South Atlantic Quarterly

Melinda Cooper
Shadow Money and the Shadow Workforce:
Rethinking Labor and Liquidity

New Deal monetary reforms established a par-

ticular kind of banking institution—the federally
insured commercial bank—and a new relationship between money, labor, and the state. By agreeing to insure the deposits held by private banking
institutions, the New Deal state recognized the
private creation of money as a public good, necessary to the long-term stability of both the financial
system and industry (Ricks 2011, 2012). New Deal
money was federally insured money—private
bank money buttressed by the faith and full credit
of the state. And it was this architecture of guaranteed money that allowed the US state to underwrite the extraordinary expansion of social insurance that sustained the postwar compact with
industrial labor. Insofar as the historical mutations of money can be said to express a particular
kind of social relation, federal deposit insurance
can be seen as emblematic of the “class compromise” of the New Deal, “guaranteeing the funds
of ordinary people while also serving to greatly
relax the survival constraints of banks and allowing them to engage in new forms of credit extension” (Konings, this issue: 263). Today this class
compromise is long since broken and money itself
has partially evolved beyond the boundaries of New

The South Atlantic Quarterly 114:2, April 2015
doi 10.1215/00382876-2862773  © 2015 Duke University Press

Published by Duke University Press

South Atlantic Quarterly
396  The South Atlantic Quarterly

April 2015

Deal banking regulations, into a shadow space of federally uninsured transactions and private collateral.1 This new source of private money creation—
known as the shadow banking system—was at the heart of the recent financial crisis, an event that might be more accurately described as a crisis of
money.2 It is therefore imperative that we look to the novelty of this new
form of liquidity—what I refer to as shadow money—if we are to understand
the politics of money today.
The broker-dealer banks that constitute the shadow banking sector
fulfill many of the traditional roles of New Deal depository institutions,
albeit on behalf of institutional investors and firms rather than everyday
depositors (Gorton 2010a, 2010b; Mehrling 2011; Ricks 2011, 2012). Like traditional banks, they perform the function of credit intermediation or maturity transformation—the conversion of short-term IOUs into long-term
investments—although they do so outside the regulated institutional space
of the New Deal commercial bank. Instead of collecting deposits from individual savers, broker-dealer banks finance themselves in the money market
by raising short-term IOUs (sale and repurchase agreements, or repos) that
they then invest in portfolios of longer-term financial assets in the credit
markets—asset-backed securities composed of mortgages, student loans, or
consumer credit. Their IOUs—repos, rather than deposits—exhibit many of
the properties conventionally attributed to money.3 They are highly liquid, of
continuous, instantaneous maturity, and subject to negligible price fluctuation (Ricks 2011: 92; 2012: 731).
Unlike New Deal depository institutions, however, shadow banks issue
money without explicit access to central bank liquidity or risk management
backstops such as federal deposit insurance or the federal discount window
(Mehrling 2011: 118; Pozsar et al. 2012; Adrian and Ashcraft 2012: 1). Shadow
money is uninsured money—money whose value is not formally underwritten or backstopped by the state. Instead, right up until the financial crisis,
investors in the repo markets attempted to provide extrastate guarantees for
the value of shadow money by using collateral in exchange for deposits and
securing this collateral with the use of a credit derivative instrument known
as the credit default swap. In lieu of federal deposit insurance, depositors
in the repo markets would receive a bond in exchange for the “cash” lent
(Adrian and Ashcraft 2012: 14). The nature of these bonds changed as the
market became more heated. During the early 1990s, Treasury bills were
presumed to be the safest form of collateral, but as T-bills became scarce,
they were increasingly replaced by private forms of collateral such as AAArated asset-backed securities, which were in turn protected by credit deriva-

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South Atlantic Quarterly
Cooper

Shadow Money and the Shadow Workforce  397

tives issued by the likes of American International Group (AIG) (Gorton
2010b: 43). In this way, the liquidity of shadow money came to be guaranteed
by an entirely private system of collateral and credit risk management, one
that was not formally underwritten by the Federal Reserve.
The widespread use of credit derivatives in the shadow banking system is remarkable not only because it constitutes a private source of risk
management, but also because it fundamentally challenges the actuarial calculus of risk on which the New Deal banking system relied. Although it is
commonly referred to as an insurance contract, the credit default swap is
neither classified nor regulated as a form of insurance in law and differs in
key respects from the insurance contract as it came to be defined in the late
nineteenth century. In a credit default swap contract, the seller of protection
is under no obligation to calculate the actuarial probability of the event in
question (in this case, default) much less provide for adequate reserves, while
the buyer of protection need not have any “insurable interest” in the protected asset (Janeway 2012: 164). Like the derivative contract in general, the
credit default swap is oriented toward nonstandard, exotic, or nonprobabilistic risk: its risk management function can be described as fractal rather than
Gaussian, in the sense that fractal mathematics implies a continuous deflection from limits rather than the asymptotic progression toward an infinite
limit that undergirds classical, Gaussian probability theory (Mandelbrot
2006; Ayache 2010). In this respect, issuers of credit default swaps are better
described as “private dealers” (Mehrling 2011) or speculators—rather than
insurers—of last resort for the shadow banking system, sustaining liquidity
for exotic assets whose value is uninsured or uninsurable.
The banking panic that broke out in August 2007 originated in the
market for private, uninsured money, or repo. When a decline in house
prices triggered an unexpected rush of defaults among subprime mortgage
holders in 2006, the value of the AAA-rated securities that were routinely
used as collateral in the repo market became uncertain. Broker-dealer banks
such as Bear Stearns and Lehman Brothers that had used mortgage-backed
securities and collateralized debt obligations to borrow from “depositors” in
the repo market found themselves forced to accept “haircuts” on the value of
their collateral. As the market value of collateral came under threat, issuers
of credit derivatives such as AIG refused to sell protection on AAA-rated
securities that had until recently been considered as safe as Treasury securities. And with the disappearance of this last form of private guarantee,
liquidity vaporized from the repo market. Ultimately, the private system of
guarantees formed by collateral and credit default swaps proved incapable of

