Of Markets and markets

Gautam Bhan explores divergences in attitudes towards debt in his response to Arjun Appadurai's lecture, Thoughts on a Capitalist Imaginary.

Reflecting on complex arguments while they are still percolating in one’s brain is, as this reflection is bound to be, an incomplete and possibly even unfair task on both the reader and writer. Nevertheless, in the spirit of thinking out loud in the Johannesburg Workshop, the words below offer first reflections on Arjun Appadurai’s talk Thoughts on a Capitalist Imaginary that opened the current edition of the JWTC.

Appadurai’s context is a moment of deep financialisation at a time of late capitalism with a possibly new mode of production that – and herein lies the contest at the heart of the argument – he argues must push us to rethink the commodity form itself. Looking at the form of the derivative, he says that Marx’s core concept of relative surplus is no longer extracted by increasing the productivity of workers but by a new medium: the leveraging and circulation of debt, or risk upon risk. It is debt then that becomes the base of accumulating relative surplus, of creating value. This debt becomes available to the financial machine through its deep inroads into everyday life. We cannot refuse debt, he says, to live, access shelter, educate ourselves, protect our health. Though this “we” is unevenly distributed across and within different parts of the world, “we” are increasingly, he argues, debt-labourers rather than wage-labourers.

Value then is no longer simply related to price. Commodities begin to merge into commoditized assets rather than take other more familiar, tangible, historical forms. Here the echoes of the many bankers, heads of state and economists throwing their hands up saying that had no way to say how much the bundled, securitized, sold and re-sold American housing mortgages were really worth at the peak of the foreclosure crisis resound convincingly. A trading and investment bank, argues Appadurai, cannot tell you with any accuracy whether it made money at the end of the month or not – value can no longer be calculated in the double entries of the bookkeeper’s accounts.  

How do people enter this imagination? They are, as argued above, debt-labourers. They are also, however, agents of resistance. Resistance comes in the more recognizable form of debt refusal (which he acknowledges but argues is limited) and his own claim: the possibility of socializing and democratizing debt itself. He favours the latter because, he argues, extracting future value (the very idea of debt) is not inherently “bad” – the question is of who controls it and to what ends. This is certainly the moment when one’s spine tingles with a slight nervousness: can the very mechanisms of debt that he describes as being so opaque submit to an idea of control, let alone a democratic one?

I want to engage briefly with only two of the ideas here: one is to take seriously the unevenness of debt penetration in everyday life given our task to think from Johannesburg and the South; and the other to think about the institutional challenges of a resistance that seeks to “socialize and democratize debt.”

The first response is to think about what place a market of derivatives has with markets of everyday life. This is not to argue that global financial markets are not connected to each other across geography and scale and that they influence the local street corner as much as the stock exchange. It is instead to say that the materialities, specificities and degrees of these connections matter. Global processes and flows localize through what Anna Tsing described as “friction.” That friction is an essential space for those of us concerned with place and with the local. How does this new system of value impact markets that run on other modes of production – informal markets, industrial markets, or even national markets of countries “off the map”? Appadurai is right to point out that countries like India were insulated from the worst of the global financial crisis in 2008 because they were not as deeply enmeshed in these cycles of debt-fuelled financialisation. Appadurai argues that it is possible that such enmeshment could just be a matter of time but is it possible that such a “trajectorist” (to use another of his own terms) logic is not inevitable? That resistance could also take the form of refusing this enmeshment?

Edgar Pieterse’s presentation on the following day outlines one kind of friction. He argues that for a significant many across Africa, the future will remain in informal, vulnerable and uncertain work and shelter. For the markets that such places and urban residents produce, what is the imagination and reality of debt? What are the circuits of production and the generation of value? I am not saying that Appadurai claims that a move from wage labour to debt labour is happening in such places. I am seeking to translocate his inquiry to ask it from a different site and push us to think: how would we reconstruct his arguments if we asked them from the informal market rather than the New York stock exchange? How would we think about what kind of representation of the Market the derivatives market really is. Such a translocation could allow us to recalibrate the relative location, power and spread of the debt economy vis-à-vis the Market.

The second point of engagement is to think about resistance. I echo Appadurai’s relative lack of enthusiasm about debt refusal but for a different reason. In transitioning economies (and trajectorist words re-enter our dialogue!) like India, debt remains a sign of social and economic mobility; the ability to arrive and be able to partake in formal market mechanisms not just to alleviate emergency or disaster spending or to smooth consumption but to actually improve the quality of one’s life and enter onto a trajectorist, progressive narrative of upward mobility. The hunger of many Indian residents is not to refuse debt’s pervasive hold on their life as in the US but, in fact, to desperately seek an ability to harness it.

Yet, at least now, even this harnessing is particular. To generalize and speak unforgivably broadly in categories like “India,” debt cannot be seen outside a culture of very high savings in the country. Debt is something that one enters post-saving, as a reward for financial discipline and always alongside it. Debt default in India is a story of the poor, not of those in the formal financial system. It is a story of farmer suicides and micro-lending, though the latter allows a much easier connection to Appadurai’s global financial circuits of debt and value. In short: to be in debt remains a deeply ethically, spiritually and social difficult space for most Indians, even those with the financial means to be able to leverage and afford it.

Yet Appadurai’s other option of refusing financialisation – to socialize and democratize debt— immediately makes one wary precisely because the institutions and processes that are to be reclaimed remain so unclear. If the very premise of a hyper-financialisation is its opacity, how and where does one begin to think about controlling or re-directing this set of actions towards different ends? Here, my final thought is to think tangibly about the derivative as a contract, one that then can be regulated and adjusted through controlling its terms – refusing, for example, the ability of banks and traders to have contracts that do not have the limits of time and closure that we expect them to.

