Andrew Saldino

Department of Philosophy and Religion
Clemson University
asaldin@clemson.edu

 

Review of: Mark C. Taylor. Confidence Games: Money and Markets in a World Without Redemption. Chicago: U of Chicago P, 2004.

 

In Confidence Games: Money and Markets in a World Without Redemption, Mark C. Taylor turns his attention to the topic of money and markets in order to shed light on what are undoubtedly among the most important and complex structures of the world in which we live. For, whatever else one understands, one is missing a crucial piece of the puzzle if one does not understand how money operates in the global economy. Taylor’s book represents an extraordinary attempt to do just that and, in the process, reminds its readers that no one book, no matter how smart, can put all the pieces of this puzzle together. For in its attempt to explain the profound theoretical complexities of financial marketplace, this book glosses over real issues of power that are fundamental to understanding the causes and effects of the ways that money get circulated in our world.

 

In his preface, Taylor suggests that this book has its origin in two events: the suspension of the gold standard by Nixon in 1971 and the stock market crash of 1987. The first event occurred without Taylor’s knowledge while he was abroad in Denmark and left him bewildered when he converted his small stipend into Danish kroner and received $200 less than he had the previous semester. “Where did the money go,” he wondered, trying to process this first experience of money’s “virtuality.” Regarding the second event, Taylor recounts a conversation with his son, Aaron, in October 1987:

 

"You know," I said, "the past few days have been pretty amazing."
Aaron, who was fourteen at the time, asked, "Why, what's going on?"
"The stock market has crashed and billions and billions of dollars have vanished."
"Really? Where's the money go?"
Once again, I had no answer. But by this time, I had come to suspect that the issue was not merely a matter of economics. (xv)

 

And a matter of mere economics it is not. Taylor spends the next 300 pages unpacking an entire history and philosophy of culture that is astounding in both its scope and depth. In taking account of this project, Taylor suggests that it “represents the culmination of an argument I have been developing for more than three decades” (xvi). And for those familiar with the richness of Taylor’s work during that period, that alone is reason enough to give this book some attention. While many elements of Taylor’s previous work are in evidence here, Confidence Games does mark a culmination in his attempt to develop a philosophy of culture consistent with the complexity of our world.

 

In summarizing the goals of this book in a subsequent interview, Taylor says:

 

I have three major objectives in this book. First, to explain how art displaces religion and then markets and finance displace art as the expression of spiritual striving during the past two centuries; second, to examine the interrelationship between postmodern philosophy and art on the one hand and finance capitalism on the other hand; third, to develop a model of global financial markets as complex adaptive systems. In the course of this analysis, the intricate interrelation of neo-liberal economics, neo-conservative politics and neo-fundamentalist religion becomes clear. (Taylor, Interview)

 

In seeking to explain the development of the global financial marketplace and its relationship to culture, Taylor has set an enormous task for himself. How well does he succeed in accomplishing these goals? Well, sometimes Taylor’s broad historical arguments are persuasive, and other times they seem strained. Consider, for instance, Talyor’s argument that the last two centuries have witnessed a broad transition from religion to art to the market as the preeminent locus of spiritual meaning in our culture. Certainly many other genealogies could be constructed to account for the rise to prominence of global capital, and I suspect that this history records the development of Taylor’s own thinking over the last thirty years, as it has moved from philosophy of religion to art and now into broader cultural issues, as much as it accurately describes the transitions in Western culture. However, while the exact genealogy that Taylor traces may not be convincing (is art necessarily the middle term between religion and money?), the more important point that there has been a transition from God to money as the foundational principle of Western society is almost beyond dispute. This crucial idea provides all of the historical support that Taylor needs for underscoring the importance of markets in the contemporary world.

