Three causal explanations for financialization

Economic Anthropology, “Financialization” 2018

DOI:10.1002/sea2.12114

Finance beyond function: Three causal explanations for financialization Aaron Z. Pitluck1 , Fabio Mattioli2 , & Daniel Souleles3 1 Department of Sociology and Anthropology, Illinois State University, Normal, IL 61761, USA 2 School of Social and Political Sciences, University of Melbourne, Melbourne, Victoria 3010, Australia 3 Department of Management, Politics, and Philosophy, Copenhagen Business School, DK -2000, Frederiksberg, Denmark Corresponding author: Aaron Z. Pitluck; e-mail: [email protected] This article suggests that it is advantageous for social scientists to deliberately depart from functionalist theories seeking to explain the expansion of financial instruments and logics across social life. Rather, we identify three causes of financialization from three extant clusters of scholastic activity: an organic political economy that sees finance expanding as a product or by-product of larger state- and imperial-level political struggles, a relational sociology that sees the ways that finance expands by becoming another medium for expressing and constraining social relationships, and a cultural analysis that observes the increasing redefinition of discursive and material practices as financial. Across this larger discussion, we introduce and situate the contributions to this journal’s special issue on financialization. Keywords Financialization; Functionalism; Political Economy; Performativity; Relational Sociology

The social sciences recognize financialization as a significant phenomenon behind much of contemporary daily life—everything from provisioning for the elderly in retirement to delivering an education to children and young adults to accessing housing to alleviating rural poverty. It all seems to increasingly involve some manner of equity investment, interest-bearing debt, and tradable securities. Yet, social scientists, and especially those sociologists and anthropologists who conduct empirical work, struggle to theorize the causes of financialization and instead focus on its implications. Broadly, financialization can be understood as a nonlinear and potentially reversible process whereby financial markets, actors, institutions, and motives increasingly influence social life (Epstein 2005; also see Krippner 2005). In brief, financialization is “more finance”: the temporal and spatial expansion of finance. The forms and contexts that more finance can take are wildly varied, as the contributions to this special issue demonstrate. Langley in the United Kingdom, Truitt in India and Vietnam, Badue and Ribeiro in Brazil, and Rethel in Southeast Asia (articles in this issue) show the myriad ways that state-level policy decisions aid and abet the spread of financialized monetary and accounting measures all the way from low-level conditional cash transfers to housing and urban development policies to the state’s relationship to gold, thereby gilding everyday life with more financial practices. By contrast, Radhakrishnan in India, Kusimba in Kenya, and Ofstehage in Brazil (articles in this issue) show the ways that financialized practices both change and reinscribe social relations in locations as widely varied as a soybean farm and across a mobile cellular network. Finally, Polillo in academic America and Baron focused on the Classic Maya (articles in this issue) shift the conventional causal arrow and show the way that social relationships can generate new financial forms—everything from cacao money to abstract random-walk mathematical functions. Despite this variety, we suggest that the dominant explanations for financialization are functionalist and that much can be gained by moving beyond this. In fact, significant extant scholarship already does so (e.g., Beunza and Stark 2004; Hertz 1998; Miyazaki 2013; Polillo 2013; Preda 2013; Tobin 2016; Zaloom 2006, among others); and yet, © 2018 by the American Anthropological Association. All rights reserved

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A. Z. Pitluck et al. this same scholarship has not attempted to displace functionalist accounts with a theorization of financialization (Bear et al. 2015). In this article, we address both the strengths and dangers of functionalist explanations. Such theories tend to view the economy as a mechanistic closed system and to excessively deemphasize agency in favor of structural explanations. We identify three nonexclusive and overlapping lines of argumentation that explain financialization without making functionalist claims. In the tradition of an organic political economy (OPE), financialization emerges as the result of political struggle within nation-states or empires. Scholars who situate their work in relational social theory, by contrast, see financialization as the expanded use of financial media in social relationships caused by the expansion of financial relational packages in society. Finally, in a cultural economy approach, financialization is explained as the discursive and material redefinition of cultural practices as “financial.” While we believe that future research on financialization will be strengthened by a sensitivity to these three distinctive social theories, and to their intersections, we do not argue that a synthesis is necessary. We suggest that as a phenomenon with a long history, often connected to inequality, the expansion of finance is more profitably approached as a nonfunctional, historically contingent, nonlinear, and potentially reversible social process, as exemplified by the three classes of causal arguments that we have identified. But first, to the functionalists.

