Geographies of finance I

I Introduction

The past five years have palpably been years of crisis in the world of finance and its myriad geographies: crisis in personal finances; crisis in bank finances; and crisis in state finances. Researching, thinking and writing in the midst of crisis, those interested in financial geographies have, not surprisingly, focused heavily on the present and the future. What, for instance, might be done now to alleviate existing crisis conditions and to minimize the likelihood of future recurrences? In the first of three progress reports, however, I step back from the immediate vicinity of the present and its turbulent ongoing developments to emphasize the importance of bringing to bear on these developments a critical historical imagination.

The studies I report on here collectively display just such an imagination. But their value also lies, I will argue, in two further properties they share. First, they allow us to think and write history not (just) of the past but, after Foucault (1979: 31), of the particular present within which serial crises have materialized. Second, the histories they relate are very much spatial histories; and thus they constitute, in various interlinked ways, historical geographies of the crisis-ridden present. I develop this argument in six parts.

II Historical-geographical roots

Although some researchers have suggested that the global financial crisis which began in 2007–2008 had relatively shallow roots relating to contemporary failings of market structure and institutional governance (e.g. Clark, 2011; cf. Christophers, 2011), the clear scholarly consensus is that to understand what has been happening we need to look considerably further back in time. We need, in short, to construct an extended historical genealogy of events, and one rigorously attentive to issues of geographical connection, constitution and differentiation.

Numerous accounts have emerged to admirably fulfil this role. Geographers will likely be most familiar with Harvey’s influential reading, which directs us back to the 1970s and, inter alia, ‘excessive capitalist empowerment vis-à-vis labour and consequent wage repression’, leading to entrenched ‘problems of effective demand’ only ‘papered over’, through to 2007, ‘by a credit-fuelled consumerism’ (Harvey, 2010: 118). Emphasizing the significance of the growing role of the financial sector (especially in the USA) from the same point in time, Harvey’s account squares with that of Krippner (2011), who adds a unique perspective in the shape of an examination of the domestic US political-economic conditions that enabled the rise of finance – albeit somewhat inadvertently – in the first place. But the global perspective added by Harvey is crucial. For, as Pettis (2013: 4) has recently insisted, issues such as effective demand (or what he calls underconsumption) can only be meaningfully analysed at the international scale. Hence the explanatory power of crisis studies such as those of Pettis (2013) and Panitch and Gindin (2012). The latter, like Harvey (2010), root the crisis historically in the institutions and processes of global capitalism, but explicitly identify global capitalism as a product of informal ‘American empire’ (cf. Schwartz, 2009).

In what sense are these ‘genealogical’ geographical histories? After Foucault (1984: 78–81), the objective is certainly ‘not to demonstrate that the past actively exists in the present’. Nor, equally, is it to enact a single-minded ‘pursuit of the origin’ or ‘an attempt to capture the exact essence of things’. To be sure, the historical genealogist ‘sets out to study the beginning’, but in doing so she ‘will cultivate the details and accidents that accompany every beginning’ and ‘will never neglect as inaccessible the vicissitudes of history’. The aforementioned accounts are replete with such vicissitudes and their unearthing of roots is, in this respect, richly genealogical. So, too, are more micro-scale – but no less fascinating – historical geographies like that written by Domosh (2013). For Domosh, the American economic imperialism in which Panitch and Gindin (2012) embed the current crisis began long before the Second World War, as evident in the development in revolutionary-era Russia of practices facilitating the movement of capital. Local studies such as Domosh (2013), attesting as they do to Foucault’s (1984: 89) ‘profusion of entangled events’, vitally complement broader macro studies in helping us illuminate the tangled roots of the financial present.