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and the demonetization of gold—challenges the conceptual limits of classical sociological theories of value. but also in the capital market. uncoupled from gold. “the central lesson of the crisis is that the American system requires the Fed’s support as dealer of last resort. In the words of Perry Mehrling (2011: 115). and not just for Treasury securities . the mathematics of money is thought to reside in the dynamics of equilibrium or the standardization of risk. both derived from nineteenth-century theories of thermodynamics and Gaussian probability. such as financial derivatives. the Federal Reserve refashioned itself as market maker of last resort to the shadow banking system. uninsured money into sovereign money and the credit default swap into a federal function (Mehrling 2011: 132). Whether we look to the resources of Marxist value-form theory. not just in the money market . and the Federal Reserve was compelled to step in to absorb extraordinary levels of private debt. all of which define money in terms of the abstract exchange of equivalents. . standardizing logic of federally insured New Deal money? When we talk about shadow money we are dealing no longer with an instrument to standardize risk but rather with the abstract form in which uninsured or nonstandardized risk becomes liquid. which was specifically created as a way of evading the actuarial. nor is it clear what form such a compromise might take in the current conjuncture.” In effect. and the proliferation of financial derivative contracts that monetize contingency itself? And how does it explain the phenomenon of repo. turning private. . But how does it account for the general destandardization of monetary forms that has followed the rise of the dollar as global reserve currency. or shadow money. the adoption of floating exchange rates. in the 1970s. This framework may have been adequate for conceptualizing the operations of the nineteenth-century gold standard or the mid-twentiethcentury institution of federally guaranteed money.South Atlantic Quarterly 398  The South Atlantic Quarterly • April 2015 holding up the edifice of shadow money and shadow credit intermediation of its own accord. The phenomenon of shadow money—like many of the new monetary forms of the post-Fordist era. Georg Simmel’s or Max Weber’s sociology of money. What it provokes us to conceptualize is the exchangeability of nonequivalence or the liquidity of nonmetric difference—a problematic that has long been Published by Duke University Press . but also for private securities. And yet it is far from clear that this intervention presages a long-term class compromise of the kind inaugurated by the New Deal. The scope of the Federal Reserve’s response to the financial crisis is without historical precedent. . by assuming the risk management role of credit derivative issuers such as AIG. or neoclassical economics. floating exchange rates. .

on the one hand. Bryan. has rarely been addressed directly. The article seeks to theorize the relationship between shadow labor and shadow money while avoiding the fetishism of neoorthodox theories of finance. that the financial derivative and precarious labor have assumed such uncannily similar contractual forms in the present moment (see Bryan. And yet the question of the relationship between new forms of money and credit. Langley 2008. for example. after all. performativity theorists sought to understand liquidity crisis as a failure of epistemology. on the one hand. consumers. Martin. on the other. some of the most radical attempts to rethink the epistemology of money beyond the limits of neoclassical economics simply presume that money. and Rafferty 2009. What is equally at stake in the credit derivative and the zero-hour contract is the absolute contingency of post-Fordist work time—labor that will be performed at some unspecified place and time—and the challenge this poses to actuarial modes of risk management. this issue). whose causes were ultimately to be found in the self-referential intricacies of financial models (MacKenzie 2011). and workers. Published by Duke University Press .4 Recent theories of financialization have pointed to the increasingly intimate relationship between the everyday life of consumer credit and the fortunes of high finance (Martin 2002. This article argues instead that the question of liquidity—and its failures—can only be understood if we theorize the “dialogical” nature of the relationship between labor and money. irresolvable conflict to dialectical mediation. In the wake of the financial crisis. and Jefferis. is capable of sustaining its own liquidity.South Atlantic Quarterly Cooper • Shadow Money and the Shadow Workforce  399 familiar to mathematicians of topological or fractal geometry but which has been largely neglected by economists. Allon 2010). The dramatic expansion of consumer credit that has characterized the past few decades has in turn been linked to the long-term stagnation of wages and social welfare in the Anglo-American economies (Barba and Pivetti 2009). a position that ends up attributing crisis to the external interventions of the state in much the same fashion as orthodox financial theory (Ayache 2010). and the shifting composition of labor. It is far from coincidental. despite the widely recognized fact that financial assets are increasingly imbricated with the income flows of everyday borrowers. Rafferty. And in the meantime. a term I borrow from Mikhail Bakhtin (1981) to signal a spectrum of strategic relations ranging from open. left to itself. and the foundationalism of labor theories of value. Each of these perspectives seeks to confine and resolve the question of liquidity within the internal workings of financial markets.

then defeated from above by the “Volcker shock. and uninsured labor—and. from the depository institution to the shadow bank. long-term. By simultaneously guaranteeing consumer savings against bank default and staving off the threat of bank runs. The Fordist Consensus—Underwriting Money and Insuring Labor In 1933 Henry Steagall persuaded Congress to include federal insurance of private money creation—the Federal Deposit Insurance Corporation (FDIC)— in the New Deal Banking Act. engendering a wholesale crisis of value whose tensions are far from being resolved today. It is this solution that broke down in the recent financial crisis. In retrospect. the market for securitized consumer debt could not expand any further unless it adapted to include the nonstandard risk and the nonconforming borrower. has offered a solution of sorts to the social insecurity of labor. In other words. the migration of money creation. It argues that the rise of the shadow banking sector must be understood as a long-term response to the crisis of the New Deal social state—a crisis that precipitated the breakdown of the Keynesian monetary consensus in the 1970s and the subsequent restructuring of labor around uninsured or contingent labor contracts. This innovation was designed to prevent the bank runs that had devastated commercial banks and thrifts during the Great Depression and. credit. and securitization was viable only as long as the US state was willing and able to sustain a core workforce of standard. the FDIC sought to establish a consensus of mutual confidence between bankers and savers (Russell 2008: 69). nonstandard. The New Deal architecture of money.South Atlantic Quarterly 400  The South Atlantic Quarterly • April 2015 on the other. as such. When this consensus was challenged from below in the 1960s and 1970s. In a context where labor itself was increasingly insecure. until recently.” the United States sought to counteract the political fallout from the long-term precarization of labor by a corresponding expansion of consumer credit into the frontier space of uninsured risk. using premiums contributed by banks themselves. represents an ongoing response to the evolving risk profile of labor itself. was charged with the task of insuring deposits to a maximum limit. Shadow money creation has grown in concert with the expansion of the shadow workforce—the sector of the post-Fordist workforce engaged in contingent. insured workers—a workforce that excluded minorities and women of all races. from insured deposit to uninsured repo. and the changing form of money. its promise seems to have been confirmed by the relatively few bank Published by Duke University Press .

Lieberman 1998: 23–25). which was also created under the terms of the Social Security Act. can be understood as “emblematic” of the New Deal class compromise. The Social Security Act of 1935 is hailed “as the most comprehensive social policy creation in US history” (Mettler 1998: 53). agricultural. and service workers as well as those engaged in “periodic or seasonal employment. this compromise rested on the rigorous exclusions of the Fordist family wage. the Social Security Act did not overtly voice its exclusion of Published by Duke University Press . in various guises.5 In this respect. remains rigorously tied to the regular. national old-age insurance was unavailable to domestic. which defined white men as a privileged class of insured workers only by virtue of relegating minorities and women of all races to the more marginal. And yet until the 1960s. as Martijn Konings (this issue) notes. when banks themselves began to outrun the regulatory limits of New Deal banking reform. From the very beginning.” with the result that very few African Americans or Latinos had access to public pensions at all. Federal deposit insurance. the stabilizing role of federal deposit insurance extended well beyond the realms of the banking sector. Importantly. The actuarial calculations of social insurance were literally built on the foundations of Fordist labor—without the standardization of work time and wages implicit in the long-term contract of employment. long-term contract of employment until this day and as such offers no protection to nonstandard and seasonal workers (Katz 2008: 222–25). By underwriting the private creation of money. welfare. the FDIC stabilized the relationship between depositors and banks and laid the foundation for a new class compromise between unionized labor and the state.South Atlantic Quarterly Cooper • Shadow Money and the Shadow Workforce  401 failures that occurred from 1933 up until the 1980s. and credit programs that were implemented by the New Deal social state. nonunionized. and uninsured sectors of the workforce. while white women benefited only through marriage (Mettler 1998: 53–73. Unemployment insurance. At their most ambitious. in the panoply of social insurance. these programs offered a form of comprehensive social insurance to a core labor force of unionized workers. establishing the insured industrial worker as the privileged partner of the Fordist class compromise. it would have been impossible to calibrate the difference between short-term deposits and longterm investments or to calculate average risks into the long-term future. Its model of public-private social insurance—collective insurance delegated to the private sector but backstopped by the state—would be replicated. These divisions of labor were everywhere inscribed in the social insurance policies of the New Deal.

