The changing role of trade unions in a financialised UK

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Master Thesis Political Science: Our Changing Global Economic Order

The Changing Role of Trade Unions

in a Financialised UK

By

Jonny Faragher

11984163

Word Count:

16803

June 2018

Lukas Linsi

Luc Fransen

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Summary

The world has witnessed some significant changes over the decades since the 1980s. These changes need to be observed and understood, as they can, and often do, challenge our current assumptions of what we believe institutions and organisations are supposed to represent. This thesis seeks to explore union behaviour through the systematic rise of finance and the demise of the trade union movement in the UK. Starting from the ‘winter of discontent’, it shows how a narrative was constructed that would lead to declining union membership, and the introduction of the self-regulating finance sector. Following that, it tracks the contribution to financialisation from New Labour, and how little the unions did to abate these changes. Finally, it turns to the unions themselves, through analysis of reports and annual accounts it argues that unions have transformed from the solidaristic

organisations to organisations that are becoming increasingly self-interested through their investment activities and subsequent behaviour. This view challenges the current

assumption across much of the literature that assumes labour unions bargain for equitable outcomes, and that this has been caused and directed by changes in the economy.

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1.0 Introduction

The last 40 years has seen the financial sector develop into an industry that has woven itself into almost every area of the economy and has become a shaping force in the behaviour of institutions. In the UK, the ‘big bang’ of the Financial Services Act 1986 is commonly regarded as the starting point for modern finance. However, many of the subsequent developments in the financial sector were enacted by New Labour under Tony Blair. This is a party that was established on a foundation of socialist principles and known for its Union based membership support. Labour unions are often prescribed as the counter-vailing force to halt financialisation, but in this instance, it seems, that has failed to be the case. This prescription comes from the fight over the distribution of resources. Labour unions are known to bargain for greater remuneration for their members. The rentiers, whom are the financiers, seek to increase their economic rents through various methods of extraction. The question then is, why did a party known for its support from trade unions go relatively unabated in implementing financial orientated policies that were against the general interests of labour?

The Supremacy of finance has led to many structural changes and behavioural shifts amongst firms, individuals, and societal organisations. This dominance has led to

‘shareholder value’ becoming the focal point of many firms’ activities, which has had a ripple effect across many sectors of the economy and the political-sphere, leading many firms changing their approach from retain and reinvest, to downsize and distribute (Lazonick & O’sullivan, 2000). Due to this change in approach, real investment and growth has

reduced and rent-seeking behaviour has taken centre stage. Non-financial firms are now less concerned with traditional production and trade as a method of obtaining profit, and more concerned with the collection of dividends and interest payments. Therefore, the rise of finance can be seen as a process of resource extraction from the real economy, with shareholders being the main recipient of the proceeds from this process, and labour being at the impairing end.

The application of shareholder value within the firm, and its custom of

short-termism, has led to cost-cutting measures being imposed that effect labour. Despite some firms registering record profits, this holds no bearing in the firm’s retention of their

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about the number of staff intended to be laid-off (Rossman and Greenfield, 2006).

Furthermore, financialised activities have led to pressure to reduce labour costs, which has led to the restructuring of employment contracts, meaning that conditions, in which

employees are subjected to, have become less favourable. What could once be regarded as ‘gig-economy’ employment practices are becoming a feature in many places of work that once offered a stable job. The glossed term for such jobs is that they provide flexible work, but what is failed to be stated is that flexible work provides the employee with none of the benefits that their more stable employed counterparts enjoy. Benefits that are excluded can include; entitlement to sick pay, paid annual leave, and guaranteed hours of work. A lot of these changes have come from modifications to labour market policy. Firms

sometimes stake the claim that the labour market might be too tight and apply political pressure in order to relax the rules. Political actors, in the hope of improving their prospects by altering statistics, often heed to such pressure in anticipation that the next

announcement of official unemployment figures provides them with some political ammunition.

So, with firms announcing record profits and laying off staff, potentially freeing up more revenue to be returned as profit, the expectation is that this should provide more opportunity for investment. However, real investment has suffered. The allocation of profits, under the shareholder value principle, usually finds itself being issued out in dividends, or being used in share buy-back programmes, also known as ‘downsize and distribute’. This has damaged the long-term profitability of firms, and like vultures, the actions of financiers have led to the demise of many companies such as Enron. Instead, investment in the economy is now, almost excessively, channelled into the financial sector. In the hope of generating above market gains, instruments such as collateralised debt obligations, mortgage backed securities, and equity purchases are now the preferred option of many investors looking for a return on their capital. Despite all of this, and how little consideration it is now afforded, the labour process is still vital for value creation within the economy (Cushen and Thompson, 2016).

Lin and Tomaskovic-Davey (2013), in analysing income inequality in the US, conclude that the increase of financialisation in the economy not only came from the lack of a

countervailing actor, such as labour unions, but that financialisation may have also contributed to the decline in labour unions. That is where this thesis will seek to further

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explore this turn of events in relation to the UK, as little as been discussed about the interplay between the two actors – the financiers and labour. A combination of dynamics has led labour unions unable to thwart the financial shifts in the economy that have occurred over the last three decades, where in a country such as the UK, that had 13 years of a trade union financed Labour government between 1997-2010, receiving as much as 60% of its funding from such sources (Hopkin and Shaw, 2016), might come as somewhat of a surprise.

It is evident that the influence of trade unions has experienced significant decline in recent times. Reduced influence can be attributed to the fall in trade union density and membership, which has witnessed steady regression over the last three decades. This has led to the belief amongst some that there has been no countervailing actor to limit the flow and effects of financialisation on the economy and on labour (Lin and Tomaskovic-Davey, 2013). In addition, the effects of globalisation in integrating global capital markets has further led to declining labour strength. It should also be noted that the extraction and channelling of capital away from the real economy has led to a decline in labours share of income (Dünhaupt, 2013). What is happening is a set of dynamic changes, where unions are no longer able to influence the way that they used to. The risk of capital flight and new legislation has led to a transformation in their behaviour. As a result, unions are developing new activities to ensure their survival, and potentially new ways in which to apply pressure. In the UK, many of the policies that were installed under Thatcher’s administration, which led to the exponential rise of finance, were not only maintained under Tony Blair’s New Labour government, but also expanded. One of the most significant changes came through granting the independence of the Central Bank from the government via the Bank of England Act (1998). In a bid to bring an end to the cyclical nature of the boom and bust, that was a feature in the economy of old, the Bank of England was granted the authority of controlling monetary policy, adhering to inflation targets through the control of the interest rate. This is quite contrasting to the Nationalisation of the bank that was undertaken by Clement Atlee’s Labour government in the post-World War period. New Labours granting of independence has, arguably, led to handing of control of the economy to the most central, and undemocratic, financial institution in the economy. Since this development, the UK’s financial sector has expanded from 12% of GDP in 1978 to around 22% in 1990, and it has continued to grow, accounting for over 30% of the UK’s GDP in 2007 (ONS, 2014). The

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Labour party can trace its origins to the trade unionism of the early 20th_{century, and still to}

this day it finds itself significantly bank-rolled by such actors. Which leads to the question why trade unions in the UK offered support to Blair’s New Labour party, and government, despite obvious differences in interests?