Functionalist theories of financialization Throughout the twentieth century, functionalist causal imagery and explanations had a long gestation in the social sciences, initially in anthropology (e.g., Malinowski 1931; Radcliffe-Brown 1935) and then imported into sociology, most notably by Talcott Parsons (Davis 1959). Although the term is seldom used (except in a pejorative sense) in contemporary anthropology and sociology, it continues to have currency in various fields of economics, thereby shadowing much scholarship on finance. Given this, we argue that this sort of functional explanation continues to be a dominant and influential implicit explanation for financialization throughout the broader social sciences. Hans Joas and Wolfgang Knöbl (2009, 56) define functionalist arguments as describing and explaining social phenomena by examining the functions that they fulfill within a greater whole. Functionalist arguments are potentially attractive to scholars with diverse ideological and theoretical commitments to explain social patterns that are equifinal, that is, wherever we find “uniformity of the consequences of action but great variety of the behavior causing those consequences” (Stinchcombe 1968, 80). Functionalist explanations of financialization are often attractive because empirical research often finds financialization to be equifinal. A critique of functionalist explanations is that they tell “‘just-so’ stories that are difficult to falsify, working backwards from what is to why it must be” (Davis 2009, 51, emphasis in the original). Using Stinchcombe’s and Joas and Knöbl’s argumentation as a point of origin, we suggest that functionalist explanations of financialization must make two simultaneous, circular claims. First, functionalist theories explain financialization by exploring how it fulfills a manifest or latent function for individuals, for classes, and/or for capitalism. In these arguments, financialization is the prerequisite for (or one of the causes of) the sound functioning of the social system. When pushed further to explain why individuals or groups are compelled to promote financialization on behalf of the social system, functionalist explanations necessarily make a second claim: There is a homeostatic mechanism that ensures that social forces promote just the right amount of financialization, thereby maintaining the functional needs of the social system. In this second theoretical claim, financialization is the consequence of the homeostatic mechanism ensuring the functioning of the social system. We argue that two of the most common explanations of financialization are both functionalist but that they differ in their homeostatic mechanism: Academic and applied economists theorize that financialization is caused by a process of isomorphic evolution generated by market competition, whereas Marxist theories argue that financialization is caused by class interests advanced by class positions. These two mechanisms are not logically exhaustive; however, they encompass the most widespread functionalist arguments. In what follows, we review 2

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Finance beyond Function each literature and synthesize a critique of each as a prelude for examining three nonfunctionalist explanations for financialization.

Financialization as an evolutionary functionalist process Economists understand financialization as an evolutionary functional process driven by diverse actors seeking pragmatic solutions to their immediate problems. Over time, financial products and institutions that fail to solve problems are abandoned, while financial processes that satisfy actors’ needs are retained and incrementally improved. Functionalist economists posit that society is becoming increasingly permeated by finance because it provides more efficient solutions to its increasingly complex problems. For example, how will individuals, groups, and nations move money into the future and enable the elderly a healthy and sustainable retirement? How will we optimally move future money into the present and enable entrepreneurship and homeownership? How will public infrastructure be financed in the face of necessary massive expenditures associated with global warming? In this type of theory, cultural evolution is the homeostatic mechanism that ensures that dysfunctional financial practices and products are eventually selected out, while superior products persist and diffuse to meet societal needs. For example, in “A Functionalist Perspective of Financial Intermediation,” Robert C. Merton (1997 winner of the Nobel Prize in Economics and son of functionalist sociologist Robert K. Merton) observes a “financial-innovation spiral” (1995, 26) constituting two arms—“financial engineering” and advances in academic finance theory—that together build numerous new forms of finance, which are pruned through intense competition. Computer and telecommunications technologies that reduce transaction costs, in turn, enhance and improve interinstitutional and intermarket competition. This pressurized evolutionary process “push[es] the financial system toward an idealized target of full efficiency” (26). Perhaps the most influential contemporary advocate of this functionalist explanation for financialization is Robert J. Shiller, a 2013 Nobel laureate who teaches at Yale where students are provided with institutionalized occupational pathways into the finance industry (Shiller 2012, ix–xii, 233–34; see also Ho 2009). In Finance and the Good Society, Shiller (2012) argues that finance and financiers do not have their own goals; rather, like skilled engineers, “financial engineers” develop products and markets to meet the functional needs of society: “Finance … is a ‘functional’ science in that it exists to support other goals—those of the society” (6–7). He encourages his students to view all social life as having “a hidden financial architecture” to support it (Schiller 2012, 135–36). Descriptively, Shiller’s explanation for financialization is that the diverse products of humanity—including poetry—require financing and that civilizational development and financial development are intertwined. Shiller also makes a normative argument that society would benefit from additional financializations—albeit ones attuned to his normative egalitarian vision of a “democratizing” and “humanizing” finance. Financialization as a class-based functional process A second common framework for explaining financialization is constituted by theories that describe the growth of finance as a function of structural tensions within capitalism; by relieving the stresses endemic to capitalism, financialization allows for its historical perpetuation. The specific mechanisms such critical theories identify, vary, and are generally associated with the proliferation of interest-bearing capital (also known as fictitious capital), that is, monetary credit that does not help consumption or production, but the only aim of which is to produce more capital. Broadly, Marxist arguments maintain that class interests and solidarity constitute a crucial reason to expand finance. Rudolf Hilferding’s ([1910] 1981, 367) Finance Capital understands financial capitalism as the situation in which “control over social production [is] increasingly [put] into the hands of a small number of large capitalist associations” that “separate the management of production from ownership” (see also Magdoff and Foster 2014). Economic Anthropology, Online ISSN: 2330-4847

