might protect or increase the value of what we own, no matter how humble our jobs or how modest our earnings. We also have something to lose by resisting it insofar as our well-being hinges on the continued possession and preserved value of what resources we have managed to acquire.
We are classified in a way that applauds our propensity to look beyond the tight limitations on our work toward a future in which our households will soar or tumble as a result of our investments today, and to disregard the institutional constraints that, to sustain profitability, determine the value of our possessions, work and earnings, and by extension our own fates. We are named middle class. This designation opens its arms to all of us, from the highest-earning professionals and managers, through successful or struggling business owners and self-employed service providers, to the lowliest personnel and precariously employed interns. This is the case insofar as we make most of our living off work yet possess, or have the prospect of someday possessing, material and human resources whose value can be maintained or enhanced through investment. The designation “middle class” represents our consideration of what we own and how we fare as if they were the outcomes of our personal choices and efforts. It further represents our commitment to sacrificing for our future as if this future relied on our choices and efforts alone.
What makes this idea so compelling is that, to the extent that the value of our possessions does not change too radically while also making us better off than people who own less, or better protected against misfortune than we would have been without them, our best efforts often do pay off. We can therefore plausibly consider our pains to acquire property as prudent investments rather than compulsory forfeitures or reckless gambles. The more strenuously we work and study, plot careers and save for a home, for old age or for our children’s education, the more engrossed we become in these endeavors and the greater our inclination to trace our fortunes back to them, above all else. Moreover, the more we delay gratification in anticipation of something better, the more reluctant we become to discredit our renunciations as externally imposed and therefore personally meaningless. We not only invest but also take pride in our investments and in ourselves for having made them.
But wait. What if we find we have had quite enough of struggling, competing and investing? What if, at some point, we decide that whatever assets we have already managed to ferret away give us a fair shot at living the kind of life we want to live, and that it is high time to sit back and reap what we have sown? Economists call the incomes generated by property “rents” and those who live off them “rentiers.” They distinguish rents from the earnings that come from work and from the profits that come from enterprise. The fantasy of rentier leisure is one in which we can afford to work less, selectively or not at all, by living off our property. This sounds great for us but not so much for capitalism’s imperative of accumulation. The institution of private property can very well boomerang for capitalism in the sense of providing not a common incentive but a common disincentive to work and invest.
And there’s more. With only so much surplus generated through each cycle of production, how thinly—from the standpoint of potential profitability—can it be spread in globally available household property on top of other hoards of cash or assets that working households can simply hold on to for a rainy day? Recall that the promise of profit appropriated from the economy’s surplus has the potential to encourage production’s independent organizers, facilitators and financiers to forge ahead, risks and all. When a broad spectrum of the population has the political power to reclaim a portion of the surplus in the form of privately stored savings, cars, homes, social protections, academic degrees and the like, this could prove too heavy a drag on profitability and growth, even if most of them still work for a living. Economists have been discussing such dangers since household property has become pervasive, and tinkering with solutions that chip away at it, such as inflation and taxation. But the most insidious solution has been taking shape in recent decades, following an era of unprecedented growth in the rates of property ownership and the proliferation of household assets and savings.
Over the course of the 1980s and 1990s, national and regional markets have been deregulated and integrated into a global financial market, easing the flow of capital and the provisioning of credit to governments and firms everywhere in the world. It has helped stimulate competition and make accumulation smoother and more flexible. Capital is fed to profitable enterprises while overcoming social and geographic barriers between them. It is also withheld from enterprises that do not perform as well, regardless of their significance for national economies and regional populations. Novel financial instruments allow the risks attached to different kinds of investment (like changes in currency values or interest rates) to be pooled, subdivided, priced and sold off as further investment products. As a result, the volume of trade and enterprise as well as the bulk of global investment capital has grown exponentially, all the while creating new risks and opportunities for profit. Economic actors facing intensified competition as well as pressures by shareholders to increase the value of their holdings have come to rely on financing to survive and prosper. The reliance cuts both ways, as the intensification of economic activity and competition has amplified pressure on the global financial market to provide credit, bonds and shares, channel investment and manage risk.
The profit-hungry agencies of global finance are ever on the prowl for new investment opportunities, including in goods and services that had previously been financed publicly through taxes and social insurance arrangements, or privately through work earnings and bank-deposited savings. Industrial capitalism has given way to finance capitalism, flagging the dominance of global finance in public and private funding arrangements and in setting the terms for economic growth. Risk estimates and pricing signal, to investors, avenues of potential profit or loss. Through this pricing, finance comes to regulate all aspects of economic, political and social life. It insinuates itself into the way in which institutions operate, the infrastructure through which services are provided, and the choices that national economies as well as firms and enterprises must weigh in order to remain viable.
The scholarly term for finance’s dominance in the economy and society is “financialization.” In advanced economies, financialization has dovetailed with other economic trends grouped under the heading of neoliberalism, mainly the decreased readiness of states to pool risks, stabilize incomes and provide goods and services through taxation and social insurance arrangements. The public safety nets that had spread piecemeal after the Second World War in advanced economies have been rolled back to varying degrees in each of them. Salaries have not grown apace with rising prices, while employment has become more precarious with the removal of work protections and the weakening of organized labor. The convergence of stagnant and unreliable work incomes with diminishing public goods and services has created urgent need among workers and citizens to counter mounting insecurity with whatever resources they manage to get their hands on.
Enter global finance. Through credit cards, installment plans, mortgages, student loans and other long-term lending, along with the financial management of savings, insurances and pensions, financial institutions rush in to cater to cultivated mass demand; hence the growing significance of financial services and instruments in household economics. This is accompanied by an imperative that requires anyone ensnared in the web of finance to become financially literate, able to recognize investment opportunities and use financial instruments with discernment while shouldering risks and taking responsibility for the outcomes of their investments or lack thereof. This responsibility often includes a self-imposed reduction in spending to balance family budgets and make sure that one’s capital inflows and outflows are sustainable over time.
To ease the ongoing circulation of capital, institutional investors such as banks, insurance companies and pension funds intermediate between households and global finance. They do so through the provisioning and management of mortgages, pensions and other long-term savings products, insurance policies and consumer credit. They bundle the payments and repayments organized by these products, and they price them in bulk before selling them on to other market players. The value that household property represents flows back into the market to become credit for more investment. Because the value of this property is implicated in the ebb and flow of financial markets, it is itself in flux. Consider all those
