Considered in these terms, we can get a relatively clear perspective of the politics motivating the film. It is one more liberal tirade against the greed of the global financial community, alleging their culpability in efforts to profit by defrauding tens of thousands of small investors of their hard earned life savings in order to orchestrate shady, backroom deals that will shift billions of dollars from publicly transparent balance sheets to clandestine offshore accounts for use in dirty deals that will earn chief executives and other major stakeholders billions more. Whether or not Clooney and Foster realize, they are rehashing the same sorts of prejudices against finance capital enshrined in the writings of figures like John Maynard Keynes and other, more faithful leftist critics of global finance like John Hobson. Moreover, they reiterate negative conceptions on finance with a long history in American politics, most clearly represented within the left wing of the contemporary Democratic Party but more emphatically apparent in Trump's appeal to economic populism in the recent Republican Party presidential primaries. In short, it seeks to confirm in fiction what tens of millions of Americans already believe about the high-flying players of Wall Street - they are just a bunch of crooks in Armani suits, stealing the amassed wealth of small savers, in conspiratorial combination with the media, by means of marketing snake oil as safe financial investments to achieve economic prosperity.
As a recurring admission, I have to advance that my capacity as a cinematic critic leaves much to be desired. David Sims of The Atlantic gives what I find to be a well articulated critique of the cinematic shortcomings of "Money Monster" (see Sims, "Money Monster: A Bear of a Wall Street Satire," The Atlantic, May 13, 2016, at: http://www.theatlantic.com/entertainment/archive/2016/05/money-monster-furious-satire-or-frivolous-star-vehicle/482652/). Lacking a substantial expertise in articulating the cinematic points of reference that might inform a more expansive critique of what was both strongly presented and entirely missing from the performances and the screenwriting in "Money Monster," I am content to accept Sims' conclusion that the film missed its mark in attempting to develop a mature and socially conscious satirical hostage thriller, wasting a good cast to rely on pure star power to sell tickets. On the other hand, from my amateurish standpoint as viewer, I did enjoy the film. Far from diminishing the entertainment value of "Money Monster," the performances by Clooney, Roberts, and Jack O'Connell (as Kyle, the disgruntled investor/hostage taker), or Foster's abilities as the film's director, my critique resides at the level of political economy and, as such, argues why a film like "Money Monster" might appeal to certain leftist impulses against finance except that such appeals are dangerous because, truthfully, they do not lead anywhere! Against the implicitly Keynesian or otherwise economically populist political undertones in "Money Monster," we need a thoroughly Marxist perspective to argue that the global financial community is neither a self-evident and selfless driver of economic development nor an unambiguously manipulative, and possibly criminal, repository of evil. I will seek to articulate a multi-part criticism that acknowledges that any Marxist criticism of contemporary financial capital cannot be presented in black and white but must respect the entire spectrum of utilitarian and consequentialist arguments for and against finance.
1. There is nothing innately corrupt or corrupting in finance capital. The critical problems of finance reside in the institutions, at myriad global contexts/sites within which financial processes are situated, the effects of which can generate perverse incentives for financial agents.
The notion that the mere existence of a financial industry creates inherent perverse incentives, ultimately generating reckless profiteering at the expense of savers, borrowers, and/or third parties (e.g. government/taxpayers), exaggerates the problems connected to finance in ways that are not helpful to a broader evaluation of the public interest with respect to financial regulation. In general, the perspective advanced by "Money Monster" and other recent films (most notably "The Big Short," a film based on real accounts of the mortgage market meltdown in 2007) tends to paint financial processes in a light that accentuates their potential to promote corruption. In "Money Monster," the actions of IBIS' CEO exemplify this conception - it turns out that IBIS' massive loss was directly implicated in an attempt to hedge a foreign mining company engaged in a labor dispute while bribing the leaders of the striking labor organization to call off their labor action. Admittedly, this fictionalized account manifests a plausible outcome of financial processes, but we need to consider the institutions that might frame such a set of processes. Reckless investments or outright fraudulent activities by financial sector actors are more conceivable when, across major industrialized economies, interest rates on financial lending remain at relatively low levels for prolonged periods. In such periods, financial sector actors start looking for highly scarce opportunities to reap above average returns, even when these opportunities introduce exceptionally high risks to investors. Alternatively, as the speed of financial activities increase on a global scale with technological innovations, finite opportunities for arbitrage profits arising from rapid hedging of margins on equities, foreign exchange, commodities, and derivatives may open up. The point here, in reality as with the fictionalized IBIS, is to utilize specialized computer algorithms to orchestrate automatic trading of assets when particular price thresholds have been realized. All of this activity is strictly legal in most regulatory contexts.
In this regard, however, the range of activities deemed legally permissible to the financial sector constitutes a political question, decided by governments and central bankers in relation to divergent policy imperatives and basic underlying conceptions of improper behavior shaped both by fundamental cultural understandings (e.g. religious prohibitions of usury, shaping legal conceptions of unfair lending practices) and by the nature of various financial activities or the understanding of such activities exhibited by regulators. Critically, any set of legal institutions governing finance in a particular cultural/national context articulates not only the limitations/restrictions on financial sector actors but also the loopholes to be exploited and expanded in the interest of profit (where an inch given by regulators must, at all costs, be torn into a mile by the financial sector). To the extent that financial actors prove successful at discovering and slipping through loopholes in particular regulatory contexts in order to gain prolific rates of profit on risky investments without physically contributing anything to the broader social wealth through their actions, they invariably become targets for criticism by wide segments of the general population. Insofar as the business of the financial sector as a whole is to reap profits where they had never sown through productive activity (e.g. to extract interest from productive economic agents from activities like manufacturing that actually produce tangible wealth), it stands to reason that every other segment of a population outside of finance may leer at the conspicuous wealth of the bankers and exchange traders with an omnipresent jealous glance. Thus, we are left, in the United States, with the image of the bankers as parasites, preying on small farmers and small businesspeople, lending at extravagant rates of interest only to repossess the tangible assets of the productive classes when they fail to pay the share that finance capital means to cruelly extract from their hard earnings.
Ultimately, such perspectives accentuate the very American ideology of producerism, the notion that only the production of tangible, physical goods and services, destined for consumption by households or by other firms, can garner legitimate claims for a share of social wealth. By this criterion, any profiteering by the financial sector can only be regarded as illegitimate, regardless of its scale in relation to the profits of non-financial entrepreneurs. If, as Americans, we hold admiration for the ingenuity and entrepreneurial zeal of an Andrew Carnegie in steel production, then we similarly disparage the role of the banker J.P. Morgan who eventually bought Carnegie out of the company he started to create U.S. Steel - Morgan never created the massive wealth in steel production of Pittsburgh; he merely usurped its orchestrator to profit fabulously from virtual monopolization of the industry. As such, producerism feeds the perception that there is something innately illegitimate to profit in the financial sector - that somehow, all the wealth concentrating itself on Wall Street must be a product of theft and fraudulent extraction from the true producers of wealth. In this view, by definition, any industry that makes its profit by extracting wealth from productive industries while producing nothing itself must be corrupted and corrupting to an economic system as a whole if only because it spreads the conception that non-productive extractions of wealth constitute legitimate activities.
