BITS & BRIEFS: Finance drains firms // The Adjunct Crisis // Sociology of cashless society // Risk officers increase risks // The myth of the empowered consumer // Credit, Neoliberalism, and post-Apartheid South Africa

This time, especially worth reading  and sharing articles:

“Finance is no longer a tool for getting money into productive businesses, but getting money out of them” — by J.W. Mason

Corporatization, marketization, and adjunctification of the university end up producing the corporatized student — by Yasmin Nair 

Sociology of money and India’s informal economy: Why a cashless society would hurt the poor — by Dana Kornberg

Chief Risk Officers led banks to take on even more risks hoping for “maximizing risk-adjusted returns” — by Kim Pernell, Jiwook Jung, and Frank Dobbin

> Is this the era of the empowered consumer? Or is this a system of grossly asymmetric power relationships? — by Jacob Silverman

Crime impacts differently the economic mobility of people from advantaged vs. disadvantaged communities — by Richard Florida

Credit reform in post-Apartheid South Africa: Neoliberalism coupled with the promise of freedom (to consume) — by Deborah James 

sociology of money

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Thatcherism’s greatest achievement

In 2002, twelve years after Margaret Thatcher left office, she was asked at a dinner what was  her  greatest  achievement.  Thatcher  replied:  “Tony  Blair  and  New  Labour.  We forced our opponents to change their minds.”  (Conor Burns, April 11, 2008)

Thatcher Tony Blair neoliberalism

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Stephen Hawking: Technology drives ever-increasing inequality

On 6 October 2015, a great theoretical physicist Stephen Hawking conducted a special Reddit “Ask Me Anything” session. Out of the thousands of submitted issues, Hawking selected those he wished to reply, mainly discussing aspects of artificial intelligence. In conclusion, Hawking picked a question about technological unemployment and ended with an insightful alarming observation on socio-economic and political trajectories:

Q: Have you thought about the possibility of technological unemployment, where we develop automated processes that ultimately cause large unemployment by performing jobs faster and/or cheaper than people can perform them? Some compare this thought to the thoughts of the Luddites, whose revolt was caused in part by perceived technological unemployment over 100 years ago. In particular, do you foresee a world where people work less because so much work is automated?
Stephen Hawking: “If machines produce everything we need, the outcome will depend on how things are distributed. Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution. So far, the trend seems to be toward the second option, with technology driving ever-increasing inequality.” (The original Reddit thread)

Apparently, every brief history of time is the history of class struggles…


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Marketcraft as the New Statecraft

