This article is part of the b2o: an online journal Special Issue “The Gordian Knot of Finance”. 

Return of the Repressed: Oceanwide’s Angeleno Ghost City

Michelle Chihara

In the early 2000s, the American press became fascinated with Chinese “ghost cities.” Images of darkened condo towers in new but empty districts appeared across the media, from Al Jazeera to CNN.  In Ordos, at the edge of the Gobi desert, a modernist museum like a flattened Lego egg sat surrounded by canyons of silent skyscrapers. Tianducheng was a faithful mini-recreation of the city of Paris, France, complete with flower boxes and Tour Eiffel, that stood eerily quiet. Other extravagant developments were never finished or occupied, from Chenggong to Guangzhou.[1]

China’s unprecedented boom cycle had provoked a building frenzy far beyond what the economy could absorb. When the bubble burst, thousands of newly middle-class Chinese investors lost their savings and never received the homes they had been promised. The results looked post-apocalyptic. Trampled banners in deserted ballrooms and parkways gathered dust, among row upon row of echoing McMansions, with vines crawling up the unused walls.

Across the press, and in Chinese official discourse itself, the ghost city trope “supplied a charged new metaphor through which to report on China’s property sector” (Woodworth 2017, 1273). The idea never gained a precise sociopolitical definition. It was always a phrase that served as a lightning rod for controversy and debate, even as it gained currency within China itself. The state worried about ghost cities, as it sought to balance its command-and-control policies with the actions taken by Chinese families now free to use real estate—in the proud US tradition—as both shelter and primary investment strategy (Ibid.).

Most of the journalists writing for North American audiences assumed that ghost cities were the problems of a planned economy not our own. Some economic papers on the topic also functioned on the premise that authoritarian capitalism and its failure to respond to market signals were to blame for “government subsidized overbuilding.”[2] Both presumed that the ghosts were exotic and foreign, fallout from misguided policies. But the realities of the global economy have brought these specters back to haunt the West.

One critic calls London’s architectural trend of catering to the needs of empty luxury dwellings the necrotecture of the global super-rich (Atkinson 2019). Dubai and South Korea have ghost cities; the website Vacant New York tracks empty commercial and residential properties; historic chateaux listed as short-term luxury rentals on AirBnB dot the French countryside amongst the overcrowded and under-funded banlieues. To many Marxist critics, this is garden-variety over-accumulation. These are simply the busts at the end of the boom cycles, they’re endemic to capitalism, authoritarian or liberal. And it’s true that, like the original ghost towns of frontier California, the Ordos Municipality was built on speculative mining profits.

Even if they’re not new, however, the dynamics that created ghost cities in China persist and metastasize. If anything, they’re getting more severe. The Western coverage of China may have been laden with the ironies of Orientalist clichés, and yet, the aesthetics were a transnational means of involving the public. Ghost cities give democratic stakeholders a way to see the severity of the problem, a way to grasp the local consequences of finance’s Gordian knot, in all its international interconnectedness.

***

In downtown Los Angeles, about a year ago, base jumpers and graffiti artists claimed an abandoned development as their own by filming viral videos from inside the empty towers. On Instagram, one video is captioned “the calm before the storm.” It opens with a wide shot, drone footage set to hip hop.

Two young men stand at the top of an unfinished building. On iron girders high above the city, they swim in golden sunset light. As they move catlike across the bare beams, they look deliberate but impossibly relaxed. They control the swoop of their cameras with their thumbs.

In the next beat, they base jump. A series of five narrow rectangular parachutes glides down, flashes popping off all around. But if the silks spiraling between the graffitied towers were the main attraction, the preamble at sunset best captures the lonely dangerous beauty of the act.

Every floor of these unfinished high-rises–on every level, in every window–was tagged by a graffiti crew. Leaving a mark on the buildings became, through online subcultures, a sine qua non of street self-branding. The aesthetic additions to the abandoned towers, at the heart of the city, brought press attention and sparked global interest. The police stationed themselves around the perimeter, parked at every corner of the lot, to shut it all down.[3]

Most of the public discussion at the time centered on whether or not the graffiti was art. Should taxpayers should be responsible for the clean-up and police patrols? But in February, the Los Angeles Times’ last article about the empty buildings called them a “Capital Fail”(Miranda 2024). Of the many journalistic articles about the towers, this one, in the Arts and Culture section, came the closest to articulating what the ghost towers in eye of the storm truly represented: The fact that land use in global cities, including in the heart of urban America, is being driven by the opaque needs of international capital.

***

The original project in the heart of downtown L.A. was built by a Chinese company called Oceanwide (now Tonghai), through a funding mechanism known as the EB-5 visa program. This program has been inviting foreign investment into the US since the 1990s, giving predominantly Chinese and sometimes Indian people a way to transform their home currencies into dollars, while essentially purchasing green cards. If they invest a certain amount, they receive a financial path to permanent residency and citizenship. The program is a highly-contested set of rules, subject to multiple news investigations and Senate hearings, with detractors labeling it “Citizenship-for-Sale.”[4] EB-5 investments have raised persistent concerns about fraud and money laundering.[5] And yet, despite recent controversies around Trump’s son-in-law Jared Kushner using the program to finance part of a deal in New York, the program was recently renewed (Hackman and Putzier 2022; Democracy Forward 2022). EB-5 was originally supposed to create American jobs in rural areas or districts with high unemployment. The evidence suggests that it has, instead, primarily served the needs of international real estate developers.

Oceanwide is down the block from the Metropolis, another EB-5 project created by some of the same players. The Metropolis was completed, and it includes a finished boutique hotel with requisite rooftop pool and spa, plus luxury condos. The developer sold the complex at a loss in 2022 (TRD staff 2022). The owners have had trouble filling the sparkling columns. It’s not so much a ghost city as a glass zombie.

Commercial vacancy rates are at a record high in downtown Los Angeles, and EB-5 investments have contributed to a glut of overly-vacant luxury units, in an area desperately in need of affordable housing.[6] Some of the Oceanwide contractors are now suing to get paid. The property was named in an FBI warrant targeting the corrupt city councilman, Jose Huizar, who is serving time for fraud related (of course) to real estate development and a bribery scheme with yet another Chinese developer.[7] The results, in other words, for the city, are an aesthetically interesting mess. And as with the scandals around the mayor of New York taking bribes from Turkey, local politics have become inseparable from the demands of far-flung developers.

During China’s boom, unsurprisingly, the economy provided Chinese investors with myriad methods of circulating their funds into global dollars, like EB-5. But this isn’t exactly what Xi Jinping wanted. Since 2016 or 2017, Jinping has been cracking down on capital controls. By 2020 and 2021, the Chinese state was locked in a game of chicken with its own real estate giant, Evergrande. The Communist Party had generally worked to backstop problems in its economy, to stop them from spreading. But in the face of $300 billion debts and the need to slow overheating markets, Evergrande was ultimately forced to back down, all the way down, into liquidation (Wu and Steinberg 2017; Saeedy and Feng 2024). You can now see some of Evergrande’s ghost cities being demolished online.

The CCP wanted to water its local economy with more of its own funds, it wanted investors to spur growth at home. It also wanted to discourage high-risk, high-reward speculation. These goals are sometimes at odds.

Money created quickly is fast money. It carries a certain momentum when it goes looking for high rates of return. It needs appreciating asset classes in which to park itself. Much of the capital that has fled China has gone against the wishes of the CCP, but not all, and not all fast money can technically be counted as fraud.

Money laundering, in the original sense, meant hiding the criminal source of profits by routing the funds through legitimate businesses. But much of the fast money coming out of China falls into more of a grey area, within systems that obscure all profit sources equally. Drug cartels, Eastern European oligarchs, crooked Malaysian prime ministers, American tech entrepreneurs, and middle-class Chinese investor—they all share the same access to financial anonymity.

Capital flees into dark money, increasingly out of reach of the regulations of any one nation. As soon as Chinese developers amass a certain level of capital, they become international players. Once fortunes reach a certain size, they enter a space in some ways above and between Wall Street and The City, above and between the laws on the books in any one center of global finance—what one financial journalist calls Moneyland (Bullough 2019a).

The US national security state does sometimes lash out against truly illicit money, with tools largely provided by the Patriot Act. The Department of Justice has powerful allies and works with NGOs like Global Financial Integrity. And at the same time, the US is the fastest growing tax haven in the world (Bullough 2019; Bullough 2019b). It has brought the race to the bottom of the deregulation barrel back to its own shores. While the US is the home base for the most powerful shadow banks and hedge funds, capital flows with no restrictions across borders, hunting for the next loophole or program that might provide an edge or an arbitrage opportunity. The aftermath of the 2008 crisis has only entrenched the dynamics that knit high-end real estate developers across the globe into one unstable, highly speculative market.

Many middle-class Chinese investors have lost out through the EB-5 program, alongside Angeleno taxpayers. But the needs of finance’s big dogs never jibed with the needs of regular people. International capital pushes funds into luxury building trends that don’t take their cues from local markets. The result is almost never good local jobs, the erstwhile promise of EB-5. It’s empty towers in the midst of a housing crisis, as the tent cities continue to rise around the tagged and abandoned monuments to indifferent global wealth.[8]

***

The drone footage at sunset—with the bright painted letters popping against a tangerine sky and the young people dangling their legs off sky-high rafters—was created by young street artists and influencers. They were looking to create value, for themselves, on the social media platforms owned by corporate America. They incidentally aestheticized faultlines in the global regime. But the images haunted the public and drew audiences because they expose a tear in the fabric of the city.

The display of daring by the base jumpers invites comparison with an iconic 1932 photograph of iron workers in New York City. The New York Herald-Tribune’s black-and-white image of “Lunch Atop A Skyscraper” similarly captured the public’s attention. In that moment, workers on a beam 850 feet in the air—eating and smoking— sat in for the aspiration and hopes of a generation of immigrants. Their bravado became the symbol of the skyscraper itself, an incarnation of the zeitgeist.

Today, the young men on the girders with their drones are the dystopic version, Miracle on 34^th Street reshot as Blade Runner. Romanticizing the bravery of the Irish laborers in the ‘30s validated their role in the emerging financial order, just before the New Deal. The 21^st century ghost towers in L.A. are more counter-cultural, more cyberpunk than daily news, more dystopic carnival than imagined community.

At the same time, the taggers and base jumpers created a kind of impromptu and spontaneously vibrant public space. They acted as a reminder that in the wake of hollowed-out cultural institutions, in search of least a certain density of weak ties, people will take back the city center. The aesthetic is the only way for the public to engage, on the ground, with the consequences of dark global finance.

***

In moneyland, it’s almost impossible for local municipalities like Los Angeles to hold developers accountable. The concrete construction of the Oceanwide towers means the luxury units can’t be remodeled into smaller apartments. Even demolishing the towers represents an extraordinary expense in a dense urban context.

Corporate partnerships that span both countries, and currency-sterilization in a dollar-based global economy, are pulling China and the US deeper into an increasingly complex relationship. Conflict has been growing around everything from the Belt and Road program to China’s push to control resources in Africa to the data and IP policies of social media giant TikTok. International security concerns and trade wars, state capitalism and crony capitalism and the gray areas in-between, all are increasingly enmeshed. Local interests are increasingly pit against the needs of capital, with no resolution in sight, as the temperature rises (Loughlin and Grimsditch 2021; Ip 2024).

There are coalition groups like the Hedge Clippers (as in, they clip the excess growth of hedge funds) trying to address issues like the carried interest tax loophole, a boring-sounding but multi-billion dollar glitch that lets hedge funds avoid massive amounts of taxation. Organizations like LAANE and SAJE, here in Los Angeles, are doing the long slow work of organizing community stakeholders across sectors. These groups seek to hold big, international money locally and democratically accountable. Aesthetics will always play a part in that organizing work.

Ghost cities may once have seemed exotic and foreign. But the street artist Nick Sozonov’s drone shots of Oceanwide bring the trope home and give local audiences purchase on the topic. Attention spans now move at the speed of TikTok. It’s hard to keep people focused on the details of financial loopholes, they keep slipping away behind a cat meme. But art reminds us that when we look in the mirror, the empty towers are still there, looming right behind us.

