LIBOR and the Uses of Culture


Why is there so much interest in the "culture of banking"?

A few weeks ago, the City of London was beset by yet another scandal, this time over manipulation of the London Interbank Offered Rate (LIBOR) used to determine short-term interest rates by banks and other lending institutions. As with the other scandals that have rocked the centres of global finance in recent years, the political response has been timid, but it has been accompanied by a great deal of handwringing over the culture of banking. For example, Sir Mervyn King, governor of the Bank of England, made the following statement on the 29th of June:

What I hope is that everyone now understands that something went very wrong with the UK banking industry, and we need to put it right. That goes to both the question of culture in the banking industry and to the structure of the banking industry: from excessive compensation, to shoddy treatment of customers, to a deceitful manipulation of one of the most interest rates, and now, this morning to news of yet another mis-selling scandal. We can see that we need a real change in the culture of the industry.

In this statement, King is preempting one of two possible journalistic responses to the LIBOR scandal, which are: "We name the guilty men" or "arrow indicates defective part" (Engelen et al.:1). Obviously, King is preempting the latter type, and the defective part being indicated is "culture." Therefore, it is important to ask how King and the others responsible for overseeing the banking system conceive of culture and its function in the global financial system.

Culture, as Raymond Williams has noted, is one of the most complicated words in the English language. Originally, it referred to biological and agricultural concepts. Later it became a synonym for "civilisation," and eventually an artistic term, as in "high culture". Williams points to three uses:

Once we go beyond the physical reference, we have to recognise three broad active categories of usage. The sources of two of these we have already discussed: (i) the independent and abstract noun which describes a general process of intellectual, spiritual and aesthetic development... (ii) the independent noun, whether used generally or specifically, which indicates a particular way of life, whether of a people, a period, a group, or humanity in general... But we have also to recognise (iii) the independent and abstract noun which describes the works and practices of intellectual and especially artistic activity.

In his usage, it first appears that King is closest the second and third definitions, or perhaps a combination of the two. He is referring to the way of life of a group of bankers, their practices, and activities.

One of the outcomes of the global financial crisis has been the growth of a certain type of article which contain anecdotal accounts of life in financial institutions. For example, Alexis Goldstein gives an account of the "cultural indoctrination" process by which a young Wall Street intern becomes a banker (there is also an amusing explanation of why bankers must never appear satisfied with their bonus).

The idea of cultural indoctrination seems to be synonymous with the concept of socialisation, or the process by which people learn their groups norms, values, attitudes, and behaviours. There are two important points here. The first is that our concept of culture is suffering from slippage through the definitions given above. A process of socialisation or cultural indoctrination is closer to the first possible definition given by Williams above.

The second point is more theoretical. Generally, a working concept of socialisation requires the adoption of a social constructivist metaphysical framework. Crudely put, this means that an individual's knowledge of reality is the result of a social process or, even more crudely, that reality is socially constructed. Certainly, Goldstein's first hand account seems to adopt this view and, when he eventually breaks from the version of reality constructed by Wall Street, it parallels neatly the standard two-level description of ideology given by Žižek in The Plague of Fantasies and The Pervert's Guide to Cinema.

While Boris Johnson's demand that "we speak up for the banks" may appear laughable, with regards to culture he may have a point. Rather than viewing the culture of banking is an obstacle to the correct functioning of the system of global finance, can we not see it as a source of strength. Individual bankers in particular rely on certain fictions ("we work harder than everyone else") in order to continue to work as bankers.

That being said, there are important reasons why we might hesitate to adopt constructivist metaphysics, and the concepts of ideology which spring from them and which are deeply embedded in the concept of socialisation. One reason is given by Laclau and Mouffe in Hegemony and Socialist Strategy (i.e. the impossibility of the Marxist structure-superstructure relationship). Following on from this, while we may see elements of banking culture as a support for the psychology of individual bankers, extending this insight to banking as a whole isn''t a straightforward task.

A second reason is the menaing of King's statement itself. Is he saying, in essence, that we have to construct reality differently? His proposed solutions consist of a change in bank leadership and the full implementation of Vickers proposals seem to indicate that he has something else in mind. His story isn''t suggesting we construct reality differently so much as it is supplying us with a particular construction.

All of the preceding is to suggest that the way King and others deploy the concept of culture with reference to the banking crisis is inadequately covered by the common definitions of either Cultural Anthropology or Cultural Studies. However, there are other ways of looking at its usage in this circumstance.

The idea of culture as an obstacle to be overcome probably has its origin in Max Weber''s The Protestant Ethic and the Spirit, but its usage is particularly common in international development. In the development context, culture is commonly used by officials as a reason for the failure of a given project. In a review of development literature from the 1980s, Alan Rew wrote the following:

On the one hand, there is an evident wish to include culture as an explanation for project outcomes and processes. On the other hand, culture and society are seen as obstacles to the project or, largely implicitly, as factors to be managed reactively if the project is to succeed. (1997:91)

This trope of "culture as obstacle" is exactly the usage that we now find politicians and regulators deploying against their own domestic institutions. They suggest, in other words, that the system of global finance would function just fine - if only culture was properly managed.

The deployment of a "culture as obstacle" story also reflects a broader shift with respect to globalisation, particularly when globalisation is formulated in terms of flows through which we can see globalisation is far from a one sided affair (Urry:4-5). For example, in the colonial phase of globalisation, Britain exported Christianity to Africa. Now Africa exports Christianity to a largely secular Britain through the migrations of devout West-African immigrants to the UK.

Similarly, explanations which made culture an obstacle to the success of (neoliberal) development in Africa are reused to explain to the failure of (neoliberal) regulation in the financial centre of the City of London. In other words, developing countries are not just laboratories for economic policies, as in the case of Latvia''s implementation of a flat tax, but also for the narratives which accompany and sustain those policies.

In a review of the use of narratives leading up to the financial crisis, researchers from the University of Manchester make the following point:

Contemporary elites have made the Barthesian discovery that stories are not necessarily frivolous distractions or cynical ideologies, but rather literary assets which acquire exchange value under certain conditions. (Engelen et. al:14) Under the conditions of the LIBOR scandal, and the restrictions of journalism indicated earlier, the arrow of blame needs to point somewhere. Either, it can point to the financial regulators (who were warned about LIBOR in 2008), or it can point to the bankers themselves. "Culture as obstacle" allows the latter.

Central bankers and financial regulators can certainly save their own skin if this particular narrative is accepted. Has anyone on the regulatory side been sacked or resigned over any of the recent financial disasters? However, pointing the arrow at bankers (people) may also serve the interests of banking (business), and explain Bob Diamond''s resignation as CEO of Barclays.

As we have seen, from a policy stand point the deployment of the "culture as obstacle" story by King and others merely results in renewed calls for implementing the Vickers recommendations. These recommendations were to have been implemented anyways, and won''t be implemented until 2019. Effectively, they have exchanged the story for years of extra life.

Thus King fills the role of Scheherazade in Barthes's example (Engelen et al.:12), though she only received a single nights reprive. This strategy of deferment is further evidence - if any were necessary - that there is neither a consensus about how to reform the relationship between finance and democracy nor anything like the political will required to prevent a future crisis. It is certain that before 2019 actually rolls around there will be another story to tell. Maybe it will be Ali Baba and the Forty Thieves.

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