by Steven K. Vogel*

What if we thought of marketcraft (market governance) as a core government function comparable to statecraft? And what if we sought to optimize market governance rather than to minimize government intervention? I submit that this simple reframing would generate analysis of market dynamics and prescriptions for government policy that deviate fundamentally from the conventional “free market” wisdom.
Consider market reform, for example. The pervasive language of liberalization, privatization, and deregulation implies that market reform is primarily a process of removing constraints. But liberalizing markets does not mean liberating them. In reality, empowering markets is a process of building institutions, not one of removing constraints. It requires more state capacity, not less. It means more regulation, not less.
Marketcraft How Governments Make Markets Work VogelLet’s begin with market reform in the post-Communist world.  We have now experienced several decades of debate over the nature of the transition from a planned economy to a market economy, often caricatured as a contest between shock therapy and gradualism. The crux of the debate hinged on whether market reform was primarily a matter of dismantling the old command system or one of building the institutions to sustain a market economy. The latter view has now prevailed, both in the realm of scholarly analysis and in that of real-world experience. But if we had viewed market transition as a matter of marketcraft, then shouldn’t this have been obvious from the outset? Couldn’t we have avoided a lot of fruitless debate and some devastating policy errors?
Or consider market reform in developing countries. Again, we have traversed several decades of debate over the fundamental nature of the problem and the appropriate solutions, sometimes depicted as a contest between the Washington Consensus and a more institutional perspective. And the latter view has now prevailed, after a protracted battle, countless flawed policies, and untold human suffering. But shouldn’t we have figured this out a bit sooner?
And what about market reform in the advanced industrial countries? While we have discovered that market reform requires building institutions in post-Communist and developing countries, we have been slow to recognize that the same logic applies to rich countries as well. Ironically, we are less attuned to the institutional character of market reforms in our own countries because they already have a fairly well developed institutional infrastructure. But market reform means enhancing this institutional infrastructure in the rich countries, just as it does elsewhere.
The term we most commonly use to describe market reform in rich countries – deregulation – nicely illustrates the confusion. The term is typically used to depict a decrease in government regulation and an increase in market competition, as if there were a natural association between the two. But enhancing competition most often requires more regulation, not less. In network sectors, for example, incumbents are not likely to voluntarily cede their market power. So the government has to fabricate competition via regulation. In telecommunications, for example, governments crafted competition via asymmetric (i.e. anti-incumbent) regulation, requiring incumbents to lease their lines to their competitors.
In the rich countries, as elsewhere, insufficient attention to the institutional nature of markets has fostered policy errors, with devastating results. The causes of the global financial crisis are complex, multidimensional, and intertwined, yet the essence of the story boils down to a massive failure of marketcraft. Federal Reserve Chairman Alan Greenspan made this case rather poignantly, if inadvertently, with his famous recantation in testimony to Congress in 2008. “Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially),” he conceded, “are in a state of shocked disbelief.” Pressed by Committee Chairman Henry Waxman on whether his laissez-faire ideology contributed to decisions that he regrets, Greenspan replied, “What I am saying to you is, yes, I found a flaw. . .”
The U.S. authorities committed fundamental errors of marketcraft in the lead-up to the financial crisis. They gave financial institutions greater freedom to engage in risky behavior without strengthening regulation and oversight. They chose not to regulate derivatives in the late 1990s, partly because they viewed derivatives as instruments within an isolated market of sophisticated investors, and partly because they feared that regulation would destabilize financial markets. They put too much faith in the ability of market players to self-regulate. And they failed to appreciate the degree to which the U.S. mortgage-backed securities market had become plagued with misaligned incentives.
But marketcraft can do good as well as evil. After all, marketcraft produced the information revolution. The U.S. government funded the research that produced much of the relevant technology, and provided early-stage capital for many of the most successful high-tech firms. U.S. institutions, and the Silicon Valley ecosystem in particular, fostered the innovative start-ups that played a key role in commercializing the Internet, with innovations in devices, computing, transmission, and services. Antitrust policy played a less obvious but equally critical role by preventing vertically integrated firms like IBM and AT&T from dominating the emerging information technology sector. And this in turn enabled the open innovation characteristic of the digital economy. And regulatory reform brought lower communications costs, including flat-rate local service, which allowed startups to offer value-added services and household consumers to experiment with new applications at a reasonable cost.
These two examples – the financial crisis and the information revolution – illustrate the enormous stakes in the game of marketcraft. I am not suggesting that marketcraft is the same thing as statecraft. But I am contending that marketcraft has profound implications for economic performance, social welfare, and national power. So we should want to get it right.
Marketcraft will be even more critical going forward.  The marketcraft realm is growing as a share of what governments do, and as a core element in how governments enhance or undermine the welfare of their people. Some of the core items on the marketcraft agenda – financial regulation, intellectual property rights, and the governance of the digital economy – are among the most consequential policy issues today.
* Steven K. Vogel is the ll Han New Professor of Asian Studies and a Professor of Political Science at the University of California, Berkeley. This article is based on his new book, Marketcraft: How Governments Make Markets Work (Oxford, 2018). Vogel is also the author of Japan Remodeled: How Government and Industry Are Reforming Japanese Capitalism (Cornell, 2006), Freer Markets, More Rules: Regulatory Reform in Advanced Industrial Countries (Cornell, 1996), and co-editor (with Naazneen Barma) of The Political Economy Reader: Markets as Institutions (Routledge, 2008).