Ultimately, such perspectives accentuate the very American ideology of producerism, the notion that only the production of tangible, physical goods and services, destined for consumption by households or by other firms, can garner legitimate claims for a share of social wealth. By this criterion, any profiteering by the financial sector can only be regarded as illegitimate, regardless of its scale in relation to the profits of non-financial entrepreneurs. If, as Americans, we hold admiration for the ingenuity and entrepreneurial zeal of an Andrew Carnegie in steel production, then we similarly disparage the role of the banker J.P. Morgan who eventually bought Carnegie out of the company he started to create U.S. Steel - Morgan never created the massive wealth in steel production of Pittsburgh; he merely usurped its orchestrator to profit fabulously from virtual monopolization of the industry. As such, producerism feeds the perception that there is something innately illegitimate to profit in the financial sector - that somehow, all the wealth concentrating itself on Wall Street must be a product of theft and fraudulent extraction from the true producers of wealth. In this view, by definition, any industry that makes its profit by extracting wealth from productive industries while producing nothing itself must be corrupted and corrupting to an economic system as a whole if only because it spreads the conception that non-productive extractions of wealth constitute legitimate activities.
I think that this viewpoint is wholly consonant with the political project underlying "Money Monster," even if it doesn't tell the whole story. Further, I think it is important to identify producerist ideology as the source of criticism of Wall Street in order to argue, definitively, that it does not derive from Marxism (in fact, predating Marxism) and that Marxists might be wiser to distance themselves from such thinking, if only because it dilutes the potential for a stronger critique of finance from a legitimately Marxist perspective.
2. The perversion of financial incentives becomes socially relevant if and only if financial processes generate important effects on non-financial economic, political, and/or cultural processes, undermining democratic institutions and/or the capacity of substantial populations to achieve meaningful, expansive, and inclusively rewarding economic development. If we grant the notion that the financial sector undertakes certain activities that are legally suspect within particular regulatory contexts and/or morally questionable in relation to certain systems of ethics, then we must simultaneously question the extent to which such activities constitute a real social problem. That is to say, when should we consider improper or unconscionably immoral or reckless behavior by bankers, exchange traders, and fund managers a problem against which the state should be responsible to intervene to hold guilty parties accountable and to prevent a broader contagion of negative consequences? There are a number of relevant circumstances that I clearly have in mind in this regard. In reference to actual financial activities, Ponzi schemes and pyramid investments, orchestrated with the promise of high returns for investors for which no profit sources in real economic activity actually exist, represent clear cases of improper behavior by financial sectors agents. If such schemes tend to be legally prohibited in most regulatory environments and such prohibitions should be adequate to signal financial sector agents that these sorts of schemes generate important negative economic effects that the state means to avoid in the interest of the general welfare, then it should be reasonably clear that the motivation for prohibiting such schemes resides in the potential for broad based spillovers across an economy, threatening to liquidate stores of accumulated wealth for defrauded investors and simultaneously undermine confidence in the financial sector and the economy as a whole. As such, the point in preventing financial sector improprieties is to defend the capacity of the financial sector to do what it does well, performing the roles a market economy needs it to perform: redistributing capital from individuals who do not need it to others who do and insulating individuals against catastrophic losses to the value of their tangible assets by means of insurance. Even the limited performance of these roles can obviously be problematic, however. When particular, specialized financial sector agents cross intra-sectoral boundaries to generate complex, specialized investment instruments that attract, by means of high prospective rates of return, large quantities of capital and, thus, increase the sensitivity of the larger economy to changes in the activities that have attracted the investments, a potential exists for economic impacts that transcend the boundaries of finance.
In this regard, I have in mind the transformation of secondary mortgage markets from the late 1970s to the mid 2000s through the creation of specialized financial instruments (e.g. collateralized debt obligations (CDOs)) that redistributed risks of a rapid decline in housing values across of much wider range of the financial sector. Coupled with the intensified role of variable rate mortgage lending to individuals at high risk for default, the collapse of transformed secondary mortgage markets, thus, led to a financial perfect storm, destroying massive stores of wealth in pension funds, hedge funds, and 401K plans and leading to the insolvency of investment banks like Bear Stearns and insurance companies like AIG. Critically, the sorts of complex linkages between diverse financial sector firms implicated in the transformation of secondary mortgage markets leading up to the 2007 crisis would not have likely happened in the pre-1999 regulatory environment governed in the U.S. by the Glass-Steagall Act of 1933, which prohibited, among other things, ownership of significant quantities of securities by commercial banks as a principal source of corporate income. This post is not the proper place to attempt a disaggregation of the mortgage market meltdown and its complex sources, but it should stand to reason that any set of linkages between commercial banking and the issuance, rating, and marketing of securities is apt to create conditions through which any financial panic is likely to spread like a contagion throughout a broader economy, far transcending the boundaries of the financial community.
In a more general sense, the presence of significant accumulations of capital, capable of investment to yield rates of return in productive economic activities, may and often does facilitate the flow of capital into political/governmental/regulatory processes with the intention of shaping the creation or enforcement of rules and regulations, among other things, to enhance the profitability of future investments. The financial sector cannot be emphasized here to the exclusion of political expenditures by productive firms, across a range of industries with a stake in the performance of governmental activities/regulation. Certainly, investments of corporate funds from the petroleum and natural gas industries in the U.S. play an important role in shaping and constraining legislative and regulatory efforts, especially at the federal level, to address the effects of hydrocarbon utilization on climate change. On the other hand, the character of the financial sector in the U.S., as a subject to regulation in the public interest, ensures that some subset of its available capital resources will be expended in efforts to impact federal and state regulation of financial activities. At the very least, the overthrow of the Glass-Steagall regime of financial regulation in 1999 (i.e. the Gramm-Leach-Bliley Act) was certainly undertaken at the behest of numerous financial sector firms, both in commercial banking and in investment banking/insurance/brokerage, in the interest of enabling firms on both sides of the Glass-Steagall firewall to merge and begin integrating operations to achieve economies of scale and scope in commercial banking and exchange/securities market activities.
With all of these considerations in mind, it seems obvious that circumstances exist that should merit regulation of financial sector activities that might have the potential to inflict widespread pernicious effects on general economic performance and promote a degradation of democratic and bureaucratic oversight of financial sector firms. On the other hand, a primary criterion for regulatory necessity must reside in the capacity for certain activities and the proliferation of certain products (e.g. CDOs) to seriously undermine the solvency of important financial sector firms and, through linkages, the health of non-financial sector firms and the broader economy, including millions of small investors. Further, the potential of financial and non-financial sector firms to impact democratic electoral and legislative processes and the bureaucratic regulatory process has to be addressed by qualifying the capacity to utilize capital as a means to exercise corporate free speech to corrupt democratic governance.
These qualifications have been, in recent years, critical arguments in financial sector regulation and electoral financing reform in the U.S. advanced overwhelmingly by the Democratic Party. To a significant degree, the Democrats have come to a more constrained imagery of the capacity for government to shape the operation of the U.S. financial sector, even as liberal outliers (e.g. Elizabeth Warren of Massachusetts, my senior Senator) continue to call for a reinstatement of the Glass-Steagall firewall between commercial and investment banks. Over the remainder of this document, I seek to argue why a more expansive vision for the role of government in regulating the financial sector is both unnecessary and counterproductive relative to the broader evolution of financial sector activities and diversification of actors/firms. Critically, it is my view that we need to expand the range of alternatives within the financial sector to address critical needs for the development and growth of particular forms of non-financial, productive activities, particularly at the margins of capitalism proper. Such an imagery of financial sector regulation ultimately demands a more micro-focused, surgical role for banking and exchange/securities market regulators.