The National Labor Relations Act (NLRA) of 1935. President Franklin D. domestic. some of the most powerful industrial unions would avail themselves of this act of legislation to forge generous workplace compacts with their employers. replaced the short-term interest-only mortgages that had hitherto dominated the market with a new and safer form of mortgage Published by Duke University Press . New Deal labor legislation only entrenched these divisions still further by assigning distinctive social protections to different classes of worker. standard employment. the special bargaining powers awarded to unionized labor by the NLRA also served to create a separate system of private workplace benefits for a powerful sector of the industrial working class. established the right of industrial workers to join trade unions. as the housing crisis of the Great Depression intensified. standard employment that went along with private workplace coverage (Klein 2003: 230). Perhaps the most visible and lasting materialization of the New Deal actuarial compact was the creation of a private housing market sustained by federal insurance. The privileges accruing to unionized industrial workers were tightly linked to standard employment and closely modeled on “a white male model of participation in the workforce: the full-time. full-year worker” (Klein 2003: 228). In its first few years of existence. In 1933. The sexual and racial divisions of labor that shaped the Fordist workplace therefore became the decisive criterion in determining inclusion or exclusion from social insurance. also known as the Wagner Act. the HOLC refinanced tens of thousands of home owners in danger of default and. and take legal industrial action. Moreover. their employment in agricultural. African Americans and women of all ethnicities were marginalized from this system by virtue of the fact that they were underrepresented in the most powerful industrial unions (Mettler 1998: 50–51).South Atlantic Quarterly 402  The South Atlantic Quarterly • April 2015 minorities and women but rather structured provision around the normative presumption of full-time. engage in collective bargaining. But as it became clear that the New Deal state was never going to deliver the universal welfare system that many had hoped for. while also lobbying for improvements to universal social insurance (Klein 2003). who were able to negotiate private pensions that were much more generous than standard Social Security benefits and health insurance plans that were entirely unavailable to other workers. in the process. Roosevelt signed into law the Home Owners’ Loan Corporation (HOLC) and charged it with the task of protecting small home owners from foreclosure. Over the following decades. and seasonal work rarely conformed to the model of full-time.

Published by Duke University Press .South Atlantic Quarterly Cooper • Shadow Money and the Shadow Workforce  403 contract—the long-term. provoking a mass migration of whites from the city centers to suburban hinterlands. single-family homes. rising from 44 percent of male-headed families in 1934 to 63 percent in 1972 (Jackson 1985: 215–16). amortized loan (the so-called vanilla or conforming mortgage) (Jackson 1985: 195–96). It was not until the late 1960s that these exclusions to the New Deal social insurance contract would be seriously contested. unionized worker. male industrial worker—its gendered and racialized normativities starkly materialized in the standardized. and housing models (Jackson 1985: 205–13). and borrower profile. African Americans—both women and men—were systematically denied access to state-insured housing credit through the urban risk ratings of the HOLC. making it almost impossible for minorities to gain access to mortgage credit. And women of all ethnicities and classes were excluded from obtaining consumer credit in their own names (Hyman 2011: 191–206). the very terms of the conforming. for “uninsurable. Yet in exchange for this federal guarantee. home ownership was a privilege reserved for the white. which routinely assigned the color red. Its federal guarantees led to a dramatic expansion of home ownership in the postwar era. an option that relieved the banks of default risk and freed them up for further loan extension (Poon 2009. even in the absence of overt discrimination.” to the inhabitants of inner-city ghettos (hence the term redlining) (Gordon 2005: 207). fixed-rate. the FHA encouraged banks to expand their mortgage portfolios and lower interest rates. or Fannie Mae. The FHA’s insurance model left an indelible mark on the postwar landscape: it favored suburban. created in 1938). vanilla mortgage were premised on the working life of the standard. and this challenge is intimately linked to the collapse of the Bretton Woods monetary regime. location. By promising to compensate lenders in the event of default. and required homes to conform to particular lot sizes. construction methods. to the detriment of inner-city tenements. In 1934 Roosevelt created a second organization—the Federal Housing Administration (FHA)—to provide federal insurance protection for mortgages issued by commercial banks. lenders needed to comply with the FHA’s strict underwriting criteria. Like the Fordist family wage itself. which covered everything from the payment structure of the mortgage to housing models. These mortgages could then be sold on to long-term investors such as insurance companies or pension funds through the conduits of the Federal National Mortgage Association (FNMA. Moreover. single-family allotments that proliferated in the postwar suburban landscape. Hyman 2011: 45–72).

often African American and migrant workers. Under its auspices. moreover. At their most interesting. industrial workers in the Rust Belt Northern states to the exclusion of African American agricultural and domestic workers in the South. successive administrations sought to meet and contain these demands by offering a measured expansion of New Deal social programs and labor protections. the federal government poured funds into education. and consumer credit and the overt discrimination that kept their wages consistently lower than that of men. hoping to ease the endemic impoverishment of the inner-city ghettos.South Atlantic Quarterly 404  The South Atlantic Quarterly • April 2015 Fordism at the Limits—Money. but as women entered the labor market in growing numbers they also began to question their exclusion from New Deal labor protections. the Great Society sought to extend some of its provisions to the growing numbers of African American workers who had migrated from the South in the postwar period (Quadagno 1994: 10–11. The challenge to the Fordist/Keynesian consensus. and public housing. unionized working class. Throughout the 1960s and 1970s. was not limited to the workplace per se but also targeted the racial and gender politics of the family wage. Johnson launched the Great Society programs just months after the civil rights march on Washington in 1963 and implemented them shortly after the urban riots of the following summer. what these movements called into question was the very normative premises of the Fordist consensus and its foundation in the family wage. and radical. strikes proliferated in a context of full employment (Panitch and Gindin 2012: 128). Labor. health care. social insurance. 30–31). of the work-based exclusions Published by Duke University Press . Philadelphia. New York. which too often colluded in the racial division of the labor force (Georgakis and Surkin 1975). and Chicago erupted in urban riots in the summer of 1964 as African American migrants from the South protested their relegation to devastated inner cities and their continuing exclusion from the basic provisions of the New Deal social state (Quadagno 1994). The New Deal had favored white. President Lyndon B. Throughout the decade. but not all. In and of itself. the growing presence of women in the workforce undermined the rationale of the family wage. the very success of Keynesianism had shifted the balance of power in favor of the working class. The Great Society also sought to redress some. and Welfare beyond Standardization By the 1960s. also launched a succession of wildcat strikes and challenged the exclusiveness of the New Deal trade unions. But the militancy of the 1960s was not the sole preserve of the white. and it is at this point that its moderating promise ceased to be useful from the point of view of the state. The nonunionized sectors of the industrial workforce.

