Awakening to the Promise and the Failure of
Neoliberal Financialization of Fiduciary Money

An Innovative New Social Narrative of Social Decision Making through the Institutional Social Structures of Civil Society, Enterprise, Finance and Government to Shape an Economy of Technological Sufficiency, Social Equity and Habitat Longevity for Living Our Best Lives in the 21st Century, and beyond…

and within Finance, a new 21st Century Global Citizenship in a New 21st Century Global Commons of Fiduciary Money

The three core principles of the Neoliberal social narrative of the social structures for social decision making are:

The Invisible Hand – all social decisions made by society are the sum total of the individual choices we each make for ourselves, individually, as being in our own best interest as we each determine for ourselves what we believe is in our own best interest (this is less about selfishness, and more about self-determination)
The Growth Imperative – unqualified quantitative growth in the volume of transactions taking place in the economy is THE path to a future of more that will be better for more
Government vs. Markets Exclusivity – the only two social structures through which individual choices are aggregated into social decisions are Government and Markets and as between these two, the better is Markets; Governments’ only true function is to step in when Markets fail, to socialize the costs of that failure, make necessary regulatory adjustments to prevent a repeat of that precise failure, and then step away once the Markets get running again
All three are false.

We can talk about how Markets are better than Aristocracy (pre-19th Century Government) for making decisions for society about financing for enterprise to shape the economy, but Markets are not the only alternative to Aristocracy (modern day Family & Friends) in our modern Continuum of Capital, and Government today is no longer an Aristocracy (although Neoliberalism is working hard to create a New Aristocracy of Asset Management today).  So, we need a new social narrative that deals with the full continuum of contemporary capital structures, in which Markets are only 1 of 6, and Government also has a role in financing enterprise to shape our economy that is not just to correct for Market failures.

Progress Gets Stripped of Social Consequence To Become Growth.

Exchanges & Funds evolved out of the ship shares trading business that began in Holland in the 16th Century. During the 18th Century, the practice of selling shares in ship voyages evolved into the practice of selling shares in factories that evolved during the 19th Century into an authentic version of our modern practice of financing large-scale, long-lived enterprises (like steel mills, railroads, telegraph and telephone lines, newspapers, etc.) by securitizing corporations, dividing them into shares issued for trading on share price in the share price trading markets that we call Exchanges & Funds.

In the beginning, and authentically, these share price trading markets were peopled by individuals buying and selling shares with their own money, for their own account, placed bets on that quintessentially 19th Century expectation of PROGRESS as material advancement towards a better future through technological innovation, economies of scale and geopolitical expansion into an infinitely receding horizon of space and time: The Frontier.

By the early 20th Century, these frontiers were filling up, as Western economies of industrial manufacture and mass market merchandizing encircled the globe.

During the Mid-Century, Space replaced Earth as the frontier for infinite expansion, but that ended at 10:58 pm EDT on July 20, 1969, when Neil Armstrong, Mission Commander of the Apollo 11 Moon Mission stepped out of the Lunar Lander Eagle, taking his historic

“one small step for man. One giant leap for Mankind.”

But the step Neil took was not the leap we were expecting.

We ventured into Space expecting to find a New Frontier for ongoing endless expansion. Instead, when we got there, all we found was rocks.

And this New Reality. We have the Earth, and well and truly ours.

Also, it is what we have.

Will it be enough?

Markets don’t judge. Market participants do.

That’s how markets are designed to work. That’s the theory of the Invisible Hand. It works only when the markets are dominated by individuals who are broadly representative of the population more generally, and who are free to make choices according to their own values, and are not tyrannized by The Growth Imperative.

Within the 19th Century social narrative of Progress, this is how the markets are conceived: market participants make buy, hold and sell decisions in speculation on which technological innovations for economies of scale would drive Progress in a new direction.

As that narrative of Progress, which became the American Dream of suburban sprawl in the Post-War years, crashed into Neil Armstrong’s New Reality of the earth is what we have, the markets needed a new story to generate trades.

Neoliberalism proposed a new story of Progress stripped of social consequence, to become pure Growth: unqualified, quantitative increases in transaction volumes from one period to the next, measured in prices paid in money, without regard to who benefited such increases, and who got hurt by them.

Individuals trading with their own money, for their own account, in pursuit of their own proper purposes, idiosyncratically and opportunistically, wouldn’t really be inspired to trade by such a reductionist, extractive, externalizing, dehumanizing, uncaring and recklessly unreckoning narrative of Growth for Growth’s sake. It just doesn’t make any common sense.

Professionals trading professionally would. Especially of they were trading professionally with someone else’s money.

Where could these professionals find large sums of other people’s money that market makers could use to make money making markets on unqualified Growth?

Endowments had money.  But the really big money was in Pensions, and retirement savings, more generally. What we call Fiduciary Money.

So Neoliberalism proposed financializing this Fiduciary Money, using it for speculation on market movements in the markets for trading on shares prices. 

We are seeing this Neoliberal stripping of Growth from social consequence in the anti-ESG campaigns that are being waged in the US, especially, arguing that Asset Managers Managing Assets for Asset Owners (in this case, specifically, public pensions) MUST BE FREE to pursue “purely financial” returns, without any requirement that they give any consideration of the social consequences of these so-called “purely financial” financial decisions.

Market makers liked it. After all, markets only meed growth in share price to deliver the liquidity that makes them work. Where that growth is coming from is not really important to the successful functioning of the markets. So reducing PROGRESS to GROWTH worked just fine.

And it sold like hotcakes!

Especially once the market makers were able to seize control of Fiduciary Money – Pensions & Endowments – and use it to churn the market, buying and selling on GROWTH stripped of all social nuance and consequence.

We have seen this happen before, market makers seizing control of institutional money to transform share price trading into speculation on Growth stripped of social consequence.

Neither time did it work out well.

The first time was The Gilded Age, when market makers monopolized insurance money to fuel a speculative asset pricing boom that concentrated wealth and power in the hands of the trusts.  That boom went bust in the Panics of 1893 and 1907, almost bankrupting the US Treasury and requiring Teddy Roosevelt to ride in to break up the bursts, while state legislatures made it illegal for insurance companies to speculate on share prices with policyholders’ premiums.

The second time was The Roaring Twenties, when market makers monopolized depositary banking to fuel another speculate asset pricing boom that concentrated wealth and power in the hands of corporations. That boom went bust in the Crash of ’29 and The Great Depression, requiring FDR to regulate (and separate) both commercial and investment banking, and to create worker pensions and social safety nets.

This time, it is happening with Fiduciary Money – Pensions & Endowments – fueling a share price trading boom that is concentrating wealth and power in the hands of Asset Managers.