Re-thinking the Liquid Core of Capitalism with Hyman Minsky

Introduction

Before the financial crisis of 2007–8, finance and its governance were widely seen as technical issues, best left to professional economists and policymakers. Since then, finance has lost that technocratic aura and has become much more legible and politicized. In this changing context, it is not clear that critics of finance are doing a good enough job. It seems that just as the black box of finance has been opened up and just as it has become a topic of widespread interest, its critics are doubling down on a very specific line of critique – a line that is not without merit but is also limiting and defensive. That critique consists in the notion that we can view financial speculation as the central problem, and the associated idea that we can distinguish between ‘good finance’ (i.e. finance that works in the service of productive activity and the general interest, typically associated with the manufacturing economy of mid-20th-century Fordism) and ‘bad finance’ (i.e. finance that is speculative, that seeks to appropriate without contributing and aims to make money by gambling, typically seen as emblematic of the neoliberal economy that has emerged over the past four decades).

An argument that was frequently heard in the aftermath of the 2007–8 crisis was that we had forgotten a more radical Keynes, one whose insights could not be integrated into mainstream economics. We will refer to this position as ‘post-Keynesianism’ – which is how it has come to be known in heterodox economics, although it needs to be emphasized that this notion of a more radical Keynes can be found not just in heterodox economics but also in economic sociology and political economy. Key to the ‘post-Keynesian Keynes’ is an emphasis on the role of uncertainty and the way this differs from risk. Because mainstream economics thinks in terms of objective risk (uncertainty that can be statistically quantified), it has difficulty with situations where we do not have such probabilistic knowledge about the future, where we are genuinely in the dark about where things are going. It is this element of true, irreducible uncertainty that a radical Keynes is seen as bringing back in. From this angle, speculation is a problem because it does not respect the limits of our knowledge – it is a kind of investment that is driven not by the accurate assessment of underlying values but by irrational sentiment and unrealistic expectations and so leads to unsustainable levels of debt and financial instability. When speculation takes over, financial growth is no longer driven by the logic of efficient markets but by irrational ‘animal spirits’ and the ‘fetish of liquidity’.

This critique of financial speculation can be seen as a special case of a wider socio-cultural critique of modernity. The latter takes modernity to task for its acidic nature, its tendency to destroy the social foundations and organic texture of human life and to leave people adrift in an ocean of contingency and uncertainty – ‘all that is solid melts into air’, as Marx famously put it. We can find echoes of this perspective across a wide range of classic and modern authors, but among contemporary social theorists the critical conceptualization of modernity as a force of liquefaction has been most prominently and powerfully formulated by Bauman (2000, 2005). The critique of liquid modernity is often employed with caution, as it can easily give rise to a certain nostalgia for a more solid past. But even though it is well-known that the political valence of this line of critique is flexible, it has remained a mainstay for critical theory in a broad left frame. Bauman certainly was not without appreciation for some of the achievements of liquid modernity, but the critical thrust of his core argument nonetheless works through an implicit appeal to the superiority of more cohesive communal structures erected on sturdier values and secure foundations.

The economic critique of speculation draws legitimacy from the wider influence of that more general cultural critique. This is clear enough in Keynes’ own work, whose economic theories certainly had their own integrity but were nonetheless stamped by his disdain for capitalism’s vapid, speed-driven culture that produced nothing memorable or lasting. But we should consider that this is not a one-way street, and that the longevity of the critique of modernity as a force of liquefaction also reflects the implicit reliance on certain under-examined ideas about how markets work. In other words, we may want to consider that the reason that ‘all that is solid melts into air’ as a line of critique has had such longevity, despite widespread awareness of its ill-defined parameters and conservative overtones, is because the critique of capital in social and cultural theory has remained at such a generic level. Bauman’s emblematic understanding of liquid modernity is limited in very specific ways by a lack of sustained engagement with economics and finance. Of course, arguing this point in detail would us take well beyond the scope of this paper, and here it serves primarily as a framing conjecture – we submit that there may be a significant social theory payoff for engaging in greater depth with core problematics of political economy. We will develop this point by engaging with the work of economist Hyman Minsky, whose understanding of capital and value can help us re-set some of the terms of debate, providing us with a set of political economy concepts that also have significant purchase on key questions in social theory.

We should therefore start by zooming in on what exactly the problem is with the post-Keynesian approach. It is notoriously difficult to specify the objective limit beyond which the growth of speculative credit is no longer sustainable. Although the idea that the growth of speculative finance has gone beyond an objective limit has some intuitive plausibility, it has never translated into a meaningful ability to predict crises, let alone to identify a limit point. In fact, the history of financial commentary is littered with predictions of financial crisis that have turned out to be incorrect. What such predictions fail to consider is that a speculative element is always at the heart of the logic of capital – the idea that we can have capital without a speculative aspect is misleading. Of course, such an argument could easily morph into a way to dignify the self-presentation of modern finance through notions of efficient markets, in which speculation and liquidity feature only in terms of the logic of arbitrage. That is not what we will be arguing – instead, our aim is to propose a perspective on the logic of capital that is critical yet does not rely on an unacknowledged or implicit foundationalist appeal.