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A. Z. Pitluck et al. This specific stage of capitalist development took place after the crises inherent to industrial or factory-based capitalism reduced the rate of profit of productive investments (Marx 1867). Financial capital is constituted by the emergence of a compound of industrial and banking monopolies that rely on the circulation of money, interest, and debt to accumulate capital—a process that, historically, has resulted in imperialist expansions. Key here is that Hilferding explains the emergence of finance capital as a functional response to class struggle (Marx and Engels [1848] 1967). Financialization needs to happen, because this is how the owners of capital maintain their class position. In turn, opposition to this oligarchy will be the role of the proletariat and bring about the end of history. To this point, Hilferding (1910, 367) predicts that the tendency of finance capital is to establish social control of production, but it is an antagonistic form of socialization, since the control of social production remains vested in an oligarchy. The struggle to dispossess this oligarchy constitutes the ultimate phase of the class struggle between bourgeoisie and proletariat.

In Hilferding’s view, finance capital constitutes a developmental stage of capitalism where the new configuration of production, distribution, and consumption promoted by an alliance between financiers and state elites produces a proliferation of interest-bearing capital. Building on Hilferding, Arrighi (1994) describes financialization as cyclical, caused by the dialectic of competition between capitalist states that embrace different forms of capitalist production to achieve political hegemony. In Arrighi’s perspective, financialization intensifies when a specific system of accumulation is losing competitiveness, and finance appears to generate enough profits to maintain hegemony. In this scenario, finance is not a twentieth-century phenomenon. Financialization occurred when Italian city-states lost political power to the Netherlands and when the latter was outcompeted by the British Empire, and again when the British system was supplanted by US hegemony after 1945. The current period of financialization, which began in the 1970s, corresponds to the decline of North American global hegemony and the rise of a new systemic cycle of accumulation based on Asian-led outsourcing and flexible accumulation. Financialization, however, does not only designate the autumn of hegemony. Echoing Magdoff and Sweezy (1987), Harvey (2003, 2005) suggests that financialization emerges as a consequence of the excess of money and the lack of profitable production that plagues contemporary capitalism. Productive capital is generally hard and costly to move about the globe, and even when it can be moved, it risks shifting power relations or generating economic crises. Finance, instead, can allow unlimited accumulation. Investing in finance solves the spatial limits to capitalist accumulation, allowing the capitalist class to place their liquid money in space-less products, which can be proliferated, exchanged, and controlled with increasing returns and with virtually no geographical boundaries (Aalbers 2008).

The limits of functionalist theories of financialization The systemic descriptions provided by functionalist theories of financialization, while productive in describing some of the large-scale shifts connected with financialization, incur two theoretical limitations. First, functionalist theories conceive of the economy as a closed social system animated by political economic mechanisms. In this mechanistic theory, the economy is conceived of “as a machine of quantities and relations between categories … whose enduring logic is discovered and operates independently of analysis” (Erturk et al. 2008, 34). Numerous schools of social science find this distinction between the economy and economists untenable. In contrast to mechanical engineering, the “laws” of finance are not ahistorical and universal; how finance operates is contingent on social structures, such as the legal, regulatory, and political environments (cf. Hart and Ortiz 2014). Even on a metaphoric level, finance is dissimilar to a technology that can be optimally applied to solve similar social problems in different societies. Academic finance is dissimilar to engineering; it is a social science, like economic anthropology. 4

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Finance beyond Function Second, functionalist theories tend to downplay agency in favor of structural explanations. True, strong functionalist theories must identify agents with interests in expanding or maintaining financialization and can potentially identify agents with interests contrary to financialization. However, all such agency is ultimately selected by the social system itself, even in class-based functionalist theories, where individual creativity and laws of capitalism are constantly portrayed as in tension but historical and global forces carry a decisive weight. In their most extreme versions, such functionalist approaches reduce agents to “cultural dupes” following the social system’s scripts or the imperative of monetary self-interest (Granovetter 1985). There is a certain beauty, and often political usefulness, to the synthetic way in which functionalist theories explain how a great variety of behaviors result in the equifinal phenomenon of finance’s expansion. Nevertheless, we identify three promising explanations for financialization that eschew functionalist argumentation. The first approach draws on OPE, as exemplified by the work of David Graeber, to argue that financialization emerges as the result of political struggle within nation-states or empires. The second explanation draws sustenance from the relational turn in the social sciences (Emirbayer 1997) to argue that financialization is the expansion of financial media in social relationships caused by the expansion of financial relational packages in society. The third explanation dissects these relational packages by following the cultural turn, associated with the work of Michel Callon and Marieke de Goede, to argue that financialization is the discursive and material redefinition of cultural practices as “financial.”

