it makes a radical claim about politics in the condition of capitalization as subordinated to the logic of financialisation
two reasons for confronting financialisation – two lessons of 2008 crash: derivatives markets present a systemic risk to national world economies, and that the relative size of these markets presents a systemic risk to geopolitical and economic securities (sums now being traded are equal if not greater than national econs)
four considerations (motivating factors for arguments)
1. finance power – what is finance power distinct from modern state sovereignty? since finance here is a euphemism for a systemic market led dynamic of capital accumulation…what is required is a power theory of finance that must take its lead from the operational complexity of financial markets. he develops a non-standard general theory of price and of the political economy of finance. financialisation is now a political power.
2. futurity. the reorganization of the relation to the future via price in general, not just within the circumscribed arena of derivatives markets but across the entire social order. derivatives are seen to systemically operationalize an unprecedented modality of the wager that is intrinsic to the standard notion of betting but is theoretically and practically unavailable upon the basis of that standard notion. what is going on in derivatives markets is a kind of wagering on the future that cannot be understood in terms of standard notion of bet.
3. left accelerationism must abandon its admittedly ambivalent attachment to a Marxian labour based determination of capitalism and political economy because these are not the prerequisites of capital power in general but tendentious misapprehensions of it. the proposition advanced here is that what capitalism and political economy needs to be understood according to the most advanced theoretical tools available today, this means finance in general and derivatives in particular not Marxism.
4. critique of what he calls neo-rationalism. ‘the extirpation of social norms by capital power (a normativity that does not entail the destruction of social order but the chronic reinstitutionalisation of a risk order)’ – this is what financial speculation does according to Malik – ‘casts significant doubt upon the political and theoretical adequacy of a neo-rationalist programme to the ambitions of LA. if neorationalism contends that subjective norms can be progressively transformed by the pragmatic universalism of self-revising rational norms, that contention supposes both the authority of reason not only over conceptual thought but also over social norms, and also the revisability of social norms… capital-power, though certainly not directed by theoretical reason, revises social norms to the point at which [they] lose efficacy altogether; authority of any kind is not a prevalent power-modality in the risk-order; and risk itself proscribes any tendential organization or universalist determination…other than greater capitalization.’ claim being made here is (and critique of LA) is that the idea that collective self-org can challenge capital power is precisely what is undermined by the risk order as intrinsic to the logic of financialisation. financialisation entails an operationalization of risk, which is to say a wager on the future, and this modality of wager/invocation of risk subverts any voluntaristic attempts to determine the future, or to collectively organise in order to construct the future on the basis of an actually existing state of affairs. this is the radical political contention of the text. existing social norms do not provide an adequate basis for reorganizing our relationship to the future, we have to understand the financialized operationalization of risk in order to be able to effectuate the future and this means that rationality is not a political resource. risk/gambling supplants organization and planning. critique of latent voluntarism of LA.
Malik uses four resources – first, Nitzlan and Bichler Capital as Power, which is a challenge to Marxian accounts of capital but also the dominance of neoliberal understandings of political economy
secondly, the logic of derivatives as Derridean difference
thirdly, work of Esposito on time binding
and finally Ayache on derivatives markets as an inscription of contingency
so Malik’s argument draws on all four sources, critically on Derridan, Esposito and Ayache but more or less uncritically on Nitzan and Bichler
any systematic critique of N+B would undermine all the subsequent steps of Malik’s argument
N+B propose that capital is directly power because it is neither a material entity nor a productive process but rather the very ability of absentee orders to control, shape and structure society more broadly
for N+B capitalism is not a mode of production that has certain political consquences that inaugurates a certain ordering of power – capitalization is directly an effectuation of power
the main conflict in capital is between those accumulating power
there’s no class struggle
the antagonism is not between social classes its between capitalists themselves
or as Malik puts it ‘Capitalists do not seek to accumulate capital nor (as liberal business dogma has it) to maximize profits, but rather to ‘beat the average’ represented by the normal rate of return. Capitalists do not seek to accumulate capital nor (as liberal business dogma has it) to maximize profits, but rather to ‘beat the average’ represented by the normal rate of return. The rate is set not just by the standard instruments, but also by the …N+B’s shorthand for accumulation by intracapitalist rivalry is differential accumulation’
the two primary aspects of differential accumulation are price and sabotage
price tells us how much a capitalist will pay now to receive a flow of money later. price is merely the unit with which capitalism is ordered. and capitalization is the pattern of that order.
