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Finanzialization and Strategy. Narrativeand numbersMarkus Kallifatides aa Stockholm School of Economics, PO Box 6501, 113 83,Stockholm, SwedenPublished online: 30 Apr 2009.

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REVIEW ESSAY

Finanzialization and Strategy. Narrative and numbers, by Julie Froud, Sukhdev Johal, Adam

Leaver and Karel Williams, Oxford, Routledge, 2006, xviþ392 pp., £90.00, ISBN 9-78-0-415-

33418-1.

Froud, Johal, Leaver and Williams’s book contains three extended case studies of the ways in

which narratives of corporate strategy, finely subdivided into firm, industry and grand economic

stories, are reflexively related to accounting numbers and circulated among corporate managers,

analysts, consulting firms and best selling authors of how-to management books. All this takes

place in an economy in which the stock-market has become an object of interest to large strata

of society, slowly but surely turning the attention of almost everybody towards day-to-day

movements in share prices.

I felt schizophrenic about the book: in defence of my own sanity I will argue that the book is

to blame, and not me. I will begin in the mode of praise.

The studies of the histories of GlaxoSmithKline, Ford and General Electric all illustrate the

interweaving of business, politics, media and the rest of civil society in this organizational

society of ours. They do so by way of sustained empirical research, a great deal of ‘feel’ for

the field, and diligence on the part of the four authors. The case studies make great reading.

Overall, and quite explicitly, the main proposition of the book is that ‘shareholder value’ is a

rhetoric that spurs on the formation and expression of increasingly utopian managerial visions of

how radical transformations of businesses will take place and make it possible for shareholders

to reap the massive rewards to come. This contrasts rather sharply with the realities of the past

where the big corporations in the West have faced all sorts of constraints that make these narra-

tives even more unrealistic.

The study of GlaxoSmithKline shows clearly that the fate of ‘Big Pharma’ is predominately a

question of politics. Will governments, after all the major source of finance for the pharma-

ceutical industry, retain their relatively one-sided generous stance towards this particular

private industry, or will they attempt to socialize some of the profits generated from the practice

of modern medicine? All else are details really, but financial analysis of the companies proceeds

without taking that into account, focussing forever on the details rather than on the more funda-

mental preconditions for the business under analysis.

Ford is the story of a mature, slow-growth and globally competitive industry. The authors

hint at the company being in a rather dire situation with ageing plants in high-cost America.

The twists and turns of management, primarily sequences of rationalizations, ventures into

finance and international acquisitions respectively, do little to produce the numbers that analysts

are looking for. Hence, the stock is never valued along the same lines as those of Big Pharma, for

instance. Now, the analysis of Froud et al. can be underlined even more, as Ford has been posting

huge losses in recent years.

Managers can make many strategic moves (both in rhetoric and in practice) but they have a

hard time finding strategic levers to achieve profitable growth. The study of General Electric

includes an ironical non-transferable list of ‘how-to’ principles explaining the apparent, and

necessarily temporary, success of GE and its CEO ‘Neutron-Jack’ Welch. The piece de resist-

ance of the managerial strategy of GE has been the internalization of finance into an industrial

ISSN 1740-5904 print/ISSN 1740-5912 online

# 2009 Taylor & Francis

DOI: 10.1080/17405900902750096

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Critical Discourse Studies

Vol. 6, No. 2, May 2009, 153–163

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corporation. Despite the enormous growth of GE’s financial businesses, it has benefitted

from being analysed by industrial analysts, rather than analysts versed in the arts of banking

and insurance. Furthermore, GE management has benefitted from GE being regulated as an

industrial company, despite the fact that it has since long turned into a major ‘bankassurance’

corporation.

Were I to summarize the conscious or unconscious management philosophy of Jack Welch,

I could do so by citing an anonymous manager from Robert Jackall’s magisterial 1988 anthro-

pological study of the ethos and world-view of American corporate managers:

The code is this: you milk the plants; rape the businesses, use other people and discard them; fuckany woman that is available, in sight, and under your control; and exercise authoritative prerogativesat will with subordinates and other lesser mortals who are completely out of your league in moneyand status. But you also don’t play holier than thou. This last point is as important as all the others.(Quoted in Jackall, 1988, p. 97)

GE has systematically milked the industrial businesses and raped the financiers of its financial

operations. The probable using and discarding of women and other lesser mortals are beyond the

scope of study in Froud et al. The stark contrast to the precepts of ‘GE Way’ shines clearly in

their descriptions, however. One is tempted even to conceive of it as myth vs reality, and that

is where praise will turn into ‘something completely different’.

