An Empire of Indifference: American War and the Financial Logic of Risk Management

by Randy Martin

Overview

In this significant Marxist critique of contemporary American imperialism, the cultural theorist Randy Martin argues that a finance-based logic of risk control has come to dominate Americans' everyday lives as well as U.S. foreign and domestic policy. Risk management-the ability to adjust for risk and to leverage it for financial gain-is the key to personal finance as well as the defining element of the massive global market in financial derivatives. The United States wages its amorphous war on terror by leveraging particular interventions (such as Iraq) to much larger ends (winning the war on terror) and by deploying small numbers of troops and targeted weaponry to achieve broad effects. Both in global financial markets and on far-flung battlegrounds, the multiplier effects are difficult to foresee or control.

Drawing on theorists including Michel Foucault, Giorgio Agamben, Michael Hardt, Antonio Negri, and Achille Mbembe, Martin illuminates a frightening financial logic that must be understood in order to be countered. Martin maintains that finance divides the world between those able to avail themselves of wealth opportunities through risk taking (investors) and those who cannot do so, who are considered "at risk." He contends that modern-day American imperialism differs from previous models of imperialism, in which the occupiers engaged with the occupied to "civilize" them, siphon off wealth, or both. American imperialism, by contrast, is an empire of indifference: a massive flight from engagement. The United States urges an embrace of risk and self-management on the occupied and then ignores or dispossesses those who cannot make the grade.

Product Details

ISBN-13:	9780822339960
Publisher:	Duke University Press
Publication date:	03/14/2007
Series:	a Social Text book Series
Pages:	230
Product dimensions:	6.00(w) x 9.00(h) x 0.48(d)

About the Author

Randy Martin is Professor of Art and Public Policy at the Tisch School of the Arts at New York University. His books include Financialization of Daily Life, On Your Marx: Relinking Socialism and the Left, and Critical Moves: Dance Studies in Theory and Politics, also published by Duke University Press. He is a former editor of the journal Social Text.

Read an Excerpt

An Empire of Indifference

AMERICAN WAR AND THE FINANCIAL LOGIC OF RISK MANAGEMENT

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By RANDY MARTIN

Duke University Press

Copyright © 2007 Duke University Press
All right reserved.
ISBN: 978-0-8223-3996-0

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Chapter One

From Security to Securitization

In the language of homeland security, economic normalcy has become seamless with political emergency. Security is an investment-a term that has changed its meaning from its initial, ecclesiastical one, dating from the seventeenth century, of putting on robes to assume spiritual powers: among powerful nations it was once enough to drape oneself in the flag to be imbued with the attribute of security. "Investment" by the nineteenth century was used in military engineering to denote the isolation of a hostile force or fortress by blockade. Just as old is the sense of the term, in colonial commerce: the use of money to purchase goods. Subsequently, eighteenth- and nineteenth-century economists would distinguish investment, the acquisition of property, from speculation, a distinction that eventually would largely disappear. The idea of security is still older than that of investment. Use of the word to mean safety or freedom from danger goes back to the fifteenth century. Already at this time security could also refer to a bond, a pledge to fulfill a debt; these bonds would develop, by the seventeenth century, into exchangeable documents, bills of credit among firms sold in specialized markets. The roots of credit in faith, evident in the general appeal of financial services today, constitute what Marieke de Goode calls "a genealogy of finance," whereby our confidence in money is established through all manner of religious and artistic representation.

Homeland security is best understood from the perspective of the original double meaning of safety and debt, but the concept moves in a world where the political and the economic are most commonly separated in public conversation. Pressing on the political meaning of security brings its economic double to the surface once again.

The wisdom of finance wrought as a way of life now guides foreign policy, the simultaneous othering and remaking of them into us. The ascent of finance, its insinuation into daily affairs, and its primacy of self-anointing investors compromise the abilities of the state to unify its population around a national principle even as this process rests upon a hyper-vigilant regime of regulation and intervention. To wit, controlling inflation necessitates continuous action that is necessarily preemptive. This is both the logic and the public rhetoric of interest-rate adjustments by the Federal Reserve Board.