 

Up until the Protestant Reformation, Taylor notes, the Church had a strong aversion to market activity (but not to money!), based on, among other things, the prohibitions of taking interest found in the Bible. Without interest the expansive power of a market economy is highly curtailed. Luther, while breaking from the Church, affirmed the prohibition of collecting interest as an element of his basic disdain for worldly activity. Indeed, as Taylor notes, “for Luther the greatest sin of the Catholic Church was the commodification of religion” (78). All this changes with Calvin’s view of economic success as a sign of an omnipotent God’s blessing and his subsequent acceptance of collecting interest as a vehicle of this success:

 

By emphasizing God's omnipotence so strongly, Calvin inadvertently collapses transcendence into immanence. If all acts and events are ultimately the result of God's providence, divine and human wills are finally indistinguishable even if they are not precisely identical. No longer imposed from without, divine purpose now emerges within the play of worldly events. With this aestheticization of creation and the immanentization of purpose, the way is prepared for Scottish moral philosophy and the birth of modern political economy. (84)

 

The fascinating point that Taylor makes in tracing this history is that the Smithian metaphor of the “invisible hand,” which comes to play so central a role in modern economic theory, was originally a theological metaphor derived from Calvin’s belief in God’s workings in the world: “God’s hand is not, of course, always visible; on the contrary, since God’s plan is ‘secret,’ ‘true causes of events are hidden to us,” Taylor writes, quoting Calvin (84). And given the prominence of Calvinism within eighteenth century Scotland, Taylor’s insinuation that the centrality of the “invisible hand” to Smith’s economic theory has its roots in Calvinism is both compelling and important.

 

In connection with this history, Taylor unfolds two related histories: that of money and representation. Taylor has proven himself an expert in the philosophical issues of representation, and if his treatment of these issues is a bit loose here, it is only because he has a bigger agenda in this work. Both money and representation, Taylor points out, have become increasingly abstract or “spectral,” and when these histories are combined with the theological history outlined above, one gets a real sense of the direction of the book’s argument:

 

As one moves from exchanging goods through exchange mediated by representational money (e.g., metal and paper) to spectral currencies, which are completely immaterial, there is a shift from immanence (actual things) through transcendence (referential signs) to relational signifiers traded on virtual networks, which are neither immanent nor transcendent. . . This trajectory initially seems to be characterized by progressive abstraction and dematerialization. Industrial and information technologies transform life by creating abstract economic processes and dematerializing financial instruments. Throughout much of the twentieth century, art follows a parallel course: as art becomes more abstract and progressively dematerializes, it becomes further and further removed from the everyday world. The aesthetic equivalent of religious transcendence is the autonomy of the work of art. This autonomy, we have seen, is expressed in the self-referentiality of l'oeuvre d'art, which mirrors the self-reflexivity of capital. At the moment when abstraction seems complete, however, everything changes. Just as the transcendence of God reaches a tipping point at which it inverts itself and becomes radical immanence, so artistic abstraction eventually reverses itself and reengages the world. (117-18)

 

When artistic abstraction reengages with the world, it does so in the form of an increasingly abstract money whose value has moved from the referential to the relational. This lack of referentiality, latent in the history of money itself, becomes full blown with two crucial policy shifts in the 1970’s: the aforementioned removal of the gold standard in 1971 and the Federal Reserve Board’s 1979 decision to let currencies “float” in relation to one another. With these two moves, the dollar became fundamentally freed from external control and was allowed to regulate itself through the working of the market’s invisible hand, in which absolute faith was required. These principles remain with us, regulating not only commodity markets (as in Smith) but financial markets as well, thus instantiating a faith commitment in the efficacy of this invisible hand at the core of society’s economic organization. The religious dimension of this transformation is not lost on Taylor. Stripping away of money’s ultimate referentiality signifies an economic “death of God,” although not an annihilation of God, if, like Nietzsche, one thinks of God in terms of the absolute foundation that insures social order. “In retrospect,” Taylor concludes, “it is clear that God did not simply disappear, but was reborn as the market” (6).