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Leonora Barry: a pioneer statistician of women’s labour

by Eli Cook*

Unfortunately yet unsurprisingly, the world of economic quantification was dominated by men in the nineteenth century. In honor of International Women’s Day, here is a story, excerpted from my book The Pricing of Progress, on Leonora Barry, one of the most important – and forgotten – economic thinkers of Gilded Age America.
Leonora BarryAn Irish immigrant, Barry was widowed in 1881. “I was left, without knowledge of business, without knowledge of work, without knowledge of what the world was, with three fatherless children looking to me for bread,” Barry would later note. These miserable conditions likely led to the death of her eldest child.
Desperate to find work to keep her other children alive, she got a job at a hosiery mill, where she made 11 cents a day. It was while working at the mill that she joined the Knights of Labor — the largest and one of the most important American labor organizations of the 1880s. Barry had a knack for labor organizing and within two years found herself not only the master workman of her own branch but the leader of an entire district assembly of fifty-two locals.
She was elected to represent her region at the national general assembly in 1886, where she was one of sixteen women among 660 delegates. While at the national assembly, Barry was made head of the new Department of Women’s Work. Her main mission was to traverse the country collecting statistics on women’s labor that would reveal “the abuses to which our sex is subjected by unscrupulous employers” and the need for “equal pay for equal work.”
By the late 1880s, Barry had become renowned for the statistical reports she compiled for annual general assemblies. With an arresting depiction of the condition of women’s labor in America, Barry’s reports combined statistical data with a strong moral critique of industrial capitalism. Her reports focused on both the laborer’s wages and the employer’s profits, which enabled her to measure the level of exploitation at the American workplace.
“The contractor who employed five operatives made 30 cents per unit, or 1.50 a day,” she noted in one example, “while each worker received only 30 cents for the entire day’s work.” “Men’s vests are contracted out at 10 cents each,” she noted in a second example, “the machine operative receiving 2.5 cents and the finisher 2.5 cents each, making 5 cents a vest for completion.” Since twenty vests constituted a day’s work, Barry calculated, “a contractor who employed five operatives reaped a dollar a day for doing nothing while his victim has 50 cents for eleven and twelve hours of her life’s energies.”
By the 1890s, however, Barry was once again forced to return to the factory. With the Knights of Labor all but destroyed, there were no statistical institutions through which she could make her voice, and those of countless other women, heard. Nevertheless, in the Progressive Era, statistic-wielding labor activists such as Florence Kelley and Crystal Eastman would follow Leonora Barry‘s trailblazing example.
* Eli Cook is Assistant Professor of History at the University of Haifa.  He is the author of The Pricing of Progress: Economic Indicators and the Capitalization of American Life (Harvard University Press, 2017)

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Great academic opportunities: 25 calls for papers, 8 PhD fellowships, 6 postdocs, 3 jobs, 3 summer schools, 3 awards, 2 grants

Dear ES/PE community member, see below an abundant list of great call for papersacademic opportunities: 25 calls for papers for conferences and workshops (some are fully or partially funded), 8 doctoral fellowships, 6 postdoctoral positions, 3 job openings, 3 summer schools (fully or partly funded), 3 awards, 2 research grants — in various areas of economic sociology, political economy, and related fields, with March 5 — 31 deadlinesShare this post with your colleagues and students. Good luck!

