Beyond Twin Deficits: Emotions of the Future in the Organizations of Money

American Journal of Economics and Sociology, The, Oct, 1999 by J. F. Pixley

ABSTRACT. This paper outlines new developments in the sociology of money. It highlights certain aspects of Post Keynesian monetarism and explores Keynesian concepts of emotions relative to economics and economic sociology. Gunnar Myrdal's work on time and money contributes to the discussion. Underdeveloped areas of discourse in both sociology and economics are identified and the resulting superficiality of references to money are examined. Sociology, for example, has historically neglected concepts of future time and money, while economics has paid little attention to emotions and organizations. Removing these orthodox barriers allows economics to be informed by concepts previously relegated to sociology, such as emotions of trust and confidence. This process may induce the disaffected from both disciplines to draw from each other, creating an alternative, and ultimately more satisfactory understanding of money.

I

Introduction

MONEY AND HIGH FINANCE ARE MAJOR CONTEMPORARY CONCERNS. Advocates of market orthodoxy are having difficulty advancing the merits of further financial liberalization to an 'informed public', and even former proponents are expressing disenchantment. [1] One need only consider the failure of 'shock therapy' for Russia, where a formal finance structure was lacking; or the World Bank's criticisms of the IMF's policy toward Indonesia in 1998, where unemployment, distress and military violence mounting daily. [2] The heartland of world finance, Wall Street, attempting to suggest that the 1997-1998 Asian financial crises were only due to 'cronyism', was startled in late 1998 by the sudden collapse of a US hedge fund ironically called Long Term Capital Management (LCTM). It was alleged to have borrowed US$1.25 trillion, investing twenty times its own capital on some holdings. The large investment banks (e.g. Merrill Lynch and Goldman Sachs), required by the Federal Reserve to rescue it, had been kept in the dark about LCTM's long-term exposure; apparently influenced by the financial sector's blind faith in LCTM's so-called 'gurus' John Meriwether and two Nobel-winning economists. [3] In other words, 1998 was not a good year for high finance.

Amidst these crises, critiques of market liberalism are a 'growth industry'. [4] New arguments for international and national regulation are important but few offer assessments of the limits of proposed remedies. More necessary than criticism, however well-justified, are innovative theoretical challenges which will engender alternative research programs and alternative policy debates. Contemporary problems are too pressing for analysis to remain constrained by disciplinary boundaries. Sociology has been reluctant to assess the financial side of economic life with its intensely future orientation. In the same way, economics has been relatively uninterested in the hierarchical, unequal distribution of power and the conflicts (not mere competition) for control over opportunities that largely take organizational forms.

Where might a fruitful meeting place on money exist? Economists and sociologists agree that a money economy cannot exist without a normative consensus and trust, backed by state authorities (Mizruchi & Steams 1994 p. 317). Trust is central to the existence of money, however most monetary theories treat it as an ad hocery (Ingham, 1996a p. 250). In contrast, sociological explorations of trust are well-developed and linked to the concept of risk (e.g. Nikias Luhmann, Ulrich Beck). In the case of finance organizations, trust and risk are pre-eminent but rarely defined in these sociological terms (despite their reassuring names, such as Bankers Trust). Thus, where economics and sociology intersect, sociology is capable of analyzing trust but needs active, cross-disciplinary discussions with economists about money. Economists, in contrast, may be interested in the converse.

Only a few sociologists have developed a significant body of research on money. Of note are Tom Burns (e.g. 1998), Geoffrey Ingham (e.g. 1984; 1996; 1996a; 1998) and Giovanni Arrighi (1994; 1998). They have insisted that money is a social relation and, consequently, a social institution. Although the leading economic sociologist Richard Swedberg discussed international finance earlier (1987), he and Mark Granovetter (1985) have subsequently had more influence on important research on embedded networks in market arenas. Sociological and cross-disciplinary perspectives on money emerged at the height of the inflation of the 1970s (e.g. Hirsch & Goldthorpe 1978; Burns et al 1987) but later abated (Ingham 1998). Other sociological work includes Heiner Ganssmann (1988) and Nigel Dodd (1994), who agree with Ingham about this neglect. Sociology has looked at the social and cultural effects of money and/or accepted orthodox economics or neo-Marxian political economy of money as a neutral veil or a medium of communica tion (e.g. Mizruchi & Stearns 1994, Deutschmann 1996). It has not looked at the 'power struggles' at the center of the production of money, as Ingham proposes (1998 p. 14).