Financialisation and the Business of the Soul 9789390122752

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Financialisation and the Business of the Soul1 PRANAB KANTI BASU

Prelude Anjan was deeply involved in numerous political projects with some of which I had the fortune to be associated. These common associations took various forms as the times changed – from a little magazine to fact finding missions for rights organizations back to a more political broadsheet. The long debates and conversations with Anjan in the course of these associations, among other forces, shaped my academic journey towards an analytic that was more broad-based than what my disciplinary training inclined me to. We shared too an interest in the question of community and that of formation of subjectivity or what makes people, as individuals, think and act as they do and how does this relate to the constitution and change of the whole that we call society. Or is it just the ‘cunning of history’ which is manifest in the course of change? We spent long hours on our trips debating the significance of class as agency. I thought that it would be a fitting tribute to my friend to explore some of these questions within a broadly Marxist discursive space. My focus here is on the question of subjectivity formation in the age of financialisation. This also seems pertinent for the theme of this volume. After a century of revolutions that have claimed descent from the ideas of Marx, the socialist movement seems to be in disarray. We have to realise that one of the major reasons behind the general apathy towards the left is the increasing self centeredness that is qualitatively different and more intense in this age of financialisation. It is important that the practitioners of revolutionary politics realise that the strategy and tactics of revolutionary practice have to be consonant with the times. There is often a tendency to take what is written in the works of Marx, Lenin or Mao as blueprint of action. This seduction of ease has to be kept at bay for at least two reasons: one, such practice disregards the concrete situation, to which all of these iconic figures paid great attention; secondly, and more fundamentally, there are passages in Marx (and not just in Lenin) that support the theory of a party whose leadership personifies revolutionary This was published in Partha Chatterjee et al. (Eds.), After the Revolution. New Delhi: Orient Blackswan, 2020, 314pp. (Paperback). ISBN: 978-93-90122-75-2. 1

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knowledge and therefore the lived experiences of the people that shape their subjectivities is totally discounted. This tendency more than anything else, I believe, has been at the root of the downfall of many left revolutions the world over. At the base of this dismissal of peoples’ experience is an essentialist, linear view of the course of history (often called the stage theoretic view). This again is rooted in an essentialist world view the core of which is constituted by class relations (defined purely in economic terms). Pure and sufficient knowledge of society can be gleaned from analysis of this core. This is a rationalist exercise that can be undertaken by those who have the necessary theoretical expertise – the party bosses. This leads to various kinds of grotesque aberrations of leaders of communist parties. We have seen these reported, censored, exaggerated, hysterically defended and vilified. Our purpose is not to go into these. We are concerned with a particular fallout of the essentialist world view: the erasure of experience and, therefore of subjectivity formation. This leaves a large segment of the organised left totally unconcerned with the way people think and why. The entire focus of their political practice is the dislodging of existing state power. This leaves them without the means to complete even their truncated, and less than meaningful mission. Further, without considering subjectivity formation the task of constituting the new man of the revolutionary era cannot be addressed. This essay tries to bring the question of subjectivity formation in this age to the centre stage. We will explore the question of subjectivity through a version of commodity fetishism. This also brings up a dimension of commodity that is most pertinent to the question of the relation between commodities, values and socialism that is rarely discussed. Though the question of plans versus markets has been much discussed in the context of USSR, this dimension has not been accorded the importance that it deserves. We do not discuss this question front on, but our approach can be extended to this field. I do think that financialisation is not important as a separate era of capitalism just because it brings in its train new dynamics and forms of crisis to the economy, but also because it gives birth to a kind of pervasive and different subjectivity that needs to be understood by revolutionaries. As we have remarked, we have to understand the concrete situation of the current times. For this it is imperative that we analyse in some detail the economic phenomenon called ‘finacialisation’. We will try to understand how financialisation gives a new twist to the process of subjectivity 2

formation in the age of capital. We will try to unravel the issue through a rereading of Baudrillard’s hyperreality through the Lacanian concepts of real, imaginary and symbolic. Our entry point into the process of subjectivity formation in the age of capital is the Marxian concept of commodity fetishism. Lest the reader gets put off by the bombardment with what could be an array of unfamiliar concepts to some we promise to elaborate all terms with examples, as far as possible. We will begin with a narrative of the economics of finacialisation. Though this narrative is somewhat detailed we have tried to maintain readability for the uninitiated. This detailing is unavoidable because this forms the basis the qualitatively new homo economicus that is our focus. Introduction The great evangelist of neoliberalism, Margaret Thatcher, made quite a few incisive observations about its basic nature. In an interview to Sunday Times, May, 1981 she said “What's irritated me about the whole direction of politics in the last 30 years2 is that it's always been towards the collectivist society. People have forgotten about the personal society. And they say: do I count, do I matter? To which the short answer is, yes. And therefore, it isn't that I set out on economic policies; it's that I set out really to change the approach, and changing the economics is the means of changing that approach. If you change the approach you really are after the heart and soul of the nation. Economics are the method; the object is to change the heart and soul.” (emphasis added). And, of course we have her famous harangue against society. In an interview for Woman’s Own’ given in September, 1987, she said “There is no such thing as society. There is a living tapestry of men and women and people...All too often the ills of this country are passed off as those of society. Similarly, when action is required, society is called upon to act. But society as such does not exist

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These were the post World War II decades when the capitalist world believed, broadly, in welfare states and Keynesian policies. 3

except as a concept. Society is made up of people. It is people who have duties and beliefs and resolve. It is people who get things done.” (emphasis added) In a nutshell, she says that for long the illusion has been bred that humankind is related through ‘society’. It is time to break free of this illusion. To achieve this freedom people’s thinking about the economy should be fashioned such that it inculcates the value of individualism in the ‘heart and soul’3. Though Thatcher was talking from the pulpit, her words turned out to be prescient. We will try to understand how Thatcher's normative prescriptions actually worked out in the West as a result of the structural economic compulsions of the age of financialisation’. There are various questions that financialisation and the financial crisis have brought to the fore about the world we inhabit. Quite obviously they have raised questions about the nature of the economy. But because of the overdetermined character of various levels of social being within the conjuncture (i.e. their interdependence with contradiction) it has also raised questions about other aspects of social being. I am primarily interested in trying to formulate an approach to understanding how reality4 is constructed in the era of financialisation. This question is intimately related to Thatcher's project of capturing the ‘heart and soul’. It is necessary to concede at the outset we are discussing the countries where financialisation and the attendant change in character of the cyclical capitalist crisis are pronounced, i.e. with the Western countries. It is undoubtedly a ‘provincial’ exploration (but which is not?). Financialisation Financialisation is the emergence of the financial sector as the growth sector in contrast to the materially productive sectors of the economy. This is a phenomenon that has engulfed the leading capitalist nations. The tendency was observed in the USA roughly from the mid seventies. Different empirical measures have been used to test the existence, or otherwise, of this 3

