The Heretic’s Guide to Global Finance
Brett Scott interviewed by Lewis Bassett.
A friend told me once that the 21st century’s equivalent of the sorcerer is the economist. Our community’s wise men, economists are in touch with forces beyond our control, having direct lines to the central banks, the IMF and the other gods of finance. These men alone understand the mysterious and smiting whims of The Market. They forecast our fate while we nail planks across our doors to protect against the oncoming hailstones of bailiffs.
“I think the financial system is implicitly strengthened by this perception of distance,” Brett Scott tells me in the empty cellar of a seedy wine bar in Mayfair. Brett is the author of The Heretic’s Guide to Global Finance; Hacking the Future of Money. After studying anthropology he worked for an NGO in his home country of South Africa before changing tact. “I didn’t want to get drawn down a straightforward path of working for a humanitarian NGO, doing all the expected things of someone with in an interest in social and ecological justice. I wanted to try something different.” Brett worked for two years as a broker at a start-up firm attempting to sell derivatives in the aftermath of 2008, a time in which selling derivatives must have felt like selling cakes to recovering diabetics.
I met up with Brett to talk about his book and to discuss whether hacktivist mischief in the absence of a critical theory of capital can really be a methodology for social and ecological justice.
3:AM: So how does one, as you put it, break in to finance?
Brett Scott: Well you have to have a haircut, so I had my first ever cut with this lady called Marianne. Then my mother brought me a suit. To begin with I had no idea about the financial sector. I knew literally nothing. So I downloaded all these things off this website called Investopedia and tried to read them on the plane. I spent three months staying on sofas while applying for any job that sounded financial. I was interviewed by Lehman Brothers twice, once literally a month before they went bust. Then I found this little company that was completely new. It had a blank website and all it said on it was that they were looking for eight people to come and work for them.
3:AM: So you were there for two years, and you got a lot of experience, which is clear from the first section of the book, containing the clearest and most practical explanations I have read for how finance functions. You write that “finance is a practice oriented industry” and that “the purpose of a system is what it does.” You say you don’t want to understand finance through the lens of any particular theory, why?
BS: In the end you are always going to have some sort of theory behind the way you see stuff. But the point is that within activist movements or any social movement there is a tendency to try and have an a priori theory and then you see finance through that. In an ideal world you want to construct understanding from the bottom up.
3:AM: What I find useful about your book is the pragmatism gained from not having to depend on theory. There are lots of good examples: comparing ticket touts to traders and using eBay as an analogy for the London Clearing House. Some people argue finance imposes itself upon society and functions solely as a means by which to extract profits without producing any new value. I believe this is the claim in a forthcoming book by Costas Lapavistas. There’s also a really good text by Escalate Collective called Salt that talks about how finance risk is physically embodied in the worker, that is, the average person who takes on a mortgage or a credit card and whose standards of living are at flux as a result of financial risk. In your book part of the assumption is that finance is worth taking control of or redirecting in some way rather than doing away with it entirely. Can you defend how finance is useful? Or what would a world be like without finance as we know it now?
BS: At a really basic textbook level, what finance does is handle the stuff that is produced of which there is no immediate use for, so we can pass that stuff on to somebody else, obviously not pass it on in a gift sense, pass it on so that in the future it can be taken back with a greater return. A normal economic exchange might be at one point in time when one thing is exchanged with another. But finance is a way of making that exchange take place over longer periods of time, the hope being that the exchange will be met with a lot more returns. So it’s a way of redistributing resources. That can theoretically have positive aspects. For example person A wants to produce stuff but doesn’t have any resources while person B has resources but doesn’t want to do anything useful with them right now. A lends these resources to B who produces new stuff and so is able to give the resources back (or the value of them) plus some of the new stuff that has been made. The idea is the whole thing gets bigger and bigger and bigger. So finance is an integral aspect of economic growth.
3:AM: That doesn’t necessarily make it a good thing right?
BS: No! Of course the foundational assumption there is you want a growing economy and finance is a tool for that. But on top of that you can still ask what does most of the finance industry do? Most of this industry isn’t involved in the useful redistribution of resources at all. It’s going into other financial firms or speculative activity, so non-productive forces, a lot of what Costas will be talking about, I imagine. So your old school bank, which is funding the local businesses, is not doing that. The bank is busy funding hedge funds and that’s a useless activity, yes.
