The market hates you
than you hate yourself.
Rae Armantrout, ‘Hate’, Wobble
Late last year, The Economist devoted a campaign to castigating central banks, including those of Europe, China and Britain, for being ‘keen to be green.’ The magazine argued that ‘too much greenery risks politicizing [the banks] and compromising their core missions’. The Economist positions itself as particularly worried about the democratic legitimacy of central banks’ intervention, despite admitting that the same interventions ‘saved the global economy during the financial crisis’ (my emphasis).
The double standard – hardly a novel feature of The Economist’s ‘extreme centre’ position – reflects a religious adherence to capitalism. Capitalism, Walter Benjamin wrote in ‘Capitalism as Religion’ spreads itself ‘not to atone for … guilt but to make it universal, to hammer it into the conscious mind … so as once and for all to include God in the system of guilt and thereby awaken in Him an interest in the process of atonement.’
(Trump takes it upon himself again and again to announce his own ‘exoneration’, less, it would seem, to deny guilt, and more to, as the etymology suggests, lighten the load, or relieve himself of responsibility.)
Demonstrating Benjamin’s insight, Raj Patel and Jason W Moore point out in A History of the World in Seven Cheap Things, that the labour necessary for the emergence of capitalism was secured in, for instance, South America as elsewhere by making people work for nothing, and giving them Christianity in return, with the empty promise of salvation. Capitalism never pays its bills. Lives are cheap, but when it comes to saving the economy, no measure is too great.
Adam Tooze’s Crashed shows that, contrary to The Economist’s fork-tongued neutrality, politics is deeply implicated in economic governance and records the immense cost that was sunk into maintaining precisely the same economic system that caused the crisis.
In salvaging the economy, central banks, politicians and other actors continued to trade in debt, currency and power. Tooze cites a piece of economic scripture: ‘Everyone cannot save at once without provoking a recession.’ But in fact, what his book demonstrates is rather that not everyone can be saved at once. Crashed is a history of how financial markets took precedence over people, and moreover, how a profoundly anti-democratic politics prevailed.
History and neoliberalism
Why do we need a history of the financial crisis now? Crashed is a history from the inside. It pursues the logic of the ‘Davos mind-set’ from the ‘boot prints they left on those they impacted or through the conformist market-oriented culture that they moulded.’ This mindset, as The Economist displays, believes in de-politicising the economy, and has narrated its own history of the crisis and the ordinary functioning of the economy in ways ‘that void the presence of politics.’
Standard accounts of the economy portray it as a quasi-natural phenomenon, and for years, the financial establishment tried to sell this story about global financial integration and power. Ironically, it did so by establishing predatory and highly active economic institutions with close ties to politics. But a naturalist narrative, as Hannah Arendt warns in ‘The Concept of History’, is radically disempowering. It ‘obliterated the defensive boundaries’ between human action and mechanical processes, making modern history into a sort of organic, inevitable ‘development.’
Another version, offered to Tooze by one of the protagonists of the bailout, was crisis-fighting as a military operation. Obviously intended by Tooze’s informant to heroise himself as ‘a man of fortitude’, this narrative also works to justify the
moral burden of dirty hands, to do what was necessary in the public interest. But how did [he] define that public interest? First and foremost his commitment was to upholding the stability of ‘the financial system’ … That was his key article of faith.
It is the same discourse is used to dissuade central banks from ‘greening’. The Economist calls it ‘mission creep.’
These portrayals ‘are the coordinates of memory and commemoration’ and have contributed to the perpetuation of neoliberal governmentality. Far from causing its fall, the near-collapse of financialised capitalism has led to more of it, albeit in the form of what William Callison and Zachary Manfredi call Mutant Neoliberalism. But the crisis also vindicated astute analysts of neoliberalism, starting from Michel Foucault, who had long recognised that financial de-regulation actually entails a great deal of government intervention.
As Tooze points out, all markets are political, and ‘all commodities have politics. But money and credit and the structure of finance piled on them are constituted by political power, social convention and law’. The conditions of the crisis were created by the emergence of new, politically enabled markets in debt, credit and the dollar. The hierarchy of the international money market ironically gave the free-marketeer ideologues in America and other rich states an excellent position to enforce this hierarchy when it threatened to collapse.
The key principle of neoliberal economics is competition. But, arguably, we have mistaken this principle for its previous incarnation in classical liberal free markets. Tech oligarch Peter Thiel’s contempt for competition reveals this mistake. He whines, ‘Capitalism is premised on the accumulation of capital, but under perfect competition, all profits get competed away.’ The kind of competition that interests neoliberals is not within markets, but within society, so that it can be turned into a market. Neoliberal governance is all about creating the conditions for capitalist markets to emerge. If you can imagine it, they want a market for it.