Successive regulations prohibited racial and gender discrimination in the credit market. Having divested itself of the fiscal burden of mortgage credit. indigent. Dymski 2009: 153. Although benefits continued to be eroded by inflation. And even as universal health insurance remained far from the political agenda. The Fair Housing Act of 1968 and the Equal Credit Opportunity Act of 1974 extended racial antidiscrimination norms to housing and credit markets. Each of these legislative reforms called for a more inclusive welfare state.South Atlantic Quarterly Cooper • Shadow Money and the Shadow Workforce  405 of the New Deal. and disabled a minimum level of access to health care. created a private competitor. to allow the aged. the very structure of housing credit was reformed and standardized. even as housing credit itself was undergoing substantial reform. one whose privileges were no longer defined by the sexual and racial hierarchies of the Fordist household. amendments to the public pension program of the 1935 Social Security Act gradually extended coverage to the predominantly African American farm and domestic workers who had been excluded from its original provisions and to the service occupations in which many women were employed (Quadagno 1994: 158). as the federal government removed Fannie Mae from its balance sheet. In the meantime. The Home Mortgage Disclosure Act of 1975 and the Community Reinvestment Act of 1977 explicitly outlawed redlining and introduced systematic procedures to monitor the demographic profile of bank loans. in 1965 Congress approved two federal social insurance programs. Freddie Mac. Hyman 2011: 213–17). and authorized both to create and sell bonds (securities) out of the mortgages they underwrote (Quinn 2009). the creation of a market in mortgage-backed securities foreshadows the later generalization of securitization within the private banking sector and the subsequent expansion of a shadow banking system. respectively. Medicaid and Medicare. the federal government continued to underwrite the risks inherent in housing loans and therefore tended Published by Duke University Press . while Regulation B of the 1974 Equal Credit Opportunity Act enabled married and unmarried women to obtain full access to credit in their own names (Gordon 2005: 216–18. In many respects. The structural discrimination written into personal banking relations also came under increasing scrutiny during this period as women and racial minorities pointed to their continuing exclusion from consumer credit as one of the prime reasons for their economic disadvantage. And yet the mortgage-backed securities of the late Fordist era remained firmly within the actuarial framework of the New Deal monetary consensus to the extent that they restricted credit to the standard subject of labor and were implicitly insured by the state (Schwartz 2009: 184).

the growing militancy of Fordist social movements had led to plummeting levels of corporate profitability and a vicious circle of Published by Duke University Press . and female—classified as nonconforming by virtue of their distribution in the labor market rather than any personal prejudice on the part of bank managers (Hyman 2011: 215–17). Inevitably. no antidiscrimination law could alter the fact that high-risk. By the end of the decade. Under the impetus of new antidiscrimination laws. Yet despite these considerable legislative and bureaucratic efforts. which rested on the distinction between private and public social insurance. the domestic movements of the late Fordist era played a decisive role in the destruction of the New Deal/Bretton Woods monetary order.and race-based distinctions that were written into the New Deal. these entities set out to redress personal bias in the allocation of consumer credit by introducing standardized.6 They would ultimately force the Republican administration of President Richard M. the antidiscrimination politics of the late Fordist era was only partially successful in redressing some of the normative exclusions of the Fordist credit regime. nonstandard workers were disproportionately African American. standard forms of credit such as the vanilla mortgage and conforming borrowers. whose power was made manifest in skyrocketing food and oil prices. pursued alongside the war in Vietnam. The resulting increase in federal and state expenditures. These enduring distinctions were structural to the Fordist family wage.South Atlantic Quarterly 406  The South Atlantic Quarterly • April 2015 to favor safe. social insurance for the deserving poor and public assistance for the undeserving. the Great Society programs led to a doubling of social expenditures. Latino. By the late 1960s. was enormous. thereby undermining the very architecture of money that had sustained US power throughout the postwar era. Nixon to liberate the US dollar from the fiscal limitations imposed by gold. outpacing even defense spending on the war (Panitch and Gindin 2012: 128). As such. nationwide credit risk scores that would evaluate borrowers according to employment rather than race or gender (Poon 2009: 660). this commitment to safe lending criteria came into tension with the overt mission of the government-sponsored entities to overcome discrimination in credit markets. Most of the social programs implemented under the umbrella of the Great Society sought to expand the provisions of social insurance without altering the basic architecture of the New Deal class compromise. These programs were designed to reduce inequalities and placate dissent without challenging the limits of US Keynesianism. But the militantism of late Fordist labor and welfare movements was such that it challenged these limits and pushed the state to pursue deficit spending beyond the sex. Along with the rise of anticolonial movements in the global South. unionized and nonunionized labor.

the longterm reorganization of labor. It is a matter of some considerable historical irony that some of the most generous increases in New Deal social welfare were introduced under the Republican administration of Nixon. the militantism of the late Fordist era forced the US state to extend wage and welfare concessions beyond the limits of the standard subject of Fordist labor.South Atlantic Quarterly Cooper • Shadow Money and the Shadow Workforce  407 wage and price inflation. a move that ultimately undermined the workability of the New Deal monetary architecture. The challenge to the Fordist consensus was neatly reflected in the inability of neoclassical Keynesian economics (the dominant vernacular of the time) to account for the unique macroeconomic conditions of the early 1970s. But after the full employment and stable inflationary conditions of the 1960s. At the beginning of his first term. credit. confounding any attempt by the state to utilize the standard instruments of Keynesian fiscal management. short-term speculative capital flows fled the dollar and the United States was forced to formally abandon the convertibility of the dollar against gold (Arrighi 2003: 35). In this respect. the political costs of tightening monetary policy proved too high. Nixon’s concession to the militantism of the late Fordist era finally tested the limits of the Bretton Woods regime of fixed exchange rates: as the US balance-of-payments deficit continued to widen. low levels of unemployment by rising wages” (Friedman 1977: 454). only a few short years before the spectrum of political alternatives would swing decisively to the right. The effect was liberating. A succinct expression of Keynesian economics as it had come to be understood among US economists of the postwar era. the so-called Phillips curve postulated a “stable negative relation between the level of unemployment and the rate of change of wages—high levels of unemployment being accompanied by falling wages. and money around nonstandard risk must be understood as an effect of labor’s political insurgency during the Published by Duke University Press . For a brief moment. unemployment and inflation now combined together as “stagflation” and began a slow and seemingly inexorable rise in the early 1970s. the US government was able to ignore both budget constraints and inflation and to pursue Keynesian deficit spending beyond the mediating limits that had been built into the Keynesian project from the very beginning. Well before his inauguration to a second term in 1972. Having exempted itself of the monetary discipline of gold. for Democrats and Republicans alike. Nixon just as abruptly resumed his policy of welfare expansion and allowed inflation to pursue its inexorable rise (Arrighi 2003: 10). then. then. but without an alternative social compromise in sight. Nixon did make a brief attempt to quell inflation. as businesses attempted to offset wage concessions to unionized labor by raising prices (Panitch and Gindin 2012: 135).

