Few pieces in the 23-year history of LBO have attracted as much hostile correspondence as “Web of nonsense” in #119. It was a critique of the mode of thought, almost foundational to a brand of populism on both the left and the right, “that sees the problems of capitalism—like the polarization of rich and poor and the system’s vulnerability to periodic crises—as primarily financial in origin.” While this tendency has a long history, and pervades a lot of the pseudo-radical tradition in the U.S., it always achieves special prominence at the time of financial crises.
To reprise for a moment before taking on a fresh eruption of the syndrome: capitalism is a system organized around money. Almost nothing is undertaken in the realm of production for reasons other than the accumulation of money. As the money accumulates, something must be done with it, which is why financial wealth expands over time. But even though that financial wealth often seems to inhabit a world of its own, it is ultimately connected to what Wall Street calls the “real” sector. For example, all the mortgage securities that caused the recent mischief were ultimately connected to one of the most basic needs of all, shelter. There is no way to separate neatly the monetary from the real. The social problem emanating from the securitization of mortgages isn’t only the increasingly baroque development of financial assets but also the commodification of the house and its transformation into a speculative asset. Which is why populist financial reforms can’t take you very far: they address symptoms, not pathogens.
But that never stops people from trying. The latest populist spasm is Arianna Huffington’s “Move Your Money” campaign, which would have those of us with money in large banks move it to small ones. This touches on another foundational populist fantasy: that virtue and size are inversely related. Her website, which thrives on the unpaid labor of hundreds of eager contributors, even provides a helpful list of convenient local banks if you enter your zip code.
What’s wrong with this scheme? Several things.