as Welfare Social Impact Investing and British Social Policy 1997 2016 Philipp Golka
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Philipp Golka Financialization as Welfare Social Impact Investing and British Social Policy, 1997-2016
FinancializationasWelfare PhilippGolka SocialImpactInvestingandBritishSocial Policy,1997-2016
PhilippGolka
SociologyofMarkets,OrganizationsandGovernance
FriedrichSchillerUniversityJena Jena,Thüringen,Germany
ThisworkhasbeenacceptedasaPhDthesis(dissertation)attheFacultyofSocialand BehavioralSciences,Friedrich-Schiller-UniversityJena,Germanyin2018,as: FinancializationasWelfare – SocialImpactInvestingandtheResonanceofFinancialMarket FramesinBritishSocialPolicy,1997–2016.
ISBN978-3-030-06099-2ISBN978-3-030-06100-5(eBook) https://doi.org/10.1007/978-3-030-06100-5
LibraryofCongressControlNumber:2018965203
© SpringerNatureSwitzerlandAG2019
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Thepublisher,theauthorsandtheeditorsaresafetoassumethattheadviceandinformationinthis bookarebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernortheauthorsor theeditorsgiveawarranty,expressorimplied,withrespecttothematerialcontainedhereinorforany errorsoromissionsthatmayhavebeenmade.Thepublisherremainsneutralwithregardtojurisdictional claimsinpublishedmapsandinstitutionalaffiliations.
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FormyfatherJan. Inlovingmemory. Foreword Sincetheturnofthecentury,socialimpactinvesting(SII)hasbeenemergingasa newbranchofsustainableinvesting.SIIinvestorsfocusontheimpacttheirinvestmentshave notonlythe financialreturnoninvestmentbutalsothe “socialimpact” theirinvestmentsentail.Putdifferently:inwhatwaydoestheinvestmentindeed improvethesituationofthepersonsconcerned?Thisquestionisparticularlyintriguing,asinthecaseofSII financialmarketinstrumentsareemployedtosolvesocial problems.Ideally,bothaspectsturnoutwell:withtheinvestment,thesocialaswell asthe financialgoalsarereached.
WhilemanySIIresearchersanalyzethemeasurementoranalysisofthesocial impactinquestion,PhilippGolkafocusesonanotheraspect.Heasks,how,andin whatwaySIIasa financialmarketinstrument fitsintotheexistingwelfarestate institutions,ordisrupts,orevenreplacesthem.IsSIIacaseof financializationin whichanormatively “good” endeavorbywayofitsinvolvementwithandinthe financialmarketbecomes financializedandconcurrently financializesthewelfare state?Or,asGolkaputsit:arewelivinginaworldthatisincreasinglydominatedby financialactors?
Toaddressthisquestion,Golkaargues,basedonareviewofempiricalresearch, thatacrucial andoftenoverlooked tippingpointin financializationprocessesis theemergenceofcooperativerelationsbetween financialandnonfinancialactors.He usestheempiricalmaterialat firsttoshowthathisconceptionof financializationis adequatetodescribetheempiricallyobservedprocessbutalsoto findamechanism capableofexplainingtheemergenceofsuchties.Here,heshowsanimportantgapin institutionaland financializationtheories,namelythestructuringroleof field-level, backgroundconditionsfortheacceptanceofinnovativeframes.Thesolutionhe proposesdrawscompetentlyoncurrentandclassicviewsofpragmatismwhile remainingwell-suitedforfutureempiricalresearch.
Golka’sbookmakesmanifoldcontributionsonseverallevels.Itcontributestothe debateabout financialization;itadvancesourtheoreticalunderstandingof fields, frames,andresonancespaces;itoffersauniqueinsightintothe financializationof SIIandtheBritishwelfarestate;anditmakesacontributiontopublicsociologyby
discussingthemeritsandpitfallsofSIIandoffersreflexiveknowledgeforSII proponentsandresearchers.
Golka’sbookisaverycompellingworkofexcellentquality.Eachpartis finely drafted,well-foundedinitsapproach,richinmaterial, fine-grainedinitsanalysis, rigorousinitsargumentation,consistentlypresented,superblyverbalized,and deeplyinsightful.Itisalsoaverycourageousworkasittacklestheories,methods, andempiricalobjectsinanintrepidway.Inanexcellentmanner,Golkanotonly deeplypenetratestheories,methods,andempiricalobjects,buthealsoconvincingly connectsandrelatesthemtoeachother.Readingthebookisbothanintellectualjoy andsatisfyingintellectualwork.
Jena,Germany November2018
StefanieHiß
Acknowledgements Thisbook,andthedoctoraldissertationuponwhichitisbased,couldneverhave beenwrittenwithoutthegeneroussupportfromalargenumberofpeopleforwhom mygratitudefarexceedsthesenotionsofacknowledgement.
Firstofall,IamdeeplygratefultoStefanieHißforgivingmetheopportunityto embarkonthisjourneybyacceptingandsupervisingmeasagraduatestudent.In everystepoftheprocess,shewasaninexhaustiblesourceofsupportaswellas criticalandconstructivefeedback,withoutwhichthisbookwouldneverhavetaken shape,letaloneseenitspublication.EveChiapello’sinvitationtojoinher workgroupforasemesterabroadatEHESSParisandhergeneroussupportata criticaltimewereofvitalimportancetothiswork.Itwouldhavebeenimpossiblefor metodevotethewholebooktothestudyof financializationintherealmofpublic policywithoutherintellectualandpersonalencouragement,aswellasherseriousnesstodiscussmywork.
Myworkfurthermorebenefitedsigni ficantlyfromsupportandcommentsbyLisa KnollandMichaelHutter,aswellasbythefacultyatFreieUniversitätBerlinwho allowedmetoparticipateintheirPhDseminars:ElkeSchüssler,GregoryJackson, andJörgSydow.Ireceivedveryhelpfulfeedbackfromparticipantsparticularlyat theSocietyfortheAdvancementofSocio-Economics2016conferenceinBerkeley, the2016LondonSocialImpactBondsWorkshop,andthe2017SocialFinance, ImpactInvesting,andtheFinancializationofthePublicInterestconferencein Hamburg.Ibenefitedmassivelyfrommyinterviewees,whotookthetimetoanswer (orrework)myquestionsthoroughly,providedmewithcrucialdata,andgrantedme accesstotheirpersonalnetworksforfurtherinterviews.Inaddition,LeslieHuckfield providedmewithinsightsanddataIwasunabletoaccesselsewhere.
ThisstudywouldhavebeenimpossiblewithoutaPhDscholarshipfromthe GermanFederalMinistryofEducationandResearch,whichhasbeenrealizedbythe FoundationofGermanBusiness(sdw).Inaddition,fundingfromtheAlexandervon HumboldtFoundation’sAnnelieseMaierResearchPrizethathasbeenawardedto EveChiapelloallowedmetospendayearattheUniversityofHamburg,where AnitaEngelsandherteamprovidedmewithawelcomingandstimulating environment.
