Cultures of Financialization

Fictitious Capital in Popular Culture and Everyday Life

M. Haiven

• Publisher: Palgrave Macmillan
• Year: 2014
• Print ISBN: 9781137355966
• eBook ISBN: 9781137355973
• Topic: Social Sciences
• Subtopic: Business General
• Index: Social Sciences

Drawing on a wide range of case studies, Cultures of Financialization argues that, in our age of crisis, the global economy is more invested than ever in culture and the imagination. We must take the idea of 'fictitious capital' seriously as a way to understand the power of finance, and what might be done to stop it.

1

The Reproduction of Fictitious Capital: The Social Fictions and Metaphoric Wealth of Financialization

It is no exaggeration to say that, since the 2008 crisis, there has been an explosion of academic interest in the financial sector, its periodic crises, and the impacts and implications of both for society at large. I started my own research into finance capital in 2005, and it was my great misfortune to be trying to complete a PhD thesis on the topic as a monumental and historical financial crisis unfolded, in a time when, every week, new analyzes of the very sector I was looking at were emerging from nearly all political and disciplinary quarters. The only option, really, was to continue with the lines of inquiry with which I had begun: how do we account for not only the tremendous power of financial wealth in a moment of neoliberal globalization (see Bryan and Rafferty 2006; Lapavitsas 2013; LiPuma and Lee 2004), but also the fact that what is perhaps the most powerful and pervasive economic force in human history is made up of what are, at first glance, imaginary assets? After all, the fabled credit default swaps and collateralized debt obligations at the core of the 2007/2008 meltdown were, essentially, made up. Sure, they referred back to “real” assets in terms of the homes owned by sub-prime borrowers, but, as financiers and the rest of us were to learn as the crisis unfolded, the value ascribed to these assets was dramatically less than the price at which these financial instruments circulated. In other words, there is something profoundly and tantalizingly cultural about contemporary finance capital, about the way confidence, belief, identity and rhetoric are rolled into an evolving economic landscape dominated by themes of speculation, immateriality and communication.

It is tempting here to reach for the postmodern canon, for the work of Jean Baudrillard (1997), for instance, and identify these speculative objects as “fourth-order” simulacra: objects which have abandoned all reference to the real world, which just refer back to an eternal hall of mirrors, an infinite play of signification. There is merit to this approach, and I have used it myself (Haiven 2013b), drawing on Jacques Derrida’s (1974; 2007) theory of metaphor to help explain the character of financial wealth. Derrida’s intervention was to suggest that the line between metaphor and other elements of speech is “always already” blurred. This is in contrast to analytic theories that see metaphor as merely a second-order element of speech, an artificial creative substitution of meaning used for stylistic purposes. Derrida argues that a large number of the words we use every day were once metaphors, and that metaphor is a process at the very core of language. Take, for instance, the word investment. It stems from the Latin vestire, from which we also derive the word vest: it means to dress or to cloak oneself. Early-modern Italian merchants used this as a metaphor for the different profitable purposes to which money could be put – they were dressing their money up when they lent it to trading or manufacturing ventures that would bring a favourable return. This metaphor resonated, and the word invest became independent of its original meanings, folding into living language. It began to become what linguists call a dead metaphor, a metaphor whose metaphoric quality has disappeared or goes unremarked or unobserved. Lo and behold, by the late 20th century investment not only named the most profitable activity in a hyper-financialized global capitalist economy, but was increasingly borrowed as a metaphor to explain all manner of activities in our social lives.

