Rethinking calculation: the popularization of financial trading outside the global centres of finance

Abstract

The paper looks at the popularization of financial trading in Israel. It presents a qualitative analysis of the calculative models and techniques that are promoted by financial trading schools, service firms and books. Broadly, the popularization of trading in this field involves a focus on ‘technical analysis’ (TA) and relies upon a socio-psychological reading of financial charts. Incorporating explicitly non-economic ideas into traders’ calculative logic – including an emic notion of ‘performativity’ – popular TA constitutes an attempt to ‘reverse’ the making of markets: to calculatively trace price formations back to the minds, hearts and arrangement from which they had allegedly sprung as a means of foreseeing their future shape before it fully materializes. Tying the psyche and the market in a calculative loop, popular TA transcends existing social theories of financial calculation. The paper discusses this challenge and its implications for our understanding of the expansion of finance.     

Religious fundamentalisms,territories and ‘globalization’

Abstract

This paper analyses what the two main monotheist religious fundamentalisms – Islam and Christianity – have had to say about the international system, and in particular their attitudes towards, and visions of, ‘globalization’. The paper concentrates upon the fundamentalist position in respect of the two religious doctrines discussed while fully recognizing that the non-fundamentalists and mainstream traditions in each case do not necessarily share the sentiments announced by – or pursued by – their fundamentalist co-religionists. But it is the fundamentalist variants of the two doctrines that are having the greatest impact on the international situation, so the emphasis is upon these (though there are also some shorter reflections on Jewish religious fundamentalism). In addition, the paper concentrates upon the attitudes of these positions towards the idea of ‘territory’ since this is one of those categories that are more widely at stake in the general discussion of globalization and its consequences. Finally, the paper assesses the impact of these doctrines on the conduct of international relations, the likely success or otherwise of their impact, and the nature of the international system that is being forged in the wake of the re-emergence of fundamentalist activity in the domestic and international spheres.     

The material production of virtuality: innovation,cultural geography and facticity in derivatives markets

Abstract

In the existing literature, the ‘virtual’ nature of financial derivatives is often commented upon, but how these products are brought into being has seldom been examined in any depth. This article analyses the development since 1970 of organized financial-derivatives trading in the US and UK (in particular, of derivatives exchanges and of the British financial spread-betting industry), with the goal of examining the ‘material production of virtuality’. The article explores the similarities and differences between technological innovation and innovation in derivatives; discusses the role of the ‘internal’ cultures of financial markets and of the wider culture (in particular, the legal traces of hostility to gambling); and analyses the requirement of ‘facticity’ for the measure underlying a cash-settled derivative, focusing in particular on the most important such measure, British Bankers’ Association LIBOR (London interbank offered rate).     

Risk illusion and organized irresponsibility in contemporary finance: rethinking class and risk society

Abstract

This paper analyzes the lead-up to and aftermath of the 2008 financial crisis to show how processes associated with risk society – the social production and distribution of systemic financial risk in a context of organized irresponsibility – are contributing to the intensification of contemporary class-based inequalities. Utilizing a framework based in Bourdieusian class resources, the analysis moves beyond Beck's rejection of the relevance of class relations to systemic risk, and his critics’ denial that risk transforms existing logics of distribution, to identify key shifts in the relation between contemporary financial risk, power and inequality. The conclusions of this study, showing how systemic financial risk in contexts of organized irresponsibility contributes to differential ‘risk-classes’, suggest that risk is a key source of contemporary inequality and that reconstructing the theory of risk society can illuminate these changes.     

Institutional Power and the Risk of Finance

ABSTRACT

This article examines the nature of financial reason and the firm-level processes shaping and sustaining financial accumulation. It argues that the standard views of financial reason offered by neoclassical theory and international political economy prevent a nuanced understanding of key corporate power systems. Drawing on Hilferding’s theory of finance capital as well as his unique methodological approach, the paper shows that these accounts fail to consider properly the range of forces constituting financial rationality.     

