Fragment on finance capital, state regulation and the raw materials commodity bubble

What follows are my slightly edited remarks on a discussion on the reform of the financial trading system and what the role of finance is under capitalism today where I reject the common left idea that it is simply parasitic. I look at whether we can expect the state (or EU) to intervene to ban the likes of Credit Defualt Swaps and short term selling. I end with a fragment on the useful (to capitalism) component of the current speculative bubble building around raw material prices. The notes flow from a discussion of the article ‘Confronting the Sovereign Debt Crisis: Beyond the Cycle of Austerity and Debt’.

What follows are my slightly edited remarks on a discussion on the reform of the financial trading system and what the role of finance is under capitalism today where I reject the common left idea that it is simply parasitic. I look at whether we can expect the state (or EU) to intervene to ban the likes of Credit Defualt Swaps and short term selling. I end with a fragment on the useful (to capitalism) component of the current speculative bubble building around raw material prices. The notes flow from a discussion of the article ‘Confronting the Sovereign Debt Crisis: Beyond the Cycle of Austerity and Debt’.

What provoked the discussion was the following extract from the article ‘Confronting the Sovereign Debt Crisis: Beyond the Cycle of Austerity and Debt‘.

"The radical left, for its part, has also failed to address in any meaningful way the concentration of financial wealth. Apparently hypnotized by the workplace, home of the beloved workers struggles’ of yesteryear, left activists don’t seem to have noticed the gargantuan shifts in the accumulation of wealth that have characterized the last thirty years of capitalism."

In my opinion the quote above is confusing where wealth is found with where (our) power is found. Which in the article leads not very surprizingly for the call for better & stronger state intervention to control capital. Given that (particularly here in Ireland) it is very obvious which side the state is on you then have to wonder just where the power exists to impose such a ‘solution’ on capital via the state apparatus. That’s not something that can be achieved though a few marches or even riots or token short term ‘general strikes’ as we have seen in Greece.

Also ‘in a meaningful way’ is in there so if you point out an example of the radical left addressing the concentration of financial wealth that example can be dismissed as ‘not meaningful.’ That’s a little sneaky but I think the question of where (if not the workplace via the general strike) the power lies to impose such fundamental changes is more fundamental. I don’t intend that as being rhetorical BTW, if/as opposition builds then I think that question has to move to the fore as we know marches, rounds of rioting, token strikes and need it be said electoralism don’t contain such power.

In terms of examples I’m thinking more of Greece where there has been significant examples of resistance in all the forms above then Ireland, where there has not.

The orthodox leninist left has been arguing that the "financial system is operating as the principal form of accumulation in capitalism" line since Lenin laid it down in "Imperialism" in 1917 ( see wikipedia summary  ) I actually think Lenin (and the article) are probably wrong in terms of the core idea that this represents the ‘principal form of accumulation in capitalism of today’ as its confusing circulation with accumulation. The two are so linked in today’s world that they are hard to seperate out but the doubling in size of the global working class that has occurred in the last 20 years under neo liberalism would seem to suggest that accumulation is not simply a question of a small number of core workers moving vast quantities of wealth around and around the computer systems of the IFSC and other financial trading locations.

The importance of this is the orthodox tendency to see financial capital as purely being parasitic on real productive capital leads to the sort of reforms suggested in the article. If it was simply parasitic then as a set of demands they should be quite achievable under capitalism as being in the interests of the ‘productive’ section of the capitalist class. If however they are symbiotic – that is both sectors rely on each other for their mutual survival this is not the case.

In brief I suspect that the orthodox position (which this article is actually part of rather than an argument against) far from improving our understanding of modern capitalism actually works against it. With the ultra orthodox leninist version this is easy to see as just about ever prediction Lenin made in Imperialism turned out to be incorrect. It’s harder to argue this in the case of the more recent re-creations as they tend to disown their parent and so don’t have a long (non) predictive history to be measured against.

I should add I don’t think anyone of the left really understands how capitalism works today, but then (as we have recently seen) pretty much nobody on the planet understands that ‘in a meaningful way’ if we take that to mean an ability to even predict major events with temporal accuracy – its quite possible that is now impossible.

I’m not arguing here against the placing of any demands on the state, simply that the ones suggested in the article are so counter fundamental to how capitalism functions that they won’t be conceded without a massive exercise in power from below. It may have been a provocation to appear to reject the workplace as that place of power but where that power lies is a pretty important question.

Leaving the ‘provocation’ aside I think the idea that financial system can be ‘reformed’ ‘in a meaningful way’ by the state needs to not only answer that question of power but short of that seems premised on the orthodox idea that financial capital is simply parasitic. So the crisis we are in becomes a question of the over influence of such ‘bad capitalism’ so that such reforms can protect us from in the future if perhaps we at least remain vigilant in ensuring the state ‘does its job’ in that regard. That’s pretty much have previous financial crashes have been understood with each ending with a new cycle of state regulation to prevent it ever happening again.

The surge in commodity prices of recent years is a bit less clear cut than simply being down to speculation – the real growth of the Chinese economy has resulted in a major demand spike with massive imports of raw material. In that context the speculative element is performing the ‘useful’ function of providing the incentive to expand and open up new mining operations (or to nick lead pipe, roof and copper sculpture & rail cable). It’s all a bit mysterious though as the Chinese importation seems to be well ahead of actual use so its speculated they may be building up stock piles to hedge against a future commodity shortage / price boom – a process that does demonstrate that the financial speculation isn’t simply parasitical on the ‘real economy’ but very much part of the currently most dynamic geographical sector of the real economy. That said in particular with Chinese economic growth slowing it would seem the raw materials bubble may well be about to burst once more.

Source: This text is a cut & paste of my contributions to a Facebook conversation on the article with the author and others. I find these FB conversations really useful in allowing a tenuious ‘thinking out loud’ type discussion as opposed to the more ‘here are the answers’ feeling of publishing articles or even blogs. Most of what I’ve written above flows from things I’ve absorbed from a wide variety of sources over the last 5 years rather than a particular finished and nuanced position on what are actually very, very tough questions. But all the same I’m blogging it now to preserve it here and maybe return to later.