Craig Berry discusses his article ‘Citizenship in a financialised society: financial inclusion and the state before and after the crash’. Craig is Deputy Director of the Sheffield Political Economy Research Institute at the University of Sheffield.
All recent governments in the UK have pursued ‘financial inclusion’ at the individual level, as part of the broader agenda around ‘asset-based welfare’, that is, efforts to enable individuals to play an enhanced role in ensuring their own long term financial security through asset ownership.
Financial inclusion ostensibly refers to the ability of individuals to participate in the financial system. At the most basic level, it means access to banking services. Often, the benefits of financial inclusion have been articulated in terms of enabling and incentivising individuals to save. Invariably, however, the aim is to ensure individuals are able to access credit (the economic opposite of saving), so that they can use debt to participate in the housing market, or support consumption more generally.
The immediate context in which financial inclusion has been pursued is the apparent financialisation of UK society. Financialisation refers to the increased role of finance in individuals’ daily lives as well as the economy in general. Financial inclusion has invariably been presented as a progressive ‘response’ to financialisation. This leads to the suggestion that financial inclusion policies represent a new form of citizenship-based entitlements. As the economy evolves, so the argument goes, welfare-based protections must evolve too. The threat we are being therefore protected from is financial exclusion.
However, it must also be pointed out that by increasing participation in the financial system, and subjecting greater numbers of people to risks associated with engaging with the financial system, financial inclusion also serves to advance the process of financialisation. As such, financial inclusion policies contribute to exposing the financially excluded to new forms of risk, and intensifying financial risks for the already included.
The promotion of individualised ‘defined contribution’ pensions – by all recent governments in the UK – is a telling example. Ostensibly, policies such as ‘automatic enrolment’ (based on a new statutory entitlement, for most employees, to employer contributions into our pensions saving pots) represent an attempt to provide access to long term saving vehicles for the ‘under-pensioned’. Yet they have been accompanied by efforts to reduce state pension entitlements for most people – therefore retrenching an important dimension of the welfare state. Moreover, these policies have exacerbated the decline of collectivised ‘defined benefit’ pensions in the private sector – through which individuals and employers shared the myriad risks associated with capital market investment.
Policies designed to increase prospects for home-ownership also typify the real intent of financial inclusion. Help to Buy and its predecessor schemes claim to be unlocking the dream of home-ownership for disadvantaged groups, yet they have to be understood in a context in which the state’s role as a housing provider – through social housing – has been delegitimised and dismantled.
Help to Buy is in fact highly self-defeating, in that by pushing up house prices it makes home-ownership less affordable. But that, of course, is precisely the point. In a financialised economy, the housing market plays an incredibly important role in funding consumption, by making the already rich feel even richer. The state no longer protects us from the macro-economic risk of housing market collapse, but rather concentrates on adding fuel to the fire.
The implication of financial inclusion policies for citizenship is quite clear. It intensifies the ‘responsibilisation’ of citizenship evident most obviously in welfare-to-work policies, which are based on the notion that individuals have a duty to find a job – any job – in return for social security payments. Our right to a pension or housing have been significantly diluted. By default, individuals become more responsible for providing for their own welfare in these regards. The state may appear to be supporting our capacity to shoulder this burden through policies such as automatic enrolment and Help to Buy, but in practice it is merely facilitating greater exposure to the associated financial risks to serve its over-riding objective of securing economic growth at all costs.
The right to participate in the financialised economy is, from the perspective of citizenship, no kind of right at all, insofar as participation intensifies rather than alleviates threats to individual well-being. What is missing from the financial inclusion agenda is any sense that we, as citizens of a liberal democracy, have any right to shape financialisation through collective decision-making processes.
Interestingly, in the citizenship education programme introduced by New Labour, while issues around personal finances were part of the curriculum for pupils aged between five and eleven, when the emphasis is on young citizens developing ‘life skills’, finance is conspicuous by its absence from the curriculum for older pupils, when the emphasis turns to political participation and critical thinking. The implication is that financialisation is something for citizens to come to terms with, but not challenge through democratic institutions.
Of course, democratic oversight of financialisation would fundamentally contradict its logic, because it would probably subject the process to evaluation based on non-financial criteria. Should we, at the very least, expect the state to establish social insurance-style protection against the risks of financial inclusion? Most bank deposits are of course already fully protected by the state, but there are few signs that such protection would be extended to more complex financial products such as mortgages and pensions.
The crucial issue, however, is not whether such changes should occur, but rather whether it is conceivable that they might. Essentially, to redraw the boundaries between state and citizens in this fashion would require a transformation of the model of economic growth within which financialisation is a central component. If the financial crisis did not inspire such a transformation, it is hard to imagine it occurring in the foreseeable future.
If you enjoyed this blog entry, you may be interested in a similar article: Promoting healthy pathways to employability: lessons for the UK’s welfare-to-work agenda by Colin Lindsay & Matthew Dutton