FacebookTwitterRedditEmail

Lucrative Dealing in the Age of Austerity

Photo by Funk Dooby | CC BY 2.0


CounterPunchers
such as Michael Hudson and Rob Urie have long informed its readers about what goes on in the financial sectors of the US economy in particular and the global economy more generally.

Their writings are usefully complemented for me by valuable accounts of how banking insiders do their work, ranging from the more journalistic (Michael Lewis and Matt Taibbi come to mind) to the more scholarly.  Among the latter, Doug Henwood’s Wall Street: How It Works and for Whom (Verso Press, 1987), although published over two decades ago is still pertinent, especially in view of the Senate’s recent vote, with Trump’s support, to roll back some of the Dodd-Frank legal provisions regulating “too big to fail” banks– thereby of course increasing the likelihood taxpayers will be stiffed yet again in the event of another major banking collapse (deemed to be “inevitable” by Bill Gates).

I have just finished Tony Norfield’s The City: London and the Global Power of Finance (Verso Press, 2016).  Norfield was a banker for 20 years, so a lot of what this book conveys is first-hand knowledge.

If Henwood showed, among other things, why the 2008 crash was virtually inevitable, Norwood’s book indicates, likewise among other things, why another such financial disaster will be just as unavoidable, unless significant changes are made, not just to the financial sector, but to the prevailing system of capitalist accumulation in its entirety.

The City makes four principal claims:

+ “A small group of powerful countries has a privileged position in production, commerce, investment and financial relationships compared to all the others”.

+ “The financial system does not sit on top of, or alongside what almost all economic commentators call the ‘real economy’; it pervades all economic activity”.

+ “The concept of finance is not tied to a particular type of institution, or to a separate ‘financial sector’. All kinds of capitalist companies conduct important financial operations”. Norwood provides the examples of the Ford Motor Company and General Electric, which have units engaging in financial-sector activity.

+ “It is a mistake to treat the UK financial markets as simply being satellites of the US markets. To use a more accurate astronomical metaphor, the relationship is better described as a ‘double planet’ system: rather than the UK simply orbiting the US, each country’s financial market exerts a significant ‘gravitational’ pull on the other, even though the pull of the US is obviously larger. More than that, the centre of gravity for the global system is determined the balance of power among all the major capitalist countries, a balance that will shift over time as their relative power changes” (Norfield’s emphasis).

These claims are substantiated via Norfield’s informative overview of day-to-day operations of the UK’s financial sector in relation to its US counterpart, and the part it plays in global capitalism.

While these financial sectors provide mechanisms which oil the levers and cogs of the real economy, they nonetheless require an important fiction for many of their operations.

Organizations (and the individuals who run them) in the financial sector extract revenues from assets which have not yet created value, and which may never in fact create the anticipated value (because the assets in question “tanked”).  The revenues extracted in this fashion are from asset-prices which move up and down in the market, with a more or less appropriately employed broker then placing a bet on a price, while of course not getting caught out by the market when prices fluctuate.

These are bets, says Norfield, but we should resist the temptation to view the market as a mere casino– the market operates, ultimately, in order to take control of the world’s resources.  The betting element ensues from the fact that no value is created by prices simply going up or down, even if there is a “return” to be reaped by the broker/investor who happened to make a good bet on a particular price movement.

Marx used the notion of “fictitious capital” to describe money gained in this way, and Norfield shows us how fictitious capital works today, rightly characterizing it as a form of “constructive parasitism”.

Norfield’s argument in this book shows why we need to disregard the conventional wisdom that the much-publicized malfeasance and corruption prevalent in the financial sector can only be addressed by draconian punishments for those running banks and investment houses who stray from the “narrow” path of probity and rectitude.

An example of this wisdom is provided by a US congressional aide who, during the 2008 financial crisis, said to Matt Taibbi with reference to Lloyd Blankfein, the egregious CEO of Goldman Sachs: “You put Lloyd Blankfein in a pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street.  That’s all it would take. Just once”.

Punishing individual parasites will not overcome the conditions, intrinsic to capitalism, which conduce to “constructive parasitism”.  With the ready connivance of the political order, ways will be found to maintain this systemic parasitism, while perchance this or that financier, deemed dispensable by the ruling elites, gets pounded in the ass behind bars.

Financialization per se may not generate value, but instead enables its operators and beneficiaries to harvest “earnings” which can then be used to acquire and control resources in the real economy.

For those who know a little religious history (and this is my extrapolation from Norfield), the deployment of these fictions in the creation of fictitious capital is somewhat analogous to the medieval sale of papal indulgences.  Riches accrued to the papacy from their sale, but the indulgences themselves were fictions, despite the pretense they were otherwise.

No pope worth his salt in our somewhat more cynical times would get away with trying to enhance the “earnings” of the Vatican Bank by flogging off these conjured-up indulgences to believers.

If insider accounts are to be believed, the Vatican Bank today espouses realistic banking practices and makes its money from deals with the mafia.  O tempora, o mores!