This question is deepened further considering the fact that, although introducing the national minimum wage through the National Minimum Wage Act 1998, why did New Labour fail to curb the use of such employment methods, even though Blair himself said in a 1995 conference speech that they would bring them to an end (Britishpoliticalspeech, 2018). It has long been stated that New Labours path to government was built on

reassurances that neoliberalism would prevail, and that there would be no increases in tax, which would certainly provide some peace of mind to the financial sector. Introducing the tax credit benefit system was one of the only expansions in passive labour market policies undertaken by Blair’s Labour government. Furthermore, there was no real increase in any of the other state benefits granted by the government. The New Labour model was built on growth and economic expansion, by doing away with the boom and bust of the past, Blair’s government presided over the longest period of sustained growth in UK’s history - 63 consecutive quarters – before the biggest economic crash in a century.

So herein lies the problem, why, when based on Thatcherite neo-liberal market principles, which trade unions were known to outright contest during their implementation, did those exact unions continue to provide funding and support to a Labour party so

insistent on enacting out those very same policies? The lack of pressure from unions, and the now expected lack of action from the Labour party, has led to financialisation

encompassing everyday life. Whilst the economy grew, so did inequality, and the balance of power shifted more and more towards the financiers. Policies that were enacted by New Labour have focused on changes to the labour market, regarding minimum wage setting and employment conditions, and changes to the financial sector, with the Financial Services and Markets Act 2000. Additionally, changing economic conditions have created an imbalance and led to the swelling of consumer-based debt. Trade unions should have surely seen this economic imbalance, and their resources firmly situated in political party funding of the Labour party, should have provided the leverage to generate political pressure, but that failed. Clearly, union behaviour in politics has changed, which asks the question, what is the role of trade unions in (UK) politics?

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Therefore, there has to be an explanation as to why, or what, was the cause for there being little objectification from unions towards New Labours policies, particularly those that aided the financial sector. It leads one to think whether there was a

mis-alignment of interests regarding policies, or if the internal power structure within the labour party prevented unions influence over policies. Furthermore, answers to these questions steer towards whether the regulatory changes to the functioning of labour unions had any effects on their operational structure or interests, or if there were significant social and economic changes that meant they had to adapt to survive. Since the introduction the Trade Union Act 1984, the behaviour of unions has steadily changed. Media publications have lambasted fat-cat union bosses as hypocrites and often condemned their militancy. Based on these assumptions, it can be hypothesised that the development of changes that unions have experienced since the implementation of the Trade Union Act 1984, has led them to becoming different organisations than what they were once commonly assumed to be. These changes in underlying assumptions could be the cause of their changing motives, and ultimately led to change regarding how they respond to situations.

This thesis will apply the following theories; the insider outsider model developed in Rueda (2005); the power resource theory adopted in Huber and Stephens (2001); and collective action by Olson (1982), which should all provide an ample framework to help in exploring these changes. The power resource theory is a comprehensive model used to analyse the distribution of power between actors within the political arena. This theory is useful in determining unions interests in fighting and obtaining equitable outcomes for their members, and their ability to do so. Whereas the power resource theory views labour as homogenous the insider outsider model distinguishes the difference between sections of labour regarding the employed and unemployed, therefore helping to deepen the analysis concerning different groups interests. It seeks to answer that if unions are not fighting for equitable outcomes for all, then what are their preferences for supporting those that are in relatively stable employment against those that are not. Finally, the incorporation of the collective action theory will provide some understanding as to whether labour unions have transformed and can now be considered self-serving organisations, or if they still seek to serve labour.

The rest of the thesis will be structured as follows. The next section will describe the theoretical framework adopted from Rueda, Huber and Stephens, and Olson in more depth.

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Through the development of its framing will help render it more applicable to the proposed discussion. Thereafter will follow an in-depth review of the literature, detailing what is already known about the financialisation process, its connection to labour, and what is currently understood about the role of trade unions in politics. Following this, the next chapter focuses on the research design and the methods that will be employed, mainly regarding the reasoning for selection of a single case study, data collection, and the qualitative assessment that will be undertook concerning the research findings. The penultimate chapter will explore and analyse the research findings, and what they tell us about the changes regarding the structure of the economy as it has become more

financialised, and the changing nature of the unions in their attempt, or lack-of, to act as labours countervailing force to stem the flow of financialisation. The final chapter will form the conclusion, where the underlying argument will be synthesised and analysed in relation to the adopted theoretical framework, and what this means for our current understanding of what labour unions are supposed to represent in a financialised economy.

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2.0 Research Design

This next section will explore what methods will be used in order to test the proposed hypothesis. First, this section will begin by exploring the decision and reasoning in the selection of the case, and why that it is best to be used in this Thesis. Second, the proposed methods that will be used will be discussed, and also extend to describe why they are the most suitable. Then, focus will extend to the data and sources that will be used, why they are appropriate, and where they will be obtained from.

Prior to discussing the decision in case selection, and due to its relative ambiguity, it is important to define what is meant by financialisation of the economy in this paper. I will borrow from and slight adapt the definition of Epstein (2001) in constructing the definition of financialisation, in which it is defined as: the increasing role of financial actors, financial markets, financial motives, and financial institutions within the economy. Due to the theoretical frameworks applied, observing the interaction in the political-sphere between labour organisations, the government, and financial institutions. The countervailing

measure imposed by labour will be viewed as: labours collective ability to bargain, influence, and direct policy towards their interests. The focus on labours ability to bargain and

influence will come through assessment of representative labour organisations, namely, labour unions. Which, under current assumptions and scholarly literature, are believed to be solidaristic organisations which represent labours interests.

This thesis will incorporate three main hypothesis that are believed to be potential answers for what the role of trade unions in the UK has become, and they are;

H1: Unions are no longer guided by the interests of whom they represent but have become organisations that represent their own self-interest.

H2: Due to changes in the labour market, unions are more inclined to protect the interests of insiders than outsiders, narrowing their interests and who they represent.

H3: Unions are still solidaristic organisations that focus on redistribution, and apply their resources to do so, but have suffered from limitations to their bargaining power.

