Pixley harcourt (eds ) financial crises and the nature of capitalist money; mutual developments from the work of geoffrey ingham (2013)

Financial Crises and the Nature of Capitalist Money Mutual Developments from the Work of Geoffrey Ingham Edited by Jocelyn Pixley Honorary Professor in Sociology, Macquarie University

Financial Crises and the Nature of Capitalist Money

Financial Crises

and the Nature of

Capitalist Money

Mutual Developments from

the Work of Geoffrey Ingham

Edited by

Jocelyn Pixley

Honorary Professor in Sociology, Macquarie University

Senior Visiting Fellow, IRRC, Faculty of the Australian School of Business,

University of New South Wales

Professorial Research Fellow, Global Policy Institute, London Metropolitan University

and

G C Harcourt

Visiting Professorial Fellow in the School of Economics, Faculty of the Australian School of Business, University of New South Wales

Emeritus Reader in the History of Economic Theory, Cambridge University

Professor Emeritus, University of Adelaide

Editorial, introduction and selection matter © Jocelyn Pixley and

Geoffrey Harcourt 2013

Individual chapters © Contributors 2013

Foreword © Richard Swedberg 2013

All rights reserved No reproduction, copy or transmission of this

publication may be made without written permission

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Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages

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in accordance with the Copyright, Designs and Patents Act 1988

First published 2013 by

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Contents

J F Pixley and G C Harcourt

1 Requirements of a Philosophy of Money and Finance 19

7 Reforming Money to Exit the Crisis: Examples of

Non-capitalist Monetary Systems in Theory and Practice 124

vi Contents

11 Economic Policies of the New Consensus

Philip Arestis

12 A Socioeconomic Systems Model of the Global

Financial Crisis of 2007+: Power, Innovation, Ideology

Tom R Burns, Alberto Martinelli and Philippe DeVille

13 Credit Money, Fiat Money and Currency Pyramids:

Reflections on the Financial Crisis and Sovereign Debt 248

13 2 Marxian categories for the analysis of money, credit

Acknowledgements

This book is an edited collection based on a definite idea As the editors,

we have been pleased and most interested in the serious intent of each author to this task The chapters give great insights into very important aspects for joint ventures between sociology and economics on the nature of capitalist money We thank them very much; and for the care with which they responded to our questions As well, we are grateful for the suggestions of the anonymous referees and for the team at Palgrave/Macmillan, notably our editor Taiba Baitool and Gemma Shields and our copy-editor Nick Brock

The authors and the publishers would also like to thank Presses Universitaires de France for permission to reproduce the following chapter in English: André ORLEAN, « La sociologie économique de la monnaie », in Traité de sociologie économique edited by Philippe Steiner and François Vatin, © PUF, 2009

J F Pixley and G C Harcourt

Sydney, May 2013.

Foreword

The current financial crisis has placed two items firmly on the agenda for today’s social science: a better understanding of capitalism and a better understanding of finance The work of Geoffrey Ingham con-tains interesting and helpful views on both of these topics, as do the essays in this volume

As its title indicates, one of Ingham’s very first books – Capitalism Divided? The City and Industry in British Social Development (1984) – was devoted to capitalism And so is his latest one, Capitalism (2008) As

readers of Ingham’s many books and articles know, he has also out his career been fascinated by the role of money, most importantly

through-in The Nature of Money (2004) but also through-in the edited volume Concepts of Money (2005) What makes Ingham’s work even more relevant for

today’s concerns is that the key novelty in his analysis of money – the

idea of credit-money – is also central to his view of what makes capitalism

into such a dynamic and volatile economic system

To get a full view of Ingham’s theory of capitalism, and properly understand its originality, it is helpful to take a quick look at its prede-cessors and competitors This will also help to explain why he decided

to cast his own theory of capitalism in the way he did

As we know, the theory of capitalism was created by Marx, most

importantly in Capital (1867) Two aspects of Marx’s theory especially

concern us here, namely that he saw capitalism as a system, and that this system has a central mechanism that explains how it works To Marx, and also to Ingham, capitalism is not just a collection of institu-

tions but a distinct socioeconomic system, that is, a whole where the

parts interact and from which you can also read out what will happen What drives the capitalist system according to Marx, is the continuous appropriation of surplus labour in the form of wage labour

While Marx was primarily interested in the production of surplus value in the factories, he also devoted quite a bit of attention to finance and viewed it as integral part of the capitalist system As opposed to modern theoreticians of finance, Marx also saw financial crashes and scandals as natural to and inherent in capitalism

After Marx’s death in 1883, it was gradually realized that there was something wrong with his theory of capitalism The working class was not becoming increasingly poor and radicalized; the first major

x Foreword

revolution did not take place in the most developed capitalist country

at the time, but in Russia; and so on Ever since around 1900, attempts have been made to replace the original Marxian theory of capitalism

with an equally strong and analytically powerful new theory of

capital-ism – a theory of capitalcapital-ism that can explain what is happening in ern capitalist societies with better accuracy than the original Marxian theory This is also where Ingham’s work comes into the picture.The first major attempts to recast Marx’s theory were made by Max Weber and his colleague Werner Sombart Besides introducing the term capitalism into academic discourse, Sombart contributed a detailed his-torical account of the history of capitalism It is hard to link Sombart to one specific theory of capitalism; he entertained a number of different approaches How his view of capitalism developed over time can be fol-

mod-lowed through the successive editions of Modern Capitalism (1902–27).

Max Weber, whose mind was more analytical than that of Sombart, suggested that there is an important cultural dimension to capitalism, which has not only played a key role in its origin (religion) but also plays

a key role in its current and most modern form (rationality) In such works

as The Protestant Ethic and the Spirit of Capitalism (1904–05) and Economy and Society (1921–22), Weber showed how modern workers and capitalists

are part of a cultural-economic system that makes them work incessantly and reinvest the profits Modern rational capitalism is not only driven by

a search for profit, but also by a specific view of life and lifestyle

Another important attempt to recast Marx’s theory of capitalism and replace it with a new one was made by Joseph Schumpeter His most

relevant works in this context are The Theory of Economic Development (1911) and Capitalism, Socialism, and Democracy (1942) Schumpeter sug-

gested his very own central mechanism and driving force in capitalism: the entrepreneur By creating new combinations, the entrepreneur invests capitalism with its characteristic dynamic The entrepreneur is full of ideas and knows how to push these through, but he lacks eco-nomic resources and these are supplied by the banker

The role of finance in Schumpeter’s scheme is the following Entrepreneurs do not have capital; and for this they have to turn to a banker The banker is no entrepreneur and even though Schumpeter acknowledged the existence of what he called wildcat banking, he restricted the role of the entrepreneur to manufacturing

Besides Weber and Schumpeter, Ingham includes Keynes in his sis of post-Marxian theories of capitalism Keynes, as we know, operated within the tradition of mainstream economics which he also reshaped

analy-in many ways His analysis of fanaly-inance, for example, is still extremely

Foreword xi

useful Like Weber and Schumpeter, Keynes was afraid of capitalism stagnating and in this way coming to an end His own remedy for this,

as outlined in The General Theory (1936), was increased state

expendi-tures These would not only translate into increased aggregate demand through the multiplier effect; they would also encourage businessmen

to invest and set their ‘animal spirits’ free

The last analyst who deserves a mention in this context – although Ingham rarely refers to him – is Karl Polanyi According to Polanyi, the key mechanism of capitalism consists of two interacting forces One of these is the constant unleashing of capitalist markets; the other, equally constant, is the resistance that this unleashing of capitalism leads to Polanyi’s term for this mechanism is the double movement

