Paul Langley‘s The Everyday Life of Global Finance: Saving And Borrowing in Anglo-America is obviously a very relevant book for our times and a very illuminating one at that. The starting point of the book is this:
“It is only over the last quarter of a century or so that stock market investment has become somewhat ordinary and mundane, very much embedded in everyday life. But what transformations have taken place in routine saving practices in order that more extensive investment relationships have been forged? How are these relationships produced and consolidated, and in what ways do they contain their own vulnerabilities and contradictions? Do these new relationships signal a genuine and inclusive ‘democratization’ where the financial markets are made to work for all, or does investment in the financial markets remain out of reach for many? What are the implications of these relationships for our understanding of finance more broadly, and for political action that, once again, might serve to place Wall Street’s financial markets ‘on the defensive’?” (3)
The book then examines the changes in credit practices as made available to individuals through a variety of networks and the interconnection of these networks of ordinary borrowing with the capital markets. Capital markets themselves are part of the networks of global finance. Indeed, the book revolves around a series of concepts (financial networks, financial power, financial identity and financial dissent) that capture the nature of every day life of finance and the changing nature of saving and borrowing. Langley also mobilizes Michel DeCerteau’s approach on the sociology of everyday life as well as Foucault’s ideas relating to discipline and surveillance in the constitution of the borrower-investor subject, an identity ridden with contradictions, never fully achieved and a trigger for dissent. Financial networks, power, identity and dissent constitutes the main topics of the book.
The starting point of the evolution of saving and borrowing corresponds with the dominance of neo0liberalism in Anglo-America (the book’s scope, the US and UK). The neoliberal ideology and economic dominance successfully redefined investment as rational form of saving:
“Significant here is a reworking and a re-reckoning of ‘risk’, which is viewed positively in networks of everyday investment, and negatively in networks of thrift and insurance. It follows, therefore, that the transformation of Anglo-American saving entails the partial displacement of networks of thrift and insurance by networks of everyday investment.” (53)
In the context of the “new economy”, the new discourse then became that prudent saving and insurance were conservative and timid, not to mention inefficient to provide for a future income compared to the calculable and predictable (thanks to a variety of tools) riches to be had once one joined capital market investments. If one type of saving (traditional thrift and insurance) is low-risk but low-return and certainly insufficient to provide for one’s future compared to another type of saving (investment), then, it makes more sense to invest than save.
This represented a major cultural shift. Everyone could make a lot of money provided one exercised personal responsibility, the mantra of the 1980s and 90s that also justified scaling back on welfare provisions. This shift was also presented as liberating: one could exercise more control over one’s life by taking charge of one’s financial future. This was also a shift from collective arrangements (insurance) to individualized ones (personal portfolio of investment).
At the collective level, this was matched by the waves of privatization (especially in the UK). Welcome to the shareholder society, one in which, as Margaret Thatcher said, there was really no such thing as a society but only individuals and their families, in charge of their finances, operating as free agents. Such shift was also supported by tax incentives, of course and became even more visible in the shift from occupational pensions and defined benefit plans to 401ks and defined contributions plans.
The trend here is individualization (a concept strongly developed by Ulrich Beck and Zygmunt Bauman) whereby individuals have to find individualized / private solutions to systemic and structural contradictions, all packaged as increased freedom in a climate of where traditional savings and pensions are presented as old-fashioned or in crisis (Social Security). Interestingly, then, personal investments come to be seen as better alternatives, responsibly managed by rational actors using the proper tools and reading the financial sections of newspapers to find the best investments. Because, after all, one can better manage one’s money than the government (that discourse made a big comeback in George Bush’s failed attempt to partially privatize Social Security).
One of the most interesting aspects of the book is not just it’s unveiling of these cultural shifts and their impact on everyday investment practices but what Langley, using Foucault, calls “the making of everyday investor subject” (90). That is, these transformations did not just operate at the structural and institutional levels but all the way down to the crafting of a neo-liberal subjectivity and subject as free investor in charge of one’s investment as rational actor. In other words, the creation of a neo-liberal self.