 

Increasingly unregulated financial markets in the 1980’s then gave rise to new ways of gambling on the market through stocks, options, futures, and swaps, all of which became highly leveraged and further and further removed from the material economy. “These markets,” Taylor writes in specific reference to derivative markets, index futures, and index options, “are bets on bets on bets, which seem to have little or nothing to do with the value of the underlying assets on which they are based” (180). As financial markets become increasingly spectral or virtual during this period, so our economy has become as postmodern as our philosophy and our art. Taylor here compares Wall Street to Las Vegas, insisting that “one cannot understand Wall Street in the 1970’s and 1980’s if one does not understand Las Vegas” (8). Wall Street’s postmodern economy, while increasingly distinct from the material economy it financially supports, and upon which it depends, is as real and surreal as the architecture, gambling, and culture on the Strip in Vegas.

 

If the crisis in financial referentiality mirrors the crisis of representation in philosophy, then Derrida and other postmodern theorists become crucial to understanding the postmodern economy, according to Taylor. What Derrida has to teach here is twofold: that the pure relationality of signs (and thus money and markets) in a world without final referents renders the desire for a completely stable financial system a chimera, and that this desire for foundation in economic theory is just another manifestation of a metaphysics of presence that has determined the tradition of Western thought. This presence is found in a wise, benevolent “invisible hand” that guides the flow of capital through the system. That the invisible hand is always pushing the market back towards equilibrium is a fundamental tenet of modern economic theory. This model claims to work without referentiality, that is, as a system of pure relationality in which entirely self-interested participants unconsciously produce the most efficient production and distribution of resources possible. That this system of supposedly pure relationality continually moves towards success, in terms of a stable equilibrium that promotes economic growth, is the final referent of the system itself. The efficiency of the market has, in effect, become the final referent, an invisible God making sense of a complex economic universe. The intelligence and goodness of the “invisible hand” is the guiding metaphysical presupposition of the system, the onto-theo-logical assumption that grounds modern economic theory.

 

The danger of this philosophical assumption is revealed in tracing the history of the “efficient market hypothesis.” This hypothesis treats the market as a complex but calculable entity that always tends towards equilibrium. Taylor traces the potentially disastrous results of this assumption by looking at the rise and fall of Long Term Capital Management (LTCM). Created in 1994 by financial analysts intent on minimizing investment risk, LTCM “put into practice the mathematical theories financial economists had developed. Their investment strategy rested on an unwavering faith in the efficient market hypothesis” (257). While these models enjoyed great success in the first few years, increasing competition forced the company to leverage itself more and more in order to continue to profit. LTCM, like many investors and institutions in the 80’s and 90’s, utilized the liberalization of stock and bond markets to make “bets on bets on bets.” And when the Russian ruble collapsed in August 1997, it set off a global financial crisis revealing both the interconnectedness of our economies and the lack of stability in a currency system that is purely relational. At the very time when the economists upon whose theories LTCM were built were receiving the Noble Prize in Economics for models that were used to minimize risk in calculating value, LTCM was on the verge of requiring a $3.625 billion bailout to avoid a global financial meltdown. This bailout effectively ended LTCM and, for many, the viability the efficient market hypothesis. Taylor quotes Lawrence Sumners (former Secretary of the Treasury under Clinton and current President of Harvard) in support of this position: “The efficient market hypothesis is the most remarkable error in the history of economic history” (276).

 

If these models were so bad, why did they gain such credence? Taylor offers this explanation:

 

The answer, it seems, is that people from universities and Wall Street to Main Street wanted to believe in the models. Paradoxically, these economic formulas and models were symptoms of the very desires and emotions they were designed to eliminate. Rationality, order, and predictability become all the more desirable in a world that appears to be increasingly irrational, chaotic, and unpredictable. The greater the uncertainty and irrationality of the real world, the greater the desire to believe in an ideal world where investors are rational and markets are efficient. (276)

 

Taylor synthesizes this analysis by highlighting its religious dimension, one that often remained unconscious to those in its grip.