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2.1 Case Selection

This thesis will use a single case study analysis on what can be considered as a relevant case, focusing on the Labour party in the UK, trade unions in the UK, and financialisation within the economy. The period of focus will encompass the years 1980-2010 and will extend either side of this observed period for the following reasons. First, this period is considered significant due to the inauguration of New Labour and its neoliberal orientated principles. Second, this period covers the years of Tony Blair’s premiership within the Labour party. Furthermore, analysis will extend beyond the encompassed period to provide comparative analysis of the environment prior to Blair’s appointment as head of the Labour party, as well as shortly after. This case is further intensified by the underlying assumptions of what trade unions are supposed to represent, and their relation and function within the Labour party.

In Odell (2001), he highlights several defined reasons why a single case study would be chosen, and what the scholarly benefits are in using such methods. Taking from the paper by Odell, it can be highlighted that this type of case is a descriptive case study, where there is small story to be displayed considering the interaction of actors during the observed period. This case should also illustrate the use of theory, relating to both the insider

outsider model in Rueda (2005), the power resource theory by Huber and Stephens (2001), and the logic of collective action by Olson (1971). In doing so, it should lessen the abstract nature of such theories, and highlight to the reader its real-world applicability, especially in a contemporary case. This closely links to what Odell (2001) categorises as the disciplined interpretive case. He describes, as is the reason for why the case was selected, that this type of selection occurs as the case is selected for investigation due to it being recent or intrinsically important. This type of case study is used to interpret events by applying known theories. Odell himself highlights potential obstacles and deficiencies in using such cases, one being the selective reconstruction of events in order to support a favoured theory. However, in this instance, the case is not being applied in support of the theory, more so the theory is being applied to help shed light and understanding on the case. None the less, due diligence will be in order in the information gathering and analytical

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2.2 Methods

The empirical section within this paper will deploy the use of descriptive statistics in aid of analysing structural changes that have taken place. Furthermore, this provides quantitative supplementation to the qualitative assessment. The descriptive element will mainly be formed through the creation of a database detailing the annual financial accounts of trade unions. Analysing trade union accounts allows for understanding of their financial

operations, and how they maintain functionality. The use of accounts will seek to support the argument about how Unions have changed, and whether this has potentially led to a realignment of their interests. As this thesis sees to explore unions relations in a

financialised economy, focus on the accounts will centre around the level of financial assets that are held, and what their sources of income are. In addition, such analysis should shed light on how the trade unions are responding in the decline of membership, in order to maintain sustainable operations.

Rather than solely using quantitative methods, which is likely to be highly ineffective concerning the research proposed in this thesis, the research is going to mainly use a

qualitative approach, with quantitative supplementation. This is because qualitative methods will better unravel the complex multi-faceted political structures in a country like the UK, as opposed to analysing the correlation between readily definable variables. The purpose of the qualitative methods is to analyse the political engagements amongst specified actors of interests, those are; labour unions, New Labour, and the financial class. Documents that will be examined include; labour party conference texts; Labour party election manifestos; minutes from meetings; and any correspondence that has been recorded between actors of determined importance. It is believed that by supplementing qualitative analysis through the observation of changes in government policy, particularly labour market policies and financial policies, will be suitable in being able highlight relations and changes between the variables. A qualitative approach will also aid in the construction of the narrative that this thesis seeks to build.

The final method that will be used is process tracing. This will be applied to help identify causal mechanisms between the observed variables and in understanding an outcome. Again, like the qualitative analysis, process tracing will be applied to the analysis of documents. There are two objectives with applying this method. First, it is hoped to

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provide analytical explanation in relation to the power resource theory that is being used. Second, it will provide a narrative explanation of a causal path that leads to a specific

outcome (Vennesson, 2008). As Vennesson highlights, this method is particularly important for policy reasons, particularly in analysing the link between theory and policy.

Nevertheless, that being said, there is no guarantee that deploying this method will generate success in analysis. There are some potential limits within process-tracing, some are common across many areas of social science research, including cognitive bias.

Particular caution will need to be paid to the empirical sources, ensuring that there is a high level of accuracy and reliability. The level of accuracy would need to be given to the

construction of the data set, and reliability concerning the archived files that they are representative of the events that they describe.

2.3 Data and Sources

The correct and suitable sourcing of data can be considered one of the most important elements in conducting research. By doing so allows for the comparable nature of different studies, and it restricts the likelihood of generating inaccurate findings. At present, there is no online database detailing trade union accounts in any sense. Therefore, there is a need to construct a database concerning trade union financial accounts. The database is

constructed from primary documents that detail the annual accounts of trade unions, formally known as AR21, from the years 1990-2016. While the years 2003-2016 can be found in a digitised format through the UK national archives website, the remaining had to be manually recorded and entered into the spreadsheet, and this was done by visiting the National Archives in London. This method of collection and presentation is deemed to be the most appropriate and necessary way of displaying and examining the material.

Alongside the data collected from the archives, data will also be sourced from

international and UK-based institutions. The World Bank World Development Indicators will be used as a point of reference for key economic indicators when drawing comparisons in analysis. Further data will be drawn from the Office of National Statistics [ONS], the Bank of England, IMF, and ICTWSS. The data from these sources relate mainly to economic data, as well as data concerning labour markets, and like the World Bank they are commonly used. Each of these sources is considered reliable, with the ONS and Bank of England providing

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more specific related data than other international organisations might do. It is of known importance in creating research and findings that offers a comparable quality, and it is believed by using these indicators will fulfil that requirement.

As explained in the previous section, primary documents relating to the Labour Party will be analysed. At present, these are currently located in the Peoples History Museum in Manchester. The documents detailed in this collection range from party election

manifestos, to conference speeches and reports, as well as minutes of National Executive Committee meetings. The data and information collected from these documents are what will form the basis of material for the qualitative analysis. Additionally, as mentioned prior, research for primary documents will also extend to Parliamentary acts, legislative

propositions, and debates that have taken place within the houses of parliament. It should also be said that some secondary sources will be used where analysis on the relevant discuss section has already been conducted. Sometimes this will be used in support of an original argument that is made, and in others it will be used to draw on findings to

supplement the overall argument that is being made. These will come from a range of journal articles and books, as well as online sources from respected publications.

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3.0 Theory

The role of trade unions in politics, to some at least, may be a foregone conclusion in that they represent the interest of workers, and fight to improve their position. However, subsequent political developments and transformations to the economy are probable cause to lead to wider changes in behaviour amongst different actors. The economic

transformations that are observed within this thesis specifically relate to the rise of finance. Capital is replacing labour as the favoured mode of production, and consumers greater access to finance is fuelling consumption where wages were once solely sufficient. Whether it was a cause of, or has stemmed from, economic changes, the legislative environment that shapes laws and behaviour has also changed. As a result of these changes, organisations and actors are also likely to adapt to new laws. Bearing these changes in mind, this raises the question, what is the role of trade unions in politics? Figure 1 shows the changing behaviour of unions as membership power decreases. A decrease in membership power can come from an overall decline in membership, either from legislative changes, structural economic changes, or members attitude towards to unions changing.

