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Debt, complexity and the sociological imagination
Lisa Adkins
Introduction
Since the financial crisis of 2007-08 there has been a growing interest within sociology as well as within allied social science disciplines in debt and indebtedness. This has resulted in a range of analyses which, in various ways, attempt to outline the social conditions of indebtedness, that is, to define or map indebtedness in sociological terms. In so doing, such analyses have touched on a range of critical issues including austerity, the expanded powers of financial and banking institutions, and the relationship between the state and financial capital. In this chapter, I will suggest that to date much of the sociological engagement with debt and indebtedness has been limited by a number of issues. This includes a failure to engage with the dynamics of finance and finance markets and especially the long-term and embedded process of the transformation of debt into liquidity. It also includes the operation of the assumption that debt possesses particular properties or capacities in regard to the social, as well as the supposition that debt, particularly household and personal debt, amounts to illiquid and stagnant households. I will outline how such assumptions are compromising the ability of sociologists to identify and engage with the ways money, debt and finance have become deeply embedded in social life and have become central to the dynamics of social formation. This includes class formation – whose dynamics are increasingly based not on occupations but on the dynamics of financial assets and especially their distribution – and the materialisation and dynamics of what I will term here ‘Minskian households’, that is, households which exist in a permanent state of speculation.
This chapter therefore amounts to a call for sociologists to rethink their understandings and engagements with debt and indebtedness and offers a number of points of orientation for the development of a sociology of debt. Following Gane (2015) I will suggest one guiding principle of this development must be an engagement with the technicalities and complexities of money, finance and debt. While such an engagement is by no means straightforward, not least because of the jurisdictional hold that the discipline of economics exerts on this terrain, it is nonetheless a necessity given the centrality of money and finance to the dynamics of the social. To begin to set out these interventions I turn first to the growth of interest in debt within sociology and the social sciences more broadly stated.
Sociology faces the crisis
In the past ten years, an interest has emerged across the social sciences in debt and indebtedness. This includes household and personal indebtedness as well as sovereign debt and public deficits. Interest has therefore emerged in regard to both private and public debt (see, for example, Blyth, 2013; Deville, 2015; Graeber, 2011; Lazzarato, 2011, 2015; Montgomerie, 2009; Roberts, 2013; Streeck, 2014). Undoubtedly, the momentum for this ongoing interest is grounded in the 2007-08 global financial crisis and its aftermath. The crisis of liquidity and its immediate and long-term consequences made a number of issues explicit which were not readily apparent to many social scientists prior to the financial crisis. These issues are legion, but here I will highlight four.
First, the financial crisis and its aftermath made it overt that populations are beholden to institutions of credit and that lives are lived in and through debt. Indeed, the financial crisis and its aftermath made clear that populations are not only beholden to institutions of credit but are also exposed to movements and fluctuations of finance markets and especially to the fortunes and movements of securities (including mortgage-backed securities) traded on finance markets. The financial crisis and its aftermath made explicit, then, how populations not only live lives which are financed through debt, but also how they are thoroughly exposed to the operations of finance markets.
Second, the financial crisis and its aftermath made clear how sovereign power had become subordinate to financial capital, that is, to the key institutions and brokers of credit. This latter was evidenced in how emergency measures and monetary policies adopted in the aftermath of the crisis – including emergency bailouts of banks, the establishment of bank recapitalisation funds, the adoption of strategies of quantitative and qualitative easing, austerity budgeting and the application of austerity measures to the social state – all served the interests of financial elites and finance capital, not least by returning liquidity (and profitability) to the financial system. The subordination of sovereign power to finance capital was also evidenced in how the aftermath of the crisis saw a process of the further devolution of authority in regard to monetary policy from states to central banks, a process which has contributed to the ongoing transformation of central banks from lenders into dealers of last resort whose key role and function is to ensure the liquidity of securities markets (Mehrling, 2010).
