Conclusion

Although the cases discussed in this book involve corporations and governments in crisis, they reveal a great deal about ordinary relations between banks, nonfinancial firms, and states and about the processes of power within them. Many of the details of these relations become public through litigation and congressional hearings, providing insight into those circumstances under which the potential power of banks translates into real and far-reaching consequences for nonfinancial firms and states. Although I cannot prove that the processes and relations uncovered here are typical in non-crisis situations, I have shown that the banks can activate and exercise that power at will. Moreover, the banking community's power to socially construct corporate reality restricts the everyday decision making of nonfinancial firms by delimiting management's choice of alternative actions.

The cases presented here also demonstrate the dialectics of fi-

nance capital relations. Initially loans expand the relative autonomy of the state by removing restrictions imposed by international aid agencies or by compensating for limited tax revenues. Loans also expand the range of discretion of corporate managers (over labor, other corporations, the state, and so on). But in the long run loan relations can restrict the relative autonomy of the state and the range of discretion of corporate managers. The sale of corporate stock forges similar dialectical relations between corporations and financial institutions that manage pension and trust funds holding those stocks. At first the stock purchases increase a corporation's cash flow, thereby broadening its range of discretion in matters such as plant relocation and expansion, merger mania, merger defense, and product development. But again, in the long run large holdings of corporate stock in pension and trust funds can severely constrain managerial autonomy if those holdings are dumped on the market.

Finally, the patterns of bank hegemony and the control of capital flows found in corporate relations also characterize relations between the financial community and governments both domestically and internationally. For example, the collective control of capital flows gave banks the power to declare St. Louis ineligible for mortgage investments, pushing that city into decline (Ratcliff 1980a, 1980b, 1980c); New York City's 1974–1978 brush with bankruptcy and its subsequent struggles with the banking community illustrate similar processes of the social construction of economic reality (Lichten 1986). The experiences of developing countries like Mexico that have tottered on the brink of default demonstrate that huge lending consortia structurally empower banks to construct the political and economic reality of whole countries, sometimes against the interests of U.S. foreign policy (see Girvan 1980; Glasberg 1987). Poland's struggle with the Western banking community in the early 1980s suggests that this power transcends not only national boundaries but ideological differences as well. Indeed, a 1979 article warned that "U.S. Banks Are Making Foreign Policy" by extending loans to foreign governments:

When many of the loans are not repaid as scheduled, these credits . . . will be recognized for what they are—disguised aid to the recipient countries. It will then be clear that foreign policy decisions have been made

by private institutions. . . . Private banks are effectively making United States foreign economic policy without public debate or oversight by elected representatives. (New York Times , 18 Mar. 1979, F14)

Why should we care about what happens when major elements in the business community do battle or when governments struggle with a collective banking community? Our jobs, our pension funds and IRAs, our financial well-being are threatened by these struggles and the power they reveal. For example, when the institutions managing our pensions and IRAs invest heavily in stocks of firms that go bankrupt or whose stock the banks dump, our funds lose a great deal. Consider that Michigan and Illinois teachers lost their entire pension fund investments in W. T. Grant Company. Workers always lose power when firms and the state struggle with a collective banking community. Mexico's workers lost jobs, wages, consumer power, and bargaining power as a result of the state's struggle with the banking community and the IMF. Cleveland's workers lost jobs and wages when Kucinich lost to Voinovich because of struggles with the banks. W. T. Grant's workers lost their jobs, their pensions, and their severance and vacation pay when that firm went bankrupt. Chrysler's workers lost jobs, wages, pension fund contributions, job security, and bargaining power in the automaker's struggle for a bailout.

The struggles and power processes described in this book also have international consequences. Development may never succeed in countries with mounting debt burdens. Struggles to avoid default invoke the imposition of IMF austerity packages that undermine development efforts as large portions of the country's gross national product transfer from development projects to debt servicing. Reductions in social welfare expenditures leave basic needs unmet. And the austerity package requirement of reductions in imports frequently means that the country cannot import spare parts for industrial production. This pattern suggests that debates on development and growth in the Third World must include an analysis of the role of international finance capital. Those of us in developed countries must also take notice, whether our country is the target or not. Cheapened labor in crisis-stricken countries may undermine workers' bargaining power and jobs in countries like the United States because it attracts runaway shops. In addition, devel-

oping countries' reductions in imports could spell trouble for the exports and balances of trade of developed countries, touching off recessions, job losses, and further reductions in labor power. Remember, too, that the United States is now the largest debtor nation in the world. What happens to Third World debtor countries can happen here as well, with the same consequences for labor.

What can we do? The cases described in this book imply a potential source of power and participation for labor. Pension funds represent the single largest source of investment capital in the world (Rifkin and Barber 1978). Right now banks administer this vast pool of workers' deferred wages. Should labor resume control of its own pension funds, it would be able to offer an alternative to banks' hegemonic control of capital flow relations. Consider, for example, how different the resolution of Chrysler's cash flow shortage might have been had the UAW controlled its own pension funds. The ability to offer a competitive source of finance capital would have strengthened labor's bargaining position with Chrysler, the state, and perhaps the banks. The union might have lost far less as a result. Indeed, it might have gained a greater voice in the firm's decision-making processes in exchange for bailing out the firm.

Federal deregulation of the banking industry in the United States has intensified the power of collective purse strings by contributing to the concentration of capital flows, as large commercial banks take over small savings and loan associations and force others out of business. Fewer banks mean less competition and greater hegemonic control of finance capital resources. A return to federal regulation would allow the state to reverse this increasing concentration of capital and power in the banking industry. Regulation and labor control over pension funds could alter capital flow relations and the processes of power, which in turn could alter the consequences of those relations.