Like out-of-control Godzillas, financial markets have become
monsters that eat everything. Why do they do this, and how can they be
controlled? Sociologists want to know.
Most analyses of the current economic morass start and end with
finance. Maybe it was unruly lending to home borrowers, or maybe it was
new financial instruments that we didn’t understand but now must love
— just like Dr. Strangelove and the bomb. Many now believe that
capitalism has undergone a “Copernican revolution” in which financial
markets are now the core of our economic system — giving the boot
to the centrality of corporations.
In reaction, sociologists are taking their turn in the explanatory
arena. Sociology is about understanding how societies operate and where
meaning and values are found. What are the nonfinancial impacts of the
ascendency of finance? Economic sociology is now the fastest-growing
field in sociology and is elbowing its way into finance and business
departments.
In early August, the American Sociological Association held its
yearly meeting in San Francisco. In connection, a workshop bringing
together many of the best sociologists of finance from around the world
was held at UC Berkeley. Like other academic disciplines, sociology has
become globalized — and some of the papers at this conference
were fascinating. To take one example, Alya Guseva of Boston University
examined the credit card industry in Russia and the Ukraine. Credit
card companies in Russia qualify those to whom they issue cards by
visually inspecting their consumption, and not their income.
Since tax cheating and gray-market income is so high there, credit card
companies have no way to verify income. So instead, they dispatch
employees to the homes of its potential clientele. There, they gently
quiz potential borrowers about things such as their vacation plans.
Zeroing in on the location of the alleged vacation, the creditors
engage in seemingly normal chit chat to expose any puffery on the part
of the would-be borrower.
But, the real action in this discipline is in trying to discover
where the politics lie in financial markets. If one is interested in
controlling the voracious behemoth that is today’s financial markets,
the workshop’s competing visions were helpful. According to the
organizers of the Berkeley panel, entitled “The Politics of Markets,”
economic sociology has usually looked at human financial interactions
as being “embedded” in political institutions or culture. That is, if
you were trying to figure out how to understand and affect what was
going on in commercial or financial relationships among people,
understanding their culture and the relationships was key. But some in
the profession now claim these lenses are too primitive. For them, it
is the tools and devices that financiers use that deserve most
scrutiny. The technological medium contains the political message, they
argue.
Columbia professor Daniel Beunza and others argue that it is in the
construction and use of the tools in which politics, meaning, and
morals are to be found, not in the political and regulatory environment
in which they operate. So for people like me who think that moral
issues in finance are important, they claim that the locus of inquiry
should be the actual tools and not the overall political system or even
the regulatory system. Because once the tools do their thing, the barn
door is already open and the animals are out, and no amount of
governmental effort can bring them all back in to account for the
damage they have wreaked.
One example to consider is the controversy over what is a “socially
responsible” investment. Money held for our benefit in health and
pension funds is often invested in companies that do not respect our
values and may in fact directly oppose them. We want our investments to
be “socially responsible,” yet competing visions of that term’s meaning
conflict in several arenas. Fisticuffs can be seen in law concerning
the fiduciary duties of those who invest pension money, and similar
disputes emerge in politics over questions such as whether Wal-Mart’s
labor practices should play a part in decisions to allow it to open new
stores. But for Beunza and others, the important area of inquiry is in
the actual computer interfaces used by people who buy and sell
financial products for pension funds. These new economic sociologists
argue that the morality lies in the technology.
The sociologists at this conference understood that if they are
going to make such finely grained arguments, they need to practice some
old-fashioned ethnography. So, many have been sitting down with
arbitrage traders and other finance types to figure out why they act
the way they do and how they make and use their tools. Thinking of some
poor graduate student observing traders who pull down salaries a
hundred times as large is interesting to ponder. The mounds of cash
their subjects earn must make a career change awfully tempting.
It was unsettling to hear at the conference that many of the
research projects these sociologists are embarking upon sound eerily
like standard business school classes on how to make money. For
example, sociologists are trying to figure out why certain hedge funds
have produced outsized financial returns and others less so. I guess
there will soon be sociologists working for asset managers to help them
decide which managers to hire. But simply being enablers of the primacy
of finance seems a waste of this discipline. So I hope that economic
sociologists will use their training to help steer finance in a good
direction. If not, they will be no more than tools themselves.