Countlessdiscussionswithfriendsandcolleagueshavepropelledmythinking andtheirresultsaredeeplyinterwovenwiththistext.Theseincludethewholeteam inJena,aswellasMaxHeimstädt,GeorgFischer,LorenzGrünewald-Schukalla, JuliaBartosch,CamilleRivière,andMehdiArfaoui.Withouttheunconditional supportandcompanionshipofJensBendel,JoschaEnger,LaurenHowe,Hanna Pauls,andMarcoPaladines,noneofthiswouldhavebeenpossible.
Myfamilyisthefoundationuponwhichallofthishasbeenbuilt.Ihaveneverfelt thismorestronglythansincethetragiclossofmyfatherearlierthisyear.Iwouldlike todedicatethisbooktohim.
Jena,Germany
November2018 PhilippGolka
2FinancializationandSocialImpactInvesting
2.1WhatisFinancialization? .............................9
2.1.1FinancializationinMarketsandInstitutionalist PerspectivesonCapitalism.......................10
2.1.2FinancializationBeyondMarketsandtheRole oftheState ..................................13
2.2SocialImpactInvestingintheUK:LinkingFinancialization andInstitutionalistScholarship.........................17
2.2.1WhatIsSocialImpactInvesting?. .................18
2.2.2SocialImpactInvestingandSocialPolicyDynamics intheUK...................................21
3Financialization,Fields,andChange .........................27
3.1FieldsandFinancialization... .........................28
3.1.1TheUseofFieldsfortheStudyofFinancialization. ....28
3.1.2Neo-InstitutionalFieldTheoriesandTheirLimitations...31
3.1.3FligsteinandMcAdam’sAlternative ................34
3.2StrategicActionFieldsandFinancialization......... .......41
3.2.1FinancializationRevisited ........................41
3.2.2SocialSkill,Cooperation,andFieldInterdependence....43
3.2.3SettlementsandFieldDynamics ...................46
3.3UnderstandingtheVoid:Cooperation,Opportunities,and Mechanisms.......................................48
3.3.1OpportunitiesandtheProblemofHorizontal Cooperation. .................................48
3.3.2PragmatistMechanismsandtheEmergence ofCooperation... .............................52
5.1TheFieldofSocialImpactInvestingintheUK.....
5.2SocialImpact:DefinitionsandGovernance.................77
5.3SocialImpactInvestingandRedistribution.................83
5.3.1FinancialIntermediation.........................84
5.3.2CapitalMobilizationandPublicSubsidies............90
5.3.3PrivateSubsidies..............................94
5.3.4LaborandRedistribution ........................96
6FinancializationasWelfare
6.1EntrenchedSocialProblems..
6.1.1WhatCountsasaSocialProblem.
6.1.2WhatDoesNotCountasaSocialProblem...........107
6.2TheorizingCauses:TheImpactandInvestmentNarratives
6.2.1TheUnder-InvestmentNarrative...................109
6.2.2TheImpactNarrative...........................111
6.3FinancializationasWelfare ............................116
6.3.1CelebratingDisruption:TheSocialInnovation Discourse ...................................117
6.3.2PrognosticFraming:ImpactInvestingandtheSolution ofSocialProblems.............................119
6.3.3MotivationalFramingandtheImpactInvestingField Frame. .....................................124
7FieldEmergenceandStabilization ..........................129
7.11997–2002:PolicyInnovationandDisparateFields..........132
7.1.1SettingtheStage:BritishSocialPolicyAroundthe Millennium.. ................................133
7.1.2PrecursorsofSocialImpactInvesting...............141
7.22001–2005:ContestingSocialEnterprisePolicyandPublic ServiceDelivery....................................147
7.2.1SocialEnterprise:SettlingtheRules,Expanding theScope...................................147
7.2.2EarlyDynamicsinSocialInvestmentandSocial EnterpriseFinance. ............................150
7.2.3TreasuryAppropriatingSocialPolicy:Towards HybridizationandResonance........... ..........153
7.32006:CriticalJuncture...............................157
7.3.1UnclaimedAssetsandtheBirthofSocialImpact Investing....................................158
7.3.2TheOfficeoftheThirdSector:HybridizingSocial EnterprisePolicy..............................162
7.42007–2010:PilotingSocialImpactInvesting...............166
7.4.1GordonBrownasPrimeMinister..................166
7.4.2CreatingResonancefortheFinancializationofWelfare...170
7.4.3BridgingtheDisconnect:TheBirthofSocialImpact Bonds........ ..............................174
7.52010–2016:FieldExpansion...........................177
7.5.1ConservativesandtheEmergenceofaNewSettlement...178
7.5.2MaintainingInvestors ’ ExpectationsThroughSubsidies: TheLeveragingState.. .........................184
8Financialization,Resonance,andtheEmergenceofCross-Field Ties ..................................................189
8.1PragmatistMechanismsandCooperationinSocialImpact Investing.........................................190
8.2Resonance.....
8.3ResonanceSpacesandFieldDynamics..