Before the supremacy of strategic intervention, the Fed had long mastered the art of the preemptive strike. Investors would want to think of themselves in these terms as well. While acting in one's own interest assumes a stable present to mitigate an uncertain future, preemption acts to turn a presumed certainty about the future into a present suddenly made uncertain and therefore open to opportunity. Cutting interest rates treats the specter of future inflation as a tangible presence, just as does the panoply of financial products that issue from the credit economy, especially the class of securities called derivatives. When preemption drives foreign policy, the same logic is at work. Potential threats are actualized as demonstrations of the need for further intervention. Preemption is the temporality of what will be explored here as the political and moral economy of securitization, the future made present. Whereas the history of securitization is an incorporation of the foreign in the domestic, the reaction to risk brought home, the terror war as foreign policy directs this ambiguous domesticity outward.

: THE MORALITY OF RISK

Risk management bridges security and finance. Financial risk is the prospect of a greater than expected return on investments. Security is the converse: "preventing adverse consequences from the intentional and unwarranted actions of others." Security as a sense of entitled protection readily slides into the calculating logic of financial securities. As has happened many times in the past, moral and political economy-the production of value as right and as wealth-have become entangled. Like the usurers once subject to sanctions, the figure of risk, once a bad subject to be avoided, must now be presented as right and true. Safety is a public good whose ultimate preserve is legitimate warfare. This moral achievement of the well-governed state is transferred to an ethical subject who does good and well by accepting risk. To make sense of the present conjuncture of imperial dis-ease, with preemption auguring small interventions meant to have large effects, the articulation of finance and military authority, of economy and polity, needs explanation.

In the world of finance, the consolidation or bundling of local, individual debts (such as mortgage loans) into certificates of ownership or indebtedness (stocks or bonds) that can be publicly traded or sold elsewhere is called securitization. Securitization was the "revolution" in financial services meant to mitigate the risks that came from these violating insecurities. Mortgages, car loans, and credit card debt are securitized when some financial interest purchases them from the issuer and then reorganizes this debt according to its risk characteristics. High-risk mortgages or credit card debt-those whose debtors are beyond a certain debt-to-income ratio-can be separated and packaged as a distinct commodity or derivative. Risk is the measure for the rate of exchange among debt commodities. In the simplest terms, securitization assembles credit, derivatives disperse risk.

Securitization, far from being a reduction of polity to economy, announces an intricate affiliation between the two. It interweaves particular circuits through which wealth is amassed, the deployments of force to forge the shape of social life, and the whole repertory of engagements at people's disposal to transform abstract beliefs into credible practice. There is no question that financial sectors flourish during moments of imperial trepidation and turnover. In this the present bears the signs of other eras. Much effort to wrestle the present into some serviceable political coherence oscillates between the poles of the all-is-new and nothing-has-changed dichotomy, complicating the task of knowing what difference a critical intervention might make. Novelty is but an aspect of the present. Not all is new, and it would seem that little of the past ever fully departs. One temptation is to postulate the advent of new times in which everything moves in syncopation to the old ways, freed of their burdens and bad habits, but the challenge to critically oriented political thinking is to notice what is different in the present so as to revalue what now seems possible.

Caveats aside, just what does make the present ascent of finance any different from the dull march of the market's ways over the past five hundred years? What has shifted since the days when security and its double took shape as the morally requisite means of building the common wealth? And with marketization, commodification, consumerism, neoliberalism, neoconservatism, privatization, and deregulation, aren't there enough words already to describe what capitalism does to our lives without weighing in with one more-financialization? The treatment of how finance affects politics, of how fiscal policy infuses foreign policy, is both a specification of those other terms and an invitation to notice what has been added to the pot. While analytic clarity can be very quickly compromised by the complexity of what it actually encounters, let me present a very preliminary schematic distinction between the generic reason of the market and its present elaboration in finance, and what kind of ideal self is implied by the recent shift.

