The Asset Basis of Structural Power: Finance Capitalism, Democracy and the Dollar

Michael McCarthy, Marquette University

This essay argues that a feature of finance capitalism in advanced capitalist democracies like the US and the UK is greater geographic mobility of a portion of the income producing assets. This increased capacity for capital exit and flight from a political territory alters the character of the political power of capital. It makes three interlocking arguments to develop this view. First, using the metaphor of a game, it argues that the character of the wealth assets in a country’s accumulation model helps to lay out possible “moves” available to capital holders and hoarders in politics. It suggests that when income producing assets are primarily fixed in the territory, as occurred in the mining-intensive Chilean case under Allende, structural power exercised in the form of disinvestment can turn violent as wealth holders have to stay and fight to defend their asset claims. Yet when capital assets are mobile, as in the French case under Mitterrand, structural power will be exercised primarily in the form of capital flight. Second, comparing trends in relative sectoral size, the characteristics and governance of non-financial firms, and household wealth in the two centers of finance, the US and the UK, it argues that contemporary finance capitalism has enhanced the international mobility of income producing assets. Finally, it argues that the global financial system creates profound interdependencies and a state’s location in the global political economy further conditions the capacities of actors exercising structural power. As in the French case, in states whose currency is more vulnerable to global financial flows, the structural power of finance will be more powerful and a greater threat. However, because the dollar functions as the world’s reserve currency, policymakers in the US have mechanisms available to mitigate likelihood of currency devaluation through destabilizing capital exits.

No extended abstract or paper available

 Presented in Session 212. Global Money, Finance, and Neoliberalism