Bookmarker tag: topic/financialisation (7 notes)

What was the chain of events that helped facilitate the process of developing countries becoming beholden to institutions like the IMF and the
World Bank which dictated neoliberal policies—starting with the OPEC oil crisis of the early 1970s and the petrodollars that were produced by those countries in the Middle East that had oil?

DH: There’s a very interesting story to be told about that and I’m not sure it has been fully elaborated upon yet. With the OPEC oil price hike in 1973, a vast amount of money was being accumulated by the Saudis and other Gulf states. And then the big question was: well, what’s going to happen to that money? Now, we do know that the U.S. government was very anxious that that money be brought back to New York, to be circulated back into the global economy via the New York investment banks, and persuaded the Saudis to do that. Why the Saudis were persuaded to do it remains a bit of a mystery. We know from British intelligence sources that the U.S. was actually prepared to invade Saudi Arabia in 1973, but whether the Saudis were told: recycle the money through New York or you get invaded … who knows?

Now, the New York investment banks then had vast amounts of money. Where were they going to invest it? The economy wasn’t doing very well at all in 1974–75, as, all over, it was in depression. Citibank head Walter Wriston came up with the comment that the safest place to invest the money is in countries, because countries can’t disappear—you always know where they are. And so they started to make the money available to many countries like Argentina, Mexico—Latin America was very popular—but also places like Poland even. They lent a lot of money to those countries.

That worked out quite well for a while, but then in 1982 there was this general fiscal crisis, particularly after Volcker had raised the interest rate. What this meant was that the Mexicans who had borrowed money at 5 percent were now having to pay it back at 16 percent or 17 percent, and they found they couldn’t do it. Mexico was about to go bankrupt in 1982. That was the point at which neoliberalism kicked in. The U.S. via the International Monetary Fund and the U.S. Treasury said: we’ll bail you out, but we’ll bail you out on condition that you start to privatize and open up the country to foreign investment and start to adopt a neoliberal stance. Initially the Mexicans really didn’t do that very much, but by the time you get to 1988 they start to do it sort of big time.

But here’s the interesting thing: it’s unreasonable to think that actually the U.S. imposed neoliberalization on Mexico. What happened was that the U.S. was putting neoliberalizing pressures on Mexico and an elite inside of Mexico seized the opportunity to say: yes, that’s what we want. So it was a coalition between the elite in Mexico and the U.S. Treasury/IMF that put together the kind of neoliberalization package that came to Mexico in the late 1980s. And actually, if you look at the pattern, it’s very rare for there to be a straight imposition of neoliberalizing policies through the IMF or the U.S. It’s nearly alwaysan alliance between an internal elite, as it had been in Chile, and U.S. forces that put this thing together. And it’s the internal elite who are as much to blame for neoliberalization as the international institutions.

[...] When we talk about financialization, all we’re really talking about is that the provision of a larger share of all goods and services involve financial transactions—more of education, healthcare, housing is provided through the market and through credit markets in particular—and that more of the profits made from the production of goods and services are staying in the hands of the financial sector. In fact the financial sector’s share of profits rose from about 10 percent of profits some thirty years ago to 40 percent in the last few years. So what financialization really means is that financial transactions are becoming more and more prominent in everyday life and they are becoming more and more lucrative, more and more profitable.

[...] virtuosity, for Virno, is our capacity to create value, and, in an age of cognitive capitalism, it is that capacity that is ever more at stake. Financialization, I suggest, is a key means of capturing, shaping and enclosing virtuosity. What is Wall Street except a massive “machine” (in the Deleuzian sense of the term) for harnessing and putting to work the incredible creative and cognitive energies of a massive pool of financial workers? And what is debt (finance’s key product) except a complicated means of disciplining virtuosity, of creating a situation in which one must apply one’s creativity, ingenuity and social and cultural capacities towards capitalist ends (Lazzarato 2012)? [...]

On the one hand, the financial sector is incredibly creative. Some of the finest and most refined minds of each successive generation are cherry-picked from elite universities hedge-funds, investment banks and their institutional periphery to dream up ever more rapid, cunning and diabolical ways to make money out of money. The development of new derivative financial products, new avenues of inter-market arbitrage, new revenue streams to capitalize, new technologies of high-frequency trading and new ways of reading, visualizing and interpreting the market have seduced not only the graduates of elite business programs, but also PhDs in fluid dynamics, astrophysics, cellular biology and computer engineering. To be sure, the vast majority of what goes on in the financial sector is deeply uncreative (endless number-crunching and paper-pushing, scrupulous research on economic sectors and investments, meticulous computer programming, hectic digital trading and ruthless power-brokering). Taken as a whole, however, the financial sector is a staggering reactor of human creativity, a playground of the mind where the unfathomable pressure of intense competition creates a remorseless ecosystem of constrained innovation, which, no less strange than the uncanny depths of the ocean, is populated with monsters at the very limits of the imagination

Still, for all that intelligence and innovation, the sector mostly produces immaterial financial assets or metaphoric wealth – in other words, practically nothing of tangible or lasting value. From one angle, in fact, it destroys value: liquidating public assets by privatizing services, foreclosing on homes and businesses, and imposing austerity measures that funnel social wealth upwards to an apparently lawless global oligarchy. Financial forces also superintend a global economic system that is characterized by a massively unfair global division of creative labour, where creative opportunities are reserved for a fraction of the world’s population (mostly in Northern cities). The remainder spend longer days and shorter lives in fields, factories and kitchens, with little opportunity to practise creativity and even less to have it recognized or valued. Most of the wealth “created” by the financial sector is, in a sense, derivative – it derives its value as a reflection or means of representing real-world labour and wealth. Finance, at least at first blush, appears to be a glitzy simulacrum of value that nonetheless disciplines and (dis)orients the economic and social world. In this sense, finance is, a form of class war, which synthesizes, aggregates and puts to work the creativity of the financial “industry” in the interests of perpetuating and, indeed, more deeply entrenching reigning inequalities and forms of exploitation.

