03 January 2014


'Identity and the Hybridity of Modern Finance: How a Specifically Modern Concept of the Self Underlies the Modern Ownership of Property, Trusts and Finance' by Jongchul Kim in (2013) The Cambridge Journal of Economics argues that
Postmodern thinker A. N. Whitehead argued that the idea of the identity of the self is one of the significant mistakes made by modern philosophy. From this postmodern perspective, this essay examines how this mistaken concept underlies the modern ownership schemes of property, trusts and finance. It argues that exploiting the hybridity of money and credit explains the development of modern ownership from property to trusts and modern finance, and that, in the process of exploiting this hybridity, property owners struggle to endure and secure their identities permanently. This essay also analyses unethical aspects of the hybridity of modern finance, as well as its systemic vulnerability, which contributed to the financial crisis of 2008. The essay concludes with a brief discussion of a general reform principle for the financial sector. 
Kim comments that
The ideas of identity and person are premises of modern Western philosophy. The modern philosophers Friedrich Hegel and John Locke explained the relationship between person and property. Critical legal theorist Roger Cotterrell (1987) explored how the legal relationship between person and property is extended to collective ownership and is made permanent by the legal institution of the trust. Legal theorist Frederic Maitland (1911) argued that this legal idea of the trust developed into the idea of the trust fund, which is prevalent in modern finance. John Maynard Keynes (1972) argued that the money motive of financial investors is a semi- pathological desire to secure “a spurious and delusive immortality.” These scattered, fragmented insights can lead us to link modern ideas and institutions such as the identity of the self, property, trusts, finance and the psychological desire for immortality. This linking helps us understand how the concept of modern ownership comes from the modern mind (especially that of a dominant group), which interprets and perceives itself and the world in a peculiar manner. This understanding remains elusive, however, as long as these scattered insights remain fragmented because each of them by itself is limited. For example, Hegel and Locke assumed that the modern idea of person was a “universal” concept, and even Cotterrell believed that conceptualizing a person as the owner of property is common sense (1987: 83). Thus, these three theorists failed to realize that the modern idea of personhood is a peculiar way of understanding the self and is ontologically problematic. Maitland did not develop his argument that the trust led to the trust fund in detail. Keynes understood the desire for immortality in a Freudian manner and never linked this desire with the mistaken modern idea of the identity of the self. This essay attempts to overcome the limitations of these scattered insights and to rethink the ontology of modern ownership. 
Philosophers have debated the question of whether there is a persistent subject that undergoes change through time. Postmodern philosophers Alfred North Whitehead (1978: 167) and Friedrich Nietzsche (1989: 45) argued1 that this idea of personal identity is one of the significant mistakes made by modern philosophy. According to them, the idea comes from the false conception that reality has the same structure as language. Our language takes the form of “subject and predicate.” When we think that reality has the same “subject-predicate” structure as language, we separate the subject from the predicate, or the “doer” from the “doing.” 
Based on the mistaken idea of identity, Hegel devised the concept of dialectics to explain how the various institutional forms of identity—such as money, the state, and the world spirit— have developed. From a postmodern critical perspective, in contrast, this essay argues that rather than dialectics, the exploitation of the hybridity of money and credit explains the development of modern ownership from property to trusts and modern finance, and that, in this process, property owners struggle to endure and secure their identities permanently. As a result of this hybridity, the financial instruments of modern banking can be called credit-money. These instruments include bank-notes, which are issued by commercial banks, and the shares of money market mutual funds (MMMFs) and repurchase agreements (repos), which have been issued by shadow-banking institutions in the twentieth and twenty-first centuries. Credit-money is self-contradictory because the concept of money is inherently contradictory to the concept of credit. The transfer of a credit instrument creates a creditor-debtor relation that imposes a repayment obligation on a debtor. In contrast, money, including cash issued by a central bank, is defined as anything that is generally acceptable in the final settlement of creditor- debtor relations. The discussion of the ontology of modern finance must be founded upon historical reality. We thus have to choose historical accounts that stimulate our new interpretation. The accounts that help us do so are those of Maitland (1911), Alan Macfarlane (1973), Ronald Stanley Neale (1975) and Jongchul Kim (2011), which are critical of classical theories such as those of Karl Marx, Max Weber and Crawford Brough Macpherson, and which emphasize the central role of the trust in explaining the nature of modern ownership. For the discussion of shadow banking, this essay also relies on the research of Gary Gorton and Andrew Metrick. 
This essay first examines the peculiar modern relationship between person and property. It then examines how this relationship is made permanent by both the trust and modern finance, which exploit a hybridity between person-property relationships and creditor-debtor relationships. Next, it examines how this hybridity has been exploited in shadow banking in the twentieth and twenty-first centuries. Finally, it comments on the moral implications of the idea of personality and modern banking in regards to forgiveness and briefly suggests as a general principle for financial reform the abolition of hybridity through the creation of a clear distinction between creditors’ rights and owners’ rights.