Bob Jessop Lancaster University
Variegation, Financialization, and the Financial Crisis
Outline
• What is money? The complexities of its forms and functions
• What is capitalism? Beyond mainstreams and Marxisms
• Always-already present abstract potential of crisis
• A global system or national varieties?
• Variegated capitalism in the shadow of …
• SSA and RA approaches to crisis of 1970s
• KBE versus Finance-Dominated Accumulation
• Financialization
• Financial crisis
• Conclusions
Money as a Social Relation
• Money is not a thing, it is a fetishized social relation
• Money is a commodity and a fictitious commodity
• Money is a not a single social relation but a complex and contradictory ensemble (assemblage) of social relations
• Money has diverse functions and forms
• Tensions between money as money and money as capital
• An adequate account should consider 3 interrelated moments of the money, credit, and capital forms: – the functions of money;
– the hierarchy of money forms;
– the tension between ‘national currency’ and world money and its reflection in the contradictions of currency pyramid
The Essence of Money?
• ‘Babylonian madness’ over the origins of money: answer depends partly on one’s ontological view on ‘nature of money’, with all risks of hindsight on later developments
• Tracing the history of successive forms and functions of money is not the same as explaining the hierarchy of forms and functions of money in a given historical context
• Development of money functions is related to changes in forms of money (and vice versa)
• Crucial distinctions: – money as credit/debtor relations tied to unit of account,
– role of capitalist credit money in organizing circuits of capital,
– role of fictitious capital in integrating societal relations
Abstract Potentials, Concrete Causes
• Even before he analysed capitalist production relations, Marx noted a theory of money and credit was the essential foundation for developing a theoretical account of crisis
• Accumulation and crisis dynamics rest on interaction of:
– abstract forms of crisis (abstract potential of crisis) in commodity circulation (esp of capitalist commodities)
– and the basic crisis-tendencies of capitalist production (which may be expressed concretely in various ways)
• While profit fluctuations are critical to monetary crises that are directly rooted in industrial and commercial crisis, some monetary crises have their own causes and impact wider economy via contagion and blowback
Functions of Money
Function Definition Crisis Dynamics
MMC Means of circulation (exchange) Liquidity crisis
MMV Extrinsic measure of value (price) Unstable price system
MH Store of value (hoard, then capital) Devalorization
MMP Means of (deferred) payment (incl. taxes), money as (proper) money
Excess credit, insolvency, generalized credit crisis
MMI Money as interest-bearing capital Money as independent value, i.e., concentrated form of total capital
Contradictions between functioning capital and capital as property
WM World money as means of international payment
Gold (bullion) shortage, oversupply of top currency
The Capitalist Mode of Production
• Wealth appears as an immense accumulation of commodities
• Commodity form is generalized to labour-power (which is a
fictitious commodity but treated as if it were a commodity)
• Duality of labour-power as concrete labour and labour time
• A political economy of time (note especially the constant
rebasing of abstract time treadmill effects)
• Key role of money as social relation in mediating and modifying
the profit-oriented, market-mediated accumulation process
• Essential role of competition in the dynamic of capitalism
• Market mechanism cannot secure all conditions of capitalist
reproduction (even ignoring labour process) (endogeneity?)
CAPITALISM
Rational
Capitalism
Political Capitalism
Traditional commercial capitalism
Mode #1
Trade in free markets & capitalist production
Mode #2
Capitalist speculation and finance
Mode #3
Predatory political profits
Mode #4
Profit on market from
force and domination
Mode #5
Profit from ‘unusual’ deals with
political authority
Mode #6
Traditional types of trade
or money deals
Weber’s Modes of Capitalism (Based on Swedberg 1998)
Categories for Analysing Capital
Capital as functioning capital
Productive capital (constant and variable) plus capital of circulation (commodity and money capital) Merchant’s capital (commodity-dealing capital and money-dealing capital) has necessary functions
Division of labour plus division of property among productive capitalists Commercial credit reduces demand for own capital Bank credit concentrates spare funds and savings of all classes in hands of money-dealing capitalists
Capital as property
Interest-bearing capital (titles of ownership or financial assets) Fictitious capital when viewed in terms of capitalized income streams
MMC employed neither in production or circulation - useless from viewpoint of capital, value set by capitalization of revenues relative to interest rates
Fictitious capital (narrow)
Money lent as MMC directly or via banks to state (e.g., to finance wars, public expenditure, state activities)
Basis for exchange of money against ownership titles – can be multiplied many times over (leverage)
Space, Time, and World Market
World market is both a presupposition and posit (result) of capital accumulation: not self-identical over time but alters with modes and extent of world market integration. E.g.
