Professor Saskia Sassen

Professor of Sociology
Columbia University

Opening Speech: Professor Saskia Sassen

It’s a great, great pleasure to be here, not just because of this astonishing beautiful place but also because of the subject and the people and the young women who organised it all. I really feel like they need a second round of applause.

So, I wanted to bring us back to an earlier moment and to argue that there are particular breaking points that in my reading mark a difference: We have entered a new epoque. I think we entered that epoque in the 1980s solidly.

The work of getting there started much earlier. And one issue that comes out of that sort of mix of elements is that the way complex systems changed, and our unions are complex, our countries are complex by now, and so, it’s not always easy to detect that change, it’s actually often quite difficult to detect that change and so I want to sort of argue that one of the most brutal markings of this transformation which actually became visible I would say about twenty years ago, though it started in my reading after the 1980s.

So I repeat, in the 1980s I think we leave behind a kind of economy, society, you know, politics that starts after World War II in the United States and here in Europe that brought about the expansion of a middle class, that brought about a lot of great things.

I think by the 1980s we had entered a new form of our economies but in our complex systems that is not very visible. It is very difficult to detect that transformation. Now, you know, one can have endless amounts of arguments about the particular dates, the particular places and dates.

But, to me, sort of very vaguely put, by the 1980s but starting in the 1970s – remember that in the 1970s most of our countries were actually fairly poorish, the United States was in deep trouble, there were all kinds of transformations going on – so that makes visible, I would argue, the end of an epoque that starts after World War II which was actually very successful in reinventing Europe, in reinventing the United States.

So, the new economy that begins, one very dramatic way of putting it and, since I have so little time to speak, dramatic should help rather than not help, is the rise of extractive logics. Before that, I think that what dominated was constructive logics. We had to rebuild. We were innovating, we were making new laws, etc. etc.

But after the early 1970s a certain poverty sets in and I would say that by the 1980s we are existing already in a new world. One, I repeat, one dramatic factor, very partial but very powerful, is the rise of extractive logics.

Now, I have done a lot of my research on this type of subject, on high finance. Now, high finance has nothing to do with traditional banking. Traditional banking is a reasonable, you know it is commerce. High finance is not commerce, high finance is an extraordinary capability based on algorithmic math, the work of physicists – and I am not blaming the physicists, I respect and admire physicists – but they wound up being invited by financial firms to develop instruments, brilliant instruments and it is truly a transformation.

So right now, yes, we have still traditional banking and that’s all fine. Traditional banking is commerce, it sells something, money for a price. High finance is not commerce, it is something radically different. Now, high finance is just one little component of our economies but it has a dangerous capacity to actively transform and extract from just about anything.

So, I have a very long list of these brilliant interventions and, again, what lies behind this is not the physicists themselves, they are the instrumentality, but what lies behind that is a logic that I call a  logic of extraction. It’s about extracting. So, in the United States, I know this is about Europe but allow me a moment to talk about the United States, the United States is an extreme case, but in the United States high finance has been able to concentrate an extraordinary amount of value. Secondly, high finance can transform just about anything including very modest big housing operations, you know, for low-income people and that is one of the things I have been researching. I mean, it’s an extraordinary capability and I would say that some of the modes in which we have thought our Western society have actually suffered under this modality but it’s not visible.

The high financiers, these are extraordinarily sophisticated operations, but, I repeat, when you put in play algorithmic mathematics and it’s all those physicists, you walk into Goldman Sachs where you had a hundred secretaries, you now have a hundred physicists. That brilliance, actually, is quite extraordinary and succeeds in constructing sources of income and sort of extractive modes that are quite distructive.

Now, I want us to keep that in place and I want to bring in a very different, earlier case which, I think, has also marked us which we forget and that is the making of OPEC. Do you remember OPEC? OPEC was made in the 1970. The sum of the Asian countries and the Middle east countries had oil. There was also, of course, Venezuela was part of that etc. but it was mostly there. They made a lot of money because they kept the prices high, I am sure many of you remember all of this. But they didn’t know what to do with all this money, so they brought in Western style, especially American-style, high level banking in order to make a profit out of the gains they had made, to make that money that they had from oil to us all, in order to make that money work.

And, so, at that point, banks from Europe and from the United States – and that is an earlier time, that is before the current moment that I am describing, right – went to Africa and they went to Asia and they sold the money of the Middle Eastern oil owners. They created massive distortions, in Africa especially. They sold all that money that, you know, they didn’t know what to do with in the end. And, so, there is a story here that goes back, and I think Africa is still suffering from that, that is a disastrous intervention. Money was made, you know, by the oil producers and money was made by the intermediary banks which were mostly American. So, when you begin to put all of these things together – and these are histories that have left traces, they’re not invisible traces, we can experience, we can document them –, when you put it together that way and you arrive at the current period.