Education, for instance, is increasingly talked about as an individualized “investment in the future,” rather than a shared social good (Williams 2006; 2008), and, likewise, we are constantly being told that the fostering of children by parents and society at large is an investment. Books are being published that advise people to learn to invest time and affect in their relationships for later payback (see Martin 2003, 91–107). All these new meanings of investment are now being folded into common parlance: they elicit almost no response any more. And this is where metaphor gets dangerous: as George Lakoff (2003) and others have noted, metaphors function to hide social violence – they often work to disguise or normalize unstated or unacknowledged ideological assumptions. Think, for instance, about the way the term “at risk” has been deployed as a disciplinary metaphor to euphemistically describe certain populations, a discursive slight of hand that at once erases the specificity and origins of poverty or marginalization and at the same time focuses the subject in question under the scrutiny of power (see Martin 2007, 37). Metaphors, in this sense, are elemental to the composition of discourse in the Foucauldian sense of the term: a “regime of truth” or an order of knowing, speaking and understanding that both emerge from social power relations and help reinforce or reproduce those relations.

As such, the recent application of the metaphor of investment to all areas of social life is far from innocent. It is both symptomatic and constitutive of a shift towards financialization. That is, the fact that the metaphor of “investment” has become an expedient way for people to articulate their relationships and choices is, from one angle, evidence of the saturation of the general consciousness of society with financial ideas. But it is also a key means by which that saturation is advanced, the way financial modes of thinking and understanding are stitched into and throughout the social fabric. This cultural and linguistic shift both reveals and advances a broader socio-economic reality of financialization.

Financialization has two overlapping meanings. Political economists tend to use the term to refer to the increased power and influence over the global economy of the so-called FIRE sector, an acronym for high Finance (banking, investments, speculation), Insurance and Real Estate) (see Epstein 2006; Foster 2010; Levitt 2013). They point to the massive growth of financial firms, largely thanks to years of neoliberal deregulation which, for instance, in many jurisdictions eliminated the distinction between investment and commercial banks, or opened up mortgage markets to new forms of securitization. Financialization refers, in this sense, to the way multinational corporations, since the so-called “revolution in shareholder value,” have come to be seen less as producers or distributors of goods and services and more as vehicles for speculative capital (Fine 2010; Hudson 2010; Ho 2009). It refers to the profound and corrosive power of financial markets, especially bond and currency markets, over the policy choices of governments around the world – not only the governments of nation-states but also those of cities, provinces and, as we are seeing in Europe, supra-national organizations as well (Albo, Ginden and Panitch 2010; Bello 2013, 43–61; Strange 1997). Financialization in this sense refers to the increased mobility of transnational capital flows, as well as to the way those flows are accelerating and becoming more and more chaotic thanks to increasingly sophisticated forms of securitization and automated high-frequency trading, a system in which computers are, by some accounts, executing the majority of exchanges (Tiessen 2012). It also refers to the way financial markets are increasingly shaped by almost sublime formulae and technologies for managing risk, for creating new, overlapping, interconnected derivative products whose scale and complexity defy the human imagination (Holmes 2010; Stark 2009).

But financialization also means something more, as the above example of the metaphor of “investment” indicates. It means deep penetration of financial ideas, tropes, logics and processes into the fabric of everyday life (see Martin 2007). We can return to the example of education. Not only has it come to be understood as a highly individualized commodity in which students are told they should invest in order to get the payoff of a stable, middle-class life. It has become a key means by which individuals are integrated into the global financial economy (Blacker 2012; Caffentzis 2010; Williams 2006). In the United States, student loan debt has topped $1 trillion, and, as with the sub-prime mortgage market, these loans are broken apart, rebundled and securitized, their spectral presence haunting the global financial architecture, casting its shadow over perhaps the majority of investment portfolios. It is not just student loans, of course. From mortgages to credit-card debt, from retirement savings to amateur stock trading, we are all increasingly involved in a form of everyday financialization that is integrated into a global financial system where individual debts and investment disappear into an interconnective æther of speculation (Martin 2003; 2007). Even the poor are not immune. In North America, of course, we have seen the rise of sub-prime lending, but this is only one aspect of a larger financial poverty industry made up of extremely profitable pay-day loans operations, pawn shops and discount financial services aimed at short-term profiteering from social immiseration (Aitken 2006; Rivlin 2010; Wyly et al. 2009). Likewise, in the last decade world political and economic leaders have been seduced by the lure of micro-finance schemes where small loans are extended to the world’s poorest populations (notably to women) in order to share with them the magic of free-market capitalism and the uplifting responsibility of debt (Bateman 2010; Roy 2012; Young 2010). To this we might add the increased financialization of public policy, including the recent fascination with things like “social impact bonds” and the lure of “venture philanthropy” which seek to replace decrepit and underfunded state services with market-driven proxies beholden to financialized metrics of success (see Chapter 5).