Michelle Chihara is Associate Professor of English at Whittier College, where she teaches media studies, contemporary American literature, and journalism. Recent peer-reviewed publications include chapters in Money and American Literature and Los Angeles, A Literary History, both forthcoming in Cambridge University Press (2025. Other essays have appeared in Post45: Contemporaries, Politics/Letters, Bloomberg, n+1 and Avidly.org. She was formerly the section editor for Econ & Finance at The Los Angeles Review of Books, where she also served as Editor-in-Chief. Her current book project is a journalistic trade book about behavioral economics, working title Behave! The science of influence in American culture.

References

Atkinson, Rowland. 2019. “NECROTECTURE: Lifeless Dwellings and London’s Super-Rich.” INTERNATIONAL JOURNAL OF URBAN AND REGIONAL RESEARCH 43 (1): 2–13. https://doi.org/10.1111/1468-2427.12707.

“BASE Jumper Leaps from Graffitied Towers in Downtown L.A.” 2024. KTLA News at 5. KTLA. https://www.youtube.com/watch?v=x9dEFqbgX-Q.

Bullough, Oliver. 2019a. Moneyland. New York: NY: St. Martin’s Press.

———. 2019b. “The Great American Tax Haven: Why the Super-Rich Love South Dakota.” The Guardian, November 14, 2019, sec. World news. https://www.theguardian.com/world/2019/nov/14/the-great-american-tax-haven-why-the-super-rich-love-south-dakota-trust-laws.

Chan, Melissa. 2009. “China’s Empty City.” Al Jazeera, November 09, 2009. YouTube https://youtu.be/0h7V3Twb-Qk?si=1p3oQJcXuaBSuBcB

Chung, Stephy. 2016. “Abandoned Architectural Marvels in China’s Largest Ghost Town.” CNN, November 21, 2016. https://www.cnn.com/style/article/china-ordos-ghost-town/index.html.

Democracy Forward. 2017. “Uncovering Kushner’s Involvement in Renewing Visa Program,” 2017. https://democracyforward.org/lawsuits/uncovering-kushners-involvement-in-renewing-visa-program/.

Hackman, Michelle, and Konrad Putzier. 2022. “Congress Set to Revive EB-5 Program Giving Green Cards to Foreign Investors.” The Wall Street Journal, March 9, 2022. https://www.wsj.com/articles/congress-set-to-revive-eb-5-program-giving-green-cards-to-foreign-investors-11646861559.

“Hearing on ‘Citizenship for Sale: Oversight of the EB-5 Investor Visa Program’ before the Senate Committee on the Judiciary on June 19, 2018 | USCIS.” 2018. June 19, 2018. https://www.uscis.gov/tools/resources-for-congress/testimonies/hearing-on-citizenship-for-sale-oversight-of-the-eb-5-investor-visa-program-before-the-senate.

Huang, Josie. 2017. “As DTLA Vacancies Rise, Landlords Increase Breaks on Rent, Parking | LAist,” September 15, 2017. https://laist.com/news/kpcc-archive/in-high-vacancy-dtla-landlords-offer-move-in-speci.

Ip, Greg. 2024. “America Is Sliding Toward Chinese-Style Capitalism.” The Wall Street Journal, March 21, 2024. https://www.wsj.com/economy/america-is-sliding-toward-chinese-style-capitalism-fff67df4.

“L.A. Joins Ranks of Cities with ‘ghost Towers’ with Graffiti-Covered Oceanwide Plaza.” 2024. Los Angeles Times. February 10, 2024. https://www.latimes.com/entertainment-arts/newsletter/2024-02-10/la-oceanwide-plaza-essential-arts-arts-culture.

Lloyd, Annie. 2017. “Downtown L.A. Vacancy Rate Highest In 17 Years | LAist.” LAist, September 16, 2017. https://laist.com/news/downtown-la-vacancy-rate-highest-in.

Loughlin, Neil, and Mark Grimsditch. 2021. “How Local Political Economy Dynamics Are Shaping the Belt and Road Initiative.” Third World Quarterly 42 (10): 2334–52.

“Newly-Discovered EB-5 Scam Highlights Fraud, National Security Weaknesses, Need for Long-Term Reform.” 2017. https://www.grassley.senate.gov/news/news-releases/newly-discovered-eb-5-scam-highlights-fraud-national-security-weaknesses-need.

“Our Latest Report: Housing Shortage on the Rise in LA – The Angeleno Project.” 2023. https://theangelenoproject.org/the-hard-facts/.

Saeedy, Alexander, and Rebecca Feng. 2024. “Evergrande Was Once China’s Biggest Property Developer. Now, It Has Been Ordered to Liquidate. – WSJ.” The Wall Street Journal, January 20, 2024. https://www.wsj.com/articles/evergrande-faces-imminent-liquidation-after-talks-with-top-creditors-break-down-4af5f657.

TRD staff. 2022. “Greenland Sells Metropolis Apartment Tower for $504 Million.” The Real Deal, November 9, 2022. https://therealdeal.com/la/2022/11/09/greenland-sells-metropolis-apartment-tower-for-500m/.

Witthaus, Jack. 2023. “Downtown in Distress: Los Angeles Signals Why Nation’s Office Space Headaches Could Last for Years.” CoStar, March 19, 2023. https://www.costar.com/article/531623023/downtown-in-distress-los-angeles-signals-why-nations-office-space-headaches-could-last-for-years.

Wu, Jane, and Julie Steinberg. 2017. “Big Chinese Deals Stall on Capital-Outflows Clampdown.” The Wall Street Journal, January 27, 2017. https://www.wsj.com/articles/big-chinese-deals-stall-on-capital-outflows-clampdown-1485563072?mod=article_inline.

Zahniser, David, Emily Alpert Reyes, and Joel Rubin. 2019. “FBI Corruption Probe Goes beyond L.A. Councilman Jose Huizar to Include Other City Hall Figures.” Los Angeles Times, January 12, 2019, sec. California. https://www.latimes.com/local/lanow/la-me-ln-huizar-warrant-20190112-story.html.

[1] Al Jazeera (Chan, 2009) and CNN (Chung, 2016) are just two of many examples.

[2] See Ghost Cities of China website at MIT (http://ghostcities.mit.edu/)

[3] This was widely covered in the news, but see (“BASE Jumper Leaps from Graffitied Towers in Downtown L.A.” 2024)

[4] See (“Hearing on ‘Citizenship for Sale: Oversight of the EB-5 Investor Visa Program’ before the Senate Committee on the Judiciary on June 19, 2018 | USCIS” 2018)

[5] See (“Newly-Discovered EB-5 Scam Highlights Fraud, National Security Weaknesses, Need for Long-Term Reform” 2017)

[6] See (Witthaus 2023), (Huang 2017) (Lloyd 2017)and (LA CAN) and (SAJE) reports.

[7] See LA Times article for a link to the federal warrant (Zahniser, Reyes, and Rubin 2019)

[8] (“Our Latest Report: Housing Shortage on the Rise in LA – The Angeleno Project” 2023)

This article is part of the b2o: an online journal Special Issue “The Gordian Knot of Finance”.

Teleological Limits:  Value Creation on Financial Platforms

Janet Roitman

There is a widespread but unspoken, bedrock assumption: finance is always already effective. It therefore seems, from the durable perspective of that foundational premise, impossible to untie the Gordian knot of finance.[1] One response to the challenge of the Gordian knot is to forgo attempts to loosen it and instead find the fissures in the rope – the fault-lines of change. The fault-line approach admits to the profound structuring effects of financial practices, financial devices, and financial institutions. But it raises the question of the very notion of “financial power.”

To address that question of power, we need to consider the following questions: What are the limits of finance? How are specific financial practices expressed in heterogeneous terms? How are they instantiated in diverse ways – and thereby create fault-lines, generating the grounds for what Arjun Appadurai (1986) called paths and diversions?

The Limits of Finance

While establishing the limits to finance might be a metaphysical endeavor insofar as it seems to imply that we can define the essence  of finance, some scholars have documented the limits to processes of financialization, or the limits to efforts to extend financial institutions, services, and products both geographically and to new consumer markets (Christophers 2015; Davis and Walsh 2017; Mader 2018, Engelen 2008; Bernards 2019a, 2019b). These limits are both empirical and analytical.

First, as Brett Christophers has argued, the intensification of financialization in an increasing number of domains (i.e. the financialization of “everyday life”) is not inexorable. Attempts to generate financial assets have resulted in particular responses.  For instance, Christophers (2010 and 2015: 194-5) examines limits to the financialization of land – perhaps the Ur-asset – which is instantiated through recourse to cash economies and other exit options.  And, while land might be the asset of original capitalist sin, we can observe something similar more recently established asset classes, based on data sets, for instance, which one might deem the forefront of capitalist transgression. In those instances, as well, we see the limits: in Sub-Saharan Africa, for example, although the implementation of national digital identities and thereby automated taxation would seem to close the door to exit options, it has incited an overwhelming return to the anonymity of cash (and cryptocurrencies).

Second, there are analytical limits to finance, which is not a totalizing institution nor expressed in a seamless logic. Similarly, financialization is not a totalizing, seamless practice. This doesn’t mean that it is possible to locate the “outside” of finance; that would assume a bird’s-eye view – a God perspective or absolute truth vision – from which to do that. What we encounter here is precisely the problem of immanence: financial objects and financial practices are constantly produced as constituent elements of socio-technical networks, which we can observe in terms of particular epistemologies, but not know as ontological entities (cf. Latour 2003).

But, even in spite of the empirical and analytical limits to finance noted above, we nonetheless typically posit finance as a totalizing concept and assume its teleology – that it achieves its endpoint, that it ties and always tightens into a Gordian knot.

However – and this is where we get to the knot’s internal fissures -, finance signifies heterogeneous terrain.  When we refer to finance, are we referring to investment banks, asset management firms, central banks, pension funds, stock markets, bond markets, capital markets, consumer credit markets, sovereign wealth funds? When we refer to finance, are we referring to the operations of finance, which includes pricing, trading, hedging, intermediation, accounting, computation, modeling, automation, etcetera?  Or are we referring to the practice of finance – also an expansive terrain, since we’d have to account for the myriad instantiations of financial practice in the world today (China, India, Singapore, United Arab Emirates, South Africa).

Despite this heterogeneity and these open-ended questions, we seem to assume that “finance” is a unified system and that it has a particular unidirectional logic which is always already effective. It seems that – while we evidently took heed of the critique of the teleology of developmentalist thinking – articulated in the 1980s, but harking back to the critique of 1950s modernization theory – we reproduce developmentalist logic with regard to finance and financialization.

Kinks and Fissures in the Gordian Knot

To illustrate my point about the limits to finance and the political significance of its expression in specific financial practices expressed in heterogeneous terms, I’ll walk through a scenario. And I’ll do so with reference to a place considered the most subjugated by global finance: Sub-Saharan Africa (SSA).  My illustration refers to infrastructures of emergent financial technology (fintech) platforms across the continent.

Financial platforms are perhaps best defined as infrastructures for the extension of financial technologies. Fintech platforms are the basis for modes of intermediation in commercial banking and retail payments through non-bank payment rails – that is, through financial entities that don’t have banking licenses.  And they’re increasingly – if not gingerly – becoming a means to manage the historical subjugation of non-convertible currencies.

How does that work? In SSA, payments and transfers between different African states are international operations involving international currency exchanges. This is because African currencies are non-convertible: they are “soft” currencies, not openly traded on the forex market. Due to the non-convertibility constraint, transfers both into and across Africa are the most expensive in the world, especially when they transmit through legacy systems like commercial banks or Western Union. On average, the cost of an international transfer of $200 is 7.9 %, compared to the world average of 6.9%. And, amazingly, the costliest transfers are between African neighbors. For instance, a $200 remittance transfer from Tanzania to Uganda costs 39.1% (World Bank/KNOMAD 2023: 43). Because most cross-border payments and transfers are international currency operations, settlement involves buying and selling dollars and clearing through non-African banks. In 2017, only about 12% of intra-African payments were cleared within the continent. This obligation to route settlement through overseas banks adds an estimated $5 billion a year to the cost of intra-African currency transactions (Wellisz 2022: 47). When we add to this the fact that African sovereigns are constrained to the Eurobond markets for debt issuance (see Gabor 2021), we can say that this schematic description is evidence of the structural power of global finance.

