(Philadelphia: Temple University Press, 2015), 264 pp. paper, $29.95.
In this book Randy Martin brings a most original approach to the study of contemporary society. He develops the idea that the financial derivative engenders an entire new social logic. The book focuses on the three spheres of society – the economy, the polity, and culture – and argues that the conceptual and practical integrity and autonomy of these spheres have been “complicated and, in certain aspects, undone by forces unleashed through the social logic of the derivative” (8).
Martin explains the nature and significance of derivatives in terms of the undoing of the unity that is the economy. After the fall of the Bretton Woods system, financial actors started to hedge against currency fluctuations through the use of derivatives – contracts for agreeing in advance to trade (buy and sell currencies or commodities) at a certain rate in the future. However, today derivatives can be produced out of such things as a singer’s potential future earnings.
While initiated to protect against risk, derivatives actually produce almost limitless opportunities for risk-taking. The sum total of all derivative contracts far exceeds the actual or underlying price of the assets being traded. In fact, the value of derivatives, if cashed in, would be more than the annual global GDP. By June 2008, more than $1 quadrillion of derivative contracts had been issued. In contrast, even after the recession, as late as 2014, the global GDP was $75 trillion.
The book quotes Ayache with respect to knowledge: “Derivatives…are the un-knowledge of the future made [into a] market… They have no existence outside the market” (32). And as Ulrich Beck, also cited by the author, writes, “World risk society is a non-knowledge society…it cannot be overcome by more and better knowledge… Non-knowledge rules in the world risk society” (47).
The aim of this book is less to analyze the dangers posed by this political economy than to illuminate the new social logic associated with the derivative.1 Integral to this new social logic, along with risk taking and risk making, is contestation. Derivatives, as new financial products that are bought and sold, have values attached to them. Drawing on the work of Bryan and Rafferty, this book emphasizes that the value of all such products is contestable – in fact it is precisely the contestable (or uncertain) nature of their value that produces the market in derivatives as it also produces volatility and risk (62).
Contrasted with the “system” metaphor of the economy and other ways that the traditional capitalist economy has been understood and practiced, the derivative involves ideas and practices of contestability, risk management and risk production, fragmentation and dispersion, motion, volatility, and arbitrage (making large investments on small differences in price that result in large profits). These ideas and practices constitute the new social logic (52).
In this analysis, just as the unity that is “the economy” has been undone by the derivative, the unity of “the public” has also been undone. The public, too, has been dispersed and rendered volatile. The book contains a brilliant analysis of what has happened to the conception and production of the public good. With the government policy of tax exemption for donations to non-profits, private donors have come to define and shape “public goods,” that is, what public goods are most worthy of support. Private citizens and nongovernmental organizations (NGOs) have come to replace the authority of the state.
Moreover, the use of tax exemption on which the nonprofit economy depends deprives government of revenue that might be available for public use. Reagan embraced non-profits as a means to cut government entitlements. The book reports that only 10% of the funds for non-profits go to programs for the poor and underserved.
In addition to spending much of their time and resources (20-40% of their revenue) in fundraising, the non-profits themselves have been transformed in other significant ways by big donors who come from the corporate world. These individuals use metrics to assess performance. Nonprofits are forced to trade their commitment to long-term change for immediate measurable gains. As non-profits fail to meet the metrics, they cease receiving funds. The assessment measures that the non-profits must meet become the public goods. “This raises questions as to what values of assessment should be applied and what values escape measure altogether” (82). Moreover, large donors such as CEOs and financial magnates tend to focus their giving on foundations started by other corporate CEOs and financial magnates whose names they recognize, instead of focusing on the ultimate recipients.
