Popular in Political Science

American Politics

Keeping the Republic

Boston College Marc Landy

British Politics

Entrepreneurial thinking: the politics and practice of policy impact

University of Sheffield Matthew Flinders

Canadian Politics

Parties and Elections: An End to Canadian Exceptionalism?

St. Francis Xavier University James Bickerton

Asian Politics

The Politics of Knowledge in Development

University of Delhi Madhulika Banerjee

American Politics

Fifty years of declining confidence and increasing polarization in trust

University of California Berkeley Henry Brady

American Politics

The Opening Dilemma

Cornell University Richard Bensel

Political Economy

Wait and See?

University of Liverpool Mariaelisa Epifanio

The Afterlives of Global Capital

View more insights in Social Sciences - Political Science - Political Philosophy

View more figures from University of Alberta

View the page of Rob Aitken

Read the Study

Next in Political Philosophy

Human Dignity and Political Criticism

Colin Bird | University of Virginia

Milton and the Republican Politics of Paradise Lost

Frank Lovett | Washington University in St Louis

Decomposition and decay have influenced capitalism growth, but how does “waste” and value relate post-2008 financialization? Rob Aitken defines financialization as the systematic conversion of misery into wealth.

Image courtesy of interviewee. January 22, 2024

Log-in or Sign-up to Faculti
Currently viewing this subject insight as a guest. You have insight(s) remaining for this month. Login to view 8000+ figures on the platform.

Generating Workspace...

Export as PDF

This video video discusses the intersections between financialization, waste, value, and the implications for society, particularly in the context of the 2007-2008 financial crisis and ongoing issues such as climate change. It highlights how the financial sector's importance increased from the 1970s, leading to a dynamic in which economic value often derives from the exploitation of waste rather than the integrity of assets. The discussion contrasts "risk-capable" actors—who navigate financial crises and can exploit opportunities in waste—with "at-risk" populations that suffer from economic instability.

The Irish financial crisis serves as a key example, exemplifying how large banks became burdened with toxic assets linked to the housing market collapse, leading to a need for large-scale bailouts. A public agency was formed to purchase these bad debts, allowing banks to survive while global investors were able to buy revitalized assets at fractions of their initial values.

The narrative then connects to climate change, positing that financial institutions are attempting to create financial instruments to manage risks associated with climate disasters, paralleling the lead-up to past crises. This video video reflects the tension between abstract financial markets and the tangible impacts they have on communities, particularly those who remain vulnerable to economic fluctuations.

This video video calls for greater public engagement and understanding of financial mechanisms, arguing that decisions impacting climate management and economic stability shouldn't be left solely to experts. It suggests that activists play a crucial role in translating complex financial concepts into more accessible language for those affected by these issues. Overall, the text underscores the need for a public dialogue on financial practices and their real-world consequences.

Language:

Export as PDF

X-TIMESTAMP-MAP:LOCAL=00:00:00.000,MPEGTS=900000

00:00.025 --> 00:01.965
So I, I've been thinking about a couple different

00:01.965 --> 00:04.365
timeframes here with respect to our,

00:04.825 --> 00:06.165
our financial economy.

00:06.545 --> 00:08.805
One has gotta to do with the period we often refer to

00:08.805 --> 00:11.525
as the, the, the, the period of financialization,

00:11.755 --> 00:13.885
beginning in the 1970s, 1980s,

00:13.885 --> 00:15.885
when the financial sector became a much more important part

00:15.885 --> 00:18.405
of our, of our economic structure and system.

00:19.185 --> 00:21.845
And then, I was thinking as well about the,

00:21.865 --> 00:24.005
the more recent timeframe in the, in the context

00:24.005 --> 00:26.805
of the 2007, 2008, financial crisis,

00:27.025 --> 00:28.205
global financial crisis.

00:28.425 --> 00:30.045
And in both of those contexts,

00:30.075 --> 00:32.245
I've been just interested in the ways in which,

00:32.855 --> 00:35.885
there is this relationship between waste and and value

00:35.985 --> 00:37.525
or decay and decomposition.

00:37.525 --> 00:41.085
So it's a question in general about, given the, the nature

00:41.105 --> 00:44.565
of our economy today, how much sort of value

00:44.585 --> 00:48.165
and wealth is generated through assets that have integrity,

00:48.545 --> 00:52.365
and how much is generated through, the, the sort of,

00:52.365 --> 00:54.325
dynamics of, of waste and decomposition.

00:55.105 --> 00:58.325
And, and I think that sets up a, an important question

00:58.475 --> 01:01.405
that, have some political significance,

01:01.405 --> 01:04.045
both in the co in the, in the wake of that financial crisis,

01:04.145 --> 01:06.125
but also in the period sense,

01:06.125 --> 01:07.925
and especially in relation to the question of climate

01:07.945 --> 01:09.205
and how climate can be managed.

01:09.395 --> 01:11.885
Obviously, what happened in that financial crisis was,

01:12.385 --> 01:14.965
like the dissipation of an enormous amount

01:15.065 --> 01:16.565
of financial value.

01:17.265 --> 01:21.205
Um, and, and so I was thinking about how that value was,

01:21.205 --> 01:24.085
both wasted, and then the ways in which it was kind

01:24.085 --> 01:27.645
of attempted to, to be recalibrated or re recaptured.