Key to this attempt is a more precise differentiation and re-articulation of two concepts: speculation and liquidity. We propose not to use speculation as a term with any necessary critical valence: in the postfoundational world that we inhabit, value is inherently and inescapably speculative, never simply representational or passively symbolic. Of course, particular choices or constructions can be more speculative than others or they can be speculative in qualitatively different ways, but we will never get a handle on this problem by assessing the speculative dimension against a set of imagined foundational values. Instead, it requires that we introduce a perspective that is more attuned to capital’s temporal logic. To this end, we need a more accurate understanding of liquidity. Liquidity should precisely not be seen as a universal condition of modern life: in an inescapably speculative world, liquidity becomes a practical problematic – a resource or a constraint. Many of us will at some point experience an acute lack of liquidity and feel that to be a major practical problem. Holding liquidity – i.e. cash, the least questioned form of value – is a way to navigate the secular condition of uncertainty.

Neither mainstream nor heterodox theory allows us to conceptualize this speculation-liquidity nexus. Each in its own way thinks of liquidity as something that naturally accompanies the expansion of markets or capital. In mainstream economic theory, liquidity is depicted as a natural property of markets; any constraints in this regard are seen as exogenous and as quickly arbitraged out. Critical theories in a post-Keynesian frame tend to argue that the expansion of financial capital produces an increase in market liquidity until the debt pyramid reaches a tipping point and begins to deleverage, when market liquidity ‘freezes’. But this dichotomous approach, which assumes that liquidity is near-universally present until it becomes near-universally absent, does not allow us to understand liquidity as an ongoing problem that needs managing. Authors in economic sociology have attempted to provide a more nuanced understanding of liquidity as a social relation. Here, liquidity is understood as emerging when there is intersubjective agreement among market actors about market conditions – liquidity in such approaches is understood as resulting from the translation of uncertainties into certainties. Carruthers and Stinchcombe, for example, argue that ‘liquidity depends on “know-ability”’ (1999: 378). However, this is to pull the issue of uncertainty and speculation back into a rationalist frame that is unable to account for the practical role of liquidity. Indeed, the idea that a formal communicative device can render economic action fully transparent and knowable is precisely the fantasy on which mainstream economics is founded.

Economic actors seek liquidity because it provides a buffer against the effects of an uncertainty that it can never eradicate. Liquidity is not a formally derived, transcendental fix or solution that addresses an evenly shared condition of uncertainty but represents a social relation in a more substantive sense of the word, prominently featuring issues of power and control. It is a competitive resource for managing uncertainty – a risk-shifting device, a way to temporarily reduce one’s exposure to risk, often by pushing it onto others. Our emphasis on the role of liquidity as a resource should not be mistaken to mean that liquidity is a zero-sum game, as if the overall amount of cash in an economic system was fixed. Rather, it means that we cannot understand liquidity as a market infrastructure in abstraction from the distributional dimension, the way it is differentially generated and accessed.

In order to elaborate this perspective, we will advance a new reading of Minsky’s work. Minsky is often credited with the original articulation of post-Keynesianism as a theoretical position and he is often paradigmatically associated with that critique of speculation (Keen, 2011; Wray, 2017). Indeed, during the 2007–8 crisis, the term ‘Minsky moment’ was widely used to refer to a financial ‘tipping point’ – the moment when the amount of debt becomes so disconnected from productive economic activity that it becomes unsustainable and the debt pyramid starts to crumble. However, there is a very different side to Minsky’s work, one that appreciated the inherently speculative nature of economic life. This side allows Minsky to be read as offering a post-foundational perspective on political economy, a perspective that rejects the idea that we can know the true, fundamental value of anything or that it would be possible to entirely eliminate the speculative dimension and only think in terms of quantifiable risk. Rejecting fundamental value did not, however, lead Minsky into a postmodern frame that generically emphasized uncertainty, contingency and full-scale liquefaction. Instead, he examined the temporal structure of future-oriented economic action. He emphasized how the need to actively position ourselves vis-à-vis the future (i.e. to make investments) requires economic actors to tie up (typically borrowed) cash liquidity for a particular period of time, and analyzed how (given the absence of fundamental, unchanging values) this generates a combination of payment obligations and earnings that need active managing in the present. In this context, it is only in the most exceptional circumstances that liquidity is not an issue.

We will develop this argument in several steps. First, we explain how Minsky can be understood as offering a post-foundational perspective on political economy that foregrounds a particular understanding of liquidity. Second, we discuss how this post-foundational approach is not just an exercise in academic criticism but is attuned to the practical reality of financial governance. Policymakers don’t think in terms of fundamental values or timeless truths: their primary concern is to keep the system going from one day to the next, to maintain ‘flow’. Third, we show how this allows for a specific understanding of the contemporary, neoliberal era, which emphasizes the institutions that provide liquidity to too-big-to-fail constituencies and asset values that cannot be allowed to collapse. Fourth, we discuss how a sizeable segment of Western societies has been able to participate in the inflationary logic of this too-big-to-fail dynamic, primarily through property ownership. Fifth, we look at the other side of that logic, the way in which a growing segment of the population is locked out from participation in the benefits of property inflation. The conclusion restates the argument we develop in this paper and indicates the direction in which a postfoundational understanding of capital, more fully in tune with the lived experience of everyday capitalist life and more conversant with the kinds of questions that are more typically studied in social theory and cultural studies, might be developed further.