‘bonds, shares, etc. are simply different incarnations of the same thing: they are all income-generating entities’
this has three consequences:
prices are uniform across space and time providing universal transhistorical equivalents – in this view prices are independent of the value of a currency within a specific economy, so prices can be transplanted or converted across economies and currencies. secondly, price is a direct index of differential accumulation, and hence of social power, it structures the dynamic reordering of power, in other words price fixing is power ordering. thirdly, price is the medium of a transformative power rationality, whose specific historical organization is the result of intra-capitalist conflict. intra-capitalist conflict is all about price fixing.
sabotage (this is the second aspect) locally entails diminishing competing firms capital accumulation relative to one’s own, and globally entails limiting the average overall rate of growth of profit, in order to secure differentially greater accumulation against the average rate. as a systemic condition differential sabotage manifests itself in diverse social arrangements including unemployment, inflation, wage restraints, social fragility, education policy, immigration regulation, etc. Capitalists do not accumulate capital by seeking to maximize profit by maximizing productivity, but rather differential accumulation requires compromising productivity as such. Business is then not just unproductive, but moreover necessarily counterproductive, as are capitalists societies overall and in general. this means that finance necessarily promulgates sabotage in general, meaning it is an inherently counterproductive power. the positive determination of price qua abstract financial magnitude is that it directly indexes capital’s power ordering and reordering. through price fixing, its how social institutions, and the organization of society can be ordered and reordered. capital power is exerted through pricing. pricing and sabotage are coeval and mutually determining, directly constituting the order of power across society at every scale, as a necessarily integrated political economy. this demonstration of differential accumulation via price setting strategies makes it explicit that the administering price according to mark-ups already embodies the power to incapacitate the social order. if price setting advances differential accumulation via both accumulation and the concentration of social power, then prices set the market. Administered prices make explicit that price is the medium of capital accumulation qua power-ordering. This is what power is in capitalism. The power to price is the power to create and destroy social order independently of social constraints. markets and pricing predicated on finance enable social reshaping and reformatting ‘in innumerable ways’ that ‘no other ruling class has ever been able’ to undertake. finance is the condition and means of capital-power, and capital ‘is finance and only finance’
this means that capitalization is a species of financialisation. as the structural condition of capitalization, finance logically precedes it, or inversely economic practice is a restricted theoretical and practical rendition of capitalization, and capitalism is only a particular order of financialisation, meaning that it is not the only possible one.
this is crucial for Malik’s argument, because his claim is that a postcapitalist society can’t be a post-financial society, so that postcapitalism will simply be an alternative order of financialisation. that’s the basic claim. but this entails a distinction between financialisation as a kind of structural a priori or condition, and financial markets as a social historical instantiation of this logic of financialisation. Malik distinguishes the a priori financiality of capital-power as a systemic condition for capitalization, and finance markets as practical institutional operating mechanisms and facts of capital accumulation. So what we have is a familiar philosophical distinction between financialisation (a priori) and financial markets (empirical instantiation). relies on articulating two dimensions of finance: as a priori condition and historical fact – without directly identifying them, and as we’ll see his argument depends upon distinguishing financialisation and markets but its not clear how viable this distinction is.
what is a derivatives contract? the key distinction is between the forward price, which is the price agreed in the contract, and the delivery price, which is the actual price of the asset at maturity.
the derivatives contract is made in view of the likely difference between delivery and forward prices, yielding a profit or loss for one of the parties
contract of the derivatives claim is contingent in a double sense, firstly: it depends upon an eventuality independent from and external to the contracted price, which is known as the underlying asset. secondly, in the prevalent sense in which it is understood in the derivatives markets, the eventuality upon which the payout depends may or may not be occasioned, meaning that the contract will lead to a gain or a loss to one or another without certainty as to who will be gaining/losing party
Gains or losses are made dependent on whether the price agreed in the contract, the delivery price, is higher or lower than the market price of the underlying (spot price) at maturity.
