Economy, Class, Ideology and the Transformation of the

Organisational Field in Britain and the USA: A Neo-Marxian View

Stephen Ackroyd,
Lancaster and Cardiff Universities, UK.

Paper for the BSA Annual Conference, Leeds, 2012.

This paper gives additional information concerning the thinking on which Stephen Ackroyds
part of the plenary address to conference (to be given with Rosemary Batt) is based. It is a
draft and its contents are under review. Any comments or criticisms are welcome to the
following e-mail address: s.ackroyd@lancaster.ac.uk
Please do not quote without
permission.

Thanks are due to the following people for comments on an initial draft: Jo Grady (Leicester)
with whom related publications have been written; Paul Adler (U Southern California), Rick
Delbridge (Cardiff) and Matt Vidal (Kings, London)

Abstract
In the last three decades there have been significant developments in the capitalist mode of
production in the UK and USA. Drawing on the distinction between the three circuits of
capital distinguished by Marx and various analysts since (production, commerce and finance),
it is argued a new international division of economic activities has emerged involving
relocation and re-articulation of the circuits. Much of production is now located in China and
the Far East, and finance substantially located in Britain and the USA. These developments
have had extensive consequences for national economies and for the types of organisations
and institutions taking prominent places within them. Associated with the re-articulation of
circuits of capital in a new geo-political context, there has been a reconfiguration of class
structures and economies more generally. We argue here there has been significant social and
economic re-configuration of Britain and the USA, suggesting the emergence of a new group
within the ruling class (a new elite, or, more accurately, dominant class fraction) which has
taken over leadership of the ruling class and the key institutions in these economies. This has
led to an astonishing redistribution of wealth and income in these countries, rapidly increasing
the already disproportionate assets and income of the top 0.1 % of the population. The
increasing dominance of this group of finance capitalists and its supporters explains the
emphasis on freeing restrictions on investment when this is not obviously in the interest of the
state and still less of the majority of the population, and the wholesale reform of the state
itself. We argue that many of the changes that have interested academics interested in
organisation can be seen to be collateral fallout from these processes and which together have
significantly altered the organisational landscape.

Introduction
It is widely acknowledged that there has been a greatly increased pace and scope of
organisational change in recent decades. Large companies have undergone transformation
with the introduction of global supply chains, for example; in many countries the institutions
of the state have been systemically reformed as services have been remodelled with new
modes of delivery; key occupations have been greatly developed management consultancy,
information systems analysts, project managers which depart significantly from the modes
of organisation of the traditional professions. For many, organisational change is simply
assumed to indicate progressive improvements of social capacity and economic effectiveness.
Yet there remains much evidence of systemic dysfunction. Crises are endemic to the socioeconomic system and social instability periodically breaks out. In this paper it is suggested it
is time to reconsider the relevance of Marxian analysis to organisational change.
True, there has been interest in understanding the extraordinary economic events of recent
times: there have been some insightful discussions of the recent banking crisis, for example.
(See the recent edition of the Journal of Organisation (Vol 18 (2), 2011) and Engelen et al,
2011). Academics interested in accounting have studied the role of accounting practices and
their relation to the production of the crisis of 2008 and related events (Arnold, 2009;
Hopwood, 2009; McSweeney, 2009; Sikka, 2009). There are penetrating studies of
innovative financial instruments (Morgan, 2010) and the sequence of events that was centrally
involved in the banking crisis (Froud et al, 2010; Klimeki and Willmott, 2010; Willmott 2011;
Reed, 2011). There have been interesting theoretical forays (DeCock et al, 2011; Stein, 2011;
Harney, 2011). While some commentators suggest the systemic nature of processes lying
behind change, they usually only gesture towards the idea, they are also implicated in deeper
developments originating the capitalist economy.
So far the best known discussions of systemic change have been by social-liberal economists
(Krugman, 2008; Stiglitz, 2009) and political scientists (Hacker and Pierson, 2009) who are
critical of the dominant orthodoxy amongst economists. They suggest mainstream economics
has failed to consider the character of the political change processes and particularly their
social impact. There is, however, incisive and penetrating critical analysis from a few
political economists (Gamble, 2009; Harvey, 2010) whose work is deeply influenced by
Marxian theory, and who offer valuable insights into the systemic nature of the changes
currently reshaping Western economies. While their work establishes that Marxian ideas have
continuing relevance, it makes too little of the connections between economic transitions and
patterns of organisational innovation and change. However, interest in systemic change has
begun to develop amongst sociologists, a number of whom recognise the formative effects of
the economy and the connection of this with organisational change (Crouch 2004, 2011;
Davis 2009). In this paper, by contrast, it is argued that concentrating analysis on the effects
of the economy has particular relevance to understanding organisational change.
Accordingly this paper draws inspiration from some of the modern classics of political
economy (Lipietz, 1985; Arrighi, 1996; 2007). The approach here does not deny propositions
central to established Marxian scholarship but re-contextualises them 1 . It is argued that the
current phase of capitalism is based on increased specialisation in economic activities in
different parts of the world, that some obvious wider patterns of change are related to these
developments. The idea, originating with Marx and frequently used since, that there are
different circuits of capital; specifically, production, commerce and finance, is used here. The
account applies these ideas about different circuits and argues that they distortions and
instabilities specifically arising from the specialisation between, and the changed geo-political
location of, circuits of capital and the necessarily unregulated nature of the emerging
international system of economic relations. In other ways the approach is orthodox:
developments within the capitalist economy itself are analysed first, considered in terms of

the developing spatial specialisation of circuits of capital. Next there is the consideration of
class formation and transformation in different locations; subsequently, we consider changes
in the place and role of the state, and finally turn to the contribution of ideology. In the
conclusion, organisational changes that can be identified as being connected to the processes
discussed are drawn together.
The paper cover a lot of ground and not all relevant subject matter can be considered in the
detail it deserves. There is much only sketched and much missed out. Our strategy for
making this explanatory task feasible is to move from the general to the particular. Whilst the
argument begins by briefly discussing economic change in an international frame, we then
focus the scope of the analysis to Britain and the USA, concentrating on examples of
organizational and institutional changes in Britain. The paper considers four inter-connected
areas:

Reconfiguring the economic base: here we analyse changes within the capitalist
economy, using as basic concepts the distinction between the productive, commercial
and financial circuits of capital. It is argued there has been a re-articulation of
substantial parts of the productive and financial circuits of capital in a new,
internationally dispersed division of labour. Much of the productive circuit of capital
is now embedded in China and the Far East, but the finance capital circuit is remains
located in the West.

Changes of the class structure: economic developments have also produced dramatic
changes in the composition of the social classes in the regions and territories
subjected to the new international division of labour. Distinctive developments of the
ruling class in China and Russia are paralleled by very different changes in Britain
and the USA. In Britain and the USA the rise of a class fraction of finance capitalists
has had fateful consequences for subordinate classes.

The new role for the state: now dominated by a finance-capitalist ruling class, the
role of the state and its place within Britain and the USA has also changed. This
explains the extensive re-configuration of state institutions, and the adoption of
distinctive new policies and actions. Attention is drawn to the redirection of state
powers rather than their reduction.

