Last week as I listened, along with many other Americans and others around the world, to President Bush’s most recent effort to reassure us about the current economic meltdown I had a “Road to Damascus” moment. It happened as I heard Bush repeat the word “faith”: faith in America’s institutions, faith in its workers, faith in capitalism, faith in our capacity to survive other disasters (such as 1929 and 2001). And, of course, the faith we needed to weather the recent crisis and get to the other side, such faith, in Bush’s rhetoric, being not only the need of the moment but the fulcrum for the journey to recovery.
I instantly saw that a great feat in reverse discourse engineering had occurred: we had moved into the era of the “Faith-Based Economy.” Many of us had already developed a certain worry about the place of “faith” in the Bush administration’s weird form of ecumenical evangelism, which had used the idea of faith-based organizations to allow the covert infiltration of a certain brand of religion into American civic life, with a definite bias towards white, Protestant, evangelical forms rather than say, to Muslim, Catholic, Jewish, Hindu or Rastafarian forms.
But now we are in a new Weberian moment, where Calvinist ideas of proof, certainty of election through the rationality of good works, and faith in the rightness of predestination, are not anymore the backbone of thrift, calculation and bourgeois risk-taking. Now faith is about something else. It is faith in capitalism itself, capitalism viewed as a transcendent means of organizing human affairs, of capitalism as a theodicy for the explanation of evil, lust, greed and theft in the economy, and of the meltdown as a supreme form of testing by suffering, which will weed out the weak of heart from those of true good faith. We must believe in capitalism, in the ways that the early Protestants were asked to believe in predestination. Not all are saved, but we must all act as if we might be saved, and by acting as if we might be among the saved, we enact our faith in capitalism, even if we might be among the doomed or damned. Such faith must be shown in our works, in our actions: we must continue to spend, to work hard, to invest, and, as George Bush long ago said, “to shop” as if our very lives depended on it. In other words, capitalism now needs our faith more than our faith needs capitalism.
Practically, what does this mean? It means austerity, chosen or imposed: less insane credit-card acquisitions, less whacky mortgage seeking, less obese cars, fewer happy miles on the road, fewer “business expenses” (unless of course we are senior AIG executives). It means leaving our money in the banks and having renewed faith in the FDIC, for if we race to our banks and take our money home in cash, we shall show our lack of faith in the banks, and the banks will suffer, and if the banks suffer, the world financial markets will suffer, and if the world financial markets suffer, the volcanoes will explode, the rivers will flood, the lightning shall strike, and all of us will be reduced to ashes, along with our melted credit cards, our worthless pension funds and our homes with negative equity.
But Faith, it turns out, is not enough. Capitalism, as a master-belief system, reasonably operates on faith. But markets, especially capitalist financial markets, need something more specific: Trust. And that is the second biggest Revelation of the last few weeks. We have a trade deficit, as we all know, but much worse is our “trust deficit.” No one trusts the (financial) other anymore, we are told, and without trust no one lends and without lending the plastic ceases to work and everyday life comes to a complete halt. This news will come as a shock to all of us on “Main Street,” who trust our friends, our neighbors, our leaders, our churches and our employers as much—or as little—as we did last year. No, trust is not a Main Street problem, it is a Wall Street problem. In other words, banks won’t lend to one another, and that problem in the high mountains of finance is melting down into the valleys and plains of our everyday lives.
Why won’t the banks, the hedge funds, the investment banks and all the other gentlemen-rogues who are part of the banking business trust one another? Have they lost their faith in capitalism? No, not quite. They still believe in the financial markets and in the rightness of the larger principles of profit, speculation and upside risk. What they no longer trust in is—each other! And they don’t trust each other because they have constructed for themselves a version of the Prisoner’s Dilemma whereby they fear that each party’s self-interest lies in non-cooperation, and hence in suboptimal solutions, solvable only by a large infusion of cash from the outside to prime the Trust Pump.
The major arguments for the recent bailout still do not quite explain why the trust between banks evaporated when just a few weeks ago, the lending potlatch was in full swing, loans were being made to everyone except known felons, deportees or illegal migrants, and each of us on Main Street was receiving at least ten offers to get new credit cards every week. The banks trusted each other to a fault, and loaned money to one another as if there was no tomorrow. They became pathologically trusting of each other and were in an intoxicated haze of downstream trust-based lending. This orgy of trust was based on reversing Frank Knight’s great insight about risk and uncertainty, according to which uncertainty is what lenders should hate and risk is what they should seek to define and quantify, so they can take measurable risks to increase profits. It turns out that our banks have been pretending to know all about the risks they were taking, through devices which were mostly variations on derivatives.