The book within the book

There is an introductory book within the book on the academic discourse of corporate strategy,

the rhetoric of ‘shareholder value’, the real processes of ‘financialization’ and broad themes in

social philosophy. This book within the book also contains analyses based on two samples of

data covering ‘giant firms’ in the United States and the UK over two decades, 1983–2002. It

is on this minor part of the book that I will concentrate, because it is there that my schizophrenic

response was rooted. I will treat it in a format appropriate to the text under scrutiny. I will hit

hard and somewhat verbosely!

In a rhetorical format that I recognize from so many other works, the authors declare:

[. . .] we could not endorse overexcited commentators who credit the narrative and performative witha near miraculous capacity to format and frame action, understanding and consequences. On thisissue, the British response to the French intellectual should echo that of Waugh’s editor to his over-bearing proprietor, ‘up to a point, Lord Copper’. (Froud et al., 2006, p. 5)

First, I must say that taking a generalizing nationalistic shot at the French does not come across

as a great idea for ‘British’ (Imperial, is it?) intellectuals ‘after Reagan and Thatcher’ (p. 5). I

prefer Marc Faber’s more individualistic approach of calling the British Prime Minister,

Gordon Brown ‘a clown’.1 Second, this summoning of anonymous straw men remains forever

a discursive device ready made for deconstructive, ‘infidel readings’. Third, Froud et al.

persist in constructing straw men, not only referring to the French, but all sorts of people:

On the evidence presented in our introduction, the top management of giant firms are not (as businessapologists maintain) hugely creative and constructive social actors; nor (as leftist critics maintain)the agents who ensure capital gains at the expense of labour. Set against our evidence that giantfirms grow no faster than GDP while CEO pay has risen much faster, top managers in giant firmsappear to be an averagely ineffectual officer class who do, however, know how to look after them-selves. (Froud et al., 2006, p. 7)

‘Business apologists’ and ‘leftist critics’ remain anonymous. Nevertheless, they do make for an

imagined discursive middle-ground to be occupied by the sound, cool-headed authors.

I shall return to what Capital and Labour has gained or lost from financialization. First, I feel

compelled to discuss the problematic of most discourse, including the book reviewed here.

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Missing the problematic

Giant firms, on average, grew with the growth of GDP, Froud et al. report. For aggregate demand

economists that is not startling news. Indeed, the growth of giant firms is a main driver of GDP

growth. Why giant firms, on average, would grow significantly faster than the rest of the

economy, I have no idea, nor do Froud et al.

What the authors furthermore fail to note is that some firms expand while others are in

demise. Since all shareholders are not perfectly ‘portfolioized’, some shareholders share the

fate of most corporate stakeholders of being subjectively and objectively tied to particular

firms rather than some average. This may well be why particular shareholders and stakeholders

alike tend to be deeply interested in the quality also of management. Everyone cannot beat the

average, of course, but some can and do. Corporate stakeholders, by and large, try to ensure the

particular giant firm in which they have their stakes belongs to the successful ones and to avoid

being among those that fail completely. The fact that, on average, giant firms grow in unison

with GDP, is not really a good reason for stakeholders to consider management an ‘averagely

ineffectual’ group of people. Indeed, it proves nothing to that effect.

On the contrary, the growth of giant firms in line with GDP (on top of being partially circular,

as giant firms make up a big chunk of GDP) is what the dominant coalition of corporate stake-

holders (major shareholders, unions of ‘core’ workers, and their political affiliates, usually the

two major political parties) have been looking for in the first place. For Western industrial

giants, especially after the hard hitting entry of new competition from Asia and elsewhere, this

translates into increased pressures to innovate on products (e.g. internet in your mobile phone,

space travel for ordinary millionaires, clothing that you can also eat), marketing (for instance,

pressing for commercial media rather than public service media free from advertising), production

processes (such as outsourcing simpler tasks to low-wage, preferably non-democratic, countries

were workers enjoy few human rights), and on finding new ways of externalizing costs of pro-

duction (shifting pollution and waste overseas for example), while retaining as much as possible

of income (e.g. by finding new ways of avoiding taxation). (See, for example, Korten, 1995.)

This is what some ‘leftist critics’ have been arguing for quite some time. Management of

giant firms is one class of people working, sometimes very hard at that, to realize this project

of continued GDP growth in the already wealthy countries. It has proven a challenging task

indeed. On average, GDP growth in the rich countries has been slowing down since the end

of the 1960s (e.g. Brenner, 2002). One should allow for the speculation at least that, without

well-trained managers, the situation would have been very different; China, India and the

rest would have been ‘catching’ up much faster in terms of GDP (if not necessarily per

capita, which includes a massive effect from reproductive patterns of the population and policies

of migration). Is it not probable that such a speculation lies at the heart of the sustained wide-

spread belief that managers are required to run companies and hence the reluctance to revolt

against the arrogance of the managerial class?