Capital through a Post-Foundational Lens

The rejection of speculation as unproductive activity, driven by the irrational spirit of gambling, certainly can be found in Keynes’ work. In The General Theory, he famously compares speculative investment to a newspaper competition that requires readers to rank images not according to some objective standard but on the basis of what they thought other readers were thinking and feeling (Keynes, 1936: 156). Keynes viewed speculative activity as concerned with manipulating the ‘psychology’ of the market and short-term gains. And he contrasted this with more rational attempts to ‘forecast the prospective yield of assets over their whole life’, the fundamental value of things based on the production of material goods and services (Keynes, 1936: 158).

But even though the post-Keynesian claim to have its roots in Keynes’ own analysis is plausible enough, its engagement with his work is nonetheless rather literal and one-sided. In particular, it is unable to do much with the philosophical aspects and context of Keynes’ work, the extent to which it reflects a modernist concern with the malleability of secular time and the fact that it thought of money and finance as a means to handle the experience of being caught between an unchangeable past and a wide-open future. For instance, Keynes’ comment on the role of ‘animal spirits’ in economic life is often referred to in a context that emphasizes the irrational character of financial market psychology. But in The General Theory it in fact refers to ‘a spontaneous urge to action’ (Keynes, 1936: 161), an impulse that escapes calculation and is always necessary even just to initiate productive investment (Tellmann, 2016: 72). By this logic, the willingness to work with uncertainty is not a pathological feature of the capitalist mindset but part of a distinctly modern concern to shape an open future.

Shackle (1972: 217–18) viewed Keynes’ theory as having two faces. On the one hand, Keynes wrote a powerful critique of a rationalist mindset, the idea that there was some universal equilibrium solution to the problem of economic interaction. On the other hand, he himself tended to adopt that kind of mindset: his hope was that his insights into the limitations of classical political economy could be translated into an economic policy manual for the modern age. As much as he was concerned with the possibility of fluctuations in the way investors valued things, Keynes still held on to the idea of a long-run market outcome against which short-run valuation shifts could be judged – as if there exists some neutral notion of what the ‘whole life’ of something consists in, a time of life that was simply naturally given, rather than shaped by the dynamics of capitalism. He was reluctant to accept that the newspaper contest – a game of valuation driven by mutual expectations, in which people speculate on what other people are thinking and promising – is really all there is.

This provides a useful lens through which to view Minsky. His work (Minsky, 1982, 1996, 2008) probably also has two faces, and there is enough textual evidence for Minsky as a post-Keynesian. But this misses out on his most important insights: he realized that all economic choices and investments were speculative in the sense that their value would only be determined in a future that is unknowable because it will be shaped by events that we cannot predict. Thus Minsky thought of debt and speculation not as pathological features of an otherwise robust capitalism based on the production of real things. Instead, he viewed the logic of debt and credit, of speculative promises and projections into the future, as the very stuff of capitalist life (Mehrling, 1999; Neilson, 2019).

For Minsky, economic actors were essentially balance sheet entities, working on the basis of promises received and promises made. They raise cash by extending promises and they use this cash value to make investments, to buy promises made by others. At issue here was not whether the amount of debt taken on was sound in some foundational sense, but rather the entirely practical fact that economic actors need to generate sufficient cash flow to be able to service their debts. This is what Minsky referred to as a liquidity constraint: whatever our long-term plans, they need to include some provisions to make it until tomorrow. I may have the world’s best investment opportunity, but if I have to borrow in order to buy it and the returns it generates are not enough for me to keep up with my repayment schedule, I’ll be forced to sell. In other words, liquidity buys us the time we need to make our investments work out. Whereas Keynes thought of the concern with liquidity as a ‘fetish’, simply a refusal to commit patiently to the production of real value, Minsky thought of it as primarily a ‘survival constraint’ (a term that Mehrling (1999: 139) has recovered from Minsky’s doctoral thesis). Liquidity is like oxygen or bloodflow: a temporary absence of it will kill off even the most robust organism, cutting short what might have been a long and productive life.

The idea that we can invest all our resources in the future and patiently wait for an eventual payoff is something that can only arise if you can take your liquidity for granted. And often people cannot. Minsky understood very well that liquidity constraints were not distributed equally or democratically or on the basis of need. Some find themselves under intense pressure to maintain payments on small amounts of debt, whereas others can count on endless forbearance. This is the important truth in the joke that if I owe the bank a thousand dollars that I can’t repay, I’m the one with the problem; but if I owe the bank a million times that amount, the problem is really a shared one – and the bank will have every interest to make sure I don’t default and to accommodate my continuous requests for a new repayment schedule. The logic of payment does not follow abstract scientific principles: my ability to have my access to liquidity extended is really mostly dependent on the likelihood that, were I to fail, I would take my creditors down with me.