01:28.345 --> 01:31.325
Um, but there were also wastes that were real harms

01:31.325 --> 01:33.605
for individuals and families and communities and so on.

01:33.685 --> 01:35.205
So just thinking about the broad spectrum

01:35.225 --> 01:36.925
of our financialized capitalism and,

01:37.265 --> 01:40.165
and, to what degree that capitalism today is,

01:40.345 --> 01:41.925
is predicated on or,

01:41.925 --> 01:45.885
or balanced on, waste versus,

01:45.885 --> 01:49.125
versus other sources of, dynamic, growth and so on.

01:49.325 --> 01:50.685
I, I was interested in Irish case.

01:50.945 --> 01:53.245
It was on, it was, a very particular case,

01:53.265 --> 01:55.285
but maybe part of a broader dynamic.

01:55.285 --> 01:58.325
Obviously, Ireland's a very small economy in some ways

01:58.345 --> 01:59.845
and a very particular place,

01:59.865 --> 02:02.165
but it, it, its experience of financial crisis,

02:02.325 --> 02:04.565
I think is really indicative of, of this trend where,

02:05.255 --> 02:06.925
where like waste and,

02:06.925 --> 02:09.125
and especially with those actors who are able to

02:09.955 --> 02:13.245
survive moments of decomposition and even find value in it.

02:13.245 --> 02:16.125
So this is a distinction between, that, that,

02:16.225 --> 02:18.325
an important scholar Randy Martin refers to as

02:18.435 --> 02:21.565
between the risk capable and the at risk.

02:21.585 --> 02:23.845
So in our financialized economy, there are lots

02:23.845 --> 02:27.525
of risk capable actors who are able to navigate uncertainty

02:27.525 --> 02:29.005
and danger in moments of crisis,

02:29.305 --> 02:31.485
and even in sometimes find in some cases,

02:31.555 --> 02:32.805
find value in those moments.

02:33.065 --> 02:35.405
And then there, there's, the at risk, the populations

02:35.405 --> 02:37.165
that are very vulnerable to uncertainty

02:37.625 --> 02:38.965
and have no ability really,

02:38.965 --> 02:42.485
and no, no resources to manage, the uncertainty.

02:42.745 --> 02:45.725
And so the Irish case gave, an episode

02:45.755 --> 02:47.965
with which we could think this through a little bit.

02:48.105 --> 02:51.045
And what happened in the, in the Irish context was,

02:51.125 --> 02:55.285
a financial economy that was, really impacted

02:55.505 --> 02:56.885
by the enormous

02:57.065 --> 03:00.965
and very rapid, devaluation of, of assets so that a lot

03:00.965 --> 03:02.685
of the large Irish banks were like,

03:02.685 --> 03:04.925
like many other institutions around the world, but,

03:05.305 --> 03:07.325
but in a very particular way were saddled with these.

03:07.465 --> 03:10.285
Um, so-called toxic assets, like assets who no longer,

03:10.375 --> 03:11.565
which no longer had value.

03:11.565 --> 03:13.725
Many of these assets were investments,

03:13.995 --> 03:15.325
that were tethered in one way

03:15.325 --> 03:18.885
or another to like a global housing developments.

03:19.225 --> 03:22.085
Um, and, and when that subprime

03:22.085 --> 03:24.925
or housing development, when that, when that crashed, these,

03:25.065 --> 03:27.085
investors and these large banks

03:27.085 --> 03:29.325
that were facilitating these investments in the Irish case

03:29.325 --> 03:32.885
were left, enormously exposed, so exposed in fact that,

03:33.265 --> 03:36.405
it was a, a real, a real threat to that stability of

03:36.405 --> 03:38.605
that system and requiring a European and,

03:38.945 --> 03:41.965
and even broader multilateral bailout of the Irish economy.

03:42.025 --> 03:44.045
And part of that involved this, this agency

03:44.045 --> 03:45.685
that was created, public agency that was created

03:45.785 --> 03:47.725
to buy these, these bad debt.

03:47.725 --> 03:50.805
Essentially what happened was this agency was charged with,

03:50.945 --> 03:53.725
purchasing these bad debts from the banks,

03:53.785 --> 03:58.205
and they, they exchange, with the banks, sort

03:58.205 --> 04:00.285
of government bonds in exchange for these bad debts.

04:00.285 --> 04:02.965
So essentially you're moving these bad or toxic or,

04:02.985 --> 04:06.005
or valueless assets off the balance sheets of these banks,

04:07.025 --> 04:09.245
which then allowed those banks to survive.

04:09.665 --> 04:12.125
Um, and, and in some ways was like kind a public injection

04:12.225 --> 04:13.885
of, of money into those banks.

04:14.625 --> 04:15.885
Uh, but at the same time,

04:16.035 --> 04:18.005
this agency then spent the better part

04:18.005 --> 04:20.165
of the following decade trying

04:20.165 --> 04:22.165
to rehabilitate some of these assets.

04:22.325 --> 04:25.045
A lot of them were built, were, were related to,

04:25.075 --> 04:26.125
housing developments,

04:26.195 --> 04:27.805
both in Ireland but also around the world.

04:27.885 --> 04:28.965
A lot of them were in London.

04:29.145 --> 04:32.405
So they had, they had tied into, into the British,

04:32.665 --> 04:34.125
kind of financial system.

