[OPE] David Harvie, "The Measure of a Monster Capital, Class, Competition and Finance"

From: glevy@pratt.edu
Date: Mon Jul 28 2008 - 09:44:54 EDT

>From the current issue of "Turbulence"
related†article by Christian Frings†
is also in this
In solidarity, Jerry

The Measure of a
Monster: Capital, Class, Competition and Finance : turbulence 

The Measure of a Monster: Capital, Class, Competition and Finance

Pundits are describing the global ‚€˜credit
crunch‚€™ as potentially the worst crisis to befall
capitalism since the Wall Street Crash of 1929 and the Great Depression
that followed. We doubt the value of such comparisons, but there is no
doubt we need to make sense of the origins, nature and meaning of the
current financial crisis. Most important, we need to grasp its potential
and its dangers for us. Here we print two analyses. In the first,
Christian Frings suggests that not only was neo-liberal
‚€˜financialisation‚€™ a response to
struggle, but that its crisis is now opening up new possibilities for
movements. In the second (below), David Harvie argues that finance plays a
role that goes to the heart of competitive calculation, accumulation and
class struggle; the present crisis is thus a crisis of both measure and

- Turbulence 

‚€œInternational financial markets have developed into
a monster that must be put back in its place‚€Ě 

‚€“ Horst K√∂hler, German President and
former head of the IMF 

The numbers associated with
finance are mind-boggling. The entire value of annual global output
changes hands in just six days‚€™ trading on the
world‚€™s financial markets! Sometimes
‚€“ like now, in the midst of the
‚€˜global credit crisis‚€™
‚€“ finance seems to get out of control. The voices of
those ‚€“ such as Horst K√∂hler or, from the
Left, Walden Bello ‚€“ denouncing finance and calling for
its regulation rise to a crescendo. 

Is all of this financial
activity merely ‚€™speculative‚€™? Is it
a symptom of capital‚€™s flight from
‚€˜a stagnant real economy‚€™, that is,
from ‚€˜production‚€™ where it has to
struggle with living labour to extract surplus value? Certainly much
financial-market activity is speculative in that traders are taking risks
in the hope of making a profit. But all capitalist activity is speculative
in this sense. There‚€™s nothing more speculative than
throwing money into production ‚€“ that is, purchasing
means of production, including labour-power ‚€“ and then
trying to make the breathing, struggling, desiring human bearers of this
labour-power work hard enough to make you a profit. 

Speculation isn‚€™t the whole story, though. In fact
arguing whether financial markets are primarily about
‚€™speculation‚€™, or whether they are
‚€™stabilising‚€™ or
‚€˜destabilising‚€™, easily falls into
the trap of implying that investment in the ‚€˜real
economy‚€™ ‚€“ the accumulation of
alienated labour in factories, fields, call centres and schools
‚€“ is somehow more
‚€˜ethical‚€™. This sort of critique of
finance also misses its most important function, which goes to the heart
of capital accumulation, competition, class and the class struggle. 

The financial markets, and in particular those arcane instruments
known as ‚€˜derivatives‚€™, are all
aboutmeasure, measuring the production of value, measuring capital
accumulation. Financial derivatives allow all the different
‚€˜bits‚€™ of capital (across time,
across space and across sectors) to be priced against ‚€“
orcommensurated with ‚€“ each other. Derivatives even
turn the very contingent nature of value ‚€“ its
contestability ‚€“ into a tradeable commodity. 

The ‚€˜performance‚€™ of different
assets ‚€“ that is the
‚€˜performance‚€™ of its associated
‚€˜bit‚€™ of capital, including the
workers exploited by that bit of capital ‚€“ can be
measured by its rate of return. And thus each asset, if it is to survive,
must deliver a competitive rate of return. Each must meet or beat the
market ‚€˜norm‚€™. Financial investors,
speculators ‚€“ call them what you will
‚€“ do not care whether they trade cocoa futures, the
Argentinian peso or some index linked to the FTSE100. They seek simply the
greatest return (taking risk into account). And so, by their trading
actions, the ‚€˜performance‚€™ of those
‚€˜top‚€™ 100 companies is compared to
the ‚€˜performance‚€™ of the entire
Argentinian economy (if that economy is
‚€™strong‚€™ the peso will rise in
value) and to cocoa farmers everywhere. The implications for workers
across the planet are clear.
Our‚€˜performance‚€™ is being measured.
The performance of a Detroit car-worker can be compared not only with that
of his neighbour on the production line, or even with her counterpart in
Alabama or South Korea, but with garment workers in Morocco, programmers
in Bangalore and cleaners on the London Underground. Competition is
intensified, as is class struggle. 