Abbreviations ACEVOAssociationoftheChiefExecutivesofVoluntaryOrganisations
BSB/BSCBigSocietyBank/BigSocietyCapital
CDFICommunityDevelopmentFinancialInstitution
CEOChiefExecutiveOfficer
CICCommunityInterestCompany
CITRCommunityInvestmentTaxRelief
CoSAPrimeMinister ’sCouncilonSocialAction
CUACommissiononUnclaimedAssets
DTIDepartmentofTradeandIndustry
DWPDepartmentofWorkandPensions
EUEuropeanUnion
ICRFInvestmentandContractReadinessFund
IGUInternalGovernanceUnit
IPOInitialPublicOffering
NESTANationalEndowmentforScience,TechnologyandtheArts
NEETIndividualNotinEmployment,Education,orTraining
NGONon-governmentalOrganization
NHSNationalHealthService
NSINewSociologicalInstitutionalism
OTS/OCSOfficeoftheThirdSector/OfficeforCivilSociety
PbRPaymentbyResults
PFIPrivateFinanceInitiative
PSAPublicServiceAgreement
SAFStrategicActionField
SESocialEnterprise
SELSocialEnterpriseLondon
SIFISocialInvestmentFinanceIntermediary
SIISocialImpactInvesting
UKUnitedKingdom
USUnitedStatesofAmerica
VATValue-AddedTax
VCSVoluntaryandCommunitySector
ListofFigures Fig.4.1Researchprocessandkeyevents.................... ..................62
Fig.5.1Field-leveltransformationsinBritishSIIandsocialservices......74
Fig.5.2RedistributiontowardsSIIintermediaries............................83
Fig.5.3SocialImpactBondsstructureandrelations.........................84
Fig.5.4AccumulatedcentralgovernmentsubsidiestoSIIactors(directand indirect)..................................................................90
Fig.8.1Exemplaryillustrationoftheproblemofcooperation...............196
ListofTables Table2.1Ideal-typical,relationaldistinctionbetweenSIIsub-types ........20
Table2.2Keyactorgroupswithpositioningandorganizational templates..............................................................22
Table4.1Maincodingschemeanalysis1. ....................................70
Table6.1SIIproponents’ socialproblemdiscourses,emergenceandlinks topolicy fields,andrelated financialproducts .....................103
Table6.2Threeformsofsocialinnovationdiscourse........................117
Table7.1TimelineofkeyeventsinthedevelopmentofSIIintheUK .....130
Table7.2ShiftinSIIproponents’ strategicframeduringresonancebuilding withVCS..............................................................159
Table8.1Schematicoverviewoftheresonancemechanism.. ...............197
Table9.1PublicsociologyanddimensionsofreflexiveknowledgeforSII stakeholders ...........................................................217
Chapter1 Introduction Arewelivinginaworldthatisincreasinglydominatedby financialactors?This questionhasgeneratedextensivedebateacrosseconomicsociology,politicaleconomy,andorganizationstudies(vanderZwan2014).Scholarsof financialization havestronglysupportedthisclaimbyshowinghowinthepastforty-or-soyears, financialactorshavenotonlyextractedandamassedunprecedentedamountsof wealthbutalsoprofoundlytransformedavastsetofobjects,rangingfromindividuals,households, firms,andstates,to(formerly)criticaldiscoursessuchassustainability,orinternationaldevelopmentpractices.Institutionalistscholarsofcapitalist varietyhavebeenmorecautioustoattributesuchauniformdirectionofchange.In particularregarding firms,theyhavearguedthatinstitutionsonanationallevelexist thatconstraintheabilityof financialactorstomillthroughextantsocialordersand transformthemintheirfavor.Indeed,thequestionofwhetherandhow financial actorshavethecapacitytotransformsocialordersseemstobecentralhere.Ifweare ableto findouthowandunderwhatconditions financialactorsareabletobecome moredominant,thenwewillhavemadealeapforwardtounderstandingnotjustthe currentstateofthesocialworld,butpossiblyevendemarcatingwaysoutofa potentiallyone-sideddominanceof financialactors.
Understandingthroughempiricalworkthechange-makingcapacityof financial actors orlackthereof promisestocontributetooneoftoday’skeypuzzlesin sociology:therelationbetweenstructureandagency.Towhatextentarewehumans determinedbythesocialstructures,suchaslanguage,organizations,orinstitutions, thatarearoundus?Howisitpossibleforustotranscendtheirconformingpressures toconceiveofsomethingnewandaltersocialrealityforthepeoplearoundus?Isthis moreaquestionofourindividualcapabilities,ourpositionvis-à-visothers,the natureofthestructuresaroundus,orareotherfactorsmoreimportant,andhowdo theyinteract?
Thisbookaimstocontributeonboththetheoreticalandempiricallevel.Though myprimarygoalistoenhanceourunderstandingofthecurrentstateof(mostly Western)capitalism,thisphenomenonisinextricablylinkedtotheoreticalquestions.
© SpringerNatureSwitzerlandAG2019
P.Golka, FinancializationasWelfare, https://doi.org/10.1007/978-3-030-06100-5_1
Thus,itwouldbeimpossibletoaddresstheformerwithoutthelatter,andsomewhat detachedfromsocialrealitytodosoviceversa.
Onanempiricallevel,Iaimtounderstandhowprocessesof financialization unfold.Thescholarlyliteraturehasalreadymadeimportantcontributionstoour understandingof financialization:Debatesbetween financializationandinstitutionalistscholarshavebeenthemostheatedregardingthecaseofcorporategovernance. Here,theformerhavearguedforasignificantandratheruniformtransformationof firmsaccordingtotheinterestsofshareholdersand financialinvestors(Lazonickand O’Sullivan2000).Bycontrast,institutionalistshavearguedforsetsofexternal, constraininginstitutionsthatshapethetransformationprocessofcorporategovernanceandconstrain financialactors’ abilitytoaffectchange(AguileraandJackson 2003).
Thismarksthejackingpointofthisbook.Asanempiricalcase,Iselectwhat institutionalistswouldseeastheprototypeofanexternal,market-constraining institution:thewelfarestate.Here,Istudytheprocessthroughwhich financialactors havetransformedtheprevailingsocialorder,creating financialproductsthatoperate within andeven through thewelfarestateandthustransformhoworganizations inthis fieldact.If financialactorsaresuccessfulintransformingsocialordersinthis case,thenwemighthavetothoroughlyrethinkourconceptionofinstitutionsand theirroleinconstrainingeconomicactors.
Moreconcretely,Iinvestigatethecreationofa “socialimpactinvesting” capital marketwithintheBritishwelfarestate.Accordingtoitsproponents,socialimpact investing(SII)denotesthepracticeofcombining financialinvestmentswiththe pursuitofameasurable “positivesocialorenvironmentalimpact.” AsSIIisalabel thatinvestorsadheretothemselves,alargevarietyofsubcategoriescanbeidentified. Thelargestgroupamongtheseinvestorsarethoseakinto “sociallyresponsible investors” whoattempttochange firmsinextantmarkets,suchasintheproduction ofmaterialgoods,toadheretosomeformofsocialorenvironmentalstandard (JPMorgan2014).Theseinvestorsarenotofconcernhere.WhatIaminterested inisamuchsmallerbutqualitativelymoresigni ficantgroupthatattemptstoalterthe workingsofgovernments,publicorganizations,andnot-for-profitsocialservice providersinordertoextractrevenuestowardstheir financialintermediaryorganizations.ThisgrouphasbeenparticularlysuccessfulintheUK,makingBritainthemost interestingcaseinthisregard.Forexample,SIIactorsintheUKhavecreated so-called “SocialImpactBonds” (SIBs), financialproductsthatturnthesuccessof socialserviceprovidersinalteringthesocialbehaviorofindividualsintoaspeculativereturnopportunityfor financialintermediaries:Ifserviceprovidersmeet predefined “outcome” targets,thenpublicauthoritieswillrepayinvestorswho have financedtheinterventionwithavariablerateofreturn.TheseSIBsarejust oneexampleofhowsignificantlytheBritishgovernment,publicorganizations,and not-for-profitsocialserviceprovidersalteredtheirwayto(inter-)act.