3. Marxism's gripe with finance does not concern the mere accumulation of wealth in the global financial community; it implicates the relationships existing between financial investment, on the one hand, and productive capitalist and non-capitalist economic processes, on the other. The first section of this critique introduced the quintessentially American ideology of producerism, implying a politics privileging industries creating tangible, physical products against industries that merely facilitate certain activities. The former manifest a legitimate claim to the mass of physical social wealth generated by industry, while the latter exercise a parasitic role, extracting social wealth without actually contributing to its production. In a sense, a Marxian view of finance, as a non-productive sector, accepts a producerist conception provisionally. However, the theory that I mean to articulate here critically divests of the legitimation of claims by financial and non-financial sector actors.
Producerism has problems with interest and capital gains from fluctuations of pricing on shares of equity and debt instruments, as compensatory payments to financial sector agents, because, ultimately, such payments to the financial sector must emanate from productive activities and, as such, constitute extractions that might otherwise compensate agents engaged in real productive activity. The Marxian counterargument resituates all productive activity, all producers, and all non-productive facilitators of productive activity in relation to surplus labor, the residual produced mass of useful goods and services generated over and above the social reproductive needs of the producers, subject to consideration at diverse interconnected and simultaneously conditioned/conditioning scales of economic activity (e.g. the firm, the household, the regional macroeconomy, inter-regionally linked national economies, etc.). In the 1980s, the two theorists who most influenced my understanding of Marxian economic theory, Steve Resnick and Rick Wolff, developed the terminologies of fundamental and subsumed class processes to describe divergent economic relationships to surplus labor (see S.A. Resnick and R.D. Wolff (1987), Knowledge and Class: A Marxian Critique of Political Economy, Chicago: University of Chicago Press). The former set of processes describes the production and appropriation of surplus labor. The latter set describes the distribution and receiving of surplus labor. Considered in these terms, Marxian economic theory articulates class structures with four distinct class positions: producer, appropriator, distributor, and recipient of surplus labor. Moreover, we can acknowledge that individuals may both simultaneously occupy multiple class positions in a particular class structure and simultaneously hold diverse class positions in multiple, divergent class structures.
When we break down economic activity in these terms, we can conclude that financial sector processes of borrowing, lending, insuring, and underwriting securities occupy particular relationships to the production of useful goods and services and that these relationships both reflect and mediate certain forms of class conflict over the appropriation and distribution of surplus labor, between producers and appropriators, between distributors and recipients, and among competing recipients. Marxian theory manifestly acknowledges that there is a fundamental class conflict, within the specific boundaries of capitalist class structures, between the producers of surplus labor (i.e. the "working class") and its appropriators (i.e. capitalist entrepreneurs, corporate boards of directors, etc.). This constitutes the classical Marxist imagery of class conflict between workers and capitalists over the size of the surplus relative to the level of necessary compensation to the producers. It doesn't directly implicate the financial sector. When Verizon landline workers recently went on strike against their company, they were not simultaneously engaged in a direct struggle against Verizon's financiers, the commercial banks that had lent Verizon capital directly, the investment banks that had underwritten securities for Verizon, and the investors, both individually and through consolidated funds, who maintained a debt or equity/ownership stake in Verizon. However, the particular connections articulated by a smoothly functioning financial system in which Verizon regularly borrows capital, services debt, and issues securities, including widely distributed equity shares, implies that, in various ways, the strike by Verizon's landline workers extended far beyond the limited boundaries drawn by the production of labor services and the appropriation of surplus values generated by such labor services in the name of Verizon shareholders by Verizon's board.
Financial relationships are emphatically subsumed within larger productive capitalist class structures, and the recipients of interest payments and other forms of compensation for financial services are secondhand recipients of surplus labor, in a value form, extracted in the first place from its producers. The fact that there is a secondhand distribution of values in this circumstance, likewise, implies that there must be a (vertical) conflicting relationship between the distributors of surplus labor and its recipients. In the case of Verizon, the board of directors and its executive representatives must be seeking to minimize the scale of subsumed payments to each particular recipient, if for no other reason than to provide slack in the event that unforeseen expenses may befall the corporation. At the same time, there must be a (horizontal) conflicting relationship between all of the competing recipients of surplus, with each subsumed class facilitator of productive operations seeking to emphasize its relative importance to the health of the class structure as a whole. Again, in the case of Verizon, such subsumed forms of class conflict manifest themselves as competing priorities in the servicing of financial obligations to holders of corporate debt, against the prerogatives of equity shareholders to receive dividends, and against a range of other non-financial stakeholders in the overall health of the corporation.
If we approach finance through this Marxian class analytic framework, then we cannot ignore the basic premise that financial sector activities provide something useful and important to productive firms in primarily market-oriented economies, even if, strictly speaking, finance is not essential to the production of corn by farmers, to the manufacture of automobiles by a car manufacturer, or the production of cellular communications services by a cellular phone carrier. In its most simplified sense, the financial sector accumulates masses of savings from divergent sources in order to invest those savings as capital. In so doing, the sector operates to redistribute savings across a macroeconomy in order to smooth out disproportionalities in the supply of savings and the demand for capital across space and time. Irrespective of the sorts of investments undertaken by financial sector agents or the compensation rates extracted by such agents, this is a really important non-productive economic activity for market economies. It is conceivable that we could come up with alternative ways to redistribute savings across an economy, say, by taxing personal savings away from individuals and allowing the government to distribute the tax revenues to investors as subsidies at zero rates of interest. Maybe such a mechanism would work just as well as a free market operating with financial sector firms dedicated, in one way, shape, or form, to achieving the most profitable distribution of available capital. On the other hand, even as a Marxist, I am still not ready to demonize free market economies with financial intermediaries for performing a necessary function, with regular attendant cyclical fluctuations and crises rooted in the structural mechanics of market economies.
4. Serious Marxian criticisms of contemporary global finance, from a standpoint favoring communist development, need to recognize that in discussing both finance capital and communism we are not addressing unitary wholes but piece-wise networks. In earlier times, Marxists and other critics of finance capital have viewed the financial sector as a singularity with the finance capitalist as a representative of capital, in its purest, latent sense, disconnected from the productive labor that creates the wealth that it attracts. Relative to the larger theoretic structure of, say, Marx's Capital, such perspectives on finance capital might be forgiven as abstract components in a presentation intended to convincingly simplify a set of class relationships against productive industry. Likewise, past Western liberal (and Marxist) criticisms of communism mimicked the crude macroeconomic singularities conceptualized by effectively authoritarian, Marxian-inspired state bureaucratic planners, who had themselves reduced communism, as a single mode of surplus labor appropriation, into a problem of centralized collective ownership of the means of production by the state through the auspices of a vanguard revolutionary party and collective planning of social consumption needs by an omniscient state bureaucratic apparatus. In the end, both these imageries reduced highly complex problems on the articulation of economic systems into a struggle between two monolithic camps informed by competing theoretic foundations and, in the real geopolitical world of the Cold War, represented by the liberal capitalist West and the Soviet system of "already existing" socialism. This section means to problematize both sets of singularities to argue that, if we want to come to terms with the role of finance capital in contemporary multiply-scaled, market-oriented economies in relation to communism, both as a possibility and as an already existing reality in a wide array of places, especially in the "liberal capitalist" West, then we need to break up our existing theorizations about competing and mutually exclusive systems.
