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The Culture of Markets

Dedicated to the memory of my father, Mister Charlie

The Culture of Markets

Frederick F. Wherry

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Copyright © Frederick F. Wherry 2012

The right of Frederick F. Wherry to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs, and Patents Act 1988.

First published in 2012 by Polity Press

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Contents

Acknowledgements

Introduction: Culture, Markets, and Economic Life

1  The Cultural Roots of Market Demand
2  The Cultural Dimensions of Market Supply
3  The Culture of Money and Prices
4  How to Conduct Cultural Analyses of Markets

Conclusion: Toward a Cultural Sociology of Markets

References

Index

Acknowledgements

While writing this book, I benefited greatly from my conversations with a number of scholars. Peggy Somers and I co-taught a graduate seminar at the University of Michigan on Cultural Approaches in Economic Sociology where we benefited from our interactions with one another and with the students in the Michigan Economic Sociology and Organizations Cluster. I also benefited greatly from my conversations with Viviana Zelizer, Alejandro Portes, Jeffrey Alexander, Nina Bandelj, Richard Swedberg, Fred Block, Dario Gaggio, and Lyn Spillman who shared their work with me while I was writing this book. Peggy Somers, Greta Krippner, Jason Owen-Smith, and Mark Mizruchi read some of the initial chapters from the book, and so too did James Furst who sent along links to Newsweek, CNN Money, and The Wall Street Journal to remind me how my work speaks to contemporary issues. James also reminded me to enjoy the writing process. Thank you, James.

I am indebted to Jonathan Skerrett at Polity Press who acted as an attentive and sensitive editor and to Susan Beer for her efficient and enthusiastic copy-editing. There are many others who should be thanked, so I must beg their forgiveness that their names do not appear here. Of course, any mistakes or shortcomings herein are my responsibility alone.

I owe much to my family for helping me stay balanced, especially my mom Peggy, my twin sister Frances, my brothers Bernard, Sam, Reggie, and Scott as well as my partner James, who has helped me see most things anew. This book is dedicated to the memory of my father, known to many as Mister Charlie, who passed away as this book project came to a close.

Introduction: Culture, Markets, and Economic Life

This book is about how culture shapes markets. But what does this look like in practice? One of the pitfalls that easily befall academic books is the emphasis on theory at the expense of demonstration – how are cultural theories about markets made manifest in real life? For this reason, we will turn to a comprehensive review of theories in the final chapter of the book and will only sketch some of the classical theories at this chapter’s end. This will enable us to focus on empirical puzzles now and on how existing studies help us solve them, as the book proceeds.

In this chapter we begin with some illustrations of what culture looks like in the marketplace before moving to how culture makes a difference for “the bottom line” of profit. Then we move to brief discussions of market demand and supply from a cultural point of view. Next we turn to money and prices, re-casting these seemingly straightforward processes as anything but.

Let us begin with a description of Chrysler’s turnaround in a recent Newsweek article. Stay attuned to the emphasis on the chief-executive-officer’s charisma, the effect he has on his audience of employees who have gathered as if for a ritual ceremony. In this gathering, the CEO professes that he wants to create a “tribal” bond among the members of his top management.

[At Chrysler, the] workers now hang on [Sergio Marchionne’s] words. Last month a sea of faces looked to their leader expectantly at company headquarters as 11,000 employees crowded to see him. Marchionne spoke about their status as survivors, recognizing aloud how hard he had pushed them. As he spoke of their commitment, his voice broke, forcing him to stop to regain control. After all, car guys don’t cry … [According to Marchionne, during that moment of silence,] ‘not a chair moved, not a phone went off’ as the crowd waited for him to continue … [Marchione has] flattened the organizational structure [at Chrysler], creating a system – as he did first at Fiat – where 25 executives report directly to the chairman. It’s his way, he says, of creating a tribal bond among top managers. (Berman, 2011)

In other words, the commitment to the product and the company goes beyond a rational calculation of how much one can benefit financially from being a part of Chrysler. A sense of obligation, a feeling of we-ness obtains among the managers, or at least this is one of the explicit goals of the company’s head.

Even the macroeconomy seems to be wrapped up in meanings, public representations, costumes, postures, gestures, and tone. When the chairman of the Federal Reserve makes a speech, market watchers and market movers are attuned to the mood of his speech. The chairman’s credibility comes not only from what he says and how well his statements are backed up by evidence but also from the manner in which he delivers his statement and how well he plays his part.

