Frédéric Lordon

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= French heterodox economist, much appreciated by Christian Arnsperger


Review

"The book is called Jusqu'à quand? Pour en finir avec les crises financières. Frédéric easily stands as one of the most brilliant economists of his, and hence my, generation. (Well, yes, it's publicly known that he was born in 1962, just four years before yours truly.) The way he blends technical expertise, political shrewdness, and a focused interest in philosophy and anthropology is something I find not only personally appealing, but scientifically essential. Frédéric Lordon has endeavored over the past twenty years to build his own particular brand of what I would call integral economics. Taking his cue from the 17th-century philosopher Baruch Spinoza, he has chosen to use economic agents' "affects" (which lie at the border between the neuronal and the emotional) as the anchoring point for both an approach to money and finance which is truly fascinating, and a theory of social conflict which he terms a "metaphysics of struggles" (métaphysique des luttes). I won't go into too many details now, but let me just say that Frédéric's central idea is that, since we (universally) act in the vicinity of our affective perceptions, and hence of our interests as we perceive them, we can only be brought to change if we affectively adhere to the idea that something must change; and, on the contrary, as long as (be it out of fear or because we are angry that things of interest to us are going to be taken away from us) we affectively refuse the idea of change, we won't just resist it but actively struggle against it. Therefore, the "We" is a theater of constant struggles -- and this, to Lordon, is a metaphysical fact, not just a momentary feature of reality -- and interests clashing with, or even crashing into, other interests. Self-regulation is therefore virtually impossible, and codes of ethics and good conduct are, in his eyes, a complete sham. For him, calls for morality and "ethics" are, especially in the business and financial worlds, mere alibis to avoid having to submit to the only really effective tool: political -- and therefore juridical -- regulation.

It's a shame that Frédéric Lordon's two gripping books on the financial crisis -- Jusqu'à quand? Pour en finir avec les crises financières (Raisons d'agir, 2008) and La crise de trop: Reconstruction d'un monde failli (Fayard, 2009) -- as well as his hilarious play in alexandrine meter (D'un retournement l'autre, Seuil, 2011) haven't been translated into English. Together, they form an amazingly didactic panorama about the causes and consequences of financial deregulation (alternatives in English include George Cooper's The Origin of Financial Crises and Adrian Buckley's Financial Crisis), and they also trace out radical reform measures by way of re-regulating the financial sector, re-disciplining banks (way beyond what the current Basel Accords impose), and massively backtracking on so-called "financial innovation." Lordon's threefold message -- if I may be permitted to collapse his truly brilliant analyses into a few rudimentary words -- is that (a) financial deregulation and the proliferation of high-risk "innovations" were pushed in the name of a more economically efficient "We" (efficient money, asset, and capital markets were supposed to allocate risks and resources "optimally") and of a more culturally advanced "We" (Fed Chairman Alan Greenspan saw the access to home ownership, with the associated feeling of prosperity as people rode the wave of the real-estate bubble, as a way to reinforce pro-capitalist worldviews in the U.S.); but that (b) in actual fact, the underlying economic and cultural model served a small minority of interests and created perverse incentives for an even smaller minority of "I"s whose existential meaning lay in earning ever more millions -- and those minorities could obviously not be counted on to regulate and rein in their own excesses. Ergo, (c) only a State-driven, public and therefore sufficiently drastic re-regulation of finance, banking, and the market economy in general could undo the fundamentally perverse incentives which the promoters of financial interests had created for themselves.

Let's call Lordon an ontological and metaphysical realist. He's not neo-Hobbesian, however, because for him, everything is political to begin with -- there isn't ever any "state of nature" in reference to which the rules and regulations we adopt could be explained. There's never an "I" without a "We" in Frédéric's work (he doesn't espouse stark methodological individualism), but the key issue in his metaphysics of struggles is that, most of the time, the "I" uses the reference to the "We" out of pure self-interest -- hijacking the collective, as it were, to use it for the furtherance of his/her own interest, of his/her existential meaning. This is what points (a) and (b) of his message indicate. In other words, each "I" builds his/her worldview and preferred economic theory (both of which refer to "We") in such a way that they will cohere with, and further, his/her existential interest -- and s/he does this within a framework in which, most likely, political relations are highly asymmetrical so that some worldviews and theories get disproportionately more hearing from public authorities than others. This means that a minority of "I"s' self-interested references to the abstract "We" get translated into actual policy (in this case, financial deregulation in the alleged "common interest") and become the dominant political and cultural reference point of the concrete "We."

