- Derivatives – a demon sucking the world dry!
- Home loans, Oil Price, Weather – Derivatives gamble on everything!
- A cut from our electricity bill goes to gamblers!
- How globalized gambling started driving our lives
- They own your loans, your income and your life – how to take it back?
- How the 1% drove 99% to debt and destruction – US experience
- Capitalism – Titanic without life boats for the masses!
- How to save the world from the capitalist madness!
Venture Capital firms and hedge funds invest in corporations and push them to earn more and more returns on their investment resulting in increased work load, lay offs and paycuts for employees as we are witnessing in IT sector in companies like Cognizant (CTS), Tata Consultancy Service (TCS), Infosys, Wipro and other MNCs.
On the other side, the same finance capital invests in the lives of working people in the shape of housing loans, education loans, insurance policies and other financial instruments. Salaried class is squeezed more and more with interest rate shuffles and various fees. But, if someone loses their job and the working class as a whole is not able to service their loans, finance capital is in deeper trouble.
Capitalism in 21st century is caught in this pincer squeeze. They are trying to wriggle out of this by passing more and more of the burden on to the poorest of the poor in countries like India, pushing mindless exploitation of natural resources and reckless damage to environment.
How do we put an end to this? As far as financial debts are concerned, the working class can take direct action – calling for cancellation of farmers debts, student loans and home loans and asking for state provided education, universal health care and housing facilities.
The world run by the financial sharks is driven resolutely in the opposite direction by throwing everyone to the mercy market forces (read, the clutches of financial elite). It is upto the educated section of working class to take up the cudgels and save the world from the capitalist destruction.
Read on for the 8th and concluding part of an analysis of derivatives markets by Dick Bryan and Michael Refferty. This was originally published in Socialist Register vol 47 in 2011. We are publishing the tamil translation of the same along with the English text for reference.
From the perspective of capital, labour is not just labouring class producing surplus value. Labour is now also cast by capital as an ‘asset class’: not in the sense of the ‘ownership society’ promoted by President Bush, but an object of portfolio investment that sits alongside other classes like equities, bonds and credit derivatives. In the search for yield and diversification, the household and its wage income represents new opportunities for capital’s profitable asset holding. In particular, working-class aspirations of home ownership were, in the lead-up to the crisis and subsequently, a particularly attractive investment for capital. With housing treated by workers as a place to live (from labour’s perspective, an illiquid asset), there was the anticipation that investing in labour’s desire to retain its home was likely to be safer than many investments. The widespread availability of AAA rated mortage-backed securities seemed to vindicate this perception.
History now shows that labour as an asset was not well risk-managed by capital or the state. From around 2003 the lending was over-extended, and households took out loans that were unlikely to be repaid: the now-familiar story of ‘sub-prime’ and ‘originate-to-distribute’. Significant parts of labour failed to deliver the repayments which formed the income streams of the mortage-backed securities. The prices of many securities were destined to tank. By 2007, a cycle of foreclosures was underway and the holders of mortage-backed securities began losing money rapidly. In important respects, therefore, it was labour, and its faillure as an asset class, not its power as a working class, that triggered the global financial crisis.
Contra the position that ‘labour was not to blame for the financial crisis’, we argue that there is a need to focus directly on labour’s role in the crisis. It is through this focus that we can find the power of organized labour beyond its advocacy of state regulation. Indeed, in understanding the power of labour in the context of finance, there is a clear parallel with the labour process. Just as the worker cannot be separated from their labour power – part of what constitutes labour as a distinctive and critical input into production – so the worker cannot be separated from the risks attached to their loan repayments. With this inseparability comes political capacity. Unlike all other inputs into production or forms of asset, labour expresses the capacity to resist inside production and inside finance. Capital’s vulnerability to labour in production is also its vulnerability to labour in finance.