04:34.185 --> 04:35.165
And there were, there were even

04:35.165 --> 04:36.765
international investments as well.

04:37.105 --> 04:41.805
And so this agency, sort of tried to extract more value

04:41.825 --> 04:44.885
or try to try to kind of revitalize the value of these,

04:44.885 --> 04:46.085
these wasted assets.

04:46.585 --> 04:49.525
But what's interesting to me was, the politics of that,

04:49.525 --> 04:53.085
of that process, so that when, when this agency did,

04:53.265 --> 04:57.605
manage to, find value and, and,

04:57.625 --> 04:59.565
and once again revitalize some of these assets,

04:59.565 --> 05:02.125
they were almost always, doing this in, in,

05:02.225 --> 05:03.445
in kind of two ways.

05:03.475 --> 05:06.605
They were, they were selling these revitalized assets

05:06.785 --> 05:10.605
or these kind of like rekindled, assets

05:10.745 --> 05:13.405
to global investors, especially American investors.

05:13.505 --> 05:15.485
So large American, funds

05:15.515 --> 05:18.485
that often specialize in distressed assets.

05:18.665 --> 05:21.085
So there are, there's now a layer of organized layer

05:21.105 --> 05:24.645
of investors that, that specialize in, in buying these,

05:24.835 --> 05:27.325
that distressed or wasted or toxic assets.

05:27.905 --> 05:30.165
And the second element of this is really important note is

05:30.165 --> 05:32.085
that these investors were, were buying these,

05:32.375 --> 05:35.765
these assets at a tiny fraction of their initial face value.

05:36.265 --> 05:39.925
So these investors were finding enormous value,

05:40.705 --> 05:43.645
in these wasted assets over the years as they were able to,

05:44.105 --> 05:45.165
to revitalize them.

05:45.265 --> 05:46.805
So tho those were a good example

05:46.805 --> 05:49.805
of like risk capable investors who not only were able

05:49.805 --> 05:51.125
to survive that financial crisis,

05:51.225 --> 05:54.485
but in fact in some ways to extract, value

05:54.505 --> 05:57.045
and profits that that most weren't.

05:57.305 --> 06:00.125
Um, so that's, you know, thinking about the politics of, of

06:00.265 --> 06:01.285
who benefits

06:01.345 --> 06:02.845
and who ultimately is harmed in

06:02.845 --> 06:04.645
that process, is interesting.

06:04.645 --> 06:07.765
And, and, this also relates of course, to the ongoing

06:08.325 --> 06:11.645
difficulties in the Irish housing market today, where the,

06:11.745 --> 06:15.885
the, those who were at risk, continue to be at risk even

06:15.985 --> 06:19.125
as, you know, large risk capable investors were able

06:19.125 --> 06:20.885
to extract value from that deep crisis.

06:21.025 --> 06:23.925
So it was a small, in some ways, example,

06:24.145 --> 06:26.285
but really, one that was indicative

06:26.285 --> 06:28.605
of the dynamic at play in the financial crisis

06:28.625 --> 06:32.205
and thinking about an economy where, waste is

06:32.875 --> 06:34.565
obviously disastrous for some,

06:34.585 --> 06:37.805
but an opportunity for others, like a longer debate, a

06:37.935 --> 06:39.525
among those who write about

06:39.585 --> 06:42.205
or observe, financial markets.

06:42.545 --> 06:47.045
And so for, for some, those financial markets

06:47.105 --> 06:50.605
and the ways in which they have changed since 1970s has

06:50.605 --> 06:52.645
to do with the ways in which they're becoming more

06:52.645 --> 06:55.485
and more abstract or virtual or detached from reality.

06:55.545 --> 06:58.525
So there's the sense that financial markets are,

06:58.525 --> 07:02.165
these enormously complex, often digital networks that,

07:02.435 --> 07:04.045
that trade virtually around the world.

07:04.065 --> 07:05.565
And there's some real truth to that, like

07:05.635 --> 07:08.565
that these markets have grown enormously,

07:08.565 --> 07:09.885
because of this kind

07:09.885 --> 07:11.685
of like virtual world in which they operate.

07:11.685 --> 07:14.405
But there's a sense that there's a, a real di a real divide

07:14.405 --> 07:16.525
between that kind of economic activity

07:16.825 --> 07:18.965
and then the real world that, that those of us,

07:19.065 --> 07:20.285
you know, the rest of us live in.

07:20.385 --> 07:24.765
And, and, and so, you know, those, small Irish,

07:24.765 --> 07:26.805
investors who were, who were buying a second home

07:26.805 --> 07:27.845
or were investing in houses

07:27.905 --> 07:32.565
and so on, they, they, they saw real physical harms and,

07:33.025 --> 07:34.765
and problems as a result of this.

07:34.865 --> 07:36.925
And for them, it wasn't just a, a kind of a virtual

07:37.505 --> 07:41.285
or detached, or abstract kind of, relationship.

07:41.705 --> 07:44.165
But what it, what it, what seems to me important about the,

07:44.165 --> 07:46.725
the Irish case, or maybe more broadly about,

07:47.385 --> 07:51.045
the dynamic around global capitalism today is that there,

07:51.255 --> 07:53.485
there is, a lot of ways in which we,

07:53.625 --> 07:58.085
we can see the physical material, real kinds of consequences

07:58.145 --> 07:59.645
of this more abstract economy.

