[OPE-L] Subprime mortgages, subprime currency

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Mon Nov 19 2007 - 16:52:10 EST


The term "casino capitalism" is a bit deceptive I think because the larger the amount of capital funds owned, the more the owner is able to insure the capital against risk, i.e. engage in relatively riskfree accumulation. If there are gambles and risks, they are taken mainly by the fund managers (there was an article on Goldman Sachs in the NYT today). I often have to admire the expertise of these people insofar as they take on tremendous responsibility, plus the science and art of capital management. Of course there are also crooks, but where very large sums of capital are at stake, the crooks in the majority of cases do not last very long. If you own a very large amount of capital, it is difficult to hide that you own it, and then you are unlikely to place it with somebody about whose reputation there are any kind of doubts. But point is if you look at the portfolios of the wealthy class in total, then it turns out that the bulk of their placements are in relatively "safe" investments and the owners risk only a minor portion of their total capital, the majority do not even know much technically about capital management, and leave it to investment specialists. They might gamble in casino's etc. but that's just a few thousand dollars here or there. 

Increased social instability and market uncertainty are I think in part a direct result of the deregulation of capital and money markets, and the reduction of social security provision. The idea was, that if you deregulate these markets and promote competition, you get more investment in production and economic growth. To some extent that has been true, but quantitatively in an overall sense the major thing that happened was that investors borrow cheap money in some form here to place it there, in order to get the maximum return for the least possible effort. This is a wellknown phenomenon within the bourgeois classes, so that there's often a certain sense of pride in the fact that "I made the effort to supply a real product that satisfies human needs", rather than simply speculating.  And ordinary workers in their majority don't buy stocks with their savings, they buy houses. If there are real creative entrepreneurs, they are in their majority the little guys, not the big guys. 

What I am trying to say is that in an overall sense, the domain of very large sums of capital is often a very "conservative" scene from a political point of view, with a lot of anxieties about issues which from a global point of view are rather peripheral. There are tremendous world problems crying out for a solution, and also tremendous opportunities to do something about them, but proportionally relatively few big investors who will stake their capital (well, the Saudi king is committing a lot of funds to look into the global warming problematic for example). 

It turns out that whether you own a lot of capital in itself is not so important, it is whether you can reliably organise large numbers of people to do something with it, that is the real challenge. If you can unite and lead a lot of people to achieve a constructive project, you are a hero these days, because it is so difficult to do successfully. The ethos of individual freedom is often more of a hindrance than a help, insofar as it gets in the way of people co-operating in accordance with a shared goal. People will co-operate, as long as it doesn't cramp their style, or conflict with their interests, which may change quickly. If you have more mobility of labour, it also means that if an employee is off as soon as he's no longer happy with what he's doing, or gets more money elsewhere - good for him, but not good for the continuity of organisations, and the quality of work done.  

What is a "regime of accumulation"? I have ten different ways of thinking about it, which I suppose I could link together in a theory. I discussed it briefly once with the chief economist of the Socialist Party here. We were talking about the "private equity" trend. He explained that the main thrust of party policy is to champion a wellfunctioning public sector and oppose the increase in socio-economic inequality - insofar as we are stuck with capitalism in the forseeable future, he favoured a "Rhineland capitalism". By this he meant - I guess - essentially a "social market economy" of the Adenauer type. This is basically a left-social democratic programme for the economy. I was a little surprised to hear it, because how can a model of the future be a return to the past? Anyway. The point is really that the bottom line for Dutch workers is that they want sufficient social security so that they can plan the basics of their lives acceptably, and save sufficient funds for their retirement. 

In the European debates, you could distinguish two main trends of thought. One trend is to say that marketisation and privatisation gone wild leads to social breakdown (social disintegration and lack of social cohesion). So you need to curb that, and the state must institute sufficient social supports. The other trend is to say that in reality, there is not really so much marketisation and privatisation gone wild except for the money markets, neoliberalism is largely a myth, in fact markets are generally overregulated, and it is a problem, so that we should create more market freedom in an otherwise overregulated scene. 

But the debate gets terribly confused, because everybody sits on their ideological hobbyhorses with vested interests in a situation where traditional notions of Left and Right often no longer make a lot of sense, with very little comprehensive research being done on the total picture of things, or theories of good quality being formed. You can find both leftwingers and rightwingers articulating either trend of thought in some way. If for example, proportionally, self-employed operators pay more tax on their income than corporations do, where is the justice in that? If people are in reality more and more regulated by laws in their personal lives, how does that serve the cause of freedom?  Often the people who make the theories or set the questions are remote from the people the theories and questions actually apply to, and therefore, maybe valid thoughts are articulated in a language which doesn't make much sense when you look at the real experience to which it refers. It is not so much that grand narratives of quality are no longer possible, but rather there are few opportunities to produce them, or conditions that encourage their formation. Social science has become a commodity like anything else, with all that entails.


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