There is one collective that Thatcher endorses– the religious family. If government abdicates to promote individualism then the religious family inculcating conservative values can be the only social network on which state power can rely. The state continues to need the family as an ‘ideological state apparatus’ potent specially for civilising the child in its formative years to be pliant to the requirements of the ruling order. 4 We are using the term in a Lacanian sense to distinguish it from the Real. While Real is the unsymbolisable thing that we know exists and which haunts us with its unfathomable character. Reality is the psychically-socially produced substitute for this absent Real, to give us the illusory strength to cope with this absence. 4

phenomenon. Krippner (2005) argued, in a widely cited article, that the employment ratios are not good indicators of the relative importance of the financial vis-a-vis other sectors. This is because of the low employment intensity of this sector. Instead she opts for profit ratios as better indicators of dominance. Following Arrighi (1994) she had defined financialisation as a pattern of accumulation in which profits accrue primarily through financial channels rather than through trade and commodity production. ‘Financial channels’ are channels through which liquid assets move in expectation of future gains. Krippner concluded from her detailed empirical analysis that the shift towards financialisation was indeed significant since the eighties. The official enquiry committee report of the USA would later concur with this assessment: From 1978 to 2007 the amount of debt held by the financial sector soared from $3 trillion to $36 trillion, more than doubling as a share of gross domestic product. The very nature of many Wall Street firms changed—from relatively staid private partnerships to publicly traded corporations taking greater and more diverse kinds of risks. By 2005 the 10 largest U.S. commercial banks held 55% of the industry’s assets, more than double the level held in 1990 On the eve of the crisis in 2006 financial sector profits constituted 27% of all corporate profits in the United States, up from 15% in 1980 Understanding this transformation has been critical to the Commission’s analysis. (FCIC, 2011) Causes As Magdoff , et.al. (2010), Foster, J. B (2009) and Magdoff (2008) have detailed, the neoliberal policies initiated through the mid seventies under the pretence of remedying the ills of Keynesianism resulted in a highly skewed growth pattern. An elaborate structure of ideology and compulsion was constructed to coax and cajole the nations to adopt a set of policies that came to be known as neoliberal. These consisted of curtailing social sector expenditures as they were argued to be wasteful and acted as disincentives to individual effort; dismantling of international barriers to goods and capital movement supposedly to promote efficient production; pampering capital with fiscal and monetary concessions to induce them to invest for modernisation; restricting trade union freedoms and de-indexing wages5 to ensure that labour did not eat into the productivity gains of modernisation. All these policies were either willingly 5

Delinking nominal wages from price index.

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accepted by nations like the USA or forced on unwilling nations through the conditionalities imposed by IMF and World Bank when nations approached them for bailout in the event of international payments crises. The efficacy of these measures has been strongly contested in a vast literature that includes those of the Magdoffs, Foster and others. But these measures have undoubtedly caused a pronounced tendency towards increasing skewness of income distribution: de-indexation unleashed a process of continuously decreasing real wages; the process was further aggravated by restrictions on trade unions; mobility of capital and produced goods led to a shut-down of small units and to increasing concentration of capital; fiscal and monetary concessions increased the wealth and income of the large capitalists; governments’ virtual withdrawal from social sector spending deprived the poorest segments of the population of income supplements. This works as disincentive for investment in mass consumption goods, compensated somewhat by the increased demand for high end consumption goods. Esoteric needs have to be created so there is an expansion in sales and in the workforce employed in sales and advertisement. “Credit financing of consumer purchases is also used for boosting consumer purchases. Globalisation also expands the scope of earning profit in another area – speculation. New instruments of global speculation emerged.” (Basu, 2009, 137-138). The large and persistent deficits of USA had also, over the years, created a large fund of Eurodollars that needed investment outlets. By the end of 1970, 385 billion eurodollars were booked offshore (Brittain-Catlin William, 2005, 8-9). By December 1985 the Eurocurrency market was estimated by Morgan Guaranty Bank to have a net size of 1,668B, of which 75% are likely Eurodollars. (Galen, 2003). To these were added, through the seventies, other sources of funds desperately seeking investment outlets, which were denied by the stagnating manufacturing sector. As Engelen et. al. (2010) have argued “as a result of pension reforms (the global replacement of pay-as-you-go systems by pre-funded pension systems), international trade imbalances and rising commodity prices (especially oil), there is a growing ‘wall of money’ facing global financial markets that is looking for investment opportunities”. The termination or drastic reduction in welfare spending, which we have already remarked, also forced the poor segments of the population in the West into the financial market in the search of some asset backing for health care, education, etc. As 6

long as home equity was positive6 mortgage funded home owners could secure loans to meet expenditures that were previously borne by the state. While policy changes since the seventies as well as continuing trends in international transactions and prices generated a large fund seeking investment outlets denied by the stagnating manufacturing sector, new investment opportunities were also being created in the financial sector. Some of these were the product of those very policy changes. “The unevenness of deregulation, as well as the continuing relevance of the state and national regulatory traditions, opened up numerous opportunities for ‘regulatory arbitrage’7, which by the 1990s were being exploited by nimble players like hedge funds, private equity funds and other private capitalcontaining vessels domiciled in offshore financial centres.” (Engelen et.al. 2010) Financial innovation But the scope for investment in the financial sector expanded exponentially through ‘financial innovation’. Financial innovation essentially took the form of derivatives. A derivative is a financial asset (basically a piece of paper with a promise – a promissory note) whose price is derived from the price of some other asset. This other asset could be a real asset or another financial asset. Considered sympathetically, the purpose behind the evolution of derivatives is to reduce individual risk8. In the case of some types of derivatives the risks are supposedly reduced through a kind of insurance against probable loss. This is claimed for classes of financial assets derived from stocks, bonds, commodities, currencies, interest rates and market indexes. These 6

Home equity is the excess of the rate of inflation of home price over the rate of interest being already paid against the mortgage that funded the purchase of the home and represents an increase in net worth of the loanee house owner. 7 Arbitrage is trade intended to make profit on the basis of regional variations in returns, mainly in the form of prices. Plainly, buying cheap to sell dear. In this particular case the commodity traded is currency and the variation is in degree of state control over capital markets and convertibility, from nation to nation. 8 For example, A buys a share of ABC Co. at R 120 hoping to make a gain by selling the share at a greater price in future. But A is also afraid that the price of the share may decline in future. To guard against this probability, i.e. to hedge, A takes an option (which is a form of derivative) to sell the share to B at R 120 after a year. That is A has the right to sell the share to B at R 120 one year later, no matter what be the price then. If A exercises this right B has to buy the share. To get this option A has to pay a daily premium for as long as the option lasts (in this case, one year). If the price falls below R 120, then A will, most likely, exercise the option. A can buy back the share at the current market price, say R 100, thus having pocketed the difference (R 20). Of course A will have to offset this gain against the premium paid. If the option is properly priced, the premium will just match the gain of A. The loser, B, will consequently also be adequately compensated. In this sense the risk will have been reduced. 7

are broadly, forwards9,options, futures10and swaps11. In the case of certain other kinds of derivatives created by securitisation of original debt (the form of derivatives that were actually predominant and which we will discuss in detail, presently) individual risk was supposedly reduced through spreading the risks among a large number of individuals. Actually, during this period, instead of reducing risks, derivatives increased risks through aiding speculation as well as through increasing the opacity of the actual risk of an asset. The innovations multiplied the amount of financial assets in circulation in order to gain from the excess liquidity available on the market. It was purely a matter of demand and supply, with little intention or technical equipment to reduce risks12. Financial innovation is significant both in the quantitative sense of inventing a huge market for investable funds as well as in the qualitative sense of creating new forms of assets that actually worked to snap the link between the real and financial sectors breeding the hyperreality that is our prime concern. Like innovation in any field, it is not as if the financial assets and entities that emerged during this period had no antecedents, but the layers of credit instruments (or financial instruments) based on a single asset multiplied so many times over that the link between the original asset and the financial instruments ceased to exist in the minds of the buyers of the instruments. Further there were new institutional forms of innovating agencies that shielded them from monitoring by the regulatory authorities.