Huber and Stephens’ (2001) work in the Development and crisis of the welfare state empirically validates their alternative views of the State concerning PRT (p13). Their

approach contradicts the Pluralist and orthodox Marxist view of the state. These two views

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relate to the state as being the result of free interplay of different interests on a level playing field without systematic advantages for some interests, and that state policy is a result of capitalist interests alone, respectively. Instead, they offer a framework that is guided by political institutions, where state policy results from the power relations between different actors. The two different actors that shape the power relations are the capitalist interests, and the organisation of subordinated classes. Those two actors are the financial class, or rentiers, and labour organisations, such as trade unions, respectively. Of course, the former has a systematic advantage as they rely less on organisation for enforcing their articulation in comparison to trade unions. The struggle between the two actors is for distributional power, and the subsequent distribution of resources.

Assuming that unions undertake a solidaristic approach in their interests and obtain greater redistribution rights for labour - which can be referred to as the traditional view of unions – is likely to lead them into direct conflict with the rentiers. The resulting

distribution of power would be the decision of the ruling political party at the time, which is likely to be dependent on the political orientation of the said party. The traditional view is what we know unions interests are to represent such as, the fair remuneration in exchange for labours’ labour and the common ownership of public services. This is the perception of unions which most authors adopt in their analysis, particularly within the financialisation literature. This view is developed from the origin of trade unions and their formation in the late 19th_{and early 20}th_{century, seeking to improve workers’ rights and conditions. Union}

conflict with opposing classes is nothing new, during unions inception it was with the capitalist class – the factory owners of the time – and now it is with the financiers that seek to weaken workers conditions and pay, in order to improve their method of rent-seeking extraction to acquire greater distributional power.

Whilst within the PRT approach adopted here, and much of the literature concerning the labour movement in general, labour is considered a homogenous class, Rueda (2004) takes the view that labour is not a homogenous political actor (p62). This theory is designed to draw the differences in interests between different groups of labour, mainly insiders and outsiders. Insiders are those workers with highly protected jobs, and therefore not greatly threatened by high levels of unemployment (ibid). On the other hand, outsides are workers which are either unemployed, or hold jobs that offer low salaries or low levels of protection, employment rights, benefits (ibid). Each group also benefits from

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different labour market policies. Outsiders benefit from an overall higher level of labour market policies regarding regulation, and insiders potentially benefit from both active labour market policies and passive labour market policies (ibid).

The unions, in their representation of workers, and depending on who they

represent, are going to have a varying degree of interests. If we were to assume that unions were to represent the perceived different interests of insiders and outsiders, then it might provide some understanding of their behaviour in each of the situations. By assuming this, it is also assumed that unions adopt a narrow range of interest, by only representing one section of the labour class. Since insiders benefit from relatively stable and secure

employment, their representation by unions is likely to centre around protection from job losses or lobbying for a higher degree of employment protection. In a financialised economy, as will be shown, the announcement of record profits is no guarantee of job security. However, those in more high-skilled protections might not feel the need for unions, believing in their own ability and skills to offer the adequate safeguard to ensure their employment.

Unfortunately, the same cannot be said for outsiders whom are categorised by their precarious employment, often in low-skilled, service sector-based industries. As they are low-skilled, their weakness stems from the ease in which they can be replaced, and are, therefore, more likely to rely on the bargaining power of unions to safeguard and better their position. Unions, in representing outsiders, are likely to focus their attention on improving the working conditions, or terms of employment that outsiders endure. Additionally, unions may seek to lobby governments in order to gain better redistribution for outsiders in the form of improved welfare transfers. It may be brought into question, why can’t unions represent labour as a whole and why do they have to refine themselves into representing the narrow interests of different labour sections? To answer that, you have to look at the effects of globalisation, and when the demand for low-skilled labour has reduced in developed economies, and increased in developing economies, the demand for high-skilled labour has subsequently increased in developed economies. This has created an inverse relationship, where the demise of low-skilled sectors has resulted in greater

preference for high-skilled workers in the skilled employment sector.

If unions aren’t organisations that represent the narrow interests of insiders and outsiders, and don’t fight for greater redistribution for workers in general, then they can be

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considered self-interested organisations. Olson’s (1971) logic of collective action is particularly useful in analysing this type of behaviour. Olson considers it somewhat of a fallacy that groups of individuals with common interests tend to further those common interests, and paradoxically groups of irrational individuals may sometimes act in their common or group interest (Olson, 1971, p2). Self-interest behaviour is considered the rule when economic issues at are stake and self-interested individuals will not act to achieve their common or group interests (ibid, p1, p2). Olson outlines that decisions of meetings are public goods, and as the meeting becomes larger, the contribution by individual towards the public good becomes smaller (ibid, p66). It is for this reason that small leadership groups are created, and form what are known as the action taking groups. (ibid).

Unions, due to their size, are prone to suffer from the free-rider problem and are headed by the general secretary, as well as having established national executive

committees, which can be considered the action taking group. The fact that unions are structured in such a way means it is highly likely that their interests are more narrowly defined. It is the general secretary’s job to ensure that the union operates smoothly, and they receive very generous remuneration for doing so. It is likely, as is the case for the business leaders, that their interests are their self-interests and would therefore seek to better improve that. It is difficult to determine what they might be, but if they correlated personal income to union income, or union membership, then there is probable cause that the general secretary would seek to improve that element. This could come from taking a hard-line militancy approach, as some do, in the hope that it appeals to certain sections of the traditional movement. Alternatively, they could take the opposite approach, and become a more modern trade union in hoping to draw members in by not being associated with the unions of the past. On the other hand, there could be a multi-complexity of actions that could be considered for their self-interest, including investment decisions to secure their future, or to merge with other unions for the same reason, even to the disgruntlement of some members.

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4.0 Literature Review

This thesis seeks to explore what the role of trade unions are in a financialised economy. First, it will seek to unpack the relevant financialisation literature to see what it tells us about the different aspects of financialisation in an economy, and the effect it might have on labour, and economic behaviour. Second, it will also explore the related literature on financialisation and how it effects labour, labours share of income, including its discussed connection with labour unions. Finally, this will lead into what the role of trade unions in politics is, or at least, what we believe it to be. In addition, generalised assumptions will be discussed from the relevant studies, as well as unions’ responses to globalisation. Before that, it is important to reconfirm what financialisation can be considered to be. Epstein (2001) defines financialisation ‘the increasing role of financial motive, financial markets, financial actors, and financial institutions in the operation of the domestic and international economies’ (Epstein, 2001, p3). For the purpose of this thesis, this is the definition that will be adopted.