Now, in a world of global climate change, soil erosion, deforestation, species extinction, and

with death threats hanging over the Great Barrier Reef, Bangladesh, Holland and Denmark, and

with fresh water supply a major problem for billions of human beings, questioning this project of

GDP growth in the wealthy nations is probably the upcoming theme of truly critical rather than

apologetic discourse (for an example of such critical discourse, see Hornborg, McNeill, &

Martinez-Alier, 2007).

Financialized economy

Now, besides and intermingled with the real economy there has always been the financial

economy. The role of public debt in this intermingling was understood some time ago:

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The public debt becomes one of the most powerful levers of primitive accumulation. As with thestroke of an enchanter’s wand, it endows barren money with the power of breeding and thus turnsit into capital, without the necessity of its exposing itself to the troubles and risks inseparablefrom its employment in industry or even in usury. The state-creditors actually give nothing away,for the sum lent is transformed into public bonds, easily negotiable, which go on functioning intheir hands just as so much hard cash would. But further, apart from the class of lazy annuitantsthus created, and from the improvised wealth of the financiers, middlemen between the governmentand the nation-as also apart from the tax-farmers, merchants, private manufacturers, to whom a goodpart of every national loan renders the service of a capital fallen from heaven-the national debt hasgiven rise to joint-stock companies, to dealings in negotiable effects of all kinds, and to agiotage, in aword to stock-exchange gambling and the modern bankocracy. (Marx, 1867, Chapter 31)

Not even Marx could have thought that all of public debt would be consumed by gambling rather

than accumulation. That, however, is what has recently occurred. It is on this enchanted financial

plane, in the wake of enormous build-up of national debt, that corporate managers have moved

from their balancing act of the corporatist era (the stakeholder theory of the firm), and joined

hands with a growing class of money managers to increase and shift private savings away

from bank deposits and mattresses, into the hands of expanding ‘institutional investors’ (the

shareholder or agency theory of the firm). This neo-liberal transformation was remarkably suc-

cessful across a number of countries during the 1980s and 1990s (e. g. Fligstein, 2001; Blyth,

2002). The result has been exploding asset prices, be it in real estate, antiques or shares, followed

by crashes. Indeed, the monetarist pseudo-fight against ‘inflation’ has seen inflation like never

before. And in the words of a former Swedish prime minister, ‘inflation is the poor man’s

enemy’. The trouble was, of course, that this particular social democrat thought (or simply

argued?) he had curbed inflation, when in reality it was rampaging throughout his reign.

The mediators in these processes, the corporate managers and the money managers, have cer-

tainly ‘skimmed’ a big chunk of wealth from all this, as Froud et al. show with some degree

of detail, as have many others as well. Some wage labourers have become wealthy by day-

trading before each crash. Most small-time savers, however, would undoubtedly have been

‘economically’ better off by simply buying a governmental bond and holding on to it and/or

reinventing their unions in ossified disarray.

All of the above is exactly what would be meant by stating that managers have been more

than averagely effectual agents of capital, rather than ‘ineffectual’ ones. Capital, i.e. non-

productive income, such as dividends, commissions, realization profits from real estate and

antiques, has grabbed a larger chunk of total wealth. The ideological trick was to have many

wage labourers think they could become rich without working and/or fearing that the state

would no longer be able to provide pensions, etc. The combination of these politics of fear

(of old age without a benevolent state) and desire (for making it big), was the logic behind

the ‘casino capitalism’ of the past 29 years.

Although Froud et al. have produced a detailed account of some of the core processes in this

overall transformation, none of these issues that I have raised, however, was apparently enough

to catch their curiosity. They claim to be on another intellectual joint venture.

Creating the straw men

Their venture begins with the following:

The established social science discourses are generally associated with a founding doxa; thus, main-stream economics believes in the market as an allocating mechanism, just as classical sociologybelieves that stratification can be read off the division of labour. (Froud, et al., p. 21)

That would imply that Max Weber, who went to some lengths to disassociate himself from Karl

Marx in some passages of Theses on Feuerbach on the issue of stratification and the division of

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labour (ruling ideas, ruling classes), was not a Trager of ‘classical sociology’. (Indeed, Karl

Marx disassociated himself from himself on quite a number of issues, as with all true scientists,

to such an extent that Louis Althusser was later to detect the ‘epistemological break’ in his

work). With straw men like that, you simply cannot lose!

And I guess those anonymous French intellectuals have a point: performative (narrative)

actions sometimes ‘shape action, understandings, and consequences’ to a remarkable degree,

since Froud et al. have managed to secure endorsements for their book from authoritative

voices such as Michael Power and Hugh Willmott. In line with the overall tendency to inflation

in late capitalism, this book is referred to as ‘path breaking’ and ‘essential reading’. Not so fast,

Lord Copper!