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Forward unlike options, impose the obligation to sell or buy the underlying asset. Options give the right, without obligation. That is why if A had bought a future, A would not have to pay any premium, but would have to sell the share of ABC Co., which B would be obliged to sell to A. 10 The big difference between forward and future is in the daily adjustments in the futures. If price changes the next day, then the gains and losses would be immediately credited or deducted. For forwards, nothing happens until maturity. 11 Swaps are derivatives that are used to switch or swap the probable gains or losses from movement of interest from the party holding the underlying financial asset to another party. Suppose A has lent money at a flexible rate to some party. A makes a swap agreement with B, whereby B will continue to pay the current rate of interest to A whatever be the market rate of interest. Such a swap sale will occur if and only if A anticipates that interest rate will go down, while B anticipates that it will increase. 12 In this sense financial innovations are totally unlike innovations in the real sector. In the real sector innovations increase productivity; financial sector innovations were quite ad hoc and, apart for the market in options – only one form of derivative out of a myriad, for which the Black-Scholes model was developed – there was no credible theoretical exercise to objectively determine the price of any derivative. Unlike in the case of real sector innovations, the objective determination of prices is necessary in the case of financial innovations if they are to actually serve as risk minimisers, as is claimed. 8

Layers of securities With exponentially rising property prices it became attractive for banks to finance mortgage backed property purchases. The demand for such purchases by the underprivileged burgeoned, for reasons we have elaborated. In the face of rising demand for such mortgages, the banks went in for sub-prime lending, i.e. lending to prospective buyers who did not fulfil the criteria to be deemed creditworthy under normal circumstances, obviously at a higher than normal rate of interest. Basic requirements like proof of income and a down payment were overlooked by lenders against mortgage; even 125% loan-to-value mortgages were given to prospective homeowners. This was on the presumption that the annual inflation rate of property prices being around 15%, the excess value of loans would even out in less than two years. The primary loan market that consisted of credit card payments, consumer loans, home loans, car loans, etc. was expanding, but this was not unusual. What marked out this period was the transformation of “illiquid and opaque income streams like mortgage payments, credit card payments, car loan payments and so on into tradable assets through the technique of securitization” (Engelen, et.al. 2010) These were called Asset Backed Securities (ABS). A set of assets with similar cash flows (like home mortgage or consumer loan) were bundled into tranches of varying degrees of risks. These tranches were then fragmented and sold in smaller packets as financial assets that paid the buyers a fixed rate based on the cash flows from the original assets. The original asset – realty asset, car, consumer good, etc. acted as collateral. These ABSs were rated highly as AAA or A+ by credit rating agencies like Moody’s, Standard and Poor13. Even tranches containing subprime mortgages as collateral received AAA as long as they were given priority of payment on receipt of money from original asset. Lower rated tranches were compensated with higher coupon rates or interest rates. The chain was further elongated repeating the same process of devolution of asset as used for creating ABSs. Because of the reasons we have already elaborated the funds available for absorption in the financial markets seemed unending. This, in turn, allowed investment banks to create and sell collateralized debt obligations (CDO), which essentially packaged equity and The US Government’s Financial Crisis Inquiry Commission reported that there were ‘forces at work behind the breakdowns at Moody’s, including the flawed computer models, the pressure from financial firms that paid for the ratings, the relentless drive for market share, the lack of resources to do the job despite record profits, and the absence of meaningful public oversight.’ (FCIC,2010, xxv) 13

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"mezzanine" (medium-to-low rated) tranches from ABSs and repackaged them yet again, this time into CDOs. Often these CDOs obtained AAA rating! This model of credit expansion has been called the ‘originate and distribute’ model because the banks that advanced the original loan against real collateral did not hold on to the asset (the mortgage, for instance). The chain devolution of liabilities coupled with the unscrupulous rating by agencies14 created a system where the actual worth of a financial asset (in terms of risk paying ability) was entirely obscured from the buyers of these securities. The original asset creator, the bank, was also protected as the assets (whose worth proved highly inflated when the crash occurred) and the liability were both pushed off its balance sheet. The explosion of the financial sector was self generating and quite divorced from the real sector growth. Record-low interest rates combined with loose lending standards to push up the inflation rate of real estate prices. In spite of the low incomes of a large segment of the borrowers they were also able to refinance their loans because of the high home equity. New institutional structures The opacity of the financial assets was enhanced through a restructuring of the asset creating institution. The ABSs were sold to special entities created solely for this purpose called Structured Investments Vehicles (SIV) who in turn repackaged them as CDOs. These short term debt obligations that were marketed at rates of interest lower than their originating ABSs. So the SIVs bought the long term debt obligation (ABS) that paid a high rate of interest; they sold short term debt obligations (CDOs) and paid lower rates of interest. New CDOs were marketed when existing CDOs matured. The difference between the rate on ABS and CDO was pocketed by the SIV. SIVs are less regulated than their originating institution, and are created in order to push the mortgage off the balance sheet of the mortgage originating large investment houses – like commercial banks and investment houses – to the balance sheet of SIV. This made the already obscure credit worthiness of the CDOs more opaque. From 2000 to 2007, Moody’s rated nearly 45,000 mortgage-related securities as triple-A. This compares with six private-sector companies in the United States that carried this coveted rating in early 2010. In 2006 alone, Moody’s put its triple-A stamp of approval on 30 mortgage-related securities every working day. The results were disastrous: 83% of the mortgage securities rated triple-A that year ultimately were downgraded. (FCIC, 2010) 14

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Lo (2012) summarises this using Gorton (2009): What Gorton describes is a machine dedicated to reducing transparency. Even today, it's still striking how the available statistics in his account dwindle as one gets to the upper layers of the cake. There are estimates, guesstimates, important numbers with one significant figure or less, and admissions of complete ignorance. Even the term "sub prime" represents a reduction of transparency—Gorton details at some length the heterogeneity of the underlying mortgages in this category, a term that wasn't part of the financial industry's patois until recently. Making of the housing bubble As we have noted, various factors contributed to the heavy inflow of funds into the financial sector. There were certain contingent factors that channeled most of these footloose funds into the realty sector. The tech bubble of the late 90s had already made people cautious of the stock market. The terror attack of 9/11 was followed by a panic that the Federal Government of the USA tried to control both through the ideological message that to buy was patriotic and through the policy of reducing interest rates. This fuelled both debt financed consumer buying as well as a high demand for property. The latter was encouraged by a number of other factors, some of which we have noted: acquisition of asset to offset the increased risk of accidental expenditure caused by drastic cutback of social welfare spending, more than 100% loan-to-value ratio of mortgage finance, declared income earnings were not verified. Mortgage rates were also reduced, risky mortgage finance instruments were introduced to attract buyers who would normally not be eligible for loans. All these contributed to a huge boost in demand for real property. As Holt (2009) has summarised, using S&P/Case-Shiller Index, home prices were rising at a steady rate of around 8 percent through 1990 to 1997. Then there was a sudden jump “peaking in the 2nd quarter of 2006 over 132 percent higher than they had been in the 1st quarter of 1997.” What followed, as Holt elaborates, was a self expanding and self validating explosion in the financial sector with no reference to what was happening in the real sector. The persistent increase in home prices ever since the great depression led to the common perception that it