the payout of a derivative is determined solely by the terms set out in the contract, this means that the historical material or qualitative particularity of the underlying is irrelevant
the standard way of describing relation between price and pricing is exogenous – a traditionally conceived wager
on this account derivatives are nothing but a wager on a price differential over time
(predicated on the non-knowledge of the future)
on this account the uncertainty between the contracted price and the delivery price is epistemic – best bet on your ignorance of the future
epistemic uncertainty into an ontological indeterminacy
this is where he brings in Derrida and the notion of temporization
the derivatives contract constitutes a price differential between delivery and strike prices
the contract defers the trade of the underlying in order to institute the price differential, and conversely the price differential specified by the forward contract is simultaneously a deferral of the exchange of the underlying asset, or put schematically the forward contract defers exchange to constitute a price differential for an underlying asset between times or across markets just as its positing of that differential defers the immediate vending of the asset
a deferred differential or a differentiating deferral
crucial conceptual problem here is that the difference between the forward price and the delivery price is not an actually determined magnitude (not on Malik’s account, he argues against those who claim that it can be)
nor is it the difference between two actual differences
the future difference is constitutive of the present difference just as the present difference is constitutive of the future difference
the differentiation at issue is therefore not the determination of the determinable difference between two actually determined differences but rather the derivatives contract is the determinate inscription of an indetermination
derivatives constitute price differentials precisely according to this differential logic of temporization, which is no less their operation, the delivery
what’s interesting about derivatives in Malik’s account is – its not an exchange
temporization becomes a condition for speculation
so what is going on in derivatives trading is speculative accumulation via temporization
you make money without exchanging anything
derivatives on Maliks account are hauntological because they inscribe the indetermination of what he considers to be an unpresentable future, rather than the undeterminability of the unpresentable past
this is where he parts company with Derrida – the unpresentable past in Derrida is a trace of the other, source of ethical responsibility
for Malik, inscribing the indetermination of the future is a political act, whereas for Derrida registering the undeterminability of the past is an ethical responsibility
‘derivatives are not pre-ontological, rather their ontology consists of a binding and enforceable contract that is constituted by statute’
the derivatives contract binds time – it’s a temporizing operation which exerts capital power
the logic of capitalization, as an ordering and disordering of a social system, is concentrated in the binding of time in the derivatives contract
the institution of derivatives is the constitution of price differentiation
this is where he follows Ayache in arguing against the Black-Scholes-Merton standard account of pricing
the BSM account treats as a Weiner process, where the uncertainty of the actual movement of a price in the future is rendered as a probability, a bounded calculated anticipation
on BSM account ‘the anticipation of price movement, the measure of changing market forces is both memoryless and, given its unpredictability, futureless’
it is only the present probability of what the future might be…
here what is being criticized in the BSM account is the attempt to model the movement of pricing in terms of probability theory
in probability theory there’s a segmentation of the modes of time, and compartmentalization such as past present and future are mutually exclusive states in a linear series
so one can calculate the probability of a future outcome based on information about the actual state of the system
in Malik’s argument, probability only operates if you can decompose wagering into a series of discrete steps, e.g. coin toss – the determinate outcome is independent of flip/history. we know long run probability is 50:50 but we don’t know probability for finite series
so time is segmented into flips/series of states that are undetermined by the previous states, and only in this way can you calculate probabilities
you must also be able to discreetly identify the possible outcomes
standard financial praxis – account of their own operations as both logically predicated on, and operationally constituting, the volatility and …
the contract is between a constative and a performative relation of price
in the BSM account you can represent the possible outcomes of the wager because the outcome of the wager is independent of the praxis of the wager
exogenous relation between price and pricing, because the practice of pricing is in no way determines the prices
what determines market movements are forces working independently of the derivatives contract
