On Sat, Feb 27, 2010 at 10:19 AM, Marv Gandall <marvgandall at videotron.ca> wrote:
> Meanwhile, could you expand a bit on your statements that "this changes the relationship between petty bourg and prols with owners" and "is also a very nice materialist understanding of neoliberalism (contra Harvey's rather idealist one)."
Dick Bryan happens to be my thesis supervisor, so I might jump in here. Yes, one of their concerns is to dispute the line that derivatives and other financial innovations of the last few decades are a great manifestation of irrationality, froth and/or waste. Or at least to 'bend the stick' against that conception and to say there is much else interesting about them.
They compare the great expansion of derivatives with the 19th century advent of the joint stock company as a new form of capital. Both increasingly 'socialise' capital and transform competition. The rise of the joint stock company, with shares widely traded on large exchanges, transformed competition because it made much easier the comparison of returns on capital across industries, and the flow of capital out of low-profitability lines and into high-profitability lines. In doing so it also parcelled capital out into little pieces, replacing the old propietorships and their human capitalists with a more abstract 'capital'.
Derivatives, they argue, do something similar, but they parcel up not whole firms but fragments of capital-in-motion - exposures to this or that risk, the liquidity of different stocks and flows through businesses or portfolios, and so on. Individual firms and investors find them useful to offload risks they don't want to run and focus on their specialties. Specialist counterparties emerge and (ideally) manage their portfolios to balance out. But at a systemic level, the process facilitates the comparison and valuation of all kinds of different risks and time horizons. Capital becomes still more socialised and abstract - yet still based ultimately on the extraction of surplus value.
Brad says "this changes the relationship between petty bourg and prols with owners". This is part of a process that has been going on for as long as workers have had substantial savings and borrowings - which in Australia at least goes back to the post-war period, the great expansion of mortgages and consumer credit etc. Now private pension funds have become very important. Working class reproduction has become increasingly financialised - knitted through circuits of capital - both through debt, which effectively capitalises future streams of their disposable income, and through savings, which participate in circuits of capital (and, we might add, urban property) - and in fact have become very important components of money-capital.
Mike Beggs