Financialization: Between the economic and the cultural

So, financialization is not merely an economic and political shift; it is also a socio-cultural one. This, no doubt, has much to do with the dynamics of economic struggle as they play out today, including the war over the future of the heavily indebted post-middle class and the afterlives of the post-war welfare state (see Ehrenreich and Ehrenreich 2013). After all, it is only through debt that the majority of individuals can cover the costs of the erosion of the welfare state after years of neoliberal assault, whereby the costs of education, healthcare, childcare, transportation and housing have been downloaded onto individuals in the form of user fees (Soederberg 2013), representing a massive shift of societal risk (Hacker 2006).

But this is where the question of financialization becomes tricky. It does not allow us a clear or clean distinction between the economic and the cultural. What do we make of a form of capitalism dependent not only on the exploitation of labour time but also a form of ever-increasing consumerism based largely on debt (Dienst 2011; Ross 2014)? What do we make of a system where the rise and fall of whole economies appear to hinge on the performative speech acts of central bank chiefs, or on the confidence and credulity of increasingly fickle investors (Marazzi 2008, 13–36); of a system where stock markets are so jittery and interwoven that they can tumble because of a leaked memo at a Fortune 500 corporation? What do we make of a system that, ultimately, is in the grip of imaginary money, where nearly unfathomable flows of immaterial wealth define and determine the material lives of nearly everyone on the planet? There is something here about the relationship of culture and economics that troubles our established understandings and frameworks.

Metaphors like “investment” tend to emerge as linguistic innovations to serve certain social purposes: they help explain reality and, if they resonate with people’s experience and expectations, they become part of the vernacular. To the extent metaphors work, they begin to die – to recede or retreat into language, their metaphoric nature forgotten or overlooked, to the extent that, eventually, they disappear completely. For instance, words do not actually “disappear” – they never “appeared” in language at all; I just used a dead metaphor, but, until I pointed it out, you likely did not notice I had done so. For Derrida (1974; and also Nietzsche 1976, 42–46), language itself is ultimately composed of dead metaphors. Derrida does not believe there is any original, metaphor-free language on top of which metaphors rest, nor is he interested in discovering some deep, hidden structure to language. In a classic Derridean poststructuralist move, he posits that all language is metaphoric, even those words we imagine are fixed and stable or that we assume are unproblematic and unimpeachable connections between signifying word and signified world. Because metaphor is always retreating into language, all language is tainted and influenced by metaphor (2007). Language is a set of mutually suspending claims to meaning, as each word relies upon its connection to others. It is a fabric woven through endless “play” (1967), a polyseme that indicates (among other things) the constant creative (semi-competitive) repurposing of language and meaning, and also the inherent malleability or plasticity of language. In other words, your ability to understand my metaphoric use of “disappear” relies upon a whole variety of linguistic metaphoric relationships – we can never trace language back to its “real” root. If all language is metaphoric, our ability to use and understand language is not simply our comprehension of the meaning of each word and their syntax; it is our involvement or participation in living language, our constant use of and innovation within language. This demands that we constantly reinvent metaphor. We are constantly delving into the trove of language to invent new meanings and repurpose old words like “delve” and “trove” or “invest.”