The development of ideology: the reconfiguration of the ruling class within the UK
and USA has entailed the adoption of new kinds of authoritative ways of thinking especially about economic processes and economic and social policies. Here, in
common with others (Harvey, 2005; Gamble, 2009), the rise of neo-liberalism is seen
as an ideological re-presentation of economic ideas.

It is argued that, even in the truncated form presented here, enough evidence is marshalled to
demonstrate the explanatory reach of classical Marxian thinking, and its potential relevance to
studies of change.

Circuits of Capital and Transitions in the International Economy

The conception of the economy involving the operation of distinct circuits of capital
originates with Marx in Capital. In volume one, Marx clarifies the productive circuit of
capital, in which value is added in capitalist production by the increase in money arising from
the difference between the costs of production (paid out for raw materials, labour, rent etc)
and the money realised when manufactured goods are sold. Marx also distinguishes the
commercial and the finance circuits 2 . In the second type of circuit, though not seen by Marx
as a source of value, money is potentially added to capital by means such as the sale of goods

remote from the point of production (where they are relatively scarce) and may be sold at a
premium 3 . In volume three, Marx distinguishes the circuit of finance capital in which money
is added to loans in the form of interest. This is also not for Marx a source of value; on the
contrary, additions to capital here are a form of rent accruing to loaned capital. Of course
finance capital can create money through the extension of credit, although additions accruing
from this, as with trading surpluses, are not for Marx independent sources of wealth.
The distinction between circuits of capital has been used in a wide range of applications by
Marxist theorists. As also noted by Lapavistas (2011), the single most notable contribution is
made by the Marxist theorist and statesman Hilferding (1910/1981) who used Marxs
distinctions to clarify the inner mechanisms of capitalism in German development. Hilferding
noted the emerging integration of banking and industrial institutions in Germany at the time,
which he identified as finance capitalism. Arguably, Hilferding was led by his knowledge of
Germany into thinking this type of close integration of the finance and manufacturing circuits
constituted the expected trajectory of capitalist development. But history discloses that some
quite different relationships between the productive and the financial circuits - from
coordination through to disarticulation are possible 4 . Subsequently the distinction between
circuits of capital has been used by numerous contemporary commentators. Of interest is
work by Thompson (1987) who used the distinction between industrial, trading and financial
circuits to discuss features of the British economy and its trajectory of development postWorld War II. Another using the distinction between circuits of capital as analytical concepts
is Ingham (1998, 2000, 2005). Amongst the basic insights arising from applying the
distinction between circuits of capital concerns their articulation. Differential
institutionalisation may not only restrict the movement of capital between circuits, but lead to
significant disconnections between them. This recognition introduces the possibility of
imbalances between different sections of an economy; and between different states and
regions when there is spatial specialisation between international circuits.
Few commentators have explicitly linked the conception of circuits of capital with the
emergence of the new geo-political specialisation between types of economic activity.
However, Harvey comments on spatial fixes in Limits of Capital (1991). There is also
Arrighis sustained historical and spatial analysis in The Long 20th Century (1996). Arrighi
considers historical shifts between production and finance and reveals sequences of
international relocation that have occurred in capitalist development. Thus the current
redistribution of activities, with much of the global productive circuit now firmly implanted in
the Far East, and especially in China, whilst Western centres specialise in finance capital
activities, has some important historical precedents 5 . Of course the global manufacturing and
finance circuits are necessarily connected. There is now a highly concentrated international
trading circuit of capital connecting Europe, the USA and the Far East linking a small number
of large container ports mostly in developed regions, through which the majority of
international trading is channelled. However, it is also clear that production and finance are
significantly disconnected. There is a permanent imbalance of trade between East and West.
Also, financial flows are far from closely attuned to the needs of the productive economy, the
great majority of the business being transacted between financial institutions and businesses
and financial institutions and governments in developed counties. Though often needed, loan
finance is not available in many places in the world (for example, subsistence farming),
because Western finance cannot be accessed 6 .
Because uneven development persists, international growth is poorly described by the notion
of globalisation, as has been suggested by various commentators (Hirst,Thompson and
Bromley, 2009; Held and McGrew, 2007). However, in addition to the relative separation of
these circuits, there is the possibility of disarticulation between them. The huge oversupply of
finance capital, which is not sufficiently connected to creative uses in the real economy, is
one reason for the international economic instability we now experience (See also Magdoff
and Sweezy, 1987). Thus, the emergence of China as the new workshop of the world placed

competitive pressure on manufacturing in the West and was accompanied by the development
of New York and the City of London as the most important locations of an oversupplied
finance capital circuit. Unfortunately, the resulting international economic system is flawed,
as the application of the concept of circuits of capital helps us to see.

The Rise of Finance Capital in the West

The processes underlying the new specialisation of circuits in the international context are
clear. The rapid rise of manufacturing in China was due to the availability of cheap labour
and state facilitation of production through such policies as zoning of industry, provision of
infrastructure and premises and control of any putative development of free labour markets
and labour organisation. A vigorous small business sector - which was also able to mobilise
significant cheap labour - arose from local communes. Also important was the influence of
FDI channelled mainly through international joint ventures over which the central state
nevertheless maintained strict surveillance. It is also plain that in Britain and the USA there
was quasi-voluntary abandonment of manufacture. As manufacturing came under sharp
pressure for its lack of profitability in the nineteen seventies and eighties, there followed the
phased withdrawal of capital from industry.
In Britain, the shift from an economy based in manufacturing to one dominated by finance
was easy, as the institutions to facilitate this were well-developed; though it was not achieved
without class friction. Historically the productive circuit (contributed predominantly by
manufacturing) was the most developed and profitable circuit from the early nineteenth
century until well after World War Two. However, for much of recent history, all three
circuits were well-developed as Lash and Urry (1987) imply by describing the British
economy as a Makler (or middleman) economy. Ingham (1988) argues, however, that the
presence of a highly developed finance capitalist sector in Britain was of little benefit to
manufacturing in this country because it did not offer preferential access to finance. Rather,
the effect was the opposite: British stocks and bonds had to compete with high coupon
investments also marketed by London. The lack of adequate capital supply was thus a
continuing problem for British businesses, causing them to be chronically undercapitalised.
However, the surpluses from manufacturing and other business did flow in the opposite
direction more consistently.
When manufacturing came under pressure after the Second World War, capital began to be
withdrawn from it. By comparison with the embattled state of production, however, finance
was thriving; earnings were fuelled by the growth of world demand for financial services, and
the influx of surplus capital. New sources of capital were available in the UK and USA not
found elsewhere, producing growth in financial centres and stimulating financial innovation.
Of under-estimated importance here, was the availability of significant new sources of capital
specifically for London, keeping Britain as a fellow traveller with the USA in many of these
developments. The origins of finacialization conducting business by maximising returns to
the capital utilised - has its origins in this period in both Britain and the USA. In some ways
that Britain was able to keep up was a surprise. Britains colonial possessions had been
mostly abandoned and sterling was dwindling in importance 7 . The US dollar had become the
worlds main reserve currency. There were, however, important reasons why US banks and
financial institutions did not sweep the field and absorb all surpluses from overseas, as
London had in the past. An interesting example was the investment of money from the nearEast. Surplus petro-dollars, contributed large sums for investment in both the US and the UK.
Some US financial institutions e.g. domestic banks were underdeveloped by comparison
with the British, and a combination of opportunism and inventiveness allowed London-based
financiers to reap advantages. The invention of the Eurodollar via the Eurobond was a key