To definitively posit Marxism's larger argument against the producerist critique of finance, there is no more or less legitimacy to the subsumed extraction of revenues by the financial sector from productive firms (or from households seeking consumer credit) than there is in the fundamental extraction of surplus labor from its producers by its appropriators (i.e. the fundamental class process) or than there is in any other form of subsumed extraction (e.g. taxation by the state) as compensation for the facilitation of certain conditions of existence for the production of surplus labor by productive capitalist (or non-capitalist) firms. For Marxism, the larger problem remains the extraction of surplus labor from the labor of its producers by appropriators who individually or collectively are not identical to the former. Marxian theory regards such situations as cases of exploitation, defined by the fundamental class process of a given class structure. Argued in these terms, the extraction of interest or other compensatory payments to financial sector agents from productive firms is most critically problematic to the extent that the class structure of the productive firm is exploitative and provision of financial services succeeds in facilitating conditions through which the exploitation can be repeated over time. On the other hand, it is equally possible and probable that at least some financial sector agents provide capital to firms that operate without exploitation and, most critically, firms with collective appropriation of surplus labor by its producers, defined within Marxian theory as communist enterprises.
To the extent that Marxism's principal concern is to promote the development of communism, in market-oriented economies or anywhere else, our critical question with respect to finance concerns the capacity of financial processes to support or hinder communist development. Emphatically, how can collective, communist entrepreneurs in a market-oriented economy negotiate the relevant hurdles in obtaining financing for entrepreneurial projects from financial sector firms? Insofar as the financial sector is fragmented rather than monolithic, are there certain fragmentary components within the financial sector that might be more amenable to communist entrepreneurial projects? To the extent that communist enterprises encounter irremediable impediments to financing through mainstream banking or non-bank financial intermediaries, how might networks of communist entrepreneurs replicate financial mechanisms to successfully realize financial conditions of existence and, thus, reproduce communist process of collective surplus appropriation over time in market-oriented contexts?
The first step in problematizing these imageries is to concede that when we think about finance capital, communism, and myriad other apparently broad social institutions (e.g. the state), we are talking not about ontologically solid fields that encompass substantial swaths of space and time but about networks that piece together processes over discrete, distanciated spaces and disparate, non-sequential moments in time, the discrete individual agents who set such processes into motion and are subsequently compelled in act in response to them, and the effective pathways, through which we can theorize the particular ways in which a given set of processes condition other processes. Imagining institutions in this way mandates that we continuously keep in mind that all institutions, no matter how large, influential, or imposing, are grounded in really tiny, microscopic building blocks and articulated by agents who do the work that it takes to assemble the institutions as networks and prevent them from falling apart. This follows the logic of networks advanced by the actor network theorists (e.g. Bruno Latour, John Law), in spirit if not in all its particulars.
Thus, at the most basic level in finance, there are individual agents, interacting with other agents to organize multidirectional flows of capital, sometimes to facilitate a productive investment, sometimes to insure productive investments or fictitious investment instruments, sometimes just to facilitate conditions of existence internal to the firm (e.g. human resource management/recruiting and development). Without excessively probing the definition of capital per se, finance necessarily requires the accumulation of a set of accessible resources that can either be used to produce new/expanded value, for non-productive consumption, or to lie fallow, in part, awaiting some point in the future at which the resources may be used to exercise a claim on new value. Finance involves various mechanisms of redistribution for these resources. It must also include the transmission of signals in multiple directions, enabling capital accumulating individuals (savers) to comprehend the costs and benefits of capital accumulation and lending and enabling productive (capitalist) and non-productive users of capital to comprehend the potential benefits and costs of investing. Traditionally, economic theory has interpreted these signals in reference to sets of interest rates on borrowing and lending, but contemporary financial processes have become more complicated than this to incorporate mechanisms to address/insulate against uncertainties in the investment of capital.
Moreover, they need to more broadly incorporate an understanding that money, as the principal and most liquid form of capital, attains a value that arises from social consensus, beyond any definitive connection to the production costs or utilitarian valuation of a particular commodity (e.g. gold). The mechanisms that confer a definitive value on money in exchange with goods and services operate on and through the actions of individuals across entire macroeconomic systems. They ultimately constitute continuous reiterations of multi-party offer/validation processes, where one party defines the value of money in relation to a single good or service and the value is either validated or rejected by other parties. The repetitive and (spatially/temporally) dispersed nature of offer/validation and the capacity to transpose valuations for one good or service against others in monetary terms, with divergent levels of consistency and logical/contextual variation, solidifies the value of money in exchange, at least for given moments/contexts. That is to say, money and its valuation operates through networks of agents conducting exchange and receiving signals regarding the value of money in other exchanges, in other places or other times. Financial agents, in this respect, carry the process a step further, by transposing the value of a certain quantity of money today against some future valuation, in turn accounting for the inconvenience of holding or lending money rather than consuming goods and services that it could purchase today. Again, the validation of such a process of assigning rates of interest on money capital is a networked multi-party act, involving not only lenders, borrowers, and intermediary agents, but also overarching organizational entities like central banks, legislatures, bank regulators, and agents distributing information on interest rates and transaction costs in financial processes.
Borrowing/assembling and lending money capital, the central circulatory processes of a banking system, constitutes a initial phase in the articulation of a financial system as a series of interconnected networks that, in turn, connect small/individual and large/institutional investors, governmental agents (executives/regulators, legislators, jurists), and wide ranges of productive and non-productive borrowers. Insurance adds a second dimension to the process, where financial sector agents pool money capital as premiums paid by financing agents to insulate against risks to the future monetary value of physical assets or fictitious resources (e.g. debt or equity-based financial instruments), where the risks to such assets can be reliably assessed and underwritten for some period.
At the cross section of insurance and bank lending, securitization involves, in part, the simple pooling of loanable money capital (i.e. debt instruments/bonds) to fund investments in new capital, new durable consumer goods, or new government spending and, in part, the redistribution of proprietary claims to productive and/or non-productive assets (i.e. equities/stock). The processes through which funds are assembled for investment in the case of securities markets and for insurance are not palpably different from the banking process in terms of the formation of networks, even to the extent that the scale of lending/investing pools for securities markets, in terms of geographic distribution and sheer numbers of financiers, may be much larger and more conspicuous in relation to coverage by the agents of mass media processes. That is to say, the performance of equity shares for particular capitalist corporations enjoys substantial attention from cable business news networks, even as the latter go to great efforts to insist that they are not providing investment advice to viewers. Notwithstanding the levels of market capitalization and the substantial media publicity accorded securities market performances of Exxon-Mobile common stock or seven-year US Treasury bonds, the lending processes for both mimics the lending process for a thirty-year fixed rate mortgage to prospective home owners by a commercial bank, credit union, or specialty mortgage lender. Conversely, alternative components of securities markets mimic the insurance process, insofar as they function to insulate the future monetary value of real/physical or fictitious assets against palpable risks. Futures and forward contracts constitute the most basic forms of securitized insurance, a category collectively designated under the label of financial derivatives. Here, again, the differences between insurance, per se, and derivative markets concern, in part, differences in specific public regulatory regimes (e.g. regulators in the US, in particular, have faced pointed difficulties in developing an adequate system of regulation relative to derivative markets) and differences in the scale of investment pools.