Calls for papers:

> CfP: “Understanding the political economy of digital technology”, BSA Digital Sociology Study Group event, Vrije Universiteit Amsterdam, May 27, 2018. DL: March 5

> CfP: “Financialization and development policies: Critical perspectives on new financial circuits for international development projects” conference, University of Hamburg (Germany), 12-14 September 2018. A limited number of grants are available to cover travel and residence costs. DL: March 6 

CfP: “The Political Economy of Migration in Africa” conference, African Heritage Institution (Enugu, Nigeria), June 28 – 29, 2018. DL: March 7

> CfP: “Global inequalities“, The Development Studies Association annual conference, University of Manchester (UK), 27-29 June, 2018. DL: March 9

> CfP: “Institutions and The Future of Global Capitalism“, the 5th World Interdisciplinary Network for Institutional Research conference, Chinese University of Hong Kong, 14-17 September, 2018. The keynoters are Lynda Weiss, Xu Chenggang, Justin Yifu Lin. DL: March 10

> CfP: “The Working-Class Avant-Garde” symposium, London South Bank University (London, UK), 22 June 2018. DL: March 11

> CfP: “The State of Capitalism and the State of Political Economy“, the 9th International Initiative for Promoting Political Economy conference, University of Pula (Pula, Croatia), September 12-14, 2018. Various working groups issued thematic calls. DL: March 15

> CfP: “Educational Inequality: Mechanisms and Institutions“, Amsterdam Centre for Inequality Studies conference, University of Amsterdam, 5-6 July, 2018. The keynoters are Marius Busemeyer, Michelle Jackson, Ludger Wößmann. DL: March 15

> CfP: “Whatever Has Happened to Political Economy?“, The 15th Italian Association for the History of Political Economy conference, Università di Genova (Genoa, Italy), June 28-30, 2018. The keynoters are Geoffrey Hodgson and Harro Maas. Scholarships for junior scholars are available. DL: March 15

> CfP: “Feminist Debates on Migration, Inequalities & Resistance“, the 27th International Association for Feminist Economics conference, State University of New York at New Paltz ( New Paltz, New York), 19-21 June, 2018. The Rhonda Williams Prize given to scholars from underrepresented groups. DL: March 15

CfP: “The Non-Death of Neoliberalism” conference, York St. John University (York, England, UK), 25th May 2018. DL: March 16  

CfP: “Effective Financial Capability Interventions for Economically Vulnerable Individuals and Families“, The Journal of Consumer Affairs‘ special issue and the US Treasury Department’s Financial Literacy and Education  commission symposium, Washington, D.C (USA), Fall 2018. March 16 

> CfP: “Consuming In, and Consumed By, a Trump Economy”, one-day pre-American Sociological Association mini-conference by the Consumers and Consumption section, Rutgers  University (NJ, USA), August 10, 2018. DL: March 16

> CfP: “Law in Global Political Economy: Heterodoxy Now“, The Institute for Global Law and Policy conference, Harvard Law School, 2-3 June, 2018. DL: March 16

> CfP: “Transforming Cities: Urbanization and International Development Policies in the Global South in the 20th Century” conference, Freie Universität Berlin, 11-12 October, 2018. Participants will be reimbursed for travel expenses and accommodation. DL: March 18

> CfP: The 2nd international conference on “Cliometrics and Complexity”, École normale supérieure de Lyon (France), 4-5 June, 2018. No registration fee. DL: March 19

> CfP: “Growth, History and Development”, The 9th Historical Economics and Development Group workshop, the University of Southern Denmark (Odense, Denmark), June 4, 2018. The keynoter is Noam Yuchtman. No registration fees;  lunch and dinner are provided. DL: March 23

> CfP: “The moral dimensions of economic life in Africa” workshop, The Nordic Africa Institute, Uppsala (Sweden). Some funding from is available for a few scholars who need support; scholars based in African institutions are particularly encouraged to apply and an effort will be made to support their participation. DL: March 28

CFP: The 10th Critical Finance Studies Conference, University of Gothenburg (Sweden), 9-11 August, 2018. The keynoters are Saskia Sassen, Orsi Husz, Brett Christophers. The conference is free of charge. DL: March 30