Destruction of ‘strategy’, destruction of structuralism

Froud et al. provide a beautiful expose of some of the literature marketed under the rubric of

‘strategy’ and used in business schools and management seminars across the globe. Taking

off from Alfred Chandler’s Strategy and Structure, Froud et al. guide us through the debates

of the decades, clearly showing how contrasting ideas take turns as the doxa of the day. It

becomes very clear that ‘strategy’ is the preferred rubric of those who claim to have discovered

particularly robust and perhaps even invariant truths about how business success, defined as

profitability and/or growth, is achieved. In such literature, Froud et al. show, reliance is

heavy on anecdotal evidence and short on period cross-sections of firm data – often leading

to startling turns to the worse for previously upheld exemplary firms (pp. 23–25).

How can such a discourse continue to operate through institutions such as academic strategy journals[. . .] The answer is that the discourse is stabilized for the academic and business communities of stra-tegists by two intellectual devices: the first device is a heavy framing of the basic problem definitionwhich most or all strategists share; and the second device is a form of argument that makes limiteduse of empirical evidence, mainly to confirm prior identifications. (Froud et al., 2006, p. 25)

This issue was first posed at the end of the 1960s in a structuralist way by referring the present in thetext to an absent master structure such as Althusser’s concept of problematic. That creates all kind ofepistemological and practical problems about discourse as overdetermined ventriloquism and doesnot deal with more recent perceptions that discourse often involves many voices and polysemy.But it is still possible to take away the idea that strategists who disagree for example on internalor external levers of advantage may yet share common assumptions and a frame of referenceabout problem definition. (Froud et al., 2006, p. 26)

Strictly speaking, Althusser never posed ‘this’ issue; he did refer the present in the text to the

absent problematic. Exactly what epistemological and practical problems were associated

with that? Apparently not too grave ones, as Froud et al. make the main point that there are

indeed latent contents beneath the manifest in precisely the way structuralisms of all sorts

figure. The non-problematized notion of ‘the firm within a defined industry’ is a prime

example of such a notion within the ‘polysemic’ discourse of ‘strategy’. Froud et al. show it

beautifully. Strategy texts quite obviously refer to a rather fixed absent master structure.

Texts cannot, of course, be reduced only to that absent master structure, nor can their reception

by readers be assumed, among other things because of polysemia. I cannot imagine that Althus-

ser would have objected to that!

This notion of latent contents, furthermore, was clearly not proposed ‘first’ at the end of the

1960s; according to Althusser (1966/1969, and Ricoeur, 1985/1988) at least, it was proposed by

Marx! Discourse as ‘polysemic’ and ‘plurivocal’ are not ‘more recent’ notions at all. The ideas,

or notions, of ‘polysemia’ and ‘plurivocality’, are quite obviously latent content in the manifest

critique of bourgeois economics and romantic philosophy that Karl Marx pursued from a young

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age, and then, maturely in Das Kapital. The zillions of meanings given to the word value, for

instance, would be the exemplum of Marx’s analysis of polysemy and of the plurivocality of

the discourse of political economy. Beneath all this polysemy and plurivocality, however, he

discovered the absent master structure – capitalism, in short.

Althusser claimed all the above. The word polysemia, perhaps, is more recent than Marx, but

surely not more recent than Althusser! (I am tempted to point to the Afterword in For Marx, in

which Althusser makes fun of the Ecole Normale Superieure habit of making use of the ideas of

others, changing a few words, and presenting them as novelty. Althusser makes fun of his pupil

Foucault, while, of course, acknowledging the quality of his work. En passant, one would

suspect that these French always count on the British not to read backwards, being too busy

with the collection of empirical data – and with publishing or perishing.)

On page 26, it is asserted that ‘The importance of rhetoric was established by McCloskey

(1986)’. On the same page, a growing unease in me reaches its summit, when Froud et al.

pay respect to their own lineage, which apparently begins with Bachelard (1940) and ends

with Law (2002), ‘so that we now speak of a discourse called “Science, Technology, and

Society”‘. Well, I am not in that ‘we’.

Froud et al. tend to do to social thought what they accuse the discourse of ‘strategy’ of doing

to corporate practice. They use ‘vignettes’ instead of historical analyses of the likes of Alfred

Chandler, they provide no ‘systematic empirics’ and fail to reflect on refutation by events,

such as the mistreatment of literatures that I have pointed to above (and more to come

below), but, more importantly, they refuse to see what is in their own empirical materials.

‘Systematic empirics’ with regard to the discourse on ‘strategy’ would, at a minimum,

include investigating the following variables: ideas about strategy, author’s place of work,

author’s and author’s place of work’s major clients and financiers. Glancing at the qualitative

material that Froud et al. provide, and using personal knowledge, I detect an almost complete

symmetry, not only in the ideas on strategy, but also in the precise origin of them: a very

limited number of schools including the Harvard Business School. The null hypothesis to be

tested by way of ‘systematic research’ would be if Harvard Business School and its closest

rivals have ever produced ideas that can be regarded as counter to the interests of the managers

of major US corporations trained at HBS and rivals and/or providing most of their funds.

