Interview with Tony Norfield on finance and the imperialist world system today

Tony Norfield

Below is an interview which Redline was recently able to do with Tony Norfield, whose book The City: London and the global power of finance is an examination of the role of finance in the global economy today.  It is published by Verso on April 12, ISBN: 9781784783662.  It will also be published the same day as an e-book, ISBN: 9781784783679.

Philip Ferguson: Could you tell us a little bit about your political background and how you chose to do your PhD on British imperialism today?

Tony Norfield: The PhD that I completed in 2014 was titled ‘British imperialism and finance: a contribution to the theory of contemporary imperialism’. I thought I had something new to The City, front cover of Verso booksay on these questions, both because ‘British imperialism’ was a term that nowadays seemed to be used only for the colonial period and because, as far as I could see, nothing had been done on this topic relating to the UK since the 1980s, ie before the recent decades in which the financial system had become such a major issue. I have long had an interest in ‘finance’ and capitalism, since well before I ended up, much to my surprise, in getting a job in a bank dealing room.

I have always been interested in how things work economically/socially. Initially, as a teenager, this led me to be a left-wing Keynesian, as I thought the capitalist economy could be more progressively managed. Later, at university, I was attracted by Marxist analysis as it made much more sense! I have been a Marxist ever since. My jobs have also been in economics and business, and these have provided so-called ‘real world’ experience with which to judge and develop Marxist theory.

Phil F:  The book seems to have a wider remit than just British imperialism. What made you expand your area of analysis?

Tony N: I think that any particular country can only be understood as part of the global system. How an economy/society evolves depends on its relationships with others, which determine what its options are and guide the decisions made. By definition, British imperialism could not be understood by only looking at Britain. In the same way, each major power develops in relation to the others. I wanted to put British imperialism at the centre of the analysis, seeing that as a responsibility given that I live in the UK. But I also wanted to counter the common UK left-wing view of seeing the UK merely as a ‘lapdog’ of the US, eg in the Iraq war. This naturally led also to a more comprehensive coverage of the situation of all the key powers in the global economic and financial system, not just the US and the UK. More theoretically, this also called for an explanation of the role of ‘finance’ for capitalism today.

Phil F:  One of the things I find rather frustrating about some left economic writers labelled Marxist is that they try to ‘improve’ on Marx in ways that actually break with the tools of analysis he developed and end up wedding Marx to Keynes. Your work seems much more classically Marxist; you use the tools to build upon and add – quite significantly I think – to Marx’s analysis.

Tony N: I have been open to accepting that there might be problems in Marx’s Capital, and also in Lenin’s understanding of imperialism, and I cover the relevant topics in my book. However, in my view, there are surprisingly few problems in their analyses for understanding the world today, despite the key texts being written a century or more ago. I think the strength of their analysis reflects the intensity of debate at the time they were writing. Marx had Engels, another genius, to correspond with; Lenin had the party he developed; each had events exploding around them that sharpened their understanding.

As a friend suggested to me, Lenin’s Imperialism was the 20th century’s Communist Manifesto, although Lenin did not take into account the way that it was not only a ‘labour aristocracy’ but a wider section of the working class movement in the richer countries that had sided with imperialism. That is a material fact that has determined the political problems we face today.

Unfortunately, we have lived in more barren political times, despite the chronic crisis we face now, and this has also limited the development of Marxist theory. As an example, I found in my PhD research almost nothing of any value on British finance from left-wingers since the 1980s. Also, the most revealing historical accounts of British imperialism that have been published in recent decades have been from ‘mainstream’ writers, even conservatives.

I aimed to build on Marx’s analysis, and my focus has been on finance. This started with the derivatives market, one that is something I know a lot about and one that is most prone to idiotic misunderstanding by radicals. But I have found that an analysis of the financial system also enables a better understanding of the question of capitalist profitability.