Fundamental to classical liberalism is a faith that the urge to truck and barter resides in human nature and is something that the artifice of the state can only impede. The neoliberal turn, said to reign for the past twenty-five years, paradoxically enlists that very state to spread market values throughout the realm. According to Wendy Brown, this colonization of liberal democracy, in which the state acts to promote liberty by a neoliberal market reason, in turn situates "citizens as individual entrepreneurial actors." Her account of the neoliberal turn is worth quoting at length:

While this entails submitting every action and policy to considerations of profitability, equally important is the production of all human and institutional action as rational entrepreneurial action, conducted according to a calculus of utility, benefit, or satisfaction against a micro-economic grid of scarcity, supply and demand, and moral value-neutrality. Neo-liberalism does not simply assume that all aspects of social, cultural and political life can be reduced to such a calculus, rather it develops institutional practices and rewards for enacting this vision. That is, through discourse and policy promulgating its criteria, neo-liberalism produces rational actors and imposes market rationale for decision-making in all spheres. Importantly then, neo-liberalism involves a normative rather than ontological claim about the pervasiveness of economic rationality and advocates the institution building, policies, and discourse development appropriate to such a claim. Neoliberalism is a constructivist project: it does not presume the ontological givenness of a thoroughgoing economic rationality for all domains of society but rather takes as its task the development, dissemination, and institutionalization of such a rationality.

Hence the triumph of the market cannot be assumed. It must be achieved. Moral responsibility is equated with the ability to be a utility-maximizing actor forever weighing cost and benefit. Government must be vigilant in intervening among those too mentally or morally weak to act on their own behalf. Privatization has a didactic function of showing how the market intervenes better. Perhaps it is fair to ask what happens when the "neo" itself is no longer new, or when its magic seems to have faded in the laboratories of the South, especially Latin America, where once Argentina, Bolivia, Brazil, and Ecuador were crowded together as its poster children. Now each of those countries-either in fiscal policies or in foreign affairs-has defaced the poster. As astute a left business observer as Doug Henwood has asked, "Neoliberalism, RIP?"

It should be remembered, however, that neoliberalism never stood alone. Moralizing was not left to the market, but had a strong cultural and religious bent, evident in neoconservatism. The expansive use of military spending makes both Reagan and George W. Bush look like Keynesians convinced that the state had to step in and stimulate demand for goods where the market could not. The moral imperatives to reshape domestic life, like the war on drugs and the educational policy No Child Left Behind, always came with a state-wielded stick that was costly to hold. While the shorthand for neoliberalism is small government and free markets, the neoconservative menu serves a privatizing state and interventionist markets. The state must act to control indolence-inducing public sectors and the market must be spread (forcibly if needed) to effect human liberty. Economists of most stripes continue to believe that economistic behavior is rooted in human nature-a classical specter that continues to haunt all constructions-but the nature of the state meant to conform to this nature varies widely.

More than admitting that life is a cocktail of contrary tendencies, I want to add an ingredient to the mix. With the advent of a marketplace of values, finance over the same period (roughly thirty years) has come to qualify reason with risk. Risk is not simply a calculation that benefits will exceed costs, but a wager on accumulating beyond expected returns. When every cost and uncertainty can become an opportunity, the secure precincts of happiness are left behind for the dizzying heights of risk. Risk is not simply a construct that one abides but something somatized as a way of being. The gauge of risk tolerance is not "What will it cost me?" but "Can I sleep at night?" Risk also performs a moral function, by sorting out those with the disposition to embrace it from those relegated to being bad risks. The risk taker is a righteous agent of history; those at risk are left in the ashcan.