Inthisbook,Iarguethatthesetransformationsareemblematicforprocesses of financializationonamoregenerallevel.Mypointisthattounderstand financialization,weoughttounderstandhowandexplainwhy nonfinancial actorschange toact.Thisway,wemayunderstand financializationasthesocialprocessthrough
whichnonfinancialactorsbegintotake financialactorsintoaccountinsuchaway thatprofitopportunitiesfor financialintermediariesarecreated.Sincenonfinancial actors,likeallsocialactors,mayprincipallyactotherwise(Forst2015a),thekey questionbecomes howitmakessense fortheseactorstoforgesuchrathercooperativerelationswith financialactors.Thus,fromthisperspective,weunderstand nonfinancialactorsashavingastakeinprocessesof financializationastheyhope tomaterializesomekindofobjectiveinforgingsuchrelations.Suchaperspective discordswithlargepartsofinstitutionalistscholarshipthattendstoseethestateas anexternalrefereeinsuch financializationprocesses.Rather,myperspectivefollows yetexpandsthe “state-sponsored” view(Belfrage2008)thatunderstandsrepeated stateinterventionsaskeyto financializationprocesses.
Tracinghow financializationmakessensefornonfinancialactorsdoesnotimply thattheyconsciouslycalculatetheutilityofactingaccordingly,nordoesitmeanthat nonfinancialactorsareunrestrainedtoactinwhateverfashiontheywouldliketo.A vastbodyofsociologicalworkhasshownthelimitationsofassumingsuchatomistic,rationalactorsandthereforemakingtheassumptionsofrationalchoicetheory evenforquestionsofeconomicexchange inapplicable(e.g.Beckert2003).However,notingthatactorscouldprincipallyactotherwisemakesusequallycarefulof anoversocializedviewonagencywhereactorsblindlyfollowscriptsprovidedby theirsocialenvironment.Afterall,suchanorm-followingviewofactionseemsdifficulttoreconcilewithchange oratleastchangethatdiffersfromrigidpathdependenciesorfunctionaldifferentiation.
Onewayhowthesetensionsbetweenover-andundersocializedviewsofaction havebeendischargedinthepastthreetofourdecadesisthroughsocial fieldtheories (Martin2003).Ingeneralterms, fieldsaresociallyconstructed,meso-levelsocial orders.Althoughahostof fieldtheoriesexists,mostofthemareconcernedwiththe questionofhowactorsbegintotakeeachotherintoaccount,andwhatconsequences arisefromthesepatternsofinteraction.Thismakes fieldtheoriesparticularlyuseful forourendeavorastheyallowtoconceptualize financializationasaprocessinwhich financialactorspenetratenonfinancial fieldsand,bymakingnonfinancialactorstake themintoaccount,alter(or “financialize”)therulesofthevery field.Yetevenatthe fieldlevel,thisisatremendouslycomplexsocialprocessthatis,asinstitutionalist scholarshiphasshown,boundupwithstructuralconditions.
Thus,ifwearetounderstand financializationfroma fieldperspective,our field theorymustbeabletoaccountforboth financializationanditsabsence.Thisiswhy inthethirdchapter,Iwillcriticallydemarcatetheexplanatoryhorizonof field theoriesforthequestathand.Mydiscussionwillfocusoncomparingtwoofthe mostpromising fieldtheories,newsociologicalinstitutionalism,andstrategicaction fields(SAF)theory(FligsteinandMcAdam2012).Iarguethatakeyreasonforthe explanatoryadvantageofSAFtheoryisthatitprovidesuswithasocialontologythat understandssocietyoverallasa “denselatticeworkofinterdependent fields” (FligsteinandMcAdam2012,p.58),ratherthanasan “inter-institutionalsystem” (Thorntonetal.2012).Thismeansthatthesameorganizingprinciple,SAFs,holds forall,state, financial,andnonfinancialactors.
KeytoSAFsisthatactorsaretheorizedtoactaccordingtotheir position within theirproximate fieldenvironment.Thisisoffundamentalimportanceformyperspective,asitallowstobreakopenactorclasses suchasgovernmentsorsocial organizations into fieldsofpositionedactors.InSAFtheory,thisislinkedwitha secondkeyfeature:anactiontheorybasedonAmericanPragmatismthatseesaction asguidedbysocialsituationsthatcorrespondtoactors’ positionswithinthe field. Here,actorsareconceptualizedasskillfulinthattheyunderstandtheirownand others’ situationsandarecreativeindevelopingmeanstocooperatewithothersto advancetheiraims.
IarguethatthisiswhySAFtheoryisparticularlywell-suitedtoallowusto understand financializationprocesses.BasedonSAFtheory,wemayunderstand financializationasthesuccessofskilled financialactorsindevelopingcooperative tieswithnonfinancial fields.Theproblem,however,isthat,whileSAFtheoryiswell suitedtoexplain contentious fielddynamics,itisinitscurrentformnotfully equippedwithamechanismthatexplainshowandwhennew cooperative tiesacross dynamic fieldsemerge.ThereasonforthismightbethatSAFtheoryisinessence acombinationofFligstein’s(2001b)conceptionof fieldsandsocialskilland McAdam’sworkoncontentioussocialmovements(MacAdametal.2001).This makesthequestionofcooperativemobilizationacross fieldsfallonthewelding seambetweenboththeoreticalcomponents which,duetothenoveltyofthetheory, hasnotyetbeenexplored.ClosingthisconceptionalvoidinSAFtheorytherefore representsthemaintheoreticalcontributionofthisbook. Together,thisstudypursuestworesearchquestions.Ontheempiricallevel,the questionis:
1. How,andunderwhatconditions,doprocessesof financializationunfold?
InChap. 3,IwillshowthatSAFtheoryprovideslargepartsoftheanswertothat questionbutleavesopenanundertheorizedresidualspace.Thisleadstotheresearch questiononatheoreticallevel,whichis:
2. Howdoskilledactorsformnewcooperativetiesacrossdynamic fields?
Toanswerthesequestions,Iwillstudythedevelopmentofsocialimpact investingthroughanin-depth,qualitativecasestudy.Iwillfollowanabductive methodologythatpromisestoovercomekeyepistemologicalproblemsthatarise fromqualitativeresearchthatfollowsthe “groundedtheory” perspective(Tavory andTimmermans2014).Mostgenerally,advocatesof “groundedtheory” arguefor inductivetheoryconstructionthatseestheoriesasemergingexclusivelyanddirectly fromtheempiricaldata.Fromanepistemologicalperspective,theproblemwiththis approachisthatthetheoreticalandtheempiricalarefundamentallydifferentphilosophicalrealmsthatcannotbe “bridged” throughinductiveresearch:anytheoreticalgeneralizationofempiricalmaterialimpliesattheveryleastaconceptionof whattheoryisthatcannotbereducedtotheempiricalmaterialalone.Thisiswhy abductiveresearchersarguethatratherthanattemptingtoartificiallyreducetheoreticalknowledgewhenconductingempiricalresearch,researchersshouldusethe empiricalmaterialtodevelophypothesesthatbecomeinterestingonlyinthelight
oftheory.Thus,theyproposearesearchprocessthatfrequentlyiteratesbetweenthe theoreticalandempiricallevels.
