ISSN: 1705-6411
Volume 12, Number 2 (July 2015)
Author: Dr. Jon Baldwin
As would be expected of a thinker from the left concerned with issues of political economy, Jean Baudrillard’s work can be used to illuminate the machinations of geopolitical finance and the global economy. The most significant event to recently occur to this economy was the financial crash and crisis of 2007/8. A Baudrillardian reading of these events is the prime focus of the essay. Baudrillard’s work proposes that the origins of the crash can be found in the transformation of capitalism into a new form of hyper-capitalism, namely neoliberalism. As well this is the transformation of the economy into a financial simulacrum, namely a hyper-real economy. This article proposes that the suspension of the gold standard by United States President Richard Nixon in 1971 is the principal act of deregulation of the market. This fundamentally transmuted the nature of the economy. This ‘freeing’ of the market can be understood as a semiotic act, even a creative act, and is compared to radical movements in the arts. It is common to use the phrase gold standard to refer to a model of excellence or a foundation upon which judgement may be based. Postmodernity may be defined as an era that has lost such gold standard foundation. Nixon’s claim that ‘Gold is dead’ echoes Friedrich Nietzsche’s claim that ‘God is dead.’ Nothing is the same after this. There is no longer any possible morality of the market. The flow of capital is freed from any anchor to real wealth. We witness, as Baudrillard had fully anticipated, the virtual international autonomy of financial capital. Monetary debt becomes a mere paper promise and the world becomes more successful at creating claims on wealth than creating wealth itself. This is the play of floating capital. In this financial simulacrum money becomes a sign free of any reference to real wealth or production. When this simulacrum is exacerbated to the point of parody, the bubble bursts and crash ensues. The crash and crisis of neoliberalism can be seen to fully correlate with Baudrillard’s principle of exacerbation.
The article begins by outlining the official and unofficial accounts of the crash of 2007/8. It suggests that capital is, to a certain extent, perpetual crisis. The move of the economy into neoliberalism and the discontent this facilities is remarked upon. The deregulation of the gold standard is a key moment in the move to a hyper-real economy. Analogies with post-modern architecture, music, literature, and poetry are made. These analogies are possible because, at heart, they all involve issues with the political economy of the sign. Indeed, in the early 1970’s Baudrillard had identified a certain correlation between Saussure and Marx on the semiotics of value. The deregulation of the gold standard is argued in the article to be central to the genealogy of the hyper-real economy. The implications of this are considered as well as consequences of the move to simulated finance and the virtual market. One outcome is the freeing of the economy and unlimited financial speculation. The trans-economics of speculation is argued to be exacerbated to the point of parody, and hence the bubble bursts. The article concludes with a discussion of the Baudrillardian motif of exacerbation.
The world’s leading economies are in crisis and the harsh repercussions of the financial crash of 2008 are still being felt. The global financial meltdown continues and economic inequality has reached extremes not seen for a century. Business and government in their economic activity, commercial or military expansion, corruption, and surveillance are widely distrusted. Many people regret the consumerism and social corrosion of modern life. However the emancipatory activities of protest, activism, and both the traditional and radical left, appears already exhausted, ineffectual, and have yet to deliver. Less fortunate people in the west seem entrapped in a form of what Baudrillard would call Stockholm syndrome – expressing empathy for a system that does not have their interests at heart and which conceals gross inequalities of wealth, power, and opportunity. They seem content to accept exploitative and precarious working conditions, and the compensatory pathologies of narcissistic consumption (retail therapy), media spectacle (a thousand channels and nothing on), fantasies of status and advancement (the mythologies of advertising), and celebrity idolatry (the twittered selfie). Meek acceptance or resignation to a banal, materialistic, nihilistic society appears complete for some.
Capital and affluent societies have always had waves of boom and bust – stasis and chaos – but what is crucial about the current financial situation is its scale. It is a global crisis and not regional like other previous crashes. It cannot be contained, assistance is not available from some other region, and austerity measures are already being met with civil disobedience. Dependent on one’s perspective, this heralds one of the greatest catastrophes of recent history or one of the most significant opportunities for radical change. Nobel laureate economist, Joseph Stiglitz, has proposed that the crisis – the fall of Wall Street, the revelation of the machinations of the bankers, and market fundamentalism – presents a legitimation crisis to capitalist society akin to the effect of the fall of the Berlin Wall upon communism.
