chapter  7
25 Pages

The American sub- prime homeowner consumer

Globalization meant increased economic interconnectedness that had brought with it an ‘explosion of service industries coupled with the development of a consumer culture, where people regard themselves as economic consumers as well as producers’. In this context there was much for government to do to prepare its citizens to be competitive and entrepreneurial.1 In this political rhetoric, globalization is rarely referenced as a function of financial flows, created and operated by financial systems that have been deliberately and actively liberalized. Indeed Gordon Brown’s assessment of the crisis is that it was the first crisis of globalization. Brown does not deny that there were many problems generated by British banks, such as Northern Rock and the Royal Bank of Scotland, yet the defining feature of the crisis was that it was global in nature and caused primarily by the interconnectedness of the global financial system. As he said, many European banks, unbeknownst to governments, had bought large portfolios of US sub-prime mortgages. For Brown, the ‘storm was brewing . . . [in the US] . . . and was certain to come rolling across the Atlantic’.2 Because the crisis was global in nature, a global response was required. There is no doubt that some of Brown’s prescriptions are Keynesian and progressive in nature, giving credence to academic arguments that suggest that New Labour always stood ready, if needed, to activate a coarse version of Keynesianism.3 And his message also carries with it moral indignation against the behaviour of bankers worldwide.4 Yet there remains little recognition of an active governmental role; one which sought to foster attitudes and behaviour in the population, and which required banks to provide the necessary and sufficient credit. Moreover, the parameters in which Brown discusses this crisis of globalization make it very difficult to differentiate this crisis from the global depression of the 1930s. Indeed, Karl Polanyi’s 1944 text, The Great Transformation, focuses on the role of international finance in the years preceding the Great Depression, and points to how the gold standard created destabilizing financial flows across nations and specifically across the Atlantic. To differentiate this crisis from previous banking and economic crises requires that it be understood as referring to a unique political disposition: neoliberalism. This is, of course, not to deny that financial contagion is a real phenomenon; European banks that held large portfolios of US sub-prime mortgages that had gone bad were clearly exposed to the US housing market. Alternatively, if one government faces difficulties funding its budget deficit, and interest rates start to rise, it is likely that investors will focus attention on other countries whose economies appear to be structurally similar, thus spreading a crisis from country to country. All the same, rather than being concerned with the interconnectedness of the global financial system, this chapter seeks to bring out the similarity of the neoliberal political rationality as it has been practised in relation to the consumer and household beyond Britain, specifically in the United States. The implicit point being made in this chapter is that what is global about this crisis is not globalization per se, but the rationality of neoliberalism which has been played out globally in a number of domestic contexts, and with similar results.