While the current literature on financialisation is usually centred on the

development of financial sectors in the economy, it is often attributed that the driving force behind financialisation, particularly in firm-focussed analysis, is the principle of ‘shareholder value’. Shareholder value has emerged as the central belief of corporate governance since the 1980s (Lazonick & O’Sullivan, 2000). The conception of shareholder value orientates firms towards short-termism, through the drive for increasing profits in the short term. Rather than retain these profits for future investment to ensure long-term growth, they are instead distributed to shareholders through dividend payments. This is likely to increase the earnings-per-share, a measure which is heavily considered by investors when making

decisions. A high earnings-per-share potentially makes a stock more appealing to investors, and therefore increases the price due to increased demand.

The ‘Shareholder value’ mode of governance has become especially prominent in Non-Financial Corporations, which are now engaging in financial activities that were once reserved for specialised financial firms. However, studies exploring how distinctive

financialised activities are connected to, or manifested in NFC’s are largely lacking (Cushen and Thompson, 2016). NFCs have come under increasing pressure from investors to

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cutting benefits and wages for workers; engaging in fraud and deception to increase

apparent profits; or moving into financial operations to increase profits (Epstein, 2001, p.7). This has led to changing relations between NFCs and Banks, with the former becoming reliant on internal finance, and seeking external finance on the open markets, leading NFCs to acquire independent financial skills (Lapavitsas, 2011). Those financial skills could be seen as an extension of what Krippner (2005) specifies as portfolio income, which is the measure of financial profits from interest, dividends, and capital gains from investments that NFCs accrue, and has been increasing relative to traditional sources of NFC income. Tori & Onaran (2017) find that increased orientation towards external finance by NFCs had a fundamental role in suppressing investment in the NFCs. This is due to the reduced

availability of internal funds acting as a constraint on future investment decisions and has led to the change from retain and reinvest, to downsize and distribute.

The changing role of central banks in the financialised economy is something that has come under the analytical lens in some of the literature. The central bank is an

institution that has gained political independence and economic authority since the switch from Keynesian economics to the American established supply-sided monetary economics. Moreover, they are now central in developing and implementing monetary policy, and are perhaps underappreciated, but are, none the less, an important player in the distribution of earnings (Morris and Western, 1999). Lapavitsas (2009) makes the claim that central banks have emerged as the dominant public institution that defends the interests of the financial sector and are the controllers of credit money backed by the state. Epstien (2001)

extensively focuses on central bank policy in the financialised era. The author highlights the obsession of inflation targeting by central banks, often with the price of generating higher unemployment in doing so. Moreover, it is stated that the independence of the central bank was designed to keep monetary policy out of the hands of labour, as well as the industrial capitalists. However, it is found that central bank independence was found to give disproportionate power to finance, and as the power of the rentiers grew, central bank policy became more guided by their interests. Later work by Epstein regarding the central bank shows that Wall Street financiers were able to influence policy, in order to maintain the bubble of the 1990s, before its eventual collapse (Epstein, 2005).

The distributional effects associated with financialisation and the central bank has led to a strand of literature that focuses on the effects of financialisation on labour, and

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labours share of income (Lin and Tomaskovic-Davey, 2013; Kus, 2012; Assa, 2012;

Dünhaupt, 2013; Martin, Rafferty, and Bryan, 2008; Cushen and Thompson, 2016; Kwon and Pontusson, 2010; Arestis, Charles, and Fontana, 2013; Guschanski and Onaran, 2018). Several studies have focused on the decline of labours share of income, but only a few have linked it to financialisation (Dünhaupt, 2013). Kus (2012) uses panel data from 20 OECD countries over the time period of 1995-2007 to analyse the effect of financialisation on labours share of income. She finds that financialisation has a positive association with income inequality, and that association is stronger in countries which have weak unions. In Dünhaupt’s study, using a cross-sectional data set of 13 countries over a time period of 1986-2007, she finds that increasing dividend and interest payments contributed to a declining share of wages in national income for labour (Dünhaupt, 2013). Lin and Tomaskovic-Davey’s (2013) paper uses cross-sectional data at the industry level and observes changes over the years 1970-2008, but only for the US. They find that

financialisation could account for over half of the decline in labour’s share of income, and they believe that the decline of unionisation meant there was no countervailing actor

representing the interests of labour. Furthermore, they claim that financialisation may even have contributed to the decline in union density. Assa (2012) broadens the analysis by focusing on the effects of financialisation on inequality, growth, and unemployment. Using panel data from the OECD, he finds that there is strong empirical evidence to suggest that financialisation has a significant negative impact on all three variables.

It’s been shown that financialisation has reduced labours share of income, but there is other literature that lends itself to focusing on financialisation and its effect on top incomes (Flaherty, 2015; Huber, Huo, and Stephens, 2017; Gomez and Tzioumis, 2006). In Flaherty (2015), the author observes 14 OECD countries from 1990-2010 through a panel analysis. The results show that distinctive mechanisms have led to the growth of top incomes, and is linked to the increased dominance of financial instruments. Additionally, the emergence of asymmetric bargaining has disproportionately enhanced the fortunes of those in the top income bracket. Huber, Huo and Stephens (2017) are more extensive in observing the top 1% in post-industrial democracies from 1960-2012. This study is of particular interest because it discredits marginal productivity and its association with income. Instead, it is stated that the income concentration towards the top is a political phenomenon, and is associated with changes in union density, top marginal tax rates, and

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investment in public tertiary education. They even go as far to say as that this growth in income is largely unrelated to financialisation and wealth accumulation. Gomez and

Tzioumis (2006) analyse the effects that union presence has on CEO compensation between 1992-2001. Results indicate that union presence does reduce CEO compensation but orientates it towards high levels of pay with lower stock options, but it does not reduce the performance sensitivity of CEO compensation when compare to non-union firms.

Some studies draw their attention towards a different labour dynamic, and the effect financialisation has had. Cushen and Thompson (2016) argue that the labour process is still vital for value creation and extraction in non-financial corporations that have become financialised. The two most notable observations in the study show that financialisation drives value extraction through squeezing labour costs and revenues, and that

financialisation is the basis of perpetual restructuring which exacerbates worker insecurity. A study by Martin, Rafferty and Bryan (2008) takes a more class-centric approach to

financialisation and links the process of financialisation to capitalist-class relations. Within their paper they view the development of financialisation similar to that of Taylorism, in the way that it is reorganising labour. Whilst not specifically focussing on financialisation, but more so on the global integration of financial markets and its effect on labour power, Kwon and Pontusson (2010), find that this form of globalisation has led to a decline in labour strength. From the discussed literature the area of financialisation and labour, particularly labour power, remain relatively unexplored and the studies that have touched on aspects of labour suggest that there is still significant progress to be made in understanding the nexus between financialisation and labour. The examination of this puzzle is further justified by the findings in Lin and Tomaskovic-Davey’s (2013) where they believe that the decline in labour unionisation meant that labour has not been able to countervail the effects of increased financialisation, and that financialisation may have even led to the weakening of labour.