What this means it that the capitalist economy is at its core structured in terms of time (Adkins, 2018; Konings, 2018) – not just in the trivial sense that things take place in time and are therefore subject to change, but in the more profound sense that it makes no sense to analyze processes of change as if they are driving towards a neutral long-term state where things are organized according to some kind of true value or purpose. Time is an active and differential force, and the logic of credit and debt cannot be seen as something that takes place while more fundamental processes work themselves out. For Keynes the ‘meantime’ mattered because, as he famously quipped, ‘in the long run we are all dead’ (Keynes, 1924: 80). Subverting this formulation, Minsky rejected the proposition that an independently given long run had had any salience at all. In the game of capitalism, some survive, and others die, some thrive, and others languish – all time is borrowed, and we only ever live in the meantime.

A More Practical Theory

These may appear to be primarily philosophical points, but they have important implications for how we understand economic and financial governance and allow us to do so in a way that is more attuned to its practical reality. Keynes had a rationalist understanding of public policy, viewing policymakers as engineers manipulating the levers and pullies of a given system. Minsky had more appreciation for the fact that policymakers don’t necessarily have a better understanding of the logic of the system than economic actors themselves do. To his mind, there was no clear dividing line between financial practices and their governance: central banks and other public authorities are no more able to see into the future and to transcend uncertainty than private investors are.

Public institutions have no way of knowing or relating to the true value of things, and this means all methods for influencing the financial system involve the short-term manipulation of liquidity constraints in a somewhat reactive way. In this respect, Minsky belonged to a tradition of pragmatic thinking about the nature of central banking that includes thinkers such as Walter Bagehot (1877) and Ralph Hawtrey (1932) – who had been closely involved with the practical operation of the financial markets of their day. In their view, the main role of the central bank was to contain the effects of crises that had always been such a marked feature of the capitalist banking system. When banks are faced with a drain on their deposits, they sell off their investments in a bid to maintain liquidity. But in doing so, they can trigger a fall in asset prices that makes the situation worse for everyone and only adds to the general pressure on banks’ balance sheets. The idea of the lender-of-last-resort doctrine is that the central bank can block this dynamic by temporarily taking bank assets onto its books and providing banks with liquidity.

This policy principle has always been viewed with considerable suspicion because of the way it is seen to violate the basic principles of market discipline, and the way this could be exploited by large financial institutions that are ‘too big to fail’. Bagehot (1877) tried to address the perception of an unfair advantage by instructing central banks to restrict their lending to sound collateral, assets whose long-term value was not in question – that way, so was the idea, the intervention would be effectively neutral. But this never offered much of a solution in cases where banks only had assets of unknown or poor quality. The lender-of-last-resort function is only effective insofar as it provides liquidity in exchange for bank assets at minimum prices. The limitations of the Bagehot principle were particularly evident in the early 20th century United States. The Federal Reserve would not extend credit against stock holdings and could only see the self-reinforcing spiral of falling prices during stock market crises as confirmation of the correctness of this view. This was one of the reasons why the Federal Reserve let the financial system go into free-fall with the crash of 1929: banks appeared to be fundamentally insolvent rather than merely temporarily illiquid – even though, if plenty of liquidity had been provided upfront, the insolvency might never have manifested.

After the crash and the depression that followed, the US financial system experienced a long period of relative stability. It is common to attribute this stability to the role of the Glass-Steagall legislation (which separated commercial from investment banking) in repressing speculative finance (Helleiner, 1994). But Minsky in fact saw this quite differently. Although banks could no longer invest the deposits that the public had entrusted them with in the stock market, they had plenty of other opportunities (provided by the rapid expansion of consumer and mortgage credit) for investing in assets that were really not in keeping with any traditional definition of soundness. For him, the key factor at work was the creation of a financial safety net, and in particular deposit insurance, which removed the rationale behind bank runs. By socializing risk, deposit insurance addressed the problem at a deeper level than after-the-fact last-resort lending.

But the way in which this system prevented occasional financial downturns created a specific new problem: permanent inflationary pressure. The Federal Reserve realized that this needed to be kept in check if the new system was to last, but it was unable to impose real constraints on the banks, which found it all too easy to resort to methods of money and credit creation that were not covered by the post-New Deal institutional framework (what we would now call ‘shadow banking’). These dynamics were not covered by the protections of deposit insurance and so brought back the kind of instability that the New Deal had been trying to eradicate. Instability became worse over time, and the mid-1970s saw the first bailouts of large financial institutions. Minsky did not seem to see a real solution to the problem – his lack of faith in the possibility of clean and precise external interventions led him to feel that that there was no real way out of this predicament. He appeared to view muddling through and ad hoc bailouts as the price for avoiding a rerun of the crash and depression. And in that way, he had his finger on the pulse of the culture among policymakers, who recognized their own role in fueling the problem yet did not see a way out that would not involve a massive crisis (as articulated in Arthur Burns’ (1979) well-known talk on ‘the anguish of central banking’).

