‘Economic revolutions are always monetary’
from The Memory Bank by keith
Mauss, Polanyi and the breakdown of the neoliberal world economy
Anthropology in the financial crisis
Everybody knows that we are living through a hinge moment in world history, the financial crisis of 2008. The collapse of the credit boom has already had dramatic social consequences: the default and nationalization of banks, dramatic losses of personal savings and mortgage foreclosures on a massive scale...
The rise and fall of national capitalism
In order to understand the potential of our moment in history, we need to reflect on competing visions of the development of capitalism in the twentieth century and before. There is no more fruitful place to begin such reflection than Karl Polanyi’s masterpiece, The Great Transformation, published in 1944 and largely gestated in England during the 1930s. It opens with a highly selective account of the making of world society in the nineteenth century, a society that Polanyi not unreasonably considered to be lying in ruins as he wrote. Money was a central feature of all four pillars of this civilization. Polanyi identified the interest that had sustained a century of peace in Europe with what he insisted on calling haute finance...
The conditions Polanyi described for the decades leading up to the First World War have been closely replicated in the last quarter-century. As the smoke rises from the rubble of neoliberalism’s demise, we should revisit the story of national capitalism’s rise and fall; and Polanyi’s account of that earlier cycle has lost none of its fascination for us.
Money, much as Durkheim argued for religion, is the principal means for us all to bridge the gap between everyday personal experience and a society whose wider reaches are impersonal. Money is often portrayed as a lifeless object separated from persons, whereas it is a creation of human beings, imbued with the collective spirit of the living and the dead. Money, as a token of society, must be impersonal in order to connect individuals to the universe of relations to which they belong. But people make everything personal, including their relations with society. This two-sided relationship is universal, but its incidence is highly variable. Money in capitalist societies stands for alienation, detachment, impersonal society, the outside; its origins lie beyond our control (the market). Relations marked by the absence of money are the model of personal integration and free association, of what we take to be familiar, the inside (home). This institutional dualism, forcing individuals to divide themselves between production outside and consumption at home every day, asks too much of us. People want to integrate division, to make some meaningful connection between their own subjectivity and society as an object. It helps that money, as well as being the means of separating public and domestic life, was always the main bridge between the two. That is why money must be central to any attempt to humanize society. It is both the principal source of our vulnerability in society and the main practical symbol allowing each of us to make an impersonal world meaningful...
We also need ways of reaching the parts of the macro-economy that we don’t know, if we wish to avert the ruin they could bring down on us all. Perhaps this was what Simmel had in mind when he said that money is the concrete symbol of our human potential to make universal society.
The two great means of communication are language and money. Anthropologists have paid much attention to the first, which divides us more than it brings us together, but not to money whose potential for universal communication is more reliable, in addition to its well-advertised ability to symbolize and even generate differences between us. We cannot afford to neglect money’s potential for universal connection, choosing rather to demonize it as the source of our vulnerability to those who have a lot more of it. It is high time for us to return to a more inclusive philosophical tradition of anthropology, building on Kant’s example, but also on the neo-Kantianism of Durkheim, Mauss and Simmel in the early twentieth century . I have been driven to this conclusion by studying money as the most tangible manifestation of the new human universal that is our shared occupation of the planet.
Mauss and Polanyi
Do anthropologists have something to say about all this? It would help if we could bring the distributive consequences of finance down to a concrete level. Our readers might then be able to engage with money not as a superhuman force with devastating effects, but as the outcome of ideas and institutions that can and should be changed by human action. Kula objects have magical power for those who exchange them, but anthropologists have shown their social logic and instrumentality. We have always invented concepts to describe and explain social processes quite different from those familiar at home. The current crisis presents us with a compelling reason to do so again, this time in a global context. When others may be losing their heads, there are rich precedents in the anthropological literature for where to start.
