EDITION: ECOLOGIES.
Colin Drumm on a call to doing political economy that takes the class dimensions of both generational struggles and monetary policy seriously.
The Asset Economy: Property Ownership and the New Logic of Inequality, a team effort by Lisa Adkins, Melinda Cooper, and Martijn Konings, is a popular synthesis of the three authors’ previous books: Adkins’ The Time of Money, Cooper’s Family Values, and Konings’ Capital and Time. This highly readable and to-the-point book is a welcome intervention that begins by recognizing the struggles that traditional paradigms of political economy have encountered in seeking to make sense of an epoch dominated by financial crises, central bank interventions, asset inflations, and generational conflict, and moves on by attempting to develop some new and more useful concepts: key among them the notion of what they call “speculative logics.”
In the mind of this reviewer, the book is rather more successful at the first half of the project than it is at the second. The authors have, without a doubt, pinpointed the Achilles heel of received political economic traditions, both liberal and left: “the dominance of the commodity as a paradigm” is such that “the proliferation of relations of credit and debt is seen as an extension of the logic of the commodity and exchange.” The problem, as the authors correctly identify, is that this view “misleadingly models the way in which households participate in the financialized economy,” a point which is especially crucial in our context of intense social struggles over asset prices in sectors like housing, and the return of landed inheritance as a key driver of class formation. Even more welcome is Adkins et al.’s recognition that the asset-owning classes who benefit from financially-driven inequality are far more broad than the proverbial “One Percent” — involving a “wider logic of asset ownership that includes a large percentage of households” — and their insistence that our theories of class must consider intergenerational inheritance as well as occupation and income as one of its fundamental and defining characteristics. Such a conception is obviously necessary if we are to theorize the experiences of our post-’08 generation: there’s a big difference between a broke Millennial and a broke Millennial with rich parents, even if we went to the same schools and work the same jobs for the same pay.
This reframing of political economy around the notion of the asset, rather than the commodity, is in some ways an insistence upon what is often overlooked about Marx: that he named his great work “Capital,” rather than “The Commodity,” for a reason. Marx already understood, at a fundamental level, what Adkins et al. mean by the “logic of speculation,” or the notion that the capitalized asset represents “the constitution, in the present, of a claim on anticipated future revenue flows that is supported by legal instruments as well as wider institutional conditions.” But their work seeks to move beyond Marx in another way by rejecting his notion (which was nothing but the good sense of classical political economy) of finance as “fictitious capital,” or the idea that asset values must ultimately be grounded in a substance of value, a real economy, or a concept of economic fundamentals: “the political economy critique typically places a heavy emphasis on the unsustainable character of property inflation – that is, the idea that the growth of asset values is not supported by economic fundamentals and that… ‘what goes up, must come down’.”
As the authors note, however, the experience of the crash of 2008 and the subsequent era of central bank interventions via quantitative easing have largely failed to conform to the expectations implied by such a notion: “The financial crisis of 2007–8 was widely expected to put a stop to several decades of credit growth and property inflation, but failed to do so. Indeed, the rise in house prices has been particularly pronounced since then.”
With the price of ground floor entry into the American middle class thus rising out of proportion to incomes, younger people find themselves increasingly locked out of middle-class reproduction via what the authors call the “Fordist” path of employment: with the consequence that inheritance and inter vivos transfers become the only ticket left into a new, much more highly restricted, middle class formation.
The strongest insight of the book, which follows from these observations, is that asset inflation is itself a form of inflation (in addition to and separately from the more commonly invoked inflation of a consumer price index) and that inflations in general are not neutral and objective changes in the value of money but rather conjunctural conflicts between social classes over the distribution of wealth in a changing economy. Inflation, in other words, always and everywhere has a class character: during the 1970s, they argue, “those who benefited most from inflation were the middle-income homeowners who had borrowed to buy a house,” while, “by contrast, inflation seriously eroded the wealth of the top decile and centile of households.” After the turning point of the early 1980s, however, involving a “Wall Street driven counter offensive” and policy induced recessions at the hands of the central banks, these dynamics were successfully (from the point of view of elites) contained by ushering in the late 20th century situation of a bull market in assets in a context of stagnant wages.
It was, the authors suggest, these transformations that led to the development of a broad based “asset economy” as an implicit constitutional compromise for the squashing of wage inflation: “These dynamics,” they note,”would very likely have generated significant social unrest had they not been accompanied by the promise that the gains on asset appreciation would be distributed among the wider population.” The problem, of course, is that while it may not be true that ‘what goes up must come down’, it is certainly true that what goes up without coming down… can only go up once. The result, they convincingly suggest, is to articulate the class struggle with a generational one, such that these two axes of antagonism must be understood as fundamentally linked even if not strictly identical.
