Financialisation, Social Investment and Europe’s Social Question

Dr Charles Dannreuther
University of Leeds

The Research Idea

Scholars from England and Denmark will discuss the relationship between financialisation and social innovation in contemporary welfare provision. While the financial crisis has accelerated reforms in welfare provision in Europe, many of these changes had their origins in the 1990s. During this period categories of class and conflict were reframed as social constructs in a sociological turn in economic and political theory. In practice the rejection of these categories was explained with reference to exogenous structural changes in society, economy and the state through phenomena like globalisation. Our thesis is that financialisation – the extension of financial practices, interests and norms into new places and levels of activity – offers a better explanation for how social support is now provided, how welfare is defined and how desert is understood. We will ask: how have the institutional innovations in social investment introduced in the pre-crisis period performed during and after the financial crisis? How have debates about the financial crisis reshaped the perception of social investment? How did the extension of financial practices influence the articulation of social policy need and interest both before and after the crisis? The small group brings researchers on the financial crisis with researchers on social innovation policies. They will share post Keynesian economics, international political economy and public policy to help understand how material interests have been reframed through financial innovations to change the role and meaning of welfare. This will relink material with the social to enable sustainable welfare in Europe.


Many European welfare states have adopted social investment programmes (Midgely & Tang 2001). The social investment perspective was advocated by intellectuals (Giddens 1998; Esping-Andersen 1999) as a departure from the post-war male breadwinner welfare state and its 1980s neo-liberal successor of labour market deregulation and welfare retrenchment. Social investment would prepare individuals, families and societies to adjust to new social risks such as labour market change (Rubery, 2011) giving social policy a ‘productive function’ (Hemerijck, 2013: 37). Yet despite decades of change based on these policies even work is not enough to sustain basic living standards (Commission 2014).

Ideas, models and narratives have been seen as central to welfare reform (Viz & Van Kersbergen 2012), social investment policy (Jordan 2012) and the framing of recipient identities (Conroy 2013). These approaches argue that ideas are causal beliefs that guide action (Béland and Cox, 2011), a view shared in recent explanations of the financial crisis (Jessop, etal 2014). Yet ideas hide complex power relations, moral agendas (Sutcliffe-Braithwaite 2012) and are limited in their applications (Jackson 2010), ignoring how markets that deliver services are themselves complex social relations informed by power relations of gender, family and work (Ingold and Etherington, 2013). Social investment policies offered respite against globalisation, but did so by extending financial practices to create new forms of asset based welfare (Finlayson 2009) that amplified the damage of the financial crisis (Stockhammer 2004).

Ideas in themselves are insufficient in explaining welfare reform and the role of financial practices within it.

The Focus

Our approach examines how real life problems have been redefined as financial as problems. By beginning from this question and then unpacking how financial practices have redefined social relations our research will show how the real life problems have been offered as financial opportunities for financial investors seeking low risks and high returns, favourable corporate structures that offer significant, revenue streams for intermediaries and banks seeking to securitise other debts and whole new markets that can be exploited by cash rich companies.

We will integrate expertise on financialisation (Brown, Dannreuther) with changes in social and welfare provision from a gender (Weiss) corporate (Horne) service delivery (Ingold) and practitioner (Ingold and Dannreuther) perspectives. In this way we are able to explore not only how policy innovations relate to financial practices but also how these interact with other structuring variables that influence policy change.

We will do this in three steps. First we will examine how SIPs have performed in a number of key areas (eg the supply of microfinance to encourage self employment) and examine how these have performed against their defined objectives. Second we shall examine how the framing of these innovations was influenced by institutional practices – such as audit, benchmark compliance, formal evaluation –developed in relation to financial sector activities and discuss how this occurred. Finally we shall examine how ideas (theories, semiotics and morals) used to justify shifts in social investment privilege financial practices such as valuing bonds and securitizing debt over realising social need.

Theoretical Novelty

The conceptual innovation will be to engage with the meaning of social need under financialisation by critically examining the use of “social need” in the reform of welfare policies and its redefinition over time. An important starting point will be to consider the historical determination of need within particular periods of capital accumulation and examine how these have been redefined and constructed in relation to particular moments of political conflict and economic crisis. During these periods different realities prevail and become institutionalised as truths through the practice of representation and evaluation. Financialisation introduces an important additional dimension of time. The incentive for financial actors to redistribute social costs over time separates social need from social policy in a number of ways. For example, it separates the place in which the need is experienced from the community that absorbs the cost of supplying them. Rather than integrating social need with political community, financial practices isolate the need in the form of an asset like a bond that can be packaged with senior or junior debt to create anonymous tradable commodities. We shall examine how this part of the financialisation process renders place meaningless by examining how compliance with social innovation agendas has weakened the European Social Model across the EU. A similar theme will be to explore the how the working life, once regulated by labour law, has been transformed through the need to repay debt and to find ways of supplementing eroded pension provision.


Our group draws on a wide range of approaches that fit within the broad category of heterodox political economy. These include Marxism (Horne), post Keynesian economics (Brown, Jespersen), political science (Dannreuther), sociology and labour economics (Ingold). We also have a wide range of empirical studies to draw from the FESSUD project (Brown), from the COST Action (Dannreuther) and from the two perspectives of Denmark and the UK. In addition two of the participants have worked in public administration which offers a practical dimension to the study.

While inter disciplinarity is an important asset to a discussion we are also aware of the problems of ill disciplinarity. For these reasons we shall organise the workshops around specific themes that will enable us to bring findings from our previous research to the discussion. This will ensure that we do not sacrifice analytical rigour in our discussion. We shall therefore examine how performance of SIPs has been evaluated using economic sociological and political science analyses. In exploring the role of institutional practices in creating and asserting financial notions of reality in social policy practice we shall again draw on our respective disciplinary knowledge. Finally we shall examine how the ideas that have informed social investment policy agendas reflect economic interests, social interests and those of political actors.

Work Plan

The group will meet once in Leeds and once in Roskilde. The first meeting will allow us to present drafts of papers that will assess the relationship between financialisation and social investment policies in Europe. At this first meeting we will discuss how we conceptualise the relationship between financialisation and social investment. This will take the form of us introducing the analytical problem that we wish to interrogate and relating this to the main social need that the policy intervention is intended to address and the need demonstrating how this has been constructed to relate to the financialisation process. This will also offer us the opportunity to both clarify how we understand the terms “financialisation” and “social need” and to locate the research papers within a broader understanding of materialism in contemporary social science.

At the second meeting we shall present first drafts of the papers and invite broader discussion from colleagues. At this session we shall also investigate and strengthen our understanding of a materialist research agenda as well as specifying future research funding (such as a COST Action) and publications (in a special issue of Economy and Society of Cambridge Journal of Economics).


We aim to highlight the link between welfare reform and the process of financialisation which have to date been largely treated as separate phenomena. By identifying the various ways through which this interaction has taken place and focusing on the conceptual as well as the empirical foundations to these interactions we aim to promote a rethinking of what the social means in Europe. The idea of the social has been overly located in national compromises (as the varieties of capitalism describe) rather than in transnational social needs. The redefinition of social need has been dramatically influenced by the interests of the dominant players of the financial markets, whose interests define the scope of possibility in welfare policy under austerity. By reimagining the idea of the social, and drawing on a broad range of social science, comparative expertise and academic and practitioner experience, we aim to help reframe what society and social policy can mean in Europe today.

  • Dr Laura Horn Roskilde University
  • Professor Jesper Jespersen Roskilde University
  • Dr Stefanie Wöhl University of Vienna
  • Dr Jo Ingold University of Leeds Business School
  • Dr Andrew Brown University of Leeds