Studies that directly analyse the link between unions and financialisation are limited, but Rossman and Greenfield (2006) do just that. Whilst limiting their scope to focus on the industries that concern to the International Union of Food, Agriculture, Hotel, Restaurant, Tobacco, and Allied Workers Association, they highlight that in todays financialised economy rising sales and record profits are now associated with job losses. The fact that this is happening highlights the diminishing power of unions, as in times gone by rising sales

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and profits were retained and reinvested, now firms are downsizing and distributing those profits. An important contribution from this paper is the changing view of how every business is now viewed as a financial asset and not a place of employment. Adopting such views is likely cause for changing the behaviour and operations to be in line with how success is measured. However, the most significant point raised is that with the changing shape of the economy Unions must also follow suit and change the way in which they organise and collectively bargain. They attribute the changing structure of the economy, and the fundamental power shifts that have taken place the result of financialisation.

So, considering that financialisation has gone relatively unabated since its development in the 1980s, and trade unions power has diminished, in addition to being relatively ineffective with averting the effects that financialisation has had on labour, then what exactly is their role in politics? The solidaristic goal of unions is the fight for the fair distribution of resources, which can also be viewed as a struggle for equality. Gosling and Machin (1995), analyse UK earnings dispersion across three dates, 1980, 1984, and 1990. They find the earning dispersion amongst skilled and semi-skilled workers is lower in unionised sectors than non-unionised. Adopting an international perspective, Pontusson, Rueda, and Way (2002) analyse wage distribution in 16 OECD countries between 1973 and 1995. Results show that unionisation and centralised wage bargaining primarily affect the distribution of wages by boosting the relative position of unskilled workers. Whether their goals are totally solidaristic or not, these studies show that active union engagement does improve wage distribution in sectors where they are present. Although not providing a detailed explanation as to what has caused the change, Wallerstein and Western (2000) analyse the effect of the changes in union density. They find that union density has fallen dramatically as a result of a decline in membership, and with wage bargaining becoming more decentralised, the outcome is that inequality has increased sharply. However, they state that is still unclear whether high levels of union density and centralised wage bargaining leads to lower or higher levels of unemployment.

Turning more generally to the economic roles of unions, Checchi and Lucifora (2002) find that union practices have been more centred on the protection of insiders, which they as current members, as oppose to outsiders who are seen as potential members. They also offer insights into the potential behaviour of union leaders towards labour market reforms, and that they would oppose any reforms which sought, in the long run, to drive out unions,

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and would offer support to institutions that are favourable to their activity. Analysing their behaviour in a globalisation context, conventional assumptions would hold the unions are likely to support restrictive immigration, as it would benefit insiders in times of high unemployment or economic recession. However, Avci and Mcdonald (2002) argue that unions are actually like to oppose such measures, and this is the result of the

transnationalisation of labour markets, through demonstrating increased solidarity with migrant labour. This solidarity is believed to be in response to challenges concerning their legitimacy, membership and recruitment. These two studies offer somewhat opposing analysis of union behaviour, as immigration is likely to affect the prospects of the insiders, in which Checchi and Lucifora claim unions would protect this groups interests.

Perhaps the dynamic discussed above can provide some substance to the view that Unions are complex, dynamic and hierarchical organisations. This leads to two polarising views of what unions are. At one end of the spectrum they are considered to be oligarchies, with union officials securing monopoly power to stay in office, and at the other end they are considered to be quasi-democratic, due to the presence of informal parties and the

existence of voting (Booth, 1984). Whether unions fall into either category is likely cause for a detailed analysis, but what this can tell us is that unions are heterogeneous and

complex organisations, and it is unlikely that not one assumption, or category, can underpin the behaviour of every union. Whilst the empirical literature is brief on union behaviour, there is cause and justification to expand on this line of work and focus on union behaviour in a financialised economy. In order to do this, a new way is proposed to analyse unions, and that is to include analysis of their financial accounts.

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5.0 Financialisation, Unions and the UK Labour Party

5.1 Structural Change of the 1980s

This section will explore the structural economic and political changes that occurred during the 1980’s within the UK. These changes inevitably laid the foundations for the

transformations that occurred in the subsequent decades. During this decade, and the year 1979, there are many key note developments that transpired. Such events accumulated and created a path dependent environment where it would be, simply put, impossible to revert back to the political and economic landscape which it left behind. Some of the changes that took place were part of a political dynamic, where decisions were taken that would have a lasting effect, and others were what could be considered natural economic transformations. Examples of economic transformations that can take place include the decline of industries, technological innovations, and the rising dominance of other

industries. It’s also worth considering the societal changes and social conversions that are likely to occur, either as part of a ripple effect from shifts in the political and economic dynamic, or by being a driving force behind the change itself. The social forces that derive from the actions and beliefs of the wider population are key, as they can be shaped by economic changes, and they can also apply pressure for changes in the political sphere by various means such as casting a ballot, protesting, or striking.

The 1979 ‘winter of discontent’ is a well-documented event in UK history, it was characterised by mass public sector strikes that were demanding pay rises to alleviate the stress on real-wages that was applied by the high inflation of the 1970s. Labour were the government of the time and objected to any pay increases as it could be theorised that this would only fuel further inflation. Effects of the strikes impacted almost every citizen as household waste went uncollected, left to fester in the streets, and bodies of the dead not being buried (Travis, 2009). The crisis represented a failure for then Labour government and allowed for the construction of the narrative that the trade unions were ‘holding the country to ransom’ (Hay, 1996, p255). When the 1979 general election was concluded, Margaret Thatcher and her Conservative party took a majority of seats, becoming the largest party, and forming the next government. The Conservative manifesto for the 1979 election had 5 pledges, one of which was to bring inflation under control, as well as ‘strike a fair balance between the rights and duties of the trade union movement’, in which there

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would be reform over how trade unions were allowed to operate

(Conservativemanifesto.com, 2018). Additionally, it was also pledged to help people become homeowners, a noteworthy policy, which will be discussed later. What this event shows is the changing societal attitude towards unions, and how this made the