Across the global South, the challenge to reclaim institutions may be a different one from the North – if the latter has economic institutions that are undemocratic, opaque, protected and powerful; the former, in many ways, has institutions that struggle to exist and remain effective – either to ride a new global financial value ride or to resist it.

Gautam Bhan teaches at the Indian Institute for Human Settlements, Bangalore.

Thoughts on the Capitalist Imaginary

Arjun Appadurai 

Capitalism today surrounds and saturates us in a way it never did before. In its home regions, notably in the United States, it has taken the form of deep financialization. Finance now far exceeds the sphere of production and manufacture of industrial goods. Since the early 1970’s we have had the rapid development of a host of financial instruments, which were barely imaginable in the time of Karl Marx. The breakthrough that made this financial explosion possible was the idea that risk itself could be monetized, allowing a small set of actors to take risks on risks. This is the core of the logic of the derivative, an instrument that has allowed financial technicians and managers to make virtually every part of our everyday lives susceptible to monetization. In this way, housing has now been turned into a machine for monetizing mortgages, the environment has been monetized through carbon trading and many other derivatives, education has been captured through sophisticated methods of creating student debt, health and insurance have been thoroughly penetrated by models of risk, arbitrage and bets on the future. In short, every day life is linked to capital not so much by the mechanism of the surplus value of labor but through making us all risk-bearers, whose aggregate risk can be endlessly combined and recombined to provide new forms of risk-taking and profit-making by the financial industries. We are all laborers now, regardless of what we do, insofar as our primary reason for being is to enter into debt through being forced to monetize the risks of health, security, education, housing and much else in our lives.  

www.hermes-press.com, Capitalism is Democracy

This situation is most visible in the advanced capitalist countries and hence the financial collapse of 2008 was primarily felt and amplified in these very countries. But very few countries in the world escaped the effects of the collapse, since finance capital had been spreading its activities worldwide for at least the last 30 years. Still, many parts of the global South, including South Africa, did not experience the shock of the collapse as profoundly as did the United States and Europe. The buffers that created this measure of insulation were primarily that the new derivative logics, creating multiple loops between debt, risk and speculation, were less advanced in these countries. Another way to put it is that in the countries of the global South, the process by which all debt is made potentially monetizable, through derivative instruments, has been less rapid and more uneven than it has been in the countries of the North Atlantic.

However, the global spread of the capitalist imaginary has by no means been arrested or compromised. Banks, hedge funds and insurance companies are aggressively pushing their way into new markets, seeking to lobby for legislation that will allow them to bring the same untrammelled debt markets from which they profited (and which also crashed in 2008) to the countries of the global South. Thus, it is only a matter of time before the countries of the global South also find themselves fully exposed to the volatility, inscrutability and extra-legality of the derivative-based financial markets of the North. As James Baldwin once said in another context, “no more water, the fire next time”.

One of the many challenges we now face is how to resist the sense that this global process is inevitable and that it cannot be subverted. The question is: what sort of politics needs to be produced to resist it? The main answer that has emerged in various parts of the world is debt-refusal, as in important segments of the “Occupy ‘ movement. Debt-refusal by mortgage owners, students, pension-holders and others certainly is a legitimate political tactic, insofar as it offers an immediate tool for starving the beast of financial capitalism. But is it enough? Is it even the best way of making capitalism work for the 99%?

In this lecture, I develop the outlines of a different view of financial capitalism, one that does not see the logic of the derivative as inherently inequitable or evil.  My point of departure is to return to Marx, but through a financial lens. Marx’s central insight about the workings of industrial capitalism was (in the three volumes of Capital) to notice the distinction between absolute and relative surplus value. In simple terms, absolute surplus value was to be found in increasing the amount of labor that a firm could apply to producing commodities for sale, as by increasing the number of workers or by increasing the length of the workday. Relative surplus value, on the other hand, was generated by improvements in technology, workplace organization or other means by which labor productivity could be increased without hiring more workers or paying for more labor time. This is how a given firm could compete with other firms which were producing the same commodity. The key to the appropriation of relative surplus value was to make a given amount of labor produce more profit, without increasing wages. The difference was profit in the hands of the capitalist.

Today’s financial capitalism, which Marx could not have entirely foreseen in his day, does not primarily work through the making of profit in the commodity sphere, though a certain part of the capitalist economy still operates in this sphere. By far the larger portion works by making profit on the monetization of risk and risk is made available to the financial markets through debt in its myriad forms. All of us who live in a financialized economy generate debt in many forms: consumer debt, housing debt, health debt, and others related to these. Capitalist forms also operate through debt (since borrowing on the capital markets has become much more important than issuing stock or “equity”). The complex technical issue is how consumer debt becomes the basis of corporate debt and vice versa.

From this point of view, the major form of labor today is not labor for wages but rather labor for the production of debt. Some of us today are no doubt wage-laborers, in the classic sense. But many of us are in fact debt-laborers, whose main task is to produce debt, which can then be further monetized for profit by financial entrepreneurs who control the means of the production of profit through monetizing debts. The main vehicle for this form of profit-making is the derivative, and thus the derivative is the central means by which relative surplus value is produced in a financialized economy.

From this it follows that the key to transforming the current form of financial capitalism is to seize and appropriate the means of the production of debt, in the interest of the vast class of debt producers, rather than the small class of debt-manipulators. From this point of view, it is not debt as such which is bad, since it allows us to bring future value into the present. The challenge, rather, is to socialize and democratize the profit produced by monetization of debt, so that those of us who actually produce debt can also be the main beneficiaries of its monetization. This vision of the nature of the capitalist imaginary is what I seek to elaborate and justify in the remainder of my lecture.

Arjun Apppadurai (New York University), is the author of The Future as a Cultural Act (Verso, 2012)