Veblen, Bataille and Financial Innovation: Theory Culture & Society June 2015

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Veblen, Bataille and Financial Innovation
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Theory, Culture & Society
2015, Vol. 32(4) 105–131
Veblen, Bataille and ! The Author(s) 2015
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DOI: 10.1177/0263276414566643
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Earl Gammon
University of Sussex
Duncan Wigan
Copenhagen Business School
Abstract
This article advances towards the reconceptualization of financial innovation. It
examines the calamitous role of financial innovation in the global financial crisis,
developing a non-rational theorization of finance within the social economy that
factors in the role of affect. Outlining the foundations for such an approach, the
analysis draws on Thorstein Veblen and Georges Bataille, whose work encompasses
psycho-social conceptions of political-economic agency. From the more anthropo-
logical lens of Veblen and Bataille’s theorizations, it is possible to move beyond
instrumentalist accounts of financial innovation premised on pecuniary expedients
and aspirations of market completion. As we argue, in a broader affective economy,
contemporary financial innovation serves invidious ends, providing a means of attain-
ing social distinction, constituting a medium for violent expenditure and bestowing
access to sovereign expression on its purveyors. Highlighting the non-rational dimen-
sion of financial markets prompts a reconsideration of the nature of crisis and the
means of its redress.
Keywords
affect, Bataille, financial crisis, financial innovation, Veblen
The financial crisis that erupted in August 2007 was proximately driven
by the overvaluation and subsequent depreciation of assets linked to the
US subprime housing market. This was abetted by the co-mingling of
two technologies, securitization and credit derivatives, the trade in which
presupposed continuous access to short-term funding from the ‘shadow
banking system’ (Pozsar et al., 2010).1 Before the crisis, the unparalleled
scale and complexity of new financial instruments attracted considerable
attention among financial experts. The debate that emerged revolved
around the functionality of these complex, opaque and largely
Corresponding author: Earl Gammon. Email: e.gammon@sussex.ac.uk

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106 Theory, Culture & Society 32(4)
unregulated technologies. Those with faith in financial innovation,

rational expectations and efficient markets believed these technologies
drove market perfection by optimally abating and dispersing risk, mini-
mizing transaction costs and completing markets. To some the fulfilment
of this promise seemed imminent: ‘Financial innovation will slow as we
approach a world in which financial markets are complete in the sense
that all financial risks can be efficiently transferred to those most willing
to bear them’ (Greenspan, 2003). Detractors, however, saw markets that
far outstripped the requisites for risk management within the real econ-
omy, pointing to rampant speculation, market concentration, undiag-
nosed counterparty risk and perverse incentives (Buffett, 2003: 14;
FSA, 2002; Rule, 2003: 136–43).
Unifying the majority of participants on both sides of this debate was
a focus on the technical specificity and functioning of these instruments.
Understandably, given the dizzying and seductive complexity of synthetic
financial products and the apparent alchemical powers of their pur-
veyors, the ‘rocket scientists’, the debate has largely excluded the lay
person, requiring a level of expertise in financial markets and finance
theory exceeding the bounds of popular engagement. Comprehending
these instruments requires, it seems, immersion in an alphabet soup of
acronyms and the dogged acquisition of a jargon and expertise endemic
to a limited sphere of financial practitioners (Lépinay, 2011).
The focus on the technical specificities of derivatives is not unprob-
lematic, though. To the extent that those attempting to map out the
terrain of these instruments immerse themselves in a narrow financial
discourse, they sacrifice the capacity to provide a broader theorization.
To the extent that one accepts a reified view of these technologies, defined
within a circumscribed instrumentality, one loses sight of the perform-
ance of finance (Clark et al., 2004), and risks being swept up in its
drama.2
This article, resisting this tendency, aims to broaden the social theor-
ization of these financial technologies, moving beyond the analysis of
innovation’s functional role in controlling risk, or its instrumental role
in abetting capitalist accumulation. In so doing, we re-evaluate securi-
tization and derivatives as historically specific technologies enframed
within a particular symbolic and cultural economy. Akin to a more clas-
sical and inductive political economy, we roll back instrumentalist
assumptions about wealth and prestige, typically defined in narrow mon-
etary and material terms, aspiring to a more holistic socio-cultural or
anthropological3 view on the rituals of finance.
Reconceptualizing financial innovation, this analysis assumes that all
political-economic agency is affectively overdetermined (Gammon,
2008). Overdeterminism, sometimes referred to as multideterminism,
should not be confused with linear determinism. The former refers to
dynamic processes that bring about the compromise and convergence of

Gammon and Wigan 107
conflictual and contradictory unconscious and conscious intent. Rather

than actors simply being driven by the expedient of pleasure maximiza-
tion, economic agency is overdetermined by the anxiety of intra- and
inter-subjective coherency. Pursuing coherence, individuals sometimes
contradict the expected behaviour of hedonic actors, deranging the
potential for welfare gains. The anxiety of subjective coherence eventu-
ates in aggressive actions that sabotage the real economy to maintain a
solvency in the sense of self, a sense of sovereignty.
Innovation itself is a process that we see as impelled by unconscious
affective drives. Lester and Piore (2004) suggest that innovation is some-
thing not directed towards the solution of well-defined problems, but
arising from interpretative processes. Obliquely adapting this observa-
tion, we see social innovation entailing the retroactive ascription of
rational coherence to unconscious social dynamics, and their institution-
alization. With financial innovation, we argue it was impelled by uncon-
scious aggressivity and anxiety, pushing the limits of financial production
at huge cost to the real economy. The complex recombination of existing
financial knowledge and technologies found conscious rationalization in
narratives of market completion and risk dispersion.
Thus, our aim is not to map out what derivatives do within a limited
setting bounded by ‘the market’, but to situate them in a wider uncon-
scious social field. We seek to understand the complex motives, the con-
figuration of social desires and taboos that give rise to, animate and
amplify these technologies. As anthropologists have recognized, com-
plete and reliable explanations regarding actors’ motivations are difficult
to elicit from the subjects involved. Malinowski noted of the Kula
exchanges among Trobriand Islanders that he could not gain even a
‘partially coherent account’ of this complex institution by asking its par-
ticipants to define it; the Islanders could elaborate on the motives for
their own individual actions, their rationality per se, but seemed unaware
of how the collective institution shaped their motives, beliefs and habits.
Similarly, the fuller comprehension of financial innovation lies outside
the mental range of the banker or mainstream economist (Malinowski,
1922: 64).
Deploying an anthropological lens in examining economic life is
hardly novel, having been part of early inductive approaches of political
economy. Bernard Mandeville, a decisive precursor to Adam Smith,
developed an anthropological perspective in explaining the wealth of
nations; he dismissed the view that moral fortitude was the fount of
national prosperity, a view he argued belied the complex configuration
of motivations within society. Mandeville, like Malinowski, discounted
social actors’ explanations of their own behaviour; ostensibly virtuous
acts were merely culturally specific manifestations of ‘self-liking’.4 The
anthropological view fell out of favour with the rise of neoclassical ortho-
doxy, which catalysed the progressive displacement of inductive by

