Johnna Montgomerie

The Pursuit of (Past) Happiness? Middle-class Indebtedness and American Financialisation

The crisis gripping financial markets in late 2008 had brought about multiple bank failures, both investment and commercial, in the USA and Europe, as well as insolvency of the insurance giant AIG and the two US federal mortgage agencies Fannie Mae and Freddie Mac. The resulting instability has sent stock markets around the world into precipitous decline. Coordinated and unilateral government interventions have used every conceivable policy tool to address the liquidity and solvency problems facing the banking industry as a means of shoring up stability in the global financial system. This article considers the liquidity and solvency problems facing middle-income US households in order to shed light on the political, social and economic dimensions of the crisis. Before the crisis struck over the course of 2008, the US economy experienced a protracted period of financial market growth. Beginning with the New Economy, a frenzy of Initial Public Offerings (IPO) and the advent of shareholder revolution revitalised US capital markets, contributing to the economic recovery of the 1990s. The seven years following the dot.com bubble burst in 2001 were characterised as a period of excess liquidity and cheap credit that we now know inflated a series of asset bubbles in property and stock markets. The concept of ‘financialisation’ has been used increasingly to describe this period of financial expansion across Anglo-America and Europe. Despite its different manifestations, financialisation is a new conceptual tool used by social scientists across various disciplines ‘to make empirical and theoretical sense of the tempestuous rise of finance in contemporary capitalism’. At its most general level, financialisation evaluates how individuals, firms and the domestic economy are increasingly mediated by new relationships with financial markets. A key aspect of the financialisation literature evaluates how innovation in retail banking integrates individuals or households into capital market networks through transformations in households’ investment and borrowing patterns. Different conclusions are drawn by the two main theoretical paradigms used to evaluate New Political Economy, Vol. 14, No. 1, March 2009

Bridging the critical divide: global finance, financialisation and contemporary capitalism

This article is about two distinct frameworks that evaluate why finance matters in contemporary capitalism. The International Political Economy (IPE) literature on global finance analyses the geopolitical dynamics of financial markets where finance matters because it is an integral element of power in the global political economy. The newer literature on financialisation offers an account of present day capitalist dynamics where individuals, firms and the macro-economy are increasingly mediated by new relationships with financial markets. These two frameworks share a common ground: both reject the mainstream orthodoxy of neo-classical economics and positivist methodology. Essentially, the global finance and financialisation frameworks are different sides of the same critical coin. This article offers a sympathetic critique of both the global finance and financialisation bodies of literature. I argue that greater engagement between the literatures would provide new fruitful avenues of research.

Escaping the tyranny of earned income? The failure of finance as social innovation

This is an article about the outcomes of the mass marketing of retail financial products in the USA since the early 1980s. Our aim is to change the frame of the debate about the democratisation of finance by evaluating the extension of credit and ownership as a major social innovation led by profit-seeking retail banks. We focus on privately led social innovations of income supplementation through credit and of security through property. Put simply, we ask: to what extent has this social innovation of credit and ownership released wage and salary earners from the tyranny of earned income? To this end we present empirical evidence from the United States, which suggests that the extension of credit and asset ownership in an unequal society is self-defeating because it does not abolish the tyranny of earned income and, indeed, it tightens the vice insofar as low-income individuals and households accumulate debt but not assets. The implication is that finance as privately led social innovation has failed and it is time for fundamental rethinking of much that has been taken for granted.

Financialised Capitalism: After the Crisis and beyond Neoliberalism

This paper serves as an introduction to a special issue which explores many new questions, intellectual and political, posed by the current global financial crisis. The aim is to get beyond the convention asking the well-rehearsed questions about what caused the crisis, or why the established theories could not predict it. For we can safely predict that many critical thinkers in political and cultural economy already know, or think they know, the answer to what caused the crisis. This is because they will construct the origins and causes of the within the problematic which they endorsed before the crisis began. Namely, that neoliberalism demarcates the period since 1970 as one of privatisation, liberalisation and support for free markets which essentially takes ideological propositions at their own word and, consequently, fail to distinguish between rhetoric and practice. This special issue explores some new ways of fundamentally reconsidering or challenging established ideas about neoliberalism and finance. For financialisation researchers, the intellectual struggle against organising concepts of neoliberalism and disembedded finance is unfinished business.

An important failure: knowledge limits and the financial crisis

Abstract This paper introduces a theme section on knowledge limits in and after the financial crisis. It explores how and why practitioners have generally responded less conservatively to crisis than academics, and argues that academics within a variety of problematics could do more by reflecting critically on the heroic ideas about the role of knowledge which were current across the social sciences in the decade before the crisis. It then turns to introduce the sections papers before finally raising the possibility of a more explicitly political approach to understanding finance.

The Logic of Neoliberalism and the Political Economy of Consumer debt-led Growth

This book explores the relationship between neo-liberalism, state power and global governance, exploring national differences in the exercise of state power in a variety of industrialized and developing economies. Among the strengths of this volume are its detailed global scope, its range of case studies in diverse policy areas, its analysis and critique of neo-liberalism, in theory and practice, and its impact upon state power and global governance.

Owning the consumer—Getting to the core of the Apple business model

Abstract This paper uses a business model framework to analyze the main limitations of Apple Inc. post-2003, a significant turning point in the companys history. As such, we move beyond an exclusive focus on what makes Apple unique or different by evaluating the mundane and out-dated elements of its business model. To do so, we examine the end-to-end supply chain, from source to store, to present a more holistic evaluation of the Apple business model. Drawing on the existing literature, we argue that the quintessential element of the Apple business model is its ability to ‘own the consumer’. In short, the Apple business model is designed to drive consumers into its ecosystem and then hold them there, which has been hugely successful to date and has allowed Apple to wield enormous power in the end-to-end supply chain. We demonstrate this through a detailed evaluation of Apples physical and content supply chains and its retailing strategy. Moreover, we find that the very business processes that enable unparalleled corporate control bring with them new problems that Apple has thus far been unable, or unwilling, to adequately address.