development. With it, it was then possible to offer investment opportunities and services
denominated in dollars but not subject to US law or regulatory authority. London-based
merchant banks led the development. Capital came into this market from a variety of sources.
In addition there was Russian migr capital which became a deluge by the 1980s. In the
1960s and 70s, the Russian state invested funds in London and New York, mainly through the
British-licensed Moscow Norodny Bank (Michie, 2006); subsequently, in the 1980s and 90s,
newly enriched Russians, who were also circumspect about holding cash in the US, invested
heavily in London especially in Eurodollars and US dollar-denominated bonds held in
London (Shaxson, 2011). Shaxson estimates that as early as 1970 the Eurobond market was
worth US$ 46 billion. When the oil shocks hit in the mid 1970s this was the main way nearEastern and other surplus money was routed to deficit-plagued consumer countries. By 1980
there were US$500 billion in this market, and UD$ 2.7 trillion near the end of the next decade
(Shaxson, 2011: 92)
The lifting of exchange controls in the early 80s by the first Thatcher administration, which
marked the end of state sponsorship of corporatism, was feared likely to lead to major flight
of domestic capital from the UK. Flight of capital did occur, moving out of manufacturing
applications and it did have the expected effect of worsening the plight of many British
companies. On the other hand, exchange control reforms produced greatly improved
conditions for the operation of finance capital institutions in Britain and later the USA though
they developed with different trajectories. Britain (i.e. the City of London) was, especially
after 1987, in the lead in achieving and exploiting de-regulation. Another important
development in the UK, making London attractive to outside investors, was the development
of a range of largely unregulated tax havens, most in former colonial possessions Bermuda,
the British Virgin Islands, the Cayman Islands and Hong Kong 8 (Shaxson, 2011). The US
authorities were initially provoked by this opportunism, especially when US corporations
began to make major use of these facilities in the 1980s. Subsequently, they were forced to
relax their objections as individual US states began a race to the bottom, themselves
offering more and more lax regulatory regimes to US corporations. With that development at
least US corporations had less reason for recourse to London and British tax havens (Palan et
al., 2010). However US corporations continued to use these facilities: this was the context in
which corporate scandals Enron and World Com amongst others - were incubated. The full
consequences flowing from the initial steps in the removal of financial controls and
regulations were unrealised and continued to ramify.
The capital sums processed in London and New York became vast. In the 1980s, the markets
for stocks and bonds, the largest share of this business traded in New York, was already huge.
By 1990, the value of all securities in circulation, roughly 75% of which traded through
London and New York, was estimated at around 21 trillion US$, split equally between stocks
and bonds. By 1997 the figure had doubled to 40 trillion and by 2005 stood at nearly 100
trillion, with the majority in corporate and Govt bonds as opposed to stocks, but amounting to
more than estimates of gross world product (Michie, 2006a). Around 60% of world stock was
traded in New York (NYSE and NASDAQ) and London (the LSE) in 2004 (Michie, 2006b).
The UK has the highest market capitalisation as a percentage of GDP of any country in the
world. This was 225% in 1999, as compared with Germany (67%) and the USA (- the next
highest at 152%). With relatively low interest charges, Governments and companies were
easy to persuade to borrow large amounts. The willingness of governments to over-borrow is
a key element in the ongoing Euro-zone crisis. Be that as it may, fee earnings from handling
and processing financial transactions have grown rapidly, despite declining rates for such
transactions. In addition to fees, there are many benefits which flow from exchanging, lending
and otherwise using capital by US and British-based institutions: the capacity to make
fiduciary issues, to claim interest and other payments from investments as well as earnings
from a range of other uses for capital such as insurance which remains a lucrative business.

The burgeoning scale of traditional business has led to development of new uses for capital.
As became clear after the banking crisis of 2008, the extent of the connections of banks with
other types of financial organisation was complex. Evidently the large sums of liquid capital
available had stimulated innovative ideas as to how to earn from it. A range of substantially
new finance capital organizations hedge funds, private equity groups, money market funds,
special investment funds and so on - have emerged whose activities interconnect with
corporations and banks, but which have found new and often highly profitable activities
(Engelen et al, 2011). These grew enormously from the middle of the 1990s, making
calculations of the banks exposure extremely difficult. The surplus of liquid capital available
stimulated financial innovation and is clearly one of the more important of the factors
contributing the rise of the virulent profit-seeking form of finance capitalism now found in the
UK. It clearly did not also stimulate sufficient evaluation of risks. Just how far these
developments extend is still not fully established. The shadow banking system, as the nexus
of these institutions came to be called, is not well regulated and what occurs within it not fully
known. Indeed, describing it as a system suggests more co-ordination and efficiency than it
merits. The creation of credit and the extent of debt has passed in some areas beyond the
capacity for enumeration, still less of control 9 .
How far the development of this business and associated institutions helps the economy of
Britain and the USA is debatable. In Britain, from 19802000, the finance, property and
business services sector was the only area of substantial growth in numbers of organisations.
UK government statistics show such organisations grew from being around 6% of the total
organisations to 25% in the period (Ackroyd, 2002: 23). However, the increased employment
was not proportionately large, the taxes such organisations pay are notoriously low.

Effects on Classes
There is much to support the Marxian idea that the economic shifts now outlined will be
reflected in significant changes in the composition of the social classes in the particular
regions and territories implicated in the new division of economic labour.
A key difference between China and the USSR has been how their ruling classes
reconstructed themselves. This significantly affected how they were able to contrive the
engagement of subordinate classes in the transition to capitalism. In China, a highly unified
and centralised ruling class retained a firm grip on central political power and the economy,
and used its control in selective ways to promote industrial capitalism. In both territories,
because the pre-capitalist regimes had acted in punitive ways against these groups, the virtual
absence of an entrepreneurial and professional middle-class was a handicap in achieving
economic development. However, in China the small business sector was grafted onto the
economic base constituted by the residual communal economy (which had been eviscerated in
the territories of the former USSR), and it was allowed to extend itself through its distinctive
web of kin and quasi-kin affiliations, leaving the development of large business and the
control of labour supply to the powerful central state apparatus.
In Britain and the USA the rise to prominence of the circuit of finance capital did not occur
without friction within the ruling class. However, the class was effectively reconstituted as
manufacturing was run down and finance capital consolidated its power. As suggested
earlier, capitalism in the UK was historically divided between industrial, commercial and
finance capital (Ingham, 1988; Lash and Urry, 1987). This implies cleavages within the
ruling class in Britain, with different class fractions having different interests and projects.
There is much evidence of the decline of the industrial fraction as its economic base became
unprofitable and was progressively dismantled. There was a phased process of decline in the
traditional base of the industrial ruling class, in which there was quasi-voluntary withdrawal