Such research efforts would be in Bourdieuian tradition that Froud et al. do claim to have

inherited. Unless such research is undertaken, how could one refute the idea of ‘classical soci-

ology’ that stratification and the division of intellectual labour is almost perfectly legible from

the division of labour, in this case the division of labour between giant firms of the United States

and the rest of the world? Is it not almost self-evident that Harvard Business School, one of the

most prestigious and awe-ful places on earth, produces ideas for those who control the biggest

economic resources, which is the reason it is awe-ful and prestigious? Is it not a reasonable

hypothesis that ‘strategy’ is one of the ‘figures of thought’ (Asplund, 1979) mediating

between the material, self-serving managerial practices within these giant firms and the idea-

tional discourses of consultants/academics?

Why relinquish the idea that discourse does tend to be epiphenomenal to practice? ‘Polyse-

mia’ in audible and legible discourse regularly hides the absent, latent, master structure, the

problematic. In this case, I have highlighted the ‘vulgar Marxist’ ‘problematic’ of increasing

funding for a number of ‘academic’ institutions in the United States. Or, have you ever seen

an article from an HBS author that explicitly states – probably truthfully – that it was produced

in order to secure income for the school or the author’s consulting firm and friends? I insist that

the notion of quite a bit of discourse as ‘overdetermined ventriloquism’ is reasonable and

remains of importance to any critical, emancipatory project. We do not have to take all texts

so seriously. Reading Michael E. Porter is not a project at par with reading Das Kapital.

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If we were to take all texts seriously, there would be no time left for political work, or the

most subversive of all: non-production, non-consumption. By the way, ‘vulgar Marxism’

comes across as ‘vulgar’ only to those who cannot come to terms with the fact that some

human beings have proven capable, not only of calculated intellectual fraud, but of calculated

atrocities such as planning for genocide and its marketing as ‘duty’ or ‘destiny’; or accepting

‘collateral damage’ from ‘precision bombings’, all for prestige and money. Althusser himself

was obviously one of those sensitive souls who could not accept the brutality of some human

beings (including him as it turned out). Hence, the insistence on the belief that ideologues

must first convince themselves before convincing others (repeated for instance by Berger &

Luckmann, 1966). What if that is plain wrong? What if ideologues, on average, are ‘in the

know’? Dare one suggest that that is what was implied in much of the work of Erving

Goffman (e.g. 1959), with the concept of ‘back-stage collusion’ as a testimony to the idea?

Behind the scenes, as it were, cynicism runs wild, along with drinking and sex. Could this be

why critical journalists (and anthropologists such as Jackall) – who prowl back stage – describe

the world so differently from academics who remain committed to studying the front stage

narratives and numbers?

None of what I have said thus far implies a rejection of what Froud et al. continue to say

concerning the profound ironies of attempts to shape ‘corporate governance’ in the United

States and the UK, and in particular, the increasing absurdities of CEO pay (pp. 49–64).

Froud et al. prefer the term ‘value skimming’ to designate the processes by which a small

number of individuals carve out a tiny percentage of huge streams of money (such as giant

firm cash flow) which amounts to enormous amounts for each individual of the well-positioned

group. Incidentally, Aglietta and Reberioux (2005) refer to those best positioned to skim

corporate value – investment bankers – as the ‘princes of finance’, and provide mathematical

modelling of the financialized economy they have co-created, showing its proneness to collapse,

such as the one we have witnessed in 2007 and onwards. Indeed, Ernest Mandel did much the

same in 1972.

However, a truly ‘new’ (or ‘less common’) Althusserian way of thinking about these endless

debates on management pay is that they potentially serve to hide the much more profound pro-

blematic of ‘economic growth’ among the already wealthy nations, perhaps to the detriment

of humanity. Mandel, for his part, argued with himself for a couple of pages about such

issues, and then decided to run with the idea that growth is good.

Insistence on ‘new thinking’

Now, apart from being French, Aglietta and Reberioux would also be scorned for being ‘political

economists’. Froud et al. insist on making the distinction between ‘cultural economy’ and ‘pol-

itical economy’. This insistence, in my view, subverts interpretation of much of their own

empirical materials, and the materials from other scholars they refer to. Despite being British,

Froud et al. engage in ‘epochalist’ exaggeration of the difference between their own research

and that of others. Instead of acknowledging that ‘political economy’ has been ‘cultural

economy’ since the writings of the Paris Manuscripts, Froud et al. twist and turn to uphold

this particular dichotomy. ‘Political economy’ is said to be interested in ‘invariant’ consequences

of ‘a new form of capitalism’, something with Froud et al. deny as they claim that ‘social

rhetoric’ is the driver of transformations (e.g. p. 65), and hence, they say, outcomes are

‘uncertain’ and ‘varied’.

