Imagined Futures

Fictional Expectations and Capitalist Dynamics

Jens Beckert

• Publisher: Harvard University Press
• Year: 2016
• ISBN:
  9780674545892
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

In a capitalist system, consumers, investors, and corporations orient their activities toward a future that contains opportunities and risks. How actors assess uncertainty is a problem that economists have tried to solve through general equilibrium and rational expectations theory. Powerful as these analytical tools are, they underestimate the future's unknowability by assuming that markets, in the aggregate, correctly forecast what is to come.Jens Beckert adds a new chapter to the theory of capitalism by demonstrating how fictional expectations drive modern economies—or throw them into crisis when the imagined futures fail to materialize. Collectively held images of how the future will unfold are critical because they free economic actors from paralyzing doubt, enabling them to commit resources and coordinate decisions even if those expectations prove inaccurate. Beckert distinguishes fictional expectations from performativity theory, which holds that predictions tend to become self-fulfilling prophecies. Economic forecasts are important not because they produce the futures they envision but because they create the expectations that generate economic activity in the first place. Actors pursue money, investments, innovations, and consumption only if they believe the objects obtained through market exchanges will retain value. We accept money because we believe in its future purchasing power. We accept the risk of capital investments and innovation because we expect profit. And we purchase consumer goods based on dreams of satisfaction.As Imagined Futures shows, those who ignore the role of real uncertainty and fictional expectations in market dynamics misunderstand the nature of capitalism.

ONE

INTRODUCTION

THROUGHOUT MOST of history, the level of economic wealth has changed very little. Only with the onset of the industrial revolution did it begin to accelerate, leading to unprecedented levels of economic production and affluence (Figure 1.1). This shift began in a few European countries and in North America, but ultimately, over the course of the twentieth century, it spread to almost all regions of the world; today economic and social development across the globe is shaped by the dynamics of capitalism, in the form of growth as well as recurrent economic crises. What explains the extraordinary momentum of the capitalist economy?

Scholars of capitalism trace the dramatic creation of wealth that began in the late eighteenth century to a plethora of factors: among them are technological advances, institutional changes, the division of labor, the expansion of trade, commodification processes, competition, exploitation, the increase in production factors, and cultural developments.¹ The deep crises capitalism has witnessed again and again are attributed to overaccumulation, regulatory failure, lack of investment and consumption, psychological factors, and miscalculations of risk.²

FIGURE 1.1. Growth per capita of world GDP. Data source: Maddison (2001: 264, Table B-21).

As comprehensive as these explanations are, they pay only limited attention to another, no less essential aspect of capitalist dynamics: its temporal order. Changes in temporal orientations of actors and the enlargement of time horizons into an unknown economic future are crucial components of the genesis of the capitalist order, and of its dynamics. This holds for economic growth as well as for economic crises. Capitalism is a system in which actors—be they firms, entrepreneurs, investors, employees, or consumers—orient their activities toward a future they perceive as open and uncertain, containing unforeseeable opportunities as well as incalculable risks. The spread of competitive markets and the expansion of monetary exchange have anchored this temporal orientation toward an open future in the institutional fabric of the economy and society. But it is also anchored in the unique human ability to imagine future states of the world that are different from the present. As they seek to make profit, augment their income, or increase their social status, actors create imaginaries of economic futures, the achievement or avoidance of which motivates their decisions. The temporal disposition of economic actors toward the future, and the capability to fill this future with counterfactual economic imaginaries, is crucial to understanding both how capitalism diverges from the economic orders that preceded it and its overall dynamics. This book investigates the impact of such imagined futures on the dynamics of capitalism.

The Future Matters

Making imagined futures a cornerstone of understanding the dynamics of capitalism is a distinct departure from most current scholarship on the economy in sociology and political science. Over the past thirty years the slogan “history matters” has become a rallying cry for both historical institutionalism and sociology. To explain current outcomes, historical institutionalists investigate the long-term structural trajectories that form developmental paths and shape choices in the present (Mahoney 2000). Institutional paths differ from country to country and cannot be easily abandoned; in general, only external shocks are seen to cause a shift in these trajectories. Sociological institutionalists, though they place a stronger emphasis on cognition, are similarly oriented toward the past, and see social change as a process of isomorphic adaptation to existing institutional models (DiMaggio and Powell 1991).³ Political scientists and sociologists concur in their assumption that present outcomes are formed by past occurrences.

