Finance and Social Production Adam ArvidssonP2P Foundation

I’d like to expand a bit on a number of ideas that came out of a discussion with Christian Marazzi on the financial crisis, organized by the student movement at the University of Milano, last Friday. Marazzi has done a lot of innovative and thought-provoking work on the role of finance within the post-Fordist economy and the deep structural roots of the financial expansion that has marked the last two decades (or since 1979 and Paul Volker’s monetarist turn at the Fed). Indeed, the growing size and importance of financial markets is one of the two important structural trends that have marked the transition away from industrial Fordism (to an ‘information economy’ a ‘knowledge economy’ an ‘ethical economy’ or simply ‘post-Fordism’ the exact denomination is not an issue here). Indeed, with Geroge Soros, we can argue that the current crisis is the end of a financial ’super bubble’ that has run its course since the early 1980s. This has built on a continuous expansion of credit (refinanced by a massive inflow of cash from emerging economies like China). The consequence has been a substitution of credit and financial rent for wages as the source of income of the US (and Western European) middle class. The most visible structural consequence of this financial expansion have been a financialization of a number of services related to the reproduction of everyday life: credit card debt, housing and mortages, pensions, insurance, health care and education. To this transfer of the responsibility for the reproduction of life from the public sector and the welfare state to financial markets has corresponded a massive securitization of life conduct, that is; the invention of a number of often very complex financial instruments, the risks of which are are in the end related to the life conduct of human subjects (their liability to pay their mortages, to get sick and so on). Indeed Christian Marazzi argues convincingly that this link between finance and life conduct is one of the defining elements of the neoliberal political order, tracing it back to the New York City bancrupcy in 1975. At that point, the City relied heavily on the issue of municipal bonds. In turn, its ability to repay those bonds was contingent on its ability to reduce costs for social services and crime. This way, the financial rent that the middle class (that had purchased the bonds through, mainly pension funds) could receive, came to rely on the life conduct of the underclass (who were the main recipients of costly social services) and, consequently, policing the latter became a way of securing the income of the former.

The second deep structural tendency of post-Fordism is the massive flight of value from the mechanisms of capture that were established with the Fordist industrial economy. We discuss this at length in the forthcoming second chapter of the Ethical Economy book, but to reassume the argument in a nutshell: Social production, the production of (mostly but not exclusively) immaterial wealth outside of the capitalist economy has increased massively with the diffusion of information and communications technologies. Companies increasingly rely on what they see as the ‘free lunch’ of social production by institutionalizing various forms of ‘prosumerism’: brand management and marketing where consumers play an active part, user- led innovation schemes, customer co-produciton of goods (Ikea) and services (McDonalds) and the cultivation of reputation and public opinion through Corporate Social Responsibility Schemes. Furthermore, social production has become an important element within the capitalist production process itself. Knowledge workers create value by using their social and communicative capacities to organize processes of cooperation and collective intelligence. Complex global production chains (or networks) thrive of meaningful relations of trust and cooperation between supplier and other partners. These are all forms of wealth that are produced outside the capitalist economy proper: that is they are generally not motivated by monetary gains, and they cannot be commanded or sanctioned by bureaucratic power. Indeed, because such socially produced wealth is generated outside the reach of the mechanisms of capture and governance with which the capitalist economy works, they are not easily measurable as valuable resources. Indeed, the products of such forms of social production tend to figure on financial statements as ‘intangibles’ for which there is no coherent method of measurement. In 2005, seven per cent of US corporate investments were directed to building such intangible resources, principally, trust, brand equity, corporate reputation and ‘intellectual capital’: that is, principally values that build on the ability to establish meaningful and durable social relations, or what we call ‘ethical values’.

This massive recourse to social production has changed the situation of both companies and workers. For companies, value is increasingly generated outside of the wage relation, in diffuse practices of social production that cannot be easily managed or measured. Success and profit becomes increasingly contingent on the ability to capture such socially produced wealth, and depend less on the direct contribution of salaried labour. For workers, gainful employment tends to be configured less as a single wage relation to one employer, and more as a multitude of income streams from very diverse forms of practices: regular salaried employment, short term work, consultancy, childrens work, unpaid forms of social production that can be monetized in different ways, entrepreneurship, engagements with the growing informal economy, financial or real estate speculation etc. This way, both the appropriation of value on the part of companies and the generation of income on the part of workers tend to move outside the once dominant wage relation. Present phenomena like the neonomads who launch start-ups out of Starbucks cafés with wifi connectivity or the return of the ’sublimes’ testify to these tendencies.

Since the wage relation looses its centrality as a way of distributing social wealth, it also looses it centrality as a way of appropriating surplus value and profits. This way the enormous expansion of personal debt as a the source of the new kinds of securitized value streams that underpin new financial instruments could simply be seen as the establishment of an alternative to salaried labour as an instrument for the capture of value. In the fordist model the extraction of surplus value relied on the exploitation of salaried labour. This way the labour contract guaranteed both the worker a secure long term access to the means for the reproduction of life, and for the capitalist, a secure long term and predictable stream of surplus labour ( in the form of the productivity of the working day that exceeded the cost of labour). In the post-Fordist model the financial system anticipates necessities for the reproduction of life (a house, health insurance etc.) and receives in turn a long term and (relatively) secure value stream in the form of interest payments. The interest payments become a direct extraction of surplus from the whole life practice, and not just from the working day. This happens in a situation where the wage relation is becoming less representative of the real process of wealth creation. The sources of this surplus, just like the sources of the ‘living wage’ can , and increasingly do, drive form a multitude of diverse sources of income. What is more, the value of these activities is set outside of the wage relation controlled by capital. As a free lance worker, entrepreneur, or member of the ‘precariat’ the value of my products is generally determined by my networks of friends, colleagues and clients. They are the ones who determine how much I work, when and what I get paid. Even i forms of regular employment- like many forms of knowledge work, productive agency engages a number of activities that lie outside of the wage relation (free time, contacts, networks etc.)

The parallel rise of, on the one hand such ‘anomalous forms’ of employment and the importance of social production in general, where the determination of value is increasingly autonomous vis a vis capitalist government, and, on the other hand the direct financialization of life conduct, would suggest a general shift in the modality of extraction of surplus value: from the wage relation and its dependency on discipline and controlled time, to the debt/finance relation where the comprehensive surplus generated by the multitude of productive practices that make up he life process is directly captured by means of interest payments. Correspondingly, the modality of government shifts from discipline, from imposing a certain form of conduct, to control, form making calculable the risk arising form a multitude of forms of conduct that evolve autonomously. Class distinctions are configured around the access to such financial rent. Who has the capital and ability to benefit from rising real estate markets, in which the social production of the metropolis is monetized, and who does not. The terrain of social movements shift from the factory to the city and the banlieus.