The movement of capital, though much accelerated, still remained, however, relatively slow. The splitting up of the world market into separate parts, each of which was exploited by a particular nation, the exclusion of competition among themselves on the part of the nations, the clumsiness of production itself and the fact that finance was only evolving from its early stages, greatly impeded circulation’ (Marx and Engels, German Ideology, 1845-6)
Variegated Capitalism - I
VarCap points to incomplete,
provisional, inherently unstable,
and fractal economic orders that
are based on the co-existence,
structural coupling, asymmetrical
conditioning, and co-evolution of
different, but still dynamically
compossible, accumulation
regimes and modes of regulation
seen in terms of their multiscalar
location in time-place and in space
of flows
Variegated Capitalism - II
• This does not entail singular
logic with unique directionality
at level of world market – it
excludes it!
• Explore VarCap as a global order
evolving in the shadow of one
(or more) dominant ‘VoC’ and
with distinctive emergent logic
• This approach can be applied to
sub-global spaces (e.g., North
Atlantic, East Asia, EU) whilst
noting world market context
Global Shadow of Neo-Liberalism
Shadow results from the relative
weight of finance-dominated
accumulation in neo-liberal
economies, from the ‘ecological
dominance’ of such economies
in the world market, from the
general place of finance in global
circuits, from the roll out and/or
reform of international regimes
that embed forms of neo-liberal
disciplinary constitutionalism
EU in Shadow of Neo-Mercantilism
Shadow results from relative
weight of export-led growth in
the “Modell Deutschland”, from
the ‘ecological dominance’ of
German economic Grossraum in
European Economic Space,
especially in the Eurozone, from
institutional flaws in design of
Euro (cf. those in Bretton
Woods), and from Germany’s
hegemonic position in EU and
wider EES
Marx on Hierarchy of Money Forms Form Content Validation Role of state Crisis
Commodity Physical commodity
Has, contains, embodies value
State sets unit of price formation
Limited supply of money commodity
Commercial Credit
Notes, bills of exchange
Convertibility Legal tender Private debt
Bank money Notes, bills of exchange
Convertibility Legal tender Private debt
Bank Credit Banks create credit through advancing loans
Convertible into money commodity, guaranteed by state
Banking policy Reserve ratios Guarantees notes
Liquidity and solvency crisis, excess leverage
Central Bank Credit
Lender of last resort
Convertible into bullion at CB and/or guaranteed by state
Central banking policy, may own or control CB
Excess leverage Solvency crisis Currency crisis
State Money Fiat money Symbolic money issued by state
Taxation, coercion, legitimacy, credibility, or extractive power
Taxation, coercion, coinage, seigniorage
Sovereign debt crisis, fiscal crisis, other state crises
World Money Bullion Bullion or relations among states
Imperialism, interstate relations, hiearchies
Bullion shortage, Triffin dilemma
Crisis, what Crisis?
• Crises as ‘accidental’ products of natural or ‘external’ forces rather than antagonistic internal relations (e.g., invasion, tsunami, crop failure, SARS)
• Crises as ‘structurally-determined’: inherent crisis potentials and tendencies of specific social forms with corresponding patterns of crisis-management (e.g., capitalism, democracy)
• Crises ‘in’ are normal and may be resolved through established crisis-management routines and/or through innovations that largely restore previous patterns
• Crises ‘of’ are less common and involve a crisis of crisis-management, indicating inability to ‘go on in the old way’ and demanding more radical innovation.
What Follows Fordism?
• Crisis in/of Atlantic Fordism rooted in crisis of structural coherence between principal (structural) forms of capital relation (wage relation, including social wage, and money form). Internationalization (+ other crisis-tendencies) weaken wage as demand source, money is national.
• Trial-and-error search for post-Fordist economic regimes leads to a hegemonic economic imaginary (knowledge-based economy) and to neo-liberal political project that prepares ground for finance-dominated accumulation
• KBE widely endorsed at many sites and scales (OECD, EU Lisbon Agenda, national/regional/urban strategies, etc.)
