Scholar Robert Meister on a new model: Using the financial markets to fuel historical justice

Revolutionary thinker and author of “After Evil” on how the financial markets could be leveraged toward justice

Part 1 of my illuminating interview with Robert Meister, the author of “After Evil: A Politics of Human Rights,” explored some of the most pressing questions of our time. How can we achieve “historical justice,” Meister’s most essential concern? What is due those who still suffer the consequences of past wrongs from the present-day beneficiaries of those wrongs? Is justice to be ever-deferred to some future time, or can we achieve it now? As many readers advised by mail, our exchange on these topics led to some surprising places.

Part 2 follows and leads to more. We resume Meister’s sophisticated critique of “Responsibility to Protect,” the post-Cold War ethos that — certainly in my view — has caused or worsened many more crises than it has helped resolve. Meister, who lectures in the History of Consciousness program at the University of California, Santa Cruz, anatomizes this flawed line of thinking better than anyone who has tried. We then advance into the front edge of Meister’s most recent work, exploring the mechanisms to achieve historical justice in a financialized economy.

Meister again turns on new lights. They shine brightly.

The question of bodies is the core doctrine of “R2P,” or Responsibility to Protect, as you’ve already mentioned. And R2P is how we get to repudiating past violence while endorsing present violence as exceptional. Syria is a case in point. R2P confers upon the U.S. a self-administered dispensation to ignore international law in Syria and many other places.

It’s interesting to note in this connection that with the rise of “Human Rights Discourse,” neither our government nor our press ever makes reference to America’s incessant breaches of international law. These are quite beside the point. I relate this to Human Rights Discourse and the narrative of the calculating of R2P. “Humanitarian responsibility” effectively serves as a cover for lawless adventure. Am I correct?

Yes. Human Rights Discourse is the opponent of international law as traditionally understood. At The Hague in the 1990s there were two cases brought simultaneously, one against [Slobodan] Milosevic’s government for violating human rights in Kosovo and the other brought by Milosevic against the NATO powers for bombing Belgrade to enforce human rights. And people like Ian Brownlie [the late English barrister and international lawyer] were on Milosevic’s side, saying that NATO was violating international law by bombing civilians in Belgrade.

Let’s turn to the categories of these people you touched on earlier: the perpetrator of injustice or evil, the perpetrator’s victims, and the beneficiaries in the present of past injustice. The relationships among these social and moral positions change fundamentally after 1989, it seems to me. I’d like you to explore these shifts.

To begin, please explain how Human Rights Discourse changes the position or relationship of the beneficiary and, in effect, denies all need for what you call redistributive justice.

Here’s a simple version of it. The victims have trauma, according to Human Rights Discourse, and the beneficiaries get to keep what they gained but have anxiety. And so how do you treat both the trauma of victims and the anxiety of beneficiaries?

You treat this by creating events, rituals, ultra-moments at which the beneficiaries become compassionate witnesses who would have been rescuers had they been present at the time of the injustice. Such a narrative produces an inter-temporal fix that alleviates the anxiety of the beneficiary by allowing him or her to see the victim not as a victim of injustice but rather, in a sense, as a sufferer from trauma. Trauma becomes the present effect of the past in a way that gives the beneficiaries less anxiety about being able to keep their gains, while at the same time feeling that they owe the victim something. But what’s owed — humanitarianism — is once again the right of victims to an attitude rather than, for example, restitution.

That’s how it works. Temporality is key. It works by perversely creating a version of an inter-temporal justice which reduces justice to a set of appropriate feelings, or to the generation of a more appropriate affect of a certain kind.

Getting back to this issue of the messianic versus the prophetic, the waiting time of the messianic is completely interrupted by prophetic urgency, which overturns those feelings in ways that are mistaken, by people who are the object of those feelings, for simple anger.

Just to be clear, what distinction do you mean between prophetic and messianic? This is, again, the Quranic and Pauline notions of time.