in combination with the austerity politics of monetarism. The strategy of targeting the trade union movement—the most privileged sector of the labor movement—appeared especially designed to halt the momentum of Fordist militantism. the overall proportion of the US workforce covered by standard work contracts would decline in favor of old and new forms of nonstandard employment. Throughout the 1980s and 1990s. independent contractors. however. along with the social insurance programs it made possible. there was no longer any external economic reason for limiting fiscal expenditures on welfare and wages. By restricting the money supply. the New Deal consensus was broken in 1979. definitively abandoned Keynesian monetary and fiscal policies in favor of the austerity politics espoused by monetarists such as Milton Friedman. the Reagan revolution radically shifted the balance of powers in the other direction. Over the following decades. The Volcker Shock—Destandardizing Labor and Money Ultimately. these movements had pushed at the limits of the Fordist class compromise by calling for an extension of social insurance beyond the standard subject of labor. the ranks of casual workers. President Ronald Reagan was able to launch a full-scale assault on unionized labor and its expectations of a continuously rising standard of living (Panitch and Gindin 2012: 171). Under the influence of Chicago school labor law. when the chair of the Federal Reserve. Paul Volcker. the so-called Volcker shock drove up nominal interest rates to 20 percent overnight and induced an almost immediate recession. temps. The monetarist turn was eminently political: without the discipline of gold. and the self-employed swelled across the entire workforce (Gleason 2006: 1). this new order of floating exchange rates and destandardized money. Yet Volcker was determined that wage and price inflation needed to be curbed and that the “standard of living of the average American [had] to decline” (quoted in Rattner 1979). Under the full employment conditions of the 1960s. employees leased or subcontracted from business service firms. by dismantling the entire edifice of standard Fordist labor. employers sought to replace Published by Duke University Press . In this atmosphere of heightened austerity. would be refashioned as a weapon to neutralize the inflationary demands of the Fordist labor movement. Its long-term effect was to prompt a three-decades-long decline in wages and to restructure the entire workforce around nonstandard labor.South Atlantic Quarterly 408  The South Atlantic Quarterly • April 2015 1960s and 1970s—its refusal to accept the normativities of New Deal social insurance. By the end of the 1970s. on-call workers. day laborers.

standard employment in unionized Published by Duke University Press . unionized labor. The trend toward the destandardization of labor has no doubt been just as overwhelming in other OECD (Organisation for Economic Co-operation and Development) countries. even the most conservative of estimates identified one-third of US workers as nonstandard—an estimate that excluded informal workers and the many tens of thousands of migrant agricultural workers on temporary entry visas (Parker 2002: 109). Fudge. when Medicare and Medicaid were introduced to help the aged. has been particularly acute in the United States because of the historical relationship between New Deal social protections and the collective bargaining powers of standard. and the poor. and Vosko 2002).South Atlantic Quarterly Cooper • Shadow Money and the Shadow Workforce  409 the insured. however. and the United States only achieved a minimal form of public health insurance in 1965. Hacker (2012: 4–5) explains. By 2001. in the process redefining the worker as an “independent contractor” (Epstein 1983. The effect on social insurance. unionized sectors of Fordist industry enjoyed access to workplace insurance benefits (particularly health and pension plans) that were far more ample than the minimum offered to other standard workers— while nonstandard workers were entirely excluded from the basic minimum until the 1970s (Mettler 1998: 68–73). Tucker. This reserve army of nonstandard workers now represents a “shadow workforce” of monumental proportions whose precarious attachment to New Deal labor protections and social insurance coverage continues to sanction the erosion of work conditions in the standard employment sector. The Social Security Act of 1935 did not include a provision for universal health insurance. nonstandard work arrangements spread throughout the labor force. During the 1990s. health insurance was always directly tied to full-time. long-term contract of employment that had defined the unionized Fordist workplace with commercial contracts that were breachable at will. the US New Deal was unique in having established a system of public-private welfare that supplemented minimal universal rights to social insurance with more generous workplace benefits for unionized workers (see also Katz 2008: 174–80). As Jacob S. Boris and Klein 2012). extending beyond low-wage and feminized service work to affect the professional business-service and knowledge sectors (Kalleberg 2013: 90. With the exception of these programs for the nonworking poor. These labor practices were first introduced by temping agencies that employed an overwhelmingly feminized workforce in the 1960s and were later adopted by the public service sector as it sought to divest itself of newly powerful service-sector unions (Hatton 2011. the disabled. This historical peculiarity of the US welfare state meant that workers in the strongest. 102).

The vertically integrated firms of the Fordist era now only retain a small core of workers on long-term employment contracts. Yet these gains were abruptly reversed under Reagan. who inaugurated a politics of anti-inflationary fiscal austerity that has since become a defining feature of neoliberal government across partisan lines. as subcontractors. has led to plummeting levels of social insurance coverage. The evolving composition of the workforce has had a particularly dramatic effect on levels of health care coverage. manufacturing industries in which the social compact between labor and capital was originally forged: the migration of industrial labor offshore and the recomposition of the domestic workforce around smaller. the problem was particularly acute for the working and nonworking poor who fell outside the eligibility rules for Medicaid or Medicare. At least until the passage of President Barack Obama’s health care reform (itself a mandate to regulate and promote individual health insurance rather than a universal health system as such). in-sourcing the rest of their workforce on a nonstandard basis. In part. while one-fifth enjoyed private workplace pensions (Fraser 2011: 451). both public and private. almost two-thirds of the workforce were protected by some form of private health insurance. and temps—many of whom are disqualified from the established legal definitions of insurable labor. the erosion of health insurance no longer applied only to low-income workers but had also come to affect the large Published by Duke University Press . service-based firms. By the mid-1970s. Yet by the 1990s. given the absence of universal health insurance in the United States. The smaller firms that predominate in the service sector often do not provide in-house health insurance plans to their workers. twothirds had access to the old-age benefits provided by Social Security. rendering it unforgiving in its exclusion of nonstandard workers and particularly sensitive to the changing composition of the labor force (Quadagno 2005). This system of private-public welfare reached its high point under the Republican administration of Nixon. Hacker 2006: 11). while larger corporations routinely exclude their contingent of nonstandard—but often long-term—contractors (Swartz 2007: 3–4). The public-private welfare regime that emerged from the New Deal has not survived the decline of the unionized. this decline in social insurance can be attributed to the changing nature of the labor contract itself.South Atlantic Quarterly 410  The South Atlantic Quarterly • April 2015 industry. independent contractors. who oversaw the most generous increase to Social Security payments in the program’s history and extended federal insurance to private workplace pensions under the terms of the Employee Retirement Income Security Act (ERISA) of 1974 (Quadagno 1994: 159.