deductive methods. Mechanical and hedonic conceptions of motivation

came to dominate, obviating considerations of the organic role of culture
and social institutions in enframing behaviour.
A broader approach was not extinguished, and we draw on its vestiges
to recast the interpretation of financial innovation in a larger social econ-
omy. We tap into two distinct yet complementary strains of thought:
Thorstein Veblen’s evolutionary institutionalism and Georges Bataille’s
‘general economics’. Social anthropology inheres strongly in Veblen’s
work, bearing an atavistic resemblance to Mandeville’s theorization of
motives and desires. Veblen saw past the rhetoric and normativity of
‘neoclassical economics’ – a term he coined (Veblen, 1900: 261) – showing
another level of volition within social economies that could not be
mapped within the ‘rational’ coordinates of homo economicus.
Specifically, Veblen argued that certain economic institutions made
manifest predatory drives, undermining industrial pursuits.5 His
approach is genuinely evolutionary, examining the development of
social institutions and challenging the surreptitious social teleologies
that distort the approximations of mainstream economic analysis. So
too, we draw on Bataille who, like Veblen, eschewed the narrow instru-
mentalism of what he referred to as a ‘restricted economy’, fleshing out
non-rational dimensions of social economies that escape the conscious
awareness of those there engaged.6 Also like Veblen, Bataille saw strong
affective forces working themselves out through social relations, at times
in catastrophically destructive ways.
Synthesizing Veblen and Bataille requires a creative reading, as stark
differences exist between them. Veblen was critical of prodigality in soci-
ety, adopting a utopian view of technological progress, with ‘unhindered
machine process’ overcoming an ‘unstable, transitory stage of culture’
created by modern business enterprise (Veblen, 1939: xvii). Theorizing
the instinct of workmanship, Veblen conceived of humans as moral
agents who abhor waste and see an innate beauty in efficiency, utility
and simplicity (Mayberry, 1969). This understanding gave him a norma-
tive basis for evaluating the development of institutions. In contrast,
Bataille saw in human nature the necessity of non-productive expend-
iture. He, Burke (2005: 133) claims, ‘was a Veblen with the plus and
minus signs reversed’. Bataille would have seen Veblen’s utopia as prob-
lematic, with society’s inability to expend excess and pent-up energy
leading to potentially catastrophic outcomes. Rather than an ethics of
efficiency and parsimony, Bataille’s was one of furthering expenditure, of
channelling excess to ensure survival (Stoekl, 2007). However, for
Bataille the restricted market economy prompted the refusal of the
wealthy to indulge in free forms of unproductive expenditure. This
obstructs socially beneficial expenditure. Thus, both Veblen and
Bataille would condemn the expenditure of contemporary financial
elites, but for clearly different reasons (Bataille, 2003: 174, 176).

A reason for drawing on Veblen and Bataille is that both recognized

strong non-rational and unconscious affective forces driving individuals
in ways that belied utilitarian conceptions. Familiar with Freud’s theor-
ization of unconscious motivations, Veblen (1924: 26) focused on the way
drives and institutions influence economic behaviours, deriving conclu-
sions in accord with psychoanalytic theory (Wolozin, 2005: 729). In par-
ticular, Veblen’s conception of the predatory drive dovetails with Freud’s
theorization of drives (Stanfield, 1999: 251). Bataille drew heavily on
Freud’s conception of the unconscious. He saw the unconscious resisting
and subverting attempts to be bridled by the homogeneous organization
of knowledge and society, manifesting in what he referred to as the het-
erogeneous (Noys, 2000).
Adapting the work of Veblen and Bataille, we conceive of financial
innovation as multidetermined, having a socially contingent instrumen-
tality in terms of risk mitigation and speculation, but also operating on
another level of motivation within the wider social economy. At a con-
scious level, innovation has sensibility and coherence within the discur-
sive frame of finance. At the same time, it functions at an unconscious
level, performing operations of which the actors within the restricted
economy remain unaware. Unconsciously, institutions and social tech-
nologies are sites for the conduction of affect – of anxiety and aggression
– within a social order. There is, in essence, a greater affective economy in
operation, channelled by the prevailing discursive frames of societies.
Veblen and Bataille, in their own ways, saw affect overdetermining osten-
sibly rational economic behaviour. As we elaborate, operations taking
place at an unconscious level can work against the endemic logics and
teleologies that develop within the prevailing discursive frame. A para-
dox emerges, sustained so long as it remains untheorized. In the case of
securitization and derivatives, while seemingly acting to perfect and com-
plete the market, rendering risk fungible, they undermine the basis of
production in the real economy and create systemic instability.
Contemporary financial innovation has marked the evolution of the
institution of property, significantly transforming the dynamics of social
production. This evolution, though, has produced far from desirable
outcomes, and re-establishing more sustainable forms of social produc-
tion requires that we become conscious of the affective economy that
overdetermines the ‘real’ economy (Thompson, 2011). As Bryan et al.
(2012: 300) state, ‘there is a danger that a response to financial crisis can
be too readily framed in a way that reconfirms analytical
presuppositions’.
One key implication of this analysis is the need to re-evaluate
responses to the global financial crisis. Inasmuch as the crisis has been
perceived as one of mispricing, requiring a technical and regulatory fix,
the potential for a sustainable recovery is curtailed. Adhering to
Bataille’s principle that the veritable problem of economics is excess,

not scarcity, the current fiscal retrenchment severely circumscribes the

potential for expenditure, exacerbating the chances for catastrophic
social outbursts. The immediate response that appears more sustainable
in terms of conducting the economy of affect is counter-cyclical fiscal
policy. The value of full employment in the general economy of affect
lies not in creating surplus accumulation, but in enhancing conditions for
expenditure. A more comprehensive response, though, would require a
broader social transformation.
Beyond Rationalist Economics

I believe Man . . . to be a compound of various Passions, that all of
them, as they are provoked and come uppermost, govern him by
turns, whether he will or no. (Mandeville, 1988: 38)
In our analysis we break down assumptions – implied and explicit –

regarding the rational basis of social production in advanced capitalist
economies. As Lyotard (1993: 108) expounded, ‘there is no primitive
society’, by which he meant there was no line separating the ‘rational’
operations of capitalism from the functioning of an affective/libidinal
economy. There is no primitive society, for there is no ‘modern’ society
to contrast it with. All social economies, capitalist ones no less, are
defined by rituals and ceremonies that foster affective transformations
in individuals and groups, naturalizing otherwise arbitrary social oper-
ations. As an example, the costumes and rituals of our courts help to
induce solemnity, which in turn subdues challenges to authority.
Crucially, the proximate appearance of an observable rational process
or institution is likely to be underpinned by unobservable socio-psychical
relations. Positing a false dichotomy between the rational and mechan-
istic, and the affective and unconscious, reifies the modern and, in this
context, reduces the comprehension of finance to too narrow an eco-
nomic and technical task.
Historically, anthropology and economics occupied distinct spheres of
influence; where anthropology has examined economics, it has generally
been relegated to the task of investigating ‘primitive’ economics in non-
industrial societies.7 Modern economies are implicitly considered to lie
beyond the scope of anthropology. Modern economic phenomena, such
as financial derivatives, consequently accrue a status that equates them
with the machine, and via this elision are stripped of their non-rational
content.
Where there is no primitive society this ring-fencing of economic
enquiry becomes contestable. There is no distinctively ‘economic’ reality
to be revealed. As Hamilton (1991: 944) argued, the anthropological gaze
needs to be cast on conventional economics, viewing with as much scep-
ticism the claims of economists as we ‘would the expostulations of other

