Abstract
The global financial crisis has been called a crisis for not only economies but economic knowledge and the discipline as a whole. We may be forgiven for wanting to take economists to task, but are they the only ones who must think carefully about the products of their research? This essay reviews two books written in response to recent economic turbulence: Farewell to Growth by Serge Latouche and The End of Finance by Massimo Amato and Luca Fantacci. The former is an impassioned plea for social change targeted at activists. The latter is a magisterial work of economic history that explores the roots of repeated economic collapses over previous centuries, questioning the nature of money and the importance of liquidity to market societies. Both books are interesting reads, but though Latouche’s book would be very useful in classrooms, it is Amato and Fantacci’s text that offers intriguing possibilities for sociologists of money, and raises troubling questions for economic sociologists more generally.
In the continuing wake of global financial crises, economic inequalities are increasing not only between North and South, but also within countries of the Global North. As social scientists and members of societies in the grip of economic and social turmoil, we might be forgiven for wanting to momentarily turn away from the challenges of solving our social and economic woes to take our colleagues from economics out to the proverbial woodshed and ask, perhaps a bit angrily, ‘What is the point of you?’ Or perhaps, ‘What were you thinking? Were you thinking at all?’ If social scientists feel anger towards economics and economists in academia, government and business, we are not alone. An entire industry has appeared producing books ranging from balanced critiques to full-scale jeremiads encompassing a broad spectrum of political views. Along with a rising tide of publications criticizing economic and financial knowledge, global protest movements directly oppose austerity measures based on these very theories and concepts. Popular anger towards the ‘1%’ and finance workers is directed towards people whose positions are the product of neoliberalism and neoclassical economic thought.
By now we have passed through the stage of seeking causes for current woes, or asking what went wrong in the credit crunch and ensuing disasters that fully surfaced in 2008. From Gillian Tett’s (2009) astutely observed Fool’s Gold to Andrew Ross Sorkin’s (2009) Too Big to Fail and Roger Lowenstein’s (2010) The End of Wall Street, there have been numerous insider portraits of greed and finance gone awry. What comes next is the woodshed question, though preferably posed without recourse to violence: What is the purpose of economics as a discipline? If its aim is to produce increasing inequalities, social and economic volatility and ecological degradation, then we all agree that the destructive job is nearly complete. Yet even the most cynical anarcho-capitalist libertarian might be hard pressed to accept this definition of the ostensible purpose of economics. But, considering the deepening entanglements of some strands of economic sociology with high finance, perhaps economists are not the only ones who should be held to account.
Two recent books, Serge Latouche’s (2010) Farewell to Growth and Massimo Amato and Luca Fantacci’s (2012) The End of Finance, propose new aims for post-crisis economics. Latouche, like Tim Jackson (2009), argues that the western world’s economic problem is an unrealistic ideological faith in endless growth, so a new economics must be based on controlled economic contraction, sustainable development and reduced consumption. Amato and Fantacci draw upon meticulous historical research to show that liquidity and the very nature of money are central to repeated financial crises. Though they do not cite Susan Strange’s (1986, 1998) work – a curious omission in an otherwise perspicaciously referenced text – Amato and Fantacci (pp. 99–111) share her concern with deregulation and the ‘heating up’ of financial markets, in which they argue money has become a commodity rather than fulfilling its key roles as a medium of exchange and measure of value. Though Latouche and Amato and Fantacci may not agree on the causes of current economic crises, they share anti-capitalist, though not necessarily anti-market, approaches.
Both books offer critiques of received wisdom in economics, but a close reading also points to deficiencies in economic sociology. Latouche’s text highlights the importance of considering alternative economic models and practices. Under a bizarre division of labour, studies of sustainability, social programmes based on low and no-growth economic models, and ecological transition movements are left to sociologists in other fields. Even alternative currencies and local exchange and trading schemes are considered peripheral to mainstream economic sociology, which for the moment is somewhat dominated by studies of high finance. Amato and Fantacci’s book is of interest to scholars of money, but it is also a clear critique of those who accept pat stories about the inevitability of finance as it is, rather than how it could be. The sociology of high finance has shied away from questioning the fundamental inequalities upon which this sector is based, which Amato and Fantacci confront without hesitation.
