THE AGE OF SPECULATIVE CAPITAL AND GLOBAL CIRCULATION FIGHTS (1)

by Achim Szepanski

Michel Feher, in his new book Rated Agency, claims that the financialized capitalism that began in the 1970s amounts to a Copernican revolution in that the new regime of capital accumulation no longer focuses on industrial enterprises built on vertical integration and internal growth, but that in this regime both the corporations and the economies of which they are a part would have to refer to the financial markets, which would be dominated by large global banks and institutional investors​ (and by the shadow banking system, one must add).

The financialization of developed economies can be measured by the relative size of the financial sector compared to GDP, the volume of profits that financial institutions realize compared to other firms, and the portfolio incomes of non-financial firms. Beyond such indicators demonstrating the transfer of funds from the real economy to the speculative financial circuits, what characterizes lenders today is their power to seek out those projects that deserve financing, which in turn defeats those that do are dependent on credit, constantly have to prove their attractiveness to investors and thus have to gear their economic activities not only to making a profit, but also to establishing creditworthiness.

Stock corporations in particular must not only strive to maximize the difference between income and production costs in the long term, but also work to increase the stock prices, which are evaluated by the financial markets, in the short term in favor of the shareholders. Thus, the real success of these companies does not result solely from the realization of profits made from the sale of products and services, but is based on the capital gain that can also be obtained from share buybacks.

The hegemony of credit does not only affect the private sector, but also relates to national governments, which must now make their national location more attractive to financial capital. In order to increase the competitiveness of their companies in a global environment where financial capital can circulate freely, states must make their territory as attractive as possible for international investors by protecting property rights. At the same time, governments and parties are being forced to organize their re-election, which according to Feher has contributed since the 1980s to states increasingly financing themselves through the issue of government bonds instead of taxes, i.e. fueling government debt to meet the tax burden not to go too high for the population and not to completely dismantle the welfare state. Thus, states and their governments continually increase their dependence on the financial markets, which are then lauded for promoting the economic discipline of the agents they credit to everyone's satisfaction. To forestall the distrust of the bond markets, which is reflected in rising interest rates on government bonds, governments must increase the flexibility of the labor markets, cut welfare programs, reduce taxes on capital and scale back any serious regulation of the financial markets. In the 1990s, however, the national debt, which was intended to compensate for the loss of tax revenue, assumed such proportions that private lenders worried about the solvency of the states, so that social benefits had to be further cut and parts of the population depended on public services were encouraged to take out loans to compensate for the lack of social benefits.​
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In typical neoliberal fashion, it has been argued that this would encourage citizens to increase discipline in managing their own lives as autonomous and self-responsible businesses. And of course the question of creditworthiness also affects individuals who can no longer rely on long-term jobs and state-guaranteed social benefits, since the companies and states, which are themselves dependent on the evaluation of financial investors, can no longer offer long-term employment contracts and sufficient social benefits, so job-seeking individuals need to make themselves valueable, such as through well-paid subject-related skills, flexibility, and sufficient networking. Their ability to find a job is now more influenced by the credit attributed to human capital than by collective agreements on wages and working conditions.

The material precarization forces the need for large parts of the population to take out loans in order to access houses, continue their studies and meet certain consumer desires or simply to survive. And for borrowing, you have to provide proof of collateral. If this is not the case, then in order to prove solvency, at least prospects (increasing market value of the house) or reputation, which consists in the fact that the loan can be repaid through wages, for example, must be proven. The neoliberal reforms contributed to transforming the individuals, who are obsessed with the utilitarian calculus of maximizing their own utility or income, into the financialized subject, who shifts their own value to the assets to be continuously valued, to the small capital to maximize x.