III Conditions of possibility

Admirers of Foucault’s endeavour to write genealogical histories of the present often point to its political potency. One dimension of this perceived potential (and there are several) can be captured in a relatively simple tenet: that the present is not the only present that could have materialized. There was no inevitability to its crystallization; things were not always this way, and things could have developed very differently, punctured as history has been by all the aforementioned ‘vicissitudes’ and ‘entangled events’. As Roth (1981: 43) observes of Discipline and Punish (Foucault, 1979), ‘The genealogy of the present form of the prison is a criticism of this form because it undermines the claims of the ideology of the prison to being concerned with eternal problems’. Foucault himself makes a comparable point about history as critique. Power and its exercise are preconditions of our present to the extent that they explain why history developed in one direction and not another. ‘The research that I am undertaking here’, Foucault wrote in The Birth of the Clinic (1973: xix), ‘therefore involves a project that is deliberately both historical and critical, in that it is concerned – outside all prescriptive intent – with determining the conditions of possibility of medical experience in modern times.’

Recent years have seen the publication of a raft of studies testifying not only to the power-saturated conditions of possibility of the contemporary crisis experience, but to the geographical constitution of such conditions: geography, these studies show, is fundamental to historical questions of how and why the financial world developed in this particular way. Take Levy’s (2012) luminous account of the development in 19th-century America of that pivotal technology of capitalist finance: risk. In its decisive period of crystallization, risk was defined by its spatiality, ‘born on the deep, in the act of maritime voyaging’. Observes Levy: ‘Risk was first synonymous with marine insurance – a financial instrument for coping with the uncertainty of transporting commercial goods across maritime space’ (Levy, 2012: 3). Closer to the present, there is Hyman’s (2011) notable examination of the emergence of consumer debt within the circuits of American capitalism. ‘Despite capital’s global mobility’, Hyman (2011: 8) argues, ‘every place has produced its own unique way to practice lending and repayment’. If place is critical, so also, Hyman shows, is space, with postwar suburban growth the bedrock of both the American dream and the consumer debt economy – an argument echoing that made long ago by Walker (1981). There is, moreover, something strikingly Foucauldian about Hyman’s (2011: 5) observation that it was ‘neither inevitable nor obvious’ that from among the ‘nearly infinite ways devised to extend credit’, just ‘a few forms took root, proliferated, and dominated’ in postwar America; and his claim that such outcomes were forged ‘in the struggles between borrowers, lenders, and investors in a particular historical moment’.

We may also be justified in looking considerably further back in time to come to grips with the historical-geographical conditions of possibility of – paraphrasing Foucault – financial experience in modern times. Last year saw the long-awaited publication of Brown’s (2012) epic investigation of the role of wealth in the making of Christianity in the western Roman empire in the 4th–6th centuries. In this regard, consider the following, arresting admission:

the more I have studied the theme of wealth in the churches the more I am convinced that the Roman empire was made up of distinctive regions. The Christian churches in each region … were as much the product of local conditions as was any other feature of the Roman world. A true history of Latin Christianity requires an unremitting sense of place. (Brown, 2012: xxii, emphasis added)

Schoenberger (2008: 666), meanwhile, makes the compelling geographical argument that the monetized commodity markets with which we are so familiar today emerged historically as ‘a mechanism for managing resources over time and space rather than as a way of facilitating exchange per se’, basing this claim on examination of market formation in Greece in the 5th century bc, in Imperial Rome, and in Europe in the 10th–13th centuries.

Another study ranging similarly ambitiously across far-flung times and spaces is Graeber’s much-discussed Debt (2011). In among the extraordinary abundance of local detail is an important historical generalization predicated in large part on geography. Even though virtual monies, in the form of credit, long preceded coin in most parts of the world, such monies were limited both qualitatively and quantitatively until very late in the final period discussed by Schoenberger. Especially where one was dealing with strangers, and certainly for anything but the smallest transactions, people ‘expected money that would be acceptable anywhere’ (Graeber, 2011: 74). And that, Graeber concedes, meant coin. Only once trust in something other than metal could be confidently extended and maintained across space did credit begin, according to Graeber, to usurp the former. We can find support for Graeber’s narrative in an array of variously complementary studies. Bennett (2012), for example, examines the crucial role of Trade Protection Societies in underpinning the trust necessary for national credit-based economies in Britain and Ireland from the late 18th century. Lazzarato (2012: 89, 51) offers the altogether more sweeping assertion that the creditor-debtor relation is now sufficiently all-encompassing socially and geographically (it is ‘unimpeded by state boundaries’) to be considered ‘the most general and most deterritorialized power relation through which neoliberal power governs the class struggle’. Perhaps. Yet there remains sufficient nuance in the literature on historical geographies of finance to warrant caution as to the types of generalities proffered by Lazzarato and Graeber. Kuroda’s (2013) marvellous study of divergent cash and credit systems in pre-industrial China, Japan and England is, in this respect, a case in point.