At this point, from the perspective of Marxian theory, the key problem to be sorted out concerns the relationships between particular investment pools and particular investments. What sorts of capital investments directly perpetuate exploitative class processes, especially capitalism? Which support subsumed class processes that contribute to the perpetuation of exploitative processes? Which directly support non-exploitative class processes, especially communism, or otherwise support subsumed class processes that might be expected to support communisms? Basic epistemological problems proliferate in asking such questions, to the extent that Marxian definitions of class do not typically inhabit conventional financial sector analyses, either with respect to banking, insurance, or securities markets. In a more fundamental sense, this problem brings us back to the initial Western liberal ambivalence toward communism, as an analytical category appropriated, actively or passively, by the "already-existing" socialist economies of the Twentieth century Soviet bloc. As such, it is critical that we consider the meaning of communism and its practical existence within Western "liberal capitalist" economies from the same sort of network perspective.
Borrowing/assembling and lending money capital, the central circulatory processes of a banking system, constitutes a initial phase in the articulation of a financial system as a series of interconnected networks that, in turn, connect small/individual and large/institutional investors, governmental agents (executives/regulators, legislators, jurists), and wide ranges of productive and non-productive borrowers. Insurance adds a second dimension to the process, where financial sector agents pool money capital as premiums paid by financing agents to insulate against risks to the future monetary value of physical assets or fictitious resources (e.g. debt or equity-based financial instruments), where the risks to such assets can be reliably assessed and underwritten for some period.
At the cross section of insurance and bank lending, securitization involves, in part, the simple pooling of loanable money capital (i.e. debt instruments/bonds) to fund investments in new capital, new durable consumer goods, or new government spending and, in part, the redistribution of proprietary claims to productive and/or non-productive assets (i.e. equities/stock). The processes through which funds are assembled for investment in the case of securities markets and for insurance are not palpably different from the banking process in terms of the formation of networks, even to the extent that the scale of lending/investing pools for securities markets, in terms of geographic distribution and sheer numbers of financiers, may be much larger and more conspicuous in relation to coverage by the agents of mass media processes. That is to say, the performance of equity shares for particular capitalist corporations enjoys substantial attention from cable business news networks, even as the latter go to great efforts to insist that they are not providing investment advice to viewers. Notwithstanding the levels of market capitalization and the substantial media publicity accorded securities market performances of Exxon-Mobile common stock or seven-year US Treasury bonds, the lending processes for both mimics the lending process for a thirty-year fixed rate mortgage to prospective home owners by a commercial bank, credit union, or specialty mortgage lender. Conversely, alternative components of securities markets mimic the insurance process, insofar as they function to insulate the future monetary value of real/physical or fictitious assets against palpable risks. Futures and forward contracts constitute the most basic forms of securitized insurance, a category collectively designated under the label of financial derivatives. Here, again, the differences between insurance, per se, and derivative markets concern, in part, differences in specific public regulatory regimes (e.g. regulators in the US, in particular, have faced pointed difficulties in developing an adequate system of regulation relative to derivative markets) and differences in the scale of investment pools.
At this point, from the perspective of Marxian theory, the key problem to be sorted out concerns the relationships between particular investment pools and particular investments. What sorts of capital investments directly perpetuate exploitative class processes, especially capitalism? Which support subsumed class processes that contribute to the perpetuation of exploitative processes? Which directly support non-exploitative class processes, especially communism, or otherwise support subsumed class processes that might be expected to support communisms? Basic epistemological problems proliferate in asking such questions, to the extent that Marxian definitions of class do not typically inhabit conventional financial sector analyses, either with respect to banking, insurance, or securities markets. In a more fundamental sense, this problem brings us back to the initial Western liberal ambivalence toward communism, as an analytical category appropriated, actively or passively, by the "already-existing" socialist economies of the Twentieth century Soviet bloc. As such, it is critical that we consider the meaning of communism and its practical existence within Western "liberal capitalist" economies from the same sort of network perspective.
Emphatically, approaching from the class analytic perspective advanced by Resnick and Wolff, I fundamentally reject the idea that an entire macroeconomic agglomeration (e.g. a national economy) can be labeled communist, or, for that matter, capitalist, even as a default generalization. Class structures constitute spatio-temporal networks, in the same manner as financial structures (lenders/financiers-financial firns-borrowers/investors). They are composed of the individual sites at which class processes take place, at specific discrete times and in discrete places. The site at which capitalist producers generate surplus labor embodied in tangible, marketable products (e.g. glasswares, fast food, luxury automobiles) is contained by such a capitalist class network, as is the site at which the capitalist appropriators involved in the same class structure appropriate this surplus labor in a monetary form for distribution. Likewise, the sites at which bankers provide short term financing for the class structure and, in turn, receive a share of the surplus labor as compensation in the form of interest on debt are included in the network. Conversely, myriad sites generally unconnected to the class structure may exist outside of the network, and certain spaces contained by the network at specific temporal moments are excluded at all other moments. The point here is that class, as a set of economic processes, does not overflow its spatio-temporal boundaries - it does not describe an entire economy, much less an entire society, to say nothing of a political system.
Communism, as a class structure, involves an identity between the collective producers of surplus labor and its collective appropriators, implying the absence of exploitation in the appropriation process. This doesn't tell us anything about either the actual production process (i.e. the types of goods or services being produced, the technologies employed, the relative efficiency of production factors, etc.) or the process through which the outputs are distributed to their consumers (e.g. market exchange, distribution en masse by right, distribution within a proprietary network by paid privilege). Beyond this, it tells us nothing about the particular conditions of existence facilitating the repetition of communist class processes over time or the subsumed class distributions from surplus labor necessary to effect each condition of existence in a satisfactory form.
To posit an example, what if we have a restaurant that functions with a communist fundamental class process? Its producers would undertake all of the necessary tasks to produce dishes of food to be served to patrons, perform necessary maintenance of the kitchen, dining room, pantry/refrigerator spaces, and all associated equipment, and perform all other tasks essential to the production and serving of food. If they operate on a strictly for-profit market basis, then they accept a monetary value in exchange for the goods and services they provide to patrons. As a communist restaurant, the producers would, thereafter, appropriate the total value they receive from patrons, pay their wages and account for the replacement costs for inputs, including depreciation of equipment, and, then, account for the residual as a monetary equivalent of surplus labor. This residual would remain to pay all ancillary expenses necessary for the restaurant's operation, including taxes, savings for future capital investment, and repayment of accumulated debts. In this manner, if the restaurant maintains a credit line with a local bank, it may, from time to time, draw on its line of credit to meet short term costs and pay back these expenses with interest for the privilege of having a reliable source for commercial lending. Such expenses represent a deduction from the mass of monetized surplus labor appropriated by its producers. As such, it constitutes a linkage between the financial sector and a single communist entity, producing goods and services for a limited regional market.
If the above characterization is at least partially accurate, then linkages between mainstream financial sector agents and market-oriented communist firms likely proliferate in Western liberal free market economies, at least in large urban regional markets where the space exists for extended partnerships that merit the label "communist." Conversely, other types of communist entities might be more or less likely to participate in mainstream financial networks. To the extent that we acknowledge household production as a site for class processes, we need to consider the particular ways in which communist households surely interact with mainstream banking agents for, among other things, home mortgages and short term consumer financing of automotive, home repair and improvement projects, and small ticket household appliances. Similarly, such households might be inclined to undertake retirement savings and other long term savings/investment of incomes through brokerage and the purchase of marketable securities. We might theorize other such financial sector linkages involving networks of communist households, say, incorporating families joined together in a religious congregation or a parent-teacher association in order to secure the particular conditions of existence arising from the larger aggregate (e.g. insuring property associated with an athletic booster club).