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would never end. Government, labouring under the same illusion, felt no need for regulation. Mortgage lenders gleefully continued with subprime lending, refinancing of due loans and competitively lowering rates and terms as they too believed there was no risk as realty prices would keep rising forever. ‘Investment bankers continued to issue highly leveraged mortgage backed securities.’ These securities were not risky as long as everyone continued to be deluded. The AAA rating by rating agencies, often given unscrupulously, would appear justified. As the international ‘wall of money’ kept moving into this market the security prices would keep rising. Insurance companies selling swaps ‘would face little liability on these contracts if home prices kept rising’. Subprime borrowers would continue borrowing as long as rising prices afforded positive home equity and loan refinance opportunities were available. Lo (2012) gives a good overview of the literature dealing with the causes of the bursting of the housing bubble but comes up with the rather unenlightening conclusion: “there is still significant disagreement as to what the underlying causes of the crisis were, and even less agreement as to what to do about it.” What is certain is that the fall in home prices, mortgage defaults and foreclosures on loans started earnestly from the third quarter of 2006. This marked the beginning of the The Financial Crisis and The Great Recession. And just as rising home prices had been self fulfilling prophesy, falling prices too reinforced the common and expert belief in falling prices. This much is clear that when home equity i.e. (rate of increase in home prices minus rate of interest on home loan) fell it was profitable to default and this was the beginning of the crisis. In July 2007 Standard and Poor downgraded Bear Stearns from AA to A. It ultimately died in March 2008 when the US government brokered a deal for J P Morgan’s purchase of Bear Sterns with substantial government funding. In September 2008, Lehman Brother filed for bankruptcy. AIG collapsed in the same month. Given the high rate of leverage and huge exposure to the huge exposure to derivatives it was predictable that the collapse, if and when it came would be dramatic. A look at Bear Stearns gives an idea of the thinness of the ice on which these players were skating. ‘By year-end 2007 its balance sheet showed $395 billion in assets supported by $11.1 billion inequity – a leverage ratio of around 36 to 1. Notional contracts amounted to 12

around $13.4 trillionin derivative financial instruments of which around 14% were in listed futures and optioncontracts.’ (Ryback, W) It is also clear that because of the many layered structure of the financial market that had been created since the 90s, any shock would have a hugely magnified impact on the financial sector. What is nowhere clarified is the reason behind these shocks. Our contention is that this cannot be clarified through economic analysis alone because the event was the outcome of a social trauma. In an incisive article, Fine and Difonze (2011) argue Rumors are always with us, but at moments of uncertainty in which perceptions of threat demand swift action, they have greater influence. .. We operate through emotional heuristics that include confidence, beliefs about corruption, and persuasive stories. Beliefs about community channel our activities.

Nowhere is this better seen than in the case of bubbles, when communities coalesce to embrace a belief that demand for a commodity will rise with rapidly escalating prices. Bubbles involve high-volume trade in assets or products with prices higher than their intrinsic value, and they reveal how the social psychology of belief shapes our lifeworld, both when they expand and as they pop. Needless to say, bubbles only become recognized after the fact. Something creates that inflated value: rumor is often the answer. At first everyone agrees that the inflated value seems obvious and then it becomes implausible. Bubbles cannot survive without rumors, but likewise, the burst-ing of those same bubbles also depends on rumor as well. As a result, rumor may be euphoric or depressive. An Analysis We will argue that in its current phase capitalism in the Western countries has assumed a hyperreal (a term we borrow from Baudrillard) character that is sustained by a particular and pervasive form of individualism, making Thatcher’s words prophetic. The social bonds (mediated as they were through commodities in the capitalist order) have, as if, melted into the 13

rarefied world of finance capital. But, we will argue in contrast to Baudrillard, that the Lacanian force of the unsymbolisable real does not drop out in the hyperreal space but remains as a haunting fear in gossips and rumours. The Great Recession was the disruption/dislocation of the hyperreality of capitalist expansion based on financialisation by the sudden, unanticipated (because unaticipatable) intrusion of the real. The remedy is also located in the arena of the social psyche: not in economic policies designed to rejuvenate the ‘real’ economy (or what is perceived as the reality of the economy through traditional fiscal and monetary measures); but in policies designed to restore faith in the financial sector. That is why we have the paradoxical phenomenon of rising stock prices and other financial indicators without significant or sustained recovery of real indicators. We argue that the hyperreality engendered by finacialisation is entwined with a specific type of subjectivity. We will explore this connection and briefly discuss its implications for practice. There have been theoretical interventions with which we have a certain kinship. These analyses of the age of neoliberalism have also focused on the question of new subjectivities that this era produces. One strand argues that this age sees the penetration of the logic of homo economicus into all modes of being. Another sees the ‘immateriality’ of production as the locus of potential mobilization of subversive ‘multitudes’. But, as Madra and Ozselcuk (2010) contend, none of these strands elaborate on how the economy works on and is worked on by the other levels of social interaction to generate the subjectivities that are either plaint or potentially subversive. Our attempt is precisely in this direction: to see how the political economy of financialisation is a major constitutive force in the formation of subjectivities and then to see how the new desires, above all, distinguish the recurrent crises of this phase from the previous crises. Commodity Fetishism We will begin our analysis with a quote from Amariglio and Callari (1989) which pithily states our discursive antecedents: The critique of economic determinism is a call for Marxist discourse to adopt a theoretical strategy that does not hinder analyses of the cultural and political as well as economic constitution of such forms of social agency as individuality – a theoretical 14

strategy that would challenge the discursively produced determinist instinct to dismiss the concept of the individual as a figment of bourgeois imagination. (Amariglio and Callari, 1989:40) Thus the question of individual as subject and agent is brought to the fore of the analytical structure. This creates a discursive space for the individual as thinking agent against the grain of deterministic reading of Marx (that make the class the affective agent and individual as waiting to be brought out of the slumber of false consciousness induced by commodity fetishism of capitalist economy to be integrated into the class for itself). The concept of commodity fetishism read as a socio-economic process becomes pivotal to this venture. The constitution of the products of labor as commodities and the determination of value requires ...just that confluence of cultural, political, and economic processes which effects the constitution of social agents as individuals, agents who recognize each other as equals, who objectify human activity, and who act as rational (economic) beings. It is the presence of such individuals that creates the possibility for, and gives meaning to, any calculation of mathematical averages to begin with. (ibid: 41) Marx starts his presentation of the analysis of capitalism in Volume I of Capital from the analysis of commodities. In other words, in his presentation, he first elaborates certain building blocks or concepts which he later binds together to form the analytical edifice of capitalism. Among these blocks he considers ‘commodities’ as structurally vital. Let us look at this ‘enigmatic thing’ to see the beginnings of the process through which Thatcher’s rational man captures the heart and soul of humanity. To see this we follow Marx’s analytical path – contrasting a petty producers’ economy15 with a community economy. What is exchange and why is it necessary? Exchange is the mutual and simultaneous transference of rights over equivalent property. Consider the event of buying a ball pen for ten

