What is Finance? A Conversation with Keith Hart, Daromir Rudnyckyj, and Caitlin Zaloom

Photo by James Smith.

This post builds on the Openings and Retrospectives collection “After 2008,” which was published in the November 2018 issue of the Society’s peer-reviewed journal, Cultural Anthropology.

Jen Hughes and Tariq Rahman: Collectively, these essays span vastly different parts of the world. However, one of the concepts that holds them together is finance. In anthropology but also well beyond the discipline, finance is somewhat of a slippery term, referring to activities that range from rotating credit collectives to securities and derivative contracts. We wanted to start by asking what might be a deceptively straightforward question: what is finance? Given finance’s ever-increasing diversity, to what extent is the term still analytically useful?

Keith Hart: I prefer the specific to the general use of the term finance. It is the specialized management of large sums of money by large bureaucratic organizations: governments and corporations, especially the banks. Financial refers to this sector and should not be confused with smaller-scale money transactions. Financialization refers to an expanded role for financial services in the economy and in ordinary people’s lives. An example would be bundling rents paid for use of student accommodations into a financial instrument bought and sold in markets that are dominated by this sector. What matters analytically is to be able to distinguish between historical phases and degrees of the intrusion of finance into how we all live. I also use the terms finance capitalism and financial imperialism to draw a comparison between the last four decades and a similar period leading up to the First World War, when capital accumulation by means of finance overtook capitalist organization of production and trade as the driving force in the world economy. It ended in tears then and will again now.

Daromir Rudnyckyj: In the broadest terms, finance simply refers to the management of money. In this sense, it includes practices as diverse as a homemaker managing his household budget and a peddler taking out a microfinance loan to expand her trade. It also includes a central banker deciding to adjust interest rates to meet an inflation target and a hedge fund manager deciding where to allocate investment capital. These are all sites where money is managed. Finance is a critical domain for anthropological investigation because virtually every human being who lives in a condition characterized by the division of labor is confronted with the problem of managing money. Most of these human beings must monitor (and, in turn, are often monitored by) the credit and debt relationships in which they become embedded by virtue of earning money through labor or other means or of spending money to provide for their consumptive needs.

My research has focused on a specific subdomain of finance, to which practitioners refer as “Islamic finance.” It is an endogenous category in the sense that it circulates as a recognizable domain of action for a global network of experts. In my essay for this collection and in my recent book, Beyond Debt (Rudnyckyj 2019), I discuss the ways in which the category of Islamic finance is contested by its practitioners. On the one hand, I draw attention to debates over what is it that makes Islamic finance Islamic. Differently positioned actors made divergent claims regarding this question. Some saw it as adherence to a literal interpretation of injunctions found in Islamic texts, such as the Qur’an and the hadiths (the recorded words and deeds of the prophet Muhammad). Others viewed it as a set of moral principles regarding justice, equality, and social cohesion. Still others simply saw it as brand, with little substantive difference from what they referred to as “conventional finance.” By drawing attention to contested definitions such as these, anthropologists can draw attention to emerging and experimental forms for organizing human life.

The analytical utility of a concept is a function of the extent to which it clarifies thinking and advances thought. The analytical utility of the concept finance depends on what one seeks to explain. Concepts are sometimes fetishized (in a Marxian sense) in that they are endowed with power beyond what they are designed to do or, indeed, are actually capable of doing. As far as marking out a domain of analysis, the concept finance provides a certain degree of utility, inasmuch as it makes the management of money the object of intellectual examination.

This is critical because, for a long time in anthropology, topics such as finance were off-limits. The discipline presumed its object of analysis to be the lifeways of traditional others who, so the story went, did not have monetized economies, although they may have used “money stuff”—tokens such as shells, beads, or stones—that had some, but not all of the characteristics of modern money. However, when the discipline realized that the binary between tradition and modernity on which anthropology had been founded was little more than a convenient fiction, that enabled the discipline to focus on a range of phenomena that had previously been terra incognita.