Farewell to growth
This book is an environmentalist’s manual for a degrowth economy, an anti-capitalist guide with ready talking points for critiquing the dominant growth paradigm in economics and in development policy and research. Latouche does not offer an explanation of the credit crisis, but presents its causes as a statement of fact: dogmatic pursuit of growth at all costs is the root cause of global social and economic problems, including the financial crisis. His primary concern is providing guidelines and ideas for building new economies, not analysing the flaws of the old ones. This book is the latest in a series of publications on décroissance and global development from Latouche. Those seeking the scholarly arguments and empirical materials that inform his analysis – largely stated in polemical terms in this volume – should consult Survivre au développement (Latouche, 2004), La Pari de la décroissance (Latouche, 2006), and L’Invention de l’économie (Latouche, 2005). In the book reviewed here Latouche (pp. 11–20) provides a wide-ranging overview of historical and contemporary critiques of growth as the only means to prosperity. This is useful because it highlights scholars, such as the Romanian economist Nicholas Georgescu-Roegen, whose research Anglophone sociologists might not encounter outside the slowly dwindling community formed around Ivan Illich’s work and legacy. Unfortunately, Latouche’s coverage is broad but thin, and serves more as a list of names and tantalizing hints for further reading. There are several glaring contemporary omissions, the biggest being the absence of any reference to Jackson’s (2009) Prosperity Without Growth, and scholars who are building upon this work.
Latouche’s argument proceeds in three stages. He begins by illustrating the centrality of growth in the consumer capitalist imaginary, and then explains the dysfunctions of the neoliberal growth paradigm, reiterating its association with colonialism and imperialism (p. 11). A finite planet cannot sustain boundless expansion of desires and consumption, but the version of consumer society Latouche (pp. 16–20) presents is oversimplified, perhaps to the point of caricature. Some scholars of consumer culture, such as Daniel Miller (2008, 2010) – whose work has explored the myriad meanings of accumulated ‘stuff’ – might object to Latouche’s (p. 16) image of meaningless accumulation. Sociologists interested in cultural intermediaries, or who have produced thoughtful studies of promotional materials and ads, like Franck Cochoy (2008, 2010), might consider Latouche’s (p. 17) description of advertising as a ‘colossal amount of material, visual, audio, mental and spiritual pollution’ more hyperbolic than critical. Such jeremiad-like rhetoric is no doubt exciting for students, but it does detract from the seriousness of the issues he addresses.
The book’s second section outlines pragmatic, but utopian, dimensions of a contracting sustainable economy with a focus on conviviality (Illich, 1973). This section is primarily concerned with a new agenda for development that emphasizes local autonomy, democracy and using increased productivity to decrease working time. None of these ideas is new or innovative, but Latouche’s account is sometimes inconsistent. In an endorsement of localism, Latouche (p. 49) writes that ‘the creation of one precarious job in the mass market destroys five sustainable jobs in local shops’. Setting aside the problem of defining what is meant by ‘mass market’, this negative view of precarious work seems to contradict an enthusiastic assessment of job agencies and contingent work several pages earlier (Latouche, p. 40). Temporary employment is not the same as job sharing, an important, but missing, distinction in Latouche’s vision of a more productive and convivial society with shorter working weeks. No sustainable society can be built on the basis of contingent or temporary employment, as anyone enduring academic adjunct culture can attest. Readers interested in a rigorous consideration of shorter working weeks and sustainable economies should consult Coote et al.’s (2010) book, 21 Hours, from the new economics foundation. The final section attempts an outline of a political programme for degrowth and a transformation of work that echoes Ivan Illich’s (1973, 1978) proposals in Tools for Conviviality and The Right to Useful Unemployment. Latouche (pp. 92–93) rejects affiliation with right- and left-wing politics, espousing a different – and, arguably, equally fuzzy – dichotomy of ecological preservers versus environmental predators.
Farewell to Growth is a handy introduction to degrowth ideas and activist concepts, but offers only a shallow critique of current economic problems. Readers seeking a sound justification for, and defence of, theoretical and conceptual foundations of degrowth economics should instead consult Jackson (2009). Despite these shortcomings, Farewell to Growth is a teachable book, and perhaps intentionally so. David Macey’s translation is lucid, capturing the energy and urgency of the original. Each of the book’s three well-defined sections are approximately 30 pages in length, which is amenable to a three-week module in first-year undergraduate courses in conjunction with extra readings each week. The material is relevant to courses on environmental sociology, especially those focusing on globalization or sustainability activism; economic sociology, particularly with respect to work or heterodox economics; and the sociology of development. As an alternative, the book could be assigned for a single lecture in a second- or third-year course, or for postgraduates, in conjunction with further readings. For those teaching Ivan Illich, this book is an excellent example of his legacy and current intellectual relevance.
