THIS ISSUE <16.1contents.html> ALL ISSUES
TALK BACK MUSE
IATH
------------------------------------------------------------------------
PMC Logo
Economy of Faith
*Andrew Saldino <16.1bios.html#saldino.bio> *
/Clemson University /
asaldin@clemson.edu
© <#copyright> 2005 Andrew Saldino.
All rights reserved.
------------------------------------------------------------------------
Review of:
Mark C. Taylor. Confidence Games: Money and Markets in a World
Without Redemption. Chicago: U of Chicago P, 2004.
1. In Confidence Games: Money and Markets in a World Without
Redemption, Mark C. Taylor turns his attention to the topic of
money and markets in order to shed light on what are undoubtedly
among the most important and complex structures of the world in
which we live. For, whatever else one understands, one is missing
a crucial piece of the puzzle if one does not understand how money
operates in the global economy. Taylor's book represents an
extraordinary attempt to do just that and, in the process, reminds
its readers that no one book, no matter how smart, can put all the
pieces of this puzzle together. For in its attempt to explain the
profound theoretical complexities of financial marketplace, this
book glosses over real issues of power that are fundamental to
understanding the causes and effects of the ways that money get
circulated in our world.
2. In his preface, Taylor suggests that this book has its origin in
two events: the suspension of the gold standard by Nixon in 1971
and the stock market crash of 1987. The first event occurred
without Taylor's knowledge while he was abroad in Denmark and left
him bewildered when he converted his small stipend into Danish
kroner and received $200 less than he had the previous semester.
"Where did the money go," he wondered, trying to process this
first experience of money's "virtuality." Regarding the second
event, Taylor recounts a conversation with his son, Aaron, in
October 1987:
"You know," I said, "the past few days have been pretty amazing."
Aaron, who was fourteen at the time, asked, "Why, what's going
on?"
"The stock market has crashed and billions and billions of
dollars have vanished."
"Really? Where's the money go?"
Once again, I had no answer. But by this time, I had come to
suspect that the issue was not merely a matter of economics. (xv)
And a matter of mere economics it is not. Taylor spends the next
300 pages unpacking an entire history and philosophy of culture
that is astounding in both its scope and depth. In taking account
of this project, Taylor suggests that it "represents the
culmination of an argument I have been developing for more than
three decades" (xvi). And for those familiar with the richness of
Taylor's work during that period, that alone is reason enough to
give this book some attention. While many elements of Taylor's
previous work are in evidence here, Confidence Games does mark a
culmination in his attempt to develop a philosophy of culture
consistent with the complexity of our world.
3. In summarizing the goals of this book in a subsequent interview,
Taylor says:
I have three major objectives in this book. First, to explain
how art displaces religion and then markets and finance
displace art as the expression of spiritual striving during
the past two centuries; second, to examine the
interrelationship between postmodern philosophy and art on the
one hand and finance capitalism on the other hand; third, to
develop a model of global financial markets as complex
adaptive systems. In the course of this analysis, the
intricate interrelation of neo-liberal economics,
neo-conservative politics and neo-fundamentalist religion
becomes clear. (Taylor, Interview)
In seeking to explain the development of the global financial
marketplace and its relationship to culture, Taylor has set an
enormous task for himself. How well does he succeed in
accomplishing these goals? Well, sometimes Taylor's broad
historical arguments are persuasive, and other times they seem
strained. Consider, for instance, Talyor's argument that the last
two centuries have witnessed a broad transition from religion to
art to the market as the preeminent locus of spiritual meaning in
our culture. Certainly many other genealogies could be constructed
to account for the rise to prominence of global capital, and I
suspect that this history records the development of Taylor's own
thinking over the last thirty years, as it has moved from
philosophy of religion to art and now into broader cultural
issues, as much as it accurately describes the transitions in
Western culture. However, while the exact genealogy that Taylor
traces may not be convincing (is art necessarily the middle term
between religion and money?), the more important point that there
has been a transition from God to money as the foundational
principle of Western society is almost beyond dispute. This
crucial idea provides all of the historical support that Taylor
needs for underscoring the importance of markets in the
contemporary world.
