I spent half of last week in Manchester, at a very fine conference organised by CRESC, Finance in Question/Finance in Crisis. The majority of the discussions focused on economic cognition: why didn't financial elites know? What didn't they know? Did they definitely not know? Why didn't academic economists know? What was what it exactly that they didn't know? And what about sociologists, including sociologists of finance and Marxists? Come to think of it, they should have put Her Majesty on one of the panels.
Donald MacKenzie gave a great lecture on how the complexity of hybrid financial products straddled too many separate cultures of evaluation (a working paper version is available here [pdf]). Philip Mirowski gave a rabble-rousing tour through the various delusions of the American economics profession. Of course there are cognitive stances towards the economy that do not profess to know what's going on - those of Keynes and Hayek most notably. But there is a clear sense, following this crisis, that various parties claimed to, but did not. Mirowski believes that scarcely any of them have yet admitted this, let alone atoned for it.
My own paper echoed some of Mirowski's comments. When an "entire intellectual edifice" collapses, as Alan Greenspan declared it had in summer 2007, what do economic and regulatory elites do? I tried to explore three accounts of failure that are available to the economic rationalist, namely market failure (the crisis was a problem of externalities), a hedgeable risk (the crisis was a calculable event that additional markets could deal with, indeed the short-sellers in the hedge funds did precisely that), or systemic/ecological ill-health (the crisis was like a quasi-biological illness that struck the system as a whole). I use a similar typology in my paper to be given at After Markets this Friday.
Ironically, the rapidity and apparent totality of this intellectual collapse then potentially acts in the system's favour. As Bob Jessop argued, this crisis is in marked temporal contrast to the 1970s and the collapse of Keynesianism. The recent crisis struck with such rapidity, that it could be immediately re-framed as a policy emergency, to be dealt with by the very same elites that had overseen it arising. Alternative cognitive frameworks - or leftwing responses - were caught even more unawares than the regulators and bankers themselves, hence the surreal feeling that nothing much has changed. Andrew Gamble even posed the question: can we even be sure that this was a crisis? We've heard a great deal about crises wrong-footing states spatially (a common Marxist analysis of the 1970s points to how Bretton Woods was undone by the emerging geography of currency markets); but maybe the 2008-09 crisis needs to be understood in terms of its surreal chronology, unfolding in days, rather than years, and thereby re-configuring core assumptions about the nature of capitalist crises.
So it is that the same people are in positions of power and authority, making even larger sums of money, doing many of the same things. The same cognitive tools are being used, bar the addition of some complexity thinking from Andrew Haldane - as Karel Williams and Melinda Cooper both explored - plus the addition of some psychological quirks from the behavioural finance brigade, who most speakers seemed to view as entirely un-heterodox.
The problem with this crushing sense of normality is that it risks pervading sociology and critique also. Appealing for sociology to become 'more normative', as Doreen Massey and Andrew Sayer both did, seems simply to reiterate the efficiency/equity division, which ultimately leaves neo-classical economics alone to its efficiency calculations. Yet if sociology doesn't 'get political', then it risks simply repeating the same language of the expert actors it is following and de-constructing - a very standard critique of the sort of STS-inspired economic sociology of MacKenzie. MacKenzie does, at times, come across like a knowledge management guru and also (as Mirowski accused him of being) a little too credulous of the notion that warping financial rules is 'innovation'. Early on at the conference, Saskia Sassen made the important point that we need a way of explaining and criticising finance with reference to something outside of finance.
Which leaves the Marxists, of which there were plenty. But this isn't a typical Marxist crisis. It isn't a crisis of over-production, but one of excessive complexity, even if it does conform to David Harvey's depiction of neo-liberalism (dating back to the New York City debt crisis) as a system of crises that induces the state to under-write finance. Andrew Gamble asked whether we even have an appropriate term for this crisis, or whether we need to think of it as some other form of event that happened. An emergency, certainly, but not a crisis as we typically understand it.
When both left and right are so wrong-footed by a crisis, we're all reduced to unpicking the intellectual systems that facilitated it, accompanied it, and which emerge from it. Like the scene in Pulp Fiction where John Travolta and Samuel L Jackson experience the miracle of blazing gun fire failing to kill them, the emergency of autumn 2008 leaves society astonished to be still standing, despite the mountainous debt. Yet mountainous debt itself is normalised in this system. Mirowski made the observation (that had never occurred to me) that the 'knowledge economy' discourse is a critical feature of how neo-liberalism sustains itself, because it enforces a connection between knowledge and debt: students and universities are nurtured, pampered and prioritised in the knowledge economy, but then end up owing everyone and everything.
There are four things that might problematise this analysis of an 'emergency' that 'just happened'. Firstly, it started in the heart of America. This makes it very unlike other neo-liberal crises, and while it may be a crisis that served finance capital quite well, it cannot be said to have served its waning 'global hegemon'. This therefore has profound political implications.
Secondly, Gamble pointed out a political paradox of neo-liberalism, namely that it has depended on centre left politics (cosmopolitanism, globalism, rights discourses, as most obviously during the Clinton administration) for its efficacy, but that crises have historically aided the right. By this account, the crisis will likely lead to the fragmentation of international politics, but produce no system or rationality in its place. I mused on something similar here, as the crisis was unfolding.
Thirdly, it may (who knows?) turn out to be a repetitive crisis. Many speakers seemed to take the view that another crisis may not be so far away. Crises are, in any case, fairly frequent affairs under neo-liberalism, but have been typically farmed out to other nations. But perhaps now we will witness Wall Street and The City remain in a critical condition of periodic near-death experiences, being repeatedly rescued, until the rescuers themselves lose all credit-worthiness. Then we'll know what sort of crisis we're looking at, and its impact on prosperity (especially public wealth) in the West will be very profound. Certainly too profound to be framed as merely a policy dilemma.
And finally, there is fundamental uncertainty. Grahame Thompson's paper looked at the problem of volatility as an object of knowledge. Volatility, unlike risk, is something that cannot be predicted or priced, but only plotted retrospectively - Keynes understood this. The notion of seeking to model or prevent it through macro-prudential regulation or trendy systems analysis is pie in the sky. So what to do? Thompson introduced various thought techniques, with which to view the present from positions of imagined futures.
The evolutionary perspective on capitalism recognises the uncertainty of the future, but at the same time treats the past as having followed some script. In this respect, it is guilty of the same janus-faced conceit that Bruno Latour holds all science guilty of ("I determine scientific advances when facing the future, but attribute everything to 'nature' when viewing the past"). We're currently dwelling within a crisis of such uncertainty and opaqueness, that we can't even demonstrate that anything has yet changed at all; that's how inadequate both economics and sociology have become. But accepting this of the present and the future surely bestows a similarly Nietzschean analytic of history on the past: it is senseless and logic-less.
After the conference, I did a bit of wandering around Manchester, a city I am shamefully ignorant of. The city, perhaps as much as any city, is capitalist crisis layered upon capitalist crisis. And perhaps not one of them was caused or necessary. The causal chain that led this 'Great Northern Railway Warehouse' to become a casino can be rationalised, like volatility, only in retrospect. The notion that sociology (Marxist or otherwise) ought to have done any better than economics is to fall prey to the rationalist conceits of the latter. Give uncertainty its due, I guess, is the perennial lesson.