07:59.745 --> 08:02.685
So for these investors who were either in the lead up

08:02.685 --> 08:05.605
or in the aftermath, of the crisis we're,

08:06.055 --> 08:08.485
we're investing in these, housing stocks.

08:08.485 --> 08:10.445
For them, it was in some ways an abstract relationship.

08:10.475 --> 08:13.325
They, they were buying investment vehicles that were,

08:14.145 --> 08:18.005
you know, made up of many small pieces of,

08:18.585 --> 08:20.205
of actual mortgages around the world.

08:20.205 --> 08:21.685
They would have no connection to those mortgages.

08:21.685 --> 08:23.085
They would've no, no way of knowing

08:23.085 --> 08:24.365
what they actually referred to.

08:24.385 --> 08:26.005
So it was a very abstract relationship.

08:26.305 --> 08:29.765
And yet for, for the risk, that risk, that relationship

08:29.785 --> 08:31.565
to those houses was very physical

08:31.565 --> 08:32.805
and visceral and, and real.

08:33.145 --> 08:35.565
And so I began thinking about the, the Ghost Estates in,

08:35.565 --> 08:37.645
in Ireland, but these ghost estate exist also in,

08:37.645 --> 08:38.965
in the United States and in Spain

08:38.965 --> 08:40.925
and other places where the crisis crested.

08:40.925 --> 08:42.765
And these were, these were housing estates

08:42.835 --> 08:45.005
that were only partially finished when the

08:45.005 --> 08:46.125
crisis, mounted.

08:46.305 --> 08:47.925
And they were, they, they, they were left.

08:47.925 --> 08:49.205
They were, they, they were left in

08:49.205 --> 08:50.365
that kind of frozen state.

08:50.665 --> 08:53.125
And so these gosa estate are a real physical reminder

08:53.195 --> 08:56.685
that finance, however abstract it might be, you know,

08:56.685 --> 08:58.965
remains to, to have this really material

08:59.025 --> 09:03.125
and physical, kind of like presence or residue.

09:03.265 --> 09:06.525
And a lot of activists have been working in

09:06.525 --> 09:08.725
and around those ghost estates, to remind us

09:08.725 --> 09:11.125
and to reconnect our understanding of the financial markets

09:11.125 --> 09:13.365
to a more physical kind of,

09:13.505 --> 09:16.325
or visceral even kind of,

09:16.885 --> 09:17.965
manifestation of, of that crisis.

09:18.025 --> 09:20.085
So there's like reconnecting the financial world back

09:20.085 --> 09:24.245
to its actual impacts in the real world was one of the,

09:24.245 --> 09:25.565
important strategies that,

09:25.565 --> 09:27.645
that activists concerned about the financial crisis we're

09:27.645 --> 09:28.925
trying to, trying to develop.

09:29.425 --> 09:31.605
So I've been thinking about this, dynamic between waste

09:31.805 --> 09:34.765
and value between the material and the physical and so on.

09:34.785 --> 09:37.445
And, and the abstract as, as a platform

09:37.445 --> 09:40.165
for thinking about things have changed even since the

09:40.165 --> 09:41.445
2007, 2008 crisis.

09:41.505 --> 09:44.005
And one element of this has to do with climate change.

09:44.505 --> 09:46.165
Uh, and if you, we can think about climate change

09:46.185 --> 09:49.325
as in fact, maybe one of the ultimate forms of,

09:49.545 --> 09:51.485
of wasting in our world today.

09:51.485 --> 09:54.445
We, you know, thinking about the increasing,

09:54.685 --> 09:57.005
physical damages associated with climate change, with,

09:57.005 --> 10:00.605
increasing amounts of environmental and natural disasters

10:00.605 --> 10:01.885
and catastrophes and so on.

10:02.345 --> 10:03.445
And that's obviously one

10:03.445 --> 10:05.165
of our biggest challenges we're facing globally.

10:05.505 --> 10:08.125
But what's interested me in the way is the way in which,

10:08.765 --> 10:11.845
a lot of financial institutions have reacted to that,

10:12.105 --> 10:13.885
in all sorts of ways.

10:14.025 --> 10:15.605
Uh, and so I've been thinking about,

10:15.605 --> 10:17.405
the ways in which financial institutions are beginning

10:17.405 --> 10:20.885
to develop financial, like innovative financial instruments,

10:21.475 --> 10:23.085
kind of in the way in which, in the lead up

10:23.085 --> 10:25.605
to the subprime crisis in 2007, they were developing,

10:25.785 --> 10:29.165
you know, new ways to, to kind of like,

10:29.605 --> 10:32.405
organize these mortgages and sell these mortgages and so on.

10:32.515 --> 10:34.485
What we've seen in the last 10 years are,

10:34.485 --> 10:38.205
increasing forms of innovation among insurers and banks

10:38.465 --> 10:40.605
and, other financial,

10:41.385 --> 10:43.565
and investment vehicles to address climate change.

10:44.025 --> 10:46.725
Uh, so this involves like catastrophe bonds, for example,

10:46.785 --> 10:48.165
and new insurance products.