IV This time – and place – is different

A historical-geographical imagination is also essential to placing crisis in context, and to recognizing something that scholars and other commentators focused narrowly on crisis in the present often tend to forget: that this time is not (really) different. There are almost invariably powerful precedents or parallels that one can refer to in order to augment understanding. The authoritative account of such precedents and parallels is Reinhart and Rogoff’s exhaustive This Time is Different (2009), a book immeasurably enhanced by its broadly based geographical purchase and sensitivity. ‘We have been here before’, the authors bluntly state (p. xxv). ‘No matter how different the latest financial frenzy or crisis always appears, there are usually remarkable similarities with past experience from other countries and from history.’

Such parallels, a blossoming literature shows, are evident at all levels: at the level of the immediate causes of crisis; at the level of state responses; and at the level of subsequent developments. The issue of causes need not be laboured here since I have already dealt with it extensively in section II. Furthermore, the essential feature of cause-comparability across financial crises – the ‘excessive debt accumulation’ associated with all of the ‘vast range of crises’ analysed by Reinhart and Rogoff – scarcely constitutes a novel recognition in today’s intellectual milieu. One study worth singling out, nevertheless, for demonstrating parallels in the means of geographical transmission of crisis rather than underlying causes per se, is Winseck’s (2012) examination of the aggravating role of communications media in the world’s first global financial crisis, in 1873.

What, however, of responses and subsequent developments, which are of course mutually constitutive (regulatory authorities responding to developments as they unfold, and those responses shaping, in turn, ongoing developments ‘on the ground’)? Here, too, recent research demonstrates important historical antecedents and thus lessons. Lindberg (2008), writing about 17th-century Germany, utilizes a wide lens in considering post-financial-crisis developments, assessing implications for constitutional change, property rights regimes, and subsequent economic growth dynamics – all of which have obvious resonances today. Reinhart and Rogoff (2009), writing before the full implications for public finances of the most recent banking crisis, associated bailouts and ensuing recession would begin to become apparent, offered an extraordinarily prescient observation from their own historic research: ‘On average, government debt rises by 86 percent during the three years following a banking crisis’ (p. xxxii). Winkler (2011) casts his eye back to 19th-century US commercial banking crises in assessing present Euro-area governments’ response to their ongoing financing woes, identifying similar ‘rescue’ instruments mobilized in each case. Ashton (2011), meanwhile, draws parallels between the US subprime crisis of 2007–2008 and a more recent precedent – the US banking crisis of the late 1980s – to argue that emergency state interventions during financial crises have become productive moments for credit risk: securing broader norms of risk-taking by selecting out and effectively socializing problematic loans.

V Historicizing discourses of finance

We would be radically constraining Foucault’s understanding of genealogy, of course, if we were to limit ourselves to the analysis of events, their causes, and the developments and responses flowing from them, without addressing how all of this history is framed and constituted at the discursive level. What role, in the history and present of financial crisis, do we need to accord to the construction of truths – truths, inter alia, about banking, about economy, about debt and about economic subjectivity? How much attention should we pay to the question of the location of the powers to speak, define and be heard – in short, to produce the discourses of truth in and through which events occur, are represented and are responded to?

Fortunately, some strikingly suggestive work has recently appeared to help us in answering these questions. Above all, this work emphasizes the indispensability of history in showing why today’s crises and the responses to them are framed and negotiated (and ultimately enacted) in the languages they are. Two short articles, by Carstensen (2013) and Flandreau (2012), focus on the pivotal role of earlier financial crises in shaping the discourses within which later – today’s – crises come to be envisioned. Carstensen’s case is that of Denmark and the constitutive power, today, of the particular ideas arising from the 1980s Danish banking crisis and of those institutions most closely aligned with such ideas. Flandreau’s case is nominally better known (the Great Depression of the 1930s), but he tells a novel story: of Depression revolutionizing discourse on finance, and of bankers’ discourse on the ‘efficiency of greed’ steadily infiltrating, in a purified form, the language of mainstream economics, with manifold contemporary implications given the power of the economics establishment (cf. Christophers, 2013).