Today, of course, it is common to find anthropologists participating with and observing central bankers (Riles 2011; Holmes 2014), financial analysts (Leins 2018), development professionals (Whitington 2019), management consultants (Chong 2018), journalists (Boyer 2013), police officers (Karpiak 2010), scientists (MacPhail 2014), bureaucrats (Gershon 2012), and physicians (Roberts 2012), just to mention a few of the fields that have become the subject of anthropological inquiry. The discipline offers a unique perspective on expert domains by examining how knowledge in these domains is produced, the practices that go into its construction, and the effects of these practices once such knowledge is put into circulation. In this sense, anthropology documents the conditions of possibility for the knowledges and practices that shape human life today. This is analogous, in a way, to an earlier anthropology that elucidated the contexts that framed cultural practices for exotic others.

I am not sure we need an anthropology of finance to go along with all the other “anthropologies of” that seem to be proliferating; anthropological work on finance shares many of the same preoccupations of economic anthropology more broadly conceived. Nevertheless, given the importance of finance in configuring modern anthropos—the contemporary human being—finance is a critically important domain of investigation.

Caitlin Zaloom: Finance is a useful anthropological concept because it focuses analysis on the social relations built by the exchange of funds in debt, credit, and investment. The concept can be especially useful in illuminating how lenders and borrowers, investors and firms, are bound together across time. These contractual relationships establish connections that are often unequal and sometimes novel. They also carry powerful, but implicit, instructions that direct social conduct. Finance as a concept establishes these bonds as objects of inquiry.

Finance is a useful anthropological concept because it focuses analysis on the social relations built by the exchange of funds in debt, credit, and investment.

U.S. student loans, like those I discuss in my essay for this collection, are a paradigmatic case. Each spring, college students sign agreements to borrow money from the federal government that they will (under the standard payment program) pay off for a decade after graduation. Their government lender treats this as a choice that students and their families make, together and in private. Using finance as a concept to examine this exchange helps reveal, first, the power of the government at the nexus of of debt, credit, and investment. Next, it exposes the specific goals that organize the American life course—like college education—and the specific mechanisms—like so-called Direct Loans—that organize its arc. Finance also directs attention to practices of repayment that extend debt relations through time and compels inquiry into how these relations feed back into the system, shaping families, careers, and politics. In other words, examining financial relations reveals the constitution of contemporary social and political power.

Finance is also a useful concept because it points to a particular historical moment in capitalism, one that challenges us to reexamine political economy from the heights of global capital to the intimacy of the kitchen table. Since the 1970s, governments have come to rely on debt, credit, and investment to stabilize their books and to take geopolitical positions; at the same time and relatedly, the financial industry has gained greater power and influence around the world. The 2008 mortgage crisis showed how the ascendance of the industry and its now-integral place in government were tied to the private worlds of home and family. The language of crisis and (rightful) accusations of malfeasance, however, obscured the interplay between the global markets in derivatives and the private sphere of aspiration driven by families’ expanded reliance on debt and investment for core achievements like home ownership, higher education, and retirement. The particular financial economy we have runs on sacred commitments that tie generations in ways that are historically novel. The concept of finance frames these relationships and opens up an investigation of what makes them distinctive today.

JH and TR: In their own ways, each of these essays urges attention to financial markets as they emerge outside of the West. What is at stake in these novel configurations? As global power dynamics shift, are we witnessing substantive changes or simply a changing of the guard? To put it bluntly, are the evils of finance baked in or is finance flexible enough to accommodate a more ethical approach?

KH: I chose to restrict my argument to the leading Western economies partly because anthropologists now study the whole world but tend to focus on the Rest to the exclusion of the West. I am much concerned with the relationship between Europe and Africa, not so much with regard to financial markets (although I study the euro crisis closely) but as a striking aspect of a huge demographic shift comparable to European expansion in the nineteenth century. In 1900, Europe had 25 percent of the world population and Africa 7.5 percent. The United Nations’s middle projection for 2100 is Europe, 6 percent and Africa, 40 percent. This means that Africa will be the most dynamic zone for world markets in this century. I know that climate change, wars, disease, and changing fertility patterns have unpredictable consequences. But when all of the Americas, Europe, Russia, and Oceania (including Australasia) could account for under one-fifth of the world population in 2100, I think we may safely conclude that what is coming up will not be business as usual. The quickest way to reverse financial dominance would be major wars and environmental disasters. Imagine the Chinese economy if such a war disrupted global transport and trade as the years 1914–1918 did. My interest is in trying to inform the political and economic options for Africa under various historical scenarios. Avoidance of large-scale phenomena is, however, universal in anthropology today.