What was the catalyst for the crash? After decades of largely steady growth and expansion the global economy began to reveal signs of distress in 2007. On the 9th August BNP Paribas is the first major bank to acknowledge the risk of exposure to the subprime mortgage market and freezes three of their funds. Subprime lending is typically made to those who may have difficulty maintaining the repayment schedule. These high credit risk loans are characterized by higher interest rates making them lucrative to the institutions granting them. The chief executive of another major bank, Northern Rock, will later claim that this was ‘the day the world changed.’ In 2008 it became apparent that financial difficulty had snowballed and that the world was experiencing the onset of the worst economic crisis since the Great Depression of the 1930s. Day by day there was the utter collapse of huge and household name financial institutions, the failure of core businesses, stock and housing market downturn, and decline in consumer wealth and economic activity. Global retirement funds dropped by 20 per cent in a single week. Economies worldwide slowed, credit was tightened, and international trade declined. Banks had to be bailed out by nation states to avert a meltdown on Wall Street.
A number of causes and triggers of the crash were proposed with varying weight given by differing authorities. These involved a complex intersection of economic policies and deregulation. They include the encouragement of home ownership, the relatively easy access to loans for subprime borrowing, and subsequent overvaluation of bundled subprime loans, all of which assumed the housing market would continue to grow indefinitely. There were also questionable modes of trading by buyers and sellers, an ambition for short-term instant profit over longer term growth. There was a lack of adequate capital holdings by banks and insurance companies to support the financial commitments they made.
An important distinction should be made here between the individual and the economic system itself. Often it is all too easy to scapegoat a few individuals for their failings in the attempt to present the financial system as essentially just and workable. Undoubtedly there were individuals’ idiosyncrasies within the system. There was blatant greed, idiocy, insider dealing, criminal activity, and escalation of little more than Ponzi schemes. There were dealers on cocaine, antidepressants, or anti-anxiety medication, which fuelled exuberance and the taking of risks one would normally avoid. Memorably, Tom Wolfe cites a study that discovered that “traders with unusually high levels of testosterone at the start of the trading day could be counted on to turn a profit by the day’s end.” However, when it came to sex “his demonstration rarely took more than 60 seconds. It went pump pump pump pump pump pump pump pump oo-oo-oo-oo-oo-oooouh uh oo agghhh and bingo – roll off, snore like a bear” (Wolfe, 2013: 19). Traders treated their customers with disdain, referring to them as ‘muppets’, ‘guppies’, ‘suckers’, ‘marks’, ‘sheep’, ‘chumps’, ‘lambs’, ‘baby seals’ (Ibid). But these were the only people actually providing ‘liquidity’, that is, ready money. Also worthy of consideration are the hiring policies of financial Human Resources departments with their tried and tested techniques for ensuring they only hire the most aggressive and money-driven of all their candidates, and their ability to weed out anyone with morals, restraint or empathy. Whilst there is an element of ‘human error’ to the crash ultimately focus should be upon the economic system itself, a system that churns out and feeds off such individuals.
The U.S. Senate’s report, Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, concluded that the crash was the result of “high risk, complex financial products; undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street” (U.S. Senate: Levin-Coburn, 2011). Concomitant with this, and to address and attempt to lessen the chance of a recurrence, the Dodd-Frank Wall Street Reform and Consumer Protection Act regulatory reforms were adopted. This was an overhaul of the U.S. financial regulatory system on a scale not seen since the restructurings that followed the Great Depression. The act attempts to increase regulation of banking and risk, increase transparency of markets (in particular derivatives), and protect consumer and insurance interests. There are further measures to increase standards and cooperation in accounting procedures and credit rating agencies. The ambition of the legislation is announced as follows: “To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail’, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes” (Ibid.).
Alongside the new regulatory measures there have been two dominant responses to attempt to lessen the impact and aggravation of the crisis. One is unprecedented fiscal stimulus such as institutional bailouts and quantitative easing – the printing of more money – to promote economic activity. Another has been the implantation of austerity measures such as public spending cuts, and certain tax increases. The general mood from western governments and big business has been one initial embarrassment and hand-wringing followed by an air of business as usual: the show must go on. There has been the regulatory patching up, the closing of a few loopholes, the making of some cuts here, and a stimulus of the economy there. The belief is that after several years, maybe even a decade or two, economic growth will return to the previous level and things will be back to normal. The masses must tighten their belts. They must accept the slashing of public spending, the shrinking of social protection, and an impoverished quality of life. They must accept the thwarting and regression of progressive change. They must knuckle down and ride out the storm while seeing advancement opportunities for their children dwindle to levels unknown for more than half a century. That is the mainstream official, Wall Street, version of events. On this account the crash presents no insurmountable obstacle to the ideology of free market capitalism. The crash is seen as just a blip. There is historical amnesia and myopia in this official vision. On the other hand there is a more critical view of the crash.