The Neoliberal Management of Liquidity

The monetarist shock of 1979, engineered by Paul Volcker, changed this dynamic in a way that Minsky had not foreseen but that is entirely comprehensible when seen through the lens he provided us with. Monetarist doctrines, typically associated with Milton Friedman and quite influential during the 1970s, relied on a belief in an arbitrarily defined, exogenous monetary standard that Minsky rejected as naïve. But Volcker had a very pragmatic take on monetarism and never expected it to deliver what it promised (Silber, 2012). He looked to monetarism not as a means to enforce an external limit or standard on the financial system, but as a politically expedient way to break with accommodating monetary policies and to take the ‘muddling through’ option off the table.

The consequences of the Volcker shock were entirely foreseeable (which is exactly why the Federal Reserve had been reluctant to pursue similar policies in previous years): inflation gave way to a highly volatile dynamic of financial expansion in the uninsured shadow banking sector. During the next decade, the American state came to the rescue of a number of financial institutions that were too big to fail (Stern and Feldman, 2004). In this way, it established a logic of too-big-to-fail expectations that amounted to a new regime of risk socialization: institutions that are vital to the operation of the system can expect to be bailed out if they get themselves in trouble. The state was never going to sit idly by as the financial system returned to dynamics of boom and bust: when instability took the form of systemic threats, authorities could be relied upon to bail out the institutions that had overextended themselves. Of course, Volcker would not have been able to predict the specific features of that regime; but the very point of the neoliberal turn in financial management was to create a context where risk could be socialized in ways that were more selective and therefore non-inflationary (Konings, 2011).

It is not that anyone has ever lost sight of the morally troubling aspects of too-big-to-fail. But during the preceding decades, the American public had become deeply invested in the financial system: whatever their moral misgivings or philosophical convictions about the nature of real value, they were very much part of and increasingly wrapped up in the speculative beauty contest at the center of the economy. As a consequence, although bailouts have often elicited a great deal of anger, it is also recognized that they are entirely necessary. When the future seems uncertain, the only certainty we have is that we cannot let the banks fail. Under these circumstances, the very thing that in policymaking circles was once considered a source of moral hazard – the creation of expectations of financial assistance – came increasingly to be treated as a policy instrument.

Under Alan Greenspan’s tenure there emerged something like a preemptive bailout regime, dedicated to alleviating the liquidity pressures on large institutions whenever asset prices threatened to lose their upward momentum. In the early 20th century, it had been the anxiety about sound fundamentals that, in the spirit of the Bagehot doctrine, had prevented the Federal Reserve from acting more decisively. In the neoliberal era, this gave way to keen awareness that the failure to act might work as a self-fulfilling prophecy, producing the very downward spiral of asset prices that it feared (Mehrling, 2011). It is here that we find something that is quite distinctive to neoliberalism as a governing philosophy. If there is a distinctively neoliberal rationality, this has little to do with the literal content of Milton Friedman’s monetarist theories and much more with a particular orientation to the uses of risk and uncertainty, an intuitive comfort with the prospect and reality of instability. Long before the current fascination with post-truth, neoliberal policymaking embraced the idea that the concern with fundamental values was of little practical use and that what really mattered was the possibility of keeping the system going, from one day to the next, above all keeping afloat those entities that could drag the whole system down with them.

This is really what has permitted (what is now often referred to as) the ‘financialization’ of Western economic systems. That trend has any number of aspects, and over the past years social scientists and humanities scholars have started to describe these different dimensions in a degree of institutional empirical detail that cannot be found in economics or finance scholarship (Mader et al., 2020). However, it is important to appreciate that these manifestations are all directly or indirectly premised on the continuous growth of asset prices underpinned by this too-big-to-fail logic. Post-Keynesian critics typically understand financialization on the ‘what-goes-up-must-come-down’ model – that is, as the irrational growth of speculative debt that defies economic gravity. But this is to view the growth of finance through an essentialist lens. It is also unable to see what Minsky saw, namely that the politics of liquidity is not a surface-level affair, at best capable of postponing the inevitable bursting of the bubble, but is instead at the core of how capitalist finance works.

The Everyday Life of Asset Inflation

The public at large has related to this logic of asset appreciation at the core of neoliberal finance in different ways. In some respects, it has been able to participate in and take advantage of it. Key here is the appreciation of real estate. Of course, many have also been able to benefit from rising stock prices, through pension schemes or in other ways. This has attracted significant attention from scholars, because it is the most obvious way in which the public could be seen to participate in the fast-paced world of high finance. But we focus here specifically on property appreciation for two reasons. First, it has by far the most ‘democratic’ credentials and has played a central role in the maintenance of a middle class and the management of social logics of legitimation. In almost all large Western cities, property prices have increased at a rate that far outstrips wage or GDP growth. Through this process a propertied middle class has emerged that has a stake in the logic of asset inflation. This element of buy-in has generally not been sufficiently appreciated: the tendency to present finance as a conspiracy that is perpetrated on the population at large by a small group of elites – present not only in overtly critical political economy scholarship but equally in politically middle-of-the-road approaches such as Piketty’s (2014) – ignores this crucial aspect. Neoliberalism has created a constituency of homeowners that have a vested interest in the kind of policies that maintain the value of their most significant asset.

