Public Seminar (PS): What motivated you to write Rated Agency?

Michel Feher (MF): Well, three motivations probably. The first one, which is the longer one, comes from reading many years ago Foucault’s lectures on neoliberalism and then thinking through that from the Foucauldian perspective but also realizing soon that these lectures were delivered in 1979 and the last one was delivered two or three weeks before Thatcher was elected for the first time. So these were lectures that took place before or on year zero of the neoliberal era and so they talk about the neoliberal agenda as it was developed by neoliberal scholars. They don’t talk for obvious reason what neoliberalism became once these reforms were actually implemented. And so what struck me and that was the starting point of the work and its first incarnation was an article I wrote in 2009 in Public Culture: the type of subject that is constituted by the neoliberal regime or the neoliberal art of government is quite different from the one that the neoliberal scholars had in mind and that Foucault described. In other words, the entrepreneur of the self, the concept that you find in Foucault’s lectures, is, or at least so is my claim, not something that actually panned out and that the reason why it didn’t pan out is the financialization of neoliberal policy but not the actualization of their agenda. So that discrepancy is the beginning of the project.

PS: How did the project and your arguments develop from this initial observation?

It led to a double project. One which is now published, which is developing this discrepancy but is also trying to think through what it meant and what it implied in terms of political and social activism and resistance. The main motivation is a certain malaise with the left critique for several reasons. First of all, in the wake of the 1980s, the first left critique was that this was basically a backswing from social democracy to good old wild capitalism and liberalism. The concern was the throwback to a previous stage of capitalism. And there were some elements that could contribute to that. Just the fact that inequality would rise to point that was unknown since the 1920s, the golden years of capitalism, there was some kind of analogy in it. But then the first amendment to that very much prompted by the reading of Foucault’s lectures was the reading that neoliberalism in fact was not a return to old laissez faire neoliberalism. But in fact what the neoliberals would try to do and say is that competitive market economy is the optimal social system but not the natural social system. So instead of needing the state to withdraw, they came to think that the state should sustain it, which meant a retooling, not a loosening or withdrawal, of government. That instead of a Keynesian or a social democratic government the purpose of which was to protect the most fragile parts of the populations against the roughness of market relations, what we should have is a government that protect the fragile mechanism of the market from the demagogy of the people. The other thing, also brought up by Foucault. Was the fact that there was an element of social engineering in neoliberalism, which is about shaping every economic agent, government, company or private citizen into an entrepreneur. And especially essential was to make sure that people who were not entrepreneurial would nonetheless think and behave as entrepreneurs because as long as we lived in liberal democracy, if wage earners continued to identify as wage earners whose interests would be opposed to the interest of the property trustees, it was just a matter of time before socialism would come. So the only way to prevent that would be either to suppress democracy which could be done in some countries like Chile but not in Northern Europe or the United States or retool the wage earner so that s/he would seize to identify as such and would instead adopt the mindset of entrepreneurs. The neoliberal project was then producing financialization which then was producing a different kind of subject and maybe a different priority for government because governments were now there to sustain financial markets and not just any market. And then there was of course a big interest in finance and financialization in the wake of 2008 because the left started to plan its combat. But then they focused on that as if financialized economy itself was a problem. Not only that it was producing bubbles that would burst but that it would in fact itself be a bubble that would eventually burst. Which meant that the horizon of the left is very much the fact the bubble is going to burst and we would be back in 1978 dealing with the problems and hopes of the 1970s. So going against that was very much the motivation, the ultimate motivation of the book. Not only by showing that the subjective formation of financialized capitalism was not the same as the neoliberal agenda, but also making another Foucauldian move with regard to activism which was the fact that once we identify the type of subjectivity moulded, shaped, and fashioned by financialized capitalism, instead of rejecting it, the main point becomes to appropriate it and to try to turn it towards different purposes.

PS: Are there future projects that continue the work you started in Rated Agency?