We can do no better than to renew our engagement with the writings of Marcel Mauss and Karl Polanyi. The ideas of these foundational writers in economic anthropology have been sliced and diced – like mortgage debt – to serve different purposes over the years, but their perspectives on political economy can help us to make sense of the current situation and to recommend a path forward beyond market fundamentalism. Mauss’s reflections on money and exchange in The Gift have often been misunderstood. Probably his essay’s title and later academic discourse have obscured his concern there to use unconventional money forms to illuminate some potentially dangerous aspects of money forms based on capitalist corporations and the welfare state. Mauss was a cooperative socialist in the British tradition of the Rochdale Pioneers, Keir Hardie and the Webbs. He was a tremendous Anglophile and spent the war on the front line as a translator for British and Australian troops. He also kept a close eye on the cooperative movement in Switzerland and Germany. He lost part of his inheritance financing a cooperative bakery in Paris. But his metier was as a political journalist. His political writings were published together in 1997 and they run to 700 pages, about two-thirds of them written in 1920-25, the period when he wrote The Gift. He was anti-capitalist, but not anti-market. He was pleased that his uncle’s idea of an organic division of labour was extended to international economy after the war. He also tried his hand at financial journalism, notably in the context of the exchange rate crisis of 1922 when he wrote that “Economic revolutions are always monetary”, a pregnant comment whose implications I would like to apply to our present circumstances.
In analyzing practices such as the kula ring or potlatch, Mauss pointed to how monetary means were a crucial constituent of the social order. The social distinctions allocating rights to engage in different exchange institutions organized the monetary media and were organized by them in turn. Malinowski showed that not everyone had the right to engage in the kula ring; and this had particular implications for social rules and hierarchies. The imagined ‘force’ of the monetary ‘objects’ also defined the multiple but limited possibilities of the participants. If the ‘gift’ implied disinterest, it was in fact a site of sometimes violent power struggles. These helped to define, reproduce or transform the social order and even the boundaries of particular groups. Mauss observed, on the basis of these reflections, that in contemporary capitalism the wealthy classes acted increasingly as if they did not belong to a social order that made redistributive obligation a condition of their hierarchical privilege. Their amnesia when it came to the ‘gift’ was not just a function of power, but of an accumulation of power that considered itself to be socially unbounded. As a result, heightened strife put the social order itself at risk.
Although Polanyi’s analysis of how markets became disembedded from the rest of society, in The great transformation and after, is often thought of as a general critique of market relations, like Mauss he considered markets and money to be fundamental elements of any social order. He too contended that the classes who benefited from markets, particularly high finance in the decades before the First World War, neglected the interests of the rest of the population, with devastating consequences for society. The distribution of resources, according to him, should not be left to the search for profit in market relations, but needed also to acknowledge solidarity between all members of society. Like Mauss, Polanyi was concerned with the ideas that defined money, the rules of its use and the social distinctions that made its circulation possible and legitimate. Above all, he identified the historical dialectic or ‘double movement’ whereby the drive of capitalists to escape from social constraints met the countervailing power of classes and institutions (such as those adhering to the welfare state) acting in society’s self-defense. Polanyi analyzed the specific effects of shifts in the distribution of resources, showing how this was the object of violent power struggles culminating in untold human misery and the protracted death of a civilization. Anthropologists following him would thus explore how the social struggles over money are understood by the participants, and with what consequences for distribution itself. This would offer a critique of the pretense that economics is not social or political; beyond that, it would constitute a research programme.
The two authors could be said to be complementary. Mauss reminds us that monetary relations may be understood by analysing how the objects of exchange and the social roles of the participants are defined. This process is not restricted to the political utopias of liberalism. As much as the kula was a particular way to understand political economy in the Western Pacific, the ‘rationality’ of homo economicus is just another version of this, not simply a human universal to be accepted without reflection. Polanyi drew attention to how economic institutions organize and are in turn organized by a plurality of distribution mechanisms that, in the modern world, affect the lives of millions of people who participate in them, without being granted any measure of control. This led him to highlight the inequality created by these institutions, as they swing between the poles of market and state, of society’s external and internal relations. In the current crisis, the immediate reaction is to turn to a variety of government institutions with Keynesian redistribution in mind, flipping the coin from tails to heads as it were, instead of insisting that states and the markets have to work together in less one-sided ways than before. To this end, Polanyi’s call for a return to social solidarity, drawing especially on the voluntary reciprocity of associations, reminds us that people in general must be mobilized to contribute their energies to the renewal of society. It is not enough to rely on impersonal states and markets.