More powerful still, arguably, is a series of arguments relating to fundamental questions of economic and financial identity, subjectivity and morality. We are all well aware today, for example, of the couching of questions of debt, debt assumption and debt repayment – for governments and individuals alike – in the language of responsibility. We are also aware of a related discourse on the freedoms ostensibly afforded by financial ‘independence’. But from where, and when, do such discourses – discourses of immense social and even psychological power – originate?

Three previously mentioned studies open up intriguing lines of inquiry in these respects. Graeber (2011) is especially strong on the curious matter of how the idea of defaulting on debt has shifted over time from being something relatively unexceptional and thus ‘normal’ – indeed, something built into the very qualitative and quantitative fabric of debt – to being something socially and economically objectionable. Lazzarato (2012: 33–42) addresses similar themes. For him, in fact, the ethical attributes of ‘Indebted Man’ are so significant that ‘what one defines as “economy” would be quite simply impossible without the production and control of subjectivity and its forms of life’. This (debtor) subjectivity has two main components: fault or guilt (for having taken debt on) and promise (to honour the debt); capitalism has created a technique of ‘constructing a person capable of promising’. This financialized subject, of course, is posited politically as possessing freedom of choice; but, as Lazzarato remarks, the debtor is ‘free’ only insofar as she assumes a way of life compatible with reimbursement. If Lazzarato associates this bundle of economy-and-subjectivity with post-1970s neoliberalism, however, Levy (2012: 5) insists we look further back in time to reveal the emergence of capitalist financial freedoms, and again points to the key property of risk. The new vision of ‘freedom’ which materialized in 19th-century America, says Levy, ‘linked the liberal ideal of self-ownership to the personal assumption of “risk”’. Crucially, in practice, such ‘freedom’ increasingly entailed dependence – dependence, specifically, on a new corporate financial system which manufactured new forms of insecurity and uncertainty.

VI On the uses of history

Perhaps Foucault’s central ambition in writing histories explicitly of the present was to rewrite the relation between past, present and future that is implicit in so much ‘traditional’ historiography. On Foucault’s reading, history is something constructed, something political, and something owned and used. In this light, he especially criticized conservative histories that depict the past in such a way as to legitimate – all the while obfuscating the iniquities of – the present and thus to reproduce the present in the future. Writing a history of the present in the present, and reclaiming the past in the process, could serve instead, in Foucault’s view, to help make the present a past, and thus free the future from the present. Of course, Foucault has been far from alone in elucidating mainstream political renderings and uses of history, and in attempting to subvert them; Hobsbawm (1997: 3–5) was another fearless critic of ‘the politico-ideological abuse of history’: ‘The past legitimizes. The past gives a more glorious background to a present that doesn’t have much to celebrate.’ Yet it is in Foucault’s (1984: 90) envisioning of an always-unsettling ‘genealogy’ that the concept of history as ‘curative science’ is perhaps most powerfully articulated.

Such matters are of the utmost relevance in relation to financial crises. This is not only because the different histories told about financial crisis, as about all other social phenomena, are written from particular vantage points – particular geographical and social perspectives, and particular positions of power – at a later point in time. It is also because financial crises, as is widely recognized, are especially ‘prone to generate multiple explanatory accounts’, and because even if many of these accounts originate in the popular imagination there is often ‘spillover from popular lore into historiography’ (Marcus, 2012: 2–4). Furthermore, history always has a geography. What is the geographical scope and locus of a conservative, justificatory history on the one hand and a subversive history on the other?

