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Arjun Appadurai, Banking on Words

Antonella Angelini
Banking on Words
Arjun Appadurai, Banking on Words. The Failure of Language in the Age of Derivative Finance, Chicago, University of Chicago Press, 2015, 180 p., ISBN : 9780226318806.
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1In David Cronenberg’s movie adaptation of Don De Lillo’s novella Cosmopolis, Eric Packer, a young billionaire prince of Wall Street, stands to lose his empire following a bad bet on currencies. Amid looming financial ruin and signs of social unrest, he inches across Manhattan in his white stretch limousine on a whimsical mission to get a haircut. A constant flow of financial figures reflects on his alabaster face, passing by as inconsequentially as do the tumultuous events unfolding outside the limo. In the course of the journey, several people of personal importance to Packer manage to climb into the back of the car to make contact with him.The repetition of this format creates a predictable pattern in which each walk-on reinforces the expectation that another one will occur. At the same time, due to the highly volatile overall circumstances, uncertainty grows as to whether the next expectable and expected walk-on will indeed take place. This tension adds to the feeling of claustrophobia of the car-bound setting. And at some point, one realizes that there is nothing more to the journey than the successful continuation of this sequence of precarious appearances. Or, to push it further, one realizes, as the Guardian commentator Peter Bradshaw has suggested, that one has to do with ‘a movie about danger in which nothing is credibly at stake’.

2In a number of respects, Cosmopolis presents a striking parallel to Arjun Appadurai’s gripping and compact (sometimes to the point of the adamantine)Banking on Words. Not only do they both deal with crisis in the age of financial capitalism, but they also share a similar understanding of it. Cosmopolis portrays financial disaster in personal terms so exotic that it is almost indistinguishable from the exorbitant era of success that thrived before. And it is precisely this enmeshment of success and failure that Appadurai takes to be exemplary of our epoch, and thus worthy of investigation. Certainly, the question is never stated in quite these terms, for the express objective of the book is to shed new light on the nature and role of derivatives in financial capitalism. But this is done in the context of an undercurrent theme: uncovering the root from which both success and failure spring. For the dizzying fluctuations of financial markets do seem to have a common origin, namely, in the process of value production and its increasing alienation from reality under financial capitalism. Such a development receives scrutiny on the basis of two key insights. The first is that the hyper-abstraction of value production is made possible by the new role of language in financial instruments, and particularly in derivatives. The second insight is that financial capitalism owes its current shape to the specific disposition that some of its operators have towards risk and uncertainty. Financial instruments, for their part, reflect and enact such a disposition. But let us proceed with order.

3The book opens with a claim that functions as a premise. Derivatives, argues Appadurai, are the main technical innovation of contemporary finance. Understanding their nature thus promises to give insight into the dynamics of crisis in general. Next, it is argued that derivatives have to be seen as linguistic artifacts ‘the essence of which are promises by the losing party to pay the winning party an agreed-upon sum of money in the event of a specific future price outcome’. Language operates here at two levels. There is the fact that a derivative is a referent to something more tangible than itself. It is, in other words, a proposition about another object that might itself be derived from another similar object. A derivative chain thus embodies an essentially linguistic claim to value, in the sense that its status rests in the credibility of the propositions composing it. Secondly, there is the exchange of promises between two financial operators. The main claim is that derivatives are written contracts, which share the promissory element of all contracts. To grasp the full implications of this conclusion, one needs to consider the linguistic proprieties of promises, and particularly the conditions of their success and failure. In this respect too, derivatives are somewhat special, for they consist in a pair of ‘antagonistic promises’. The promises of both individuals have the same conditions of felicity and are thus mutually exclusive. Only one of them will produce profit at the end of the stipulated period of the contract.