Financialization from political struggle Politics is not just an expression of class positions, nor does it simply follow the needs and whims of capitalism (Hall 2016; cf. Grossberg 1986, 62). Inspired by Gramsci’s interpretation of politics as praxis, we identify organic political economy as a heterogeneous intellectual tradition that focuses on political action rather than function. OPE produces structural analyses that, unlike functionalist approaches, treat the economy as a historical, contextualized, open-ended process animated by tensions rather than dialectical equilibriums (Bear et al. 2015; Tsing 2000). While some OPE scholars subscribe to a dominant–subordinate class paradigm, most pay attention to the diversity of tensions and struggles that financialization generates between and within social classes. In this perspective, financialization is not a prerequisite for the proper functioning of the social system. Instead, financialization emerges from an open-ended process of political struggle within empires and nation-states. Financialization results from attempts to impose, gain, or contest control over the resources a society sees as valuable—a fact encouraged by the increasingly large, often heterogeneous composition of human societies. In contrast to many functionalist theories of financialization, OPE rejects historical determinism and does not associate financialization with a specific stage of development of capitalism or as a solution to certain problems of capitalism. For OPE, financialization is not caused by capital’s intrinsic need to “escap[e] low profits in the sphere of production” (Lapavitsas 2013, 798), but by a new set of relations and institutions that emerge in the wake of political struggle. OPE’s findings can be interpreted as reinforcing the varieties of capitalism literature by emphasizing that the paths toward financialization differ considerably across nation-states (Becker et al. 2010; Bohle 2018). OPE sees financialization as the product of political struggle between, against, and among state and financial elites. Baron (2018) demonstrates that the expansion of financial logics can very well happen in noncapitalist societies. The monetization of cacao beans and cotton textiles in the Classic Maya empire (250–900 CE), for instance, was directly connected to struggles for political power and imperial expansion. Once cacao and textiles became accepted as money, their cultivation and exchanges accelerated, and the work people could and should do, who would profit from that work, and what was accounted as valuable were transformed. A similar theory is advanced by Graeber (2011). In his historical and comparative cultural analysis of debt, financialization appears as a shift from delayed reciprocity (i.e., debt on a human scale) to abstract debt dynamics

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A. Z. Pitluck et al. (i.e., financial debt). This commodification of debt is made possible by a violent association between groups of financial elites and state (or imperial) apparatuses. Despite its pernicious character, however, financial debt maintains its halo of human morality—hence the contradiction, whereby moral norms force the necessity of paying one’s debt, even when such morality results in immoral and dubious political gains. OPE scholars provide ample historical and ethnographic data that support Graeber’s perspective and correlate the emergence of strong state hierarchies with the development of financialization. Kalb and Visser (2012), for instance, show that financial elites have gained tremendous power and influence in advanced democracies and within the European Union (EU). Scholars who examine EU policies and practices find that its bureaucratic structure relies on revolving doors with financial institutions (Tsingou 2015). Sharing the same milieu as Eurocrats, financiers can shape macropolitical decisions (Kalaitzake 2017) and can benefit from benevolent oversight on crucial issues such as mergers and acquisitions (Wigger 2012) or taxation (Fernandez and Wigger 2016). Unlike Graeber, however, most OPE scholars see financialization as a result of an additional layer of struggles—that is, as a weapon for political fights among dominant classes rather than only as a source of power utilized to control the 99%. Rethel (2010, 2018) and Rudnyckyj (2013) demonstrate how Malaysia’s state-driven financialization was motivated by an attempt to gain international power and legitimacy and attract capital flows. Mattioli (2018) suggests that, in Macedonia, financialization is a constitutive part of an authoritarian statecraft project whereby new political elites are able to supplant older oligarchs by expanding credit relations and monopolizing the money supply. In the aftermath of the global financial crisis, increasingly indebted businesses and oligarchs became reliant on the government’s access to international debt—a result of its geopolitical importance for the EU. Similar findings are advanced for the cases of Hungary (Johnson and Barnes 2015) and Russia (Dawisha 2015), where illiberal leaders utilized the expansion of finance as a tool to bribe, fight, or subdue political rivals. Consequently, financialization does not always result in more liquidity, faster monetary circulation, or abstracted debt dynamics (Bonizzi 2013; MacKenzie et al. 2012; Pitluck 2011). For example, Truitt (2018) demonstrates that financialization can generate both demonetization and monetization of gold. Faced with the continuing importance of gold as a vernacular means for storing value and exchanging goods, the Vietnamese and Indian states tried to variously control and restrict its use. By making it a reserve asset for national banks, the (de)monetization of gold signals the attempt by state elites to manipulate not only their citizens’ wealth, but also their nation’s position in global markets. Finally, OPE suggests that financialization can become a tool for protest against the state–finance nexus. Mann (2017; cf. Ferguson 2009), for instance, shows that financial language, symbols, and resources are appropriated by resistance movements. His analysis of the bombing of the Montreal stock exchange reveals how the Canadian Anglo-Saxon federal government relied on financial mechanisms, such as raising bond yields and inducing capital flight from the Francophone regions, to tame Quebec’s independence movement. Independentists, however, appropriated other financial tools, such as developing a cooperative credit system, which reduced the region’s financial dependency on Toronto. Similarly, Appel (2014) suggests that financialization generates its own discontent and resistance and can be acted on to create alternative political and economic systems. For the women and nonheterosexual males Appel interviewed, the experience of working within financial firms constituted a powerful motivation for their newfound political activism and engagement in alternative banking activities. Not all organic political economists agree, however, on the intentionality of financialization. Souleles (2017) identifies among American private equity investors a certain ambivalence about the causes and effects of the mergers and acquisitions over which they preside. And although most see financialization as the result of deliberate political actions taken amid fights over state or imperial power, a few scholars who focus on regulation tend to understand financialization as an unintended consequence of political struggles or pragmatic expediency. Fligstein (1990), for instance, shows that attempts to impose US federal control over corporations through antitrust regulation and enforcement had the unanticipated consequence of motivating corporations and elites to financialize. Similarly, 6

