Note on McNally’s “From Financial Crises to World Slump”

March 14, 2009

While I found this paper interesting, it’s low on theory and long on description – perhaps McNally’s method of writing is to leave the bulk the theory in the books in which he found them (with references), assuming that if you want to you will go read the theory… but the rest should be understandable without it. Which is kind of interesting to think about in relation to Lacan’s style: Lacan tries to frustrate you in order to make you go read things for yourself and reap the benefits of study, where McNally prefers to present information that it might easily be understood, but leavs hints (references) about the bigger picture…

On the same note, it was once pointed out to me that grad students tend to spend to much time in papers giving exegesis of theory, rather than getting to the point…

Anyway, beyond my interest in the simple description of the crisis and the economic tools that precipitated it (because I’m next to completely ignorant about what’s happening), I liked the following section the most:

During every crisis, value measurement is radically disrupted and destabilized. Pressures of over-accumulation and declining profitability induce a destruction of values that reorganize the foundations of capitalist production. In the process, existing capitals are de-valued, until a new and relatively stable valuation is found. In fact, for Marx, an essential feature of crises is that they destroy the old value relations that persisted through a period of boom, over-accumulation and declining profitability in order to lay the basis, through destruction and devaluation of capital and labour power, for a new set of value norms. 38 Today, as we have seen in Section 3, derivatives offer an indirect way of trying to measure value by way of measuring risk. But in the midst of this crisis, the risk measurement models that have guided derivatives markets have completely and utterly failed (15).

38 See for instance, Karl Marx, Theories of Surplus Value, v. 3 (Moscow: Progress Publishers, 1971), pp. 518-19.

In trying to measure abstract risk, the models in question attempt to create indicators of current and future value relations by predicting the riskiness of investment or economic activity in a given situation (and the appropriate premium or “risk reward” that ought to be expected). Inherently, these models involve violent abstractions, to use Marx’s term, insofar as they reduce concrete social, political, climatological and economic relations to a single scale of measurement, often with life-threatening implications, as we shall see. The process of abstraction these models undertake involves treating space and time as mathematical, as nothing more than different points on a grid. This homogenization of space and time assumes that what applied at any one spatio-temporal moment applies in principle at any other. Future events in multiple spaces are thus held to be predictable on the basis of past events. But crises destroy any basis for such assumptions – they bring about the “collapse” of “the whole intellectual edifice” on which they rest, as Greenspan notes. As a result, nobody knows any longer the value of trillions of dollars worth of financial “assets” – Collateralized Debt Obligations, Asset Backed Commercial Paper, and much more. Consequently, lack of knowledge of “the details of . . . derivatives exposure” is not a problem unique to Lehman Brothers; it is a systemic problem that will not quickly or readily be resolved (15).

Now, this doesn’t just sound like things come to be ‘worthless,’ but even more radically that there is no system by which to measure worth (i.e. value). It sounds a great deal like the ‘slate-clearing’ that Zizek talks about re: destruction of the Law and clearing the space for ‘creative sublimation’ – by imposing a new Law you would have all the same material elements (“no one knows the value of … financial ‘assets'”) and a new system of organization that would make them function. Is the implication, then, that we cannot even say, as McNally does, that there are “trillions of dollars of assets” because dollars have effectively ceased to exist? Money is starting to not work. The symbolic matrix (or perhaps the fundamental fantasy?) is loosing its ‘efficacy,’ crumbling away… The financial sector is fading, taking real markets and people with it.

(This is perhaps where a link could be made with Zizek and D&G – ‘immaterial transformation’, aka D&G’s version of the event as the creation of a new system based on existing elements. I.e. the creation of new connections between machinic-elements to make a new machine (blah blah blah))

The further implication of this is that a new system, not based on commodity fetishism, could take the place of the one that is dying so that we would perhaps not ever again talk about exchange-value. It’s shortly after this section that McNally makes his brief remarks on the political possibilities of the crises – reverting to Keynesianism is a way of reviving capitalism, not moving past its confines to a new system based not on profit but people…


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