Oikonomics: a social life of money

Do free markets destroy everything? A response to ResPublica, "red tories" and Philip Blond

Philip Blond, the new, fashionably disheveled, poster boy of the conservatives seems to have something against free markets. I am variously labeled ‘slightly mad’ to ‘not making sense’ for suggesting that markets and communities can exist together because there is no such thing as ‘A market’ (free or otherwise) or ‘A community’. To talk in abstract terms about them being ‘good or bad’ is meaningless without context. The terms can be interchangeable for me depending on your context and perspective, a community needs exchange to exist and adapt, a market needs community to establish rules for exchange and avoid free riders taking over. You can legislate for both to be run on principles of equality, rationality, liberty etc although in reality this gets lost in translation from legal principles to social practice.

Perhaps this is what ResPublica are mean when they say that free markets destroy society? Do they mean 'free markets' as currently constituted and institutionalised within the City? Arguably our modern ‘free market’ for investment and finance is anything but. It is a relatively closed club of investors who only trade with those in the club – in part for solid economic reasons (they can maintain margins and avoid the spiraling costs of servicing lots of small customers which so troubles retail banks) and partly out of tradition and convention. They expect and maintain ‘status’ in society through their subsidies and personal rewards – a new aristocracy (and equally cut throat and competitive within their own class) who finds it hard to imagine a world without them.

I am probably therefore being unfair to Respublica and their ability to get attention to their ideas through careful political soundbites – but I would also caution that their ideas don’t become merely slogans for other political agendas which may conveniently edit some of the nuances of their analysis of what makes societies and markets tick.

Kiva and the nature of money

Listened to a very engaging conversation between Premal Shah and John Grant at NESTA last week. At one level it was an inspiring point of view from a successful entrepreneur, but I was left feeling that a lot of Kiva’s promise was going unrealized because of the way they constructed money and credit relations on the site.

Kiva’s aim was to transform the relationship between the ‘rich’ countries and ‘poor’ both in terms of economic injustice (which modestly Premal claimed to have had little real impact on at this stage) and in terms of the social relations between ‘rich’ and ‘poor’ countries. John Grant was very sympathetic on this point, citing his own experience of working with disaster relief charities which have the effect of painting all Africa "south of Tunisia" as victims and needy individuals.

Even this picture from my local Starbucks demonstrates everything I personally find abhorrent about the way we construct ‘need’ in Africa – the down turned headed, pleading eyes, lack of adults, lack of context (always need is personal and close up) – which may well be effective at picking the purses of consumers but also serves to distance us from the individuals (objectifying them as problems rather than encouraging a more productive, risk based assessment of potential – or capability). Why do marketers feel the need to justify their cause by quoting numbers? Is it particularly effective to reduce humans to statistics?

Back to Kiva. Premal Shah characterized Kiva as consumption rather than capitalist/productive experience. His illustration of why we feel ok buying things we don’t need when there is need elsewhere (i.e. it is literally distant), a distance which the stories and requests on the Kiva site eradicates and brings into our living rooms and laptops in a very personal and interactive way. His users display ‘addictive’ behaviours (checking status of loans at 2am) and seem to get a buzz from both the act of giving and getting the feedback of a successful loan application. This perhaps explains why people are so angry about the fact that there is little real connection in terms of money with the people you loan to in reality (the loan money is pooled rather than being supplied directly). However, this positions Kiva as just a more internet savvy, internet 2.0 charity experience rather than a ‘social lending’ site (I, and other zopaites in attendance, kept politely quiet when it was trailed as the ‘world’s first….’). Kiva is not channeling money as "investment", but rather encouraging us to consume for moral purpose (giving to another in need). Nothing wrong with this in itself, but I am not sure that it transforms the relationship between rich and poor – just makes the perception of inferiority personal.

For me, Kiva has missed a trick in encouraging people to take risks on others, driven by SEC regulatory fears rather than any philosophical bias, as this meant they had to make the loans interest free to avoid their being defined as ‘securities’ (which have sunk the aspirations of many social lending sites in the US). The problem is that this interest free status has the effect of transforming the loan to a simple donation. Now as Premal quoted, there are plenty of examples where loans exist without interest payments, but such systems are not without reciprocal obligation. As I have noted on this blog before, Athens had such a system of loans between family, friends and fellow demesmen called ‘koinonia’ finance; but in that case, there was an implicit ‘favour’ which could be called upon for a similar loan at a later date. There is no such obligation implied on Kiva. In essence, by writing off any sense of ‘return’ – beyond the return of the money which is then recycled into another loan – I am avoiding making any risk assessment on the loans instead judging them on their emotional pull or potential social value. I can do much the same thing through Oxfam (‘choosing’ what my money is spent on - although such choice is illusory).

