NigeriansTalk

My col­umn of this week. Cross-posted.

Anthro­pol­o­gist Karen Ho car­ried out a seventeen-month-long field­work on Wall Street, inter­view­ing and observ­ing invest­ment bankers. She first started out work­ing as a rookie man­age­ment con­sult­ing ana­lyst in a hybrid invest­ment and com­mer­cial bank. She planned to first work in finance her­self for a while before going back to grad­u­ate school to study and write a dis­ser­ta­tion on Wall Street cul­ture. She got laid off after six months into her job. That expe­ri­ence of being laid off became one of the cen­tral things she stud­ied dur­ing her field­work. The field­work formed the basis for her dis­ser­ta­tion, which was pub­lished in 2009 as Liq­ui­dated: An Ethnog­ra­phy of Wall Street.

The book is not so much an indict­ment of Wall Street as it is a pre­sen­ta­tion of the way the Street under­stands its place in the scheme of things. She high­lights the self-understanding of invest­ment bankers as ‘being’ the mar­ket, an under­stand­ing that goes as far as to jus­tify, on the one hand, receiv­ing insanely huge bonuses, and on the other, being very liq­uid indi­vid­u­als them­selves. The rate of staff turnover on Wall Street is extremely high.

Per­haps the most instruc­tive point is the way Wall Street has changed cor­po­rate Amer­i­can cul­ture in the past 25 years. Cor­po­ra­tions, which were seen as part of the wel­fare cap­i­tal­ism of the post 2nd World War era, grad­u­ally lost their sta­tus as social insti­tu­tions. Share­holder value has become nat­u­ralised as the sole rea­son for the exis­tence of cor­po­ra­tions. There­fore, any­thing that can improve share­holder value, no mat­ter how short that increase in value lasts, is encour­aged. This some­times includes hos­tile takeover, and almost always demands mas­sive job cuts and down­siz­ing. Once cor­po­ra­tions are no longer seen as social insti­tu­tions that pro­vide jobs and care for cus­tomers, those are rather easy things to do.

The empha­sis on share­holder value has led to short-term think­ing and has often robbed cor­po­ra­tions of the abil­ity to make long-term plans. Here is an exam­ple. If a group of investors buys up a com­pany by lever­ag­ing that same com­pany on the junk bonds mar­ket, with the plan to cut jobs in order to ‘improve’ the share­holder value of the com­pany before sell­ing it off, why would they make long-term plans for such com­pany? This could hap­pen to cor­po­ra­tions that are healthy, all things – includ­ing share­holder value – considered.

This leads me to what is cur­rently hap­pen­ing in the Niger­ian bank­ing indus­try. As we all know, the Niger­ian Cen­tral Bank took over five banks last August. Shortly after, the Cen­tral Bank pub­lished a list of the banks’ debtors. One thing that has been under-played is the cor­po­rate prac­tices of those banks dur­ing the Niger­ian stock mar­ket bubble.

Actu­ally, the prac­tices of the banks were what cre­ated the bub­ble. Increas­ing their own share­holder value became the main job of the banks. Of course, in a weird way, this is under­stand­able. Wall Street could claim to work on increas­ing share­holder value of cor­po­rate Amer­ica; in Nige­ria, the bank­ing indus­try is cor­po­rate Nige­ria. As Abim­bola Agbolu­aje noted in his col­umn in this news­pa­per a few weeks ago, banks were grant­ing loans that were then spent on stocks, includ­ing theirs.

It is not by chance that it was after the bub­ble burst that the Cen­tral Bank took over the banks. Before then, the prof­its banks were declar­ing, plus their share­holder value, were highly manip­u­lated fig­ures that bore no rela­tion­ship to the actual con­di­tions of the banks. Now, they have to find a way to rec­on­cile their bal­ance sheet, some­how. The cur­rent cry in the Niger­ian bank­ing indus­try is that banks are lay­ing off staff in droves and clos­ing up branches. Those who are not laid off have to endure pay cut.

How­ever, a lot still remain unclear. Once it seemed like a few heads had rolled the pub­lic felt paci­fied. The feel­ing of schaden­freude among the pub­lic was very pal­pa­ble after the list of debtors was pub­lished. That is under­stand­able, but the point is that the banks are not in trou­ble sim­ply because they gave out too many bad loans.

One of the biggest strengths of anthro­pol­ogy is that anthro­pol­o­gists have a pen­chant for ask­ing basic and sim­ple ques­tions, ques­tions whose answers are some­times assumed to be known, until they are asked. That was the atti­tude Karen Ho directed at Wall Street. Wouldn’t it be inter­est­ing to turn that kind of atti­tude towards the Niger­ian finan­cial industry?