Polanyi and Mauss made sure that their more abstract understandings of political economy were grounded in the everyday lives of concrete people, thereby lending to field research the power of general ideas. I have already noted a significant stream of recent research on aspects of capitalism, but anthropologists have largely left the global effects of an unequal distribution of money, the class conflict between rich and poor everywhere, to other branches of the academic division of labour, especially to economists of whatever political persuasion. There are rich precedents for the anthropological study of distribution in particular contexts, but we still tend to privilege the rural inhabitants of the former colonial empires and settle for cultural representations of isolated social fragments.
The missing link between the everyday and the world at large can be found in the work of Polanyi and Mauss. An unblinking focus on distribution at every level from the global to the local reveals how the social consequences of political economy and the way it is understood by those who make it are one and the same social process. The current crisis renders this insight particularly visible, since it challenges contemporary financial ideas, while its tangible distributive effects are felt and feared throughout the world. We are clearly witnessing a power struggle of potentially awesome consequences. Each new political response to the latest economic calamity evokes the spectre of the Great Depression and its bloody aftermath. The mask of neo-liberal ideology has been ripped from the politics of world economy.
Money in the making of world society
What light do Mauss and Polanyi throw on the part played by markets and money in the making of world society? Mauss held that the attempt to create a free market for private contracts is utopian and just as unrealizable as its antithesis, a collective based solely on altruism. Human institutions everywhere are founded on the unity of individual and society, freedom and obligation, self-interest and concern for others. The pure types of selfish and generous economic action obscure the complex interplay between our individuality and belonging in subtle ways to others. He was highly critical of the Bolsheviks’ destruction of confidence in the expanded sense of sociability that sustained the market economy. In his view, markets and money were human universals whose principal function was the extension of society beyond the local sphere, even if they did not always take the impersonal form we are familiar with. This was why, in a long footnote to The Gift, he disputed Malinowski’s assertion that kula valuables could not be considered to be money. Mauss advocated an ‘economic movement from below’, in the form of syndicalism, co-operation and mutual insurance. The true significance for him of finding elements of the archaic gift in contemporary capitalism was to refute the revolutionary eschatology of both right and left. Most of the possibilities for a human economy already co-exist in our world; so the task is to build new combinations with a different emphasis, not to repudiate a caricature of the market in the name of a radical alternative. Here Mauss follows Hegel — rather than Aristotle or Marx — in seeking the integration of institutional possibilities that have been variously dominant in history rather than representing them as mutually exclusive historical stages.
Mauss was interested in how we make society where it didn’t exist before. Hence we offer gifts on first dates or on diplomatic missions to foreign powers. How do we push the limits of society outwards? For him money and markets were intrinsic to this process. Hence giving personalized valuables could be considered to be an exchange of money objects if we operate with a broader definition than one based on impersonal currencies and focus rather on the function of their transfer, the extension of society beyond the local level. This helps to explain his claim that “economic revolutions are always monetary”, meaning that they push us into unknown reaches of society and require new money forms and practices to bridge the gap. The combination of neoliberal globalization and the digital revolution has led to a rapid expansion of money, markets and telecommunications, all reinforcing each other in a process that has extended society beyond its national form, making it much more unequal and unstable in the process.
All economic possibilities coexist now, including those that have been variously dominant in history. Our task is to build economic solidarity through new institutional combinations and with a new emphasis. This is a concept that animates much progressive intervention in Brazil and France, as well as a new collection produced by the US Social Forum. It means combining the equal reciprocity of freely self-organized groups with the redistributive powers of the state. It is, however, no longer obvious, as it was for Mauss, Polanyi and Keynes, where the public levers of democratic power are to be located, since the global explosion of money, markets and telecommunications over the last three decades has severely exposed the limitations of national frameworks of economic management. We are clearly witnessing the start of another long swing in the balance between state and market. Before long, a genuine revival of Keynesian redistributive politics seems to be inevitable. But the imbalances of the money system are now global, as the financial rescue operation recently performed on failing American banks by the ‘sovereign funds’ of some Asian and Middle Eastern governments shows. Society is already taking the form of large regional trading blocs like the EU, NAFTA, ASEAN and Mercosul; and the Bretton Woods institutions (World Bank, IMF, WTO) promote no interest beyond that of western capital. The strength of any push to reform global institutions will depend on the severity of the current economic crisis. A return to the national solutions of the 1930s is bound to fail.
