A couple of years ago I jotted down a step-by-step guide to help my son get started on his university essays. That’s always the most difficult bit of writing – starting – and it never gets any easier. I thought some other might find it useful as well, so I’ve put it on a short video. Have fun! Beware, last minuters: the first step is ‘start early’.
I hope this helps avoid a few essay crises. If you like it, pass it on! PS: you don’t have to go to the bar in step 12 if you don’t want to.
When the infamous Zong trial began in 1783, it laid bare the toxic relationship between finance and slavery. It was an unusual and distressing insurance claim – concerning a massacre of 133 captives, thrown overboard the Zong slave ship.
The slave trade pioneered a new kind of finance, secured on the bodies of the powerless. Today, the arcane products of high finance, targeting the poor and troubled as profit opportunities for the already-rich, still bear that deep unfairness.
The Gregsons, claimants in the Zong trial, were merchant princes of 18th century Liverpool, a city that had quickly grown to be one of the world’s leading commercial capitals. The grandiose Liverpool Exchange building, opened in 1754, boasted of the city’s commercial success and the source of its money, its friezes decorated with carvings of African heads.
But Liverpool’s wealth also stemmed from its innovations in finance. The great slave merchants were also bankers and insurers, pioneers in what we today call financialisation – they transformed human lives into profit-bearing opportunities.
From the point of view of merchants, the Atlantic trade was slow, unreliable and risky. Ships were threatened by disease, by poor weather, and by the constant threat of insurrection. To speed up the flow of money, merchants began to issue credit notes that could travel swiftly and safely across the ocean.
Slaves would be purchased in Britain’s African colonies and transported to the Americas where they were sold at auction. The merchant’s agent would take the money received and rather than investing it in commodities like sugar or cotton to be sent back to Liverpool, they would send a bill of exchange – a credit note for the sum plus interest – across the Atlantic.
The bill of exchange could be cashed at a discount at one of the many banking houses in the city, or replaced by another, again at a discount, to be dispatched to Africa in payment for more human chattels. Credit flowed swiftly, cleanly and profitably.
The obscene novelty of the slavers’ banking system was that this financial value was secured on human bodies. The same practices continued on the plantations, where the bodies of slaves were used as collateral on loans allowing the expansion of estates and the acquisition of yet more productive bodies. The slaves were exploited twice: their freedom and labour stolen from them, their captured “economic value” leveraged by cutting edge financial instruments.
The Liverpool merchants also pioneered the use of insurance as a means of guaranteeing the financial value of the their commodities. The slavers had long recognised that the only way to survive the occasional total losses that expeditions incurred was to gather together in syndicates and share the risk.
So when the captain of the Zong realised he was unlikely to land his cargo of sickening and malnourished slaves, he ordered 133 souls to be thrown overboard. The perverse legal logic was that if part of the cargo had to be jettisoned to save the ship, it would be covered by the insurance.
These bodies-as-financial-commodities had only speculative value. Insurance made it real and bankable. This was true in 18th century Liverpool and it remains so in 21st century Wall Street.
Financialisation has since taken many forms, but basic elements remain the same. It is based on uneven power relations that capture future individual obligations and make them saleable. The contracts underlying the 2008 credit crisis, for example, turned future mortgage payments into tradeable financial securities with actual present value.
For those issuing the bonds, the profit was risk free. The risk was borne by predominantly poor Americans, whose adverse credit ratings and lack of financial skills made them easy prey for the issuers of mortgages so constructed as to lock them into economic bondage. These people were disproportionately black, Latino or migrant.
Insurance played a part here, solidifying the speculative value of investments to the benefit of traders. And when the bubble finally burst governments stepped in to maintain this system, the US Federal Reserve supporting giant insurer AIG to the tune of US$182 billion (£139 billion) while many people lost their homes.
The credit crisis bailout is eerily reminiscent of another. By the time of abolition slave ownership was so embedded in British society that the government was forced to compensate individual owners for the loss of their capital – it required an enormous loan that taxpayers only finished paying off in 2015.
I’m not saying that bankers today are like slave traders. But I am saying that contemporary finance is still riddled with regimes of dominance and exploitation at work.
Take contemporary philanthrocapitalism, where finance seeks to do good while also benefiting investors. Novel financial instruments position social problems as an opportunity for profit. The bodies of prisoners, for example, become implicated in schemes to prevent recidivism with personal character reform the trigger for investment payouts.
Schemes such as this make social problems the responsibility of individuals and ignore the structural relations of austerity that lie behind them. Finance wins twice, praised for solving the very same problems that it has benefited from creating.