Phil F:  One of the things I like about your work, along with that of people like Michael Roberts and Andrew Kliman, is that it works back from events like the Global Financial Crisis (GFC) to explain the underlying forces at work. That the GFC is not a thing in itself, but that the rise of the financial sector is itself premised on problems in the productive sphere – most especially the law of the tendency of the rate of profit to fall.

Tony N: There are some similarities in our areas of research. We have each spent a lot of time examining evidence that contradicts the usual myths about modern capitalism, although, in different ways, they spend more time on the rate of profit question than I do. While we would share a view that the basic problem for capitalism is the production of profit, in the past few years my own emphasis has been on understanding how the financial system is an expression of capitalist power and on the financial form of the crisis. Another way of putting it is that in crisis-related work I have focused on how what Marx called the ‘law of value’ is influenced by finance, especially taking into account the privileges of the imperialist powers.

Phil F: I want to turn now to some more specific things from your book that I think our readers might be interested in. Could you tell us a bit about the rise of financial power and also what you mean by ‘Britain’s invisible empire’?

Tony N: An early idea for the title of the book was ‘Invisible Empire’. The new title, The City, came later. The earlier one was to reflect two things. First, that for many – at least the news media and most academics – ‘British imperialism’ was only a historical concept, something dating back to the colonial period. Second, that it was not colonialism, but a particular form of the hierarchy of power in the world economy that defined imperialism. The ‘invisible’ part of this is seen in the financial system, which is something accepted as part of the business infrastructure, rather than most people having any idea of how it evolved in the power hierarchy. My book traces the key changes in the world financial system from the inter-war period, to the post-1945 Anglo-American system and the euromarkets, to the explosion of financial trading from the 1980s.

Phil F:  In chapter 4, you look at the various components of the financial sector – and I guess it’s important to stress here, we’re not talking about finance capital as used by Lenin in Imperialism, but about the financial sector. Would you like to explain the difference and talk about the component parts of the financial sphere? Also, why is this sector important today?

Tony N: In the book, I spell out the role of the main types of institution in the financial sector, from banks to life insurance companies, etc. However, this is to place them within the overall financial system, a system that includes the dealings of all kinds of corporation. For example, Facebook’s owners have used Facebook shares to fund the purchase of WhatsApp. Mergers and acquisitions are important aspects of the monopolisation of economic power today. The longer argument will have to be read in the book, but the concept of ‘finance capital’, derived from Hilferding’s work, has a number of problems.

Phil F:  For some time it was quite fashionable to talk about globalisation meaning an end to nation-states and national, competing capitalisms. It seems pretty obvious in 2016, however, that the nation-state is very much alive and kicking and so are competing national capitals. Who is calling the shots these days in terms of financial, and overall economic, power?

Tony N: The US is obviously the major capitalist power, and the one with ‘full spectrum dominance’ as military pundits put it. However, this fact leads many to see other powers as just willing accomplices in US plans, as noted in the criticisms of Tony Blair and UK government policy. This perspective completely fails to understand how the different powers have their own agendas, even if they may agree on a lot, and how their interests clash. For example, the bombing of Libya was an Anglo-French initiative that sought to draw in the US military, and the US was opposed to Britain signing up to the China-run Asian Infrastructure Investment Bank. However ‘hegemonic’ US power is, it has not been sufficient to impose a solution on the Middle East and that is still up for grabs. The pervasive crisis leaves all the powers with unsolvable problems, ones that are likely to lead to more military adventurism and opportunist politics.

Phil F: How do China and the BRICs fit in? Is China really going to overtake the United States as the world’s dominant economic player?

Tony N: The BRICS term was a Goldman Sachs marketing tool to massage the egos of politicians who wanted to be seen as more important in the world. Ironically, Jim O’Neill of Goldman wanted them to get a more prominent role in the existing world institutions, but China, especially, was more determined to establish different institutions from the IMF, World Bank, etc.

