Sovereignty Effect

Joseph Vogl's book Der Souveränitätseffekt (The Sovereignty Effect) is the narrative of a network constellation at the center of which a blind spot, a "zero point" (Ernesto Laclau), ensures that a practice is administered that cannot justify itself theoretically, but can only be understood as coping with the state of exception.

Vogl is interested in "a political decision-making power that operates apart from popular sovereignties and bypasses democratic procedures. In the course of the last three hundred years, it has taken on the character of a 'fourth power' in which the formation of capital power cannot be separated from the activation of power capitals. The current dominance of the financial regime is thus understood as the latest manifestation of an economization of governance, which manifests itself in aggressive couplings between political structures and private capital, in the efficient linking of market and power. The notorious juxtaposition of economics and politics proves to be a legend of liberalism and is not sufficient to grasp the genesis and shape of modern exercises of power" (p. 8).

Vogl presents a brilliant reconstruction of modern finance from the dual Point of View of an entanglement of the two poles of state and economic power calculations on the one hand and the ideological legitimation of this entanglement by a still almost theological understanding of "economics" as an art of government on the other. >> dual point view

This story begins with the Genoese monetary fairs of the fifteenth and sixteenth centuries, reaches its next two high points in the formation of first the Dutch and then the English maritime and financial powers, and presumably does not end with the emergence of the U.S.-Atlantic Federal Reserve System and the European Central Bank. Vogl can draw on a rich and well-documented literature on economic history, but draws his most important punchlines not only from the founding histories of such famous institutions as the Casa di San Giorgio in Genoa (est. 1407), the Wisselbank in Amsterdam (est. 1609), the Bank of London (est. 1694) and, less famously, the Deutsche Bundesbank and the Chilean central bank refounding after the 1973 coup against Allende, but also from extensive intellectual debates about these foundations, the most famous of which (at least since J.G.A. Pocock's book The Machiavellian Moment) has certainly been the debate about public credit as conducted by Daniel Defoe and others around the Bank of London.

These intellectual debates are all the more revealing, the more perplexed political and economic theories have been and continue to be by phenomena such as public debt, the social role of the treasury, and the monetary and fiscal policy control instruments of central banks. One would hardly believe how reliably a scholarly discussion of the "essence" or even a definition of money falls silent as soon as it is necessary not only to take note of a possible state influence on debt, credit and money, but to incorporate it as constitutive in a theory of finance. Wonderfully restrained, Vogl formulates that nobody finds an answer to the "[...] fundamental question (of) in which concrete way the correlations between central bank and market dynamics are organized, whether these relations function episodically and event-like or continuously and constantly, in which respect central banks act inside or outside the economic system and whether they are thereby able to represent a weak, necessary or sufficient condition for the reproduction of finance" (p. 201).

For this is the blind spot that Vogl illuminates with ever new stories, ever new approaches and ever new formulations. Capitalism is not only, as still in Karl Marx, the product of the exploitation of labor by capital, nor only, as in Rudolf Hilferding, the result of an alliance of fixed industrial capital and mobile financial capital, but, as Defoe put it, the result of a solution to the problem of state financing by private entrepreneurial initiatives.

These initiatives tamed the prince by relieving him, on the one hand, of the laborious business of collecting taxes and securing the coinage and, on the other, by offering him the prospect of perpetuating, eventually perpetuating, the national debt. This was particularly successful in cities where power lay in the hands of a commercially active nobility (Genoa, Venice), where constant warlike conflicts justified a high tax burden and forced control of the state's finances (the Netherlands) or where the king had already been successfully integrated into parliament (England).

But it came at a price, and it is this price that Vogl is concerned with. The entanglement of political power and economic calculation results from a spontaneous solution of practical problems that is not covered by any theory of sovereign power and free market economy. The only figure of thought that can be invoked and yet no longer invoked is the theological figure of thought of a decree set up as an "economy" that requires angels disguised as officials in order to be reasonably enforced on earth.