The Knowledge-Based Economy
Knowledge-Based Economy
Basic Form
Primary Aspect
Secondary Aspect
Key Institutional Fix
Spatio-temporal fix
Capital Valorization of knowledge- and design-intensive capital
Capital as intellectual property
Competition state plus moderate IPR regimes (with risk of an anti-commons)
Knowledge-intensive clusters, cities, regions
Compet-ition
Innovation-led, Schumpeterian competition
“Race to bottom” and fall-out from creative destruction
Increased role of global trade regimes, IP regimes,
Complex + multi-spatial with local and regional forms
(Social) Wage Relation
Production cost (for mental as well as manual labour)
Source of local or regional demand (hence flexible)
Flexicurity for full employability, aiding demand and global competitiveness
Controlled forms of labour mobility, globalized spatial division of labour
State Competition state oriented to innovation-led growth
‘Third Way’ as flanking / supporting mechanism to cope with new social exclusion(s)
Schumpeterian Workfare Post-National Regime
Multi-scalar meta-governance (e.g., open method of coordination)
Finance-Dominated Accumulation
Finance-Dominated Accumulation en Régulation
Basic Form
Primary Aspect
Secondary Aspect
Key Institutional Fix
Spatio-temporal fix
Capital
Fast, hyper-mobile money (including derivatives) as general form
Valorization of capital as fixed asset in global division of labour
De-regulation of financial markets, state targets price stability, not jobs
Free trade without national or regional state controls; grab future values
(Social) Wage
Private wage plus household credit (promote “private Keynesianism”)
Cut back on social wage as (global) cost of production
Numerical and time flexibility; new credit forms for households
War for talents plus race to bottom for most workers and “squeezed middle”
State
Neo-liberal policies with Ordoliberal constitution
Flanking plus soft + hard disciplinary measures to secure neo-liberalism
Free market plus “strong state” (authoritarian statism)
Endorses intensified uneven development at many sites + scales as market outcome
Global Regime
Create space of flows for all forms of capital
Dampen uneven development, adapt to rising economies
Washington Consensus regimes
Core-periphery tied to US hegemony, its allies and relays
Money and Derivatives
Function Definition Derivatives
MMC Means of circulation (exchange) Currency swaps, futures
MMV Extrinsic measure of value Commensuration (no standard of value)
MH Store of value (hoard) Hedging
MMP Means of payment (reserves for deferred payment, buying capital)
Securitization, credit + interest rate swaps, etc
MMI Money as interest-bearing capital Money as independent value, i.e., concentrated form of total capital
Securitization of capital as property, capital as function, arbitrage
WM World money Currency arbitrage
Significance of Derivatives
• Rise of derivatives generalizes, intensifies competition around means of production, money capital, specific capitals as units of competition, and social capital
• Derivatives represent a form of market completion that overcomes limits of world market noted by Marx/Engels in German Ideology (see above): – overcomes frictions of national boundaries,
– opens national economies to foreign competition,
– helps to overcome clumsiness of production,
– enhances the role of finance in promoting competition
• Completion of world market activates “all contradictions”
The North Atlantic Financial Crisis
Finance-Dominated Accumulation in Crisis
Basic
Form Primary Aspect Secondary Aspect Institutional Fixes
Spatio-
temporal fixes
Money /
Capital
Rising antagonism
between “Wall
Street” and “Main
Street” (etc.)
Epic recession based
on debt-default-
deflation dynamics
(D4)
De-regulation crisis
of TBTF predatory
finance + contagion
effects
Protectionism in core
economies, growing
resistance to free trade
from periphery
(Social)
wage
Credit crunch puts
private Keynesianism
into reverse
Austerity reinforces
D4, leads to double
dip recessions
Growing reserve army
of surplus, precarious
labour
Global crisis and
internal devaluation
reproduction crisis
State
Political capitalism
undermines Ordo-
liberalism
Austerity policies
meet resistance,
harsher discipline
Crises in political
markets reinforce
“post-democracy”
Cannot halt uneven
development at many
sites + scales
Global
Regime
Unregulated space of
flows intensifies
“triple crisis”
Multilateral, multi-
scalar imbalances and
race to bottom
Crisis + rejection of
(post-)Washington
Consensus
Crisis of US hegemony,
BRICS enter crisis and
global disarray
The North Atlantic Financial Crisis
• This crisis (more commonly, and misleadingly, called the
‘global financial crisis’) has a specific aetiology:
– NAFC must be situated in world market
– Related to variegated capitalism – more than mechanical sum of interacting varieties of capitalism in the world market
– Finance is more than money, credit, or capital relations
– Hierarchy of money and currency pyramid
– Financialization is more than growth of financial activities relative to other sectors or financialization of everyday life
• Need to study new forms of money and their dynamics,
especially derivatives as forms of interest bearing capital
Finance-Dominated Regimes in Crisis
• NAFC emerged directly from “capitalist speculation and
finance” rather than from a specific type of “free trade in
markets and capitalist production”
• It was enabled by “unusual deals with political authority”
(de-regulation of finance via legal changes and regulatory
capture) and “predatory political profits” (tax cuts for rich,
welfare cuts, privatization, “disaster capitalism”)
• But it has specific form due to hyper-financialization of
advanced neo-liberal economies and, in particular and
most immediately, practices of de-regulated, opaque, and
sometimes fraudulent financial institutions
Fundamental Forces and
Relations of “Epic Recession”
Global Liquidity Explosion
Global Money Parade
Speculative Investing Shift
Debt Deflation Default
Financial Institutions Asset Prices Banks and Finance
Non-Financial Business Product Prices Non-Bank Business
Consumer-Household Labour Wages Consumer-Household
Financial Fragility Consumption Fragility
Declining Real Economic Indicators
Real Asset Investment Household Consumption Global Trade and Exports Industrial Production Employment ....
