Everyday Legitimacy and International Financial Orders.

Seabrooke, L. (2007). Everyday Legitimacy and International Financial Orders: The Social Sources of Imperialism and Hegemony in Global Finance. New Political Economy, 12(1), 1 – 18.

Shaun Balderson.

Leonard Seabrooke, in ‘Everyday Legitimacy and International Financial Orders’, asks ‘how do states build financial power in the international political economy’? The common answer to this question has a focus on the ‘big end of town’ (the stock exchange, the large banks, institutional investors and dominant corporations) or historical shifts between principal financial centres.

However, Seabrooke differs from this focus and argues that while institutions at the ‘big end of town' represent the ‘sharp end' (where financial strength is most concentrated), there are more everyday sources of financial power. This article thus goes on to argue that states not only draw financial power from the ‘big end of town', but can help to sustain their international influence by legitimating their financial reform nexus (policies of property, credit and tax) to ‘LIGs'(people below median income). By doing this, a state can broaden and deepen its domestic pool of capital, to increase its capacity to export and attract capital and have a regulatory and normative influence on its international financial order.

Seabrooke argued, to examine how legitimation processes works between the state and LIGs, we must understand the politics of collective resistance and everyday practices, which together demonstrate how changing economic and social conventions provide impulses to a state to change its financial reform nexus.

Seabrook's offered two cases and three mechanisms, in order to highlight the importance of everyday legitimations for the creation and maintenance of a state’s financial power.

Cases:

England between the 1890s and 1900s

• Here, LIGs’ disapproval increased as expectations about credit and property access increased along with tax burdens for the wealthy. Despite progressive redistribution through tax, the state was seen to have failed, in the eyes of its citizens, when it came to issues of credit and property. In this way, as expectations about credit and property access were not met - legitimacy claims cannot be said to have been conferred.
• As a result of this, there were international consequences for English imperial influence on the character of the ‘international rentier economy' - as its own domestic policies became more reliant on shaky democratic foundations.

The United States under Ronald Reagen

• Here, we witness that despite Reagan's administration's attempt at a rentier shift (that reorders political and economic relations in a socially regressive manner), the public and private contestation from LIGs provided ‘impulses for redistribution that despite dramatic increases in income inequality, generally increased access to credit and property, as well as lowering relative tax burdens.’
• The United State's propagation of changes to the financial reform nexus included a popular movement of financial innovations based on surveillance and creditworthiness. According to Seabrooke, as a consequence of this, ‘surveillance in the international credit economy increased and support of US hegemonic influence, especially in the diffusion of new financial practices...'

The United States under George Bush and Bill Clinton

• In this example, we witness how notions of individual economic responsibility (something that departs significantly from the former consensus on social liberal principles) impacts what is considered legitimate by the majority of the population. In this way, it's important to remind ourselves, as Seabrook's had earlier in the paper, that when discussing legitimacy we are not discussing the ‘good' from the scholar's perspective, but what is considered rightful and fair by the majority of the society under examination.
• In order to demonstrate this, Seabrook's bears the example of how studies often show that in the 1990s and 2000's high degrees of income inequality have been considered legitimate by the majority of the population.
• Because of individual economic responsibility (something fuelled by Bush's administration) Bush engaged with certain impulses that enabled him to launch a ‘sustained attack on LIGs across the financial reform nexus’ - including policies of i) regressive tax reforms in 2001 and 2003. ii) The weakening of credit consumer rights Acts (CRAs) provisions. iii) FMAs targeting for privations and the removal of its ability to provide cheap capital for mortgages - the legitimacy of those actions was conferred not contested.
• Simultaneously with these domestic changes, US influence in the international financial order moved from a hegemonic character to an imperialist character. According to Seabrook's, this can be seen in an increased emphasis on foreign direct investment backed by military force (Iraq), the increased use of tax havens, and a ‘shift from attracting investment to FMA securities to ever expanding US Treasury debt’.

Overall then, what we witness in Seabrook paper, is that, through tracing changes in everyday legitimations, as seen in above examples from the US and England, we are able to understand how non-elite agents are able to transform their own political, social and economic environments, with consequences for hegemonic or imperialist influence in the international political order.