DR: My essay is based on fieldwork that I conducted in Malaysia on efforts to create a global financial network, grounded in Islamic principles, that would operate alongside and as an alternative to the conventional financial system with its hubs in New York, London, and Hong Kong. The experts who were seeking to create this system saw it as a more stable and, indeed, sustainable alternative to conventional finance. This question was particularly acute following the financial crisis of 2008, which many people involved in Islamic finance took as prima facie evidence of the corruption and failure of conventional finance. These experts were, on the one hand, trying to develop contracts, institutions, and procedures that would enable this system to function as a viable alternative, while also constantly asking themselves what made this system Islamic. There were two things at stake: 1) trying to create an alternative to conventional finance with transnational viability, and 2) ensuring that this alternative was authentically Islamic.

Yet I must push back just a bit against this question and the assumptions latent within it. I would invoke Marx’s (1977, 568) age-old insight that it is not technology that oppresses the worker but the system of social relations in which technology is embedded that leads to her oppression). Money is merely a technology through which credits and debts are recorded. Finance—the management of money—is a set of interrelated technologies and technological systems. Therefore, there is nothing inherently good or evil about it. It is the system of social relations in which finance is embedded that can have either positive or negative effects. Human beings make decisions about how tools are used and we can decide how to use them for positive or negative effects. Strike Debt is but one example of how finance can be deployed toward positive, or in your terms “ethical,” ends (see Appel 2015). But there are many other examples as well, from currency reform initiatives to community currency experiments.

It is the system of social relations in which finance is embedded that can have either positive or negative effects.

The main problem with finance today is that, too often, people at the elite levels of finance have been able to manipulate the regulations designed to govern them (Tett 2009; Appadurai 2016). In no small measure, this is due to forty years of neoliberalism, which has promoted a mode of economic government based on deregulation and minimal state intervention. This has created tremendous growth and incredible wealth, but also a yawning chasm of inequality and incessant instability (Piketty 2014). As I describe in Beyond Debt, part of the promise of Islamic finance lies in the fact that, due to structural limitations on debt and leverage, it offers a financial regime with more moderate growth but also less volatility and possibly greater equality. At the end of the day, finance need not be an immense cosmos into which we are born, live, and die, but can be a tool that we collectively create and ultimately deploy to achieve communities in which we can thrive.

CZ: Finance is flexible. Contracts of debt, credit, and investment encode the social relations and hierarchies of the moment they are enacted; however, because finance stretches obligations across time, it also acknowledges the inevitability of change. This makes finance good for examining the dynamic of social durability and emergence that is always in play. It also opens up debt, credit, and investment arrangements to questioning as circumstances shift.

The aftermath of the 2008 financial crisis exposed student debt to such rethinking. In the wake of the crisis, while student debt continued its rapid climb, the U.S. job market was tanking for young people even as the stock market was racing to its historic peak. This contradiction—the rich getting richer, while middle- and lower-income people were taking on burdensome loans just to get a college degree and a shot at stability—lies at the heart of the movements for free tuition and against student debt. The unequal relations between government, banks, universities, students, and their families no longer made easy sense. Student debt once looked like a path to a prosperous future; after 2008 it resembled a bumpy road without discernible end.

Debt does not need to be damaging. In fact, debt is essential to social life, as anthropologists have long known. It binds people to one another in social projects that create future possibilities that otherwise could not exist. In order to support higher education as a project of social equality, loan repayment needs to accommodate the fluctuations of contemporary life. If student debt payments go up and down with income and accrue just enough interest to keep up with inflation (as they already do in several countries), they will encourage graduates to experiment with their jobs and their lives in ways that can renew the American promise and, at the same time, fund the educations of those who come next. Under the right circumstances, debt can be an investment shared between generations.


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