IninvestigatingthecaseofSII,Ihavefollowedthisavenue.ThisiswhyIwill beginbylinkingtheempiricalmateri altothetheoreticalproblem(Chaps. 2 , 3 ,and 5 ).Inasecondstep,Iwillusetheempiricalmaterialtodevelopahypothesis regardingthetheoreticalresearchquestion(Chaps. 6 and 7 ).Inathirdstep,Iwill relatethishypothesisbacktothetheore ticallevelandsolidifytheempirical fi ndingsagainstthebackdropofSAFtheoryandsociologicaltheorymoregenerally(Chap. 8 ).
I findthatacollaborativetiebetweenagroupofpolicymakersandimpact investorswaskeytotheemergenceanddevelopmentofSII.Throughthiscooperation, financialintermediarieshavebeensuccessfulinmobilizingapproximately £1.3billioninpublicsubsidies.Usingabductiveanalysis,I findthatthistiewas establishedbecausepolicymakersincreasinglyaccepted financialintermediaries’ strategicactionframe(SnowandBenford1988)thatpresented field-level financializationasameanstoachievepublicwelfare.Strategicactionframesproblematizea specificsocialsituationandbuildonthisanalysistodevelopavisionofanalternative futurethatmotivatesanalterationoffutureactionpatterns.Keyto financialization wasthusthesuccessof financialactorstomakenonfinancialactorsaccepttheir prognosticandmotivationalframing.However,theirabilitytodosowasfundamentallyconstrainedbytheirabilitytoframetheirproblem descriptions accordingto nonfinancialactors’ problem situations.Crucially,asproblemsituationsareliked withpositions,thisismoreaquestionofdynamicsin nonfinancialactors’ proximate fieldenvironment ratherthan financialactors’ capabilities.Nonfinancialactorsuse theinterpretationoftheirpositioninadynamic fieldenvironmentto test whether cooperativetieswith financialactorsmakesense.Atatheoreticallevel,thisproposed “resonance” mechanismfortheemergenceofcooperativetiestherefore blendsthe “EuropeanPragmatism” (BoltanskiandThévenot2006;Habermas 1981)withitsAmericancounterpart.Ontheempiricallevel,thismechanismshifts ourattentiontothestructuredopportunities,or “resonancespaces,” thatallowforthe mobilizationofnonfinancialactors.
Inadditiontothiscontributiontosociologicaltheorizing,Idevelopasmall contributionto “publicsociology” (Burawoy2005):throughanin-depthanalysis oftheSII fieldstructure,Iattempttoshowhowtherealityofimpactinvesting profoundlycontradictstheclaimsofinvestors.Moreprecisely,Iwillshowinalittle moredetailthannecessaryforthetheoreticalquestionhowSIIrepresentsacaseof financializationthatalterstherulesofsocialserviceprovision firstandforemostto thematerialfavorof financialintermediaries.Thesameistrueformydetailed analysisofinvestors’ justificationsofSII.Iarguethatbecauseoftheseinner contradictions,SIImarksaparticularlyinterestingempiricalcaseof financialization initsownright.Thisiswhyitappearedsensibleandlegitimatetometodevoteequal attentiontoboththeempiricalandtheoreticalpuzzlesthatSIIpresentstous.
Thestructureofthisworkissomewhatunusual:itroughlytakestheshapeofa sandwichwhereathicklayerofempirical findingsisencapsulatedbytwolayersof theory.Althoughthosetwolayersmightattimesbesomewhatdry,theyarenotonly
necessaryinordertosufficetheepistemologicaldemandscreatedbythemethodologyofabductiveanalysis,butalsotoformacoherentobjectoutofwhatwould otherwisebeasetofunrelatedingredients.
Thebookwillproceedasfollows.Thenextchapterestablishesalinkbetweenthe debateof financializationandinstitutionalistscholarship,andtheempiricalcaseof SII.Todoso,I firstintroducethisdebateandthenpointtoanoften-overlooked strandofthe financializationliteraturethatiskeytounderstandingthecaseofSII. Thisliteraturestudiestheroleofstateandgovernmentactorsinprocessesof financialization.Inasecondstep,IestablishthelinkbetweenSIIand financializationby contextualizingthephenomenonandlinkingitsdevelopmenttodynamicsinBritish socialpolicy.Basedonthis,Ishowhowitmakessensetoapplyameso-level perspectivetounderstandthedevelopmenttrajectoryofSII.
Thethirdchaptertranslatestheseempiricaldebatesandissuestothetheoretical level.Here,Iintroducethe fieldconceptandanalyzetheexplanatorypotentialof different fieldtheoriesforthedebatebetween financializationandinstitutionalist scholarship,aswellasfortheempiricalcaseofSII.Comparingneo-institutionalist andSAFconceptionsof fields,Ishowtheexplanatorybenefitsofthelatteroverthe former.Subsequently,IintroducekeyconceptsofSAFtheoryandshowhowthese guidetheempiricalanalysis.Bydoingso,Ipointtothetheory’sconceptualvoid regardingcooperativetiesacross fields.
Inthefourthchapter,Ipresentmymethodologicalapproach.Followingthe abductiveapproachtoempiricalresearch,I firstdescribetheiterativeresearch processasitledmetothe “abductivemoment” inwhichIdefinedmy “resonance” hypothesis.Inasecondstep,IdescribetheempiricalresearchmethodthatIusedin ordertoinvestigatethecaseofSII:aqualitativecasedesigninwhichIconducted twoempiricalanalyses.Forboth,Ipresenttheempiricalmaterialandtheanalytical process,anddescribehowsucharesearchdesignrelatestothequestionsathand.
The fifthchapterrepresentsthe firstofthreeempiricalchapters.Bydemonstrating the fieldstructureofSII,Ishowhowitdoesindeedrepresentacaseof financialization. Moreconcretely,Ishowhowtherulesadvocatedforbyinvestorsfavortheirinterests andconstrainnonfinancialactors’ possibilitiestoact.Moreover,IshowhowSII createsprofitopportunitiesforinvestorsbyallowingthemtoextractrevenuesfrom socialserviceproviders,privatefoundations,andpublicorganizations.