Even such a measured defence of a materialist interpretation of generational politics will be controversial in some quarters, but to my mind it is not only welcome but overdue. Many unforced errors on economics plaguing much of the post-2008 literature could be avoided by taking The Asset Economy’s interventions to heart. The book, however, has two significant drawbacks — one of omission and the other of substance — that limit the scope and usefulness of its conclusions. The first, perhaps more understandable limitation is that the book has relatively little to say either about quantitative easing itself, invoked in passing but not discussed in any detail, or about the history and geopolitics of the dollar system more generally. This is a tangled topic and admittedly difficult to treat in such a short book, but the story of generational conflict over asset prices stemming from structural changes in the 1970s cannot be divorced from the transformation of the United States from the world’s biggest creditor to the world’s biggest debtor over the course of that decade, a transformation that made its asset markets central to the global financial system in a way that is surely important for the story the authors want to tell. While their reticence to get into the weeds of such a topic here is understandable, future work seeking to build on the theses presented here will need to investigate this history in some detail. As it is, the narrative is presented, misleadingly, as though it were an almost purely internal development of the domestic economy.
A more serious criticism has to do with the frequently (and somewhat repetitively) invoked notion of “speculation,” which seems to be an important point of shared vocabulary among the three authors. Their usage of this concept is frustrating due to the fact that — despite leaning heavily on the work of the economist Hyman Minsky in both introducing and making use of it — their employment of the term discards almost entirely the distinction that Minsky wished to make by it. While the authors are correct, I think, to push back against an interpretation of Minsky as a moralizing critic of “speculation and overindebtedness” along the lines of the fictitious capital theory discussed above, their own presentation of his concepts is misleading in that it collapses Minsky’s distinction between hedge, speculative, and ponzi units and also conflates speculation with riskiness as such — a pair of concepts better left apart. In christening the neoliberal household as a “Minskyan” one on the grounds that it has been inserted into a “speculative, future-oriented logic,” they collapse Minsky’s concept of a speculative finance unit into a simple notion of any agent involved in a relation to futurity and its inherent uncertainty.
To put things in this way is not only to abandon the usefulness of Minsky’s actual concepts, but also to open their argument to charges of a lack of historical sense and weaken the claim — whose only historical support is made from silence — that the dynamics they describe are “not best understood as a return to an earlier era, when property was passed on (generally among men) from one generation to another in a more or less stable and mostly uneventful way” but rather something distinctly modern and new. The notion that inheritance processes used to be more or less stable and uneventful is a dubious claim in itself, and might be quite a surprise to medievalists and biblical scholars alike… but, more to the point, can it really be the case that the simple exposure of households to the ontological uncertainty of the future, as such, is really so epochally and earth-shatteringly new as all that? Surely even the late medieval English peasant household with their carefully husbanded cash reserves and their gardens were exposed to the volatility of future events in this relatively trivial sense.
They could have made a stronger case for what is really new about the situation they describe if they retained, rather than obliterated, the distinction that Minksy intended by a speculative finance unit as opposed to hedge or ponzi units. While these terms do not appear in the text or footnotes of The Asset Economy, the abandonment of Minsky’s concept (and, with it, most of his model) despite the invocation of his name and terminology is justified by Konings in Capital and Time. There, he argues that Minsky’s own hedge/speculation/ponzi distinction is already part of the wrong reading of Minsky (which paints him as a theorist of fictitious capital) and that what Minsky really meant to say was that everything is speculative — a claim that is repeated in The Asset Economy. In support of this, he argues that Minsky’s notion of a hedge unit must necessarily be “grounded in the real value of material production,” which he dismisses as relying upon the metaphysical foundationalism that he has already rejected. Since the distinction between hedging and speculation is poorly grounded, he claims, and since ponzi is defined by Minsky as a special case of speculation, we can dispense with this theoretical framework entirely and just speak of all entities with a balance sheet as being ipso facto “speculative.”
This weak reading of Minsky and insistence upon a vaguer and more buzzwordy notion of “speculation” is unfortunate, not because exegetical rigor is a good in and of itself, but because it leaves theoretical resources on the table. It is simply not true that the notion of a hedge unit in Minsky relies upon a concept of economic fundamentals. Minsky — for better or worse — is a theorist who operates on the level of pure surfaces: cash flows and balance sheets. All that matters, in his conception, is whether or not future contractual obligations are matched in every relevant period by future expected cash flows. If they are, then it is a hedge unit: but such a portfolio can be constructed purely out of government securities, and thus has no obvious conceptual relation to the “real” economy. If they are not, then the unit is either speculative or ponzi, the difference being whether the intention is to fund the portfolio through future revenues, in the former case, or asset sales, in the latter case. Regardless of the details, each of Minsky’s three “postures” towards the future (including that of the hedge unit) can be constructed by a portfolio of assets which have only the vaguest possible relation to anything resembling the “real” economy, simply by virtue of the fact that they meet the cash flow expectations defining each posture. The abandonment of Minsky’s distinction is therefore unwarranted, and the book would have benefitted from engaging with his concepts more rigorously.
Ultimately, however, neither of these limitations vitiate what is welcome about the book: a call to doing political economy that takes assets — and the class dimensions of both generational struggles and monetary policy — seriously.
The Asset Economy: Property Ownership and the New Logic of Inequality by Lisa Adkins, Melinda Cooper and Martijn Konings is published by Polity Books. New Socialist £5 and above subscribers can get a 20% discount.