Third, the financial crisis and its aftermath made explicit how states themselves were entangled in and reliant on debt and especially on the trading of sovereign bonds, that is, on the trading of bundles of sovereign debt in finance markets. The crisis and its aftermath, in particular, made explicit how states were beholden to finance markets and financial institutions (including the shadow banking sector and central banks) in the pricing, grading and dealing of this debt. The downgrading and collapse of the value or, more precisely, the collapse of the collateral or security function (see Gabor and Ban, 2016; 2017) of the bonds of particular states (especially the peripheral states of the European Union) following the financial crisis made this binding dramatically clear. Ultimately, and as is by now well documented, this collapse forced peripheral European states tied to the binding rules of the European Monetary Union to seek bailouts from the European Central Bank (ECB) as well as from the International Monetary Fund (IMF) to refinance their own debt. The conditions of these bailouts on the part of creditors included compulsory and severe forms of fiscal austerity (Blyth, 2013).
Fourth, it became clear that economic growth was tied to debt and in particular that demand was fuelled by debt and indebtedness especially, but by no means only, by household and personal debt and by transaction-based credit traded in fast-moving and roving finance markets. It became clear, in other words, that growth was generated by credit debt, which in turn was tied to the operations of market-based finance and banking. This entanglement of debt and growth was dramatically highlighted in the aftermath of the financial crisis, not least in how temporary credit restrictions and credit freezes contributed to drops in demand, indeed in how it became clear that the crisis of liquidity had unleashed a recession. The financial crisis and its aftermath made explicit, in other words, that capital accumulation had become finance-led.
It would surely not be an overstatement to say that, for many sociologists, the making explicit of these issues was little short of revelatory. In fact, prior to the crisis, beyond a cluster of economic sociologists, specialist sociologists of money and sociologists of science and technology interested in the operations of finance (see, for example, Dodd, 1994; Ingham, 2004; Knorr Cetina, 2003; Mackenzie, 2003; Mackenzie and Millo, 2003; Zelizer, 1994) there was little by way of engagement with finance, money and debt within the discipline. In part this was an issue of the long-lived disciplinary boundaries and especially the thoroughly embedded division of labour between sociology and economics in place since the beginning of the twentieth century, which located money and finance firmly in the jurisdiction of economics (see Ingham, 1998; Stark, 2009).1 But the lack of interest in and awareness of the significance of money, debt and finance to the dynamics of economy, state and society in the lead up to the financial crisis on the part of sociologists should also be located in terms of more middle- and short-range trends in sociology as a discipline. In particular, it must be located as one outcome of moves across the social sciences from the late 1970s onwards towards anti-foundationalism (see, for example, Barrett, 1992). In this move, concerns with political economy, socio-economic processes and socio-economic structure were not only sidelined but also widely problematised. This was so because the modes of analysis associated with such concerns – especially materialist modes of analysis – were characterised as antithetical to anti-foundationalism, not least because of their positivistic outlook, their search for foundational value, their mechanistic determinism, and their naïve attachment to the coordinates of realism. While the terms of these critiques were both complex and contested, nonetheless one unquestionable outcome of them was a turn away within the discipline from the economic and from socio-economic phenomena.
It is in the context of this turn away from the economic – notwithstanding the emergence of a revitalised economic sociology – that the revelatory nature of the financial crisis and its aftermath for sociologists should, in part, be placed and understood. Postone (2012) has, however, argued that the crisis and its aftermath highlighted far more than a movement away from the economic within the social sciences. It also revealed, he argues, the limits of dominant modes of inquiry and especially of anti-foundationalism:
Dominant for the last three decades, [anti-foundational] approaches now seem to have reached their limits, unable to grasp adequately our current moment of transformation. The shift away from the study of large-scale historical processes and structures has been, arguably, partially responsible for the difficulties the human sciences have had to delineate the contours of what has become a systemic global crisis. (Postone, 2012: 228)
While I am certainly not in agreement with the sentiment expressed here that a focus on large-scale historical processes pertaining to the rise of the significance of money, debt and finance would, by necessity, be anti-foundational in orientation2 what is of interest is Postone’s contention regarding the inability of the social sciences to respond adequately to the crisis. This claim is of interest for two reasons. First, it sits somewhat uneasily with the explosion of engagement within the social sciences, including within the discipline of sociology, with the financial crisis and its aftermath. Second, this claim is of interest as it raises the question as to what extent such engagements have come to grips with the dynamics at play in the crisis and its aftermath. That is, and to use Postone’s terms, it raises the question of whether or not these analyses have adequately delineated the contours of the crisis and its aftermath.