10:48.665 --> 10:51.245
And what's happening in a very general way in this area,

10:51.425 --> 10:53.205
and I could give some more specific examples if

10:53.205 --> 10:54.685
that's useful, but just in general, is

10:54.685 --> 10:56.485
that these institutions are trying

10:56.485 --> 10:58.005
to think about the uncertainty associated

10:58.005 --> 11:00.885
with climate in its physical harms and disasters

11:00.885 --> 11:03.805
and so on, as a risk that could be managed financially.

11:03.905 --> 11:06.805
So can they, can they create financial vehicles that would,

11:07.075 --> 11:09.405
that would take that uncertainty around climate

11:09.625 --> 11:12.885
and the real harms and wasting that it represents

11:13.385 --> 11:15.285
and turn it into investment vehicles

11:15.285 --> 11:17.125
that could be sold to global investors?

11:17.225 --> 11:19.725
So this is what a catastrophe bond is, for example, it's a,

11:20.005 --> 11:23.055
a, a financial instrument that the value

11:23.055 --> 11:25.455
of which is based on the, the possibility

11:25.835 --> 11:27.415
of enormous catastrophes.

11:27.475 --> 11:30.775
And, and so there's value in that for, for investors.

11:30.835 --> 11:32.335
Now, these investors argue that this is a way

11:32.335 --> 11:34.135
of managing the risk of climate

11:34.195 --> 11:35.775
and of distributing that risk widely,

11:36.075 --> 11:38.895
but at the same time, for the risk capable,

11:38.895 --> 11:40.935
they are extracting value from this uncertainty,

11:40.935 --> 11:43.695
or they're trying to, these, these are risky kind

11:43.695 --> 11:47.055
of maneuvers, but there's an attempt there to, to,

11:47.125 --> 11:50.135
find value, even among this like unprecedented kind

11:50.135 --> 11:51.775
of uncertainty associated with climate change.

11:51.775 --> 11:54.365
Where as we, as we speak right now, we're, we're seeing

11:54.365 --> 11:57.525
that the cop meetings happening, and negotiating.

11:57.525 --> 11:58.605
And so we're, we're more

11:58.605 --> 12:00.205
and more aware of, of the enormous

12:00.535 --> 12:01.685
harms associated with climate.

12:02.225 --> 12:04.245
And so I've been interested in the ways in which financial

12:04.245 --> 12:06.645
institutions react to that in, in, in a way, in which kind

12:06.645 --> 12:10.205
of parallels, some of the 2007, 2008 kind

12:10.205 --> 12:13.085
of crisis we're talking about, enormous uncertainty.

12:13.745 --> 12:17.365
And, again, some of these, you know, catastrophes

12:17.365 --> 12:20.685
that we've seen are do, are attached to enormous values.

12:20.745 --> 12:23.325
And so that, that adds some instability in

12:23.325 --> 12:24.405
the global financial system.

12:24.865 --> 12:26.125
Um, the, the, a lot

12:26.125 --> 12:28.485
of global insurers now talk about global protection gap,

12:28.485 --> 12:31.205
which is the gap between the uncertainties

12:31.205 --> 12:33.725
that they think we're gonna be facing over the coming years

12:33.755 --> 12:35.685
just in terms of say, natural disasters

12:35.985 --> 12:38.125
and the amount of that that's actually protected

12:38.145 --> 12:39.285
by insurance contracts.

12:39.285 --> 12:41.565
And it's sort of like somewhere around 20

12:41.585 --> 12:44.125
or 30% only are, are covered by any kind of insurance,

12:44.125 --> 12:45.605
and that that gap is widening.

12:46.105 --> 12:50.365
Um, so they feel like on one hand these mechanisms could

12:50.365 --> 12:53.005
fill the gap and, and help, help help

12:53.005 --> 12:54.285
that protection gap be narrowed.

12:54.285 --> 12:55.685
There's a lot of uncertainty about that.

12:55.945 --> 13:00.525
And, we, these are, these are forms of uncertainty.

13:00.525 --> 13:03.205
We haven't really have a long-term record of.

13:03.265 --> 13:04.965
So, so how we would predict that is,

13:05.105 --> 13:06.485
is is really complicated.

13:06.485 --> 13:08.005
And so, yes, I think there are some

13:08.505 --> 13:11.165
who are predicting the instability could maybe,

13:11.195 --> 13:14.925
like you could imagine a scenario similar to the 2007, 2008,

13:14.925 --> 13:18.845
where the value something triggers,

13:18.865 --> 13:20.205
an enormous dissipation of value

13:20.545 --> 13:21.845
and it overwhelms the system.

13:22.465 --> 13:25.445
It that could lead to, like, could trigger a kind

13:25.565 --> 13:26.565
of like crescendo

13:26.625 --> 13:30.405
or waves of, of instability that, that again,

13:30.405 --> 13:31.645
governments may have to step into

13:31.705 --> 13:33.205
to help rebalance in some way.

13:33.275 --> 13:35.845
Just thinking about the politics of financial markets is,

13:35.945 --> 13:37.165
is, is interesting.

13:37.605 --> 13:38.645
I, I think,

13:38.825 --> 13:41.805
one observation I've had working in this field as a, not

13:41.805 --> 13:43.565
as an economist, but as a political scientist,

13:43.665 --> 13:48.165
is thinking about, the politics of, of the,

13:48.165 --> 13:50.845
instabilities associated with global financial markets.