Giorgio Agamben has reconstructed this figure of thought in a magnificent way. But as much as it may correspond to a practice, it contradicts the idea of a Functional Differentiation of Politics and Economy, as it becomes established in modernity, in order to be able to understand and describe the relations of society that are no longer hierarchically ordered. A subjection also of the merchants and financiers to the power of the prince was in contradiction to the dependence of this prince on the money of the merchants and financiers. This contradiction, which had already preoccupied Plato and Aristotle in their attempts to establish a constitution of the "just" city, had to be resolved; and it could be resolved only by making it theoretically invisible and practically useful. Political theory registers a permanent state of exception, a reason of state that must always be reweighed, and an exercise of power that can only be secured arcane because it must be accepted, if not initiated, by those over whom it is exercised. >> functional differentiation politics economy

Vogl speaks of a seigniorial power (derived from "seignoriage," the coinage profit or strike treasure that accrues to central banks when private individuals hold the money they issue, for example, as a result of the difference between the metal value and the face value of a coin, or even the possibility of money creation through the printing of banknotes) that can be controlled neither princely nor democratically, but is exercised by small circles of administrators, creditors, and banks about which, Dirk Baecker repeats himself, no political or economic theory provides information.

At the same time, however, this seigniorial power sits at the center of a gigantic cycle of public debt and private credit, of growing taxation of the population and increasing monetarization of social relations, without which the capitalist development of cities and states in early modern Europe would not have been possible and would still not be possible worldwide. It played no small role that this public credit succeeded in establishing a regime of relatively low interest rates, which no longer had much to do with earlier usurious interest rates and was thus also able to appease the church's ban on interest.

And finally, Vogl continues, it is this seigniorial power that needs to be understood if one wants to trace the role and function of those central banks and central banks whose constitution in a "circuitous" (pp. 149,159,173,181, 245 et passim) way takes account of both public and private interests and whose legal and administrative form at the same time ensures that they can make their decisions largely independently of these interests. These banks are the "monstrosity," the thing that eludes the gaze and thus has to be shown, to which Vogl's interest is directed. For here, an economic calculation of securing capital is bundled with political strategies of securing the monetary system, which in a functionally differentiated society, if one believes its liberal ideology, should not be left to any decision, but only to the free play of forces.

The singularity of modern finance intertwines politics and economics in a way that contradicts the ideas of a sovereign exercise of power by the state and an exclusion of private interests from this exercise of power. But how, that is the question Vogl raises in this brilliantly written book, is this contradiction to be understood? Are we really dealing with a phenomenon of "functional de-differentiation," as Vogl suggests by placing the first chapter of his book under this title?

"The antagonism of politics and economics itself creates a blind spot, it obscures the fragile system boundary and the processes of functional de-differentiation" (p. 25). Vogl hesitates, because analytically he has to make the same distinction between politics and economics, state and capital, power and money, which he questions empirically. So what is the status of this difference? Are we dealing with insufficient theoretical means, a misunderstanding of practice, or in fact with an ideologically more than welcome blind spot, the elucidation of which will acquaint this "capitalist" society with itself in an entirely new way? Vogl opts for a combination of ideology critique and political enlightenment, for a late Marxist purified theory of capitalism, which no longer cherishes revolutionary expectations, but also does not refrain from lamenting the loss of political sovereignty, as if this could be regained by democratic means. It does not leave it at the analysis of a heterogeneous singularity, but subscribes, on the one hand, to the diagnosis of a theoretical coherence that goes by the name of "capitalism" and, on the other hand, to the justification of a political expectation that aims at not completely abandoning the intention of a control of society – and not only: of politics – by democracy. >> democracy

But there is no other way. Cultural studies cannot separate itself from the singularity it analyzes. Its narrative links itself to the narratives it studies. Its historical knowledge becomes part of a debate that can have practical consequences and become theoretical argument. This, then, is the aim of Dirk Baecker's objection to this spot-on and highly stimulating book. Vogl underestimates the possibility of using the theorem of functional differentiation to analyze the function of central banks as well. And he underestimates the possibility of understanding capital and power in a way that, by differentiating them, is also able to reveal their entanglement. Both possibilities are worth recalling here, because only then can the debate about the contribution of the hybrid construction of finance to triggering financial crises be meaningfully pursued.

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BAECKER, Dirk, 2015. Der blinde Fleck des „Kapitalismus“: Zu Joseph Vogls Buch „Der Souveränitätseffekt“. Zeitschrift für Germanistik. 2015. Vol. 25, no. 3, p. 635–642.