Crucial silences: When Accountability Met PFI and Finance Capital

During recent years, a wide spectrum of research has questioned whether public services/infrastructure procurement through private finance, as exemplified by the UK Private Finance Initiative (PFI), meets minimum standards of democratic accountability. While broadly agreeing with some of these arguments, this paper suggests that this debate is flawed on two grounds. Firstly, PFI is not about effective procurement, or even about a pragmatic choice of procurement mechanisms which can potentially compromise public involvement and input; rather it is about a process where the state creates new profit opportunities at a time when the international financial system is increasingly lacking in safe investment opportunities. Secondly, because of its primary function as investment opportunity, PFI, by its very nature, prioritises the risk-return criteria of private finance over the needs of the public sector client and its stakeholders. Using two case studies of recent PFI projects, the paper illustrates some of the mechanisms through which finance capital exercises control over the PFI procurement process. The paper concludes that recent proposals aimed at “reforming” or “democratising” PFI fail to recognise the objective constraints which this type of state-finance capital nexus imposes on political process.

New Financial Elites, or Financial Dualism in Historical perspective? An Extended Reply to Folkman, Froud, Johal and Williams

This paper challenges the recent suggestion that a new financial elite has evolved which is able to capture substantial profit shares for itself. Specifically, it questions the assumption that new groups of financial intermediaries have increased in significance primarily because there is evidence that various types of financial speculators have played a similarly extensive role at several junctures of economic development. The paper then develops the alternative hypothesis that, rather than being a recent development, the rise of these financial intermediaries is a cyclical phenomenon which is linked to specific regimes of capital accumulation. The hypothesis is underpinned by historical data from the US National Income and Product Accounts for the period from 1930 to 2000, which suggest that the activities of `mainstream' financial intermediaries have been accompanied by the frequently countercyclical activities of a `speculative' sector of security and commodity brokers. Based on the combination of this qualitative and quantitative evidence, the paper concludes that the rise of a speculative financial sector is a potentially recurrent phenomenon which is linked to periods of economic restructuring and turmoil.