By prophetic I mean the view that something has been revealed that is beyond our feelings and our eyes and that gives special meaning to the present moment. So that there’s an immediate connection between truth and justice. It’s Quranic, to be sure; but there are elements in the Jewish prophetic tradition that have that as well. The prophetic is a moment that unites prediction and conversion, and in doing that, disrupts the logic of postponing justice to await conversion that is essential to the messianic.

In the course of these shifting relationships, beneficiaries purport to a new identification with victims. Can you expand on that?

Beneficiaries bear witness to the suffering of victims, and imagine that undamaged victims have rescued them from becoming victims in their turn. In a sense, what distinguishes the beneficiary in the counterrevolutionary situation from simply somebody who disagrees about the justice of the old order is that the beneficiary is actually able to imagine himself, herself, as becoming a victim, and perhaps even deservedly so.

One of the ironies of the abolitionist movement in the United States is that it — I don’t want to say it oversold the evils of slavery, but it infinitized them to the extent that no one could imagine being in the midst of people who had suffered such evils and still be safe. There were dystopian novels in South Africa, even by anti-apartheid liberals like Nadine Gordimer, that describe the potentially violent end of apartheid in precisely this way.

The question of counterrevolution: I thought your book very good on this. Specifically, I was very impressed with your critique of pre–1989 revolutionary justice in this respect. Revolutionary justice rejected the merely moral victory, insisting on political and material victory. But in so doing, it effectively proceeded to create enemies — a counterrevolution — such that revolution is eventually defeated by the very enemies it creates.

As you explain in Chapter 1 and later on in more detail, counterrevolution consists partly of those who may recognize the wrongs of the past and themselves as beneficiaries, and defend the past anyway out of fear of the retribution that might be visited upon them. It’s an important and original critique, it seems to me, especially coming from a Marxist. Can you talk about that?

We in the Marxist tradition used to equate moral victory with political defeat, and regarded it as a criticism to say someone won only a moral victory because it meant they got a political defeat. The trouble with Marxist revolutions taken in their own terms — and this is part of the class framework in which they’re based — is that they are revolutions against the beneficiaries, not against the perpetrators, and yet the perpetrators are the people you want to defeat. What you’re doing when you defeat the beneficiaries is continuing to struggle after the apparent victory has been won, until you turn the beneficiaries into enemies — who claim, essentially, to have morally defeated you before they’ve politically defeated you.

To be morally damaged by injustice in the eyes of the counterrevolutionary can be expressed formulaically as being someone who conflates beneficiaries with perpetrators. The issue is — and this is of course getting back to our earlier discussion — a subtext in the debate with which I grew up about Brown v. Board of Education. Are the current beneficiaries of an evil system to be conflated with perpetuators of that system? The notion is that it’s somehow a form of moral damage from that system to make that move.

I’ve said that the counterrevolutionary project is the project of opposing victims not because they are victims but because they were morally damaged by their victimhood, in the sense of creating anxiety on the part of beneficiaries, which would be justifiable rather than unjustifiable. Insofar as the counterrevolution succeeds, it succeeds by bringing about moral defeat from what appeared at first to be a moral victory on the part of the revolution.

How do you get around that? Well, in my view — and it’s an overarching argument in “After Evil” — the transitional justice framework is a technology for relieving the anxiety of beneficiaries in a way that allows the victims a moral victory and marginalizes those victims who would be morally defeated by continuing to struggle on.

Maybe you could elaborate on your critique of the principal devices deployed in the process of transitional justice: truth commissions, human rights trials such as South Africa’s. Can you explain your criticism of transitional justice and its institutions?

There are different institutions. There are trials and there are truth  commissions and there are cultural events and so on and so forth, and I wouldn’t want to make a blanket criticism of all of them. I’m not against museums. How can you be against museums and things like that?

To me, the quintessential moment at the truth commission in South Africa was Desmond Tutu’s examination of Winnie Mandela, for whom the struggle wasn’t over. She did see the battle as a battle against beneficiaries rather than a struggle for the conversion of beneficiaries in a way that saves their souls. My criticism is essentially that, to the extent that truth commissions represent what happens as a conversion, they blunt the critique. I sometimes tell my students that if there’s one question that cuts across all of my projects, it’s the relationship of critique, confession and conversion.

