Misrecognising the City

One of the reasons that the City (and the financial world in general) seems to generate so much anger is that many people seem to have little understanding of what it is and how it works.1  All they see are a small group of people getting very rich, whilst everyone else is having to tighten their belts in this new age of austerity.

But as recent commentators, including this one, have pointed out in the wake of the Greg Smith resignation: what’s new? Just as it seems to have taken Smith a remarkably long time to discover what many other people have known for years about Goldman Sachs and organisations like it, it seems to have taken the wider public an even longer period of time to (begin to) wake up to what’s been going in the City and other financial institutions for decades. Welcome to the world of finance capitalism.

Of course, the concept of finance capitalism has been around for a long time, particularly in Marxist circles. Rudolf Hilferding, for example, wrote about it a hundred years ago (Hilferding, 1910). One of the problems with finance capitalism is that it appears to give money a far greater role in the economy than classical (and neoliberal) economists would like to give it credit for. Michael Heinrich (Heinrich, 2006), and Papadimitriou and Wray (Papadimitriou & Wray, 1999) both discuss this in their respective papers.

However, I think there is an even more fundamental problem: finance capitalism reveals the true nature of the beast. Whatever people might think about industrial capitalism, i.e. the type of capitalism that Marx describes and analyses in such brilliant detail in Capital, at least it seems to be something that most people can grasp, get their head around. Industrial capitalism produces things, tangible things, that we can all see, touch and consume. We may not like to know too much about how these things are actually produced and how people suffer for them to end up on our tables and in our shops, but at least we can see the finished product and we know (because politicians and economic commentators keep telling us) that industry and manufacture are a ‘good thing’.

With the City and the financial world, however, things are a lot less tangible. It’s not that easy to grasp that a great deal of ‘real’ industry is owned by investment banks, and that there are very few (if any) ‘traditional’ capitalists left, i.e. in the tradition of the rich mill or factory owner, that employed literally armies of worker. In a world of post-Fordism and hyper-modernism, it’s becoming increasingly difficult to define what an organisation actually is, let alone who actually owns it.

Marx thought that finance would become subordinate to the demands of industrial capital. Nowadays, however, that relationship is a lot more complex and complicated. Capitalism continues to mutate and transform itself. There is even a argument to be made (I would argue) that capitalists no longer exist. As Lacan said in 1974, we are all proletarians now – because we are all slaves to capital. But then again, even Mark pointed out that the capitalist was simply a personification of capital.

This is in no ways an apology for finance capital or a justification for what goes on in the City. Rather, it is to suggest that it might be more helpful to try and understand what the City actually is and how it works, as opposed to just getting angry and outraged at a small group of people earning a great deal of money. It’s all very well to point out the toxicity of the City environment (which I along with many others have done recently), and it’s all very well to argue that the City and the financial world is being run by a bunch of corporate psychopaths (see for example Clive Boddy’s brilliant short paper on this (Boddy, 2011)). No doubt this is all true. However, in my view this is to miss a fundamental point: the toxicity of the City, the corporate psychopathology2, etc are symptomatic (in a loose sense of the word) of a particular social formation, a particular set of social relations. Whether or not there is an alternative (and more to the point better) set of social relations is another question.


Boddy, C.R. (2011) The Corporate Psychopaths Theory of the Global Financial Crisis. Journal of Business Ethics, (102), p.pp.255–259.

Heinrich, M. (2006) A Thing with Transcendental Qualities: Money as a Social Relationship in Capitalism [Internet]. Available from: <http://mrzine.monthlyreview.org/2006/heinrich031106.html#_ednref2> [Accessed 13 March 2012].

Hilferding, R. (1910) Finance Capital: A Study of the Latest Phase of Capitalist Development [Internet]. Available from: <http://www.marxists.org/archive/hilferding/1910/finkap/index.htm> [Accessed 27 March 2012].

Papadimitriou, D.B. & Wray, L.R. (1999) Minsky’s analysis of financial capitalism.

  1. And some would argue that this lack of understanding extends to those who actually work there! []
  2. As I have pointed out in a previous posting, the concept of ‘corporate psychopathology’ is problematic in itself. Certainly from a Lacanian position it has little or no meaning. In my view many so called ‘psychopaths’, corporate or otherwise are probably psychotic. []