> CfP: “Power and Governance: Forms, Dynamics, Consequences” conference, University of Tampere (Tampere, Finland), 27–29 August 2018. The keynoters are Gili Drori, Vivien A. Schmidt, Sylvia Walby, and more. DL: March 30

CfP: “Making & Doing Technoscientific Futures Better“, the 6th Annual Workshop on The Changing Political Economy of Research & Innovation, Lancaster University (Lancaster, UK), 23-24 July 2018. The workshop will be held before the EASST conference. The keynoters are Susan Robertson and Mark Carrigan. DL: March 30

> CfP: “Political Economy of Trust“, a workshop at Istanbul Technical University (Istanbul, Turkey), 4th May, 2018. There is no registration fee. DL: March 30

CfP: “Evolutionary foundations at a crossroad: Assessments, outcomes and implications for policy makers“, the 30th European Association for Evolutionary Political Economy conference, University of Nice Sophia-Antipolis (Nice, France), 6-8 September, 2018. The keynoters are Richard Nelson and  Sidney Winter. There are various research areas including economic sociology, institutional change, comparative political economy, and more. DL: March 31

> CfP: “Karl Marx in the 21st Century” International Symposium, Hosei University (Tokyo, Japan), 22-23 December, 2018. DL: March 31 

> CfP: The 19th Conference of the International Association for the Economics of Participation, University of Ljubljana (Slovenia), July 12-14, 2018. The keynoters are  Jan Svejnar and Avner Ben-Ner. A partial reimbursement is available for participants from developing economies and students. DL: March 31

PhD scholarships:

Doctoral Fellowships at the Max Planck Sciences Po Center on Coping with Instability in Market Societies, Sciences Po (Paris, France). Research topics should be situated in economic sociology, political economy, or economic or political history. DL: March 15. Recommended.

5 PhD fellowships in Development Studies, the International Institute of Social Studies, Erasmus University (Rotterdam, The Netherlands). DL: March 15

> PhD studentship “Understanding Migrant Workers Collective Organising in the Service Economy”, Nottingham University Business School. DL: March 9

> PhD position “The 2008 UK financial crisis: policy, regulatory and state capture?“, University of Nottingham (UK). DL: March 16

> PhD Scholarship on “Informality, informal or shadow economies, with a specific focus on the former USSR region“, Institute for International Conflict Resolution and Reconstruction, Dublin City University (Ireland). DL: March 22

> 3 PhD positions within the project “Legitimacy, Financialization, and Varieties of Capitalism: Understanding Sovereign Wealth Funds in Europe” at the Maastricht University (The Netherlands). PhD position 1 – “Global Political Economy“; PhD position 2 – “International Political Economy“; PhD position 3 – “Comparative Political Economy“. DL: March 28 

2 PhD positions in the research group of the Chair of Political Economy and Development, Department of Political Science, University of Zurich. DL: March 30 

PhD Position in Sociology “Social Inequalities in Children’s Skills Development: A Longitudinal Project“, Trinity College Dublin (Dublin, Ireland). DL: March 31

Summer schools:

> CfA: “Historical perspectives on neoliberalism: Political Economy and Social history since 1970” PhD seminar, Max Planck Sciences Po Center on Coping with Instability in Market Societies (Sciences Po, Paris), May 16-18, 2018. No participation fees; travel and accommodation costs will be covered. DL: March 15. Recommended.

