Money and finance: For an anthropology of globalization

February 12, 2014 2:23 AM

There is much talk today of a financial and economic crisis comparable to the 1930s. With the threat of a currency war and the euro’s collapse looming, the specter of the Great Depression’s bloody aftermath has returned with a vengeance. Several versions of how to make human beings and build society co-existed during the Cold War, when much of the world won independence from colonial empire. Yet, discussion of humanity’s growing interdependence is today limited to a one-world capitalism driven by finance. What have anthropologists to say about that? It would seem very little. But a positive case can be made for the discipline’s contribution to public debate. We make such a case here. We review recent developments in the anthropology of money and finance, listing its achievements, shortcomings and prospects, while referring back to the discipline’s founders a century ago. Economic anthropologists have tended to restrict themselves to niche fields and marginal debates since the 1960s. We hope to reverse this trend by focusing on money’s role in shaping global society and bringing world history into a more active dialogue with ethnography.

Money and finance: For an anthropology of globalization by Keith Hart and Horacio Ortiz
posted by infini (17 comments total)

> euro’s collapse looming

Get with the news bud. It appears to be off life support.
posted by GallonOfAlan at 3:54 AM on February 12, 2014

It's been so long since undergrad philosophy that I forgot how much academic writing is all prolegomena no project. I felt like this was a bait and switch until I remembered that many articles don't actually do anything, but rather open spaces in which things might be done.
posted by jpe at 5:11 AM on February 12, 2014

With the threat of a currency war

We've been in one for thirty years and it's almost over. China has won every battle and is about to wrap up the war. The US manufacturing base has been all but destroyed since its peak in 1979.

The steadfast refusal of China to float the yuan or even let it appreciate consistently has been the biggest downfall of the US domestic economy. The US government letting it happen will go down as the biggest foreign policy failure of all time.
posted by Talez at 7:05 AM on February 12, 2014 [2 favorites]

Why does "global economy run by finance" translate in my brain to "more eggs, fewer baskets"?
posted by Benny Andajetz at 7:07 AM on February 12, 2014

Why does "global economy run by finance" translate in my brain to "more eggs, fewer baskets"?

Because capital can easily move globally hunting for the cheapest labor.
posted by Talez at 7:10 AM on February 12, 2014

Metafilter: all prolegomena no project
posted by jcrcarter at 7:13 AM on February 12, 2014 [3 favorites]

Talez. On the topic of money and international finance I am clueless person. Do you have a suggestion for more reading on the topic of China's monetary policy (and our foreign policy as it pertains to this)?
posted by GrapeApiary at 8:13 AM on February 12, 2014

I don't know of any good books. Good articles pop up now and then and Krugman has been doing columns on it for years although his stance has somewhat softened now that wages have gone up dramatically in China.
posted by Talez at 8:55 AM on February 12, 2014 [1 favorite]

Is money an object or an idea, real or virtual? One thing or many? Historically specific or a human universal? Is it a creature of markets or states, or both? Is it credit or debt, or both? Is money impersonal or personal, or both? If it is what it does, which function is most important – medium of exchange, means of payment, unit of account, or store of wealth? Many anthropologists still use the word “money” without saying what they mean by it.

keith hart:

The idea of money as a source of social memory was also crucial for John Locke who figures prominently in our story as the philosopher who inaugurated the modern age of democratic revolutions. Locke was obsessed with money's role both in establishing a progressive social order and in subverting it as its criminal antithesis. Indeed he believed that money launched humanity from the state of nature onto the road to civil government. As long as men’s possessions were limited to perishable products, the scope for property was restricted. Money, by offering a durable store of value convertible against all useful things, unleashed the potential for property accumulation and for the intergenerational transmission of inequality. For Locke then, money was indispensable to that development of cultural memory on which civilisation depends.

but i also like bernard lietaer's formulation of money as an agreement (representing trust/confidence) and monetary architecture as a tool for societal evolution, but what does that mean?

while conceptually i think it's the idea of an information system that transmits value or an operating system that allocates resources, practically speaking it's a sovereign tax credit and a claim on the productive output of an economy (its basket of goods and services) so the revolution in thinking goes:

...a government's 'solvency constraint' is not a function of any accounting relationship or theories about the present value of future surpluses. A government's solvency constraint ultimately lies in its political capacity to levy and enforce the payment of taxes... Note that a government's 'political capacity to levy and enforce payment of taxes' depends first and foremost on the quality of the real economy it superintends. The value that a government is capable of taxing if necessary to sustain the value of its obligations increases with the value produced overall. A government that wishes to be solvent should first and foremost interact with the polity in a manner that promotes productivity. Secondly, the political capacity to levy taxes depends upon either the legitimacy of or the coercive power of the state. A government that wishes to sustain the value of its obligations must either gain the consent of those it would tax or maintain an infrastructure of compulsion... I like to imagine excessively coercive regimes are inconsistent with overall productivity...

which means that a) Debt should be compared to wealth, not just to GDP:

If there’s one asterisk to put after the shocking comparative figures, it’s that the debt-to-GDP ratios don’t take into account Japan’s huge asset holdings. At the end of March 2012, Japan’s central government had assets totaling some Y600 trillion, roughly half of its total liabilities projected for next March, separate MOF data show. And those assets include Y250 trillion in cash, securities and loans. Critics often say Japan’s fiscal health could quickly improve if the government sells some of those assets, a step the MOF is reluctant to take partly on worries that doing so could deprive lawmakers of incentives to improve government finances.

and b) National Equity is what matters:

I myself put greater stress on the ability of a government to rule its territory, command the wealth and allegiance of its subjects, and continue to generate a more or less stable political equilibrium. Every developed country has the wealth to pay off its debts, if at least it has the political willingness to do so.

in this light, calls for public banking, state banks, infrastructure banks, &c. can be seen in the context of differential access to central banking with dissatisfaction over preferential treatment leading to accelerated exploration of alternatives...

-Martin Wolf: Free the poor in the new Machine Age

So what should be done?

First, the new technologies will bring good and bad. We can shape the good and manage the bad.

Second, education is not a magic wand. One reason is that we do not know what skills will be demanded three decades hence. Also, if Mr Frey and Prof Osborne are right, so many low- to middle-skilled jobs are at risk that it may already be too late for anybody much over 18 and many children. Finally, even if the demand for creative, entrepreneurial and high-level knowledge services were to grow on the required scale, which is highly unlikely, turning us all into the happy few is surely a fantasy.

Third, we must reconsider leisure. For a long time the wealthiest lived a life of leisure at the expense of the toiling masses. The rise of intelligent machines makes it possible for many more people to live such lives without exploiting others. Today’s triumphant puritanism finds such idleness abhorrent. Well, then, let people enjoy themselves busily. What else is the true goal of the vast increases in prosperity we have created?

Fourth, we will need to redistribute income and wealth. Such redistribution could take the form of a basic income for every adult, together with funding of education and training at any stage in a person’s life. In this way, the potential for a more enjoyable life might become a reality. The revenue could come from taxes on bads (pollution, for example) or on rents (including land and, above all, intellectual property). Property rights are a social creation. The idea that a small minority should overwhelming benefit from new technologies should be reconsidered. It would be possible, for example, for the state to obtain an automatic share in the income from the intellectual property it protects.

Finally, if labour shedding does accelerate, it will be essential to ensure that demand expands in tandem with the rise in potential supply. If we succeed, many of the worries over a lack of jobs will fade away. Given the failure to achieve this in the past seven years, that may well not happen. But we could do better if we wanted to.

The rise of intelligent machines is a moment in history. It will change many things, including our economy. But their potential is clear: they will make it possible for human beings to live far better lives. Whether they end up doing so depends on how the gains are produced and distributed. It is possible that the ultimate result will be a tiny minority of huge winners and a vast number of losers. But such an outcome would be a choice not a destiny. A form of techno-feudalism is unnecessary. Above all, technology itself does not dictate the outcomes. Economic and political institutions do. If the ones we have do not give the results we want, we must change them.

-Editorial Comment: Wall St vs the People
-Tale of Two Worlds
posted by kliuless at 9:41 AM on February 12, 2014 [7 favorites]

Wolf is a rather long way of saying "what the fuck happened to the 15 hour work week that was supposed to happen on the back of productivity gains?"
posted by Talez at 10:17 AM on February 12, 2014

Today’s triumphant puritanism finds such idleness abhorrent.

It's both the cause of and punishment for poverty.
posted by oneswellfoop at 10:51 AM on February 12, 2014

It's both the cause of and punishment for poverty.

"If we took away welfare they'd all get jobs! It worked for my slacker cousin!"
posted by Talez at 11:33 AM on February 12, 2014 [1 favorite]

Behold the new, new economy?

...the future depends on us being able to successfully redefine labour and purpose — and with it value itself. A new meritocracy based on progress, talent, creativity and doing the previously considered impossible (irrespective of monetary value) must in other words be nurtured.

One value system isn’t necessarily going to replace the other overnight, but a period in which two parallel complementing value systems coexist must somehow be encouraged rather than repressed.

So far, arguably, the only economy that encourages such a parallel model is China. This is perhaps the reason why western analysts and strategists, who value the economy on western terms, find it consistently breaks all the standard rules and defies all expectations (i.e. doesn’t fall apart as anticipated).

As James White at Colonial First has argued on many occasions, people forget that China is not pursuing capitalism as it is understood in the developed world, but rather a hybrid model of public investment and very aggressive market-based competition with the aim of a consumer surplus rather than economic rent.

China seems to understand that, until the economic problem is fully solved, it will only be able to set itself apart by encouraging the parallel value system, which the west fails to understand and is still scared of.