My criticism of these technologies of “transitional justice” is that they equate confession of the critique with the necessary conversion that turns the future into a different time than the past. I think similar questions can be raised about Marxist critique of capitalism, which is what my current work is about. But this is fundamental to my thinking — to question the idea that somehow confessing the critique changes everything.

Language alone is sufficient, supposedly.

Mm-hm. And instead of justice, all we really owe each other is an attitude.

I’m going to quote you: “If the past was evil, we would do better to conclude justice must be something new.” This you wrote as you summarized your conclusions in “After Evil.” A couple of points here.

One: Your view of the imperative — the end of evil must coincide with the commencement of justice — seems to be among your intellectual evolutions. If I understand the book correctly, you step back from that actually.  

Two: You confess we’re not sure what historical justice will look like. And this point brings us to your new work, wherein you seem to have a clearer idea. Can you talk about these two points, starting with the first?

Yes. That was where I began my critique of transitional justice, as postponement of the revolutionary project, as a compromise of the revolutionary project, and as the kind of political defeat that I had always thought a merely moral victory would be.

The revolutionary project being the commencement of justice.

The commencement of justice. Not to say that it would be instantaneous, but to say that it would be a new beginning of a real sort rather than simply an end to the past supported by technologies that were all aimed at preventing the past from recurring, including suppressing the demand for justice, which is then considered to be part of the past as well.

So far so clear.

I came to see that the transitional justice techniques were an advance over the counterrevolutionary project, or the defeat or regression of the revolution. They are an advance to the extent that they allow the moral victory to the victims. They were an advance to the extent that the critique behind the revolution was confessed. But, then, that critique was mistaken for a conversion. Rather than historical justice, what resulted was a new world devoted to “never again,” to preventing the kinds of conflicts that the revolutionary demands had set loose from being raised in a way that created anxieties on the part of beneficiaries. And here we’re back to the past, but minus the imperative of struggling for justice.

And now to bring the point home, I think you were headed into your idea of justice as an option in the complete meaning of the term, including its use in financial markets.

I saw this idea of buying time as a real project that the transitional justice movement had defined for itself as a benign successor to the counterrevolutionary project. What I’ve been looking for — and I hadn’t found it in “After Evil” — is the possibility of a successor to the revolutionary project, the project of keeping justice on the table rather than taking it off the table.

In “After Evil,” I identified the counterrevolutionary project with the suppression of justice. I identified transitional justice with the confession of the injustice of the past, but valued the option of justice in the present as worth nothing. It’s something that we might have been able to do in the past, that we might be able to do in the future. But today, we’re the wrong people; from now on it will be too soon until it is too late. And besides, we need to understand how to make rational decisions given the choices that are realistically available to us.

But in concluding “After Evil,” I began to think — it was after the financial crisis of 2008–2009 — that many of my colleagues and contemporaries could simply dismiss my arguments, presupposing that we lacked the conceptual tools for talking about historical justice in a way that wasn’t simply a path back into further injustice in the future. At the same time, the financial crisis made me very aware of the fact that the mechanisms in which much wealth was held and in which accumulation was taking place were actually derivatives — contingent claims that would have value under some circumstances and not under others. Why not, then, consider options theory as a conceptual framework for thinking about and valuing inter-temporal claims? Why not try to think of historical justice as itself an option, in both the colloquial and technical sense?

An option basically is a way of attaching a present value to something that is unknown in the future. I saw, even in the financial crisis that we went through, that something like $13 trillion in collateral changed hands, not to mention the funds that flowed as a result of that collateral. This was done by applying concepts of enforcing contingent claims — puts and calls — employing a highly developed conceptual apparatus that is used every place but the area that I was talking about.

