Julie Froud

The Private Finance Initiative - risk, uncertainty and the state

Abstract This paper analyses the UKs Private Finance Initiative (PFI) at a conceptual level by focusing on the management of risk, which is central to the justification for the policy and its application across the public services, and uncertainty, which underlies the role of the state. The paper argues that the rhetorical support for PFI rests on a conflation of risk and uncertainty and that PFI leads to contractual arrangements that are inappropriate for the provision of public services over the medium term.

The democratization of finance? Promises, outcomes and conditions

ABSTRACT This paper analyses the ‘democratization of finance’ or the promise that all households can make money and/or manage risk by buying appropriate financial services products. It does so by exploring the reasons for discrepancy between what is promised and what can be delivered. Our analysis starts from the economic promises and political pitches for the democratization of finance since the early 1990s and the corollary emphasis on promoting mass financial literacy. The article then identifies three key social preconditions which must be satisfied before the promise is delivered. Evidence and argument from the UK and US suggests that these conditions are not met because the context is confusing, individuals lack calculative competence and products are opaque. Under these conditions felicitous outcomes are uncertain for existing middle class savers and very unlikely for lower income groups. A concluding section relates this analysis to the cultural economy literature and to the politics of social security versus individual responsibility.

Appraising and Evaluating PFI for NHS Hospitals

This paper explores the use of appraisal in the development of proposals to use private finance to provide acute hospitals under the Private Finance Initiative (PFI). It addresses the extent to which value for money (VFM) and affordability (which must be satisfied to enable a scheme to be approved) are demonstrated in the documents prepared by hospital Trusts. It identifies a number of issues (such as the transfer of risk and the development of public sector comparators) that pose new problems for investment appraisal, which are specific to its application to PFI.

Financialisation and the Coupon Pool

This article aims to extend our understanding of the role of capital markets in present day capitalism. It starts from a critical examination of established terms, shareholder value, corporate governance and financialisation, before suggesting a new generic term, coupon pool capitalism. The second half aims to demonstrate that, unlike the other terms, the coupon pool concept distinctively emphasises the generation of contradictions and instabilities. Empirical evidence is used to support the concept and explore dynamics.

Working for themselves? Capital market intermediaries and present day capitalism

This article uses earlier debates on managerial capitalism to set up and explore questions about the role and possible effects of fee-earning capital market intermediaries in present day capitalism. The question then becomes whether a new group of actors (the capital market intermediaries) have taken a new leading role in the economy, in part by constraining the discretionary power of an old group of actors, the salaried corporate managers. A broader analysis of the new group of intermediaries makes two key points: first, business models in activities such as investment banking, corporate law and private equity all generate substantial rewards for senior intermediaries; second, the different agendas of these different groups have the net effect of encouraging an economy of permanent restructuring. The conclusion highlights differences between the managerial revolution and the rise of new intermediaries, while noting the role of this new group in an economy of permanent restructuring.

Private Equity and the Culture of Value Extraction

The rapid growth of private equity had, by the mid 2000s, provoked mixed reactions. For The Economist, ‘the private equity industry has moved from the fringe to the centre of the capitalist action’ and offers ‘in many ways a superior model of capitalism’. A few months later, a leading German Social Democratic Party politician was less complimentary when he described private equity investors in Germany as ‘locusts’ who were stripping assets and destroying jobs. The metaphor was slightly different when Business Week described private equity investors as ‘gluttons at the gate’. At the same time, the continued growth of private equity was making some fund managers uncomfortable about how private equity funds were using debt to overpay for assets and the chief investment officer of the CalPERS pension fund publicly expressed fears about an asset price bubble, which were quietly echoed in the analysis of risks in a British Financial Services Authority (FSA) discussion paper. Both supporters and critics consider the development of private equity to be significant, but does it represent a new business model for capitalism? The global growth of private equity has certainly been spectacular. Between 1985 and 2005, private equity funds experienced a compound annual growth of 18.5 per cent, and after 2005 growth has been more marked. According to Private Equity Intelligence, private equity funds raised US

A new business model? The capital market and the new economy

401 billion in 2006 or nearly 25 per cent more than the US

Reconceptualizing financial innovation: frame, conjuncture and bricolage

311 billion raised in 2005. The global industry includes a relatively small number of very large American funds like Texas Pacific, Blackstone and KKR, now joined by large British funds like Apax and Permira; some of the large funds are themselves public companies, with many more, smaller unlisted private equity houses. As funds have grown, with US

New actors in a financialised economy and the remaking of capitalism

10 billion funds now increasingly common, this has allowed larger deals to be done; the recent trend of syndicate or ‘club deals’, where several private equity houses work together and contribute finance to a deal, has allowed buyouts of over US

Accumulation under conditions of inequality

30 billion with enthusiasts talking up the possibility New Political Economy, Vol. 12, No. 3, September 2007