economic sociology_ the european electronic newsletter Vol ume 12, N umber 2 | March 20 11 12.2 Editor Nigel Dodd, London School of Economics Book Review Editors Mark Lutter, Max Planck Institute for the Study of Societies Sascha Münnich, Max Planck Institute for the Study of Societies Editorial Board Patrik Aspers, Stockholm University Jens Beckert, Max Planck Institute for the Study of Societies, Cologne Johan Heilbron, Centre de Sociologie Européenne, Paris Richard Swedberg, Cornell University, Ithaca Table of Contents Note from the editor _2 The Financial Crisis and the End of All-Purpose Money | by Keith Hart_4 Economic Governance in the Eurozone: A New Dawn? | by Brigitte Young_11 The Euro Trouble and the Global Financial Crisis | by Christoph Deutschmann_17 Should Crisis-Hit Countries Leave the Eurozone? | by Peter North_21 The Level of Financial Literacy of Russians: Before and During the Crisis of 2008-2009 by Olga Kuzina_27 Book Reviews_ 44 http://econsoc.mpifg.de Note from the editor 2 Note from the editor Dear reader, deny its ‘acidic’ qualities but seeks to redress an imbalance in our conception of modern, nation-state money by em- Welcome to the first Newsletter issue of 2011. This looks phasising its potential to empower individuals and recon- like being an important year for the political economy of figure our communities through what he calls its’socially Europe, during which major decisions are being debated redemptive qualities’. In the essay published here, Hart about the future of its core currency, the euro. These de- continues in this vein by making out a vibrant and articu- bates are taking place amidst a debt crisis which embraces late case for a more nuanced approach to money in which, both states and private banks, and which is being experi- partly as a response to the fact that during this latest fi- enced especially severely in Ireland, Greece and Spain. nancial crisis states’ “capacity to print new money has Some scholars and commentators have been predicting been almost exhausted,” our monetary systems are reor- that the euro will have been fundamentally transformed – ganized – globally – in ways that bring benefit rather than reduced in size and more tightly regulated and integrated harm to the social organization of the economy. in fiscal terms – by the time the year ends. Meanwhile, the eurozone’s most significant problems – serious imbalances Brigitte Young has written extensively on the political between Germany and other countries, large fiscal deficits economy of Europe, in addition to her work on themes in Spain, Greece, Ireland and elsewhere, and the continu- such as gender, risk and globalization, and here she looks ing exposure of banks (including those in Germany) to directly at the euro crisis. Whereas Hart boldly states that unmanageable losses – show no sign of abating. Should he ‘would not wish to return to currency controls and the euro contract or even fail, the consequences will be felt state-managed money’, Young grapples with the future of far beyond its member states, indeed they will play a major a euro in which such controls have been placed under role in shaping the world’s monetary systems for some severe questioning since its (so-called) sovereign debt crisis years to come, not only in relation to the ongoing ‘wars’ in began towards the end of 2009. According to Young’s which major currencies such as the US Dollar and Renminbi clearly-argued analysis, the euro zone seems to be con- are embroiled, but at a local level, too, as people get to fronting a situation in which there is a genuine prospect grips with the rapidly changing monetary landscape that two hitherto distinctive and conflicting systems of around them. policy-making – a rules-based German model with its in- dependent central bank, as against a French model (gou- All of the papers included in this issue of the Newsletter vernement économique ) in which monetary policy is more have been written by eminent researchers and scholars deeply embedded in political institutions – may be coming who are well qualified to address such matters, and I hope closer together through the development of much-needed you take as much from reading their articles as I have reform proposals, the ‘Pact for Competitiveness’. This done. I am extremely grateful to the authors, all of whom could be a new dawn for the euro, Young suggests, in have taken time from busy schedules to write pieces espe- which what is novel is that ‘Germany is no longer outright cially for the Newsletter . And, as always, I am in debt to rejecting economic and fiscal governance at the eurolevel’. Christina Glasmacher, whose unfailing good humour and efficiency make the editor’s job much easier and more Christoph Deutschmann has been working on money for pleasurable than it would otherwise be. well over two decades, for example, through his Die gesell- schaftliche Macht des Geldes (2002). In this highly The first paper of the issue is by Keith Hart, previously thoughtful piece, he