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That is an economy where the laboring people own their tools, like the cottage producers. Produced goods, not labour power have become commodities. Marx does not see this as a historical antecedent but only as analytical antecedent: “Definite historical conditions are necessary that a product may become a commodity. It must not be produced as the immediate means of subsistence of the producer himself. Had we gone further, and inquired under what circumstances all, or even the majority of products, take the form of commodities, we should have found that this can only happen with production of a very specific kind, capitalist production.” (C I: 118) 15

rupees. You owned ten rupees and the shopkeeper owned the ball pen. At the end of the transaction you own the ball pen and the shopkeeper rupees ten. Further the ball pen and rupees ten are equivalent simply because the exchange has taken place. If you thought that rupees ten was too much for the ball pen you would not have bought it; if the shopkeeper thought that the ball pen was worth more he/she would not have sold it. What was the reason behind the exchange? It was necessary because you needed the ball pen which you did not produce. That is, there exists social division of labour: some produce this thing some others produce that thing. Before we proceed further let us explore this simple example a bit further to understand the prerequisites of exchange. Transference of rights between you and the shopkeeper implied that to start with you had private property right over ten rupees while the shopkeeper had private property right over the ball pen. This implies that the existence of private property rights is a prerequisite for exchange. Social division of labour makes labour social unlike the individual labour of, say, Robinson Crusoe who was shipwrecked and became self sufficient in production and consumption. In society producers specialise and are, hence, not self sufficient. This raises the question of how to decide what amount of which good to produce. This is broadly decided in two ways: through direct man-man16 relation; indirectly through the mediation of the market. Direct allocation of social labour can take two forms: command and consent. If there is, say, a planning board that decides the physical allocation of resources we call it a command economy. If a tribal economy decides what to produce/gather by some sort of consensus then it is a consent economy. We are concerned with an economy where allocation of social labour is mediated through the market as it largely is in the modern world. To flesh this out we compare a community economic space with a petty producers’ economic (PPE) space. In the community economic space the works of the carpenter, the blacksmith, the agricultural producer, the weaver etc., are perceived to be different from one another – the question of quantitative comparability does not arise. Social labour, which is recognised as such by the members of society, is allocated between these different activities according to the socially approved need of society for the products of their labour. The products are not perceived as private property of those who produce them. Compare this with a simple commodity producing economy or PPE where the carpenter, the blacksmith, the agricultural producer each 16

‘man’ is used for human being. I am not using it in a gendered sense. 16

owns one’s necessary means of production. Their products are, therefore, also owned by them, i.e. they have private property rights over their products. Because of the intrusion of the sense of property, products are not perceived to be social. Social labour (which the carpenters’, the blacksmiths’ and other labours continue to be because of the existence of specialisation) is not perceived to be social, but private. The man-man (direct) relation has broken down. It is no longer as if some people are designated by some social authority (which may be consensual or command based) to produce cloth and some to produce wheat because ‘society’ has decided it needs so much cloth and so much wheat. I produce cloth more than is necessary for my needs because I need other things that are produced and so owned by others. How much more cloth must I produce? It will depend on my personal needs for other things and the rate at which I can exchange cloth for these other things. So this rate of exchange or price becomes fundamental. Price is a relation of equivalence between commodities. So the social division of labour – a manman relation – takes the ‘fantastic’ form of a relation between commodities. Then if we bring in equilibrium prices the allocation will have been theoretically achieved without any human interaction. The actors in this ‘end of society’, the present as it has been characterised by Thatcher, are unaware of the loss of human interaction and react on the economic plane only to equivalences in the market. This is ‘commodity fetishism’. The social identity of persons is also decided by the individuals’ relation with commodities: income i.e. how much of commodity ownership of vests with a person within a time period (daily, monthly, etc.) and wealth i.e. how much of commodities have accumulated with the person.

The individuals are now not connected through any community ties. Economic communication occurs through the ‘exchange’ of private property. This requires the law of private property and the cultural evolution of a notion of equivalence, of a notion of abstract labour. Making commensurable heterogeneous things implies the cultural emergence of the idea of something same constituting/making meaningful the commodities.

Marx starts his exposition of commodity exchange by exploring the basis of equilibrium prices or exchange values. Since all commodities have prices, prices must be explained by something else that is common to all other commodities. This could be either that they have use values 17

(utilities) or that they all are produced by human labour. But utilities are specific to commodities – the use value of a kilo of wheat cannot be compared to the use value of a shirt, say. Obviously, Marx is not talking of abstract utilities of the neoclassical or mainstream economics17, he is talking of the concrete use that a good has in the eyes of society. Then the only determinant of price can be the labour expended in its production. But this too is not comparable: just as use values of wheat and shirt cannot be compared so too the specific labours of the wheat grower and that of the weaver cannot be compared. The emergence of the idea of exchange is symbiotically linked to the emergence of the idea of abstract labour. If I think that I am having to work too hard as a weaver or too long to get the wheat I need through exchange, while my neighbour (producing wheat) is working much less to get the same quantity of wheat, then I will leave weaving and go into wheat production. This comparison involves somehow abstracting from the differences in the nature of work of the weaver and the wheat grower. In their minds the weaver and the wheat grower must somehow compare their labours. Mind you this is not a comparison of exact clock hours worked to produce, say, 10 Kg of wheat and the clock hours necessary to produce the length of cloth that exchanges for 10 Kg of wheat – because the work of the wheat grower may be more strenuous, and this would be recognised by both. So what it means is that the agents in the simple commodity producing economy have an idea of equilibrium price that is based on abstract labour embodied in the commodities. If the current market price (that is primarily determined by demand-supply mechanism) differs from this value determined price then there will be immigration to /emigration from some activities from/to some others. So Marx abstracts from all the particular characteristics of these labours to arrive at labour in general or abstract labour. The positive character of this labour is that it is labour that produces private property. Prices then are determined by the amount of abstract labour socially necessary for the production of a unit of a commodity. Being abstract, such labour cannot be measured in clock hours. But still this abstract category has a material existence in the sense that the buyer and seller perceive that their products exchange against each other because they have equal quantities of a common quality: being products of somehow comparable labour. This is their social content. And the form that the social content takes is material in the sense of being historical: it occurs 17

Neoclassical economics conceives utility derived from a commodity as purely personal and abstract. Personal: the utility I derive from a pen is not the same as that derived by another and cannot even be communicated to the other. Abstract: I can compare the utility I derive from the pen with the utility I derive from a shirt. 18

only in a particular type of society – commodity producing economy. Of course, as we have already noted, Marx observes that this is historically linked to the emergence of the capitalist economy (footnote 14).