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Finance beyond Function Krippner’s (2011) archival research finds that three key US policy shifts that are widely acknowledged to have contributed to financialization were enacted with a very different motivation—to expediently, temporarily, and partially address three interrelated political and economic crises from the late 1960s and 1970s (for a similar process in the EU, see Nolke 2016; Stockhammer 2011).

Financialization as the expansion of finance in relational work Finance is noteworthy for manifesting itself in the minutiae of the social world, as theories of the financialization of “everyday” life demonstrate (cf. Davis 2009, 191–234; Langley 2008; Martin 2002; van der Zwan 2014, 111–14). Much of this literature examines the consequences of financialization as a new cultural frame that corrupts sociality, or at least inserts it into a new capitalist framework (Bear et al. 2015). In contrast, this section draws on Viviana Zelizer’s (2005, 2012) theory of relational work to explain how changes in everyday sociality can be a causal explanation for financialization. Specifically, we argue that financialization is the expanded use of financial media in social relationships caused by the expansion of financial relational packages in society. Initially, our thesis might sound counterintuitive to readers who see finance as a “fictitious commodity,” an argument that gained currency through the work of Karl Polanyi (1957). Polanyi views finance and society as “separate spheres and hostile worlds” in which the expansion of finance leads to “inevitable contamination and disorder … when the two spheres [come] into contact with each other” (Zelizer 2005, 20, in another context). In anthropology, the “hostile worlds” perspective has gained significant traction, as many anthropologists detail the corrosive impact of finance and debt (e.g., Graeber 2011) on social and communal relations, now regulated by “fictive” financial packages rather than the “real” values of production. For example, consider the impact of finance on food production. Lawrence (2014, 421) suggests that agricultural commodity derivatives and other food-based financial instruments “lose their connection with physical products.” For investors, food is an opportunity for trade and speculation rather than a symphony of taste that cements social intimacy (Russi 2013). Similar arguments have been made for medical research when investor mechanisms and financial abstractions are utilized to cope with natural disasters (Erikson 2015a, 2015b; Glabau 2016), bureaucratic and audit practices (Shore and Wright 2015), and urban development (Aalbers 2008; Brash 2011). In contrast to Polanyi’s (1957) thesis, other studies suggest that “finance” and “society” are poorly described as “separate spheres,” much less hostile ones. Finance is no less embedded in society than any other social tie—a point vividly demonstrated by Viviana Zelizer’s (2005, 2012) theory of the economy and intimate relations as “connected worlds.” For Zelizer, social actors infuse all social relationships—including economic, intimate, and intimately economic relationships—with meaning. Individuals express their self-identity and demarcate their relationships by choosing appropriate media. For example, “persons X and Y call each other ‘sweetheart,’ engage in transfers of information, advice, gifts, financial aid, and occasional sex, using the telephone, Internet, and money as their media” (Zelizer 2005, 56). Money and other forms of finance are merely one such “medium” people use in social relationships. Malleable cultural templates (“relational packages”) such as the concept of “sweetheart” structure such agency, which determines the media appropriate for that relationship. Zelizer defines this agency constrained by relational packages as “relational work”: the efforts individuals exert to create, maintain, differentiate, or terminate their social relationships with one another (Bandelj 2012; Bandelj, Wherry, and Zelizer 2017; Block 2012; Zelizer 2005, 2012). The sociality of inflows and outflows of “financial” and “nonfinancial” media in people’s lives is vividly illustrated in Figures 1 and 2 in Kusimba’s (2018, 250, 252) study of Kenyan social ties. Moreover, in ethnographic work, it can be analytically challenging to attempt to distinguish “financial” from “nonfinancial” media. For example, for the migrant farmers who moved from the United States to Brazil who Ofstehage (2018) analyzes, raising money from international investors and purchasing farms in Brazil were means to an end: reproducing their farming identity