Capitalism, its critics say, has always had waves of boom and bust. A boom fuelled by lending and private debt is always and inevitably followed by bust. Witness the recent bubbles in third world debt (1980s), the Asian meltdown (1990s), dot.com fever (2001), and property and mortgages (2007). On this view capitalism is perpetual crisis. The regular and cyclical nature of boom and bust is apparent in a broad historical overview of US economic activity. There were depressions in the 1830s, 1870s, and 1890s, and a financial panic in 1907: “It is interesting to note that all were immediately preceded by some kind of speculative financial boom that went bust, followed thereafter by the sharp and deep contraction of the real economy in the wake of the speculative bust” (Rasmus, 2010: 11). The crash of 1929 was a massive financial catastrophe chiefly caused by highly leveraged speculative borrowing. Hand-wringing and regulation followed such as the introduction of rules to stop such leveraged speculative trading by banks with customer deposits. Certain stability in the 1950s and 60s followed and there was no major financial catastrophe until the deregulation and removal of the aforementioned rules in the 1970s and 80s. Hence we arrive at another massive financial catastrophe caused in part by highly leveraged speculative borrowing. Again, this is being followed by hand-wringing and regulation. And so it continues like endless sequels to a film that was awful to begin with. As Marx and Engels had anticipated in The Communist Manifesto, “And how does the bourgeoisie get over these crises?…by paving the way for more extensive and more destructive crises” (Marx, 2002: 184).
What is crucial, however, about the contemporary financial situation is its scale. In the late 1990s Baudrillard had proposed that “what has triumphed isn’t capitalism but the global” (Baudrillard, 1998: 10). It may now already be a cliché and a form of wishful-thinking for some, but Christian Marazzi suggests that this is “one of the greatest crises of history” (Marazzi, 2011; 9). joseph Stiglitz has proposed that the crash presents a legitimation crisis for capital and should all but silence the most vociferous supporters of neoliberalism (the neoconservative supported vision of ‘capitalism on steroids’). This may well be overly optimistic but what remains significant is the fact that ‘capitalism’ or ‘neoliberalism’ is now emerging as the name of the problem rather than as something that seems obvious, the best, natural, or even inevitable.
The term neoliberalism was originally coined in Europe in the late 1930s to suggest a new form of liberalism following the decline of interest in classical liberalism. It fell out of favour until recently whereby the meaning has shifted somewhat to embrace a host of related ideologies, mode of governance, and policy packages that are all favourable to a hyper-capitalism. There is a clear relationship with globalisation and imperialism. There are nuances but typically the political philosophy of neoliberalism supports total economic liberalisation, ultra-free trade, open markets with no geographic restriction, complete deregulation, and on-going privatisation. It would weaken and decrease the public sector in favour of the private sector. For its critic’s neoliberalism is a form of fundamentalism as crude and dangerous as any other fundamentalism. This market fundamentalism seeks market solutions and suggests competition as the answer to any problem. The competition, however, is not on a level playing field: it is won by those with connections and concentration of capital, founded on imperialism, slavery, theft, and lineage. The players take illegal short cuts, creatively cut corners, exploit others, and avoid tax payments. As with any competition it ensures that there are some winners but a majority of losers. This is at odds with the neoliberal claim that competition ensures the best outcome for all involved. A political economy has been established which ultimately only benefits a wealthy elite. Neoliberalism advocates the unfettered use of free market techniques and principles outside the spheres of commerce and business in the creation of new markets and interventions in non-economic areas and social space such as health, care, education, culture, energy, and so on. The basic premise is that everything will run better if run as a business.
The neoliberal answers to the canonical questions of philosophy, such as ‘Why are we here?’ and ‘What should I do?’ are answered thus: We are here for the market, and you should compete. Neoliberals tend to believe that “humans exist for the market, and not the other way around” (Treanor, 2005). The human is defined as merely a potential entrepreneur, the middle-manager of their own life, which is seen as their own initial capital and enterprise. Neoliberalism perhaps makes sense only to those already holding the bargaining chips of economic power, or the poor souls who have internalised this ideology and definition of their finite time on earth in purely economic terms. Since the 1970s neoliberalism as a practical system of government has been implemented in various forms around the world often under the guise of liberal-democracy but in reality as variants of crony capitalism (a sprinkling of liberal legitimacy to dictatorships), corporatocracies (the corporate takeover of nation states), and unfettered and unrequested globalisation.
