This lecture entitled “Anthropology, Policy, and the Global Financial Crisis” was delivered by Gillian Tett, author of the best-selling Fool’s Gold, U.S. managing editor of the Financial Times, and social anthropologist. Read about Gillian Tett’s book, Fool’s Gold, in the Guardian or the Economist. She also spoke at the AAA last year. Here’s the video of her AAA 2010 talk, ‘Silence and Silos: The Problem of Fractured Thought in Finance’.
How did a person with a PhD in social anthropology manage to become the managing editor of the Financial Times, and what room is there for other anthropologists in current economic debates and policy development? This was the main focus of Gillian Tett’s Distinguished Lecture at the American Anthropological Association on a chilly Friday night in Montréal.
Tett is a remarkable exception to the rule of hiring people with degrees in economics and the hard sciences. Indeed, before 2007, Tett would rarely admit that she gained her doctorate in Anthropology, because to most people in economics, research that examined social patterns looked irrelevant or suspicious. One man even suggested to her that anthropology was something that hippies do – though, Tett joked to us, on these days hippies on Wall Street seems normal.
Since the crisis of 2007, however, Tett is finding that more and more economists are aware that their models don’t necessarily predict economic behaviour: home owners, protesters, and investment bankers alike engage in all sorts of irrational behaviour. She tellingly refers to Alan Greespan’s admission to U.S. Congress that his failure to predict the crisis resulted from a flaw in his thinking. Observers quickly jumped on this statement as a confession that economic models are fallible because they do not take into account a human element.
While Greenspan has since backtracked on this admission, claiming that commentators misread his statement in what amounts to ‘a flaw in thinking about this flaw in thinking’, Tett tells us that Greenspan does admit that common assumptions about the incentive structure inside banks was completely off the mark. Banks were not, in fact, incentivized to minimize risk: rather, they were oriented towards competing for the title of ‘too big to fail’, because they knew that the government would then bail them out. This granted them a license to essentially punt the bank, knowing that they would never go under.
It’s not just assumptions about economic models and incentives that have been questioned since 2007. Another fascinating development is a reversal of the export of economic knowledge and policy practice around the globe. Whereas it has long been assumed that developed economies develop best practices and export them to emerging markets, since 2007 this knowledge flow has partially reversed. Traders in developed economies who were not used to working with high levels of risk (especially political)–because they believed it did not affect their models–are now depending upon traders in assumed unstable political economies, such as Argentina, whose economist are much better prepared for the unexpected. Thus the myth of exponential progress is being tested in social terms as well as economic terms.
Tett contends that economies must learn to ‘share pain’ to cope with changes and the depletion of resources. Some cultures are better prepared to do this than others: in Japan, for example, banks made wage cuts across the board in response to crisis, and avoided retrenching their workforces. This has not happened in the U.S., where instead of spreading losses, companies fire their lowest-paid workers and give their directors large bonuses. Why on earth would you pay bonuses to people responsible for bad decisions? After all, Tett half-jokes, ‘If nuclear power plant managers were paid according to an incentive structure similar to banks, they’d all blow up.’ She blames this policy on a national mindset of abundance, contending that Americans assume that resources are infinite, and ‘have no idea how to divide up a shrinking pie’. Japan, in contrast, is a small nation that is aware that it must use its resources wisely.
How, then, can anthropologists contribute to these new directions in economic discussions? Tett cites three main areas that anthropologists are good at analyzing: cohesion, complexity, and credit. What is it that allows people to stick together on the micro and regional levels? Why is it that people are camped out in Zucotti Park, and how do we share the pain of resource redistribution? Having studied social systems for over a hundred years, anthropologists have the training to ask these questions and map out the ways in which we connect at different social levels.
Complexity is another very important issue. We live in a society that is increasingly connected in a myriad of ways. More than ever before, people have the technologies to participate in society, to be part of the world’s social system and economy. Yet the global economy is so complex that very few people really understand how it works. The rest of us have to trust that the people at the top know what they are doing. Anthropologists such as Karen Ho and David Graeber have already begun to do the translation work required to de-obfuscate the workings of the economy and explain them to a broader audience. This can be a challenging task because, as Ho especially illustrates, bankers themselves don’t often have an accurate picture of what they are doing, especially when it comes to understanding their own culture.
The third issue is credit, whose operation is based on the trust people have for each other. Tett asks, ‘In a complex society with dependence on an elite, what happens when trust breaks down?’ Few people discuss trust, let alone do research on it. And the academic environment rarely encourages engagement with these kinds of issues.
Tett suggest that this is because anthropologists tend to be dissidents who distrust power and are reluctant to become entangled with it. We also dislike being in the public arena, possibly because we are so used to ‘hiding in the bushes’ for our fieldwork. We also devalue our work incredibly: Tett reports that one survey of anthropologists showed that we are mostly pretty happy with our pay, and points out that if the same survey were undertaken with economists, you would get an entirely different result.
Tett believes that anthropologists have more chance right now of getting ourselves heard than we have ever had before. She urges us all to ‘get savvy and get out of the bushes’, learn the system and not be shy in playing it. This is the only way we’re going to mobilize our work and get a voice in the current debate. She calls for us to produce ‘a hundred books like David Graeber’s’ (referring to his book Debt: The First 5000 Years) that challenge our long-held, institutionalized economic assumptions. As she says, ‘The diversity of anthropology done today is incredible; the tragedy is that no-one is aware of it’.