What does this have to do with finance? Derrida’s theory of metaphor offers us a useful metaphor for what happens in the world of financial speculation. Like metaphors, financial instruments are, from one angle, attempts to explain the world (McGoun 2003). A share in a company or a government bond is an attempt to express or represent an underlying value. Or so we might like to imagine. Certainly, this is the mainstream economic view of the matter. But the reality is more complex. As we will see in a moment, while the real world of value exists, financial instruments are never perfect or unproblematic representations of that value. The prices at which financial assets are exchanged are not direct representations of the underlying value of the “real stuff” to which they allegedly refer. For instance, in 2007 the price of a sub-prime mortgage had almost nothing to do with the value of the house in question, nor was it an accurate reflection of the mortgagee’s ability to repay the loan (see McNally 2011, 97–112; Wyly 2012). Rather, the price of a sub-prime mortgage was a function of its circulation in a broader speculative financial economy (see Chapter 2). Its price represented its relationality to a vast array of interconnected speculative gambits. For those influenced by neoclassical economics, the invisible hand of the market is supposed to aggregate market actors into a sort of collective intelligence that, through the magic of competition, will ascribe the “real” (or at least a realistic) value to assets. In other words, if markets worked properly (“all else being equal,” as the economists, fatefully, like to say), the price of a credit default swap based on sub-prime mortgage-backed collateralized debt obligations would be an accurate monetary representation of (or at least a good-faith reference to) some underlying real-world asset (poor people’s homes). But, for these thinkers, markets are, of course, imperfect and are susceptible to all sorts of distortions. Those still clinging to the scraps of neoliberal orthodoxy, for instance, see these distortions as the result of the corrosive influence of government in markets, especially the mortgage markets, including the hybrid corporations of Freddie Mac and Fannie Mae (and their equivalents outside the United States), which, in their zeal to encourage private lending to poor homeowners, used the public coffers to mitigate investor risks in the secondary mortgage market, thus throwing into crisis the system’s inherent ability to arrive at the proper price (cf. Greenspan 2008).

My argument is that the price of a financial asset, like the meaning of a word, is suspended between multiple competing claims to meaning, amidst an ecology of play. So the value of a government bond is not merely a good-faith reflection of that nation’s or city’s ability to repay the original loan plus interest, which is what it essentially claims to represent. Instead, just as the meaning of a metaphor is suspended between and part of a linguistic ecology made up of multiple claims to meaning, so, too, are the prices of financial assets suspended within financial markets made up of multiple competing claims to value. While all financial assets may claim to be a real representation of underlying “real-world” values, they are, in fact, inter-referential within their own economy of meaning. So, for instance, a share in British Petroleum (BP) ostensibly represents a given fraction of the underlying assets and productive capacity of BP. But, in reality, the price of that share will also (perhaps predominantly) depend on what potential investors imagine the future of BP might be. It will depend on the geopolitics of oil and of the probability of environmental regulations or political instability. More generally, it will depend on the fluctuations of markets more broadly. This is a relatively simple example, but it gets more complex when we recognize that shares in BP are rarely valued on their own, but typically as part of portfolios or as collateral for loans, or are fragmented and securitized, incorporated into derivatives contracts and otherwise lost within an increasingly complicated financial economy. Here we can get a sense of the metaphoric value of financial assets. If we believe Derrida, language never touches down, never settles on a stable and eternal relationship between signifier and signified. It is endlessly metaphoric. But the reason it works and does not just descend into postmodern chaos is because it is useful. We manipulate our world and cooperate as social beings through language.

So, similarly, finance may never have a moment when a financial asset accurately and unproblematically refers to a real-world value (whatever that is, and we would have good reason to question anyone who proposed that there is some accurate measure thereof). And, indeed, as we shall discuss, this is the fundamental root of its crises. But finance as a sector, in spite of this, is useful. It is useful because, as I shall illustrate, it is an essential element of capitalist accumulation, in spite of its problematic relation to the reality it aims to measure. In the same way as metaphor facilitates and occludes social violence, finance disciplines and (mis)measures the financialized capitalist economy, with typically tragic consequences.