13:51.025 --> 13:53.485
And often, my observation is that most

13:53.485 --> 13:55.005
of the people I talk to feel

13:55.005 --> 13:58.125
that financial markets are often the purview of like,

13:58.125 --> 14:01.965
experts so that, you know, they're so complicated, they're

14:01.965 --> 14:05.685
so specialized that only, financial economists

14:05.705 --> 14:08.605
or accountants or investment analysts can understand that

14:08.665 --> 14:09.845
to some extent that is true.

14:10.545 --> 14:13.685
But at the same time, the, IM, you know, the, the,

14:14.465 --> 14:17.645
the significance of of these markets politically is

14:17.645 --> 14:21.765
so wide ranging that I think we need to find ways to,

14:22.145 --> 14:24.485
to make them legible and not to the broader public.

14:24.785 --> 14:25.805
So this has to do again

14:25.805 --> 14:28.765
with like the follow up from the financial crisis in 2007.

14:28.825 --> 14:31.445
And you can see that the, the at risk,

14:31.545 --> 14:35.045
the at risk population did, take the,

14:35.285 --> 14:37.485
a disproportionate kind of, set

14:37.485 --> 14:39.005
of harms from that crisis.

14:39.265 --> 14:41.365
And so there's a political question that we need to kind

14:41.365 --> 14:43.045
of be aware of, but even if we're thinking about the issue

14:43.045 --> 14:44.765
we were just talking about a minute ago around climate,

14:45.535 --> 14:47.765
these are decisions about how climate is managed

14:47.865 --> 14:50.605
and how collectively we're going to confront this enormous

14:50.605 --> 14:51.725
Global uncertainty.

14:52.185 --> 14:55.445
And I don't think it's, it's, I I think there's lots

14:55.445 --> 14:58.205
of reasons to be worried about leaving those decisions to

14:58.835 --> 15:02.885
financial experts, that we need to find a, a way to,

15:03.505 --> 15:05.485
to make that a more public discussion

15:05.705 --> 15:07.525
that's more legible to the rest of us.

15:07.985 --> 15:10.605
And so I was just impressed in some ways by the activists,

15:10.985 --> 15:12.845
in the Irish context of how they,

15:12.845 --> 15:15.965
they were at least trying to, to translate,

15:16.165 --> 15:19.285
a very abstract, complicated financial crisis into terms

15:19.285 --> 15:20.885
that would be understandable for those

15:20.885 --> 15:23.085
who were now facing housing shortage

15:23.185 --> 15:26.125
or increase in housing costs or difficulty finding housing,

15:26.145 --> 15:29.005
or maybe they'd lost, an asset themselves

15:29.035 --> 15:31.005
that they were counting on for their retirement

15:31.005 --> 15:32.125
or their long-term security.

15:32.705 --> 15:34.605
So, the implications there are, I, I, I,

15:34.645 --> 15:35.765
I realize I haven't said much about

15:35.765 --> 15:37.325
what the solution would be there, but I think the question

15:37.345 --> 15:41.805
is, how do we create a public conversation around these,

15:42.425 --> 15:45.085
financial mechanisms that are really involved in a lot

15:45.085 --> 15:47.525
of important, issues today?

Financialization and Its Impact on Value

00:00:00 - So I, I've been thinking about a couple different timeframes here with respect to our, our financial economy. One has gotta to do with the period we often refer to as the, the, the, the period of financialization, beginning in the 1970s, 1980s, when the financial sector became a much more important part of our, of our economic structure and system. And then, I was thinking as well about the, the more recent timeframe in the, in the context of the 2007, 2008, financial crisis, global financial crisis. And in both of those contexts,
00:00:32 - there is this relationship between waste and and value or decay and decomposition. So it's a question in general about, given the, the nature of our economy today, how much sort of value and wealth is generated through assets that have integrity, and how much is generated through, the, the sort of, dynamics of, of waste and decomposition. And, and I think that sets up a, an important question that, have some political significance,
00:01:04 - but also in the period sense, and especially in relation to the question of climate and how climate can be managed. Obviously, what happened in that financial crisis was, like the dissipation of an enormous amount of financial value. and, and so I was thinking about how that value was, both wasted, and then the ways in which it was kind of attempted to, to be recalibrated or re recaptured. but there were also wastes that were real harms for individuals and families and communities and so on.
00:01:35 - of our financialized capitalism and, and, to what degree that capitalism today is, is predicated on or, or balanced on, waste versus, versus other sources of, dynamic, growth and so on. I, I was interested in Irish case. It was on, it was, a very particular case, but maybe part of a broader dynamic. Obviously, Ireland's a very small economy in some ways and a very particular place, but it, it, its experience of financial crisis, I think is really indicative of, of this trend where,
00:02:06 - and especially with those actors who are able to survive moments of decomposition and even find value in it. So this is a distinction between, that, that, an important scholar Randy Martin refers to as between the risk capable and the at risk. So in our financialized economy, there are lots of risk capable actors who are able to navigate uncertainty and danger in moments of crisis, and even in sometimes find in some cases, find value in those moments. And then there, there's, the at risk, the populations
00:02:37 - and have no ability really, and no, no resources to manage, the uncertainty. And so the Irish case gave, an episode with which we could think this through a little bit. And what happened in the, in the Irish context was, a financial economy that was, really impacted by the enormous and very rapid, devaluation of, of assets so that a lot of the large Irish banks were like, like many other institutions around the world, but, but in a very particular way were saddled with these.