Inthesixthchapter,Ipresentinvestors’ discourse.Basedonthestrategicaction framesperspective,Ishowhowinvestors’ discoursenotonlylegitimatestheirown actions,butalsoadvancesanuancedrolestructureforallpartakingactorsatthe field level.Totheextentthisframeisaccepted,anSII fieldthatestablishesinvestors’ centralpositioncomesintoexistence.Thisiswhyinvestors’ framingtakesacentral roleforthequestionof financializationandthedevelopmentofcross-fieldties. Intheseventhchapter,Ipresentthemostimportantempiricalanalysis:the longitudinalcasestudyofthedevelopmentofSII.Here,Ishowhowinvestors’ framingnotonlychangedaccordingtotherulingparty’snormativediscourse. Moreover,Ishowthatinvestors ’ successinalteringnonfinancialactors’ waytoact hingedonaparalleldevelopmentinthesocialpolicy field.Concretely,Ishowhow theincreasingdominanceofHMTreasuryforsocialpolicymakingunderGordon
Brownincreasinglycreateda “resonancespace” forinvestors’ arguments.Crucially, theTreasuryitselfreliedontheverysamemechanismtoalterthepolicy fieldasit builtonitsformalroleasthesafeguardofthepublicbudgettotransformsocial servicesintothe “valueformoney” deliveryof “socialoutcomes” bysocialorganizations.Thus,dynamicsconstrainedbythestructureofthepolicy fieldeventually shapedopportunitiesfor financialactorstoaffectchange.Tousetheseopportunities, financialactorsbenefitedfromthefailureofsocialorganizationstomaintainaclear profit/not-for-pro fitboundaryasthisallowedthemtoenterthe fieldofpublicservice delivery.Followingthesequalitativeinnovations,investors’ large-scalequantitative successcameasashiftinpolicyadvisorynetworkswiththe2010Coalitiongovernmentexpandedtheresonanceofinvestors ’ argumentsattheexpenseofthe perspectiveadvocatedforbynot-for-profitorganizations.
Intheeighthchapter,Icondensetheempirical findingsintoamore fine-grained hypothesisoftheresonancemechanism.Inasecondstep,Idrawonthenotionof “pragmatistmechanisms” (Gross2009)toshowthattheresonancemechanismis indeeda causal one.Basedonthis finding,Ifurtherqualifythenotionof “resonance spaces” andshowhowitrelatestothetheory-levelresearchquestionontheemergenceofcooperativeties.Lastly,Itranslatethese findingsbacktotheempiricallevel toshowtheuseoftheconceptforthedebatebetweeninstitutionalistand financializationscholarship.
Inthe finalchapter,Idiscussandcriticallyevaluatethecontributionofthisstudy. Todoso,I firstpointouthowthisworkadvancesbothsociologicaltheorizingas wellasempiricalresearch.Then,Ishowimportantlimitationsofthisworkand suggestwayshowfutureresearchcouldaddressthese.Lastly,Iattempttoprovide “reflexiveknowledge” (Burawoy2005)tostakeholdersofsocialimpactinvesting outsideofandwithintheacademicworld.
Chapter2 FinancializationandSocialImpact Investing Thegoalofthischapteristoplacetheempiricalphenomenonintothesociological debate,thusprovidingamorespecificintroductionthanthe firstchapter.Forthis reason,I firstintroducetheconceptof financializationandhowithasbeendebated fromaperspectiveofinstitutionalistscholarshipofcapitalism.Then,Ipointtothe ubiquitousandmultifariousroleofthestateinshaping financializationprocesses, whichhasoftenbeenoverlookedbothby financializationandinstitutionalist scholars.Then,IintroducetheempiricalcaseofSIIintheUKandshowitspotential forstartingaconversationbetweenthesedifferentliteraturestreams.Bysketching linkagesbetweenSIImarketdevelopmentanddynamicsinBritishsocialpolicy whichwillbediscussedextensivelyinChap. 7 Ipointtowardstheexplanatory utilityofameso-levelperspectiveforthecaseofSII,andtheoutlinedacademic debatemoregenerally.Thismeso-levelperspectiveisthendevelopedonatheoreticallevelinthefollowingchapter.
2.1WhatisFinancialization? Theacademicdebateon financializationislargeanddiverse,includingmany differentdefinitions,theoreticalapproaches,levelsofanalysis,analyticaldimensions,andempiricalobjects.Itisthereforeneitherpossiblenorusefulforour endeavortoprovideanexhaustivereviewoftheliteratureascanbefoundelsewhere (seee.g.Dore2008;VanderZwan2014).Rather,mygoalistoshedlightonthe academicdebatearoundthe socialprocess of financialization.Incontrasttoinstitutionalistscholars,mygoalistoarguethat financializationisarathergeneralsocial processthatmayunfoldinvastlydifferentorganizationalset-ups.Keytounderstandingthisprocess,Iargue,aretheconditionsunderandwaysinwhichstateactors getinvolved,andhow,bydoingso,thestateitselfisbeingchanged.Basedona literaturereview,Iwilldevelopaworkingdefinitionof financializationas asocial processinwhich financialactorsacquireacentralpositioninsocialordersand
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P.Golka, FinancializationasWelfare, https://doi.org/10.1007/978-3-030-06100-5_2
changethosesocialorderstotheirmaterialbenefit,criticallybasedoncooperative relationswithstateactors.ThesubsequentsectionthenshowshowSIIisarelevant casefromthisperspective.
Iacknowledgethatsuchanapproachisignoranttomoremacro-level financializationscholarshipsuchasintheworksofArrighi(1994),DuménilandLévy (2004),orStockhammer(2004).Thisisbecauseratherthanexanteassuming regimesofaccumulationthatinevitablycreateincreasingeconomicinequalities, myperspectiveseekstounderstandhowprocessesof financialization whichcertainlycreatemorelosersthanwinners unfoldasaproductofhumanagency.This doesnotmeanthatIamarguingagainsttheexistenceofinherent “logics” of capitalism,butIinsteadattempttounderstandhowtheselogicsarereproduced, altered,andfurtherentrenchedbyreflexive,critical,andcreativesocialactorswho could,inprinciple,actotherwise.Likewise,Iignoreasecondimportantstrandofthe literaturethatfocusesontransformationsof financialmarketsandcanbenamed “financializationof finance.” Here,scholarshaveplacedgreatemphasisonthe relationbetween financializationandtechnologicaldevelopments(Coombs2016; MacKenzie2008;MacKenzieandMillo2003).Moreover,scholarshavestudied how financialintermediationhaschangedfollowingimportantregulativechanges (ChiapelloandWalter2016).However,thesestudiesaremostlyconcernedwith transformationsin speculation (i.e.circulating financialproducts),whereasIam mostlyinterestedintransformationsregarding investment,thatis,monetary flows thatbothenterandexitthecircuitof financialintermediation(Knorr-Cetina2009). Thechasmbetweenthesetwo fieldsof financeisexemplifiedbythetemporaldensity of financialintermediationactivities:whilespeculative financialactorsmaytrade billionsofUSDollarsperminute,eventhelargestinvestorsusuallytakeayearor longertoachieveasimilarturnover.Thus,althoughthese fieldsarerelated,entirely differentinfrastructuresandstrategiesareinplace,andhencewemaysuspect differentcausalwaysofhowtheseactorschangetoact.