I was recently invited to participate in a virtual seminar, ‘Building a market for exchange traded derivatives for recyclables’ (29 July 2020). That’s a fine idea, a financial market inspired solution to many practical problems facing global recycling. The recycling market is dogged by informational problems, with oversupply in some areas and undersupply in the areas where there is meaningful demand. It is dysfunctional, in the words of Rowan University’s Professor Jordan Howell, who organised the seminar. Finance theory tells us that a derivative market might be the answer, offering producers and buyers the possibility to gain some surety as to future prices and plan accordingly. Howell’s colleagues Professors Jordan Moore and Daniel Folkinshteyn shared research showing that derivatives markets tend to improve trading conditions in the underlying commodity market as well. Industry experts shared their stories about starting financial markets and managing risk through derivatives while the audience comprised industry representatives, regulators, and academics from across the United States. I was honoured to speak alongside Commissioner Rostin Behnam of the US Commodity Futures Trading Commission, who set a regulatory vision of innovative markets serving the economy through a robust and fair process of price discovery.
The event was organized by Professor Howell and his colleagues, academics from the Rowan University School of Business in New Jersey, and sponsored by the New Jersey Recycling Enhancement Act Grant Program and the Rowan Centre for Responsible Leadership. Despite the usual technological gremlins, it was a fascinating session.
My talk was titled ‘What makes a market? Understanding the social connections that underpin markets’. I was delighted to be able to say that that many of the findings of my research had already been echoed by earlier speakers, especially Stein Ole Larsen, a Norwegian entrepreneur who has founded NOREXECO, an exchange for pulp and paper.
Academics are on strike, again. The marketization of universities, with the accompanying metrification of academic labour, has come in for plenty of scrutiny both from colleagues and commentators. We can see clearly that the whole package of market relations degrades our working conditions, our security, and constitutes an assault on our profession. That’s what the action is about. But these finer points still appear to be tricky for some to comprehend. Yesterday The Guardian reported that Universities are likely to be the next in line for Dominic Cummings’ special treatment, explaining that:
‘A recent report by the rightwing Policy Exchange thinktank, founded by Michael Gove and seen as close to government thinking, said the higher education sector was seen as “out of touch” and “a sitting duck” for the new government. It claimed universities had lost “the faith of the nation in some critical areas” and flagged familiar ministerial concerns about failures to protect freedom of speech on campus, so-called “low quality” degrees that offered poor economic returns for students, excessive vice-chancellor pay and degree grade inflation.’
The irony! Michael Gove’s own right wing think tank complaining about universities acting exactly as instructed by a decade of government diktats! For as surely as night follows day, these very concerns – grade inflation, overpaid VC’s, and lightweight courses – follow from the very market structures that have been imposed on the sector.
My book, Creating economy: Enterprise, intellectual property, and the valuation of goods, with Barbara Townley and Nicola Searle receives favourable reviews in Journal of Cultural Economy and The Law Teacher. Rimi Kahn’s review essay in JCE calls the book ‘a timely and lucid analysis of the social and institutional processes through which the translations from text to product take place…an astute and empirically grounded study’. Kahn concludes that the book is ‘vital reading for those interested in the complexities of neoliberal cultural economy’, and that ‘it offers a generative new approach for examining questions of cultural production ownership and value.’ Ruth Soetendorp, writing in The Law Teacher, praises the book’s interest in theorizing intellectual property beyond the confines of the law school, and calls it a source of ‘invaluable insights’ for those interested in using the book as a pedagogic resource.
I wrote this in December 2019, facing a general election bogged down in Brexit, anti-Semitism, and dog-whistle politics; worn out by helplessness at the end of a year of political despair. The gains hard-won through our last industrial action seemed to be slipping away, our employers refusing to budge and the trustees of our pension funds treating us with contempt. We were furious. We took strike action for eight days and things changed. Talks restarted. We saw an apparent willingness to listen and heard sympathetic noises on matters that won’t cost too much or be easily tested. In the end, however, we have met with intransigence from our employers. We have made some progress, but not enough, and we are out on the pickets again. This time feels different: less anger, more quiet determination. It is difficult for all involved. I am genuinely distressed on the part of my students, who are suffering a severe interruption to their studies. I’m also persuaded by the argument that civility makes friends (thank you Dr Fergus Neville!) and we are standing on the picket lines with new comrades.
I took this post down for a while to reflect. But I see the very tactics that so provoked me played out on grander stages. In politics, for example, our Prime Minister urges us to be friends and unite Britian as he forces through the most divisive and hard-right political agenda in living memory. Be nice too easily means be quiet; civility remains a potent mechanism of control. We Brits are just too damn polite, overburdened by our bourgois heritage.