native informants’. As the market becomes imbued with the status of

high theory, it is incumbent upon critical enquiry to denaturalize and
transcend accounts of market activity offered by insiders.
Only when the underbelly of finance, the passions and drives articu-
lated in the pristine appearance of calculable process, is revealed can its
politics be apprehended and potentially remedied. Critics and advocates
of contemporary finance, in our terms, share some of the same ground,
and consequently are prone to reproduce convention and mimic ortho-
dox economic accounts, albeit that the former do so via contradistinc-
tion. We deepen the critical accounts of contemporary finance so the
observable dynamics of markets are not divorced from their equally vol-
itional affective content. To maintain this separation is either to cede
ground to the status quo or to neuter the impact of work that seeks to
overturn it. The notion that the market has clearly discernible boundaries
separating it from a wider social field is false and crucial to a certain
political imaginary and programme.
The recent crisis challenged our capacity to understand the machin-
ations of the financial system. Broadly, we have been asked to compre-
hend the debacle in terms of a ‘systemic mispricing of risk’. In an
environment of cheap credit, poorly mapped correlation and counter-
party exposures combined with a systemic underestimation of the poten-
tial non-linearity and variance in the valuations of complex and highly
leveraged products. Blindsided by the insurance of failure to pay that
credit derivatives offered, and seduced by the prospect of optimal diver-
sification, market participants underestimated ‘delta’;8 as values plunged,
huge amounts of collateral were required to sustain losing leveraged
positions. We apparently face an urgent need to comprehend product
pricing, the calibration and manipulation of capital adequacy regula-
tions, the modelling of Counterparty Valuation Adjustment, the
impact of accounting technologies on the evolution of market prices
and the myriad linkages between assets and institutions across leveraged
financial markets. Our enquiry is therefore subject to an exacting and
potentially reductive discipline. Financial markets are information pro-
cessing machines which require careful engineering and calibration.
A mechanical view epistemologically divides the financial from the
social, rendering the affective content and constitution of haute finance
invisible.
Accounting for the role of affect, we foreground a broader sociality in
financial innovation. Within the repressive strictures of neoliberal gov-
ernance, securitization and derivatives allowed certain individuals at the
centre of global financial markets to extract themselves from the every-
day drudgery imposed on the vast majority by the accentuated discipline
of the market economy. For a limited number, securitization and deriva-
tives provide sovereignty and identity foreclosure. Unperturbed by both
prior limits on financial production and the prior limits of financial

technologies, a financial elite accesses a legal right of sabotage and a

virtual monopoly on expenditure.
It is important to recognize that markets are multidetermined. New
financial technologies raise important functional issues and interests coa-
lesce and conflict around them. Markets are materially distributive and,
as ethnographers reveal, markets raise important issues pertaining to
dominant modes of theorizing social life. However, new technologies,
in addition, conduct and convey affect, providing the basis for invidious
predation, the attainment of sovereign expression for some, and a limited
process of venting social surplus. Here we turn to Veblen and Bataille in
elucidating the complex of determinants of economic life.
A Veblenian Reading of Financial Innovation

The encompassing social theorization of economic life in Veblen’s work
is instructive in examining financial innovation in a broader social econ-
omy, and developing a more anthropological perspective on their func-
tioning. Veblen’s (2007) theorization of the motives driving consumption
contests instrumentalist accounts of economic behaviour seen through a
utilitarian/hedonic lens, and is applicable in examining the immediate
social context of financial markets. Similarly, his theorization of the
predatory drives operating in business enterprise, drives undermining
the efficiency of the productive economy, throws doubt on the mantra
of market completion attached to innovation.
Veblen’s (2007) prescient analysis of the incubating mass consumption
society in his Theory of the Leisure Class offers insights into problematiz-
ing financial innovation beyond narrow instrumentalism. Breaking away
from the disciplinary stranglehold that neoclassical economics was estab-
lishing, he cast an anthropological gaze on diverse habits of consumption
and engagement in leisure activities by different social strata in fin de
sie`cle United States. In an evolutionary vein, Veblen argued that,
through consumption and leisure, archaic traits and tendencies resonate
in the interactions of the acquisitive and self-interested individuals of
modern capitalism. For him, consumer culture was characterized less
by a reductive psychology of the insatiable desire for pleasure, and
more by the desire for emulation and invidious distinction.
Veblen discerned a generalizable social division in production and
consumption. The majority of societies witness certain classes of individ-
uals employed in the drudgery of manual and industrial pursuits, occu-
pations essential for daily reproduction but conferring minimal prestige
upon those undertaking them. Other select classes, to varying degrees,
are debarred from such endeavours, involved in a ‘higher plane’ of occu-
pations in areas such as government, warfare, religious observances and
sports (Veblen, 2007: 7–8). These are occupations of ‘exploit’, involving
individuals converting to their own ends the ‘energies previously directed

to some other end by another agent’, and procuring discernibly asym-

metrical benefits (Veblen, 2007: 14). From this exploit arises the possi-
bility for engagement in leisure, activities beyond the requisites for the
subsistence and survival of the community, and from which prestige
issues.
Differing degrees of reputability divide members of a community
based on occupation and lead to social tension. There is the emulative
drive of those of lesser social esteem to enhance social standing. At the
same time, there is the drive of those of a higher order to regulate and
innovate patterns of consumption and leisure in maintaining relative
reputability.
To diminish the threat of social tension, institutions, the ‘settled habits
of thought common to the generality of men’ (Veblen, 1909: 626), evolve
as a means of arbitrating the economy of prestige. Institutions guide
habits of consumption and production, helping to rationalize and natur-
alize the division of labour. In a community’s scheme of life, institutions
lay down the conditions for gaining reputability, governing the norms
regarding the engagement in leisure and unproductive consumption. The
institutions of caste, class, race and gender divide societies into micro-
economies of prestige, each with its rituals and performances sifting the
different grades of reputability of their constituents. The conspicuous
abstention from productive labour through leisure is far from a state
of idleness (Veblen, 2007: 57), with institutions eventuating in complex
and costly rituals and social performances that mediate the passage of
waste into prestige. Even in capitalism, wealth is an imperfect correlate of
reputability, with lineage, etiquette, manners, language and education
delineating gradations of reputability. For example, the efforts of nou-
veau riche in acquiring wealth prevent engagement in requisite forms of
leisure that would confer upon them commensurate levels of prestige.
Contemporary financial innovations, we argue, mark an evolution in
the institution of property that has given rise to a new expression of
leisure, an elaborate performance that marks apart the ‘masters of the
universe’ of haute finance from the mere mortals of the productive econ-
omy. The key defining aspect of leisure is a relative disengagement from
‘useful’ or productive labour. The performance of leisure, in fact, is only
possible when one has been freed from the tethers of productive work,
supported by the labour of others.
In finance, the hierarchical division between front and back offices
marks the separation between those engaging in performative and pres-
tige occupations and those undertaking the drudgery of productive work.
In the front office are the investment bankers and traders recruited from
elite institutions, who perceive themselves in a superior relation to those
undertaking the mundane clerical and accounting tasks of the back office.
Standing at the entry point of revenue streams, the front office enjoys the
lion’s share of the spoils, as opposed to back-office employees, who are

perceived as a drain on revenue (Riles, 2011). The division of rewards is

legitimated by the perception of the back office as a ‘cost centre’, with
‘the refusal of the investment banks to recognize or compute their con-
tributions as part of revenue generation’ (Ho, 2009: 79). As one former
back-office worker on Wall Street explains, ‘There were the “heroes” in
the front and the “grunts” in the back – those who “made it happen”
and those who “watched it happen and then cleaned it up”’ (Carroll,
2007: 82).
Financial innovation of the 1990s opened up the stage for a new cast
of performers, the ‘quant jocks’ or ‘rocket scientists’, who combined
trading prowess with technical and mathematical savvy. These individ-
uals, frequently holding advanced degrees in mathematics and physics,
provided the know-how for modelling and pricing financial products that
would miraculously disperse risk. Pablo Triana, reflecting on his experi-
ence in the derivatives market, emphasizes ‘qualification reverence’ in the
performance of finance.
If you have a PhD, have taught at prestigious universities, and

manage to convince outsiders of your indomitable scientificness,
then the world will sheepishly assume that you operate from a
magically mysterious black box built upon the most sophisticated,
latest quantitative techniques, no questions asked. (Triana, 2009:
256).
Front-office quants resemble the priestly class as described by Veblen.