The claim of varied outcomes stands in rather sharp opposition to their own findings. Ana-

logous to the strong correlations pointing to a master structure beneath the ‘strategy’ discourse,

‘financialization’ is all over the numerical and narrative materials of Froud et al. It forms

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precisely that kind of stable gestalt which ‘political economy’ has been trying to describe and

subject to devastating emancipatory critique. Such a ‘gestalt’ or Weberian ‘ideal-type’ is not

an ‘invariant’ in the real world; it is an intellectual tool for enabling investigation, understanding

and prediction of the real world. Without such then we will do very little in this world, as com-

munication would become impossible. And we simply cannot wait for micro-level studies of all

of reality before making judgements of that reality. That would doom us to the sidelines

indefinitely!

In a spirit of defiance against ‘epochal’ assertions, and of synthesis in general, Froud et al.

systematically avoid making summarizing arguments about their own materials. Were they to do

so they would be repeating the arguments of others, and adding good, sometimes excellent,

empirical illustrations to those arguments. (I would like to point to what old Marx had to say

about British empiricists and their treatment of history as ‘dead facts’.) I will give four detailed

points to illustrate.

First, the table on p. 70 is highly informative; contrary to what Froud et al. say, it clearly

indicates a one-way shift to short-termism in corporate finance. There have been more financial

assets relative to real fixed assets on corporate balance sheets. This implies, in a very law-like

manner, an increased susceptibility to financial market movements on corporate balance

sheets, and therefore, increased probability of corporate failure (for instance caused by

sudden and massive write-offs on goodwill from mergers and acquisitions). In these conditions,

pure financial effects can more easily cause bankruptcy for companies doing operative profits,

even large such profits. This seems to be to be an overwhelming, ‘invariant’ trait of present

day US and UK capitalism (e.g. Aglietta & Reberioux, 2005; Faber, continuously updated).

According to this infidel reading of mine, Froud et al. do not let themselves open to ‘verisi-

militude’, as they do not even try to predict anything. Their non-model therefore tends toward

the socially inconsequential. It implies nothing for no one, or anything to anyone (the latter

by the way is a great tactic for summoning endorsements from all quarters). The difference

should now, in 2008, be overwhelmingly clear, as the predictions of ‘political economy’ have

proven accurate indeed.

A second important point made by many authors is the idea that the processes referred to as

‘financialization’ have included increased payout of dividends, alongside exploding top manage-

ment compensation. On pp. 87–88, Froud et al. try to ignore that management compensation,

when it comes largely in the form of equity-related income, should logically be regarded as

rent to Capital, as opposed to Labour. If one prefers a model of more than two factors of pro-

duction, so be it. ‘Managerial labour’ has gained more and other labour less. This has happened

consistently over two decades in their own two samples of US and UK ‘giant firms’. Froud et al.,

however, apparently would like us to question the idea of this rather ‘invariant’ condition, rather

than believing in it.

Thirdly, Froud et al. seem to ignore that the unaltered ‘net’ dividend pay-out ratio from profits

combined with an increasing debt to equity ratio, which they talk about in other places in the

text, implies an increasing payout to shareholders relative to other recipients of corporate

income. Instead, Froud et al. question the idea from ‘political economy’ that ‘financialization’

implies increased dividend payouts. Challenging ‘political economy’ with the ‘new’ thinking

of ‘cultural economy’ takes precedence over even slight reflection on their own material and

argument. Obviously, shareholders have put in less of the capital, but received roughly the

same chunk out of profits, i.e. relatively more than other recipients of corporate income (creditors

and labour). The inclusion of the good old metric Return on Equity could have aided. For some

reason, it was not included. To complete the importance of this, let me point out that those very

creditors are now, in 2008, broke, with devastating consequences on ‘Main Street’ now that poli-

ticians remain committed to supporting ‘Wall Street’ first no matter what.

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Fourthly, the major point made in the ‘political economy’ debate on this ‘rise of finance’

(Fligstein, 2001), is that real investments tend to diminish as a consequence of financialization

(i.e. short-termism takes over). That was what the (suspiciously Irish?) Mary O’sullivan and

others were pointing out at the turn of the Millennium (e.g. Lazonick & O’sullivan, 2000).