Derived from Rasmus , 2010: 16
Currency Pyramid
Form Features Crisis-Tendencies
Top Currency
Issued in and/or sanctioned by the state that enjoys world economic leadership , i.e., the predominant state in world market
If national currency is also international reserve currency, possible tensions between short-term domestic and long-term international objectives
Master Currency Circulates mostly in geo-political blocs, e.g., thanks to political dominance of issuing state
Loss of hegemony or domination in bloc (decline of GBP and FFR blocs in 1960s-70s; rise of yen bloc in 1980s)
Negotiated or Political Currency
Based on international regimes with strong emphasis on mutual benefits rather than coercion
Euro suffers from emerging latent incompossibility of EU economies and inherent design flaws of EMU
Passive or neutral currency
Circulates domestically, no major role in international regimes
Limited appeal, leading to adoption of other currencies (e.g. dollarization)
Euro and Currency Pyramid
Form Euro Weaknesses, crisis-tendencies
Top Currency
EU is not the world economic leader. Euro is not the established currency of a normal state with usual set of powers (coercion and tax monopoly)
EU economies do not meet economic requirements of top currency; also lack military-political power to encourage and/or enforce adoption of euro
Master Currency
Circulates in EU as geo-political bloc due to political as well as economic dominance of (quasi-)issuing state (Franco-German axis, DM model)
EMU is part of state project linked to variegated European capitalism in shadow of neo-mercantilism in world market in shadow of neo-liberalism
Negotiated or Political Currency
Based on international regimes with strong emphasis on mutual benefits rather than coercion
Negotiation to join EU also linked to negotiation to join EMU. Request or demand depending on economies
Passive or neutral currency
Circulates domestically, no major role in international regimes
National currencies of candidate states with limited economic clout and/or political stability.
EU Debt-Default-Deflation Crisis?
• Eurozone crisis is not just another Minsky-induced recession
nor another crisis of competitiveness in individual economies
– for both, there are routine crisis-management responses
• Crisis has evolved into epic recession, based on financial and
consumption fragility, that is creating a debt-default-deflation
trap (already well under way in Eire). This is aggravating the
credit and competitiveness crises in EU
• Rigidities of EU and Eurozone plus strong interdependencies
create pathologically compossible variegation, impossible
choices, and threaten to turn EU into an incompossible dream
The View from Davos
Crises as Revelatory Moments
• Crises tend to disrupt accepted views of the world and how to ‘go on’ in it, calling into question theoretical and policy paradigms as well as people’s everyday routines
• Crises are threat and opportunity: – threaten established views , practices, institutions, social relations
– opportunity for reflexion, learning in, about and from crisis, and theoretical, policy, and practical innovation
– may also lead to re-assertion of old ideas and values, policy paradigms, and routines (restoration, reaction)
• In short, they are complex, objectively overdetermined moments of indeterminacy, where ‘decisive’ action can make a major difference to future
Economic and Political Crisis
• Economic crises have more radical effects when there is a crisis in the state and political life and when crisis provokes challenges to state as well as economic forms
• Current crisis was not initially linked to a crisis in the state (i.e., dominant patterns of governance and government): instead, “market failure” led to “state rescue”
• Indeed, roll-out of free markets has been associated with extension of strong state at home and with new forms of transnational governance inaccessible to popular forces
• Both aspects limit scope for social movements to define the nature of the crisis and to shape responses
Crisis Construals and Domination
• Power is the ability not to have
to learn from one’s mistakes
(Deutsch 1963: 111).
• Elites may try to impose costs
of their mistakes onto others
• Entrenched blocs, durable
alliances, and/or temporary
coalitions of the powerful may
seek to allocate costs of crisis
management/ adjustment and
also shape learning processes
Never Let a Serious Crisis Go to Waste
• Control health care costs and expand coverage
• Energy security and alternatives
• Simple and fair taxes
• Reform education to train the workforce
• Reform regulation of finance based on transparency and accountability
37
Never Let a Serious Crisis Go to Waste
• Cut welfare expenditure
• Public sector pay freeze
• Full employability, not full
employment
• Tax cuts for top 1 per cent
• Bail out banks, no bankers to
go to prison
• Double dip recession
• Rising debt/GDP ratio
• Warnings from IMF
38
Conclusions
• Money is a fetishized social relation
• It has multiple, hierarchically organized forms and functions
• To understand money we need to go beyond money as money and include money as capital and, increasingly, its increasingly fetishized and fictitious forms
• Crisis dynamics exist as abstract potential but their forms are objectively overdetermined, their construals subjectively indeterminate, and their outcomes both path-dependent and path-shaping
This presentation derives in large part from research conducted during the tenure of an ESRC Professorial
Research Fellowship: Grant RES-051–27–0303
Top Related