Finally, it isn't outside the realm of reason that broader organizational communist entities could form linkages with a complex ensemble of financial sector agents. I most clearly have in mind entities like the consolidated Mondragon cooperatives of the Spanish Basque region or the looser networks of workers' cooperatives engaged in manufacturing under flexible specialization in the Emilia-Romagna region of Italy. It isn't outside of the realm of reason that an assemblage of communist organizations might seek to secure financing of large scale expenditures, particularly in durable capital equipment or infrastructure, by means of securitization through bond markets. The critical steps in this argument concern the willingness of private investors to engage in the long term debt financing of organizations characterized by collective appropriation of residual earnings by employees and, perhaps, collective ownership of proprietary capital by employees and, additionally, the willingness of communist organizations to engage in securities markets on, among other things, ethical grounds. Here, again, we are approaching organizations founded, potentially, on a deeper antagonism toward capital and what it represents relative to the labor process. On the other hand, I would continue to insist that the relationship between productive capital, either in a standard capitalist firm or a communist entity, and the financial sector is complex and not entirely amenable to generalizations that ignore the ways in which productive and non-productive sectors interact to mutually secure conditions of existence.
Going further, it would impoverish our larger analysis if we did not simultaneously acknowledge the capacity of communist entities and broader communist networks to exploit alternative financial intermediaries, including sources of their own creation extending beyond the limitations of retained quantities of surplus labor/investment fund. Mondragon's bank, Laboral Kutza, is simply the most conspicuous example of a communist network inventing it's own alternative financial sector to do what mainstream financial agents do for productive firms. It isn't far fetched to imagine that the basic debt financing relationship could arise between households jointly involved in any broader cooperative project characterized, on at least certain microfoundational levels, by collective appropriation of surplus labor by its collective producers. This would be true of any simple or extended partnership in which individual partners lend a share of their personal wealth holdings back to their firm in exchange for interest payments. It is similarly not out of the realm of reason to contemplate borrowing and lending between individuals in an extended family within which multiple households constitute communist class structures. Again, the larger issue implicated here concerns financial processes as basic conditions of existence to the perpetuation of class processes, communist, capitalist, or otherwise, where the mainstream financial sector by no means exists as the sole mechanism for borrowing, lending, or even insurance.
Concluding, this section has sought to resituate the financial sector and financial processes, in general, against communist class structures, with particular interest in the sorts of communist class structures most evident in Western liberal free market economies. Adopting a network approach, connections of this sort arise, principally, as communist entities seek to secure financial conditions of existence. However, insofar as financial processes manifest their own structural conditions of existence, we must acknowledge the particular ways in which borrowing, lending, investments, and insurance mutually secure conditions of existence for both productive class structures and non-productive financial structures. Again, it is entirely possible that the conditions of existence secured by private financial sector entities could be secured through taxation and redistribution of incomes toward productive entities. On the other hand, I want to reassert that something is invariably lost when private sector agents with accumulated experience/learning-by-doing are replaced by public bureaucracies that may lack the capacity to determine when particular investments are viable and/or sustainable in particular markets over time. In this regard, I would argue that the integration of productive communist entities/networks and non-productive financial entities/networks is both inevitable and salutary.
5. The confrontation between working people (as small investors) and the global financial community needs to be critically appraised in relation to the existence (or breakdown) of public institutions oriented toward facilitating the distribution of wealth, the presence and accessibility of productive non-capitalist alternatives in the creation of wealth, cultural processes generating broader social expectations on wealth and consumption, and the capacity of democratic institutions to undertake the active policing of sanctioned behavior by financial agents.
To the extent that the financial sector performs largely non-productive/non-value producing labor, firms engaged in the financial sector do not encounter fundamental class conflict (i.e. conflict between surplus labor producers and non-identical/exploitative surplus labor appropriators). Financial firms do not earn revenues through exploitation of labor power; they receive surplus labor, as a component of their total revenues, through subsumed class distributions from productive firms either as interest on debt or as returns/dividends to equity. Conversely, assets generating non-class revenues, emanating from, among other things, interest on consumer debt, make up other important components in the asset portfolios of financial firms. Evaluated in these terms, the relationship between working people, as surplus labor producers in either exploitative or non-exploitative contexts, and financial sector agents reflects the second hand impacts of fundamental class conflict - capitalist producers earning relatively high labor incomes may not manifest as much need to rely on financial lending to supplement labor incomes in fueling their consumption practices. Certain asset classes of durable consumption goods, like housing stock or automobiles, conversely, tend to necessitate some interaction with the financial sector by working people as borrowers in order to displace the temporal limitations on accumulation of wealth from labor incomes, one of the basic theoretic rationales for the existence of the financial sector per se. As relevant as these concerns on borrowing are to a broader consideration of the ways in which working people interact with the financial sector, my deeper concern in this section reflects the opposite end of the financial relationship, involving working people as savers and lenders, fueling accumulation of loanable or otherwise investable funds as liabilities to financial sector firms.
Consideration of saving and lending by surplus labor producers is not a common theme within Marxian theory. Marx's own predisposition toward labor market processes in Capital carried an assumption that labor incomes would, on average, be reduced to a culturally contextual subsistence level, implying that, on average, capitalist producers would be incapable of saving substantial quantities of income. A role for finance can readily be constructed within Marx's basic understanding of subsistence and, to a significant degree, such an expansion in the conceptualization of the value of labor power in particular economic contexts would critically expand the descriptive power of Marxian theory. For my purposes, I am going to proceed from an assumption that savings by capitalist and non-capitalist surplus labor producers is, ordinarily, possible and that, at least in certain contexts, it is a regular and necessary feature in the operation of solvent financial systems. Emphatically, in the industrial/post-industrial Western economies, there is at least some expectation that working people, over the course of their careers, will retain a share of incomes destined for consumption after they are no longer capable of receiving a stream of labor incomes (i.e. retirement). Larger questions, however, emerge when we begin to consider the mix of public and private, social and individual media through which working people undertake savings, how such mixes of savings/investment funds accumulate and get redistributed with divergent levels of risk and uncertainty, and how overall levels of savings are impacted by a range of class and non-class processes.
To the extent that the financial sector performs largely non-productive/non-value producing labor, firms engaged in the financial sector do not encounter fundamental class conflict (i.e. conflict between surplus labor producers and non-identical/exploitative surplus labor appropriators). Financial firms do not earn revenues through exploitation of labor power; they receive surplus labor, as a component of their total revenues, through subsumed class distributions from productive firms either as interest on debt or as returns/dividends to equity. Conversely, assets generating non-class revenues, emanating from, among other things, interest on consumer debt, make up other important components in the asset portfolios of financial firms. Evaluated in these terms, the relationship between working people, as surplus labor producers in either exploitative or non-exploitative contexts, and financial sector agents reflects the second hand impacts of fundamental class conflict - capitalist producers earning relatively high labor incomes may not manifest as much need to rely on financial lending to supplement labor incomes in fueling their consumption practices. Certain asset classes of durable consumption goods, like housing stock or automobiles, conversely, tend to necessitate some interaction with the financial sector by working people as borrowers in order to displace the temporal limitations on accumulation of wealth from labor incomes, one of the basic theoretic rationales for the existence of the financial sector per se. As relevant as these concerns on borrowing are to a broader consideration of the ways in which working people interact with the financial sector, my deeper concern in this section reflects the opposite end of the financial relationship, involving working people as savers and lenders, fueling accumulation of loanable or otherwise investable funds as liabilities to financial sector firms.