But not all disciplines in the social sciences agree that the present is largely determined by the past. In a chapter on the concept of temporality in sociology, Andrew Abbott (2005) pointed out that sociologists and economists apply opposing strategies when explaining events in the present. “While sociologists see present events as a final outcome emerging from the past, economists reason backwards from the future: Decisions are explained by the present value of expected future rewards” (406). In a similar vein, Arjun Appadurai (2013: 286) observes that “economics has consolidated its place as the primary field in which the study of how humans construct their future is modeled and predicted.” While much of economics includes the future in explanatory models (see Chapter 3), the capacity to imagine futures should play a much larger role in explanations of economic action in sociology and political science. This is particularly true when it comes to the capitalist economy.

The capacity to imagine counterfactual futures is of course a human characteristic that exists independent of capitalism. Imagined futures are crucial to understanding the development of modernity in general; and they exist, though in different forms, in traditional societies as well. Religious eschatology, for instance, projects futures unrelated to the economy. By the same token, the capitalist economy’s orientation toward an open economic future does not exist solely at the level of action orientations: the capitalist economy institutionalizes specific systemic pressures that enforce a temporal orientation toward future economic opportunities and risks. Only by closely examining these institutionalized pressures may we comprehensibly shed light on the role of actors’ temporal orientations with regard to economic processes.

In particular, two institutional mechanisms enforce the future orientation of actors in capitalism: competition and credit. The ceaselessly changing environment that has accompanied the spread of market competition has forced actors to remain alert to threats from other actors who deviate from established practices as they seek new opportunities and ways to overcome threats they themselves perceive. Constant forward momentum is necessary if one is not to fall behind. Competition forces firms to seek more efficient forms of production and introduce new products to the market. As one firm increases productivity or offers new products, all its competitors are pressured to innovate and develop even more efficient forms of production and better products. The pressure to succeed in competition has also been transferred to employees, whose prospects and social status depend on their success in the labor market. Competition forces them to acquire and maintain marketable skills by anticipating and adjusting to new labor market demands (Chapter 6). The pressure extends also to consumers, in that they express their social status through the purchase of ever-new consumer items (Chapter 8).

The “expansive dynamism of capitalism” (Sewell 2008) is also institutionalized through the credit-based financing of investments. Credit provides access to resources to which no “normal claim” (Schumpeter 1934: 107) exists. The claim is only justified through future success. Credit is a central pillar of capitalist growth because it allows firms to engage in economic activities that could not otherwise be undertaken, using resources they have yet to earn. At the same time, the interest charged for credit forces firms to produce products of higher market value than the investments being made in them. The “claim” to capital must be earned through the expansion of economic value. In this way, the credit system both provides opportunities for growth and enforces that growth. Firms that fail to produce sufficient surplus lose access to capital and are eventually wiped out from their markets.

Economic and social competition and the financial system create both opportunities and a systematic demand for dynamic change, which forces actors to pursue the economic opportunities to be found in imagined futures. This “restlessness” (Sewell 2008) keeps capitalist economies in “dynamic disequilibrium” (Beckert 2009), which is constantly upended through the decentralized decisions of market actors operating within the institutional constraints of competitive markets and a monetary economy. Capitalist economies destabilize and stabilize themselves by continuously undermining their own historical forms: firms relentlessly seek new profit opportunities, employees strive to build careers, consumers hunt for new consumption experiences. Surviving and thriving in an environment in which current forms will not last demands that firms, employees, and consumers be constantly oriented toward a future they cannot yet see.

Although temporal orientation toward the future is a cornerstone of capitalism, it is not a cornerstone of the study of capitalism; it is taken up far more often in popular culture than in the social sciences. The “American dream” is perhaps the most significant cultural representation of imagined futures assumed to shape economic attitudes and motivation. The dream of upward social mobility based on equal opportunity is a crucial motivating and integrating force in American society. But despite the obvious importance of imagined futures, few sociologists have seen them as particularly useful, let alone central, to understanding capitalist dynamics. Two notable exceptions are Max Weber ([1930] 1992), in his studies on Protestant ethics, and Pierre Bourdieu (1979, 2000), particularly in his accounts of the social and economic transformations in Algeria in the mid-twentieth century (see Chapter 2). Scholars from other disciplines have highlighted the role of imagined futures in general and, more specifically, the role of imaginaries. In economics, George Shackle (1979) has assigned the greatest significance to the role of imaginaries in the economy, thus foreshadowing many of the arguments developed in this book. More recently, Richard Bronk (2009) advanced the idea that the way we imagine the indeterminate future structures much of economic behavior. Bronk discusses in detail the work of many economists and philosophers since the Enlightenment and the role of imaginaries in their thinking. The anthropologist Arjun Appadurai (1996, 2013) has called attention to the role of imaginaries of the future in the creation of the modern subject and of political participation. Benedict Anderson’s (1983) now classic Imagined Communities highlights the role of imaginaries in the process of nation building, but Anderson focuses more on the past and the present than on the future. There have also been efforts to integrate the role of imagined futures into the field of general sociology (see Chapter 3).⁴ Most prominent, perhaps, are the works of Alfred Schütz (1962), Niklas Luhmann (1976), and Cornelius Castoriadis (1998). More recently, Ann Mische (2009, 2014) embarked on the project of a sociology of the future, critiquing sociological approaches that explain present action only in light of past occurrences.⁵ Finally, in specialized sociological fields such as innovation and technology studies, there is a vibrant discourse on the role of projections of the future in the development of new technologies (see Chapter 7). These move forward through imaginaries, which are a “cultural resource that enables new forms of life by projecting positive goals and seeking to attain them” (Jasanoff and Kim 2009: 122).