The last major attempts to produce a new theory of modern ism that could replace Marx’s original theory occurred in the 1940s

capital-which saw the publication of Schumpeter’s Capitalism, Socialism, and Democracy (1942) and Polanyi’s The Great Transformation (1944) Since

those days the most important attempt to construct a new theory of capitalism has been made by contributors to an approach known as

‘varieties of capitalism’ – and by Ingham While the former have duced many interesting studies of capitalism in individual countries,

pro-they tend not to see capitalism as a system nor to have a central

mecha-nism The value of their work is primarily empirical; it contains many helpful and interesting analyses of institutions

Ingham, in contrast, is much closer to the classics He insists on the systemic nature of capitalism; and he has also advanced his own candi-

date for what constitutes its central mechanism This is credit-money or

the money-creating capacity of debt To cite two characteristic tions from his work: ‘capitalism’s distinctive structural character is to be

formula-found in the production of credit-money’ (The Nature of Money, p 13);

and ‘capitalism’s dynamic engine [is] the creation of credit-money in

the money market’ (Capitalism, p 80) According to Ingham, it was also

the capacity to produce credit-money that created modern capitalism

He is, however, more concerned in his work with understanding temporary capitalism, than in presenting a full-scale theory of the his-torical origins of capitalism

con-So how does Ingham’s theory of credit-money help us to better stand today’s capitalism and the current financial crisis? As to contem-porary capitalism, it is clear that finance plays not only an important

under-role in modern capitalism but also an increasingly important one

Current works on financialization have established this fact beyond doubt It is also obvious that credit is at the heart of modern finance

xii Foreword

But it is not equally obvious that the factors that the other

theoreti-cians of capitalism singled out in their works are not also important for

an understanding of modern capitalism While Marx may have been

wrong about surplus labour, his idea of the accumulation of capital

being a central mechanism is less easy to dismiss The same can be said

of what Schumpeter has to say about the entrepreneur; what Weber has

to say about cultural factors; Polanyi about the resistance to capitalism;

and Keynes about the role of state expenditures to keep capitalism going

Ingham’s focus on the role of credit-money for explaining the current

financial crisis rather than on capitalism in general is a different matter

It is clear that finance is at the very heart of the current crisis of

capital-ism and also the capacity of modern financial instruments to generate

a flow of new money It is true that finance operates in a different way

today than in the days when it was dominated by deposit-taking banks

Nonetheless, Ingham’s theory points in the right direction

What ultimately makes the work of Geoffrey Ingham so relevant and

suggestive today – and also the essays in this volume – is perhaps that

he asks all the right kind of questions What is the nature of modern

capitalism and exactly how does this system work? What is the role of

money and credit in this system – we know they are central, but exactly

how and in what way do they operate, and with what consequences?

Notes on Contributors

Philip Arestis is University Director of Research, Cambridge Centre for

Economics and Public Policy, Department of Land Economy, University of Cambridge, UK; Professor of Economics, Department of Applied Economics

V, Universidad del País Vasco, Spain; Distinguished Adjunct Professor of Economics, Department of Economics, University of Utah, USA; Research Associate, Levy Economics Institute, New York, USA; Visiting Professor, Leeds Business School, University of Leeds, UK; Professorial Research Associate, Department of Finance and Management Studies, School of Oriental and African Studies (SOAS), University of London, UK; Philip is the holder of the British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies (2009–10) Served (2009–10) as economics consultant on the Central Asia Regional Economic Cooperation (CAREC) programme, under the auspices of the Asian Development Bank (ADB) Philip also served (2005–13) as Chief Academic Adviser to the UK Government Economic Service (GES) on Professional Developments in Economics Philip has published as sole author or editor, as well as co-author and co-editor, a number of books, contributed in the form of invited chapters to numerous books, produced research reports for research institutes, and has published widely in academic journals Philip is, and has been, on the editorial board of a number of economics journals

Tom R Burns is Professor Emeritus at Uppsala University, Sweden,

Visiting Scholar, Woods Institute for the Environment, Stanford University and Senior Research Associate, Lisbon University Institute (ISCTE/CIES) He received a BS in Physics and an MA and Ph.D in Sociology, all from Stanford University He has published more than 15 books and

150 articles in the areas of governance and politics, environment and technology, administration and policy making He has also published extensively on social theory and methodology, with a focus on the new institutionalism, the sociological theory of human interaction and games, theories of social systems and sociocultural evolution

Victoria Chick is Emeritus Professor of Economics at University College

London She has written books and articles mainly in three fields: money and banking, macroeconomics (especially the economics of J.M Keynes), and the methodology of economics She has had visiting positions at

xiv Notes on Contributors

many universities in Europe and America, has served on the Council of the Royal Economic Society and the editorial boards of several journals and was co-founder of the Post-Keynesian Economics Study Group

Philippe DeVille is Emeritus Professor of Economics at the Catholic

University of Louvain (UCL) He received his Ph.D in Economics at Stanford University, California He is a member of the Institute for Research

on Economic and Social Issues of UCL DeVille has published articles in the fields of macroeconomics, systems analysis applied to socio-economic issues and critical analysis of capitalism His long-term collaboration with Tom R Burns resulted in numerous books and articles, among others ‘The

Three Faces of the Coin’ (2003), Dynamic Systems Theory’ (2007), Man, Decision, Society (with Burns and T Baumgartner, 1985) and The Shaping of Socio-economic Systems (with Burns and T Baumgartner, 1986).

Sheila C Dow is Emeritus Professor of Economics at the University of

Stirling in Scotland and Adjunct Professor of Economics at the University

of Victoria in Canada Throughout her career she has worked on the theory of money and banking and the history and methodology of eco-nomic thought, both informing and informed by her work in public service in the UK and Canada (most recently as a special advisor on monetary policy to the UK Treasury Select Committee) Her latest book

is Foundations for New Economic Thinking: A Collection of Essays (Palgrave

Macmillan 2012) She is co-convenor of SCEME, co-editor of the WEA’s

online journal, Economic Thought, and a member of the Center on

Capitalism and Society Past positions include being Chair of the International Network for Economic Method and co-Chair of the Post Keynesian Economics Study Group

Luca Fantacci teaches international economics and the history of

finan-cial crises at Bocconi University in Milan His research focuses on money and credit in historical perspective Inspired by Keynes’s ideas, Fantacci

is working on clearing schemes, both at the European and the local els, aimed at facilitating what the crisis has shown to be systemically obstructed: the payment of debts and the circulation of money He is the

lev-co-editor of Money and Calculation (Palgrave Macmillan, 2010) and the author, together with Massimo Amato, of The End of Finance (2011) and Saving the Market from Capitalism (2013).

Charles Goodhart, CBE, FBA is Emeritus Professor of Banking and

Finance with the Financial Markets Group at the London School of Economics, having previously, from 1987 to 2005, been its Deputy Director Until his retirement in 2002, he had been the Norman Sosnow

Notes on Contributors xv

Professor of Banking and Finance at LSE since 1985 Before then, he had worked at the Bank of England for 17 years as a monetary adviser, becom-ing a Chief Adviser in 1980 In 1997 he was appointed one of the outside independent members of the Bank of England’s new Monetary Policy Committee until May 2000 Earlier he had taught at Cambridge and LSE Besides numerous articles, he has written a couple of books on monetary

history; a graduate monetary textbook, Money, Information and Uncertainty (2nd edn, 1989); two collections of papers on monetary policy, Monetary Theory and Practice (1984) and The Central Bank and The Financial System

(1995); and a number of books and articles on financial stability, on which subject he was Adviser to the Governor of the Bank of England, 2002–04, and numerous other studies relating to financial markets and

to monetary policy and history His latest books include The Basel Committee on Banking Supervision: A History of the Early Years, 1974–1997 (2011), and The Regulatory Response to the Financial Crisis (2009).

