A Sociology of Financialisation?

Idea go

What does a sociologist know about finance? Surely it’s a matter for accountants, economists and business people?….and maybe politicians and lawyers when things go really wrong. But sociologists know about society and how people interacting in groups manage their affairs collectively, so its not so surprising that they have an interest in finance, especially when things go wrong in a way that affects whole societies. The financial crisis that emerged in 2007, intensified in 2008 and has continued to ricochet around the world ever since, has shown that modern, industrialised, market capitalist, societies are unable to manage their economies in a steady and controlled way. What many call the project of neo-liberalism, the belief that economic affairs are best left to the market and that social and political arrangements should simply maintain the freedom of economic actors to engage in it, has held sway for the last thirty years and appeared to be associated with growing prosperity. But now that market capitalist orthodoxy has shown itself to be unable to manage crises and worse, to be implicated in their creation and proliferation through financial ‘innovations’ and new ways of creating debt. The wealth it created through growth was actually built on the exploitation of labour and resources from the less developed world and the fool’s gold of debt-fuelled housing. The increasing inequality between the haves and have-nots, on both the international and the domestic stages, was ignored because it was made to seem as if everyone was getting richer. Of course they weren’t and this delusion that markets run on neo-liberal lines are the best way to manage social relations has been revealed to operate in the interests of elites, increasing their wealth and importance while those at the bottom of the society are expected to cover the cost of financial mismanagement through a regime of austerity. And in the UK sociologists have been trying to get a word in edgeways in the debate about financial crises but politicians and journalists, those arbiters of the terms of debate, have largely taken no notice.

Since the heady days of the 1960s and 70s when fabian socialist academics worked with UK governments towards a more civilised and inclusive society, sociology has been pushed from the academic limelight by economists, especially those offering ideas about how to ‘improve the efficiency’ of financial and public services. The change of name in 1983 by Thatcher’s Tory regime of the ‘Social Science Research Council’, set up by Wilson’s labour government in 1965, to the ‘Economic and Social Research Council’, gave a lead to the economists and removed the epithet ‘science’. This symbolically set a tone that has pushed social research to the margins of decision making about society ever since; even under the Blair government sociology was directed to address ‘social exclusion’ but not treated as having anything to say about the workings of society as a whole and certainly not about anything as important as finance. But this does not mean that sociology has nothing to say about how money shapes and reflects social relations in modern societies. Marx, Weber and Simmel were all acutely aware that money, its accumulation, its regulation and its meaning were what distinguished modernity from traditional social forms and this sensibility continues to be at the heart of sociology as the study of modern societies. When I arrived at Lancaster University in 2007 I joined a group of sociologists with a range of interests including gender, culture, new media, science, environment and technology. But within and across these interests was a concern with political economy, an analysis of the underlying financial interests that shape the social relations of modernity. This concern has, with the continuation of the financial crises, become a research focus in itself for a number of Lancaster sociologists who work apart-and-together on issues of finance. Let me tell you about the approach of just a few of them.[1]

It is when the economy looks as if it is in trouble that economists or financial experts come forward with diagnoses and interpretations to try to sort things out. Bob Jessop’s current project at Lancaster analyses the competing interpretations of financial crises and shows how the one-sided, neo-liberal account of the dynamics of contemporary capitalism actually created the conditions for financial crisis. Placing the management of the crisis in the hands of those who represent finance capital has, together with institutional weaknesses at state and international levels, blocked effective solutions to the crisis that would have benefited ordinary people rather than financial elites. Critical interpretations of neo-liberalism have been marginalised in crisis management so it is still the advice of economists and financial experts, whose interests lie in rescuing financial institutions rather than restoring the real economy, whose analyses are heeded. The lack of popular mobilization against the management of the financial system is best explained by the widespread belief that everyone is to blame. It seems that whatever disagreements there are on the international stage, whatever radical proposals are put forward, no serious players question the ‘basic logic of profit-oriented, market-mediated capital accumulation’ (Jessop 2012: 37). What they are all looking for is a way to return to ‘business as usual’, to financial control through markets that operate in the interests of the few.

Another colleague, Andrew Sayer, focuses on the return of the rich and the super-rich who have been the ones to gain most during the limited growth of the last four decades. A post-war boom linked to productive investment benefitted working people as well as the rich but it has been displaced by a shift to what he calls ‘parasitic investment’ – credit money and financial instruments that extract unearned income from the global economy in the form of interest, rent, dividends and speculative gains. Those whose wealth derives from controlling land, property and money that others need are able to control the economy which has led to them moving production to where labour is cheapest and restricting wages and salaries. However, inadvertently, this has led to a restricted growth in aggregate demand that in turn limits the economic capacity of the society as a whole. The neo-liberal orthodoxy suggests that we need the resources of the rich, both their capital, which they generously rent to us, and their economic expertise in handling money and dealing with markets. But, as Andrew argues ‘we cannot afford the rich’: we need a moral economic critique of this new rentier class, and of the property relations that have allowed it to arise. I might add that we need to reassert a moral culture that doesn’t tolerate usury but values the mutual obligations of responsibility and care between all citizens, regardless of what they own. It’s time to think again and take control of our all our assets in the interests of everyone, not just the rich.