MF:Writing Rated Agency gave birth to a much longer project, which is not finished yet, where I basically to try to sketch what could be seen as a genealogy of ambition. In other words, the conditions that preceded the — I used to call it the neoliberal condition but now I think of it as the investee condition. Precisely because the discrepancy that is interesting in terms of social engineering is that the purpose of the neoliberal was to an extent the restoration of the liberal subject, in other words, the subject of interest pursuing his or her interest and pursuing the maximization of his or her satisfaction. Instead, it seems to me, that the neoliberal subject is a credit pursuing subject that prioritizes their appreciation as portfolio seekers, which is not the same thing as satisfaction.

Raising Expectations: Life Under Financialized Capitalism 

While scholarly studies of neoliberalism describe the anatomy and triumphal march of an art of governing, the literature on the hyper trophy of finance recounts the emergence of a new regime of capital accumulation. Since the late 1970s, Western economies have experienced what the sociologist Gerald Davis characterizes as a Copernican revolution. They no longer revolve around the industrial corporation wagering its prosperity on vertical integration and internal growth, as in the Fordist era. Instead, both the corporations and the economies of which they are a part revolve around financial markets dominated by large universal banks and institutional investors.

The financialization of developed economies can be measured by the relative size of the financial sector in their GDP, the volume of profits made by financial companies compared with those of other enterprises, and the proportion of portfolio income — relative to commercial cash flow — in the accounts of nonfinancial firms. However, over and above such indicators — the examination of which corroborates the thesis of a massive transfer of funds from the “real economy” to speculative financial circuits — what truly manifests the ascendancy of credit suppliers is their ability to select the projects that deserve to be financed. Ultimately, their power consists more in deciding what the real economy will comprise than in draining it of resources. The hegemony of finance is therefore bound to modify the conduct and expectations of those who experience it. For if economic agents are now primarily intent on making themselves attractive to investors, what they pursue is arguably less the profit yielded by their professional activity than the credit necessary to exercise it.

Initial evidence for this behavioral shift comes from the strategy of publicly traded firms. What for more than three decades has been called “corporate governance” does not aim to maximize the difference between sales revenues and production costs over the long term. Its sole objective is eliciting an increase, in the very near future, of the value assigned by financial markets to the stock held by shareholders. A corporation’s real success does not reside in the profits generated by the sale of the goods or services it produces but in the capital gain resulting from its next share sale. That is why practitioners of “good” governance so often use a substantial portion of their resources to “buy back” shares of their own company. Absurd as a commercial or industrial strategy, this practice is nevertheless sound when, in order to be “competitive,” a CEO must attract investors whose sole concern is the shareholder value of the firms they finance.

The primacy of credit is not confined to the private sector. Meeting the preferences of the holders of their public debt has also become the main preoccupation of national governments. Rather than reviving growth or forwarding the transition of their economies toward sustainable energy sources, public officials are primarily committed to boosting the attractiveness of their territory to bond markets. To avert the distrust of bondholders — which is expressed by a rising interest rate on treasury bills and bonds — political rulers who want to appear responsible cater to their creditors’ famously predictable tastes by increasing the flexibility of their labor market, cutting social programs, slashing corporate and capital gains taxes, and putting off any serious regulation of financial institutions.

Finally, the pursuit of creditworthiness also informs the conduct of individuals, including those who once staked their economic security on stable jobs, regular pay raises, and guaranteed social benefits. Since both corporations and states have made it their priority to sustain the confidence of investors, employers and governments are no longer in a position to promise lifelong careers to their employees and constituents. It is now up to job applicants to make themselves valuable, either by advertising highly prized skills and an appealing address book or, failing that, by displaying unlimited availability and flexibility. Altogether, their ability to find work depends more on the credit attributed to their human capital than on collective agreements about salaries and labor conditions.

The material precarity created by this alteration in the conditions of recruitment forces large swaths of the population to borrow, whether in order to access real estate, continue their studies, acquire consumer durables, or simply survive. Yet anyone hoping to obtain a loan must offer guarantees. In the absence of sizable assets, aspiring borrowers generally rely both on prospective collaterals — such as the market value of the house they wish to buy or the income that the degree they want to get is purported to generate — and on the reputation for reliability they have acquired by repaying previous loans. Demonstrating their solvency, whether predicated on actual resources, a reputable record, or wise projects, enables borrowers to sustain their creditworthiness — moral, as much as financial — thereby persuading creditors to keep lending to them.