But there is another connotation of commodity fetishism to which we have just alluded in passing. Exchange occurs between individual property owners of their own volition. This question of individuality is central to our theme. Amariglio and Callari (1989) express this connotation succinctly: The trading of unequal quantities of actual labor time is a theoretical problem because the agents of trade are constituted as “individuals” whose self-identity is in conflict with an unequal exchange. Those agents are defined as individuals who are “rational economic beings” both in their consciousness and in their behavior, who conceive of the network of social relations within which they are inscribed as a network of (political and economic) equality (at least potentially), and who treat the things they bring to market, and the things they receive in exchange, as possessions – that is, they identify themselves, and behave, as private proprietors. Inequality in exchange would violate this ensemble of qualities that defines individuals...It was in order to provide a resolution to this contradiction that Marx developed the concept of commodity fetishism. A resolution of the contradiction that affirms the existence of individuals must theorize the possibilities for a transformation of trade (of unequal quantities of actual labor times) into exchange (of equivalents). (op.cit. 47-48, emphasis added) There is a fascinating link between Lacan’s narrative of the constitution of self within the field of the imaginary and Marx’s narrative of constitution of the individual (as elaborated by Amariglio and Callari) at the moment of exchange that can be productively deployed. To exist one has to be recognized by an-other. But this means that our image, which is equal to ourselves, is mediated by the gaze of the other. The other, then, becomes the guarantor of ourselves. We are at once dependent on the other as the guarantor of our own existence and a bitter rival to that same other. (Homer, 2005, 26).

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Let us read the moment of introduction of exchange through the discourse of commodity fetishism as Amariglio and Callari see it. ‘The theoretical problem we see emerges from the absence of any guarantee that these acts of trade involve equal magnitudes of labor time. In fact, these are trades of unequal magnitudes of actual labor time. But, this inequality notwithstanding, for commodity circulation to take place trade must be conceived by the agents of circulation – by individuals – as an exchange of equivalents. There is thus a contradiction: the same process of circulation is at once both an unequal exchange of quantities of actual labor times and an exchange of equivalents.’ (op.cit. 45) The conceptualisation of self (as property owner as opposed to the unmediated existence as undifferentiated part of community – ‘they identify themselves, and behave, as private proprietors’) is organically linked with the emergence of the notion of exchange. I own property, but what is its worth? What is my labour worth? I project it into a commodity and then in the act of exchange with another’s property I realize its worth. To have any worth the ‘unequal magnitudes of actual labor time’ ‘must be conceived by the agents of circulation – by individuals – as an exchange of equivalents’. So realization of my worth (the worth of my labour), my selfhood, consists of two events: I put my labour into a commodity; the worth of my commodity is seen through the gaze of another. Concrete labour is valued as abstract labour; the individual as property owner sees himself/herself through the gaze of an-other with whom he/she contracts to exchange owned commodity and thus to see its worth. The projection/alienation of different concrete labours into one another and the birth of abstract labour together constitute the ego(or what I perceive as socially sanctioned image) of my concrete labour (i.e. abstract labour equivalent) that is born at this ‘mirror stage18’ with the assimilation/subsumption of concrete, different labours into undifferentiated abstract labour. There is another analytical step in the evolution of the working class ego as the labour power itself, not just the products of labour (as in the PPE), becomes a commodity. This leads to the constitution of individuals within the working class. We are not going into the details of this 18

A term popularised by Lacan to indicate the stage at which one recognizes or (mis)recognizes oneself through the gaze of another, which may be the infant’s gaze at his/her reflection in the mirror or reflection in the eyes/face of the mother. 20

process, which I have dealt with in detail elsewhere (Basu, 2012). The process of constitution of the selfhood of the members of the working class is not significantly different from the process of constitution of the ego of the petty producers that is why we are not going into this at length. In fact this similarity in conceptualising by Marx has certain debilitating consequences for the practice of the Communist Parties that I have also discussed. The basic contention was that, as Marx observes in The Critique of the Gotha Programme, the workers look on themselves as proprietors, albeit of a specific commodity that does not allow exploitation of others. But this very realisation constitutes their ego in the same manner as that of the petty producers. We find corroboration of this position in The Critique of the Gotha Programme. Elaborating on the nature of the economy that Marx thought should emerge in the immediate post socialist situation he says: What we have to deal with here is a communist society, not as it has developed on its own foundations, but, on the contrary, just as it emerges from capitalist society… The same amount of labor which he [the laborer] has given to society in one form, he receives back in another. Here, obviously, the same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal values. (Marx 1875, 4) And further on: Hence, equal right here is still in principle -- bourgeois right… this equal right is still constantly stigmatized by a bourgeois limitation. The right of the producers is proportional to the labor they supply; the equality consists in the fact that measurement is made with an equal standard, labor. (Marx 1875, 5) To return to our project, this ego that continually projects and assimilates is the tense area in which the subsequent work of expectation/anticipation of future prices will go one. But this tense field of contradiction between anticipation and realisation within which one can elaborate, albeit partially, the cyclical turns of the capitalist economy is premised on the relation of

21

correspondence/non-correspondence between abstract labour values (or transformed prices19) and market prices. When the relation between values and prices is snapped in the major part of the economy (as happens in the age of financialisation) this tension is displaced onto the field of the hyperreal and the threat of the real. Fictitious commodities This is a term coined by Polyani (2001). This category – fictitious commodities – which can be defined as commodities (i.e. things that have prices) not produced by labour, is useful for our analysis. Marx also deals separately with the question of the price determination of land and money-capital, which belong to this category. We have seen the contradiction and unity at play in the field of commodity fetishism as the social aspect of the individual economic agent evolves through abstraction from concrete to abstract labour that forms the basis of equilibrium price or exchange value. This field of the imaginary20for constitution of economic selfhood recedes in the case of commodities that are not the products of labour. The tense field of commodity fetishism where the propertied individualin-society is constituted does not exist in the case of commodities not produced with labour. There is neither concrete nor abstract labour associated with these commodities and hence the associated imaginary space does not exist. There is only the symbolic space of prices that float without any anchoring signifier (we will shortly elaborate the meaning of this term). Modifying

19

In the PPE, which we are discussing equilibrium prices are determined by (AL) values. But in a capitalist economy, that is one where not only the product of labour but labour power itself has become a commodity, equilibrium price is equal to ‘transformed value’. If the prices equal AL values then the rates of profit would be different so capital would migrate from low profit lines to more profitable lines of production. This is referred to as the transformation problem that has attracted a lot of attention both from marxist as well as non-Marxist scholars. We are not going into this, partly because of its highly technicalmathematical nature and partly because we are concerned primarily with the socio-psychological impact of the changes in forms of capitalism. 20 Lacan visualizes human psyche to be an arena of continuous tension between the force fields of the imaginary, the symbolic and the real. These concepts were not static, as he continued to define and redefine them (or rather to use them) in evolving ways. For simplicity one can use a chronological elaboration that has been used by some commentators. We elaborate the field of the real in the next footnote. The imaginary is the field where the ego is constituted. Ego is the continuously evolving image of self in its relation to others in the world that is constituted and reconstituted through the individual’s ceaseless attempts to achieve selfhood. This journey, in a chronological sense, starts with infant in the mirror stage, which we have briefly touched upon. 22