from traditional activities in parallel with the rise of the new ruling group. There were some
counteracting factors which delayed the onset of this process, such as the form of external
regulatory institutions and the orientation of supportive institutions at home - including
government policy 10 . However, by the end of the 1970s industrial capitalism was becoming
increasingly unprofitable and difficult to prop up 11 .
From the late 1960s unprofitable companies had been falling to hostile takeovers and for
many their assets were stripped out or sold off . Initially there were only a few highly visible
corporate raiders in this business. Later it became more routine, with takeovers in larger
numbers, many undertaken by conglomerates (e.g. Hanson Trust, Williams Holdings etc)
whose policies were to liquidate businesses and to rationalise them to realise capital from
selling assets. Remaining businesses were retained so long as they remained profitable but
much capital was withdrawn (Williams, Williams and Haslam, 1990). Once this practice
became well-understood, businesses were rationalized in advance of attention by
conglomerates by their own managements anticipating the attentions of predators. In the
process parts of businesses and sometimes the whole enterprise were sold off as MBOs or to
foreign buyers. Thus from the 1970s, as substantial shareholders themselves, the top
managers of large firms were increasingly motivated by profit-making rather than corporate
growth as their main strategic objective 12 . In the next two decades the manufacturing and
commercial sectors reorganised themselves and, the remaining businesses were increasingly
run on financial rules 13 . The financially-orientated elite became increasingly dominant.
Withdrawal of capital from manufacture and commerce also dictated changes in
organisational structures. Manufacturing companies were reorganised so that businesses
could continue on the basis of a higher ratio of returns to capital employed. From this time,
we also see beginnings of increased internal financialization of all kinds of business activities;
that is to say the profitability of different activities was carefully and routinely scrutinised. In
manufacture such activities were highly developed (Froud et al, 2006; Ackroyd, 2009). It
also seems clear that the practices of organisational downsizing and de-layering were driven
by these developments. Distributed modes of manufacture generally and the use of extended
supply chain in particular were developments driven along by rigorous quantitative
evaluation. By outsourcing components large organizations could drastically reduce their
committed capital, whilst remaining in business and selling final equipment into traditional
markets at a profit (Ackroyd, 2007).
By 1980 or so, with the accession to power of right-wing governments (Reagan in the USA
and Thatcher in Britain) the position of the finance capital fraction of the ruling class was
secure. The rise to power of the finance capitalist class is indexed by the rise in the share of
the national income of the top 0.1% of the British population. This grew from 2.7% of GNP
in 1974 to 12.3% of GNP in 2011 (Shaxson 2011). This situation is not UK-specific, as
similar changes are evident in the US, where the top 0.1 % of the US population according to
Hacker and Pierson have seen their income grow in a similar way over the same sort of period
(2010: 155). Hacker and Piersons figures show even more concentration with the top 0.01
% (the richest 15,000 or so US families) having seen their share of income increase even
further, with more than 6 % of national income accruing to them (2010: 155. See also Hills,
2010). In addition, Shaxson (2011) reports that the Tax Justice Network estimated that
wealthy individuals held 11.5 trillion dollars worth of wealth offshore, which equates to
approximately the entire gross national product of the United States. Thus, not only are the
financial elite exceptionally wealthy, they are depositing this wealth in tax havens and thus
evading taxation and any potential redistribution of that wealth through taxation.
The removal of manufacturing capacity and the reorganisation of remaining manufacturing
and commercial organizations, produced the collapse of manufacturing employment in the
UK during the 1980s (Ackroyd and Whitaker, 1990) and the reduction in the income and life
chances of the working class. Downsizing and de-layering have implications for the

conditions of work and career prospects of the professional middle classes. The result is thus
not a trickle-down effect in which as the wealthy get richer so does everyone. In fact, the
effect has been the opposite. Over the last 30 years, the established trend which was towards
the reduction in income inequality, and which was steady for much of the last century, was
reversed after 1970 14 . The persistence of what is called job polarisation is a feature of the
trends is widely evident (Goos and Manning 2006; Autor 2010; Vidal, 2012)

The Activities and Policies of the State

Given the date of his writing, however, Marxs conception of the state was modern. He does
not think of it simply as legislature and judiciary. Although he did not anticipate the extent of
the enlargement of the state in the late 19th century and beyond, when the administration grew
extensively, he did recognise the importance of administration for the state. Today the state is
thought of by Marxian and non-Marxian theoreticians as a complex set of mediating
relationships between economy, polity and civil society.
Marxs view of the capitalist state is that its resources are instruments for extending or
reinforcing exploitation in the economic sphere and for otherwise controlling the economy in
the interests of the property-owning class. In the memorable phrases of the Manifesto, for
Marx the state is: The executive committee for managing the common affairs of the whole
bourgeoisie. Later Marxists theorists have debated, among other things, the extent to which
the state will favour particular interests over others (Miliband, 1973; Jessop, 2002). Certainly
incoming governments in 1979 in Britain (Thatcher) and in 1980 in the USA (Reagan) - mark
a sharp break with previous attitudes and policies. The turn into the eighties is widely
regarded as a watershed in politics for both countries.
In retrospect what is striking is the confidence with which a series of reforming policies were
undertaken by incoming governments in 1979/80. This is consistent with the idea that a new
class fraction had already secured a dominant position within the class as whole, and the class
itself with the economy. It now sought to develop appropriate policies to consolidate its
power. In the UK policy-making in several areas began boldly but gathered momentum as
time went on. Policies in favour of finance capital interests were evident from the start.
Almost the first act of the incoming Thatcher administration was to abolish exchange
controls, and so allow the free movement of capital. This was actively threatening to
domestic industry, and was not countenanced by previous governments of any party. Here
was a clear signal about the lack of importance now attributed to industry. There were
immediate tax reforms as well. Presented as tax simplification these included the removal of
the highest levels of income tax. The programme of selling-off (privatisation) of state-owned
assets was initiated more slowly, though the first major privatisation (the sale of the
pharmaceutical company Amersham International) occurred as early as 1982. Large-scale
privatisations followed and became a central feature of government actions. Between 1984
and 1986 there were seven major privatisations, including British Telecom (4Bn), British
Gas (4Bn) and BP (7Bn). Here there was calculation as to how quickly to go, but no lack of
commitment to the objective. Another less well-known example is the effective under-mining
of the planned arrangements for the improvement of state pension provision. As an
alternative, private pension provision was encouraged.
Other favoured policy objectives such as reducing the level of state expenditure on social
services, education and health and the reform of industrial relations are not difficult to
connect with the interests of finance capital. There was not only an idea that state expenditure
should be reduced but that the basis of provision should be changed from publicly to privately
owned provision. As with the ownership of industrial assets, so with social services, there is
nothing wrong with them in principle so long as they can be privately provided, and become
yet more places in which private capital may be utilised. Market-based supply was secured in