This book builds on these formative contributions, arguing that imaginaries of the future are a crucial element of capitalist development, and that capitalist dynamics are vitally propelled by the shaping of expectations. Institutional trajectories from the past are not irrelevant to explaining outcomes, of course, but, based on the contributions mentioned above, sociologists would do well to shift more of their attention to the future, particularly to the images of the future that actors nourish. Furthermore, temporal orientations and perceptions of the future are relevant far beyond the economic realm investigated here, and may indeed underpin a fresh paradigm in sociology. This, then, is the core hypothesis of this book: “history matters,” but the future matters just as much.

Microfoundations

Investigating economic phenomena is an important area of research in sociology and political science. However, economic sociology and political economy often differ in the level of analysis they choose. Economic sociologists have, for the most part, investigated the “embeddedness” of economic action in order to show that economic outcomes can only be explained with reference to social life—its structure, institutions, and culture—and the way it shapes opportunity structures and actors’ beliefs. Often embeddedness is seen as a means of allowing the reduction of uncertainty. Economic sociology has focused on the micro- and mesolevels of analysis, and scholarship in this field frequently consists of case studies showing the different ways in which economic action in contemporary economies is embedded.

The institutional approach of political economy, by contrast, focuses on explaining macrolevel outcomes, investigating the development of the capitalist economy in relation to the state and to dominant interest groups. Much research in this tradition has attempted to explain the institutional differences among developed capitalist regimes, as well as the macroeconomic consequences of these differences (Hall and Soskice 2001b). More recently, the investigation of capitalism as such has (again) become a topic of increasing interest (Streeck 2011).

Some institutional approaches in political economy are founded on the assumption that changes at the macrolevel—in the law, in consumer demand, in inflation, in wealth distribution, or in technologies—need not be described with any specific reference to actors (Thelen and Steinmo 1992). In other words, they see no need to attend to the processes of social interaction that underlie the macrodevelopments they observe. The recourse to the distribution of power resources, for instance, explains individual decisions and collective outcomes (Hall and Taylor 1996; Korpi 1985). Other approaches in political economy do focus on the microfoundations of economic dynamics, but assume that actors are rational agents or that they follow cognitively determined scripts (Hall and Taylor 1996; Korpi 1985; McDermott 2004; Shepsle 2006).

Capitalist development stands at the center of political economy, and it is the topic addressed in this book.⁶ However, the book does not provide a new structural explanation of capitalist dynamics, nor establish a more refined rational actor theory, behavioral approach, or power resource model. Rather, it explores how macrodynamics are anchored in social interaction and interpretations of social reality. In this sense, it draws insight from those strands of economic sociology that focus on the interactional level; however, unlike most of this scholarship, here it is only a starting place in an attempt to understand and explain the broader question of capitalist dynamics.

Thus, this book proceeds from a microperspective and uses action theory as its starting point. Any approach to capitalist dynamics that includes the openness of the future must proceed from the social interactions that take place in the economy. An analysis of imagined futures as a force in capitalist dynamics focuses on the social interactions that underlie both the buoyant expansion and sudden crises of capitalist economies. The future enters social interactions through perceptions of the social world, which are anchored in actors, even if these perceptions are socially shaped and should thus not be understood in purely individualistic terms.

Laying the microfoundations for an understanding of capitalist dynamics is an interpretative approach that makes it possible to bring economic sociology and political economy into closer dialogue with one another, using instruments primarily developed in the field of sociology to explore a question that has in current scholarship been addressed mostly by political economists.

This implies that the book sympathizes with endeavors in economics and political science that attempt to discern the microfoundations ...

Table of contents

• Cover
• Title Page
• Copyright
• Dedication
• Contents
• Acknowledgments
• Epigraph
• 1. Introduction
• I. Decision-Making in an Uncertain World
• II. Building Blocks of Capitalism
• III. Instruments of Imagination
• 11. Conclusion: The Enchanted World of Capitalism
• Notes
• References
• Index