Philip Mirowski, at the end of Never Let A Serious Crisis Go To Waste, shows how this has dramatic consequences for how neoliberals think we should address climate change: create financialised markets for carbon and other resources, and allow entrepreneurial eccentrics to gradually develop geo-engineering technology. Meanwhile, as in the case of upholding the economic system in the wake of the financial crisis, the neoliberal refrain has always been to curtail discussion or attempts at any other kind of political system.
Markets and economics
If the intense (re)production of markets led to such a catastrophic crash, what is the neoliberal view of a market? It is a difficult question to answer but what is clear is that markets have gradually financialised, even if they remain dependent on technology, and material relations, as Donald McKenzie maintains.
Markets are creations of the collective imagination, with rating agencies admitting that it is ‘impossible to value certain assets fairly regardless of their quality rating’, and investors realising that ‘there was nothing holding the dollar up other than their own purchasing of it.’ When it was needed at the height of the crisis, Tooze writes that major European and American banks ‘achieved a collateral multiplication of 400 percent, amounting to roughly $4.5 trillion in additional funding, effectively out of thin air.’ (David Graeber uses the same phrase to describe what happened when an economist took a job in a bank to learn how banks ‘made money’: ‘They simply create money out of thin air, or, as he preferred to put it, ‘fairy dust.’’)
The manipulation of economic instruments to rescue banks makes a mockery of conventional economics. Again and again, the kinds of self-assured predictions made by capitalist mouthpieces like The Economist proved downright wrong. As the US financial system collapsed, for instance, ‘the dollar did not plunge, it rose’, the share of the state in economic activity increased with market stimulus, and austerity proved economically (and socially) depressing. Yet the orthodoxy prevailed, even as the crisis unfolded, and, tellingly, beyond, as Raphaële Chappe highlights. So-called fiscal hawks insisted that governments cut social spending and taxes, and were accused by their moderate peers of ‘implicitly accepting as binding the views of the same financial markets whose mistakes precipitated the crisis’.
The discipline operates under nebulous assumptions about what makes markets work, and seems obsessed with stroking investor confidence. The aim of austerity was ‘supposedly to maintain confidence and to create space for private sector recovery’. This would reassure markets that the public purse would absorb losses incurred by banks’ risky investments. Tooze observes, however, that ‘confidence is one of the most quicksilver concepts in economics’, and, as we all know, these measures simply allowed the wealthiest to indemnify themselves against financial uncertainty in a way that no one else could. Indeed, some actively stoked the crisis with ‘an eye to speculative profits to be made by trading on uncertainty.’ After all, as one admitted, ‘big money does organize itself somewhat like feral hogs. If they detect weakness or a bad scent, they’ll go after it’.
Disproportionate responsibility, disproportionate austerity
In order to preserve the appearance of stable foundations, the risk to financial markets had to be transferred wholesale to the public. As Tooze sums it: ‘public claims replaced private debts’, and ‘merely turned banking crises into fiscal crises’. The burden of that crisis in the form of those risks was now placed on ordinary people rather than on the ‘cluster of gigantic transnational banks’ and ‘tiny elite who were doing extremely well’. Although it is grimly satisfying to highlight just how close to nationalisation some of the measures were, not only did they re-finance the financial sector on a massive scale, they also did nothing to constrain or control how that money was used or directed.
Along with the dose of medicine applied unscrupulously to the people and public finances, administered orally, there was also a spoonful of sugar. However, this sugar did not enter the same orifice. I am inclined to say it went in the other end: finance capitalism tastelessly received all the benefits, while everyone else received the foul pharmaceuticals, as if to prove that pharmakon means both medicine and poison or sacrifice.
The obscene disproportion in who caused the crisis and who was made to suffer it required justification. Although Tooze writes that the ‘new macrofinancial economics … strips away all comforting euphemisms’, nevertheless we must be taught to blame ourselves for social inequality. So, one protagonist declaims, ‘There was a vast amount of imprudent lending going on. Almost everybody believes that wealth, as it was experienced by households, was in excess of its reality. Too easy money, too much borrowing, too much wealth.’ No mention of the fact that wealth inequality throughout this period was steadily rising. But for neoliberals and other capitalist ideologues, it was households who experienced too much wealth, and they who must be disciplined by deceptive and paternalistic austerity.
The efficacy of the right in claiming the moral, economic and political ground has come in part because left and centrist governments had vacated politics per se to technocratic managerialism. Centre-left governments in power during the crisis failed so decisively in part because, at the crucial moment, they identified both their own and their nations’ interests with those of global financial capitalism. as Melinda Cooper points out in ‘Anti-Austerity on the Far Right,’ this allowed the right to claim the territory of anti-austerity. This has ominous historical precedents, Cooper notes, as do the strategies that accompany it, including xenophobia, racism and nationalism as solvents against class solidarity.