Baudrillard we could say that reality is simulated by the symbolic21 in the field of fictitious commodities. Prices of fictitious commodities If things are not produced by labour, obviously their equilibrium prices cannot be determined by socially necessary abstract labour time. Talking of the price of financial papers Marx says: Their market-value is determined differently from their nominal value, without any change in the value (even though the expansion may change) of the actual capital. On the one hand, their market-value fluctuates with the amount and reliability of the proceeds to which they afford legal title. If the nominal value of a share of stock, that is, the invested sum originally represented by this share, is ￡100, and the enterprise pays 10% instead of 5%, then its market-value, everything else remaining equal, rises to ￡200, as long as the rate of interest is 5%, for when capitalised at 5%, it now represents a fictitious capital of ￡200. Their value is always merely capitalised income, that is, the income calculated on the basis of a fictitious capital at the prevailing rate of interest. (C III, 319-320) Marx says the same thing about the price of another fictitious capital – land: It follows, then, that the price of land may rise or fall inversely as the interest rate rises or falls if we assume ground-rent to be a constant magnitude. If the ordinary interest rate should fall from5% to 4%, then the annual ground-rent of ￡200 would represent the

21

Baudrillard claims that real is simulated by the symbolic, while we claim that reality is simulated by the symbolic. These are Lacanian terms. ‘Real’ is what cannot be symbolized i.e. conceived within any symbolic space or space within which we communicate like, say, language. ‘Reality’ is what produces the effect of being real or is perceived as real. For example we may say: ‘theoretically no one has any privileged position within a democracy, but in the real world things are different’. This ‘real world’ is not something that we cannot conceive; only it is more complicated than the world defined as democracy within the discourses of social sciences. It is because we can conceive what this world is that we know that some are privileged, contrary to the analytical definition of the democratic world. "Cancelling out the real, the symbolic creates ‘reality,’ reality as that which is named by language and can thus be thought and talked about" (Fink 25) 23

annual realisation from a capital of ￡5,000 instead of ￡4,000. The price of the same piece of land would thus have risen from ￡4,000 to ￡5,000 (CIII, 445-446) Thus there is a circularity in the determination of prices of fictitious commodities with no reference to any signified (which, in the case of commodities produced with labour, is the abstract labour contained). The price of land or a financial paper is the capitalized value of the future returns from that asset. In other words it is the sum of money, which if lent out at the prevailing market rate of interest, would fetch the same returns as that asset. And the stream of returns is what that price, if lent out in the market, would earn as interest. But the more important point (and one that is of prime significance in analysing the fragility of the present stage of capitalism in the advanced countries) is whether at all one can conceive equilibrium prices of such commodities i.e. prices which if attained the whole system would remain steady, either in a stationary state or in a state of growth without fluctuations. In the case of commodities produced with labour we had argued, following Marx, that equilibrium is established when the prices of commodities in a PPE are proportional to their AL values, and to transformed values in a capitalist system. In the case of fictitious commodities Marx denies this possibility and states categorically that there is no concept of equilibrium price: But it is different with the interest on money-capital. Competition does not, in this case, determine the deviations from the rule. There is rather no law of division except that enforced by competition, because, as we shall later see, no such thing as a “natural” rate of interest exists. By the natural rate of interest people merely mean the rate fixed by free competition. There are no “natural” limits for the rate of interest. Whenever competition does not merely determine the deviations and fluctuations, whenever, therefore, the neutralisation of opposing forces puts a stop to any and all determination, the thing to be determined becomes something arbitrary and lawless. (ibid, 233, emphasis added) The average rate of interest prevailing in a certain country – as distinct from the continually fluctuating market rates – cannot be determined by any law. In this sphere there is no such thing as a natural rate of interest in the sense in which economists speak of a natural rate of profit and a natural rate of wages. (ibid, 237)

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When he says that ‘neutralisation of opposing forces puts a stop to any and all determinations’ he is referring to the short run competitive market outcome or what is often referred to as current market prices. By ‘opposing forces’ he is means forces of demand and supply. But if there is a long run equilibrium price then it is demand and supply that will adjust in such a way that this equilibrium price will be established in the long run. This equilibrium price would be determined from outside (by average cost in mainstream economics and abstract labour values in Marxian economics). The determination from outside is what Marx is referring to when he says that in the case of fictitious commodities demand-supply forces ‘puts a stop to any and all determination’. Of course prices are determinate but they are not determined from outside. If, in the long run prices are determined from outside, then opposing forces of demand and supply would adjust so that the long run equilibrium price is established. In our PPE example this occurs through the migration from one profession to another. In that sense i.e. in the case of non-fictitious commodities ‘opposing forces puts[do not put] a stop to any and all determination’. Rather these forces adjust to correspond to the determination from outside. In the case of fictitious commodities there is no such thing as a long run equilibrium price (which must refer to something outside). This is what Marx means when he says ‘In this sphere there is no such thing as a natural rate of interest in the sense in which economists speak of a natural rate of profit and a natural rate of wages’. This ‘outside’ is what we interpret as the referential or reality (as opposed to Baudrillard’s ‘real’). On the face of it the symbolic – the current market price of the asset/security – is all there is. No one is concerned with anything beyond. The financial institutions were willing to lend to realty buyers who would otherwise not be deemed creditworthy because the realty prices were rising at such a rate that the creditor could make a profit by selling off the realty in case of default. These institutions were lending more than even the current worth of the asset because prices were rising and this fuelled anticipation of continuing rise that would make the asset value greater than the loan value in a couple of years. Even those who could not afford the repayment were taking loans to buy realty because home equity (a term we have explained) was positive and they could always refinance their loans maintaining a positive net worth to cover expenses that the government previously used to take care of – health, education. This frenetic no-turningback (because there is nothing behind you) has been vividly captured by Holt (2009, 126) who we have already quoted at length. 25

Not only is there no referential for the determination of ‘natural price’ of asset, there is opacity regarding what constitutes the asset that backs a financial security. We have seen how this opacity is structured, layer upon layer, through the growth of MBSs, CDOs and the SPVs and SIVS. ‘In short, a signifier refers us to another signifier, which in turn refers us to another signifier in an almost endless chain of signification.’(Homer, 42) This, of course, is Lacan referring to the sliding of the signifier over the signified. But the sliding is halted through the ‘anchoring points’ like the central concepts of an analytic, say. For example profits, wages, prices would simply keep sliding and referring to each other in the discourse’s insistent search for meaning if not fixed through the anchoring signifier of abstract labour values. But in the case of the fictitious commodities the sliding is not halted by any anchoring signifier. Rather it is the signifier itself masquerading as the whole of the sign that halts the insistence of meaning. Hyperreality Baudrillard begins his exposition of his concept of hyperreality with the tale of Borges where the cartographers of the Empire draw up a map so detailed that it ends up exactly covering the territory (but where, with the decline of the Empire this map becomes frayed and finally ruined, a few shreds still discernible in the deserts - the metaphysical beauty of this ruined abstraction, bearing witness to an imperial pride and rotting like a carcass, returning to the substance of the soil, rather as an aging double ends up being confused with the real thing) (Baudrillard, 1981, quoted from the Stanford University net version that does not have pagination). He turns the tale around to ‘the territory whose shreds are slowly rotting across the map.’ But even this is not adequate to describe the age of hyperreality. For there never was a territory. It is the map, the simulation model that produces the ‘real’. There is no tension between the real and the representation. I cannot desist from quoting Baudrillard’s lyrical description of this loss: But it is no longer a question of either maps or territory. Something has disappeared: the sovereign difference between them that was the abstraction's charm. For it is the difference which forms the poetry of the map and the charm of the territory, the magic of the concept and the charm of the real. This representational imaginary, which both culminates in and is engulfed by the cartographer's mad project of an ideal coextensivity 26