A word or phrase from the Fed chairman – or even a gesture – has the power to move financial markets … Every detail of his public presentation will matter. Above all, he’ll need to seem confident, even as he fields what’s likely to be aggressive questioning, image consultants say. “It’s unfortunate that you’d be judged on posture, or looks, or tone,” said Gerard Carney, head of U.S. financial communications for the PR firm Fleishman-Hillard … As for his attire, it’s best to stay simple and conservative at the press conference, said Michael Christian, an image consultant at Manhattan Makeovers, who has written books under the name William Cane. Christian suggested a white shirt and a navy suit, which he said convey credibility. (Alden 2011)

It would seem that the market interface is a stage populated by sometimes colorful but sometimes dull characters. Some of these characters need a makeover in order to operate more effectively in the marketplace (Wherry, forthcoming). Markets are not merely technical accomplishments; they are cultural intentions that are inculcated, enacted, and that must (their audiences) engross.

Anthropologist Marshall Sahlins proposes that markets are cultural intentions. By this, he means that people within a society share loose understandings about how they should survive, how they should exchange, and what is appropriate for commercial exchange. He rejects the notion that markets are technical, efficient responses to a natural environment characterized by scarcity.

[M]en do not merely “survive.” They survive in a definite way. They reproduce themselves as certain kinds of men and women, social classes and groups, not as biological organisms or aggregates or organisms (“populations”). True that in so producing a cultural existence, society must remain within the limits of physical–natural necessity. But… not even the most biological of cultural ecologies can claim any more: “limits of viability” are the mode of practical intervention … Within these limits, any group has the possibility of a great range of “rational” economic intentions, not even to mention the options of production strategy that can be conceived from the diversity of existing techniques, the example of neighboring societies, or the negation of either. (Sahlins 1976: 168)

From one society to the next, markets are organized differently, not because a physical–natural necessity or a lack of information about other societies precludes these markets from being structured otherwise.

It then should come as no surprise that economic sociologist Frank Dobbin finds a different cultural intention in the organization of the railways in the United States, Great Britain and France that cannot be explained post-hoc by the “limits of viability” of the physical-natural world in which the tracks are laid. As we shall see in Chapter 2, each country had access to the same technology and faced similar environmental constraints in their physical-natural worlds, yet in each country, the railway industry was organized differently, less centralized in the United States; more centralized in France and Great Britain.

There are a number of industries that could be organized in a centralized versus a decentralized. Take the example of healthcare. Debates have raged over whether the United States would benefit from a national healthcare system, whether a single-payer (centralized) system would work best in terms of efficiency, and why the United States’ healthcare industry differs so dramatically from the healthcare industries in other Western industrialized countries with access to similar technologies and facing similar environmental (physical-natural world) constraints. This book shows why it is not merely a matter of politics and lobbying: there are deeply laid mental tracks orienting the direction that industries take when they are being organized or re-organized.

Industries follow different logics of operation, yet these logics and what is considered normative for a company, an industry, or an entire country are not necessarily consistent nor is there a broad consensus about how an industry should be organized. Roger Friedland and A. F. Robertson bring these insights together in Beyond the Marketplace: Rethinking Economy and Society, where they offer a telling example of how social norms are “transacted in daily life and are often bitterly contested” (Friedland and Robertson 1990: 37).

[There are] “different vocabularies of motive (loyalty, acquisitiveness, faith) and symbolic systems by which to create and measure value (nation, money, religion) … Every marketplace is assaulted, from time to time, by confiicting logics. Is the supply of oil, for example, to be regulated by profit-maximizing transnational corporations, by states seeking to conserve strategic resources, or according to the needs of people in households for heat, power, and transportation? In what sense is water a “public good” if the problem of scarcity is resolved by raising tariffs rather than by equitable rationing? (Friedland and Robertson 1990: 37)

A cultural understanding of market logics and of economic action more generally enables an investigation of markets that hones in what people actually do rather than what a narrow set of theories say they should. Meanings (cultural intentions) must be taken into account or those things we call markets cannot be reasonably understood.