Consideration of saving and lending by surplus labor producers is not a common theme within Marxian theory. Marx's own predisposition toward labor market processes in Capital carried an assumption that labor incomes would, on average, be reduced to a culturally contextual subsistence level, implying that, on average, capitalist producers would be incapable of saving substantial quantities of income. A role for finance can readily be constructed within Marx's basic understanding of subsistence and, to a significant degree, such an expansion in the conceptualization of the value of labor power in particular economic contexts would critically expand the descriptive power of Marxian theory. For my purposes, I am going to proceed from an assumption that savings by capitalist and non-capitalist surplus labor producers is, ordinarily, possible and that, at least in certain contexts, it is a regular and necessary feature in the operation of solvent financial systems. Emphatically, in the industrial/post-industrial Western economies, there is at least some expectation that working people, over the course of their careers, will retain a share of incomes destined for consumption after they are no longer capable of receiving a stream of labor incomes (i.e. retirement). Larger questions, however, emerge when we begin to consider the mix of public and private, social and individual media through which working people undertake savings, how such mixes of savings/investment funds accumulate and get redistributed with divergent levels of risk and uncertainty, and how overall levels of savings are impacted by a range of class and non-class processes.
To begin, we need to consider Resnick and Wolff's fundamental class process and the question of how much the producers of surplus labor will be able to claim as necessary labor, foundational to labor compensation, relative to surplus. This problem transcends the boundaries of capitalism. Capitalist producers struggle to increase their compensation rates relative to the surplus values seized by capitalist appropriators in accordance with the terms of labor contracting. On the other hand, communist producers confront the same basic struggle to define how much labor needs to be consigned to their own compensation relative to the surplus labor that must be steered to achieve their collective conditions of existence. In this regard, we need to query the foundations of a broader theory of compensation for labor power in market contexts, generally, and examine the ways in which producers that do not operate within market contexts receive determinate levels of compensation in order to secure subsistence. It may be the case that only market-oriented producers/the rentees of labor power actually retain a margin of excess returns from the performance of labor to participate in financial savings and investment, however, the compensatory principle is essentially the same between both such groupings, especially if we assume that compensation takes place in a monetary form.
Producers need to regularly obtain a certain mass of articles of consumption in order to reproduce their capacity to produce goods and services on a recurring basis. On a social scale, a broader macroeconomy needs to possess the capacity to produce or otherwise obtain (through commerce) a basic set of goods and services to feed, clothe, and shelter its population, including its producers and its non-producers, on a continuous basis. Some share of these goods and services needs to be directed toward compensation of the producers to achieve their continuous reproduction, some must be directed toward the non-producers so that they are not left to starve, and some may be moved/invested toward other social ends including growth and development. This abstract characterization of macroeconomic development theory would be needlessly abstract if we did not recognize, from a Marxian standpoint, that every macroeconomy evolves over time to transform its patterns of consumption and its basic definitions of need, constituting subsistence. Most Twenty-first century Western economies tend to incorporate higher levels of caloric intake per individual than economies in, say, the central African lakes region or in rural Andean communities in Bolivia or Peru. Similar insights might be made especially regarding Western European economies as a function of time. The level of subsistence defined for a contemporary resident of the Netherlands would differ widely in comparison to that of either a Sixth century Frisian peasant or feudal overlord. Likewise, the mix of goods and services included in subsistence consumption is different in every case, even to the extent that basic abstract calculations of statistics like caloric intake or the square footage of personal living space are equivalent across diverse cases. It suffices to say that defined levels of basic subsistence are social constructs, relative to the level of macroeconomic development of any individual economy. If the concept of subsistence structures the necessary level of compensation for producers, moreover, then we would have to comprehend fundamental class conflict, for capitalism or any other class structural form, as a struggle by producers to push necessary compensation above basic subsistence, even as the latter construct remains perpetually in flux.
Similarly, on a social scale, as other approaches to development theory have not so subtly implied, the extent to which social resources can be directed toward investment in the growth of macroeconomic productive capacities actively shapes subsistence over time. In this regard, the functioning of every macroeconomy involves a balancing act between contemporaneous consumption and investment in the future growth of consumption possibilities. Conversely, we need to differentiate between the actions of the appropriators/distributors of surplus labor to push down levels of necessary compensation for the producers in the interest of investment in productive assets/new capital and the interest of producers to steer distributions of surplus labor toward ultimately non-productive categories of consumption, including the basic consumption of various categories of non-producers.
This basic introduction to the stakes involved in macroeconomic growth and development, underlying the dynamics of the financial sector in critically important ways, potentially illuminates a multi-level redistributive mechanism related to investment in new productive capacity for a macroeconomic system. Emerging from the outcomes of fundamental class conflict, on the one hand, the appropriators of surplus labor enjoy a capacity to steer some share of the surplus toward new capital investment, contingent, especially within market-oriented systems, on the expected future profitability of such investments. On the other hand, to the extent that the producers are capable of pushing necessary compensation rates above basic subsistence levels, however they are defined, the producers may, themselves, participate in investment to increase the scale of future consumption possibilities through the financial sector. If we take this multi-level redistributive mechanism seriously, then, emphatically, the funds invested through the financial sector would have to be evaluated as a mix of subsumed class distributions of surplus labor and non-class distributions of necessary compensation from producers. To the extent that the latter component most interests us, we need to inquire why the producers would make such investments and under what circumstances they might forgo the opportunity.
Investments in financial assets constitute a claim on the future generation of surplus labor by productive entities and/or the redistribution of surplus labor to non-productive entities, under the specific terms outlined in the purchase of a particular financial instrument. The claims might be equity/ownership-oriented, like the claims generated from the sale of common or preferred shares of stock. They might be debt-oriented, like the claims generated from the sale of a corporate or public bond. They might arise from satisfaction of a set of categorical circumstances, like an insurance policy or a futures contract. Definitively, however, they will all involve the generation of a claim to specified quantities of surplus labor. The recipients of such incomes are, definitively, subsumed recipients of surplus labor, however those surplus labors are classed (i.e. capitalist, communist, ancient, or otherwise). In most circumstances, working people, as producers of surplus labor, will invest in financial assets from the total mass of their necessary labor incomes because they are seeking to obtain a supplemental contemporaneous or future non-labor income source. They place funds into a certificate of deposit at their bank to claim relatively higher non-labor interest incomes from their bank's consumer and/or commercial lending activities. They buy shares of stock or invest in mutual or exchange traded funds to gain incremental dividend incomes and the possible opportunity for capital gains from short term appreciation in asset prices. They invest in financial annuities with the expectation that they will be able to draw on the enhanced future value of such policies, especially after they will either cease to have labor incomes or they expect to have diminished labor incomes.
