Robert Peston is a kind of modern broadcasting hero. The BBC’s Economics Editor is a popular, engaging and energetic figure who helps explain capitalism to the people of the UK. Sometimes though, he seems rather a worried man. He worries about the price of crude oil. He worries about the government deficit and the latest unemployment figures. He worries about the balance of trade. Robert – just like many of our politicians – worries about the latest GDP figures. He tends to spend a lot of time worrying about the latest Chinese export statistics.
These things are real. They matter. So that’s why Robert worries about them. They tell him – and he tells us – how modern capitalism is working. And we need capitalism to work because There Is No Alternative.
At least for several decades before the financial crisis, modern capitalism has been the only game in town, the dominant structure of production. Margaret Thatcher and later Slavoj Žižek taught us about TINA; traditional socialist parties across Europe have remodelled themselves to work within, rather than against, modern capitalism; Francis Fukuyama (1989) proclaimed the End of History in the form of western-style liberal capitalism; and Mark Fisher (2009) has described capitalist realism as our dominant ideology which now pervades all areas of society.
Yet since the financial crisis, it has also become clear to many of us – including even to Robert if he can dare to admit it – that our capitalist economy is in a sort of artificial suspended animation. How can it really be capitalism if it isn’t even real? When it’s become a sort of postmodern work of fiction?
Since the crash, the conjuring tricks of leverage and fractional reserve banking have been more widely revealed. The unprecedented and astonishing programme of trillion dollar quantitative easing and a barrage of other government interventions have woken us up to the economic world we inhabit where value is almost totally disconnected from the underlying material reality.
Indeed, Frederick Jameson (see, for instance, 1998) had observed even before the crash how Marx’s ‘fictitious capital’ had become entirely disconnected from the real economy. This isn’t just the view from relatively obscure circles of Marxist academia – ‘volatility guru’ Christopher Cole (2014) of Artemis Capital Management explains how:
Modern financial markets are a game of impossible objects. In a world where global central banks manipulate the cost of risk, the mechanics of price discovery have disengaged from reality… In the postmodern economy… our fiscal well-being is now prisoner to financial and monetary engineering of our own design. Central banking strategy does not hide this fact with the goal of creating the optional illusion of economic prosperity through artificially higher asset prices to stimulate the real economy. In doing so they are exposing us all to hyperreality or what Baudrillard called “the desert of real.”
So much it seems, then, of what we tend to think of as modern capitalism has actually become an “economy of pure sign functions.” John Lancaster (2008) dates this development as early as 1973 and the publication of the Black and Scholes formula, which helped price and thus catalyse the market for derivatives – now incredibly worth trillions of dollars and many times the value of global GDP. These derivatives make a mockery of the real.
In 2014, the Bank of England pulled the curtain back still further, publishing an explanation of how money is created, admitting that “Bank deposits make up the vast majority – 97% of the amount currently in circulation. And in the modern economy, those bank deposits are mostly created by commercial banks themselves.” So when the unit by which we measure the value of the economy is a unit which can be conjured from thin air by anyone with a banking licence, it seems we have entered this bewildering landscape of economic postmodernism where value is surface only and where the connections between signifier and signified have been utterly severed.
So derivatives are worth trillions of dollars, money is printed out of thin air by banks and by central banks, and implicit and explicit state subsidies are worth billions of pounds. We all know that GDP figures are no real reflection of the state of the economy. We all know the FTSE rises and falls in response to animal spirits and perceptions of perceptions of perceptions. Is any of this real Robert? Our economic indicators are now simulacra – disconnected from the practical economic mode of production. This is a make-believe, ersatz economy. There is no real economy. Take a look behind the curtain.
Perhaps more of us – beyond Jameson and the authors of Empire, Hardt and Negri (2000) – should have seen this coming. Because postmodernism as a structure of feeling has been so visible in a cultural context over the last few decades. So how, for so long, did so many of us miss its emergence in the economic sphere, when we know from Marx and others to consider the interdependence between ideology and material economic conditions; between the superstructure and the base? With postmodernism buzzing around the cultural superstructure, shouldn’t we have spotted how it also characterised much of the economic base? Indeed, now we have spotted it, this postmodern economy seems to be everywhere. Come on Robert, surely even you can see it?
