Florencia Mallon has argued similarly (1995, 6): ‘In families, communities, political organizations, regions, and state structures, power is always being contested, legitimated and refined. Some projects, stories, or interpretations are winning out over others; some factions are defeating others. The interaction among different levels, locations or organizations in a given society—say, between families and communities, communities and political parties, or regions and a central state—redefines not only each one of these political arenas internally but also the balance of forces between them.
Stories of Peoplehood, Rogers Smith
I’ve written here before about an idea I call ‘democratic efficiency‘: the belief that one can infer popular beliefs from institutional outcomes because aggregated individual choices are manifested in an unmediated fashion in politics and policy. That means that whatever the public believes will (absent some interference in the normal functioning of our political system) automatically be translated into policy, because of competitive electoral incentives between he two major parties. Recent research has provided even more evidence that this is not a useful way to talk about the world. The piece that has generated the most discussion has been Martin Gilens and Benjamin Page (pdf) that tested different explanations for American politics. While the authors don’t actually come to this conclusion, the general take away has been that this piece demonstrates that the United States is an oligarchy.
Guest post by Dan Greene
I wanted to chime in and talk about a liquidity, character, and the social mission of these institutions because I think there’s another parallel between Wall Street and ed reform that we can draw out from Karen Ho. She writes:
For Wall Street bankers, one of their key imagined social roles as ‘market doers’ is to create liquidity, to speedily unlock and allocate money (as in the takeover movement) to its ‘best’ use. Through their own immersion in the market, especially the anxious, difficult experiences of constant downsizing and reinvention, their skills and lives—embodying the market and their roles in it—have also become “more liquid.” (244)
Traders justify their high pay not only by their smartness and overwork but by their perceived social benefit: They inject liquidity into illiquid markets or commodities, they make markets where there weren’t markets before. This generates shareholder value but, by a neat trick of historical revision, shareholder value is conflated with economic value more generally. So not only are they justified in theirs risks and bailouts and what not by providing liquidity to businesses who need it, but by a sort of trickle-down cultural intervention where staid institutions are liquidated and become better able to adapt to quickly changing and increasingly global economic conditions. So bigger institutions and different people get modeled on the personal lives of financial elites: constant downsizing and reskilling is prized above all, and rewards are based on bonuses and other deal-related incentives and not on anything related to the underlying asset, let alone anything approaching a long-term investment like a salary or a pension.
Ho traces the rise of shareholder value beginning in the 1980s as the dominant ethos for business. It became “the central explanation and rationale for corporate restructuring, changing concepts of wealth and inequality, and the state of the America economy.” (122) She argues that the phrase was uttered constantly by her informants, and that “it shaped how they used their ‘smartness’ and explained the purpose of their hard work.” (123)
Shareholder value was premised on the notion that financial analysts knew more about what these firms needed than those with expertise and experience. And it also meant dismissing any concerns for stakeholders other than shareholders. Any money spent on others—whether that was employees or the communities that depended on these businesses—was seen as a waste. This stance justified and encouraged “hyperexploitive labor practices.” (146) The destruction such practices inflict are justified by the idea that it brings about “efficiency.” As one analyst said:
If I’m an employee, then there may be some temporary dislocations in the economy, but long-term, with a higher employment rate because at the end of the day, the most efficient, the most imperative industry should survive. The best operation should survive. (157)
Economic inequalities then—inequalities in freedom as producer and as consumer—are embodied in unequal legal rights. In assigning and enforcing legal rights to the fruits of transactions, the law is doing more than protect the winnings in the game of production and exchange. It is dealing unequal hands to the players. Further state intervention to alter the distribution of rights and liberties, to the advantage of those whose liberty is most restricted as a result, in part, of state action cannot be properly described as “statism” in any obnoxious sense. There may, however, be good reasons of policy against disturbing many of the present inequalities. But elucidation of this matter will require another chapter.
Karen Ho reports that one defining feature of work on Wall Street is exploitation: specifically incredibly long hours and very hard work. She calls it “a white collar sweatshop.” (84) Recruits experience shock when they realize what their working conditions will be like. But ultimately, this work is seen as justifying the vast differences in rewards they receive and great inequities among them. “Unlike most workers in the neoliberal economy, elite Wall Streeters still experience a link between hard work and monetary rewards and upward mobility—although that link is importantly enabled by prestigious schooling, networking and a culture of smartness.” (74) Yet they (wrongly) imagine that others in the economy did not work hard—that the rest of corporate America worked nine-to-five. (103) “On Wall Street,” Ho says, “overwork is a normative practice.” (99) Indeed, these two things go together—Wall Street’s denizens believe they are smarter and work harder than everyone else, and that this justifies the power they wield in the country and around the world.
It’s normal to hear critics of “education reform” or “the accountability movement”, speak of “corporate ed reform,” and highlight the role of finance in pushing it. But it’s not always clear what this means. Reformers certainly praise choice and markets, and rail against unions and public institutions. But is there more to it than that? I think there is. When I read Karen Ho’s Liquidated: An Ethnography of Wall Street, I found the connections between her findings and the ed reformers striking. Attending to these connections, I would argue, helps us make sense of both of these world’s better. This post is the first of three posts discussing the link between Wall Street and education reform. (You can read part II here and part III here.)
Karen Ho’s ethnography of Wall Street places great emphasis on what she calls the ‘culture of smartness’ as a key to understanding this world.