He explains how priests act as mediators between the ‘inscrutable powers
that move in the external world’ and the ‘common run of unrestricted
humanity’ (Veblen, 2007: 237). The priest finds means ‘to impress upon
the vulgar the fact that these inscrutable powers would do what he might
ask of them’. For the hubristic quant, it is a matter of convincing others
of his ability to tame the inscrutable powers of the market, dispersing risk
through innovative financial technologies. So too, the practitioners of
financial engineering rely on mystification to maintain their distinction,
like, as Gillian Tett (2009: 104) suggests, medieval priests speaking a
financial Latin incomprehensible to the laity.
Another facet of Veblen’s work applicable to interrogating the pro-
ductive role of financial innovation is his theorization of the drives of
predation and workmanship. These oppositional drives are culturally
mediated and reproduced, and their balance is a determinant of the lon-
gevity and sustainability of a social economy. Predation, which previ-
ously found expression in the institutions of warfare and slavery,
contemporarily finds subtle expression through a ‘covert regime of self-
aggrandisement and differential gain’ (Veblen, 1964: 183). Veblen, criti-
quing views of the innate efficiency of markets, showed how the desire for
‘differential advantage’ – mediated by property – frequently subverted or

‘sabotaged’ the productive output of industry. Workmanship, on the

other hand, represents a creative impulse, artfully deploying the extant
knowledge of a community to meet the demands of life. It is undertaken
as much as an end in itself as out of instrumental considerations (Veblen,
1964: 31–2).
Whereas a model premised on the maximization of material wealth is
conducive to the idea of the linear growth of the market, Veblen’s psych-
ology, premised on relative prestige, gave greater scope for actors wilfully
disengaging or ‘unprofitably’ deploying resources to preserve or enhance
social standing. Growth for Veblen, unlike for neoclassical economists,
was not the solution to the problem of economic psychology, but an
incessant perturbation. Technological innovations in the productive
economy – the fruit of workmanship – have typically precipitated
changes in the economy of prestige; as greater scope is provided for
emulation by lower classes in society, as with the advent of cheap man-
ufactured goods, elite fashions and superlative forms of consumption
emerge to maintain invidious distinctions.9
In exemplifying predation, Veblen pointed to the evolution of property,
through which differential advantages in society have been maintained. For
him, private property represented the legal right of sabotage, the right of
discretionary idleness to secure concessions from the working population
(Veblen, 1924). With the rise of limited liability and ‘absentee ownership’ in
the 19th century, Veblen saw a legal conspiracy against productive effi-
ciency, belying the agglomeration and risk-sharing functions of this new
form of property (Baskin and Miranti, 1997; Chandler, 1990; Coase, 1937).
He lamented that under the new regime, ‘the differential advantage of own-
ership is alone regarded in the conduct of industry under this system’
(Veblen, 1908: 107) and ‘net gain in money-values is a more convincing
reality than productive work or human livelihood’ (Veblen, 1924: 217).
Akin to the development of limited liability, financial derivatives bring
forth a novel form of property for effecting sabotage and producing
differential advantages that preserve invidious distinctions. While
within the everyday practices of finance derivatives help to create an
immediate source of invidious distinction, on a more systemic level,
they work in a predatory manner, elevating the world of haute finance
above the productive economy and beyond its apparent strictures.
Ownership progressively abstracts from the materiality to which it
refers. In a derivative contract, property is constituted in circulation
and remains in that same sphere, never to be consumed via use (Bryan
and Rafferty, 2006). Simply, property in derivatives denotes possession of
the performance of assets without the necessity of, or disciplinary
imperatives arising from, property in the underlying entity. This abstrac-
tion and intangibility from moment to moment emancipates the pur-
veyors and users of derivatives from the discipline of the real,
providing opportunities for predation.

Within the instrumental rationality of finance, credit derivatives con-

stituted a breakthrough in market completion. Owners of bonds could
use these products to separate the interest rate of a bond and the credit
risk it carried. The trade in aggregate would optimize risk dispersal,
improve the allocative capacity of finance and reduce the cost of credit.
Less recognized was the capacity of these technologies to mark the rela-
tion between creditors and debtors with a predatory character (Wigan,
2010). Credit derivatives cut links, which had partially reconciled the
interests of lenders and borrowers, and severed ties between risk and
responsibility.
Drawing on this notion of predation offers a distinct vantage point on
the corporate scandals of the turn of the millennium. That banks were
aware of the precarious and fabricated financial position of these cor-
porates but continued to finance them presents an intriguing puzzle.
JP Morgan and Citigroup entered into US$8bn in prepaid swaps
(loans) with Enron. The banks paid the full value of the swap upfront,
while Enron promised to make repayments over time. Despite appear-
ances, and due to the off-balance-sheet nature of these contracts, these
deals were not accounted for as loans. Additionally, the banks arranged
several deals designed to inflate end-of-year profits (Partnoy, 2003: 338).
The banks were in a strong position to be aware of Enron’s fragility.
However, in 1999 Citigroup had a US$1.7bn exposure to Enron, four
times the bank’s internal limit on exposure to the company. Enron was
the subject of 800 credit default swaps with a notional value of US$8bn
(ISDA, 2002: 12). In this way Citigroup passed on its entire, ultimate,
US$1.2bn exposure to Enron (Partnoy, 2003: 376).
That large global banks had extended huge volumes of credit to Enron
in the context of a deep and liquid credit derivatives market meant these
loans embodied no information with regard to the banks’ private evalu-
ation of Enron as a business proposition. Credit derivatives afforded a
capacity to transform banks’ position in relation to debtors and pruden-
tial standards. Using credit derivatives haute finance constructed indiffer-
ence to positive performance as debtor, and in aggregate reformulated
the relationship of finance to ‘real’ wealth production.
This Janus-faced predatory motive has been equally apparent in the
present crisis. In a cheap money environment, banks at the centre of
the market generated unprecedented levels of progressively fragile debt
and transferred likely future losses to less sophisticated and differen-
tially regulated entities. The relationship between Goldman Sachs and
the financial arm of American International Group is instructive in
this regard. AIG Financial Products (AIG FP) was a first mover
among the insurance industry in trading securitizations and deriva-
tives. Not subject to capital reserve requirements, they proved an
ideal depository for trades generated by the investment banking com-
munity, and so eliminated the limit on financial production set by