G.C Harcourt is an Emeritus Reader in the History of Economic Theory,

Cambridge (1998), Professor Emeritus, Adelaide (1988) and Visiting Professorial Fellow, UNSW (2010–13) He is the author/editor of 29 books and over 350 articles, chapters in books, and reviews

M G (Mark) Hayes is Fellow and Director of Studies in Economics at

Robinson College, Cambridge He is an economist with research ests in Keynes and in the co-operative movement, including Fair Trade with which he was formerly involved as a practitioner, after an early career as an investment banker His primary research is on and related

inter-to Keynes’s General Theory, and he is Secretary of the Post-Keynesian Economics Study Group (PKSG) His major book is The Economics of Keynes: A New Guide to The General Theory (2006).

Geoffrey Ingham is a Life Fellow of Christ’s College, University of

Cambridge where he has taught sociology and political economy for forty

years His recent publications include Capitalism (2011) and ‘O sacred ger of pernicious gold!’, European Journal of Sociology, LIV(1) (2013).

hun-Bob Jessop is Distinguished Professor of Sociology and Co-Director of

the Cultural Political Economy Research Centre at Lancaster University

He is best known for his work in critical political economy, state theory, the analysis of welfare state restructuring, and contributions to the phi-losophy of social science He had a three-year ESRC Professorial Fellowship

to study crises of crisis-management in the North Atlantic Financial

Crisis In 2013 he co-authoredTowards a Cultural Political Economy: Putting Culture in its Place in Political Economy (with Ngai-Ling Sum).

xvi Notes on Contributors

Alberto Martinelli received his Ph.D in Sociology from the University of

California, Berkeley He is currently Professor of Political Science and Sociology at the University of Milan and former Dean of the Faculty of Political and Social Sciences at the University of Milan He is former President of the International Sociological Association and is Vice-President

of Research for the International Social Science Council (ISSC) Among his

numerous publications are Transatlantic Divide: Comparing American and European Society (editor, 2007), Global Modernization: Rethinking the Project of Modernity (2005), La democrazia globale (2004), International Markets and Global Firms ( 1991), Economy and Society (with N.J Smelser, 1990), and New International Economy (with H Makler and N.J Smelser, 1982).

André Orléan is a French economist, working at the CNRS (Centre

National de la Recherche Scientifique) and the EHESS (Ecole des Hautes Etudes en Sciences Sociales) His main research domains are finance and money, analysed from a heterodox perspective His main publications are

La violence de la monnaie (2nd edn, 1984, written with Michel Aglietta), La monnaie entre violence et confiance (2002, written with Aglietta), Le pouvoir

de la finance (1999) and L’empire de la valeur (2011; to be published in

English in 2014) He is currently President of the French Association of Political Economy (Association Française d’Economie Politique, AFEP)

Jocelyn Pixley is an Honorary Professor in Sociology, Macquarie

University; Senior Visiting Fellow, Faculty of Business, University of NSW, Sydney, and Professorial Research Fellow, Global Policy Institute, London Metropolitan University An economic sociologist, her recent

publications include Emotions in Finance: Booms, Busts and Uncertainty

(2012), an edited collection with Routledge (2012), and articles on

uncertainty and central banks in Theory & Society, the Journal of Economics, the British Journal of Sociology and the American Journal of Economics and Sociology.

Socio-Malcolm Sawyer is Emeritus Professor of Economics, University of

Leeds, UK He is the lead co-ordinator for the EU-funded 8 million euro five-year project on Financialisation Economy Society and Sustainable Development (www.fessud.eu) He established and is managing editor

of the International Review of Applied Economics and the editor of the book series New Directions in Modern Economics He is also the author

and co-author of 12 books (the most recent with Philip Arestis on the

Economic and Monetary Union Macroeconomic Policies: Current Practices and Alternatives, forthcoming with Palgrave Macmillan) He has also

published over 100 papers in refereed journals on a wide range of topics and recently, including papers on fiscal policies, alternative monetary

Notes on Contributors xvii

policies, path dependency, public–private partnerships and ising labour supply and unemployment

conceptual-John Smithin is Professor of Economics in the Department of Economics

and the Schulich School of Business, York University, Toronto, Canada

He previously held teaching appointments at the University of Calgary and Lanchester Polytechnic (now Coventry University) in England In the academic year 1995/1996 he was elected Bye Fellow at Robinson College, Cambridge He holds a PhD and MA from McMaster University and BA (Hons) from the City of London Polytechnic (now London Metropolitan University) His research interests are in the fields of mon-etary theory, macroeconomic policy, and the philosophy of money and

finance He is the author of Essays in the Fundamental Theory of Monetary Economics and Macroeconomics (2013), Money, Enterprise and Income Distribution (2009), Controversies in Monetary Economics (2003, 1994), Macroeconomic Policy and the Future of Capitalism (1996), and Macroeconomics after Thatcher and Reagan (1990).

Richard Swedberg is Professor of Sociology at Cornell University His

two specialties are economic sociology and social theory

David M Woodruff is Senior Lecturer in Comparative Politics at the

London School of Economics and Political Science He is the author of

Money Unmade: Barter and the Fate of Russian Capitalism (1999) and

arti-cles on the political economy of money, trade, exchange rates, and legal institutions His present research concerns the intersection of ideas and institutions in the euro zone crisis

L Randall Wray is a Professor of Economics at the University of Missouri–

Kansas City and Senior Scholar at the Levy Economics Institute of New York His current research focuses on providing a critique of orthodox mon-etary theory and policy, and the development of an alternative approach

He also publishes extensively in the areas of full employment policy and, more generally, fiscal policy With Levy Institute President Dimitri B Papadimitriou, he is working to publish, or republish, the work of the late financial economist Hyman P Minsky, and is using Minsky’s approach to analyze the current global financial crisis Wray is one of the founders of the

Modern Money Theory approach Wray is the author of Money and Credit in Capitalist Economies (1990), Understanding Modern Money: The Key to Full Employment and Price Stability (1998) and Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems (2012) He is also co-editor of, and a contributor to, Money, Financial Instability, and Stabilization Policy (2006) and Keynes for the 21st Century: The Continuing Relevance of The General Theory (2008).

Introduction to Positive Trespassing

J F Pixley and G C Harcourt

This volume is a joint venture – a debate about the basics of a ogy and economics of money It is unique in being written by scholars from both disciplines who are committed to this task, and in start-ing from the highly original groundwork of Geoffrey Ingham’s writ-ings that prompted this mutual endeavour The volume takes a critical look at money’s institutions and shows that crises arise from money’s unresolved tensions It demonstrates the centrality of money to capi-talism and considers the implications of this dominating institution There is an examination of the further looming worries about the crisis since 2007, which has made this dialogue about the understandings of money particularly timely Both disciplines have far too much to offer

sociol-to remain in their present damaging standoff While we are thankful

to see it reducing, remnants are maintained by orthodox economic and sociological theorists who, in spite off all of the crises of the past 30 years, and many before these decades, still argue that money really does not matter, that it is just a mere commodity or symbol of other trends or that, at least in the long run, it is neutral We suggest that since money

is a promise, an understanding of this social relation must be a joint endeavour between economics and sociology

I Money in economics and sociology1

The near collapse of the payments system in 2008 created confusion and widespread recessions No one was less surprised than the theo-rists of credit money, although there were no grounds for smugness Theories of money as an institution and social relation are uncongenial

to the financial sector, which, if it resorts to theories at all, relies on an orthodoxy that denies the importance of money Yet it is the dominant

2 Financial Crises and the Nature of Capitalist Money

relation of modernity and certainly of capitalism That banks create money through lending with a state licence to do so is of no interest So, although the financial edifice was caught with no clothes on, a charade about money continues because banks control the social heartland, and, we later suggest, may have weakened the democracies