Consider, too, the cultural intentions of consumers. In The World of Goods (1979), anthropologists Mary Douglas and Baron Isherwood remind us just how culturally infused the acts of buying and using goods can be. Through consumption, one glimpses “moral judgments about what a man is, what a woman is, how a man ought to treat his aged parents, how much of a start in life he ought to give his sons and daughters” (Douglas and Isherwood 1979: 37). On some occasions, one offers cash to another person; on other occasions, a gift, a drink, flowers. What a person exchanges has to be matched with the appropriate occasion; otherwise, the initiator of the exchange may become embarrassed or may find that her interlocutor refuses to consummate the transaction. These dynamics indicate that market exchange and consumption are thoroughly cultural affairs, and that everything cannot be reduced to a quantified dollar amount.

The failure to realize how culture constitutes the rules of consumption, pricing, and exchange has resulted in a number of baffling predicaments. For example, after Harley Davidson went from nearly going bankrupt to emerging as a highly demanded product in the 1980s, it seemed that the demand for Harleys resulted from the improved design of the engine and the marketing stories generated by branders. Other companies witlessly tried a similar strategy but failed to capture the imagination of consumers. Sociologist and marketing professor Douglas Holt explains that the demand for Harleys depends on its status as an icon, and that the product became an icon not only as a result of what the company did, but also as a consequence of what people active in their brand communities (recreational users of the product who establish voluntary associations of riders) did and how the myth of the rebel rider became authored by prominent films and television programs. This also happened to coincide with societal cultural disruptions – changes in how people saw themselves (see Chapter 1). It is this alchemy that explains the change in demand, and attempts to hunt down cool (as Malcolm Gladwell put it) cannot transform a product into an icon. Iconic products have their congregants of believers who are using the product to deal with the times in which they live. Technical fixes and savvy marketing messages are not enough to influence demand. Companies that ignored the rituals and the various groups that generated their product’s brand value did so at their peril.

We find similar missteps as the US government tries to satisfy its electorate with tax cuts. A survey on people’s perceptions of the Administration’s tax policies revealed that much of the voting public was unaware that they had received a tax cut. How could this be? The numbers don’t lie. A person either pays more or less than she previously did in taxes. It turns out that the way that people account for their money has less to do with total dollar amounts and more to do with how the tax cut was administered and what it was called. Had they received a single check (a windfall gain), the average consumer would have felt the satisfaction of the cut; however, by receiving modest reductions each month in their payroll tax obligations, they did not feel that they had been given anything. It does not matter that the total amount they received over the course of twelve months in small deductions might have exceeded what they would have received in a one-time payment.

These mental accounting heuristics bring to light the cultural meanings of money. How people understand money, prices, savings, investments, and debt have less to do with the mathematics of what is in the bank account or the expected value of a loss versus a gain. And people use money to do more than just purchase goods and services. Sometimes money becomes the basis for sociability, a way to mark membership in a community, or a way to confer appreciation. It should, therefore, come as no surprise that American Express has its own social currency, other credit cards offer loyalty points, airlines offer frequent flier miles, and some communities issue their own community dollars. The marketplace and the currencies that facilitate exchange are multi-vocal sites for the affirmation, generation, and transformation of meanings.

What Culture Is

Paul DiMaggio offers a useful definition of culture: “social cognition, the content and categories of conscious thought and the taken-for granted” (DiMaggio 1990: 113). Let’s take a look at each component of this broad definition. By social cognition, DiMaggio means that what people believe and the attitudes they hold, along with they way that they evaluate behaviors and things, are socially constituted. Just as people are born into a culture with a language and a structure of language that existed before they were born, so too do individuals find themselves by birth or by migration to inhabit a shared sense about how the world is ordered (or at least about how things ought to be ordered and done).

Much of the way that people experience the world is through the categories we have about what goes together and what should remain separate. These categories have boundaries and people often take them for granted. For example, there is a categorical boundary between people and things. We can imagine that most things should be sold, unless we are talking about the Declaration of Independence. It is now generally understood that people should not be auctioned off as if they are cattle, and when slavery existed, it was made possible by re-defining the category of human person so that there were some biological humans who were not considered to be culturally as full human beings. These modes of categorization make bidding for organs for those needing organ transplants or auctioning off babies in the adoption market to be nearly unthinkable. There are ways that this can be accomplished technically and there may even be arguments for how safeguards could be put into place so that the adoption market only allowed safe bidders to participate, but the categorical boundaries render these exchanges null.