Second, buying a house is in many ways the ultimate Minskyan move: it requires locking up a large amount of debt-financed liquidity in an asset that does not necessarily furnish the means for repayment of the debt – even in the context of rapidly appreciating home values (Adkins, 2019). This becomes a little different if households are able to buy additional properties with a view to renting them out, and it changes further when we think about the very top layers who own property as part of a diversified portfolio of assets. But for the bulk of property owners, liquidity is never not an issue, even in a rising market. In the world of high finance, liquidity can often remain in the background, especially when markets are going up and a stock portfolio can be sold at a moment’s notice. But in everyday life, there is no neat, linear or predictable relation between projected future returns on assets and liquidity in the here and now. From a household point of view, the struggle for liquidity is an ongoing concern (Bryan and Rafferty, 2018).

The Keynesian household of the mid-20th century also needed to borrow in order to buy a home, but property prices and the amount of debt taken on existed in a specific relationship to predictable life-long (male) wages, ensuring ongoing access to appropriate amounts of liquidity that ensured steady repayment of the debt, timed to expire at the point of retirement. This is drastically different in the contemporary era, when a model of lifetime employment holds little relevance even for the well-educated. The route to building up wealth operates less and less through employment and increasingly requires participation in the logic of asset inflation, i.e. owning assets that are covered by the too-big-to-fail logic that maintains contemporary asset inflation (Adkins et al., 2020).

To understand the contemporary dynamics of property ownership we therefore need to focus on the social and political logics of liquidity and its management. Discussions that concentrate on quantitative notions of over-indebtedness or predict the inevitable bursting of the property price bubble are distractions in this regard. The neoliberal property bubble has never actually burst, owing to the institutional configuration of policies that we have highlighted. It is of course true that some indebted households go under, but it is equally true that many (and in fact most) do not. Going under or staying alive is not primarily a function of the quantum of debt or the ratio of that debt against an externally anchored source of fundamental or foundational value – it is a question of the ability of households to service their debts, i.e. an issue of liquidity. The financial crisis of 2007–8, so deeply bound up with the way in which expanding homeownership was fueled through credit growth in the shadow banking system, was widely diagnosed as the end of neoliberal asset inflation. But in the decade-plus since that event home values have resumed their upward path (Ryan-Collins, 2018). Key here has been the consistent attention paid by policymakers to the liquidity situation of property-owning households. For instance, central bankers may at various times have considered it desirable to put an end to so-called quantitative easing policies and start pushing interest rates back up, but they have generally refrained from doing so because they are also keenly aware that this would have greatly strained the ability of highly leveraged households to maintain their repayment commitments. In an important sense, homeowners are a too-big-to-fail constituency. We are accustomed to thinking of home values as bound up with a spatial distribution (location) but, as we have argued here, they are also deeply bound up with the distribution of time and liquidity.

The more significant problem that has become apparent in recent years is that continued property inflation, by continuously raising the bar of entry into property ownership, undermines its own democratic credentials. Certainly, more homes than ever are owned, but these tend to be second, third and additional homes purchased for investment purposes. Moreover, many households are now actively passing on the asset-based wealth they have accumulated in the context of rising house prices to their children, most often to enable property purchases. Many who are not able to make such ‘clean’ transfers are leveraging their housing assets to release equity for intergenerational transfer purposes, taking on more mortgage debt to enable their children to buy property and to participate in the wealth effects of asset ownership. The very policies whereby an asset-owning democracy was constructed are now preventing new people from entering into that middle class. And yet the promise of building up property (by paying down a mortgage instead of paying rent) has lost none of its salience as a pillar of social integration. The contradictions engendered by property inflation cannot be understood by assessing them against an external standard of what constitutes real value; instead, they are entirely internal to that process (Konings et al., 2021).

The Other Side of Asset Inflation

Homeownership has remained the main way in which ordinary people have been able to buy into the too-big-to-fail logic of neoliberal asset inflation. ‘Human capital’ thinking once held out a very different prospect, namely that neoliberal citizens might all enjoy the full benefits of capital ownership by thinking of themselves not as workers or employees selling labor-time but as entrepreneurs investing in and valorizing their own capacities. By this logic, education is an investment in one’s own future self, meant to result in skills that will generate returns and capital gains in the future and allow for the repayment of the debt incurred to build them (Brown, 2015). But here the gap between the promises and reality of neoliberalism has been far wider than in the case of home ownership: the bulk of human capital – that is to say, the skills and capacities that working people have to offer – has been subject to devaluation. More and more people have to cobble together their earnings from various activities, and even those fortunate enough to hold a job with considerable employment security and benefits have to deal with the fact that average wages have not increased for four decades. Advancement as a wage-earner is entirely an individual affair, and the only sectors where the ‘human capital’ idea has had some reality are those which are more less directly connected to the world of asset inflation. Even the logic of the gig economy is to a large extent explainable through this lens (Fernandez et al., 2020).