The end of finance
If Farewell to Growth is a polemical call to action against the growth paradigm in economics, which is posited as a cause of global financial and ecological crises, then The End of Finance is a thoughtful reflection on the flawed relationships between financial markets and money that lie behind repeated economic collapses, followed by a proposal for finance and monies that serve the interests of international trade and markets, rather than being commodities to be traded. The title is double-voiced, referring to the purpose of finance and to its ending in payment of debts. Unlike David Graeber (2011), who argues for a cancellation of debts, Amato and Fantacci (pp. 49–51) suggest that contemporary relations of credit–debt are fundamentally flawed; instead of facilitating trade and production, credit becomes an instrument of profit production for creditors and an inescapable prison for many debtors. As for the goal of finance, it should be the end of a credit–debt relation, the settling of accounts. The authors (Amato and Fantacci, p. xiii) begin with a bold claim: despite widespread calls for financial reform, there is little consensus on what finance is, what practices require reform, or how changes should be implemented. Their text aims to address these critical oversights. In doing so, The End of Finance provides a strong challenge to glib, neoliberal-influenced readings of economic history that present the development of finance as an inevitable, evolutionary process (pp. 211–212).
The scope of this book is ambitious. The End of Finance has three parts and a preface, each with its own complementary rationale. In their introduction, Amato and Fantacci distinguish between capitalism and market economies, and take a position almost unthinkable from economists after three decades of neoliberalism and global expansions of finance.
In capitalism, financial crises are inevitable; in the market economy they are inadmissable. Being truly in favour of the market means starting to depart from capitalism. Departing from capitalism does not, however, mean abolishing finance. What comes to an end in this crisis is the idea of finance grounded in the representation of money and credit as commodities. (Amato and Fantacci, p. xxiv)
This separation of markets and capitalism is a precondition for their critique of liquidity and monies as commodities. If we accept, following neoclassical theorists and neoliberal ideologues, that crisis is a normal state part of finance, then it becomes impossible to know whether a financial system, let alone an entire economy, is functioning correctly (p. 11). Thus the measures of markets’ performance become growth and liquidity, which the authors (p. 63) highlight as the fundamental roots of repeated economic crises.
The book’s first section is a phenomenology of finance, which attempts to identify what finance is in the 21st century, and what it should become. They identify risk, liquidity, credit and perpetual deferral of payment as key elements of an unstable model of finance that fails to meet the needs of markets and trade. These problems arise from the paradoxical nature of money in the capitalist economy, where it functions as a store of value, payment and value measurement (pp. 32–45). Using money as a store of value restricts its usefulness as a means of payment, because there is a temptation to hoard rather than to circulate. Moreover, ‘when money is also a store of value, money as a measure of value ceases to be something really different from what it measures’ (p. 40). The function of storing value is at odds with the other two tasks money is called upon to perform. To create finance that serves trade and markets by helping creditors and debtors settle payments – rather than creating conditions of debt servitude and non-payment – then a different kind of money is needed, one that is not a store of value.
The second, and longest part of the book, is a reverse chronological history of finance. This section traces the expansion and development of liquidity as an economic problem through its repeated blockages and overflows in Europe. These chapters provide historical evidence and analysis supporting the authors’ theoretical claims in Section I. Those who have read Strange’s Casino Capitalism (1986) will find the first two chapters of Section II familiar. The authors highlight several missed opportunities to create a finance system based on clearing – credit without accumulation –rather than finance based on liquidity and unjust credit–debt relations: the European Payments Union and Keynes’s alternative Bretton Woods proposal. They end the section with a discussion of 16th-century trade fairs, and the birth of non-clearing-based credit–debt relations in Bisenzone. This material could stand alone as a book in its own right.