Finally, there are ways of seeing the world and one’s place in it that preoccupies cultural approaches to markets. Paul DiMaggio uses an essay written by Thurmond Arnold in the late 1930s to illustrate that how people approach work and organizations depends on their interpretive frames. Arnold writes:

The transition from the life of a trial lawyer to that of a professor at the Yale School of Law [was] a most interesting one. The academic life was different from practice in that the scholarly heroes were men who dug up little sections of truth for the love of it – a purely monastic ideal. Yet this mythology was tempered and molded by the great overshadowing divinity, the American Businessman. Yale was doing what it could to search for truth in the same organized efficient way in which the United States Steel Corporation made steel. There was much about Yale in 1930 in common with the Rotary Club of Laramie, Wyoming, from which the writer hailed. “Service” was the watchword and the organized “project” was the crusade. (quoted in DiMaggio 1990: 120) The marketplace is not simply a place where money is made; it is a site of service, a place where crusades and social movements attempt to overturn “bad” practices. From one institution to the next, there is a creed, a set of principles about how one should behave and what the various modes of behavior mean.

What Markets Are

In this book, we use the term market loosely. Sometimes, markets are specific sites where goods are bought and sold. At other times, markets are abstract spaces where people assume the roles of buyer or seller, third party monitors or regulatory enforcers. One can imagine a flea market, an auction, a handicraft market, outdoor markets, or even malls and large superstores as sites where things are placed on sale and buyers come to purchase them. These sites vary in whether the prices are fixed or negotiated, and even the style of talking about prices and value varies from one type of market to the next. Sometimes prices are prominently displayed; at other times, prices are nowhere to be found as a face-to-face negotiation establishes what it will be. Sometimes prices are held up as more important than quality, and at other times, prices seem too vulgar to attach to the goods or services on offer.

Markets are also virtual, found online, with symbols, photographs, personalities, and staged events that give these markets a sense of character, and that allows participation in these markets to become a form of play. E-Bay has a different character and interface than Craigslist, and these markets vary rather significantly from the exchange of stocks and futures on TD Ameritrade.

Karl Polanyi informs how we think about markets. Markets have varied over time in the logics that organize them. The logics of exchange and self-regulation characterize the modern capitalist markets of today, but other central principles have organized markets in various places at different periods of time.

This cursory outline of the economic system and markets, taken separately, shows that never before our own time were markets more than accessories of economic life … The self-regulating market was unknown; indeed the emergence of the idea of self-regulation was a complete reversal of the trend of development. It is in light of these drafts that the extraordinary assumptions underlying a market economy can alone be fully comprehended. (Polanyi [1944] 2001: 71)

Polanyi argues that markets are a cultural phenomenon because the belief in a market that self-regulates did not magically emerge among market participants. It was consciously worked on, so that whenever the market mechanism seemed that it would collapse because capitalist owners of companies had gone too far in exploiting the workers in their factories, the national government would step in to assuage the sufferings of workers and to offer explanations for why the market works the way it does and how the self-regulating markets could benefit all involved.

What the Classics Say

It is helpful to take a moment to think about what Emile Durkheim, Max Weber, and Karl Marx have had to say about culture and markets. While the concluding chapter will go into more depth regarding sociological theories that inform the case studies in this book, this section will sketch how these thinkers have shaped the types of questions we now ask about culture and markets.

In the first edition of the Handbook of Economic Sociology (1994), Neil Smelser and Richard Swedberg identify Durkheim’s understandings of the economy as “less comprehensive and systematic” (11) than that of Max Weber. Durkheim’s most important contribution to economic sociology, in their reading, is The Division of Labor in Society ([1893] 1984) because it rejects the notion that the division of labor serves only the economic function of generating wealth and optimizing efficiency. For Durkheim, social solidarity and cohesion result from the division of labor. As the division of labor increases, the interdependencies of one unit with its others also increases, and this generates the need for rights and duties that ensure cooperation.

Smelser and Swedberg also acknowledge that “rituals, feasts, and other solidarity-enhancing mechanisms” and an economy based on morals are essential for society’s cohesion, but they do not go into detail as to what Durkheim means by morality or how ritual and religion work in modern economies. Durkheim wrote that in pre-modern times, people understood what we now call private property as something that belongs to the gods (Durkheim [1957] 2005: 121–220). These religious beliefs transformed land and later private property into sacred objects needing protection from defilement. Between his ideas found in Professional Ethics and Civic Morals ([1957] 2005) and those found in The Elementary Forms of Religious Life ([1912] 1995), Durkheim had established that consumption and the constitution of an object as somehow worthy of collective protection derived its logic from ritual and non-market beliefs. In modern times, this linkage has been stretched into a fanatical protection of property rights and a missionary-like zeal for proselytizing free market principles. Among economic sociologists, Viviana Zelizer arguably goes furthest in showing how sacred and profane distinctions are made about life insurance and how currencies are created to hold not only economic value but also religious, magical, and social beliefs.