The governments of Ronald Regan and Margret Thatcher, with big business whispering and tonging in their ears, are said to have done much to facilitate and disseminate such neoliberal ideology. A key resource for their ideas is Friedrich Hayek’s paranoid and unwarrantedly influential book The Road to Serfdom. Hayek argued that the trend, as he saw it, towards socialism and collectivisation occurring throughout the west in the 1940s was incompatible with freedom and democracy. The fear is of the growth of the state and variants of socialism. His ideology is perhaps best summarised by Ronald Reagan’s famous quip: “The nine most terrifying words in the English language are ‘I’m from the government and I’m here to help.’” Given the recent bank bailouts this rings rather hollow today. Thatcherism is largely synonymous with neoliberalism. The tributes that followed the recent death of Thatcher revealed how much of neoliberalism is now taken for granted even of the left of the political spectrum. One delightful piece of dissention was offered by Labour M.P. Glenda Jackson in a House of Commons speech which went against the mainstream of historical amnesia. She spelled out the disapproval of such neoliberalism for the general population of the UK. Thatcherism wrought “the most heinous social, economic and spiritual damage upon this country… We were told that everything I had been taught to regard as a vice – and I still regard them as vices – was, in fact, under Thatcherism, a virtue: greed, selfishness, no care for the weak, sharp elbows, sharp knees, all these were the way forward…[people know] the price of everything and the value of nothing” (U.K. Parliament, CM201213). Also typical in enumerating the social problems, growing populist reaction, and discontent of neoliberalism are the heartfelt words of a UK school teacher: “We train children to be successful, ruthless, greedy and selfish; our virtues are money, fame and looks. We do not reward kindness, do not value loyalty, we do not care about courage” (Griffiths, 2013: 11).
The World Health Organisation has predicted that depression is on track to become the second most widespread disease, after heart disease, in the developed world by 2020. Oliver James (2008) posits a strong correlation between rising rates of mental distress and nations most advanced in neoliberalism. Our hugely increased wealth over the past half century has done nothing to increase our happiness. In fact not only does market capitalism have little impact on improving levels of happiness but it actually exacerbates certain types of mental illness. Rates of distress among women in the UK almost doubled between 1982 and 2000. This is also true of the US and in striking contrast with more egalitarian and collectivist countries. Capitalism itself, with countless boom and bust cycles, is fundamentally bi-polar, swinging from the hyped-up mania and exuberance of a boom to the depression and come down of a bust. The advocacy of cognitive behaviour therapy, James suggests, must be refuted as merely a sticking plaster for a sick society which encourages individuals to try to think positively rather than challenge the status quo. James describes the human being under neoliberalism as a passive, empty, anxious, isolated person for whom life has no meaning except work and who compensates for this through compulsive consumption. Our emotional malaise is a direct result of increased competitiveness, individualism, materialism, and the way that these exploit our insecurities. Selfish capitalism generates insecurity and inflates comparisons. A winner-takes-all competitiveness merely creates losers and a pandemic of low self-esteem. It offers only compensatory pathologies around consumption, celebrity, and status.
The acceleration of neoliberalism is clearly a crisis in itself, and a back-drop to the actual crash. There will be numerous ways of telling the story of the crash and the ‘biggest bubble in history’ but at some stage all plot lines will converge to one place and one time: Camp David, Maryland, on the afternoon of Friday 13th August 1971. Here, in secret, Richard Nixon met Federal Reserve chairman Arthur Burns and other advisers. The backdrop was high inflation, and high unemployment. These were implications of the fact that since the mid 1960’s the US had begun to borrow enormous sums to fund Lyndon B. Johnson’s ‘Great Society’ and the Vietnam War. In essence “the US began to live – and kill – considerably beyond its means” (Kunkel, 2012:23). To avert a run on America reserves Nixon announced the advice he was going to follow on television on Sunday 15th August, before the markets opened: “I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold … Now, what is this action – which is very technical – what does it mean for you?” (http://www.presidency.ucsb.edu/ws/index.php?%20pid=3115%20#axzz%201UZnES7PMon). Indeed, what does it mean and what are the implications today?