Conservatives electable with them addressing this issue as one of their key election pledges. It wasn’t until the second term of Thatcher that the Conservatives introduced the Trade Union Act 1984. Data collected in the AIAS ICTWSS (2016) database, which calculates union density as the net membership of the proportion of wage earners in employment, shows that union density increased from 50.7 in 1979 to 51.9 in 1981, before falling to 48. 9 in 1984 (AIAS, 2016). Since 1984, union density has declined continuously, equating in 2013 to half of what it was in 1979. The 1984 act sought to curb the powers of the trade unions in the way that industrial action could be considered legitimate. It was a requirement that a secret ballot be held before calling a strike, and that a new general secretary had to be elected every 5 years (Legislation.Gov.UK, 2018a). In doing so, it became more difficult for unions to take industrial action, and it would also curb the power of militant union leaders by restricting the amount of time they could head an organisation. Furthermore, there were two other factors contributing to the decline trade unions. First, employment in manufacturing, a sector that is relatively unionised, declined as a share of total employment from 27% in 1978 to 18% by 1990 (News.BBC.co.uk, 2002). Second, from the decline in membership and contestation to Thatcher’s policies, some unions had to liquidate assets in order to keep functioning. William, Morris, and Aston (2010) provide the example of the Amalgamated Engineering Union, and how it sold about half of its fixed, quoted, and unquoted assets between 1978 and 1986 (William, Morris, and Aston, 2010, p161). During the first 7 years of the 18 that the Conservatives would be in power, unions suffered severe limitations in their ability to influence political decisions.

The decline in trade union membership and limitation of their powers conveniently came before the implementation of the Financial Services Act 1986, also known as the ‘big bang’. The act changed the financial and economic landscape, by deregulating the market it allowed for expansion of consumer credit, and the scope for tradeable financial products and services (Legislation.Gov.UK, 2018b). Data from the World Bank shows that the year after the acts implementation, stock market trading as % of GDP jumped from 18% in 1986 to 57% in 1987, and trade has averaged around 70% of GDP a year from 1987 to 2014

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compared to 10% before 1986 (Databank.worldbank.org, 2018). This increase in the trade of stocks is likely to have created a rise in the number of shareholders, as well as increase the size of investors’ portfolios. Another likely explanation for the growth in traded stocks is from the privatisation programme, which peaked in the 1980s (Davis and Walsh, 2015, p677). The idea was to reduce the size of the state and increase the size of the private sector, with flotations of on the London Stock Exchange being the favoured method of approach in selling the assets. Some of the sectors that were floated included energy, water and telecoms. What these events signify is the handing control of public services, industry and debt over to the financial sector (ibid), as well as the beginning of the shareholder value concept as we know it, as more shareholders come into existence and their level of control increases they are going to be given greater consideration and power, as is evident amongst the current financialisation literature that covers this topic.

The Financial Services Act 1986 led to the increase in structural dominance amongst the financiers, but there were also other changes that caused a change in obligations for those in the labour class. The governments right-to-buy scheme, which gave the occupiers of social housing the right to purchase their house, along with the expansion of mortgages made home ownership-occupiers increase from 10.2million to 13.4million over the decade from 1981 (Ball, 2013). However, the private sector has failed to keep up with demand and the social houses that were sold were not being replaced. By increasing the number of households in possession of an asset such as property, it is likely to have steered the expectations of those households towards increasing the value of that asset, and with demand outstripping supply, has caused growth in house prices to outpace other forms of growth in the economy, especially wages (Rogers, 2013). From 1980 to 1990, UK debt increased from 60% to 120% of GDP (Keen, 2017). The effect that the expansion of debt and home ownership has had on labour is with its ability to strike. It is likely that with the risk of losing pay or your job from taking industrial action is going to make members of the labour class more reluctant to strike when they have debts to service, as they have the fear of losing all they have built up.

The structural shifts that have been observed within this period of time have been path dependent, and it is unlikely for the UK to revert back to the economic environment that preceded it. Despite unemployment doubling following the deindustrialisation of the economy from 1979-1984 (Ball, 2013), the Conservatives were still able to win a second

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term. What this shows is that the distrust towards Unions was still a concern of the electorate, and the political beliefs and ideologies of the population firmly rested with Thatcher. Following on, into the second term the structural shifts continued, with homeownership increasing 30%, and the deregulation of the financial sector allowed for financial products and services to be developed and consumed. This became a method to aid labours consumption, allowing consumption demand to remain sufficient for economic growth and prevent any form of crippling recession which could have serious consequences for the incumbents. What has also been witnessed here is the declining influence of unions and changing obligations of the general population has fuelled their demise. Unions

relevance has dwindled as industrial action has become more difficult to orchestrate. All these changes have reduced the unions ability to influence state decisions and achieve more solidarisitc goals by bargaining for greater redistribution.

5.2 Old to New Labour 1990s-2000s

Before turning to the series of events and developments that led to the birth of New

Labour, this section will explore the financialisation that occurred during New Labour’s time in office. Policies that should have been contested by unions, and their effects, will be unravelled to understand what changes in the economy were brought about, and the effect that they had. There will also be some comparison between the implemented policies of Labour and the manifesto and policy documents that were released in the years running up to the 1997 landslide victory that granted Tony Blair and his Labour party the right to govern after 18 years of Conservative rule. Many of the measures which are used to gauge the level of financialisation in an economy, like the amount of consumer debt, or the number of mergers and acquisitions, will be incorporated to understand what the consequences of the changing relations between the Unions and Labour were, before turning to analyse that feature. Neoliberalism is often believed to be the driving force behind the policies of this time, which maybe so, but the underlying preferences are shaped by what is considered important, and, further, the dominance of sectors will determine what prevails and what is left to demise.

A key feature of a financialised economy is an independent central bank. An independent central bank has the duty of controlling the rate of inflation by manipulating the interest rate, taking all responsibility from the government. As stated within the

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literature review, it has been found that financiers have been able to influence central bank policy, in order to maintain bubbles. One of the very first acts of the New Labour

government was to grant such power to the Bank of England, through the Bank of England Act 1998. The legislation created the Monetary Policy Committee, a board of nine members whose role is to ensure that inflation is kept within the recommended government

guidelines of two percent, and to assist the economy in creating strong growth and

employment (Legilsation.Gov.UK, 2018c). Epstein (2001), makes the case that the objective of strong growth and employment will be sacrificed as the cost of maintaining the rate of inflation. However, the data shows that at no time has the interest rate risen at the same time of unemployment, and as a matter of fact, the interest rate was reduced when there was a temporary increase in unemployment between 2005-2006, although this began to increase when inflation went over two percent, but there were no further increases in unemployment when that occurred (Bank of England, 2018a; ONS.gov.uk, 2018a, 2018b). That being said, since the committee’s inception there hasn’t been a time where the economy has experienced rising inflation and unemployment like that of the 1970s, so it is still difficult to fully determine the loyalties of the central bank.