Capital’s aspiration is for investment outlets which tap into the incomes of labour but which keep labour compliant. Such investments cannot be both sustainable and also based on the short- or medium-term impoverishment of labour via the extraction of unsustainable interest payments – what Lapavitsas has termed ‘ financial expropriation’.51 This was capital’s – and the state’s – recent error in the incorporation of labour into global finance via securitization. Capital’s need is for a sustainable working class that will participate actively in financial markers and provide long-term product to meet the demand of securities markets. Various regulatory agenda follows to protect capital from itself, including agendas for market transparency.
To protect capital from labour’s failure as an asset class requires that labour be better risk-managed. Financial literacy coupled with consumer protection constitutes a particular response from states, on behalf of capital, for addressing labour as a source of financial crisis. For capital, workers (and households) must be made to perform more effectively as financial entities, capable of meeting capital’s requirements as an asset class. For capital itself, the focus turns to new products that might be sold to labour as protection against the vicissitudes of financial markets: products such as real-estate future markets and income and pension insurance. For the state, policy focus has turned to financial literacy. Programmes of financial literacy are being presented as beneficial for worker, so that they might better pursue their own self interest. But the effect is to create labour as a more reliable asset in which to invest.
The International Monetary Fund, amongst others stated the agenda clearly:
Overall, the transfer of risk from the banking sector to nonbanking sectors, including the household sector, appears to have enhanced the resiliency and stability of the financial system – mainly by widely dispersing financial risks, including throughout the household sector. Policymakers may now need to take the next logical step by helping households to improve on their financial education and to obtain quality advice and products necessary to manage their financial affairs. In fact, there is a growing consensus, in both the public sector and the financial services industry, on the importance of promoting the financial education of households.52
The possibility of achieving the aspired-to financial literacy is dubious.53 It is hard to disagree with the conclusions of Schuberth and Schurz who, in a review of the effects of financial literacy, contend that ‘the primary purpose of financial literacy programs is to discipline the uninformed poor how to behave in a way that makes public regulation obsolete and enables the solution of problems by market forces’.54 But our concern in this context is not whether financial literacy will make markets more efficient and workers more prudent, but that the agenda aims to re-build labour in the image of capital.
The implications for labour open up a response to this scenario. The agenda developed in this paper points to a focus on the process of commodification of risk, and the incorporation of labour into capital’s risk-shifting agenda: an agenda which presents as the ‘other side’ of derivative growth from the 1980s, expressing the growth as a defeat of labour as well as an innovation of capital.
Framed this way, the alternative politics is conceived in resistance to risk shifting: a struggle for public housing, public pensions and public education; not better practices in the process of lending and securitization of mortages and tuition fees, or greater prudence in the investment of workers’ savings. This is, of course, not a new agenda. Indeed, it may appear a both age-old and as highly state-centred. But, in the current era, such stands represent not a defence of the state (for states themselves are integral to the risk-shifting process) but an attack on capital’s new frontier of accumulation. The alternative meaning, therefore, is to give everyday struggle a global context and impact. Moreover, an awareness of the commodification of risk (and derivatives as commodities) reminds us that all struggles against risk shifting, be they over wages and working conditions or pensions, mortage repayments and bank fees are all struggles in the site of capitalist production.
Labour can learn from the financial crisis that it is integral to this frontier of accumulation. Its failure to perform at this frontiers (a failure to keep repaying loans) was the catalyst of the global financial crisis: it showed the potency of labour, albeit unintended. We find, through financial innovation, that capital needs labour, and in new and urgent ways.
The decline of manufacturing and the rise of finance is not the end of labour as a class, but the possibility of its reinvention. This implies the need to go beyond class organization in the sense of trade unions that obtain more individual incomes for workers and labour parties that obtain the same via transfer payments. It suggests the need to think about a shift to class organizations that concentrate on winning class benefits in the form of universal goods and collective services not based on the expenditure of individual incomes or borrowing to obtain them. This involves moving towards decommodifying social relations, including labour power itself. This is the essential political agenda of resistance to the derivative form.
courtesy Socialist Register (vol 47 in 2011)