The Social Silences and Social Consequences of Finance

Aaron Ackerley | 14 November 2018

Modern History | Political History | Economic History | British History | Media History

It is widely acknowledged that the financial system plays a central role in modern economies and that the actions of financiers can have negative effects on wider society, exemplified by the ‘banker-bashing’ that followed the 2007-08 financial crash.

How the financial system actually functions, however, remains ill-understood, due to efforts by those involved in the system to keep their activities hidden, a widespread sense that finance is too complex or too boring to deserve attention, and the lack of focus devoted to its less visible elements by large sections the media and prominent politicians. The social impacts and the destructive elements of finance – both legal and illegal in nature – need to be recognized, historically and at the present moment, by both journalists and academic researchers.

Recently making a reappearance in the news, the 1MDB scandal saw Goldman Sachs bankers use bribery to steal at least $2.7 billion from a Malaysian government investment fund.[1] The ‘cum-ex’ scandal, whereby tax authorities were tricked into paying out multiple capital gains tax rebates on the same dividends, meanwhile, has received little coverage in the UK media aside from in the financial press. Although most of the ‘cum-ex’ transactions occurred in Germany, at least ten other countries across the EU were affected and it is estimated that state treasuries have been defrauded out of up to €55.2 billion. The fraudsters were able to carry out their schemes for so long due to a lack of scrutiny of their activities.

Utilising insights from her PhD in Social Anthropology, Gillian Tett of the Financial Times has argued “it is not just what we discuss – or debate – in public that matters but what we don’t discuss that is really important, in terms of reproducing the status quo”.[2] As Tett demonstrated, the world of complex financial instruments such as Credit Default Swaps was an example of one of these “social silences”, being ignored by most of the media as it was considered too boring and technical. However, it was developments in this area which proved central to the 2007-08 financial crisis.

Undertaking my own research examining how journalists reported on the economy in interwar Britain, it became apparent that finance was often perceived as too arcane to be grasped by those who were not experts. Newspaper editors such as Geoffrey Dawson at The Times relied on their financial editors to provide advice on financial matters, alongside their reporting of events in the City of London.[3] However, many financial editors generally provided positive rather than critical coverage of the banking sector and institutions such as the Bank of England, partly because they saw themselves as providing a bulwark against socialist critics of banking, and capitalism more generally.

Personal relationships between journalists and figures such as the Governor of the Bank of England, Montagu Norman, also played a role. As the historian Robert Boyce noted, The Times financial editor Courtenay Mill “maintained a posture of critical independence towards the individuals and firms about whom he reported, while uncritically defending the City’s commercial interests. Not infrequently, it seems, he allowed his column to become the vehicle for Norman’s views”.

The behaviour of many interwar financial journalists served to preserve the authority of those in the City. It also bolstered what Geoffrey Ingham identified as a “core institutional nexus” between the City, the Bank of England and the Treasury, which for long periods of the twentieth century served to promote the interests of the financial sector over that of other interest groups.

For example, in the interwar period, a focus on low inflation and an unwillingness to allow government borrowing to fund public works programmes – what has been called ‘the Treasury view’ – suited the interests of debt holders in the City, but was detrimental to manufacturing industries, workers and the unemployed.[4]

A contemporary example of the predominance of the financial sector in Britain is outlined by Nicholas Shaxson of the Tax Justice Network: “Can an oversized City of London and the rest of Britain prosper alongside each other? Or, for the regions to prosper, must the City of London be humbled? This is perhaps the defining economic question of our times. It is a question ultimately bigger than Brexit.”

The volatile political events of the past few years emerged in part due to the ongoing economic and social legacies of the 2007-08 financial crisis. The current financial system continues to enable tax havens to function, which blurs the line between legal tax avoidance and illegal tax evasion, increases inequality, destabilises societies by starving states of tax revenue, and, as the Panama Papers showcased, allows criminals and dictators to amass large fortunes in secrecy.[5]

Opaque financial dealings and large concentrations of wealth have also enabled ‘dark money’ to influence the political process, a long-term problem in the US which also played an important role in the Brexit referendum, as journalists such as Carole Cadwalladr of the Observer and those writing for openDemocracy have revealed.

My own research examines the ways in which the workings of the financial sector were – or, as was often the case, were not – reported by the British interwar press, and how the deference shown to the City and its institutions facilitated the introduction of destructive economic policies.  Most notably, the decision to return to the gold standard in 1925 was an attempt to reclaim the City’s position as the centre of international finance which harmed British manufacturing industries and exacerbated unemployment.

Financial markets today dwarf those of the interwar period, and this has led to financial actors having more political influence and to their actions having greater repercussions across society. The historical and continuing importance of finance – both its scope and power, as well as the ways in which socially destructive activities are undertaken out of sight – is something that historians and contemporary commentators need to keep in mind even as other issues such as the rise of populist and nationalist politics understandably capture their attention.

Aaron Ackerley is a Wolfson Postgraduate Scholar at the University of Sheffield. His research examines the coverage of economic ideas in the British interwar daily press, charting how economic narratives were constructed in the newsroom, presented in print and consumed by readers. You can find Aaron on twitter at @AaronAckerley 


[1] Their accomplice, the Malaysian financier Jho Low, had earlier used money he siphoned off from the fund to ingratiate himself with Hollywood stars. In an ironic development, this included Leonardo DiCaprio, who starred as another infamous financial criminal in Martin Scorsese’s The Wolf of Wall Street (2013), and claims have even been made that some of Jho Low’s illicit money was used to help fund the movie. Tim Leissner, who worked at Goldman Sachs while the money was embezzled, has claimed that other staff at the bank were involved, and that his decision to hide his actions from the bank’s internal compliance department was “very much in line” with the general culture there.

[2] 2018 also marks twenty years since the esteemed international relations scholar Susan Strange sadly passed away. Strange’s trajectory went the opposite direction to Tett’s, as she moved from financial journalism at the Economist and the Observer to academia, where she pioneered a new focus on international political economy. Strange’s influential book States and Markets, which charted the role of international financial markets in the global system, was also was first published thirty years ago. Casino Capitalism examined a previously overlooked development, presciently pointing to the immense expansion of international financial markets, and the instability and political ramifications that would follow. Shortly before she passed away, Strange expanded updated her analysis in her final book, Mad Money.

[3] During the interwar period financial editors were usually referred to as ‘City editors’.

[4] G.C. Peden, ‘The “Treasury View” on Public Works and Employment in the Interwar Period’, Economic History Review, 37.2 (1984), pp. 167-181.

[5] In a captivating book, two of the journalists responsible for breaking the story recount how they did so, and the wide range of individuals  implicated in using such schemes, from western business and political elites, to many of Vladimir Putin’s closest associates.