In 2006 Brian Holmes, an art critic, activist and social theorist who lives near me in Paris, wrote a wonderful essay on art’s financial futures, ‘The speculative performance’. This stimulated me to reply in a letter which is reproduced below.
Dear Brian, I like your piece on financial speculation very much. The Goldberg example (an Australian artist who performed publicly as a speculator on Rupert Murdoch’s News Corporation) reminded me of the UBS trading floor in Chicago, the largest of its kind, buried at the centre of a black skyscraper on Wacker Drive. The trading floor has no outside windows; there is a lot of security stopping you getting near there. No-one can see in, but the traders see out through scores of TV screens on the walls carrying everything from weather reports to newscasts to flickering banks of money numbers. It is a concealed panopticon on the world economy. I felt the power of it all then and wrote about it in ‘Notes on the counter-revolution’.
Here is what I think about the central question you pose concerning what speculation means. I start from Max Weber’s analysis of capitalism in Part IV of the General Economic History. He defines it as ‘rational enterprise’, meaning the attempt to place an economic project with an uncertain future on a basis of means-end calculation. Capitalism is driven by two impulses: speculation (the desire to win money for nothing) and calculation (the desire to eliminate risk wherever possible). It succeeded because the second principle became dominant, at a terrible cost to those who were forced to shoulder the risks that capitalists passed on. Frank Knight in Risk, Uncertainty and Profit offered a narrower but sharper lens for looking at all this when he distinguished between risks you can calculate and those you can’t (uncertainty). Casinos can predict their profits on turnover with amazing accuracy. Insurance and banking traditionally kept within stringent actuarial limits.
This Faustian bargain with the future has universal qualities, according to my reading of Mauss. Everywhere economic relations have to be pushed beyond the boundaries of local society because none is materially self-sufficient. Money and markets in a wide variety of forms supply this function of social extension. Risk and uncertainty are always thereby increased, but the dangers are moderated by a series of institutions, both personal and impersonal. The locus classicus is the Trobriand canoe expedition where kula valuables exchanged between partners offer a measure of protection in foreign places.
What we saw in the last three decades, and especially since 1990, was a massive extension of economic relations on a world scale (globalization) with the development of new financial instruments seeking to take advantage of the opportunities of deregulated finance and at the same time trying to figure out ways of containing the increased risk. Arbitrage attempts to take advantage of small price discrepancies between markets that are separate. If these actions are successful, market compartments are broken down and one market replaces several. As you describe here, derivatives seemed to offer ways of making the shift to a single market more precise as well as highly profitable to pioneers.
These profits became so great in the later stages of Greenspan’s credit bubble that, in order to remain competitive and keep their jobs, CEOs embraced the riskier options. In the process banking became a species of betting in which the line between risk and uncertainty moved inexorably towards the latter pole. Many people saw the dangers of the asset bubble that developed as a result. But there was always the other story to counteract the doomsayers: capitalism had entered a new stage where what was once radical uncertainty had become calculable risk. According to this interpretation, the financial institutions who had pioneered this new stage (Wall St and the City of London) were leaving the rest of the world behind, stuck in conservative and unprofitable practices.
Where do you draw the line between speculation and calculation, between risk and uncertainty? My favourite definition of religion is Durkheim’s, that it is the attempt to build meaningful bridges between the known and the unknown, between everyday life and the disasters that lie in wait for all of us, especially death. Money takes on some of the qualities of religion in capitalist societies by mediating between the the finite desires and obligations of each of us and our human potential for universal society.
Like many people, I was caught up in the making of world society as a single market for communications. The end of the Cold War, the rise of the internet and the emergence of China and India as economic powers all pointed to a massive extension of commercial relations on a global scale. All the classical founders of social theory recognized that, for all its contradictions, capitalism’s historical role is to bring cheap commodities to the masses and to break down the insularity of traditional communities through commerce. These developments brought echoes of the classical liberal revolutions to the late twentieth century world: a massive movement of people with horizons less fettered by local political restrictions than before.
Whenever I visit a new country and extract local currency from a hole in the wall, I offer a mental toast to Harold Wilson, the British Prime Minister who stopped us from taking more than 300 quid a year out of the country in the 1970s. Angolan women jump on planes to Rio, Paris, London and Dubai to stock up on goods they can sell in the streets of Luanda. I know, it’s unsustainable; but the freedom of it, compared with any conditions they knew before, is something I cherish.
So the bubble has burst and state power is everywhere on the rise. The state’s role as lender of last resort appears to be our only hope as we stare into the abyss. I doubt if the same politicians who supervised the boom will have the wit to get us out of the bust. In any case, where is the state these days? Is it the US acting alone, federations like the EU, surely not nation-states as in the 1930s? What price will we be expected to pay now for greater security, if indeed it can be bought? After all the looting that went on and still does, I can’t bring myself to denigrate money and markets without acknowledging some of the social benefits of that great commercial expansion.
Rather than rely on the central banks and their political masters to get us out of the mess, I envisage people in general taking advantage of the economic breakdown to assert their solidarity in new ways. The digital revolution in communications has been taking remarkable strides in the last five years, manifested as the rapid development of more personal ways of making society through networking sites, social bookmarking and much else. The failure of the institutions developed after 1945 (and not just neoliberalism) represents a huge opportunity for an economic revolution that would reinstate democracy as the guiding principle of our socieities. Maybe money in its speculative guise would be largely irrelevant to a society, but we are unlikely to be able to manage without relying on money in some other form.
I haven’t addressed your thesis on money and art directly and I would like to at some stage. My starting point would be Lawrence Weschler’s book on Boggs: a comedy of value. I read an interview with Charles Saatchi the other day where he was asked if he thought his role as a buyer of modern art distracted from the real value of the art and he replied, “The money is the message”. I couldn’t resist your use of the tulips story too since Anne Goldgar’s book Tulipmania tries to argue that most of what we think we know about it is bunk. But these are bits and pieces. I wanted to start by laying out some of the metaphysical foundations of my understanding of money’s potential in society.
As ever, Keith