a series of steps. Firstly, there was assertion that exiting modes of provision were not
adequate in health and social care purchasing and providing agencies of the state were
separated, so that the institutions approximated market forms of delivery. Secondly, the thrust
of policy was to identify elements of service provision for which private suppliers could
compete. Despite lack of evidence that education, social services or health care could be
provided effectively by private arrangements, especially for the poorest people, the
introduction of some quasi-market and then market-based patterns of provision were widely
introduced (Pierson, 1994). The vigour with which these policies were pursued suggests a
confidence that they were appropriate and should be pressed home. This level of confidence
was extraordinary and is usually thought to derive from acceptance of neo-liberal ideology.
In industrial relations too there was a shift of policy. In the recent past industrial relations
institutions were seen as necessary and even valuable to achieving reduced industrial conflict
and effective government. Trade union leaders were consulted by governments in a weak
form of corporatism. Collective bargaining was more than simply tolerated; it was usually
seen as a necessary part of an effective industrial economy. New right governments, by
contrast, attached little importance to industry and saw little place for unions. Emphasis
shifted from achieving effective incorporation of organised labour to tidying up troublesome
leftovers of the industrial economy. Not simply curbing unions but cutting back if not
eliminating their power was the objective. Here as elsewhere the matter was dealt with
incrementally. A series of legislative measures, which would progressively weaken the
effectiveness of trade unions, were passed in 1980, 1982, 1984 and 1988. Even so, these
measures provoked sharp confrontations which were not avoided. The approach included a
willingness to plan for and undertake a major confrontation with the miners - at the time the
most militant section of organised labour - in 1984. This ended with a complete defeat for the
miners and for organised labour, from which it has not yet recovered 15 .
The welfare state also came under assault; but also not head on. What was being undertaken
in this area was to some extent hidden by, amongst other things, the claim that the system of
provision was inefficient and the goal was reform rather than removal. A policy of indirect
attack was no doubt judged expedient. The welfare state was embedded in Britain over a long
period, much of it only coming into existence in response to political pressures. Clearly, in the
past, subordinate classes have influenced both the institutional forms and the policies of the
state, especially once democratic representation was achieved. Thus, state welfare agencies
are, in considerable measure, the products of the political action of subordinate classes and
represent an historical investment for them (Esping-Anderson, 1996; Crouch, 2011). Thus, in
Britain, dismantling the welfare state is not difficult to see as an attack on hard-won, nonwage benefits. It also provides the livelihood of considerable numbers of the professional
classes. The new emphases of state policy, however, indicate deep antipathy to the
institutions of the welfare state as a non-market type of institution. These are based on
community values and professional expertise as opposed to the market and managerial
control.
If this account of the actions and policies of the state is plausible, it is suggestive of how little
of this has been apprehended by the academic community. Some of the effects of these
policies have been carefully noted and some widely studied, but mostly the political context is
seen to have little bearing on the matter. The reform of public sector organisations is often
seen as politically neutral development, to a considerable extent justified by the logic of
efficiency.

10

Neo-Liberalism: the Ideology of Financialized Capitalism

Almost no mention of ideology has yet been made. The standing of the concept is low
amongst academics and intellectuals today 16 , it having been very effectively attacked by
critics such as the philosopher Karl Popper 17 . On the other hand, many of the points made
here, especially those concerning the origin of government policies, can be very plausibly
attributed to the effects of ideology. Also, that the changes we have been examining in earlier
sections have not been widely apprehended or their significance assessed suggests that
ideology may be at work.
For Marx much of the economic writing of the 19th century could be seen to contribute to the
ideology of the rising industrial bourgeoisie, because it flatters their role and serves to justify,
protect and develop their interests 18 . We have argued for the rise to prominence of finance
capitalists within the ruling class of the UK and USA since the nineteen seventies, and this
leads to an expectation that the development will likely bring along with it changes in the
representation of the interests of the ruling class; in short it will throw up new contributions to
ideology. As several analysts have argued, neo-liberalism is a set of ideas that does precisely
this (Harvey, 2005; Gamble, 2009). Neo-liberalism emphasises centrally the importance of
unconstrained economic relationships and introduces a new emphasis in economic doctrine.
Classical economics in the tradition of Smith enjoins that certain types of market relations
would limit the power of participants buyers and sellers - and produce a free society. With
neo-liberalism this idea about perfect markets becomes not too subtly altered to the
suggestion that freeing economic relationships of all kinds of itself maximises the efficient
allocation of resources and produces optimum political freedom. Thus neo-liberalism is
predisposed to remove all restraints to economic choices including those that involve the
allocation of capital. As Harvey shows, these ideas first gained credence at the end of the
nineteen seventies when economic management appeared to produce low growth.
Within neo-liberal thought, because economic relations themselves provide the maximum
political benefit, economic considerations should always override other priorities including
the needs and wishes of large numbers of people. Harvey (2005) shows that neo-economic
liberalism, once adopted, had a strong effect on the level of wages of ordinary workers (which
went down) and the productivity they achieved (went strongly and consistently up). Similar
points can be made about the income and wealth of the wealthiest people, as has been
suggested also here. The free allocation of resources thus leads to results that would be
disputed if they were the result of purely political action. As Crouch argues (2004) the
cynical denigration of politics and political processes is a feature of the political values in
societies under neo-liberalism. Without neo-liberal ideology it is easy to imagine the effects
of neo-liberal policies producing much conflict. In contrast to this it seems there is now
widespread acceptance of the terms of the debate now established by these economic
doctrines. This is surprising because the emergence of these ideas has entailed a sharp turn
away from what has been called the post-War settlement between people and government,
in which there was supposedly the expectation of increasing equality of income and wealth, in
part embodied in a system of welfare benefits providing for social security. But this is to
overlook the manner in which neo-liberalism was introduced.
In their work on ideology, Abercrombie et al (1980) argue that for the time they wrote
before the concerted rise of neo-liberalism - the dominant ideology was principally aimed at
the dominant class itself, and was never intended to incorporate subordinate classes. It is not
difficult to accept this was true in the early days of neo-liberalism. At the beginning it was not
of great consequence for the working classes whether there should be the free movement of
capital, or markets should be opened to more competition. In the early days, the most
significant objectors were the industrial capitalists threatened by the flight of capital from the

11

domestic economy. Viewed in this way it was the financially orientated fraction of the ruling
class - that today wields such significant economic and political power - for whom promoting
the acceptance of the ideology of neo-liberalism amongst the capitalist class as a whole was
critically important. As we have seen, the rise of finance has emphasised the importance of
the movement of capital without constraint. Given the proposition that there are different class
fractions within the ruling class which vied for power and leadership, neo-liberal doctrine had
much to offer finance capitalists.
As neo-liberal ideas were used to justify trade union reforms and the dismantlement of the
welfare state, however, it became clear that neo-liberalism had consequences for working
people and professionals. Although not fully hegemonic at any time, ten years on, to use
Eagletons term, key aspects of neo-liberalism had become naturalised (Eagleton, 1991);
that is, widely accepted as the only way of conducting business and embodied in much
everyday behaviour. It was largely accepted amongst the population as well as spokespersons
of government. This means that those who are not convinced by these ideas nevertheless
have to engage with institutions embodying neo-liberal principles and on terms they do not
approve; and, by these conforming actions, they also add further legitimacy to it. Increasingly
there are no alternative institutions through which to work, nor any effective counter ideology
to use to challenge received ideas. Once an ideology has achieved dominance in this way
there is little escape from it: if people choose to engage with the dominant discourse then they
become complicit in it and provide legitimacy for it; if they do not engage with it then they
face the prospect of exclusion and isolation (Jessop, 2010).
Not understanding or noticing ideological dominance means that representations of political
issues go unquestioned: they are presented as reality rather than an ideological construct that
benefits ruling-class interests. Any successful challenge to neo-liberal hegemony needs to
recognise that this is an ideology, and far from truth itself. There is every possibility that
academic research, especially in business and related areas, easily becomes largely accepting
of the background assumptions that surround and inform specialist knowledge and narratives;
with, as a result, many academics being complicit in the overall drift of change, and some
actively supporting it.