Financial Crisis: Wasted Assets and Recovery

00:03:10 - which no longer had value. Many of these assets were investments, that were tethered in one way or another to like a global housing developments. and, and when that subprime or housing development, when that, when that crashed, these, investors and these large banks that were facilitating these investments in the Irish case were left, enormously exposed, so exposed in fact that, it was a, a real, a real threat to that stability of that system and requiring a European and,
00:03:42 - And part of that involved this, this agency that was created, public agency that was created to buy these, these bad debt. Essentially what happened was this agency was charged with, purchasing these bad debts from the banks, and they, they exchange, with the banks, sort of government bonds in exchange for these bad debts. So essentially you're moving these bad or toxic or, or valueless assets off the balance sheets of these banks, which then allowed those banks to survive.
00:04:12 - of, of money into those banks. but at the same time, this agency then spent the better part of the following decade trying to rehabilitate some of these assets. A lot of them were built, were, were related to, housing developments, both in Ireland but also around the world. A lot of them were in London. So they had, they had tied into, into the British, kind of financial system. And there were, there were even international investments as well. And so this agency, sort of tried to extract more value
00:04:44 - these wasted assets. But what's interesting to me was, the politics of that, of that process, so that when, when this agency did, manage to, find value and, and, and once again revitalize some of these assets, they were almost always, doing this in, in, in kind of two ways. They were, they were selling these revitalized assets or these kind of like rekindled, assets to global investors, especially American investors.
00:05:15 - that often specialize in distressed assets. So there are, there's now a layer of organized layer of investors that, that specialize in, in buying these, that distressed or wasted or toxic assets. And the second element of this is really important note is that these investors were, were buying these, these assets at a tiny fraction of their initial face value. So these investors were finding enormous value, in these wasted assets over the years as they were able to,
00:05:45 - So tho those were a good example of like risk capable investors who not only were able to survive that financial crisis, but in fact in some ways to extract, value and profits that that most weren't. so that's, you know, thinking about the politics of, of who benefits and who ultimately is harmed in that process, is interesting. And, and, this also relates of course, to the ongoing difficulties in the Irish housing market today, where the, the, those who were at risk, continue to be at risk even

Value and Waste in Financial Markets Dynamics

00:06:19 - to extract value from that deep crisis. So it was a small, in some ways, example, but really, one that was indicative of the dynamic at play in the financial crisis and thinking about an economy where, waste is obviously disastrous for some, but an opportunity for others, like a longer debate, a among those who write about or observe, financial markets. And so for, for some, those financial markets
00:06:50 - to do with the ways in which they're becoming more and more abstract or virtual or detached from reality. So there's the sense that financial markets are, these enormously complex, often digital networks that, that trade virtually around the world. And there's some real truth to that, like that these markets have grown enormously, because of this kind of like virtual world in which they operate. But there's a sense that there's a, a real di a real divide between that kind of economic activity and then the real world that, that those of us,
00:07:20 - And, and, and so, you know, those, small Irish, investors who were, who were buying a second home or were investing in houses and so on, they, they, they saw real physical harms and, and problems as a result of this. And for them, it wasn't just a, a kind of a virtual or detached, or abstract kind of, relationship. But what it, what it, what seems to me important about the, the Irish case, or maybe more broadly about, the dynamic around global capitalism today is that there,
00:07:53 - we can see the physical material, real kinds of consequences of this more abstract economy. So for these investors who were either in the lead up or in the aftermath, of the crisis we're, we're investing in these, housing stocks. For them, it was in some ways an abstract relationship. They, they were buying investment vehicles that were, you know, made up of many small pieces of, of actual mortgages around the world. They would have no connection to those mortgages.
00:08:23 - what they actually referred to. So it was a very abstract relationship. And yet for, for the risk, that risk, that relationship to those houses was very physical and visceral and, and real. And so I began thinking about the, the Ghost Estates in, in Ireland, but these ghost estate exist also in, in the United States and in Spain and other places where the crisis crested. And these were, these were housing estates that were only partially finished when the crisis, mounted. And they were, they, they, they were left. They were, they, they were left in that kind of frozen state. And so these gosa estate are a real physical reminder
00:08:56 - remains to, to have this really material and physical, kind of like presence or residue. And a lot of activists have been working in and around those ghost estates, to remind us and to reconnect our understanding of the financial markets to a more physical kind of, or visceral even kind of, manifestation of, of that crisis. So there's like reconnecting the financial world back to its actual impacts in the real world was one of the,