Conclusions: Polanyi’s prophecy then and now
So what are the lessons to be drawn from comparing our situation with the one Polanyi depicted before? He explained the world crisis then as the outcome of a previous round of what many today would call “globalization”. There are substantial parallels between the last three decades and a similar period before 1914. In both cases, market forces were unleashed within national societies, leading to rapid capital accumulation and an intensification of economic inequality. Finance capital led the internationalization of economic relations and people migrated in large numbers all over the world. Money seemed to be the dominant social force in human affairs; and this could be attributed to its greater freedom of movement as the boundaries of society were extended outwards, then by colonial empire, now by the digital revolution and transnational corporations. The main difference is that the late nineteenth century saw the centralization of politics and production in a bureaucratic revolution, while a century later these same bureaucracies were being dismantled by neoliberal globalization. Moreover, the immediate winner of ‘the second thirty years war’ (1914-1945) was a strengthened national capitalism whose synthesis of state and market was hardly anticipated by Polanyi.
It is odd that Polanyi appears sometimes to reduce the structures of national capitalism to an apolitical ’self-regulating market’. For his analysis of money, markets and the liberal state was intensely political, as was his preference for social planning over the market. His war-time polemic, reproducing something of his opponents’ abstractions, was more a critique of liberal economics than a realistic account of actually existing capitalism. This would explain the lingering confusion over whether he thought a ‘disembedded’ market was possible or just a figment of liberal ideology, ‘market fundamentalism’. Similarly, one could argue either that neoliberalism did effectively disembed the market economy or that its claim to have done so was a mystification of the fact that markets were still embedded in largely invisible political processes. In either case, the postwar turn to ‘embedded liberalism’ (Harvey) or social democracy — what I have called the apogee of national capitalism — is only weakly illuminated by The Great Transformation.
I have made much here of Mauss’s idea that the principal function of money and markets is to extend society beyond its present limits. Thus Malinowski’s ethnography of the kula ring could be taken as a metaphor for the world economy of his day, with island economies that were not self-sufficient being drawn into trade with each other by means of personalized exchange of valuables between local leaders. These canoe expeditions were dangerous and magical because their crews were temporarily outside the realm of normal society. This always happens when society’s frontiers are pushed rapidly outwards, as they have time and time again in the last two centuries and long before that. The period of ‘neoliberal financialization’ could be compared with previous episodes in the history of global capitalism, such as the dash to build continental railroads, the gold strikes in California, Alaska and South Africa or the wild rubber boom of the mid- to late nineteenth century. There are many analogous episodes to be found in the mercantilist economies that emerged during the period 1500-1800, notoriously the ‘South Sea bubble’ and the ‘Tulips craze’. Similarly, the last three decades saw a rapid extension of society’s frontiers after the postwar convergence of state and market in national capitalism reached its limit in the 1970s. The quick wealth and cowboy entrepreneurship we have just witnessed was made possible by the absence of regulation in a period of global economic expansion. The end of the bubble marks an opportunity to consider how world markets might now be organized in the general interest.
It is easy enough to harp on the irrational excess and sheer inequality of the neoliberal era — the heedless speculation, corporate skullduggery, outrageous looting of public assets, not-so-creative destruction of nature and society. But there are lasting institutional effects, just as there were to previous booms which generated transport and communication systems; a mildly inflationary gold standard; new industrial uses for rubber; stock markets and colonial empires. I have suggested here that the extension of society to a more inclusive level has positive features; and, before we demonize money and markets, we should try to turn them to institutional ends that benefit us all. The world economy is more integrated than it was even two decades ago; we need new principles of political association with which to put in place more effective regulatory frameworks. Fragmentation would be a disaster. Clearly the political questions facing humanity today concern distributive justice. The long period of Western dominance of the world economy is coming to an end. New actors on the world stage will have their say about who gets what. An escalation of war and general fractiousness is quite likely. Under these circumstances, a focus on the socially redemptive qualities of money and markets might be quite salutary. In this constructive sense, I depart from Polanyi’s conclusions; but I fear that his time as a prophet is yet to come.