Which brings us to the
present crisis. At the heart of the crisis lay
‚€™subprime‚€™ borrowers and so-called
Collateralised Debt Obligations or CDOs, another type of derivative
instrument linked to these borrowers‚€™ mortgages. Not
only is our access to housing dependent upon capitalist exchange. Not only
has our struggle to keep a roof over our heads become a profit-making
opportunity for investors. Our
‚€˜performance‚€™ as debtors is measured
by the global financial market and is yoked to that market, and through it
to the performance of all other
‚€˜assets‚€™ ‚€“ the
programmers and the cleaners, the farmers and the garment workers. In
short, we become ‚€“ in our reproductive activity as well
as our waged work ‚€“ subjects of competitive

Those who invested in mortgage-backed CDOs
clearly believed that those borrowers,
‚€™subprime‚€™ and otherwise, and the US
economy in general, would ‚€˜perform‚€™.
In other words, that US householders and workers would perform their
assigned role in competitive calculation. Of course, a small proportion of
borrowers would not ‚€˜perform‚€™, but
these risks had all been taken into account in CDOs‚€™
‚€˜risk-and-return profiles‚€™. Risks
had been calculated and priced. In the event, many more borrowers failed
to perform and, as the defaults spread, the financial system in its
entirety was threatened. 

At one level this crisis is a crisis
about needs versus profits. Our needs for housing versus those of
investors ‚€“ or capital ‚€“ for a rate
of return. It‚€™s a crisis that, like all crises, reveals
how our access to social wealth, such as housing, is rationed by money.
Just look at the growing ‚€˜tent
cities‚€™ ‚€“ American shanties
‚€“ whilst houses made of timber, bricks and mortar stand
empty as a result of foreclosure. 

But the present crisis is
also a crisis of measure. Investors mispriced risk, they miscalculated.
Bankers are now talking about market
What‚€™s interesting about this crisis is not so much
that financial institutions have lost a lot of money ‚€“
so far $300 billion has been ‚€˜written
down‚€™ ‚€“ but that, almost a year on,
they still don‚€™t know exactly how much. Through the
duration of the crisis, financial markets have failed to measure value and
thus to commensurate capital. Capital ‚€“ for it to be
capital ‚€“ must be commensurated. If
‚€˜bits‚€™ of capital cannot be measured
and entered onto a balance sheet as so many dollars or euros, then
they‚€™re just so many barrels of Brent crude or
such-and-such a number of tonnes of coffee: their status as capital is
threatened. Thus a crisis of the measure of value is a crisis of value,
and of capital itself. 

Part of our politics must take the form
of resistance to competitive calculation. The holders of sub-prime loans
showed this potential negatively: the capacity of a (generally black)
working class in the US triggering crisis by refusing to perform the role
assigned them and the calculation implied. The challenge is to work out
how to frame this power positively. 

Subprime borrowers are
those with ‚€˜poor credit histories‚€™,
individuals with no secure income or assets, who may have defaulted on
loans in the past. In short, the precarious! 

instruments are financial assets or securities whose value derives, in
principle at least, from the price of some underlying commodity, asset or
set of assets. A future, for example, is a firm commitment to exchange a
certain commodity or asset at an agreed price at some point in the future;
an option is similar, but gives its holder the right to buy or sell, but
with no obligation to do so. With swaps, the two parties exchange income
streams or debt repayment commitments, e.g. a variable-interest rate loan
denominated in yen is swapped for a fixed-interest rate payment in
dollars. In practice, prices tend to be established in derivatives markets
first, and the price of the underlying asset or commodity is derived from
these. So the price a Guatemalan coffee farmer receives for her crop is
actually set by traders on the London International Financial Futures and
Options Exchange (LIFFE) ‚€“ occupied during
1999‚€™s Carnival Against Capital. Derivatives may be
linked to commodities (coffee, cocoa, pork bellies, oil and so on), shares
or share indexes (such as the FTSE100), interest rates,
currencies‚€¶ There are now even derivatives based on
the weather and, for a few a months, there existed a
‚€˜Policy Analysis Market‚€™, which
allowed trading on coups d‚€™√©tat,
assassinations and terrorist attacks. 

The word mortgage has
its roots in Norman French; literally it means ‚€˜death

In the 1970s, another decade of
escalating oil prices, Western banks
‚€˜recycled‚€™ petrodollars to many
‚€˜Third World‚€™ governments in the
form of loans (at variable interest rates). Whole economies were thus
exposed to the measure and discipline of international financial markets.
The real meaning of discipline became apparent in the course of the
international debt crisis of the 1980s and the various financial crises
throughout the 1990s and the first decade of this century. 

Credit has its origin in the Latin word credere, ‚€˜to

David Harvie is a member of
The Free Association and an editor of Turbulence. 

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