The politics of finance: cultural economy, cultural studies and the road ahead

ABSTRACT

Cultural economy of finance examines the cultural constitution and implications of financial markets in light of the growing financialization of economies and social life. In the effort to explain ‘how finance actually works’, it rejects both depoliticized mainstream financial economics and predetermined Marxist political economy. However, this rejection has resulted in a lack of analyses of the politics of finance. In this paper, I suggest that cultural economy of finance should nurture a form of analysis indigenous to cultural studies – provisional framework building – whereby politically urgent and contextually specific frameworks could be offered to provoke debate about the power relations within and political impacts of financial activity. I offer a description of provisional framework building based on key commitments of cultural studies, and several examples of the practice that have already taken place in research on financial markets. More of this work can create a more rigorous and grounded understanding of the politics of finance within the umbrella of cultural economy of finance.

KEYWORDS:

• Cultural studies
• performativity
• neoliberalism
• cultural economy of finance
• politics

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Carolyn Hardin is Assistant Professor of Media and American Studies at Miami University, Ohio. Her research combines cultural studies and political economy approaches to examine the culture of finance. She has written on the topics of neoliberalism, debt, retirement investing, value, financial technology and arbitrage and her work has appeared in journals including Cultural Studies and American Quarterly. Her current book project entitled Arbitrage: Debt, Technology and the New Dynamics of Finance examines the history and culture of the obscure financial trading technique at the center of the global financial crisis. Her current research project examines financial risk measurement techniques and the contemporary crisis of representation.

Notes

1. The first assumption is based on the application of the physics theory of Brownian motion to financial markets. Louis Bachelier is thought to be the first person to make such an application, but later financial economists, including Harry Roberts, formalized the application in the so-called ‘random walk hypothesis’ (Fox 2009). Fama (1970) is cited as the first economist to formalize the ‘efficient market hypothesis’ (Fox 2009, 107). Fox’s (2009) The Myth of the Rational Market chronicles the numerous crises and challenges these ideas have withstood. Milton Friedman (1966) famously released economists from the responsibility to make realistic models when he argued in 1953 that ‘complete “realism” is clearly unattainable, and the question of whether a theory is realistic “enough” can be settled only by seeing whether it yields predictions that are good enough for the purpose in hand’ (41). For Friedman, ‘criticism of economic theory as unrealistic is largely irrelevant’ (41).

2. Philip Mirowski has recently declared that ‘sociologists of finance all too often repeat and recapitulate economists own stories  …  never challenging their stories. They don't report exactly what they do; they report what they say they do’ (Mirowski 2013a).

3. This approach characterizes three particularly influential works: David Harvey’s A Brief History of Neoliberalism, Philip Mirowski and Dieter Plehwe’s The Road from Mont Pelerin and Michel Foucault’s Birth of Biopolitics. In the latter, Foucault, examines the roots of European neoliberalism in the German ordoliberalism of the 1930s while provocatively claiming that the US has always been neoliberal: ‘liberalism played a role in America during the period of the War of Independence somewhat analogous to the role it played in Germany in 1948: liberalism was appealed to as the founding and legitimizing principle of the state’ (Foucalt and Senellart 2008, 217).

4. For example, in ‘Hobbes’ redoubt? Toward a geography of monetary policy’ (2010), Geoff Mann explains the creditor-biased politics of central banks’ targeting inflation as their sole policy objective. In an in-depth, technical description of central banking, Mann acknowledges the influence of the neoliberalism literature by stating that inflation targeting is often theorized as one of a set of ‘paradigmatic neoliberal policies’ (3). However, he does not substitute this theory for a thorough-going political economic analysis, even claiming that ‘the class politics [of creditor-biased central banking] at work is not specific to the post-Fordist, neoliberal era’ (15). Similarly, Fiona Allon and Guy Redden explain the accepted wisdom that the global financial crisis was ‘a banking failure caused by newly complex high-risk instruments in the world of securitised finance and its lack of regulation under neoliberal governance’ (378) but go on to explain the importance of two neglected factors, ‘the cultural politics of home ownership and makeover culture’ in the creation of a ‘culture of continual growth’ that served as a necessary condition of the housing bubble and crisis (386). In a nod to the hegemony of neo- liberalism as a label for contemporary capitalist dynamics, they offer that what they have described might be related to ‘neoliberal rationalities' (386), but they do not allow ‘neoliberalism' language to stand in for political analysis.

5. Such is the case when arbitrage fails. The ‘limits to arbitrage’ literature in behavioral economics explains the reasons why arbitrage is sometimes unsuccessful, but with the assumption in hand that it should be promoted because it increases efficiency (e.g. Schleifer and Vishny 1997; Gromb and Vayanos 2010).

6. Grossberg (2010) explains, ‘Cultural practices contribute to the production of the context as an organization of power, and construct the context as a lived experience of power’ (24).

7. Political urgency alone might lead cultural studies into a hyper-presentist and reactionary approach to knowledge production that chases each new crisis. However, in combination with a form of radical contextality that considers not merely the present relations of a context, but also historical relations and even the relations that produce the temporality of a context (as ‘new’, ‘old’, ‘emergent’ or ‘waning’), the cultural studies approach to provisional framework building described here treats even the issue of temporality itself contextually. This approach to temporality, as well as contextuality more generally, proves that cultural studies can only exist as an interdisciplinary practice that draws on and communicates across multiple modes of knowledge production (historical, geographical, sociological, etc.) in order to produce and refine provisional frameworks.

8. Thanks to Larry Grossberg for this insight.

9. For a lengthy and pithy explication of the opposition, see Carey (1995) Garnham (1995a, 1995b) and Grossberg (1995).