In the everyday functioning of society, there will therefore be various classes of self-interest. Each such class is a network of "I"s who, even though they may never have met and may never meet, share the same outlook on what's important for them and therefore for society as a whole. There is no conspiracy involved (although there frequently are asymmetries as to who gets listened to most, and who gets ridiculed), there is simply an objective collusion of self-interests based on shared existential outlooks (that is, shared views as to what's meaningful and what's important). These interest classes, Lordon proposes, gradually shape the functioning of the economic system and create the incentives (for instance, asymmetric bonuses leading to an absence of accountability, or financial derivatives that allow for Herculean amounts of leveraging) which will most further their interests. The self-interest of certain intellectuals, he continues, plays into these mechanisms as well, leading some economists to defend deregulated financial markets as "efficient" and to portray -- in line with the interests of the financial institutions that sometimes finance their research -- various "financial innovations" such as derivatives as conducive to optimal risk-sharing, even though the reality of the crisis has shown markets to be grossly inefficient and derivatives to create leverage-driven catastrophes of previously unheard-of proportions as huge risks that had long remained invisible suddenly materialized.

Lordon brilliantly combines the microeconomics of Spinoza, Keynes, and Bourdieu with the macroeconomics of the French "régulation" school of economics to offer us an approach to the crisis in which the sole plausible outcome is a firm, top-down re-regulation of the whole financial sector by the public sphere. He makes a very convincing point of it and, in fact, goes about it in a way quite similar to what I earlier called the "ultimate" and the "intermediary" goals. Frédéric's ultimate goal is a high-growth, full-employment capitalist economy with high levels of social protection (as a Keynesian social democrat, he isn't at all interested in de-growth or in post-capitalist alternatives). His intermediary goal is a set of regulatory framework conditions -- both microeconomic and macroeconomic, going from the creation of unlimited negative bonuses (i.e., "maluses") for traders all the way to the radical reforms of the Lisbon treaty -- that severely rein in the latitudes of financial institutions to reap two-digit returns by emitting exceedingly risky instruments. What Lordon's approach is highly skeptical of, however, is what I have called the "immediate" goal of building awareness and consciousness among citizens in general, and among the agents working in the economy in particular.

Why is this so? He holds hard and fast to a theory of "interest classes" which says that people will only act on their own interests and, more precisely, on the affective emotions that "mobilize" them to act. So yes, there may be -- and are, in fact, likely to be -- revolts and even revolutions as the common people gradually realize that, for all the dominant rhetoric and for all the dominant mechanisms of the economy, none of what goes on in the financial sphere is in their own interest. But Lordon's approach is adamant that such movements will not be transitional but, rather (as happens at the end of his play D'un retournement l'autre), will be more or less reenactments of the storming of the Bastille. The reason for this is, mainly, that in his perspective revolt or even a change of vision and a change of heart, leading to "transition advocacy," can't possibly occur in people who are active within the financial sphere. Why? Well, because if such people did act on "alternative" or "transitional" convictions they'd be trampled by the competitive logic that's at work in the sector -- they'd make losing investments, offer too low rates of returns, and be driven out of the market in a short while. Their "class" interests wouldn't be furthered at all. It's not a question of individuals being "bad," says Lordon, it's a question of the structural rules not being the right ones -- and this is what motivates his insistent call for top-down re-regulation without any concern for whether there are agents within the system who might "support" this regulation. In short, he is utterly skeptical of what I have called "low-grade radicalism" as a prelude to "high-grade radicalism" (see previous post, dated June 29)." (http://eco-transitions.blogspot.com/2011/07/regulatory-change-consciousness.html)