Disunity among scholars of money, economists and sociologists, along with economic historians and so on, has not helped the situation Combined with resistance from the sector, a democratic public sphere has not been informed by even barely adequate approaches to money for many years This is not for any lack of students of money making valiant efforts in the public sphere But without some overall unity in the plurality of analyses of money, of friendly debate between the dis-ciplines, the space for understanding only becomes more confined In contrast, we want to expand this theoretical space

As far as we are aware this is the first book to involve a number of the finest in economics and sociology in a shared debate about the nature

of money, and to do this by building on the work of a sociologist The volume is a work of mutual trespassing that takes up the question posed

by Geoffrey Ingham, the premier sociologist of money, who has made one of the most thought-provoking contributions to understanding money in recent times Since he achieved this by using the major think-ers on money from both disciplines to build his own theoretical foun-dation and approach, this volume is a direct response to his questions: Why must economics and sociology be so separate in debating money, when both disciplines are needed? In what ways can drawing on both expand understanding? We have taken it as a call to engage in ‘positive trespassing’, to use the bold phrase of the late Albert Hirschman, for the following reasons

There are many attempts to build bridges between the historically quite rigid separations of these disciplines Every move to encourage ways for sociology and economics to learn from each other is long over-due and entirely welcome Economic life needs broad analyses, and

‘anything goes’ or an exclusive defence of narrow orthodoxies on both sides may impede any such attempt Many economists are often ‘implic-

itly’ also sociologists, and vice versa, even if we show their disciplinary ways of thinking to be both desirable and necessary We hope that our collective volume is a major step in this endeavour, which, with its spe-cific focus on money, also has a public intent given the severity of the continuing crisis since 2007

The book takes up a specific theme of Ingham’s main scholarly aim, which also makes it different This is to discuss the nature of money

J F Pixley and G C Harcourt 3

from various positions, and to make its own contribution to placing the current troubles on well-considered and societal-level analytic foot-ings What everyone aims to explore is ‘the essentially social nature of money in the sense of a monetary space defined and circumscribed

by its social production and use’, as Ingham puts it.2 In this way, the book is timely and insightful for anyone interested in debates on the current crises

Our contributors offer original new work that shows, in ous ways, how much stronger the analytical framework is when there is

heterogene-a meeting of the two disciplines The kinds of understheterogene-andings of money can vary but, at their core, no one in this volume denies that money

is central to capitalism and to contemporary political and economic life Approaches to money can never reach ‘perfection’, so the move-ment is from less adequate accounts to more adequate ones The earlier theories of the principal economists and sociologists of money are not only essential because these works have been distorted or obscured in the meantime (Ingham 2011: 2) but also because they make it possible

to ask new questions

As early twentieth-century physicists remind us, most problems that require understanding can be seen in different ways From one angle …

‘only certain quite definite ways of asking questions make sense’ yet from another, one asks different questions (Heisenberg, cited in Calhoun 1995: 8) Therefore a dialogue between multiple theories that

pose different questions to the same problem cannot reach the single,

adequate theory but a range of more adequate accounts This idea is far from neoclassical economics that, first, pretends that the methods of nineteenth-century physics can be applied to the social as well as the natural world; that, second, depends on a bedrock ‘atom’ that never varies according to the position of the viewer who asks different ques-tions of the ‘atom’; and that, third, the ‘atom’ is the sole entry point Sociologists and economists dispute the atomised rational individual

as entry point, and instead ask questions of the institutions and social relations of money We should stress, before comparing the contri-butions, how different questions apply At the broadest level ‘money has a dual nature As social technology, it expands society’s “infra-structural power”; but this collective capacity can be appropriated by particular interests and used “despotically” as a means of domination’ (Ingham 2011: 67) One must, then, ask different questions of the two sides of money

To show how these different questions are applied to our theme, the chapters tell their own arguments, which are briefly compared below

4 Financial Crises and the Nature of Capitalist Money

John Smithin demonstrates that an interdisciplinary approach for a philosophy of money and finance has to combine four elements – social ontology, economic sociology, monetary macroeconomics and political economy This combination, as Smithin sees it, can allow a proper understanding of money and includes ethical and political dimensions Thus ‘social reality’ is constructed by asking different questions, and economic sociology demonstrates that this ‘reality’ cannot rely on ‘micro-foundations’ Moreover, heterodox approaches

to monetary macroeconomics need to start with sociological analyses

of the social institutions of money before moving into their more

‘technical’ field In this vein, Mark Hayes stresses that by combining the approaches of Keynes and Ingham, the nature of capitalist money

is understood as conflict-ridden Ingham applauds Keynes’s major interventions, yet emphasises that a monetary theory of production needs strengthening According to Hayes, Ingham’s innovation rests

on showing that uncertainty for individuals is not the source of the rate of interest but rather the rate emerges from struggles between debtors and creditors In a broad and bold approach, André Orléan not only starts from the premise that money is a social relation that

is best seen as a social force, but also, more extensively, argues this extraordinary collective, emotional and moral authority turns on monetary representations As an economist he gives a thoroughly sociological account, and derives emotions not from uncertainty in money, as Pixley (2004) following Keynes attempted, but rather from

a coherent approach to money sui generis.

Charles Goodhart explains how the uncertainty of expectations is frequently minimised only in appearance, by diverse forms of ‘group-think’, which, he argues, are unavoidable given the social nature of the constitution of knowledge, and indeed should be praised Adopting a slightly similar theme, Randall Wray concentrates on the role played by money in promoting the public purpose, and argues that heterodoxy should learn from Ingham’s work, as does Goodhart, on the institu-tions and social relations of money’s creation and use Wray suggests a more socially responsive, positive frame for such arguments than the conservative punitive frame, and calls for a new meme for money as

‘the tie that binds’

Monetary surrogates, in David Woodruff’s interesting sociological examples, show the quite different social and institutional contexts of the two main functions of money, because surrogates have a limited capacity to be accepted media of exchange Why is this so? The distinct

or dualistic social bases of both functions are too often avoided, argues

J F Pixley and G C Harcourt 5

Woodruff, by playing down money as a means of payment, a function that is or must be authoritatively secured But, as Luca Fantacci sug-gests, the systemic liaison between sovereign democratic states and capitalist finance is increasingly dangerous; this is not logically denied

by Woodruff either, in his dire cases To Fantacci, reform should look at diminishing money’s store of wealth ‘function’ and separating money from debts, and he describes several non-capitalist monetary systems that do so

In later chapters monetary policy, banking and the current crisis are put under a critical lens In a specific examination of the UK, Victoria Chick takes the historical origins and organisational forms of banks

as prerequisites for understanding the current crisis whereby, as Chick shows, today’s ‘monstrous’ shape of banks was due to competition for profit at a frantic pace The ‘traditional’ style of banking and its ethics had declined in the 1980s and there was a growth in securitisation Manipulation of the Libor is by no means the only evidence of oppor-tunism; however, above all it exposed the irresponsibility of both the City, and the state that had franchised the supply of money to the banks but declined to supervise its quality Moving on, specific relations of the state to the internally generated credit money are complicated by the problem that the functions of money are ambiguous or incommensu-rable, themes explored by Malcolm Sawyer Central bank money and state money are compared in Sawyer’s chapter, which, like others, looks

at the perceived relationships of the state to money

Sheila Dow draws on Ingham’s approach to emphasise so inclusively the importance of social experience to understand central bank sig-nalling Trust is the essential bond in the relations between central banks, banks and the public, but trust is by nature fragile and central bank policy is influenced by political processes and power within the private and, above all, the financial sector Dow asks whether cen-tral banks engaged in moral hazard (too) – since moral hazard is the opportunism so praised by neoclassical studies – in breaking their deal to supervise banks Philip Arestis considers problems with the