4. Up until the Protestant Reformation, Taylor notes, the Church had
a strong aversion to market activity (but not to money!), based
on, among other things, the prohibitions of taking interest found
in the Bible. Without interest the expansive power of a market
economy is highly curtailed. Luther, while breaking from the
Church, affirmed the prohibition of collecting interest as an
element of his basic disdain for worldly activity. Indeed, as
Taylor notes, "for Luther the greatest sin of the Catholic Church
was the commodification of religion" (78). All this changes with
Calvin's view of economic success as a sign of an omnipotent God's
blessing and his subsequent acceptance of collecting interest as a
vehicle of this success:
By emphasizing God's omnipotence so strongly, Calvin
inadvertently collapses transcendence into immanence. If all
acts and events are ultimately the result of God's providence,
divine and human wills are finally indistinguishable even if
they are not precisely identical. No longer imposed from
without, divine purpose now emerges within the play of worldly
events. With this aestheticization of creation and the
immanentization of purpose, the way is prepared for Scottish
moral philosophy and the birth of modern political economy. (84)
The fascinating point that Taylor makes in tracing this history is
that the Smithian metaphor of the "invisible hand," which comes to
play so central a role in modern economic theory, was originally a
theological metaphor derived from Calvin's belief in God's
workings in the world: "God's hand is not, of course, always
visible; on the contrary, since God's plan is 'secret,' 'true
causes of events are hidden to us," Taylor writes, quoting Calvin
(84). And given the prominence of Calvinism within eighteenth
century Scotland, Taylor's insinuation that the centrality of the
"invisible hand" to Smith's economic theory has its roots in
Calvinism is both compelling and important.
5. In connection with this history, Taylor unfolds two related
histories: that of money and representation. Taylor has proven
himself an expert in the philosophical issues of representation,
and if his treatment of these issues is a bit loose here, it is
only because he has a bigger agenda in this work. Both money and
representation, Taylor points out, have become increasingly
abstract or "spectral," and when these histories are combined with
the theological history outlined above, one gets a real sense of
the direction of the book's argument:
As one moves from exchanging goods through exchange mediated
by representational money (e.g., metal and paper) to spectral
currencies, which are completely immaterial, there is a shift
from immanence (actual things) through transcendence
(referential signs) to relational signifiers traded on virtual
networks, which are neither immanent nor transcendent. . .
This trajectory initially seems to be characterized by
progressive abstraction and dematerialization. Industrial and
information technologies transform life by creating abstract
economic processes and dematerializing financial instruments.
Throughout much of the twentieth century, art follows a
parallel course: as art becomes more abstract and
progressively dematerializes, it becomes further and further
removed from the everyday world. The aesthetic equivalent of
religious transcendence is the autonomy of the work of art.
This autonomy, we have seen, is expressed in the
self-referentiality of /l'oeuvre d'art,/ which mirrors the
self-reflexivity of capital. At the moment when abstraction
seems complete, however, everything changes. Just as the
transcendence of God reaches a tipping point at which it
inverts itself and becomes radical immanence, so artistic
abstraction eventually reverses itself and reengages the
world. (117-18)
When artistic abstraction reengages with the world, it does so in
the form of an increasingly abstract money whose value has moved
from the referential to the relational. This lack of
referentiality, latent in the history of money itself, becomes
full blown with two crucial policy shifts in the 1970's: the
aforementioned removal of the gold standard in 1971 and the
Federal Reserve Board's 1979 decision to let currencies "float" in
relation to one another. With these two moves, the dollar became
fundamentally freed from external control and was allowed to
regulate itself through the working of the market's invisible
hand, in which absolute faith was required. These principles
remain with us, regulating not only commodity markets (as in
Smith) but financial markets as well, thus instantiating a faith
commitment in the efficacy of this invisible hand at the core of
society's economic organization. The religious dimension of this
transformation is not lost on Taylor. Stripping away of money's
ultimate referentiality signifies an economic "death of God,"
although not an annihilation of God, if, like Nietzsche, one
thinks of God in terms of the absolute foundation that insures
social order. "In retrospect," Taylor concludes, "it is clear that
God did not simply disappear, but was reborn as the market" (6).
6. Increasingly unregulated financial markets in the 1980's then gave
rise to new ways of gambling on the market through stocks,
options, futures, and swaps, all of which became highly leveraged
and further and further removed from the material economy. "These
markets," Taylor writes in specific reference to derivative
markets, index futures, and index options, "are bets on bets on
bets, which seem to have little or nothing to do with the value of
the underlying assets on which they are based" (180). As financial
markets become increasingly spectral or virtual during this
period, so our economy has become as postmodern as our philosophy
and our art. Taylor here compares Wall Street to Las Vegas,
insisting that "one cannot understand Wall Street in the 1970's
and 1980's if one does not understand Las Vegas" (8). Wall
Street's postmodern economy, while increasingly distinct from the
material economy it financially supports, and upon which it
depends, is as real and surreal as the architecture, gambling, and
culture on the Strip in Vegas.