The combination of US dollar hegemony and currency hierarchy, along with the abiding centrality of neocolonial banking institutions that service the commodities sectors (oil, mining) but not retail banking, creates a tight Gordian knot that speaks to the problem of financial sovereignty in contemporary currency regimes.  And since it’s extremely unlikely that global banking institutions will adopt the South African rand or the Nigerian naira as a reserve currency, it’s very likely that resistance can only come from within, per Michel Foucault (1978).

It’s worth digressing to note that while Foucault didn’t focus on cutting the Gordian Knot, he did lament that we “still have not cut off the king’s head,” a reference to our monolithic and monological conception of power. We might wonder whether such a conception of power as sovereignty is perhaps reproduced in our approaches to finance either as an always already effective teleology; or, in the terms that have dominated recent debates in political economy, as an effective infrastructural power.  The latter approach illustrates – convincingly – the effects of infrastructures that participate in processes of politico-economic subordination, such as what I just described with regard to currency subordination in SSA (Braun 2018, Braun and Gabor 2020, Rethel 2010, Hardie 2012, amongst others). This work maintains that infrastructural power translates into the power of financial agents. Though there are real merits to this research, the conclusion is somewhat tautological: by virtue of infrastructural power, agents exercise power. But, more importantly, those living in SSA (consumers, but also financial sector actors) focus on the extent to which there are fault-lines in the operations of infrastructures, which is a worthy view.

New Modes of Intermediation: Mobile Money and the Float

One sector which has exhibited the potential to generate fault lines is the non-bank payments and mobile money sector. Mobile money sounds like some kind of monopoly money, but the value of transactions in the global mobile money sector for 2022 totaled a massive 1.26 trillion USD, about half the GDP of France. In SSA, mobile money platforms and non-bank payment service providers are the overwhelming services of choice for payments and money transfer operations. This is true for both international and intra-African transactions.

Again, the scale of this should not be underestimated: in 2022, the African continent hosted 763 million registered mobile money accounts (of the 1.6 billion global accounts).  There were 218 million monthly active accounts (more than half the global amount); and the continent represented $32 billion of the global $1.26 trillion transaction value (GSMA 2023a). Sub-Saharan Africa is the “global epicentre of mobile money” (GSMA 2023b), which involves peer-to-peer and business-to-business transactions as well as $1.3 billion in international remittances processed per month for that same year.

Mobile money is a financial service provided by the mobile network operators/mobile money issuers. It’s a money transfer tool. Because mobile network operators don’t have banking licenses and hence can’t take deposits, they create subsidiaries, which are licensed nonbank entities. Through these nonbank subsidiaries, the telecoms establish a trust account with a partner bank, where the fiat money equivalent to the e-value of customer base digital wallets is held.  This is ‘the float,’ which is one of the primary forms of value generated by the mobile money financial platform. It’s a liquidity pool generated by the e-money/fiat money interface. And it’s significant: the mobile money transaction float value in Ghana alone in April 2023 totaled over $1 billion (Bank of Ghana 2024: 13).

In commercial banking, regulations stipulate that floats be held as liquid assets, or in accounts that are classified as current accounts, typically earning 0% interest. In the fintech sector, this has been a blind spot. In the US and Europe, fintech and big tech firms pay customers zero interest to digital wallets and yet collect interest on the float held by banks (Carstens 2019). In SSA, there has been conflict over the attribution of interest accrued to these funds held in commercial bank custodian accts, which involves debate over the status of digital wallet accounts. Regulations have been implemented that prescribe profit-sharing arrangements, most of which entail returning interest to digital wallet holders.

This contestation and consequent redistribution indicates how digital platforms represent new modes of intermediation that tighten the Gordian knot of finance through the extension of financial institutions and associated markets and yet generate fault lines, which fray the strands of that knot (for elaboration, cf. Roitman forthcoming). Apart from minor instances of revenue sharing, liquidity pools are also increasingly used for treasury and foreign currency management. And this practice is increasingly seen as a means to circumvent – if not eliminate – the costs of soft-currency subjugation.

To do this, the liquidity pool generated by the non bank financial service providers (the float) is used to solve nonconvertible currency and liquidity constraints. Increasing numbers of pan-African payments companies enable interoperable cross-border and domestic digital payments. Their services include payments and settlement, as well as foreign exchange and treasury management across multiple countries and currencies. These firms are effective alternatives to the international correspondent banking system, which is costly and is a vestige of colonial banking and currency regimes.

These platforms are cognizant and often explicit about the political stakes of their services. At a digital finance sector industry conference held in 2022, the CEO of “ABC Finance” [pseudonym] underscored a central problem: no one will hold African currency in the national banking systems across the continent. Because the vast majority of government and corporate bonds are denominated in dollars, African central banks are mandated to support the value of their respective currencies, which means rationing dollars and other hard currencies. ABC’s response is to become the largest non-bank foreign exchange broker in Africa: it buys and sells currencies using its own balance sheet. In other words, it sells balance sheet liquidity and offers wholesale foreign exchange (sometimes using crypto stablecoins). Hence the CEO characterizes ABC’s financial platform as a means to “deconnect Africa from the US dollar.”

That wild aspiration aside, we have seen a recent, though very modest, decrease in the share of US currency usage in payments clearing, which dropped from 50% in 2013 to 45% in 2017.  During the same time, the use of the British pound decreased from 6.2% to 4.6%. These declines result from the increased usage of regional currencies (e.g. West African franc) and the South African rand (SWIFT 2018). [Note that figures reported by SWIFT don’t account for the use of cryptocurrencies]. We can also note an increase in intra-African trade that relies on regional payment platforms, facilitated by emerging solutions to real-time multi-currency clearing across the continent. A key element in the advancement of this trend is the development of payment systems denominated in local currencies. Thus, for example, existing regional payment systems – such as the East African Payments System (EAPS), the Southern African Development Community’s Real Time Gross Settlement System (SADC-RTGS), and STAR-UEMOA, the Automated Transfer and Settlement System led out by the Central Bank of West African States – are currently formulating plans to operationalize interconnections between their organizations with the aim to establish a pan-African settlement platform.

Importantly, these aren’t just private market-based ventures. In 2021, the Pan-African Payment & Settlement System (PAPSS) was established with the explicit mission to enhance financial sovereignty. PAPSS is a cross-border, financial market infrastructure that enables real-time gross settlement through participating central banks.  It aims to reduce the need for banks to source hard currencies to support transactions between two African parties. It serves commercial banks, payment service providers, and fintech firms; and it provides an alternative to the high-cost transactions that transpire through correspondent banks located outside of the continent. Also, as an aside, it is devised to generate the conditions for local currency lending instead of dollar financing, or the development of local currency bond markets (see Gabor 2021). Ultimately PAPSS displaces the role of non-African intermediaries, such as the European-based SWIFT system. In that sense, it’s a concrete response to hard currency subjugation and an effort to “free foreign exchange in Africa” (Wellisz 2022).

***

Is the freeing of foreign exchange in African transpiring through processes of financialization?  Yes. But these are equally concrete practices that serve to loosen the Gordian Knot, or to generate fault lines in existing financial infrastructures. In other words, what I’ve described herein could be subsumed into the “logics of finance” arguments – the extension of the tentacles of financial institutions into the Dark Continent. But Africans, like the Chinese or those living on the Indian subcontinent and in the Middle East, have always had finance. In Sub-Saharan Africa, finance existed from the days of the great Ashanti gold empire through to today’s interoperable mobile money platforms. In that sense, finance hasn’t “come to” Africa.  And, like everywhere, those living on the continent are subjected to financial practices and institutions as much as they create kinks in the Gordian knot through appropriation and transgression.

Janet Roitman is a professor at RMIT University. She is founder/director of the Platform Economies Research Network (PERN) and an Associate Investigator with ARC Centre of Excellence for Automated Decision-making and Society (ADM+S). Her research focuses on digital financial technologies and emergent forms of value. She is the author of Fiscal Disobedience: An Anthropology of Economic Regulation in Central Africa (Princeton University Press) and Anti-Crisis (Duke University Press). She sits on the editorial boards of The Journal of Cultural Economy, Finance & Society, Platforms & Society, and Cultural Anthropology. Prior to joining RMIT, Janet was a University Professor at The New School in New York. Her research has received support from the Ford Foundation, The MacArthur Foundation, The US Institute of Peace, Agence française du developpement, The American Council of Learned Societies, The Institute for Public Knowledge, and The National Science Foundation.

References

Appadurai, A. 1986. The Social Life of Things. Cambridge University Press.

Bank of Ghana. 2024. Summary of Economic and Financial Data. May 2024: www.bog.gov.gh

Bernards, N. 2019a. The Poverty of Fintech? Psychometrics, Credit Infrastructures, and the Limits of Financialization. Review of International Political Economy, 26(5), 815–838.

_____. 2019b. Tracing Mutations of Neoliberal Development Governance: ‘Fintech’, Failure and the Politics of Marketization. Environment and Planning A: Economy and Space, 51(7), 1442–1459.

Braun, B. 2018. Central banking and the infrastructural power of finance: The case of ECB Support for repo and securitization markets. Socio-Economic Review 107. 515.

Braun, B., & Gabor, D. 2020. Central Banking, Shadow Banking, and Infrastructural Power. In P. Mader, D. Mertens, & N. van der Zwan (Eds.), The Routledge International Handbook of Financialization. Routledge, 241-252.

Carstens, A. 2019. Big Tech in Finance and New Challenges for Public Policy. SUERF Policy Note, 54, 1–12.

Christophers, B. 2010. On Voodoo Economics: Theorizing Relations of Property, Value and Contemporary Capitalism. Transactions of the British Geographers 35: 94-108.

_____. 2015. The Limits to Financialization. Dialogues in Human Geography, 5(2), 183–200.

Davis, A., & Walsh, C. 2017. Distinguishing Financialization from Neoliberalism. Theory, Culture & Society, 34(5–6), 27–51.

Engelen, E. 2008. The Case for Financialization. Competition & Change, 12(2), 111–119.

Foucault, M. 1978. The History of Sexuality. Vol. I (trans. R. Hurley). New York: Random House.

Gabor, D. 2021. The Liquidity and Sustainability Facility for African Sovereign Bonds: Who Benefits? (Eurodad Report):https://www.eurodad.org/the_liquidity_and_sustainability_facility_for_african_sovereign_bonds_who_benefits

GSMA. 2023a. The State of the Industry Report on Mobile Money 2023. GSM Association.

GSMA. 2023b. State of the Mobile Money Industry in Sub-Saharan Africa 2023. GSM Association.

Hardie, I. 2012. Financialization and Government Borrowing Capacity in Emerging Markets. Palgrave Macmillan.

Latour, B. 2003. The Promises of Constructivism. In, D.Ihde and E. Selinger, eds. Chasing Technoscience.  Indiana University Press: 27-46.

Mader, P. 2018. Contesting Financial Inclusion: Debate: Contesting Financial Inclusion. Development and Change, 49(2), 461–483.

Rethel, L. 2010. Financialisation and the Malaysian Political Economy. Globalizations, 7(4), 489–506.

Roitman, J. forthcoming. Financial Platforms: Beyond the North-South Divide. in Westermeier, C., Campbell-Verduyn, M., Brandl, B. eds. Cambridge Global Companion to Financial Infrastructure. Cambridge University.

SWIFT. 2018. African Payments: Insights into African Transaction Flows. White Paper.

Wellisz, C. (2022). Freeing Foreign Exchange in Africa. IMF Finance & Development. https://www.imf.org/en/Publications/fandd/issues/2022/09/Digital-Journeys-Africa-freeing-foreign-exchange-wellisz

World Bank/KNOMAD. 2023. Migration and Development Brief 39, December.

[1] This contribution is based on research supported by the US National Science Foundation. It also benefitted from discussions at the “Cutting the Gordian Knot of Finance” Symposium, University of Sydney, 4-5 April 2024.

This article is part of the b2o: an online journal Special Issue “The Gordian Knot of Finance”. 

Functionalism, Token Economies, and Money Design: Slipping Past the Gordian Knot of Finance

Dick Bryan

It’s quite standard for orthodox explanations of money to go immediately to its three core functions: means of exchange, store of value and unit of account. Such a functionalist definition of money does not define what money is; just what its ideal social roles are.