I began by developing a conception of what it means to think of austerity as the companion to Human Rights Discourse, and, in the book, I do talk about Human Rights Discourse as the affective and more positive side of globalization, which had other sides that were less positive. I began to think of the idea that justice does have value in the present, and that that value could be considered using the language of options.

Not only could that value be considered by using the language of options; it could actually be appropriated using the conceptual apparatus that options theory makes available to us. I thought that here we might have a more benign alternative to the revolutionary project in the way that transitional justice was a more benign alternative to the past revolutionary project.

Very interesting. We’re now into your new work. I’m going to take as its representative document a paper you are about to give at the New School. You call it “Is Justice an Option? Politics After Evil.” It seems to read straight out of “After Evil,” the book. You raise the topic, even as you say it’s too soon for specific ideas. Now you’ve developed some, and in my read, you’re talking in general about the re-politicization of justice, meaning historical justice. Is that a fair summary?

Exactly.

The title of the paper is a play on words, which I didn’t realize at first. It was invigorating to come upon the discovery.

Some people might say it’s a confusion.

You mean, literally, to think of justice as an option. A financial one; a call, in financial terms. You mean a continuation of Marxian thinking. As Marx thought of justice amid abundance in the context of industrialization, you’re thinking about justice amid abundance in the context of a financialized economy.

I’m looking at vehicles of accumulation. Marx lived in a world in which the main form wealth could be accumulated, other than hoarding money or buying land, was in means of production — equipment and raw material. We now have ways of manufacturing other vehicles of accumulation, and many of them take the form of derivatives or options.

The all-important question here: Can you explain the concept of optionalized justice, and what might it look like in practice?

A justice option would be exercised by a revolution that would bring about an event of disaccumulation, namely, the illiquidity of capital markets. The question is, when you’re not in a position to bring about a revolution and essentially eliminate the cumulative benefits of the past, which include, to a large extent if not exclusively, the cumulative benefits of past injustice — when you’re not in that position, how do you value today the unexercisable option to end the game of compounding capital accumulation?

The idea here is that an event of revolutionary disaccumulation — essentially of capital market illiquidity — is always a political option that has a present value even if it can’t be exercised. We know from options theory that its present value would increase — exponentially! — with underlying volatility — a rise in inequality, a fall in legitimacy — and not be based on the probability that a revolution will occur. So there could be ways to increase the value of historical justice as an option through politically induced volatility, and/or by making it politically uncertain whether the state will support the liquidity of capital markets as volatility rises.

But what about the mechanics of it?

Well, the mechanics are already there. Option valuation presupposes the liquidity of the market; it presupposes that there is a market, in the same way that in previous periods the value of productive capital presupposed the existence of a labor force. In the late 19th and early 20th centuries, a general strike would have been an event of capital disaccumulation, when capital was held in the form of raw materials and producer goods. Some measure of justice was exacted by not exercising the option of the general strike in exchange for up to a third of GDP. This was the welfare state.

The light flickers on.

Now, in the 21st century, the valuation of options based on risk presupposes the liquidity of capital markets. My colleagues sometimes say that it’s like the Protestant ethic, where there’s fundamental uncertainty that frames degrees of relative risk.

The question of whether the state will bail out capital markets that are illiquid is a fundamental existential risk. It happened in 2008 because the suicide bombers on Wall Street, as I like to call them, threatened to blow themselves up along with everyone else if they were forced to take a discount on the valuation of their assets. So instead, the U.S. government actually swapped government debt for private debt. It essentially provided a guarantee — in financial terms a “liquidity put” — but without ever requiring that the put be paid for by means of giving the public a “call” on all or part of the potential upside of the market when liquidity was restored. This is not how financial markets normally work.

So as I said, the mechanisms are there.

Please take this further. The comparison between the industrial economy of the past and our financialized economy is clarifying.

Well, imagine debates about socialism 100 years ago, when there was a threat of a general strike. One side might say, “The wealth is there. It can be redistributed. It will still remain as wealth, regardless of who holds it.” The other will say, “The value of wealth depends on who holds it. It will go down to zero if you try to redistribute it. Let’s just talk about how we distribute incremental changes in wealth and maybe we can have some kind of marginal welfare state with the benefits of future growth.”