which offered guaranteed returns or “defined benefits” and replaced them with defined contribution plans such as the 401(k)—whose “returns are neither predictable nor assured” (Hacker 2012: 5). The new defined contribution plans. and insured by the federal government. And yet consumption has nevertheless been maintained—often at extraordinary levels. The number of firms offering old-age benefits has simultaneously declined. and removes any residual loyalties to the collective fate of labor.South Atlantic Quarterly Cooper • Shadow Money and the Shadow Workforce  411 numbers of professional. the Volcker shock was far from producing the absolute (fiscal and credit) austerity that monetarists had hoped for. responsible for managing his or her own life risks. In effect. it became evident that as long as investors were willing to invest their dollar reserves in US securities and as long as inflation was kept under control. displacing risk from the worker to the employer to the state. by contrast. one of the unexpected side-effects of the monetarist turn was to bring foreign investment flooding back into the market for US securities. On the contrary. whose real value has stagnated relative to wages (Hacker 2006: 122. even the pension programs that are still provided by private employers no longer follow the actuarial and redistributive logic of New Deal social insurance. and technical workers who were employed as independent contractors. the United States would be able to extend public and private credit to historically unprecedented levels (Konings 2011: 13). Beginning in the early years of the Reagan revolution. make no claim to insure the risks of labor: they are essentially individual savings accounts whose returns are contingent on the investment decisions made by the individual worker and the vicissitudes of the financial market (Hacker 2006: 113). Over the following decades. The evolving risk profile of US labor has utterly eroded the conditions that sustained mass consumption during the Fordist era: predictable work histories. This is a model that advocates of privatization would like to extend to Social Security in general. and social insurance. In the meantime. stable or rising incomes. the plans were funded by the employer. thereby providing the US state and household with an abundant and cheap source of credit (Krippner 2011: 92–94). The ensuing turn toward “financialization” meant that consumer credit could keep expanding even as wages and social welfare budgets stagnated. academic. leaving a growing proportion of the workforce to rely on the basic provisions of Social Security. employers began to phase out established pension plans. 129). successive administrations Published by Duke University Press . since it redefines the worker as an investor. The traditional guaranteed pension plans exemplified the public-private model of social insurance established during the Fordist era: modeled on Social Security. After the Volcker shock.

and Uninsured Labor The rise of shadow banking can be traced to the early 1980s. obscures the extent to which the very institutional and contractual forms of credit creation have had to mutate as an effect of the changing profile of the post-Fordist workforce. This peculiar combination of fiscal austerity and financial abundance was to become an enduring feature of US and other Anglo economies from the mid-1980s onward. Securitization. a transformation that was facilitated by both external forms of deregulation and institutional innovation from within. Shadow Banking. Bellofiore and Halevi 2012). however. then. I turn to this process in the following section. insured workers— a workforce that could be relied on to maintain the long-term financial obligations of social insurance and consumer credit.South Atlantic Quarterly 412  The South Atlantic Quarterly • April 2015 did everything in their power to counter income and consumer-price inflation while allowing assets (nonconsumables such as housing) to appreciate without discernible limit. have migrated beyond the regulatory spaces of the New Deal banking system. money and credit have had to evolve to price nonnormal risks and. Today these conditions no longer hold even for the most privileged sectors of post-Fordist labor. arguing that post-Fordism has more or less reinvented Keynesian demand management by substituting private deficit spending for the public deficit spending of the welfare state (Crouch 2009. As work histories become less predictable. the postFordist expansion of credit would not have been possible without a profound transformation of the New Deal banking system itself. when nonbank financial firms began to compete with commercial banks to provide services that were restricted under the terms of the New Deal Banking Act. in the process. Regulation Q of the New Deal Banking Act restricted the interest payments Published by Duke University Press . In other words. The New Deal banking system presupposed the existence of a core workforce of regular. Their continuing deference to Keynesian economics. Heterodox economists have proposed the concept of “privatized Keynesianism” as a way of understanding this process. rather. consumption has been sustained by the burgeoning of low-cost credit. Post-Fordism. As the social wage of the post-Fordist workforce has stagnated. In many respects. commercial banks had been the privileged beneficiaries of New Deal financial regulations. Federal deposit insurance guaranteed the security of consumer deposits and insulated depository institutions from bank runs. leading to historically unprecedented levels of household indebtedness (Barba and Pivetti 2009). concession—of its own. has been able to survive to the extent that it offered a class compromise—or.

Mehrling 2011: 89). while at the same time shifting these risks onto the consumer (Porter and Twomey 2012: 144–45). a situation that the federal government sought to relieve by relaxing constraints on mortgage lending. which evolved as an outright alternative to traditional depository institutions. The combined effect of these regulations was to bolster the profitability of commercial banks by providing them with a cheap. and various money market instruments such as repos. By the mid-1980s. These included money market mutual funds. Published by Duke University Press . The rapidly rising interest rates generated by the inflation of the late 1970s placed banks under extreme pressure. fixed rate or vanilla mortgage. in the belief that interest-rate competition among banks had contributed to the economic crisis of 1929. What we call the shadow banking system—a private. Nonbank financial firms. which offered a close substitute to deposits (Gorton 2010a: 4. since regulatory reform in the early 1980s also allowed commercial banks to evade some of the restrictions of the New Deal Banking Act and brought them into a symbiotic relationship with the shadow banking sector itself. Adrian and Ashcraft 2012: 31). money market instruments were in high demand among institutional investors such as pension funds that were managing ever greater amounts of money and needed a “short-term. They therefore seized the opportunity to fashion alternative transaction reserve accounts that would compete with the traditional deposit (Russell 2008: 86–87). the Regulation Q controls on interest rates became increasingly burdensome to bank depositors and a competitive obstacle for the banks themselves (Russell 2008: 84–85). secure. and were not subject to Regulation Q controls on interest rates. the scope of shadow money creation far exceeded that of the New Deal banking sector with its government-insured money claims (Ricks 2011: 121. safe. interestearning transaction account like demand deposits: repo” (Gorton 2010a: 15). parallel system of money creation—emerged out of these competitive maneuvers. in the meantime. were unencumbered by the various regulatory limits of the New Deal depository institution: they were not obligated to contribute to deposit insurance. Reforms passed in the early 1980s authorized federal depository institutions to issue variable-rate mortgages—products that replaced the calculable risks of the long-term.South Atlantic Quarterly Cooper • Shadow Money and the Shadow Workforce  413 that could be paid on deposits. and abundant source of funds. Yet the story is not one of simple substitution. These loans would later be marketed en masse to subprime borrowers. As inflation rose in the 1970s. however. The traditional commercial banks continued to lose market share to nonbanks throughout the 1990s—so much so that by the time of the recent financial crisis. with the unpredictable risks of volatile interest rates. had no reserve requirements.