Following on from the Bank of England Act 1998, another piece of legislation that was closely related is the Financial Services and Markets Act 2000. The act established the Financial Services Authority, which is an independent regulatory body for the financial services industry and was funded by fees charged to that same industry (Legislation.gov.uk, 2018d). The regulatory body is guided by the four main objectives; maintain market

confidence and financial stability; public awareness; consumer protection; and the reduction of financial crime. It is no real question concerning the level of failure in which this authority failed, as it preceded over the regulation of a financial system that caused the largest economic downturn since the great depression. The granting of independence to the Bank of England, and this authority, detaches direct blame for the crisis from the government. But by the government detaching control, a regulatory framework has been sustained that has allowed the financialisation of the UK economy to continue to grow. Whilst the Financial Services Authority was supposed to be accountable to Parliament, its independence allowed the conditions for the crisis to develop, with no regulation over the trade of the risky derivative products which caused UK banks and their customers to be so exposed.

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The Minimum Wage Act 1998 sought to provide a national minimum to anyone who was a worker and not of compulsory work age (Legislation.gov.uk, 2018e). This policy can be considered as anti-financialisation and anti-neo-liberal, as it was the introduction of a wage floor in the labour market protecting un-unionised workers on low pay – a

characteristic of service sector employees. Trade union membership had been tumbling since the 1980s, and this could be seen as a measure to improve the wage bargaining of the low paid. However, prior to its introduction, and under previous system, before it was dismantled through the Trade Union Reform and Employment Rights Act 1993, wage bargaining used to be conducted on a sectorial basis between the unions and the sector they represent before this was abolished with the. This act puts the government at the centre of wage setting, therefore, it would be between the Unions the government to negotiate wage increases. Doing this on a country-wide basis would be complex due to the pressure on inflation, it could cause in rural areas and may actually make it more difficult to increase than the previous system. What is important, which will be reviewed in detail in the following section, is the disassociation between Labour and the Unions that would prevent any militancy or hostility from the Unions towards the Government that would be reminiscent of their relations around the late 1970s, concerning any wage setting in the future. Furthermore, the likelihood of this event was reduced even further as trade union density had continued to decline, albeit at a slower rate than previous years (AIAS, 2016).

Chart 1: Consumer credit lending excluding student loans Source: Bank of England, 2018b

0 50000 100000 150000 200000 250000 30 Ju n 93 31 M ar 94 31 D ec 94 30 Se p 95 30 Ju n 96 31 M ar 97 31 D ec 97 30 Se p 98 30 Ju n 99 31 M ar 00 31 D ec 00 30 Se p 01 30 Ju n 02 31 M ar 03 31 D ec 03 30 Se p 04 30 Ju n 05 31 M ar 06 31 D ec 06 30 Se p 07 30 Ju n 08 31 M ar 09 31 D ec 09 30 Se p 10 30 Ju n 11 31 M ar 12 31 D ec 12 30 Se p 13 30 Ju n 14 31 M ar 15 31 D ec 15 30 Se p 16 30 Ju n 17

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One of the effects from the introduction of the ‘big bang’ to financial services was the expansion of consumer credit debt. Chart 1 shows the expansion of consumer credit lending in the UK, excluding student loans. Whilst the government is not directly

responsible for the expansion of consumer credit, this is a consequence of New Labours decision to allow for the independent regulation of financial services. The enlargement of those that are able to borrow and the amount that they are allowed to borrow has, in no doubt, fuelled the increase in the number of traded financial products that are derived from such sources. Whilst consumer credit is still dwarfed by the number of mortgage-based securities, which were one of the main causes of the financial crisis, the demand for derivatives is likely to have been a factor in the expansion of the consumer credit market. On the other hand, consumer credit has allowed for consumption demand to be

maintained, allowing consumers to feel as though they still have purchasing power, and ensuring that the economy continues to grow.

Another characteristic of a financialised economy is the rate in which mergers and acquisitions occur. In the 1996 Labour party publication, they highlight that mergers and acquisitions can increase efficiency and competitiveness, and that the current system implemented by the Conservatives fails to do so (Labour Party, 1996). They propose a streamlining of the process, ensuring the bidding company does not lose out whilst the case is processed by the competition authority. Chart 2 shows the level of mergers and

acquisitions that have taken place quarterly, and whilst foreign related takeovers have

0 50 100 150 200 250 300 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Number of Mergers & Acquisitions UK

In UK by UK companies Abroad by UK companies In UK by foreign companies

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reduced, within the UK they have been increasing steadily. Due to data location difficulty, it is hard to fully determine the effect that this had on competition. However, a report by the Social Market Foundation in 2017, found that eight of the ten consumer markets they analysed were highly concentrated and dominated by a small number of large firms, with the car and mortgage market being two of the markets analysed that were not considered to be concentrated (Social Market Foundation, 2017). The measures undertaken by the Labour government appeared to have an opposite effect to the one that was hoped. By streamlining the process, the number of mergers and acquisitions have increased, but this has come at a cost to the consumer and has likely led to more oligopolistic markets. Additionally, it is also likely to have caused job losses as operations between merging companies are united.

As previously described, a key feature of a financialised economy is the notion of shareholder value. Since the publication of Milton Friedman’s 1979 article outlining that a business’ sole interest is to its shareholders, the stakeholder Vs shareholder debate has circled around the business world ever since (Gamble and Kelly, 2001). The same could be said for labour party. In their ’95 conference paper, they raise the prospect of allowing shareholders a non-binding vote on the level of executive pay-packages, to make them more transparent and open, and provide the owners of the company, shareholders, an opinion on matters (Labour party, 1995). The following year in their 1996 policy document, there is the call for companies to become the ‘stakeholding’ company, extending to

incorporate the wider collective of company stakeholders (Labour Party, 1996). However, when in power, the New Labour government opted for the former, in 2002 it announced the ‘say on pay’, and while initially the vote was non-binding, contestation to that aspect soon meant that it became binding (Culpepper, 2012). This is arguably the start of the

shareholder value ideology that is witnessed today, as shareholders have been granted power over executive remuneration packages, those executives are going to take decisions in which benefits and improves those shareholders position.

Before turning to the social and work policies that were implemented under Tony Blair, it is worth paying note to how inequality changed during the Blair years. As the UK Labour party is known for its socialist roots, it would be expected that measures would be deployed to reduce inequality and alleviate poverty. Chart 3 depicts the level of income inequality before household costs and shows that whilst there have been some periods of

The changing role of trade unions in a financialised UK

Master Thesis Political Science: Our Changing Global Economic Order