The financialisation of the global economy over the last 30 years had a particularly profound effect in Britain as a consequence of the historic economic and political power of the City of London writes Jonathan White in Guardian Comment.

As the Labour party meets this weekend, its leadership will come under pressure from the trade union movement to show that it has something to offer in place of the coalition's disastrous austerity programme. The TUC is gearing up to march for "A Future that Works" in the immediate wake of a congress that called for the nationalisation of much of Britain's banking sector. The unions will be demanding something more than "cuts with a human face". There is talk of the need for an alternative economic strategy. Not before time.
It's not just that we need a growth strategy to replace the coalition's scorched earth austerity policies. There are far deeper problems with the UK economy that explain how we got here and that must be tackled by any future Labour government.
The financialisation of the global economy over the last 30 years had a particularly profound effect in Britain as a consequence of the historic economic and political power of the City of London. The period following the big bang in the 1980s left our economy weak and almost uniquely dependent on a bloated financial sector. As a result, manufacturing now accounts for a mere 14% of GDP. Britain's bank debt is higher than the US, Germany or France, equivalent to 460% of GDP, and its economy lags far behind these countries in recovering from the effects of the crash in 2007.
To compound this, the financial sector has changed the way companies behave. Its insistence that capital should follow short-term shareholder value has impeded investment in industrial modernisation through research and development. Meanwhile, the City has extended its grip over large areas of social life. The housing market thrives on failing to supply enough affordable homes and City firms and private equity funds siphon off taxpayers money by milking lucrative public service contracts and trading in PFI debt.
Reversing this legacy will mean decisively breaking with the neoliberal economic assumptions that led Labour to espouse the efficiency of markets, right up to the moment where they spectacularly failed in 2007. It will mean embracing a comprehensive set of policies aimed at winning control of investment and breaking the grip of the City over political and economic life.
Many of these proposals are already widely current on the left, in the labour movement and beyond: public ownership of much of the financial sector, investment in a massive programme of house building to create jobs and kickstart growth; long-term investment in new green industries; new model public services.
But these policies cannot be cherry-picked. Instead, they must form part of a coherent strategy aimed at achieving sustainable growth, narrowing inequality, breaking the grip of the City and effecting long-term change through the strategic use of social ownership. The monetarists and neoliberals on the right in the 1980s understood the importance of ownership when they busied themselves introducing a succession of world economies to the doctrines of shock therapy. Now the left must learn the same lesson in reverse.
Ownership matters because with it comes democratic control. Labour must be prepared to fully nationalise part of the banking sector, create a democratically controlled investment bank, take public stakes in new companies in strategically important green industries or create new mutuals to enable long-term investment and planned growth. It must be prepared to build socially owned houses again and to regain public control of public services on a newly democratised basis.
None of this will go down well with New Labour's votaries at Progress. It will play even less well with their friends in the City. Nonetheless, it remains the case that if a progressive government ever really wants to get Britain working again, it must confront the immovable object in the Square Mile with the irresistible force of social ownership.