Perhaps if Kiva was more creative about the way it characterizes the concept of return (and made into something which the recipients of the loans can return to their backers) then it could get around the regulatory issues. It would require them to deal with the distribution issues they have faced from their local lending partners in each country but surely it would be more in keeping with their overall philosophy.

Alert Me and google powermeter - It's better than telly

Just managed to get my new Alert me power meter up and running, so now I can see ‘live’ the energy usage (electricity) in my house on a little icon on my desktop and (eventually) through my igoogle home page.

Alert me tells me my usage and the cost instantly on little graphs (which are still a bit technical looking but I am sure that some more domesticated versions of measurement will be coming soon!) and the whole set up took less than 20 minutes (mainly waiting for downloads and confirmations).

Having reduced my ‘baseload’ (I think that is the jargon) to the minimum (about 400W) without having stuff thrown at me (my wife is trying to work on her laptop) I then watched for the effects of a normal breakfast (kettle, toaster, microwave) – effect = 5.1 KW of consumption and hitting the ‘redline’.

So do I feel differently about my energy? Well it is certainly now ‘visible’ as a significant element of my consumption – I spend more on energy than on say shirts or nights out – but I am not sure what I need to do now to reduce my consumption by a significant percentage. I would liken it to the experience of using a runners watch (yes, I am sad and map my jogs with a gps that tells me speed, elevation and heart rate). I am logging how I am doing but it is too early to know whether I can make any improvements in the longer term.

Perhaps it is coincidence but I am reading Foucault’s Discipline and Punish and perhaps my consumption needs disciplining to conform to societies new norms of scarcity (scarcity of capacity for waste/externalities rather than as yet scarcity of production) – perhaps an energy boot camp. Certainly my energy is now being ‘monitored’ (although Google are keen to point out it is MY DATA – WHICH I CAN CHOOSE TO DELETE!) and here we have the source of potential conflict. My wife’s quip was that I would now become ‘Git dad’ and have the kids sitting in the dark while I sit avidly over my meter watching for any quiver towards the redline (and given it is internet based, even when I am out of the home) – but I am under no illusion about how ‘rules’ are created in any household and what really governs good behavior in the domestic space.

Sky faced what they called "the handbrake" of the homemaker when their entertainment technology entered the domestic field - which they released partly by accident by introducing Sky + and the Discovery network. 

Shifting (nudging?) the cultural field of the homemaker to the home controller (in a positive sense) will be vital if all this ‘energy’ being spent to get us to reduce our energy consumption is not to be wasted as it runs up against a wall of cultural capital invested in creating the ideal hearth and home.

Aussie driver travels 370 miles to pick up the paper

Meeting the media after driving 370 miles to get a paper, 80 year old Eric Steward was a bit bemused by all the fuss. On the subject of death he was as phlegmatic as his national stereotype demands (‘he’s out there waiting for us, you just got to wait your turn’) but on the subject of Sat Nav’s we heard a voice from another world not just another generation,

"Why would you want one of those? You can’t get lost. There is no fun in that."

If he doesn’t want it as his epitaph, I’m having it.

This is modern money: insights from Matthew Collings' This is Civilisation

I have been quiet on this blog in the last week or so because I have been reading a book which has made me think, combined with a teething toddler who isn’t letting me sleep and a business that is on the verge of being something real and revolutionary. Matthew Collings produces and presents enigmatic TV series on Modern Art, Civilisation and Beauty. His style is personal, ironic, intimate and always thought provoking. However, I was unaware of his writing beyond the TV scripts. I accidentally discovered his book, This is Civilisation in Foyles art section while looking for inspiration for a semiotic study. It is in the wrong section. It is a work of philosophy (although I am sure he would hate that classification).