‘New Consensus Macroeconomics’ from various technical heterodox approaches Although it might be extraordinary that the model gives

no acknowledgement to a financial sector (to lay people who correctly assume that ‘banks’ exist), this omission would be unsurprising from the viewpoint of the dual nature of money’s institutions A sociological analysis could show that although ‘a new way of thinking’ may be ‘des-perately needed’, as Arestis carefully explains, any such development would depend on the balance of social forces On this, a contrasting

6 Financial Crises and the Nature of Capitalist Money

sociological system approach is centred on the social construction of

complex, dynamic systems, and on unpredictable conflicts and

chang-ing definitions of the ‘situation’ Tom Burns, Alberto Martinelli and Philippe DeVille focus on inherent vulnerabilities in money, banking and finance, and destabilising factors involved in banking crises, and are pessimistic about proposed reforms Bob Jessop does not see the global financial crisis as an anomaly (nor do others) – to him it is an expression of numerous crisis tendencies, which he analyses in depth Jessop explores the possibility of a synthesis of Marx’s work with that of Ingham around the core idea that money is a social relation In trying

to identify the distant agency involved in the types of change such as the past 30 years, Jocelyn Pixley starts at the basic institution of capi-talist money, the ‘memorable alliance’ between the sovereign state and

haute finance, using Ingham’s work Capitalism Divided? on the teenth- and twentieth-century City of London Pixley suggests a social

nine-movement analysis can best explain changes, notably when today’s tor comprises agents of agents locked in organisational conflicts with a tangential relation to social needs

sec-In concluding, Geoffrey sec-Ingham assesses this dialogue on the nature

of money, on its inherent conflicts and on, to its crises And since he made the challenge, we hope that our endeavour will foster construc-tive criticism to more mutual research and to widen public debates

We believe that this volume is an excellent starting point in tering the confusion and counterintuitive nature of money The space for informed debate is so often crushed, and our authors explore the sleights of hand, the absurd reliance on mechanical metaphors and also the outright dissimulation Is it no accident that the split between economics and sociology left money to economics for so long? Why

coun-did so few sociologists read Keynes when his economics amounted to

a defence of society? Ingham recounts this disappointing background

of near hostility on numerous occasions (for example, 1996 a, b; 2004) Accordingly, we aimed to move beyond the old standoff Money

is a social relation and, as such, sociologists should analyse money, although it is incredible that we even have to say this (just as Nigel Dodd, 1994, also argued) The collection is a major breakthrough in diminishing this damaging division It is a mark of the goodwill and scholarship of authors that they see how necessary is a genuine meet-ing ground, which, in different ways, they construct The diversity of positions is another noteworthy factor, since there are numerous ways that the two disciplines can engage, as well as through history, political science and philosophy

J F Pixley and G C Harcourt 7

II Contra the orthodoxies in economics and sociology

Economics has long enjoyed a kind of imperialism (Thurow 1977; Harcourt 1979) Some economists are proud about this; many university finance departments do not draw on the diversity among scholars of money It seems to us a weird anomaly that in the name of choice, the proclamation is ‘there is no alternative’ Other economists remain rela-tively open-minded: Geoffrey Harcourt, this volume’s economics editor

– as Geoffrey Ingham wrote in his 2004 The Nature of Money – created

‘the bridge without which I would not have been able to travel between the two tribes’, economics and sociology

Whether orthodoxy is simply more adamant in defending its turf,

or whether managerial universities are destroying scholarly endeavour, there are grim trends Is it any longer worth calling neoclassical impe-rialism and postmodern sociology ‘disciplines’ or social sciences? How many ‘Royal Bank of Scotland Schools of Finance’, or ‘Enron Schools

of Accounting’ and ‘Rupert Murdoch Schools of Media and Cultural Studies’ have had to rebrand? Why must Heterodox Economics be for-

bidden the name Economics for rejecting a model of a corn-only society

for example (see Hayes herein; Harcourt 2003), or refusing to teach that

banks must make ‘the most’ of tax schemes up to the point of

bank-ruptcy (Schoenmaker and Goodhart 2010)? Perhaps we could rebrand

some of these the ‘hired prize-fighters’ or ‘shallow’ sinners against

‘sci-ence’, and less the ‘disinterested inquirers’.3 Moreover, to the extent that

‘theory’ is socially influential, a definition of opportunism (in foundations) has a self-fulfilling nature in policies (see Chick and Dow) Opportunism is the ‘done thing’, hence Libor rigging; or shareholders are opportunistic ‘owners’, hence bonuses to ‘control’ opportunistic bank executive-employees with benchmarks: policies that boomerang tirelessly

micro-In facing these problems, similarities among contributors can be cerned Sociology long ago rejected any claims that the social sciences could make predictions: so do our economics contributors Since the crisis, the serious financial press has made numerous calls for policy makers to heed the other social sciences, citing the failures of neoclas-sical and other studies The useful comment by Dudley Dillard (1987: 1625) that orthodoxy has ‘pretensions’ to universality is a point with which all our contributors agree Mainstreamers still, incredibly, mostly seek predictions and defend the current monetary structure that has been proved wanting time and again The obvious practices show that money is not a commodity but a distant, impersonal – and an ever more

dis-8 Financial Crises and the Nature of Capitalist Money

vice-like – relation between creditors, debtors and states These flict-ridden relations are ruled out, in a sense logically, in the exclusive reliance on individualist methodology and mathematical models, the

con-models so used by the true ‘imperialists’, haute finance In the worst

cases, money is not an object of theory, and nor is money held to be analytically ‘important’ This position, near charade, remains, even after

a credit money inflation and crisis of such proportions that none can say, and sensibly in this volume do not claim to say, that they can see a pathway from this current collapse in money and onwards, to threaten-ing economic life as such

On the sociological side, it is a tragedy that money, a promise, was largely ignored after the contributions of Weber and Simmel (and see Orléan) In economics, the notion of uncertainty as a primary condition

of capitalist dynamism was minimised or reduced to ‘information netics’, as in Hayek – even if he emphasised uncertainty Furthermore the post-1950s sociology, which rightly rejected predictions, neverthe-less failed to heed what Schumpeter, Knight and Keynes had carefully shown in relation to uncertainty and money These social science econ-omists offered a gift to sociologists, which only a few accepted until recently Our economics contributors listen to sociologists and are from traditions of economic thought that sociology has neglected for too long.4 The sociological imperialism of Talcott Parsons itself declined rap-idly, but his legacy – which basically saw money as a medium of commu-nication or mere ‘passive reflection’ of other social processes – remains (albeit in pockets) to this day Perhaps it is well meaning

cyber-Although we welcome the attempts to form bridges between the tribes of economics and sociology, whether in mutual support or (at least) benevolence, we are not so nạve as to imagine that orthodoxy is

likely to change In some cases, it is radical thinkers inside haute finance

who are more critical (as is mentioned later)

And there are numerous dissidents from one-way types of ciplinary bridges As the economist Thomas Schelling remarks ‘what annoys me about [one neo-classical economist,] Gary Becker … is that

interdis-he doesn’t appear to think tinterdis-here is anything to learn from outside nomics He is not interested in coupling the methodology of econom-ics with the methodology of sociology … [He is not ‘inspired by real interest’ in specific subjects under study] … he is primarily interested

eco-in showeco-ing that traditional economic models are all you need’ to study nearly anything (cited in Swedberg 1990: 194)