Bugs,predations or manipulations? Incompatible epistemic regimes of high-frequency trading

Abstract

Calls for greater transparency as well as corporate and individual accountability have emerged in response to the recent turbulence in financial markets. In the field of high-frequency trading (HFT), suggested solutions have involved a call for increased market information, for example, or better access to the inner workings of algorithmic trading systems. Through a combination of fieldwork conducted in HFT firms and discourse analysis, I show that the problem may not always stem from a lack of information. Instead, my comparative analysis of different market actors (regulators, market analysts and traders) shows that the diverse and complex ways in which they access and construct knowledge out of information in fact lead to what I call different epistemic regimes. An understanding of how epistemic regimes work will enable us to explain not only why the same market event can be viewed as very different things – as market manipulation, predation or error – but also why it is so difficult to arrive at a unified theory or view of HFT. The comparative perspective introduced by the idea of epistemic regimes might also serve as a starting point for the development of a cultural approach to the study of financial markets.     

Reconceptualizing financial innovation: frame,conjuncture and bricolage

Abstract

This article argues for a reconceptualization of financial innovation which, as culprit and victim of the current crisis, is now damned by those who once praised it. But what is financial innovation? The dominant answers from mainstream finance and social studies of finance share variations on a rationalistic view whereby financial innovation is about improving markets or at least extending the sphere of rational calculability. Because improvisation is more important than the dominant perspectives can admit, this article proposes a new concept of financial innovation whose three main elements – frame, conjuncture and bricolage – are indicated by the title of this article. The importance of this problem shift is that it highlights the inherent fragility of this type of intermediary-led financial innovation where things will often miscarry and highlights the need for a more radical rethinking about policy responses to the financial crisis that began in 2007.     

‘Marching from all governorates’: labour lacunae in Mubarak’s Egypt

Abstract

Starting in 1991, Egypt undertook ‘structural adjustment’ reforms at the behest of international financial institutions and the country’s foreign donors. These reforms have often been included in a larger discussion of economic reforms and the withdrawal of the state from the Egyptian market. While certainly market-based, these reforms were interpreted and implemented in a uniquely Egyptian context and moved forward not through a market logic but with a specific understanding of political feasibility. Despite these local peculiarities, Egypt experienced a backlash familiar to researchers of structural adjustment internationally. How did Egypt’s structural adjustment and other ‘liberalizing’ reforms produce spatialized and sectoral backlash and drive workers from quiescence to militancy? Based on extensive fieldwork and interviews conducted in 2011–2013, this paper argues that the choices made by the Egyptian regime from 1991 to 2010 generated ‘labour lacunae’ – spaces in the political-economic structure where methods of interest aggregation were replaced by coercion or neglect – allowing militancy to flourish. I explore how labour entrepreneurs exploited these ‘lacunae’ to redefine ‘local’ protest in the run-up to the Egyptian Revolution of 2011.     

How to change other people's institutions: discursive entrepreneurship and the boundary object of competition/competitiveness in the German banking sector

Abstract

The paper explores recent public debates about the structure of the financial system in Germany. It pays particular attention to their symbolic-strategic dimension, that is, to attempts by several institutional entrepreneurs to reformulate the criteria of organizational legitimacy, concentrating on the sense-making and legitimization processes involved in institutional persistence or change. The paper discourse-analyses a campaign by institutional entrepreneurs – mainly representatives of commercial banks – who attempted to homogenize the criteria of organizational legitimacy in the German banking sector by questioning the fundamentals of the three-pillar system and the non-commercial banks. Institutional entrepreneurs are understood as discursive entrepreneurs whose actions refer to institutionalized generalizations of value. In the case of the financial sector in Germany, it was the generalized value of competition/competitiveness that served as a discursive device to legitimize the attempts of commercial banks to alter the institutional structure.     

Introduction to Neumann: law and socialist political theory

Abstract

Regulators attempt to understand financial markets and their risks in terms of categories of knowledge and datasets that are defined and produced by the markets. However, regulators cannot adequately interpret or utilize such knowledge, for reasons including their social distance from the sites of knowledge production, the diversity of financial firms’ proprietary risk models, firms’ abilities to game the rules thus rendering the ‘metrics’ meaningless and several backfiring aspects of global regulatory networking and reform. Calls for yet more information about trading, posed in terms of the merits of transparency, result in information swamping of regulators. Meanwhile, while policy-makers tinker with regulatory structures (‘architecture’), political reaction to the crisis de-legitimizes public regulation as a project. Yet there is one positive aspect of the reforms – enhancing powers for ‘resolution’ of financial firms in ways that impact upon investors while minimizing wider destabilization – upon which the regulatory information requirement can and should be refocused. To protect the public interest, legal transparency is required, trading transparency is not. This paper introduces these issues by drawing on critical work on transparency and markets.     