I was hooked from the first pages as he tells about his parents troubled history and then dives into the Egyptian and Greek art in search of civilization. Suddenly the TV’s relatively flat experience is left behind and replaced by a rich ethnographic descriptions of experiences, essays of art criticism and personal diaries around the script which provide their own engaging and challenging narrative on the topic. It is all left justified, with the art floating in his words – the antidote to the coffee table art books that surround it on the shelf.

Perhaps I am biased but it is his asides on the relation between art and consumerism which have illuminated many new thoughts and insights for me. It has also jump started a perspective on money which has been bubbling for some time now – about the relationship between theory, techne and practices of money.

It is worth quoting one passage in full:

"2. The Pessimists

Fun

In the 1960’s consumerism becomes the dominating value, money wins, especially US money. It offers freedom. You can be an individual and you can measure you individuality by the consumer objects that surround you and reflect yourself back to yourself. We are offered the world: material security, economic wealth and object-infested lifestyle. We know consumerism isn’t the only thing which makes life worth living but we learn to live with the unease and doubt that results from going along with it. Everything seems simultaneously confident and unhinged."

Here for me, is as succinct expression of modern money and the roots of the crisis as I could ever achieve. Here is the paradox written simply and effortlessly. Money has been liberated and in doing so become a separate practice created out of individual experience and culture but by calculation and mathematics. The problem with this situation is that ‘being good with money’ becomes a function of science and education rather than part of the cultural habitus. Innovation lies in the hands of the ‘experts’ rather than the subterfuge of the ‘everyman’. Perhaps it will be art which leads the fightback against the encroachment of our practice of money by the ‘counters’ and ‘regulators’? Will art point out the illusion of certainty created by science? Of course, the irony as Collings points out is that art too has been seduced by money. We value art the way we value any commodity. Money has liberated art and in doing so stripped it of its power to talk about what money is – a power that would require its rejection of money as the ultimate arbiter of value. So perhaps the man who lives without money shows us best what money is?

The Ethics of Bankers

Is being good the same as being good with money, or rather someone else’s money? The FSA have been keen to publicize the numbers of individuals who have been rejected as worthy of running banks (18 in the last year apparently), what is less clear is how the ethics of an individual will affect the culture of the company which they run?

Certainly, banks are more hierarchical and rule driven than most organizations, however, by making it an issue of ethics rather than management competence or control is a continuation of the theme that banking crisis was not a failure of the system but a failure of morality. I find this analysis somewhat dangerous because it assumes that with the right people the system will work just fine, thank you very much. There is very little evidence that any system, however perfect it may be in theory, has any hope of controlling the practices of money in everyday life.

It paints a picture of the bank executive as a guardian or philosopher king guiding his citizens based on some higher understanding and once more centralizes responsibility rather than placing it in the hands of the individuals who in reality "make money" in every sense.

Can we blame an individual for the sales culture within RBS and HBOS? Was it a failure of individual ethics or merely a mistaken collective belief in certainties and truths which have been found wanting? Alan Greenspan was certainly repentant for his error of faith in markets, but aren’t we just replacing one philosophy (the overly deterministic, positivist materialism of economists) with another (a strange mix of social and technological idealism - which Chris Dillow critiques as ‘managerialism’ in his book "The end of politics").

I would be intrigued to know how these interviews are conducted and more importantly who is the judge of these ethics of bankers. I doubt that the FSA employs someone schooled extensively in Socratic method so I imagine it is something of a Q&A approach with a measure of ‘fitness for banking’ scored out of 20 perhaps? Answers on a postcard. Given the ability of individuals to subvert the fact finds and interviews which regulate our usage of money (essentially a measure of knowing the right answer rather than an enquiry into the truth of things).

Perhaps they can learn from the apocryphal stories about Cambridge interviews and their esoteric lines of questioning, which various Dons are very keen to avow but personal experience suggests have a very small element of truth about them. Personally I wouldn’t be asking them about their ‘ethics’, nor would I be asking them to imagine life as a cow or answer the question – "is this a question?" (answer, "yes, if this is an answer"). What about a short 1000 words on ‘being good with money’ – what it means and how they see their organization’s role in the everyday practice of money? Or my personal favourite, what would be the first thing you would do after winning a personally significant sum on the National Lottery? (best answer to date from the poor guy who thought he had won the Euro millions jackpot - he borrowed £1000 instantly and wanted to move next door to Alan Shearer! - liquid modern ethics writ large!)