Anti-institutional analysts, given the financial institutions that we

actually have, are also time-wasters As one of us notes (Harcourt, 2012),

J F Pixley and G C Harcourt 9

there are many economists whose excellent work only shows ‘how hard

it is to be non-mainstream in the present environment’ Harcourt gests that ‘non-mainstreamers have to work twice as hard as main-streamers’ The other co-editor agrees (Pixley 2012), and suggests that heterodox economists – in trying to debate those seeking predictions and who are, as Schelling says, uninterested in any other theories – have better work to do in teaming up with relevant disciplines in a genuine engagement Some time ago Ingham argued that ‘it might be helpful if heterodox schools … were to systematise their positions with reference to sociology’ (1996a: 271) Hence the two editors’ mutual aim

sug-is to achieve thsug-is in both ways - a debate around a coherent topic of capitalist money

We are not alone The volume is part of the broader tradition of the

American Journal of Economics and Sociology, for example, funded in ‘the

interest of constructive synthesis in the social sciences’ by non-profit US foundations since 1941 The reasons are deliberated in a special issue in

1999, which accuses the American sociologist Talcott Parsons of ing ‘the nefarious deal’ in the 1930s with the orthodox marginalist eco-nomic theory put forward by Lionel Robbins, into an ‘ominous détente’ that constituted sociology as the ‘science of leftovers’ (Moss 1999: 552).5

broker-Granted, the AJES, like many other interdisciplinary journals, such as the Journal of Socio-Economics or the Review of Social Economy, has suffered

from the academic promotion system of citation inflation in narrowly defined types of journals This is despite universities’ frequent attempts

to mount interdisciplinary programmes at every level from ate to PhD These are designed principally to attract students but do not always discuss any discipline in much depth, whereas our volume is careful in this respect At a broader social sciences level, notable offer-

undergradu-ings go back to a Keynesian heyday of 1957 in Komarovsky’s Common Frontiers, which included Robert Lekachman’s terrific argument As he

states (1957: 338), ‘Keynes’ new engine of analysis depends on a set of sociological and psychological insights which appear to demand much combined research by social scientists’

Turning to the individual works that make disciplinary comparisons, the enormous contribution by Richard Swedberg, who contributes our preface, on bridging the gap between economics and economic sociol-ogy has had a tremendous influence There are many others; we do not pretend here to give an exhaustive survey Swedberg’s work is highly regarded and required reading in many universities The comparisons are striking; the economist Oliver Williamson is cited (also by Ingham 1996a: 245) as saying that sociology studies the ‘tosh’ Despite quite

10 Financial Crises and the Nature of Capitalist Money

contrary enthusiasm that Swedberg found of Albert Hirschman (1982), noted warmly for unashamedly ‘trespassing’, of Schelling quoted above, and others, he may well agree that sociology’s efforts to respect the work in economics have been a one-way street to date As Swedberg (1990: 3) says, the two groups ‘have been estranged from each other for far too long, to the detriment of both’ and his works generally aim to

‘redraw the boundaries’

Also to mention in eternal hope, more associations and institutes now try to bridge the gap between the two disciplines – the heterodox economic associations in many countries are collaborating with eco-nomic sociology associations; the Max Planck Institute in Cologne is a combined economics and sociology endeavour, with Jens Beckert and Wolfgang Streeck notable leaders Country-wide, Japanese economists are brought up on translations of the works of Max Weber as much as those of Joseph Schumpeter A former president of Brazil is an economic sociologist, and South America is blessed in having many top econo-mists and sociologists, whose work is too often neglected Indeed in our view the ‘North–South’ distinction is a pernicious stereotype

Although the volume is grounded in optimism for combined ses, we oppose the production of any more dogmas The split was nefar-ious; many Keynesians became wedded to technical positivism, unable

analy-to imagine that the social conditions of possibility are not going analy-to change purely from their allegedly ‘better’ ideas Worse, in recent years the ‘new’ orthodoxy in sociology has managed nearly to destroy the discipline altogether While heterodox economics is certainly more via-ble, the study of money has always been an uphill task Public incom-prehension and fear are only one problem Professionalism is another Governments and corporations do not hire professionals so that they can ignore their pressing needs, and pure research can suffer unless professionals are protected by standards of independence, such as giv-ing advice without ‘fear or favour’

Nevertheless, anyone offering predictions is always welcome in money’s institutions (profits can be made even from a Marxist); forecasts might paper over the necessity of elite responsibility for decisions Leaders can later blame and usually cannot act unless many more have ‘blood on their hands’ Social theory, for example, does not aim for professional-ism (eschewing the legacy of Parsonian functionalism and service to the state) But to Stephen Turner it’s a junkyard of grim justifications:

Carlyle is said to have responded to a gentleman who ridiculed blers by commenting that there was once a man named Rousseau

scrib-J F Pixley and G C Harcourt 11

who wrote a book They bound the second edition of his book, Carlyle said, in the skins of those who laughed at the first (Turner 1996: 15)

On one hand, is Rousseau any more responsible for the dark side of the French Revolution than Marx for Stalinism? On the other, in Hayek the theory actively supported anti-democratic forces and Foucault was

a closet libertarian uninterested in democracy.6

This gloomy line of thinking gives too much away to the ‘power

of ideas’ Where is the balance between the social forces and the demic ‘scribblers’? Ingham treads this path carefully and modestly (1996a, b), seeking logical coherence in face of middle-range theories

aca-of neoclassical economics and aca-of the ‘third way’ or ‘new economic’ sociology One major criticism is that both treat certain concepts as neutral or merely ‘technical’ or ‘in nature’ To Ingham this incoher-ence is due to a far longer methodological dispute dating back not to Parsons in the 1930s alone, but to the ‘marginalist revolution’ of the 1870s After that:

Orthodox neoclassical economics … ultimately lost all tual grip on ‘social structure’ [It] … showed virtually no interest in either social interaction, historically specific social institutions or the systematic or emergent properties of social ‘wholes’ … In addi-tion … the market of the perfect competition model is not seen as having a social structure beyond the interplay of ‘forces’ of supply and demand (Ingham 1996b: 551)

intellec-If orthodoxy mainly ignored the historical and social sciences (though some, like Marshall, did not: see, for example, Aspers, 1999), Keynesian

economics became the twentieth-century challenge; to Ingham it

‘nec-essarily contains an embryonic sociology’ (ibid.) The further tragedy was twofold: once Keynesians lost ‘policy relevance’ (Pixley 2009) they spent the bulk of their energies disputing imperial orthodoxy (under-standably), neither working (enough) on better theories nor collaborat-ing with sociology Second, ‘new’ economic and ‘third way’ sociology rarely read the Keynesians in the early stages (although, for example, see Wiley 1983) Little attention was paid to Veblen’s economics and Polanyi

on money, and Parsons’ view of money and ‘supply and demand’ cepts became ‘natural’

con-To the sociological editor, it cannot be emphasised enough that money

is pre-eminently social, and Ingham demonstrates the unwitting but

12 Financial Crises and the Nature of Capitalist Money

distressing ignorance in sociology long after the demise of Parsonian functionalism As far as I know (Pixley), the only fields to which Ingham devotes little attention are contemporary social theory and poststruc-turalism: on the latter I would say ‘why bother anyway’ On the former,

my guess is that a Craig Calhoun would be open to discussion Even

among the greats of 1980–90s social theory like Jürgen Habermas, with the mighty Frankfurt School behind him, to figures like Giddens, theo-ries of money, say in Schumpeter, hardly played a role: money remained

in the shadow

Exceptions in sociology that did offer a credit money approach either from Keynes, Weber or Schumpeter, and which also emphasised mon-ey’s emotions, include the excellent work of Norbert Elias and Randall Collins; and Veblen’s commentary on optimism and uneasiness is sin-gled out in Giovanni Arrighi, an avid student of both Marx and Keynes Veblen wrote, soon after the Great Depression of 1873–96:

Depression is primarily a malady of the affections of the business men That is the seat of the difficulty The stagnation of industry and the hardship suffered by the workmen and other classes are of the nature of symptoms and secondary effects [For remedies to work, they must] reach this emotional seat of the trouble and … restore profits to a ‘reasonable’ rate (Veblen 1904: 241)

Veblen gives a sociological analysis of the economy’s emotions Yet

in texts on social theory of the 1990s, a sense of gloom pervades the likely fate of sociology However, the problem remains that money is

no concern even for the critics in social theory Jeffrey Alexander takes Giddens to task: ‘His model rests upon the same simpliste set of binary

oppositions as did earlier modernization theory [Parsonian] in its

most banal forms.’ That is, there is ‘before’ and a ‘now’ in ‘reflexive

modernity’ where, to Giddens in a certain breathless failure of tion, ‘everything is different’ (as Alexander says, 1995: 44) So was the Dot.com bubble! Giddens actually praised rational expectations in his own version of social theory: it was ‘reflexive’ (Pixley 2002) The num-bers of ‘petit-bourgeois intellectuals’ who retreat into the present and make long-term prognostications on that basis seems to grow (apologies for paraphrasing Norbert Elias and Raymond Williams) Social theory now studies ‘celebrities’ as if that were society’s main problem Craig Calhoun (1995) calls postmodernism ‘pseudo history’ and accuses it of trivialising ‘epochal change’ There is also the drastic (mis) use of his-

reflec-tory and ergo propter hoc fallacies Similarly Ingham questions the ‘new

J F Pixley and G C Harcourt 13

economic sociology’ for misreading Karl Polanyi.7 Instead of seeing, as Polanyi did, that ‘embeddedness’ occurs across all types of societal prin-ciples, whether market, reciprocity or redistribution, much economic sociology excludes market exchange from a normative foundation They take Durkheim too far: markets are not sites of ‘normlessness’

or anomie (Ingham 1996b: 555) To the contrary, the ‘switch’ to

mar-kets in Polanyi’s Great Transformation is one where market inequalities

are imposed on systems of reciprocity (for example, welfare states) or redistribution (for example, noblesse oblige) Norms are also embedded

in market principles, with money treated as a ‘fictional’ commodity like labour, that Polanyi criticised Although virtually unknown to all other societal types, they are norms of opportunism, ‘dog-eat-dog’ and fanatic competition (Pixley 2010)

Moving from this gloomy situation of sociology’s neglect of money,

we briefly mention the decisive organisations of money; the World Bank is hiring more from heterodoxy and sociology than in the 1990s, and so too are the regulators There are signs of openness in central banks; some senior officials in the Bank of England (BoE) display such tendencies, including Andrew Haldane In addition, one of our contributors, Charles Goodhart, was a former member of the Bank’s Monetary Policy Committee (MPC) and worked for the BoE Also Lord Turner, of the UK’s Financial Services Authority (FSA), spoke loudly of the many ‘socially useless’ functions of the City of London in 2010 The International Monetary Fund gave an internal criticism in 2011 against the ‘capture’ of the Fund by neoclassical economics In shock after Japan’s earthquake and nuclear ‘meltdown’, in early 2011, the Japanese Ministry of Finance likened Forex traders betting on the Yen to ‘thieves

at the scene of a fire’ These are not statements from regulators and bureaucracies of small ‘radical’ states but rather come from those at the core of the system

These key organisations are putting out new debates, speeches, papers and books Major publications about the financial crisis have resulted from government inquiries, however, the horror reading inside these tomes – the two US inquiries, FCIC (2011) and the Levin Report (2011), each being more than 800 pages in length – has hardly been taken

up by policy makers For example, despite continuing stereotypes that central bankers failed to ‘predict’ 2007, both reports have extensive evidence citing the many earlier warnings And also that some regula-tors and central banks dismissed these ‘anecdotes’, such as the strong empirical detail of predatory lending for years, on the grounds that their predictive models were superior This so-called ‘anecdotal’ charge

14 Financial Crises and the Nature of Capitalist Money

was used by orthodoxy to dismiss the renowned Charles Kindleberger’s works years ago, a point he complained about in every new edition There is only past evidence And, to us, there are also social institutions designed to cope, as best they can and surely better with modesty, with the unknowable future

On money, there are some interdisciplinary offerings on the recent financial crisis, such as one co-edited by a contributor to our volume, Luca Fantacci (Amato et al 2010), although he agrees with our conjec-ture that such kinds of cooperation are rare (for example, Whimster 2009; Kyrtsis 2010).8 The bulk of collections let alone monographs on

the crisis is based in either sociology or economics.9 Alternately stream orthodoxy joins psychology or neurology, and sociology and heterodoxy join cultural anthropology, geography, law or ethnography, all with interesting and often valuable debates

main-This volume bridges the gap in a two-way strategy rather than a directional and unconstructive form of point scoring Granted, it is inspired by the specific subject of money That our subject is modernity’s main social relation, a modernity that has not ‘passed away’ as so often purported, gives the book its own importance We believe the institution

uni-of money has a significant, even defining influence on labour markets, economic growth, the nature of corporations, households, international integration and other areas of interest to economics and economic sociol-ogy, among many disciplines Pixley would go so far as to say that in its impact, money is only less spectacular than warfare but as influential

At its worst, money is closely connected to the possibility of warfare in many ways At its historically recorded best, money is socially creative

Conclusion

This volume does not delve into the depressing disciplinary history of a continuing standoff; we have mentioned it in this introduction only to show the extent that we have tried to create something new beyond this split and accept each other’s gifts in gratitude We develop analyses of the social conflicts of money-as-promise from that earlier sociology We look at the uncertainty that constitutes the meaning of financial insti-tutions and structures that attempt to cope with uncertainty – these fragile systems and underanalysed policies, from that earlier econom-ics It is a collection of sociological views that sees economy and society

to be inseparable It is a collection of economic views on precise aspects

of economic life, and particularly money, which are shown to have no meaning without connecting to society and its institutions Both views

J F Pixley and G C Harcourt 15

see money as the central social link, and that money’s dual purposes must be understood in a critical sense, from the point of view of our democratic institutions

The further view is well stated by Wolfgang Streeck, and it is one that inspires other ‘joint ventures’ of which he is a part:

Social science can do little, if anything, to help resolve the structural tensions and contradictions underlying the economic and social dis-orders of the day What it can do, however, is bring them to light and identify the historical continuities in which present crises can be fully understood (Streeck 2011: 28)

It is rightly a modest role, yet here doing something new Nearly all

of the contributors draw on the other discipline to a greater or lesser extent and are willing to meet on these mutually inspiring turfs To continue this metaphor, instead of barbed wire fences of uncivil dis-missal, there are a few modest hedgerows and a number of stimulating crops grown in these diverse fields This rotating crop metaphor is apt for our English scholar Geoffrey Ingham who laid such good ‘turf’ for

us to trespass and work upon

The ideal is not to give up one’s own disciplinary expertise; rather

it is to enrich it by respecting the contributions of others It is tant to avoid passing fads Money is too important, too dangerous, too much a fragile social relation to be left solely to economists, and least

impor-of all to those close to the financial sector Neither the serious financial

press – nor in one powerful arena, the IMF’s self-criticism of

neo-clas-sical influence10 – are so close, despite their welcome exhortations for a broader understanding of money This understanding is long overdue

In these senses, we believe the collection to be unique

Notes

1 We stress that an introduction cannot possibly cite every major expert on money in the two disciplines, nor their excellent, careful scholarly works with which many of our contributors are very familiar (as their reference lists show) Furthermore, we do not debate ‘gold bugs’, Tea Party and other extreme anti-staters or religious fundamentalists; e.g in the adage ‘neither a borrower nor a lender be’, which would extinguish money altogether That

is, the credit-debt relation is an inseparable structural one: it defines both

16 Financial Crises and the Nature of Capitalist Money

sides (there are no creditors without debtors) that in a socially defined space further join in money creation