It was an incredible political failure. At a time when mainstream publications were announcing the death of capitalism, the New Left sided instead with the feral hogs and paid out the people. In fact, it’s a little more sinister. Crisis management, Tooze quietly notes, was directed against the left-wing insurgency that slowly but noisily organised in the wake of the crisis. He suggests that by ‘preying on its reasonableness, the brutal tactics of containment did their job. Against the Right they did not …’
I do not think that we are looking at a failure at the level of political theory or messaging, as Eli Zaretsky recently suggested of the recent UK election result. Something more ‘base’ is at work, to double the Marxist term: namely, an attachment of the middle class to its hoarded wealth, something like what Benjamin describes in One-Way Street as a
helpless fixation on notions of security and property [that] keeps the average citizen from perceiving the quite remarkable stabilities of an entirely new kind that underlie the present situation. Because the relative stabilization of the [pre-crisis] years benefited him, he feels compelled to regard any state that dispossess him as unstable. But stable conditions need by no means be pleasant conditions.
Tooze aptly compares the crisis response and currency system it enforced to the global intelligence system laid bare by Edward Snowden. We are beginning to see that both of these systems are directed against left-wing movements, leading to innocuous organisations, environmental movements and pacifist, and anti-fascist leagues being associated with terrorist organisations on a police guide in the UK. In southern European countries, laws that had been designed to ‘counter the spectre of Communist insurrection’ were revived to fight anti-austerity movements. ‘It was a blatant attempt to shift the balance of social and political power by means of monetary policy.’
In tandem, the oligarchs closed ranks. Desperate to appear ‘as sound managers of the economy’, the newly elected Democrats sided with the banks: ‘Concern for the confidence in the financial markets was their common denominator.’ The strategy of ‘comprehensive mobilisation’ against financial oligarchs was left to the right who perceived it as a ‘moment in which high-minded corporate liberalism shaded into a self-dealing of liberal corporatism.’ It was an easy target given the ‘incestuous relationship’ between government and finance, lately played out in Australia by Julie Bishop and Christopher Pyne making use of the proverbial ‘revolving door’.
The world over
Vindicating one of Quinn Slobodian’s theses in Globalists that neoliberalism was a response to the decline of political empires, the network of benefactors and victims of the crisis-fighting extended rather than trimmed the new economic empires. The liberal capitalists, who, as Alexander Zevin points out in Liberalism at Large, ‘once wanted to dismiss the entire [aristocratic] diplomatic corps and replace it with merchants’, might feel themselves vindicated. But, as Zevin also notes, Marx recognised in the same ‘organ’ that the tenets of laissez faire market liberalism and global free trade meant little more than an ‘aristocracy of finance’. Moreover, Marx perceived in the mid-nineteenth century what the crisis made impossible to ignore: that sovereignty no longer lay in the state, but with the banks.
Such conclusions make a mockery of various nations’ futile insistence on their independence from the toxic American financial system. European politicians and intellectuals alike maintained a façade of ‘geopolitical innocence’ despite their ‘deep entanglement’ with American finance (and foreign policy). Germany’s persistent sense that it had withstood the crisis both disguises the fact that it was simply the American government that bailed out its biggest banks with dollar funding, and moreover led to its malicious treatment of Greek, Spanish and Portuguese governments. It proved that, in the general outcry against sovereign interference by way of re-distributing debt burdens, the powerful nations were more than happy to sacrifice the sovereignty of their less powerful neighbours.
Outside of the West, China and Russia tried to recuse themselves from the crisis. China’s intensive trade relationship with the US and deep investments in American economic growth made that impossible. What prevented a recession in China was a massive public stimulus that was ‘particularly effective because it combined huge government spending with a spectacular loosening of monetary policy.’ The anxiety about Chinese ownership of American public debt, which made Chinese observers like Goa Xiqing see ‘not capitalist democracy, but ‘socialism with American characteristics,’ may be partially assuaged by the fact that China has little other options for its investments. ‘What other safe asset were there to buy? China and America were locked together willy-nilly.’ Russia, meanwhile, did openly what the US does covertly. The Kremlin re-financed the economy, forcing some oligarchs to inject their own money, and distracted from its unstable economic situation by instigating wars in Eastern Europe.
Knowledge and democracy
It is a truism of neoliberal economics that only markets know. Markets provide information upon which investors make decisions. In response to growing concerns about the banking sector in the early 2000s, the Basel II accords enshrined the principles of ‘self-regulation, disclosure and transparency’. However, these principles never really came into effect, and even after the crisis they were to be self-administered. Yet transparency is impossible in the finance sector – it would simply reveal the rot at the core. Throughout the crisis, key figures admitted this in no uncertain terms.