The emergence of privately issued tokens, sometimes referred to as ‘crypto’, presents a significant challenge to functionalist framings of money. The concern here is not some holistic defense or critique of ‘crypto’, for there are so many tokens (the current estimation is 2.5 million^[1]) and each has its own objective, its own protocol, and its own credibility. Some are best understood as creative and reliable record-keeping and trading infrastructure, others are best understood as memes or cultural expressions. Their quality and viability is variable. Instead, my concern is to explore the challenge to mainstream functionalist definitions of money, and ultimately to capitalist formalism, that come with the emergence of privately issued tokens.

Perhaps they point to the Gordian knot of finance as a specifically capitalist knot, and the solution is to build ways to go around it; not to try and unpick it.

Functionalism

The theoretical foundation of a functionalist approach is the proposition that the institutions that make up society, be they education, religion, family of the economy, all perform a purpose that maintains society as a stable system of norms and values. So, when money is defined by its functions, it is by reference to its ability to maintain social stability. For Durkheim, often credited with being the father of functionalism, a shortage of functional norms resulted in the growth of anomie and could over time even lead to the breakdown of social order and stability. We see, then, that a functionalist account of money immediately, embeds a conservative agenda that systematically delimits what gets called ‘money’. When we see the current Gordian knot, the appeal of anomie, at least in relation to money and financial design, starts to grow.

Before we move to alternatives to functionalism, it is important to see how functionalism systematically shuts down innovations in money and finance. Although the functionalist definition of money makes no explicit reference to the state, it has been clear for the last hundred years or so that money tied to the state – chartalist money relying on the state’s reputation, capacity for enforcement and underwriting capacities – represents the contemporary money standard. Functionalism is therefore tied to the capacities of the state, and alternatives without comparable governmental affiliations, be they crypto-based or other, become defined outside the category of money.

There are many examples where the state’s role is invoked as the delineator of ‘money’ and ‘non-money’. Are community or local currencies, such as Sardex or the Bristol pound, money? Generally, they are not defined as money; they get called ‘complementary’ currencies in that they are used to substitute for ‘real’ money in particular and limited contexts. They are seen by money conservatives to lack in any of three domains: a) they are only local (national scale is inserted into the functionalist criteria as an implicit condition of being ‘money’); b) many are digital (and so are currently thought of as existing outside of state financial regulation) and c) they are not recognized by the state as ‘legal tender’ (so they cannot be used in monetary relations with the state).

Does a token have to be stable in order to be money? The conventional answer is emphatically ‘yes’. Indeed, the claim is that state money is not just stable; it defines stability. A prominent argument is that bitcoin can’t be money because it is not a stable store of value; it is often called a ‘volatile speculative asset’.  Leaving aside the fact that for many lengthy parts of the last 15 years – since bitcoin’s initial appearance – bitcoin has been by far a better store of wealth than bank deposits, why does volatility preclude something being a store of value? It may be considered a volatile store of value, but why is there the condition that money must be ‘stable’? If people are actually using the asset to store wealth, its volatility per se cannot be a constraint on its moneyness. Indeed, the question could eventually be posed as to whether bitcoin is volatile with respect to the US dollar, or whether it is the dollar that is volatile with respect to bitcoin?

There are further twists here, for connection to the state does not in fact always guarantee money’s stability. The Zimbabwean dollar, for example, has had an average annual inflation rate of over 600 percent per year over the past 20 years, reaching a peak rate in the global Financial Crisis in the billions, and at various times in that duration the government has ceased issuing dollars, letting other national currencies be used instead. Yet the Zimbabwean dollar is still called ‘money’, even though it clearly lacks money functionality, because of its connection to the state, though it is certainly not ‘functional’ for Zimbabwean society.^[2]

Money or ‘moneyness’

Functionalism uses secondary criteria, such as state, scale, and stability, to create a binary differentiation of ‘real’ money from its various digital and local contenders. Yet in the practices of financial markets, the issue is really one of degrees and dimensions of ‘moneyness’, where the condition of moneyness is not legal tender, scale, or stability, but liquidity. Liquidity itself once meant how close to cash an asset is, so economics could define degrees of liquidity that start with cash-as-money (‘cash is king’) followed by a series of asset classes defined on the basis of their distance from cash: money in the bank is a bit less liquid, term deposits even less liquid, etc., on up to treasury bonds. This was the basis of definitions of money supply associated with central banks’ adherence in the 1980s to ‘monetarism’(i.e. measures such as M1 (money in circulation) and M2 (M1 plus savings deposits and mutual funds, etc.) that once dominated debates about monetary policy). The problem that became apparent was that these different measures started moving at different rates, leaving central banks unsure as to which version of ‘money supply’ they should be targeting. Yet this framing of money and liquidity remains dominant.

The other meaning of liquidity is how readily an asset can be sold at its ‘full’ price (the narrowness of the bid-ask spread); that is, whether instant sale requires a significant price discount or sale at full price takes significant time. This alternative definition is important, for as financial markets and communication technology develop, liquidity can be found outside of conventionally-defined ‘money’. One aspect of this is that cash, once the liquidity benchmark, has itself become less liquid – increasingly vendors refuse to handle cash, and various central banks have raised the possibility of fees for use of cash, to cover the costs of its provision. The other aspect is that certain financial markets, especially financial derivative markets, have such high turnover that their bid-ask spread is negligible: any asset can be converted to any other asset almost instantly and without the need to discount from the current price. Assets in these markets appear to have a degree of moneyness. Crypto markets are also achieving these liquidity conditions, particularly the largest tokens.

The point here is that derivatives and crypto tokens have moneyness in that they meet certain attributes of money. In the official functional binary, they are deemed ‘non-money’, but they are actually breaking down the coherence of that binary. Derivatives are designed to bridge financial categories, for example, between money and commodities (derivatives are themselves produced in financial houses, as commodities to be sold) and between debt and equity (total return swaps or convertible bonds have attributes of each financial claim). Similarly, crypto tokens are part financial assets, part money, and they can substitute for money in certain settings. The desire by central banks to exclude them from the definition of money has a clear state policy pragmatism: if their issuance cannot be controlled by central banks they are deemed outside the domain of stabilizing monetary policy – it is simpler to define them as ‘not money’. Yet central banks themselves are starting to introduce digital money, recognizing the virtues of blockchain technology to offer fast, verifiable transactions. With shifts in crypto ledger verification systems from proof of work to proof of stake, the energy costs of blockchain transactions are now lower than the costs of conventional financial clearing houses.

Functionalism may save us from ambiguity about money, giving greater apparent clarity to definition, but it does so by simply taxonomically precluding ‘real’ financial developments that are breaking down that clarity, so forcing that definition of money towards incoherence. This doesn’t, of itself, make privately-issued tokens either usable or coherent, but it must open the space where their potential role is addressed more openly.

Unit of account

The unit of account function of money is probably the least discussed, as it seems to be a passive function. Most explanations point to it as the unit in which records (accounts, ledgers) are kept, and immediately slip to the nomination of a national currency as the form of the unit of account (the baht is Thailand’s unit of account; the birr is Ethiopia’s, etc.).

Several critical issues slide by in this framing. First is the connection of the unit of account to the naming of a national currency. The baht is not a ‘function’ of money, it is a unit of denomination of (a particular) money, and that denomination is an insufficient condition for being a unit of account. What matters, when we think of the production and sale of a cup of coffee for $4, is not that it is denominated in dollars (a somewhat trivial insight), but that it ‘scores’ a 4, while a sandwich may score 3 times higher, and a bottle of water half.  Economic and accounting practices and conventions specify the processes by which these relative scores are attributed, and money simply offers the units in which they are expressed.

J.M. Keynes, in his 1930 A Treatise on Money, using the term “money of account” rather than “unit of account”, contended that money of account is the “primary concept” of a theory of money.

Perhaps we may elucidate the distinction between money and money of account by saying that the money of account is the description or title and money is the thing that answers to the description. Now if the same thing always answered to the same description, the distinction would have no practical interest, but if the thing can change, whilst the description remains the same, the distinction can be highly significant. (emphasis in original) (Keynes, 1930: 3)

Keynes went on to the illustration that debt denominated in gold equal to the weight of the king varies with who is appointed king. But the point applies also to Zimbabwe: money (the thing) is changing in ways unrelated to the description. It is apparent, then, that popular depictions of the unit of account tacitly rely on precisely the functionalist presumption that ‘the same thing always answers to the same description’, such that the money thing and the unit of account can indeed stand in for each other.

However, if things financial, economic, and social are not stable, then this presumed passive function of money itself becomes volatile. A functionalist approach does not want to engage the possibility of disparity, and it will try to ignore emerging volatility until it expresses itself as a monetary crisis. Such volatility can have various origins. It can stem from a rapid buildup of assets on the books of central banks and raise the question of whether the underwriting of financial market stability is infinitely sustainable. Another challenge could be a looming failure of accounting conventions, for instance the inability to account for the value of intellectual capital, which makes up the predominant value of the world’s big tech companies, and hence the incongruity of  these companies’ share prices remaining so exceptionally high relative to company earnings.^[3] Another expression of failure, ‘external’ to current accounting would be the incapacity to deliver modes of measuring and recording that depict the real costs of environmental damage.

A further assumption in the functionalist depiction of a unit of account is the notion that there should be just one unit: just one way to attribute value, for a value monologic is functional to social stability. Two related issues arise here.

First, two countries with different currencies may well share a unit of account. Britain and the United States have different currencies, but they adopt basically – though certainly not completely – the same ways of measuring (accounting conventions; state levies and bounties). Indeed, it is only because they have this shared base that shifts in exchange rates can give information about ‘the economy’ rather than just about the money thing itself. Put simply, focusing on different currency denominations as different units of account exaggerates state autonomy and diminishes the underlying level of globality in economic processes.

Second, we should challenge the functionalist premise that a singular unit of account is itself an expression of social stability and consider whether it is actually a statement of power, asserting the hegemony of one discourse of value over all others. Specifically, the (single) unit of account in capitalist countries reflects capitalist modes of calculation and the rule of the conditions of profit. The coffee scores 4 and the sandwich 12 because these are the profitable number of dollar units at which these goods are supplied to the market. Corporate assets are, by convention, valued according to the expected future capacity to deliver profit (which is why the extraordinary valuations of the tech giants is such a transgression of coherence).

For most progressive political movements, challenging the unit of account is out of reach, so politics becomes the process of demanding the state modify the power of the rule of profit: to tax polluters and to subsidize the living standards of the poor, etc. One of the potential virtues of ‘crypto’ token systems, as privately issued ‘money’, is that they could trigger challenges to the state’s unit of account: a new ‘money’ could provide the space for new criteria for measuring the values of goods and of assets and liabilities.

At the base of all tokens are accounting practices: recording transfers on a reliable ledger. So defining a unit of account – or the protocol by which units of account will be socially defined and enacted – is one of their genesis design questions. The problem is, however, that most leading crypto designers are not seeing this potential. Bitcoin embeds no alternative ‘views’ on the unit of account, so it operates just as an aspiring contender with state monies, utilizing their units of account. Stablecoins, managed to maintain parity with the dollar, are heavily invested in treasury bonds as collateral, so they too operate within the units of account of state money.

Other crypto designers are rather entranced by the deceptive simplicity of Hayek’s libertarian economics, and his advocacy of private money competing with state money for popular use resonates with their deeper politics. But Hayek is by no means challenging the capitalist unit of account: indeed his challenge is to the propensity of states to meddle with the profit-based unit of account by ‘distorting’ market signals. We may consider whether we find here an economic basis for the alliance of libertarianism and authoritarianism that is so visible in political life right now.

To move away from a capitalist economic framework, we must start by challenging functionalist definitions of money and seek disruptive, but creative, reframings of what money can become. One such project, with which I am involved, uses financial technology and distributed ledgers to create postcapitalist protocol, designing the conditions of an economy with multiple, coexisting units of account and allowing members of a network to express which value criteria they wish to endorse. Perhaps some will support capitalist profit criteria, but others will support investments and outputs with environmental and social criteria embedded in their value propositions and ledger systems. The challenge is how to keep these multiple value systems coexisting and determined in distributed, not centralized, processes, and preclude collapse to a monologic. I invite you to read our recent book Protocols for Postcapitalist Expression (Bryan, Lopez and Virtanen 2023)^[4] which seeks to build protocol to meet those challenges.

Dick Bryan is emeritus Professor in Political Economy at the University of Sydney where he has worked on the digitization of financial assets and its relation to financial risk. He is also Chief Economist at the Economic Space Agency, a digital ledger organization building the protocol for a postcapitalist economic network.