Previously the Bretton Woods system of international financial exchange had fixed exchange rates based on the US dollar, which was redeemable for gold by the US government at the price of $35 per ounce. This anchor meant that the U.S. was committed to backing every dollar overseas with gold. The dollar was anchored to gold and other currencies were anchored to the dollar. Paper banknotes in circulation carried the guarantee that they could be exchanged for a certain amount of gold. As gold is scarce, this put strict limits on the amount of money that governments could print. The suspension of the direct convertibility of the U.S. dollar into gold ushered in the era of freely floating currencies. This is a move away from the strict post-Depression regulation of U.S. finance. The current world monetary system assigns no special role to gold; indeed, the Federal Reserve is not obliged to tie the dollar to anything. It can print as much or as little money as it deems appropriate.
Nixon’s neat opportunism “changed the rules of world trade” (Auters, 2010: 35). and Slavoj Žižek confirms that the decision to abandon the gold standard for the US dollar “was the sign of a much more radical shift in the basic functioning of the capitalist system” (Zizek, 2012: 17). In semiotic terms Nixon suspended the relationship between a sign and its referent – in this instance money and gold. This disconnected the circuit between paper and bullion, and hence representation and the real. The implications following this type of divorce of sign systems from their referent (even if the relationship was always only ever idealist or utopian) underpin much of Baudrillard’s work. The implications of the loss of a core referent, or loss of a sign systems connection to a reality, are often discussed under the rubric of postmodernism. The much debated term was first used around the 1870s but gained wider currency in the 1970s. Following Nixon there is no transcendental law of capital and in many ways anything goes. There is incredulity to grand narrative of the modern, planned, regulated market.
One can make an analogy with developments in the arts. Around the date of the ‘Nixon Shock’, July 15, 1972 at 3.32 pm to be exact, Pruitt–Igoe, a large urban housing project in St. Louis, Missouri, was given the final coup de grâce by dynamite and the first stage of demolition was complete. For architectural theorist and provocateur, Charles Jenks, this was the day modern architecture died and a new paradigm emerged: postmodern architecture. The destruction of the complex, typified by poverty, crime, and segregation, signalled the failure of public policy planning and is seen as a direct indictment of the ideals of modernism and of the society-changing aspirations of the International School. Modernist architectural form, planning, and space were meant to regulate good conduct and healthy behaviour. Postmodern architecture, for better or worse, is incredulous to such ambitions and has loss the gold standard and regulation of modernist planning.
In music one might point to composer Arnold Schoenberg’s ambition of the emancipation of the dissonance. Music loses the standard of tonality and arguably sounds like the dissonance of emancipation. Literature loses the regulated contract between author, text, and reader with fragmentation, paradox, parody and questionable narrators. The work of art loses the divine and cult value. It is no longer the representation of a referent just as money is no longer a representation of gold or wealth. Religious and mythological themes, the portrait of the patron, the landscape, and the slice of modern life all dissipate. Art becomes a self-referential sign system playing with its own possibilities. Its referent becomes other art movements and as such becomes simulation. New Age spirituality is a quasi-sentiment of the ineffable freed from the dogma and rituals of the standard of institutionalised religion. In Baudrillard’s signature theory, reality itself becomes a self-referential system disconnected from the gold standard of the Real.
Let us take a moment to stretch a tentative analogy with what happened in poetry and the deregulation of verse. The Oxford Companion to English Literature announces that “Verse in the twentieth century has largely escaped the straitjacket of traditional metrics.” Likewise we can say that ‘Economics in the twenty first century has largely escaped the straitjacket of the traditional regulated market.’ In England ‘free verse’ was initially a term of derogation before it became a battle cry, and today is more or less a neutral descriptor. Emerging at the advent of European modernism, the French term vers libre, first used by Gustave Kahn in the late 1880s, signified poetry free from the closed forms such as the sonnet, villanelle, or sestina, making very little or no use of traditional rhyme or meter. Kahn refused all legitimacy to traditional meter, seeing in it only a constraint, “an essentially political one – the inherited legacy of royal centralism and absolutism, put to work in servile manner” (Meillassoux, 2012: 22). Charles Baudelaire, with his focus on modern life in the city, also signals the freeing of poetry from strictly religious, mythological, or natural referents. There is no standard in terms of form or content that poets are bound or restricted by.