Conclusion: The Transformation of the Organisational Landscape

The Marxian analysis developed here suggests why a particular set of related changes is
occurring in Britain and the US, and why they are less prevalent in other locations. A
distinctive form of finance capitalism has established itself in these countries, extending its
power through the progressive finacialization of many institutions and bringing about
collateral change. It is the systematic features of change, originating in the economy and class
structure and ramifying through organisations and institutions which this approach can
capture. Our point is that, for Britain and the USA, which have been incubating this form of
capitalism for several decades, the pattern of organisational change is already pervasive.
The new organisational landscape lacks large, unified and strongly centralised structures; but
it is not lacking clear lineaments of its own. The large, centralised structures which
dominated whole regions in the Fordist economy, providing the bulk of employment and
fostering the welfare state, are gone. But large firms remain significant features of the
financial capitalism that has replaced Fordism. Despite the incremental withdrawal of capital
from manufacture, there remain many large organisations. Outside the financial sector, many
of the largest and most profitable organisations are commercial companies which connect
sources of supply across the world, but deliver their products and services into developed
economies. Thus, commercial and trading organisations are now dominant in the non-

12

financial sectors of the UK and the USA 19 . However, the reorganization of large firms is
itself driven by the rise of finance capitalism. Specifically, large firms have responded to the
attentions of financial institutions and/or copied their strategic objectives, by reconfiguring
their structures and by the financialization of their own internal processes and procedures. In
addition, the push towards the reconstruction of major corporations and the wholesale
reorganisation of public sector organizations by the state, have transformed the organisations
supplying skilled services to businesses: accountancy, business consultancy and law
particularly. The business services sector now contains some of the largest and most
profitable businesses in these economies. So what are the main features of the new
organizational landscape?
First is the rise in the importance of financial organisations. There has been a proliferation of
financial institutions of varying types and sizes. The concentration of numerous and varied
financial institutions in special enclaves within Britain and the USA is striking - from
insurance companies and markets, through investment houses, pension funds, securities
companies and securities markets to banking groups (there are >500 foreign banks with
branches in London) to small organisations in the new and more speculative fringes of
finance. Some British and American retail banks are amongst the largest in the world, though
they have been weakened in the recent crisis and are dwarfed by the scale of business
generated by the sales of securities, they remain important features. However, in this sector
there are high levels of interconnection between large and small organisations. Collectively,
these institutions are a formidable concentration of financial power.
Finance capital has acquired considerable political power and independence as well. In the
UK in recent decades there has been transfer of the power to control the economy from the
Treasury to the Bank of England. Also, a politically influential and self-referential
managerial elite has become highly active in both Britain and the US. Sharing the same
ideology, a small number of individuals move between the top positions in the leading private
sector organisations, in regulatory institutions and in key government posts - the so-called
revolving door of financial power (Stiglitz, 2009; Hacker and Pierson, 2010; Peston, 2008).
Its monetarist doctrines are now seemingly accepted by parties across the political spectrum,
in that the same people are re-appointed after changes in government (Bernanke, King), and
pursue similar policies irrespective of the party in power. Its views and assumptions are
accepted without much question. For example, in the recent financial crisis governments did
not question the claim that the banks were too big to fail and simply bailed them out without looking any quid pro quo.
In addition, innovative financial groups are actively reorganising companies in the nonfinance sectors of the economy, without any questioning in government circles of the policy
implications of this. The leading institutions doing this have shifted over time, but their
actions are notable by spectacular profit-making capacity and their impact on the companies
they acquire. It is characteristic of these institutions to reconfigure other organisations to
extract surplus and make high profits 20 . Since mid 1990s leadership has been taken of small
and highly specialised organisations - private equity partnerships, other special investment
groups and activist investors. Their visibility as features of the landscape is low, but their
formative importance is great. Private equity funds and special investment funds are not
entirely new, but their operations have greater and greater importance as the scale of their
operations has greatly increased (Morgan, 2009).
Second, there has been the transformation of many businesses, including major corporations
by their own adoption of finacialization. We argue that this is, at least in part, a proximal
effect of the existence of PE funds and other predatory investment vehicles. What we see is
the adoption of the similar priorities and practices in advance of attention from PE funds etc
as a pre-emptive move. In particular, we identify a form of corporate structure and an
associated managerial regime, which is highly adapted to financial capitalism, within which

13

the internal application of finacialization can take place. The new form was noted first in the
US in the nineties (see Prechel, 1997; Zey and Camp, 1996), but structures and practices very
similar to these have since been identified in the UK (Ackroyd 2002). This form is primarily
distinguished by extensive or distributed organisational structure comprised of a small head
office and numerous small constituent units; these are branches in retailing operations,
subsidiaries and affiliates in other kinds of firm. The activities of constituent parts are
effectively coordinated and monitored from the strategic centre. Units within the financialized
large firm are subject to continuous appraisal through key performance indicators (KPI) of
which the return on capital employed (RoCE) is fundamental. These organisations favour
operations in which it is possible to minimise the capital committed, but to combine this with
a high return on the investment. Every opportunity is taken to bear down on costs and the
performance of each unit is carefully monitored. Key moves here are minimising labour costs
and often adopting anti-union policies; utilising sophisticated management procurement and
distribution systems; disciplining suppliers and making them bear much of the cost of
production and holding stock (Ackroyd, 2007; Prechel and Morris, 2010). Large retailing
organisations are a visible example and Vidal (2012) has proposed a generalised model of this
organisational type which he terms Waltonism. This alludes to earlier models of the iconic
large firm Fordism, Toyotaism and an example is the most profitable retailing organisation
in the world, the US firm Walmart 21
Third, the transition to the finance capital economy can be recognised in the transformation of
highly skilled labour. The financialized economy has a large appetite for skilled professional
workers, for legions of accountants and auditors (to calculate how effective the profit
extraction process is) lawyers (to produce the contracts required to accompany almost every
transaction) and business consultants (to advise on the details of business reorganisation, as
companies are bought and sold and internally reorganised to adjust asset / return ratios). The
firms that supply these expert services are now large by historical standards and increasingly
orientated towards export. The largest accountancy firms are predominately American and
British, as are the largest legal firms (Muzio et al., 2008). The transformation of small
professional partnerships into the huge hierarchical managed businesses we see today is one
another feature of the development of financialized capitalism (Muzio and Faulconbridge,
2009).
Fourth is the transformation of the institutions of the state. This has gone through a
recognisable sequence, driven by the policies of neo-liberalism to financialize public sector
institutions. Initially there is the denigration of existing services as inefficient and unable to
contribute high levels of service. Managerialization is then insisted on to improve provision.
The means by which managerial performance is assessed is to measure selected KPI for
organisations of the same type which are then ranked. By reference to the ranking some
services are deemed to be weak or to fail. This is taken to indicate the need for further
managerialization. Next there is denial of government responsibility. Public support is
allegedly too costly and the state administration is assumed to be inefficient. Therefore, going
back to that is not an option, only forward to a more managed type of provision. Finally,
there is apparently no option but to utilise private finance. The result is the break-up of a
unified and relatively uniform pattern of provision for public services, and formerly public
assets being subject to financial performance criteria. The public bureaucracies are replaced
by numerous specialist organisations many of which will constitute a revenue stream for
private capital. The constituent organisations providing the new services may be small, but
they are often branches or subsidiaries of finacialized corporations.
The driver of the financial capitalism now dominant in the UK and USA, and the paramount
policy objective of the finacialized organisations now prevalent is the realisation of profit. In
pursuit of this, any move is seemingly legitimate, including routinely impeding market
processes. Indeed, the market process of allowing prices to be fixed by the continuous
interaction of buyers and sellers is increasingly rare. Much business for financial

