Sunday, March 17, 2019
10.1 & 10.2 Musaraj & Woodworth/Ulfstjrne & McGregor - Social Networks and Speculative Finance
All readings of this week discuss how social networks -- of family, kin, migrants -- play a role in fueling speculative finance or are transformed/shaped by speculative finance or bubbles. Taking one of the articles, discuss how in this specific case are social relations important in the circulation, expansion and/or collapse of the respective speculative bubble?
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All of this week's articles have similar roles that social networks play within speculative finance. In the Pyramid Firms and Value Transformation reading, the key to the expansion of pyramid schemes in Albania were the kinships of migrants from abroad-in this case, Italy and Greece. These people were lured back to Albania in the early nineties for economic survival and promise after the fall of the communist regime. If not physically, then monetarily. Distant kin throughout Eastern Europe would pool all their cash and assets with family in Albania. This 'migration' was seen as a "type of investment". The more money that was invested, was promised to yield more returns on interest from 10% in upwards of 50%. In order to receive a large return, it behooved the people of Albania to send for these remittances from family abroad. This circulation of funds had persuaded more and more people to invest, further expanding the economic bubbles of Albania, from people both inside and outside the country. There is a continuing pattern where the promise of wealth was given to all that invested. At some point, the scheme cannot continue, these promises are broken, and social and political upheaval ensues as so many people gave all that they had. Albania was no exception with violence and anarchy especially in the cities of Tirana and Vlora, where the firms were most prominent.
ReplyDeleteWoodworthùs's article talks about the contexts of a bubble in inner Mongolia. The article mentions that the banks in the region tended to be the only formal places where one could lend money as well as find investment, as well as mentioning that these banks tended to be inflexible when compared to the less legal, more informal, and more flexible lending establishments. For those who wanted to be apart of this informal sector, they were looking for a practical way to invest and make a living. Many of these people as well tended to be in poverty and living in rural areas, looking for more profitable work in a city. The article mentions that in the case of recent to the cities, these informal institutions were widely used to live well in the cities, as well as a way to gain social status. Later on in the article, Woodworthùs talks about Mr Liu, who went to the city and was apart of some informal establishment. In the article, Mr. Liu talks about relocating to an apartment that has ample room for him and his family and in a way luxurious, paid for by the informal banks, where his previous house was crowded and simple. Later on, Mr. Liu's family members would make a joint investment in a informal bank, so that they could live a better life. The article as well notes that during the boom, that families and and friends tended to be rather flexible when it came to giving and loaning a close friend or relative money, even going as far as to forgive loans given. However, as the boom began to collapse, those same lenders would tend to be much more inflexible when giving money away.
ReplyDeleteThrough all the articles of this week we can see how social networks are closely involved in speculative finance. Throughout all the articles there is also a continuous promise on wealth if one invested into these different schemes which increases citizen's hope of reaching wealth and thus leads to an increase in the investing of these schemes. In the Pyramid Firms and Value Transformation article, the scheme relied on one's social networks of family abroad to gain investments. When people invested for the migration of kin, there was a promise to yield a much greater return, though these investments just further increased the economic bubbles in Albania. In Woodworth's article it was also described how there was this promise of greater wealth when families in Mongolia invested in order to be wealthier in the cities. Those who were trying to be practical in order to increase funds opted to invest with informal lending companies which seemed to be more flexible than formal companies. There began to be a boom of investment and good returns within the scheme for awhile, during this time people were more willing to give loans to family, those they were close to. However when the boom began to collapse there was sudden inflexibility to lending away money. But in both articles we can still see how social networks tie into the investment of schemes.
ReplyDeleteIn the gaolidai scheme of Ordos, China, social relations, rapid urbanization, manipulative actions played a major role in the rapid boom of the city followed closely by an even larger crash/bust that has left the city a ghost town. Interestingly, the gaolidai scheme did this by providing migrant, rural families large sums of money upon relocating to Ordos so long as they occasionally lended their earnings to gaolidai operations. Furthermore, the gaolidai scheme took advantage of these families in regards to their low levels of education and ability to attain higher paying metropolitan jobs. In China, as well as many parts of the world, there still exists social constructs in which people of wealth and higher education act as a gold standard for many while taxi drivers, street cleaners, and other blue collar jobs are seen as menial and unworthy of city life. By relocating numerous rural families who had little education, the gaolidai relied on these families constant lending so that they could remain in good social standing within in the city. Additionally, these families began forming their own social communities that relied on the gaolidai to maintain their newfound way of city living. The formation of these social communities further contributed to the expansion of the booming Ordos economy and gaolidai scheme. Seeing such large sums of money being distributed further led to white collar workers who already inhabited the city to take notice of what they perceived to be an excellent investment opportunity.
ReplyDeleteMcGregor's article discusses Zimbabwe's diasporic funding of urban development. Government and international agencies encourage "diasporic transnational investment" based on calculations of stimulus to industrialization, housing, and employment within developing countries, though these logistics are often too simplistic or unrealistic when taking into account national dynamics and fluctuating or unstable markets. This mentality also places globalization concerns over the concerns of the local citizens affected by transnational financialization. These agencies assume that though the financial investments are high risk that migrants can navigate them because diaspora investors work with knowledge of internal investment opportunities for local citizens and that their patriotic sentiment allows for adjustments in market rates of return. The property investors were investing to insure a safe and successful return to Zimbabwe more so than as pure profiteering. They latched onto the idea of building funds for assisting family in Zimbabwe and were not thinking about the globalist ideas of transnational investment.
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