References

Bryan, D. Lopez, J. and Virtanen, A. 2023 Protocols for Postcapitalist Expression. London: Minor Compositions.

Keynes, J.M. 1930 A Treatise on Money. London: Macmillan.

^[1] This compares with 180 national currencies and 334 million joint stock companies (companies listed on stock exchanges. In 2024, 5,300 new tokens are launched each day.  See  https://www.coingecko.com/research/publications/how-many-cryptocurrencies-are-there?utm_source=newsletter&utm_campaign=Data%2BVisualization&utm_medium=email

^[2] A similar, though less extreme case could be made regarding the currencies of ​​Turkey and Argentina

^[3] See, for example, https://www.ft.com/content/308541a8-5f14-42c8-9b7d-e314059dadb4.

^[4] See https://postcapitalist.agency/

This article is part of the b2o: an online journal Special Issue “The Gordian Knot of Finance”. 

Capital of Lies

Amin Samman

What metaphors should we use to talk about finance? There are many provocative formulations to choose between. A relentless machine, processing everything in its path; a bulimic stomach, spitting out all that it chews up; a central nervous system, sensing and sending messages for capital; a firm hand that has a chokehold on policymaking; a giant squid sucking on the face of humanity.[1] Each of these opens up a different way of thinking about the power of financial mechanisms. But what happens when thought itself is imagined as integral to financial power? What role do “mechanisms of the mind” play in maintaining the rule of finance? Neither political science nor political economy is well-equipped to answer this question. The philosophical and literary discourse on nihilism gives us a language much richer in possibility. There are lies and there is the lie. The lie keeps us coming back for more, generating yet more lies. It never pays to unmask the lie. Lies are more lucrative. Perhaps this is why public policymakers persist in imagining and administering the world in financial terms.

***

What is “the lie”? The lie is not the same as lying as we normally understand it. Lying is something we do with words. One lies when one intentionally deceives others with words. The lie entails something else—namely, deceiving ourselves about the status of words and of thought. Words are not things; concepts are not reflections of entities or worldly configurations; symbolic systems are not the expression of a cosmic mechanics. All of these things—words, concepts, theories—are ultimately metaphors. This was Nietzsche’s point. “Truth” is an effect achieved through the repetition of metaphors. Nietzsche makes this case in a posthumously published essay called “On Truth and Lie in an Extra-Moral Sense”:

What, then, is truth? A mobile army of metaphors, metonyms, and anthropomorphisms—in short, a sum of human relations, which have been enhanced, transposed, and embellished poetically and rhetorically, and which after long use seem firm, canonical, and obligatory to a people; truths are illusions about which one has forgotten that this is what they are; metaphors that are worn out and without sensuous power […] (Nietzsche 1976: 46-47)

There are two important points to draw from this commentary. First, if truth is nothing but worn-out metaphors, then the lie is that these metaphors are something else: classifications, descriptions, windows onto the structure of the world. We tend to forget that metaphors are none of these things. And this is why forgetting is a form of lying. We lie to ourselves when we imagine that there is something rather than nothing at the bottom of our words. This amounts to a psychology of denial, repression, or self-deception. The second point, which Nietzsche immediately goes on to make himself, relates to a group dynamic. To be truthful means to employ the usual metaphors, “to lie according to a fixed convention” (47), to lie with the herd.

These points correspond to the opposing poles of Western nihilism. On one side, an emptiness at the bottom of words that haunts existence (the problem of religious nihilism), on the other, a social formation that turns this condition into a plastic cage (the nihilistic condition of postmodernity). This duality provides a potentially valuable perspective on financial power. During the heyday of neoliberalism, it was common to hear about the power of financial ideas, ideologies, and imaginaries. This was the case with neo-Gramscian political economy and constructivist political science, for example, which sought to explain our enduring attachment to the neoliberal-financial worldview.[2] But these theoretical projects failed to reach their goal because they did not go far enough. They did not follow their suspicions about discursive framing and sloganeering through to their logical conclusions. And for good reason: any attempt to get to the bottom of words can only end in self-sabotage.

Theoretical projects sabotage themselves by wearing out their metaphors and hardening into an edifice of interlocking concepts. An economy of ideas, interests, and institutions coagulates around a founding lie, be that rational choice or historical necessity. This is self-deception playing out at the level of theory. But it is also the consequence of a more basic self-deception. We want to lie to ourselves.

***

What makes the lie so appealing, so lucrative? Cioran had an answer. Though influenced by Nietzsche and often compared to him by critics, Cioran was suspicious of even the most sensuous illusions. Hence the exquisitely wrought but dark vision he paints, in The Temptation to Exist, of lies piling up on top of one another.

everything which keeps us from self-dissolution, every lie which protects us against our unbreatheable certitudes is religious […] We last only as long as our fictions. When we see through them, our capital of lies, our religious holdings collapse. To exist is equivalent to an act of faith, a protest against the truth, an interminable prayer […] (Cioran 1968: 221)

Cioran’s metaphors mix here to startling effect. The lie appears as a religious craving to cover over the absence of truth, and existence, in turn, assumes the form of a financial challenge: to manage one’s religious holdings, to accumulate a capital of lies, ultimately, to “profit by one’s share of unreality” (210).

There are two ways of bringing this idea to bear on financial society. The first entails using it to think through the technical operations of finance. Joseph Vogl (2022: 105) has recently done something like this, describing the financial sector as an elaborate arrangement of “profitable truth game[s].” Valuations and therefore fortunes emerge “from opinions mirroring opinions about opinions” (34), giving us a society heavily invested in “value ghosts” and “referential illusions” (103). This point should by now be relatively uncontroversial. The second route, yet to be adequately explored, runs in the opposite direction. It entails thinking about the entire financial system as a gigantic decorative fantasy, a Baroque structure whose primary purpose is to “obscure the truth of the absence of the truth” (Pefanis 1991: 114). It is not the only such structure, but it appears to be among the more captivating, the more transfixing, of our time.

A concrete example: In March 2024, the Financial Times reported a global stock market rally driven by the boom in Artificial Intelligence (Steer et al. 2024). It is easy to think about this as an outcome of the financial process, the product of its temporal mechanisms and the way these spiral into an ecstasy of speculation (see, for example, Szepanski 2024). But we can also think about it as a “façade to the void” (Cioran 1975: 48). And this façade will not survive too much scrutiny. As it happens, the markets never threaten this kind of scrutiny. They are too busy linking one thing to the next to worry about the absent foundations of finance or value. Meanwhile, the rule makers find themselves in a different situation. They must do exactly the same as market traders, only without appearing to do anything of the sort. Baudrillard wrote about this delicate balancing act in Forget Foucault:

the secret of the great politicians was to know that power does not exist […] To know that it is only a perspectival space of simulation […] and that if power seduces, it is precisely […] because it is simulacrum and because it undergoes a metamorphosis into signs and is invented on the basis of signs. This secret […] also belongs to the great bankers, who know that money is nothing, that money does not exist […] Power is truly sovereign when it grasps this secret and confronts itself with that very challenge. When it ceases to do so and pretends to find a truth, a substance, or a representation […] then it loses its sovereignty […] it dies also when it fails to recognize … itself as a void […] (Baudrillard 1987: 58-59, emphasis in original)

The business of finance thrives on runaway lies. The politics of finance consists in a carefully renovated façade that maintains the illusion of truth. These are important points that the critique of finance has yet to fully grasp.[3]

***

Why can’t we just unmask the lie and get on with it? This is key to the hegemony of finance and our seeming inability to break free from its spell. The cultural turn in political economy led to the naïve belief that this was a simple matter of mobilizing competing ideas and countervailing ideologies. If only we could swap out one discourse for another, we could win a whole new world. It was a cul-de-sac and this kind of theory had next to nothing to do with the demise of neoliberalism, which was already on its own reincarnation cycle. Constructivism and neo-Gramscianism may no longer be in vogue, but the underlying impulse has migrated to the fringes of economic theory, where it blends legal scholarship with policy activism. The entire Modern Monetary Theory project should be understood as a political attempt to implement the theory of economic constructivism.

Perhaps the best example, at least the most revealing, is the Mint the Coin movement. Founded in 2011 against a backdrop of mounting fiscal crisis, it proposes to harness the fictitious character of money by minting a trillion-dollar coin and paying off US government debt in one fell swoop. Scott Ferguson speaks about this kind of measure as rekindling and partaking in the plenitude of the holy fisc. Money is a “boundless center of abstraction” (Ferguson 2018: 167), he says, and if only we were able to embrace this, we could enjoy a world of limitless generosity and care. The problem is we remain wedded to “cruel fiction[s]” (3) like finite money, unsustainable debts, and so on. Ferguson is far too optimistic about our ability to do without fictions.

Consider the following model, which appears in a 1994 essay by Mark Taylor called “Discrediting God”:

The currency of psychological investment is the libidinal current whose flow is regulated by the constantly shifting difference between credit and debit. Though seeming to tend toward equilibrium, the psychic economy can only operate if books do not balance. When the positive and the negative or pluses and minuses cancel each other, we reach the null point where eros becomes thanatos and being becomes non-being. (Taylor 1994: 604, emphasis in original)

He continues:

While the establishment and maintenance of equilibrium might appear to be the aim of economic systems, the achievement of this purpose would result in the annihilation of the structure. (617)

Libidinal economists like Deleuze and Guattari would tell you that none of this is metaphorical. That may well have been the key to their success, but only because libidinal economy itself is nothing more than the circulation and exchange of metaphors (Bennett 2016). And in this case, Taylor’s model provides an interesting metaphor for our relationship to metaphysical fictions. Imagine belief in terms of credit and disbelief in terms of debt. One can disbelieve some things and believe others, one can disbelieve everything and believe nothing, one can even believe everything and disbelieve nothing. But the books cannot be allowed to balance. One cannot reach the point where belief and non-belief neutralize each other. One needs to keep moving, keep believing and disbelieving.

The next question is how to allocate one’s credulity, how to manage one’s portfolio of lies. Going all in on disbelief is to court metaphysical bankruptcy. Not for the faint of heart. The other extreme—total credulity—is the way to delirium. A decadent pursuit that normally requires a considerable outlay of resources. The normal thing to do is to maintain a more balanced portfolio; to use the usual metaphors, to lie and to believe according to fixed convention, to go with the herd.

Modern Monetary Theory (MMT) now appears in a new light. MMT identifies a number of cruel economic fictions. It then presents the world with a theoretical fiction of its own, albeit one that alleges to do away such things. But the MMT project, at least in its current form, is doomed to fail for two reasons. First, because it underestimates the psychological value of our fictions. We know this because it sets out to rob us of our most important fiction: namely, that we live in a “real” economy composed of something other than illusions. Second, because it overestimates the political value of unmasking our fictions. If the art of power is keeping its emptiness a secret, then MMT commits the mortal sin of exposing the secret. Instead of renovating the façade of power, it draws attention to the void beneath.

The implications of this stretch beyond the political fate of MMT. Indeed, the case of MMT suggests a much broader lesson about the interplay between heterodoxy and the lie in public policy. Lying against the herd is one thing, but at least one can accumulate a capital of lies amongst a group of new believers. Unmasking the lie in order to harness the fictitious quality of economic order is much more treacherous. If one’s capital of lies were to evaporate, if one’s religious holdings were to collapse, what would happen to one’s constituency of believers? It would disappear. In short, the psycho-political arithmetic of unmasking the lie is all wrong. The only way to make it add up is to tell more lies. This raises some extremely thorny questions about duplicity and politics. Would not the most effective platform for MMT be to lie in order to acquire the status of a truth, instead of try in vain to unmask the lies of public finance? In which case, would it not then have to choose between power and transparency?

***

All this comes back around to the riddle of what sets or keeps the financial world in motion. The only satisfactory way to approach this question is through an unusual metaphor, a metaphor that we still remember to be a metaphor. And this metaphor, which likens lies to capital and existence to a portfolio of lies, opens up a new perspective on the value of orthodoxy. The image of an economic world consisting of all the usual metaphors masquerading as truths offers a considerable degree of consolation, a significant metaphysical return on psychic investment, enabling everyone to get on with the business of managing their capital of lies. It is no wonder, then, that economic policymakers cannot or will not trade in the market worldview for anything else, especially not the idea that we can choose any worldview we want. The psychic payoff attached to the idea of market rule is of greater political value than the one attached to various efforts to harness the fictitious quality of economic order. That is why policy discourse struggles to part ways with economic and financial orthodoxy.