So here it is again in (nearly) all its intemperate rage…
It’s Monday, noon. The morning has gone well: big turnouts on the picket lines, much solidarity from colleagues and students. In east Fife we stood in the fog and the dreich, and the bagpipes played; Stephen Gethins, our MP, turned up and wished us well and fussed my dogs, who are now staunch SNP hounds; our twitter is flooded with pictures of pickets and placards. The Second Great University Strike is underway. And now I’m home. It’s quiet, the dogs are sleeping off their exertions, and I am at my keyboard; I have things that I am trying to think through and, academic that I am, I do not know how else to do so. Strike writing.
The topic in hand is civility. Specifically, the repeated injunction from the institutions for which we work that we should approach this dispute in a ‘civil’ manner. At the risk of boring the reader, let’s recap for a moment why we are striking: a sustained assault upon our pension scheme, a significant real term drop in our salaries, inequalities of race and gender, casualization, temporary contracts, general workload and the accompanying audit practices. These are just the headline-grabbers that the union put on the ballot paper. Our profession is in tatters, with stress and overwork rife. Everywhere I hear that enough is enough, that something has snapped, that the social contract around higher education is not so much broken as in smithereens. Our employers’ refusal to negotiate has driven us to industrial action where we stand to lose eight days of salary in the run-up to Christmas. I am sure I am not alone in feeling pretty uncivil about this whole affair.
Protests in Hong Kong have captured the world’s attention in recent weeks, with demonstrators closing streets and the airport, and Chinese forces amassing near the border with a none too subtle threat of violent reprisal. The protests began in response to a new extradition law, but have spilled over into a general unease about the future of Hong Kong’s special administrative status.
This special status sets Hong Kong apart from mainland China in a number of ways. As well as enjoying various social and political freedoms, it has a free market economy and is one of the world’s biggest financial centres. Global finance has attracted a number of Chinese elites but has not benefited a large chunk of Hong Kong society.
But if Hong Kong’s protesters succeed in pushing back against the oversight of Beijing, it would serve to reinforce the benefits the elites already enjoy from Hong Kong’s economic arrangements. This parallels the situation in the UK, where financial elites could soon embrace a low-tax, low-regulation future following a no-deal Brexit driven by populist concerns about immigration and inequality.
Hong Kong’s financial sector was a creation of the British, who used it as a route into Chinese markets. It boomed following the opening of the Chinese economy. When, in 1997, Hong Kong returned to China, it preserved some of this offshore status as a special administrative zone. The beneficiaries this time were Chinese.
Hong Kong stores great reserves of capital in comparative secrecy, channels global investment into China – also in secrecy – and is a crucial part of China’s long-term plan to establish the Renminbi as a global reserve currency through offshore markets. The local “dim sum bond market”, issuing RMB denominated debt, has been a remarkable success, with the equivalent of more than US$100 billion of capital circulating.
Hong Kong has been implicated in shadier dealing. Investigative journalist Nicholas Shaxton puts it bluntly: “Hong Kong is where most of the corruption in China is accomplished.” Other scholars see Hong Kong as an amalgam of onshore and offshore finance, with a strong legal system, tax treaties, and a robust financial market.
London’s success as a global financial centre has also been driven by its status as a hub for offshore financial services, a position greatly supported by its strong connections throughout Britain’s former empire. In the 1960s and 1970s, for example, London became home for the “eurodollar” markets. These were lending markets operating in US dollars, located in London but considered to be beyond the purview of the UK’s legislation.
London-based lenders could charge higher rates than the national currency controls of the time allowed. The United States benefited as the depth and liquidity of eurodollar markets supported the dollar’s reserve currency status; international banks arrived in droves and the City, London’s financial district, thrived. Regulators on both side of the Atlantic turned a blind eye, quietly admitting the economic benefits the markets bestowed. Even the Soviets invested.
Masters of reinvention
Both London and Hong Kong are centres of perpetual reinvention. Following the financial crisis, the City’s innovations have included managing the wealth of the global super-rich and an arrangement with the Chinese government to develop the offshore trading of the RMB.
In the same way that Hong Kong’s protesters fear Chinese control, a number of Brexiters claim the EU comes with too much red tape. Interviewing financiers for research into London-based markets, I found overwhelming support for Brexit, largely driven by a distaste for increasing layers of regulation.
It is certainly the case that Europe has never been comfortable with London’s activities as a conduit for international funds. No one expects the EU to maintain the City’s “passporting rights” which allow firms based in the UK to trade freely across the EU. And the mundane but profitable business of settling euro transactions is likely to be pulled within the bloc.