This regime of economic relations focused on wealth has seduced large swathes of society into believing that it is the best way to live. John Urry gives us a short history of oil, explaining how the housing boom of the US suburbs was built on cheap oil to fuel the automobility needed to the social mobility of bodies that was in turn associated with the social mobility of status. But spiralling demand for, and price of, oil between 2002 and 2008, led to an unstable situation so the effect of hurricanes Rita and Katrina in 2005 on energy production was enough to spark a crisis. Insufficient oil to meet demand pushed up the price and set off a series of economic shocks that led to the financial crises that have reverberated around the industrialised economies ever since. The suburbanites couldn’t afford the petrol they needed to get to work, the value of their properties dropped, the economy slowed, they lost jobs and then couldn’t repay their loans. It meant that the financialised packages of debt that had fuelled the boom backfired in all directions, including across the Atlantic.

A simple analysis would say ‘why on earth did we abandon the Keynesianism that had helped a responsible state to manage markets and financial systems!’ But the economic interests of the few have led to different ideas about finance. The threat of re-regulation of financial institutions has actually led to a deep caution in lending money – to each other, to businesses keen to invest and to those who need to buy housing in countries where there is little housing to rent. Sylvia Walby suggests a broader social science approach that looks at the social consequences, the ethical foundations and the impact on individuals of financialisation and not just the legal and economic processes. She suggests that it is too important to leave to economists; sociologists, policy analysts, political scientists, historians, lawyers, geographers and other social scientists need to work together to find out just how the institutions and instruments of finance work. The tendency to blame the consumer, the worker and the house owner has diverted attention away from fully analysing the policies and practices of business and government. The concepts of ‘markets’, ‘equilibrium’ and ‘rational choice’ have held sway for too long; analysis needs to grapple with ‘complexity’, ‘feedback loop’s, ‘chains of causation’ and the dispersal of economic effects through geographic and social space.

Knowledge is not only part of understanding financial crises, it can, in its own way contribute to them. The promise that through innovation science and technology might stimulate the continual growth that neo-liberal market capitalist societies depend on has turned knowledge itself into a financialised commodity. Information technology and bio-technology have been recognised as opportunities for the extraction of monetary value as futures and derivatives rather than real or sustained economic growth to create what Larry Reynolds and Bron Szerszynski (2012) call ‘political economies of promise’. Scientific knowledge has become a property, intellectual property, that has an economic life all of its own beyond explanation by the economics of science. David Tyfield argues (2012) that the progressive global propertisation of knowledge, which makes great claims to be in the name of ‘innovation’, is actually making innovation impossible. By restricting who can use knowledge, and for what, the economic possibilities of new ideas are constrained. And the privatisation of the public institutions through which knowledge has been shared for the good of all is making it impossible even to analyse the economic effect of these restrictions on knowledge as property.

As the oil runs out, as world population continues to grow, as the climate heats up, as environmental pollution increases, as natural resources – including food – fall short of the demands on them and as technology fails to deliver the solutions because someone wants to extract the maximum monetary value from it, there is one thing we can be sure of. Crises, which will always manifest as financial crises at some point, are going to continue to exceed the capacity to simply ‘manage’ them. Journalists and politicians need to start looking further than the corporate interests in their lobbies, their own experience as business people and the advice of economists trained in business schools. Or the future will be even worse for all but the rich than it already promises to be… and eventually it will do for the rich too.

Tim Dant

References:

Jessop, Robert. (2012) ‘‘Narratives of crisis and crisis response: perspectives from North and South’, in P. Utting, S. Razavi, and R.V. Buchholz, eds, The Global Crisis and Transformative Change, Basingstoke: Palgrave Macmillan, 23-42.

Sayer, Andrew (2012/3) ‘Facing the Challenge of the Return of the Rich’ in W. Atkinson, S. Roberts, M. Savage (eds.) Class Inequality in Austerity Britain, Houndmills, Basingstoke: Palgrave.

Reynolds, Larry and Szerszynski, Bron (2012) ‘Neoliberalism and technology: Perpetual innovation or perpetual crisis’ in L. Pellizzoni and M. Ylönen (eds.) Neoliberalism and Technoscience, Farnham: Ashgate.

Tyfield, D. (2012a/b) The Economics of Science: A Critical Realist Overview (in 2 volumes), London: Routledge.

Urry, John (2012) ‘The Great Crash, Oil and the American Suburbs’ in Societies Beyond Oil: Oil Dregs and Social Futures, London: Zed Books.

Walby, Sylvia (2010) ‘A social science research agenda on the financial crisis’, 21^st Century Society: Journal of the Academy of Social Sciences, Vol. 5 (1): 19-31.

Tim Dant is Professor of Sociology and was until recently Head of the Department of Sociology at Lancaster. His research is on the sociology of culture, his most recent book is ‘Television and the Moral Imaginary: Society through the Small Screen’ (Palgrave, 2012) and he is currently researching for a project on materialism and morality.

http://timdant.blogspot.co.uk/

http://www.lancs.ac.uk/fass/sociology/profiles/Tim-Dant/

Read Related Articles

Jonathan Haidt on Moral Psychology

Robert Shiller on Behavioral Economics

Rejoinder to Gary Guttings Doubts about the Behavioral Sciences

Economic Inequality and Political Power (Part 1 of 3)