14

organisations anyway arises from simple brokerage or by firms opening and operating in
space between buyer and seller and taking a fee or percentage for doing so. A bank stands
between lenders and borrowers, stock traders stand between buyers and sellers of securities.
Merchant bankers advise companies and governments about buying and selling assets, and
will advise both types of client and contribute little but their expertise. Rating agencies fix the
prices of assets as much as the markets for the stock and so it goes on.
However, the core institutions of the type of financial capitalism found in Britain and the US
do more than stand between buyers and sellers: they manipulate price movement for profit.
Like conventional investors they seek to make money from market fluctuations, but they have
devised ways of making profit from downturn in prices as well as upturn. They can only do
this if there are financial instruments that allow the investor to insure (hedge) against the
downturn. But once it is possible to profit from any movement of price, the possibility of
making money by exacerbating price movements is open. Shorting, for example, in many
ways a characteristic activity of financialized capitalism, involves taking an insurance against
declining prices then selling at a loss, but making money by calling in insurance against loss.
There is a double benefit if the assets sold are not yours in the first place, as they can be
returned (value reduced) to the lender. In sum, this is a form of capitalism parasitic on itself.
Its operations encourage the concerted focus of businesses on the question of how to wring
maximum profitability from any bundle of assets.

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Willmott, H., (2011) Book Review: Making sense of the financial meltdown-an extended
review of The Spectre at the Feast: Capitalist Crisis and the Politics of Recession,
Organization, 18 (2).
Zey, M., and Camp, B., (1996) The transformation from multidivisional form to corporate
groups of subsidiaries in the 1980s: Capital crisis theory. Transformation 37 (2): 327-51

For some, recurrent crises of capitalist accumulation in the 20th century are attributable to
the slow-down in the rate of growth (ultimately deriving from the tendency of the rate of
profit to fall) and the rise of the multi-national corporations (Baran and Sweezy, 1966;
Magdoff and Sweezy, 1987; Brenner, 2002). For these writers the current wave of
widespread financialization, which is seen by many as a basic problem, is as much a response
to crisis as a cause of it. However, we argue that this theory relies too heavily on factors
internal to the development of Western capitalism itself for its explanation and particularly on
the notion that the rate of profit will inevitably decline in mature capitalist economies. As
Arrighi points out (2007), this is a proposition that originated with Adam Smith though it was
endorsed by Marx and others. However, as Marx and others have also noted there are several
counteracting processes that may be operative, such as the discovery of new applications and
markets. The importance of very large and oligopolistic corporations in the latest phase of
capitalist accumulation is of course indubitable, but this approach also underestimates the
capacity of these firms to adapt themselves and to invent new extensive structures in response
to pressures for increased profitability.
Another important body of Marxian theory and analysis is regulation theory (Aglietta,
1979; Jessop, 1990; Boyer, 1990). This approach, correctly in our view, identifies the
importance of the regulation of the capitalist economy by state and quasi-state bodies in order
to secure the conditions for effective capitalist accumulation. However, the regulation of
capitalism has been much easier to identify in some epoch than others. As regulationists
themselves admit it has been difficult to identify clearly the outlines of the next regime of
accumulation, and particular its regulatory features, following the failure of Fordism (Boyer,
2000). However, the origin of crisis in the failure of effective regulation to emerge is itself
persuasive. Arguably, despite the value of their insights, both the monopoly capitalist and the
regulationist schools are too focussed in the internal development of capitalism, which though
undoubtedly important, do not take sufficiently into account the relevance of geo-political
shifts in the location and specialisation of capitalist activities in an emerging international
context.
2

Marxs discussion of the commercial circuit begins at the start of Capital with his
consideration of exchange. Exchange is analysed as an introduction to the analysis of the

20

labour process and its contribution as a source of value in the productive circuit of capital.
Marx returns to the consideration of trade and commerce at various other points.
3

It is not denied that there are other sources of value than labour contributing in the
productive circuit merely that the productive circuit is the most significant historically.
Various conditions of the trading circuit provide interesting cases.

We argue the economies of Britain and the USA are dominated by a finance capitalist class,
but finance capitalist institutions are not themselves well integrated; still less are the finance
and industrial circuits of capital. Establishing itself as dominant the financial circuit has
driven out the productive circuit in the UK. Interestingly Hilferding develops a theory of
capitalist crisis based on disarticulation, as we do.

Arrighi (1997) points to the concentration of formerly dominant global powers on finance
capital. All three circuits are important to Arrighis substantive analysis, though he does not
formally dissect the trading circuit, analytically contrasting on the production circuit
(M-C-M*) and the financial circuit (M-M*).

Dividing the global total of money held in financial securities (> 100 trillion US$ in 2011)
by the worlds total population (7 billion) gives a figure of around US$ 15,000 per head, in
marked contrast to the actual distribution of wealth in which there is extreme inequality.
7

The Sterling Area, established in 1939, was the remnant of the British global dominance of
world trade in the 19th and early 20th centuries, in which the exchange rate of a large group of
currencies was pegged to the pound. The Sterling Area, though of diminishing importance,
continued to provide a source of revenue to the City through the fifties and sixties.
8

These had and still have the ambiguous status of being independent of British regulatory
jurisdictions, but still in some sense under the protection of the British state. Investors were
aware that no aggressor would move against even a micro-state that was still a British
dependent territory. Thus, amongst other things, the City of London became the entrepot for
a great volume dubious as well as legitimate overseas capital, and the main channel for access
of such money to the legitimate international banking and trading systems (Shaxson, 2011).
9

In addition to the shadow banking system which is institutionally based in particular places,
there is also unaffiliated hot money of which there are hundreds of billions US$ that move
about the globe at high speed in pursuit of half a point of additional interest. This footloose
capital is almost entirely unregulated and is a known source of potential instability. Hot
money causes bubbles to develop in markets and regions by over-supplying local investors
with cash, feeding local enthusiasm. Although charging premium interest, such money has
become more risk adverse as it has become more mobile, potentially destabilising whole
regions as it moves out of locations that are abruptly re-evaluated as risky (Strange, 2005;
Soros, 2009).