2 In discussion with the editors recently

3 Marx ([1873 Afterword to Capital Vol I] 1954: 25) In this passage, Marx’s

disinterested inquirers definitively include David Ricardo; see also King (1979: 386; 390), who points out that Marx is most distressed by Malthus for alleged plagiarism, more than any ‘sycophancy’ that is insufficient to explain the motives of ‘vulgar’ economists King argues that Marx does not subscribe to ‘bad faith’ sociology of knowledge, but (to Pixley herein) it was Karl Mannheim’s majestic failure that gently qualifies that point

4 The split has meant that very few sociologists would or do claim expertise

on money, but their interest is growing to the extent that the volume could never possibly include all of them Even a list would be too long, or might leave out excellent titles, entirely inadvertently

5 To show there are indeed exceptions to this split, the late Professor Moss was partly based in the Austrian (Hayek) and partly the Henry George tradi-tions, and attended many International Sociology Association (ISA) confer-ences in the Economy and Society research committee; he was a completely generous and inclusive scholar One of the presidents of that ISA commit-tee became the President of Brazil, Fernando Henrique Cardoso; and interest

in his finance policies revived recently (e.g The New Yorker, 2011, Nicholas

Lemann, ‘The Anointed’ 5 December) Alberto Martinelli, another of our contributors, was a president of the ISA The same can be said of many of our

economists for their respective Associations The current AJES editor, after

Larry Moss, is a heterodox economist

6 On democracy, our volume takes up Harcourt’s point (2012) that ‘Keynes was not especially noted for democratic sentiments – he was very much a phi-losopher king’, and Pixley’s argument that Keynes offered an analysis that showed (perhaps instrumentally), that equality was a societal issue in that liquidity is not an option for the whole community Schumpeter also stresses

these points (differently), e.g in his Theory of Economic Development (1934)

In contrast, a legacy today, from Hayek for example, opposes democracy dently in his later work), and ‘insists that market inequality brings economic

(stri-‘efficiency’ via ‘information’ (Pixley 2012b) Pixley argues that the ‘efficient market hypothesis’ came from that Hayek tradition, though the other editor, Harcourt, doubts this A friendly debate between us will no doubt ensue after the fun involved in editing this volume

7 A very interested review of Ingham’s Capitalism, 2011 (Pettifor 2013) is

wor-ried about his neglect of Polanyi, but one cannot do everything in one text

8 Whimster (ed.) (2009) included everyone, politicians, economists, FT

econo-mists to sociologists Alexandros Kyrtsis edited a broader inter-disciplinary

collection, Financial Markets and Organizational Technologies, 2010.

9 Political science is also very active and just in sociology collections, for example, see Lounsbury, M and P M Hirsch (eds) (2010) One recent New Economics Foundation text (Ryan-Collins et al 2011) demonstrates that commercial banks create the bulk of the world’s money: Charles Goodhart wrote the preface and Victoria Chick recommended it Whether drawing

on Schumpeter, Simmel, Keynes or Weber, most contributors agree that no analysis can start without acknowledging this issue of bank credit-money;

J F Pixley and G C Harcourt 17

cf standard theory and bank trader-politics at present, that blames the state for all of money’s troubles, if not the ‘rigidities’ of welfare and job security Pixley interviewed many top financiers (2004; 2012) who were scandalised about this approach, so the sector is itself not ‘monolithic’

10 Dwyer, 2011; also see the FT series that started on 9 January 2012, on

‘Capitalism in Crisis’

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Aspers, P (1999) ‘The Economic Sociology of Alfred Marshall’, American Journal

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Calhoun, C (1995) Critical Social Theory Cambridge, MA: Blackwell

Dillard, D (1987) ‘Money as an Institution of Capitalism’, Journal of Economic

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of an interdisciplinary approach than is currently the norm in demia This chapter, therefore, accepts Ingham’s position essentially without reservation.

aca-In what follows, the first section of the chapter identifies each of

the academic disciplines (if that is the right word) that seem to be

relevant, and how they relate to the traditional branches of ophy itself This is the origin of the idea of the ‘requirements’ for

philos-a philosophy of money philos-and finphilos-ance Lphilos-ater sections then philos-address, in turn, a number of the obvious questions arising from the overall scheme and make some attempt to answer them Particular atten-tion is paid to Geoff Ingham’s home discipline of economic sociol-ogy, and to the philosophical gulf that exists between that field of study and the mainstream/neoclassical notion of microeconomics or micro- foundations

20 Financial Crises and the Nature of Capitalist Money

Interdisciplinary approaches to the economy, business, money and finance

According to Smithin (2009, 2011), a realist approach to monetary and financial issues able to effectively cross interdisciplinary boundaries

would require study in each of the following fields (in order):

(1) A Realist Social Ontology

Lawson (1997, 2003) or Kim (2011) The argument is that there needs

to be developed a realist ontology of the underlying social institutions relevant/necessary to the conduct of economic activity It must include all such things as business firms, money, banks, governments, and so

on In short, there has to be an investigation of the basic nature of social

institutions and social facts (Searle 2010) Geoffrey Ingham’s most

important book is entitled The Nature of Money (2004) It is larly important to stress the large difference in kind between the ‘social

particu-facts’, and the facts of the physical or biological world, the so-called

‘brute facts’ studied in natural science Searle (1995), for example, wrote

extensively about this in his Construction of Social Reality I think that

it is vitally important to note that the title of Searle’s book was not the Social Construction of Reality.

Next, the idea of economic sociology implies a study of the specific

social institutions in a given socioeconomic system The research lem of the pioneering economic sociologist Max Weber (2003/1927), for

prob-example, in the General Economic History was to decipher the ‘meaning

and presuppositions of modern capitalism’, also known as the ‘method

of enterprise’ (Collins 1986) Meanwhile, Schumpeter (1983/1934)

wrote about The Theory of Economic Development set explicitly in the

context of the institution of ‘capitalist credit-money’ (Ingham 2004) Geoffrey Ingham himself recently published a book, entitled simply

Capitalism (2008), dealing with the twenty-first-century version of the

phenomenon

Monetary macroeconomics is (I would say) by far the most important

‘technical’ field of economics It has, of course, not coincidentally,

John Smithin 21

been the main area of interest for a great many heterodox mists, including such groups as Post-Keynesians, circuit theorists, and contemporary adherents of MMT (modern money theory) The main thing to notice about this general area of research is the overwhelm-

econo-ing emphasis on the qualifier monetary Macroeconomics is

mon-etary economics, nothing more, nothing less The titles of Keynes’s

most important books, A Tract on Monetary Reform (1923), A Treatise

on Money (1971/1930), and The General Theory of Employment Interest and Money (1964/1936) most certainly seem to have been intended to imply as much The focus on money is also the essential reason why the social institutions of money itself, credit, banks, and so on, need

to be thought about in depth before the topic of macroeconomics can even get started Geoff Ingham has written persuasively on this sub-ject in an article ‘Some Recent Changes in the Relationship between

Sociology and Economics’, published in the Cambridge Journal of Economics in 1996.

Political economy, finally, deals with questions of policy and

governance, comparative economic systems, notions of equity, and

income and wealth distribution Ingham’s (1984) book on Capitalism Divided was an important and well-regarded contribution to this

disci-together comprise the relevant epistemology as opposed, particularly,

to neoclassical microeconomics Similarly, the subject of political omy in category (4) corresponds to ethics and politics in categories (III) and (IV) This is the point at which the ethical and political dimensions become relevant A graphical representation of the correspondence between our two lists appears in Figure 1.1