Money and finance don’t normally get much discussed on this site. All that might change. Last summer’s ‘subprime’ mortgage crisis in the United States (and the run on Northern Rock bank-cum-building society over here) has developed into a full-blown ‘credit crisis’: the global financial markets are in what the commentators describe as ‘turmoil’ and ‘catastrophe’ threatens. Last week, the US’s fifth-largest investment bank, Bear Stearns, imploded. In a ‘rescue’ orchestrated by the Federal Reserve, another bank, JPMorgan Chase mopped up its shares, which had been trading for $170 a year ago, for two bucks each. Jimmy Cayne, Bear’s chairman and former chief executive, who held a 5% stake, has seen his ‘worth’ fall from $1.2 billion to a mere $11 million. Apparently managers are having to sell holiday homes. (What were we saying about resentment?)
But it’s all more interesting and complicated — and worrying and exciting — than this. Not only is there financial crisis. There’s also recession in the US — economists define recession as two successive quarterly falls in output — but if it wasn’t poor people finding they could no longer keep up with mortgage payments that triggered the subprime crisis then what was it? And central bankers in Europe and elsewhere are worried about inflation. (‘Some say the world will end in fire, some say in ice’ — this was a former IMF chief economist quoting poet Robert Frost in an address to a recent meeting of monetary policymakers. Fire = recession; ice = inflation.) So, the return of stagflation?
Let’s look at inflation. Well commodity* prices are rising rapidly, but what’s behind this? A lot of it comes down to climate change activism in the North and workers’ struggle in the global South. Greater demand for biofuels (so we can stop emitting CO2 without changing the way we live) is pushing up the price of all crops. As people get richer in the South they are demanding more meat and this also puts upward pressure on crop prices — since it takes something like 6kg of wheat (or equivalent) to produce a single kilo of meat. There is much commentary about ‘China’s voracious appetite for resources’, which is pushing up the prices of commodities such as steel, copper and so on, but the real wages of Chinese production workers have risen by an average of 11% every year over the past decade (compared with 3% a year over the previous ten years). However much this statistic is phrased in the passive voice doesn’t change the fact that there’s an active subject here.
But what sparked me to post this, was a piece in this week’s Economist, ‘Apocalypse now?’. With ‘the world going to hell in a handcart’, the piece wonders what ‘you’ [i.e. a financial investor] should buy. And here we’re getting back to more familiar Free Association territory. Because we’ve written before about how at times of crisis (far-from-equilibrium situations, ‘moments of excess’, states of exception…) illusions and ‘ideology’ are stripped away, reality seems to be laid bare. This is as true for ‘them’ as it is for ‘us’ — which is why The Economist, say, is usually a much better read than The Guardian.
In the pub after our recent talk about capitalism and climate change, discussion turned to money and somebody suggested the universal equivalent is a mutually agreed fantasy. Exactly! This precisely the problem facing investors now. There’s no mutual agreement on what anything is ‘worth’, or (and in the world of capitalism/finance this is the same thing) will be worth at some point in the future.** After discussing the problems with holding government bonds (the government, the US government at least, won’t default, but what if its currency the dollar keeps falling in value?), depositing money in banks (what if they collapse, like Bear Stearns?) or buying gold (but it’s taken gold almost three decades to regain its price of 1980) the author, ‘Buttonwood’, concludes:
In a complete meltdown, for example during world wars and revolutions, it is hard to find anything that keeps its value. Stockmarkets collapse. Governments default on their debt. Private property is no longer respected, either because governments seize the assets or because goods cannot be protected from criminals. Jewellery might hold its worth, but you had better have a good hiding-place. Think of all the treasures looted by the Nazis or the Red Army.
But we also see here how bourgeois commentators still don’t get it. Buttonwood is assuming that ‘value’ is something objective, a property intrinsic to a thing. It’s not, it’s social. S/he can’t move beyond categories like ‘government’ and ‘criminal’, or conceive of revolutionaries who aren’t of the bolshevik sort. Why would I want to loot jewellery? And, more importantly, it’s only a store of ‘value’ in a world of abstract labour. And here’s the other big assumption. Buttonwood assumes any such period of uncertainty and ‘suspension’ of the law of value will be temporary, that after some period of months or even a few years, things will return to capitalist ‘normality’.
So, what should ‘you’ do? Buttonwood quotes approvingly the advice offered by some ‘Wall Street veteran’ who suggests that ‘investors should own, as insurance against the apocalypse, “a farm or a ranch somewhere far off the beaten track but which you can get to quickly and easily.” Well, as Buttonwood admits, this assumes ‘war and disorder are avoided’, but it reminds me of Marx’s story in Capital of ‘unhappy Mr Peel’:
Wakefield discovered that in the Colonies, property in money, means of subsistence, machines, and other means of production, does not as yet stamp a man as a capitalist if there be wanting the correlative — the wage-worker, the other man who is compelled to sell himself of his own free-will. He discovered that capital is not a thing, but a social relation between persons, established by the instrumentality of things. Mr. Peel, he moans, took with him from England to Swan River, West Australia, means of subsistence and of production to the amount of £50,000. Mr. Peel had the foresight to bring with him, besides, 3,000 persons of the working-class, men, women, and children. Once arrived at his destination, “Mr. Peel was left without a servant to make his bed or fetch him water from the river.” Unhappy Mr. Peel who provided for everything except the export of English modes of production to Swan River!
And this is why all this is exciting for us. Because this crisis is a crisis of value — what things are ‘worth’ — and that means that it has the potential to become a crisis of values (plural): what do we value, what sort of world(s) do we want to live in?
* Being good Marxists here at freelyassociating.org, we understand a commodity to be that peculiar amalgam of (capitalist) value and use-value, the product of abstract and concrete labour, but in economist-parlance commodities are agricultural goods, such as wheat, coffee, pork bellies (bacon) and soya (yes, all you vegans, soya is a commodity too) and minerals and metals, such as oil, steel and gold.
** One of the main ‘points’ of finance and financial markets — along with their disciplinary function — is to convert uncertainty into risk. I’ve just started reading An Empire of Indifference: American War and the Financial Logic of Risk Management, by Randy Martin. In the Introduction, the author suggests that ‘preemption, bringing the future into the present, has since the 1970s been the guiding principle for fiscal policy.’ (As it has been for foreign policy/politics, such as the ‘war on terror’.) And then this bit, which is great: ‘In terms of the experience of time, preemption means that the future is profaned. The future no longer holds a promise that the constraints of the present can be transcended or transformed. Without a conviction that the future bears our dreams, the idea of progress becomes difficult to sustain.’ Maybe this is why most of us find finance boring, because it holds no promise, it leaves no space for hope.