bank ‘risk sensitive’ capital reserve requirements. Goldman Sachs

found in AIG FP a willing recipient of the credit risk it produced
in its CDO (collateralized debt obligation) business, earning a hand-
some spread between the price AIG received for ‘insuring’ risk and the
price paid by others to take it on. To perpetuate these deals, Goldman
Sachs did not need to own billions of dollars of the underlying
subprime mortgage bonds. Instead, the bank constructed mortgage-
backed securitizations with credit derivatives, synthetic contracts that
replicated the performance of slices of triple-B rated mortgage bonds.
Not only did credit derivatives provide a means to predate upon an
unstable bubble, they also opened a trade unconstrained by a limited
‘real economy’ supply.
Goldman Sachs profited from originating and redistributing securi-
tizations written on an increasingly unsustainable mortgage market.
The bank could produce any required amount of this credit risk by
synthesizing mortgage-backed bonds via credit derivatives, inuring
itself against potential defaults and eventual financial instability. Lewis
(2010) aptly describes this process as ‘laundering’. Securitization not only
redistributed credit risk, it redefined it. Triple-B rated mortgage bonds
were converted into triple-A by rating agencies on the principle that the
assets in the securitization were not correlated; they were not likely to all
go bang at once. In this instance, AIG was the proximate victim of pre-
dation as the immediate holder of the risk, but in the last instance the
broader public carried the can via massive state bail-outs and the ensuing
economic crisis. To borrow from Veblen (1924: 331), the credit deriva-
tive, ‘is of a more perfect order of absenteeism’, whereby the owner of
aspects of assets evades the disciplinary boundaries set by property in the
underlying asset.
Veblen’s theories of the role of the leisure class, absentee ownership
and business enterprise in modern capitalism illuminate the dynamics,
practices and distinctions that we identify in the institutionalization of
derivatives and securitization. It is Veblen’s abiding concern with the
techniques devised for negotiating conceptions of self in the social econ-
omy that we adopt, in part, to penetrate the unconscious dimensions of
financial innovation. In turn, Veblen’s analysis of absentee ownership
illuminates the invidious and predatory character of the contemporary
credit system. Ultimately, in mapping the operations of an economy of
prestige, we move closer to laying the groundwork for a broader, more
anthropological, theorization of financial innovation.
Veblen, though, does not provide a singular and comprehensive frame-
work to accomplish our objective. Though the economy of prestige and
predation outlined by Veblen plays an important role in the evolution of
financial innovation, it only captures part of the essence of the prodig-
ality involved in these technologies. Thus, to further our analytic frame-
work, we turn to the work of Georges Bataille.

Financial Innovation in the General Economy

The application of the heterodox economics of Georges Bataille to the
analysis of financial innovation may seem peculiar, but it is a theoriza-
tion that complements – and in important ways furthers – the work of
Veblen, offering invaluable insights into paths towards sustainable social
production. Bataille is known by some for the pornographic nature of his
fiction, such as his Story of the Eye, and others for his role as a precursor
of poststructural theory (Noys, 2000: 1; Richardson, 1994: 1); seldom is
his name invoked in debates on economics. Tracing the pervasive influ-
ence of Bataille’s views on consumption and waste on theorists such as
Foucault, Baudrillard, Lyotard, Deleuze and Guattari, one appreciates
how his work fostered counter-intuitive conceptions of governance and
subjectivity in capitalism. In particular, Bataille’s critique of economics’
defining preoccupation with scarcity and exploration of the problem of
‘excess’ provide a unique view on the development of financial innov-
ation, and its role in the financial crisis.
Bataille, like Veblen, rejected the narrow hedonic model advanced by
deductively inclined economists. Bataille, abreast of developments within
anthropology, saw that economies premised on accumulation – fuelled
by the Smithian propensity to truck, barter and exchange – were the
product of particular socio-cultural pressures. So too, Bataille, schooled
in the work of Nietzsche, distrusted the rhetoric of positive economics,10
promoted in bad conscience by those Nietzsche (1996) referred to as the
‘English psychologists’, men who sought to erect a new fictive secular
morality around the concept of utility. Like Mandeville, Veblen and
Freud, Bataille’s theorization reveals ‘perverse’ motivations in acts that
were seen to be abetting the growth and prosperity of civilization.
Though recognizing self-duplicity in the workings of social economies,
generating exuberance and drama in social life, unlike Veblen, Bataille
did not view this as pernicious (Stoekl, 1986: xvi). He saw excess as a
means for society to dissipate the superabundance of energy it confronts
when it has met the requirements for subsistence. Whereas Veblen saw
uselessness and predation abounding in honorific expenditure, Bataille
saw potentially useful means of channelling and dispelling excess.
This appreciation of the excess of energy that confronts all societies led
to Bataille’s rejection of the notion of economics as the science of scar-
city. In his three-volume work The Accursed Share, Bataille problem-
atizes the core issue of economics in terms of how societies destroy or
squander the wealth accumulated from the excess of energy. He contrasts
the restricted economy of the normalized rational actor, with its focus on
instrumental accumulation strategies, with the broader general economy,
which considers the ‘play of living matter in general’. Bataille tells us, ‘On
the surface of the globe, for living matter in general, energy is always in
excess; the question is always posed in terms of extravagance.’ Contrary

to the view of conventional economics, Bataille argues: ‘It is to the par-

ticular living being, or to limited populations of living beings, that the
problem of necessity presents itself’ (Bataille, 1988: 23).
Influenced by Nietzsche’s (1996: 8) project of the ‘transvaluation of all
values’, which denounced Judeo-Christian morality for imposing a type
of ‘self-crucification’ in proscribing humans’ vital connection with
nature, Bataille sought a political economy that regenerated this connec-
tion. The asceticism of capitalism, deriving from the Protestant work
ethic theorized by Weber, damned up the exuberant flows of nature,
leading to a growth in ressentiment and the lust for power. For
Bataille, the positive principle of utility within capitalism is a ‘principle
of powerlessness, an utter inability to expend’ (Baudrillard, 1987: 135).
Thus, in his theorization of general economy, the ‘machinic enslavement’
of homo economicus is replaced with a living and breathing ‘homo ecolo-
gicus’ (Deleuze and Guattari, 1984; Nodoushani, 1999: 335).
In exploring the ways in which capitalism expends excess, Bataille
draws on social anthropology in contrasting capitalism with the diverse
techniques societies have devised to rid themselves of the accursed share.
In examining the historical case of Aztec civilization, Bataille paints a
society geared towards ‘useless’ expenditure, a complex assemblage for
the dissipation of excess. Through building colossal step pyramids for
ritual sacrifice, wars waged for the capture of sacrificial victims, and the
development of astronomy and mathematics, the Aztecs created complex
methods of antiproduction for absorbing the superabundance of
energy.11 With their empire, rather than expanding territorially, deposing
local leaders and integrating them into a centralized administrative
apparatus, they left local governments intact. In not occupying con-
quests, the Aztecs gained less scope for economic extraction and accu-
mulation, but freed up more resources for exuberance in war (Hassig,
1988).
Bataille also turned his attention to potlatch, a ceremony for the dis-
tribution and expenditure of wealth among indigenous peoples of north-
west North America. Potlatch generally takes the form of non-reciprocal
gift-giving, a sumptuous offering of wealth to demonstrate and maintain
power and prestige. Mauss described the spirit of rivalry surrounding the
practice, the way it produces an agonistic relationship between tribes,
establishing rank on the basis of ability to engage in the practice (Mauss,
1970: 4). As Bataille (1988: 68) explains, gift-giving is only one form of
potlatch, with the most exuberant offerings made to ancestral spirits
through the destruction of wealth – the breaking of canoes, the burning
of villages, the slaughter of slaves.12
Exploring the diverse ways societies sanctified the destruction of
excess, Bataille highlights analogous manifestations of exuberance in
advanced capitalism. In particular, he explores the role of the Marshall
Plan as a means of expending excess, a mass transfer of wealth ‘without

