that this was recognised as wrong thousands of years ago
My question might be in these more financially, resource and environmentally constrained times, can we afford financialisaton and the rich?
Clearly we still need a level of ‘financial services’ but as a sector it needs to be controlled
The answer is increasingly clear.
Historically, societies understood that unrestrained interest and rent extraction are socially destructive. From ancient Mesopotamia through Aristotle to medieval Christianity, there was a recognition that making money from money, detached from productive activity, corrodes social cohesion. Financialisation is simply the modern, institutionalised version of that problem.
In a world facing real resource constraints, climate limits and demographic pressures, we cannot afford an economy organised around rewarding passive wealth. High interest rates do not create new resources; they redistribute income upwards. They drain spending power from households, weaken public finances, and slow productive investment. In that sense, they are not a neutral policy tool but a choice to privilege creditors over society.
We do, of course, need financial services. Payments, savings, insurance and risk management are essential utilities. But finance should be an enabling service, not a dominant sector extracting rents from everything else. When finance becomes too large, it stops allocating capital efficiently and starts distorting the economy.
So yes, the implication is unavoidable: we cannot afford the current scale and power of financialisation, nor the social role of extreme wealth that it sustains. That does not mean abolishing finance or wealth. It means containing them.
That requires lower and more stable interest rates, tighter regulation of speculative activity, effective taxation of wealth and unearned income, and a much stronger public and cooperative banking presence. In constrained times, rewarding hoarding and inaction is not just unfair – it is economically irrational.
What follows adds a bit of “colour” to the blog (with which I agree).
The European Commission (via DG ENER) the other week issued a “Communication” (COM) on “Grids”. The assertion (& that is all it is) is that the EU needs to spend between Euro500bn up to Euro1.2Trn on “Grids” (i.e. electricity networks). Apparently the money will come from “private finance” = financialisation. The ECB, EIB etc do not figure as players in this (EIB is a footnote). I can imagine the finance parasite dribbling with pleasure, Other reality: one never sees a cost-benefit-analysis (CAB) that is externally evaluated. The CABs that are done (by the network operators that benefit) are hailed as works of ?? (art? fiction?) & thus beyond reproach. I am confident that the same situation exists in the UK with NESO (the now gov owned operations arm of what was National Grid). Apparently A.I. will solve their problems plus hosing money @ networks (natch).
MP checks date – nope, not 1st April.
🙂
So, the private sector gets their nose in the trough, and that means only one thing: leverage.
We can do so much much better than this.
We seem unable to learn? The way this is set up, sounds like a cuckoo in the nest job, the private finance side will gobble up and take a huge slice at the loss to the other stakeholders. So, we are going the way of the Dodo.
If we were sensible, the private sector would get the construction contract for the grid and nothing else. That is where private/public markets really work. But stakeholdership through finance? No way, sorry. It’s like cuddling up to a Kommodo dragon expecting a good night’s sleep.
Well, at least we can bear witness to this in our time, if that is to be our time.
I really like these ideas Richard.
I wish the Green Parties were building national plans for the acquisition and organisation of the resources necessary for the care-focussed political economies we could build after the next big financial crash.
There are some superb ideas here that slapped me in the face:-
‘Resource truth precedes financial design’
‘Distribution is a precondition for stability’
‘Care and maintenance are central economic functions’
‘This school does not reject markets or money — it demotes them to instruments subordinate to real-world constraints.’ It is not just about ‘constraints’ – be careful here, maybe too negative. It is also about OPPORTUNITIES. So, we are not demoting or subordinating markets (try not to use the language of conquest) we are ‘PROMOTING’ markets in this more positive scenario. Currently these opportunities are ignored, and I would say constitute the unmet needs of many in this country and its infrastructure currently
If you talk about change you ARE taking something away. So, it is wise to replace it with something. If you are not then you are just being Neo-liberal, because they are always talking positively about change whilst they are taking things away.
The key discussion at the end is about democracy. I don’t think we have had a decent democracy for some time, if ever. That is why I cannot say I believe in it. A fair distribution of wealth and resources has to be part of a democracy or forget it. It is about promoting sufficiency in society. A world where kids and parents go hungry, freeze in their homes, go into debt for illness and also lack social justice (I am thinking about how Gaza is just one big cynical real estate grab) is not a sufficient society or world.
We have to remember that even the wise old Greeks never really sorted out democracy. Because at the heart of it wealth ruled and called the shots. The art here is to quell the fear of wealth and convince them that they can still be wealthy without having to have everyone else’s stuff as well? No mean feat I can tell you.
This is what I will be thinking about over Christmas
Wholly agree that finance must be seen as a public utility and that the market / money should be used to achieve democratically determined goals.
Using an over-simplified analogue. How can it make sense that Andrew Bailey / BoE would adopt an approach (justified on the basis of trying to bring inflation down / creating growth / reducing the ‘national debt’) that increased unemployment/ reduced wages of ordinary working people? This to me seems completely the wrong approach for a whole raft of reasons I won’t go into but I’m sure most people would instinctively understand. The point being, that finance as a public utility (and MMT), would take an almost polar opposite view, i.e., to create full employment, to ensure sufficient care, health and other public services, to invest in required infrastructure (including removing financially-driven monopolies such as water and electricity utilities and re-nationalising them), free higher education, etc.
A system – which we have called neoliberalism – that simply enriches a few, further expands inequality, and increasingly debases social care, health, education due to financialisation cannot be allowed to continue. Ipso facto we need post-financialisation.
Thanks.
The Arketa Institute already has a plan for post-growth finance, myself and others have already linked their work here.
Once more for those who missed it:
https://www.arketa-institute.org/resources/by-disaster-or-design
And here’s a detailed publication from post-growth researchers debunking the fallacy of decoupling “green growth”:
https://eeb.org/wp-content/uploads/2019/07/Decoupling-Debunked.pdf
Thanks