10

Thus, until 1975, international regulatory regimes, Ingham (2000) suggests, favoured
industrial capitalism and this preference was embedded in rules governing international
economic relations operative from 1945 1971, and especially during the period of the full
Bretton Woods agreement (58-71). The same sort of priority is indicated by state policies,
such as the limited adoption of corporatism.
11

The first recourse of industrial capitalists, increasingly under pressure from cheap overseas
production from the 1970s on, was to increase the level of the return to their existing
investment by intensifying control of the labour process. Next, pressure was brought to bear

21

for the reform of industrial relations and the removal of traditional union protections and
rights. Such moves were augmented by the pursuit of control over economic processes more
generally through bilateral links with government (Brownlee 2005:26). By the end of the
1970s, however, there was a resurgence of industrial militancy in response, and the relevance
of corporatism was being questioned on all sides. In short, the conditions for the continued
ascendancy of manufacturing capital were gradually chipped away.
12

That many senior managers had been transformed into capitalists themselves in the postwar period assisted these processes. The practice of rewarding senior managers in quoted
companies with substantial shares, which had been growing since the 1950s (Lazonick, 2004),
broke down the division between ownership and control of companies. For this group it dealt
decisively with what economists call the principle-agent problem (Brownlee, 2005: 10). As
substantial shareholders also directly controlling the use of company policy and resources,
senior managers were increasingly prone to see the businesses they directed as bundles of
financial assets. The view of the company as a practical project that can only be realised with
the help and loyalty of many other people was correspondingly diminished. By the 1970s the
top managers of large firms were increasingly motivated by profit-making rather than
corporate growth as a strategic objective. In the next two decades this came to include
downsizing and focussing on remaining profitable niche markets. A key source of earning for
many was profit-taking arising from selling-off whole manufacturing divisions or their major
subsidiaries to foreign buyers and / or to incumbent managers. Firms also became structurally
agile, that is, capable of moving into new areas of activity (typically not involving
manufacture, though possibly in related areas of commerce), as well as operating in strategic
positions at the ends of supply chains.
13

The progressive withdrawal of British capital from industry and commerce, as indicated by
sell-offs and the changed activities of firms over a twenty year period from 1985-2005, was
considerable. By the end of this short period in historical terms, the proportion of the top 200
British firms that could be classified as manufacturing companies dwindled from 50 per cent
to around 15 per cent (Ackroyd, 2011: 179). Companies left with significant involvement in
manufacture were concentrating on design, whilst off-shoring manufacturing activities to
China and Indonesia and occupying strategic positions in global supply chains. Many firms,
however, simply withdrew from manufacturing and reorganised themselves to undertake
other types of activity with less overhead. It is clear that by the early years of the new
millennium, because such businesses did not yield high returns to the shareholders the
distinctive objectives of business elites no longer included commitment to manufacturing
activities (Ackroyd, 2011: 182-183). There is evidence that the basis for change in the
organisation and ownership of large British firms from the late 1970s onwards, reflected the
change in composition of the elites in a dominant position within the ruling class.

14

For much of this century in Britain, the income gap between richest and poorest steadily
narrowed. This is evidenced by the fact that in 1918 the richest 1% of earners were rewarded
with 19% of all income. However, this figure fell significantly to 14% in 1935, 12% in 1960,
7% in 1970 and 6% in 1980. As noted by Dorling (2010) it seemed as though closing the
income gap was a natural and desirable consequence of an advanced democracy, and indeed,
was part of the post-war political consensus, and a long-term goal of Keynesian economics.
By 1992, however, the gap had increased to 10%, in 2001 it stood at 13%, and by 2005 it was
up to 16%, only 3% lower than in 1918 (Dorling, 2010).
15

The confrontation with the miners can be seen as another kind of tidying up. For this
administration it was analogous to a company closing down a costly and dysfunctional
subsidiary. Some commentators have seen the planning for and concerted action against the
second miners strike as payback by government for the pervious miners strikes (in 1972 and

22

1974) which were seen as having broken the last Conservative administration under Heath,
which lost the general election of 1974.
16

In some quarters the source of problems is the association of the concept with the thinking
of advanced Marxian theorists such as Althusser. Also, more than any other radical idea,
ideology smacks of intellectual elitism with its implication that the commonsense thinking of
large numbers of people is often misguided or false.
17

Scepticism about the validity of idea of ideology can be traced to various roots. One is the
critique that Popper made of what he claimed was historicist thought (The Poverty of
Historicism, 1955; Open Society, 1947). Ideology, according to Popper, was a key ingredient
of historicism which rendered Marxs thought not only unscientific but pernicious. Ideology
supposedly excluded the possibility of disproof. This allocated to Marxs ideas attributes that
they did not have, and denies the relevance of other valuable traits such as the desirability of
being clear about the values motivating research.
Of course Marx is less demanding about the concept of ideology than critics and later
Marxist theorists. In The German Ideology (written with Engels) and in Capital, Marx wrote
about ideology in a variety of ways. He repeatedly showed that social groups develop ideas
that are supportive of their position and interests, including ideas that are tendentious or
palpably false. He not only considers the ideas and propositions promoted by economists of
his day, but also the thinking of theologians and of idealist philosophers and businessmen.
However, he also accepted that systems of ideas are related to class position and may be
highly developed and interlocking sets of ideas.
Using Marxs ideas about ideology it is as well to remember Popper was also allied in
basic ideas and in practice - with perhaps the most influential figure in the rise of economicliberal doctrine itself Heyek. Popper shared Heyeks premises and assumptions (for
example the primacy of methodological individualism) which are now basic to economic
liberalism; and have echoes in the thought of many popularisers of his doctrines. Today much
of this critique of Marxian ideas - and indeed scepticism of theory generally is widely
accepted. Academics are now often deeply sceptical of anything that smacks of grand
narrative as at best intellectually pretentious. This goes along within widespread scepticism
about the scientific standing of social sciences, though, curiously, does not always extend to
critique of economics.

18

Marx had fun at the expense of the incautious statements of some of his contemporaries in
showing that their statements and beliefs were tendentious or palpably false in similar ways.
That there are systematic biases in thought in this sort of way, suggests that ideology may be a
valuable concept to use in the contemporary world, and that the identification of ideological
biases to be no more than responsible intellectual analysis.
19

There is, of course, a wide variety of descriptions and explanations of the movement from
the Fordist to the post-Fordist organisation already in place. Here the account offered
specifically links the changes to the development of the capitalist economy towards a finance
-dominated form, and explains the change of corporate forms only in this way. Analysts often
prefer the metaphor of the network to describe the organisational landscape, but if this is
taken to imply that there are now only large numbers of small, independent organisations
freely interacting then this is a substantial misreading of what has emerged.
20

Key roles at different times were played in the 1960s by corporate raiders (mostly outside
the city establishment). Initially these organisations were outside finance capital system
altogether and were regarded by some as rogue types of organisations. Later, (in the 70s and
80s) conglomerates in alliance with merchant banks and specialist finance houses took the
lead. In time the conglomerates faded and the banks were themselves taken over by larger
institutions, many being absorbed by retail banks.

23

21

Walmart depends for its profitability on its efficient procurement and distribution
networks. Also management priorities include increasing the ratio of return to capital
employed which, inter alia, involves keeping down the wages of its 2 million employees. At
the other end of the scale, several members of the Walton family are multi-billionaires and the
family as a whole is amongst the very richest on the planet (Forbes List, 2010). The Walmart
firm was first incorporated as recently as 1968.

24