For pedagogical convenience we can cite the myth of Arthur Rimbaud as pioneering these developments. The poet is raised to ‘seer’ with ‘verbal hallucinations’ and ‘verbal alchemy’ under the aegis of the theory that ‘inventing the unknown calls for new forms’. This is Rimbaud, in his own words, “exempt from all morality” (Robb, 2001: 194). Une Saison en Enfer was one of the first modern works of literature to show “that experiments with language are also investigations into the self.” Fifteen years before the vers libre made its official appearance in French literature, the idea that poems could be written without rhyme or metre “sounded like artistic vandalism” Ibid.). For Stéphane Mallarmé, Rimbaud was the sort of ‘attractive hooligan’ who could, and did, do “serious damage to French literature” (Ibid.). In ‘Crisis of Verse,’ Mallarmé will speak of the “exquisite and fundamental crisis” (Meillassoux, 2012: 21). occasioned by the emergence of free verse. The qualified acceptance of free verse is enabled insofar as “God had ceased, for the young Mallarmé, to guarantee the status of literary symbols” (Ibid.: 28).
For verse, as the poet believes, there are to be no political or centralist constraints, no referents or standards, no morality, and ‘God has ceased.’ For the economy, as Nixon states, there are to be no political or centralist constraints, no referents or standards, no morality and ‘Gold is dead.’ For organised religion and philosophy, as Nietzsche states, there are to be no political or centralist constraints, no referents or standards, no morality, and ‘God is dead.’ If we have broken with these standards and referents of poetry, religion, and philosophy then it is because we have killed their guarantor and transcendental signified – God. If we have broken with these standards and referents of the economy then it is because we have killed their guarantor and transcendental signified – Gold.
The ending of the gold standard may not be the single cause of the current crisis but it is certainly an enabling factor. In 1973 dollar-gold convertibility was abandoned once and for all. Enter now the play of borrowing and lending: all monetary debt since has been “mere paper promises” (Kunkel, 2012: 23). Overall indebtedness has grown faster than most national economies: “In the last forty years, the world has been more successful at creating claims on wealth than it has at creating wealth itself” (Ibid.). Marx’s circuit M – C – Mˈ (Money – Commodity – Money) becomes, as he anticipated, M – Mˈ (Money – Money). In likewise, fashion pioneer of semiology, Ferdinand de Saussure’s formula S – R (signifier and signified comprise the (S) sign which refers to (R) a referent) become S – S (Sign – Sign). That is, it becomes what Baudrillard will term a simulation, a self-contained self-referential sign system. In the financial economy money – a ‘paper promise’, a ‘claim on wealth’ – becomes a sign free of any reference to real wealth or production: a financial simulacrum. Economic referents enter into a play of self-generated signs abstracted from real value. In The Mirror of Production, Baudrillard summarises: “The sign no longer designates anything at all. It approaches its true structural limit which is to refer back only to other signs. All reality then becomes the place of a semiurgical manipulation, of a structural simulation” (Baudrillard, 1975: 128). A financial bubble, viewed through a Baudrillardian lens, can be conceived as one such simulation.
It is becoming routine in discussions of Baudrillard to note the uncanny nature of how his thought anticipates and seems to predict future developments: “the prefigurative qualities of Baudrillard’s writing are, now, self-evident” (Noys, 2012). Problems with the symbolism of the disentangling of the gold-standard are emblematic and the seeds of the current crash are planted in the early 1970s. Baudrillard notes, in 1973, that this process culminates in the ‘virtual international autonomy of finance capital’, in the uncontrollable ‘play of floating capital’. When financial capital is extracted from ‘all productive cautions’, and even from ‘all reference to the gold standard’, then ‘general equivalence’ becomes the strategic place of the manipulation: “Real production is everywhere subordinated to it. This apogee of the system corresponds to the triumph of the code” (Baudrillard, 1975: 129). Here, in a characteristic motif, the economic real (of production for instance) is subordinated to economic simulation: simulation becomes more real than the real (hyper-real). The code now becomes the greater political problem than alienation, exploitation, inequality, and so on. The financial simulacrum should not be taken as having no effect on everyday economic life: the code, the model, precedes the real.
The economy is hence forth considered hyper-real. Elton McGoun uses Baudrillard’s notion of hyper-reality in his study of intrinsic value. The simulation-model and virtual market comes to determine the real economy itself: “decisions affecting production and employment are made on the basis of stock prices, and not on the basis of production and employment” (Elton, 1997: 113) The following conclusion is reached: it is not the ‘real economy’ that shapes reality but activity in the financial economy. “The financial economy is thereby more real than the real economy itself; it is a hyper-real economy” (Ibid.). This results in a financial simulation which consists of an exchange sphere without any reference to economic reality. It is an internal (virtual) exchange with no referent. The sophistication of the financial simulacrum tends to reduce the degree of materiality of the financial reality. Schinckus explains the evolution from commercial fairs to financial markets, whereby “the goods were not exposed anymore and the transactions (on paper) became symbols” Schinckus, 2008: 1086. Finance has largely abandoned its role of raising capital or supporting entrepreneurial activity (with subsequent variants of exploitation) and is now almost totally dedicated to speculation. Orléan evokes the ‘virtual character’ of finance to describe this disconnection with the sphere of production (Orléan, 1999).