Lepler (2012) wrestles with these questions in her analysis of the dynamics of contagion in the US financial panic of 1837 (cf. Winseck, 2012). Lamenting the broad, abstract and essentially aspatial hegemonic explanations of mainstream economists and economic historians, Lepler (2012: 180) ranges across ‘personal, local, national, and international contexts’, arguing that ‘the big stories of economic history … are often built out of the tiny but significant choices of insignificant individuals’. She does so in an attempt explicitly to consider how ‘historians can reclaim economic history from economists by replacing the generalizations of curves and models with the specifics of contexts and culture’.

Samman (2012) offers a broader and highly incisive exploration of similar themes. The topic of his study is appeals to the events of the 1930s in commentary on our most recent financial crisis, and the purposes that the former serve for the creators of the latter. He shows (pp. 217–226) that the Great Depression has ‘returned’ both literally (in discourse) and figuratively (inasmuch as the events of the 1930s are invoked in ways that envisage their recurrence), and that all such individual figurations of the past obscure ‘other possible figurations that would reveal different truths about the unfolding present’. Perhaps more fundamentally, today’s resuscitation of the Great Depression has, Samman submits, returned ‘the very idea of history to the financial imaginary, rendering it open to competing figurations’. In the context of such a present, Foucault’s injunction to imagine and write critical histories thereof clearly resounds louder still.

VII Back to the future

If a critical historical imagination is vital to questioning how we – as a society – typically envision and mobilize the past, it is also crucial, lastly, to questioning how we relate to the future, and to how finance figures in this imaginative relationship. What do I mean by this? I mean, put simply, that some of our most basic understandings of the future – what it might look like, what it theoretically cannot look like– are structured by our social relation to finance capital; and that, to understand this latter relation, a historical imagination is critical. We can take each in turn.

The argument that capitalist financial relations thoroughly infuse our social imagination of possible futures is a longstanding one in economic and social theory. It is essentially an argument about money and how monetary relations bind the future to the present. Some of the key contributions here are usefully captured by Mann (2008: 5–7). The key insight is that today all money is credit money, and that because credit must later be serviced and repaid the future is automatically implicated – and delimited – in the moment of its issue. Thus money, notes Mann, ‘is a surety that the future will be qualitatively like the present’.

What is missing from Mann’s account is our second recognition: that there is a historical geography to how and when money – and thus the future we envisage – came to materialize as such. Such a historical geography has barely begun to be written. Lazzarato (2012: 46–47) hints at it in his positing of debt as the ‘principal explanation’ for the ‘strange sensation’ of living in a society ‘without possibility, without foreseeable rupture’. Levy (2012: 5), once again, offers somewhat firmer moorings. Although he does not theorize the connections, he clearly appreciates the significance of the fact that the crystallization of a financial-risk-oriented society in 19th-century America was intimately bound up with ‘how Americans thought about the future, felt about the future, acted upon it, managed it, and sometimes simply resigned themselves to it’.

VIII Conclusion

The recent work of scholars across numerous fields has demonstrated, this report suggests, the multiple ways in which a historical-geographical imagination is crucial to a critical understanding of the financial present. Contemporary financial geographies cannot begin to be adequately explained and confronted in the absence of detailed historical-geographical inquiry. Such inquiry must span not just years but decades and, arguably, centuries.

This is not because the present, in all its geographical variation, is some kind of straightforward continuation of the past (it is not), nor because a picture of the past is all that is required to explicate the present (not true either). Rather, historical – as well as geographical – sensitivity is required in order to problematize those explanations that otherwise tend to dominate: explanations that frequently ignore historical parallels, overlook historical roots, take for granted historical and geographically specific conditions of possibility, and mobilize discourses that are themselves the products of particular financial histories. It is also needed to unsettle those explanations that construct histories in such a way as to validate the present and thus forestall social critique.

All of that said, it is demonstrably the case that, while necessary, historical geographies of finance are not in themselves sufficient, least of all to the task of critically engaging ongoing transformation in financial-geographical relations, structures and processes. The geographies of finance are in constant flux, albeit with their history never entirely left behind; understanding that flux, and its implications for geographical futures near and more distant, is a pressing imperative. Work in this vein, which serves as a necessary complement to the work discussed here, will be considered in the next progress report.