The chapters in this book take on Durkheim’s work as some of the case studies dwell on shared understandings within industries or across entire societies that shape how companies organize production. Just as Durkheim acknowledged a shift from organic to mechanical solidarity, some of the case studies in this book note a movement from normative to rational logics in the discourse of large companies in the United States. And just as Durkheim focused on rituals and the generation of solidarity, this book shows how consumers participate in rituals, form brand communities, and generate a shared consciousness of kind as they buy, talk about, and ritually celebrate meaningful objects.

From Max Weber we have both an analysis of meaningful action in the marketplace and of the role that religious values, in this case, those of ascetic Protestantism, play. One’s vocation was a calling, performed as if done unto God. And financial stewardship was a way of accepting God’s gifts respectfully. Monies earned should not be spent on “lazy restfulness” or “sinful enjoyment” (Weber [1905] 2008: 146), and as one acquires wealth, one illustrates how God blesses the chosen ones and those called to His purpose. This is the spirit of market participation that facilitated the rise of capitalism.

The attempt to capture the spiritual teachings guiding market behavior have since been captured by a number of scholars, including Francis Sutton and his collaborators in The American Business Creed (1956). They review materials from 1948 and 1949 that illustrate how American businesspeople are not simply motivated by profit as they present a favorable image of their virtues, but that they are also trying to resolve a sense of conflict between their own religious beliefs and the imperative to ignore the betterment of others for self-gain. These moral strains and the attempts of people to resolve them have opened the way for such probing analyses as that of Robert Wuthnow’s Poor Richard’s Principles (1996) on how business people imbue their work with moral meanings and forthcoming work by Lyn Spillman on how business associations promote solidarity and generate collective understandings. This strand of research takes religious and other beliefs seriously as motivating people to work and as providing justifications for why their behaviors might look to an outsider to be in conflict with their moral values, but their behaviors may nonetheless be morally understandable within the context of the ethos in which they operate as an insider to a company and its imperatives.

In a well-known passage from Economy and Society ([1922] 1978), Max Weber outlines the social orientation of economic action. Analogously, consumer demand is social in that the consumer implicitly takes account of others. The social orientation of action takes four forms: (1) through instrumental maneuvers with (or against) someone else to realize a goal (Zweckrational); (2) the social conventions and ingrained habits making the consideration of some goods or services unthinkable (convention; ingrained habituation); (3) the emotions stirred through interaction enhancing or diminishing the attractiveness of a good or service (affection); or (4) collectively held transcendental beliefs rendering some things nearly invaluable or certainly priceless (Zwertrational). These four pathways remind us as sociologists to interpret the meanings that actions have for the people concerned, and it is in this realm of meaning that we find the culture of markets and of market action.

Finally, Karl Marx offers a materialist reading of the culture of markets. By this, I mean that he focuses on who owns the means of production and how these owners manipulate the labor resources of workers and the beliefs that workers have in order to maximize the profits that these captains of capital can capture. Sahlins (1976: 168–9) interprets Marx’s German Ideology ([1835] 2004) to mean that Marx himself understands the limits of historical materialism. The physical world’s limits have both an objective and a subject character. In the subjective character one finds cultural meanings and social relationships. The objective and the subjective must be considered simultaneously in order to understand the “mode of production” as “a definite form of activity of […] individuals, a definite form of expressing their life, a definite mode of life on their part” (Marx and Engels [1835] 2004: 42).

Marxists orientations toward markets have led to studies of culture as facilitating the supply of cheap labor and of branding as simply another instance in which people are exploited. In the first, we have such authors as C. K. Lee writing about factory workers in China and Hong Kong. Factory managers use local cultural understandings about family and gender to manufacture consent among the workers, reducing the wages of labor itself as well as the costs associated with monitoring and disciplining workers. Such authors as George Ritzer and Juliet Schor have honed in on the manipulation of cultural images and understandings to sell products and to cloak the devastations of market capitalism.

The Organization of the Chapters

Chapter 2Chapter 3Chapter 4The Culture of Markets