4With this understanding of derivatives, Appadurai notes that failure occurs when no one in the market can meet the conditions to make even more antagonistic promises. Concretely, this corresponds to a scenario in which large amounts of derivatives remain unsold, debt swells, and higher risks arise for would-be buyers, who therefore refrain from concluding new exchanges. This vicious circle, the author warns, is all the more consequential because it is of a structural rather circumstantial nature. The starting point here is that, if derivatives embody a linguistic claim to value, then a derivative chain can be seen as an ever-growing and self-sustaining pile of words. This insight, coupled with the insight that words can detach themselves from reality, brings out a key point. What allows a given derivativeto become virtually unconnected to its underlying asset, and hence to fluctuate widely in value, is the fact that words bring the process of value-production to the level of pure abstraction. In this sense, paraphrasing the Guardian commentator on Cosmopolis, the danger embodied by derivatives is indeed one in which nothing is at stake. But there is more than that. At each of its links, a derivative chain consists of the exchange of promises between two agents, who are jointly responsible for the fulfillment of their mutual undertakings. None of these agents, however, can dispose of the conditions for the fulfillment of the promises all the way down the derivative chain. Or to put it another way, the derivative chain hangs on nothing but the accumulation of distinct and unrelated sets of promises, each reflecting the beliefs about future prices held by the single agents at the moment of entering their specific commitments. This explains not only why a stalemate in the conclusion of new promises is a threat for the entire financial system, but also why the germs of default are built-into the very structure of a derivative chain.

5The dynamics related to derivatives would be misunderstood, however, without a firmer grasp of the environment in which they conceptually fit. The premise here is twofold: first, the technological and institutional devices of capitalism embody a collective psycho-moral disposition – i.e., an ethos – that is prior and external to them. Second, such a disposition is bound to take on new contours over time. So begins the attempt to cast Max Weber and his notion of ethos in a new light. The focus is on uncertainty, which the author sees as the key to understand both the origins and the present phase of capitalism. The uncertainty of the Calvinist believer, who has no way to know or influence God’s plan for salvation, concerns not only whether one is among the elect, but also what kind of life enhances God’s glory. In dedicating herself to the pursuit of wealth, the Calvinist believer is thus making a double gamble. She is gambling on the possibility of being one of the elect, and on the fact that pursuing worldly wealth is what an elect would do to glorify God. Although in a different form, the link between uncertainty and gamble persists and permeates the ethos of today’s capitalism. Uncertainty refers here to a situation whose outcome defeats probabilistic calculation, and thus remains outside all financial models and devices.This uncharted realm is where financial players use ‘their intuitions, experiences, and sense of the moment to outplay other players who might be excessively dominated by their tools for handling risk alone’. The financial game is thus shaped by those who ‘believe in their capacity to channel the workings of uncertainty to be winners in the game of risk’. One’s uncertain situation in this gamble is not far from that of the Calvinist believer in the face of divine providence.

6A charismatic element would thus seem to inform the ethos of financial capitalism, and to raise divinatory powers above calculative ones. With this in mind, the author returns to derivatives. Not only is the claim to value embodied by derivatives of a linguistic nature, but it is also anchored in uncertainty rather than probability. One aspect of this is that contingency is the key market-creating force. Specifically, financial actors create prices through their exchanged promises. Prices are a name or designation for that event, rather than a number belonging to some sort of mathematically derived series. Another aspect of how uncertainty operates within derivatives concerns market failure. Every trade in derivatives produces certainty out of uncertainty by retrospectively validating the claims previously made in the market. This argument, which includes insights on linguistic retro-performativity and rituals, leads to a further conclusion. When any specific attempt to enter an exchange has no result, the chain of retrospective validations on which the market as a whole rests suddenly collapses. This absolute failure resembles the one that permeates Cosmopolis, where Packer makes the gamble of his survival dependent on the continuation of the sequence of precarious walk-ons. And yet, Appadurai’s book could be criticized for failing to consider how retro-performativity operates not only to validate past claims, but also to change the conditions of their success. This seems all the more important insofar asit is by manipulating these conditions of success that operators outside the market can have a say in it.

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Antonella Angelini, « Arjun Appadurai, Banking on Words », Lectures [En ligne], Les comptes rendus, 2016, mis en ligne le 25 avril 2016, consulté le 07 juillet 2020. URL :

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Antonella Angelini

Doctor in international law (Institut de hautes études internationales et du développement, Geneva) and researcher in the Law department of Geneva University.

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