In the third section, Amato and Fantacci challenge resistance to reform. This is where the details of a clearing-based finance system and the solution to money’s paradox are explored in detail. Like Farewell to Growth, The End of Finance is an anti-capitalist book, but unlike the former, the latter is truly radical in its implications. It is ironic, given Latouche’s focus on development, for readers from the Global South, his ideas do not go far enough. No matter how sustainable, democratic and local development may become, many countries in the Global South are locked into unjust debt relations with creditors in the Global North. In their critique of liquidity-based finance, Amato and Fantacci (pp. 49–50) assert that credit must always be provided with an end date, a moment when debtor and creditor are released from mutual obligation. Their proposal for finance based on a clearing system is not a new one – its novel element is currency depreciation – but such a system would offer tremendous hope of liberation from crushing international debts for countries of the Global South. This is a prospect of economic self-sufficiency and equality achieved through trade and strictly bounded relations of credit and debt rather than aid.
For economic sociologists, and even experts in other fields interested in recent crises, finance and neoliberalism, The End of Finance is a useful and insightful book. However, despite the strength of its arguments, it has several flaws. It is badly, even clumsily, written. Those familiar with French and Italian academic writing will recognize this style, which is not often seen in contemporary English-language sociology texts. The book’s length could be reduced, and the rhetorical quality of its arguments improved, with proper editing. Parenthetical clauses, an overly conversational, rambling style and excessive verbiage should have been fixed by a skilled copyeditor. The authors are writing in their second language, and the text should have received better oversight from the publisher. The index is also inadequate, but worse than this is the lack of a reference list. Disciplinary conventions vary, but an academic text – especially one that relies upon such a wide range of sources – should have a full list of references at the end. Relying only on end notes as a record of sources cited does an injustice to the quality of the authors’ scholarship. These problems make the book a poor choice for classroom use, even on postgraduate courses, which is unfortunate.
These two books have rather different scopes and analytic concerns. Latouche is a development specialist and focuses on ecological themes and North–South global social justice. His book is a tightly focused, slender volume of fiery rhetoric. This text does not tell us anything fundamentally new, but it is pedagogically useful. The End of Finance has much more to offer; a close reading of this text raises troubling questions about recent trends in economic sociology. Amato and Fantacci’s book challenges just-so-stories about the historical development of finance, and adds strength to a small group of scholars in economic sociology and anthropology who are critical of high finance (e.g. Miller, 2002; Strange, 1986, 1998). The book also suggests intriguing avenues for the sociology of money, a relatively small field that has expanded in recent years with scholarly interest in local exchange and trading schemes (LETs) and complementary currencies.
Farewell to Growth and The End of Finance suggest alternative views of what matters in economic life. The credit crunch and ensuing disasters have been called a crisis for economics as a discipline. But this turmoil should generate some cause for concern or at least reflection from economic sociologists as well. It is not only economists who must think critically about the effect of their theories that were unleashed upon the world. Economic sociologists who promoted, or at least promulgated, the views of economic elites must take some time to think carefully about whether their work has legitimized financial knowledge and authority. It is not only economics that must change, but economic sociology too. In Europe and North America, economic sociologists have developed an enthusiasm for studying up, but have not always been very reflexive about the responsibilities and effects of studying elites (Nader, 1972). It is not sufficient to cast doubt on the putative truth or accuracy of financial models, or to speculate that economic theories may shape economies. The critics of this new economic sociology are few, though Daniel Miller (2002) has drawn attention to Callon’s subtle repurposing of neoclassical economics. Where are the economic sociologists of high finance amongst the wreckage left by the excesses of financial elites? There are ample critiques of consumer society, capitalism and neoliberalism in sociology, but their authors are often working outside that segment of economic sociology that concerns itself with the ostensibly ‘serious’ business of markets and high finance. The ethnographic insiders of high finance have little to say on these issues, and this is a problem that requires serious discussion amongst researchers in the field.
Amato and Fantacci’s distinction between a capitalist economy and a market economy deserves further consideration. Markets are often equated with capitalism in sociology, which is not necessarily the case, as the authors show. Though economic sociology is almost dangerously overinvested in the study of markets to the exclusion of other economic categories, conceptualizations of markets are fairly narrow: relations, performances, institutions. To understand non-capitalist markets, we may require different concepts, new research agendas. Can non-capitalist markets produce egalitarian societies? This is an open question. The clearing-based finance system Amato and Fantacci propose would produce more equal relations of credit and debt at least. What other kinds of relations might be produced by non-capitalist markets? To investigate such questions we cannot investigate these ideas by simply going back to financial markets. We need to seek out other modes of economic organization in a more diverse range of research settings.