5 percent. and Sallie Mae. and sell on loans to securities markets. Between the 1980s and 1990s. moving beyond the purview of government-sponsored enterprises such as Fannie Mae. as banks chose to pool. During the 1980s. Despite successive antidiscrimination laws prohibiting personal prejudice in the allocation of credit. documented source of income.South Atlantic Quarterly 414  The South Atlantic Quarterly • April 2015 In the meantime. which followed strict underwriting criteria and favored standard. into the market for private-label consumer credit that had no public backstop. securitization itself evolved. The classic originate-to-hold model of bank lending was therefore progressively replaced by the originate-to-distribute model of securitized credit intermediation. effectively removing one of the intrinsic limits to credit expansion as it had existed under the New Deal banking regime (Dymski 2009: 174). vanilla securitization was a product of the (late) Fordist era. Default rates on these loans were traditionally as low as 0. These innovations brought it into ever-closer alliance with the shadow banking sector since the broker-dealer banks that issued repo were some of the principal investors in mortgage-backed securities and other securitized debts. Freddie Mac. the federally insured depository institution was able to escape some of the limits written into the New Deal Banking Act. commercial banks were changing the way they managed loans in the long term. Gorton 2010a: 4). Heightened competition from nonbank institutions was making it unprofitable for banks to keep passive loans on their books until maturity. Using nonstandard mortgage products to attract uninsured or “exotic” borrowers and securitization as a way of repackaging these risks into an ostensibly safe product that could be sold on to third parties. vanilla loans were always subject to the premise of a standard labor contract and therefore ended up excluding most women and minorities on purely Published by Duke University Press . where they found ready purchasers among foreign and domestic investors looking to diversify their portfolios of Treasury securities (Dymski 2009: 159. whose portfolios were implicitly guaranteed by the state. the market in asset-backed securities was dominated by the government-sponsored entities. repackage. The turn to securitization liberated the commercial bank from some of the risks that were endemic to traditional credit creation: by separating loan making from the default and liquidity risks that went along with holding loans to maturity. As Herman Schwartz (2009: 184) suggests. loans made to borrowers with minimal default risk and a regular. vanilla or “conforming. securitization allowed banks to create risks they would no longer have to absorb.” loans— that is. testimony to the efforts of Johnson and Nixon to expand the market for social insurance and stateinsured consumer credit as far as possible without questioning the racialized and gendered divisions of the labor market.

by contrast. vanilla securitization continued to restrict credit to the standard. financialization did resolve the enduring problems of race. however. For a brief moment. until recently. standardizing borrowers around a “middle-class family norm” and regular forms of employment (Schwartz 2009: 184). The subprime market allowed unprecedented numbers of previously marginal borrowers and nonnormative households (single mothers and those living in other nonnormative arrangements) to aspire to home ownership—but often at an exorbitant price. had been excluded from the consumer credit market. borrowers—precisely those borrowers who would have been automatically excluded from the federally guaranteed loans issued by Fannie Mae and Freddie Mac. replaced these traditional. and a disproportionate number of women of all ethnicities (Dymski. nonstandard. In short. Having saturated the market for safe borrowers. insured worker at a time when labor itself was rapidly losing its standard profile. perhaps after rescheduling their loans several times. The vanilla loans favored by the government-sponsored enterprises operated within an actuarial calculus of risk. private-label brokers expanded into the market for the “exotic” or uninsured risk. and undocumented work in the low-wage shadow workforce—African Americans and Latinos in general. African American and Latina women in particular. And yet as long as house prices continued to appreciate. In a certain sense. extending credit to those who were employed in irregular. or Alt-A (credit-blemished). mortgage brokers began to aggressively market credit to both subprime (low-income) and Alternative-A. then. Hernandez.South Atlantic Quarterly Cooper • Shadow Money and the Shadow Workforce  415 objective grounds. simply because these new kinds of credit brokers were willing to price the risks of nonstandard labor. It was expected that a sizable number of these borrowers would default. The new generation of private brokers. were willing to extend credit to those who. By the mid-1990s. actuarial models of risk standardization with a much more speculative strategy of risk optimization through diversification into some of the more high-risk segments of the consumer credit market (Poon 2009: 666–68). private lenders were entering the market en masse and.and gender-based credit exclusion that had never been effectively addressed by antidiscrimination laws. in a context of rising house prices and heightened competition. and Mohanty 2013). As such. the private-sector expansion of uninsured money and uninsured credit embraced the nonstandard subjects who had once been summarily Published by Duke University Press . these higher-than-average default rates would be more than compensated for by the higher-than-average returns to be gleaned from rescheduling fees and the punitive conditions of subprime loans.

cannot account for the evolving. unfolding in a context of declining graduate job prospects and stagnant professional wages. But the charge of extortion. It is estimated. Above and beyond the obvious and undeniable cases of extortion. is more indicative of the full amplitude of the problem. among the ranks of the lowest-paid nonstandard workers. No doubt much of this lending was predatory. How is one to standardize risk when so few workers are protected by long-term employment contracts or reliable social insurance? And how is one to sustain the consumption levels of the Fordist era when wages are not only stagnant but also unpredictable? The actuarial requirements of federal mortgage institutions established during the New Deal and Great Society era are supremely incompatible with the contingent working conditions of the post-Fordist labor force. that up to 50 percent of subprime borrowers could have qualified for standard loans at the height of the housing boom (Brooks and Simon 2007).South Atlantic Quarterly 416  The South Atlantic Quarterly • April 2015 excluded from the New Deal social consensus. the form of money. What the subprime crisis made abundantly clear is the fragility of a system that depends on the continuous extension of consumer credit to workers who have very little chance of sustaining any form of long-term financial obligation at all. repeated by so many critics on the left. The financial crisis may have originated in the most high-risk segments of the subprime market. But what it points to is a more pervasive fault line that cannot so easily be confined to the post-Fordist underclass. for example. federally uninsured forms of money and credit that have sprung up beyond the regulatory parameters of the New Deal banking system. the rates of interest it extracted from these nonstandard borrowers proved unsustainable in the long run. however. And yet the stabilizing promise of financialization became less and less plausible as labor itself became increasingly contingent. Not surprisingly. If consumption levels have nevertheless been maintained—at extraordinary levels—it is thanks largely to the proliferation of private. that is. since it suggests that the fault line extends well beyond the lowwage service sector to implicate even the most privileged echelons of the Published by Duke University Press . seeming to confirm the notion that financialization would usher in a superior form of social democracy—a social democracy beyond the norm (Shiller 2003). and the terms of credit. symbiotic relationship between the organization of labor. The looming student debt crisis. the increasing recourse to nonstandard loan structures and exotic securitization also reflected a rational response to the evolving profile of the US workforce as more and more workers moved into the space of shadow employment and standard labor itself came under the shadow of social insecurity.