which the world’s fever would rise’ (Bataille, 1988: 175). The Marshall
offensive was instrumental in establishing a Fordist mode of production
that delivered higher standards of living, allowing for the dissipation of
energy through mass consumption. Yet this development was only par-
tially successful in absorbing the surfeit of productive capacity. An add-
itional outlet was found through the arms and space races, types of
potlatch of unprecedented scale. Though utilitarian arguments are
made for the military industrial complex and space exploration, such
arguments only partially explain the prodigality of driving a golf ball
on the moon (Bezdek and Wendling, 1992).
Despite these expressions of exuberance, the problem persists in cap-
italism’s general tendency towards the deferral of expenditure and
reinvestment of productive energies. In capitalism, ‘the generous, the
orgiastic, the lack of measure that always characterized feudal waste
has disappeared’ (Habermas and Lawrence, 1984: 90). Consumption
takes place on an unprecedented scale, but occurs in highly normalized
patterns to abet further growth; since the restructuring of the inter-
national economic order following the Second World War, consumption
has been engineered to feed back into an expansive and disentropic social
economy. As Goux (1990: 222) argues, the ‘society of consumption’ that
was consolidating in the 1960s did ‘not at all subvert the status of the
extensive concept of “utility” in political economy’, despite the fact that it
overturned extant mores regarding usefulness.
Despite contemporary capitalism’s prodigality, the expenditure of
excess is inhibited by the rigidities of an imposed homogeneity, and
remains highly precarious (Bataille, 1979).13 As advanced consumerism
is structurally fostered – not reflective of the sovereign desires of individ-
uals – it fails to exhaust the excess of energy within the social economy.
The squandering that takes place in modern consumption, as Baudrillard
(1998: 46) highlights, ‘no longer has the crucial symbolic and collective
signification it could assume in primitive feasting and potlatch’. As
Veblen would have recognized, a large portion of the consumption
that takes place is of a vicarious or emulative nature, never truly quelling
identity anxieties. When consumption is vicarious, accruing benefits for
or conferring prestige on others, and especially when it is emulative,
undertaken in the pursuit of the dividend of identity foreclosure, it
does not allow the dissipation of energy, but leads to its conduction
and potential amplification. Fashions and innovations incessantly agitate
and induce anxiety, making impossible the consummate destruction of
excess. The ressentiment, the lust for power, that results in consumer
society risks catastrophic outburst – in substitutive satisfactions for
destruction – in war, economic crises and environmental degradation.
For Bataille, a society’s sustainability is linked to its capacity to pro-
vide sovereign expression to its members in the destruction of excess.
Sovereignty, for Bataille (1991: 199), refers to those instances that arise

in the operations of a social economy that allow individuals or groups to

‘enjoy the present time without having anything else in view but this
present time’. Such a notion of enjoyment derives, in part, from a psy-
choanalytic understanding of time, whereby time is only perceived by the
psyche in instances where it is pressured by the force of lack – socially
constituted. Where the psyche is able to enjoy a moment of narcissistic
fulfilment, where it conceives itself as complete, time ceases.
All individuals enjoy sovereign moments, instances in which product-
ive considerations can be eschewed, though the methods of attaining
sovereignty, as well as the intensity and duration of sovereign moments,
vary according to social hierarchies. Bataille (1991: 199) provides a tell-
ing example: the momentary sovereignty of the worker having drinks
after a long day’s toil. While factory workers are able to attain ephemeral
sovereignty through after-work libations, the factory owner attains sov-
ereign expression by means of the extraction of the surplus value of
labour.
Ultimately, in the politics of Bataille, with his arguments for a sus-
tainable social order allowing for the sovereign expression of the hetero-
geneous, we gain new insights into the issues posed by finance. Haute
finance, we suggest, became symptomatic of the suppression of sovereign
expression in the social economy. The ‘rocket scientists’ of financial
innovation became invested with a sacred type of existence. This in
turn gave them access to an extreme form of expenditure, of financial
violence, that was the correlate to the repressive homogeneity brought
about by the intensification of neoliberal governance.
The house of cards built out of the securitization of risk with deriva-
tives was not driven by greed alone, but also was inflected with a drive
towards antiproduction, towards wasteful expenditure. For example, in
the 1993 scandal involving Bankers Trust (BT), complex derivatives were
used to perpetrate fraud against Procter & Gamble (P&G), and evidence
of greed is available in spades, but there is more to it. Internal recordings
of BT employees indicated not only pecuniary interest, but an almost
sexual pleasure in breaking established codes. One BT employee related
to another, ‘Funny business, you know? Lure people into that calm and
then just totally fuck ’em.’ In a discussion regarding a swap in which
P&G was paid only half the value of an option, a BT employee allegedly
remarked: ‘This could be a massive huge future gravy train.... This is a
wet dream’ (Holland et al., 1995). Characterizations of the recent finan-
cial crisis as an outlier or perfect storm belie that evidence of the dan-
gerous and destructive capacity of financial derivatives was clear
following the BT scandal and the Long Term Capital Management
implosion of the 1990s. The unchecked growth of the derivative markets
in the 2000s, at some level, expressed wilful negligence.14
The sabotage of production through derivatives fulfilled a desire for
wasteful expenditure that, we suggest, was aligned with the development

of neoliberal discourses and practices. The growth of the derivative mar-

kets owes much, of course, to deregulation since the 1990s, but also to the
repressive nature of neoliberal practices. The constraining discipline
accompanying neoliberal governmentality has been strongest in the
halls of haute finance, a sphere where ostensible meritocracy grinds
down the expression of self and induces a conformist hyper-individual-
ism. As Karen Ho (2009) argues, ‘neoliberalism’ should not be conceived
of as a mere abstraction exogenous to the normal functioning of social
life, but is grounded in concrete social practices evident particularly in
cultural spheres such as Wall Street investment banking. The cut-throat
competition normalized in this milieu offers few immediate means of
dissipating excess; financial technologies, though, do provide a way of
securing short-term profit and, simultaneously, subverting long-term
production. This environment, where individuals are expected to survive,
and even relish, a brutal working culture with little job security as evi-
dence of a ‘calling’ to the commanding heights of the social pyramid,
renders precarious identity foreclosure. In the midst of this exacting regi-
men, with little scope for positive exuberance, financial innovation
became an expression of sublimated destructive exuberance.
Destructive exuberance was all too apparent in the deranged motives
that fuelled the growth of subprime securitizations. Steve Eisman, a Wall
Street money manager, reflected on the growth of financial instruments
based on the expansion of debt to lower-middle-class Americans: ‘I did
subprime first. I lived with the worst first. These guys lied to infinity.
What I learned from that experience was that Wall Street didn’t give a
shit what it sold.’ Aware of the consequences of Wall Street’s practices,
he added: ‘The very first day, we said, “There’s going to come a time
when we’re going to make a fortune shorting this stuff. It’s going to blow
up. We just don’t know how or when”’ (Lewis, 2010: 24).
The antiproduction of financial innovation had wider repercussions
outside the institutions implicated in the crisis, undermining the product-
ive capacity of marginalized groups through the socialization of ‘miscal-
culated risk’. The subsequent retrenchment of private and state
investment hit young people, women and racialized minorities hardest,
undermining their current and future productive capacity. In the
European Union, 2009 unemployment for 15–24 year olds was 2.9
times that of 35–54 year olds (Chung et al., 2012: 304). Not only did
retrenchment contribute to the destruction of current potential, it will
likely generate a scarring effect, adversely impacting skills acquisition
and future earnings (Arulampalam, 2001). Women have been particu-
larly affected by austerity, the public sector being their main employer
worldwide. Even though there was talk of ‘mancession’ in the United
States, with male unemployment higher early in the crisis and women
retaining employment in flexible and low-paid work, when employment
began rising in 2010, jobs disproportionately went to men, with resulting