7. If the crisis in financial referentiality mirrors the crisis of
representation in philosophy, then Derrida and other postmodern
theorists become crucial to understanding the postmodern economy,
according to Taylor. What Derrida has to teach here is twofold:
that the pure relationality of signs (and thus money and markets)
in a world without final referents renders the desire for a
completely stable financial system a chimera, and that this desire
for foundation in economic theory is just another manifestation of
a metaphysics of presence that has determined the tradition of
Western thought. This presence is found in a wise, benevolent
"invisible hand" that guides the flow of capital through the
system. That the invisible hand is always pushing the market back
towards equilibrium is a fundamental tenet of modern economic
theory. This model claims to work without referentiality, that is,
as a system of pure relationality in which entirely
self-interested participants /unconsciously/ produce the most
efficient production and distribution of resources possible. That
this system of supposedly pure relationality continually moves
towards success, in terms of a stable equilibrium that promotes
economic growth, is the final referent of the system itself. The
efficiency of the market has, in effect, become the final
referent, an invisible God making sense of a complex economic
universe. The intelligence and goodness of the "invisible hand" is
the guiding metaphysical presupposition of the system, the
onto-theo-logical assumption that grounds modern economic theory.
8. The danger of this philosophical assumption is revealed in tracing
the history of the "efficient market hypothesis." This hypothesis
treats the market as a complex but calculable entity that always
tends towards equilibrium. Taylor traces the potentially
disastrous results of this assumption by looking at the rise and
fall of Long Term Capital Management (LTCM). Created in 1994 by
financial analysts intent on minimizing investment risk, LTCM "put
into practice the mathematical theories financial economists had
developed. Their investment strategy rested on an unwavering faith
in the efficient market hypothesis" (257). While these models
enjoyed great success in the first few years, increasing
competition forced the company to leverage itself more and more in
order to continue to profit. LTCM, like many investors and
institutions in the 80's and 90's, utilized the liberalization of
stock and bond markets to make "bets on bets on bets." And when
the Russian ruble collapsed in August 1997, it set off a global
financial crisis revealing both the interconnectedness of our
economies and the lack of stability in a currency system that is
purely relational. At the very time when the economists upon whose
theories LTCM were built were receiving the Noble Prize in
Economics for models that were used to minimize risk in
calculating value, LTCM was on the verge of requiring a $3.625
billion bailout to avoid a global financial meltdown. This bailout
effectively ended LTCM and, for many, the viability the efficient
market hypothesis. Taylor quotes Lawrence Sumners (former
Secretary of the Treasury under Clinton and current President of
Harvard) in support of this position: "The efficient market
hypothesis is the most remarkable error in the history of economic
history" (276).
9. If these models were so bad, why did they gain such credence?
Taylor offers this explanation:
The answer, it seems, is that people from universities and
Wall Street to Main Street wanted to believe in the models.
Paradoxically, these economic formulas and models were
symptoms of the very desires and emotions they were designed
to eliminate. Rationality, order, and predictability become
all the more desirable in a world that appears to be
increasingly irrational, chaotic, and unpredictable. The
greater the uncertainty and irrationality of the real world,
the greater the desire to believe in an ideal world where
investors are rational and markets are efficient. (276)
Taylor synthesizes this analysis by highlighting its religious
dimension, one that often remained unconscious to those in its grip.
In the final analysis, this dream is a religious vision in
which the market is a reasonable God providentially guiding
the world to the Promised Land where redemption finally
becomes possible. (301)
The mantra here is that "models matter" (xvi), and in a world
where relationality has come to replace referentiality, a model
that privileges stability over complexity is bound for failure.
And given the profound economic interdependence of our world, the
consequences of these potential failures become more and more
catastrophic. Taylor's solution? First, a philosophical
recognition of the reality that we inhabit:
reality is not an aggregate of separate entities, individuals,
or monads that are externally and contingently related; it is
an emerging web consisting of multiple networks in which
everything and everyone come into being and develop through
ongoing interrelations. Within these webs, subjects and
objects are not separate from each other but coemerge and
coevolve. (277)
10. Next, we need an awareness of how the economy is a manifestation
of this complex adaptive reality:
In contrast to the efficient market hypothesis, which
presupposes negative feedback and automatically corrects
imbalances and restores equilibrium, complex adaptive systems
also involve positive feedback, which can increase imbalances
and can push markets far from equilibrium where unpredictable
changes occur. Rather than occasional disruptions caused by
exogenous forces, intermittent instability and discontinuity
are inherent features of complex networks. Unlike isolated
molecules, investors are interrelated agents whose interacting
expectations make volatility unavoidable but not completely
incomprehensible. When the economy is understood as a complex
adaptive system, it appears to be a relational web in which
order and disorder emerge within and are not imposed from
without. (12)
Accepting the consequences of a deep relationality--in all
dimensions of life--stands at the core of Taylor's vision. "A
complex time needs a complex vision" (320), Taylor deadpans on the
next to last page of this work.