For our purposes, it should be noted that the entire sub-prime market was based on offering NINJA borrowers a chance for privatized upward class mobility through the lure of home ownership. One way of reading this situation is to suggest that low-income workers accepted the loans as a form of resistance to their material conditions. Indeed, many did so because, even if their homes were foreclosed, things could not get much worse: they already, after all, had virtually no assets to lose. Sub-prime loans depended to a large extent on the myth of the universality of the middle class and the idea of financialized independence; sub-prime mortgages offered borrowers what seemed to be a key to economic security, health, education and a fair share of social wealth (Aronowitz 2003; Haiven and Khasnabish 2014, 112–117). This, especially for the largely racialized urban populations that were the prime target of this form of extortion, might be read as a form of resistance to a neoliberal culture of utter abandonment and the vaporization of social security and public space (see Giroux 2012). It also relied on the tragic optimism of the American Dream that informed borrowers that brighter days were always on the horizon for those who work hard and take individualistic control of their lives. It was within this individualistic frame that taking out an extortionate mortgage with a rapidly escalating interest rate could be justified as a form of resistance for the economically marginalized (that is, when the terms of the mortgage were even disclosed by the mortgage sales representative, which was routinely not the case – Taibbi 2010). We are beholden to recognize the savvy motivations that animated people’s engagement with sub-prime finance and not fall prey to the right-wing castigation of our “financial illiteracy” or the canard that people “used their houses as ATMs” for the purchase of “big-screen TVs” and the like.

Obviously, the strategies of financialized “resistance” through finance outlined here, and to which we can today add micro-finance schemes as well, were and are Pyrrhic, if not utterly disastrous. And they stretch the definition of “resistance” almost to the breaking point, given that IMF/WB loans, sub-prime mortgages, consumer credit and the like were actively advertised and encouraged by the powers-that-be. But, as Aihwa Ong (2006) and others have recently pointed out, we do a disservice to people’s agency and intelligence when we imagine neoliberalism is merely imposed from above. It is, in fact, activated from below, enacted and performed by social actors as they contend with and respond to material conditions.

[...] all financial crises are, elementally, crises of liquidity: the fluid convertibility of one form of capital into another [...] In the most recent crisis, derivatives and other securities based on the sub-prime market ceased overnight to be convertible into ready cash or other assets because no one would buy them: they were no longer credible claims to realworld value. Indeed, fearing they would cause a crash if they revealed the scope of the problem, commentators and pundits insisted on calling it a “liquidity crisis” until the gravity of the economic crisis became unavoidable.

But I have suggested in Chapter 2 that we need to think of liquidity more broadly: liquidity names the success of capital in converting social values into economic value, the pliability of social life to the dictates of capitalist accumulation. For this reason, liquidity is correlated with resistance within the system: low resistance means high liquidity. For instance, a sweatshop in an export-processing zone is (at least ideally) a highly liquid social institution because it maximizes exploitation and minimizes resistance. Money invested in production can enjoy easy convertibility into a t-shirt or a circuit board thanks to lax laws, violence, surveillance and the ever-present threat of capital relocation – resistance is held to a minimum. It is also easily liquidated: a corporation can choose to employ a different sub-contractor and shift production elsewhere without losing a great deal of invested capital. Similarly, the highly regulated and supervised space of Walmart is a highly liquid space for capital: the t-shirt or electronic commodity is almost certain to transform back into capital (money) with very little impedance, thanks to the grooming of the shopping atmosphere, private security and surveillance, and consumer cultural norms (see Chapter 3). This somewhat reductionist example serves to demonstrate that liquidity is more than just the celerity of financial transactions: it indexes the saturation of capital into social life and the relations of production, and measures (the absence of) resistance. It refers to the ease with which the fundamental capitalist formula of accumulation, M-C-M' , can advance – in this formula, resistance is the viscosity of the hyphens.

The objective side of the crisis is no mere multiplicity of separate dysfunctions. Far from forming a dispersed plurality, its various strands are interconnected and share a common source. The underlying object of our general crisis, the thing that harbors its multiple instabilities, is the present form of capitalism - globalizing, neoliberal, financialized. Like every form of capitalism, this one is no mere economic system but something larger: an institutionalized social order. As such it encompasses a set of noneconomic background conditions that are indispensable to a capitalist economy: for example, unwaged activities of social reproduction, which assures the supply of wage labor for economic production; an organized apparatus of public power (law, police, regulatory agencies, and steering capacities) that supplies the order, predictability, and infrastructure necessary for sustained accumulation; and finally, a relatively sustainable organization of our metabolic interaction with the rest of nature, one that ensures essential supplies of energy and raw materials for commodity production, not to mention a habitable planet that can support life.

Financialized capitalism represents one historically specific way of organizing the relation of a capitalist economy to these indispensable background conditions. It is a deeply predatory and unstable form of organization that liberates capital accumulation from the very constraints (political, ecological, social, moral) needed to sustain it over time. Freed from such constraints, capitalism's economy consumes its own background conditions of possibility. It is like a tiger that eats its own tail. While social life as such is increasingly economized, the unfettered pursuit of profit destabilizes the very forms of social reproduction, ecological sustainability, and public power on which it depends. Seen this way, financialized capitalism is an inherently crisis-prone social formation. The crisis complex we encounter today is the increasingly acute expression of its built-in tendency to destabilize itself.