Martin also provides a critical review of micro-finance and a new understanding of California’s Proposition 13, which is generally considered the beginning of right-wing populism and the tax revolt in the US. Proposition 13, enacted in 1978, was an amendment to the Constitution of California that reduced property taxes to the 1975 amount and limited increases to 2% a year. The book draws on the work of Isaac William Martin to explain that in California at that time, traditionally under-assessed real estate values were being replaced by more accurate market-based assessments. With housing prices rising, these new assessments resulted in escalating real estate taxes. Hence, the Proposition was not, as often assumed, the expression of a populist, anti-tax, anti-government, anti-entitlement sentiment as much as it was an attempt by homeowners to maintain the same proportion of disposable income as before. It was also an attempt to protect what Isaac William Martin calls the “hidden welfare state” (tax exemptions for interest on home mortgages, the largest single government subsidy in the postwar era). But “hidden welfare” was not how the situation was defined by and for the public that was voting on the Proposition.2
In addition to an insightful analysis of what has happened to “public goods,” the book also reviews the informed critiques by social scientists of the practices of public opinion polling and survey research. Polling purports to report on a “public,” but that public and its “opinion” comes into being in and through the polling. Moreover, these “publics” form attachments to or identifications with celebrities or stars or “outliers,” which produces volatility just as the derivative’s reliance on outliers produces volatility. Just as the unity that had been treated as “the economy” has, according to Martin’s analysis, become undone, the unity that has been treated as “the polity” likewise has become undone.
In addition to the economy and the polity or the public, the book also analyzes contemporary culture. As with the economy and the polity, the claim is made that unity of “culture,” the source of all that is common and shared, has become decentered and undone. He describes how “modern” culture had been understood and how that understanding no longer holds. Whereas the connection between the derivative and the polity emphasized volatility, the connection between the derivative and the new cultural forms emphasizes risk. The cultural forms that emerged in the 1970s – postmodern dance, hip hop and boarding culture – all emphasize risk taking and risk making. Moreover, Martin claims that seeing how a derivative logic operates in these cultural forms, which he describes as forms of mobilization, will enable us to develop a language for describing, valuing or evaluating recent political mobilizations that are themselves decentered. This may be the most creative and controversial part of the book.
The idea here is that the practices of postmodern dance, hip hop and boarding culture provide what may be alternative principles of mobilization and alternative sensibilities that correspond in various ways to the new social logic. “The skateboarding graffitist and the hedge fund managers take themselves to be masters of their risk universes without imitating one another. They do not share models, even if their models share a social logic” (75). These cultural practices embrace risk as reward. Martin provides descriptions of tagging (sides of buildings and trains), hip hop and break dancing and notes that it was from the urban ruins that these cultural practices emerged. He reminds us of the massive destruction of housing that took place in the Bronx, Brooklyn, Harlem and the Lower East Side. Hip Hop began in the Bronx in the early 1970s. “As with postmodern dance and hip hop, boarding culture engages a population deemed at risk of disappearance with activity considered to be extreme” (202).
Postmodern dance as well as hip-hop and boarding culture involve practices that “suffuse our world but otherwise go unrecognized and that inhere in the social logic of the derivative” (178). Seeing how the derivative logic operates in these cultural forms reveals principles of mobilization and creative practices – such as risk taking, sampling or the mash-up, appropriation that effaces sources and influences, etc. – in what otherwise appears as a world in ruins. Martin claims it also provides us with a language for valuing/evaluating political mobilizations that do not take traditional forms. It is with this optimistic note — that we should not give up on the possibilities of mobilization and the creative potential of human beings to remake our world, down to our kinesthetic practices — that Randy Martin has left us.3
Reviewed by Roslyn Wallach Bologh
Department of Sociology
College of Staten Island and CUNY Graduate Center
1. On the dangers of the financial system – including debt deflation, austerity, debt peonage, and dominance over the industrial classes by the new rentier class – and political measures that can be taken in opposition, see Michael Hudson, The Bubble and Beyond (ISLET-Verlag, 2012).
2. In addition, as Michael Hudson points out, tax exemption for home mortgages means that the money that is not going to the government in the form of taxes goes to financial institutions in the form of higher mortgages.
3. For an overview of Randy Martin’s work, see the tribute by Michael E. Brown in the July 2015 issue of this journal.