For Main Street readers, let me offer the following definition of a derivative: a derivative is an instrument which is based on the risk of something happening (or not happening) to another risk, and not to another commodity. And once you do this once, you can repeat the transaction more or less indefinitely, as in risks on other risks, which are in turn risks on other risks, etc. The trust involved in these transactions in derivatives was not based on calculated risk, it was based on multiplying uncertainty, while pretending to develop and operate mathematical models that were calculating risks (ideally to the power of n). And as the uncertainties multiplied, more and more financial transactions were enabled, which allowed vast paper profits to be made as well as vast fees on these transactions, all of which were based on leveraging uncertainty rather than risk. In this vast reversal of the core principles of financial leveraging, the ultimate quarterbacks who anchored these risks (oops: these uncertainties) were the insurance companies who discovered the magical word “re,” which allowed them to insure risks on other risks. (The relationship of risk to performativity and trust is the subject of collaborative work-in-progress between Arjun Appadurai and Benjamin Lee.)
Yes, this is indeed a Ponzi scheme, but it is a Ponzi scheme with a few special twists: it required a certain number of arcane changes in the rules of accounting which allowed banks to disguise totally unspecified uncertainties as calculable (and profitable) risks; it required remarkable suspension of the elementary rules of government oversight over financial institutions; and it required a society that did not mind living with awesome amounts of debt at every level of its functioning. In other words, starting sometime in the 1980s we were already living in an FBE (Faith-Based Economy), in which no financial wannasteal really knew what derivatives were or how they worked, and each one hoped that they would be sitting on a secure chair (presumably in the Bahamas) when the music stopped. The music stopped because of the housing market (and the predictable end of the subprime lending orgy) but the game which stopped was a much larger faith-based system based on the radical replacement of risk by uncertainty.
So we are now officially living in a world where faith, risk and trust have completely redefined their relationship to one another. First, while religious faith is unevenly distributed in our larger societies and worlds, with a band of old-fashioned believers, a big band of social churchgoers, and a significant minority of yuppy Pascalians (including most professional economists), we have been barking up the wrong tree in regard to the problem of secularization. Max Weber, Durkheim and the other giants of early social science watched with concern as the march of industrial capitalism, science and the division of labor appeared to erode religious belief and we seemed to be well on the way to a “disenchanted world.” But the Iron Cage turned out to be a Pandora’s Box.
In the 1950s, sixties and early seventies, the general social science consensus was that modernization after World War II was sure to replace religion with faith in science, bureaucracy, law and education. But the world turned out to be a perverse place and, especially in the 1980s and 1990s, it became evident that religion was not on the retreat. Evangelical Protestantism was born again in the United States, Islam became the very paradigm of an expansive and aggressive religious ideology, Roman Catholicism was quick to fight back in its own favored climates and constituencies, notably in Latin America, Eastern and Southern Europe and in various parts of Asia and Africa. Even Hinduism and Buddhism, normally seen as quiet and sleepy, went global with a renewed energy and pushed their interests into various national and diasporic public spheres with scary effect in many parts of South and South-East Asia. As migrants began to carry their religious affiliations with them through the internet, television, telephone and the press, many world cities, from Detroit, London and Berlin, to Sao Paulo, Cairo and Seoul, began to be the sites of multiple religious movements, conversions, cults and churches, representing every variety of global evangelism and many varieties of indigenous tradition. The story of the Korean Protestant aid workers kidnapped by the Taliban in Afghanistan recently is only the most bizarre in a worldwide drama of leveraged conversions or duelling evangelisms. And quite a large number of people seemed to be interested in being soldiers (and cleansers) in religious wars.
And capitalism itself in the last decades of the twentieth century has been observed to be tied up with numerous forms of hysteria, panic and mystery. Local entrepreneurs in sites as different as Lagos, Taiwan and Guatemala connected new forms of gambling, speculation and scam to the related languages of salvation and millennial profit. These new forms of re-enchanted capitalism have generally been tied to the capitalist badlands, where traditions of fetish, phantasm and spectre have frequently surrounded money and its reproduction. It is hardly news, especially to anthropologists, that the repressed fetishes of the commodity are always part of the lunatic edges of modern capitalism, thus giving rise to many brands of casino capitalism, evangelical entrepreneurship and proletarian life-wagering.
We are now in a position to recognize the convergence of Bush capitalism and bush capitalism. In the very belly of the beast, in the heart of capital’s empire, we are witnessing the complete remaking of the Weberian allegory of the journey from predestination, to election, to proof, to works, to rationally governed bourgeois life, to entrepreneurial risk. This was the allegory of the prefiguring and powering of Puritan risk-taking by Calvinist rectitude.
Now this allegory is repeating itself in reverse. The appetites of the beast require restoring uncertainty to its more calculable form as risk, as a first step in restoring trust between lenders, so that they will move money to yet others, so that in turn the wheels of commerce can begin to turn and our faith in the eternal mysteries of capital can be restored. Among these are the mysteries of debt as the virtuous bride of consumption, money as capable of begetting more money, and profit for the few as the key to the welfare of all. The cardinal mystery of the market, of course, verily its Spirit, is the Invisible Hand. For the Invisible Hand to move again, it needs a Helping Hand from us, the wretched of Main Street. And in lending this helping hand, in the biggest bailout in human history, we are asked to show our Faith in the Economy. For once, and perhaps for the last time, capitalism needs our Faith as much as we need its mysteries. The global economy will never be secular again.
[For more on the current economic crisis, see the SSRC "President's Question," where Craig Calhoun asks, "What do we know about the bailouts?"---ed.]