The real and the imaginary

This excursion into Derridean metaphor theory illustrates a key conundrum in the study of financialization. What is the connection between finance’s economic and cultural registers? How do we explain the dependence of financial markets on representational paradigms (see Knorr-Cetina and Preda 2005)? And how do we explain the influence of increasingly powerful financial sector on the imagination more broadly (Haiven 2011)? Are we prepared to suggest that finance has no relation to the real economy it claims to represent, or that this relationship is purely parasitical? If the financial sector is utterly made up of imaginary conjectures built on imaginary conjectures, how can we account for its tremendous power over the global economy and daily life?

We can find few better starting places than recent sociologies of finance, including the work of scholars like Michel Callon (2007) and Donald MacKenzie (2006; 2011), who have sought to identify finance as a sphere of relationality, guided by a combination of norms, value paradigms and technologies which draw market actors into a community of shared belief and cultural production. Whether it is Callon’s investigations of financiers’ use of modelling technology or MacKenzie’s analysis of the production of financial instruments, these scholars are interested in what we might call the sociology of financial meaning-making. MacKenzie, for instance, has been at the forefront of identifying financial instruments as “performative”: according to MacKenzie, formulae like the famous Black–Scholes mechanism for derivative pricing do not simply reveal underlying market realities. Because they influence and shape subsequent financial decisions and the financial milieu more broadly, these formulae actively shape and build market realities. They are, in MacKenzie’s words, “an engine, not a camera”: they do not simply measure market realities; they help bring them into being.

Both MacKenzie and Callon, and many other sociologists of finance, are interested in the role of culture, belief and discourse in financial markets and have done invaluable and sometimes breathtaking work showing that, at the heart of the global capitalist economy, so much based on the seemingly scientific and technocratic calculation and manipulation of risk, there is an intimate human world animated by belief, communication and, indeed, culture. But both are reticent to link their analyzes of the financial system to the paradigm of capitalist accumulation more broadly. Such an approach exists in the shadow of older Marxist frameworks that have traditionally ignored or belittled these complexities and reduced them to merely the contingent, superstructural ephemera of the “real” economic base (see Butler 1998; Williams 1973). If this is the form of Marxism on offer, then perhaps we are better rid of it. Not only does it fundamentally delimit our curiosity as to how the world works, but it also forecloses the possibilities of resistance and change from the places we would least expect it (Gibson-Graham 2005). It reduces individuals to cogs in a machine, animated purely by their economic vocation (Cleaver 2000). And it does a fundamental disservice to the power of creativity and the imagination.

It is also for this reason that recent anthropological accounts of the financial sector likewise tend to avoid Marx, though they are more attentive to the broader sociological patterns that influence financial speculation and are reproduced by it. For instance, Caitlin Zaloom’s (2006) studies of financier culture have revealed the way financiers internalize a culture of risk management and are guided by an imagined relation to a highly circumscribed future. She also illustrates the way that norms and patterns of belief and behaviour are created and sustained within the largely (though not exclusively) homosocial world of financiers, and the importance of these norms to what we might call the reproduction of the financial industry (see also Czarniawska 2005; La Berge 2010; Prügl 2012). Similarly, Karen Ho (2009) has illustrated the way that financier culture is driven by a cult of “smartness” and chronic overwork and a form of hyper-individualized competition and inhumane flexibilit...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• Acknowledgements
• Introduction: Cultures of Financialization
• 1. The Reproduction of Fictitious Capital: The Social Fictions and Metaphoric Wealth of Financialization
• 2. Precariousness: Two Spectres of the Financial Liquidation of Social Life
• 3. Securitization: Walmart’s Financialized Empire
• 4. Play: Coming of Age in the Speculative Pokéconomy
• 5. Creativity: Parables of the Financialized Imagination
• 6. Resistance (and its Discontents): Finance, Regulation and Cultural Politics
• Conclusions: The Dialectics of Financialized Culture
• Works Cited
• Index