History shows they are fluid entities constantly reshaping in response to political happenstance and technological or economic advances. Markets put down roots in the shape of dense social networks shaped by bonds of trust and expertise, and in the material infrastructures – from wires, phones and screens to upscale offices, restaurants and hotels – without which they cannot function. Advantages of status and connection become embedded. When new financial frontiers open up it’s those well-placed who benefit.
Here’s the irony. Hong Kong’s protesters seek political freedom, but whatever happens in politics, it is likely that the economic advantages of the elite will be preserved through the social and material architectures of its markets.
Brexit, meanwhile, has been driven by concerns over immigration and inequality, but the no-deal on the horizon offers something else. If the new prime minister’s rhetoric of “boosterism” and “freeports” is to be believed, the City will be entirely unencumbered by regulation, free to roam the high seas of international currency flows. Here too, only the financial elites will benefit.
Here’s my new project: a podcast! It’s titled How To Build a Stock Exchange: Making Finance Fit for the Future. It’s a story of stock markets and how they came to be so important in our world. It will feature my own work and showcase the research of the sociological studies of finance as it builds an account of the evolution of financial markets and their place in a responsible, sustainable future. I introduce it as follows:
Finance matters. We’re off to build a stock exchange, but first of all I’ll spend a little time explaining why financial markets matter. This episode explores how financial markets – a crucial mechanism for the distribution of wealth – are implicated in our present political malaise and looks at some of the ways that finance has squeezed us over the last three decades.
Episode One is called ‘Finance Matters and here’s how it starts…
A famous philosopher once said – ‘It is not from the benevolence of
the butcher, the brewer, or the baker, that we expect our dinner, but
from their regard to their own interest.’ It was Adam Smith, of course,
born not far down the road from me in Kirkcaldy, Scotland, and the
father of modern economics. He once walked to neighbouring Dunfermline
in his dressing gown, apparently, so deep was he in thoughts, musings
like this, and ‘Nobody but a beggar chuses to depend chiefly upon the
benevolence of his fellow-citizens.’
From those words, published in 1776, a whole global order has sprung.
We can call it capitalism, and at its centre lies a strange entity, so
much part of our lives that we simply take it for granted.
Our pensions are under threat. You will be familiar with the headline numbers – pensions slashed by over half, to a level where the very survival of the university sector seems in jeopardy. I have done the numbers, like everyone else, and they make grim reading. But how did this whole mess come about? At root, it’s a struggle over risk and who should carry it. The deficit itself is the result of some particular choices made by regulators and administrators. Its very existence is a reflection of the broader struggles over the marketizing of universities and the social contract for public services, and it’s this battle that academics are fighting, whether we know it or not. Continue reading →
For the last two years I have been working on a ‘historical sociology’ of two stock markets established in London in 1995 in response to a series of rule changes at the London Stock Exchange (LSE).
The first, the Alternative Investment Market, or AIM, was set up by the LSE. It was established as part of LSE chief executive Michael Lawrence’s ‘seven-point plan’ for the repositioning of the Exchange as an engine for economic growth focused on the UK regions. AIM was also, in part, a reactive move allowing the Exchange to deal with competitive threats in Europe and at home, particularly growing activity under its own Rule 535. It has acted as a proving ground for many smaller companies and plays an important role in the political positioning of the LSE.
The second, OFEX (renamed PLUS in 2004) was privately operated and driven by commercial demand. Originally operated as a trading facility, it achieved legal recognition as a ‘designated market’ in 2001, and then as a Recognized Investment Exchange (RIE) in 2007. As OFEX it coexisted with the LSE and rode the dotcom wave; as PLUS it served as a vehicle for a market rebellion against the LSE. It struggled to maintain a commitment to its original small company constituency and to compete as a trading venue of choice against the Exchange. While AIM has flourished, PLUS faltered after the financial crisis of 2008, and my narrative finishes in 2012 with the sale of the PLUS RIE licence to ICAP, now NEX.
My research is based on interviews with members of the small company stock market community, as well as extensive documentary records. I have compiled a narrative account of these markets designed primarily for interested academics and for members of the professional community. It’s freely available and you can download it here. My narrative begins on the old floor of the LSE prior to the 1986 ‘Big Bang’ and finishes with the failure of PLUS in 2012. I conclude with some brief reflections upon the challenges and opportunities facing stock markets serving the smaller company sector, as illuminated by this history.
Please feel free to download, circulate, and quote. Suggested citation: Roscoe , P J 2017 , The rise and fall of the penny-share offer : A historical sociology of London’s smaller company markets. University of St Andrews.