Waste, Value, and Climate Change Dynamics

00:09:25 - that activists concerned about the financial crisis we're trying to, trying to develop. So I've been thinking about this, dynamic between waste and value between the material and the physical and so on. And, and the abstract as, as a platform for thinking about things have changed even since the 2007, 2008 crisis. And one element of this has to do with climate change. and if you, we can think about climate change as in fact, maybe one of the ultimate forms of, of wasting in our world today. We, you know, thinking about the increasing,
00:09:57 - increasing amounts of environmental and natural disasters and catastrophes and so on. And that's obviously one of our biggest challenges we're facing globally. But what's interested me in the way is the way in which, a lot of financial institutions have reacted to that, in all sorts of ways. and so I've been thinking about, the ways in which financial institutions are beginning to develop financial, like innovative financial instruments, kind of in the way in which, in the lead up to the subprime crisis in 2007, they were developing,
00:10:29 - organize these mortgages and sell these mortgages and so on. What we've seen in the last 10 years are, increasing forms of innovation among insurers and banks and, other financial, and investment vehicles to address climate change. so this involves like catastrophe bonds, for example, and new insurance products. And what's happening in a very general way in this area, and I could give some more specific examples if that's useful, but just in general, is that these institutions are trying
00:10:58 - with climate in its physical harms and disasters and so on, as a risk that could be managed financially. So can they, can they create financial vehicles that would, that would take that uncertainty around climate and the real harms and wasting that it represents and turn it into investment vehicles that could be sold to global investors? So this is what a catastrophe bond is, for example, it's a, a, a financial instrument that the value of which is based on the, the possibility of enormous catastrophes.
00:11:30 - Now, these investors argue that this is a way of managing the risk of climate and of distributing that risk widely, but at the same time, for the risk capable, they are extracting value from this uncertainty, or they're trying to, these, these are risky kind of maneuvers, but there's an attempt there to, to, find value, even among this like unprecedented kind of uncertainty associated with climate change. Where as we, as we speak right now, we're, we're seeing that the cop meetings happening, and negotiating.
00:11:58 - and more aware of, of the enormous harms associated with climate. And so I've been interested in the ways in which financial institutions react to that in, in, in a way, in which kind of parallels, some of the 2007, 2008 kind of crisis we're talking about, enormous uncertainty. And, again, some of these, you know, catastrophes that we've seen are do, are attached to enormous values. And so that, that adds some instability in the global financial system. the, the, a lot of global insurers now talk about global protection gap,

Addressing the Widening Insurance Protection Gap

00:12:31 - that they think we're gonna be facing over the coming years just in terms of say, natural disasters and the amount of that that's actually protected by insurance contracts. And it's sort of like somewhere around 20 or 30% only are, are covered by any kind of insurance, and that that gap is widening. so they feel like on one hand these mechanisms could fill the gap and, and help, help help that protection gap be narrowed. There's a lot of uncertainty about that. And, we, these are, these are forms of uncertainty.
00:13:03 - So, so how we would predict that is, is is really complicated. And so, yes, I think there are some who are predicting the instability could maybe, like you could imagine a scenario similar to the 2007, 2008, where the value something triggers, an enormous dissipation of value and it overwhelms the system. It that could lead to, like, could trigger a kind of like crescendo or waves of, of instability that, that again, governments may have to step into
00:13:33 - Just thinking about the politics of financial markets is, is, is interesting. I, I think, one observation I've had working in this field as a, not as an economist, but as a political scientist, is thinking about, the politics of, of the, instabilities associated with global financial markets. And often, my observation is that most of the people I talk to feel that financial markets are often the purview of like, experts so that, you know, they're so complicated, they're
00:14:05 - or accountants or investment analysts can understand that to some extent that is true. But at the same time, the, IM, you know, the, the, the significance of of these markets politically is so wide ranging that I think we need to find ways to, to make them legible and not to the broader public. So this has to do again with like the follow up from the financial crisis in 2007. And you can see that the, the at risk, the at risk population did, take the,
00:14:37 - of harms from that crisis. And so there's a political question that we need to kind of be aware of, but even if we're thinking about the issue we were just talking about a minute ago around climate, these are decisions about how climate is managed and how collectively we're going to confront this enormous Global uncertainty. And I don't think it's, it's, I I think there's lots of reasons to be worried about leaving those decisions to financial experts, that we need to find a, a way to, to make that a more public discussion
00:15:07 - And so I was just impressed in some ways by the activists, in the Irish context of how they, they were at least trying to, to translate, a very abstract, complicated financial crisis into terms that would be understandable for those who were now facing housing shortage or increase in housing costs or difficulty finding housing, or maybe they'd lost, an asset themselves that they were counting on for their retirement or their long-term security. So, the implications there are, I, I, I, I realize I haven't said much about

Fostering Public Dialogue on Financial Mechanisms

00:15:45 - is, how do we create a public conversation around these, financial mechanisms that are really involved in a lot of important, issues today?

Faculti AI can make mistakes

Faculti

Popular in Political Science

Keeping the Republic

Entrepreneurial thinking: the politics and practice of policy impact

Parties and Elections: An End to Canadian Exceptionalism?

The Politics of Knowledge in Development

Fifty years of declining confidence and increasing polarization in trust

The Opening Dilemma

Wait and See?

The Afterlives of Global Capital

Next in Political Philosophy

Guide

Platform and Category Pages

Contact Us

FAQs

What is Faculti?

How do you select interviews?

Interview Process

Page Structure

Popular in Political Science

Guide

Platform and Category Pages

Contact Us

FAQs

What is Faculti?

How do you select interviews?

Interview Process

Accessibility Options

Contrast Adjustment

Text Size Adjustment

Text Spacing Adjustment

Line Height Adjustment

Cursor Size Adjustment

Page Structure Options

Page Structure