Can We Remake Finance?

Can We Remake Finance?

We have witnessed the destructive effects of financialization. Can the millions held in bank deposits, corporate equities, and bonds be used instead to provide for society’s most pressing needs?

Democracy in Default: Finance and the Rise of Neoliberalism in America
by Brian Judge
Columbia University Press, 2024, 352 pp.

The Master’s Tools: How Finance Wrecked Democracy (and a Radical Plan to Rebuild It)
by Michael A. McCarthy
Verso Books, 2025, 272 pp.

While there is a broad consensus that we have been living in a neoliberal era since the late 1970s, there is little agreement on what to do about it. Authors on the left often come to diametrically opposed conclusions on questions of strategy. A case in point are new books by Brian Judge and Michael A. McCarthy. Judge ends his book, Democracy in Default, by arguing that proposals to democratize the financial system, including a set of reforms that I put forward with Robert Hockett in Democratizing Finance (2022), are incapable of effectively challenging neoliberal hegemony. In The Master’s Tools, on the other hand, McCarthy elaborates a strategy to use the financial system—the master’s tools—to dismantle the power of markets and oligarchs.

Judge’s book begins promisingly with a critique of the literature on neoliberalism. He argues that most existing analyses on the rise of neoliberalism are agent-centered: they explain the adoption of neoliberal policies—including greater reliance on markets, public-sector austerity, and more lenient regulation of business—as the result of the lobbying and funding of right-wing businesspeople, or the political efforts of Ronald Reagan and Margaret Thatcher, or the theories of Friedrich Hayek, Milton Friedman, and James M. Buchanan. He labels these accounts “neoliberalism by design” and insists they are unable to explain the extraordinary success of the neoliberal project and its feline ability to survive multiple reported encounters with its own death.

Judge reverses the standard causal story in which the rise of neoliberalism leads, both nationally and globally, to rapid financialization (the expansion of the portion of the economy devoted to financial activities like buying and selling stocks, bonds, derivatives, and other assets). Judge argues instead that financialization preceded and largely drove the rise of neoliberal policies and ideas. He shows that politicians from both major U.S. parties opted for financial measures as a way to solve intensifying distributional conflicts between capital and labor in the 1960s and 1970s—a moment when the postwar growth model based on suburbanization, cheap oil, and military spending was exhausted.

One of Judge’s examples is the creation of new government-sponsored enterprises (GSEs) in the late 1960s whose task was to purchase mortgages from banks, so that financial institutions could get older mortgages off their books and increase the number of new ones. These GSEs pioneered the process of bundling mortgages into bonds to sell to investors. It was similar collateraliz...