11. Concluding with religion, which he claims never really to have
left, Taylor contextualizes the rise of global religious
fundamentalism as both a reaction to the increasing insecurity of
our shrinking world and a structural denial of that very
insecurity. The simultaneous rise of the religious right in the
United States and the emergence of the postmodern economy are not
coincidental for Taylor. The rise of religious fundamentalism
expresses the need for the certainty and stability that are being
challenged by the growth of a destabilizing global economy. And
yet, Taylor ironically notes,
outside the U.S, religious fundamentalism often provides a way
to resist the expansion of global capitalism and American
power, while within the United States, religious
fundamentalism tends to legitimize market fundamentalism and
sanctify American power. (306)
This is as close to an analysis of the political economy in terms
of power that Taylor ever comes in this book. At another point he
notes that the Federal Reserve Board's 1979 decision to let
currencies float, and the supply-side policies that followed with
Reagan, "obviously favored the wealthy individuals and
corporations and substantial financial assets" (134). But this
line of analysis is not pursued.
12. In fact, Taylor explicitly distances himself from the Marxist
theorists of global capital. In one of the most provocative
passages of the book, Taylor suggests that
cultural critics like Fredric Jameson, Antonio Negri, and
Michael Hardt have argued that postmodernism is a symptom of
so-called late capitalism. . . .[They] share a Marxist
perspective in which cultural processes can always be reduced
to a supposedly material economic basis. . . [T]hese critics
do not analyze the distinctive characteristics of the new
network economy. . . Their theoretical perspective rests on
industrial models that are as outdated as the neo-Marxist
ideology they promote. . . [T]hese critics do not adequately
explore the ways in which culture--art, philosophy, and
especially religion--shapes economic realities. (29)
While there may some basis to the charge that these theorists read
culture too much in terms of its "material economic basis," the
overwhelming political neutrality that of Taylor's text seems to
perpetrate a great injustice by failing to highlight the
inequalities of the complex system that he describes. Power is not
merely incidental to the system he describes, and yet relations of
power are basically invisible in this text, causing this reviewer
to wonder whether a description of the world that makes no
reference to the complex ways in which power functions to produce
profound material and spiritual suffering can be an adequate
description of that world.
13. This book will not be all things to all people; that I feel
compelled to make such a statement underscores the real value of
the text. Read along with the very theorists that he dismisses,
Taylor's book presents an utterly remarkable description of the
postmodern economy that "grounds" our postmodern culture. As such,
it is a book worth reading.
/ Department of Philosophy and Religion
Clemson University
asaldin@clemson.edu /
------------------------------------------------------------------------
Talk Back
------------------------------------------------------------------------
COPYRIGHT (c) 2005 BY Andrew Saldino. READERS MAY USE PORTIONS OF
THIS WORK IN ACCORDANCE WITH THE FAIR USE PROVISIONS OF U.S.
COPYRIGHT LAW. IN ADDITION, SUBSCRIBERS AND MEMBERS OF SUBSCRIBED
INSTITUTIONS MAY USE THE ENTIRE WORK FOR ANY INTERNAL
NONCOMMERCIAL PURPOSE BUT, OTHER THAN ONE COPY SENT BY EMAIL,
PRINT OR FAX TO ONE PERSON AT ANOTHER LOCATION FOR THAT
INDIVIDUAL'S PERSONAL USE, DISTRIBUTION OF THIS ARTICLE OUTSIDE OF
A SUBSCRIBED INSTITUTION WITHOUT EXPRESS WRITTEN PERMISSION FROM
EITHER THE AUTHOR OR THE JOHNS HOPKINS UNIVERSITY PRESS IS
EXPRESSLY FORBIDDEN.
THIS ARTICLE AND OTHER CONTENTS OF THIS ISSUE ARE AVAILABLE FREE
OF CHARGE UNTIL RELEASE OF THE NEXT ISSUE. A TEXT-ONLY ARCHIVE
OF THE JOURNAL IS
ALSO AVAILABLE FREE OF CHARGE. FOR FULL HYPERTEXT ACCESS TO BACK
ISSUES, SEARCH UTILITIES, AND OTHER VALUABLE FEATURES, YOU OR YOUR
INSTITUTION MAY SUBSCRIBE TO PROJECT MUSE ,
THE ON-LINE JOURNALS PROJECT OF THE JOHNS HOPKINS UNIVERSITY
PRESS.
------------------------------------------------------------------------
Works Cited
Taylor, Mark C. Interview with Roy Christopher.
FrontWheelDrive.com. 31 March 2005
.
LINKS: Non-Graphical Users See Top of Page
/Last Modified: Wednesday, 09-Nov-2005 11:55:31 EST/