> CfA: “Doing Research with Social Network Analysis: Tools, Theories and Applications” summer school for researchers and students, Thuke Centre for Business Network Analysis at the University of Greenwich (London, UK), 13-15 June, 2018. Fee includes breakfasts and lunches

CfA: “Economy and Society” Summer School, Blackwater Castle, Cork (Ireland), 14-18 May, 2018, Fees cover accommodation, food, and entertainments. DL: March 31

Job openings:

Professorship in Sociology with a focus on Digitalization and Industrial Development (full-time, permanent), The Faculty of Social Sciences, Economics and Business at the Johannes Kepler University of Linz (Austria). DL: March 8 

Full Professor of Socioeconomics of Work (permanent), Department of Socioeconomics, Vienna University of Economics and Business (Austria). DL: March 11

Professorship in comparative labour market analysis, the Department of Business and Politics, Copenhagen Business School (Denmark). DL: March 15 

Postdoctoral positions:

Early stage researcher to work on “The impact of economic populism on inequality” as part of the FATIGUE project (three-year position), Corvinus University of Budapest  (Years 1 and 3) and University College London (Year 2). DL: March 15

A Post-doc in Sociology of Work (full-time, three years), the Department of Sociology, Goethe University Frankfurt (Germany). DL: March 15

Early stage researcher to work on ” The impact of economic populism on growth and convergence” at FATIGUE project (3-year position), Corvinus University of Budapest  (Years 1 & 3) & University College London (Year 2). DL: March 15

3 post-doctoral fellows to work on the ethical and policy issues raised by long-term changes in the labor market (one year), New York University’s Global Institute for Advanced Study. DL: March 16

> Postdoctoral Research Fellow to explore ethnographically how energy analysts and traders in the financial sector conceptualise and value oil (3-year position), the Department of Social Anthropology at the University of St Andrews (Scotland, UK). DL: March 16

Post-doctoral Fellowship “Asian Capitalisms: Diversity and Institutional Change” by Fondation France-Japon, École des Hautes Études en Sciences Sociales, Paris. DL: March 31

Research grants:

The John E. Rovensky Fellowships in US Business or Economic History for enrolled PhD students, The University of Illinois Foundation. DL: March 9

> Research grant to study inequalities and skills acquisition in young people by  Global Challenges Research Fund. DL: March 22 


> The ASA Economic Sociology section’s awards (Zelizer Award for Best Book, Granovetter Award for Best Article, Burt Best Student Paper Award). DL for all: March 15

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BITS & BRIEFS: How multinationals avoid taxes // Finance needs households // Discourse on privilege benefits the elites // Gender stereotypes in economics // Shell-based currency in California // Shopping and Enclave Urbanism in Mexico

This time, especially worth reading  – and sharing – articles:

> How Apple and other multinationals avoid taxes and accountability: A network study of offshore finance — by Jan Fichtner

Financial capitalism remains deeply dependent on households, even as it obscures their significance — by Caitlin Zaloom

> The parallel languages of responsibility (as a demand aimed at the poor) and privilege (a charge lobbed at the rich) benefit the elites by requiring that rewards be given to those who “deserve” them, instead of pushing for structural reforms — by Sean McCann

Gender stereotyping in economics: talks about men-economists focus on professional issues, about women on personal matters — findings by Alice H. Wu

> When the Great Depression broke out, California’s coastal town issued its own shell-based numbered and signed currency

“Awareness of history must enter economic theory… [This] would save us from self-defeating arrogance” — by Amit Bhaduri

Unlike in the US and Europe, malls are booming in Mexico: “Enclave Urbanism”, local globality, and consumerism — by Madeleine Wattenbarger

Offshore Financial Centers

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On the wandering and exilic being of knowledge seeker

An eminent Saxon scholastic theologian Hugh of Saint-Victor (1096 – 1141) noted in his monumental encyclopedic treatise Didascalion:

hugh of st victor“All the world is a foreign soil to those who philosophize… It is, therefore, a great source of virtue for the practiced mind to learn, bit by bit, first to change about in visible and transitory things, so that afterwards it may be able to leave them behind altogether. The man who finds his homeland sweet is still a tender beginner; he to whom every soil is as his native one is already strong; but he is perfect to whom the entire world is as a foreign land. The tender soul has fixed his love on one spot in the world; the strong man has extended his love to all places; the perfect man has extinguished his. From boyhood I have dwelt on foreign soil, and I know with what grief sometimes the mind takes leave of the narrow hearth of a peasant’s hut,  and I know, too, how frankly it afterwards disdains marble firesides and panelled halls.”