3:AM: One example you use is how one would finance building a school, something which is obviously socially useful. If I wanted to do this I am going to need money.
BS: Sure, and money is a token of resources. What you need is resources to build the school, which you do via money, but where are you going to get those resources from? Theoretically a financier would be the person to do that. So in theory you could have a gift financier, like your uncle who says, “hey I am going to give you money for your school and I don’t expect anything back.” That might be a gift financial system. Finance as it is now, though, is an extracted technology through which you set up a contractually binding system where the lender says, “I will give you the resources but I will add in all these clauses so that I get these resources back to me plus interest.” A financial instrument is made that allows money to flow to someone that needs it and then allows it to flow back to the financier. A bond is an instrument that channels money to the bond issuer but has conduits which bring the flow of money back to the investor. Equity and shares have different types of conduits in their design where the product floats and fluctuates but has the same basic principle. So these are technologies of extraction that should benefit both parties involved in the exchange.
But coming back to the question: is it useful? What all this system deals with is the exchange and growth of real resources. We can’t see that for what it is when it becomes abstracted from this basic reality, so a ‘debt instrument’ becomes a way to abstract from the exchange of the physical ecological movement of resources. But to what extent can you abstract from that to a kind of finance that doesn’t have any real world anchors? The subprime crisis was effectively due in part to a really convoluted, fancy way to fund houses. But so much of the value was false because of excessive amounts of transaction, yet in the end it still rested on actual houses.
3:AM: Right, and that is the point I was making when I referred to Salt, so that all of this false value, profit without production or whatever, it’s still based on people’s lives. So it’s still going to be someone getting kicked out of their home when it all goes to shit.
3:AM: OK, so what is the idea of a Heretic? Who is this figure or why choose this word?
BS: In the book the figure of the heretic is somebody who has access to a system but who also tries to mess with that system. The word was developed to mean someone who would have differing views to the Catholic Church. If we look at religious systems in history, very rarely do completely different and new religious systems pose a threat to the religious establishment. In fact a dominant religious system often gains a lot of its strength from the othering of different beliefs. For me the idea is you could you create a whole series of financial heretics who are people that have the ability to access to financial system but who also tend on some kind of subversive activity within it.
3:AM: Yeah, so the rest of the book is about this form of activism. You refer often to the idea of the hacker. You don’t seem to mean a hacker in terms of the hacker bogey monster, the member of Anonymous who is out to bring down the world; your interest in hackers has more to do more with play and exploration.
BS: In some hacker communities there is the sense of hacking as embodying the ethics of curiosity, exploration, having mischievous fun; creativity with some kind of subversive intent. I use the term hacker as one particular formulation of the heretic because part of what is involved in the art of hacking is gaining access to something and then twisting that thing.
3:AM: Can you give some examples?
BS: The exciting thing is essentially so much of the work is yet to be discovered. It’s waiting to be pioneered. But the example I use that is fairly well known is shareholder activism. If we return to the idea that a share is a technology, then just as a hacker would go about trying to understand how a computer technology works in order to break it open, look inside and alter the purpose of the thing, you could do the same with shareholder activism. You take the technology of finance and you recreate it with some sort of subversive intent, turning it into a tool for social justice.
I’ve done this before where I brought a share in Centrica, a big electricity company, and went to their AGM and raised an issue in an attempt to embarrass the CEO and the investors. But you can only do that well being an investor yourself and using the language of investment. After the AGM I was able to engage in a twenty minute discussion with the head of their US division. In that situation the share functioned as a technology of access, without which the company would remain inaccessible to me. So this was a classic hack, albeit very small and tokenistic.
3:AM: It sounds like the aim is to make investors feel unsure about what they are investing in. You refer to this in the book as raising the sense of risk and the sting of morality. But essentially investors have money and that person or group will want to put it somewhere. Or, in more complex language, capital has to constantly be valorised. Another thing you talk about is finding other channels through which ethical investments can be made. You mention the idea of carrot mobbing as a way to encourage ethical investment. To me this sounds a lot like the tactics that were used up till recently in the UK’s ‘green movement’, where rather than investors, the agency was thought to be held by consumers. Essentially the effect of green consumerism was to allow consumerism and production in general to continue under the idea that this crisis can be resolved through individual choice. But can you really have an activism that is based on there being an ethical choice?