Market values as described imagine a universe of value-neutral and fair rules of the game by which citizens are willed to take possession of themselves as free individuals and entrepreneurs. By contrast, financial values torque the sovereign subject into a sales agent. Financial reason focuses not on the free citizen but on the bonded investor. Rights are not given a priori, but gains are made because one is fully vested (recall the ecclesiastical meaning of investment), a portal of absent authority from which one derives one's own. The successful investor is also touched by good fortune, as if the recipient of a blessing in this seemingly secular domain. If the citizen's interests can be represented by transparent rules watched over by the state, investors are the kind of people who play the market, which means taking whatever bit they have, dispossessing themselves of it, and seeing in what form it might come back.

Leverage takes precedence over ownership, and the arbitrageur, one who preys on marginal fluctuations in price, balances with alacrity where once the entrepreneur stood fast. Whereas the entrepreneur decided for himself, the arbitrageur is embedded in the decisions of others, surfing the waves of decision and deriving unseen value from the undertow. The entrepreneur respects the boundary between property and speculation. The arbitrageur can no longer. No more moving property on and o the market, speculation has moved in full time. In the process of securitization, financial reason assembles these little bits of value, these tiny interventions, and links them to a universe of exchange.

Market value touts the individual: the owner, the utility maximizer, the secure, the free, the self-possessed. By contrast, financial reason continually references a social force that it can appeal to but not abide: the dispossessed, the leveraged, the derived, the securitized. Nothing could be more artificial than finance, or capital for others, but it does suggest a social ontology where once nature had its day. For those with the right moral fiber, a new being-or at least one born again-is on the horizon. The arbitrageur looks to trounce plants like an amoral elephant, but really he's just zealously spreading seed. No wonder that the most objectivist calculus of finance can share the mantle of power with latter-day evangelism (as the Texans Bush and Lay once did before the fall of Enron). Financial reason is a logic of agglomeration, of association, of far-flung interconnection. Its religious affinities are not Calvinist ascetic accumulation but something closer to animist cosmologies of the new evangelisms. In this light the terror war presents itself as a liberation theology grounded in risk.

The history of market society has entangled moral and political economy in a variety of ways. But time and again, moral codes compensate for social traditions that have been rent. Joyce Appleby has written of the moral economy that would be swept aside in the late seventeenth century by a money economy: "The salient features of the biblical economy were sufficiently congruent to the ordering of labor in the sixteenth century to invite belief: the world could be made fruitful through labor; labor came to man as both a punishment and a gift. As a gift it tied human society to God's charity. As a punishment it forever harnessed men and women in God's will." Economy would maintain equilibrium in the person of God, who would balance good and evil on the body of labor. The depersonalization wrought by the market severed this moral order. This break was conceptualized by John Locke, who would ground value in a natural law of money resting upon the universal consent of mankind-the money that a man possessed represented his due proportion of the world's gold and silver. The link between population and wealth would find acceptance in the natural order of which the fixed quantities of specie were the visible evidence.

(Continues...)

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Excerpted from An Empire of Indifference by RANDY MARTIN Copyright © 2007 by Duke University Press. Excerpted by permission.
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Table of Contents

Acknowledgments vii

Introduction 1

1. From Security to Securitization 17

2. Derivative Wars 64

3. Self-Managed Colonialism 97

4. An Empire of Indifference 124

Notes 169

Index 205

Editorial Reviews

"An Empire of Indifference is a brilliant study, both theoretically profound and politically compelling."-- Michael J. Shapiro, author of Methods and Nations: Cultural Governance and the Indigenous Subject

"An Empire of Indifference is the perfect answer to Thomas Friedman's The World Is Flat. Randy Martin well understands that finance capital flattens and gouges at the same time. This book is the anti-Friedman."--Neil Smith, author of The Endgame of Globalization

"While a great deal has been written about globalization, empire, and international finance, I know of no other work besides this one that looks at their intersection through the rhetorical and conceptual lens of finance. An Empire of Indifference is a strong piece of original scholarship on a very important topic."--Chris Hables Gray, author of Peace, War, and Computers

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