Covering the private parts: the (re-)nationalisation of housing finance

Abstract

Is state power or control over financial markets really withering? Most narratives/analyses of financialisation see a growing penetration of private capital into everyday life that runs parallel to the increasing power of private financial capital over state policy. Yet housing finance – mortgages – sits at the centre of banking, and banking sits at the centre of the financial system. Large-scale mortgage markets only function where the state wraps around the banking system to remove maturity risks and to limit excessive credit creation. Partial deregulation in the 1990s and 2000s created a crisis that states resolved by re-nationalising much of mortgage finance. This renewed and overwhelming state presence suggests that financialisation is a state-driven story, and that private financial power, stability and instruments require state support above and beyond contract enforcement and prudential regulation.     

Climate change,markets and standards: the case of financial accounting

Abstract

The paper examines unresolved attempts since 2005 to develop financial accounting standards for greenhouse gas emission allowances. It is a detailed empirical case study into how the large-scale experiment of carbon markets has manifested in a particular area of professional expertise – financial accounting. Theories about the role of standards usefully draw attention to the hidden work of standards in society and help explain why some things are difficult to standardise. However, there are notable gaps in conceptualising how standards are integral to wider processes of policy and technology change. Ideas from governmentality and hybrid markets (agencements) are therefore used to explore further the role of standards within markets, and provide a welcome avenue for thinking afresh about the relationship between climate change and standards.     

State Retrenchment and Administrative Reform in Ireland: Probing Comparative Policy Paradigms

Abstract

Policy choices in response to crisis may carry consequences both for distributive outcomes and for the future policy capacity of the state itself. This paper uses conceptual heuristics to interpret policy practice. It examines the underlying policy paradigms shaping Irish government decisions in the aftermath of the European financial and economic crisis. Drawing on comparative political economy literature, it distinguishes between two such paradigms – market-conforming and social equity – and applies them to three reform themes: reconfiguration of public budgets, the public service pay bargain, and the organizational profile of state competences. The findings entail lessons for understanding the malleability of policy choice, and how state policy choices in response to crisis are framed and implemented.     

Corporate governance and political impediments to regional harmonization: cases from East Asia

Abstract

Is the harmonization of financial regulatory regimes possible in East Asia? Focusing on corporate governance, which many see as a critical part of the 1997 Asian financial crisis, and which is also seen as unresponsive to calls for change, this paper argues that such harmonization is possible, but that it will not be according to the standards advocated by the International Monetary Fund, World Bank, Organisation for Economic Co-operation and Development, and other international organizations. At present, actors generally feign compliance with these international rules and standards. The pattern of noncompliance is reflective of two types of regulatory models at work in East Asia, which correspond to democratic and nondemocratic regimes. The manner by which these political institutions mediate the influence of key actors determines corporate governance outcomes. Three cases illustrate the key dynamics: Singapore (nondemocracy), South Korea (democracy), and pre- and post-World War II Japan (change from nondemocracy to democracy). By identifying the key actors that determine regulatory outcomes, this paper points to a more realistic regulatory framework. This alternative framework is a compromise between the standards advocated by international organizations and the domestic political realities of East Asia.     

China's dualist model on technological catching up: a comparative perspective

Abstract

The central question of this paper is whether China can go beyond simple technological transfer and toward innovation in this age of globalization. By adopting an institutionalist perspective, this paper argues that China has developed a dualist model during its economic transitional period in which the foreign sector has been isolated from domestic firms, while the domestic industrial sectors have also failed to develop organic linkages among themselves to facilitate technological learning and generate innovation. This paper discusses four major institutional arrangements that deeply influence China's technological development – the institutional logic of economic reform, the state's industrial policy, the financial system and the industrial structure. It suggests that, owing to these institutional elements, China has neither developed economies of scale, as compared with the South Korean case, nor has it built up a network-type of economy similar to its Taiwanese counterpart in order to generate the mechanisms needed for technological innovation.     

State transformation and resource politics: Australia and the regional political economy

Abstract

Although the 1994 Agreed Framework offers a solution to the North Korean nuclear crisis, many problems may prevent its successful implementation. Should the Agreed Framework break down, the United States and South Korea have indicated that they will ask Japan to join them in a trilateral economic sanctions regime.