For me there is no way of thinking about this current period without remembering the sort of lineages that we, the Western countries, even when it was the money of Arabic countries, even that case but also other cases, that we have shaped our economies. And this is a process that really takes off in the 1970s. By the 1980s it is clear. And, to me, that is a period that ends the kind of society that we created after World War II. But that change is simply not visible.

The tendency is to think that we are still living under that same older system that we created after World War II which was a very reasonably well-functioning society. Yes, inequality, but not what we have today. Today when I say that the current period is marked by the rise of extractive logics, I’m also saying that capabilities – and we tend to think of capabilities as positives but in this sense these are dangerous capabilities – capabilities have been constructed that are so deeply extractive that it might as well be mining. When you’re done with a mine, when you have extracted everything from the mine, you don’t care and you leave all the pollution and whatever, you don’t care, you move on to the next mine. And mining is just one instance here.

Under those conditions, I would argue that the United States, of all the highly developed countries, is exhibit number one. We have seen, for instance, and I would be curious to know, I don’t dare to talk about Europe very much since, you know, you are all experts here. In the United States the middle class that we had after World War II until the 1970s, it doesn’t exist like that anymore. It’s divided into a very rich upper middle class and an impoverished lower middle class and then we have, of course, the poor and then we have etc,. you know, but just within the middle class we can see this. I think in Europe we see elements of that. I mean, it isn’t quite as extreme, you have a much better system. The United States is a fairly brutal system of governing.

Number two, back to high finance. High finance right now, and some of you are maybe aware of also what’s happening in Europe, is buying up, a few high, high, high level financial firms are buying up modest housing. Big buildings for low-income people, in Berlin but also in many, many different places, in about 17 different countries. And the question is: why? Why are they doing that? Why is a high financial firm with all the complexities buying up modest rental buildings? I don’t claim to have all the answers, but I think I have one element of the answer and that is: it has nothing to do with housing.

It is now that we have instruments via algorithmic mathematics that transform everything into something else. So, the house really comes down to a set of assets – it’s not a house, it’s not a building, no, it’s an asset and you create an asset backed security. The high investment circle wants those types of instruments. They don’t want derivatives. The derivatives are for people like me and students and the middle class – that’s the derivatives. I recommend against buying derivatives.

The high investment circuit and sort of actors in those circuits say: give me an asset backed security. Asset is the key element.  Well, how? How do you construct an asset? With algorithmic mathematics you can make an asset just about everything, you can make an asset out of this building. You’re not selling the building, you’re just selling a certain valuation element. So, this is an extraordinary shift.

Now, coming back to the question of Europe, I think that Europe has handled this type of powerful actor, you have those actors still in Europe, but they have been able to manage those actors, to have a kind of, a set of demands. But there is one American firm, for instance, I don’t need to mention it but some of you might know, who is buying up a lot of buildings in major German cities and, so, it is transforming those buildings. Those buildings cease being just simply a building. They become something very abstract, I come back to algorithmic mathematics, and I think that there is a really very, very powerful actor involved in all of this that we need to become aware of.

Europe functions much better than the United States but this is something where in France, in Germany, in a whole bunch of countries, this has also entered here. And I would say that this is something worth checking out and becoming aware of. And I’m really thinking of the young organizers, you know, of this conference that this is a subject that you should go for, you should check it out. And in Berlin now, I know, there is quite a bit of organizing against this, they have become very aware there. I think in beautiful Potsdam, it’s such a different situation here, that probably not.

But I want to begin to conclude here to say that, I think, what the younger generations can contribute to, that we the elders maybe less so, is to understand what is the difference. Because we have existed in a way, and a lot of the general commentary suggests, that it’s still that period that starts after World War II. We haven’t invented a new name for this period. This period that takes off in the late 1970s. We still think that we are living in the same mode, not without transformations of course, but that the radicalness of the transformation that I am alluding to is a bit invisible. It’s not, you know, people don’t recognize it.

And so, the question becomes: how do we recognize a foundational change in a complex system? We live in complex systems. It’s not easy, it’s not self-evident. Most of what constitutes our cities, our economies is more or less the same. So you actually have to go digging, especially with this current transformation which is rather elusive, actually. We need to change some of our basic understandings of what is happening.

So, in the United States, which I am more familiar with than Europe, and I know that the United States is different,  the notion is that somehow things are more or less the same: we have a middle class. I say no, we have two middle classes, one is getting poorer, the other one is getting richer. You know, that’s just one little example.

But we need new categories of analysis. And I want the younger generations, I tell my students to please begin to see the difference after the 1970s, 1980s with the past. We have left behind a period that worked very well. Any complex system is going to have differences – so, inevitably, of course with inequalities, a modest middle class, a rich middle class etc. –but still functional, it worked. What we have now is an emergent actor that has destructive capacities, and housing is just the clearest instance of that, that have to be recognized and have to be fought against.

And I leave you with this, rather. You know, this is an unhappy situation but it’s also a call to action and an attempt to put on the table some basic transformations that are not very visible, but they are extraordinarily powerful and they are working brilliantly for some and negatively for quite a few.

Thank you very much.