2.1.1FinancializationinMarketsandInstitutionalist PerspectivesonCapitalism Financializationisoftenunderstoodastheroleof finance “beyonditstraditionalrole asproviderofcapitalfortheproductiveeconomy” (VanderZwan2014,p.99).A largepartofthe financializationliteraturestudieshow financialactorsbecame centralactorsinmarkets,andhow,inparallel,non-financialactorschangedtheir actionsaccordingto financialactors’ materialinterests. Redistributiontowards financialactors ispointedoutbothbetweenandwithin firms.Forexample,Baud andDurand(2012)studyhowglobalretail firmshavesince1990increasedtheir paymentstoshareholdersdespiteaslowdowninsalesgrowth.Similarly,Crotty (2005)hasshownhownon-financial firmshaveincreasedtheirpaymentsto financial companiesthroughincreaseddividendpayments,butalsothroughhigherpayments
infeesandtheincreasedpurchaseofinsurancesandother financialproducts. Moreover,non-financial firmshaveincreasedsharebuybacksinordertoelevate theirstockprices(Crotty2008;Dünhaupt2012),attimesspendingmorethantheir netincomeonsharebuybacks(Lazonick2014).Thesedevelopmentsaremirroredat anaggregatelevelbyincreasedpercentagesofGDP,aswellascorporateprofits, comprisedbythe financial,insuranceandrealestateindustries(Krippner2005; Milberg2008).
Theredistributivedimensionof financializationisfurthermorewelldocumented ontheintra-firmlevel.AsGodechot(2015)observes,payinthe financialsectoris distributedhighlyunequally,withtopearnersreapingasignificantpercentageofthe sectors’ overallprofits a findingthatisinlinewithethnographicstudieshighlightingthestrictlyhierarchicalorganizationalstructuresofWallStreetinvestmentbanks (Ho2009).Otherstudieshavefocusedonhow finance-ledtransformationsin corporategovernancehaveseendramaticrisesinexecutivepayinordertoavoid “agencycosts” thoughttoarise,accordingtoAgencyTheoryof financialeconomics, fromtheseparationofownershipandcontrolinlargecorporations(Deutschmann 2008;LazonickandO’Sullivan2000).
Thus,manyscholarsconcordinunderstanding financializationasasocial dynamicthatcreateswinnersandlosers.Tomaskovic-DeveyandLin(2011)have estimatedthatnon-financial firmshaveinthepastdecadestransferred “between5.8 and6.6trillion2011dollarsinincomeintothe financesector,mostlyasprofits.” Thisisequalto13%ofallincreasedincomegeneratedbytheUSprivatesector between1980and2008(p.553).Bycontrast,(oftenlow-skilled)workersare frequentlyfoundtohavemateriallylostfrom financializationdynamics(Dünhaupt 2012;FligsteinandShin2004;LinandTomaskovic-Devey2013) furtherincreasing financialactors’ structuralbargainingpower(Flaherty2015).Theredistributive effectsof financializationarefurtherexacerbatedinsituationsofloweconomic growth(Piketty2014).
Butwhilemostscholarssharetheunderstandingof financializationasaredistributiveprocessbenefitting(abroadcategoryof) financialactors,therearedifferent viewsregardingitscauses,dynamics,boundaryconditions,andempiricalsignificance.Regardingitscauses,mostscholarsseeregulativechangesasacriticalfactor. Forexample,intheUS,thedemiseandrepealofthe1932/33Glass-Steagall legislationseparatingcommercialandinvestmentbankingisoftencitedashaving createdenablingconditionsforalatertransformationof financialactorsandcorporategovernance,respectively(LazonickandO’Sullivan2000;Windolf2005). Likewise,scholarshaveemphasizedtheimportanceofchangestotheregulation of financialaccountingforprocessesof financialization(ChiapelloandMedjad 2009;NölkeandPerry2007).
Otherworklinkstheriseofinstitutionalinvestorstothe financializationof marketsandtransformationsincorporategovernanceinparticular(Fligstein1990; Lazonick2014;LazonickandO’Sullivan2000;Morin2000;Widmer2011; Windolf2008).Here,scholarsstudyhow “firmsrespondedtotheentreatiesof institutionalinvestors,puttingmostoftheinnovationstheylobbiedforintoplace” (JungandDobbin2012,p.53).Accordingtothisperspective,whatinstitutional
investorsarguedforwasarestructuringofthe firms’ strategiesfromafocusonprofit maximizationtoafocusonincreasingshareprice.Manyoftheseworks,again, emphasizethenecessityofregulativechanges,suchasthe1974USPensionReform Actfortheaccumulationofvastamountsofcapitalinthehandsoffewinvestment corporations.Inaddition,theseworksoftenfocusondynamicsinthesocializationof firms’ managers,frommoreproduction towardsmore finance-orientedmanagers, statingtheascendancyofinstitutionalinvestorsasoneofthefactorsinfluencingthis development(Jung2015;Zorn2004;Zornetal.2005).Wheretheseworkslargely concord,however,isintheemphasistheyputonthedevelopmentoftheacademic disciplineof financialeconomicsandAgencyTheoryinparticular.AsLazonickand O’Sullivan(2000)pointout,attemptstoestablisha “marketforcorporatecontrol”— akeyfactorintheentrenchmentofshareholdervalueorientation failedbefore AgencyTheorywasdevelopedandlargelyacceptedinthe fieldofeconomics.This meansthatforinstitutionalinvestorstotransformcorporatecontrolaccordingto theirmaterialinterests(shareprice),notonlyregulativechangeswererequired.1 Moreover,thesedynamicsrequiredachangeinmanagers’ cognitiveframes,which builtonintra-firmpowerstrugglesasmuchasonchangesinacceptedmeansand endsineconomicsandmanagementtheory.Thisdynamicisneatlypointedoutby (Khurana2007,p.320f,cit.byDore2008),comparingstatementsoncorporate governancebytheAmericanBusinessRoundtable,anassociationofUSbusiness executives.Whilein1990theysaid:
Somearguethatonlytheinterestsoftheshareholdersshouldbeconsideredbydirectors.The thrustofhistoryandlawsupportsthebroaderviewofthedirectors’ responsibilitytocarefully weightheinterestsofallstakeholdersaspartoftheirresponsibilitytothecorporationortothe long-terminterestsofitsshareholders.
In1997,thestatementwasthefollowing:
[T]heparamountdutyofmanagementandofboardsofdirectorsistothecorporation’s stockholders.[ ]Thenotionthattheboardmustsomehowbalancetheinterestsofother stakeholdersfundamentallymisconceivestheroleofdirectors.Itis,moreover,anunworkable notionbecauseitwouldleavetheboardwithnocriterionforresolvingtheconflictofinterests betweeninterestsofstockholdersandofotherstakeholdersoramongdifferentgroupsof stakeholders.