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A. Z. Pitluck et al. and relations. Instead of being passive subjects of global finance, “farmers themselves have inserted finance into farming practices, values, and social organization” (275), a fact that nonetheless transformed their work practices and understanding. To those who can manipulate its flows, the relational work of financialization provides opportunities. On the other hand, to those pressured or coerced to use financial media, the relational work of financialization can be disciplining and potentially disempowering. For example, in Radhakrishnan’s (2018) study, relatively privileged Indian women promote financialization by forcing other less well-off members of their community to enter lending groups and become indebted, even when they do not need credit, to gain prestige, influence, and perhaps occasionally an illicit income. In Kusimba’s (2018) study of digital microcredit, women do not necessarily use these new sources of loans for individual empowerment and gaining independence. Rather, they borrow and lend to express themselves as (variously) “a Kenyan woman” with digital connections who “knows what’s happening” and is worthy of “prestige and recognition.” In both studies, women in social networks are engaging in potentially risky debt relations, occasionally with little or no economic incentive to profit, as a by-product of the relational work of others in their community. Existing scholarship demonstrates that financialization is a by-product of the expanded use of financial media in people’s relationships with one another. Specifically, financial media are used to create identities, boundaries, and signifiers of the meanings of one’s social ties. At the same time, financial media are legal contracts that potentially alter the qualities of these social ties by creating new obligations and revenue streams. For example, in their analysis of mortgages in Hungary, Pellandini-Simányi, Hammer, and Vargha (2015) show that couples use mortgages as media to understand their marriages and their relationships with one another, even as the debt contracts’ financial obligations may impose new strains on the relationships (see also Halawa 2015; Palomera 2014). Similarly, Wilkis (2015) reports that in the slums of Buenos Aires, formal credit relations become crucial media in social, affective, and family relations. Individual credit cards are lent to friends and family, and individual debt becomes an item of discussion and strategy for the entire family (see also Müller [2014] for the case of Brazil and Guérin [2014] for the case of India). Lainer-Vos (2013) describes how nationalist social movements and governments in Ireland and Israel launched diaspora bonds not only as a fund-raising mechanism, but also to organize political support and “attachment” between the diaspora and these nascent nations. Lainer-Vos finds that bonds become important media for organizing (or failing to organize) the relationship between a national diaspora and its imagined community. In each of these studies, financialization is a by-product of the expanded use of financial media in people’s relationships with one another, and at the same time, the financial instruments are legal contracts that reshape the tenor of these relationships.

Financialization as the expanded use of financial relational packages Together, these cases strongly suggest that financialization—the expansion of finance—can be partly explained by diverse parties choosing to use financial media in their relational work. Yet, as Radhakrishnan (2018) also emphasizes, people’s agency to choose financial instruments is shaped by a constellation of very specific cultural templates (what Zelizer terms relational packages), which, for instance, require that one out of every five microcredit group members live in a rented home. Where do these relational packages come from? What explains their temporal and spatial expansion? One source, self-evident in Radhakrishnan’s study, is complex organizations. Another, as the OPE perspective identifies, is that national and international political institutions generate them. Both sources are well illustrated in Badue and Ribeiro’s (2018) research. They demonstrate that a cash transfer program promoted by the Brazilian state and called Bolsa Familia is appropriated and manipulated by the beneficiaries for different relational goals. Yet this financial agency comes with a traditionally gendered relational package. The program was explicitly available only to women, thereby making family welfare a female duty and allowing men to escape completely the (few) 8

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Finance beyond Function responsibilities that they had toward the household. Because this cultural assumption was already present among local women, this case of financialization exacerbates preexisting relational cleavages. As Bolsa Familia funds are insufficient to completely support a family’s expenses, women find themselves entangled in further debt with both formal and informal creditors—becoming the vessel for financial market expansions. Guérin (2014) finds a similar ambiguity in the domain of financial inclusion projects, where financial tools fail to empower local populations, instead reinforcing preexisting gender boundaries. As Schuster (2014) notes for the case of Paraguay, the relational package that permeates microcredit lending forces women to assume collective risks and repay debts as a single social unit. We interpret these studies as demonstrating that financialization can be understood as the expansion of financial relational packages in society. These cultural templates enable and constrain people to use financial media in their social relationships to demarcate their identities and to create, maintain, differentiate, or terminate their social relationships with one another.

