The current economic crisis was precipitated by failings in the financial sector. But it became a structural crisis because of the permeation of financial markets and their increasingly prosaic products into all areas of society during the preceding decades. The financialisation literature was already an established approach by 2006 (Aglietta and Reberioux 2005). It explained the penetration of financial actors into the corporation (Orhangazi 2008; Froud et al. 2000), the provision of public debt (Hardie and Mackenzie 2011) and of retail financial products like credit, mortgages and pensions (Montgomerie 2009; Engelen 2006). There has also been a reassessment of financialisation since the beginning of the crisis (Dick et al. 2012; Arestis and Singh 2010). On one side, there is a thirst to reassess these phenomena against traditional schools of thought such as Marx (Lapavitsas 2011, Potts 2011) and Minsky (Dymski 2010). On the other, there have been concerns that new approaches need to replace the reinterpretation of the crisis as a validation of previous perspectives because previous analyses 'will construct the origins from within the problematic which they endorsed before the crisis began' (Montgomerie and Williams 2009: 100). Presenting financialisation and free-market policies as disembedded markets from societies may present greater regulation of financial markets as the solution, for example. But if financial capital can exert influence through its control over other social institutions, such regulatory reforms are hardly likely to be reverse the process (Konings and Panitch 2008). Furthermore, financialisation has not only decreased the role of the state in some economic senses, but also increased its capacities in others. States exercised considerable agency in legitimating new forms of hierarchy under financial capital, but then failed to regulate the markets (Watson, 2009).
Rather than encouraging states to repackage elite-sponsored rescues in new forms, here we align with a 'political possibility [that] lies in the lived experience of the contradictory effects of power' (Konings 2009: 123) and away from the centres of power. This crisis has highlighted the centrality of the everyday, common sense or cultural political economy in both the understanding of the crisis and the specification of alternative ways out of it. Here the distinction between vernacular and establishment (Shorthouse 2010), hegemony and passive revolution (Bruff 2010), masses and elites (Seabrooke 2007) highlight different dimensions of the contradiction between the elite institutions captured by capitalist interest and popular control. Culturally informed understandings and behaviours become of far greater significance as the formally sanctioned paradigms of an outgoing regime appear increasingly fraudulent (Toporowski 2009).
With these points in mind, we seek in this article to unpack the relationship between the growth in small business policy and the financial crisis. We demonstrate that the small firm has been used as a decoy to distract attention from the underlying contradictions of capitalism in the UK from the early 1970s. Diverse properties of Hayekian freedom, romantic tradition and functionalist utility have helped to mask the conflict between wage labour and capital in both executive and parliamentary discussions. More precisely, the rhetorical support for the small firm offered individualised responses to a wide range of contradictions that emerged from the process of accumulation. Rather than addressing the underlying conflicts, these were increasingly displaced through financial products, where they were amplified. The risks of capitalism where franchised to the public while its inherent conflicts were rhetorically dissolved through ideals associated with the small firm. Members of society bought the rhetoric too well, combining the ideal of the small firm with the portrayal of ever-increasing wealth from members of society acting like Icarian individuals, taking ever more financial risks and incurring ever more debt.
This trend is epitomised by the Enterprise Act (2002), which constructed individuals as small firms and sent the message that financial failure was nothing to be ashamed of but the possible consequence of people trying to better themselves. Figures presented later in the article will provide evidence of increasing financialisation of the individual (see Martin 2002), as more ordinary people turn to such provisions to wash away the stigma of debt. Such values infested the fabric of society from City bankers to shop-workers, as the opium of individual self-sufficiency and financialisation numbed society to its inherent conflicts and inequalities. The gap between rhetoric and reality gradually increased year by year to the point at which the discursive decoy of the small firm was no longer enough to distract people from the economic fundamentals, and the crisis of confidence was unavoidable.
This article fleshes out these arguments, starting with two sections that lay the conceptual foundation. The first proposes that the small firm construction presents a franchise of increasing individualisation and uncertainty to the public. The second argues that the political construction of the small firm is central to maintaining capitalist regimes of accumulation. Having established the theoretical arguments, the rest of the article explores them in the political context of the UK. This starts with a brief discussion of the approach, leading into sections that follow four 'eras' in the exploitation of the small firm, from the Industrial Revolution through to the current crisis. This starts with an 'era' that stretches from 1800 to 1970, in which the small firm construct was excluded, yet still rhetorically important in its absence. This is followed by the political invention of the small firm as a response to disillusionment with the Fordist regime, and a look at how the politics of the specificity of the small firm played out during the 1970s and '80s. The subsequent section looks at the period from the 1990s onward, when the small firm construct became denatured and linked to a myriad of political agendas to bolster an increasingly unstable regime. This leads finally to a section exploring how the denaturing of the small firm led to increasing financialisation, and political and economic crisis in the UK.
Small firm construction, individualisation and uncertainty
Some thirty years ago in this journal, Al Rainnie argued that small firms were central to the introduction of Thatcher's political agenda in the early 1980s (Rainnie 1985). As well as rescuing the UK economy from its industrial decline, small firms and entrepreneurs were being credited with having mythical capabilities for providing employment, facilitating economic restructuring and providing alternative economic strategies for local government. Since that time, the enthusiasm of policy elites for small firms or 'SMEs' (small and medium-sized enterprises) has grown beyond all imagination; indeed directories of policies now exist (European Commission 2009). Today, no pretence is made that these policies were intended to support a specific community. Rather, they became instruments to realise diverse, ambitious but highly politicised agendas of cultural change, political empowerment and international competitiveness. Many of the contradictions thrown up by the demise of Fordism have been addressed through small business or SME policies. Thus we see SME policies promoting flexible work agendas, SME policies easing the flow of credit supply, and SME policies bringing women back into the workplace. SME policies have been at the heart of the contradictions inherent in the practices of work, finance and reproduction for some time, and so have the potential to reveal insights into the origins and management of the current economic crisis.
The central failing of SME policy is that it is not clear what a small firm is. Furthermore, this inherent ambiguity has not been so much a problem as an empowering asset from the perspective of political elites. The autonomy of the state to act has been greatly enhanced by what Rainnie described as 'the 'small furry animal' approach to small business. On the one hand they have to be protected from marauding predators, particularly the trade unions, and on the other hand they are viewed as the small successors to outdated large institutions' (Rainnie 1985: 144).
During the decade or so before the financial crisis began in 2007, the extension of financial services changed the relationship between the state and individuals, requiring them to take on more financial risk (IMF 2005, O'Malley 2004, Hall 2012). During the same period, credit scoring was increasingly used by banks to manage information asymmetries and increase bank loans to small firms (Brewer 2007; Young et al. 2008; Akhavein et al. 2001; Frame et al. 2001; Berger et al. 2009). At one level, Small Business Credit Scoring provided more objective justifications for the rationing of credit to small firms. But at another, there remained controversy over whether it was the accounts and assets of the firm or the past behaviour of the owner or her household that was being evaluated (Kahn 2000; Berger and Frame 2007; Berry et al. 2004)
The lack of clarity about what the small firm interest is has not been lost on business and other literature. In political economy literature, the class--the petit bourgeoisie--has been described as 'inconstant' in interest (King 1981; Poulantzas 1975). In management literature, the assertion that the small firm is an essential form of capitalism, contingent on the personality of the owner and her society, has become an organising principle of much small business research. By ascribing management specificity as a universal principle of small firms, one characteristic has become universal (Torres and Julien...