China presents the only serious challenge to US power. The former ‘Index of Imperialism’ chart on my blog is updated in this book to 2013-14, and more correctly now called an ‘Index of power’. China is in 3rd place behind the US and UK, and is likely to rise further in future years. Of course, it is not simply economic size that determines the role that a country plays in the world. Particularly important are the changing alliances among the key powers, not just a US-China standoff. Given the latest developments in Iran and the disaster that is South Africa, maybe a better acronym would be BRIIC! The trouble created for the major powers by Saudi Arabia makes it an unlikely candidate as a new ‘S’. Neither is Turkey a promising candidate for major status, although financial analysts were trying to include ‘T’ in another acronym.

Phil F:  To turn now to the Global Financial Crisis, quite a variety of analysts have suggested that the was the product of deregulation. The solution, therefore, is more regulation. What’s wrong with that picture?

Tony N: The capitalist market will always break through, or get around, controls on its movement. The post-war Bretton Woods monetary system crumbled under the weight of growing worldwide economic imbalances. Long before it collapsed in the early 1970s, fuel for the fire (to mix a metaphor) had been provided by the euromarkets that grew in response to the needs of corporations for huge volumes of funds, as I explain in the book. ‘Deregulation’ occurred in several stages since 1945, and began well before the Thatcher-Reagan regimes after 1979.

In the more recent 2007- crisis, deregulation has been blamed, and it no doubt made easier some of the financial excess. I think that more or less the same result would have occurred with no extra deregulation, although arguably debt levels would now be somewhat lower. I cannot prove that, but consider the following: low US interest rates were an important factor in the financial excess, and these had nothing to do with deregulation; if toxic US mortgage securities were sold so easily around the world, what does this tell us about the other opportunities for investment on offer; growth was hardly stunning in the 2001-07 period, even with the boost given by the credit expansion.

The regulation issue is for those who want to be hired to write reports and join government advisory committees to find ‘better’ policies. It does not address the fundamental drivers of the capitalist crisis.

Phil F:  One of the cruel ironies of the present situation is that capitalism seems exhausted, yet there is relatively little opposition to it.  Since the collapse of the Soviet bloc and the restoration of the market in China, a lot of people have abandoned left-wing politics or reworked left-wing politics into a kind of ‘market socialism’, which strikes me as essentially regulated capitalism and the cause of a lot of new problems. It seems that whatever is dynamic still about capitalism is a kind of destructive explosiveness and it co-exists with a big moribund sector of capitalism.

Tony N: Lenin’s term ‘moribund capitalism’ does often come to mind when considering the modern world. This is most easily seen in the mountain of debts, where to recognise that they cannot be repaid would bankrupt not only many private banks, pension funds and asset managers, but also threaten the stability of central banks. The huge disparity between the productive capabilities of society and the destruction wrought by the imperialist economy upon people’s lives should be clear. One does not have to be an aficionado of the finer points of Marx’s value theory to see it. However, at least in the rich countries there are still too many people loyal to the system. For example, the ‘1% versus 99%’ slogan ignores both the economic differentiation of the 99% – it is not one lump – and the political fact that many of the worse off are also in favour of reactionary policies from ‘their own’ states.

Phil F:  Your book seems to confirm the idea that the main reason capitalism survives is not because of any great internal dynamism but because of a lack of serious anti-capitalist opposition. Is that a fair comment?

Tony N: Two World Wars, plenty of smaller ones, and the barriers to development in many countries continue to argue that capitalism is well past its progressive phase. Indeed, there is no great dynamism. Instead, monopolistic features of the economy and private property prevent the potential social benefits of invention and innovation from being fully realised. My book does not deal with this question, but I would argue that while there is a lack of any serious anti-capitalist opposition – or much challenge to capitalist exploitation – in the rich countries, there are some more positive signs in others. I would see my own role, living in the UK, as being to explain what is going on in the world economy and to argue against views that have delusions in capitalist state policy and which can often be overtly pro-imperialist.