Nowhere has this pernicious logic of ‘human capital’ devaluation become more visible than in the realities of debt-financed liberal arts education, the kind of educational experience that does not lead to vocational or professional qualifications. Although the student debt crisis is nowhere as severe as in the US, very similar tensions are beginning to show up in other countries. Young graduates are increasingly locked into permanent debt servicing, living a life that is constantly drained of liquidity yet never translates into the accumulation of property and often not even a reduced debt. Whereas historically low, centrally set interest rates do trickle down meaningfully to homeowners, these have virtually no impact on student loans (or, for that matter, on other forms of personal debt such as credit card debt). In other words, large segments of the population are faced with a version of the ‘underwater mortgage’ phenomenon: they need to maintain payments on a debt that is larger than the asset it purchased. And this also means that the road to homeownership becomes that much harder. The kind of policy lock-in that we identified above therefore has its flipside in a logic of lock-out that makes it virtually impossible for growing segments of the population to buy into the logic of asset inflation. It is against this background that current discussions of the ‘millennial’ condition need to be seen – that is, the specific set of circumstances faced by people who are currently entering adulthood and face a much higher bar for achieving a middle-class existence than was the case for previous generations (Milburn, 2020).

Of course these generational dimensions intersect with class: millennials who have wealthy parents are able to leapfrog out of the millennial condition. When compared to peers with otherwise similar characteristics but without access to parental wealth, young people who receive enough financial assistance to be able to purchase property are in a fundamentally different financial situation by the time they are in their thirties. It is obviously the case that the generational dimension has no independent ontological reality: there is no natural solidarity within a generation that sets it up in a neatly delineated conflict with other generations. But this does not make it a sideshow to the more basic reality of class – indeed, to suggest that is the case is precisely to relapse into orthodox Marxist notions of class conflict that have difficulty communicating with the lived reality and complex empirics of class. In the present conjuncture, the generational dimension mediates the production of inequality in a very specific way, which is heavily conditioned by the need to put strategically timed intergenerational transfers to work in the logic of asset inflation. These are the kind of lump-sum payments that make the difference between being able to put one’s liquidity to work for the purpose of building up property or being forced to pay rent to support someone else’s ability to build up property.

Many young people who are on the wrong side of the lock-in/lock-out divide lead a life that is drained of liquidity, deprived of possibilities for making new investments and changing course. In a very real sense, their lives are not liquid enough. This sense of permanent crisis is very apparent in prominent diagnoses of the zeitgeist. A common lament is that a sense of future has been lost, that a progressive forward movement in and through time is no longer attainable. The idea here is that life becomes a series of moments of bare survival, forced participation in a game of which the outcome has been pre-empted by the existence of a debt to the past that can never be discharged. Lisa Baraitser (2017) talks of a new kind of temporal experience, where time doesn’t really flow as it used to, which she calls ‘enduring time’. Similar concepts are Eric Cazdyn’s (2012) notion of ‘the new chronic’, where we’re always licking our wounds without hope for a full recovery; or Lauren Berlant’s (2007) idea of ‘slow death’. However, it is too simple to say that the future is being ‘cancelled’ (Fisher, 2009, 2014). No matter how disaffected we might be, we are still intensely concerned with what is coming and agonize about decisions concerning what is to be done. This is not to deny that there is an obvious link between increasingly inescapable precarity and the growth of mental health issues among young adults – rather, it is to suggest that we not see the learned helplessness that is conducive to the depressive stance of ‘capitalist realism’ as its defining mode.

The contemporary experience of capitalist oppression and inequality is paradoxical in a way that is not easily captured by formulas like ‘the end of the future’ (Berardi, 2011: 11). We have seen that very often the logic of capital is bound up with the possibility of accessing liquidity, of buying time: when the market as a whole is being rocked by waves of instability, too-big-to-fail constituencies can sit still and ride out the turmoil, counting on liquidity assistance and bailouts. This of course is at odds with a more familiar picture of capital (and in particular finance), which associates it with speed and acceleration, i.e. an aggressive forward thrust. We have indicated that this dialectic of speculation and bailout is critical for understanding the role of capital in the present moment. And we can see something similarly paradoxical at work in how the oppressions of asset-driven capitalism are experienced. It is not so much that any sense of prospect disappears but rather that contemporary capitalism induces a paradoxical state that is best described as ‘frenetic inactivity’ or ‘non-stop inertia’ (Southwood, 2011). Something must be done because our sense of the future is all too real; but often there isn’t anything particularly effective to be done. We must be entrepreneurial and actively choose from a menu featuring only bad options, each of which will further stunt our future growth and flourishing (Elliott, 2018). What we end up with is an exhausting, nerve-racking combination of need for constant vigilance in combination with the absence of clear rewards. Elliott has called this ‘suffering agency’, a paradoxical state that demands constant alertness and preparedness but is simultaneously experienced for all intents and purposes as pre-decided. The absence of liquidity forces people to make choices even when only bad options present themselves.

