Introduction: The Structural Power of Finance Meets Financialization*

• Author: Florence Dafe,Sandy Brian Hager,Natalya Naqvi,Leon Wansleben
• DOI: http://doi.org/10.1177/00323292221125563
• Published date: 01 December 2022
• Date: 01 December 2022
• Subject Matter: Articles

Introduction: The Structural

Power of Finance Meets

Financialization*

Florence Dafe

Hochschule für Politik/TUM

Sandy Brian Hager

City, University of London

Natalya Naqvi

London School of Economics and Political Science

Leon Wansleben

Max Planck Institute for the Study of Societies

Abstract

How do we theorize and analyze the structural power of f‌inance when global capital-

ism itself undergoes constant and profound structural transformation? The literature

continues to assume that the source of f‌inancial structural power is its unique ability

to provide credit to the real economy, playing a crucial role in meeting the investment

imperative. But recent research documents that most f‌inancial market activities no

longer facilitate productive investment and can even be a drag on economic develop-

ment. If the f‌inancial sector’s primary role is not to support productive investments,

Corresponding Author:

Natalya Naqvi, Department of International Relations, London School of Economics, Centre Building,

Houghton Street, London WC2A 2AE, UK.

Email: n.naqvi@lse.ac.uk

*This special issue of Politics & Society titled “The Structural Power of Finance Meets Financialization”

features an introduction by Florence Dafe, Sandy Brian Hager, Natalya Naqvi, and Leon Wansleben and f‌ive

articles that were presented as part of the workshop series held at and funded by the Department of

International Relations, London School of Economics, November 2019, organized by Natalya Naqvi and

Florence Dafe, and at the Max Planck Institute, Cologne, June 2021, organized by Florence Dafe, Sandy Brian

Hager, Natalya Naqvi, and Leon Wansleben.

Article

Politics & Society

2022, Vol. 50(4) 523–542

© The Author(s) 2022

Article reuse guidelines:

sagepub.com/journals-permissions

DOI: 10.1177/00323292221125563

journals.sagepub.com/home/pas

then on what basis does it continue to hold structural power? The contributions to

this special issue engage with how decades of f‌inancialization have transformed the

basis of structural power toward alternative functions that have gone unnoticed

in the existing literature. These include household and real estate lending that fuels

consumption-led growth, concentration and expansion of f‌inancial institutions as

tools of geo-economic strategy, f‌inancing current account def‌icits that facilitate global

imbalances, and wealth preservation that bolsters inequality.

Keywords

structural power, f‌inance, industrial capitalism, f‌inancialization, capital f‌lows,

development

Plenty has been made of the structural power of f‌inance, and a large body of research

has now been amassed demonstrating how it affects outcomes in the global economy.

But how do we theorize and analyze this power when global capitalism itself under-

goes constant and profound structural transformation? This question provides the foun-

dation for the diverse range of contributions to this special issue.

The literature continues to assume that the source of f‌inancial structural power is its

unique ability to providecredit to the real economy, playing a crucial role in meetingthe

investment imperative. But recent research has documented that much of the f‌inancial

sector does not facilitate productive investment and can even be a drag on economic

development. If the f‌inancial sector is no longer playing a productive role, then on

what basis does it continue to hold structural power? What do the changes in the

form and function of the f‌inancial sector since the 1980s mean for its structural power?

Approaches to Structural Power: Old and New

In the late 1960s and 1970s, a debate surfaced over the source of capitalist power.

1

On

the one side was the instrumental view, which held that capitalists exert power by

drawing on inordinate resources to directly and purposefully pressure governments

into adopting policies in their favor, primarily through campaign f‌inancing, lobbying,

and elite social relations. On the other side was the structuralist view, which claimed

there is an inherent bias in capitalist economies, one that favors private businesses

as the main controllers of investment in the productive economy. According to propo-

nents of the concept of structural power, business need not exert direct inf‌luence over

government to secure favorable outcomes. In capitalist democracies, governments are

dependent on votes to stay in power and tax revenues to f‌inance the state apparatus,

both of which, they argue, hinge on maintaining high levels of productive investment,

employment, and growth. Both electoral success and a healthy tax base depend on a

thriving economy, and a thriving economy, in turn, depends on the state of business

conf‌idence. If a government implements policies that undermine business conf‌idence,

then business may respond with a recession-inducing “investment strike”that damages

the incumbent’s prospects for reelection. From the perspective of structural power, the

524 Politics & Society 50(4)