Image by Nick Chong.

Michael A. McCarthy’s The Master’s Tools is about the power that finance exerts over people. He inquires into the problem and how it could realistically be solved:

Why has finance capitalism left people worse off and further wrecked democracy along the way? Why does the financial sector increasingly determine our lives and politics… ? [H]ow might an alternative to investment for profit leave people better off, reinvigorate the demos, and rebuild democracy? (xii)

When I started reading the book I thought maybe McCarthy’s response to these questions could be better reviewed by someone whose work is directly related to them. Still it seemed like an excellent resource for someone who is seeking to learn about the subject. It soon became apparent that the point of his book — ‘democratizing finance’ (9) — calls for responses from outsiders to the author’s field.

After a few pages, I could see a connection between McCarthy’s work as a sociologist and my own as an academic lawyer: the notion of moral legitimacy. My research has grappled with ways in which aspects of legal systems embody claims (albeit imperfect) to moral legitimacy. This idea should guide analyses of interrelated systems in which power is held — financial, legal, political, among others — if we are concerned about their implications for the people who must live with them.

McCarthy contrasts the power held by the financial sector with its respectability:

Though [it] continues to occupy a dominant position in business, there are cracks in its ruling edifice. Shifts in popular opinion … have done away with any hint of finance’s moral legitimacy (6).

If, as Immanuel Kant insisted, people are moral ends who should be treated as such rather than as mere means, then the systems in which they live should be designed and operated respectfully of this inherent dignity. Accordingly, given the intensifying tendency of financial capitalism to reduce people into profit-generating instruments, it is not difficult to appreciate why, as McCarthy says, this system is afflicted with a ‘legitimation crisis’ (6).

The Master’s Tools introduces the problem in terms of moral legitimacy by illustrating the human cost exacted through the private power of financial capitalism and its extension into public power by way of political control. ‘[F]or good reason’, writes McCarthy, ‘[t]he banks, hedge funds, asset managers and insurance companies that dominate Wall Street in the US and the City in the UK are widely viewed as sources of human suffering’. The financial sector, comprised by these private entities, generates ‘tremendous upward redistribution, stagnant wages, and increased worker precarity’. It also makes ‘political economies more prone to economic volatility and hasten[s] the ecological crisis’ (6). One would have been wrong, however, if they expected that the ‘[l]oss of legitimacy’, following the 2008 financial crisis, would lead to the curtailment of ‘the power of large financial institutions’. This is because, McCarthy reasons, ‘these same institutions have also eroded democracy’ (6).

Before progressing that far, the reader can appreciate the big picture of how the moral decay fuelled by the power of financial capitalism has spread into supposedly ‘democratic’ political systems of public authority. As McCarthy puts it:

[F]ormal democratic institutions [—] the principal conduits of public policymaking are less responsive to the needs of ordinary people [—] because the [public’s voice] is increasingly [silenced] by financial power. Finance has come to occupy the driver’s seat in the economies of advanced capitalist democracies … and their financial logic radiates outward to the peripheries. They put finance at the very heart of global capitalism. The corresponding importance of credit allocation and the growth of the value of financial assets in generating income and economic activity has bent the will of politicians in its direction, with the demos rarely noticing. And this structural power is only one source of leverage. Hedging their bets … financiers flood capitalist democracies with money and........

© CounterPunch