Hugh of Saint-Victor. 1961. The Didascalicon of Hugh of St. Victor: A Medieval Guide to the Arts, translated by Jerome Taylor. Columbia University Press. (Page 101)

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A Critique of the Critique of Finance: Critics of neoliberal capitalism rarely recognize the productive power of speculation

by Martijn Konings

If there is one theme that unites the various critiques of contemporary finance, it is the emphasis on its speculative character. Financial growth is said to be driven not by the logic of efficient markets, but rather by irrational sentiment, “animal spirits” that do not respect fundamental values.
Emphasizing the role of volatility in contemporary capitalism (evident at the time of writing, as the stock market is experiencing a downturn) is important as an antidote to notions of market efficiency and equilibrium. But it is a mistake to think that it provides a sufficient basis for effective critique. Predictions regarding the limits or collapse of neoliberal finance have simply not enjoyed a good track record. Over and over, the contemporary financial system has proven capable of sustaining higher levels of speculative activity than anticipated. This has certainly been true of the past decade. Capital and Time: For a New Critique of Neoliberal Reason is my attempt to make sense of this—that is, to understand what might be wrong or missing in the existing heterodox critique of speculation, and to advance a more accurate understanding of the role of uncertainty, risk, and speculation in contemporary capitalism.
Capital and Time For a New Critique of Neoliberal Reason KONINGSAt the heart of the critique of speculation we find a distinction between real and fictitious forms of value. Although “essentialist” (or “foundationalist”) modes of explanation have been under fire across the social sciences for several decades now, when it comes to the critique of finance they have had considerable staying-power: without a notion of real value, it often seems, we lose any objective standard against which to assess the speculative gyrations of capitalist markets.
Capital and Time asks what kind of critical theory we might develop if we bracket the anxious attachment to a notion of fundamental value. To that end, it turns to the work of economist Hyman Minsky. Although Minsky has been popularized precisely as a critic of speculation, he in fact insisted that almost all value judgments and investments were to some degree speculative—their success or failure would be determined in an unknown future. For him, the key economic question is how order emerges in a world that offers no guarantees, how more or less stable standards and norms arise amidst uncertainty.
Of course, the “endogenous” origin of financial standards is a well-rehearsed theme in heterodox economics—indeed, it is a staple of the “post-Keynesian” literature that claims Minsky’s legacy. But such perspectives have never been able to break with the idea that financial stability is at its core dependent on external interventions that suppress speculative impulses. For Minsky, however, this is to miss the point about endogeneity. To his mind, there was no clear dividing line between financial practices and their governance: central banks and other public authorities are no more able to see into the future and to transcend uncertainty than private investors are.
Minsky was therefore highly skeptical about official claims of discretionary precision management: financial governance is always embroiled in the very risk logic that it is charged with managing. That also means that financial policy can appear quite ordinary, even banal: at the heart of capitalist financial management is a logic of backstopping and bailout that responds to the possibility that the failure of an institution may take down wider financial structures.
The stability of the post-New Deal financial system is often attributed to the Glass-Steagall separation of the stock market and commercial banking. But Minsky tended to view Glass-Steagall as one of several measures to direct bank credit away from the stock market towards other, no less speculative ends, notably consumer and mortgage financing. To his mind, the stability of the post-war period derived rather from the creation of an extensive financial safety net (which included, for instance, deposit insurance, which removed the rationale behind bank runs) that served to socialize risk.
This institutional arrangement turned out to have a significant drawback: a pattern of chronic inflation emerged that, by the late 1970s, was widely perceived as a major problem. Minsky’s lack of faith in the possibility of cleanly staged external interventions led him to feel that that there was no real way out of this predicament. Monetarist doctrines, ascendant during the 1970s under the influence of Milton Friedman, relied on exactly the belief in an arbitrarily defined monetary standard that Minsky rejected as naïve. Muddling through, it seemed, was the price of avoiding another financial crash and depression.
