Tony Norfield’s book The City: London and the Global Power of Finance provides readers with an insider’s look at the inner workings of London’s financial operations and international finance. Norfield is a Marxist, and The City elucidates an explicitly Marxist analysis of the financial system and how it relates to the broader system of global capitalist power, an aspect of imperialism about which there is very little written. Norfield makes a number of important points. First, he disagrees with writers who overemphasize the dominance of US capitalism, arguing that this stance overlooks the interests that other countries hold in the system and how they oppress weaker states. Second, Norfield stresses that the financial system is an integral part of capitalism, not an aberration as some who write about the “financialization” of capital claim. And finally, regarding imperialism and world power, Norfield asserts that access to finance both reflects economic power, and serves as a way of maintaining that power internationally.
Norfield’s first point is best illustrated by his description of the UK’s relationship to the US following World War II. While Britain has had less power in the global financial system than the US, especially since the war, to view it as merely a “satellite” of US power, Norfield argues, is incorrect. He illustrates how Britain has acted to serve its own economic interests and has found ways to play to its strengths. Throughout this period, the UK’s relationship with the United States has been a combination of both rivalry and cooperation, so while Britain accepted the dollar as the international currency following the war, it strove to generate business for British capitalism within the new dollar-dominated system. Norfield’s book explains in detail how London was able to maintain its role as the center of world finance, despite Washington’s rise to global dominance.
The City also situates global finance as a critical component to the daily workings of capitalist production. Norfield describes productive capitalists’ reliance on financial services to obtain funds, facilitate buying and selling, set up payment systems, and acquire foreign exchange for international trade. Financial securities (stocks and bonds), in turn, both assert market attitudes toward companies’ future earnings and impose market discipline upon them. Banks also play an important role by distributing capital within different sectors of commerce and industry. Additionally, the book illustrates the highly intertwined nature of industrial and financial capital, recognizing that many industrial firms are active in financial markets as well.
Echoing Marx, Norfield explains that profit is created by workers’ exploitation by productive capitalists, though financial earnings do not have to come directly from productive capital. This, he declares, obscures value relations and can lead to the notion that the revenue generated by financial capital has no relation to the productive sphere. Arguments that the 2007-08 economic crisis was a product of global finance run amok arise from this notion that the financial system operates independent from capitalist production. But, Norfield rightly claims that crisis is endemic to the capitalist system, so attempts to reign in the financial sphere will not eliminate crises. “The capitalist laws of the market are only modified, not abolished, by the financial system,” he explains. “This can lead to bigger booms, and bigger busts, than might have happened otherwise.”
The most crucial point made in Norfield’s book is the strong connection between finance and imperialism. Nations that hold a higher place in the global hierarchy of power, Norfield posits, have access to greater financial “privileges.” These privileges include access to capital or financial services at a low cost and the use of its own national currency in financial transactions. The ability to offer a wider array and less expensive financial services can attract more business, including foreign company listings, to a nation’s financial market. In Britain’s case, Norfield highlights that the revenues generated from London’s vast financial services have largely offset Britain’s trade deficit that emerged in the late 1980s. This is a useful example of how a powerful country can exercise its financial privilege to reinforce its position as a major power in the world. Similarly, being able to use its domestic currency in international transactions can reduce the monetary risk and cost to the company, particularly when exchange rates are volatile. This allows these firms to outcompete companies in weaker markets for lucrative financial deals. Having the dollar as the dominant international currency means that the United States reaps the lion’s share of these financial benefits, though other countries assert their own imperial power to establish their national currency for various international transactions.
Because the US dollar is the dominant international currency, the United States can be understood as the provider of global money. This position, Norfield explains, gives Washington a level of economic power unavailable to other nations. For one, the United States has the capacity to cut rival countries off from any transactions denominated in dollars. Another aspect is the Federal Reserve’s role in the provision of dollars to other countries that are often dependent on an infusion of dollars during times of market instability. This places them in a vulnerable position where their financial wellbeing is dependent upon US action. From this position, the United States can assert its power over weaker nations and force them to abide by its wishes without the use or even the threat of any military force.
The more powerful a nation is on the global stage the more benefits are available to its national capitalists. Norfield stresses capitalist corporations’ dependence on their national state, even the so-called “international” corporations. He argues that a corporation’s financial power depends on entitled access to credit markets and its capacity to initiate large-scale transactions. But these aspects of economic power depend on more than the company’s own abilities; they rely upon the strength of their own state in securing international transactions in the country’s national currency. This is a particular financial advantage, explains Norfield, which differs from the import tariffs and favorable investments or trade deals that a state may be able to leverage to the benefit of national corporations, though all are key ways in which corporations rely upon the state.
Norfield presents the 2000 takeover of the German mobile telecom company Mannesmann by British firm Vodaphone as an illustrative example of how a corporation’s connection to dominant imperial power reaps significant benefits. Vodaphone’s takeover was facilitated by the preeminence of London’s financial market in relation to the weaker Frankfurt, as well as Vodaphone’s close links to British and US money-capitalists as shareholders, revealing the corporation’s links to imperial power as crucial to its own economic dominance. The privileges that corporations receive from the power and actions of their national states can help to reinforce their position in the global economy, which can, in turn, provide tax revenues and rising employment and income, serving the interests of the state in this reciprocal relationship.
The City is a vital contribution to the Marxist understanding of international finance and how it is integrated within the global web of imperial power. Readers will not only gain a greater sense of how global finance works, but also the critical role it plays in the day-to-day management of power relations between competing nations.