Hugh Hendry, a fund manager, wrote in a recent letter to investors how there are “times when an investor has no choice but to behave as though he believes in things that don’t necessarily exist”, investing in assets that have no qualitative support. He used the analogy of the Matrix’s blue and red pills, now well understood in the financial services industry, to describe his investment strategy. For a lay reader naïve enough to believe that financial markets were still in some way still connected to the real, this is frightening stuff. Traders know the game will end in tears, but in the meantime, they still play. “Lord make financial returns correspond to real economic activity, but not yet!” Robert, surely you see this too? Stop worrying and learn to love the lie! At least while you can.
So does this mean the modern capitalist economy is dead? Why does Robert still regale us with the banality and reality of productivity gaps, unemployment rates and export ratios? Doesn’t our postmodern economy supersede this stuff?
No! Because even the traders know a day of reckoning will come one day. We do still somehow believe in GDP. We all still have to buy and consume things made in the real world. Oil still needs to be pumped out of the ground. Food needs to land on our tables. Postmodernism, both as a cultural structure of feeling and as an economic mode of production may have spread since the 1960s and begun to dominate. But it is not yet an undisputed champion. Try living off postmodern bread…
Since the crash, it has become clearer that we are oscillating between the modern and the postmodern, between capitalism and post-capitalism. Every time the hard truth of the real economy raises it head, we turn to post-modern tricks – more money creation, more contingent liabilities or more government guarantees. For a while, we float along in this fantasy land until Robert reminds us we have things to worry about – the real economy brings us down from our collective high. We realise that homeowners or Greeks can’t meet their debts, or that the Russian economy doesn’t actually produce very much. So again we turn to our box of tricks. You know this too, really, don’t you Robert?
So we oscillate between the real and the hyper-real. Between the modern and the postmodern. Between Robert’s technocratic world and a world of fantasy. Perhaps the postmodern economy has been with us since Black and Scholes and even since Tulipomania and the South Sea Bubble. It’s just that in the last few decades, the hyper-real economy has become so powerful and so the threat of a Return to the Real so significant. As we struggle to face up to its fictional and unstable nature, so we cling on to a sort of Zombie capitalism. In fact, we oscillate. Good morning Robert and welcome to the metamodern economy!
The metamodern economy? Metamodernism, as Luke Turner (2015) writes, is a “term that has gained traction in recent years as a means of articulating developments in contemporary culture… Whereas postmodernism was characterised by deconstruction, irony, pastiche, relativism, nihilism, and the rejection of grand narratives… the discourse surrounding metamodernism engages with the resurgence of sincerity, hope, romanticism, affect, and the potential for grand narratives and universal truths, whilst not forfeiting all that we’ve learnt from postmodernism.”
Robert’s – and so our – understanding of the economy is now in flux between ironic detachment and sincere engagement. We are naïve and yet knowing – we know GDP is both a nonsense and of absolute importance. Our economy is both real and unreal. It is no longer possible for Robert to return to “naïve modernist ideological positions” where he tells is that the latest export figures really matter. But neither can he ignore them. Robert can only adopt a kind of “informed naivety, a pragmatic idealism, a moderate fanaticism, oscillating between sincerity and irony, deconstruction and construction, apathy and affect, attempting to attain some sort of transcendent position, as if such a thing were within our grasp” (Turner, 2015). Robert learns to be both ironic and sincere in the same moment. Economics is both “coherent and preposterous”.
But this idea of metamodern economics is one which merely serves to describe the twin horns of our dilemma – it is “descriptive rather than prescriptive”. How to get beyond this metamodern dilemma? What comes next? Could there be a prescription? Any ideas Robert?
Perhaps a clue lies in the hidden patterns in the economy. Just as we were late to picking up the rise of the postmodern economy, maybe there’s something already out there in the material conditions of economic activity which might guide us out of the desert?
Maybe. While the ideological triumph of TINA insists we can now only inhabit capitalism, our economic system is actually comprised of a variety of modes of production. Below the postmodern fantasy which floats above us, in the real economy we sometimes compete and contest as capitalists, while sometimes the state commands and controls. Then sometimes we co-operate and collaborate in the social sphere. Some traditional and romantic modes of production are still with us. These modes ebb and flow.
A truly capitalist economy would be one in which the means of production and distribution and exchange are largely based on private or corporate ownership of capital, which has indeed come to the fore since the late 1970s in the United Kingdom. But since the financial crisis, in turns out that the public sector has made up between 42% and 47% of the economy as measured by our ludicrous and essential friend, GDP (on an expenditure basis).