Between the idea that revolution would reduce it to zero and the idea that revolution would simply take it all, there’s the question of what the option of justice is worth now, given that we don’t and can’t know the answer, which would depend largely upon what strategies revolutionaries and their opponents choose to pursue as capital markets become illiquid. But for similar reasons, no one could know whether a general strike would wipe out or appropriate the wealth accumulated in the form of production. The welfare state was the premium extracted for not finding out — something over one-third of GDP in most cases. Its value was not based on the realistic probability of a general strike — which was never high, and often exaggerated — but on the rising volatility of socioeconomic and political underliers, such as inequality and illegitimacy.

Something similar can be said about the stability of wealth accumulated in the form of financial instruments, such as bonds and derivatives written on them. Such wealth is threatened with disaccumulation by the illiquidity of financial markets — the probability of which is never high, but often exaggerated.

Very useful.

That’s where the opening for historical justice lies today. It doesn’t depend directly on a higher probability of revolution, but on the effect of volatility on fears of illiquidity — and particularly on political uncertainty about whether the state will restore liquidity by imposing austerity, effectively pricing the option of justice at zero. Not doing this means charging a premium for allowing the accumulation of capital to continue — and this, I will argue, is the present (non-zero) value of the option of historical justice.

So I’m saying that historical justice can have value even when the option of revolutionary illiquidity can’t be exercised, and that its value can be measured by the premium that could be charged for government-provided liquidity in capital markets — the “liquidity put.” The option of justice is the rollover of the opportunity to exercise it. In this respect, I’m now thinking of class justice in a democracy as extracting a price for the postponement of financial illiquidity in much the way that I speak in “After Evil” of humanitarian justice as extracting a price for postponement of  political redress of the running injustices of capitalism.

Increasingly, I’m returning to my roots as a political theorist. People say that I’m thinking of democratic politics as extracting a price for the rollover of the option of justice, even (perhaps especially) when revolution is improbable.

The operation of the instrument you describe as optionalized justice is essentially a political mechanism.

It’s a political mechanism that has a macroeconomic meaning. There’s now a large literature by leading economists, including several Nobel Prize winners, on what they call “macro-financial risk analysis.” In essence, it’s about how to place economic value on the government guarantee of liquidity to financial markets at times of high and interconnected volatility. The question for them is whether calling attention to this financial commitment on the part of government will make it politically controversial and thus less certain, thereby raising the cost that could be charged to the financial sector, which is precisely what I want to do.

There are also more microeconomic applications of this way of thinking. As a labor union president in the University of California system, for example, I tried to argue that unions should get calls (contingent claims) on the future upside to employers from concessions that were imposed on employees because of bad state budgets. The norm in labor negotiation today is that the employer gets to keep all the benefits of give-backs by employees under all future contingencies. Thinking about labor justice historically, in terms of options, can avoid this bind.

Can you offer further examples?

Sure. Once you recognize that the liquidity of financial instruments (macrofinancial risk) is a chokepoint in the global political economy, there will be a lot of discrete areas in which similar insights can be applied. Your cell phone and utility bills, for example, have already been securitized as predictable revenue streams that are the building-blocks of new financial assets. The liquidity of those assets is at stake if default rates increase. But there’s no inherent reason such payments, along with the threat of default, can’t be both collectivized and (in effect) pre-financialized.

Such forms of political organization — both within and against finance — could allow the liquidity premium to be increased and subsequently appropriated by end-users. The same could be said about student debt and mortgage debt. Once we understand that these are raw materials for creating liquidity in securities markets, that’s a point where political leverage can be applied.

Marx argued for the overcoming of the capitalist order, to put it very simply. His was a world of victory and defeat. Are you suggesting a schema wherein the capitalist order is harnessed for economic and social good — for, indeed, the achievement of historical justice?