talk of the ‘hecovery’ (Kochhar, 2011). Similar to women, racialized

minorities are over-represented in the public sector, and more susceptible
to fiscal cuts. Racialized minorities, more heavily represented in the sub-
prime market, carried an increasing cost of credit that imposed a marked
decline in living standards and life chances.
The destructive impact of subprime accentuated an ongoing process of
fiscal atrophy induced in part by financial innovation. By synthesizing
ownership, derivatives permit the construction of a position mirroring
the direct ownership of the underlying asset. However, synthetic owner-
ship does not incur the legal obligations of buying the asset directly. By
reconfiguring the temporal, spatial and legal character of ownership,
derivatives present a substantive challenge to the tax-collecting state.
While fiscal systems are nationally bounded and inherently static, capital
itself is unprecedentedly mobile and fluid. Mobility and fluidity, har-
nessed in financial innovation, are deployed to change where, when
and on what taxes are levied. Contracts are designed to transform the
location of a tax charge from a high to low tax jurisdiction.15 Deferring a
tax charge enhances the present value of income and assets. Switching the
character of revenue, for instance from income to capital, will reduce
taxes paid. In the United States derivatives are estimated to account
for an annual $100bn loss to the Internal Revenue Service (Donohoe,
2012). Securitizations also provide access to a series of tax privileges by
allowing the deferral of a tax payment, the re-characterization of income
flows and the creation of losses that can be offset against gains taxable at
a high rate.16 Opportunities for tax arbitrage fed back into the exuberant
and destructive demand for products of innovation, ultimately pushing
the system over the precipice (Eddins, 2009).
Not only did tax privileges drive the excess that led to crisis, in doing
so haute finance systematically undermined the capacity of the state to
ameliorate the impact of crisis and prime growth. While market partici-
pants enjoyed the fruits of their labours relatively unperturbed by state
impositions, fiscally attritional innovations heightened inequality and
petrified state capacity to redistribute. Resulting inequality and the
regressive distribution of fiscal burdens, by impeding growth17 and
aggravating social division, debarred the majority from access to expend-
iture and sovereignty.
For haute finance, however, derivatives and securitization provided
excess expression via an extended sovereign moment. In ‘binding and
blending’ (Bryan and Rafferty, 2006) derivatives erode ties to specific
assets and places, and recode the restraints set by orthodox temporality.
By generating a financial system dominated by synthetic assets, innov-
ation broke prior limits on financial production. The only brake on
financial inflation became risk ‘appetite’, which leveraged exposures
through credit derivatives only inflamed. By passing the risk of default
into a broader universe of ‘investors’, credit derivatives prolonged the

financial inflation of the 2000s. By increasing the connectivity of agents in

the system, securitization and derivatives ensured the subordination of
the state to the prerogatives of those who generated the system’s collapse.
Having won the argument over regulation early on (Persaud, 2003;
Tsingou, 2014), the agents operated in the shadows, sure in the know-
ledge that opacity and size imposed certain public imperatives. The top
ten credit derivative counterparties accounted for 86 percent of the trade
prior to the crisis (Fitch Ratings, 2006: 6), and this afforded them a
collective indifference to the consequences of excessive financial
production.
For Bataille, the danger of limited sovereign expression, as accentu-
ated by the financial crisis, is the growth of resentment within a social
economy. All societies are bound together by a homogeneous part, which
ensures commensurability of values and allows social communication to
transpire. This homogeneous part not only defines the society as a whole,
but is essential for the construction of the self; rejecting the ‘inviolable,
timeless and fundamentally irreducible atom’ of the Cartesian cogito, for
Bataille the self is a relation: ‘it is a knot of real communications, taking
place in time’ (Bataille, quoted in Bataille and Richardson, 1998: 31). At
the same time though, the nature of this relation is incessantly in tension
with the heterogeneous elements of the self, those aspects of the self and
of life that cannot be made commensurable, that cannot be assimilated
into the grammar of sociality. As Bataille (1979: 70) suggests, the het-
erogeneous elements of society and of individuals are identical to the
unconscious; when obstructed by the homogeneous sphere of social
life, the heterogeneous part threatens a catastrophic outbreak of affect,
an outbreak of anxiety and of violence against the self and the other in
the social order. For Bataille, similar to the views of the Frankfurt
School theorists, the rise of fascism ultimately resulted from the abnega-
tion of the heterogeneous by the intensification of capitalist social
relations, a denial of the sovereign expression of individuals in a com-
modity-mediated social reality. With fascism, the masses invested this
heterogeneous element in mythical figures and authorities in whose sov-
ereignty they sought a share of sacred existence (Bataille, 1991: 286).
Contemporaneously, the delusion of ‘ownership society’ channelled the
expression of the heterogeneous through the upper echelons of the finan-
cial hierarchy.
Conclusion
In the fallout from the global financial crisis, the role of financial innov-
ation in abetting reckless abandon by the expansion of subprime lending
has been vilified in both the popular press and academia. Yet, in explain-
ing the stratospheric growth of the instruments created out of the finan-
cial innovation of the last two decades, too much emphasis, in our

estimation, has been placed on the pecuniary dimensions of these novel

technologies.
In our analysis, drawing on the heterodox conceptions of economic life
of Veblen and Bataille, we have begun to map out how these novel
financial technologies are mediated in a broader social economy. The
emphasis on greed in explaining the financial crisis fits too neatly with
the rationality postulate of neoclassical economics, which assumes indi-
vidualized hedonic actors seeking to maximize expected utility. We have
attempted to move beyond the limitations of the rationality postulate,
and to flesh out the non-rational dimensions of the performance of haute
finance in the contemporary epoch.
Even though there is an established and growing critical scholarship
on the neoliberal discourses and practices that contributed to the crisis,
this does not explore the non-rational and unconscious motivations that
we argue are implicated. Though the unconscious is immanent in
Foucault’s conceptualization of power, he himself advised against seek-
ing out the ‘non-said’ and ‘repressed’ of discourse, placing greater
importance on ‘conscious, organized, reflective’ intentions (Grace,
2013: 234). Thus, while Foucauldian-influenced studies on governmen-
tality – where technologies of governance intersect with technologies of
the self – are insightful in revealing the complex relations of power that
both discipline and enable neoliberal subjectivities, the prime motivating
factor, in this approach, can still be largely attributed to greed. The view
of the crisis for these studies does not depart from the mainstream under-
standing of it as an unintended consequence. While Foucauldian
approaches fruitfully interrogate governmental technologies that contrib-
uted to the neoliberal ascendancy and its resilience in the wake of the
crisis, the crisis remains incidental, not in need of explanation itself.
Drawing on Veblen, we come to better understand the role of financial
innovation within an economy of prestige. We argue that innovation has
served to create and maintain invidious distinctions within the everyday
practices and discourses of finance. So too, we have argued that, far from
delivering on the promise of efficiency and market perfection through
managing and disbursing risk, financial derivatives and securitization
actually worked to sabotage the functioning of the real economy.
Innovation, despite its potential for enhancing productive efficiency,
has been deployed in a predatory manner that brings about the derange-
ment of the economy in order to accentuate invidious distinctions within
society. From Veblen, we understand how financial innovation comes to
embody narcissistic expression.
Going even further in exploring the non-rational and affective role of
financial innovation, drawing on Bataille we better understand its unique
function in the context of neoliberal social relations. Innovation, unin-
tentionally, has come to act as a conduit for dispelling excess in the midst
of the repressive conditions of neoliberal governmentality. In a world in