The Volcker shock of 1979 changed this dynamic in a way that Minsky had not foreseen but that is comprehensible when seen through the lens he provided us with. Paul Volcker looked to monetarism not as a means to enforce an external limit or standard on the financial system, but as a politically expedient way to break with accommodating policies and to proactively engage the endogenous dynamics of finance. The consequences of the Volcker shock were predictable (which is exactly why the Federal Reserve had been reluctant to pursue similar policies in previous years): inflation gave way to instability and crisis. Inflation was conquered as jobs were lost and wages stagnated. And, far from money being returned to its neutral exchange function, opportunities for speculation multiplied.
The American state was never going to sit idly by as the financial system returned to dynamics of boom and bust: when instability took the form of systemic threats, authorities would bail out the institutions that had overextended themselves. Of course, Volcker would not have been able to predict the specific features of the too-big-to-fail regime as it emerged during the 1980s and evolved subsequently; but the very point of the neoliberal turn in financial management that he had overseen was to create a context where risk could be socialized in ways that were more selective and therefore did not entail generalized inflation.
The inflation of asset values that has been such a marked feature of the past four decades has always been premised centrally on the willingness of authorities to view the “moral hazard” of the too-big-to-fail logic as a policy instrument—even if they may have decried it officially as a regrettable corruption of market principles. Spectacular bailouts, mundane policies to protect the key nodes of the payment systems, the “Greenspan put”, the different iterations of quantitative easing—these are all variations on that basic too-important-to-fail logic.
Existing critical perspectives tend to view crisis and the need for bank bailouts as manifesting the essential incoherence of neoliberal finance, its lack of solid foundations and the irrationality of speculation. Capital and Time breaks with such moralistic assessments. The way deepening inequality and the speculative growth of asset values continue to feed off each other is troubling for any number of reasons, but there is nothing inherently “unsustainable” about it—the process does not have a natural or objective limit.
At this point in time, the critique of speculation does little more than lend credibility to official discourses that present crises as preventable and bailouts as one-off, never-to-be-repeated interventions. In that way, it prevents us from critically relating to a neoliberal reality that has been shaped to its core by the speculative exploitation of risk and uncertainty, and in which regressive risk socialization serves as the everyday logic of financial governance.
* Martijn Konings is Associate Professor of Political Economy at the University of Sydney. He is the author of The Emotional Logic of Capitalism and Capital and time: For a New Critique of Neoliberal Reason. This post originally appeared on the Stanford University Press blog

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The Goose and the Common — The Privatization of Public Space

“The [following 18th century folk] poem is one of the pithiest condemnations of the English enclosure movement, the process of fencing off common land and turning it into private property. In a few lines, the poem manages to criticize double standards, expose the artificial and controversial nature of property rights… And it does this all with humor, without jargon, and in rhyming couplets… Like most of the criticisms of the enclosure movement, the poem depicts a world of rapacious, state-aided “privatization,” a conversion into private property of something that had formerly been common property or, perhaps, had been outside of the property system altogether.” (Boyle 2003: 33-4).

The Goose and the Common / Anonymous

leavening_enclosure_mapThe law locks up the man or woman
Who steals the goose off the common
But leaves the greater villain loose
Who steals the common from the goose.

The law demands that we atone
When we take things we do not own
But leaves the lords and ladies fine
Who takes things that are yours and mine.

The poor and wretched don’t escape
If they conspire the law to break;
This must be so but they endure
Those who conspire to make the law.

The law locks up the man or woman
Who steals the goose from off the common
And geese will still a common lack
Till they go and steal it back.  

Boyle, James. 2003. “The Second Enclosure Movement and the Construction of the Public Domain“. Law and Contemporary Problems 66: 33-74.

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