Amato and Fantacci (p. 37) ask whether money must perform more than two functions, or even more than one. Money as a store of value conflicts with the other duties money must perform in capitalist markets. The authors (pp. 260–267) propose a system of demurrage, or monetary depreciation. This is not a new idea, it was first proposed by Silvio Gesell, and is a feature of some complementary currencies. Keynes’s rejected Bretton Woods proposal also includes a penalty for creditor countries, as Amato and Fantacci note. Depreciating money presents a whole new range of possibilities for sociological analysis. A money that exists to be circulated, not hoarded, that rewards expenditure not accumulation, is a novel idea indeed. Simmel (1978 [1907]: 234) wrote about the unearned increment of wealth, which he described as a ‘moral merit’ attached to wealth. With depreciating money, moral merit might be attached to expenditure, or even to the extension of credit in a clearing-based financial system.
Conclusion
These two books have rather different scopes and analytic concerns. Latouche is a development specialist, and focuses on ecological themes and North–South global social justice. His book is a tightly focused, slender volume of fiery rhetoric. This text does not tell us anything fundamentally new, but it is pedagogically useful. The End of Finance has much more to offer; a close reading of this text raises troubling questions about recent trends in economic sociology. Amato and Fantacci’s book challenges just-so-stories about the historical development of finance, and supports a small group of scholars in economic sociology and anthropology who are critical of high finance (e.g. Strange, 1986, 1998; Miller, 2002; Pitluck, 2008, 2012). The book also suggests intriguing avenues for the sociology of money, a relatively small field that has expanded in recent years with scholarly interest in local exchange and trading schemes (LETs) and complementary currencies.
Farewell to Growth and The End of Finance suggest alternative views of what matters in economic life. The credit crunch and ensuing disasters have been called a crisis for economics as a discipline. But this turmoil should generate some cause for concern, or at least reflection, from economic sociologists as well. It is not only economists who must think critically about the effect of their theories that were unleashed upon the world. Economic sociologists who promoted, or at least promulgated, the views of economic elites must take some time to think very carefully about whether their work has legitimized financial knowledge and authority. It is not only economics that must change, but economic sociology too. In Europe and North America economic sociologists have developed an enthusiasm for studying up, but have not always been very reflexive about the responsibilities and affects of studying elites (Nader, 1972). It is not sufficient to cast doubt on the putative truth or accuracy of financial models, or to speculate that economic theories may shape economies. The critics of this new economic sociology are few, though Daniel Miller (2002) has drawn attention to Callon’s subtle repurposing of neoclassical economics. Where are the economic sociologists of high finance amongst the wreckage left by the excesses of financial elites? There are ample critiques of consumer society, capitalism and neoliberalism in sociology, but their authors are often working outside that segment of economic sociology that concerns itself with the ostensibly serious business of markets and high finance. The ethnographic insiders of high finance have little to say on these issues, and this is a problem that requires reflexive discussion amongst researchers in the field.
Amato and Fantacci’s distinction between a capitalist economy and a market economy deserves further consideration. Markets are often equated with capitalism in sociology, which is not necessarily the case, as the authors show. Though economic sociology is almost dangerously overinvested in the study of markets to the exclusion of other economic categories, conceptualizations of markets are fairly narrow: relations, performances, institutions. To understand non-capitalist markets, we may require different concepts, new research agendas. Can non-capitalist markets produce egalitarian societies? This is an open question. The clearing-based finance system Amato and Fantacci propose would produce more equal relations of credit and debt at least. What other kinds of relations might be produced by non-capitalist markets? To investigate such questions we cannot investigate these ideas by simply going back to financial markets. We need to seek out other modes of economic organization in a more diverse range of research settings.
Amato and Fantacci asked what the purpose of finance should be, and their answer called into question the ends of economics as well. Latouche begins by challenging the time-honoured aim of economics: expanding national wealth. These critiques suggest the purpose of economic sociology also needs some re-evaluation. Latouche’s book, as well as Amato and Fantacci’s are challenges to think beyond the narrow confines of what currently constitutes economic sociology. There is a need for more work beyond firms and finance, and even within these domains, we need a wider range of perspectives, concepts and analytical concerns. As Amato and Fantacci’s work suggests, sociological and anthropological scholarship on money could be central to this redevelopment of economic sociology.