Liquidated: an ethnography of Wall Street

[논둑길맨발로]

책 전문 보기

Liquidated: an ethnography of Wall Street

books.google.co.krKaren Zouwen Ho - 2009 - 374 페이지 - 미리보기 With "Liquidated," Karen Ho takes us into the workaday world of investment banking before the crisis, showing us the roots of the risk-taking that drew lavish compensation packages and brought the world financial system to the brink of ... 에디션 더보기

► 5:21► 5:21

Culture of Wall Street - YouTube youtube.com2009년 3월 31일 - 5분 - 업로더: UniversityofMinn Ho is the author of the upcoming book, Liquidated: An Ethnography of Wall Street . Based on three years of ...

 

Monday, September 13th, 2010 | Posted by Steve Sherman

Liquidated: A Book Review

Karen Ho’s Liquidated should be the envy of any academic seeking to make a political intervention. It is simultaneously an unusual and well thought out ‘looking up’ ethnography (a trend in anthropology to examine the thinking and culture of more powerful groups rather than more ‘traditional’ subjects of research) and a theoretical critique of the culture of the group being studied, and a full blast political challenge to their role in American and global political and economic structures. It succeeds on all these levels, and readers already quite critical of Wall Street and neoliberal economic theory will likely find it clarifies much that they vaguely understand while also offering stimulating new insights. Although the theoretical chapters may be a little daunting, much of it is useful to undergraduate classes, and hopefully it will be widely adopted.

How does one do ‘field research’ on Wall Street? The author worked for BT for several years in the mid nineties after choosing to study anthropology but before fully developing her dissertation project. As she notes, her bachelors degree from Stanford University qualified her for a position that might lead to ‘front office’ (i.e. the prestigious positions) at an investment bank. The role of elite educational background in producing the self-conception of bankers as ‘smart’ and ‘elite’ is discussed at length. She was unexpectedly ‘downsized’ out of her job, and the process of layoffs on Wall Street itself becomes a major topic in the text to understand the culture of investment banking. At that point, she developed her research agenda in earnest and supplemented her work experience with numerous interviews, primarily with people working with banks as well as in services related to banking. She offers insight into how people are recruited into investment banking, what sort of work is done and the work culture of the banks themselves, and the thinking behind it. She is thus able to illuminate in a close-up fashion the work of the investment banks over the last couple of decades, which might be summarized as the liquidation of the productive aspects of the American (and global) economies in favor of the transfer of wealth to this privileged strata. Crucial insights concern the aforementioned role of elite universities in supplying the workforce, the fallacious and ahistorical ideology that the purpose of corporations is to facilitate share-holder value, the practice of down-sizing within the banks, which produces a distorted understanding of the impact of down-sizing applied to other workforces, the role of race and gender in workplace dynamics within the banks, and the lack of any strategy of the banks besides the insertion of themselves into dealmaking situations where they can extract large profits.

To say that banks depend on elite universities to recruit people for entry level positions is almost an understatement. In fact, two universities, Harvard and Princeton, account for a very large portion of the new hires every year. A handful of elite universities and business schools fill out the remaining slots. But mostly it is Harvard and Princeton. Ho notes that writers in the student newspaper of Princeton have drolly observed that many would-be poets have suddenly discover their true calling on Wall Street as graduation day approaches. Students are drawn to banking at recruitment events where the prospect of working with the most brilliant people in the country is touted. The belief that the workforce in the investment banks is exceptionally sharp continues as an ideology at the banks themselves–after all, they’ve drawn people from the most elite schools in the country (apparently bankers indefinitely refer to the educational backgrounds of those on their teams). Thus the analysts work in a sort of privileged hall of mirrors, where seeing there own reflection proves their worthiness to make decisions involving vast sums of money that will affect millions (reading about this, I could not help but think that there is some wisdom to the ‘sent-down’ programs of the Chinese Cultural Revolution, which forced elite students to learn about the lives of the worst off strata). It should be noted that this sense of entitlement and elitism is not simply a contrast with Americans in general, but also with the heads of corporate America. The distinction between the banking sector and corporate America, elided in much left-populist analysis, is crucial. The bankers see themselves as saving the wealth of the American economy from the lassitude preval‎ent in corporate America, their wisdom to do so confirmed by their elite background.

What do investment banks do? Mostly, they identify ways that they can ‘help’ corporations–encouraging mergers and acquisitions, or the issuance of new stock, or the taking on of debt, etc–and then reap considerable profits from the fees for the services (about half of which is directly pocketed as profits, redistributed as bonuses). Much of the work of the bankers is devoted to finding these opportunities, and selling them to clientele (Ho provides some evidence that cynicism is widespread about these deals, among the bankers themselves). It is, at heart, a case of market dysfunction, since these measures are often counterproductive to the well being of the corporations themselves. Little work within banks is devoted to the big picture, needless to say. In fact, quite a bit of energy is expended on making sure power-point presentations are perfectly punctuated. The bankers justify their actions on the grounds that they are maximizing share-holder value, which they see as the real, indeed only, purpose of corporations. This ideology both fueled and was fueled by the ‘leveraged buyout‘ craze of the 1980s. Here corporations were taken over with relatively small sums of money leveraged into much larger debts. When the corporation was acquired, the debt was moved to the books of the corporations, forcing them to downsize workforces and seek short term windfalls by taking actions such as selling off different divisions. This often resulted in spikes in stock prices, even though the long term effect was to disintegrate the corporation as an economic enterprise with some responsibilities to multiple stakeholders (managers, workers, communities, etc). Similar ideas spurred on the later ‘mergers and acquisitions‘ craze, as well as the creation of the increasingly weird financial instruments which eventually sank the U.S., and the world, economy. In general, bankers’ confidence in what they are doing is constructed both through the elite background described above, and the intensity of their work environment, which includes 100 hour work weeks and screaming discipline for typos in presentations. In other words, it is not a delusion, but a reality that they work in a hard driving, tough, demanding field. They seem to imagine it as uniquely demanding, which is probably somewhat more illusory. And the belief that this in itself vests them with the enlightenment to lead the society at large clearly is a delusion.