remains a technocratic exercise that cannot in itself account for the possibility of crisis (Taleb 2010. and uninsured. Krippner (2011). for example. although pertinent. as Greta R. However deftly it is designed. unpredictable wages of post-Fordist workers. The income flows that travel through an assetbacked security or collateralized debt obligation are interest payments extracted from the volatile. nonprobabilistic risk. The credit default swap. Consumer Financial Protection Bureau 2012). What the recent financial crisis made manifest. which imposes fiscal austerity on wages and welfare even while it seeks to enlist workers/consumers in the infinite obligations of credit. Conclusion The term shadow banking refers to a system of private. It follows that the possibility of default cannot be divined from the internal workings of the financial model but is intimately attuned to the endemic insecurity of post-Fordist labor. following the neoconservative philosopher Daniel Bell (1976). progressively assuming an ever more significant role in Published by Duke University Press . not only challenges the limits of actuarial risk management in a formal sense (it is not legally the same thing as an insurance contract) but also points to the political implausibility of underwriting consumer credit in a context where the average working life is unpredictable. instead searching for final causes in external economic laws or the intricacies of financial models. uninsured money creation that evolved beyond the limits of the New Deal banking system in the early 1980s. was not an extrinsic natural law of scarcity or a failure of epistemology but an internal political limit inhering in the post-Fordist mode of accumulation. Ayache 2010. has argued. then. Despite the mutual imbrication between the fortunes of labor and those of high finance. the credit default swap will never be able to calculate the average risks of an asset-backed security when its future income streams are themselves funded by the unpredictable wages of post-Fordist workers. volatile. social studies of finance—even the most avowedly critical—have remained strangely blind to the connection.South Atlantic Quarterly Cooper • Shadow Money and the Shadow Workforce  417 workforce—those who were supposed to be the winners of the postindustrial economy (McClanahan 2011. The attempt to update neoclassical or indeed performative financial models in light of the insights of fractal mathematics. Esposito 2013). Nor does it reflect the scientific failure of mathematical models to calculate the nonstandard. But what the recent financial crisis brought to light is not an extrinsic limit to redistribution first encountered in the inflationary context of the 1970s and artfully deflected by the turn to financialization.

in the proper form of the family) and on this basis distinguish between the deserving and underserving poor. Indeed. no doubt. These nonstandard interventions on behalf of private investors stand in stark contrast to the fiscal austerity measures imposed on social services—a politics that has remained more or less unchanged. When this private system collapsed. Until the crisis of 2007. the scope of central bank interventions after the global financial crisis has gone well beyond the limited and temporary lender of last resort role advocated by classical theorists of money management from Walter Bagehot to John Maynard Keynes and Hyman Minsky. it is that political activism is at its most interesting and disruptive when it refuses to settle for either the politics of austerity or the constitutive exclusions of consensus. although applied with varying degrees of intensity. If any lesson can be drawn from the social movements of the late Fordist era. is the political context in which decisions concerning fiscal austerity are made. Having undertaken such extraordinary measures to bail out private investors. A truly ambitious anticapitalist critique. As Andrew Bowman and colleagues point out. “central banks after the crisis have operated in a ‘post-normal’ world” of non-Gaussian risk. Whether this change in context will lead to some kind of new social democratic compromise. since the late 1970s. this elaborate system of money and credit creation operated without the formal backstop of the Federal Reserve. such a compromise seems far from the political agenda. however. its participants claimed to have developed their own parallel system of private risk management and collateral—a claim that was duly confirmed by the AAA classifications granted by ratings agencies. remains to be seen. indeed. What has changed. cannot limit itself to the task of reconstituting labor as the foundation of value. to some effort by the state to recollateralize the risks of labor. then.e.. Published by Duke University Press .South Atlantic Quarterly 418  The South Atlantic Quarterly • April 2015 domestic credit and global asset markets. 2013: 457). involving “nonstandard monetary-policy crisis measures applied on a heroic scale” (Bowman et al. in the process transferring the nonstandard risks assumed by private investors onto the public balance sheet. At present. in any case. is that moments of social democratic consensus such as that achieved during the New Deal always come at the price of new lines of exclusion and new inscriptions of social value—divisions of labor and welfare that invariably anchor value in the proper reproduction of sex and race (i. What I have attempted to suggest. it is no longer so simple for the central bank to deflect calls for political accountability or to hide behind the screen of scientific expertise. the Federal Reserve was willing (some would say compelled) to absorb unprecedented levels of private debt onto its books.

For his application of fractal mathematics to economics and his critique of equilibrium theory.” New Left Review 20: 5–71. On the French welfare state. 2010. Shadow Banking: A Review of the Literature. I here follow Dick Bryan. Much of this work has precedents in poststructuralist philosophy. on the New Deal in the United States. Federal Reserve Bank of New York Staff Report No. who locate a minimal definition of money in the quality of “liquidity”: “One thing about money cannot be disputed: it must relate to some assets that are liquid in the sense of being readily convertible into something else without significant loss of value. 580. New York: Federal Reserve Bank of New York. and Chris Jefferis (forthcoming). Fiona. Allon. and Adam B. and for a consideration of the law of averages in nineteenth. The term shadow banking was first coined by the US economist Paul McCulley (2009). Giovanni. Tobias. All other forms of debt and credit are characterized by less immediate and less universal powers of transferability. and the rise of social insurance. 4: 366–81. “The Social and Political Economy of Global Turbulence.South Atlantic Quarterly Cooper • Shadow Money and the Shadow Workforce  419 Notes 1 2 3 4 5 6 For a discussion of the peculiar legal space—“elsewhere and nowhere”—opened up by shadow banking. see Martin. For a complementary reflection on the impact of anticolonial movements. and their transferability may be limited to certain classes of assets or may exact a significant loss of value. On the sources of Deleuze’s thinking in topological mathematics. References Adrian. This article focuses on the domestic pressures that led to the collapse of the New Deal and Bretton Woods monetary consensus. see Ewald 1986. see DeLanda 2002: 9–44. 2012. money itself may well represent a promise to pay and therefore a form of debt. There exist numerous historical accounts of the relationship between probability calculus. 2003.and twentieth-century statecraft. For example. Ashcraft. into other forms of value. at minimal cost. see Witt 2004. “Speculating on Everyday Life: The Cultural Economy of the Quotidian. I prefer the term liquidity to exchangeability because the latter seems to imply that only the measurable can circulate. Gilles Deleuze offers a philosophical formula for conceptualizing the liquidity of uninsured risk when he attempts to theorize the repetition of irreducible inequivalence. but what distinguishes it from other debt and credit instruments is the expectation that it is immediately and universally transferable. see Desrosières 1998. Published by Duke University Press . Arrighi.” Journal of Communication Inquiry 34. see Mandelbrot 2006. The notion of repeatable difference also has affinities with the fractal mathematics of Benoît Mandelbrot. their maturity dates may require a certain waiting period. no. at a speech delivered to a Federal Reserve conference in 2007. this issue. statistics. Michael Rafferty. Illiquid money is either an oxymoron or a definition of monetary crisis.” In other words. See Deleuze 1994: 280–325. see Palan and Nesvetailova 2014. But see Ayache 2010 and Taleb 2010 for critiques of neoclassical equilibrium economics and the mathematics of the normal distribution developed within the world of financial practitioners.

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