Meanwhile, the voluntary sector sits at around 2-3%, co-operatives at another 2-3%, and the unrecorded shadow economy potentially dwarfs the lot. These are not formal capitalist modes of production and neither are they statist. The World Bank found that over the period ‘99 to ‘06/’07, the weighted average size of the shadow economy as a percentage of official GDP was 13.5% in high-income OECD countries. While according to David Bollier (2005), one study estimated that the value of unpaid work in Britain is equivalent to 77% of GDP but not included in official GDP figures. Sharon Astyk (2011) suggests that “the formal economy – the territory of professional and paid work, of tax statements and GDP—is only 1/4 of the world’s total economic activity.”
These figures suggest that there is no such thing as capitalism! Instead we have a mixed economy, of private, public, social and informal modes of production. The associative or social economy – increasingly observed in terms of the commons – plays a vastly understated part. Robert almost never mentions it.
There may still be some trading in this sphere, some exchange, but this is not the reductive and brutal rule of CAPITALism. Humans have traded since the dawn of man – but institutional CAPITALism is a more recent phenomenon, driven by institutional models which tend to focus more ruthlessly on exchange value and remove space for the softer, more subjective, social value which can play a greater role in the social, co-operative, voluntary and informal economies.
And there is something about this social economy which could help free us from the horns of our dilemma, something in its approach to value. In modern capitalism, value is objective and determined by the price mechanism. In the postmodern economy, value can sometimes be no more than marks on a page – book value – utterly disassociated from its surroundings, deferred and detached. Yet in the commons or the social economy, value is rather more subjective and negotiated. Not subject to the pure mechanics of a textbook exchange but more subject to behaviour, social context and trust.
So this commons approach to value is not modern. This is not an objective mode of production. This is interesting because it resonates with the idea of ‘subjective realism’, which offers us an escape route from our prisoner’s dilemma of modernism or postmodernism. Subjective realism consider the argument that there is no single truth because we all have our own and points out that these two perspectives are not mutually exclusive There is such a thing as reality – man cannot live on postmodern bread alone – but we also all experience it in our own way.
If the more philosophical argument does not convince, then the economics are impressive. In the UK, more people than ever before are starting up social enterprises. The number of co-operatives has increased by more than a quarter since 2009. There are three times more members of co-operatives than individual shareholders worldwide. Co-operatives and social enterprises are thriving across Europe and Asia. In the US, new social economy models are springing up in the post-capitalist cities of Detroit and Cleveland, built around collaborative principles and the pursuit of social value. The social economy as a percentage of GDP is growing, for what that’s worth. Peer-to-peer production is exploding, the sharing economy is spreading and the idea of the Commons has gone global.
Just as postmodern capitalism existed long before we noticed it, similarly commonism has always itself existed. Commonism is already itself a power. Commonists disdain to conceal their views and aims. It is high time that commonists should openly, in the face of the whole world, publish their views, their aims, their tendencies. “We carry out the task of reconstructing a subjective reality-based economy of the state, capital and the market. We are defined and determined by superstructure so need societal reconstruction.” Robert – come with us! Let us take you by the hand.
Top Image Courtesy Wikimedia.
Astyk, S. (2011). ‘Imagining the Post-industrial economy’, see: www.scienceblogs.com/casaubonsbook/2011/11/10/what-does-a-largely-informal-e/
Bollier, D. (2005). ‘Unpaid Work as a Form of Social Wealth’, see: www.onthecommons.org/unpaid-work-form-social-wealth
Cole, C. (2014). ‘Volatility of an impossible object: Risk, Fear and Safety in Games of Perception’, see: www.artemiscm.com/research/volatility-of-an-impossible-object-risk-fear-and-safety-in-games-of-perception/
Fisher, M. (2009). Capitalist Realism:Is there no alternative?, Zero Books.
Fukuyama, F. (1989), ‘The End of History?’. The National Interest (Summer 1989), see: http://www.wesjones.com/eoh.htm
Hardt, M. & A. Negri (2000), Empire. Harvard University Press.
Jameson, F. (1989), ‘The Brick and the Balloon: Architecture, Idealism and Land Speculation’. New Left Review, see: newleftreview.org/I/228/fredric-jameson-the-brick-and-the-balloon-architecture-idealism-and-land-speculation
Lancaster, J. ( 2008), ‘Melting into Air’. The New Yorker, see: www.newyorker.com/magazine/2008/11/10/melting-into-air
Turner, L. (2015), ‘Metamodernism: A Brief Introduction’. Berfrois, see: www.berfrois.com/2015/01/everything-always-wanted-know-metamodernism/