what’s peculiar about derivatives trading, drawing on Esposito, is that the infra-wager constitutes that which is wagered upon
the act of wagering constitutes
a performative relation between pricing and price as opposed to a merely constative one
this is why prices can no longer be probabilistically mapped or represented
the volatility of markets is endogenous as opposed to exogenous to pricing
the future stipulated by the derivatives contract is unpredictable because it is produced by the very same…
in short, derivatives markets constitute prices
here we need to distinguish between present future and future present
derivatives mobilize a distinction between present future, our current anticipation of the future, and future present, that becomes actual in the future
what is traded on derivatives is not the future given the then unknown strike price of the underlying but the present risk of that price against the delivery price
derivatives pricing constantly refers to the present way of seeing the future and not the unknowable future that will come about
that is, derivative pricing makes explicit in the present the relation to an inactual and necessarily uncertain future present
this means that time is systems specific
the difference between present future and future present is always internal to a system, and here it’s a social system
the maintenance within the present of past and future presents depends entirely on the structure, organization, and capacities of any given system
this is why derivatives pricing, and is volatility, are in short constructions of time
finally, Malik distinguishes between the extra-wager and the infra-wager
the extra-wager is the standard wager – gamble on necessarily limited knowledge of inactual future occurrence
we can attempt to mitigate the risk incurred by gambling using probability – prediction – if you can find the likelihood of an outcome you diminish the risk
and Malik’s claim is that in derivatives trading – the infra-wager – the uncertainty itself is what is wagered upon
what is being wagered is the absolute indeterminability of the future state
this is why risk is ontological on Malik’s account
and this is why in the infra-wager, any instance of derivatives pricing is a wager placed not just in an indefinite betting process but also on it. Derivatives market pricing is thereby akin to odds lengthening or shortening on a bet, according to what other betters place. What is priced by derivatives markets then is the pricing process itself. Unlike the extra-wager, derivatives are an infra-wager for which the terms of the relation are not externally determined conditionalities, but only parametric constraints.
what is being wagered in derivatives is wagering itself, you’re betting on a bet, you’re not betting on some outcome that is external to the act of betting
acute involution – pricing of the price process itself, and nothing that is independent of that process enters into it
the orthodox, BSM account is an attempt to represent pricing, as if pricing was an activity that was connected to or interacting with processes in the world
the reason why pricing is the inscription of an absolute contingency, or an indeterminability as such, is a practice which doesn’t reflect or represent any data or information from outside the practice of pricing
In addition to the contingency of abstraction that is universal fungibility of the underlying forward contract the derivative is also contingent in that it posits a speculative as yet unknown eventuality. that eventuality does not preexist the contract but is fabricated by it. so you’re producing the outcome that you’re betting on. the contract constitutes its inactuality and unknowness, in other words, the unknown that is being wagered in the contract is not independent of the institution of the contract
the two different outcomes are branches of reality only one of which will be actualized at the maturation of the contract
it follows that the derivatives contract is always a contingent claim
but the contingency identified by Ayache is one that the derivative constitutes and inaugurates, and is to designated as its thetic contingency, its thetic contingency because it is instituted by the wager or by the institution of the contract. what this third contingency of the derivatives constitutes is its deracination not with regard to the underlying, from which the derivative was deracinated by the contingency of abstraction, but rather the deracination of price itself in the pricing process. It posits that the world is what it is in reality. pricing fact – except that it could have been different. only one of the outcomes are actualized the other remains inactual.
there’s an appeal to the distinction between virtuality and possibility. possibility is always abstracted from virtuality. In Bergson’s account possibility is always retrojected as a state of affairs that could have been actualized but in fact was not. This involves thinking of time as decomposable into discrete instants, time as being a movement of actualization, the actualization of a possible state of affairs that is somehow adjoined to the actual state of affairs, in other words what could be is determinable on the basis of what is. And the Bergsonian claim is that futurity or virtuality is precisely never what could be if what could be is understood as a possibility inscribed in actuality.