A definitive argument can be advanced here that financial investments occur in the interest of equalizing inter-temporal consumption possibilities for working people. That is, workers invest a share of their contemporaneous necessary labor in the interest of being able to claim a share of future subsumed class incomes as positive incomes for retirement. Alternatively, working people might expect other sources of retirement income, like tax-based governmental distributions of retirement insurance. On some level, such funds replicate the same sort of redistribution of a mix of necessary and surplus labor as private distributions effected through the financial sector. In particular, the Social Security retirement insurance system in the United States is financed through payroll taxes constituting a mix of necessary labor (personal wages) and employer contributions. The latter funds could be interpreted as a share of necessary labor intentionally retained by employers to cover tax liabilities and that such funds would otherwise be paid out directly as wages, but such an interpretation relies on the counter-factual consideration that workers would be able to command a larger share of incomes as necessary labor compensation if public retirement insurance did not exist in the United States. In either case, working people would be relying on incomes derived, in part, from collective savings of contemporaneous necessary labor and, in part, from subsumed class distributions of surplus labor in order to feed, clothe, and shelter themselves in old age.
With these considerations in mind, how should working people adjust to a macroeconomic environment in which expected returns from public retirement insurance are presumed, for diverse reasons, to be in doubt? If, in the American context, Social Security retirement insurance is presumed to teeter on the verge of insolvency, then how should American working people proceed in order to ensure that they are not rendered impoverished in old age? The answer perennially offered from partisan camps most favorable to the financial sector is that working people should be provided with the capacity and the freedom to invest in private financial portfolios that will constitute their critical source for retirement income. Working people should be empowered to take full individual responsibility for their lifelong consumption needs, and, as a consequence of social investment in productive industry, the need for generating future non-labor incomes will expanding overall social consumption possibilities over time. It is worth asking, in this regard, from a Marxian perspective, what significance the replacement of a public retirement insurance system with a system of individual retirement portfolios managed by private financial sector agents should have for working people.
I do not think the answer to this question is entirely clear. If we proceed from the general observation that the investment funds in a public retirement insurance system like Social Security are largely invested in low-risk public securities, then the long term social benefits served by such investments would need to be evaluated in reference to the mix of public projects financed from such public borrowing. For certain schools of economic theory, the answer here is easy. Most Neoclassical theorists would conclude that public investments are either economically barren or, minimally, sanctified by their capacity to provide certain public goods that would otherwise not attract private capital. As such, the accumulation of a public investment portfolio would be, in large part, socially unproductive; effectively, a large-scale public Ponzi scheme configured on "pay-as-you-go" terms. By comparison, individual investments in private capital might hold the prospect of at least some tangible, long term social return in future consumption possibilities. This is not a satisfactory answer for Marxism any more than some more nuanced contrary perspective grounded, perhaps, in traditional or Post-Keynesian approaches. Again, the problem here does legitimately concern developmental theory and the productive or non-productive nature of investments, but it also certainly involves the virtues of democratic choice in public investments, the economic value of public goods and, especially, publicly-financed infrastructures, the comparative productive and non-productive character of private capital investments, and, critically, the class nature of private capital investments. The clearest insight that can be derived from some consideration of the fate of working people when collective public retirement insurance funds become a more tenuous source of old age incomes is that the elimination or curtailing of relatively certain public retirement funds renders retirement a more uncertain institution for working people and makes working people more reliant on private financial sector agents for retirement income.
This insight gets to the heart of the message in "Money Monster," even beyond its very evident producerist overtones. In an era when the dominant discourse over collective public institutions like retirement insurance argues for individualization of risk, responsibilities, and returns to retirement savings and investment over a collective stabilization of existing public resources, how can we avoid gross manipulation of the trust of working people in the possibility of returns to private capital investments? More generally, if the most footloose and free-wheeling of financial sector agents can dangle the promise of immense, easy wealth in front of masses of working people who struggle to make ends meet on a day-to-day basis, then how should we address regulation of the private financial sector and, in particular, its capacity to spread false promises on the certainty of future wealth to the most vulnerable audiences? Conversely, how should working people be addressed in regard to their interactions with the financial sector? I want to address the former concerns in the next section. Relative to the latter question, however, a range of basic conclusions can be advanced. First, mass consumer culture introduces important problems to the extent that cultural perceptions on necessary consumption shape the conception of subsistence over time. Whether we are considering the day-to-day consumption needs of working people or their expectations for retirement consumption, individuals are constantly fed images, both in everyday existence and in media consumption, about the masses of goods and services which they should be entitled to consume. Such images warp understandings of the connection between the action of consumption and the formation and consummation of personal needs. Beyond the specificities offered by biology and physiology, subsistence is an indeterminate concept. Marxism has always held that subsistence is a cultural construct. Other schools of economic theory, especially those arising from the Marginalist revolution, eschew the notion of subsistence as an explanatory factor in consumption patterns generally, holding that human desires for consumption are ultimately insatiable. The greater fault in these approaches stems from their assertion that individual preferences are conceived internally and autonomously relative to the totality of social processes affecting and, from Marxism's standpoint, ultimately constituting the individual as a social being. It is clear to me that individual consumer preferences are complexly constituted by the interplay of internal psychological predispositions and external social interactions. Nonetheless, the everyday perceptions formed by individuals on consumption and the manifestation of needs to be satisfied by particular goods and services form important arguments in how such individuals approach discrepancies between contemporaneous incomes and evolving needs for income over time, issues that shape the way in which individual working people approach the financial sector, both for purposes of contemporaneous consumer lending and for the selection of savings/investment instruments.
In the most general terms, the more that individuals feel that their contemporaneous incomes manifest a deficiency relative to their long term consumption needs and the more their expected future labor incomes remain inadequate, the more they will rely on non-labor sources of income over time. Moreover, if public guarantees of future non-labor incomes (e.g. retirement insurance) or contemporaneous public income supports (e.g. welfare, subsidized subsistence consumption/food stamps) appear either excessively uncertain or otherwise socially unappealing, then working people will be more apt to turn to more risky private financial savings/investment instruments or, alternatively, to extremely risky if fundamentally uncomplicated speculation through, say, gaming (e.g. casinos, lotteries, and other simple, minimally regulated get-rich-quick opportunities). This is the tale of Kyle, a largely unskilled, perhaps irregularly employed, low-income worker, confronted both with life circumstances (i.e. a pregnant girlfriend) that would shortly introduce overwhelming needs for income expansion beyond his own capacity to satisfy through labor and with an opportunity represented by a small cash inheritance. Every irresponsible promise to get rich quick demands a sucker in desperate need of wealth.
6. Beyond the basic imperatives to protect democratic institutions from the possibly corrosive effects of manipulation by financial sector agents and to ensure that financial sector firms are assessed fair levels of taxation consistent with the maintenance of efficient and equitable fiscal policy, states need to maximize the liberty conferred on global financial sector agents to engage in innovations in the development of financial instruments and trading techniques/technologies.
7. We need to resist the inclination to impose excessive public regulation of financial sector firms to protect small, or otherwise more vulnerable, investors from questionable practices and marketing of suspect financial instruments. In the place of such regulation, investors should, themselves, be weary of promises for excessive returns from particular stocks or particular investment instruments.
7. We need to resist the inclination to impose excessive public regulation of financial sector firms to protect small, or otherwise more vulnerable, investors from questionable practices and marketing of suspect financial instruments. In the place of such regulation, investors should, themselves, be weary of promises for excessive returns from particular stocks or particular investment instruments.
