Your work can be described as economic anthropology, an attempt to explore the historical origins and current approaches to economics. How cultural is our economic system?
I come from an anthropology background and one of the main ways anthropologists try to understand systems is by immersing themselves in them to understand the perspective of those involved. Sometimes that is called participant observation – participating in something while observing it. You can blend those elements in different ways: Hardcore anthropology can be weighted towards extreme participation with less structured observation, really immersing yourself. Some old-school anthropology is more weighted towards observation than participation, making it more prone to a ‘judging’ outlook.
The discipline of Economics has traditionally tried to fit economic activity into universal theories. The attempt to fit all societies over time into a single theory requires a level of abstraction that is often quite disconnected from actual practice, or how people experience themselves in economies. Anthropology, on the other hand, is more attuned to describing the differences between people – the specificities and variations – and more interested in showing the ways people have provisioned themselves over time, rather than just asserting that people have always traded as ‘self-interested agents’ on markets. In essence, Economics takes one form of economic activity, forged in a particular historical and political context, and implies that this is the only form of economic activity.
Also, economics as a discipline tends to make a strange distinction between economics and politics, as if the political sphere and economic sphere can be meaningfully separated from each other. Holistic forms of anthropology, though, would explore how different economic systems are formed in or imply different political or cultural systems – how they are all interlinked.
One of the insights that came out of anthropology and historical studies is that states cannot be meaningfully separated from our modern concept of markets. That is to say, market-based thinking was enabled by, or expanded by, modern states. Within traditional Economics, self-interest is presented as natural, timeless, and inevitable. If you look at the economist Adam Smith, he makes this assumption that people have always traded with each other since the beginning of time. Whereas, history and anthropology point out many instances of societies that do not rely on trade, or do not even have private property regimes, and that have completely alternative ways to provision themselves.
It is only in the context of modern state formations that you see the emergence of the modern conception of ‘markets’. In the time of Adam Smith, modern states had already formed and he was blind to the fact that many features of economies he was observing couldn’t really exist outside of that context. So economic anthropology and history will try to situate the economy within specific political and cultural epochs.
Modern academia has attempted to create discrete disciplines to describe and understand reality, such as politics, economics, psychology, and so on. But in your everyday life no-one experiences these things as separate from each other. You don’t experience your psychology as distinct from a decision to participate in a particular form of economic activity. They are all fused into one experience. So all economic activity is intensely cultural and political. It is concerned with the distribution of resources, your ability to act in a society. The idea that there is some realm of economic activity that is separate from culture is, frankly, bullshit.
If we change our culture, can we then transform the economy?
If you come from a strict Marxist background, you’d probably tend to say the material world conditions culture, or that the underlying relations of production support a ‘superstructure’ of beliefs and institutions. So the tendency – more or less – is to see cultural systems as being a reflection of the underlying economic situation. The question then is, “Can you change your underlying economic situation by altering your culture?” And yes, it probably is possible. But it is a complex process and I’m not sure I have a coherent answer. Within economic reform movements you have some people who say things like ‘all we need to do is make people think differently to effect change’, but that jars against the reality that every single day people need to enter an economy that has a particular structure, regardless of what they think. It’s not obvious what the link between changing people’s worldviews and changing economic structure is.
Take a look at small credit unions or local currencies. People are trying to think and behave differently – act out a different culture – but in reality they remain stuck within the vortex of a much more powerful economy. Sure, if everyone, at once, changed the way they behaved, you could probably change an economic system, but there is a huge coordination problem there. It seems more likely that change is a messy and contradictory process, driven by some things we consciously choose – like small changes in behaviour – and others that we do not, such as technological changes. It’s unpredictable. The Internet, for instance, has opened up new possibilities, but also created opportunities for new monopolies of power.
To shift the question slightly, we could ask, “How do you shift culture within a large financial institution, such as Goldman Sachs?” These institutions are huge, with like 35,000 employees. They have to go into work every day and keep doing the same thing. Even if individuals within the institution want to change their own personal behaviour, the day to day pressures and requirements won’t allow it. So if you wanted to change the culture you would have to press pause on the organisation for, say, three weeks, and then go around and convince everyone in it to behave differently. But there’s no way in hell that they can press pause, so any attempt to change culture has to happen on the fly, incrementally. But these cultures get locked into these institutions, and when it gets toxic they find it very hard to change it. Here’s an analogy: imagine you have a computer that has a load of viruses, but to get rid of them will require a complete time-consuming reformatting. Now imagine you need to use it every day, and it’s not an option to be without it for a week, so you just keep using it. Likewise, we need to reformat financial institutions, but often we’re just superficially patching them up.
Access to capital is probably the most powerful dimension of our financial system. How can communities have more control over the circulation of capital at this stage?