Schinckus uses Baudrillard to tease out some of the consequences of the move to e-finance and the technological virtualization of the financial market. The emergence of automatic trading and the creation of electronic financial products have profoundly modified the organisation of the markets and financial exchanges themselves. The ‘Iowa Electronic Market’, created in 1988, was the first virtual market where all interactions took place online. Oral negotiation has been superseded by an abstract sociability whereby traders only interact via computer screens. Wolfe describes traders “trying to monitor six screens at once, six screens that fan out three over three, obscuring any connection we have to the real world” (Wolfe, 2013: 27). This leads to a ‘screen sociability’ which sees traders “personify their screen by giving them a hypothetical personality” (Schinckus, 2008: 1081).
Often stock market transactions (or rather risks) concern minute quantities, which may be just fractions of a per cent. But when these are amplified into quantities of hundreds of millions of dollars of shares these fractions soon add up. One might buy a stock (any stock, it is immaterial – and herein lies one of the very problems) to hope to inflate the general share price and then sell immediately and attempt to make an instant profit. Or vice versa, sell then buy. Wolfe cites an early example from the pioneer Edward Thorp: “He bets $332.5m – virtually one third of a billion – on selling a stock short – and bets another third of a billion buying the same stock to make a profit of one one-hundredth of 1%. Think of risking a total of close to two thirds of a billion dollars to make $2.5m! Sheer madness” (Wolfe, 2013: 21). One effect of the emergence of quantitative trading is that “It had nothing to do with any stock’s or bond’s value. It was a purely mathematical way to game the markets” Ibid.).
One issue with this creation of a virtual market is the ambition to reach the idea of the ‘perfect market’ model seen only in economic theory textbooks. In this case, “the finance reality has become a “hyper-reality” i.e. the image of the theoretical reality that we have in mind” (Schinckus, 2008: 1082). One trend of this desire to develop ‘hard models’ in finance has been the rise of econophysics, whereby economists, physicists, statisticians and computer specialists endeavour to apply models seen and developed in physics to the market. In these instance financial quotations are studied as if they behaved, for example, like gas molecules. These models then actually shape the market by being transformed into computational algorithms to price or hedge financial securities with the belief that returns will behave like physical entities. One prominent simulation model, certainly influential in derivatives, has been the Black-Scholes formula published in 1973. This was meant to cut risk and scientifically legitimate the activities of options markets around the world. However, over-reliance upon the model, and its incorrect axioms (e.g. the presupposition of negligible probability of extreme price change) was said, by the likes of NassimTaleb and Jean-Philippe Bouchaud, to spiral into the worldwide October 1987 crash.
Capital freed from regulation has no obstacle to circulation and value radiates “endlessly in every direction” (Baudrillard, 1987: 25). Recently, trade in derivatives worldwide was one quadrillion US dollars, which is ten times the total production of goods on the planet over its entire history. This is one sense of what Baudrillard means by ‘floating capital’. There is no anchor in real production or wealth. Žižek has recently suggested that the stages in the predominant mode of money seem to obey the Lacanian triad of psychoanalytic concepts of the Real, Symbolic, and Imaginary. Gold functions as the Real of money (what it is ‘really worth’); with paper money we enter the Symbolic register (paper is the symbol of its worth, worthless in itself); and, finally, the emerging mode is a purely ‘Imaginary’ one – money will increasingly exist as a purely virtual point of reference, of accounting, without any actual form, real or symbolic (the ‘cashless society’) (Zizek, 2012: 101).