-Meet China’s Biggest Shadow Bank
-Trying to deleverage China without blowing up the system
-China’s investment/GDP ratio soars to a totally unsustainable 54.4%
posted by kliuless at 4:19 PM on February 12, 2014 [1 favorite]

This seemed super relevant & is open-access (huzzah!) Banking Across Boundaries: Placing Finance in Capitalism

Brett Christophers’s Banking Across Boundaries is an unusually wide-ranging and ambitious exploration of the role and ‘place’ of banking and finance in Western capitalist systems. Prompted by the Wall Street crash and its lingering aftermath, the book nevertheless delves deeply into the histories of banking, from merchant capitalism through the industrial age to the contemporary period of ‘financialized’ capitalism. This symposium features commentaries on the book from Fred Block at the University of California at Davis, Mark Blyth from Brown University, and Ewald Engelen at the University of Amsterdam

posted by spamandkimchi at 11:59 AM on February 13, 2014 [1 favorite]

And for balance, here's another interesting book from the other end of the spectrum.

Kenyan banks fought tooth and nail to have M-Pesa shut down one year after its launch as its popularity was spreading like bushfire and posed a threat to their operations, a new book launched last evening reveals.

The book titled 'Money, Real Quick: Kenya's Disruptive Mobile Money Innovation" says that the Central Bank was forced to hire an IT consultant one year after the launch of M-Peesa to conduct an operational risk audit before allowing the mobile money transfer platform to continue operating.

This followed an order by the the Finance minister, the late John Michuki after complaints from an informal cartel of local banks unhappy with the threat posed by M-Pesa to their business.

The book says CBK hired UK and US based Consult Hyperion to conduct a thorough audit on M-Pesa which had been launched in April 2007 with just 54, 000 customers but spread as a wild fire causing panic in the banking industry.

It currently has more than 10 million customers which is more than the combined customer base of all the local banks. Bankers felt that M-Pesa was not properly regulated thus had an unfair competitive advantage which was putting the entire financial system at risk
posted by infini at 12:33 PM on February 13, 2014

Bob Diamond Seeks Financial-Services Purchases Across Africa - "Bob Diamond, former chief executive officer of Barclays Plc, said his investment firm is seeking to acquire African financial-services companies that can help businesses manage currency and commodity risks on the continent."
posted by kliuless at 6:19 AM on February 14, 2014

Information asymmetry, bad incentives and Taibbi

Matt Taibbi of Vampire Squid fame has discovered contango in a five-page mega opus for Rolling Stone magazine, in which he blames all the usual names for crimes against markets, people and everything good in the world. It’s also a running continuation of his “everything is rigged” theme...

Now, we’ve covered the “contango” trade and physical loophole story ad nauseum, and can probably be accused of sensationalism ourselves. But we’d argue there is a difference in our coverage. We have never for one minute suggested that these trades represent illegal activity. Our focus was not to denounce crooks, but rather to inform the market of what goes on. This is to breakdown the information asymmetry which ends up favouring some parties over others, i.e. to figure out their strategies, expose them and allow the market to factor that information in.

The point is to help outsiders learn how the markets operate so that they can make wiser decisions and realise the information disadvantage they’re up against. It’s all a bit like the Krypton Factor, a giant puzzle that needs solving and figuring out in the name of efficient markets. The more pieces of the puzzle you hold, the more likely you are to see the big picture.

[I]nformation asymmetry is always to be expected in a free-market. This is because market participants will inevitably use capacity, inventory and privileged information flow to anticipate or influence prices. Setting up barriers to market entry is the natural free-market way of defending one’s market position...

Banks operate according to incentives. Always have done and always will. Currently — due to abundance, technological efficiency, ‘secular stagnation’ et cetera — banks have less of an incentive to lend (and in so doing add to productivity and resources) and more of an interest to facilitate business for those who monopolise resources and restrict production by cornering markets...

This is isn’t because banks are evil per se, but rather that their raison d’etre is challenged by a surplus of capital in the world. A world without returns to capital is a world that doesn’t need conventional banking. By definition, that world turns previously economically stimulating institutions into economic pariahs, ones that need different sources of revenue to survive.

That banks end up providing services to those who corner or suppress abundant capital or resources is hardly surprising, since this creates the illusion of a need for their primary business. The only alternative would be to admit society doesn’t need them anymore and that their model is redundant.

But that would be akin to a world so healthy that doctors are no longer needed — but where doctors realise they instead have an incentive to make people sick on purpose to stay in businesses. Better still if they can suppress the information that society would now be better off without them. No, it’s not ethical. But it is a practice that tallies with free market incentives.

Which, as it happens, is the overall problem with abundance. The only way you can make money in such a world — according to the old rules anyway — is by acting unethically and against social interests. This is because the incentive now is to detract from society, to repress information, to hurt your kin, to make things artificially scarce or once again falsely inefficient.

note: reading thru the whole thing you'll probably notice some latent 'narcissism of small differences' going on (which i mostly just skipped above ;) -- particularly over the extent gov't is bought and paid for (owing to campaign finance in the UK vs. US?) -- but per usual izabella kaminska makes some great points!
posted by kliuless at 9:09 AM on February 14, 2014 [1 favorite]