between the map and the territory, disappears with simulation, whose operation is nuclear and genetic, and no longer specular and discursive. With it goes all of metaphysics. No more mirror of being and appearances, of the real and its concept; no more imaginary coextensivity: rather, genetic miniaturization is the dimension of simulation. The real is produced from miniaturized units, from matrices, memory banks and command models and with these it can be reproduced an indefinite number of times. It no longer has to be rational, since it is no longer measured against some ideal or negative instance. It is nothing more than operational. In fact, since it is no longer enveloped by an imaginary, it is no longer real at all. It is a hyperreal: the product of an irradiating synthesis of combinatory models in a hyperspace without atmosphere. (ibid ) He could be talking of the layers upon layers of securities whose primary asset base is obscured to the point of invisibility. More fundamentally, this base itself has only a purely symbolic value the market prices based on rumours and gossips with no referentiality. But we disagree with Baudrillard on a fundamental issue. Baudrillard’s hyperreality spells the end of the real that is replaced by simulation. Our contention, which follows the Lacanian tradition, is that the real can never be obliterated. In every discursive space, everyday or disciplinary, its force must continue to impact the psyche. Rather it is as if the particular self identity or individuality that the specific imaginary of the capitalist order generates is reduced to irrelevance in the age of financialisation. As we had remarked ‘[s]elf, in the order of PPE (which, as Marx observes, cannot be predominant except under the rule of capital) is produced through the twin events of putting self’s labour into a commodity and seeing the worth of self’s commodity through the gaze of another. Concrete labour is valued as abstract labour; the individual as property owner sees himself/herself through the gaze of an-other with whom he/she contracts to exchange owned commodity and thus to see its worth.’ This seeing or constructing oneself through the reflection in another is typically the work of the Lacanian imaginary. This space of the imaginary loses its significance with the increasing importance of financialisation i.e. the importance of commodities not produced with labour. Selfhood of the capitalist order – owning property – and its particular brand of socialising – abstracting concrete labours are pertinent only to the sphere of circulation of commodities produced with labour. So there is no society as the Iron Lady remarked. The individual loses the vestige of socialising that capitalism had installed.

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But the ‘real’, contrary to what Baudrillard remarked does not fade away like the empire. On the contrary it is the presence of the real that haunts the unanchored symbolic space of prices of realty and derivatives. This haunting manifests in rumours. Since there is no ‘natural price’ of these commodities the propriety/impropriety of current prices cannot be structurally manifested through the tendency towards the natural price. It is only the rumour grist that guides anticipations. This has another interesting connotation. Society that gradually loses its significance in the discourse of economics with the denigration of commodities produced with labour and the increasing importance of fictitious commodities now reinvents itself in these rumours. The increasing significance of rumours has been remarked by others, for example by Fine and Difonze (2011), but the reason has not been elaborated. With the loss of the imaginary reality has become ephemeral and the unsymbolisable ‘real’ has become more threatening, manifesting in rumours. Henceforth the cyclical turns will depend on social confidence and this is where the capitalist state will concentrate, rather than on the tangible fiscal and monetary measures. This is the significance of the bailouts of failing investment funds by the governments. The U.S. government then came out with National Economic Stabilization Act of 2008, which created a corpus of $700 billion to purchase distressed assets, especially mortgage-backed securities. Different governments came out with their own versions of bailout packages, government guarantees and outright nationalization. Concluding remarks The structure of the economy and the nature of subjectivity changed considerably during the age of financialisation. This makes it imperative to explore new analytics to understand the nature of crises and the response of the system. This is what we have attempted in a preliminary way. This does not imply that the real economy was not (and will not henceforth be) affected by the crises originating in the financial sector. GDP growth rates, unemployment rates, homelessness all indicated the severity of the crisis that was paralleled only by The Great Depression. That is why the crisis radiating from the financial sector in 2008 is called The Great Recession. But it is necessary to understand that just as the cause emanated from the social psyche and particular nature of subjectivity in this age, the official response too was motivated by the need for confidence building. Government bailouts, underwriting of buyouts, etc. may all be seen as 28

measures to shore up the failing confidence in the financial system. The government will not take ambitious welfare spending measures or even simply deficit financing on a large scale as it did to bailout the economy from the great depression. This has been the story ever since the dominance of capital was established: the defenders of the system have been more perceptive of the changes in subjectivities than those who wish to change the system. But beyond this I would like to leave the reader with a disturbing thought in this centenary year of the Soviet Revolution: was the concept of the working class itself infected with the individualism born of commodity fetishism and was this one of the principle reasons for the fall of socialism in the Soviet Union? We have already seen Marx’s remarks about the nature of consciousness that the working class inherits at the revolutionary moment of overthrow of the capitalist system. It is a consciousness that “is still constantly stigmatized by a bourgeois limitation”. But these individual workers are unified through a hierarchical higher entity – the party. This generates the possibility of the emergence party hierarchy and bossism. Possibly, this modernist22 conception of the working class was also at the root of the failure to reach a satisfactory conclusion on the peasant question. The material basis of the characterization of working class consciousness by Marx is undeniable. But unless a process of cultural transformation through lived community experience of working people in the course of revolutionary practice is embedded this inherited consciousness of the working class will always remain a possible origin for regression. What we have been trying to argue through our analysis of the age of financialisation is that this potential becomes more pronounced with age of financialisation and hyperreality. The commodity mediated interaction among individuals was socially anchored through abstract labour values. With the snapping of ties with this social anchor, human beings are simply related to prices of fictitious commodities chasing them and being chased by them. The task of the revolutionary trying to forge a sense of working peoples’ community feeling through community 22

Modernist in the sense that this conception is firmly rooted in the notion of the individual. So the ‘working class’ remains just a collection of inindividuals without the mediation of the party. The community ties that can bind the working people into something more than just an addition of individuals, is erased in the definition. Unmediated human ties (community) between individual members of the class have to be imagined and practised for the solidarity that is necessary for sustaining the revolution. The idea that individuals mediated into a collective only through the dictat of party bosses should seize power and then at a later stage will imbibe the community consciousness of ‘from each according to his ability and to each according to his need’.

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construction has become all that more difficult but imperative. It is necessary to imagine new modes of mobilizing that envision transformation of subjectivities perhaps through constructive community endeavours of the working people.

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