“The calculative technologies present in networks of everyday investment call up a subject who embraces financial market risk, deploys various calculative measures of risk/reward in relation to different equities and mutual funds, and manages risk through portfolio diversification. The subject position of the everyday investor is also authorized and legitimated in the broader neo-liberal moral and political discourse.” (92)
This subjective reconfiguration is not limited to the investing subjectivity. It also extends to other aspects of one’s life (something also studied by Richard Sennett in The Corrosion of Character):
“New worker subjects are summoned up, for example, who hold the portfolio of skills and experiences that are necessary to embrace the risks and receive the rewards of flexible labour [sic] markets.” (92)
This is very much in line with what I have described in previous posts as the redefinition of education as skills acquisition where workers go back to school on a regular basis not for the education experience but to acquire the set of skills that will put them, it is thought, in a more rationally-analyzed competitive position on the job market. It is then up to workers to monitor their skills portfolio, just as, as investors, they are expected to monitor their investment portfolio. In both cases, the assumption is that both financial and work futures are knowable things and it is up to the investor / worker to find the tools to analyze financial and career prospects. In both capacities, entrepreneurship is required, and sanctioned if absent, hence the relevance of Foucault’s approach on disciplinary techniques of the self.
“Although entrepreneurialism apparently shears the financial government of the self from the attributes of prudence and self-denial, it is nevertheless highly disciplinary. Neo-liberal government is not associated with an end to financial self-discipline, but with new forms of financial discipline that include investment as a technology of risk.” (92)
In both cases, enforced autonomy becomes the desirable cultural norm through rational investment based on tool-based analysis of either the financial markets or the labor conditions and demands. In popular culture, this has translated in a flurry of shows and books on self-help or self-management, investment advice websites and television channels where the investor has to collect all the right information and analysis to, in the end, make individualized decisions. Consequently, government agencies now more and more turn themselves into education and advice bureaus rather than social service offices. Local governments offer classes on private investment, portfolio diversification, etc. The tool are available and individuals can only blame themselves if they do not use them and do not adequately plan for a knowable future. And they certainly cannot expect the government to take care of them because of their own failure. In the parlance, individuals have to increase their financial literacy and capacity.
Indeed, the negative mirror image of the responsible investor is that of the irresponsible non-saver who expects others (the government, the employer) to take care of his retirement for him. That subject is stigmatized and depicted as doomed to a lousy retirement with limited income. For Langley, then, the everyday investor has to be constantly engaged and willing to embrace risk and knows how to use calculation tools to decipher the signs of market shifts.
But what the discourse of the investor subjects masks is that investor subjects are also workers and consumers (among other things) and this creates major contradictions in for the investor subject as these other identities face structural conditions and demands that might conflict with those of calculated and rational investment. But this discourse invokes a complete depoliticization of social relations and economic policy. The discourse of the investor subject ignores the political realities and the structure of the risk society and assumes that rational tools are available to all in an even playing field not characterized by precarization. For instance, investor subjects are summoned to build up their portfolio…
“However, worker entrepreneurs necessarily confront new uncertainties over employment contracts, hours, pay, and conditions that, obscured by discourses of risk/reward, are likely to undercut their capacity to perform the subject position of the investor. The responsible investor who builds a portfolio of securities in order to provide for his or her future requires a disposable income to invest. Investment is not a one off event, but a set of ongoing calculative performances of self care that rely, for the vast majority of individuals and households at least, on relatively predictable wages.” (109)
Ironically, shareholder value may actually be built on labor uncertainties. Hence the contradiction. The worker entrepreneur is supposed to be flexible and mobile whereas the investor subject is expected to steadily build his portfolio. And not to mention that the consumer subject is also expected to express continuous preferences through consumer credit and practices that reveal one’s status, autonomy and choices. Thanks to consumer credit, the consumer subject has also experienced the liberation from the need for available capital for consumption. In this nexus lie major contradictions and sources of tension. But in all realms of construction of the subject, the political has been evacuated to be replaced by calculable rationality. The attempt to re-politicize these subjects is the focus of financial dissent either through ethical investment or resort to alternatives (such as credit union or solidarity economics) or even art.
In spite of the de-politicized and de-socialized discourse of the investor subject, the world of everyday borrowing is marked by the persistence of inequalities built into the system and where the stratifying logic is based on calculable indexes such as the credit score. The world of everyday borrowing is stratified whereby borrowers are classified into categories such as “prime” or “subprime” or “high risk”. Access to credit by low-credit score borrowers renders the old-fashioned redlining obsolete in the face of what is known as ‘exploitative greenlining’.
