“finance is a practice oriented industry”

January 19, 2015 8:46 PM

the heretic’s guide to global finance - Brett Scott interviewed by Lewis Bassett.

Brett Scott has written for The Guardian and Resilience.

posted by the man of twists and turns (4 comments total)

Slightly related: What Should the Left Understand About the City.

I think it should be understood that the financial sector does serve some usual purposes, but has shifted and grown beyond those useful purposes into something that can destabilize the economy, and is partially parasitical on the State via bailouts. Many on the Right tend to go with either "It's perfect" or "It would be perfect if we stopped trying to regulate it". Those aren't true, but neither is "It's completely useless".
posted by TheophileEscargot at 12:35 AM on January 20, 2015 [2 favorites]

Interesting, especially in the light of the inequality thread. Having said that I'd say "destroy finance entirely" is not actually something that's held by many people involved in the debate, including "the left" who are addressed directly in Theophile's link and somewhat as well in the OP link; as such it's a bit of a strawman. Sure there's a bit of "hang the bankers!" rhetoric and a lot of gaps in knowledge in general (on my part too!), but I think most reformers/protestors, including proponents of democratic socialism etc, recognise that as long as there is money, finance is a useful tool. The objections are to the corrupted state of it.

But it's always useful to be reminded about the potential ways that reform can be effected using aspects of the institution, and also, the ways that privilege can be harnessed to dismantle itself. Having said that.. well, not that struggle is free of sacrifice, but something about the idea of starting a career for the purposes of sabotage seems like something a lot of people don't have access to or can't risk. I guess I feel that framing the means and responsibility for dismantling privilege as being in the hands of the privileged, or at least, per Theophile's link, those who have a full and empathetic (if not sympathetic) understanding of the finance industry -- if that is indeed a fair assessment -- feels structurally iffy.

But these are just first impressions; I'll keep an eye out for that book to read more.
posted by Drexen at 5:27 AM on January 20, 2015 [3 favorites]

But coming back to the question: is it useful? What all this system deals with is the exchange and growth of real resources. We can’t see that for what it is when it becomes abstracted from this basic reality, so a ‘debt instrument’ becomes a way to abstract from the exchange of the physical ecological movement of resources. But to what extent can you abstract from that to a kind of finance that doesn’t have any real world anchors?

My opinion is that the problem with finance comes from an even more fundamental problem with markets.

On the one hand, markets can work as a great way to signal which stuff should get produced in order to maximize utility/happiness. However, they only work that way if all consumers have more-or-less the same amount of money; as soon as one person can pay a million dollars for a Faberge egg and most people can't afford one dollar for a hard-boiled egg, the signals get massively distorted and markets produce the wrong stuff.

On the other hand, markets can work as a great way to encourage people to make stuff that people want, via the profit motive. However, the profit motive works best when it dangles the possibility that you might become the guy who can afford the million-dollar Faberge egg.

So the purposes of markets from an economist's point of view are two things that they can't do at the same time: Figure out what mix of production would make the most people most happy, and utilize the promise of inequality to get there. Those two things can't happen at the same time.

The problems with the finance industry - the only real problem with it being the inequality it produces - is just an especially obvious and abstracted part of the profit motive in markets. I'm not sure how to solve that problem.
posted by clawsoon at 8:02 AM on January 20, 2015 [2 favorites]

Really interesting post, thanks. As a serious lefty who works in finance, this is something I take a lot of interest in and I think this will lead down a bit of a rabbit hole. I'm printing off these articles to read when I get home tonight, thanks!
posted by triggerfinger at 9:50 AM on January 20, 2015 [1 favorite]