Financial speculation is “without reference to production or its real conditions…it plays now on its own orbital circulation and revolution alone” (Baudrillard, 1998:1). One result of this is the ‘fictitious’ nature of wealth, as Gérard Duménil and Dominique Lévy suggest in The Crisis of Neoliberalism. For instance, income is withdrawn against asset bubbles, and there are claims made on future wealth that neither can, nor will, be produced. The signs engendered by the financial simulation cannot fully be converted into real wealth, as the market is currently experiencing. Duménil and Lévy make the case that neoliberalism has less been an ideological programme on behalf of free markets than a quest for more high income on the part of the upper classes. This goes against the traditional legitimisation of neoliberalism by positing old fashion greed against liberty and free-flowing markets. In true ‘trickle-down’ fashion, however, this quest for wealth and property also appeals to the middle-class and the poor. Subprime lending was the attempt to extend to ordinary consumers “through rising home prices [consumer debt, student loans, credit, etc.], a fictitious income long enjoyed by the financial classes. The scheme could hardly last” (Kunkel, 2012: 28). This is congruent with the claim by Angela Mitropolous and Melinda Cooper that the crisis was generated by “usury from below that extended beyond the limits which were tolerable to capital” (Noys, 2010: 46). This is to say that the growth of the bubble accelerated and inflated into what The Economist has called “the biggest bubble in history.”
For Baudrillard, the crisis was an always already coming implosion impacted upon by the hyper-real economy and trans-economics of speculation. This is a flouting of the ‘law’ of value, of the market, production, surplus-value, and the’ very logic of capital’. The trans-economic develops into “a game with floating, arbitrary rules, a jeu de catastrophe” (Baudrillard, 2001: 1). Interestingly here, the crisis has come and traditional political economy has come to an end, “but not at all as we expected it to – it will have ended by becoming exacerbated to the point of parody” (Ibid.). The financial crisis has emerged, the bubble has burst, and we witness one of the biggest threats to capitalism and neoliberalism thus far, through the exacerbation of simulation. This has not come about through radical politics and not – as much as it would have been desirable to be agents of change – through critique, or dialectics, or rational discussion, or insurrection, or event, or act, or the deconstruction of political concepts, or long-term revolution, or instant revolt, and so on. Baudrillard’s argument is that we need to follow this process and exacerbate further the contradictions of the hyper-real economy to ensure its demise. If capital is now floating capital, then let us let it float away. This is the parodic, ironic, and ecstatic play of the processes often analysed under the rubric of postmodern.
Regarding the crisis there is no transcendent critique at play but immanent implosion. This resonates with the theoretical manoeuvre that Benjamin Noys (2012) has identified as ‘accelerationism.’ Noys notes that there are those who argue for the need to ‘radicalise and deepen the tendencies’ that led to the current crisis: “The tendency now becomes the immanent radicalisation of capital’s own dynamic of deterritorialisation” (Noys, 2010: 51). For Baudrillard, this immanent implosion and exacerbation is “a way of putting an end to the economy that is the most singular in style, ultimately more original than our political utopias” (Baudrillard, 1998: 2). Ecstasy is the process in play rather than dialectics. The only revolution in things today is no longer in their dialectical transcendence (Aufhebung), but in “their potentialization, in their elevation to the second power, in their elevation to the Nth power, whether that of terrorism, irony, or simulation” (Baudrillard, 1990: 63). Baudrillard proposes that it is from the inside, by overreaching themselves, “that systems make bonfires of their own postulates, and fall into ruins” (Baudrillard, 2001: 6). This is the fate that arguably awaits the exacerbation of neoliberal capital.
Rather than confront power, one must use power against itself. As Baudrillard cites as a preface in Forget Foucault, “As in judo, the best answer to an adversary manoeuvre is not to retreat, but to go along with it, turning it to one’s own advantage” (Baudrillard, 1987). In a methodological consideration Baudrillard writes that the only justification for thinking and writing is that it accelerates these terminal processes. “Here, beyond the discourse of truth, resides the poetic and enigmatic value of thinking” (Baudrillard, 2000: 83). Exacerbation is a radical form of Daoism, a going with the flow, not offering resistance but letting the power of the system destroy itself. This is certainly counter intuitive and a novel proposition but is perhaps better placed than the attempt to confront a vastly more powerful opponent head-on, or to attempt make an absurd system moral or regulated.
Neoliberalism and its “democratic dictatorship is shaping up nicely,” Baudrillard claims(Baudrillard, 1997: 149). If this is the case then ultimately, for Baudrillard, we are to challenge this from the realm of the symbolic. The economic and semiotic system suppresses and is built upon the denial of the symbolic: one must “therefore displace everything into the sphere of the symbolic, where challenge, reversal and overbidding are the law “(Baudrillard, 1993: 136). Is this principle of exacerbation, which is witnessed in the escalation and overbidding of (‘primitive’) potlatch competition that Baudrillard frequently return to, going to be effective in the ruination of neoliberalism? It is at moments like the socio-economic present that we are most likely to find out.
About the Author
Dr. Jon Baldwin is from the School of Art and Film, London Metropolitan University.
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