Amin Samman is Reader in International Political Economy at City, University of London, and author of History in Financial Times (Stanford University Press, 2019). He is Editor-in-Chief of the journal Finance and Society, as well as Director of the Finance and Society Network. He is currently completing a book manuscript with the working title Currency of Nihilism.

References

Abdelal, Rawi, Mark Blyth, and Craig Parsons, eds. 2010. Constructing the International Economy. Ithaca, NY: Cornell University Press.

Baudrillard, Jean. 1987. Forget Foucault. Translated by Philip Beitchman, Lee Hildreth, and Mark Polizzotti. New York: Semiotext(e).

Bennett, David. 2016. Currency of Desire: Libidinal Economy, Psychoanalysis and Sexual Revolution. London: Lawrence & Wishart.

Best, Jacqueline, and Matthew Paterson, eds. 2010. Cultural Political Economy. London: Routledge.

Cioran, E. M. 1968. The Temptation to Exist. Translated by Richard Howard. Chicago, IL: Quadrangle Books.

Cioran, E. M. 1975. A Short History of Decay. Translated by Richard Howard. New York: Viking Press.

Crockett, Andrew. 2011. “What Financial System for the Twenty-First Century?” In Per Jacobsson Lecture, 3–25. Washington, D.C.: International Monetary Fund.

De Boever, Arne. 2018. Finance Fictions: Realism and Psychosis in a Time of Economic Crisis. Bronx, NY: Fordham University Press.

Deleuze, Gilles, and Félix Guattari. 1983. Anti-Oedipus: Capitalism and Schizophrenia. Translated by Robert Hurley, Mark Seem, and Helen R. Lane. Minneapolis: University of Minnesota Press.

Ferguson, Scott. 2018. Declarations of Dependence: Money, Aesthetics, and the Politics of Care. Lincoln: University of Nebraska Press.

Konings, Martijn. 2015. “What is Constructivism For?” Progress in Political Economy, February 18. https://www.ppesydney.net/what-is-constructivism-for/.

Konings, Martijn. 2024. “Symposium: Cutting the Gordian Knot of Finance.” Finance and Society Network. https://financeandsocietynetwork.org/gordian-knot-symposium

Nietzsche, Friedrich. 1976. “On Truth and Lie in An Extra-Moral Sense.” In The Portable Nietzsche, edited and translated by Walter Kaufmann, 42–47. London: Penguin.

Pefanis, Julian. 1991. Heterology and the Postmodern: Bataille, Baudrillard, and Lyotard. Durham, NC: Duke University Press.

Steer, George, Harriet Clarfelt, Kate Duguid, and Stephanie Stacey. 2024. “AI Boom Drives Global Stock Markets To Best First Quarter In 5 Years.” Financial Times, March 29. https://www.ft.com/content/1f471c88-d49f-4a52-8619-cc5c0c506008

Szepanski, Achim. 2024. Capitalism in the Age of Catastrophe. Basingstoke: Palgrave Macmillan.

Taibbi, Matt. 2010. “The Great American Bubble Machine.” Rolling Stone, April 5. https://www.rollingstone.com/politics/politics-news/the-great-american-bubble-machine-195229/.

Taylor, Mark C. 1994. “Discrediting God.” Journal of the American Academy of Religion 62, no. 2: 603–23.

Vighi, Fabio. 2016. “Capitalist Bulimia: Lacan on Marx and Crisis.” Crisis and Critique 3, no. 3: 415–32.

Vogl, Joseph. 2022. Capital and Ressentiment: A Brief Theory of the Present. Translated by Neil Solomon. Cambridge: Polity.

Notes

[1] These formulations echo Deleuze and Guattari 1983, Vighi 2016, Crockett 2011, Konings 2024, and Taibbi 2010, respectively.

[2] The interested reader should consult Abdelal et al. 2010 or Best and Paterson 2010 for the particulars. Konings 2015 provides one of the few sane commentaries on this development.

[3] There are of course notable exceptions. See, for example, De Boever 2018.

This article is part of the b2o: an online journal Special Issue “The Gordian Knot of Finance”. 

Democracy and the Political Limits of Monetary Politics

Stefan Eich

There are by now two deeply familiar stories about the nature and origin of money. One is the well-worn standard economic story that used to dominate economics textbooks, and still does to a surprising extent. In this Commercial Origin Story, money emerges out of commerce and becomes more efficient over time. Over the past decade this account has, rightly, been heavily criticized, in particular by anthropologists (Graeber 2011).

In its stead, a different narrative has emerged: the Chartalist Origin Story, which has by now in an important sense become the new orthodoxy. Here money emerges not from commerce but essentially from the force of taxation. It is essentially a token that states create and then force subjects to pay taxes with it. This second story helpfully brings the state into the picture, but to a surprising extent the two accounts nonetheless mirror each other more than they can themselves admit.

Both tend to be introduced as origin stories. Both are “just so” conjectural histories that make sweeping generalizations. Crucially, both lack an actual political theory of money. Politics and the state are of course marginal at best in the commercial account. But even in the chartalist account, which purports to overcome this impasse, politics appears as an undifferentiated mass of tax power. All too often, the modern state is simply presumed and not itself historicized or theorized. What is missing is an actual account of political struggle and with that a historically attuned theory of the modern state.

This matters all the more because how we describe the workings of the monetary system, and how we situate it in relation to the modern state has vast ramifications for debates about how to craft better monetary institutions and how to democratize money. Instead of ever more elaborate origin stories we need accounts of the actual political workings of money.

That includes better accounts of the ways in which money inevitably raises complex questions of power, that render it suspended between trust and violence (Aglietta and Orléan 2002). Translated into political theory, this means that money is an institution of collective belief with rich performative, communicative and temporal dimensions. Money appears in all these aspects as a fragile project of political language and trust, with the coercive powers of the state always on the horizon, creating unique promises and challenges for democratic politics. As such, money is a “constitutional project” (Desan 2017), albeit of a peculiar kind.

Acknowledging these wider social forces at the same time highlights the temporal nature of money as a form of collective belief—perhaps even faith—about the future. As Keynes (1936: 294) famously put it, money is first and foremost an institutional embodiment of temporality. As the unit of account in which credit claims are articulated and recorded, money embodies and refracts clashing collective beliefs about the future. Money is in this sense not only the battlefield of clashing expectations about the future, but also embodies clashing ideas of the very conception of “the future”.

This framing allows us to build on the most promising credit theories of money but to also appreciate that credit (or debt) is usually accepted because of a combination of trust and force. All this amply illustrates the ways in which money is not merely a neutral economic technology but always entangled in questions of power and clashing conceptions of the future. It is moreover a site of manifold political struggles in which certain expectations about the future can easily become self-fulfilling.

In the economic sociology literature this power has recently come to be denoted as an instance of “infrastructural power” (Mann 1984; Braun 2018; Braun and Gabor et al 2020; Wansleben 2023). But there is a crucial ambiguity in how the concept of monetary infrastructural power has been taken up, namely whether we are dealing here with the power of the state or of financial markets—whether infrastructural power is primarily public or private. As Krippner (2024) has recently perceptively remarked, shared invocations of the term easily obscure significant disagreements. Whereas many locate central banks as genuine agents at the heart of this infrastructural power, others (Braun and Gabor, for example, but also Krippner herself) stress instead the dependencies of central banks on financial market imperatives. In short, on their reading it is not the state that wields infrastructural power, but the first movers are instead financial market actors. Gabor (2021) has captured the underlying paradox by describing the ways in which central banks seem today more powerful than ever and are yet at the same time without genuine political agency.

Governing Hybridity

While money is thus deeply political, that politics cannot be reduced to a sovereign will or decision. Rather, modern money is a complex hybrid that is both private and public, always economic and political at once. Money and banking are never purely private but they are tethered to the state and its central bank—and banks are fundamentally unlike other companies. But this also means, inversely, that even the state’s capacity to steer money creation is embedded in a capitalist frame of value. Here, Keynes’s understanding of money of account meets Marx’s value theory. To adapt Marx’s quip about historical agency from the Eighteenth Brumaire (Marx 1978: 595): states make money but they do not always do so as they please.

It is possible to theorize that hybridity in a number of different ways, as perhaps the original act of privatization, as a public-private partnership, as a finance franchise, and so on. But in all these approaches, the underlying relationship of mutual dependence—financial, political, and strategic—needs to stand at the very heart of any account of the contemporary financial and monetary system. States, central banks and societies at large are dependent on the banking system as a payment system, as a tool of credit creation and provision, but also as a transmission channel for monetary policy. Today that interdependence can easily feel like a form of blackmail in which banks are able to leverage their own systemic significance. But it is worth remembering that banks also need the state—and the safe assets created by the state—at least as much as the state needs finance. This relationship of interdependence poses a set of undertheorized political questions, but also points to underexplored openings for strategic action.

In addition to the hybridity of the system there is another political dimension that can get lost in the infrastructural account. To speak of infrastructural power easily suggests a misleading impression of concrete solidity, an image of monetary systems as highways. But money is more peculiar than a simple road. It is, to use Adam Smith’s image of paper money, a “wagon-way through the air” (Smith 1981: 321). And its levitation is ultimately a product of our beliefs and expectations. Money has a profoundly reflexive dimension that operates at the level of the collective imagination. In the realm of money, beliefs matter irrespectively of whether they are true or false. Any political theory of money has to take into account this reflexive logic. The central political question that emerges thus is: how to govern the hybridity of modern money, with the interdependence between state and finance that it continuously recreates, but also with its peculiarly reflexive character?

Political Limits of Monetary Politics

The point of insisting that money is always already political is thus not to suggest that it is perfectly malleable. To be sure, we develop critiques of social constructions to escape the ways in which these constructions hold us captive. That does mean piercing the veil of naturalizations in order to demythologize. But just because something is constructed does not mean it can be reshaped at will. The point therefore cannot simply be to re-assert state control. Instead, we need to recognize that state control is already part of the hybrid system yet in ways that easily frustrate notions of democratic control. In some sense this was Marx’s profound point: even if a state were to take over the monetary system but would leave the underlying structures of production untouched, it would be unable to escape the capitalist value concept. Even its ideal money would become commodified.

My point is thus not simply to underwrite nominalist claims of monetary malleability but to locate more precisely the scope for and limits to monetary politics. To posit the political construction of an institution does not imply an effortless ability to cash out the democratic promise of said institution. Nowhere is this more evident than in the realm of money, and yet it is precisely this fundamental political problem that has gotten lost in the monetary standoff between the orthodoxy and chartalism. These limits, though very real, are neither external “economic” limits, nor are they static or fixed. Instead, they arise from the fact that the construction process is not transparent to itself. Foregrounding the constructedness of money does not do away with constraints but offers us a different way of understanding the problem by emphasizing that the limits and binds are internal to the politics of money.

Monetary Democratization

And yet I remain convinced that this critique leaves considerable space for articulating substantial political demands for the democratization (the gerund matters here) of money even under contemporary conditions. That does not mean that our chains are merely imaginary but rather that democratic politics requires struggling within a system whose horizon of realization we can never reach (Taylor 2019). Here it is easy to fall into two traps that mirror each other.

The first trap is that of misrepresenting and downplaying the scale and scope of the kinds of political interventions that are available in the realm of monetary power even under capitalism—a mistake that characterizes some parts of the Marxist tradition, though as I have argued elsewhere Marx’s own position is more interesting (Eich 2022: 105-138). The state is not simply restricted to setting the unit of account, but it can and does constantly, if largely invisibly, intervene in the process of credit creation and allocation. There are of course clear limits to a state’s ability to force citizens—let alone foreign investors—to accept its own tokens. But even within the confines of contemporary central banking there are nonetheless discretionary decisions of enormous scope with vast stakes that are all entirely compatible with the existing relations of value. The power of central banks extends to their ability to reject or accept pleas for convertibility of different forms of private monies from the bottom of the money pyramid into fiat monies at the top. Whose credit claims are converted, which assets central banks buy and hold on their balance sheets, and who can count on an emergency liquidity injection are all decisions that fall under the broad heading of monetary politics and the answers to these questions are fundamentally underdetermined by the forces of capital alone.