BS: Let’s take a step back. These subversive actions might not mean anything in and of themselves, though they might be useful as part of a larger campaign. These tools of financial activism might expand the range of campaigns but on the macro level you’re not going to fundamentally alter the whole systems by some shareholder activism basically.
It boils down to the dilemma between whether a mass coordinated action is what is needed to brake a system or do you need many individual actions that slowly build and add up to something new? The latter option, from the personal perspective, tends to be more empowering because it allows people to feel that they can actually do something, as opposed to the feeling of pointlessness that comes if you feel you need to be part of some gigantic coordinated action, which is just incredibly hard to make happen. I accept it is a potential weakness. But with green investment products what people are trying to do is design a financial technology which has alternative design principals. So this is a technology that specifically excludes certain types of returns. The idea is to try and create the blueprints so you can shift the norms of the system in a way that the other investment options become seen as abnormal.
3:AM: The danger is you simply produce green investment products such as carbon trading which are quite simply not green at all; in fact they are worse than that, in that in the way they provide ideological cover to allow pollution to continue unabated. If we take investment in green tech, we can look at the example of schools again. Schools don’t or shouldn’t depend on making a profit so why would the investor who wants to make profit invest in a school? It’s clear to me there is an argument that the state has to invest in things such as these. Yet much of your book seems to be centred on the idea we need to convince investors of the merits of investing in these things.
BS: The book is focusing on what you can do with financial instruments and this is the structure of the book. I entirely think it’s way better to have a state funded school system than privately funded. But if we forget about the UK for a while and take other countries, for example South Africa, we might say we want the state to invest in the school system but the state will just say, “Well, no, we can’t. We don’t have enough resources.” There are some countries where this will be much more extreme. That is when private investment becomes another option, though you risk excluding everyone who can’t pay for it. There are debates about creating hybrid forms with sliding scales of payment. These are naturally imperfect systems of compromise. In an ideal society you want it to be given away but then do you have enough resources to give everything away?
3:AM: You mention you are interested in the actions you promote as being empowering, if not useful on the macro level. The other way of looking at this might be to think about who the activist is that this book is for. Could we not think, straightforward though it might be, that eviction resistance is a form of financial activism? I don’t think you can get more empowering than that. The act of this resistance is one in which you take back the control the economy has on your ability to live, but at the same time maybe you can challenge these methods of resource distribution, in this case of your home. I’m asking where you locate agency. I wouldn’t locate it within people who have ethical problems with the system so much as those who have immediate and inherent conflicts with the way finance is structured.
BS: Firstly, the many useful things that move around and are constituted as part of the financial system give room for loads of stuff to be considered as financial activism which I haven’t talked about. The book is perhaps aimed at the person who might define themselves as an environmental activist, a person who is making a deliberate stand against some system which they perceive to be unjust. But sure, your ideal actors are those who have a real and intrinsic reason for why they would take action. For example financial inclusion is a massive thing, the amount of people that have to rely on these payday lenders for example.
3:AM: One thing you don’t discuss are profit motives or the role of profit as a means of driving history, and nor do you discuss property relations. There is an instance in which you discuss micro financing, something you seem to praise as a form of “financial inclusion” in developing countries such as India. And yet this is a financial tool that has been heavily criticised, for instance by Silvia Federici, as a method by which finance can further extract surplus even from the world’s poorest people. It would seem to me the problem here is not financial inclusion as such but the exclusion from resources, due to property. Do you feel that is fair to say?
BS: But again this goes back to there being immediate and pragmatic responses, in which perhaps micro finance has an interesting potential. It’s not a grand tool for global justice but it could be useful if used correctly. In the end I have a much more straightforward and pragmatic view, though I don’t know if pragmatic is the right word. I understand the broader implications of not making deeper level critiques. But as I said one of the problems I often find with the traditional left is you might have a great analysis of the structural problems of what is wrong with society, but how do you go beyond this? In India we might want some redistribution of property but is that going to happen? My immediate pragmatic sense is perhaps micro financing is the solution, in part.
The Heretic’s Guide to Global Finance is out now from Pluto Press.
First published in 3:AM Magazine: Wednesday, August 7th, 2013.