argues that any thorough-going solu- interviewed by Patrik Aspers for the November 2007 issue tion to (rather than temporary fix for) the euro’s current of this Newsletter . Hart’s work came to prominence for his predicament needs to get to grips with two independent invention of the idea of the ‘informal economy’. For some but related problem complexes: the first relates to the years now - for example, through his classic article Heads global financial crisis, whereby eurozone member-states or Tails? Two Sides of the Coin (Man, 1986) and his highly- appear to have been especially hard-hit by the way that engaging Money in an Unequal World (2000) – Keith has the financial industry ‘has managed to externalize her own been exploring money in a distinctive way that does not problem and to transform it into a problem of the states’, economic sociology_the european electronic newsletter Volume 12, Number 2 (March 2011) Note from the editor 3 while the second arises from more familiar problems of agement of money on a more local level and in a more political co-ordination within the eurozone itself. Deutsch- proactive way than may hitherto have been the case. It is man shows how these problems have been interacting in striking that one of the main responses to national regula- Greece and Ireland, but argues that all recommendations tors to the financial crisis – including the UK’s Financial for greater policy and fiscal integration in the eurozone will Services Authority through its Turner Review (March 2009) be ineffective unless its outstanding debt problems are – has been to recommend stepping up programmes to dealt with, and this requires a form of ‘austerity’ on the ‘educate’ consumers and encourage greater levels of fi- part of private creditors, not just states and their citizens: nancial capability and awareness of risk. But what exactly they ‘must be brought to renounce a part of their claims’. would this entail: savers and borrowers who are more cautious, more rational – more like the homo economicus Peter North will be well-known to most readers for his that sociologists have long argued is unrealistic? Olga Kuz- work on local and community currencies, particulary ina’s paper considers exactly this problem, drawing on her through his excellent Money and Liberation (2007). Here work on financial ‘literacy’ among Russians to show how he turns his attention to the difficulties facing the euro and complex the concept is, and how difficult levels of financial asks whether these might unwittingly give birth to a new literacy or capability are to measure. Is financial literacy politics of money. As North points out, arguments on the simply a question of how much we know, or does it also political Left traditionally tend to be indifferent to money embrace questions of attitude and belief? And if it is the itself, focusing primarily on relations between workers and latter, what practical ways forward might there be from employers, or between the states and citizens during eco- this crisis that promise the ‘monetary redemption’ that nomic crises. In an intriguing analysis of various options Hart called for at the beginning of this issue? These are key confronting the crisis-hit eurozone states, North draws questions, it seems to me, which must be tackled along- attention to the experience of Argentina and envisages a side the broader-based issues that will be preoccupying future in which countries with strong regional institutions, policy-makers as this fascinating year unfolds. independent of the state, take responsibility for money issuance and produce their own currencies which supple- ment, rather than replace, the euro. Nigel Dodd Such local, ‘grassroots’ aproaches to the euro crisis obvi- [email protected] ously rest upon the engagement of people in the man- economic sociology_the european electronic newsletter Volume 12, Number 2 (March 2011) The Financial Crisis and the End of All-Purpose Money 4 The Financial Crisis and the End of All-Purpose Money By Keith Hart the twentieth century. I call it “national capitalism” and its origins lie in the political and technological revolutions of University of Kwazulu-Natal, Durban and University of the 1860s. Its historical trajectory includes two phases of Pretoria, [email protected] financial imperialism each lasting three decades, from the 1880s and the 1980s. The former ended in the First World War, so we had better watch out! Accordingly, I find it Introduction: the financial crisis necessary to distinguish between money and finance. I shall argue that the financial crisis is only superficially a By taking a broader view of money than its current identi- question of credit boom and bust. At bottom it is the un- fication with finance, I aim to historicize the present by ravelling of the social organization of money that the placing it within a long-term process of social develop- world has come to live by since its inception a century and ment, in the process offering a new explanation for our a half ago.