They did so using data from much more complete surveys of the national economies, and

their claims, including those criticized by Froud et al., are either supported or questioned not

by way of data, but by way of confused arguments. For instance, Brenner (2002), an author

well known to Froud et al., makes use of economic data to an extent that Froud et al. do not

come close to mastering. When he uses official statistics to show that dividends have gone

up, Froud et al. guess that they have not, when Brenner shows that outsourcing and off-

shoring have been underway, Froud et al. guess that they have not really, and when he shows

that real investments have collapsed, Froud et al. simply ignore the question.

In putting another discursive device to bad use, Froud et al. repeatedly question the notion

that shareholder value has been good for shareholders. Well, this is precisely the point made

by Lazonick and O’Sullivan and others brandished as ‘political economists’. ‘Shareholder

value’ has been good for the money managers, and for corporate mangers, as long as stock

markets rushed upwards, as they obviously did on a couple of occasions in the past three

decades. When the predictable (i.e. not varied and uncertain) crash arrives, most of these

people have secured their massive financial wealth increases long ago by putting cash in tax-

haven bank accounts, protected by all sorts of ideology of ‘national sovereignty’ (Marxian

thought: a war on these tax-havens would be over in, say, three weeks). Shareholders, on

average, fall back to the financial position they were in before the rallies began, if not to a

much worse position. This is what ideology in most rudimentary Marxist or Weberian

meaning does: it systematically distorts reality and abuses language in the process. ‘Shareholder

value’ was never shareholder value.

Finally, after having spent quite a bit of argumentative energy on distancing themselves from

claims made by ‘politicial economy’, the authors opt for another discursive strategy:

Whether we face a new form of capitalism or not, we need to think about what is going on in adifferent kind of way. (Froud, et al. p. 69)

My reply to that is that we were indeed facing a new form of capitalism, retaining of course

many characteristics of older forms, and we did not and do not need to think about it in too

many new ways at all. We would do much better by defending insights about capitalism

made a long time ago, and repeatedly since then. Indeed, the major linguistic consequence

of capitalism is rendering notions of ‘we’ obsolete. In its perfected form, in Late Capitalism,

there would be only Me, Myself and I, for instance, thinking in ‘new’ commodified ways.

(See, for instance, Mandel, 1972/1983, on specialist idiocy in late capitalism, and his cultural

economy disciple, Jameson, 1991, on pastiche and collage as dominant cultural forms.) We do

not have to think differently. We do not really need to think much more at all. We have to act

differently.

Many good old thoughts and a few bad new ones

Since their work spans over such a broad spectrum, Froud et al. manage to repeat the same

‘epochalist’ mistake regarding the distinctiveness of their own (‘critical’ and ‘radical’ no less)

work again and again. The entire book ends with an analysis of the managerial leadership of

Jack Welch at General Electric.

The art of management here is to understand what is possible and necessary by holding the narrativeand the performative separate from the business model in internal calculation and then to bring themtogether by public association in media and market commentary. As for the CEO, he or she then

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becomes the actors who first follows the script and then learns to improvise the public rhetoric andperformance while operating an undisclosed business model. (Froud et al., 2006, p. 365)

Jackall (1988) referred to it as the managerial art of ‘dexterity with symbols’. And would it not

have been a great idea to relate it to institutionalist organization theory flooding the academic

journals since the late 1970s? The major theoretical idea of that tradition is that, in organizational

and professional society, symbolic rationalization (‘narrative’ and ‘performance’) becomes

decoupled from formal rationalization (the ‘undisclosed business model’) in a world where

organizations meet multiple, internally inconsistent, and mutually exclusive demands

(‘utopian’ ones) (e.g. Meyer & Rowan 1977). And in what way does that differ from what

David C. Korten (1996) claimed in When Corporations Rule the World, except that Korten

took an explicitly critical attitude? That is, Korten claimed that decoupling does not engender

what Weber referred to as substantive rationalization, but rather covers up for unreason. And

he hoped for change. Wallerstein (2007) does much the same.

Californian scholars, the ‘Leftist Critics’, and the French hotheads all got it long ago, and

they are still right. Narrative and performance, signs in general, have given ample proof of

their capacity to have majorities succumb quite willingly to the interests of the few (those

few who ‘know how to look after themselves’). Some still dare call it ideology and think of it

as the main vehicle of exploitation.

As in the case of GlaxoSmithKline and Big Pharma, the evidently false – yes, false, not an

alternative narrative – image of pharmaceutical giants as some kind of humanitarians-without-

borders has not met with successful criticism until at the very last moment when the costs of pills

have become so great a burden that even the most narrow-minded accountant in the Treasuries of

the nation-states or the American insurance companies could see that something would have to

be done about it all. This, I believe, is an example of what Althusser was after when he (like

Engels) maintained that beneath all the overdetermined and contradictory ideology, there is

still ‘determination in the last instance’ by the economy. That is, he remained a ‘structuralist’.