But it would inversely also be a mistake to misrepresent and downplay the challenges that nonetheless remain for any state seeking to wield monetary power under capitalism. Modern Monetary Theory (MMT), which has done an enormous service in highlighting the actual workings of the monetary system, can sometimes be guilty of supposing that once the spell has been broken, states will somehow be liberated to wield fiscal power as they please. But not only is the state’s capacity to steer money creation still ensnared in the capitalist value form, there are also various internal political struggles over the public finances that pit defenders of fiscal and monetary orthodoxy against any attempt of reform. The underlying divergences in political and economic interests are real and they run right through any account of monetary power and the politics of credit creation. The real task in the face of these two traps must be to develop a more complex picture of monetary power that is aware of these internal limitations and that nonetheless asks what it would mean to insist on the democratization of these forces.

We can productively relate this framing back to debates on the constitutional dimension of monetary systems (Desan 2017). Constitutions are institutional expressions of the paradoxical attempt to channel and arrest political change. If they lack workable ways of amendment, constitutions can become suffocatingly conservative as dead hands of the past. And yet constitutions can also be designed in more democratic ways or can change in more democratic directions. So just as constructedness does not equate to malleability, so does constitutionalization not equate to democratization. The question for us is then whether the monetary constitution is so self-referentially shielded against external intervention as to frustrate any attempted amendments? Or are there ways in which one could at least begin to democratize the monetary constitution?

What would it mean to democratize a monetary system under contemporary capitalism and all the constraints internal to the peculiar kind of money that it produces and demands? How we spell out a vision of democratizing money varies according to how we conceptualize the constraints of the construction process but also what we take democracy to consist of. As an initial starting point, it helps to loosely distinguish between three strands of democratic theorizing: those that place emphasis on representative institutions, those that stress deliberation, and those that focus on contestation. The most persuasive theories of democracy tend to combine all three strands, not least because these seem to be interdependent in important ways. If approached through the first lens of representative (usually legislative) institutions, the politics of central banking largely appears as a problem of democratic delegation and how to make such delegated power more accountable. But greater democratic accountability of central banks would in turn arguably require more robust structures of both deliberation and contestation, namely institutionalized and non-institutionalized channels for demanding justifications and challenging power. Democratic deliberation requires a form of contestation, just as contestation often—though not necessarily—has a deliberative dimension.

What ties these three aspects of representation, deliberation, and contestation together for me is, however, not a fixed ideal of institutionalized rule but instead an acceptance and indeed embrace of indeterminacy and uncertainty as the true features of democratic life. As Claude Lefort (1988) insisted, democracy is necessarily open-ended and unfinished. The objective of my argument about democratizing money is thus emphatically not to offer an institutional blueprint but instead to make, in a Lefortian spirit, a meta-democratic point, one that is less interested in issuing policy recommendations or institutional fixes and rather insists that grappling with questions of monetary power requires bringing monetary politics back into public debate and opening it up to the indeterminacy of open-ended, democratic contestation and critique. At that point we would be touching on the element of greatest discomfort and anti-democratic suspicion among central bankers who are raised on the idea that uncertainty is poison for financial markets. The question of uncertainty might then be the most concentrated moment of real tension between financial capitalism and democratic politics.

We can no longer sidestep this question. Ever new kinds of uncertainty, from climate to geopolitical risks, intrude into monetary policymaking. Both feed the “uncomfortable knowledge” (Best 2022) of central bankers concerning the depth of their own ignorance which they can neither ignore nor ever fully acknowledge. Moreover, excluding questions of monetary governance and credit creation from democratic life and democratic debate will have pernicious consequences not just for monetary policy and our monetary systems but also threaten the health of democracy itself.  Bracketing questions of monetary design from democratic decision making  and leaving crucial policy decisions—who gets to create money, where credit flows, and who gets bailed out—in the hands of unaccountable private actors or unelected technocrats will inevitably hollow out the democratic self-understanding that we are ultimately engaged in an experiment of self-rule. Democracies would thus do well to develop better avenues for articulating the underlying political questions and the inevitable encounter with uncertainty they entail.

Conclusion

Capital rules supreme, and yet—as Walter Bagehot (1873: 20) already put it—“[m]oney will not manage itself.” All monetary systems need governance. That inevitably raises political questions of who gets to decide who governs and based on what values. The hybridity of the system constrains the political responses that are possible, but it nonetheless also affords political openings. Money is always already political, even where it appears in the guise of a privatized anti-politics; but at the same time, to say that something is political cannot be reduced to the possibility of shaping things at will. This allows us to move beyond the misleading choice between the “depoliticization” versus the “re-politicization” of money and central banking. Monetary depoliticization is itself necessarily a mirage that obscures the ways in which what might appear as depoliticization is much better understood as itself a political project of de-democratization. This does not necessarily disqualify calls for the “depoliticization” of money, but the underlying values and goals have to be articulated and defended in the language of democratic politics. Inversely, calls to “politicize” money are empty—even potentially reckless, given the current popularity of this idea on the extreme right—if they fail to articulate what kind of politics is meant to be injected. Is the objective to bundle money power in one hand or instead to open it up to democratic decision-making?

Just as we need to escape the misleading binary between the politicization and depoliticization of money, so we must transcend artificially narrow debates that reduce questions of democratizing monetary power to the nominal status of central banks. Central banks can only ever be as democratic as the monetary system through which they govern and on which they depend. Overcoming our current impasse thus requires that we ask a more fundamental question than simply whether we are for or against central bank independence. We ought to ask instead: independence from what? While “independent” central banks are shielded against democratic politics, they are entirely dependent on commercial banks for credit creation and for the transmission of interest rates. Any such central bank, even if it were to be directly elected or guided by a democratic deliberative body, will necessarily find itself in a reactive position of subservience. A genuinely independent central bank is entirely compatible with greater democratic accountability precisely by shielding it both against the executive and by making it more independent from financial markets.

The central task must thus be to create the democratic spaces in which open debate about these questions can actually take place. That means on one level to better understand the hybrid interdependence of finance and the state in the realm of capitalist money, including any strategic openings afforded by that interdependence. But it also means to look beyond the current, deeply flawed system in order to develop alternative demands for what a more egalitarian financial and monetary system could look like that actually serves as a peculiarly reflexive piece of public infrastructure.

Stefan Eich is Assistant Professor of Government at Georgetown University. He is the author of The Currency of Politics: The Political Theory of Money from Aristotle to Keynes (Princeton University Press, 2022), which was awarded the 2023 APSA Foundations of Political Theory Best First Book Prize.

References

Aglietta, Michel and Orléan, André. 2002. La monnaie entre violence et confiance. Paris: Odile Jacob.

Bagehot, Walter. 1873. Lombard Street: A Description of the Money Market. London: Henry S. King.

Braun, Benjamin. 2018. “Central banking and the infrastructural power of finance.” Socio-Economic Review, 18, no. 2: 395–418.

Braun, Benjamin and Gabor, Daniela. 2020. “Central banking, shadow banking, and infrastructural power.” In: Mader, P., Mertens, D., and van der Zwan, N. (eds.), The Routledge International Handbook of Financialization. London: Routledge: 241–52.

Desan, Christine. 2017. “The Constitutional Approach to Money,” in Nina Bandelj, Frederick F. Wherry, and Viviana A. Zelizer, eds., Money Talks: Explaining How Money Really Works. Princeton: Princeton University Press: 109–30.

Eich, Stefan. 2022. The Currency of Politics. The Political Theory of Money from Aristotle to Keynes. Princeton: Princeton University Press.

Gabor, Daniela. 2021. Revolution without Revolutionaries. Berlin: Finanzwende and Heinrich-Böll Foundation.

Graeber, David. 2011. Debt. The First 5,000 Years. New York: Melville House.

Keynes, John Maynard. 1936. The General Theory of Employment, Interest and Money. London: Macmillan.

Krippner, Greta. 2024. “Leviathan financialized?,” Finance & Society 10, Issue 1: 59–64.

Lefort, Claude. 1988. Democracy and Political Theory. Translated by David Macey. Cambridge: Polity.

Mann, Michael. 1984. “The autonomous power of the state: Its origins, mechanisms, and results” European Journal of Sociology, 25, no. 2: 185–213.

Marx, Karl. 1978. “The Eighteenth Brumaire of Louis Bonaparte [1852].” Robert C. Tucker (ed.), The Marx-Engels Reader. New York: W.W. Norton: 594-617.

Smith, Adam. 1981. An Inquiry into the Nature and Causes of the Wealth of Nations [1776]. Indianapolis: Liberty Classics.

Taylor, Astra. 2019. Democracy May Not Exist But We’ll Miss it When It’s Gone. London and New York: Verso.

Wansleben, Leon. 2023. The Rise of Central Banks: State Power in Financial Capitalism. Cambridge MA: Harvard University Press.

This article is part of the b2o: an online journal Special Issue “The Gordian Knot of Finance”. 

The Modern Money Tangle: An Introduction

Martijn Konings

It is increasingly evident that the existing economic policy paradigm is a recipe for ongoing economic stagnation, political polarization, and ecological degradation. But this growing awareness often seems peculiarly inconsequential, incapable of driving even minor shifts in the most conspicuously harmful policy settings, including governments’ enormous subsidies for fossil fuel extraction and the near-perfect exemption of extreme private wealth from taxation. Even as electoral systems have become almost as volatile as the stock market, it seems that, when it comes to economic policy, the political center holds, inexplicably.

We tend to call that paradigm “neoliberalism”. The epithet was first used by academics. But, as during the decade following the Global Financial Crisis wider communities of observers found themselves increasingly puzzled by the immunity of economic policy to feedback from social and ecological systems, the label became used more widely (Slobodian 2018, Monbiot and Hutchinson 2024). The problem, by this account, consists in politicians’ and policymakers’ unexamined belief in an expanded role for market mechanisms as the obvious solution to any and all social problems. Moreover, that erroneous belief is self-reinforcing, as the persistence or worsening of social problems is only ever taken to mean that not enough market efficiency has yet been applied.

In the social sciences themselves, neoliberalism has become a contested concept. A general definition – neoliberalism as the reformulation of a classic liberalism in response to the rise and crisis of Keynesianism – is unlikely to encounter many objections. But the critical force of the neoliberalism concept is premised on a more specific claim – namely, the ability to capture the diminishing role of the state and the expansion of the market. It is not at all clear, however, that such a shift in society’s center of gravity, from public to private, has taken place. The very period during which the concept of neoliberalism established itself as a common descriptor was also the era of “quantitative easing” (asset purchases by the central bank) and “macroprudential regulation” (concerning itself not just with the health of individual firms but with macro-level stability) during which Western governments took on an unprecedented level of responsibility for maintaining the balance sheets of large financial institutions (Tooze 2018, Petrou 2021). Entirely contrary to what the neoliberal schema would suggest, the functioning of government institutions has become deeply entangled with the expanded reproduction of private wealth (Konings 2025).

Supported by the significant historical and conceptual nuance that recent scholarship has provided, some have argued that the neoliberalism concept can accommodate such developments. But such qualifications undercut the critical thrust of neoliberalism as an off-the-shelf diagnosis of our current predicament. Others have gone further in questioning the suitability of traditional categories of state and market for capturing structures of power and exploitation that appear simultaneously archaic and futuristic. Neoliberalism, from such a perspective, may simply have buckled under the weight of its own contradictions, and we are now seeing a transition to a very different kind of society – neo-feudalism or technofeudalism (Dean 2020, Varoufakis 2024). Such takes align with the self-image of many Silicon Valley billionaires, who often see themselves less as capitalist entrepreneurs than as the founders of new dynastic bloodlines. But treating such heroic or nihilistic self-stylings as reliable guides to current transformations rather than publicly lived mental health struggles may well be a symptom of what Stathis Gourgouris (2019: 144) understands as social theory’s own “monarchical desire”.

A more helpful angle has been advanced by Modern Monetary Theory (MMT), a perspective that understands economic value as a public construct and found considerable traction by pointing out that such public capacities for value creation had been appropriated by the property-owning class (Wray 2015, Kelton 2020). Taking a leaf from the Marxist book of dialectical historical change, MMT authors propose liberating the machinery of public value creation from the pernicious regime of property relations that it has been made to serve and instead to press it into serving “the birth of the people’s economy”, in the words of Stephanie Kelton (2020). If governments can afford to bail out banks, they can fund programs with actual social value.

