Liquidity Lost

In early 2015, the political and economic fallout from the financial crisis, commonly dated to 2007–2008, continues to be felt. This was exemplified most clearly by the election to power of Syriza in the Greek elections in January 2015. Governing in coalition, Syriza stood on a broadly anti-austerity ticket. Under its leader Alexis Tsipras, it aims to renegotiate the terms of the Greek bailout from the so-called troika of the EU, the IMF and the European Central Bank. The election of Syriza reflects how Greek citizens used their vote to voice disquiet concerning the social consequences of restrictive European fiscal policies. Echoing developments such as Syriza’s election victory, debates across the social sciences concerning money and finance continue to be animated by the fallout from the 2007 to 2008 financial crisis. In particular, research has sought to reveal how a sub-prime mortgage crisis, predominately originating in the American South, has been translated into a crisis of sovereign debt beyond the USA, with austerity measures prescribed as the solution to what is now framed as a crisis of inflated public debt.

Paul Langley’s book makes a powerful and timely intervention in this debate. Through a careful analysis of the response of the political and monetary authorities of the USA and UK in the wake of the 2007–2008 crisis, Langley demonstrates the value of a politically attuned reading of the interdisciplinary fields of cultural economy and the social studies of finance. In particular, Langley examines how the variety of economic tools used to frame the crisis – including liquidity, toxicity and risk management – were not interventions ‘on’ the economy but tools that were co-constitutive of the crisis and Anglo-American economies more generally. The power of this approach is that it demonstrates the multiple framings of the crisis. In so doing, it helps us to understand how a crisis that started in securitized mortgage markets has come to effect the most vulnerable in many societies. Meanwhile, the financiers at the heart of the crisis have largely managed to return to business as usual, or at least a new normal, where financial markets are still privileged as an economic sector.

Conceptually, Langley takes as his starting point cultural economy approaches to money and finance. Langley rightly notes that this literature largely developed in the financialised and securitized boom of the 2000s, particularly through a focus on the then-heartlands of global finance, Wall Street, Chicago and London. This genealogy has shaped this interdisciplinary literature in important ways. Most notably, in the 2000s, this literature focused on understanding the development of new financial products and services associated with risk management and securitisation. At this time, in the popular consciousness at least, politics seemed rather far removed from the world of high finance and hence was not a prime concern of the cultural economy literature. However, as work on financialisation has clearly demonstrated, this financial boom was highly politicised in a number of ways. For example, through what Leyshon et al. (2004) term variegated ‘financial ecologies’, households became tied into the financial system in a number of unequal ways. As a result, there have been ongoing debates concerning the need to consider the politics of cultural economic approaches to money, finance and markets more generally (Hall 2010; Peck 2012).

Langley’s analysis offers an insightful way of developing a political sensibility within cultural economy approaches to money. By drawing on a Foucauldian reading of different ‘modalities of power relations’ (p. 23), Langley advances understandings of crisis management as a series of apparatuses that needed to be actively constructed and enacted by financial and monetary authorities. From this vantage point, he argues that:

‘economy’ is not that which is governed over in the course of contemporary financial crisis management, but is itself a crucial means through which the crisis is administered. (p. 25)

In so doing, Langley argues that, in many ways, crisis management had more of a bricolage quality (Engelen et al. 2010) to it than monetary authorities explicitly claim. Moreover, he argues that crisis management has increasingly come to use particular market devices, such as bank balance sheets, to improve, ‘quantitatively’, particular dimensions of the crisis, such as enhancing liquidity or reducing toxicity. Beyond these rather narrow quantitative aims, these interventions, according to Langley, crucially sought to create an ‘atmosphere of confidence’ that was seen by authorities to provide the path to economic recovery. Indeed, the importance of such an atmosphere is exemplified in the ongoing Greek crisis; the Governor of the Bank of England argued in January 2015, for instance, that ‘Europe needs a comprehensive, coherent plan to anchor expectations, build confidence and escape its debt trap’ (Guardian 2015).

After the introduction and conceptual framing of the book, this argument is developed over six substantive chapters that each consider a different framing of the crisis with its own associated mode of crisis management: liquidity, toxicity, solvency, risk, regulation and debt. For example, in the chapter on liquidity, Langley clearly demonstrates how the early phases of crisis management were focused on ensuring that liquidity was ‘restored’ to the international financial system. Here, his analysis ‘draw[s] attention to those elements of the discrete governance apparatus that, in relation, rendered the crisis as a liquidity dilemma: specific discourses and material devices of economics that turned on, and provided measures of, the liquidity of markets’ (p. 44). Meanwhile, in one of the most interesting chapters in the book, Chapter 8 on debt, Langley examines how the crisis, which to all intents and purposes originated in the banking sector, came to be reframed as a crisis of ‘excessive sovereign indebtedness’ (p. 147). This is a particularly powerful chapter given that sovereign indebtedness has become the most enduring framing of the crisis in several advanced economies. This is a rather sobering outcome. For example, Langley makes the important observation that the UK’s 2010 emergency budget facilitated a Spending Review that typically saw cuts of 19% in government departments beyond those that were ring-fenced (the Department of Health and the overseas aid budget). However, whilst these cuts were enacted, outstanding UK public debt rose, and ‘between one-quarter and one-third of that debt (£375 billion) was held by the APF [Asset Purchase Facility] as a result of the Bank of England’s QE [quantitative easing] programme’ (p. 160).

In this chapter, as in others, Langley, argues that the aims of an austerity politics form of crisis management are ‘also explicitly targeted, and attempted to work on and through, the affective conditions of confidence’ (p. 164) – what he terms elsewhere an atmosphere of confidence. This is an important argument since one of the prime audiences for this atmosphere of confidence are, in the case of sovereign debt, bond market investors. This demonstrates the continued power of financial markets in shaping advanced Anglo-American economies, despite their central role in triggering the financial crisis. Indeed, there is scope for work on atmospheres of confidence to be developed further. What are the market devices that are central to their (re)production? What subjectivities do they call forth and how do these processes and practices vary across space as the fallout from the 2007 to 2008 crisis continues to unfold? Here, Langley’s politically committed research approach proves valuable, not only for our understandings of money and finance, but also for interdisciplinary cultural economy research more generally.

Additional information

Notes on contributors

Sarah Hall

Sarah Hall (author to whom correspondence should be addressed), University of Nottingham, Nottingham, UK.