Institutionalistscholarsofcapitalistvariety(JacksonandDeeg2012)have questionedtheempiricalsignificanceaswellasthecausalmechanismsidentified bytheseworks.Inessence,theyarguefornationalinstitutionalcompoundsthat impactinvestors’ agencyintransformingcorporategovernance(AguileraandJackson2003).Whiletheyagreeuponmanyofthe findingsregardingtransformationsof corporatecontrolintheUS,theyshowthatchangesincorporategovernanceinother countrieshavemuchmoretakentheformofpath-dependenttrajectories,ratherthan alargelyuniform financializationdynamic(DeegandJackson2007).Forexample,
1 Thisresonateswith findingsfromderivativestrading,whereithasbeenshownthatamarketfor derivativesonlyemergedafterthedevelopmentandspreadofBlack-Scholes-Mertonformulafor optionpricing(MacKenzie2008;MacKenzieandMillo2003).
inthecaseofGermany,scholarshavestressedtheimportanceofnetworksof interlockingcorporatedirectoratesforcorporategovernance(Mizruchi1996).Institutionalistscholarshavearguedthatalbeitmanagersincreasinglyacceptedthe rhetoricof financialization,theircorporatemanagementpracticesnevertheless remainedsomewhatdecoupledfromSVOduetothelargernationalinstitutional set-up(FissandZajac2004;HöpnerandJackson2006;Vitols2002).However,in contrasttothestatistpath-dependenciesadvocatedforbytheearlierVarietiesof Capitalismapproach(HallandSoskice2001),thesecomparativeresearchers acknowledgethatinstitutionalset-upscanbeerodedthroughinternalchangeprocesses(StreeckandThelen2005).Thus,recentinstitutionalistscholarshipdoespoint todistinctnationaltrajectoriesofchangebutseemssomewhatmoreopentowards processesof financialization(JacksonandDeeg2012).Tounderstand financializationwethusneedtobesensitivetoitscontext.
Insummary,theseacademicstreamsofworkshowthat financializationisa redistributivesocialprocessthatmateriallybenefits financialactors.However,tobe successful,itneedstobe(re)producedbyactingindividualsandorganizationsoutside of financialmarkets.AsKädtler(2011,2015)shows,ina financializedcapitalism, drawingona “financialrationality” becomesapowerresource.Yetboth,themixed resultsof financializationinEuropeancountriesaswellasscholarshiponthetransformationofUS firmsshowthatthechangeofactionpatternsandrationalitiesof managersandnon-financialcorporationsiscriticallydependentonboundaryconditionsinsidethe firmasmuchasoutsidemarkets.Atthesametime, financialization scholarshipshowsthatinvestorsareindeedoftensuccessfulinshapingotheractors’ strategies.Thishintstothecoretheoreticalargumentofthisbook:makingothersactin linewithone’sownactionsnotonlyrequirescreativityandsocialskill,butisalso criticallydependentonthedynamicsituationsofthetargets.Ifanything,theacademic debatebetween financializationandinstitutionalistscholarshasshownhowboth investorsandmanagersincorporategovernancedynamicsarehighlycapable,creative,andcriticalsocialactors.Ifwearetounderstandwhosucceeds,wethusneedto studyactors’ respectivesituationsverycarefully.
2.1.2FinancializationBeyondMarketsandtheRole oftheState Accordingto financializationscholars, financialmarketactionsanddynamicshave causedsocialchangesalsobeyondmarketsandcorporategovernance.Indeed,the “financializationofX” literatureknowsavastnumberofnon-marketobjects, rangingfrommultiplepolicy fields(DavisandWalsh2015;DowlingandHarvie 2014;Lake2015;Mader2015)to(initially)criticaldiscursivepracticessuchas sustainability(FeistandFuchs2014;Hiß2013,2014)andeverydaylifeandindividual subjectivities(Aitken2007;Konings2009;Langley2006;Martin2002).Asargued above,alargepartofthe financializationliteraturestudiesnon-financialeconomic 2.1WhatisFinancialization?13
actors’ changeofstrategiesinrelationtodynamicsin financialmarkets.Here,Iwill maintainthisperspectivebutlimitmyattentiontooneparticulartypeofnon-market economicactors:thestateandpublicorganizations.2
Initseconomicfunctions,thestatemayuseaverylargevarietyofmoreorless directpolicyinterventionsthatcanbelinkedwith financialization.AstheworksI reviewbelowsuggest,thestatemayactas(de)regulator(e.g.definingrulesof exchange),provider(e.g.pensionsystems)orownerofservices(e.g.socialhousing), butmayalso(not)tax,(fully)fund,(partially)subsidize,borrow,lend,guaranteeor “bailout” financialactors,createoruse financialinstrumentssuchasderivativesand securities,oraffectmonetarypolicy.Yetscholarshiponmarket financializationis oftenratherignoranttotheubiquityandpluralityofgovernmentinterventions and theirdynamicsinparticular.Mostfrequently,thestateappearsasamereboundary condition,forexamplebyderegulating financialmarkets(e.g.inLazonickand O’Sullivan2000).Bycontrast,thepoliticaleconomyliteratureon “state-sponsored” financialization(Belfrage2008)hasprovidednuancedinsightsintohowthestateis continuouslyengagedinforgingmarketdynamics.Theseinsightsareimportantboth tounderstandthedevelopmentof financializationinproducerand financialmarkets,as wellasthe financializationofnon-market fieldssuchastheorganizationalrealmsof thewelfarestate.Thefollowingshortreviewfocusesonthelattercase.
Thepoliticaleconomyliteraturelinking financeandsocialpoliciesemergedin partialoppositiontoEsping-Andersen’s(1990)typologythatclassifieswelfare regimesaccordingtotheirdecommodifyingeffectonlabor.AsSchelkle(2012, p.61)notes, “thisdominanttraditionthusignoresthecommodifyingeffectthat socialpolicieshave,notablyinallowingunemployed,poor,ordiscriminatedagainst householdstoparticipateinmarketsotherthanthatforlabor” andthereby “misses thepointthatthewelfarestatespendsvastamountsontaxexpenditure” inorderto forgecapitalmarketdevelopmentinsocialpolicy fields.
Amongthebest-studiedexamplesof financializationin fieldsofsocialwelfareis theUS,andtoanextenttheBritish,socialhousing “market.” Housingisaparticularlyinterestingcaseasitis,in “assetbasedwelfare ” regimes(Finlayson2009) suchastheUSandtheUK,atthesametimeamarket,asmuchasa fieldofsocial policywithprofoundandcontinuousgovernmentintervention.Moreover,itisthe birthplaceandhabitatofkey financialderivatives,suchasmortgage-backedsecurities(FligsteinandGoldstein2012;Langley2008).IntheUS,thefederalgovernment sawtheexpansionofthemortgagemarketasanimportantsocialpolicygoal, buildingonthehopethattheincreasedavailabilityofmortgageswouldincrease thenumberofhomeownersinthecountry.Yet,duetothe “sprawling” natureofthe
2 Iacknowledgethatdynamicsinothernon-marketeconomicactors householdsinparticular are,too,ofcriticalimportanceforthestudyof financialization.See,forexample,Schwartz(2012) ontheinterplaybetweentheshiftfromdefinedbenefittodefinedcontributionpensionsystemsin theUS,individuals’ increasedhousepricespeculation,andregulation.Thatbeingsaid,myresearch questionfocusesmoreontherelationbetween finance,policyandpublicorganizations.
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