Historically, the ascent of financial capitalism has largely resulted from the implementation of the Mont Pelerin agenda. Even prior to Margaret Thatcher and Ronald Reagan’s conservative revolution, a group of economists and legal scholars of neoliberal observance — the founders of the Law and Economics Program at the University of Chicago — were instrumental in legitimizing the claim that the pursuit of shareholder value should be the focus of corporate governance. Worried about the technocratic drift of corporate culture already denounced by Schumpeter, these disciples of Milton Friedman blamed the declining productivity of the American economy on the disconnection between power and ownership within corporations. In their view, once they were empowered by the dispersion of stockholders, managers had ceased to assume that maximizing the distribution of profits to capital owners was their mission. Instead, they prioritized the development of the firm’s productive capacities — which meant that maintaining a high rate of reinvestment took precedence over satisfying employees but also over shareholders’ demands. Furthermore, in order to keep both labor and capital providers acquiescent, they attended to the reinforcement of their own power by filling their board of directors with cronies and negotiating mutually beneficial deals with public authorities.

Law and Economics scholars charged that the strategic priorities characteristic of managerial capitalism were conducive to a progressive interpenetration of the private and public sectors: they argued that on account of the cultural affinities between the salaried managers of large corporations and senior civil servants, the former were not only prone to behave like the latter — thereby entrenching the technocratic turn of business culture — but also relied on their assistance to evade competition. To reverse these unfortunate tendencies, neoliberal reformers called for the creation of an institutional environment wherein corporate managers would be once again compelled to do the bidding of their employers. As Milton Friedman wrote in a famous opinion piece, those entrusted with the task of managing a company they do not own must be made to recognize that their only “social responsibility” is to meet the expectations of shareholders.

For the promoters of the Law and Economics agenda, restoring the subordination of corporate managers to capital owners called for a new type of competition. Henry Manne, in particular, argued that preventing salaried CEOs from imposing their agenda and personal ambitions — however dressed up as the firm’s best interests — required the institution of a “market for corporate control.” Such a market, he claimed, would enable actual and potential shareholders to choose, keep, or replace a managerial team based on its ability to increase the value of the capital under its care. In other words, the kind of corporate governance Manne promoted would subject the fate of managers to the impact of their decisions on the price of the corporation’s stock.

By the mid-1970s, the Law and Economics approach to governance had already made major headways in business schools. Its growing prestige was largely due to the declining profitability of Fordist vertically integrated firms in search of the economies of scale. However, it was not until the election of Ronald Reagan that a propitious environment for generalizing the new mode of governance was created. Guided by neoliberal precepts, the new Republican administration hastened to remove the obstacles to hostile tender offers and leveraged buyouts, thereby enabling “raiders” to take control of underperforming firms — underperforming with respect to their shareholder value. By virtue of deregulating capital markets, US authorities were thus instrumental in impressing upon corporate managers that raising the stock price of their company was their only mandate.

While helping corporate managers understand that their job was to create value for the shareholders, the deregulatory measures pioneered by the Reagan administration — and gradually replicated throughout the Euro-Atlantic world — rapidly proved equally transformative of statecraft. Indeed, the involvement of governments inspired by the neoliberal doctrine in the emergence of corporate governance would soon affect the definition of their own economic agendas. For if they were to enhance the competitiveness of their country’s private sector in a global environment where financial capital could travel freely, public officials had to make the territory under their jurisdiction as attractive as possible to international investors. They thus staked the success of their own tenure on their capacity to lure liquidity handlers with a business-friendly tax code, a flexible labor market, and strong property rights.