Financialization as the expanding redefinition of cultural practices as “financial” There are other sources of relational packages in addition to complex organizations and state or imperial politics. A third strategy for breaking with functionalism is taken by scholars who often self-identify with the fields of social studies of finance (Knorr Cetina and Preda 2012; MacKenzie 2008; Preda 2009) and cultural economy (Pryke and du Gay 2007) and understand finance as material cultural practices. We argue that one implication of these theories is that rather than conceiving of financialization as the expansion of “finance” throughout society, financialization is the expanding redefinition of material cultural practices as “financial.” Drawing on the theory and methodology of Foucault, Marieke de Goede (2005) argues that what we now call “finance” was not originally distinguished from what we now call “gambling” and that this controversial distinction did not begin to stabilize until the early twentieth century. For example, in the Lloyd’s of London’s eighteenth-century insurance offices, one could wager on a wide range of uncertain events. In addition to speculating on one’s own life or property, one could wager against strangers’ lives or property or “place bets on the outcome of battles, the longevity of celebrities, the succession of Louis XV’s mistresses, and the outcome of trials” (de Goede 2005, 52). De Goede argues that the distinction between financial speculation and its “discursive double” of gambling is not an inherently economic distinction, but rather a political outcome played out in sermons, pamphlets, newspapers, and novels, and sometimes institutionalized in court cases and regulations. She traces out, first, how gambling was morally problematized and, second, how finance was cleaved from gambling by valorizing financial work. Such valorization continues to this day, as explored by Rethel’s (2018) analysis of state-orchestrated spectacles in Southeast Asia and in Polillo’s (2018) examination of the discourse on financial market efficiency, what became a key foundation in the valorization of financial markets. De Goede’s genealogy suggests that financialization is as old as finance and should be seen as a material discursive practice. Financialization should not, then, be conceptualized as the expansion of finance in society, but rather as the expanding redefinition of cultural practices as “financial.” The historical record emphasizes that this contested reconfiguration may be stabilized in technological infrastructure, legal courts, regulatory practices, and legislation, but the division between finance and nonfinance is often protracted, unsettled, and reversible (Mitchell 2007; Preda 2009). Consider, for example, the distinction between odious and salubrious debt and corollary debates on the circumstances under which one may legitimately profit from lending. From the mid-fourteenth through the seventeenth centuries, the Catholic Scholastics of Salamanca reconceptualized and narrowed their understanding of illicit usury and distinguished, valorized, and legitimized what became a range of licit financial practices entailing profiting from interest payments (Persky 2007, 229; cf.

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A. Z. Pitluck et al. Wennerlind 2003). Controversies about how to distinguish lenders’ interest from lenders’ fees, finance from gambling, and legitimate debt from odious debt are frequently reopened by social movements. For example, in the 1980s, the distinction resurfaced by social movements addressing the unpayable debt accrued by the Global South (Bonizzi 2013). Dating from the same time period and extending to the present, these debates have become prolific in diverse Muslim-majority countries, particularly in the Islamic finance industry (Maurer 2005; Pitluck 2008, 2013; Rethel 2011; Rudnyckyj 2013) among pious Muslim entrepreneurs (Sloane-White 2017) and among Muslim consumers (Fischer 2011; Maurer 2006). The social studies of finance scholarship often draws on two social theories, both of which can be used to understand financialization as a material discursive practice in which the nonfinancial becomes financial. The first is that agency is distributed among humans and material artifacts (see Enfield and Kockelman 2017). As Callon (1998) emphasizes, people and their organizations are not by nature homo economicus, acting calculatedly with purely instrumental, economic, or political motives. Rather, such calculative agency must be assembled (see Langley 2008, 2018). This assemblage in which economic action takes place is infused with (often material) cultural practices—norms, conventions, regulations, wires, screens, and the built environment (Knorr Cetina and Bruegger 2002; Knorr Cetina and Grimpe 2008; Lépinay 2011; MacKenzie 2006). If we understand financialization as the redefinition of cultural practices as “financial,” then we can interpret many changes in distributed agency as financialization. For example, Kusimba (2018) finds that the expansion of digital lending was caused in part by the redefinition of middle-class Kenyan femininity as borrowing and lending. As one informant explained, “what kind of Kenyan woman is not a member of many [savings and lending] groups on her phone” (252)? Similarly, Radhakrisnan (2018) finds that significant causal agency for the expansion of microfinance into poor and working-class urban neighborhoods is found not in the financial firms’ employees, but among unpaid volunteers putting social pressure on their neighbors to take out loans. In both cases, we find what were previously nonfinancial practices (behaving feminine and behaving neighborly) becoming redefined as financial practices—and in both cases, also generating “more debt” and the spatial and temporal expansion of finance. The second tool is performativity theory, in which markets and homo economicus do not ontologically exist, waiting to be discovered. Instead, social scientists and businesspeople enact the economy by interpreting it and reacting to their collective interpretations (Callon 1998; MacKenzie 2006; MacKenzie, Muniesa, and Siu 2007; Mitchell 2007; Muniesa 2014). For example, Polillo (2018) demonstrates that the efficient market hypothesis did not impose itself because of its superior “adequacy of data and tests in adjudicating truthfulness” (207). Rather, the efficient market hypothesis became successful because it permitted researchers to produce a career-generating stream of research results—so much so that the hypothesis has become a dominant cultural practice throughout the finance industry, ultimately becoming a reified “thing.” From the perspective of performativity theory, scholars and businesspeople are important agents in “provoking” (Muniesa 2014) new cultural practices into being as economic or financial. A classic study demonstrating this argument is MacKenzie and Millo’s (2003) historical sociology of the 1973 founding of the Chicago Board Options Exchange (CBOE) (see also MacKenzie 2006). Proponents for creating the CBOE faced considerable opposition. Some derivatives were interpreted as illegal gambling under Illinois state law (see de Goede 2005). Advisors in the Securities and Exchange Commission associated options trading with market manipulation, and the SEC chair unfavorably compared options to “marijuana and thalidomide” (MacKenzie and Millo 2003, 114). MacKenzie and Millo document how academic economists and their financial theories were crucial voices in undermining these arguments by changing the opinion of key regulatory and political gatekeepers. Consequently, these financiers’ cultural practices, which were previously interpreted as illicit market manipulation and gambling, were reinterpreted as licit and economically beneficial. MacKenzie and Millo’s case demonstrates that 10