MMT precursor Abba Lerner (1943, 1947) viewed his perspective on money as a public token as nothing more than a rigorous statement of the assumptions underpinning Keynes’ General Theory. Keynes himself had tried to make his work acceptable to establishment opinion by concentrating primarily on the role of fiscal policy, leaving the overarching financial structure of the capitalist economy go unquestioned. Even during the heyday of Keynesian hegemony, attempts to wield the public purse were always constrained by the fact that control over monetary policy settings was firmly in the hands of central banks (Major 2014, Feinig 2022). That was a key institutional precondition for the rise of neoliberal inflation targeting. But the absurdity of putting monetary decision-making beyond democratic control became fully evident following the Global Financial Crisis, when central banks made permanent an extensive range of subsidies and guarantees for the holders of financial assets, while governments tightened the public purse strings by cutting social programs.

In this context, arguments that had long been dismissed as crank theory were able to bypass the censure of mainstream economics and find purchase in the public sphere. The vicious response of mainstream economics to the popularity of MMT has done more to underscore than to refute the salience of its provocation – that there exist no actual economic reasons why we can’t repurpose the institutions of the bailout state, away from the gratuitous subsidization of private wealth accumulation and towards shared prosperity.

Finance, MMT understands, holds no secret: it’s just a ledger of society’s transactions and commitments. And if these records are in principle as transparent as any other system of accounts, then what is there to prevent the public and its representatives from taking charge and correcting the perverse misallocations embedded in the current system? According to MMT, the main obstacle here is the flawed, arch-neoliberal idea that governments, like private households, need to “balance the books”. Politicians who operate under the pernicious influence of neoliberal ideology do not recognize that governments are sovereign institutions issuing their own currency and are not subject to the same discipline as households. Adding insult to injury, the principle of public austerity is always readily suspended when banks need bailouts – and invariably reinstated again once the danger of system-level meltdown has passed.

MMT has adopted a very literal reading of neoliberalism, imagining that the force of its ideological obfuscations is the main obstacle to repurposing the mechanisms of quantitative easing for the advancement of the people. In reality, the problem runs deeper. The public underwriting of private balance sheets has a long history. From the mid-twentieth century it served as a key instrument for governments to manage the contradictions of welfare capitalism. During the 1970s, neoliberal ideas of fiscal and monetary austerity became influential not because of their ideological strength, but because they provided a way to manage the inflationary pressure produced by risk socialization. That permitted the routinization of bailout and backstop policies, which culminated in the intravenous liquidity drip-feed that large banks enjoy at present.

That arrangement also has deeper social and political roots than it is typically credited with. Government subsidization of asset values is a major factor responsible for the rise of the “1%”, but it has also underpinned a broader reconstruction of middle-class politics, away from wage expectations to capital gains (Adkins, Cooper and Konings 2020). The nineties represented the high point of this asset-focused middle-class politics, when rising home and stock prices delivered benefits widely enough to give credence to the promise of inclusive wealth.

The trickle-down effect has now come to a halt, but that fact does not by itself undo the ideological or institutional structure of the backstop state. The allocation of public resources has become intertwined with the private wealth accumulation in an endless number of ways that are not easily unwound. The idea that governments can do things themselves, without having to put in place complex financing constructions to mobilize private capital and incentivize the doing of said thing by others, has become so incomprehensible in the bourgeois public sphere that there simply no longer exists a straightforward channel for translating social priorities into public spending priorities. What binds the machinery of policymaking to the power of finance is not a set of discrete ties but rather something akin to a Gordian knot.

How to undo, loosen, transform, or bypass that knot? The recent past offers some clues. Since the Covid crisis, modern money has powerfully expressed both its public and its private character. When emergency struck, governments were instantly capable of doing all the things that politicians and experts routinely advise are just not possible. By expanding the safety net beyond the financial too-big-to-fail establishment, they orchestrated a “quantitative easing for the people”, in the words of Frances Coppola (2019). The world’s most powerful central banker, Federal Reserve chairman Jerome Powell, conceded that there were no real technical limits to the possibility of getting money in the hands of people who needed it (Pelley 2020). Almost overnight, MMT went from indie darling to mainstream pop star. “Is this what winning looks like?”, the New York Times wondered (Smialek 2022). Many declared the end of the neoliberal model.

But before too long, inflation surged, and discourses insisting on strict limits to the use of public money and credit returned to prominence. The discipline thus meted out has been extremely uneven. Central banks across the world have increased interest rates to slow down growth and employment, but for bankers and asset owners the edifice of quantitative easing and liquidity support remains firmly locked in place. Treasuries have similarly tightened the purse strings, swiftly undoing the broadened financial safety nets and undertaking deep cuts in social programs and public education even as they continue to increase spending on the military and corporate tax breaks.

MMTers and other progressives have not failed to call out the hypocrisy, and neoliberal nostrums about the importance of balanced budgets no longer enjoy the same intellectual authority that they once did. But it often seems as if that hardly matters – that the sheer exhaustion of neoliberalism as an intellectual paradigm merely serves to make a mockery of the idea that policy could change in a material way. We can all see that the emperor is not wearing anything, and yet we’re in the midst of a powerful restoration of economic orthodoxy, relentlessly socializing the risk of the largest players while inflicting tight monetary and fiscal policy settings on the rest of the population.

MMTers have allied with other heterodox economists to rebut mainstream arguments for deflationary policy (Weber and Wasner 2023). Inflationary pressures, they argue, had their origins in specific events such as supply-chain disruptions, and should be addressed by targeting those sources – not by carpet-bombing the economic system at large. Such arguments invoke a long history of Keynesian supply-side thinking that aims to undercut inflationary pressures in ways that do not require the central bank or the treasury to deploy their crude instruments of general deflation. The last time such a progressive supply-side agenda had made waves was during the nineties, when Democrats positioned such ideas as an alternative to Reagan’s right-wing supply-side agenda. Then, they became allied to spurious claims about a new economy and ended up providing ideological cover for Clinton’s embrace of fiscal austerity. This time, such ideas synced with the Biden’s administration’s interest in a more active industrial policy meant to counter the economic stagnation that had become evident during the previous decade and to tighten the strategic connections between key economic sectors and America’s geopolitical interests.

While the recentering of the national interest has allowed Keynesian ideas to enjoy greater influence, it has also reinforced the blind spot that has historically plagued that paradigm and that MMT had sought to correct. Even as fiscal and regulatory policy have become fully yoked to the needs of financial assets holders for minimum returns – a dependence that Daniela Gabor (2021) has referred to as the Wall Street consensus, dominated by an asset manager complex that demands comprehensive derisking for any and all projects it invests in, what fell by the wayside with the rise of Bidenomics is a critical focus on the economy’s financial infrastructure as an object of democratic decision-making.

Indeed, the Biden administration has been eager to disavow any interest in in challenging the autonomy of the Federal Reserve – one of its preferred ways to signal that there are “adults in the room” who take advice from experts. In this way, it has left the field open to the far right, which intuits much more readily that the advocates of independent central banking are false prophets, and it has made greater political control over monetary policy one of the key points of its blueprints for a more fascist future such as Project 2025. A progressive agenda that fails to engage that terrain, on which are situated the monetary drivers of the escalating concentration of asset wealth, will be unable find much sustained traction.

MMT has shown us where we need to look – where to direct our attention and bring the struggle. But its wish to beat mainstream economics at its own scientistic game, by advancing objectively better policies rooted in superior expertise, prevents it from recognizing what an effective political engagement might involve. The contributions to this forum resist the temptation to imagine alternatives as if any are readily available. Instead, they examine modern money as a complex tangle, composed of an endless range of dynamically evolving strategies and alliances that straddle any divide between public and private. The financial knot is tighter in some places than in others, but neither orthodox economics nor MMT gets the pattern into sufficiently sharp focus to see the openings and fissures.

In that sense, we should perhaps consider ourselves as occupying the mental space that Keynes did after he completed A Treatise on Money (Keynes 1930), which catalogued the extraordinary expansion of liquid financial instruments during the early twentieth century but had left him uncertain about the meaning of all this. When several years later he wrote the General Theory, his mind was on the day’s most pressing questions, above all the dramatic collapse in output and employment that had occurred during the previous years. While he recognized that such volatility could only occur in a monetary economy, he nonetheless considered it justifiable to let finance drop “into the background” (Keynes 1936: vii). Lerner viewed that as an infelicitous move, sensing correctly that it kept open the door to the restoration of an economic orthodoxy eager to sacrifice human livelihoods at the abstract altar of financial property. The contributions presented here (presented first at a symposium on the Gordian knot of finance held at the University of Sydney, generously sponsored by the Hewlett Foundation), take a step back and linger with the more open-ended curiosity that drove Keynes’ earlier engagement with the institutional logic of financial claims. How has the knot of modern money been tied?

Stefan Eich’s contribution examines money’s constitutive duality, the fact that it is public and private at the same time. He draws attention to the structural similarity of perspectives that think of the financial system as either primarily public or primarily private, and, engaging with MMT as well as other strands of “chartalist” theory, he argues that money is best seen as a constitutional project. The fact that money is at its core both public and private means that political openings always exist, even if those are never opportunities to reconstruct the financial structure from scratch.

Amin Samman asks what it is about the financial system that makes it so resistant to rational public policy intervention. To this end, he draws attention to the role of fictions in the functioning of finance – when speculative projections fail, the response is not sober reflection but a feverish acceleration of their production, eventuating in the installation of the lie as the modus operandi of capital. More earnest, truth-observant policymakers occupy a structurally impossible position, on the one hand interfacing with the delirious virtuality of capitalist finance and on the other attempting to be responsive to rational criticisms.

Dick Bryan argues that a preoccupation with how to undo or cut the Gordian knot may be misplaced. For each bit of loosening we achieve, capital has tricks up its sleeve to tighten its grip. Instead of focusing too much on the knot itself, we might think of ways to slip past it by designing financial connections that may not instantly become entangled in existing networks and their power concentrations. Challenging any clear-cut distinction between money and asset, he argues that crypto currencies could be designed to play that role.

Janet Roitman takes a different look at the image of the Gordian knot as a global imperial structure, and she asks whether it in fact attributes too much efficacy to the power of finance. While acknowledging the strength of the international currency hierarchy, she shows that dynamics challenging the dollar system arise from within the dynamic of capitalism itself. New financial technologies are instruments of economic competition, and in that capacity, they offer new opportunities for exploitation but inevitably also for the loosening of constraints, however limited or compromised such emancipation may be.

While Roitman turns our attention to the fissures in the global financial knot, Michelle Chihara concludes the forum by pointing out a major kink in the heartland of modern money. She argues that, for all our fascination with the ghost towns that the bursting of the Chinese real estate bubble produced, vacant property is a key aspect of the functioning of contemporary global capitalism. The jarring combination of vacant apartments serving as subsidized storage for transnational wealth on the one hand and a rapidly growing population of homeless and underhoused on the other, is giving rise to new forms of protest, reminding us that the grip of money is rooted in the compliances of everyday life.

Taken together, the contributions collected here shed light on different aspects of the tangle of promises, claims and commitments that constitute modern money. Such a perspective militates against the promise of a neatly executed, wholesale policy shift to reorient the economic system, but that does not entail a hard Hayekian anti-constructivism as the only alternative. MMT might be likened to a subject of psychoanalysis that, upon realizing that the world holds no deep secret, declares itself cured – but, when venturing back out, finds that its relationship to that world has undergone little practical change. It still has to do the work of deconstructing, transforming, or otherwise navigating the actual web of fictions, promises, lies, and obfuscations that it has built. In few areas of life is such thoughtful deconstruction more imperative than in our relationship to modern money, which is structured by so many layers of miseducation and misapprehension that transforming its practical operation is necessarily as much about revising our understanding as it is about getting our hands on the institutional machinery of its creation.

Martijn Konings is Professor of Political Economy and Social Theory at the University of Sydney. He is the author of The Emotional Logic of Capitalism (Stanford University Press, 2015), Neoliberalism (with Damien Cahill, Polity, 2017) Capital and Time (Stanford University Press, 2018), The Asset Economy (with Lisa Adkins and Melinda Cooper, Polity, 2020), and The Bailout State: Why Governments Rescue Banks, Not People (Polity, 2025).

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