So, in Ayache’s account of contingency, the actualized inactuality is not the realization of a possibility – this is an infra-wager, you’re not wagering on the basis of your ignorance of what could be, not what is unknown but unknowable/indeterminable
if the future is understood as a reservoir of possibility it is determinable – you can predict what could be on the basis of what is
but on this account what might be or may be is unforeseeable or unpredictable because nothing that we know about what is provides a reliable index to what may be
The representation of the world, its discrete segmentation into substances and attributes and combinations of objects in states of affairs
so its this whole ontology of representation that is being challenged by Ayache’s account of contingency
the infra-wager, as exemplified by derivatives trading, is a practice of time-binding that has the power to generate order and disorder without any prevision
this is why it’s a challenge to any model of political agency which is predictive, which supposes its possible to construct the future from the present – the future is non-constructible on this account, it can only be wagered, but the wager is what will constitute the future.
and financialisation is a practice that allows you to constitute the future without having to rely on anything you know about the present – this is its radical political valence
some critical remarks:
I think there’s a problem with the attempted link between differentiation and temporization and systemic time binding
Derrida’s argument is a critique of certain phenomenological orientations, of the Husserlian notion of the living present
Derrida’s claim is that in Husserlian phenomenology what is not yet or has been are somehow intrinsic to what is or the experience of the present, because what is cannot be understood in terms of a substantial actuality – the living present is never punctual because it is constituted by the anticipation of the not yet and the retention of what has been, and this anticipation and retention are relations, intentional acts on Husserls account which make absence constitutive of the present, but Derrida wants to radicalize this relation between presence and absence by arguing that what is present can only be present according to a certain mode of absence (deconstruction of the opposition. Every anticipation and retention presuppose the unpresentable. The standard move is to say that Derrida’s critical remarks are already there in Husserl or Heidegger’s account – subversion of presence already understood by phenomenology.
There’s a problem about transplanting the logic of temporization to a social system, because here it seems that the relationship between the present future and the future present can’t be straightforwardly adjudicated by appealing to something like self-consciousness. In other words, the difference is between what we currently anticipate (present future) and what will be independent of our current anticipation (future present) – there’s a problem with applying this to social systems because current anticipations are also conditioned by a set of representations which unfold in time. There’s a distinction between represented time, the time experienced by a system, and the time of representing, the time in which the system represents its relation to the world and experiences the difference between present future and future present. This is a straightforward philosophical distinction between the representation of succession, is not equivalent to the succession of representation – the former (RoS) is conditioned by the latter (SoR), which may not be represented.
Surely, if we’re talking about something as complicated as a social system then the difference between present future and future present is itself conditioned by the difference between the present of representation (in which the system constitutes its self-representation) and the future that will condition its present representation. Any system capable of differentiating between present future and future present is embedded in a time order which conditions the time order experienced by the system. There’s a time that is internal to the system and a time that is external that conditions the generation of time within the system. This means there’s something peculiar about using the distinction between present future and future present, and even the cross-contamination between them, to yield this description of the indeterminability of…
This then calls into question the distinction between financialisation as structural a priori and financial markets as historically conditioned social practices. In other words, its one thing to say that the practice of pricing doesn’t mirror or reflect price movements in a reality which is somehow independent of the market, but the performativity of pricing and the fact that you can no longer segment the institution of the contract or price, surely means that what is the determining factor…there is a determinate factor operative in pricing – why isn’t it straightforwardly empirical? Why isn’t it the trader’s contingent psychological state? You need the Derridean register to enforce this distinction between the unpresentable a priori and the contingent historical formation of this wagering on the unpresentable, but that’s only if you’re sure that this account of wagering actually bets time binding. If the binding of time in the derivatives contract is conditioned by factors that are unavailable to the practitioners of pricing, then in what way can wagering be taken to be constitutive of time binding at a systemic level? Once we have this difference between the representation of time and the time of representing then everything that’s going on at the level of wagering can be conditioned by factors which may be