Posts made in February 2019

Editor’s Note: The views and opinions expressed in this essay are those of French Philosopher, Michel Feher and do not reflect the views and opinions of ePa. Feher is founding editor and publisher of Zone Books. 

BY MICHEL FEHER

Elected on the promise to make the “free world” vibrant again, Margaret Thatcher and Ronald Reagan claimed a mandate to impose market discipline on everyone. The Iron Lady and her Great Communicator friend faulted their predecessors for responding to the restive 1960s with inordinate minimum wage and social benefits raises – thereby causing inflation to soar. They also blamed the CEOs of large corporations for balancing the wishes of shareholders with the demands of labor unions and consumers’ advocates – thereby causing profits to wane. Finally, they lamented that the propensity of politicians and employers to placate “special interests” groups enticed wage earners to rely more on wealth redistribution and collective bargaining than on their own hard work and initiative.

The architects of the “conservative revolution” argued that harnessing the power of the state to help markets do their job was not only good for business: more importantly, it was about encouraging the entire population to think and behave like self-reliant entrepreneurs. In their view, awakening the entrepreneurial spirit of every citizen required the creation of an environment where private companies, public administrations and individual consumers in need of resources would have to compete for private funding. To that end, they proceeded to lift the constraints that had hitherto limited the transnational circulation of capital, kept the various branches of the financial industry separate and checked the creativity of financial engineering.

Deregulations certainly enabled financial institutions to act as the arbiters of valuable endeavors. However, the order of priorities that resulted from the ascendency of finance turned out to be quite different than what its political facilitators had envisioned. For financial markets, as John Maynard Keynes warned, do not operate like other markets. More than coordinating transactions, pooling predictions is their specific function: thus the signals they produce are not prices representing the outcome of negotiations between buyers and sellers but ratings expressing the speculations of investors on the value of a project. Moreover, Keynes added, what investors speculate upon is not the eventual yield of an initiative but its immediate impact on the attention of their peers. Corporations were the first type of economic agents to internalize the guessing game of their potential backers. For almost four decades, CEOs have been less intent on maximizing commercial profits – conceived as the difference between sales revenues and production costs – than on bolstering their company’s financial credit – measured by the market value of its stock. Unrealized capital gain, rather than operating cash flow, is the metrics of success – which explains why firms use their resources to “buy back” their own shares.

The primacy of ratings is not confined to the private sector. Keen on improving the attractiveness of the companies based on their territory, 1980s governments catered to investors’ preferences for business-friendly tax codes and flexible labor markets. As the subsequent loss of fiscal revenues forced them to borrow the funds they could no longer collect, elected officials have become increasingly dependent on the value of their sovereign debt in the bond market. Maintaining the trust of bondholders is arguably the main concern of policy makers, over and above economic growth or the welfare of their fellow citizens. In time, the sway of shareholders and bondholders’ valuations has extended to households and individuals. Employers and political leaders who vie for investors’ attention can no longer provide lifelong careers and a sturdy safety net. It is now up to job applicants to make themselves valuable, either by advertising highly prized skills and an appealing address book or, failing that, by displaying unlimited availability and flexibility.

Furthermore, once faced with precarious jobs and receding social benefits, large swaths of the population have been forced to borrow, whether to access housing, study, or simply survive. Yet anyone hoping to obtain a loan must offer guarantees. In the absence of sizeable possessions, aspiring borrowers rely both on the estimated worth of what they want to acquire and the reputation for reliability that they have earned by repaying previous loans. There again, being deemed creditworthy is what enables people to navigate our brave new world. Altogether, the conduct fashioned by the speculations of investors scarcely fit the entrepreneurial type that the conservative revolution was supposed to mold. Pro-market reforms purported to create a world where capital owners, wage earners and even the unemployed would envision their lives as a profit-seeking business, calculating the cost and eventual benefit of every decision. In contrast, financialized capitalism breeds credit-seeking portfolio managers primarily attentive to the appraisal of the assets composing their material and human capital.

In the last fifteen years, the purchase of speculative ratings has spread beyond the economic sphere. Resorting to the same technologies as global finance, social media have also adopted its unique mode of valuation: online friends, followers and reviews attest to the advent of a culture predicated on the relentless pursuit of credit. Far from setting us free to pursue our self-interest, as the conservative revolution had pledged, the proliferation of platforms where people are invited to “share” their experiences, opinions, competences and needs compels us to catch and retain the interest of others – to generate bullish speculations about what we own, who we know and how we are. As ratings inform the various realms of our lives, creditworthiness gains political prominence as well. In China, the government already assigns an aggregate social credit score to its citizens – and denies them access to public utilities and programs when they rate poorly. In the US, Donald Trump has earned the undying support of his core voters by vowing to valorize some key components of their portfolio. Under his administration, being or standing by a nationalist, gun-carrying white male is, once again, a truly valuable asset.

Allocating credit is not the uncontested privilege of authoritarian and populist leaders, however. Some of the most vibrant exponents of the resistance to Trump’s agenda, from Black Lives Matter and #MeToo to the March for Our Lives, are equally focused on producing and circulating their own rating system. Their purpose is not only to discredit behaviors protected by institutional prerogatives, gender norms, and powerful lobbies but also to reappraise the lives that these behaviors depreciate. Though hardly indifferent to specific reforms regarding police practices, workplace environment and gun control, these budding movements understand that deciding who and what deserve credit has become the decisive stake of political struggles. For them, pervasive ratings are not a curse to reverse but a challenge to meet. Speculation is far too important to be left to professionals.