Japanese participation would include the severance of trade and financial flows, including money sent to North Korea from Japan's ethnic Korean community. In this paper I examine this financial flow, and, finding it a valuable linkage to the North Korean economy, conclude that Japanese participation is vital for a successful sanctions regime against North Korea.

Given this, I examine whether or not Tokyo's cooperation will be forthcoming. Japan would be inclined to participate given that it has a strong interest in eliminating a regional nuclear threat. Furthermore, Japan would also feel pressure from its allies to display diplomatic leadership in the Asia‐Pacific region, as befits a country of its economic importance.

Despite these international reasons for Japanese participation, domestic factors will be likely to prevent Tokyo from joining a sanctions regime: constitutional questions, the possibility of terrorist reprisals, interest in Pyongyang's regime maintenance, concerns for the rights of Japan's ethnic Korean community, and political ties between North Korean and Japanese politicians. I find that these domestic factors will outweigh international pressures for Japanese participation, and thus conclude that in the event of a breakdown in the Agreed Framework, alternatives to a trilateral sanctions strategy against North Korea must be considered.     

Norm diffusion and the limits to forestry governance reform in Southeast Asia's new democracies

Abstract

The return of the World Bank Group (WBG) to Burma after some 25 years’ absence, along with other international financial organizations, follows a series of extraordinary political reforms that have taken place in the country since 2010. Burma has made a transition from 50 years of authoritarian rule to what its leaders call ‘disciplined democracy’. This paper examines the likely consequences of the Bank's return for the forestry sector in Burma and the potential outcomes in forestry governance given the evolution of its development agenda over the past 25 years. While measures to address deforestation have been applied in Southeast Asia, the success of forestry governance reforms depends to a large extent on their endorsement and adoption by local power structures and political figures, as well as on the nature of the political regime itself. The record on forestry governance in Southeast Asia is particularly poor and international financial organizations continue to neglect the local political economy of deforestation. Comparatively, few studies have attempted to investigate the relationship between types of political regimes and rates of deforestation. The paper examines two other new democracies in Southeast Asia (Indonesia and Cambodia), and the impact that governance reforms have had on their deforestation trends and land use, in order to contextualize the potential impact of the WBG's return to Burma. In Southeast Asia, powerful vested interests continue to outweigh the support inside governments or civil society for the forestry governance norms promoted by international organizations. The cases of Indonesia, Cambodia and Burma illustrate that deep patrimonial interests operate within the region and that local politics cannot be ignored by international organizations designing policy reforms. The WBG should effectively engage wherever possible with the local communities and a broad range of civil society groups before developing further initiatives.     

Ownership in Theory and in Practice: Transfer of Authority in UN Statebuilding Operations

The language of ‘ownership’ is commonly used in statebuilding operations, but it is not clear that the term has either consistency or substance. It certainly does not have its literal meaning, in the sense of rights of possession either of property or a formal stake in an organization, such as shares in a corporation. Instead ownership tends to be used figuratively – much as ‘buy-in’ in this context usually does not suggest an actual financial transaction – to refer in a more vague way to the relationship between stakeholders, with meanings ranging from a sense of attachment to a programme or operation, to (rarely) actual controlling authority. This essay explores how ownership emerged as a shibboleth of the development community and how it has influenced UN statebuilding operations. The emphasis will be on rule of law institutions, but the critique of ownership applies to post-conflict operations more generally.     

Introduction: The dynamics of ideas

Abstract

Participants in today's financial markets confront a sea of data. While the availability of market data has benefits it also creates problems, notably those relating to questions of meaning, judgement and intervention: how to make sense of these flows – how to see the ‘market’, its futures, and thus act pre-emptively. Over more recent years financial organizations have been turning to new technologies of representation, in particular the design and application of visualization software in an effort to enable better visual imagination of and interaction with markets as they unfold in real time. ‘What you see is what you risk’ in many respects captures the thinking or at least the desire underlying the employment of the latest visualization software. The more powerful one's vision the better able one is to participate in increasingly complex financial markets, at least in theory.

Based on recent interviews with those involved in developing and using the latest visualization software within some of the key markets of global finance, and developing the influential work of Daniel Beunza and David Stark, and Karin Knorr Cetina, in particular, this paper adopts a cultural-economy-of-finance perspective to examine the implications of these new techniques of representation. The paper argues that the latest visual turn within finance should be afforded a more central position in the study of contemporary financial market practices.