 

In the final analysis, this dream is a religious vision in which the market is a reasonable God providentially guiding the world to the Promised Land where redemption finally becomes possible. (301)

 

The mantra here is that “models matter” (xvi), and in a world where relationality has come to replace referentiality, a model that privileges stability over complexity is bound for failure. And given the profound economic interdependence of our world, the consequences of these potential failures become more and more catastrophic. Taylor’s solution? First, a philosophical recognition of the reality that we inhabit:

 

reality is not an aggregate of separate entities, individuals, or monads that are externally and contingently related; it is an emerging web consisting of multiple networks in which everything and everyone come into being and develop through ongoing interrelations. Within these webs, subjects and objects are not separate from each other but coemerge and coevolve. (277)

 

Next, we need an awareness of how the economy is a manifestation of this complex adaptive reality:

 

In contrast to the efficient market hypothesis, which presupposes negative feedback and automatically corrects imbalances and restores equilibrium, complex adaptive systems also involve positive feedback, which can increase imbalances and can push markets far from equilibrium where unpredictable changes occur. Rather than occasional disruptions caused by exogenous forces, intermittent instability and discontinuity are inherent features of complex networks. Unlike isolated molecules, investors are interrelated agents whose interacting expectations make volatility unavoidable but not completely incomprehensible. When the economy is understood as a complex adaptive system, it appears to be a relational web in which order and disorder emerge within and are not imposed from without. (12)

 

Accepting the consequences of a deep relationality–in all dimensions of life–stands at the core of Taylor’s vision. “A complex time needs a complex vision” (320), Taylor deadpans on the next to last page of this work.

 

Concluding with religion, which he claims never really to have left, Taylor contextualizes the rise of global religious fundamentalism as both a reaction to the increasing insecurity of our shrinking world and a structural denial of that very insecurity. The simultaneous rise of the religious right in the United States and the emergence of the postmodern economy are not coincidental for Taylor. The rise of religious fundamentalism expresses the need for the certainty and stability that are being challenged by the growth of a destabilizing global economy. And yet, Taylor ironically notes,

 

outside the U.S, religious fundamentalism often provides a way to resist the expansion of global capitalism and American power, while within the United States, religious fundamentalism tends to legitimize market fundamentalism and sanctify American power. (306)

 

This is as close to an analysis of the political economy in terms of power that Taylor ever comes in this book. At another point he notes that the Federal Reserve Board’s 1979 decision to let currencies float, and the supply-side policies that followed with Reagan, “obviously favored the wealthy individuals and corporations and substantial financial assets” (134). But this line of analysis is not pursued.

 

In fact, Taylor explicitly distances himself from the Marxist theorists of global capital. In one of the most provocative passages of the book, Taylor suggests that

 

cultural critics like Fredric Jameson, Antonio Negri, and Michael Hardt have argued that postmodernism is a symptom of so-called late capitalism. . . .[They] share a Marxist perspective in which cultural processes can always be reduced to a supposedly material economic basis. . . [T]hese critics do not analyze the distinctive characteristics of the new network economy. . . Their theoretical perspective rests on industrial models that are as outdated as the neo-Marxist ideology they promote. . . [T]hese critics do not adequately explore the ways in which culture--art, philosophy, and especially religion--shapes economic realities. (29)

 

While there may some basis to the charge that these theorists read culture too much in terms of its “material economic basis,” the overwhelming political neutrality that of Taylor’s text seems to perpetrate a great injustice by failing to highlight the inequalities of the complex system that he describes. Power is not merely incidental to the system he describes, and yet relations of power are basically invisible in this text, causing this reviewer to wonder whether a description of the world that makes no reference to the complex ways in which power functions to produce profound material and spiritual suffering can be an adequate description of that world.

 

This book will not be all things to all people; that I feel compelled to make such a statement underscores the real value of the text. Read along with the very theorists that he dismisses, Taylor’s book presents an utterly remarkable description of the postmodern economy that “grounds” our postmodern culture. As such, it is a book worth reading.

 

Works Cited

 

• Taylor, Mark C. Interview with Roy Christopher. FrontWheelDrive.com. 31 March 2005 <http://frontwheeldrive.com/mark_c_taylor.html>.