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Finance beyond Function the advocacy by economists (broadly defined) in concert with market proponents was a necessary precondition for redefining these cultural practices as financial. Another cultural practice that is widely interpreted as “performing” corporate behavior is the academic theory and normative ideology of “shareholder value.” This idea was first popularized in the 1980s and advocates that a corporation’s principal purpose is to increase its share price (Davis 2009; Ho 2009). As shareholder value ideology was institutionalized, it displaced a wide variety of “economic” practices as “financial” practices. For example, corporate managers’ and aspiring CEOs’ previous benchmarks for success (such as corporate size, employee satisfaction, or community engagement) were displaced by the financial benchmark of stock market performance. To achieve this, managers made corporations more “liquid” and asset light (Davis 2009; Ho 2009). Over time, employees and customers altered their expectations and eventually adopted financial frames: Life experiences became understood as human capital, friendships became social capital, and one’s home became an asset class (Davis 2009). In sum, diverse corporate and employee cultural practices became reconfigured as homogeneous “financial” practices. Early research on the origins of this ideology was compatible with Callon’s (1998) argument that economists perform the economy; specifically, Lazonick and O’Sullivan (2000) argued that shareholder value ideology was derived from the academic research of financial economists like Jensen and Meckling (1976). However, content analysis of elite media by Heilbron, Verheul, and Quak (2014) has found that the role of academia was relatively marginal. Instead, they found that it was wealthy outsiders who initially deployed shareholder value ideology to mobilize political support for their hostile takeover battles. The origination and diffusion of shareholder value as a cultural frame demonstrates that agents’ performances may be conflictual and their capacities to perform the economy unequal. This research underscores de Goede’s (2005) larger point that interpreting financialization as a cultural practice is compatible with interpreting it as a field of political contestation (see also Holmes 2013). For example, Rethel (2018) draws on Guy Debord’s dictum that state power is “at the root of the spectacle” and then explores the role of such state-orchestrated spectacles in Southeast Asian financial institutions. She dissects state power by examining how legitimacy is assembled in government capital market masterplans, in the architecture of state financial institutions, and in the ritualized performances of state and elite financial actors in capital market conferences. Similarly, Langley (2018) argues that controversial UK government policies for financing urban infrastructure cannot be explained by the objective existence of a “finance gap”; rather, one must examine the contested cultural practices that rendered the problem and shaped alternative courses of government action. Langley does so by carefully analyzing the National Infrastructure Plan documents to reveal how agency was both strategically and experimentally assembled.

Conclusion Despite the intuitive appeal and explanatory power of functionalist theories that explain the rise and spread of finance to so many facets of human social life, we have suggested that we can produce a better accounting of the spread of “more finance” when we abandon just-so theories. In turn, we have described three scholarly clusters already moving beyond functionalism. In organic political economy, financialization emerges from the messy lives of states and empires as one more part of general political struggles. In relational sociology, finance becomes another means of mediating social relationships, thereby pulling and compelling and cajoling entire social networks into financial relationships. And finally, following the cultural turn, finance expands when material cultural practices are redefined as “finance.” We have argued that these three explanations of financialization and schools of thought benefit from a common distance from the homeostatic mechanisms in functionalist theories of social life and,

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A. Z. Pitluck et al. consequently, more accurately account for what finance actually looks like, how finance functions, and what expands the spatial and temporal edges of finance. There are fascinating intersections and plausible causal configurations between these three theories for future researchers to explore. For example, it is plausible that as cultural practices become understood as “finance,” they become relational packages; in turn, these relational packages may shape not only the norms of how financial media are used in relational work, but also the field in which power struggles mobilizing finance take place. Verifying and elucidating such potential configurations require empirical research that is sensitive at the data-gathering stage to the existence of all three nonfunctionalist theories.

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