The Sovereignty Effect: Markets and Power in the Economic Regime

The two parts of this essay revolve around a few dramas in the contemporary economy of finance. Part 1 will raise the question of the extent to which knowledge of the financial economy is a dangerous kind of knowledge, as it not only failed to predict the last crisis but, if anything, co-produced it. Part 2 will look more precisely at the organization of power in the financial-economic regime. At issue here will be the figure of an emergency politics that takes hold in the gray area between political structures and economic dynamics.

Part 1: The Strange Survival of Theodicy in the Economy

For six years now we’ve been good inhabitants of crisis [Krisenbewohner], and good inhabitants of crisis we shall continue to be. And so thoroughly have we habituated ourselves to the so-called financial and economic crisis that it is perhaps worth recalling what has happened in the last six years, which phases this crisis has passed through, and which movements of escalation were connected to it.

So let’s recall. It all began with a private debt crisis—that is, with the collapse of the 2007 and 2008 American mortgage market that constituted the first phase of the larger crisis. This then rapidly transformed itself into a global drama of liquidity, due in no small part to the structure of financial markets, the interdependence of the major players and their respective business practices, and of derivative trading in particular; this formed the second phase. In the third phase, this liquidity crisis transformed itself into a crisis of public households, or a sovereign debt crisis, impelled by bailout packages, different forms and methods of bank rescue, and the allocation of cheap or free money. And finally, the fourth phase—the latest intensification—is that the whole thing was arrived at by what I’d like to call a sclerosis of political decision processes, by a crisis of governance, if you will, connected to a difficult or uncomfortable or unclear distribution of competence and agency [Handlungskompetenzen] between political agencies, economic actors, and democratic procedures. One could say this reveals a crisis of the whole capitalist system, including its political institutions and legal conditions, as has become dramatically visible, especially in Europe. Europe presents an ideal stage for this drama, with its tensions between elected governments, national sovereignties, European jurisdictions, expert committees, and transnational networks. Europe presents an ideal stage for this sclerosis of political decision processes, this crisis of governance.

But already today we can probably discern a fifth and final phase of this crisis. However the whole drama ends up, whatever way this European or global drama turns out, I think the crisis (or whatever we might call it) will one day reveal itself to have paved a path toward the fixation of the exact system which led to this crisis. This is already foreseeable today. In the aggressive restoration of the economic order of 2007, we have already seen the intensive work of state guarantees, cheap money, debt brakes—in short, an even stronger concentration of the corporate enterprises concerned and of financial actors on the whole. The year 2009 was already one of the best years ever for Wall Street; indeed, the employees of Goldman Sachs have never earned as much as they did in 2009. And in 2010 there were more millionaires worldwide and more assets in their hands than in 2007, while approximately 60 million more people have fallen below the absolute poverty line, as determined by the consulting agency Cap Gemini. At any rate, since 2008 enormous sums of state assets have been successfully privatized—that is, redistributed.

What is remarkable about what has happened since 2008? Are there any peculiarities that we naive spectators can recognize? A first peculiarity lies in the fact that 2008 witnessed not only a global financial crash but also an intellectual catastrophe. In 2007 the International Monetary Fund still attested to the financial system’s great stability, its robust health, and the most promising of prospects, and in 2007 the...