William Cobbing

At least for the last several decades, since the fall of the USSR, modern capitalism has been the only game in town, the dominant structure of production.

Thatcher and Zizek taught us about TINA; traditional socialist parties across Europe have remodeled themselves to work within, rather than against, modern capitalism; Fukuyama proclaimed the End of History in the form of western-style liberal capitalism; and Fisher describes capitalist realism as the dominant ideology that pervades all areas of our contemporary society. 

Modern capitalism is why we concern ourselves with the price of crude oil, with government deficits and the latest unemployment figures. It’s why we worry about the balance of trade, the latest GDP figures and Chinese export statistics. These things are real. They matter. These things tell us how modern capitalism is working, and we need them to work because There Is No Alternative. 

Yet since the 2008 financial crisis, it’s become clear to many of us that our capitalist economy, is in artificially suspended animation. How can it be capitalism if it isn’t real? When it becomes a sort of postmodern work of fiction? We have entered a bewildering landscape of economic postmodernism, where value is surface only and where the connections between signifier and signified have been utterly severed. 

Since the crash, conjuring tricks like leverage and fractional reserve banking have been more widely revealed. The unprecedented and astonishing programme of trillion dollar quantitative easing and a barrage of other government interventions have woken us up to the economic world we inhabit. A place where value is almost totally disconnected from the underlying material reality.

Fredric Jameson observed that Marx’s ‘fictitious capital’ was entirely disconnected from the real economy, preempting the crash by many years. And this is not just the view of a few relatively obscure circles of Marxist academia – ‘volatility guru’ Christopher Cole of Artemis Capital Management writes:

Modern financial markets are a game of impossible objects. In a world where global central banks manipulate the cost of risk, the mechanics of price discovery have disengaged from reality … In the postmodern economy … our fiscal well-being is now prisoner to financial and monetary engineering of our own design. Central banking strategy does not hide this fact with the goal of creating the optional illusion of economic prosperity through artificially higher asset prices to stimulate the real economy. In doing so they are exposing us to all hyperreality or what Baudrillard called ‘the desert of real.’

Much of what we tend to think of as modern capitalism is in actuality an ‘economy of pure sign functions.’

John Lancaster dates this development as early as 1973, with the publication of the Black and Scholes formula, which helped price and then catalyze the market for derivatives – now incredibly worth trillions of dollars and many times the value of global GDP. Derivatives make a mockery of the real. 

Derivatives are worth trillions of dollars. Money is printed out of thin air by banks and by central banks. Implicit and explicit state subsidies are worth billions of pounds. GDP figures are not a real reflection of the state of the economy. The FTSE rises and falls in response to animal spirits and perceptions of perceptions of perceptions. Our economic indicators are now simulacra – disconnected from the practical economic mode of production. This is a make-believe, ersatz economy. Is any of this real? There is no real economy. 

Postmodernism is a structure of feeling, one that has been visible in our cultural context over the last few decades. So how, for so long, did so many of us miss its emergence in the economic sphere? We know from Marx and others that we must consider the interdependence between ideology and material economic conditions. With postmodernism buzzing around the cultural superstructure, shouldn’t we have spotted how it also characterized much of the economic base?

Hugh Hendry, a fund manager, wrote in a recent letter to investors how there are “times when an investor has no choice but to behave as though he believes in things that don’t necessarily exist”, or investing in assets that have no qualitative support. He used the analogy of the Matrix’s blue and red pills, now well understood in the financial services industry, to describe investment strategy. For a lay reader naive enough to believe that financial markets were still in some way connected to the real, this is frightening stuff. Traders know the game will end in tears, they still play.

“Lord make financial returns correspond to real economic activity, but not yet!”

Stop worrying and learn to lie.

–Dan Gregory used to work for the UK Treasury and Cabinet Office. He now works under the banner of