Banks were told to accept bailouts without informing shareholders, while the US Federal Reserve poured funding into domestic and international markets and used ‘every legal means at its disposal to prevent detailed information … from leaking to the general public.’ They worried about a run on banks or a plunge in confidence, that crucial but ephemeral thing. But they also displayed their contempt for the public, and showed that the financial sector is an obstacle to democratic decisions. This contempt was on display in Europe as well, with a major European economic bureaucrat stating: ‘I am for secret, dark debates … I am ready to be insulted for being insufficiently democratic, but I want to be serious … When it becomes serious, you have to lie.’
This claim is revealing: it implies that serious matters should be decided non-democratically. It had real effects in the Eurozone troika’s treatment of Greece, where referenda and democratically elected left-wing governments were ignored, curtailed and punished for their resistance to austerity. If we needed more evidence, it also lays bare the gap between economic liberalism and democracy. The kind of capitalism that produced the crisis is sustained by keeping itself ‘off the democratic agenda.’
As the martial language took hold, policy-makers asserted that ‘this was no time for dangerous talk about debt restructuring’, ‘no time to ask why this is happening’. The crisis response was actively and desperately de-politicised by ‘administrative measures’ that siphoned control from legislative bodies and relied more on ‘automatic politics and depoliticized commissions’. They called for ‘less democratic’ institutions ‘to begin to build a new set of rules and institutions that would make legislative inertia less detrimental to our nation’s long-term health.’
At precisely the time it became possible to ask whether the financial system was one we wanted to put up with any longer, politicians and bureaucrats fought to keep larger questions from sight, and subsequently make it impossible to legislate differently. They took the opportunity of the near-collapse of financial capitalism to brick us all up inside it. If (or when) it goes down, it’s the mausoleum we’ll all go down in together.
What will take us down then? The weight of debt has prevailed as the dominant post-crisis narrative, both in reinforcing the conservative agenda of budget surplus and austerity, and stimulating thinking and activism. It is worth noting that the pre-crisis attitude towards debt was much looser: banks operate on the basis of debts and credits, and part of the reason they boomed was by securitising debt. Credit, Tooze writes, ‘is an elastic quantity, which in an asset price boom can easily become self-expanding on a transnational scale.’ People who had previously not had access to credit now entered the market in debt. And the middle classes, ‘whether they liked it or not, were taking a speculative position’ by owning homes and investing.
But as soon as this debt was willfully displaced, from private accounts to public, it became the object of moral condemnation. It is an ironic admission that what, in the hands of finance, had a buoyant effect, in public hands would, as the German Chancellor put it, ‘rob future generations of their room for investment and development.’ And that, the added ‘is immoral.’ When she said that ‘we live at the expense of the future by running up debts’ Merkel was twisting Nietzsche. In the preface to The Genealogy of Morals, the philosopher wrote that what ‘enabled the present to live at the expense of the future’ was not debt but in fact the moral man – that is, the stultifying moralist whose morbidly austere virtues are precisely what Merkel extols.
The German-led troika also had no issue imposing ever-new debt on the hapless Greek economy, despite it having no positive effect. But the point was not, in fact, to assist the Greek people, but to discipline anyone who thought of opposing austerity, or, worse, financial capitalism. The moralistic position on debt handily gives conservatives an argument for cutting government spending and entitlements, as well as for privatisation. But it perpetrates what is known as the ‘householder fallacy’ on a global scale. Government budgets simply do not operate like household budgets. But neither truth, nor democracy, nor even good economics got in the way of the fact that binding the state to financial capitalism ‘was an end in itself.’
This has occurred on a global scale. It is a story of financial globalisation that has been masked by the discourses of development and modernisation. Taking on debt, Julia Elyacher writes, was presented for the poor as a means ‘of empowerment.’ The results have been dire, and stretch far beyond the borders of financial capitals where decisions are made. The regime of debt and finance has been an instrument of neoliberal international politics. By removing trade barriers and protections, as Silvia Federici laments, small-scale agricultural production that preserved environmentally sustainable practices has been replaced by monocultures, corporatised agriculture and land-clearing on a massive scale.
The politics of debt has turned governments into bankers like the one depicted in George Eliot’s Middlemarch, Mr Bulstrode, quick ‘to transfer obligations, severe in watching the results.’ Bulstrode’s infiltration into people’s lives was due to the fact that was ‘could touch the springs of their credit’, and Eliot’s wise narrator points out that
in this way a man gathers a domain in his neighbour’s hope and fear as well as gratitude; and power, when once it has got into that subtle region, propogates itself, spreading out of all proportion to its external means.
It is a description worthy of the times: we are living out of all proportion to our external means, but not in a financial sense, since, after all, credit is plastic. Rather, our crisis is environmental, and the obligations and desires imposed and encouraged by debt run counter to any viable solution. Debt wants a growth economy. What we need is not growth but redistribution.