The relationship described between bankers and corporations in Liquidated is quite different from the image of ‘corporate power’ held by many on the populist left. For many in the investment banking community, American corporations were bloated by the conglomeration phase of the late sixties (Ho points out that they have amnesia about their own role in spurring on conglomeration), which demonstrated that managers did not have the best interests of their shareholders, but rather their own well being, at heart. It is not power in general, but power over these corporate managers that seems most important to the bankers. Ho points out that their belief in shareholder value as the sole rationale for corporate activity is ahistorical and inaccurate. The stock market has not even been central to raise capital for American corporations–it has mostly been a means for ‘cashing out’ by earlier owners. Corporations never fit the model of self-interested rational individuals that is at the heart of classical economics. Nevertheless, theories about the more complex role of corporations were hobbled by their commitment to the hierarchical managerial culture of corporations. Thus they were not well prepared for the onslaught against their position, and the rise of ‘shareholder’ value arguments (she does not go in this direction, but it should also be said that the rise of shareholder value was eased by allowing the CEO class to join in the plunder, and including middle managers through mechanisms like 401K plans). Thus the trend in U.S. society over the last twenty five years has not been so much ever increasing corporate power as ever increasing financial power, which has typically turned corporations into hollow shells joining the pursuit of fast profits through financial mechanisms. This direction is bolstered by the elite background and relentless work environment of the investment bankers, which demonstrate their worthiness, at least to themselves.

It is also bolstered by the culture of downsizing within the investment banks. In both good times and bad, investment banks are quick to shed portions of the work force (although, particularly in good times, they are quick to rehire them). The banks often do not so much as let the downsized workers return to their desks for their personal effects, instead escorting the former employees out of the building and later shipping them the stuff. Being downsized is a recurrent theme in many bankers’ work history. On the other hand, they find it relatively easy to move into new positions. Indeed, because of the culture of downsizing, they have minimal loyalty to employers, and often start scheming to move immediately upon being hired. Far from making them more empathetic to the challenges faced by downsized workers in the larger culture, this revolving door culture makes them believe that downsizing is unproblematic and healthy for corporations and workers. In this sense, investment bankers experience of downsizing parallels the Foucauldian point that power operates over everyone. It is not their prerogative to avoid downsizing; rather, it is their privilege to be able to deal with its consequences more easily than most Americans. Similarly, the banks employ what Ho describes as a ‘strategy of no strategy’. They make no long term plans, instead simply riding the latest trends in deal making until they are exhausted. And this colors what they think all business enterprises should be doing, although it is clearly counterproductive in most fields. Indeed, this strategy does not even consistently raise shareholder value, the ostensible goal of Wall Street, since it tends to leave enterprises unable to make long term plans or face dramatic changes in their fields. What it does is provide the context for big short term windfalls for the bankers and their allies.

Ho also dismantles myths of meritocracy pervasive in the banking culture. She frequently heard the argument that all that matters to these firms is the ability of workers to put together deals. Yet the networking required to put together deals flows along familiar lines of race, class and gender privilege. ‘Workplaces’ include golf courses and strip clubs. A White guy who excels in golf, and whose company is therefore desired by many CEO types, can move forward notwithstanding his minimal understanding of the investment world. Meanwhile the limited number of minorities within the banks are viewed through racialized (and gendered, etc) lenses both by their coworkers and prospective clients. Of course, the elite universities (again, mostly Harvard and Princeton) that the banks draw from themselves work against meritocracy through legacy admissions and heavily recruiting from prep schools.

All in all, Ho’s work is a thorough and devastating critique of the ‘industry’ at the center of the American (and world) political economy. It raises questions as to why a workforce with a basically pathological inability to understand the implications of its actions and a terrifying lack of empathy for those less privileged has been given free reign, and why even a ‘liberal’ president boasts of his friendship with the likes of Lloyd Blankfein.

       

Related Articles:

• Harvard University Press leans left–so what?
• The Mideast and U.S. power
• New Book Club Announcement: Vandana Shiva and Stolen Harvest
• Further Debunking Economics: Interview with Economist Steve Keen
• The New Jim Crow: A Book Review
• Rewriting Occupy Wall Street’s First “Official” Statement
• Do Civil Society and Corporate Social Responsibility Provide the Best Hope for the Re-Regulation of Big Business?

http://www.lefteyeonbooks.com/2010/09/liquidated-a-book-review/