Low-income, high-risk individuals are now included into the system, at the interstices between the prime credit sector and the alternative forms of borrowing. With practices such as risk-based pricing (where by credit card conditions are tailored based on the risk represented by borrowers, as calculated through a variety of tools), financial exclusion takes the form of exploitative inclusion into the financial networks via subprime networks which hide the hierarchical, stratified and discriminatory nature of the system of everyday borrowing. The margins are now within the system. At the same time, discriminatory practices (such as the charging of higher interest rates) can now be presented as technical matter (based on an objective credit score, for instance) rather than discrimination.
When it comes to the subject then, the task becomes one of maintaining a good credit score as disciplinary technology of the self. A bad credit score becomes a stigma that limits autonomy and freedom.
“The ever-greater outstanding financial obligations of a majority of individuals and households, created primarily through mortgage and consumer credit networks, entail the disciplinary summoning up of the subject of the responsible and entrepreneurial borrower. A failure to meet outstanding obligations is to be ‘cavalier’, casual, careless, irrational, and irresponsible. Even when critical attention comes to focus on the practices of lenders, for example, neo-liberal policy recommendations tend to concentrate upon the rationality of responsible borrowers as ‘consumers’.” (185)
So, that is another layer of self-discipline that is added to that of investor subject. And here again, consumer subjects are expected to consume but face their financial obligations in the most rational fashion, by maintaining their credit score as well as comparing the different cards to detect the best deals. Failure to behave responsibly, in this sense, involves disciplining through higher interest rates or credit dry-up. Financial obligations then have to be managed as much as an equities portfolio through calculative strategies. In addition, what kind of card an individual possesses is also a status signal of one’s wealth and worth.
Similarly, mortgage borrowers are supposed to keep track of interest rates, calculate repayments of principal and interests and continuously refinance when conditions are deemed favorable. Access to mortgage became also essential in the constitution of the neo-liberal subject. Home ownership is a marker of individualization, autonomy and wealth but also a mark of sound financial management. After all, renting is a waste of money.
“Owner-occupation has thus been held out as an aspiration for all in an explicitly moral economy that demarcates what is respectable and acceptable on the one hand, from that which is unrespectable and unacceptable on the other.” (193)
But more than that,
“Owner-occupation has become, then, an entrepreneurial, financial, and house strategy as the home becomes an object of leveraged investment.” (195)
Home ownership then contributes to the successful performance of the investor subject. Default and foreclosure becomes the stigmatizing failures of those who have become, through their own carelessness and irresponsibility, unable to meet their financial obligations. But here again, the contradictions are obvious: home-ownership as investment (through flipping, for instance) only works in the context of ever-increasing home prices and increasing incomes. That is, as mentioned, the home-owner subject is constructed as separate from other social identities. Borrowing obligations are best met through continuous and rising incomes.
For Langley, the past fifteen years have created a specific illusion that has now been dispelled:
“The performance of multiple, neo-liberal financial subject positions – primarily ‘the investor’ on the savings side, and ‘revolver’ and ‘leveraged investor’ on the borrowing side – have been largely complementary for the last fifteen years or so.” (205)
But this has come to an end with the collapse of the housing bubble, the reset of interest rates on many mortgages and the corresponding shock-waves across the capital markets (as all these domains are interconnected networks whereby for instance, prime mortgage lending companies often own sub-prime subsidiaries and mutual and hedge funds have invested in a variety of products based on mortgages).
This edifice of disciplinary technologies of the self is now under questioning and the contradictions have become very visible.
This is indeed a great book and I have only offered a simplified account of very rich descriptions of these mechanisms of everyday finance. This book definitely needs to be read with an eye on what has happened since the economic collapse but also with an eye on the discourse of economic stimulus, for instance. In many ways, the discourse of the stimulus has been one of technicalities, a technical matter to be solved with rational analysis and the right instruments. At the same time, there have been pressures to reintroduce moral and social considerations (who gets help? What about executive bonuses? Is it logical to reward executives who have ‘failed’? Etc.).
A very relevant read.