Froud et al., on their part, provide no explanatory understanding whatsoever of why the ‘Bad

Pharma’ narrative rose to popularity at certain junctions in time/space. Somehow, in the

world of ‘Science, Technology and Society’ such things ‘just happen’.

Incidentally, I am perfectly aware that this particular text is little more than an appendix to,

for instance, Martin Parker’s (1995) criticisms of the predominance of critique in the name of no

one or nothing that has become a major mode of discourse in organizational science, or Michael

Reed’s (2005a, 2005b) tirades against his opponents in basically the same (British organization

theory) debate. Then again, this British debate was never much more than a late realization of

what Foucault was after when he referred to Derrida as practising intellectual terrorism, and

laying bricks on the last line of defence for the bourgeoisie (This you can read about on

Wikipedia these days.)

Finally, Froud et al. refer to the work of Williams (1985), When was Wales, apparently a

book on the construction of ‘Wales’ as a national identity. They use that book title to ask the

supposedly analogous question ‘When was shareholder value?’ As the reader might have

guessed by now, I would like to answer with another question: When was ‘political economy’?

Note on contributor

Markus Kallifatides is assistant professor at the Stockholm School of Economics. His research spans thethemes of constructions of managerial work and leadership, corporate social responsibility, and mostrecently, corporate governance in finance-led capitalism. In English, his writings include contributionsto Invisible Management (2001, Thomson), Corporate Citizenship in Africa (2006, Greenleaf) and theco-authored forthcoming Corporate Governance in Financial Capitalism (2009, Edward Elgar).

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Notes

1. Faber was interviewed on Lateline business, Australian Broadcasting Corporation, 13 October 2008.

References

Aglietta, M., & Reberioux, A. (2005). Corporate governance adrift. A critique of shareholder value.Cheltenham: Edward Elgar.

Althusser, L. (1966/1969). For Marx. Harmondsworth: Penguin.Asplund, J. (1979). Teorier om framtiden. Stockholm: LiberForlag/Delegationen for langsiktsmotiverad

forskning.Berger, P., & Luckmann, T. (1966). The social construction of reality. A treatise in the sociology of knowl-

edge. Harmondsworth: Penguin.Blyth, M. (2002). Great transformations. Economic ideas and institutional change in the twentieth century.

Cambridge: Cambridge University Press.Brenner, R. (2002). The boom and the bubble: The U.S. in the world economy. London: Verso.Faber, M. (continuously updated). The Gloom, Boom and Doom Report, Retrieved October 6, 2008 from

www.gloomboomdoom.comFligstein, N. (2001). The architecture of markets: An economic sociology of twenty-first century capitalist

societies. Princeton, NJ: Princeton University Press.Goffman, E. (1959). The presentation of self in everyday life. Garden City, NY: Doubleday.Hornborg, A., McNeill, J.R., & Martinez-Alier, J. (Eds.). (2007). Rethinking environmental history.

World-system history and global environmental change. Lanham: Altamira.Jackall, R. (1988). Moral mazes. The world of corporate managers. New York: Oxford University Press.Jameson, F. (1991). Postmodernism, or, the cultural logic of late capitalism. London: Verso.Korten, D.C. (1995). When corporations rule the world. London: Earthscan.Lazonick, W., & O’Sullivan, M. (2000). Maximizing shareholder value: a new ideology for corporate

governance. Economy & Society, 29(1), 13–35.Mandel, E. (1972/1983). Late capitalism. London: Verso.Marx, K. (1867). Capital. Volume I. The process of production of capital, Retrieved October 1, 2008 from

www.marxists.org/archive/marx/works/1867-c1/index.htmMeyer, J.W., & Rowan, B. (1977). Institutionalized organizations: formal structure as myth and ceremony.

The American Journal of Sociology, 83(2), 340–363.Parker, M. (1995). Critique in the name of what? Postmodernism and critical approaches to organization.

Organizational Studies, 16(4), 553–564.Reed, M. (2005a). Reflections on the ‘realist turn’ in organization and management studies. Journal of

Management Studies, 42(8 December), 1621–1644.Reed, M. (2005b). Doing the loco-motion: response to Contu and Willmott’s commentary on ‘the realist

turn in organization and management studies’. Journal of Management Studies, 42(8 December),1663–1673.

Ricœur, P. (1985/1988). Time and narrative (Vol. 3). Chicago, IL: The University of Chicago Press.Wallerstein, I. (2007). The ecology and the economy: What is rational? In A. Hornborg, J.R. McNeill, &

J. Martinez-Alier (Eds.), Rethinking environmental history (pp. 379–389). Lanham: Altamira.Williams, G.A. (1985). When was Wales? London: Black Raven.

Markus Kallifatides

Stockholm School of Economics, PO Box 6501, 113 83 Stockholm, Sweden

Email: Markus.Kallifatides@hhs.se

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