unavailable to the participants in the wager, but which are perfectly identifiable to a sufficiently fine-grained empirical analysis. So I think the transcendentalisation of the infra-wager is dubious. So, we’ve got pricing as a peculiar practice – the pricing of pricing – which seems to be impervious to any external social determination, and this then becomes the transcendentally constitutive moment – it effects the operational binding for the entire system independently of the empirical conditions of the market traders. Once one questions the transcendentalisation of the Derridean account it seems that the performativity of pricing is purely empirical and not transcendental. The endogeneity and volatility of pricing, the fact that pricing depends on what the traders happen to believe – there’s no rationale for transcendentalising that volatility. The risk inscribed in wagering is empirical and not transcendental – it seems dubious to ontologise it. A more general remark on this ontologisation of risk: what’s decisive about the claim is that temporal indeterminacy, or the indetermination of the future is ontological and not merely epistemic, so therefore that no rational action or no projection can realize the future – in other words we can’t plan or predict. This seems a contentious generalization of an experiential account – its explicit in Ayache with references to figures like Bergson – the whole critique of representation is there’s nothing but the dynamic movement through which the future realizes itself are unrepresentable and unforeseeable on the basis of any information which we have, any of those characteristics of the world that we can represent, is based on the primacy of lived experience over the relationship to objectivity, so its undialectical in that sense. And this is why the peculiar consequence if we read Ayache is trading becomes this creative act. Trading becomes an inscription of absolute contingency, it becomes a creative act. Malik doesn’t talk about creativity he talks about time binding, its as if the synthesis of time depends on this inscription of this radical indeterminability, But this is a peculiarly subjectivistic, this whole account which is supposed to be radically anti-humanist has curiously subjectivistic premises. If one has a more dialectical understanding of the relation between subject and object, one refuses to absolutise immediacy, whether phenomenologically or vitalistically, then its not true to say that the future is radically indeterminable. We can successfully predict outcomes…the border between stability and instability can always be temporarily circumscribed by sufficient sophisticated understanding of dynamic processes, and I think that here the reason why the BSM, the attempt to construct a probabilistic model of pricing is unsatisfactory is not because pricing inscribes some radical indeterminability of the future but simply because everything that traders are doing is an extremely complex nesting of entirely arbitrary inclinations. Because how they will wager is determined by their previous wager and the anticipation of their next wager, then this is a series of …a determination of one moment by the next, which can be characterized as purely empirical and doesn’t need to be extrapolated into this speculative register.
The fact that they rely on hunches or guesses and that these can only be sociologically described and not probabilistically represented is just a trivial epistemic fact and not something that should be inflated into an ontologisation of risk. Notoriously, its not the traders themselves that are incurring these risks, its always…the empirical consequences, the gains or losses will always be incurred by people outside of the market. Malik’s account is an attempt to reappropriate the ontologisation of risk for an emancipatory politics as opposed to a reactionary Darwinian liberalism. Because the claim that the future is radically unforeseeable, that we can’t plan or project or organise is a familiar claim of neoliberal ideologues, there’s nothing radical about that claim, so therefore this whole argument relies on a rejection of voluntarism and rationalism as wholly inadequate to the task of effecting an emancipatory transformation, a reordering of society, on the basis of the well-known catastrophic consequences of revolutionary politics in the twentieth century. But it seems insufficient, there’s no principled argument as to why we can’t successfully reorganize society by trying to construct future institutions on the basis of revising current institutions. Malik is rejecting what he calls this rationalistic account because if transcendental constitution is social institution it means that the way in which we understand ourselves and try to organise and reason about means and ends is a reflection of a series of social institutions which are themselves historically determined…
What drops out of this account is that financialisation turns out to be determining in the last instance for socialization, but surely financialisation presupposes a social practice…
That financialisation has this power to create and destroy social order is a consequence of familiar social relations, which have to do with property, and if we understand this I don’t see the need to avert to financialisation in order to achieve this reordering. The key presumption is that reordering predicated on a program – a programmatic reordering will simply be totalitarian: that’s the unstated premise here. We know that programmatic reorderings have had totalitarian consequences but unless…it seems bizarre to make totalitarianism the inevitable consequence of voluntarism, and that’s a standard neoliberal trope – if you will to change the world in any way you’re gonna start shipping people off to gulags. That’s just ideology.