Cecilia Schultz is a PhD candidate, looking at the politics of numbers in financial markets, specifically risk metrics like sovereign credit ratings. Her research interests fall in the fields of economic sociology, the geographies of money and finance and the philosophy of science.
In recent years, the “Big Three” credit rating agencies (CRAs) – Moody’s, Standard & Poor’s (S&P’s) and Fitch – have become common parlance in South Africa’s polity. CRA’s rate the creditworthiness of a government’s debt, issued as sovereign bonds and traded on exchanges like the Johannesburg Stock Exchange (JSE). A sovereign bond can be thought of as a debt-based investment, where investors lend money to a government in return for an agreed rate of interest. The interest rate is determined by the government’s credit rating, namely ‘the future ability and willingness of sovereign governments to service their commercial financial obligation in full and on time’ (S&P’s 2017). ‘Ability’ refers to aspects like economic growth, GDP per capita, debt-to-GDP ratio and inflation. ‘Willingness’ on the other hand, relates to the extent a government conforms to an established set of socio-political standards. Sovereign credit ratings grant governments access to liquid capital markets and the necessary debt financing to facilitate programmes of national self-determination such as health care or fiscal stimulus. More favourable ratings translate into lower cost of borrowing. Conversely, less favourable ratings demand a higher premium or dry up, with consecutive downgrades – as we have seen in the past few years. Thus, despite claiming to be ‘informed opinions’, sovereign credit ratings are imbued with power and knowledge by establishing an infrastructure of referentiality – via the ‘AAA’ scale – to denote what correct and ‘normal’ fiscal conduct should entail (Paudyn 2014).
Although modalities of public borrowing can be traced back to ancient and medieval times, it was the advent of credit money as a means of payment in seventeenth-century England that inaugurated sovereign debt as we know it today (De Goede 2005). Contrary to commodity money, credit – like paper money – is detached from a direct relationship to any actual commodities. It is a claim on goods, based on promises of future income streams (Ingham 1999). In order to fund its numerous wars and colonial conquests, the English state established a system of long-term public debt through the creation of joint-stock companies like the Royal African Company (RAC), which enjoyed special privileges and monopoly power granted by the monarchy. Shareholders could not demand their capital back but instead retrieve their funds by selling their shares to third parties. The shares, credit certificates and tickets became marketable in themselves and established a liquid secondary market for trading public debt instruments, whose value rose and fell based on the public’s confidence in the state’s political, military and financial transactions (Pocock 1975).
Credit transactions therefore rely on social imaginations of trust, which are inherently political. In modern financial markets, creditworthiness assumes a distinct geopolitical imagination that envisions spaces beyond the horizon of “the West” as sources of chaos and danger. The ‘global’ in global finance, refers not to a ‘composition of equal and pacific elements but a hierarchy of places, from known to unknown, most friendly to most dangerous’ (Agnew 2003, 16). ‘Emerging markets’ like South Africa are often portrayed as ‘fragile’, ‘volatile’ and beleaguered with policy uncertainty. At the same time however, these are destinations to be conquered: ‘risk-versus-reward’ investments. In order to gain credibility, emerging markets are encouraged to display their willingness to conform a global set of standards. From the 1980s, these standards have mainly been informed by neoliberalism (a very problematic term with many meanings, but one with which we must now live) (Paudyn 2014). This paradigm encouraged a set of free-market reforms such as deregulation, trade liberalisation and an autonomous central bank to keep inflation low. Such reforms signal a ‘favourable investment environment’, which assumedly increase possibilities for economic growth that strengthens a government’s ability and confirm its willingness to repay debt obligations (Paudyn 2014).
Sovereign creditworthiness, especially in the case of emerging markets, thus involves a distinct theatrical element (Seabrooke 2006). According to Seabrooke (2006, 158-160), CRAs, investors and traders pay more attention to emerging markets’ ‘willingness’ to behave in a creditworthy manner, i.e. to ‘talk the talk’ than their necessary ‘ability’ to repay debt. Here, President Cyril Ramaphosa seems to have identified summits as key sites to ‘perform’ his government’s creditworthiness. Apart from his involvement in international summits like the G20 Summit, BRICS Business Summit or the AU Troika Summit, Ramaphosa also launched a much revered ‘investment’ summit last year, in which he managed to garner nearly R290 billion in investment pledges. Earmarked by a number of promises and projects to improve South Africa’s investment environment, Ramaphosa portrayed this summit as ‘an expression of shared hope and renewed confidence’. Addressing concerns of policy uncertainty in the past few years, the president emphasised his government’s determination ‘to put behind us the period of uncertainty and discord and embrace a future of cooperation and partnership.’
In order to comprehend the role summits play in the movement of global capital, it is necessary that we move away from the common portrayal of summits as ‘empty rhetoric’. Even in cases where governments fail to act in accordance to the declaratory statements and promises made, summits are moments of political theatre that provide a stage on which politicians can perform their roles and portray themselves in a particular way to global audiences (Death 2011). The declarations, policy positions and promises can be thought of as poetic speech acts: instances where the ‘palpability of the sign’ becomes more important than what it means (Jakobson 1985, 356-367). Roman Jakobson identified the poetic as one of six different functions in a speech act, the others being emotive, referential, phatic, expressive, conative and metalingual. In any speech act, several functions operate in a hierarchical order, where the dominant function influences the general character of the message. When the poetic function dominates, the speech act is organised according to the material qualities of the signifier (the words used) instead of its referential aspects (meaning). To take Jakobson’s (1985) paradigmatic example, when a word is selected in a poem in order to rhyme, its referential function is less relevant than its homophonic relation to another word. Poetics thus places attention in the materiality of the signifier itself, which allows a process of doubling where the purported objectives of summits become loosened from their real-life consequences (Larkin 2013).
The symbolic, performative and theatrical role of summits enable politicians to persuade actors such as CRAs, investors and/or citizens that they are serious about issues such as repaying their debt obligations, fostering a favourable investment environment or creating jobs. Sovereign creditworthiness must be seen to be done and summits are crucial sites where this performance gets played out (Death 2011, 2). Indeed, compared to ‘frontier’ or ‘pre-emerging markets’, emerging markets enjoy considerably more ‘room to groove’ in signalling their creditworthiness to the market. Although they reify dominant ideas, subjectivities and relationships and significantly undermine democratically-based ways for imagining creditworthiness, the symbolism and dramaturgy of summits grant emerging markets agency to attract investment. The same cannot be said for ‘frontier’ economies who depend on loans from the IMF and World Bank. Much like the infamous Structural Adjustment Programmes, these economies must follow strict economic and political reforms to demonstrate their creditworthiness before gaining access to global capital markets (Seabrooke 2006).
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