While such perks did draw the desired flows of financial capital, governments quickly realized that offering them had a cost: for the measures that were appealing to investors deprived their own budgets of a significant portion of the tax revenue hitherto allocated to their citizens’ welfare. Though unwilling to question the wisdom of market deregulation, they still feared that their new priorities could make them unpopular enough to darken their prospects for reelection. Eager to sustain the reputation of their territory among creditors without losing their appeal among voters, elected leaders increasingly opted to substitute borrowing for taxation. In other words, they assumed that the clash between investors’ wishes and their constituents’ needs could be avoided only through a swelling public debt. Yet by resorting to bond markets to balance their budgets, the heads of states and governments whose deregulatory initiatives had subjected the fate of corporate managers to the whims of the stock market ended up putting themselves in a similar situation. For once reliant on borrowed funds to fulfill their missions as providers of public goods and social protection, they too became dependent on the confidence of their creditors.

As had already been the case with corporate governance, the sway of investors’ tastes on political representatives was justified in neoliberal terms: financial markets were praised for the discipline they allegedly imparted to economic agents. Making governments accountable to bondholders, the reasoning went, would keep their propensities to overspend and overreach in check: instead of indulging the demands of “special-interest groups” to secure their own reelection, the fear of jeopardizing the trustworthiness of their treasury bills and bonds would persuade them to exercise the same kind of restraint that the threat of hostile takeovers had imposed on power-hungry managers.

The argument of accountability loomed even larger in the third phase of financialization, when public officials endeavored to curb their ever-increasing reliance on debt by facilitating the access of their citizens to commercial credit. Throughout the 1980s, issuing bonds had enabled governments to honor the preference of investors for lower taxes while still attending to the welfare of their constituents. However, by the beginning of the following decade, the deficits they had incurred to compensate for the loss of fiscal revenues became large enough to make creditors anxious about their solvency. Loath to see their public debt downgraded by the markets but still afraid of being voted out of office, representatives of the state devised a new compromise, which amounted to sharing the burden of living on credit with the people under their administration: since appeasing bondholders involved major cuts in the budgets devoted to the weaving of a social safety net, households and individuals who had hitherto depended on public grants, subsidies, or benefits were now actively encouraged to borrow the funds they no longer could apply for or collect. To justify the substitution of commercial loans for social transfers, its promoters argued, in typical neoliberal fashion, that the former would train their recipients in the discipline of managing their own lives as a business, autonomously and responsibly, whereas the latter could breed only dependency and sloth.

There is thus ample evidence that over the last four decades, neoliberal reforms and their proclaimed objectives have, respectively, tightened and legitimized the grip of finance on the economy. Furthermore, the beneficiaries of financialization and the intellectual heirs of Hayek and Friedman essentially live in harmony. On the one hand, the efforts deployed by neoliberal governments to make labor markets more flexible, tax codes more business friendly, and public sectors leaner can only elicit investors’ enthusiasm. On the other hand, the discipline imposed by financial markets and institutions powerfully contributes to the enforcement of the neoliberal agenda: the pursuit of shareholder value prevents corporate managers from giving in to labor unions, the fear of losing the confidence of bondholders deters public officials from spending their way to reelection, and personal indebtedness dissuades private borrowers from supporting political agendas that are likely to drive up interest rates.

Should we then assume that the prescriptions initially formulated by the leading members of the Mont Pelerin Society are perfectly consistent with the empowerment of investors — that financialization was part of the neoliberal plan and is now the condition under which the neoliberal agenda continues to prevail? Friedrich Hayek liked to quote Adam Ferguson, a distinguished representative of the eighteenth-century Scottish Enlightenment, for whom human societies are “the result of human action, but not the execution of any human design.” Ironically enough, Ferguson’s pronouncement applies especially well to the societies that have been exposed to the implementation of neoliberal policies. For while governments looking to control inflation and stimulate supply have undeniably shaped our brave new financialized world, the people who have to reside in it hardly fit the type that neoliberal social engineering was intent on fashioning.