which individuals are enthralled by the illusory promise of sovereign

expression, of manifest selfhood, by conforming to the strictures of
hyper-individualism, the problem of excess only mounts. Derivatives
and securitization, while rhetorically playing the role of managing risk
and promoting efficiency, become the caustic expression of neoliberal
ressentiment.
To conclude, by considering the unconscious motivations at play in
financial innovation, we come to reconsider the means of addressing the
ongoing crisis. Without measures to address the lack of sovereign expres-
sion that has accentuated the destructive deployment of financial innov-
ation, the current recovery remains at best tenuous. Expecting remedy
within the limited sphere of the markets and through the limited means
of finer financial calibration will, in our terms, necessarily meet disap-
pointment. Finance and financial innovation are overdetermined in a
wider social economy of affect, and it is the anxiety and aggression aris-
ing within this affective economy that call for redress.
Acknowledgements
We are grateful to Claes Belfrage, David Berry, Andrea Lagna, Grahame Thompson, the
participants of COST Action IS0 902 at workshops in Olso and Erfurt, the anonymous
reviewers and the TCS editors for their invaluable feedback.
Notes
1. Securitization transforms illiquid assets into securities. Individual debts and
income streams of virtually any nature can be securitized. The Bowie bond in
1997, for instance, securitized future income streams accruing to sales of
David Bowie’s albums. In the crisis, banks sold highly rated mortgage-
backed securitizations to investors hungry for higher returns in a low interest
rate environment. Credit derivatives are a means to take a position on the
performance of debt, positive or negative.
2. Clark et al. (2004) label finance an ‘entertainment commodity’, wherein rap-
idly circulating financial stories are delimited by rules of fashion, theatricality
and emotion. ‘Performance’ here should not be confused with the concept of
‘performativity’ (e.g. Mackenzie, 2006).
3. ‘Anthropological’ is used here in the loosest sense. It suggests a broader
socio-cultural theorization that inheres in political economy as both a pre-
and post-disciplinary approach. This analysis does not employ modern meth-
ods of ethnology and ethnography.
4. Mandeville’s ‘self-liking’ should not be conflated with economistic concep-
tions of self-interest, being more akin to Freudian narcissism.
5. We replace Veblen’s ‘instinct’ with ‘drive’. Drive more closely conveys his
idiosyncratic and non-biological understanding. Though Veblen referred to
several instincts, including self-preservation, workmanship, sportsmanship,
exploit, idle curiosity and parental bent, we follow other scholars in dividing
these instincts/drives into the clusters of workmanship and predation (Edgell,
2001; Hunt, 2002).

6. Non-rational does not imply irrationality. Non-rational behaviour or

thought is that which does not conform to a contextually circumscribed
rationality.
7. This is not withstanding recent anthropological work on financial markets
(Callon et al., 2007; Ho, 2009; Knorr Cetina and Bruegger, 2002; Muniesa,
2007).
8. Delta measures the sensitivity of the value of a derivative or portfolio to
changes in the price of the underlying asset or assets.
9. An example is the rise of art nouveau in the late 19th century in response to
the plethora of mass-produced consumer goods.
10. Within Veblen’s work, we have encountered no references to Nietzsche,
though one would suspect that Veblen’s thought was at least indirectly
influenced by him, particularly given that Veblen was fluent in German,
and cast a wide net in his reading (Hodgson, 2004: 127).
11. The term ‘antiproduction’ belongs to Deleuze and Guattari and derives
from Bataille’s work on excess.
12. Veblen commented on the role of such consumption in producing invidious
distinctions, but also recognized a function in potlatch akin to Bataille’s
theorization of expenditure. The recipient of potlatch offerings consumes
vicariously for the prestige of the chief, but also ensures the ‘consumption of
that excess of good things which his host is unable to dispose of single-
handed’ (Veblen, 2007: 54).
13. This rigidity is clearly imprinted in the homogenization of disparate, socially
distinct risks in the pricing of derivatives and organizational risk manage-
ment (Orléan, 2010; Power, 2007). In both cases, Bataille proves insightful:
the homogeneity and atomization have incubated distorted and destructive
excess.
14. The US Commodity Futures Modernization Act in 2000 exemplifies this
wilful neglect. The Act created the ‘Enron loophole’, eliminating the threat
of Enron’s futures exchanges and energy derivatives trade being deemed
unlawful. The Act exempted all privately negotiated over-the-counter
derivatives, including credit derivatives, from regulation.
15. To sabotage US source rules, an investor may deploy an equity swap to alter
where the income is taxed. Returns from an investment in equity by a for-
eigner are subject to a withholding tax of 30 percent. However, the investor
can receive the same returns through an equity swap in which she receives
payments from the counterparty if the value of the equity increases, or
dividends are paid. The source of the income in a swap is based on the
residence of the investor, while a direct purchase of equity is sourced
where that purchase is made. If the investor is in an offshore jurisdiction,
income from the swap may be subject to no tax at all (Levin, 2012: 5–6).
16. An in-flow comprising $95 principal and $10 interest can be re-characterized
as $100 principal and $5 interest. Investors pay less tax on capital and more
on income. Capital losses across an asset pool are worth more in a securi-
tization because they can be offset against the higher rate income tax. This
played into ‘poor underwriting standards’, when originators passed ‘toxic
assets’ onto unsuspecting investors.
17. Equality and a robust progressive fiscal system are recognized to promote
growth (Ostry et al., 2014).

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Earl Gammon is a Lecturer in Global Political Economy in the

Department of International Relations at the University of Sussex. His
research examines the psycho-social dimensions of political-economic
agency.
Duncan Wigan is an Assistant Professor in the Department of Business

and Politics at the Copenhagen Business School. His research centres on
issues of international finance and taxation.
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Veblen, Bataille and Financial Innovation

Article in Theory Culture & Society · June 2015

Earl Gammon Duncan Wigan

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Corresponding author: Earl Gammon. Email: e.gammon@sussex.ac.uk

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unregulated technologies. Those with faith in ﬁnancial innovation,

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conﬂictual and contradictory unconscious and conscious intent. Rather

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deductive methods. Mechanical and hedonic conceptions of motivation

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A reason for drawing on Veblen and Bataille is that both recognized

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not scarcity, the current ﬁscal retrenchment severely circumscribes the

Beyond Rationalist Economics

In our analysis we break down assumptions – implied and explicit –

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native informants’. As the market becomes imbued with the status of

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technologies, a ﬁnancial elite accesses a legal right of sabotage and a

A Veblenian Reading of Financial Innovation

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to some other end by another agent’, and procuring discernibly asym-

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perceived as a drain on revenue (Riles, 2011). The division of rewards is

If you have a PhD, have taught at prestigious universities, and

Front-oﬃce quants resemble the priestly class as described by Veblen.

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‘sabotaged’ the productive output of industry. Workmanship, on the

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Within the instrumental rationality of ﬁnance, credit derivatives con-

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bank ‘risk sensitive’ capital reserve requirements. Goldman Sachs

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Financial Innovation in the General Economy

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to the view of conventional economics, Bataille argues: ‘It is to the par-

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in the operations of a social economy that allow individuals or groups to

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of neoliberal discourses and practices. The growth of the derivative mar-

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talk of the ‘hecovery’ (Kochhar, 2011). Similar to women, racialized

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ﬁnancial inﬂation of the 2000s. By increasing the connectivity of agents in

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estimation, has been placed on the pecuniary dimensions of these novel

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which individuals are enthralled by the illusory promise of sovereign

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6. Non-rational does not imply irrationality. Non-rational behaviour or

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Eddins S (2009) Tax arbitrage feedback theory. Available at: http://ssrn.com/

Downloaded from tcs.sagepub.com at Copenhagen Business School on July 14, 2015