The financial system as it stands, in most countries, operates at a large scale. It has centralising tendencies that give financial institutions lots of market power, and these large banks are also closely connected to government. In general, these banks find it easier and more profitable to deal with other large-scale players, directing capital to large corporations or large infrastructure projects, for example. Or else they invest in large numbers of standardised financial products that can be sold at scale, such as mortgages. They don’t have much ability, or desire, to sensitively respond to the niche needs of small-scale communities.
So how do you change that? Short of restructuring the entire system so such power does not exist, there are interim approaches such as banking regulation and reform. For example, you might lobby for quotas on banks to get them to support the real economy and smaller businesses.
Then there are attempts to bypass or augment the mainstream banks. This includes, for example, building community banking systems or municipal banks. Local banking advocates will insist that if you have a small financial institution rooted in an area, it is far more likely to serve local interests. In this debate, countries like Germany are often mentioned, as they have an older and more established system of local and regional banking. Co-operative banks are another approach. The idea is to change the ownership structure of banks to produce better outcomes, bearing in mind that co-operative banks often work at large scales and need not be local in orientation.
Then there are the local currency movements. This approach is not necessarily about accessing or raising capital, but creating economic exchange between people. This is different to raising money for a business. That said, mutual credit systems are currency systems, but they also provide access to short-term small-scale credit. They don’t solve the problem of accessing large-scale investment, but they can be very effective at allowing small businesses to trade on credit. Sardex in Sardinia is a good example.
A mutual credit system is when a network of people create an economic network and then set up a system to record when members give energy, labour or goods to another member of the network. The member who receives the labour goes negative, and the person who gave it goes positive. It’s essentially a ledger system for recording obligations between people. Members go in and out of credit and debt with each other. Over time, this is basically what a monetary system is: I contribute things, but I also needs things. When I contribute to the system I get positive credit, when I need things I am using up my credits or going into debt. This creates a cycle between members.You can create these networks with, say, 150 people, and I think they are one of the most undervalued approaches within local currency movements.
So there is local banking, local currencies, mutual credit, but there are also systems like community shares, which allow you to raise equity finance by offering shares to your local community. These have been relatively successful on a small scale.
You also have to bear in mind that is has been quite a while since there have been coherent communities in the UK. We often talk about ‘community’, but in London people often don’t know each other in their own neighbourhoods. There is a whole raft of work around community cohesion that is required before we even start to develop ways for communities to finance themselves.
I think with all of these things you have to have serious commitment. There are a lot of people trying to design local economic strategies that are volunteer-led or part-time. I’m not against small timebanks or other volunteer-led schemes, but they are not a serious challenges to the economic system. In the case of Sardex, it is a serious attempt to build a parallel currency system, and one that also integrates into the normal system. Recently I’ve become interested in the Greater London Mutual, and the network of new regional banks supported by the Community Savings Bank Association, which look like serious attempts to build local and co-operative banking.
If you can combine these alternatives with banking reform and policy changes, putting pressure on the existing banking system, you can then start to make a difference.
More recently you’ve been exploring what you call the ‘dash to a cashless society’. Could you explain how this offers new surveillance opportunities to private companies and governments, and how you understand the social consequences?
The term cashless society is a euphemistic way of saying the ‘bank payment society’. Within this system you need a bank account and you have to ask banks to facilitate payments. In a cashless society you always have to go through a financial institution.
Think about the traditional story given in any Economics course. A market is made up by two basic players – a buyer and a seller. The buyer gives money tokens to the seller who hands over tangible goods or services. In a cashless society, however, there is the introduction of a third player between every transaction – the money-passer, who moves money between the buyer and the seller in exchange for a fee. These payments intermediaries include the card companies and banks, who run the underlying infrastructure to allow this. So the ‘cashless society’ is an economic system that is predicated on every transaction passing through the banking system and groups like Visa and Mastercard.
There are a lot of institutions lobbying for this system – the banks themselves and digital payment companies who facilitate the movement of money between bank accounts. Then there is the state that can see many advantages to this. In particular it allows them to monitor all transactions. If you’re forced to use digital payment systems, all of your transactions are recorded and leave a data trail. This data can then be analysed. They are interested in this for anti-terrorism and crime detection, but also to monitor tax. There are also monetary policy interests, in particular the ability to introduce negative interest rates.
So the implications are far more than data about transactions, and it’s not just states that find this useful, but corporations, too. Large technology companies, like Google and Amazon, are trying to build payment infrastructure to expand their data monopolies and gain ever deeper insights into people’s economic behaviour. For example, big web platforms often are in the advertising business, but struggle to prove whether adverts convert into sales. So one endgame for some of these large technology companies is to discover the correlation between the adverts you see and how much you spend. So they have an obvious interest in receiving and analysing that data, and if they can track what you spend, they can also develop more efficient advertising.
Another endgame is machine learning and predictive analytics that try to predict, and ultimately steer, people’s behaviours. Banks themselves are interested in this approach, using data to influence behaviour.
There is no cashless society at present, but there is a big political push for it. In this context, it is interesting to explore crypto-currencies that create some form of counter power.