To protect liberal polities against “creeping socialism,” Mont Pelerin luminaries devised measures that were meant to restore the appeal and, more decisively, extend the reach of the entrepreneurial ethos. As they saw it, enticing individuals, regardless of their occupation, to treat their lives as a business would go a long way toward realigning their aspirations with the interests — and the political representatives — of the business community. However, for economic agents who are subjected to the selecting power and continuous ratings of investors, the prevailing concern is not so much the profitability of their endeavors as the cultivation of their creditworthiness. Required to divine and striving to inflect the expectations of potential funders, they are less prone to act and think like entrepreneurs seeking commercial profit than like asset managers speculating on the value of their portfolios. Though hardly indifferent to the revenues that their activities generate, the attractiveness on which their welfare depends derives primarily from the appreciation of their resources — real estate, equity, but also skills and social connections. Neoliberal reforms purported to fashion individuals who would rely on utilitarian calculus — rather than on collective bargaining and vested rights — to maximize their income. By contrast, the subjects of financialized capitalism tend to wager their prosperity on the continuously rated value of the assets — material and immaterial — that make up their capital.

Because market deregulations featured prominently in their program, neoliberal reformers played a decisive role in freeing up finance. In return, the hegemony of the financial markets has largely fulfilled their hopes. Thanks to investors, upholding time-honored institutions such as freedom of association and universal suffrage no longer amounts to putting the socialist fox in charge of the liberal henhouse. Yet in spite of what neoliberalism and financialization provide to and owe each other, it is hardly inconsequential that the latter breeds credit-seeking traders keen on speculative wagers instead of the profit-seeking entrepreneurs driven by rational expectations that the former sought to fashion. The identification of wage earners with either character type would have doubtless proved equally damaging to their class consciousness and thus to their involvement in social struggles about the distribution of the wealth created by the labor process. However, contrary to their conversion to the entrepreneurial ethos, the subscription of economic agents to the dictates of financial markets and institutions does not deactivate the polarity between employers and employees without fostering another kind of conflict — one that involves the allocation of credit and that pits investors against the “investees” who depend on their largesse.

Faced with what they interpret as the success of the “deproletarianization” program devised by neoliberal intellectuals and implemented by governments converted to their viewpoint, political parties formerly characterized as progressive are today split into two irreconcilable camps. In the wake of 1990s “third way” reformers such as Bill Clinton, Tony Blair, and Gerhard Schröder, most custodians of the social-democratic creed assume — either with pitiful sighs of resignation or sometimes with the brazen ardor typical of recent converts — that “there is no alternative” to the pursuit of what corporate and new public managements call “competitiveness.” As for unrepentant advocates of a break with capitalism, they paradoxically spend most of their time and energy defending the remaining scraps of the postwar social compact that earlier generations of anticapitalists used to denounce as the most alienating of snares. Caught between the opportunistic capitulation of the former and the nostalgic resistance of the latter, it is no wonder that left-leaning voters find refuge in melancholy, when they do not give up on politics altogether.

At first glance, there is little solace to be found in the fact that the stakes and expectations molded by the ascendency of finance diverge from what neoliberal social engineering purported to achieve. If anything, the empowerment of investors provides an even more efficient bulwark against “lax” fiscal policies, “rigid” labor markets, and “sloth-inducing” social benefits than the conversion of wage earners to the entrepreneurial ethos. Yet in contrast with the project of weeding out class warfare by means of turning virtually anyone into a profit- seeking and utility-maximizing entrepreneur, the fashioning of credit-seeking traders prone to speculative wagers on their assets delineates a new divide, predicated on capital valorization, rather than on income distribution.

Now what remains to be shown is that seizing on the conflicts whose main protagonists are no longer the employer and the employee, but the investor and the investee will actually help the Left shake its melancholy. In order to test this claim, the next chapters will successively examine the challenges that stakeholders might issue to companies exclusively concerned with increasing the value of their shares, the initiatives that the governed can take to counter the subservience of their governments to the ratings of bond markets, and the political aspirations and imagination that financialized economies impart to those investees who seek to alter the conditions under which credit is allocated.

Michel Feher, “Raising Expectations: Life Under Financialized Capitalism,” from Rated Agency (New York: Zone Books, 2018) pp. 16-26. Reprinted with the permission of Zone BooksRated Agency is available for purchase from Amazon.

Michel Feher is a Belgian philosopher, founder of Cette France-là, which monitors French immigration policy and a founding editor of Zone BooksHe is the author of Powerless by Design, Nongovernmental Politics, and Europe at a Crossroads.