Debt as a complex and technical issue
I will return to the idea of crisis, but it is clear from my brief sketch of the issues raised by the liquidity crisis and its aftermath, that there was not one single issue which sociologists needed to grasp to unlock its dynamics. Instead, the crisis raised many broad-ranging issues, including the relationships between the state, financial markets and financial capital, the relationship between the state and central banks, the dynamics of debt and indebtedness, the governance of debt, the dynamics of debt-led growth, and the relationship between finance-led accumulation and hegemonic neoliberalism. Critically, for sociologists it also raised the issue of the relationship between the rise of finance capital and widening forms of social inequality, an issue which included within it the distribution of the costs of the crisis. If, however, there is one feature of specifically sociological engagements with the issues raised by the crisis this has been an attempt – perhaps not surprisingly – to delineate the social aspects of these issues. Sociologists in the UK, for example, have been particularly absorbed with the social aspects of austerity, the roll back of welfare state provisioning, rising household and personal debt and lived inequalities in the post-crisis era (see, for example, Atkinson et al, 2012; McKenzie, 2015)
In his recent analysis of post-crisis monetary policy, and especially of quantitative easing (QE), that is with the process of money creation by central banks ostensibly designed to stimulate economic growth, Nick Gane (2015) similarly observes that sociologists have given over far more attention to post-crisis interventions – such as austerity programmes – which are clearly social in character. In so doing, he argues, sociologists have for the most part sidestepped those interventions which are monetary, technical and financial. He reflects that the lack of attention to such interventions is ‘perhaps because the monetary practices of central banks are perceived to be either too complex or too far removed from our day-to-day concerns to be of any practical or sociological relevance’ (Gane, 2015: 382). Gane makes clear, however, that this lack of engagement is problematic or, as he frames it, following C. Wright Mills (1959), a sociological problem, not least because ‘it is the vocation of the sociologist to tackle the public issues of our time, in spite or perhaps because of their complexity’ (Gane, 2015: 382). Via his analysis of QE, Gane shows the significance of tackling such complex and technical issues. He shows how post-crisis QE interventions in the UK unambiguously boosted the value of assets of the wealthy and in particular the assets of the richest 10% of households. In this respect, Gane suggests that QE in the UK should be located as part of a post-crisis recovery package based on a principle of regressive redistribution which is indelibly linked to accentuating social inequalities. What Gane, then, opens out via his analysis of QE is a provocation to sociologists to engage with the monetary, the financial and the technical, indeed an argument that the features and contours of the social – and especially exacerbating forms of social inequality – can only be understood and properly explained by engaging with technical, monetary and financial interventions and processes. To not engage with such processes and interventions, Gane warns, is to be ‘content to study the effects of social inequality rather than its root causes’ (Gane, 2015: 394).
The emphasis found in Gane’s analysis on the causal and on large-scale monetary and financial driven redistributive processes might be located as speaking back to Postone’s claim that the social sciences are unable to grasp the contours and dynamics of the post-crisis present. This, however, would be to downplay the clear emphasis in Gane’s analysis on the limits and problems with many sociological engagements with the post-crisis present, not least in their submergence in rebounding and redoubling effects and in their bracketing of the monetary, the financial and the technical in the analysis of these effects. A quick glance at sociological analyses of the post-crisis present confirms this to be the case. In sociological and allied analyses of austerity, for example, the experiential and the everyday lived realities of austerity are continuously privileged above the fiscal and the financial, including above shifts in the relationship between the fiscal and the financial and transformations to the structures of finance (see, for example, Jupp, 2017; Raynor, 2017; Stanley, 2014). Bracketing the latter is, however, to seriously downplay the significance of the financial in the making of present day austerity. As finance economists have detailed, the drive (or better said, compulsion) towards austerity can only be understood in terms of shifts to market-based banking and financial innovations which have transformed government bonds into high quality collateral (or securities) traded in and fueling shadow (specifically repo) finance markets for raising short-term funding. Sovereign bond markets have, then, been transformed into collateral (or securities) markets: they have been securitised. As Ga...