As a result, the criticism of capitalism, which is directed against the profit-driven nature of companies, has shifted to the financial institutions that are busy allocating credit. While capital's exploitation of wage labor has by no means disappeared, it is the demands of financial investors that have met with widespread public opposition, blaming them for increasing labor market insecurity and precarious working conditions.​
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In his text, Feher once again presents Marx's well-known theory of surplus value in order to then show that today's financial investors do not simply assume the role of classical capitalists. Specific to this type of investor is not soaking up huge dividends, interest payments and other financial income, what matters here is that these investors have the power to select participants who need financial resources. It is not the appropriation of income but the allocation of capital that is constitutive of the role of the financial investor, that is, accreditation is more important than appropriation.​

​For Feher, the increased criticism of the selective power of financial investors over that of the exploiting capitalists does not mean that the exploitation of labor power has declined; on the contrary, in companies that are set up especially for the shareholders, managers must continue to do so very strictly strive to reduce labor costs. But it is not the new forms of corporate management that are largely to blame for the transfer of income from work to capital; on the contrary, the stagnation of real wages and the dismantling of the welfare state is the "rating power" of financial ones hold investors accountable. The disappearance of legal and administrative regulations that freed the circulation of capital across national borders (as well as that of financial activities) and enabled the creation of new forms of assets, derivatives, meant that only traders in financial liquidity were responsible for the competitiveness of the Assess and evaluate companies and the economic attractiveness of national territories. Accreditation as a form of assessment of capital is now to be determined.

From a class identification perspective, there is a fundamental difference between the classical entrepreneur and the financial investor. The functional difference here has to include the aspect of its operation. For the entrepreneur, it is the labor market where a commodity called labor power is offered by its owners. The investors, on the other hand, are on the financial markets, where transactions of all kinds are transformed into assets. Companies try to extract and realize value, while investors determine the allocation of credit and determine the creditworthiness of their customers.​

The entrepreneurs run the business of appropriating the surplus value that the workers have produced, the investors decide what is actually produced. The distinguishing feature of investors, then, is not that, like industrial capitalists, they increase the prices of their products in order to make profits, or that they minimize production costs, to put it simply, but what the investors throw themselves into are projects that are theirs increase own capacity for credit. Such projects relate to states' budgets, corporate business plans, student loans, consumer desires, the fictions of start-ups, and the credit scores of wage earners. For financial institutions, governments, corporations, and households are legal entities that serve as objects that may or may not be credited. The investors constantly evaluate these properties for their creditworthiness, whereby the reversibility between investors and those who receive them, which Feher calls »Investee«, is not guaranteed, at least not like that between entrepreneurs and employees who have a dual function as buyer and seller take in. Even if financial capital in its global, liquid and anonymous forms can be described as the "pure investor", the "investees" must be included as concrete institutions and individuals, but they do not maintain a symmetrical relationship with the investors who own their Use funds and invest in projects that they evaluate themselves. At the same time, investors are also taking out loans.​

In labor markets, the buyers and sellers of labor power negotiate prices. In the capital markets, price determination does not take place through negotiations that exchange something, but through the speculation of investors whose object is the "value" they assign to tradable assets, depending on the attractiveness of the assets, on which other market participants have a say. Therefore, Minsky assumed that financial markets are structurally unstable because operations on them never lead to the determination of an equilibrium price. Rather, price increases in assets, which can be based on rumors and expectations, lead to further price increases, while, conversely, price reductions in phases of distrust lead to further price reductions in assets. Negotiations between traders are not coordinated on the financial markets, rather it is up to them to constantly generate liquidity in order to enable investors to speculate. The optimization of costs, which inspires the transaction on the classic markets, is replaced by the calculation of future expectations of the various market participants.

What has taken place here is the shift in investors' interests and their activities from profit extraction to attribution of credit. The freedom that capitalism affords to both investors and investees (those who borrow to set up projects that may well be profitable) is not that of negotiation, with which both capitalists and investees engage workers faced in industrial capitalism, rather it is the freedom to speculate or to speculate on the speculators of others to shape one's assets. Investors and investees try to influence the selection of what is produced more than the distribution of what is produced. It is less the distribution of income between labor and capital than the conditions of capital allocation that are the decisive moment of operationalization here.​​

translated by Dejan Stojkovski

taken from:

non.copyriot