Norfield’s book shows, in principle, that any effective arrival of this cynicism with regard to capitalism will have to be coterminous with its demise, just as its post-medieval equivalent in Christianity led to the expiry of the sale of papal indulgences, and the breaking-up of the church.

Until this happens to capitalism, those who benefit from these fictions of capital—the Trumps, Waltons, Murdochs, and Kochs of this world– will exert a ruinous command over our lives.

Anyone convinced that our lives are bettered by Trump, Murdoch, and the Waltons and Kochs, in all likelihood had an ancestor or two who believed they secured their salvation by purchasing indulgences from a medieval pope.

Today’s financial capitalism is a systemic racket akin to the one run by medieval Christianity, since each like the other is an occultation, albeit with terribly real effects.

History shows that medieval Christendom bit the dust, so the solution with regard to capitalism’s fictions is thus really so damn simple; and yet its implementation so damn difficult.

More articles by:

Kenneth Surin teaches at Duke University, North Carolina.  He lives in Blacksburg, Virginia.

bernie-the-sandernistas-cover-344x550

April 24, 2019
Susan Babbitt
Disdain and Dignity: An Old (Anti-Imperialist) Story
Adam Jonas Horowitz
Letter to the Emperor
Lawrence Davidson
A Decisive Struggle For Our Future
John Steppling
The Mandate for Israel: Keep the Arabs Down
Victor Grossman
Many Feet
Cira Pascual Marquina
The Commune is the Supreme Expression of Participatory Democracy: a Conversation with Anacaona Marin of El Panal Commune
Binoy Kampmark
Failed States and Militias: General Khalifa Haftar Moves on Tripoli
Dean Baker
Payments to Hospitals Aren’t Going to Hospital Buildings
Alvaro Huerta
Top Ten List in Defense of MEChA
Colin Todhunter
As the 2019 Indian General Election Takes Place, Are the Nation’s Farmers Being Dealt a Knock-Out Blow?
Charlie Gers
Trump’s Transgender Troops Ban is un-American and Inhumane
Barbara Nimri Aziz
Just Another Spring in Progress?
Thomas Knapp
On Obstruction, the Mueller Report is Clintonesque
Elliot Sperber
Every Truck’s a Garbage Truck
April 23, 2019
Peter Bolton
The Monroe Doctrine is Back, and as the Latest US Attack on Cuba Shows, Its Purpose is to Serve the Neoliberal Order
David Schultz
The Mueller Report: Trump Too Inept to Obstruct Justice
Geoff Beckman
Crazy Uncle Joe and the Can’t We All Just Get Along Democrats
Medea Benjamin
Activists Protect DC Venezuelan Embassy from US-supported Coup
Patrick Cockburn
What Revolutionaries in the Middle East Have Learned Since the Arab Spring
Jim Goodman
Don’t Fall for the Hype of Free Trade Agreements
Lance Olsen
Climate and Forests: Land Managers Must Adapt, and Conservationists, Too
William Minter
The Coming Ebola Epidemic
Tony McKenna
Stephen King’s IT: a 2019 Retrospective
David Swanson
Pentagon Claims 1,100 High Schools Bar Recruiters; Peace Activists Offer $1,000 Award If Any Such School Can Be Found
Gary Olson
A Few Comments on the recent PBS Series: Reconstruction: America After the Civil War
April 22, 2019
Melvin Goodman
The NYTs Tries to Rehabilitate Bloody Gina Haspel
Robert Fisk
After ISIS, a Divided Iraq, Wounded and Grief-Stricken
Binoy Kampmark
Julian Assange as Neuroses
John Laforge
Chernobyl’s Deadly Effects Estimates Vary
Kenneth Surin
Mueller Time? Not for Now
Cesar Chelala
Yemen: The Triumph of Barbarism
Kerron Ó Luain
What the “White Irish Slaves” Meme Tells Us About Identity Politics
Andy Piascik
Grocery Store Workers Take on Billion Dollar Multinational
Seiji Yamada – Gregory G. Maskarinec
Health as a Human Right: No Migrants Need Apply
Howard Lisnoff
Loose Bullets and Loose Cannons
Ricardo Alarcón de Quesada
Dreaming in Miami
Graham Peebles
Consuming Stuff: The Polluting World of Fashion
Robert Dodge
Earth Day: Our Planet in Peril
Weekend Edition
April 19, 2019
Friday - Sunday
Andrew Levine
What Will It Take For Trump to Get His Due?
Roy Eidelson
Is the American Psychological Association Addicted to Militarism and War?
Jeffrey St. Clair
Roaming Charges: Time is Blind, Man is Stupid
Joshua Frank
Top 20 Mueller Report “Findings”
Rob Urie
Why Russiagate Will Never Go Away
Paul Street
Stephen Moore Gets Something Right: It’s Capitalism vs. Democracy
Russell Mokhiber
Why Boeing and Its Executives Should be Prosecuted for Manslaughter
FacebookTwitterRedditEmail