Conclusion

In this paper, we have built on Minsky’s insights into the temporal structure of capital to reframe key questions in social theory and to advance beyond overly general and nostalgic diagnoses of modernity. A rethinking of the role of liquidity has been central here. To be sure, Bauman’s acknowledgement of uncertainty as a permanent, incalculable condition of modern social life converges with Minsky’s understanding. But Bauman’s understanding of liquid modernity remained a variation on the general idea that ‘all that is solid melts into air’, which understands liquidity primarily as a condition that capitalist subjects face and might praise or lament, rather than as a resource that they need to actively engage and a constraint that they cannot afford to neglect. We suggested that this limitation can be seen as reflecting a lack of engagement with key questions of economics and finance, which facilitates a casual importation of particular and insufficiently critical ideas of how markets work into a wider social critique. To be sure, in Bauman’s work following the financial crisis of 2007–8, the connections with the expansion of finance became more pronounced (see especially Bauman, 2010). But, in large part because his mind remained very much focused on the shift from a solid producers’ society to a liquid consumers’ society (he specifically viewed unproductive consumption as ‘the moving force of liquid life’; Bauman, 2005: 10), he was unable to formulate a critique of finance that was not beholden to post-Keynesian concerns such as the unsustainable character of financial growth.

To develop a more precise articulation of the role of liquidity in an uncertain world, we have relied on Minsky’s work, arguing that he provided a post-foundational perspective on key questions of political economy and that the concepts he developed provide a helpful bridge to questions of social theory. Crucially, then, our argument is at some distance from the usual claim that questions of social theory need to be considered against or set in a structural political economy context. In this respect, we are on board with Bauman’s post-Marxist sensibilities. From a Marxist perspective, liquidity problems are manifestations of deeper problems, the fact that speculative investments have been made that are not grounded in real value and are not matched by real income streams. From such an angle, it makes sense to conceptualize the problem of asset inflation in terms of the logically unsustainable divergence of property values from wages. Wigger’s (2020) analysis, for instance, sees the phenomenon of asset inflation precisely as reinforcing an understanding of society as structured by work and employment. The very existence of the Minskyan household, by this logic, proves the ontological primacy of the Keynesian household. This position is likely to make little sense to those whose professional jobs do not deliver enough income to access a mortgage-financed property purchase, or to those whose life-chances depend on the abilities of their parents to provide them with wealth transfers. As we have suggested in this paper, the notion that liquidity flows can only derive from employment is increasingly outdated in a society where asset inflation is institutionally organized through a wide array of policies that seek to keep too-big-to-fail constituencies liquid at all times.

As an alternative, we might think in terms of two axes or modes of social domination, one based in property ownership and another based in relations of work and employment (Soederberg, 2021; Standing, 2011, 2016). While such a take might be intuitively appealing and even appear to have considerable empirical purchase, it nonetheless continues to be held hostage by the notion that there is a kind of ‘in the last instance’ anchorage of dynamics of inequality to the world of work and real value. That too is hardly a nonsensical proposition of course, but it is to sideline how the world of work has itself restructured in the face of the logic of asset appreciation (Feher, 2018), that is to say, it is to prejudge the financial dynamics of asset inflation from a foundationalist perspective. It is only from a strongly normative position that one can read the attenuation of the centrality of work in contemporary capitalism as demonstrating that a society not rooted in wage-labor is incoherent. From a perspective that is less conceptually pre-committed, what stands out about the current moment is precisely the growing difficulty of adequately conceptualizing the dynamics of capital without adopting a thorough-going postfoundational perspective.

Of course, to pursue a postfoundational perspective to the point where it is no longer a broad critique of modernity (as it was for Bauman) but instead frames a critical understanding of capital might seem incongruous in a world where capital’s lack of respect for foundations and its limitless forward march seems to be such a prominent factor in the ecological degradation that could mean ‘the end of the future’ in the most literal possible sense. From such a point of view, it might make more sense to support calls for a foundational economy that is organized around meeting core human needs and requirements of long-term sustainability (Foundational Economy Collective, 2018). Appealing as such a vision is, it remains based on a normative argument dressed up as an ontological one. What Bauman would have thought of as a solid or foundational economy (the full-employment producerism of the Fordist manufacturing economy) will to many others, such as Green New Deal supporters, seem no less threatening to human life than the neoliberal economy. If at this point in time we are forced to contemplate the end of human life, the only reasonable conclusion would seem to be that we have no workable idea of what values and institutions might be able to ground, sustain and nurture human life. If the necessity of contingency defines the horizon of modernity, the task is not to eradicate speculation but to find forms of future-making that are not instantly integrated into the logic of capital (uncertain commons, 2013; Vishmidt, 2018). Such transformative speculations are unlikely to emanate from illiquid forms of life, and for that reason any new future-making project will have to engage the social struggle over liquidity and time.