The Practice of Everyday life - strategies and tactics

Reading Michel de Certeau’s the Practice of Everyday life has proved very fruitful for thinking through a potential study on the social life of money. His criticism of Social Science’s ability to examine the ways in which individuals appropriate and subvert meaning (strategic meanings of institutions and power vs. the (unconscious) tactics of the individual navigating their own paths) mirrors my own view of consumers as ‘producers of meaning’ and consumption being merely seen as a means to an end, not an end in itself.

Where I diverge, perhaps a function of the liquid modern, connected context we now inhabit, is the level to which individuals do not possess conscious strategies of their own which oscillate between conformity and subversion (often simultaneously as individual life projects) and are unconscious tacticians using a form of cultural common sense. The ‘brownian motion’ of tactics as De Certeau characterizes it, seems too random, and in its own way deterministic and limited, in its vision for the modern individual. Surely the existential angst we feel is a function of broadened horizons, new technologically enabled freedoms and the creation of long term goals which often conflict with our short term, tactical needs, desires, faults, mistakes, habits, addictions, etc. Given the right context, any individual can articulate their strategic ideal and trajectory to the level of an institution or brand, but they often lack the confidence and mutual support to carry it through. In other words, we carry the means and capabilities to produce a "kingdom of ends", but are often held back from expressing them through inherited deference to authority, repression or merely lack of self esteem and confidence.

Last week’s debate on money played out just such conflicts in the minds of bankers and bureaucrats of money, and likewise a similar rich vein of this experience is being exposed by the personalization initiatives in adult social care. Perhaps what MdC and others underestimate is the level to which individuals not only subvert but appropriate brands for the furthering of their own strategic aims and ideals, not just ‘surviving and navigating’ the city, but increasingly shaping and seizing control of it.

Realizing the potential of brands, and other vehicles for the creation of social and cultural meaning, for liberating the praxis of individuals (as well as repressing or oppressing it) will create the bridges we need to achieve the new goals of society; such as sustainability, fairness etc.

Is it better to be a customer of a big bank or a small bank or both?

The plan to break up the state subsidized Lloyds and RBS is being positioned as in the interests of competition and safety for the retail banking market – things which should, on paper at least, be beneficial to the consumer.  Will customers hived off in these new banks be happy to be a small fish in a small pond or will they shift their accounts back to the parents whence they came?  Given the experience of smaller institutions in the mutual sector and the mantra of efficiency of scale which created these behemoths in the first place are we merely turning the clock back to a time when ‘banks were boring’ and part of that boredom was to be less competitive and rely on customer inertia and apathy to maintain margins.

Perhaps the energy market is a good analogy here.  There is little evidence which I have observed that ‘choice’ and ‘competitiveness’ run hand in hand.  There is in reality a limit to the number of choices a consumer is prepared to consider and much of the vaunted ‘switching activity’ which is used as a signifier of competition is driven by a small number of people who if they are honest actually like to switch – it makes them feel thrifty. There is quite a large alternative segment of that market and the financial services market for whom switching is seen as rather pointless (better the devil you know) and it takes quite mind boggling stupidity, rudeness and sheer bloody minded cheek to get a customer to switch their allegiance to another brand.  Smaller brands also tend to be disadvantaged in the switching process even if they are competitive in terms of price because customers decide to go with the ‘next best biggest’ as a trade off between price and trust (trust in this sense means being able to blame someone if it all goes wrong).  Rather than being a signifier of competition and better deals, switching is a signifier of almost catastrophic failures of customer service.

That said, many people have more than one bank account now (the better off because of the limit on savings guarantees, others as a result of chasing deals).  Perhaps these mini-banks will specialize into specific product segments? The problem is that each one will be saddled with a branch network of (heaven forbid) the second choice branch locations which their parent may be only too happy to get shot of.  Given Lloyds in particular stepped back from the brink of closing its C&G branches, I can see one or two of those heading back under the auctioneer’s hammer before too long.

What will make banks competitive is for banks themselves to see the benefits of competition and for one of the bigger brands to adopt a more forward looking and challenger mindset – i.e. to be anything but a boring bank.  A co-conspirator of old and bank innovator Richard Duvall would have jumped at the chance offered by the current banking market stasis to start his version of the individual revolution.  I hope that others stand in the wings  to fill his big shoes and emulate some of his big ideas.