I wouldn’t put it exactly that way, although I could see how you might want to. I think of the capitalist system as a system that has created differential benefit through allowing past injustice to continue to run, through perpetuating it. The question for me is whether we can develop forms in which those benefits can be harvested for purposes of justice. Or whether it would be better, because it would be just, for them simply to vanish.

My assumption — and this was certainly Marx’s assumption — is that what would remain if the benefits held in the form of wealth were to vanish is a significant disaccumulation in the name of justice, or at least significant disaccumulation that would not be unjust because the beneficiaries shouldn’t have been allowed to accumulate it to begin with.

My view is that if that can’t be harvested, all that bad history will have been a waste. My view is not that there can’t be bubbles, but that wealth accumulated in the form of financial instruments is inherently no less real than wealth accumulated in the form of machinery, the value of which is still contingent upon the existence of liquidity in the commodity market. I believe that the production of liquidity should be the focus of socialism — that liquidity is not free, that it’s not a positive externality, that it is something for which a political price can be extracted.

I believe that that political price can be extracted out of resources that exist — that liquidity’s present price, through a democratic politics of historical accountability, can be appropriated for the purpose of diminishing the gaps attributable to past injustice.

Again, please offer an example.

So, for example, the liquidity of total credit market debt in the United States in 2008, according to the Fed, was around $76 trillion — this is all the debt, it is a raw material out of which other financial instruments can be made. It included actual government debt, which is the safe collateral that can be swapped for cash on the money market. But it also included what I would call “synthetic” government debt, which is the byproduct of pricing new financial securities by separating out the risky and the risk-free components. This synthetic risk-free debt was supposed to be just as liquid as government debt, according to asset pricing formulas, but when market liquidity was threatened it was dumped in favor of government debt, making it less liquid and thus making the formulas false.

What restored liquidity to markets was the United States government’s swap of $5 trillion in Treasuries for this synthetic debt, and its pledge to swap up to $13 trillion of Treasuries, an amount roughly equivalent to its GDP (or tax base). That’s the notional value of the guarantee that government provided. The premium, or price, that could have been charged for such a pledge is what financial economists call the illiquidity premium. I regard it as funding presently available for the purposes of justice without threatening a collapse in asset prices.

And in this example, the United States government would exercise a justice option by saying “We will produce this synthetic debt for you, if …”

“We will allow the cumulative benefits of past injustice to grow, but the premium gets paid to fund free public health care, free public universities,” and so on and so forth.

It’s a lot more money than you’d think. But the fact is, this money was just taken by some of the elements in the financial industry who threatened to blow things up if they did not get full face value for the illiquid assets on their books.

Who you have called the Wall Street suicide bombers.

Right. I occasionally advise people in Strike Debt! [the nationwide movement opposed to excessive consumer debt]. Some of them tried to do the Debt Jubilee, which essentially educates people to the fact that there is a credit market and that their obligations have already been discounted to pennies on the dollar. But beyond that, if they withhold payment it’s simply increasing the volatility of debt repayment. And like other things, like slavery, it gets exaggerated, and people in finance can think that student debt is too cheap down-market because people are overestimating the success of the pro-default movement.

That means there’s money to be made by noticing that the unwillingness to pay is exaggerated and the ability to pay is once again rising. This logic needs to be understood rather than merely resisted by movements like Strike Debt!, if they are to capture and build upon the benefits produced by their own perceived, and often exaggerated, success.

Let me end with quite a large question. Your thinking prompts it, as I imagine you will understand. What is the fate of historical justice within the capitalist order? Or, upside down, what is the fate of capitalism in a historically just world?

In other words: reconciliation or not; coexistence, one with the other; or cancellation, one by the other. Can historical justice truly be achieved within the capitalist order?

It’s a fundamental question because it goes back to whether historical justice could be achieved by a revolution against the capitalists. Disaccumulation can be achieved by revolution. The question, within capitalism, is how you raise the present value of historical justice. That’s the point I’m making.

The question, in other words, is what we can do, through political struggle, to raise the present value of the option of not having the revolution, even when we do little to increase the probability of its occurrence.