The Speaker
Wednesday, 24 July 2024 – 22:47

“Green New Deal requires tearing up the rules of finance-led growth”, In conversation with Grace Blakeley

 Grace Blakeley, author and economist for the Institute for Public Policy Research, released her first book back in September to a fantastic reception.

“Stolen: How to Save the World from Financialisation” is already on its second edition, having sold extremely well in its first month of release. The book focuses on the financialisation of the global economy in general and the British economy specifically, and the impact that this has had on our political and economic climate today.

We spoke to Blakeley about her book and about the current state of the British economy, and what this means for the future.


Why do you think Stolen has been such a hit amongst so many people and what has made it resonate more than other books on financial economics?

To be honest, the book has gone down far better than I ever imagined it would and I suppose that’s because it’s hit the right nerve at the right time for many people – particularly those active on the left. It feels like we’re at a bit of a crossroads at the moment – on the one hand, support for socialism is the strongest it has been in decades, we’re advocating incredible policies like the Green New Deal, and the Labour party is now the largest party in western Europe. But on the other hand, we’re 11 years on from the financial crisis and so little has changed – plus we’re wading into an election that looks like it will be fought solely on the basis of Brexit. I think the central message of the book – which is that we’re living through an extended crisis moment between the death of finance-led growth and the birth of something new, but that the way in which this moment plays out is up to us. If socialists can come together, mobilise and take back control of our most important economic, political and social institutions, then there is a way out of this mess. But if we can’t, the far-right will benefit. The stakes are high and socialists are looking for simple and coherent narratives that allow them to understand the world and their place in it, and communicate their message clearly and simply to others. I think Stolen plays a role in doing that.

The Labour Party conference saw the passage of motions on some unprecedented policies. What do you make of the Private School policy and the decision to break patents with compulsory licencing and a state-owned generic drugs manufacturer and – do you think this policy would impact R&D into new medicines, a major criticism of the policy?

I’m extremely pleased with the motion passed by conference on private schools – I’ve been a long-term supporter of the Abolish Eton campaign as too many of our top institutions are dominated by the children of the wealthy and powerful because they were able to attend private school. I’ve had some criticism for this position because I attended private school until I was 16 – but when I was given a choice, I opted to attend a comprehensive for Sixth Form and I found the education to be of a better quality and the environment much nicer. I don’t think the issue here is restricting good quality education – the state sector can provide a better quality of education than the private sector – the issue is restricting the access to connections and insider knowledge that allows privately educated students to rise to the top. Integrating private schools into the state sector is the only way to ensure all children can gain access to a good quality education.

The ‘Medicines for the Many’ proposals are also extremely welcome. Huge pharmaceuticals companies have been abusing the patent regime and overstating the costs associated with the development of new medicines for decades. Labour’s proposal to use compulsory licensing arrangements simply involves a commitment to make use of existing legal avenues to challenge the drugs companies when they abuse the patent system. The alternative is to continue to allow patients – like Luis Walker, who has cystic fibrosis but cannot gain access to a drug that would slow the progression of the disease on the NHS because it is too expensive – to die because they cannot afford treatment. The creation of a state-owned generic drugs manufacturer is also a brilliant policy that builds on existing research showing the role the state plays already in funding research and development – and represents another step towards the development of the kind of Entrepreneurial State discussed by economist Mariana Mazzucato.

Last month saw the tragic collapse of Thomas Cook, do you think that the collapse is the result of the company being mismanaged by greedy bosses and chasing quick profit over long term sustainability – in light of the bonuses allegedly received in the lead up to the collapse.

The Thomas Cook saga is less about greedy bosses than it is about the fundamental problems with shareholder capitalism. As I argue in Stolen, the financialisation of the corporation has led to a situation in which boards and managers consider the corporation’s only objective is to maximise value for shareholders. As a result, long-term investment in fixed capital and wage growth have both been falling for the last several decades. At the same time, corporate indebtedness has been rising – so this debt clearly isn’t being used for productive investment, in fact, much of it is simply going into ill-advised mergers and acquisitions or share buybacks. The financialisation of the corporation has effectively led to a massive internal redistribution within the firm, away from workers and towards shareholders and creditors. Of course, in cases like Thomas Cook, it is the long-term shareholders like pension funds who don’t see the problems coming that suffer more than the nimble financiers who sell in time to avoid most of the trouble. And the creditors are, of course, always protected. The UK has a huge corporate debt problem and as soon as the next recession hits, we’ll start to see a lot more corporate insolvencies.

Do you think that the current political crisis – the rise of populism and extremism – is being driven by an economic system that is under strain and failing at its fundamental duties?

Yes I do – that’s the main argument of Stolen. That is not to say that populism and extremism – particularly xenophobia and racism – can be reduced to economic issues, of course they can’t. But the argument is that when you see pervasive increases in extreme views and behaviours, there is generally a material driver. People might hold racist or xenophobic views at the best of times, but this tends only to morph into support for the far-right when times get tough. The idea of the immigrant coming to take your job, use up public services and occupy public housing only really gains traction when there aren’t as many jobs, when public services are stretched and where housing is expensive. And cross-country research has shown that it is concerns like this that tend to drive the rise of the far-right.

Your book discusses the death of finance-led growth that has largely dominated the economic system for since the 1970s – how do you think the next phase of economic growth will be achieved or is an equalisation of current gains more vital for ensuring strong quality of life?

In the book, I argue that only a substantial shift in power relations can lead to a fundamental break with the past. Now, on the one hand, we’ve had something of that shift since the financial crisis. Financial globalisation has slowed, the power of the big banks has declined sharply, and big capital is much more reliant on the state than perhaps any other time in history. At the same time, the conditions that stabilised finance-led growth in the past – rising debt, increasing property ownership, and rising asset prices – have started to fade. Without the balm of rising property ownership in the context of asset price inflation, people are starting to notice the underlying issues that finance-led growth creates – namely, low levels of investment and falling wages. As a result, support for the status quo is eroding. We’re already at a point of rupture – the question is who can take power and use this moment to build a new set of institutions that will govern the next several decades. This is why it’s so important for the left to build power. Getting control over the state is only the first step – political economy will only change when those who live off work are able to overpower those who live off wealth.

Do you think that the current emphasis on finance-led economic growth is hampering our ability to combat climate change; for an effective full-scale response does the profit-driven motivation of our economy need to be cast aside?

Absolutely. It is impossible to tackle climate change under a system that puts profit maximisation at the centre of all economic activity – in other words, it’s impossible to tackle climate change under capitalism. What we need is a Green New Deal – a massive mobilisation of our collective resources in pursuit of a democratic plan for the whole economy. That will mean a massive increase in government investment, constraining the power of finance, and also handing power back to local areas to undertake their own green investment programmes. And the Green New Deal also needs to be globalised through a new set of international institutions. In other words, the Green New Deal requires tearing up the rules of finance-led growth – it’s a huge challenge, but I firmly believe that we can do it.

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